Bharat Forge -PPD

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					PLACEMENT DOCUMENT
Not for Circulation                                                                                                           Dated April 26, 2010
                                                                                                                              Serial No. [●]




                                                            BHARAT FORGE LIMITED
            (Incorporated in the Republic of India with limited liability under     the Companies Act, 1956 with Corporate Identification No.
                                                                   L25209PN1961PLC012046)

Bharat Forge Limited (the “Company” or the “Issuer” ) is issuing up to 10,000,000 equity shares of Rs. 2 (“Shares”) each at a price of Rs. 272 per Share
aggregating to 2,720 million (“Share Issue Price”) and 1760, 10.75% non convertible debentures of face value of Rs. 1,000,000 each due in 3 yearly
installments starting at the end of 4th year to the end of 6th year, in the ratio of 35:35:30(the “NCDs”) at a price of Rs. 1,000,000 per NCD (“NCD Issue
Price”) along with 6,500,000 warrants, each of which entitles the holder to 1 Equity Share (as defined below) (the “Warrants”, together with the Shares and
the NCDs, the “Securities”) at a price of Rs. 2 per Warrant (“Warrant Issue Price”) ( “Issue”). The Issue of the Shares at the Share Issue Price, the NCDs at
the NCD Issue Price and the Warrants at the Warrants Issue Price will aggregate up to Rs. 4,493 million assuming no conversion of Warrants into Equity
Shares and to Rs. 6,261 million assuming full conversion of Warrants into Equity Shares during the Warrant Exercise Period at the Warrant Exercise Price.

      ISSUE IN RELIANCE UPON CHAPTER VIII OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND
         DISCLOSURE REQUIREMENTS) REGULATIONS, 2009, AS AMENDED (“SEBI REGULATIONS”) AND APPLICABLE TO US

THIS ISSUE AND THE DISTRIBUTION OF THIS PLACEMENT DOCUMENT IS BEING MADE IN RELIANCE UPON CHAPTER VIII OF THE SEBI REGULATIONS.
THIS PLACEMENT DOCUMENT IS PERSONAL TO EACH PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR
SOLICITATION OF AN OFFER TO THE PUBLIC OR TO ANY OTHER PERSON OR CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA.

Invitations, offers and sales of Securities in this Issue shall only be made pursuant to this Placement Document, the Confirmation of Allocation Note and the
Application Form. The distribution of this Placement Document or the disclosure of its contents without the Company’s prior consent to any person, other than
Qualified Institutional Buyers (“QIBs”) and persons retained by QIBs to advise them with respect to their purchase of the Securities, is unauthorized and
prohibited. Each prospective investor, by accepting delivery of this Placement Document, agrees to observe the foregoing restrictions and to make no copies of
this Placement Document or any documents referred to in this Placement Document. See also the section “Issue Procedure”.

This Placement Document has not been reviewed by the Securities and Exchange Board of India (the “SEBI”), the Reserve Bank of India (the “RBI”), the
Bombay Stock Exchange Limited (the “BSE”), the National Stock Exchange of India Limited (the “NSE”) or the Pune Stock Exchange Limited (the “PSE”),
(the BSE, the NSE and the PSE, together referred to as the “Stock Exchanges”) or any other regulatory or listing authority. This Placement Document has not
been and will not be registered as a prospectus with the Registrar of Companies (“RoC”) in India, and will not be circulated or distributed to the public in India
or any other jurisdiction and will not constitute a public offer in India or any other jurisdiction. The placement of Securities proposed to be made pursuant to
this Placement Document is meant solely for QIBs on a private placement basis and is not an offer to the public or to any other class of investors.

Investments in the Securities involve a degree of risk and prospective investors should not invest any funds in this Issue unless they are prepared to
take the risk of losing all or part of their investment. Prospective investors are advised to carefully read the section titled “Risk Factors” beginning on
page 58 of this Placement Document before making an investment decision relating to this Issue. Each prospective investor is advised to consult its
advisors about the particular consequences to it of an investment in the Securities.

The information on the Company’s website or any website directly or indirectly linked to the Company’s website does not form part of this Placement
Document and prospective investors should not rely on such information contained in, or available through, such websites.

All of the Company’s outstanding Equity Shares are listed on each of the Stock Exchanges. The closing price of the outstanding Equity Shares of the Company
on the BSE and the NSE on April 23, was Rs. 274.45 and Rs. 274.85 per Equity Share respectively. Currently, there is no trading activity on the PSE.
Applications have been made to each of the Stock Exchanges for in-principle approval for listing and admission of the Shares and the Warrants for trading on
each of the Stock Exchanges. Applications have been made to the NSE and the BSE for in-principle approval for listing and admission of the NCDs for trading
on the NSE and the BSE. The NCDs are not proposed to be listed on the PSE. The Stock Exchanges assume no responsibility for the correctness of any
statements made, opinions expressed or reports contained herein.

The NCDs being offered through this Placement Document have been rated by ICRA Limited as LA+ indicating adequate credit quality carrying average credit
risk. The ratings are not a recommendation to buy, sell or hold securities and investors should take their own decision. The ratings may be subject to revision or
withdrawal or at any time by the rating agencies on the basis of new information.
YOU MAY NOT AND ARE NOT AUTHORIZED TO (1) DELIVER THIS PLACEMENT DOCUMENT TO ANY OTHER PERSON; OR (2) REPRODUCE THIS PLACEMENT
DOCUMENT IN ANY MANNER WHATSOEVER. ANY DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED.
FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT IN A VIOLATION OF THE SEBI REGULATIONS OR OTHER APPLICABLE LAWS OF INDIA AND
OTHER JURISDICTIONS.

A copy of this Placement Document has been delivered to the Stock Exchanges. A copy of the final Placement Document will also be delivered to the Stock
Exchanges. A copy of the Placement Document will also be delivered to the Securities and Exchange Board of India (the “SEBI”) for record purposes.

THIS PLACEMENT DOCUMENT HAS BEEN PREPARED BY THE COMPANY SOLELY FOR PROVIDING INFORMATION IN CONNECTION WITH
THE PROPOSED ISSUE OF THE SECURITIES DESCRIBED IN THIS PLACEMENT DOCUMENT.

The Securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold
within the United States (as defined in Regulation S (“Regulation S”) under the Securities Act), except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and applicable state securities laws. The Securities are being offered and sold outside the United
States in reliance on Regulation S. Further, the NCDs will only be offered and sold to persons resident in India and will not be offered or sold to Investors in any
jurisdiction outside India. See “Distribution and Solicitation Restrictions” and “Transfer Restrictions”.

This Placement Document is dated April 26, 2010.

                                      JOINT GLOBAL COORDINATORS AND BOOK RUNNING LEAD MANAGERS
                                                     (From left to right in alphabetical order)




Axis Bank Limited                                        Citigroup Global Markets India Private Limited              Kotak Mahindra Capital Company Limited
Maker Towers F, 11th Floor,                              12th Floor, Bakhtawar,                                      1st Floor, Bakhtawar
Cuffe Parade, Colaba,                                    Nariman Point,                                              229 Nariman Point
                                                         Mumbai 400 021                                              Mumbai 400 021
Mumbai 400 005
                                                          TABLE OF CONTENTS

NOTICE TO INVESTORS ......................................................................................................................... 1
CERTAIN CONVENTIONS, PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET
DATA, CURRENCY OF PRESENTATION AND EXCHANGE RATES ............................................. 7
FORWARD LOOKING STATEMENTS ................................................................................................ 10
ENFORCEMENT OF CIVIL LIABILITIES .......................................................................................... 11
DEFINITIONS AND ABBREVIATIONS................................................................................................ 12
SUMMARY OF THE ISSUE .................................................................................................................... 20
SUMMARY FINANCIAL INFORMATION........................................................................................... 25
RECENT DEVELOPMENTS ................................................................................................................... 58
RISK FACTORS ........................................................................................................................................ 66
MARKET PRICE INFORMATION ........................................................................................................ 87
USE OF PROCEEDS ................................................................................................................................. 89
CAPITALIZATION AND INDEBTEDNESS.......................................................................................... 90
DIVIDEND POLICY ................................................................................................................................. 96
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS .................................................................................................................. 97
INDUSTRY OVERVIEW........................................................................................................................ 119
OUR BUSINESS....................................................................................................................................... 128
BOARD OF DIRECTORS AND MANAGEMENT.............................................................................. 145
PRINCIPAL SHAREHOLDERS............................................................................................................ 154
TERMS AND CONDITIONS OF THE NON-CONVERTIBLE DEBENTURE................................ 157
TERMS AND CONDITIONS OF THE WARRANTS.......................................................................... 165
JOINT VENTURES ................................................................................................................................. 182
ISSUE PROCEDURE .............................................................................................................................. 185
PLACEMENT AND LOCK-UP.............................................................................................................. 195
DISTRIBUTION AND SOLICITATION RESTRICTIONS ............................................................... 196
TRANSFER RESTRICTIONS ............................................................................................................... 200
INDIAN SECURITIES MARKET ......................................................................................................... 201
DESCRIPTION OF THE SHARES........................................................................................................ 210
TAXATION .............................................................................................................................................. 218
LEGAL PROCEEDINGS........................................................................................................................ 225
GENERAL INFORMATION.................................................................................................................. 227
INDEPENDENT ACCOUNTS................................................................................................................ 228
FINANCIAL STATEMENTS ................................................................................................................. 229




                                                                            1
                                        NOTICE TO INVESTORS

The Company has furnished and accepts full responsibility for all of the information contained in this
Placement Document and confirms that, to its best knowledge and belief, having made all reasonable
enquiries, this Placement Document contains all information with respect to the Company, its Subsidiaries
and the Securities which is material in the context of this Issue. The statements contained in this Placement
Document relating to the Company, its Subsidiaries and the Securities are, in every material respect true
and accurate and not misleading, the opinions and intentions expressed in this Placement Document with
regard to the Company, its Subsidiaries and the Securities are honestly held, have been reached after
considering all relevant circumstances, are based on information presently available to the Company and
are based on reasonable assumptions. There are no other facts in relation to the Company, its Subsidiaries
or the Securities, the omission of which would, in the context of the Issue, make any statement in this
Placement Document misleading in any material respect. Further, all reasonable enquiries have been made
by the Company to ascertain such facts and to verify the accuracy of all such information and statements.
The Joint Global Coordinators and Book Running Lead Managers have not separately verified all the
information contained in this Placement Document (financial, legal or otherwise). Accordingly, neither the
Joint Global Coordinators and Book Running Lead Managers nor any of their respective members,
employees, counsel, officers, directors, representatives, agents or affiliates makes any express or implied
representation, warranty or undertaking, and no responsibility or liability is accepted, by the Joint Global
Coordinators and Book Running Lead Managers, as to the accuracy or completeness of the information
contained in this Placement Document or any other information supplied in connection with the Securities.
Each person receiving this Placement Document acknowledges that such person has not relied on the Joint
Global Coordinators and Book Running Lead Managers or on any person affiliated with the Joint Global
Coordinators and Book Running Lead Managers in connection with its investigation of the accuracy of
such information or its investment decision, and each such person must rely on its own examination of the
Company and its Subsidiaries and the merits and risks involved in investing in the Securities.

No person is authorized to give any information or to make any representation not contained in this
Placement Document and any information or representation not so contained must not be relied upon as
having been authorized by or on behalf of the Company or the Joint Global Coordinators and Book
Running Lead Managers. The delivery of this Placement Document at any time does not imply that the
information contained in it is correct as at any time subsequent to its date.

The Securities have not been approved, disapproved or recommended by any regulatory authority in
any jurisdiction. No authority has passed on or endorsed the merits of this Issue or the accuracy or
adequacy of this Placement Document.

The distribution of this Placement Document and the issue of the Securities may be restricted in certain
jurisdictions by law. As such, this Placement Document does not constitute, and may not be used for or in
connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is
not authorized or to any person to whom it is unlawful to make such offer or solicitation. In particular, no
action has been taken by the Company and the Joint Global Coordinators and Book Running Lead
Managers which would permit an offering of the Securities or distribution of this Placement Document in
any jurisdiction, other than India, where action for that purpose is required. Accordingly, the Securities may
not be offered or sold, directly or indirectly, and neither this Placement Document nor any offering material
in connection with the Securities may be distributed or published in or from any country or jurisdiction,
except under circumstances that will result in compliance with any applicable rules and regulations of any
such country or jurisdiction.

In making an investment decision, investors must rely on their own examination of the Company and its
Subsidiaries and the terms of this Issue, including the merits and risks involved. Investors should not
construe the contents of this Placement Document as legal, tax, accounting or investment advice. Investors
should consult their own counsel and advisors as to business, legal, tax, accounting and related matters
concerning this Issue. In addition, neither the Company nor the Joint Global Coordinators and Book
Running Lead Managers are making any representation to any offeree or purchaser of the Securities
regarding the legality of an investment in the Securities by such offeree or purchaser under applicable legal,


                                                      1
investment or similar laws or regulations. Each purchaser of the Securities in this Issue is deemed to have
acknowledged, represented and agreed that it is eligible to invest in India and in the Company under Indian
law, including Chapter VIII of the SEBI Regulations and that it is not prohibited by the SEBI or any other
statutory authority from buying, selling or dealing in securities. Each purchaser of Securities in this Issue
also acknowledges that it has been afforded an opportunity to request from the Company and review
information relating to the Company, its Subsidiaries and the Securities.
References herein to “you” are to the prospective investors in the Issue.
This Placement Document contains summaries of certain terms of certain agreements, which summaries are
qualified in their entirety by the terms and conditions of such document.

The information on the Company’s website www.bharatforge.com, or on the websites of the Joint Global
Coordinators and Book Running Lead Managers, does not constitute nor form part of this Placement
Document.

                                      Representations by Investors

By subscribing to any Securities under the Issue, you are deemed to have represented, warranted,
acknowledged and agreed to the Company and the Joint Global Coordinators and Book Running Lead
Managers as follows:

•   you are a qualified institutional buyer as defined in Regulation 2(1)(zd) of the SEBI Regulations
    (“QIB”), and undertake to acquire, hold, manage or dispose of any Securities that are allocated to you
    in accordance with Chapter VIII of the SEBI Regulations. In addition, by subscribing to the NCDs you
    are deemed to have acknowledged that you are a person resident in India as defined under FEMA and
    are eligible to invest in the NCDs under applicable law;

•   if allotted Securities pursuant to the Issue, you shall, for a period of one year from the date of
    Allotment, sell the Securities so acquired only on the floor of the Stock Exchanges;

•   if you are a resident in any jurisdiction other than India, you are permitted by all applicable laws to
    acquire Securities in such country;

•   you are aware that the Securities have not been, and will not be, registered under the SEBI regulations
    or under any other law in force in India;

•   you are aware that this Placement Document has not been verified or affirmed by the SEBI or the
    Stock Exchanges and will not be filed with the RoC, has been filed with the Stock Exchanges for
    record purposes only and has been displayed on the websites of the Company and the Stock
    Exchanges;

•   you are entitled to subscribe for the Securities under the laws of all relevant jurisdictions which apply
    to you and that you have fully observed such laws and obtained all such governmental and other
    consents in each case which may be required thereunder and complied with all necessary formalities;

•   you are entitled to acquire the Securities under the laws of all relevant jurisdictions and that you have
    all necessary capacity and have obtained all necessary consents and authorities to enable you to
    commit to this participation in the Issue and to perform your obligations in relation thereto (including,
    without limitation, in the case of any person on whose behalf you are acting, all necessary consents and
    authorities to agree to the terms set out or referred to in this Placement Document) and will honour
    such obligations;

•   you confirm that, either: (i) you have not participated in or attended any investor meetings or
    presentations by the Company or its agents (“Company Presentations”) with regard to the Company
    or the Issue; or (ii) if you have participated in or attended any Company Presentations: (a) you
    understand and acknowledge that the Joint Global Coordinators and Book Running Lead Managers


                                                     2
    may not have knowledge of the statements that the Company or its agents may have made at such
    Company Presentations and are, therefore, unable to determine whether the information provided to
    you at such Company Presentations may have included any material misstatements or omissions, and,
    accordingly, you acknowledge that the Joint Global Coordinators and Book Running Lead Managers
    have advised you not to rely in any way on any information that was provided to you at such Company
    Presentations, and (b) confirm that you have not been provided any material information that was not
    publicly available;

•   neither the Company nor the Joint Global Coordinators and Book Running Lead Managers are making
    any recommendation to you, nor advising you regarding the suitability of any transactions it may enter
    into in connection with the Issue; your participation in the Issue is on the basis that you are not and will
    not be a client of the Joint Global Coordinators and Book Running Lead Managers and the Joint
    Global Coordinators and Book Running Lead Managers have no duties or responsibilities to you for
    providing the protection afforded to their clients or customers or for providing advice in relation to the
    Issue and are in no way acting in a fiduciary capacity;

•   you are aware and understand that the Securities are being offered only to QIBs and are not being
    offered to the general public and the allocation and allotment of the Securities shall be on a
    discretionary basis at the discretion of the Company and the Joint Global Coordinators and Book
    Running Lead Managers;

•   you have made, or have been deemed to have made, as applicable, the representations set forth in the
    section “Transfer Restrictions”;

•   you have been provided a serially numbered copy of this Placement Document and have read this
    Placement Document in its entirety;

•   that in making your investment decision (i) you have relied on your own examination of the Company
    and its Subsidiaries and the terms of the Issue, including the merits and risks involved, (ii) you have
    made your own assessment of the Company, its Subsidiaries, the Securities and the terms of the Issue
    based on such information as is publicly available, (iii) you have consulted your own independent
    advisors (including tax advisors) or otherwise have satisfied yourself concerning, without limitation,
    the effects of local laws and taxation matters, (iv) you have relied solely on the information contained
    in the Placement Document and no other disclosure or representation by the Company or any other
    party, and (v) you have received all information that you believe is necessary or appropriate in order to
    make an investment decision in respect of the Company and the Securities;

•   you have such knowledge and experience in financial and business matters as to be capable of
    evaluating the merits and risks of the investment in the Securities and you and any accounts for which
    you are subscribing the Securities (i) are each able to bear the economic risk of the investment in the
    Securities, (ii) will not look to the Company and/or the Joint Global Coordinators and Book Running
    Lead Managers for all or part of any such loss or losses that may be suffered, (iii) are able to sustain a
    complete loss on the investment in securities (iv) have no need for liquidity with respect to the
    investment in the Securities, and (v) have no reason to anticipate any change in your or their
    circumstances, financial or otherwise, which may cause or require any sale or distribution by you or
    them of all or any part of the Securities;

•   that where you are acquiring the Securities for one or more managed accounts, you represent and
    warrant that you are authorized in writing, by each such managed account to acquire the Securities for
    each managed account and to make (and you hereby make) the representations, acknowledgements and
    agreements herein for and on behalf of each such account, reading the reference to “you” to include
    such accounts;

•   you are not a promoter of the Company or any of its affiliates and are not a person related to the
    Promoter, either directly or indirectly and your Bid does not directly or indirectly represent the


                                                      3
    Promoter or Promoter Group of the Company;

•   you have no rights under a shareholders’ agreement or voting agreement with the Promoters or persons
    related to the promoter, no veto rights or right to appoint any nominee director on the Board of
    Directors of the Company other than such rights acquired in the capacity of a lender not holding any
    Securities of the Company, which shall not be deemed to be a person related to the Promoter;

•   you will have no right to withdraw your Bid after the Bid Closing Date;

•   you are eligible to Bid and hold Securities so allotted together with any Securities of the Company held
    by you prior to the Issue, you further confirm that your holding upon the issue of the Securities shall
    not exceed the level permissible as per any applicable regulation;

•   the Bids submitted by you would not eventually(including after the exercise of Warrants that may be
    allotted to you) result in triggering a tender offer under the Securities and Exchange Board of India
    (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended (the “Takeover
    Code”);

•   to the best of your knowledge and belief, together with other QIBs in the Issue that belong to the same
    group or are under common control as you, the allotment under the present Issue shall not exceed 50%
    of the Issue. For the purposes of this representation:

    a.   the expression “belongs to the same group” shall derive meaning from the concept of “companies
         under the same group” as provided in sub-section (11) of Section 372 of the Companies Act, 1956,
         as amended (the “Companies Act”); and

    b.   “control” shall have the same meaning as is assigned to it by clause (1) of Regulation 2 of the
         Takeover Code;

•   you shall not undertake any trade in the Securities credited to your depository participant account until
    such time that the final listing and trading approval for the Securities is issued by the Stock Exchanges
    as applicable;

•   you are aware that (i) applications have been made to each of the Stock Exchanges for in-principle
    approval for listing and admission of the Shares and Warrants for trading on the Stock Exchanges’, (ii)
    applications have been made to the NSE and the BSE for in principal approval for listing and
    admission of the NCD’s for trading on the NSE and BSE,and (iii) in each cases the application for the
    final listing and trading approval will be made only after the Allotment of the Securities in the Issue,
    and there can be no assurance that such final approval will be obtained on time or at all;

•   you are aware and understand that the Joint Global Coordinators and Book Running Lead Managers
    will have entered into a placement agreement with the Company whereby the Joint Global
    Coordinators and Book Running Lead Managers have, subject to the satisfaction of certain conditions
    set out therein, undertaken jointly and severally to seek to procure purchasers for the Securities on the
    terms and conditions set forth therein;

•   the contents of this Placement Document are exclusively the responsibility of the Company and that
    neither the Joint Global Coordinators and Book Running Lead Managers nor any person acting on their
    behalf have, or shall have, any liability for any information, representation or statement contained in
    this Placement Document or any information previously published by or on behalf of the Company and
    will not be liable for your decision to participate in the Issue based on any information, representation
    or statement contained in this Placement Document or otherwise. By accepting a participation in this
    Issue, you agree and confirm that you have neither received nor relied on any other information,
    representation, warranty or statement made by or on behalf of the Joint Global Coordinators and Book
    Running Lead Managers or the Company or any other person and neither the Joint Global


                                                     4
    Coordinators and Book Running Lead Managers, the Company or any other person will be liable for
    your decision to participate in the Issue based on any other information, representation, warranty or
    statement that you may have obtained or received;

•   you are eligible to invest in India under applicable laws, including the Foreign Exchange Management
    (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended, and
    have not been prohibited by the SEBI or any regulatory/ Governmental authority from buying, selling
    or dealing in securities;

•   the only information you are entitled to rely on, and on which you have relied in committing
    yourself to acquire the Securities, is contained in this Placement Document, such information being all
    that you deem necessary to make an investment decision in respect of the Securities and that you have
    neither received nor relied on any other information given or representations, warranties or statements
    made by either the Joint Global Coordinators and Book Running Lead Managers or the Company;

•   you understand that the Joint Global Coordinators and Book Running Lead Managers have no
    obligation to purchase or acquire all or any part of the Securities purchased by you in the Issue or to
    support any losses directly or indirectly sustained or incurred by you for any reason whatsoever in
    connection with the Issue, including non-performance by the Company of any of its respective
    obligations or any breach of any representations or warranties by the Company, whether to you or
    otherwise;

•   you agree to indemnify and hold the Company and the Joint Global Coordinators and Book Running
    Lead Managers harmless from any and all costs, claims, liabilities and expenses (including legal fees
    and expenses) arising out of or in connection with any breach of the representations, warranties,
    acknowledgements and agreements in this section; you agree that the indemnity set forth in this
    paragraph shall survive the resale of the Securities by you or on behalf of your managed accounts;

•   you are a sophisticated investor who is seeking to purchase the Securities for your own investment and
    not with a view to distribution;

•   each of the representations, acknowledgements and agreements set forth above shall continue to be
    true and accurate at all times up to and including the Allotment of the Securities;

•   you are purchasing the Securities in an offshore transaction meeting the requirements of Rule 903 or
    904 of Regulation S of the Securities Act;

•   you understand that the Securities have not been and will not be registered under the Securities Act or
    with any securities regulatory authority or any state of the United States and accordingly, may not be
    offered or sold within the United States, except in reliance on an exemption from the registration
    requirements of the Securities Act;

•   you are, at the time the Securities are purchased pursuant to Regulation S, located outside the United
    States (within the meaning of Regulation S) and you are not an affiliate of the Company or a person
    acting on behalf of such an affiliate; and

•   the Company, the Joint Global Coordinators and Book Running Lead Managers, their respective
    affiliates and others will rely on the foregoing representations, warranties, acknowledgements and
    agreements which are given to the Joint Global Coordinators and Book Running Lead Managers for
    their benefit and that of the Company and are irrevocable.




                                                    5
                               Off-Shore Derivative Instruments (P-Notes)

Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms
of Regulation 15A(1) of the Securities and Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995, as amended (the “FII Regulations”), foreign institutional investors as defined in the FII
Regulations (referred to as “FIIs”), including FII affiliates of the Joint Global Coordinators and Book
Running Lead Managers, may issue, or otherwise deal in, off-shore derivative instruments such as
participatory notes, equity-linked notes or any other similar instruments against Securities allocated in the
Issue (all such off-shore derivative instruments referred to herein as “P-Notes”), for which they may
receive compensation from the purchasers of such instruments. P-Notes may only be issued to entities
which are regulated by appropriate foreign regulatory authorities, subject to compliance with “know your
client” requirements. An FII shall also ensure that no further issue or transfer of any instrument referred to
above is made to any person other than such entities regulated by appropriate foreign regulatory authorities.
P-Notes have not been and are not being offered or sold pursuant to this Placement Document. This
Placement Document does not contain any information concerning any P-Notes or the issuer(s) of any P-
Notes, including, without limitation, any information regarding any risk factors relating thereto. In terms of
the FII Regulations as amended with effect from May 22, 2008, no sub-account of an FII is permitted
directly and indirectly to issue P-Notes.

Any P-Notes that may be issued are not securities of the Company and do not constitute any obligations of,
claim on or interests in the Company. The Company has not participated in any offer of any P-Notes, or in
the establishment of the terms of any P-Notes, or in the preparation of any disclosure related to any P-
Notes. Any P-Notes that may be offered are issued by, and are solely the obligations of, third parties that
are unrelated to the Company. The Company does not make any recommendation as to any investment in
P-Notes and does not accept any responsibility whatsoever in connection with any P-Notes. Any P-Notes
that may be issued are not securities of the Joint Global Coordinators and Book Running Lead Managers
and do not constitute any obligations of, or claim on, the Joint Global Coordinators and Book Running
Lead Managers. FII affiliates of the Joint Global Coordinators and the Book Running Lead Managers may
purchase, to the extent permissible under law, securities in the Issue, and may issue P-Notes in respect
thereof.
Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate
disclosure as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from
the issuer(s) of such P-Notes. Neither SEBI nor any other regulatory authority has reviewed or
approved any P-Notes or any disclosure related thereto. Prospective investors are urged to consult
with their own financial, legal, accounting and tax advisors regarding any contemplated investment
in P-Notes, including whether P-Notes are issued in compliance with applicable laws and regulations.

                                Disclaimer Clause of the Stock Exchanges

As required, a copy of this Placement Document has been submitted to the Stock Exchanges. The Stock
Exchanges do not in any manner:

1.   warrant, certify or endorse the correctness or completeness of any of the contents of this Placement
     Document;

2.   warrant that the Company’s Securities will be listed or will continue to be listed on the Stock
     Exchanges; or

3.    take any responsibility for the financial or other soundness of this Company, its management or any
      scheme or project of this Company; and
it should not for any reason be deemed or construed to mean that this Placement Document has been
cleared or approved by the Stock Exchanges. Every person who desires to apply for or otherwise acquires
any Securities may do so pursuant to an independent inquiry, investigation and analysis and shall not have
any claim against the Stock Exchanges whatsoever by reason of any loss which may be suffered by such
person consequent to or in connection with such subscription/acquisition whether by reason of anything
stated or omitted to be stated herein or for any other reason whatsoever.


                                                      6
  CERTAIN CONVENTIONS, PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET
          DATA, CURRENCY OF PRESENTATION AND EXCHANGE RATES

Certain Conventions

In this Placement Document, unless the context otherwise indicates or implies, all references to “you”,
“offeree”, “purchaser”, “subscriber”, “recipient”, “investors” and “potential investors” are to the
prospective investors in this Issue, references to “BFL”, the “Company”, “Our Company”, or the “Issuer”
are to Bharat Forge Limited on an unconsolidated basis, references to “we”, “us”, “our” are to Bharat Forge
Limited and its Subsidiaries on a consolidated basis. References in this Placement Document to “India” are
to the Republic of India and the “Government” or the “Central Government” or the “State Government” are
to the Government of India, central or state, as applicable. All references herein to “U.S.” or the “United
States” are to the United States of America and its territories and possessions.

The Company and its Indian Subsidiary prepare their financial statements in accordance with Indian GAAP
and the Companies Act. Indian GAAP differs in certain respects from IFRS and U.S. GAAP. The Company
does not provide a reconciliation of its financial statements to IFRS or US GAAP. Also, see “Risk Factors -
Significant differences exist between Indian GAAP and other accounting principles with which investors
may be more familiar.”

In this Placement Document, certain monetary amounts have been subject to rounding adjustments;
accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures
which precede them.

Unless stated otherwise, the financial data in this Placement Document is derived from our consolidated
financial statements prepared in accordance with Indian GAAP. The fiscal year of BFL and its Indian
subsidiary commences on April 1 of each year and ends on March 31 of the succeeding year, so all
references to a particular “fiscal year” or “Fiscal” are to the twelve-month period ended on March 31 of
that year. However, the financial year of our foreign subsidiaries is the calendar year, that is, the twelve
month period ended on December 31, of that year. The financial data of all our European Subsidiaries in
this Placement Document is prepared in accordance with IFRS. The financial data of BFA in this
Placement Document is prepared in accordance with U.S GAAP. The financial data of FAW Bharat Forge
in this Placement Document is prepared in accordance with Chinese GAAP.

Market Data/Industry Data

Market data and certain industry forecasts used throughout this Placement Document have been obtained
from market research, publicly available information and industry publications. Industry publications
generally state that the information that they contain has been obtained from sources believed to be reliable
but that the accuracy and completeness of that information is not guaranteed. Similarly, internal surveys,
industry forecasts and market research, while believed to be reliable, have not been independently verified
and neither the Company nor the Joint Global Coordinators and Book Running Lead Managers make any
representation or completeness as to the accuracy or completeness of that information. While the Company
believes that its internal estimates are reasonable, such estimates have not been verified by any independent
sources and neither the Company nor the Joint Global Coordinators and Book Running Lead Managers can
assure potential investors as to their accuracy.

Currency of Presentation

In this Placement Document, all references to “Rupees”, “Rs.” or “INR” refer to Indian Rupees, the official
currency of India; references to the singular also refers to the plural and one gender also refers to any other
gender, wherever applicable, and the words “Lakh” or “Lac” mean “100 thousand” and the word “million”
means “10 lakh” and the word “crore” means “10 million” or “100 lakhs” and the word “billion” means
“1,000 million” or “100 crores”.

Financial Data


                                                      7
All references to “USD”, “U.S. Dollars”, “United States Dollars” or “US$” refer to the United States
Dollar, the legal currency of the United States of America, “Euro” or “€” refer to Euro, the legal currency
of the European Union, “GBP” or “£” refer to the British Pound Sterling, the legal currency of Great
Britain, “RMB” refers to the Chinese Renminbi, the legal currency of the Republic of China, and “SEK”
refers to the Swedish Krona, the legal currency of Sweden.

Exchange Rates

The following table sets forth, for the periods indicated, information with respect to the exchange rate
between the Indian Rupee and the U.S. Dollar (in Rupees per U.S. Dollar). The exchange rate as at March
31, 2009 was Rs. 50.95 = USD 1.00. No representation is made that the Rupee amounts actually represent
such U.S. Dollar amounts or could have been or could be converted into U.S. Dollars at the rates indicated,
any other rate or at all.

Fiscal Year           Period End             Average               High                  Low

2007                  43.5900                45.2857               46.9500               43.1400

2008                  39.9700                40.2413               43.1500               39.2700

2009                  50.9500                45.9140               52.0600               39.8900

Source: Reserve Bank of India – www.rbi.org.in

The following table sets forth, for the periods indicated, information with respect to the exchange rate
between the Indian Rupee and the Euro (in Rupees per Euro). The exchange rate as at March 31, 2009 was
Rs.67.2264 = EUR 1.00. No representation is made that the Rupee amounts actually represent such Euro
amounts or could have been or could be converted into Euros at the rates indicated, any other rate or at all.

Fiscal Year           Period End             Average               High                  Low

2007                  58.1400                58.1079               59.9000               53.7700

2008                  63.0900                56.9900               64.4800               54.3200

2009                  67.4800                65.1429               69.1700               60.5700

Source: Reserve Bank of India – www.rbi.org.in

The exchange rates as at December 31, 2009 for convenience conversion are as follows:

Currency                             Equivalent in Rupees                 Source

1 USD                                46.68                                RBI

1 Euro                               67.07                                RBI

1 GBP                                75.03                                RBI

1 SEK                                6.49                                 Swedish Central Bank



                                                       8
1 RMB   6.84       International Monetary Fund




               9
                                FORWARD LOOKING STATEMENTS

All statements contained in this Placement Document that are not statements of historical fact constitute
“forward-looking statements”. Investors can generally identify forward-looking statements by terminology
such as “aim”, “anticipate”, “believe”, “continue”, “estimate”, “expect”, “intend”, “may”, “objective”,
“plan”, “potential”, “project”, “pursue”, “shall”, “should”, “will”, “would”, “could”or other words or
phrases of similar import. Similarly, statements that describe our strategies, objectives, plans or goals are
also forward-looking statements.

All statements regarding our expected financial condition and results of operations, business plans,
including potential acquisition and prospects are forward-looking statements. These forward-looking
statements include statements as to our business strategy, our order book, revenue and profitability, planned
projects and other matters discussed in this Placement Document regarding matters that are not historical
facts. These forward-looking statements and any other projections contained in this Placement Document
(whether made by us or any third party) are predictions and involve known and unknown risks,
uncertainties, assumptions and other factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by
such forward-looking statements or other projections. Important factors that could cause actual results,
performance or achievements to differ materially include, among others:

•   general economic and business conditions in India and other countries;

•   performance of the automobile sector;

•   our ability to manage our recent and proposed diversification;

•   foreign exchange rates;

•   competition in the industry in which we operate;

•   industrial action involving our employees;

•   adverse weather and natural disasters; and

•   our ability to raise money in normal course of business as well as to fund our business plans.

Additional factors that could cause actual results, performances or achievements to differ materially
include, but are not limited to, those discussed under the sections “Risk Factors”, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”, “Industry Overview” and “Our
Business”.

The forward-looking statements contained in this Placement Document are based on the beliefs of our
management, as well as the assumptions made by, and information currently available to, our management.
Although we believe that the expectations reflected in such forward-looking statements are reasonable at
this time, we cannot assure investors that such expectations will prove to be correct. Given these
uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. If
any of these risks and uncertainties materialize, or if any of our underlying assumptions prove to be
incorrect, our actual results of operations or financial condition could differ materially from that described
herein as anticipated, believed, estimated or expected. All subsequent forward-looking statements
attributable to us are expressly qualified in their entirety by reference to these cautionary statements.




                                                     10
                              ENFORCEMENT OF CIVIL LIABILITIES

Bharat Forge Limited is a company incorporated with limited liability under the laws of India. Further, two
of its subsidiaries are also incorporated in India. Almost all of the Company’s Directors and senior
management with the exception of two Directors are residents of India, and a substantial part of the assets
of the Company is located in India. As a result, it may not be possible for investors to effect service of
process upon the Company or such persons outside India, or to enforce judgments obtained against such
parties outside India.

Recognition and enforcement of foreign judgments is provided for under Section 13 and Section 44A of the
Code of Civil Procedure, 1908, as amended (“Civil Code”). Section 13 of the Civil Code provides that
foreign judgments shall be conclusive regarding any matter directly adjudicated upon, except:

•   where the judgment has not been pronounced by a court of competent jurisdiction;

•   where the judgment has not been given on the merits of the case;

•   where it appears on the face of the proceedings that the judgment is founded on an incorrect view of
    international law or a refusal to recognize the law of India in cases to which such law is applicable;

•   where the proceedings in which the judgment was obtained were opposed to natural justice;

•   where the judgment has been obtained by fraud; or

•   where the judgment sustains a claim founded on a breach of any law then in force in India.

India is not a party to any international treaty in relation to the recognition or enforcement of foreign
judgments. However Section 44A of the Civil Code provides that where a foreign judgment has been
rendered by a superior court, within the meaning of such section, in any country or territory outside India
which the Government has by notification declared to be a reciprocating territory, it may be enforced in
India by proceedings in execution as if the judgment had been rendered by an appropriate court in India.
However, Section 44A of the Civil Code is applicable only to monetary decrees not being in the nature of
amounts payable in respect of taxes, other charges of a similar nature or of a fine or other penalties and
does not include arbitration awards.

The United Kingdom, Singapore and Hong Kong have been declared by the Government to be a
reciprocating territory for the purposes of Section 44A of the Civil Code, but the United States has not been
so declared. A judgment of a court of a country which is not a reciprocating territory may be enforced only
by a fresh suit upon the judgment and not by proceedings in execution. The suit has to be filed in India
within three years from the date of the judgment in the same manner as any other suit filed to enforce a
civil liability in India.

It is unlikely that a court in India would award damages on the same basis as a foreign court if an action
was brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if in
its view the amount of damages awarded was excessive or inconsistent with Indian public policy. A party
seeking to enforce a foreign judgment in India is required to obtain approval of the Reserve Bank of India
to repatriate outside India any amount recovered pursuant to the execution of such a judgment. In addition,
any judgment denominated in a foreign currency would be converted into Indian rupees on the date of the
judgment and not on the date of payment.




                                                     11
                               DEFINITIONS AND ABBREVIATIONS

Unless otherwise defined or the context otherwise indicates or requires, certain capitalized terms used in
this Placement Document have the meaning set forth below:

Company related Terms

              Term                                              Description



Articles or Articles of         The articles of association of the Company, as amended.
Association

Auditors                        Dalal & Shah, Chartered Accountants, the statutory auditors of the Company.

“Bharat Forge”, “BFL”, the      Bharat Forge Limited (formerly known as Bharat Forge Company Limited), a
“Issuer”, “the Company” or      public limited company incorporated under the provisions of the Companies
“our Company”                   Act, 1956 and whose registered office is Mundhwa, Pune Cantonment, Pune
                                411 036, Maharashtra, India.

Bharat Forge America/ BFA       Bharat Forge America Inc.

BFSSL                           Bharat Forge Scottish Stampings Limited.

Bharat Forge Kilsta             Bharat Forge Kilsta AB.

Bharat Forge                    Bharat Forge Aluminiumtechnik Verwaltungs GmbH.
Aluminiumtechnik

Board of Directors or Board     The Board of Directors of the Company or a Committee constituted thereof.

CDP Bharat Forge                CDP Bharat Forge GmbH.

Director(s)                     Director(s) of the Company.

Equity Shares                   The equity shares of the Company of a face value of Rs. 2 each.

FAW Bharat Forge                FAW Bharat Forge (Changchun) Company Limited.

FCCB                            Foreign Currency Convertible Bonds

GDR                             Global Depository Receipts

Memorandum or                   The memorandum of association of the Company, as amended.
Memorandum of Association

Promoter                        Mr. B. N. Kalyani

Registered Office and/or        The registered and corporate office of the Company located at Mundhwa,
Registered and Corporate        Pune Cantonment, Pune 411 036, Maharashtra, India.
Office




                                                    12
            Term                                               Description



Registrar of Companies or     The Registrar of Companies, Pune, Maharashtra.
RoC

Subsidiaries                  The subsidiaries of the Company as enumerated, in the consolidated financial
                              statements of the Company beginning on page F1 of this Placement
                              Document.

“We”, “us” or “our”           The Company and its Subsidiaries, on a consolidated basis.

Issue related Terms

            Term                                              Description



Allocated or Allocation     The allocation of the Shares and the NCDs along with the Warrants, as the case
                            may be, following the determination of the Share Issue Price, the NCDs Issue
                            Price and the Warrant Issue Price, as the case may be, to QIBs on the basis of
                            the Application Forms submitted by them, in consultation with the Joint Global
                            Coordinators and Book Running Lead Managers and in compliance with
                            Chapter VIII of the SEBI ICDR Regulations, 2009 and the SEBI Debt
                            Regulations to the extent applicable.

Allottees                   QIBs to whom Securities are issued and allotted pursuant to the Issue.

Allotment / Allotted        Unless the context otherwise requires, the issue and allotment of the Shares, the
                            NCDs along with the Warrants, as the case may be, pursuant to this Issue.

Bid                         An indication of QIBs’ interest, including all revisions and modifications
                            thereto, as provided in the Application Form, to subscribe for the Shares, the
                            NCD along with the Warrants, as the case may be, in this Issue.

Bid Closing Date            April 23, 2010

Application Form            The form (including any revisions thereof) pursuant to which a QIB shall submit
                            a Bid in the Issue including the Share Application Form, the NCD Application
                            Form and the Warrant Application Form.

Bid Opening Date            The date on which the Company (or the Joint Global Coordinators and Book
                            Running Lead Managers, on behalf of the Company) shall commence the
                            acceptance of the Application Forms.

BSE                         The Bombay Stock Exchange Limited.

CAN/ Confirmation of        The note or advice or intimation to not more than 49 QIBs confirming the
Allocation Note             Allocation of Securities to such QIBs after determination of the Share Issue
                            Price, the final terms of the NCDs and the Warrant Issue Price.

Companies Act               The Companies Act, 1956, as amended.



                                                  13
          Term                                                Description


Debenture Trust Deed        The Debenture Trust Deed dated on or about the Closing Date in terms of which
                            the principal amount of the NCDs, the interest, the redemption premium (as
                            applicable) and all other monies payable in respect of the NCDs are secured by
                            a mortgage in favour of the Debenture Trustee.

Depositories Act            Depositories Act, 1996, as amended, from time to time

Depository                  A depository registered with SEBI under the SEBI (Depositories and
                            Participant) Regulations, 1996

DER                         Debt Equity Ratio

DP ID                       Depository Participant Identity

DP/Depository Participant   A depository participant as defined under the Depositories Act

Debenture Trustee           Bank of Maharashtra, Pune

Exercise Right              The right of the Warrantholder to subscribe, at the option of the Warrantholder
                            by way of exercise of the Warrant at any time during the Warrant Exercise
                            Period at the Warrant Exericise Price, in the manner set forth in, and on the
                            terms and conditions of, the Terms and Conditions of the Warrants, to one (1)
                            fully paid Equity Share

FII                         Foreign Institutional Investor (as defined under the Securities and Exchange
                            Board of India (Foreign Institutional Investors) Regulations, 1995, as amended)
                            registered with the SEBI under applicable laws in India.

Floor Price                 The floor price of Rs. 271.93 for the Shares and the Warrants, which has been
                            calculated in accordance with Chapter VIII of the SEBI Regulations. In terms of
                            the SEBI Regulations, the Share Issue Price and the sum of the Warrant Issue
                            Price and the Warrant Exercise Price cannot be lower than the Floor Price.

Issue                       The offer, issue and allotment of 10,000,000 Shares and 1760 NCDs, along with
                            6,500,000 Warrants to QIBs, pursuant to Chapter VIII of the SEBI Regulations
                            and the SEBI Debt Regulations to the extent applicable.

Joint Global Coordinators   Axis Bank Limited, Citigroup Global Markets India Private Limited and Kotak
and Book Running Lead       Mahindra Capital Company Limited.
Managers

NCD Issue Price             Rs. 1,000,000 per NCD.

NCD Issue Size              The issue of 1760 NCDs aggregating to Rs. 1760 million.

Listing Agreements          The listing agreements executed between our Company and the Stock
                            Exchanges.

Mutual Fund Portion         A minimum of 10% of the Issue Size i.e. up to 1,000,000 Shares and 650,000
                            Warrants shall be available for Allocation to Mutual Funds only, and up to


                                                  14
             Term                                           Description


                          9,000,000 Shares shall be available for Allocation to all QIBs, including Mutual
                          Funds. If no Mutual Fund is agreeable to take up the minimum portion
                          mentioned above, such minimum portion or part thereof may be Allotted to
                          other eligible QIBs.

NCDs                      Secured redeemable non-convertible debentures of face value of Rs. 1,000,000
                          each that will be, unless previously redeemed in accordance with the provisions
                          of the Terms and Conditions of the NCDs, redeemed at par at 35:35:30 per cent
                          of their principal amount on April 28, 2014, April 28, 2015 and April 28, 2016
                          and will entitle the holders thereof at the interest rate of 10.75 % per annum
                          payable on a semi annual basis in accordance with the terms and conditions of
                          the NCDs.
NCD Application Form      The form (including any revisions thereof) pursuant to which a QIB shall submit
                          a Bid for the NCDs in the Issue.
NSE                       The National Stock Exchange of India Limited.

Pay-in Date               The last date specified in the CAN sent to QIBs for payment of the Share Issue
                          Price, the NCD Issue Price and the Warrant Issue Price as applicable.

Payment Collection Bank   Axis Bank Limited having its registered office at Trishul, Opp. Samartheshwar
                          Temple, Law Garden, Ellis Bridge, Ahmedabad 380006 Gujarat.

Preliminary Placement     The Preliminary Placement Document dated April 21, 2010 issued in
Document                  accordance with Chapter VIII of the SEBI Regulations.

Placement Document        The Placement Document dated April 26, 2010 issued in accordance with
                          Chapter VIII of the SEBI Regulations.

PSE                       Pune Stock Exchange Limited.

QIB or Qualified          A Qualified Institutional Buyer as defined under Regulation 2(1)(zd) of Chapter
Institutional Buyer       I of the SEBI Regulations.

Regulation S              Regulation S, of the Securities Act.

SEBI                      The Securities and Exchange Board of India.

SEBI Act                  The Securities and Exchange Board of India Act, 1992, as amended.

SEBI Debt Regulations     The Securities and Exchange Board of India (Issue and Listing of Debt
                          Securities), 2008

SEBI Regulations          The Securities and Exchange Board of India (Issue of Capital and Disclosure
                          Requirements) Regulations, 2009, as amended.

Share Issue Price         Rs. 272 including the face value of Rs. 2 and a premium of Rs. 270.

Securities                The Shares, NCDs and the Warrants being offered pursuant to this Issue.




                                                15
           Term                                              Description



Securities Act             The U.S. Securities Act of 1933, as amended.

Share Application Form     The form (including any revisions thereof) pursuant to which a QIB shall submit
                           a Bid for the Equity Shares in the Issue.

Special Cash Account       A special bank account opened by the Company with the Payment Collection
                           Bank in terms of the arrangement between the Company and the Payment
                           Collection Bank.

Stock Exchanges            The BSE, the NSE and the PSE.

Warrant Application Form   The form (including any revisions thereof) pursuant to which a QIB shall submit
                           a Bid for the Warrants in the Issue.

Warrant Exercise Form      The form pursuant to which a Warrantholder shall submit an exercise notice to
                           exercise the Exercise Right.

Warrant Exercise Price     Rs. 272

Warrant Issue Price        Rs. 2

Warrants                   Warrants being offered in this Issue, unless specified otherwise, which are
                           exchangeable for one (1) Equity Share for every Warrant during the Warrant
                           Exercise Period at the Warrant Exercise Price.
Warrants Issue Size        The issue of 6,500,000 Warrants aggregating to Rs. 1768 million assuming all
                           the Warrants are converted into Equity Shares during the Warrant Exercise
                           Period at the Warrant Exercise Price.

Industry related Terms

           Term                                              Description



ACEA                       European Automobile Manufacturers’ Association.

ACMA                       Automotive Component Manufacturers’ Association of India.

BOP                        Balance of Plants.

CAD                        Computer Aided Design.

CAE                        Computer Aided Engineering.

CAM                        Computer Aided Manufacturing.

CER                        Certified Emission Reduction.

CNC                        Computerised Numerical Control.


                                                16
          Term                                              Description



DEPB                     Duty Entitlement Pass Book.

MT                       Metric Ton.

MTR                      Meter Ton.

MSEDCL                   Maharashtra State Electricity Distribution Company Limited.

OPEC                     Organisation of the Petroleum Exporting Countries.

QIP                      Qualified Institutions Placement

SIAM                     Society of Indian Automobile Manufacturers.

General Terms/Abbreviations

          Term                                              Description



AGM                      Annual General Meeting.

AS                       Accounting Standards.

Bonus Act                The Payment of Bonus Act, 1965, as amended.

CDSL                     Central Depository Services Limited.

CENVAT                   Central Value Added tax.

CESTAT                   The Customs, Excise and Service Tax Appellate Tribunal.

CII                      Confederation of Indian Industries.

Civil Code               The Code of Civil Procedure, 1908, as amended.

CLRA                     The Contract Labour (Regulation and Abolition) Act, 1970, as amended.

Delisting Regulations    The Securities and Exchange Board of India (Delisting of Equity Shares)
                         Regulations, 2009, as amended.

Depositories Act         The Depositories Act, 1996, as amended.

Depository               A depository registered with SEBI under the Securities and Exchange Board of
                         India (Depositories and Participant) Regulations, 1996, as amended.

Depository Participant   A depository participant as defined under the Depositories Act.




                                                 17
          Term                                                Description



EBITDA                     Earnings before interest, tax and depreciation of assets.

EGM                        Extra-ordinary general Meeting.

EPA                        The Environment (Protection) Act, 1986, as amended.

EPF Act                    The Employees Provident Funds and Miscellaneous Provisions Act, 1952, as
                           amended.

EPS                        Earnings per Share.

ESI Act                    The Employees State Insurance Act, 1948, as amended.

Factories Act              The Factories Act, 1948, as amended.

FDI                        Foreign Direct Investment.

FEMA                       The Foreign Exchange Management Act, 1999, as amended.

FIPB                       Foreign Investment Promotion Board.

FVCI                       Foreign Venture Capital Investors (as defined under the Securities and Exchange
                           Board of India (Foreign Venture Capital Investors) Regulations, 2000, as
                           amended) registered with the SEBI under applicable laws in India.

GAAP                       Generally Accepted Accounting Principles.

GDP                        Gross Domestic Product.

GIR Number                 General Index Registration Number.

Gratuity Act               The Payment of Gratuity Act, 1972, as amended.

IAS                        International Accounting Standards.

ICAI                       Institute of Chartered Accountants of India.

IFRS                       International Financial Recognition Standards.

Indian GAAP                Generally Accepted Accounting Principles in India prescribed by ICAI.

Insider Trading Regulations The Securities and Exchange Board of India (Prohibition of Insider Trading)
                            Regulations, 1992, as amended.

IT Act or the Income Tax   The Income Tax Act, 1961, as amended.
Act

MAT                        Minimum Alternate Tax.




                                                  18
         Term                                           Description



Minimum Wages Act      The Minimum Wages Act, 1948, as amended.

Mutual Fund            A mutual fund registered with SEBI under the Securities and Exchange Board of
                       India (Mutual Funds) Regulations, 1996, as amended.

NRI                    Non Resident Indian.

NSDL                   The National Securities Depository Limited.

OCB or Overseas        A company, partnership, society or other corporate body owned directly or
Corporate Body         indirectly to the extent of at least 60% by NRIs including overseas trusts, in
                       which not less than 60% of beneficial interest is irrevocably held by NRIs
                       directly or indirectly and which was in existence on October 3, 2003 and
                       immediately before such date had taken benefits under the general permission
                       granted to OCBs under the FEMA. OCBs are not permitted to invest in this
                       Issue.

PA                     Per annum.

PAN                    Permanent Account Number.

Payment of Wages Act   The Payment of Wages Act, 1936, as amended.

PLR                    Prime Lending Rate.

RBI                    The Reserve Bank of India.

SEZ                    Special Economic Zone.

SCRA                   The Securities Contracts (Regulation) Act 1956, as amended.

SCRR                   The Securities Contracts (Regulation) Rules, 1957, as amended.

SICA                   Sick Industrial Companies (Special Provisions) Act, 1985, as amended.

STT                    Securities Transaction Tax.

U.S.                   United States of America.

US GAAP                Generally accepted accounting standards of United States of America.

Takeover Code          The Securities and Exchange Board of India (Substantial Acquisition of Shares
                       and Takeovers) Regulations, 1997, as amended.




                                              19
                                    SUMMARY OF THE ISSUE

The following is a general summary of the terms of the Issue. This summary should be read in
conjunction with, and is qualified in its entirety by the information appearing elsewhere in this
Placement Document, including under the sections “Risk Factors”, “Use of Proceeds”, “Placement
and Lock-up”, “Issue Procedure”,“Description of the Shares”, Terms and Conditions of the Non-
Convertible Debentures” and “Terms and Conditions of the Warrants”.

10.75 per cent. Secured Redeemable Non-Convertible Debentures due in 3 yearly installments
starting at the end of 4th year to the end of 6th year, in the ratio of 35:35:30

Issuer                    Bharat Forge Limited

Instrument                Secured Redeemable Non-Convertible Debentures of the face value of Rs.
                          1,000,000 each due each due in 3 yearly installments starting at the end of
                          4th year to the end of 6th year, in the ratio of 35:35:30 (the “NCDs”) for
                          cash

Face Value                Rs. 1,000,000 per NCD

NCD Issue Price           Rs. 1,000,000 per NCD

NCD Issue Size            The issue of 1760 NCDs aggregating to Rs. 1,760,000,000.

Eligible investors for    Such QIBs as defined in Regulation 2(1)(zd) of the SEBI Regulations and
NCDs                      are persons resident in India as defined under FEMA. See “Issue Procedure
                          - Qualified Institutional Buyers”.

Minimum                   1 NCD or in multiples thereof
Subscription

Redemption Date           In 3 yearly installments starting at the end of 4th year to the end of the 6th
                          year in the ratio 35:35:30 from the date of deemed date of allotment.

Redemption Price          1,000,000

Record Date               15 days prior to the due date of payment of interest or redemption date.

Tenor                     6 years

Security                  The principal amount of the NCDs, interest, redemption premium and any
                          other monies payable by the Issuer in respect of the NCDs will be secured
                          by a first charge on the assets of the Company with minimum asset cover
                          of 1.25 times. The Security has to be created within 90 days of allotment.

Coupon                    10.75 per cent

Coupon Payment            Semi annual
Frequency

Yield to Maturity         11.0389 % per annum

Mode of Payment of        Cheque/ demand draft/ electronic mode
Interest for
Principle
Status and Ranking        The NCDs constitute direct and secured obligations of the Company and
                          shall rank pari passu and without any preference or priority among
                          themselves. Subject to any obligations preferred by mandatory provisions
                          of the law prevailing from time to time, the NCDs shall also, as regard the
                          principal amount of NCDs, all interest, redemption premium (as
                          applicable) and all other monies secured in respect of NCDs, rank pari

                                                 20
                      passu with all other present direct and secured obligations of the Company
                      to be reworded considering the NCDs would have a first charge on the
                      assets.

Events of Default     See Condition 8 of the “Terms and Conditions Non-Convertible
                      Debentures”.

Debenture Trustee     Bank of Maharashtra, Pune

Credit Rating         “LA+” by ICRA Limited

Governing Law         Indian law

Form of Issuance      The issuance of the NCDs shall only be in a dematerialized form. See
                      “Terms and Conditions of the Non-Convertible Debentures”.

Listing               The Company has made applications to the NSE and the BSE to obtain in-
                      principle approval for the listing of the NCDs on the WDM segments of the
                      NSE and the BSE, respectively.

Trading               The trading of the NCDs would be in dematerialized form only for all QIBs
                      in the WDM segments of the NSE and the BSE, respectively.

Depositories          NSDL and CDSL

Transfer              The NCDs being Allotted pursuant to this Issue shall not be sold for a
Restrictions          period of one year from the date of Allotment except on the floor of the
                      Stock Exchanges.

Use of Proceeds       See “Use of Proceeds”.

Pay-in Date           Last date specified in the CAN sent to QIBs for payment of subscription
                      amounts

Closing               The Allotment of the NCDs is expected to be made on or about April 28,
                      2010 (“Closing Date”).

ISIN No.              Applied for

Warrants

Issuer                Bharat Forge Limited

Instrument            Warrants of the Issuer that entitle the Warrantholder to subscribe to 1
                      Equity Share for each Warrant held at the Warrant Exercise Price at any
                      time during the Warrant Exercise Period

Warrant Issue Price   Rs. 2. Investors must note that the Warrant Issue Price will not be adjusted
                      towards the Warrant Exercise Price, if a Warrant is exercised and will stand
                      forfeited, if a Warrant lapses.

Warrant Exercise      Rs. 272
Price

Warrant Exercise      1 (one) Share for each Warrant
Ratio

Warrant Issue Size    The issue of 6,500,000 Warrants aggregating to Rs. 1,768 million assuming
                      all the Warrants are exchanged into Equity Shares at the Warrant Exercise
                      Price during the Warrant Exercise Period


                                             21
Eligible investors for   QIBs as defined in Regulation 2(1)(zd) of the SEBI Regulations will be
Warrants                 eligible to subscribe to Warrants. See “Issue Procedure - Qualified
                         Institutional Buyers”.

Minimum                  50,000 Warrant or in multiples thereof
Subscription

Warrant Exercise         The Warrants may be exercised at any time during normal business hours
Period                   on and after 10.00 a.m. up to 5:00 p.m. in Mumbai/ Pune on the days of
                         three years after the allotment.

Adjustments to           See, Condition 6 in the “Terms and Conditions of the Warrants”
Warrant Exercise
Price

Floor Price              Rs. 271.93 In terms of the SEBI Regulations, the sum of the Warrant Issue
                         Price and the Warrant Exercise Price cannot be lower than the Floor Price

Equity Shares issued     222,794,316 Equity Shares
and outstanding
immediately prior to
the Issue

Equity Shares to be      Upto 6,500,000 Equity Shares
issued on Exercise of
Warrants*

Equity Shares            232,794,316 Equity Shares
outstanding
immediately after
the Issue of Equity
Shares issued under
this QIP Issuance

Equity Shares issued     239, 294, 316 Equity Shares
and outstanding
immediately
pursuant to exercise
of Warrants during
the Warrant
Exercise Period*

Ranking                  The Equity Shares to be issued upon exercise of Warrants shall be subject
                         to the provisions of the Company’s Memorandum and Articles of
                         Association and shall rank pari passu in all respects with the existing
                         Equity Shares including rights in respect of dividends.

Form of Issuance         The issuance of Warrants in this Issue shall only be in a dematerialized
                         form. See Conditions in the “Terms and Conditions of the Warrants”.

Listing                  The Company has made applications to the NSE, the BSE and the PSE to
                         obtain in-principle approval for the listing of the Warrants on these Stock
                         Exchanges.

Trading                  The trading of the Warrants would be in dematerialized form only for all
                         QIBs in the cash segments of the Stock Exchanges

Depositories             NSDL and CDSL

Transfer                 The Warrants being Allotted pursuant to this Issue shall not be sold for a
Restrictions             period of one year from the date of Allotment except on the floor of the

                                               22
                          Stock Exchanges

Use of Proceeds           See “Use of Proceeds”.

Pay-in Date               Last date specified in the CAN sent to QIBs for payment of subscription
                          amounts

Closing                   The Allotment of the Warrants offered pursuant to this Issue is expected to
                          be made on or about April 28, 2010 (“Closing Date”).

Governing Law             Indian law

ISIN No.                  Applied for
*Assuming that all Warrants held by eligible investors have been exercised during the Warrant
Exercise Period at Warrant Exercise Price and no other Equity Shares are issued by the Company
during the Warrant Exercise Period, including on account of conversion of FCCBs.

Equity Shares:

Issuer                      Bharat Forge Limited

Face Value                  Rs. 2 per Share

Issue Size                  10,000,000 Shares of face value of Rs. 2 each, aggregating Rs. 2,720
                            million

                            A minimum of 10% of the Issue Size i.e. up to 1,000,000 Shares and
                            650,000 Warrants shall be available for Allocation to Mutual Funds
                            only, and up to 9,000,000 Shares shall be available for Allocation to all
                            QIBs, including Mutual Funds. If no Mutual Fund is agreeable to take
                            up the minimum portion mentioned above, such minimum portion or
                            part thereof may be Allotted to other eligible QIBs.

Issue Price                 Rs. 272 per Share

Floor Price                 Rs. 271.93 per Share

Eligible Investors          QIBs as defined in Regulation 2(1)(zd) of the SEBI Regulations. See
                            “Issue Procedure— Qualified Institutional Buyers”

Shares issued and           222,794,316 Shares.
outstanding immediately
prior to the Issue

Shares issued and           232,794,316 Shares
outstanding immediately
after the Issue

Listing                     The Company has obtained in-principle approvals for listing of the
                            Shares issued pursuant to the Issue from the Stock Exchanges on April
                            21, 2010. The Company would make applications to each of the Stock
                            Exchanges to obtain final listing and trading approval for the Shares

Lock-up                     The Company agrees that subject to certain exceptions set forth below,
                            it will not, for a period of up to 90 days from the Closing Date, without
                            the prior written consent of the Joint Global Coordinators and the Book
                            Running Lead Manager (which consent shall not be unreasonably
                            withheld), directly or indirectly: (a) issue, offer, lend, sell, contract to
                            sell or issue, sell any option or contract to purchase, purchase any
                            option or contract to sell or issue, grant any option, right or warrant to
                            purchase, lend or otherwise transfer or dispose of, directly or indirectly,

                                                 23
                         any Shares, or any securities convertible into or exercisable or
                         exchangeable for Shares or publicly announce an intention with respect
                         to any of the foregoing; (b) enter into any swap or other agreement that
                         transfers, directly or indirectly, in whole or in part, any of the economic
                         consequences of ownership of the Shares or any securities convertible
                         into or exercisable or exchangeable for the Shares, (c) deposit Shares or
                         any securities convertible into or exercisable or exchangeable for
                         Shares or which carry the right to subscribe for or purchase Shares in
                         depositary receipt facilities or enter into any transaction (including a
                         transaction involving derivatives) having an economic effect similar to
                         that of a sale or a deposit of Shares in any depositary receipt facility or
                         (d) publicly announce any intention to enter into any transaction
                         whether any such transaction described in (a), (b) or (c) above is to be
                         settled by delivery of the Shares, or such other securities, in cash or
                         otherwise. The foregoing sentence shall not apply to any issuance of
                         shares arising on conversion of warrants which were allotted to the
                         Promoters of the Company on a preferential basis. Provided however,
                         that the foregoing restrictions shall not be applicable to any issue of the
                         Shares by the Company to the extent such issue is required by Indian
                         law.

                         The Promoters of the Company, during the period commencing on the
                         Closing Date and ending 90 days after the Closing Date, agrees and
                         undertakes not to, without the prior written permission of the Global
                         Coordinators and Book Runners do the following (a) directly or
                         indirectly, issue, offer, lend, sell, pledge, contract to sell or otherwise
                         dispose of or grant options, issue warrants or offer rights entitling
                         person to subscribe or purchase any interest in any Promoter Shares or
                         any securities convertible into or exercisable or exchangeable for the
                         Promoter Shares; (b) enter into any swap or other agreement or any
                         transaction that transfers, in whole or in part, directly or indirectly, any
                         of the economic consequences associated with the ownership of the
                         Promoter Shares whether any of the transaction is to be settled by the
                         delivery of the Equity Shares or other securities, in cash or otherwise;
                         or (c) publicly announce any intention to enter into any of the foregoing
                         described in (a) or (b) above.

Transferability          The Shares being Allotted pursuant to this Issue shall not be sold for a
Restrictions             period of one year from the date of Allotment except on the floor of the
                         Stock Exchanges

Use of Proceeds          The gross proceeds of the Issue are expected to total approximately Rs.
                         2,720 million. See “Use of Proceeds”

Risk Factors             See “Risk Factors” for a discussion of factors you should consider
                         before deciding whether to buy Shares of the Company

Closing                  The Allotment of the Shares offered pursuant to this Issue is expected
                         to be made on or about April 28, 2010 (“Closing Date”)

Ranking                  The Shares being issued shall be subject to the provisions of the
                         Company’s Memorandum and Articles of Association and shall rank
                         pari passu in all respects with the existing Shares including rights in
                         respect of dividends. The Shareholders will be entitled to participate in
                         dividends and other corporate benefits, if any, declared by the
                         Company after the Closing Date, in compliance with the Companies
                         Act. Shareholders may attend and vote in Shareholders’ meetings on
                         the basis of one vote for every Share held. See “Description of the
                         Shares”

Security Codes for the   ISIN : INE465A01025


                                              24
Shares                       BSE Code : 500493
                             NSE Code : BHARATFORG


                           SUMMARY FINANCIAL INFORMATION

The following consolidated summary financial data for the three years ended March 31, 2007, 2008
and 2009 should be read in conjunction with the Company’s audited consolidated Financial Statements
included elsewhere in this Placement Document.

The summary income statement data, balance sheet data and cash flow statement data as at and for each
of the fiscal years ended March 31, 2009, 2008 and 2007 and set forth below has been derived from the
Company’s audited consolidated financial statements and schedules thereto for the fiscal years ended
March 31, 2009, 2008 and 2007, which have been prepared in accordance with the principles of Indian
GAAP as applicable at the time of their initial preparation and have been audited by Dalal & Shah,
Chartered Accountants, the Company’s independent statutory auditors and appears elsewhere in this
Placement Document. The audited balance sheet data and profit & loss account of CDP Bharat Forge
GmbH, Bharat Forge Aluminiumtechnik GmbH & Co. KG, Bharat Forge Kilsta AB., Bharat Forge
Scottish Stampings Limited, Bharat Forge America Inc. and FAW Bharat Forge (Changchun)
Company Limited as of December 31, 2009 and for the year ended December 31, 2009 are as given
below.




                                                 25
BHARAT FORGE LIMITED
CONSOLIDATED BALANCE SHEET                                                  (Rs. in Million)
                                                            As at         As at            As at
                                                      31st March,   31st March,     31st March,
                                                            2009          2008              2007
I. SOURCES OF FUNDS:
1. Shareholders’ Funds:
(a) Share Capital                                        445.40        445.40           545.40
(b) Reserves and Surplus                              15,989.17     16,095.62         14,352.56
                                                      16,434.57     16,541.02         14,897.96
2. Loan Funds:
(a) Secured Loans                                     10,735.49       6,809.12         5,950.45
(b) Unsecured Loans                                   11,172.88       9,734.81        11,945.45
                                                      21,908.37     16,543.93         17,895.90

3 Minority Interest                                      953.83        701.92           315.29

4. Deferred Tax Adjustment
(a) Deferred Tax Liabilities                           2,060.24       1,385.33         1,197.74
(b) Deferred Tax Assets                                 (217.02)      (209.00)          (91.02)
                                                       1,843.22       1,176.33         1,106.72
                      TOTAL                           41,139.99     34,963.20         34,215.87


II. APPLICATION OF FUNDS:
1. Fixed Assets:
(a) Gross Block                                       40,270.75     30,988.88         26,713.84
(b) Less: Depreciation                                15,594.43     13,227.91         10,808.59
(c) Net Block                                         24,676.32     17,760.97         15,905.25
(d) Capital work-in-progress                           3,218.95       5,841.59         3,537.27
                                                      27,895.27     23,602.56         19,442.52
2. Goodwill Arising on Capital Consolidation               4.54           4.54                -

3. Technical Know-how:                                     2.10          4.18              6.26

4. Investments:                                            2.33       2,988.36         2,073.16

                                  carried over        27,904.24     26,599.64         21,521.94




                                                 26
BHARAT FORGE LIMITED
CONSOLIDATED BALANCE SHEET (contd.)                                            (Rs. in Million)
                                                             As at          As at            As at
                                                      31st March,    31st March,      31st March,
                                                             2009           2008              2007
                                  brought over         27,904.24      26,599.64         21,521.94
5. Current Assets, Loans and Advances:
     (a) Inventories                                    7,916.46       7,271.03         6,142.07
     (b) Sundry Debtors                                 5,313.09       6,717.94         6,567.40
     (c) Cash and Bank Balances                         4,883.40       3,183.49         9,389.33
     (d) Other Current Assets                           1,419.92       1,255.41           905.91
     (e) Loans and Advances                             5,783.57       6,353.54         4,681.36
                                                      25,316.44      24,781.41         27,686.07
Less: Current Liabilities and Provisions:
      (a) Liabilities                                   8,537.93     11,552.86         11,246.74
      (b) Provisions                                    3,542.81       4,864.99         3,747.74
                                                      12,080.74      16,417.85         14,994.48
Net Current Assets                                    13,235.70        8,363.56        12,691.59

6. Miscellaneous Expenditure                                0.05              -             2.34
(to the extent not written off or adjusted)
 TOTAL                                                41,139.99      34,963.20        34,215.87




                                                 27
BHARAT FORGE LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED       (Rs. in Million)
                                        31.03.2009  31.03.2008        31.03.2007
INCOME:
Sales, Gross                                                 47,931.85   47,340.05   42,762.19
Less: Excise Duty                                             1,202.33    1,726.08    1,560.19
Net Sales                                                    46,729.52   45,613.97   41,202.00
Operating Income                                              1,010.85     908.80      580.98
                                                             47,740.37   46,522.77   41,782.98
Other Income                                                   687.10      992.93      969.15
                                                             48,427.47   47,515.70   42,752.13
EXPENDITURE:
Manufacturing and other expenses                             44,504.40   40,747.60   36,386.36
Depreciation and amortization                                 2,517.32    2,270.55    1,881.10
                                                             47,021.72   43,018.15   38,267.46
Operating Profit                                              1,405.75    4,497.55    4,484.67
Exceptional Item of Expenditure                                298.92            -     121.44
Profit for the year before income from
Associate and taxation                                        1,106.83    4,497.55    4,363.23
Income from Associate                                           (4.58)        1.22           -
Provision for Taxation
Current Tax (including Wealth Tax)                             311.67     1,369.08   1,366.54
Less: MAT credit Available for Set off in                     (157.40)           -          -
Subsequent years
   Deferred Tax                                                488.47      152.33      142.08
   Fringe Benefit Tax                                           53.00       68.00       19.95
                                                               695.74     1,589.41    1,528.57
Net Profit after taxation                                      406.51     2,909.36    2,834.66
Less: Minority Interest                                       (176.14)    (105.87)     (71.22)
Net Profit after Minority Interest                             582.65     3,015.23    2,905.88
As per last Account                                           6,753.08    5,052.45    3,290.39
                                                              7,335.73    8,067.68    6,196.27
Adjustments relating to earlier years:
Excess / (Short) provision for taxation and tax
payments                                                       (29.04)      (9.70)        4.22
Energy charges                                                       -      (4.83)     (14.14)
Impact on adoption of International Financial
reporting standards by Subsidiaries                             30.42            -              -
Excess Depreciation written back                                     -           -      37.23
Profit available for Appropriation                            7,337.11    8,053.15    6,223.58
                                         carried over         7,337.11    8,053.15   6,223.58




                                                        28
BHARAT FORGE LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED       (Rs. in Million)
                                        31.03.2009  31.03.2008        31.03.2007
                                    brought over        7,337.11   8,053.15   6,223.58
APPROPRIATIONS:
Capital Redemption Reserve Account                             -    100.00           -
Debenture Redemption Reserve                              26.10           -          -
General Reserve                                          120.00     280.00     250.00
    Dividend on Preference Shares                              -       7.14       8.25
    Tax on above Dividend                                      -      1.21        1.16
                                                               -       8.35      9.41


        Proposed Dividend                                222.65     779.28      779.28
        Tax on Proposed Dividend                          37.84     132.44      132.44
                                                         260.49     911.72      911.72
Balance carried to Balance Sheet                        6,930.52   6,753.08   5,052.45


Earning Per Share (Face value of Rs.2/-)
Basic                                                      2.62      13.44       13.01
Diluted                                                    2.62      13.44       13.01




                                                   29
Bharat Forge Limited
Consolidated Cash flow statement for the year                                     (Rs. in Million)
 Sr.
 No. Particulars                                                      2008-09    2007-08         2006-07
  A CASH FLOW FROM OPERATING ACTIVITIES:
     Profit before tax                                                1,102.25   4,498.77       4,363.23
     Add/ (Less): Share of ( Profit)/ Loss in Associate                   4.58      (1.22)             -
                                                                      1,106.83   4,497.55       4,363.23
     Adjustments For :
     Interest / Depreciation / Other Non Cash Expenses
     i) Depreciation and amortization                                 2,517.32   2,270.55       1,881.10
     ii) Amount written off against technical knowhow                     2.08       2.08           2.08
     iii) Loss on assets sold, demolished, discarded                      3.52      18.24          20.58
     iv) Provision for Doubtful Debts and Advances                       97.79       5.56          20.23
     v) Adjustments in respect of earlier years–
           Excess/ (short) provision for taxation and tax refunds      (29.04)           -             4.22
           Impact on adoption of International Financial
                                                                        51.77            -                 -
      reporting standards by Subsidiaries
           Energy Charges                                                    -     (4.83)            (14.14)
           Deferred Tax Assets Written off                                   -     (9.70)                  -
           Target Plus Incentive written off                                 -          -              67.50
     vi) Bad debts, irrecoverable advances, and sundry balances
                                                                        38.00       39.48              0.96
     written off
     vii) Proportionate deferred revenue expenses written off             5.06       3.30          17.82
     viii) Interest paid                                              1,291.36   1,269.38       1,066.95
     ix) Exchange Loss                                                  740.82          –              -
     Total                                                            4,718.68   3,594.06       3,067.30

     Interest / Dividend / Other Income Adjustments
     i) Interest Received                                             (137.73)   (320.71)       (537.59)
     ii) Dividend                                                     (217.02)   (260.55)       (162.07)
     iii) Profit on sale of investments                                (23.14)    ( 2.06)         (3.80)
     iv) Surplus on sale of assets                                      (2.04)     (3.63)         (3.89)
     v) Provisions no longer required                                 (160.34)    (24.01)         (3.52)
     Total                                                            (540.27)   (610.96)       (710.87)
                                                       carried over   5,285.24   7,480.65       6,719.66




                                                     30
Bharat Forge Limited
Consolidated Cash flow statement for the year                                         (Rs. in Million)
 Sr.
 No. Particulars                                                       2008-09      2007-08         2006-07
                                                      brought over     5,285.24     7,480.65        6,719.66
     OPERATING PROFIT BEFORE WORKING CAPITAL
                                                                       5,285.24     7,480.65        6,719.66
     CHANGES
     Changes in Working Capital
     (Increase) / Decrease in Current Assets :
     i) Inventories                                                    (645.43)    (1,128.96)      (1,408.67)
     ii) Sundry debtors                                                1,269.06     ( 195.58)      (2,446.50)
     iii) Other current assets and loans and advances                   (49.51)    (1,036.46)        (270.80)
                                                                         574.12    (2,361.00)      (4,125.97)
     Increase / (Decrease) in Current Liabilities :
      Liabilities                                                     (2,489.58)      444.62        2,339.87
     Total                                                            (1,915.46)   (1,916.38)      (1,786.10)
     CASH GENERATED FROM OPERATIONS                                    3,369.78      5,564.27        4,933.56
     Direct taxes paid                                                 (711.18)    (1,386.38)      (1,233.68)
     CASH FROM OPERATING ACTIVITIES                                    2,658.60     4,177.89        3,699.88
     Less: Minority Interest                                           (176.14)     (105.87)         (71.22)
     NET CASH FROM OPERATING ACTIVITIES (A)                            2,834.74     4,283.76        3,771.10


 B CASH FLOW FROM INVESTMENT ACTIVITIES:
   i) (Increase) / Decrease in Investment in Mutual funds               2,982.08     (909.18)          462.23
   ii) Investment in Joint Venture                                          3.95        (0.03)              -
   iii) Investment in Associates                                               -        (4.78)              -
   iv) Capital expenditure                                            (5,354.73)   (7,599.44)      (6,013.15)
   v) Sale proceeds of assets/Adjustment to Gross Block                  (38.54)       554.86          421.24
   vi) Interest Capitalised                                                51.72        (8.22)        (47.26)
   vii) Non Operating Income                                              377.89       583.32          703.46
     Total                                                            (1,977.63)   (7,383.47)      (4,473.48)
     NET CASH USED IN INVESTING ACTIVITIES (B)                        (1,977.63)   (7,383.47)      (4,473.48)

 C CASH FLOW FROM FINANCING ACTIVITIES:
   Increase / (Decrease) in Share Capital / Borrowings
   i) Equity shares                                                           -             -           0.78
   ii) Preference shares                                                      -      (100.00)              -
   iii) Secured loans - Term Loans                                     4,008.88    (1,374.96)           1.82
   iv) Fixed deposits, unsecured loans                                 (262.91)      (741.65)       4,931.74
   v) Cash credit & other borrowings from banks                        (540.16)      1,363.87         469.24
     Total                                                             3,205.81     (852.74)        5,403.58
                                                       carried over    3,205.81     (852.74)        5,403.58




                                                      31
Bharat Forge Limited
Consolidated Cash flow statement for the year                                    (Rs. in Million)
 Sr.
 No. Particulars                                                  2008-09      2007-08         2006-07
                                                  brought over    3,205.81     (852.74)        5,403.58
     Adjustments to net worth
     i) Share Premium                                                    -            -               96.02
     ii) Difference in Capital consolidation                             -      (50.20)             (41.45)
     iii) Foreign Currency Translation Reserve                      204.87      (36.37)              135.71
     iv) General Reserve                                                 -            -               40.09
     v) Minority Interest                                           251.91      386.63               315.29
     vi) Goodwill arising on consolidation                               -       (4.54)                   -
     vii) Transitional Adjustments on adoption of Accounting
                                                                          -    (380.25)                   -
     Standard (AS 15) Revised - Employee Benefits
     viii) Debenture Issue Expenses                                (23.22)             -                  -
     ix) Exchange (Gain)/Loss Adjustment to carrying cost of
                                                                  (297.80)             -                  -
     asset
     x) Revaluation Reserve for Security Investments               (24.23)             -                  -
     xi) Foreign Currency Monetory Item Translation Difference
                                                                  (340.16)             -                  -
     Account (FCMITDA)
     xi) Adjustment on adoption of International Financial
                                                                     10.52             -                  -
     Reporting Standards
     Total                                                        (218.11)      (84.73)             545.66

     Interest Paid
     i) Interest Paid                                            (1,183.63)   (1,259.01)      (1,067.30)
     ii) Capitalised                                                (51.72)         8.22           47.26
     Total                                                       (1,235.35)   (1,250.79)      (1,020.04)
     Dividend including tax thereon                               (909.55)     (917.87)        (769.76)
     NET CASH USED IN FINANCING ACTIVITIES (C)                      842.80    (3,106.13)       4,159.44
     Net change in cash and cash equivalents (A+B+C)              1,699.91    (6,205.84)       3,457.06


     Cash and cash equivalents at the beginning of the year       3,183.49     9,389.33        5,932.27
     Cash and cash equivalents at the end of the year             4,883.40     3,183.49        9,389.33




                                                 32
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              33
CDP Bharat Forge GmbH, Ennepetal
Balance Sheet as at December 31st, 2009
                                                                                                                                Amount in EURO
ASSETS                                                                          12/31/2009                                12/31/2008


A. Fixed Assets


   I.   Intangible assets
        Trademarks, patents, licenses, and similar rigths and
        licenses to such rights                                                                   332,595.00                           246,793.00


   II. Tangible assets
        1. Land, land rights and buildings including buildings
           on third party land                                                   6,133,831.66                    5,961,316.66
        2. Technical equipment and machinery                                     5,274,356.00                    2,800,229.00
        3. Other plant, factory and office equipment                             5,950,981.51                    6,358,422.51
        4. Prepayments on tangible assets and construction                       1,525,694.84   18,884,864.01    3,740,459.95      18,860,428.12
           in progress


   III. Financial assets
        1. Shares in affiliated companies                                       52,727,273.85                   43,162,273.85
        2. Loans to affiliated companies                                         3,345,000.00                    3,345,000.00
        3. Investments                                                               4,375.00                        4,375.00
        4. Loans to associated companies                                           35,000.00                       35,000.00
        5. Security investments                                                  1,030,446.84   57,142,095.69     857,203.00       47,403,851.85
                                                                                                76,359,554.70                      66,511,072.97


B. Current assets
   I.   Inventories
        1. Raw materials, supplies and operating materials       5,239,402.56                                    5,996,903.89
        2. Work in progress                                      4,325,243.50                                    7,532,727.48
        3. Finished goods and merchandise                        1,553,501.74   11,118,147.80                    3,523,111.41      17,052,742.78


   II. Accounts receivable and other assets
        1. Trade receivables                                     5,614,453.73                                   13,316,540.72
            - of which € 0.00 (12/31/2008: € 0.00)
              due after one year
        2. Receivables from affiliated companies                  739,177.92                                     3,310,240.37
            - of which € 0.00 (12/31/2008: € 0.00)
              due after one year
            - of which € 0.00 (12/31/2008: € 0.00)
              to shareholders
        3. Receivables from associated companies                     7,244.00                                        5,844.00
            - of which € 0.00 (12/31/2008: € 0.00)
              due after one year
        4. Other assets                                          2,817,637.55                                    4,124,043.82
            - of which € 0.00 (12/31/2008: € 0.00)
              due after one year                                                                                                   20,756,668.91
                                                                                 9,178,513.20


   III. Cash on hands, bank balances                                             1,232,539.73   21,529,200.73                          435,886.86


C. Prepaid expenses                                                                                 20,852.39                         115,185.61
                                                                                                97,909,607.82                     104,871,557.13




                                                                          34
CDP Bharat Forge GmbH, Ennepetal
Balance Sheet as at December 31st, 2009
                                                                                                                 Amount in EURO
EQUITY AND LIABILITIES                                               12/31/2009                            12/31/2008


A. Equity
   I. Share Capital                                                               5,000,000.00                          5,000,000.00
   II. Capital reserves                                                       50,502,428.00                         40,249,428.00
   III. Profit/loss brought forward                                           27,177,876.78                         25,731,674.16
   IV. Net income for the year                                                (13,361,484.24)                           1,446,202.62
                                                                              69,318,820.54                         72,427,304.78



B. Accruals
   1. Accruals for pensions and similar obligations        3,120,625.00                           3,135,226.00
   2. Tax accruals                                             38,485.06                                   -
   3. Other accruals                                       5,594,073.21           8,753,183.27    7,141,896.77      10,277,122.77



C. Liabilities
   1. Liabilities to banks                                  827,081.30                            4,006,697.92
         - up to one year: € 827,081.30
          (12/31/2008: € 4,006,697.92)
   2. Trade payables                                       6,112,170.32                           6,580,413.02
         - up to one year: € 6,112,170.32
          (12/31/2008: € 6,580,413.02)
   3. Payables to affiliated companies                    11,270,162.79                          10,523,016.93
         - up to one year: € 11,270,162.79
          (12/31/2008: € 10,523,016.93)
         - of which € 7,276,089.67
          (12/31/2008: € 9,346,521.39) to shareholders
   4. Other liabilities                                    1,628,189.60                           1,057,001.71
         - up to one year: € 1,628,189.60
          (12/31/2008: € 1,057,001.71)
         - of which € 345,130.64
          (12/31/2008: € 346,263.61) taxes
         - of which € 1,449.00 (12/31/2008: € 1,629.00)
          relating to social security                                         19,837,604.01                         22,167,129.58




                                                                              97,909,607.82                        104,871,557.13




                                                          35
CDP Bharat Forge GmbH, Ennepetal
Balance Sheet as at December 31st, 2009

                                                                                                                                                Amount in INR
ASSETS                                                                                   12/31/2009                                      12/31/2008


A. Fixed Assets


   I.   Intangible assets
        Trademarks, patents, licenses, and similar rigths and
        licenses to such rights                                                                             22,307,146.65                             16,552,406.51


   II. Tangible assets
        1. Land, land rights and buildings including buildings
           on third party land                                                          411,396,089.44                        399,825,508.39
        2. Technical equipment and machinery                                            353,751,056.92                        187,811,359.03
        3. Other plant, factory and office equipment                                    399,132,329.88                        426,459,397.75
        4. Prepayments on tangible assets and construction                              102,328,352.92    1,266,607,829.16    250,872,648.85       1,264,968,914.02
           in progress


   III. Financial assets
        1. Shares in affiliated companies                                              3,536,418,257.12                      2,894,893,707.12
        2. Loans to affiliated companies                                                224,349,150.00                        224,349,150.00
        3. Investments                                                                      293,431.25                            293,431.25
        4. Loans to associated companies                                                   2,347,450.00                          2,347,450.00
        5. Security investments                                                          69,112,069.56    3,832,520,357.93     57,492,605.21       3,179,376,343.58
                                                                                                          5,121,435,333.74                         4,460,897,664.11


B. Current assets
   I.   Inventories
        1. Raw materials, supplies and operating materials       351,406,729.70                                               402,212,343.90
        2. Work in progress                                      290,094,081.55                                               505,220,032.08
        3. Finished goods and merchandise                        104,193,361.70         745,694,172.95                        236,295,082.27       1,143,727,458.25


   II. Accounts receivable and other assets
        1. Trade receivables                                     376,561,411.67                                               893,140,386.09
            - of which INR 0.00 (12/31/2008: INR 0.00)
              due after one year
        2. Receivables from affiliated companies                  49,576,663.09                                               222,017,821.62
            - of which INR 0.00 (12/31/2008: INR 0.00)
              due after one year
            - of which INR 0.00 (12/31/2008: INR 0.00)
              to shareholders
        3. Receivables from associated companies                    485,855.08                                                    391,957.08
            - of which INR 0.00 (12/31/2008: INR 0.00)
              due after one year
        4. Other assets                                          188,978,950.47                                               276,599,619.01
            - of which INR 0.00 (12/31/2008: INR 0.00)
              due after one year                                                                                                                   1,392,149,783.80
                                                                                        615,602,880.31


   III. Cash on hands, bank balances                                                     82,666,439.69    1,443,963,492.95                            29,234,931.70


C. Prepaid expenses                                                                                           1,398,569.80                             7,725,498.85
                                                                                                          6,566,797,396.49                         7,033,735,336.71




                                                                                  36
CDP Bharat Forge GmbH, Ennepetal                                                                             Exchange rate EUR                    67.07
Balance Sheet as at December 31st, 2009

                                                                                                                                  Amount in INR
EQUITY AND LIABILITIES                                                       12/31/2009                                     12/31/2008


A. Equity
   I. Share Capital                                                                        335,350,000.00                                335,350,000.00
   II. Capital reserves                                                                   3,387,197,845.96                            2,699,529,135.96
   III. Profit/loss brought forward                                                       1,822,820,195.63                            1,725,823,385.91
   IV. Net income for the year                                                            (896,154,747.98)                                96,996,809.72
                                                                                          4,649,213,293.61                            4,857,699,331.59



B. Accruals
   1. Accruals for pensions and similar obligations              209,300,318.75                                  210,279,607.82
   2. Tax accruals                                                 2,581,192.97                                             -
   3. Other accruals                                             375,194,490.19            587,076,001.92        479,007,016.36          689,286,624.18



C. Liabilities
   1. Liabilities to banks                                        55,472,342.80                                  268,729,229.50
         - up to one year: INR 55,472,342.79
            (12/31/2008: INR 268,729,229.49)
   2. Trade payables                                             409,943,263.36                                  441,348,301.25
         - up to one year: INR 409,943,263.36
            (12/31/2008: INR 441,348,301.25)
   3. Payables to affiliated companies                           755,889,818.33                                  705,778,745.50
         - up to one year: INR 755,889,818.33
            (12/31/2008: INR 705,778,745.50)
         - of which INR 488,007,334.17
            (12/31/2008: INR 626,871,189.63) to shareholders
   4. Other liabilities                                          109,202,676.47                                   70,893,104.69
         - up to one year: INR 109,202,676.47
            (12/31/2008: INR 70,893,104.69)
         - of which INR 23,147,912.02
            (12/31/2008: INR 23,223,900.32) taxes
         - of which INR 97,184.43 (12/31/2008: INR 109,257.03)
            relating to social security                                                   1,330,508,100.96                            1,486,749,380.94




                                                                                          6,566,797,396.49                            7,033,735,336.71




                                                                    37
CDP Bharat Forge GmbH, Ennepetal

                                                     Profit and Loss Account for the period from January 1st to December 31st, 2009

                                                                                                                                                             Amount in EURO
                                                                                                        2009                                          2008


     1. Sales                                                                                                     76,423,194.15                               157,255,879.74

     2. Decrease in finished good inventories
        and work-in-process                                                                                       (5,177,093.65)                                  (158,176.10)

     3. Production for own plant and equipment capitalised                                                            80,144.25                                   206,310.30

                                                                                                                  71,326,244.75                               157,304,013.94

     4. Other operating income                                                                                     2,271,023.47                                  2,444,145.62

                                                                                                                  73,597,268.22                               159,748,159.56

     5. Cost of materials

        a)   Cost of raw materials, consumables, supplies and
             purchased merchandise                                                     (32,203,988.37)                                (81,353,957.12)

        b)   Cost of purchased services                                                (12,986,337.08)           (45,190,325.45)      (23,767,692.68)         (105,121,649.80)

                                                                                                                  28,406,942.77                                54,626,509.76

     6. Personnel expenses

        a)   Wages and saleries                                                        (21,640,212.50)                                (26,152,389.58)

        b)   Social security contributions and pension expenses                          (3,854,992.89)                                (6,071,103.73)
              thereof € 14,780.78 (2008: € 527,292.31)
              for pension expenses                                                                               (25,495,205.39)                               (32,223,493.31)


     7. Depreciation and amortization on intangible fixed
        assets and tangible assets                                                                                (4,576,965.72)                                (4,690,896.27)



     8. Other operating expenses                                                                                  (6,589,512.99)                               (12,881,276.23)

                                                                                                                  (8,254,741.33)                                 4,830,843.95



     9. Investment income                                                                   61,211.58                                     60,823.38
                thereof € 33,450.00 (2008: € 33,450.00)
                from affiliated companies

    10. Other interest and similar income                                                   24,054.70                                     26,200.82

    11. Depreciation on financial assets                                                   (13,883.65)                                  (323,348.04)

    12. Expenses out of transfer of losses                                               (4,447,287.83)                                (1,560,693.81)

    13. Interest and similar expenses                                                     (261,902.26)                                  (783,639.02)

                thereof € 191,656.00 (2008: € 339,086.00)

                to affiliated companies                                                                           (4,637,807.46)                                (2,580,656.67)

    14. Results from ordinary business operations                                                                (12,892,548.79)                                 2,250,187.28


    15. Taxes on income                                                                   (299,137.66)                                  (485,205.63)

    16. Other taxes                                                                       (169,797.79)              (468,935.45)        (318,779.03)              (803,984.66)

    17. Net income for the year                                                                                  (13,361,484.24)                                 1,446,202.62




                                                                                          38
CDP Bharat Forge GmbH, Ennepetal                                                                                                              Exchange rate EUR        67.07

                                                             Profit and Loss Account for the period from January 1st to December 31st, 2009
                                                                                                                                                                        Amount in INR
                                                                                                            2009                                              2008


     1. Sales                                                                                                         5,125,703,631.64                               10,547,151,854.16

     2. Decrease in finished good inventories
        and work-in-process                                                                                            (347,227,671.11)                                 (10,608,871.03)

     3. Production for own plant and equipment capitalised                                                                5,375,274.85                                  13,837,231.82

                                                                                                                      4,783,851,235.38                               10,550,380,214.95

     4. Other operating income                                                                                          152,317,544.13                                 163,928,846.73

                                                                                                                      4,936,168,779.51                               10,714,309,061.68

     5. Cost of materials

        a)   Cost of raw materials, consumables, supplies and
             purchased merchandise                                                      (2,159,921,499.98)                                    (5,456,409,904.04)

        b)   Cost of purchased services                                                   (870,993,627.96)           (3,030,915,127.94)       (1,594,099,148.05)     (7,050,509,052.09)

                                                                                                                      1,905,253,651.57                                3,663,800,009.59

     6. Personnel expenses

        a)   Wages and saleries                                                         (1,451,409,052.38)                                    (1,754,040,769.13)

        b)   Social security contributions and pension expenses                           (258,554,373.13)                                      (407,188,927.17)
              thereof INR 991,346.91 (2008: INR 35,365,495.23)
              for pension expenses                                                                                   (1,709,963,425.51)                              (2,161,229,696.30)


     7. Depreciation and amortization on intangible fixed
        assets and tangible assets                                                                                     (306,977,090.84)                                (314,618,412.83)



     8. Other operating expenses                                                                                       (441,958,636.22)                                (863,947,196.75)

                                                                                                                       (553,645,501.00)                                324,004,703.71



     9. Investment income                                                                    4,105,460.67                                          4,079,424.10
                thereof INR 2,243,491.50 (2008: INR 2,243,491.50)
                from affiliated companies

    10. Other interest and similar income                                                    1,613,348.73                                          1,757,289.00

    11. Depreciation on financial assets                                                      (931,176.41)                                       (21,686,953.04)

    12. Expenses out of transfer of losses                                                (298,279,594.76)                                      (104,675,733.84)

    13. Interest and similar expenses                                                      (17,565,784.57)                                       (52,558,669.07)

                thereof INR 12,854,367.92 (2008: INR 22,742,498.02)

                to affiliated companies                                                                                (311,057,746.34)                                (173,084,642.85)

    14. Results from ordinary business operations                                                                      (864,703,247.34)                                150,920,060.86


    15. Taxes on income                                                                    (20,063,162.86)                                       (32,542,741.60)

    16. Other taxes                                                                        (11,388,337.78)              (31,451,500.64)          (21,380,509.54)        (53,923,251.14)

    17. Net income for the year                                                                                        (896,154,747.98)                                 96,996,809.72




                                                                                                  39
Bharat Forge Aluminiumtechnik GmbH & Co. KG, Brand-Erbisdorf
Balance Sheet as at December 31st, 2009

                                                                                                                              Amount in EURO
ASSETS                                                                          12/31/2009                             12/31/2008


A. Fixed Assets


   I.   Intangible assets
        Trademarks, patents, licenses, and similar rigths and
        licenses to such rights                                                                  260,362.00                          296,891.37


   II. Tangible assets
        1. Land, land rights and buildings including buildings
           on third party land                                                  1,613,879.84                   1,670,596.84
        2. Technical equipment and machinery                                    2,691,956.00                   1,275,081.00
        3. Other plant, factory and office equipment                             560,055.00                     684,687.00
        4. Prepayments on tangible assets and construction                       126,479.13     4,992,369.97    298,324.03          3,928,688.87
           in progress


   III. Financial assets
        1. Shares in affiliated companies                                                         25,564.59                           25,564.59


                                                                                                5,278,296.56                        4,251,144.83


B. Current assets
   I.   Inventories
        1. Raw materials, supplies and operating materials       1,624,459.00                                  2,200,492.84
        2. Work in progress                                       832,575.01                                    891,416.46
        3. Finished goods and merchandise                         299,097.64    2,756,131.65                   2,395,457.99         5,487,367.29


   II. Accounts receivable and other assets
        1. Trade receivables                                     3,133,998.54                                  3,325,889.64
            - of which € 0.00 (12/31/2008: € 0.00)
              due after one year
        2. Receivables from affiliated companies                   20,150.00                                           -
            - of which € 0.00 (12/31/2008: € 0.00)
              due after one year
            - of which € 0.00 (12/31/2008: € 0.00)
              to shareholders
        3. Other assets                                           501,758.42                                    455,582.57
            - of which € 51,883.00 (12/31/2008: € 40,937.00)
              due after one year                                                                                                    3,781,472.21
                                                                                3,655,906.96


   III. Cash on hands, bank balances                                            1,522,023.95    7,934,062.56                         893,754.30



C. Prepaid expenses                                                                                84,233.31                        80,054.86
                                                                                               13,296,592.43                    14,493,793.49




                                                                          40
Bharat Forge Aluminiumtechnik GmbH & Co. KG, Brand-Erbisdorf
Balance Sheet as at December 31st, 2009

                                                                                                               Amount in EURO
EQUITY AND LIABILITIES                                              12/31/2009                          12/31/2008


A. Equity
   I. Share Capital                                                              1,381,036.99                        1,375,633.35
   II. Capital reserves                                                          3,677,543.55                        2,500,000.00
   III. Profit/loss brought forward                                                      -                                   -
   IV. Net income for the year                                                    146,955.56                         2,275,430.33
                                                                                 5,205,536.10                        6,151,063.68
   V. Silent Partnership                                                           7,122.89                            10,069.58


B. Accruals
   1. Accruals for pensions and similar obligations            29,093.00                          22,083.00
   2. Tax accruals                                             14,139.00                         277,000.00
   3. Other accruals                                      1,306,630.00           1,349,862.00   1,199,279.00         1,498,362.00



C. Liabilities
   1. Liabilities to banks                                    200,000.00                         646,417.90
         - up to one year: € 200,000.00
          (12/31/2008: € 446,417.90)
   2. Trade payables                                      1,686,497.58                          2,140,695.95
         - up to one year: € 1.686,497.58
          (12/31/2008: € 2,140,695.95)
   3. Payables to affiliated companies                    4,539,004.12                          3,826,494.84
         - up to one year: € 1,548,048.47
          (12/31/2008: € 835,539.19)
         - of which € 4,539,004.12
          (12/31/2008: € 3,725,112.38) to shareholders
   4. Other liabilities                                       308,569.74                         220,689.54
         - up to one year: € 308,569.74
          (12/31/2008: € 220,689.54)
         - of which € 195,123.96
          (12/31/2008: € 76,528.99) taxes
         - of which € 742.00 (12/31/2008: € 1,769.57)
          relating to social security                                            6,734,071.44                        6,834,298.23




                                                                             13,296,592.43                       14,493,793.49




                                                         41
Bharat Forge Aluminiumtechnik GmbH & Co. KG, Brand-Erbisdorf
Balance Sheet as at December 31st, 2009

                                                                                                                                                     Amount in INR
ASSETS                                                                                   12/31/2009                                     12/31/2008


A. Fixed Assets


   I.   Intangible assets
        Trademarks, patents, licenses, and similar rigths and
        licenses to such rights                                                                          17,462,479.34                                19,912,504.19


   II. Tangible assets
        1. Land, land rights and buildings including buildings
           on third party land                                                         108,242,920.87                    112,046,930.06
        2. Technical equipment and machinery                                           180,549,488.92                     85,519,682.67
        3. Other plant, factory and office equipment                                    37,562,888.85                     45,921,957.09
        4. Prepayments on tangible assets and construction                               8,482,955.25   334,838,253.89    20,008,592.69              263,497,162.51
           in progress


   III. Financial assets
        1. Shares in affiliated companies                                                                 1,714,617.05                                 1,714,617.05


                                                                                                        354,015,350.28                               285,124,283.75


B. Current assets
   I.   Inventories
        1. Raw materials, supplies and operating materials       108,952,465.13                                          147,587,054.78
        2. Work in progress                                       55,840,805.92                                           59,787,301.97
        3. Finished goods and merchandise                         20,060,478.71        184,853,749.76                    160,663,367.39              368,037,724.14


   II. Accounts receivable and other assets
        1. Trade receivables                                     210,197,282.08                                          223,067,418.15
            - of which INR 0.00 (12/31/2008: INR 0.00)
              due after one year
        2. Receivables from affiliated companies                   1,351,460.50                                                     -
            - of which INR 0.00 (12/31/2008: INR 0.00)
              due after one year
            - of which INR 0.00 (12/31/2008: INR 0.00)
              to shareholders
        3 Other assets                                            33,652,937.23                                           30,555,922.97
            - of which INR 0.00 (12/31/2008: INR 0.00)
              due after one year
                                                                                       245,201,679.81                                                253,623,341.12


   III. Cash on hands, bank balances                                                   102,082,146.33                                                 59,944,100.90
                                                                                                        532,137,575.90                               681,605,166.16


C. Prepaid expenses                                                                                       5,649,528.10                                 5,369,279.46
                                                                                                        891,802,454.28                               972,098,729.37




                                                                                  42
Bharat Forge Aluminiumtechnik GmbH & Co. KG, Brand-Erbisdorf                                                Exchange rate EUR                          67.07
                                                      st
Balance Sheet as at December 31 , 2009

                                                                                                                                              Amount in INR
EQUITY AND LIABILITIES                                                        12/31/2009                                         12/31/2008


A. Equity
   I. Share Capital                                                                         92,626,150.92                                      92,263,728.78
   II. Capital reserves                                                                    246,652,845.90                                     167,675,000.00
   III. Profit/loss brought forward                                                                   -                                                  -
   IV. Net income for the year                                                               9,856,309.41                                     152,613,112.23
                                                                                           349,135,306.23                                     412,551,841.01
   V. Silent Partnership                                                                      477,732.23                                         675,366.73


B. Accruals
   1. Accruals for pensions and similar obligations                1,951,267.51                                   1,481,106.81
   2. Tax accruals                                                  948,302.73                                   18,578,390.00
   3. Other accruals                                              87,635,674.10             90,535,244.34        80,435,642.53                100,495,139.34



C. Liabilities
   1. Liabilities to banks                                        13,414,000.00                                  43,355,248.55
         - up to one year: INR 13,414,000.00
            (12/31/2008: INR 29,941,248.55)
   2. Trade payables                                             113,113,392.69                                 143,576,477.37
         - up to one year: INR 113,113,392.69
            (12/31/2008: INR 143,576,477.37)
   3. Payables to affiliated companies                           304,431,006.33                                 256,643,008.92
         - up to one year: INR 103,827,610.88
            (12/31/2008: INR 56,039,613.47)
         - of which INR 304,431,006.33
            (12/31/2008: INR 249,843,287.33) to shareholders
   4. Other liabilities                                           20,695,772.46                                  14,801,647.45
         - up to one year: INR 20,695,772.46
            (12/31/2008: INR 14,801,647.45)
         - of which INR 13,086,964.00
            (12/31/2008: INR 5,132,799.36) taxes
         - of which INR 49,765.94 (12/31/2008: INR 118,685.06)
            relating to social security                                                    451,654,171.48                                     458,376,382.29




                                                                                           891,802,454.28                                     972,098,729.37




                                                                        43
Bharat Forge Aluminiumtechnik GmbH & Co. KG, Brand-Erbisdorf

                                                                                                st                     st
                                  Profit and Loss Account for the period from January 1 to December 31 , 2009
                                                                                                                                                    Amount in EURO
                                                                                         2009                                                2008


    1. Sales                                                                                         29,828,572.21                                    41,138,319.90

    2. Decrease in finished good inventories
       and work-in-process                                                                            (2,125,316.36)                                   1,223,098.36

                                                                                                     27,703,255.85                                    42,361,418.26

    3. Other operating income                                                                           738,597.56                                       753,612.29

                                                                                                     28,441,853.41                                    43,115,030.55

    4. Cost of materials

      a)   Cost of raw materials, consumables, supplies and
           purchased merchandise                                      (15,970,477.03)                                       (25,216,579.04)

      b)   Cost of purchased services                                  (3,477,105.41)                (19,447,582.44)         (5,770,938.89)           (30,987,517.93)

                                                                                                      8,994,270.97                                    12,127,512.62

    5. Personnel expenses

      a)   Wages and saleries                                          (3,582,945.83)                                        (3,716,829.39)

      b)   Social security contributions and pension expenses              (689,729.40)                                       (745,918.57)
            thereof € 36.757,59 (2008: € 41.872,79)
            for pension expenses                                                                      (4,272,675.23)                                   (4,462,747.96)


    6. Depreciation and amortization on intangible fixed
       assets and tangible assets                                                                     (1,037,099.11)                                   (1,048,658.39)



    7. Other operating expenses                                                                       (3,116,602.77)                                   (3,345,015.39)

                                                                                                        567,893.86                                     3,271,090.88



    8. Other interest and similar income                                      2,036.97                                            9,081.70

    9. Interest and similar expenses                                       (284,115.82)                (282,078.85)           (355,163.37)              (346,081.67)

   10. Results from ordinary business operations                                                        285,815.01                                     2,925,009.21


   11. Taxes on income                                                     (123,756.50)                                       (565,503.50)

   12. Other taxes                                                          (15,102.95)                (138,859.45)             (84,075.38)             (649,578.88)

   13. Net income for the year                                                                          146,955.56                                     2,275,430.33




                                                                      44
Bharat Forge Aluminiumtechnik GmbH & Co. KG, Brand-Erbisdorf                                                   Exchange rate EUR                 67.07

                                  Profit and Loss Account for the period from January 1st to December 31st, 2009
                                                                                                                                                 Amount in INR
                                                                                         2009                                           2008


   1. Sales                                                                                     2,000,602,338.13                               2,759,147,115.69

   2. Decrease in finished good inventories
      and work-in-process                                                                        (142,544,968.27)                                 82,033,207.01

                                                                                                1,858,057,369.86                               2,841,180,322.70

   3. Other operating income                                                                       49,537,738.35                                  50,544,776.29

                                                                                                1,907,595,108.21                               2,891,725,098.99

   4. Cost of materials

     a)   Cost of raw materials, consumables, supplies and
          purchased merchandise                                       (1,071,139,894.40)                             (1,691,275,956.21)

     b)   Cost of purchased services                                    (233,209,459.85)        (1,304,349,354.25)    (387,056,871.35)         (2,078,332,827.57)

                                                                                                  603,245,753.96                                 813,392,271.42

   5. Personnel expenses

     a)   Wages and saleries                                            (240,308,176.82)                              (249,287,747.19)

     b)   Social security contributions and pension expenses             (46,260,150.86)                               (50,028,758.49)
           thereof INR 2,465,331.56 (2008: INR 2,808,408.03)
           for pension expenses                                                                  (286,568,327.68)                               (299,316,505.68)


   6. Depreciation and amortization on intangible fixed
      assets and tangible assets                                                                  (69,558,237.31)                                (70,333,518.22)



   7. Other operating expenses                                                                   (209,030,547.78)                               (224,350,182.21)

                                                                                                   38,088,641.19                                 219,392,065.32



   8. Other interest and similar income                                     136,619.58                                     609,109.62

   9. Interest and similar expenses                                      (19,055,648.05)          (18,919,028.47)      (23,820,807.23)           (23,211,697.61)

  10. Results from ordinary business operations                                                    19,169,612.72                                 196,180,367.71


  11. Taxes on income                                                     (8,300,348.46)                               (37,928,319.75)

  12. Other taxes                                                         (1,012,954.86)            (9,313,303.31)       (5,638,935.74)          (43,567,255.48)

  13. Net income for the year                                                                       9,856,309.41                                 152,613,112.23




                                                                       45
Bharat Forge Kilsta AB

Balance Sheet

                              Assets                       INR            SEK            INR            SEK
                                                         Dec 2009        Dec 2009      Dec 2008        Dec 2008

Goodwill                                                  281,006,213     43,275,000              -               -
Intangible Assets                                         281,006,213     43,275,000              -               -

Property own                                               42,320,880      6,517,422     42,320,880       6,517,422
Building including the buildings on strange properties     71,453,571     11,003,861     78,138,773      12,033,383
Land improvements                                           4,920,554        757,766      5,475,800         843,274
Land & buidings                                           118,695,005     18,279,049    125,935,452      19,394,079

Technical equipment and machinery own                     573,208,076     88,274,132    551,006,228      84,855,044
Technical equipment and machinery leased                   73,496,089     11,318,409            -               -
Technical equipment and machinery                         646,704,165     99,592,541    551,006,228      84,855,044

Tools and Dies                                            123,102,091     18,957,741    119,012,433      18,327,933
Vehicles & Aircraft                                         6,630,286      1,021,065     10,353,736       1,594,477
Factory equipment                                          95,025,911     14,634,005    115,551,644      17,794,971
Office equipment                                                  -              -          336,811          51,869
Other plant, factory and office equipment                 224,758,288     34,612,811    245,254,625      37,769,250

Assets under construction/prepayments                      94,478,061     14,549,636    124,880,706      19,231,648

Tangible assets                                          1,084,635,519   167,034,037   1,047,077,011    161,250,021

Shares in affiliated companies, noncurrent                        -              -               -              -
Loans Intercompany                                        433,615,625     66,776,873   1,059,317,447    163,135,050
Financial assets                                          433,615,625     66,776,873   1,059,317,447    163,135,050

Fixed Assets                                             1,799,257,357   277,085,910   2,106,394,459    324,385,071

Deferred taxes, non-current                                79,220,700     12,200,000              -               -

Long Term Assets                                         1,878,478,057   289,285,910   2,106,394,459    324,385,071

Stores, Spares and Loose Tools                            103,432,130     15,928,564    125,655,017      19,350,892
Raw Materials & Components                                191,748,237     29,529,258    231,584,463      35,664,043
Raw material,supllies and operating materials             295,180,367     45,457,822    357,239,480      55,014,935

Work in progress                                          301,233,848     46,390,059     475,139,557     73,171,565
Finished goods                                             53,214,064      8,194,974     236,572,562     36,432,211
Inventories                                               649,628,279    100,042,855   1,068,951,600    164,618,711

Trade receivables                                         368,108,950     56,688,835    732,094,820     112,742,715
Receivables intercompany                                  118,703,875     18,280,415      8,555,888       1,317,608
Further other short-term assets                            76,582,787     11,793,761    100,582,129      15,489,663
Receivables and other assets                              563,395,612     86,763,011    841,232,836     129,549,986

Bank balances and checks                                  201,204,123     30,985,466    158,720,556      24,442,990
Cash on hand, bank balances and checks                    201,204,123     30,985,466    158,720,556      24,442,990

Current assets                                           1,414,228,014   217,791,332   2,068,904,992    318,611,687

Assets                                                   3,292,706,071   507,077,242   4,175,299,450    642,996,758




                                                           46
Bharat Forge Kilsta AB

Balance Sheet

                         Liabilities                INR              SEK            INR              SEK
                                                  Dec 2009         Dec 2009       Dec 2008         Dec 2008

Share capital                                       129,870,000     20,000,000      129,870,000      20,000,000
Capital reserve                                      25,974,000      4,000,000       25,974,000       4,000,000
Other reserves                                      225,282,489     34,693,538      558,359,838      85,987,501
Profit/ loss brought forward                      1,168,834,377    180,000,674    1,038,948,500     159,998,229
Net income for the year                            (617,934,609)   (95,162,025)    (335,653,002)    (51,690,614)
Equity                                              932,026,256    143,532,187    1,417,499,336     218,295,116

Provisions for pensions and similar obligations      76,045,554     11,711,027      72,752,551       11,203,904
Non-current loans to banks                        1,332,466,200    205,200,000     521,290,599       80,278,832
Deferred tax liabilties, non-current                 80,392,530     12,380,462     217,139,932       33,439,583
Financial Lease, non-current                         59,325,895      9,136,197       1,810,440          278,808
Non-current liabilities                           1,548,230,179    238,427,686     812,993,521      125,201,127

Liabilities towards banks (short-term)                     -               -       787,499,551      121,275,052
Trade Payables                                     336,736,832      51,857,524     679,449,011      104,635,252
Payables intercompany                              149,415,630      23,010,030     237,315,298       36,546,592
Financial Lease, current                            14,642,985       2,255,022             -                -

Flexible time & vacation                            63,088,184       9,715,590      87,142,770       13,420,000
Outstanding Invoices                                 4,545,450         700,000       4,545,450          700,000
Accrued Interest                                     3,917,269         603,260          57,578            8,867
Other current accrued liabilities                   51,026,410       7,858,075      33,340,798        5,134,488
Current accrued liabilities                        122,577,312      18,876,925     125,086,596       19,263,355

Customer provisions                                   3,246,750        500,000       8,582,355        1,321,684
Warranties                                            3,246,750        500,000       3,246,750          500,000
Audit fees                                            1,038,960        160,000       1,298,700          200,000
Other current provisions                              7,532,460      1,160,000      13,127,805        2,021,684

Salaries & wages                                     9,136,367       1,407,002       7,292,201        1,123,000
Employees taxes                                     50,458,937       7,770,684      21,581,660        3,323,579
Social security for employees                      108,961,969      16,780,160      72,509,804       11,166,521
Current tax liabilities (e.g. VAT)                  12,398,254       1,909,333             -                -
Other current liabilities                              588,889          90,689         944,668          145,479
Other current liabilities                          181,544,416      27,957,868     102,328,333       15,758,579

Current liabilities                                812,449,636     125,117,369    1,944,806,593     299,500,515

Equity and liabilities                            3,292,706,071    507,077,242    4,175,299,450     642,996,758




                                                       47
Bharat Forge Kilsta AB

Income Statement
                                                                         INR             SEK             INR              SEK
                                                                         2009            2009            2008             2008

Direct sales to customers                                               2,603,263,631    400,903,000    6,817,993,182    1,049,972,000
Sales of dies, engineering etc. to customers                               57,545,397      8,862,000       21,480,498        3,308,000
Sales Scrap                                                                67,181,751     10,346,000      313,051,635       48,210,000
Other Sales                                                                11,441,547      1,762,000       18,688,293        2,878,000
Sales                                                                   2,739,432,326    421,873,000    7,171,213,608    1,104,368,000


Increase/(decrease) in finished goods inventories and work-in-process   (357,264,208)    (55,018,743)      (6,532,688)      (1,006,035)

Cost of raw material                                                    1,339,531,128    206,288,000    4,169,554,272     642,112,000
Cost of die material                                                       40,759,700      6,277,000      125,701,173      19,358,000
Spares                                                                    128,934,936     19,856,000      197,740,062      30,452,000
Cost of raw materials, consumables, supplies and purchased
merchandise                                                             1,509,225,764    232,421,000    4,492,995,507     691,922,000

Purchased services for tools                                              14,181,804       2,184,000       6,383,111          983,000
Purchased services / subcontract                                          12,590,897       1,939,000      38,084,378        5,865,000
Energy                                                                   150,837,512      23,229,000     275,493,231       42,426,000

Cost of purchased services (incl. Energy and lease personell)            177,610,212      27,352,000     319,960,719       49,274,000

Cost of materials                                                       1,686,835,976    259,773,000    4,812,956,226     741,196,000

Salaries                                                                 180,837,482      27,849,000     292,045,163       44,975,000
Wages                                                                    252,110,138      38,825,000     600,986,412       92,552,000
Cost for overtime hours wages                                              3,902,594         601,000      25,980,494        4,001,000
Wages and salaries                                                       436,850,213      67,275,000     919,012,068      141,528,000

Social cost salaries                                                      93,805,101      14,446,000     111,857,031       17,226,000
Social cost wages                                                         81,402,516      12,536,000     192,980,327       29,719,000
Pension expenses                                                                 -               -        52,922,025        8,150,000
Social security                                                          175,207,617      26,982,000     357,759,383       55,095,000

Personnel expenses                                                       612,057,830      94,257,000    1,276,771,451     196,623,000

Depreciation on fixed assets                                             148,619,819      22,887,475     162,265,240       24,988,872
Depreciation                                                             148,619,819      22,887,475     162,265,240       24,988,872

Commission, Freight, Packaging                                            57,493,449       8,854,000     184,214,102       28,369,000
Machinery Repairs & Maintenance                                          123,415,461      19,006,000     266,469,026       41,036,271
Insurance                                                                 10,954,535       1,687,000      11,441,547        1,762,000
Rent and leasing                                                          32,558,409       5,014,000      27,298,674        4,204,000
Advising, audit & lawyers costs                                           12,967,520       1,997,000       2,824,673          435,000
Exchange rate losses                                                             -               -        50,927,449        7,842,835
Provision for doubtful debts and advances                                  6,779,214       1,044,000         146,266           22,525
Other Expenses                                                           151,809,147      23,378,632     248,334,609       38,243,568
Other operating expenses                                                 395,977,734      60,980,632     791,656,345      121,915,199

EBIT                                                                    (461,323,240)    (71,043,850)    121,031,658       18,638,894

Income from other securities and long term loans                          25,772,702       3,969,000             -                -
Other interest and similar income                                         46,746,707       7,199,000      79,708,758       12,275,161
Depreciation on financial assets and securities                           40,962,920       6,308,296     405,763,906       62,487,704
Interest and similar expenses                                             89,915,495      13,847,000      98,134,012       15,112,653

Results from ordinary business operations                               (519,682,247)    (80,031,146)   (303,157,502)      (46,686,302)

Extraordinary expenses                                                   312,447,740      48,117,000              -                -

Taxes from ordinary business operations                                     1,772,726        273,000      32,495,500        5,004,312
Taxes on losses brought forward                                           (79,220,700)   (12,200,000)            -                -
Taxes on income and profits                                               (77,447,975)   (11,927,000)     32,495,500        5,004,312

Other taxes                                                             (136,747,402)    (21,059,121)             -                -

Net income for the year                                                 (617,934,609)    (95,162,025)   (335,653,002)      (51,690,614)



                                                                        48
Bharat Forge Scottish Stampings Ltd.

Balance Sheet
at 31 December 2009
                                                      2009                     2008                     2009                         2008
                                                      £000                     £000                   INR '000                     INR '000


Fixed assets
Intangible assets                                                  -                      34                             -                      2,551
Tangible assets                                                    -                   5,132                             -                    385,072


                                                                   -                   5,166                             -                    387,623
Current assets
Tangible fixed assets held for sale                2,914                        -                  218,647                             -
Stocks                                             2,749                    4,786                  206,267                      359,110
Debtors                                            5,881                    8,183                  441,271                      613,998
Cash at bank and in hand                             667                     282                    50,047                       21,159


                                                  12,211                13,251                     916,232                      994,267
Creditors: amounts falling due within one year   (14,891)              (21,054)                 (1,117,322)                  (1,579,753)



Net current liabilities                                      (2,680)                  (7,803)                    (201,090)                  (585,486)


Total assets less current liabilities                        (2,680)                  (2,637)                    (201,090)                  (197,863)

Provisions for liabilities and charges                        (116)                      (18)                      (8,704)                    (1,351)


Net liabilities                                              (2,796)                  (2,655)                    (209,794)                  (199,214)


Capital and reserves
Called up share capital                                       3,000                    3,000                      225,100                     225,100
Profit and loss account                                      (5,796)                  (5,655)                    (434,894)                  (424,314)


Shareholders’ deficit                                        (2,796)                  (2,655)                    (209,794)                  (199,214)




                                                                       49
Bharat Forge Scottish Stampings Ltd.

Profit and Loss account
for the year ended 31 December 2009
                                                               2009                      2008                      2009                            2008
                                                               £000                      £000                    INR '000                        INR '000


Turnover                                                                9,166                    30,065                        687,756                      2,255,879



Change in stocks of finished goods and work in
                                                          (1,049)                     1,090                 (78,710)                          81,786
progress
Other operating income                                        249                   1,943                     18,683                          145,790
Raw materials and consumables                             (5,889)                (21,097)                  (441,872)                      (1,582,980)
Other external charges                                      (374)                 (1,204)                   (28,062)                         (90,340)
Staff costs (including exceptional costs of £2,157,000
                                                          (5,110)                 (7,992)                  (383,421)                       (599,667)
(2008: £895,000))
Depreciation and other amounts written off tangible and
intangible fixed assets                                    (520)                  (1,103)                   (39,017)                        (82,762)
Other operating charges (including exceptional costs of
                                                          (1,694)                 (5,041)                  (127,106)                       (378,243)
£494,000 (2008: £2,920,000))

                                                                      (14,387)                  (33,404)                    (1,079,505)                 (2,506,416)

Operating loss                                                         (5,221)                   (3,339)                     (391,749)                      (250,537)

Profit on sale of business                                              3,750                          -                      281,375                               -
Profit on sale of fixed assets                                          1,745                          -                      130,933                               -
Other interest receivable and similar income                              311                         13                        23,335                            975
Interest payable and similar charges                                    (744)                    (1,989)                      (55,825)                      (149,241)

Loss on ordinary activities before taxation                             (159)                    (5,315)                      (11,931)                      (398,803)

Tax on loss on ordinary activities                                         18                        36                          1,351                         2,701

Loss for the financial year                                             (141)                    (5,279)                      (10,580)                      (396,102)




                                                                                 50
Bharat Forge America Inc.

Balance Sheet


                                                                    December 31, 2009   December 31, 2008
                                 Assets
Current Assets
   Cash and cash equivalents                                        $         341,166   $        124,706
   Trade accounts receivable                                                2,330,096          3,601,260
   Inventories (Note 2)                                                     1,578,609          2,138,348
   Reimbursable tooling and production costs                                   44,817            227,633
   Prepaid expenses and other current assets                                  203,202            206,984
                     Total current assets                                   4,497,890          6,298,931
Property, Plant, and Equipment - Net (Note 3)                              12,742,179         15,150,361
Deferred Financing Charges - Net                                               37,038             75,835
                       Total assets                                 $      17,277,107   $     21,525,127


                Liabilities and Stockholder's Equity
Current Liabilities
   Trade accounts payable                                           $       1,551,871   $      2,331,922
   Bank line of credit (Note 4)                                             3,451,455          4,631,217
   Current portion of long-term debt (Note 6)                               5,784,997          7,808,574
   Related party note payable (Note 6)                                            -            4,350,000
   Accounts payable - Related party (Note 10)                                 271,922             50,175
   Accrued liabilities:
       Accrued compensation                                                   222,224            262,688
       Accrued interest (Note 10)                                             794,136            823,115
       Accrued management fees (Note 10)                                          -              134,809
       Other accrued liabilities                                               82,417            424,306
                   Total current liabilities                               12,159,022         20,816,806
Long-term Debt - Net of current portion (Note 6)                               10,652                -
Stockholder's Equity                                                        5,107,433            708,321
                       Total liabilities and stockholder's equity   $      17,277,107   $     21,525,127




                                                    51
Bharat Forge America Inc.




Statement of Operations


                                                                Year Ended
                                                    December 31, 2009 December 31, 2008
Sales and Other Revenue                             $     20,494,332   $    38,184,036
Cost of Sales                                             21,893,739        39,069,492
Gross Loss                                               (1,399,407)         (885,456)
Selling and Administrative Expenses                        2,854,522         4,099,126
Operating Loss                                           (4,253,929)        (4,984,582)
Non operating Income (Expense)
  Other income                                                47,474             59,003
  Interest expense                                         (644,433)        (1,162,705)
                 Total non operating expense               (596,959)        (1,103,702)
Net Loss                                            $    (4,850,888)   $    (6,088,284)




                                               52
Bharat Forge America Inc.

Supplemental Information
Balance Sheet Denominated in Indian Rupees (Rs)


                                                                December 31,       December 31,
                                                                    2009               2008

                                                      Assets
Current Assets
     Cash and cash equivalents                                     Rs 15,925,629       Rs 5,821,276
     Trade accounts receivable                                       108,768,881        168,106,817
     Inventories                                                      73,689,468         99,818,085
     Reimbursable tooling and production costs                         2,092,058         10,625,908
     Prepaid expenses and other current assets                         9,485,469           9,662,013

                     Total current assets                            209,961,505        294,034,099


Property, Plant, and Equipment - Net                                 594,804,916        707,218,851


Deferred Financing Charges - Net                                       1,728,934          3,539,978

                     Total assets                                 Rs 806,495,355    Rs 1,004,792,928

                                       Liabilities and Stockholder's Equity


Current Liabilities
    Trade accounts payable                                        Rs 72,441,338     Rs 108,854,119
     Bank line of credit                                             161,113,919        216,185,210
     Current portion of long-term debt                               270,043,660        364,504,234
     Related party note payable                                                -        203,058,000
     Accounts payable - Related party                                 12,693,319          2,342,169
     Accrued liabilities:                                                      -                   -
           Accrued compensation                                       10,373,416         12,262,276
           Accrued interest                                           37,070,268         38,423,008
           Accrued management fees                                             -           6,292,884
           Other accrued liabilities                                   3,847,226         19,806,604

                     Total current liabilities                       567,583,146        971,728,504


Long-term Debt - Net of current portion                                  497,235                   -

Stockholder's Equity                                                 238,414,974         33,064,424

                     Total liabilities and stockholder's
                     equity                                       Rs 806,495,355    Rs 1,004,792,928




                                                    53
Bharat Forge America Inc.


Statement of Operations Denominated in Indian Rupees (Rs)


                                                                      Year Ended
                                                       December 31,                December 31,
                                                           2009                        2008


 Sales and Other Revenue                                    Rs956,675,420          Rs1,782,430,800


 Cost of Sales                                              1,021,999,737             1,817,997,973


 Gross Loss                                                  (65,324,317)              (35,567,173)


 Selling and Administrative Expenses                          133,249,087              197,113,115


 Operating Loss                                             (198,573,404)             (232,680,288)


 Non operating Income (Expense)
     Other income                                               2,216,086                2,754,260
      Interest expense                                       (30,082,132)              (54,275,069)

                            Total non operating
                            expense                          (27,866,046)              (51,520,809)

 Net Loss                                               Rs (226,439,450)           Rs (284,201,097)




                                                  54
FAW Bharat Forge (Changchun) Co. Ltd.

Balance Sheet
As at December 31, 2009

                       Item                         December 31, 2009           December 31, 2008      December 31, 2009      December 31, 2008
                                                        Unit: INR                   Unit: INR             Unit: RMB              Unit: RMB
Current Assets
 Monetary Assets                                          465,298,312.00              562,995,310.00          68,061,891.00          82,352,599.33
 Transaction Monetary Assets
 Notes Receivable                                         214,809,943.00              157,989,204.00          31,421,500.00          23,110,000.00
 Accounts Receivable                                      943,880,011.00              364,019,660.00         138,066,820.42          53,247,273.42
 Advances to Suppliers                                     63,507,956.00               31,184,208.00           9,289,678.15           4,561,495.51
 Interest Receivable
 Dividend Receivable
 Other Receivables                                         18,816,851.00               18,430,016.00           2,752,450.30           2,695,865.68
 Inventory                                              1,298,966,827.00            1,180,248,639.00         190,007,434.82         172,641,834.69
 Non-current Assets maturing within one year
 Other Current Assets

               Total current assets                     3,005,279,900.00            2,314,867,037.00         439,599,774.69         338,609,068.63

Non-current Assets
 Financial assets available for sale
 Held-to-maturity Investment
 Long-term Accounts Receivable
 Long-term equity investment
 Investment Property
 Fixed assets                                           2,476,207,197.00            2,495,689,022.00         362,209,232.44         365,058,952.30
 Construction in Process                                  202,239,827.00               90,730,915.00          29,582,796.12          13,271,738.76
 Construction Materials                                    56,529,385.00               58,082,221.00           8,268,882.00           8,496,024.34
 Disposal of Fixed Assets
 Productive Biological Assets
 Oil and Gas Assets
 Intangible Assets                                        167,535,199.00              170,293,590.00          24,506,348.28          24,909,834.06
 Expense on Exploitation
 Goodwill
 Long-term Deferred Expense
 Deferred Income Tax Assets
 Other Non-current Assets
             Total Non-current Assets                   2,902,511,608.00            2,814,795,748.00         424,567,258.84         411,736,549.46

                  Total Assets                          5,907,791,508.00            5,129,662,785.00         864,167,033.53         750,345,618.09



                                           6.8364




                                                                           55
FAW Bharat Forge (Changchun) Co. Ltd.

Balance Sheet
As at December 31, 2009

                           Item                      December 31, 2009       December 31, 2008       December 31, 2009       December 31, 2008
                                                         Unit: INR               Unit: INR              Unit: RMB               Unit: RMB
Current liabilities
 Short-term loan                                         1,717,748,046.00          950,327,964.00          251,265,000.00        139,010,000.00
 Transaction Monetary Liability
 Notes Payable                                             413,911,237.00          158,946,300.00           60,545,204.63         23,250,000.00
 Accounts Payable                                        1,577,362,714.00        1,494,471,062.00          230,730,020.73        218,604,976.49
 Advance from Customers                                      3,624,202.00           13,713,788.00              530,133.10          2,005,995.49
 Accrued Payroll                                            22,863,053.00           42,436,223.00            3,344,311.72          6,207,393.20
 Taxes Payable                                              19,029,054.00            2,869,973.00            2,783,490.46            419,807.61
 Interest Payable
 Dividend Payable
 Other Payables                                            118,190,031.00           99,774,084.00           17,288,343.45         14,594,535.71
 Non-current Liability maturing within one year                                    389,674,800.00                                 57,000,000.00
 Other Current Liabilities
                    Total Current Liability              3,872,728,337.00        3,152,214,194.00          566,486,504.09        461,092,708.50

Non-current Liability
 Long-term Loan                                            362,329,200.00                                   53,000,000.00
 Bonds Payable
 Long-term Payable                                            533,616.00             1,258,865.00               78,055.18            184,141.50
 Special Payable
 Estimable Liability
 Deferred Income Tax Liability
 Other Non-current Liability
                 Total Non-current Liability               362,862,816.00            1,258,865.00           53,078,055.18            184,141.50
                       Total Liability                   4,235,591,153.00        3,153,473,059.00          619,564,559.27        461,276,850.00
Owners' Equity
 Paid-in Capital                                         2,806,825,165.00        2,806,825,165.00          410,570,646.13        410,570,646.13
 Capital Surplus                                               505,053.00              505,053.00               73,876.97             73,876.97
 Less: Treasury Stock
 Special Reserves
 Surplus Reserves
 Undistributed Profit                                   (1,135,129,863.00)        (831,140,492.00)        (166,042,048.84)      (121,575,755.01)
 Conversion Margin in Foreign Currency Report Form
                  Total Owners' Equity                   1,672,200,355.00        1,976,189,726.00          244,602,474.26        289,068,768.09

           Total Liability and Owners' Equity            5,907,791,508.00        5,129,662,785.00          864,167,033.53        750,345,618.09




                                                                     56
FAW Bharat Forge (Changchun) Co. Ltd.

Income Statement of 2009

                                                  Year ended December       Year ended December       Year ended December      Year ended December 31,
                             Item
                                                        31, 2009                  31, 2008                  31, 2009                    2008
                                                       Unit: INR                 Unit: INR                Unit: RMB                  Unit: RMB

ⅠTotal Revenue from Operation                         3,260,283,674.00          3,626,642,794.00            476,900,660.47             530,490,139.95

  Including: Revenue from Operation                   3,260,283,674.00          3,626,642,794.00            476,900,660.47             530,490,139.95

ⅡTotal Cost of Operation                              3,551,509,927.00          4,059,252,363.00            519,500,018.67             593,770,458.43

  Including: Cost of Sales                            2,967,959,500.00          3,492,516,743.00            434,140,702.71             510,870,742.34

           Operating Tax                                     18,761.00                                             2,744.35

           Sales Expense                                 69,285,729.00             41,170,937.00             10,134,826.63                6,022,312.41

           Administrative Expense                       417,908,091.00            310,651,571.00             61,129,847.72               45,440,812.53

           Financial Expense                            102,826,468.00            124,855,596.00             15,041,025.68               18,263,354.38

           Asset Impairment Loss                         (6,488,622.00)            90,057,516.00               (949,128.42)              13,173,236.77

  Add: Changes of Fair Value of Assets

      Investment Income

         Including: Income from Associates

                    Exchange Income

Ⅲ Operation Profit/Loss                                (291,226,253.00)          (432,609,569.00)            (42,599,358.20)            (63,280,318.48)

  Add: Non-operation Income                              17,700,563.00             55,214,416.00              2,589,164.27                8,076,533.89

  Less: Non-operation Cost                               30,463,681.00              1,373,791.00              4,456,099.90                 200,952.34

      Including: Disposal of Non-current Assets

Ⅳ Total of Profit/Loss                                 (303,989,371.00)          (378,768,944.00)            (44,466,293.83)            (55,404,736.93)

  Less: Income Tax

Ⅴ Net Profit/Loss                                      (303,989,371.00)          (378,768,944.00)            (44,466,293.83)            (55,404,736.93)

VI Earnings Per Share

  (i) Basic Earnings Per Share                                     (0.74)                    (1.00)                   (0.11)                     (0.15)

  (ii) Diluted Earnings Per Share                                  (0.74)                    (1.00)                   (0.11)                     (0.15)

VII Other Comprehensive Income

VIII Total of Comprehensive Income                     (303,989,371.00)          (378,768,944.00)            (44,466,293.83)            (55,404,736.93)




                                                                    57
                                        RECENT DEVELOPMENTS
We recently published our unaudited, unconsolidated selected interim financial results for the quarter and the nine
months ended December 31, 2009, which is set out below:


                                          LIMITED REVIEW REPORT

Bharat Forge Ltd
Mundhwa, Pune Cantonment
Pune -411036

1.   We have reviewed the accompanying statement of ‘Un-audited financial results for the quarter ended 31st
     December 2009’ (the ‘Statement’) in which are incorporated the results for the quarter and nine months ended
     31st December 2009 of Bharat Forge Ltd, on a standalone basis prepared by the Company pursuant to Clause 41
     of the Listing Agreement with the Stock Exchanges in India, which has been initialled by us for identification
     purposes. This statement is the responsibility of the Company’s management and has been approved by the
     Board of Directors at its meeting held on January 23, 2010 .Our responsibility is to issue a report on the
     Statement based on our review.

2.   We conducted our review in accordance with the Standard on Review Engagement (SRE) 2400, “Engagements
     to Review Financial Statements” issued by the Institute of Chartered Accountants of India. This Standard
     requires that we plan and perform the review to obtain moderate assurance as to whether the financial
     statements are free of material misstatement.

3.   A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial
     data and thus provides less assurance than an audit. We have not performed an audit and accordingly, we do not
     express an audit opinion.

4.   Based on our review conducted as above, nothing has come to our attention that causes us to believe that the
     Statement prepared, in all material respects, in accordance with Accounting Standards notified pursuant to the
     Companies (Accounting Standards) Rules, 2006 as per Section 211 (3C) of the Companies Act, 1956 and other
     recognised accounting practices and policies, has not disclosed the information required to be disclosed in terms
     of Clause 41 of the Listing Agreement including the manner in which it is to be disclosed, or that it contains any
     material misstatement.

5.   Further, we also report that we have traced the number of shares as well as the percentage of
     shareholdings in respect of the aggregate amount of public shareholdings, as well as that of the     promoters
     and promoter group (both pledged/encumbered and non-encumbered), as disclosed in          terms of Clause 35 of
     the Listing Agreement, from the representations & other records and       information & explanations given to
     us by the company’s management, and found the same to be        correct.




                                                                                  For and on behalf of
                                                                                  DALAL & SHAH
                                                                                  Chartered Accountants

Place: Pune                                                                            ANISH AMIN
Date: 23rd January, 2010                                                                 Partner
                                                                                     Membership No. 40451


                                                          58
                                            Bharat Forge Limited
          Unaudited financial results for the quarter and nine months ended 31st December, 2009
                                                                                                    (Rs. in Lacs)
                                                Quarter ended              Nine months ended
                                                                                                     Year ended
                                                   31st        31st            31st          31st           31st
                                             December, December,         December,     December,        March,
Sr.                                               2009        2008            2009          2008           2009
No.   Particulars                           (Unaudited) (Unaudited)     (Unaudited)   (Unaudited)     (Audited)
1     a) Sales & Income from Operations
      - Domestic                                31,861       21,500          83,610        93,512        111,293
      - F.O.B. value of Exports &
      Corresponding Income                      19,982       24,436          49,123        88,218        100,141
      Total Sales                               51,843       45,936         132,733       181,730        211,434
      Less : Excise Duty                         2,258          2,292         5,981        10,660         12,023
      Total Net Sales                           49,585       43,644         126,752       171,070        199,411

      b) Other Operating income                  1,196          1,661         2,651         5,527          6,344
      Total Net Sales/Income from
      Operations                                50,781       45,305         129,403       176,597        205,755
2     Total expenditure :
      a) (Increase)/Decrease in stock in
      trade                                       (187)         (236)         (424)       (4,040)        (3,307)
      b) Consumption of raw materials           22,712       21,501          58,064        87,040        101,355
      c) Employee Cost                           3,729          3,580        10,889        11,239         13,916
      d) Depreciation                            4,091          4,190        12,016        11,852         14,944
      e) Manufacturing Expenses                  8,930          8,020        21,188        29,257         33,770
      f) Others                                  3,689          3,582        10,046        12,875         15,525
      Total expenditure                         42,964       40,637         111,779       148,223        176,203

3     Profit from Operations before other
      Income, Interest and Exceptional
      Item                                       7,817          4,668        17,624        28,374         29,552

4     Other Income                                 915          1,123         2,030         3,354          4,880

5     Profit from Operations before
      Interest and Exceptional Item              8,732          5,791        19,654        31,728         34,432

6     Interest                                   2,675          2,779         7,666         7,089         10,037

7     Profit after interest but before
      Exceptional item                           6,057          3,012        11,988        24,639         24,395

8     Exceptional item
      -Exchange Gain / (Loss) ( See Note
      2)                                          (293)     (2,821)         (2,076)      (18,506)        (8,628)


                                                      59
                                                                                                       (Rs. in Lacs)
                                                Quarter ended               Nine months ended
                                                                                                        Year ended
                                                   31st        31st             31st          31st             31st
                                             December, December,          December,     December,          March,
Sr.                                               2009        2008             2009          2008             2009
No.   Particulars                           (Unaudited) (Unaudited)      (Unaudited)   (Unaudited)       (Audited)
9     Profit from ordinary activities
      before Tax                                  5,764           191          9,912         6,133           15,767

10    Tax Expenses                                1,965          (244)         3,334         1,917            5,438
11    Net Profit from ordinary activities
      after Tax                                   3,799           435          6,578         4,216           10,329

12    Extraordinary item ( net of tax
      expenses )                                     –              –             –               –               –

13    Net Profit for the period / year            3,799           435          6,578         4,216           10,329

14    Paid-up Equity Share Capital
      (Face Value Rs.2/-)                         4,454          4,454         4,454         4,454            4,454

15    Reserves excluding revaluation
      reserves as per balance sheet of
      previous accounting year                                                                              144,239

16    a) Basic Earning per share of Rs.
      2/- before and after Extraordinary
      item                                         1.70           0.20          2.95            1.88           4.51
      b) Diluted Earning per share of Rs.
      2/- before and after Extraordinary
      item
      (See Note 3)                                 1.70           0.20          2.95            1.88           4.51

17    Total Public Shareholding
      - No of Shares                        124,910,306    125,017,089   124,910,306   125,017,089 124,734,166
      - Percentage of shareholding              56.11%         56.15%        56.11%        56.15%           56.03%
18    Promoters and promoter group
      Shareholding
      a) Pledged/Encumbered
      - No of Shares                               0.00          N.A.           0.00         N.A.              0.00
      - Percentage of shares ( as a % of
      the total shareholding of promoter
      and promoter group)                          0.00          N.A.           0.00         N.A.              0.00
      - Percentage of shares ( as a % of
      the total share capital of the
      company)                                     0.00          N.A.           0.00         N.A.              0.00




                                                      60
                                                                                                  (Rs. in Lacs)
                                               Quarter ended             Nine months ended
                                                                                                   Year ended
                                                  31st        31st           31st          31st           31st
                                            December, December,        December,     December,        March,
Sr.                                              2009        2008           2009          2008           2009
No.   Particulars                          (Unaudited) (Unaudited)    (Unaudited)   (Unaudited)     (Audited)
      b) Non-encumbered
      - No of shares                        97,732,765         N.A.    97,732,765         N.A.      97,908,905
      - Percentage of shares ( as a % of
      the total shareholding of promoter
      and promoter group)                     100.00%          N.A.      100.00%          N.A.        100.00%
      - Percentage of shares ( as a % of
      the total share capital of the
      company)                                 43.89%          N.A.       43.89%          N.A.         43.97%




                                                     61
                                            Bharat Forge Limited
                                  Unaudited Financial Results for the quarter
                                         ended 31st December, 2009


Notes to financial results:

1        The above results have been reviewed by the Audit Committee, approved by the Board of Directors of the
         Company at its meeting held on January 23, 2010 and were subjected to a "Limited Review" by the
         Auditors.

2        The Accounting Standard (AS-11) "The effects of changes in Foreign Exchange Rates" prescribed by
         Companies (Accounting Standards) Amendment Rules, 2006 was amended on 31st March 2009, by the
         Ministry of Corporate Affairs. The said amendment offered an option to Companies to recognise Foreign
         Exchange Gains and Losses arising on translation of all long term monetary assets and liabilities (LTMAL)
         acquired upto 31st March 2009 retrospectively from accounting periods commencing after 7th December
         2006 (i.e.1st April 2007 for the Company) upto 31st March 2011 as capital cost of acquisition of assets
         where they relate to acquisition of assets or to a translation reserve in other cases to be amortised over the
         balance term of the LTMAL but not later than 31st March,2011. The Company had exercised this option in
         the previous year and accordingly gain of Rs.461 lacs for the quarter and Rs.186 Lacs for year to date
         respectively has been amortised in the above results which together with the gains and losses on short term
         monetary items and foreign exchange derivative instruments amounting to Rs.754 lacs for the quarter and
         Rs.2,262 lacs Year to date has been reflected as "Exceptional item". The Balance in the translation reserve
         aggregating Rs.34 lacs as at 31st December 2009 will be amortised appropriately over the remaining 5
         quarters, subject to adjustments for further fluctuations. Exchange gain of Rs.2,896 lacs for the quarter and
         Rs.7,967 lacs for year to date on translation of foreign currency liabilities relating to Fixed Assets has been
         adjusted to the cost of Assets. Hence the amount relating to the corresponding periods are not comparable.

3        Company had issued 0.5% Foreign Currency Convertible Bonds ( FCCB) due 2010 in two Tranches (
         Tranche 1 & 2) aggregating USD 600 lacs each, convertible at an initial price of Rs.336.11 and Rs. 384.12
         per share of Rs.2/- each, respectively and also issued Zero Coupon Foreign Currency Convertible Bonds (
         FCCB) in two tranches (Viz. Tranche A and Tranche B) amounting to USD 400 lacs and USD 399 Lacs
         due 2012 and 2013 respectively optionally convertible at an initial price of Rs.604.03 and Rs.690.32 per
         share of Rs.2/- each respectively. Since the Fair value (i.e. preceding 6 months average of market price) of
         the Company's Equity shares is less than the Floor price in respect of all the Tranches of the Bonds, the
         option embedded in the said Bonds to subscribe to Equity shares is, at present, anti dilutive.

4        Company commissioned its new fully integrated Ring Rolling Facility at its Centre for Advanced
         Manufacturing, Baramati on January 4, 2010.

5        During the quarter, no Investor complaint was received. There were no Investor complaints pending for
         redressal as at the commencement and end of the quarter.

6        Previous year/ period's figures are regrouped/ restated wherever necessary to make them comparable with
         those of the current period.

                                                                                   For Bharat Forge Limited

Baramati
                                                                                     (B. N. KALYANI)
Dated : January 23, 2010                                                          Chairman & Managing Director




                                                          62
                                            Bharat Forge Limited
                              Segment wise revenue, results and capital employed
                                  for the quarter ended 31st December 2009
                                                                                                    (Rs. in Lacs)
                                               Quarter ended               Nine Months ended
                                                                                                 Year ended
                                            31st Dec          31st Dec     31st Dec     31st Dec 31st March,
Sr.                                             2009              2008         2009        2008        2009
No.   Particulars                          Unaudited         Unaudited    Unaudited    Unaudited     Audited
1     Segment Revenue

a     Steel Forging                            50,618           45,201      129,049      176,192         205,112
b     Gen. Engg., Trading etc.                    276              264          743          758           1,168

      Total                                    50,894           45,465      129,792      176,950         206,280

      Less: Inter Segment Revenue                 113              160          389          371             568

      Net Sales/Income from Operations         50,781           45,305      129,043      176,579         205,712

2     Segment Results
      Profit/(Loss) (before tax and
      interest
      from each segment)

a     Steel Forging                            10,149            7,004       24,911       36,100          39,262
b     Gen. Engg., Trading etc.                     69               21          217            69            254

      Total                                    10,218            7,025       25,128       36,169          39,516
      Less:
1     Interest                                  2,675            2,779        7,666        7,089          10,037
2     Other un-allocable expenditure net
      of
      un-allocable income                       1,486            1,234        5,474        4,441           5,084
      Profit before Tax & Exceptional           6,057            3,012       11,988       24,639          24,395
      item

      Exceptional items
      -Exchange Gain / (Loss)                   (293)           (2,821)      (2,076)     (18,506)        (8,628)

      Profit before Tax                         5,764              191        9,912        6,133          15,767

3     Capital Employed (Segment assets
      - Segment Liabilities)
a     Steel Forging                           231,327          219,484      231,327      219,484         236,219
b     Gen. Engg., Trading etc.                  3,306            1,629        3,306        1,629           1,841




                                                        63
                                                                                                       (Rs. in Lacs)
                                                 Quarter ended               Six Months ended
                                                                                                     Year ended
                                                  st               st
                                               31 Dec            31 Dec      31st Dec       31st Dec 31st March,
Sr.                                              2009              2008         2009           2008        2009
No.    Particulars                           Unaudited         Unaudited   Unaudited      Unaudited      Audited
c     Unallocable Assets less Liabilities
      -Investments in Foreign                    44,834           31,904       44,834         31,904         36,720
      Operations
      -Unutilised Fund raised,                   60,729           28,219       60,729         28,219         33,833
      temporarily deployed
      -Others                                    37,616           39,672       37,616         39,672         37,033

      Total                                     377,812          320,908     377,812         320,908        345,646

4     Secondary information in respect
      of
      Geographical segment on the basis
      of
      location of customers

a     Domestic                                   30,799           20,869       80,280         88,379        105,614
b     Exports                                    19,982           24,436       49,123         88,218        100,141

The Company has identified its business segments as its primary reporting format which comprises of Forgings and
General Engineering. The main segment is Forgings. All products made by the Company essentially emanate from
forgings and therefore it is reported as an independent business segment. General Engineering is a fabrication unit
which constitute a miniscule portion of the Company's activities.

The Company on a stand alone basis operates through a single geographical segment where all assets are located in
India. Secondary segment disclosures have been made accordingly.

                                                                                        For Bharat Forge Limited


Baramati                                                                               (B. N. KALYANI)
Dated : January 23,2010                                                         Chairman & Managing Director




                                                          64
Information in addition to listing requirements:

Key unaudited combined financial parameters for Bharat Forge Ltd. And its wholly owned global subsidiaries (other
than China operations) for the quarter ended 31st December, 2009 are as follows:
                                                                                                  (Rs. Lacs)
                                                                                                    Quarter Ended
Particulars                                                                            31.12.2009                   31.12.2008
Total Income ................................................................          82,250                         97,423
Profit before tax and exceptional items .......................                         4,545                          1,034
Exchange loss ..............................................................              (83)                        (4,002)
Restructuring and redundancy cost ..............................                       (2,731)                          (669)
Profit after tax ..............................................................         2,523                         (3,656)


      1.     The above does not include financial information of FAW Bharat Forge (Changchun) Company Limited –
             Company’s Joint Venture in China.
      2.     The Company is in process of restructuring & rightsizing the operations of its wholly owned overseas
             subsidiaries. As a part of such restructuring program, operations & assets of one of the wholly owned
             indirect subsidiaries of the Company namely Bharat Forge Scottish Stampings Limited are being
             transferred to the other companies in Bharat Forge Group.
      3.     The above additional information was noted by the Board of Directors of the Company at its meeting held
             on January 23, 2010.




The Combined Financial Parameters were prepared by our management on the basis of unconsolidated financial
information derived from the management information systems (“MIS”) of each of these wholly-owned foreign
Subsidiaries and the unconsolidated financial results of our Company (which were submitted to the Stock Exchanges
in accordance with Clause 41 of the Listing Agreement and published in India). The MIS of these wholly-owned
foreign Subsidiaries are prepared in accordance with respective generally accepted accounting principles (“GAAP”)
and in the respective operational currencies. We arithmetically aggregate the items set forth above, which are
derived from the respective MIS, after conversion into Indian Rupees based on an average conversion rate for the
period using the relevant RBI reference rate.
Neither the auditors of our Company nor the auditors of these wholly-owned foreign Subsidiaries have audited,
examined or performed any procedures with respect to the Combined Financial Parameters. The Combined
Financial Parameters have not been prepared in accordance with generally accepted accounting principles in India,
particularly with respect to preparation of consolidated financial statements and are subject to a number of
significant risks, uncertainties and assumptions. They may be inaccurate and our actual results may be materially
different from the Combined Financial Parameters. Investors are cautioned not to place reliance on these Combined
Financial Parameters. See Risk Factors – “Our actual results may be materially different from certain unaudited
combined financial parameters recently published by us, and investors should not rely on these figures.”




                                                                                  65
                                           RISK FACTORS

An investment in Securities involves a high degree of risk. You should carefully consider all the
information in this Placement Document, including the risks and uncertainties described below, before
making an investment in the Securities. If any of the following risks actually occur, our business,
profitability and financial condition could suffer, the trading price of our Securities could decline, and
you may lose all or part of your investment in the Securities. Unless specified or quantified in the
relevant risk factors below, we are not in a position to quantify the financial or other implication of any
of the risks described in this section. In addition, the risks set forth in this Placement Document may
not be exhaustive and additional risks and uncertainties not presently known, or which the Company
currently deems immaterial, may arise or become material in the future.

Risks Related to our Business and Industry

The recent global economic downturn has and may continue to adversely affect our business,
liquidity and results of operations.

As widely reported, financial markets in the United States, Europe and Asia experienced significant
disruptions in recent periods, including, among other things, extreme volatility in the securities
markets, severely diminished liquidity and credit availability, rating downgrades of certain investments
and declining valuations of assets. While these conditions impaired our ability to access credit markets
and finance our operations, we cannot assure you that there will not be a further deterioration in
financial markets and confidence in major economies. These adverse economic developments affect
businesses such as ours in a number of ways. The tightening of credit in financial markets adversely
affects the ability of our customers to obtain financing for purchases and operations and could result in
a decrease in or cancellation of orders for our and our customers’ products and services as well as affect
the ability of customers to make payments. Our business is also adversely affected by decreases in the
general level of economic activity, such as decreases in business and consumer spending,
transportation, manufacturing activity and the financial strength of our customers in the automotive and
other sectors such as power generation (including wind energy), marine, oil and gas, railways,
construction and other infrastructure sectors. We are unable to predict the likelihood of recurrence and
severity of the recent disruption in financial markets and adverse economic conditions. Recurrence or
worsening of the downturn or general economic condition may continue to have an adverse effect on
our business, liquidity and results of operations.

Significant declines in automotive production levels have reduced our sales and adversely affected
our operations and financial condition, and further significant declines would have an adverse effect
on our business and results of operations.

Demand for our automotive products is directly related to automotive vehicle production, which
constituted 78.6% of our consolidated total sales for the year ended March 31, 2009. Automotive sales
and production can be affected by general economic conditions, such as consumer sentiment,
employment levels, fuel prices, interest rates, labour relations issues, regulatory requirements, trade
agreements and other factors. The automobile industry has witnessed substantial changes in recent
years, including continuing consolidation, outsourcing, decreasing profit margins in certain sectors,
regulatory and technological changes and other trends. In light of the recent global economic downturn,
automotive industry conditions, particularly in North America and Western Europe continue to be
challenging. The North American and European automotive industries suffered from sharp declines in
sales, significant overcapacity, fierce competition, high fixed cost structures and significant employee
pension and health care obligations. As a result, several suppliers in North America and Europe are
facing significant financial distress, including bankruptcies. Our foreign Subsidiaries have been
operating at low production levels since October 2008. Our overall production has decreased by 21.6%
from 417,027 MT for the year ended March 31, 2008 to 332,247 MT for the year ended March 31,
2009. We undertook a process of restructuring and right-sizing the operations of our Subsidiaries in
2009. Over this period, we incurred an expenditure of approximately Rs. 723 million for such
restructuring and redundancies. Further, declines in automotive production levels of our current and
future customers would reduce our sales and harm our results of operations and financial condition.

Unfavourable industry conditions have also resulted in financial distress within several OEMs and Tier
1 supplier and an increase in commercial disputes. Notwithstanding the government support provided
to the automotive industry, the financial prospects of certain automotive and automotive components


                                                   66
companies remain uncertain. Further, the terms, conditions and extent of any funding support provided
by governments to the automotive industry could have an adverse effect on our business, financial
condition and results of operations. Further worsening of these industry conditions could have an
adverse effect on our business and results of operations.

In addition, the automotive component industry is sensitive to other factors such as technological
changes, cyclicality and unforeseen events, including political instability, recession, inflation, further
volatility in fuel prices, increased competition from alternate modes of transport such as railways and
other adverse occurrences. Any such event that results in decreased demand in the automotive industry,
or increased pressure on automobile manufacturers to develop, implement and maintain in-house auto
component facilities, could have an adverse effect on our business, financial condition and results of
operations.

Our actual results may be materially different from certain unaudited combined financial
parameters recently published by us, and investors should not rely on these figures.

Consistent with our past practice, we recently published and submitted to the Stock Exchanges certain
key unaudited combined financial parameters of our Company and our foreign Subsidiaries (other than
FAW Bharat Forge, China) for the three months ended December 31, 2009 (the “Combined Financial
Parameters”), which are set out in the section titled “Recent Developments – Combined Financial
Parameters”.

The Combined Financial Parameters were prepared by our management on the basis of unconsolidated
financial information derived from the management information systems (“MIS”) of each of these
wholly-owned foreign Subsidiaries and the unconsolidated financial statements of our Company
(which were submitted to the Stock Exchanges in accordance with Clause 41 of the Listing Agreement
and published in India). The MIS of these wholly-owned foreign Subsidiaries are prepared in
accordance with respective generally accepted accounting principles (“GAAP”) and in the respective
operational currencies. For example, the MIS of CDP Bharat Forge, Germany and Bharat Forge
Aluminiumtechnik, Germany are prepared in accordance with German GAAP; Bharat Forge Kilsta,
Sweden and BFSSL, Scotland in accordance with IFRS; and Bharat Forge America, the United States
in accordance with U.S. GAAP. We arithmetically aggregate the items set out in the Combined
Financial Parameters, which are derived from the respective MIS, after conversion into Indian Rupees
based on an average conversion rate for the period using the relevant RBI reference rate.

Neither the auditors of our Company nor the auditors of these wholly-owned foreign Subsidiaries have
audited, examined or performed any procedures with respect to the Combined Financial Parameters
and, accordingly, they have expressed no opinion or any form of assurance with respect thereto and
assume no responsibility and disclaim any association with the Combined Financial Parameters.

The Combined Financial Parameters have not been prepared in accordance with generally accepted
accounting principles in India, particularly with respect to preparation of consolidated financial
statements and accounting for intra-group transactions. Therefore, they are subject to a number of
significant risks, uncertainties and assumptions. They may be inaccurate and actual results may be
materially different from the Combined Financial Parameters. Investors are cautioned not to place
reliance on these Combined Financial Parameters.

If we are unable to successfully implement our restructuring plan for BFSSL and Bharat Forge
America, our business, reputation, financial condition and results of operations would be adversely
affected.

Primarily due to the downturn in the automotive industry across the globe and its effect on their
business and operations, BFSSL and Bharat Forge America, two of our Subsidiaries which operate in
the European and North American markets faced significant financial difficulties. The audited financial
statements of BFSSL for the year 2009 have not been prepared on a going concern basis and the auditor
of Bharat Forge America has, without qualifying its report on the audited financial statements for the
year 2009, expressed the possibility about its inability to continue as a going concern. BFSSL and
Bharat Forge America accounted for 5.3% and 3.4%, respectively, of our consolidated total income for
the year ended March 31, 2009. We are currently implementing various measures to adapt Bharat Forge
America to lower production volumes, which include a headcount reduction, controls on costs,
development of new products and efficient working capital management. In addition, we have
discontinued the operations of BFSSL and are in the process of transferring its plant and machinery to
                                                   67
its parent company, Bharat Forge Kilsta Sweden to reduce the fixed costs associated with operating a
separate unit. Moreover, we have also entered into an agreement to sell the land owned and used by
BFSSL for its operations. The uncertainty regarding the eventual outcome of our reorganisation plan,
and the effect of other unknown adverse factors, could threaten the existence of Bharat Forge America
as a going concern and the survival of the business of BFSSL. This is dependent upon, among other
things, process of implementation of our reorganisation plan, maintaining the support of key customers,
retaining key personnel, a recovery in the automotive industry and other factors, many of which are
beyond our control. We will continue to make further revisions as necessary to our reorganisation plan
and consistent with the extremely low volume production environment in the global automotive
industry. If we are unable to successfully reorganise the businesses of BFSSL (including the sale of
land) and Bharat Forge America and implement our reorganisation plans, our business, financial
condition and results of operations would be adversely affected.

We are not in compliance with certain financial covenants contained in two of our debt facilities,
which has resulted in cross-defaults in two of our other financing arrangements, either or both of
which could result in acceleration of payment obligations of such indebtedness.

As of March 31, 2009, we were not in compliance with certain financial covenants contained in two of
our current loan agreements. Although, we received waivers in respect of such non-compliance for the
last fiscal year, we may not be able to renew such waivers in future periods, and, moreover, we cannot
assure you that we will be able to procure waivers for future defaults of the agreements in respect of the
outstanding loans, including as of March 31, 2010. In the absence of appropriate waivers for any
breach of financial covenants contained in these loan agreements, our lenders could elect to accelerate
all amounts outstanding under the relevant financing arrangements and declare such amounts
immediately due and payable together with accrued and unpaid interest. As of March 31, 2010, the
aggregate indebtedness outstanding under these two financing arrangements was Rs. 2,675.74 million
(this consisted of Rs. 2,245.50 million of borrowings by our Company and US$ 9.58 million (Rs.
430.24 million) of borrowings by Bharat Forge America).

Furthermore, these covenant defaults resulted in cross-defaults in three of our other financing
arrangements. Since the underlying covenant defaults which resulted in these cross-defaults have been
waived for the last fiscal year, we have not sought waivers of these cross-defaults, and, therefore, all
amounts outstanding under these other financing arrangements could possibly be accelerated. As of
March 31, 2010, the aggregate indebtedness outstanding under these three financing arrangements was
Rs. 6,336.83 million.

If any or all of these amounts are accelerated, and we are unable to repay the amounts due, such lender
and/or security trustee may enforce their respective security interests in certain of our assets, including
our fixed assets, land, buildings, property, plants and machinery, which may have an adverse effect on
our business, liquidity and financial condition.

The cyclical nature of automotive sales and production can adversely affect our business.

Our automotive business is directly related to automotive sales and automotive vehicle production by
our customers. Automotive sales and production, especially that of commercial vehicles, are highly
cyclical and depend on general economic conditions and other factors, including consumer spending
and preferences as well as changes in interest rate levels, consumer confidence and fuel costs. For
example, our Subsidiaries and automotive customers typically experience lower sales in the third
quarter of the year, after the onset of the summer season. Our sales are also affected by inventory levels
and production levels of automotive manufacturers. We cannot predict when manufacturers will decide
to either build or reduce inventory levels or whether new inventory levels will approximate historical
inventory levels. This may result in variability in our sales and financial condition. Uncertainty
regarding inventory levels may be exacerbated by favourable consumer financing programs initiated by
manufacturers which may accelerate sales that otherwise would occur in future periods. We also have
historically experienced sales declines during the manufacturers scheduled shut-downs or shut-downs
resulting from unforeseen events. As we, especially our Subsidiaries, typically have high fixed
production costs, even relatively modest declines in our customer's production levels and thus, our
production volumes can have a significant adverse impact on our profitability. Continued uncertainty
and other unexpected fluctuations could have an adverse effect on our business and financial condition.

In addition, dramatically lower global automotive sales have resulted in substantially all automotive
manufacturers significantly lowering vehicle production schedules. There is no assurance that global
                                                    68
automotive sales will not decrease further. This may have an effect on our profitability and future cash
flows.

We may not be successful in executing our strategy to expand our business in non-automotive
sectors.

For the year ended March 31, 2009, the non-automotive business contributed 21.4% to our
consolidated total sales. Considering the growth potential and attempt to reduce our reliance on the
automotive sector, we plan to expand our business further in non-automotive sectors such as power
generation (including wind energy), marine, oil and gas, railways and construction sectors. Given our
limited experience in the non-automotive sectors, it is possible that we may not be able to anticipate or
evaluate business risks or implement our strategies successfully. Our strategy of expanding our non-
automotive business involves understanding different market dynamics, product specifications,
technology and other factors, which we may currently be unfamiliar with.

Even if we have successfully executed our business strategies in the past, we cannot assure you that we
will be able to execute our strategies on time and within estimated budgets, or that we will meet the
expectations of targeted customers. We expect our strategies to expand our non-automotive business to
place significant demands on our management and other resources and require us to continue
developing and improving our operational, financial and other internal controls. In order to achieve
future growth, we need to effectively manage our expansion projects, accurately assess new markets,
attract new customers, obtain sufficient financing for our expected capital expenditures, control our
input costs, maintain sufficient operational and financial controls and make additional capital
investments to take advantage of anticipated market conditions. We may not be able to achieve such
growth in revenues and profits or maintain such rate of growth in the future. If we are unable to execute
our strategy effectively, our business and financial results will be adversely affected. Our inability to
manage the expansion of our non-automotive business could have an adverse effect on our business,
financial condition and profitability.

Our expansion into non-automotive sectors would depend on the performance of sectors such as
power generation (including wind energy), marine, oil and gas, railway and construction sectors.

We produce forged components for non-automotive sectors such as power generation (including wind
energy), marine, oil and gas, railways, construction and industries, and we plan to expand this business
further. Decisions by customers in these sectors to purchase components manufactured by us would, in
part, depend upon performance of these sectors. Prices of commodities and services in these industries
are frequently volatile and change in response to economic growth, political pressures, regulatory
environment, commodity inventories and disruptions in production. For example, the activity levels in
the oil and gas exploration sectors have been affected in recent years because of the volatility in oil
prices. The power sector in India is experiencing very high levels of business activity in recent years
because of deregulation carried out by the Government and greater access being provided to the private
sector in power generation, which may not be sustainable. Further, most of these sectors were severely
affected by the recent global economic downturn and there is no assurance that such occurrences may
not happen in the future. The rates of infrastructure spending, urban development and commercial
construction will continue to play a significant role in the results of our non-automotive business. Our
products are an integral component of these activities, and as these activities increase or decrease,
demand for our products may be significantly impacted, which could have an adverse effect on our
business and results of operation.

Escalating price pressures from customers may adversely affect our business.

Downward pricing pressures by automotive manufacturers are a characteristic of the industry we
operate in. Virtually all automakers pursue aggressive price reduction initiatives and objectives each
year with their suppliers, and such actions are expected to continue in the near future, especially in light
of the downturn that the automotive industry is currently experiencing. In addition, estimating such
amounts is subject to risk and uncertainties as any price reductions are a result of negotiations and other
factors. Accordingly, suppliers must be able to reduce their operating costs in order to maintain
profitability. Such price reductions may affect our sales and profit margins. Further, some of our
contracts provide for the phased reduction in per unit price. If we are unable to offset customer price
reductions in the future through improved operating efficiencies, new manufacturing processes,
sourcing alternatives and other cost reduction initiatives, our results of operations and financial
condition would be adversely affected.
                                                    69
Any changes in consumer credit availability or cost of borrowing could adversely affect our business.

A large number of vehicle purchasers finance their purchases through third party financing. The recent
economic downturn and freezing of the credit markets has led to a decline in the availability of
consumer credit and increases in consumer borrowing costs, increased default rates as a result of the
global economic downturn or otherwise, have negatively affected global automotive sales and the
continuation or worsening of these difficulties may lead to lower production volumes beyond the
reductions we have anticipated in our planning and budgeting process. Further, volatility in interest
rates affects the ability and willingness of prospective vehicle purchasers to obtain financing for the
purchase of vehicles manufactured by our customers. These factors may adversely affect our business
and results of operations.

We have undertaken and may continue to undertake strategic acquisitions and business expansions
in the future, which may be difficult to integrate and manage, and may end up being unsuccessful.

We have in the past pursued, and may from time to time pursue in the future, acquisitions as a mode of
expanding our operations. Between January 2004 and September 2005, we acquired the German
operations of CDP, a forging company in Germany; CDP Aluminumtechnik, an aluminium forging
company in Germany, the assets of Federal Forge Inc., a forging company based in Lansing, Michigan,
United States; and Imatra Kilsta AB and its subsidiary, with operations in Sweden and Scotland. In
December 2005, we entered into a joint venture with FAW Corporation, whose operations are based in
China.

We may make further acquisitions and investments as well as business expansions to enhance our
operations and technological capabilities. Even if we identify suitable acquisition targets or areas of
expansion, there can be no assurance that we will be able to raise sufficient funds to finance these
acquisitions or our expansion plans. There can be no assurance that we will be able to consummate
expansion, acquisitions or alliances in the future on terms acceptable to us, or at all. In addition, there
can be no assurance that the integration of any future expansion or acquisitions will be successful or
that the expected strategic benefits of any future expansion, acquisitions or alliances will be realised.

Further expansion and acquisitions may require us to incur or assume substantial new debt, expose us
to future funding obligations and integration risks and we cannot assure you that such expansion or
acquisition will contribute to our profitability. Failure to successfully integrate an acquired business or
inability to realise the anticipated benefits of such expansion or acquisition could adversely affect our
results of operations and financial condition.

Our business is dependent on certain principal customers and the loss of, or a significant reduction
in purchases by such customers could adversely affect our business.

We are dependent on certain principal customers. For example, sales to our top ten customers
represented 48.5% of our consolidated total sales for the year ended March 31, 2009. The loss of any
significant customer could have an adverse effect on our business. Our customers often undertake
vendor rationalisation to reduce costs related to procurement from multiple vendors. Since we are
significantly dependent on certain key customers, the loss of any one of such customers or a significant
reduction in demand from some of our customers could have an adverse effect on our business and
financial results.

Currency exchange rate fluctuations could have an adverse effect on our results of operations.

We have currency exposures related to our revenues, expenditures and financing in currencies other
than the local currencies in which we operate. As of December 31, 2009, on an unconsolidated basis,
we had significant borrowings in currencies other than Indian Rupees. Further, we also import various
equipment for our facilities for which we make payment in foreign currency. For the year ended March
31, 2009, our Company recorded a loss on account of foreign exchange fluctuation amounting to Rs.
862.74 million in the profit and loss account and a loss of Rs. 1,096.27 million was adjusted against the
cost of fixed assets and a loss of Rs. 234.28 million was transferred to the Foreign Currency Monetary
Item Translation Difference Account, which will be amortised over a period up to March 31, 2011.
These losses were on account of depreciation in the value of the Indian Rupee and recorded in
accordance with Accounting Standard-11 titled “The Effects of Changes in Foreign Exchange Rates”
prescribed by Companies (Accounting Standards) Rules 2006, which was amended on March 31, 2009.


                                                    70
We report our results of operations in Indian Rupees, which has experienced significant fluctuations in
recent years. To the extent that we are unable to match income received in foreign currencies with costs
paid in the same currency, exchange rate fluctuations in any such currency could have an adverse effect
on our revenues and financial results.

Our failure to identify and understand evolving industry trends and preferences and develop new
products to meet our customers’ demands may adversely affect our business.

Changes in regulatory or industry requirements or in competitive technologies may render certain of
our products obsolete or less attractive. Our ability to anticipate changes in technology and regulatory
standards and to successfully develop and introduce new and enhanced products on a timely basis will
be a significant factor in our ability to remain competitive. We cannot assure you that we will be able to
achieve the technological advances that may be necessary for us to remain competitive or that certain
of our products will not become obsolete. We are also subject to the risks generally associated with new
product introductions and applications, including lack of market acceptance, delays in product
development and failure of products to operate properly.

To compete effectively in the forgings industry, we must be able to develop and produce new products
to meet our customers’ demand in a timely manner. We cannot assure you, however, that we will be
able to install and commission the equipment needed to produce products for new product programs of
our customers in time for the start of production, or that the transitioning of our manufacturing facilities
and resources to full production under new product programs will not impact production rates or other
operational efficiency measures at our facilities. In addition, we cannot assure you that our customers
will execute on schedule the launch of their new product programs, for which we might supply
products. Our failure to successfully develop and produce new products, or a failure by our customers
to successfully launch new programs, could adversely affect our results of operations.

Our failure to compete effectively in the highly competitive forgings industry could result in the loss
of customers, which could have an adverse effect on us.

We compete with global competitors to retain our existing business as well as winning new business for
the new and redesigned existing vehicle platforms of our automotive customers and to win new
businesses from our non-automotive customers. The failure to obtain new business or to retain or
increase our existing business could adversely affect our financial results. In addition, we may incur
significant expense in preparing to meet anticipated customer requirements which may not be
recovered.

There can also be no assurance that we will remain competitive with respect to technology, design and
quality to our customers’ satisfaction. Some of our competitors may have certain advantages including
greater financial resources, technology, research and development capability, greater market
penetration, operate in diversified geographies and product portfolios, and therefore, may be able to
better respond to market trends. Accordingly, we may not be able to compete effectively with our
competitors, which may have an adverse impact on our business and results of operations.

Our gross margin and profitability may be adversely affected if we are unable to reduce costs or
increase prices.

There is substantial continuing pressure from major customers to reduce costs, including the cost of
products purchased from outside suppliers. In addition, our business is very capital-intensive, requiring
us to maintain a large fixed cost base. Therefore, our profitability is dependent, in part, on our ability to
spread fixed production costs over higher production volume. If we are unable to generate sufficient
production cost savings in the future to offset price reductions and any reduction in consumer demand
for automobiles or in demand for machinery in the power generation (wind energy), marine, oil and
gas, railways and construction sectors resulting in decreased sales, our gross margin and profitability
would be adversely affected.

Further, historically, wage costs in the Indian forging industry have been significantly lower than wage
costs in developed countries for comparable skilled technical personnel. In the long term, wage
increases may make us less competitive unless we are able to continue increasing efficiency and
productivity and the prices we can charge to our customers. Any significant increase in wage costs
could have an adverse effect on our business, financial condition and results of operations.


                                                     71
Our joint venture partners may not perform their obligations satisfactorily and their interests may
differ from us.

We have formed a joint venture company with FAW Group Corporation of China in respect of our
Chinese operations in which we hold 52% of the outstanding equity share capital. FAW Corporation is
one of the largest automotive groups in China and is owned and controlled by the Chinese Government.
Our Chinese operations constituted 6.9% of our consolidated total income for the year ended March 31,
2009. Our expansion into China is based on a long term strategic objective and we will continue to
consider opportunities to expand our Chinese operations. Without qualifying its opinion, the auditor of
FAW Bharat Forge in its audit report for the year 2009 has stated that based on the agreement between
the joint-venture partners, China FAW Group Corporation was required to transfer the net assets of
FAW Forge as its equity contribution in FAW Bharat Forge. However, the title of property and plant
(approximately 19,416.78 square meters), amounting to RMB 8,778,351.54.00, and land
(approximately 39,375.00 square meters), amounting to RMB25,257,626.94 (accounting to 17.25% of
the committed investment, RMB 197,332,705.00) had not been transferred to FAW Bharat Forge as of
the date of the audit report.

In additionto our joint venture arrangement with NTPC Limited and Alstom S.A., we had also entered
into a joint venture and shareholder agreement with Areva N.P. for expansion of our non-automotive
business, which has expired. While we are in discussions with Areva N.P. for the renewal of this
agreement, there is no assurance that we will be able to renew this agreement or enter into a final joint
venture or shareholder agreement, in a timely manner or at all. A delay in or failure to do so may have
an adverse effect on our business, financial condition and results of operations.

The success of our business collaboration depends significantly on the satisfactory performance by our
joint venture partners of their contractual and other obligations. As we do not control our partners, we
face the risk that they may not perform their obligations. If they fail to perform their obligations
satisfactorily, we may be unable to successfully carry out our operations. In such circumstance, we may
be required to make additional investments or become liable for our partners’ obligations, which could
result in reduced profits or in some cases, significant losses. Our collaborations may face difficulties in
their operations due to a variety of circumstances, which could have an adverse effect on our business,
financial condition and results of operations. If the interests of our partner conflict with our interests,
our business may be adversely affected.

These and other factors may cause our joint venture partners to act in a way contrary to our interests, or
otherwise be unwilling to fulfil their obligations under our arrangements with them. Any of the
foregoing could have an adverse affect on our business, reputation, financial condition and results of
operations.

Dependence on a few suppliers and absence of long-term supply contracts may adversely affect the
availability of key inputs at reasonable prices, which may in turn affect our margins and may have
an adverse effect on our business, financial condition and results of operations.

We are heavily dependent upon a small number of suppliers for our major raw materials, especially for
our Indian operations. Steel procured for our Indian operations from Kalyani Steel Limited and Kalyani
Carpenter Special Steels Limited aggregated to more than 90% of our total steel consumption on an
unconsolidated basis for the year ended March 31, 2009. Our Subsidiaries also procure a substantial
amount of their steel requirements from a limited number of regional steel mills. Discontinuation of
production by these companies or a failure of these suppliers to adhere to the delivery schedule or the
required quality could hamper our production schedule and, therefore, also affect our business and
results of operations. This dependence may also adversely affect the availability of key materials at
reasonable prices thus affecting our margins and may have an adverse effect on our business, financial
condition and results of operations. There can be no assurance that strong demand, capacity limitations
or other problems experienced by our suppliers will not result in occasional shortages or delays in their
supply of raw materials. If we were to experience a significant or prolonged shortage of raw materials
from any of our suppliers, particularly those who are sole sources, and cannot procure the raw materials
from other sources, we would be unable to meet our production schedules for some of our key products
and to ship such products to our customers in timely fashion, which would adversely affect our sales,
margins and customer relations.

Further, the automotive industry has experienced significant inflationary pressures with respect to raw
materials prices in the recent past, primarily in ferrous and non-ferrous metals. Currently and
                                                    72
historically, we have been able to pass on the increase in cost for steel onto our customers. However,
our cash flows may be adversely affected because of a time lag between the date of the procurement of
steel and date on which we can reset the component prices for our customers to account for the increase
in the steel prices. In addition, we do not have an express agreement with some of our customers to
pass on the increase in steel prices and we have been able to do so, on the basis of industry practices.
We cannot assure you that we will be able to continue such policy in the future. The inflationary
pressures have placed significant operational and financial burdens on automotive suppliers at all
levels, and are expected to continue for the foreseeable future. Our need to maintain a continued supply
of raw materials may make it difficult to resist price increases and surcharges imposed by our suppliers,
which may have an adverse effect on our business and results of operation.

In the absence of long term contracts, we cannot assure you that a particular supplier will continue to
supply our products in the future. For example, while our primary suppliers of steel are companies in
the Kalyani group, for our Indian operations, we do not have any long term contracts in place. Any
change in the supplying pattern of our raw materials can adversely affect our business and profits.

Our customers may terminate supply contracts before completion or choose not to renew contracts,
which may adversely affect our business and results of operation.

Our customers have high and exacting standards for product quality and delivery schedules. Any failure
to meet customer’s expectations could result in the cancellation or non-renewal of contracts. Generally,
our contracts with customers do not bind our customers to provide us with a specific volume of
business and can be terminated by them with or without cause, with little advance notice and without
compensation. Typically, we enter into a master/umbrella agreement with a customer and products are
delivered under specific work orders. There is, however, no commitment on the part of the customer to
pass on new work orders to us. There are also a number of factors other than our performance that are
beyond our control and that could cause the loss of a customer. Customers may demand price
reductions, change their outsourcing strategy by moving more work in-house, or replace their existing
products with alternative products, any of which may have an adverse effect on our business, financial
condition and results of operations.

The discontinuation of, the loss of business with respect to, or a lack of commercial success of a
particular vehicle model for which we are a significant supplier could affect our estimates of
anticipated sales.

Although we have work orders from many of our automotive customers, these work orders generally
provide for the supply of a customer’s annual requirements for a particular vehicle model and
assembly plant and are renewable on a year-to-year basis, rather than for the purchase of a specific
quantity of products. Therefore, the discontinuation, loss of business with respect to, or a lack of
commercial success, of a particular vehicle model for which we are a significant supplier could reduce
our sales and affect our estimates of anticipated sales, which could have an adverse effect on our
business and results of operations.

High days of sales outstanding (i.e. the average period for which the sales invoice remains
outstanding) may increase our collection risk and working capital requirements, which could
adversely affect our liquidity.

For the year ended March 31, 2009, our days of sales outstanding (represented as the ratio of sundry
debtors, including the bills discounted in the normal course of business, to total sales) in a particular
period multiplied by the number of days in that period, was approximately 75 days, which reflects the
average period for which the sales invoice remains outstanding. For our Indian operations, our days of
sales outstanding is typically high, primarily on account of significantly longer collection cycles for
export sales as compared to domestic sales. A typical indicative collection cycle for our Indian sales is
between 30 to 60 days. However, the typical indicative collection cycle for our Company’s export sales
is much longer, averaging between 150 to 180 days. For our Subsidiaries, our days of sales outstanding
are typically between 45 to 90 days.

With an increase in export sales of our Company, the total average number of days for which our
receivables will remain outstanding may increase. Our inability in the future to accelerate the
realisation of receivables could adversely affect our liquidity.



                                                   73
We are dependent on third party logistics providers for the supply of raw materials and delivery of
products.

We normally use third party logistic providers for the supply of our raw materials and for deliveries of
finished and unfinished products to our domestic and overseas customers as well as between
production facilities. Transportation strikes have, in the past, and could again in the future have, an
adverse effect on our supplies and deliveries to and from particular plants. An increase in freight costs
or the unavailability of adequate port and shipping infrastructure for transportation of our products to
our markets may have an adverse effect on our business and results of operation.

Product liability claims and costs incurred as a result of product recalls could harm our business,
financial condition and results of operations.

We face an inherent business risk of exposure to product liability or recall claims in the event that our
products fail to perform as expected or such failure results, or is alleged to result, in bodily injury or
property damage or both. We cannot assure you that we will not experience any material product
liability losses in the future or that we will not incur significant costs to defend any such claims.
Vehicle manufacturers have their own policies regarding product recalls and other product liability
actions relating to their suppliers. However, as suppliers become more integrally involved in the
vehicle design process and assume more vehicle assembly functions, vehicle manufacturers may seek
compensation from their suppliers for contributions when faced with product recalls, product liability
or warranty claims. Vehicle manufacturers are also increasingly requiring their outside suppliers to
provide warranties for their products and bear the costs of repair and replacement of such products
under new vehicle warranties. Currently, we do not provide any warranties except for a one-year
replacement warranty for sales of spares in the Indian market. We do not carry insurance for product
liability or recall in India. Our Subsidiaries, CDP Bharat Forge and Bharat Forge Aluminiumtechnik
carry such insurance for their German operations. Bharat Forge Kilsta and BFSSL Scotland have
product liability coverage without any coverage for product recall. Bharat Forge America does not have
specific product liability coverage however it is covered as a part of its overall general insurance
coverage. FAW Bharat Forge does not have any product liability coverage. Depending on the terms
under which we supply products, our customers may hold us responsible for some or all of the repair or
replacement costs of defective products under new vehicle warranties provided by us or by our
customers, when the product supplied does not perform as expected. A successful warranty or product
liability claim or costs incurred for a product recall in excess of our available insurance coverage, if
any, would have an adverse effect on our business, results of operations and financial condition.

We have substantial capital expenditure and working capital requirements and may require
additional financing to meet those requirements.

Our business is capital intensive. We continuously need to expand and upgrade our existing production
facilities. The actual amount and timing of future capital requirements may differ from estimates as a
result of, among other things, unforeseen delays or cost overruns, unanticipated expenses, regulatory
changes, economic conditions, engineering design changes, weather related delays, technological
changes, including additional market developments and new opportunities in the forging industry. Our
sources of additional financing, if required, to meet our capital expenditure plans may include the
incurrence of debt or the issue of equity or debt securities or a combination of both. If we decide to
raise additional funds through the incurrence of debt, our interest and debt repayment obligations will
increase, and could have a significant effect on our profitability and cash flows and we may be subject
to additional covenants, which could limit our ability to access cash flows from operations. We recently
redeemed foreign currency convertible bonds aggregating to US $ 131.49 million out of which US $
102.25 million was towards the principal and US $ 29.24 million was towards the redemption
premium. The redemption premium is being adjusted against our securities premium account and this
may reduce our net worth. Any issuance of equity, on the other hand, would result in a dilution of your
shareholding.

In many cases, a significant amount of our working capital is required to finance the purchase of
materials and the performance of engineering, procurement, manufacturing and other work before
payment is received from customers. Our working capital requirements may increase if the payment
terms in our agreements include reduced advance payments or longer payment schedules. These factors
may result, or have resulted, in increases in the amount of our receivables and short-term borrowings.
Continued increases in our working capital requirements may have an adverse effect on our financial
condition and results of operations.
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As a result of the recent crisis in the credit markets worldwide and challenging economic environment,
we cannot assure you that we will be able to raise the full amount we believe is necessary to fund our
capital expenditure and working capital requirements, or that such amounts will be available at costs
acceptable to us. Further, our ability to raise financing from lenders outside India will depend upon the
regulatory environment in India with regard to external commercial borrowing and our ability to raise
such funds under the automatic route. Our failure to obtain sufficient financing could result in the delay
or abandonment of our development and expansion plans or disruption in our operations and have an
adverse effect on our business and results of operations.

We are subject to risks arising from interest rate fluctuations, which could adversely affect our
business, financial condition and results of operations.

As of March 31, 2009, 31.4% of our consolidated borrowings were at floating rates which are required
to be reset on a periodic basis. If the interest rates of our existing or future borrowings increase
significantly, our cost of funds will increase. This may adversely affect our results of operations,
planned expenditures and cash flows.

Our manufacturing activities can be hazardous and can cause injury to people or property in certain
circumstances.

Our business requires individuals to work under potentially hazardous circumstances, with volatile and
often highly flammable materials. If improperly handled or subjected to unsuitable conditions, hot
metal can seriously hurt or even kill employees or other persons, and cause damage to our properties
and the properties of others. This could subject us to disruptions in our business and expose us to legal
and regulatory costs and liabilities, which could adversely affect our results of operations, financial
condition and reputation.

We might infringe the intellectually property rights of others, any misappropriation of which, could
harm our competitive position.

While we take care to ensure that we comply with the intellectual property rights of others, we cannot
determine with certainty whether we are infringing any existing third-party intellectual property rights
which may force us to alter our technologies, obtain licenses or cease some of our operations. We may
also be susceptible to claims from third parties asserting infringement and other related claims. If such
claims are raised, those claims could: (a) adversely affect our relationships with current or future
customers: (b) result in costly litigation; (c) cause product shipment delays or stoppages; (d) divert
management's attention and resources; (e) subject us to significant liabilities; (f) require us to enter into
potentially expensive royalty or licensing agreements and (g) require us to cease certain activities.
Furthermore, necessary licenses may not be available to us on satisfactory terms, if at all. Any of the
foregoing could adversely affect our business, results of operations and financial conditions.

In addition, in certain cases, our customers share their intellectual property rights in the course of the
product development process that we carry out for them. If our customer’s intellectual property rights
are misappropriated by our employees in violation of any applicable confidentiality agreements, our
customers may seek damages and compensation from us. This could have an adverse effect on our
business, financial condition and results of operations and damage our reputation.

There may be a conflict of interest with our major suppliers of steel, Kalyani Steel Limited and
Kalyani Carpenter Special Steels Limited.

Our Promoter and his affiliates collectively hold 44.0% of our current issued and outstanding equity
share capital. Further, our Promoter is also the promoter and a director of Kalyani Carpenter Special
Steels Limited and Kalyani Steels Limited, our major suppliers of steel. In the event, Kalyani Carpenter
Special Steels Limited and Kalyani Steels Limited are unable to fulfil their obligations under the terms
of our agreements with them, our ability to renegotiate the terms of such agreements or seek remedy
may be limited because of this conflict of interest. This could have an adverse affect on our business
and results of operations.




                                                     75
Our operating results may be adversely affected by environmental and safety regulations to which we
are subject to.

We are required to comply with federal and central, state, local and foreign laws and regulations
governing the protection of the environment and occupational health and safety, including laws
regulating the generation, storage, handling, use and transportation of waste materials, the emission and
discharge of waste materials into soil, air or water, and the health and safety of employees. We are also
required to obtain and comply with environmental permits for certain of our operations. There can be
no assurance that we will at all times be in complete compliance with such laws, regulations and
permits. If we violate or fail to comply with these requirements, we could be fined or otherwise
sanctioned by the relevant regulators. In some instances, such a fine or sanction could adversely affect
our business, reputation, financial condition or results of operations. In addition, these requirements
may become more stringent over time and there can be no assurance that we will not incur significant
environmental costs or liabilities in the future. We are also subject to laws requiring the clean-up of
contaminated property. Under such laws, we could be held liable for costs and damages relating to
contamination at our facilities and at third-party sites to which these facilities send waste material,
which could have an adverse effect on our business and results of operation.

Our loan agreements contain restrictions that limit our flexibility in operating our business.

We are bound by restrictive covenants in our loan agreements with domestic and foreign banks and
financial institutions. Such covenants, among other matters, prevent us from changing our capital
structure, modifying our constitutive documents, declaring dividends in certain cases or undertaking
material changes in our business without prior notification to and/or the approval of such lenders and,
furthermore, require our compliance with certain financial ratios and other financial condition tests.
Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we
cannot assure you that we will meet those ratios and tests. Moreover, the consent of our lenders for
incurring additional debt or issuing equity may be required, and there can be no assurance that such
consent will be granted, or that we will be successful in obtaining any such consents in the future,
including consents that may be necessary for us to implement our business and expansion plans.

A breach of any of these covenants could result in a default (and resulting cross-defaults) under one or
more of our loan agreements. Upon the occurrence of an event of default under any of our loan
agreements, the respective lenders could elect to declare all amounts outstanding under our loan
agreements to be immediately due and payable and terminate all commitments to extend further credit.
If we were unable to repay those amounts, those lenders could proceed against any collateral granted to
them to secure such indebtedness. If any of our lenders accelerate the repayment of our borrowings, we
cannot assure you that we will have sufficient assets to repay amounts outstanding under our loan
agreements or continue our business.

Our business and financial results could be adversely affected by strikes or work stoppages by our
employees or employees of our customers and suppliers.

Strikes or work stoppages can adversely affect the results of our operations and reputation. In addition,
many of our customers have unionised work forces. Work stoppages or slow-downs experienced by us,
our customers or key suppliers could result in slow-downs or closures of our units or assembly plants
where our products are included in the end products. We have entered into collective bargaining
agreements with employees’ associations and unions for our operations in India, Germany and Sweden.
The agreements for our operations in India and Germany will terminate in June 2010 and March 2012
respectively. With respect to our Swedish operations, the employers’ association is in the process of re-
negotiating the terms of the agreements with the employees’ association as the terms of the agreement
expired on March 31, 2010. In the event that we or one or more of our customers or key suppliers
experiences a work stoppage, such work stoppage could have an adverse effect on our business,
financial condition or results of operations.

We are highly dependent on our management team and certain key personnel, and the loss of any
key team member may adversely affect our business performance.

Our business, the implementation of our strategy and success is dependent upon our key management
team including our Promoter and our executive directors, who oversee our day-to-day operations,
strategy and growth of our business. If one or more members of our key management team are unable


                                                   76
or unwilling to continue in their present positions, such persons would be difficult to replace and our
business, prospects, financial condition and results of operations could be adversely affected.

In addition, our success in expanding our business will also depend, in part, on our ability to attract,
retain and motivate appropriately qualified management personnel. Our failure to successfully manage
our personnel needs could adversely affect our business prospects, financial condition and results of
operations. These risks could be heightened to the extent we invest in businesses or geographical
regions in which we have limited experience. If we are not able to address these risks, our business
prospects, financial condition and results of operations could be adversely affected.

We appoint contract labour for carrying out low skill operations.

In order to retain flexibility and keep our fixed overhead to a minimum, in line with industry practice,
our Company appoints contractors who in turn engage on-site contract labour for performance of our
low skill operations in India. We are subject to the risk that on an application made by the contract
labourers, the appropriate government may direct that the contract labourer system be abolished or that
we pay certain contributions for such practice. Any inability to support our growth with the required
skilled labourers may affect our operations and profitability.

Our continued operations are critical to our business and any shutdown of our manufacturing
facilities may have an adverse effect on our business and financial results.

Our manufacturing facilities are subject to operating risks, such as the breakdown or failure of
equipment, power supply or processes, performance below expected levels of efficiency, obsolescence,
labour disputes, natural disasters, industrial accidents and the need to comply with the directives of
relevant government authorities. Also, if one or more of our customers were to experience a work
stoppage, that customer may halt or limit purchases of our products which could result in the shut down
of the related manufacturing facilities. The assembly lines of our customers rely significantly on the
timely delivery of our components and our ability to provide an uninterrupted supply of our products is
critical to our business. In addition, certain of our customers impose significant penalties on component
manufacturers like us for any stoppage in any assembly line, caused either by delayed delivery of a
component or a defect in the components delivered. For example, one of our Subsidiaries, BFSSL
experienced operational issues due to the failure of the crankshaft in its 8,000 MT press in February
2007. This resulted in the loss of approximately a month of production time and a consequent delay in
the supply to the customers. As a consequence of this breakdown, two of its customers made claims of
EUR 3.70 million (Rs. 247.33 million) for reimbursement of all costs, expenses, loss and damage
incurred by an alleged failure to deliver, which has been already provided for in our financial
statements. Our business and financial results may be adversely affected by any disruption of
operations of our product lines, including as a result of any of the factors mentioned above.

We may not have sufficient insurance coverage to cover our economic losses as well as certain other
risks including those pertaining to claims by third parties and litigation.

Our business involves many risks and hazards which may adversely affect our profitability, including
breakdown, failure or substandard performance of equipment, third party liability claims, labour
disturbances, employee frauds, infrastructure failure and terrorist activities.

Our insurance may not provide adequate coverage in these circumstances including those involving
claims by third parties and litigation and is subject to certain deductibles, exclusions and limits on
coverage. We cannot assure you that the operation of our business will not be affected by any of the
incidents and hazards listed above. If our arrangements for insurance or indemnification are not
adequate to cover claims, including those exceeding policy aggregate limitations or exceeding the
resources of the indemnifying party, we may be required to make substantial payments and
our financial condition and results of operations may be adversely affected.

Our failure to keep our technical knowledge confidential could erode our competitive advantage.

Like many of our competitors, we possess extensive technical knowledge about our products. Our
know-how is a significant independent asset, which may not be adequately protected by intellectual
property rights such as patent registration. Some know-how is protected only by secrecy. As a result,
we cannot be certain that our know-how will remain confidential in the long run.


                                                   77
Even if all reasonable precautions, whether contractual or otherwise, are taken to protect the
confidential technical knowledge of our products and business, there is still danger that such
information may be disclosed to others or become public knowledge in circumstances beyond our
control. In the event that the confidential technical information or know how in respect of our products
or business becomes available to third parties or to the public, our competitive advantage over other
companies in the forging component sector could be harmed, which could have an adverse effect on
our business, future prospects, financial conditions and results of operations.

Our inability to attract, recruit and retain skilled personnel could adversely affect our business and
results of operations.

Our ability to meet future business challenges depends on our ability to attract, recruit and retain
talented and skilled personnel. A significant number of our employees are skilled engineers and we face
strong competition to recruit and retain skilled and professionally qualified staff. Owing to the limited
pool of available skilled personnel, competition for senior management and skilled engineers in our
industry is intense.

We may experience difficulties in attracting, recruiting and retaining an appropriate number of
managers and engineers for our business needs. We may also need to increase our pay structures to
attract and retain such personnel. Our future performance will depend upon the continued services of
these persons. Our inability to manage the attrition levels in different employee categories may
adversely affect our business and results of operations.

Our Company's export obligations may not be met under the EPCG scheme.

Our Company has imported capital goods under the Export Promotion Capital Goods Scheme (the
“EPCG Scheme”), of the Government of India. This scheme allows imports at concessional rates of
custom duty and requires the importer to export a specified quantity of goods over a period of seven
years and to maintain an average quantity of export per year. Non-fulfilment of such obligations may
result in confiscation of capital goods imported under this scheme and other penalties as set out in this
scheme. As of March 31, 2009 the total outstanding export obligations of our Company under the
EPCG Scheme was US$ 251.83 million over a period of seven years, with a requirement to maintain an
average export of US$ 128.63 million per annum. We have not been subject to any penalties on account
of failure to meet our export obligations in the past, since the value of exports undertaken by us has
exceeded our export commitments. However, in the event any default under the EPCG Scheme occurs,
our results of operations may be adversely affected.

We have significant energy requirements and any disruption to these power sources could increase
our production costs.

We require substantial electricity for our manufacturing facilities, and energy costs represent a
significant portion of the production costs for our operations. For the year ended March 31, 2009,
energy costs constituted 6.7% of our consolidated total income. We source almost all the electricity
requirements for our manufacturing facilities in India from the Maharashtra State Electricity
Distribution Board. If supply is not available for any reason, we will need to rely on alternative sources,
which may not be able to consistently meet our requirements. Further, if for any reason such electricity
is not available, we may need to shut down our plants until an adequate supply of electricity is restored.
The cost of such purchased power would be significantly higher, thereby adversely affecting our cost of
production and profitability. Interruptions of electricity supply can also result in production shutdowns,
increased costs associated with restarting production and the loss of production in progress.

If energy costs were to rise, or if electricity supplies or supply arrangements were disrupted, our
profitability could decline.

Reduction in Government incentives could have an adverse effect on our results of operations.

Our Company currently enjoys certain fiscal benefits on account of policies of the Government of
India, including concessional duty imports and incentives relating to Duty Entitlement Pass Book
licences (“DEPB Licences”) on account of our export sales. DEPB licenses are issued as a form of
export incentive scheme to neutralise the incidence of customs duty on imported contents of export
products. Any change in the policies of the Government of India or reduction in this assistance could
have an adverse effect on our results of operations.
                                                    78
Our attempts to lower labour costs may affect adversely affect our financial condition in the near-
term.

As part of generating cost savings and adapting our cost structure to adjust for lower vehicle production
rates, we have attempted to lower our labour costs by lowering the salaries of our employees and
reducing the number of employees. Modifications made to our employment agreements together with
comprehensive settlement agreements negotiated with unions have improved our cost structure and our
ability to adjust for changes in economic conditions. However, due to costs related to severance
packages in relation to employments which have been terminated, we may incur additional or
unforeseen costs in the near-term such as one-off payments, legal costs, additional funding
requirements for pensions and healthcare, which could adversely affect our financial condition. In
addition, we may have to restore the previously agreed salary levels, which may increase our employee
costs.

Our Company has received certain enquiries from the Enforcement Directorate.

Our Company has received two letters from the Directorate of Enforcement, Department of Revenue,
Ministry of Finance, Government of India (the “ED”) seeking information in relation to the foreign
currency convertible bonds and global depository receipts issued by our Company. The ED has sought
such information under Section 37 of the Foreign Exchange Management Act, 1999 (the “FEMA”).
Our Company has responded to all the queries from the ED and has also appeared before the ED.
Although the ED has not alleged any contravention of the FEMA, further queries and letters requesting
for additional information or questioning us on the aforesaid transactions or initiating further action
with respect to the enquiries cannot be ruled out.

We do not have any patent on our products and our corporate logo is not registered as a trademark.

Many of the products manufactured and technologies developed by us do not have registered patents.
In absence of a registered patent, we cannot prohibit other persons from using our unpatented products
and other technology, which may adversely affect our business.

An application for registering our corporate logo has been made by one of our affiliates, under Class 6,
7 and 12, which is still pending. Moreover, we have not entered into any agreement with this affiliate to
license or otherwise authorise our use of our corporate logo, under which our rights to use it would be
protected. Therefore, a third party could use our corporate logo and market their products under it,
thereby potentially harming the image of our brand. Not being a license holder of our corporate logo,
which in turn is not registered in our affiliate’s name, we could be subject to intellectual property
infringement claims by third parties alleging intellectual property rights with respect to our corporate
logo.

Risks Related to India

A slowdown in economic growth in India could cause our business to suffer.

Our performance and growth are dependent on the health of the Indian economy. For the year ended
March 31, 2009, 43.5% of our consolidated total income was derived from operating activities in India.
The economy could be adversely affected by various factors such as political or regulatory action,
including adverse changes in liberalisation policies, social disturbances, terrorist attacks and other acts
of violence or war, natural calamities, interest rates, commodity and energy prices and various other
factors. Any slowdown in the Indian economy may adversely affect our business and financial
performance and the price of our Securities.

Any downgrading of India’s debt rating by an independent agency may harm our ability to raise
financing.

Any adverse revisions to India’s credit ratings for domestic and international debt by international
rating agencies may adversely affect our ability to raise additional financing and the interest rates and
other commercial terms at which such additional financing is available. This could have an adverse
effect on our capital expenditure plans, business and financial performance and the price of our
Securities.



                                                    79
Force majeure events, terrorist attacks and other acts of violence or war involving India, the United
States or other countries could adversely affect the financial markets, result in a loss of investor
confidence and adversely affect our business, results of operations, financial condition and cash
flows.

Certain events are beyond our control, such as:

•        force majeure events, including earthquakes, cyclones, floods and other natural disasters, such
         as the tsunami which affected several parts of South and South East Asia, including India and
         Sri Lanka on December 26, 2004;
•        terrorist attacks, such as those that occurred in Mumbai on November 27, 2008, New Delhi on
         December 13, 2001 and New York and Washington, D.C., on September 11, 2001; and
•        other acts of violence or war (including civil unrest, military activity and hostilities among
         neighbouring countries, which may involve India, the United States or other countries.

Any such event could happen at or otherwise affect one or more of our businesses, which would
adversely affect our business, results of operations and financial condition. Moreover, these and other
similar events may adversely affect worldwide financial markets and could lead to global economic
recession. Such events may also result in a loss of business confidence or have other consequences that
could adversely affect our business, results of operations and financial condition. Any of such events
could lower confidence in India, as well. The occurrence of any of the foregoing could therefore
adversely affect our financial performance or the market price of the Securities, even if unrelated to any
of our operations.

An outbreak of an infectious disease or any other serious public health concerns in Asia or
elsewhere could have an adverse effect on our business and results of operations.

The outbreak of an infectious disease in Asia or elsewhere or any other serious public health concerns
could have a negative effect on the economies, financial markets and business activities in the countries
in which our end markets are located, which could have an adverse effect on our business. The
outbreaks of the H1N1 virus globally in 2009, Severe Acute Respiratory Syndrome in Asia in 2003 and
the outbreak of avian influenza, or bird flu, across Asia and Europe, have adversely affected a number
of countries. We can give no assurance that a future outbreak of an infectious disease among humans or
animals or any other serious public health concerns will not have an adverse effect on our business.

We are subject to regulatory, economic and political uncertainties in India.

In the early 1990s, India experienced significant inflation, low growth in gross domestic product and
shortages of foreign currency reserves. India has a mixed economy with a large public sector and an
extensively regulated private sector. The role of the central and the state governments in the Indian
economy and the effects on producers, consumers, service providers and regulators has remained
significant over the years. The Government of India has traditionally exercised and continues to
exercise influence over many aspects of the economy. Governments in the past have, among other
things, imposed controls on the prices of a broad range of goods and services, restricted the ability of
businesses to expand existing capacity and reduce the number of their employees, and determined the
allocation to businesses of raw materials and foreign exchange. Our business and the market price and
liquidity of our Securities may be affected by interest rates, changes in government policy, taxation,
social and civil unrest and other political, economic or other developments in or affecting India. The
Government of India has in recent years sought to implement economic reforms and the current
government has implemented policies and undertaken initiatives that continue the economic
liberalisation policies pursued by previous governments. There can be no assurance that liberalisation
policies will continue in the future. The rate of economic liberalisation could change, and specific laws
and policies affecting the automotive and automotive components sectors, foreign investment and other
matters affecting investment in our securities could change as well. Any significant change in such
liberalisation and deregulation policies could adversely affect business and economic conditions in
India, generally, and our results of operations and financial condition, in particular.

A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian
economy, which could adversely affect our financial conditions.

According to a report released by the Reserve Bank of India, India’s foreign exchange reserves totalled
US$ 252 billion as at March 31, 2009. A decline in this reserve could impact the valuation of the local
                                                   80
currency and could result in reduced liquidity and higher interest rates which could adversely affect our
future financial performance and the market place of our Securities.

Changes in trade policies may affect us.

Any change in policies by the countries, in terms of tariff and non-tariff barriers, from which our
suppliers import their raw materials, components and/or countries to which we export our products,
may have an adverse effect on our profitability.

Significant differences exist between Indian GAAP and other accounting principles with which
investors may be more familiar.

Our consolidated financial statements included in this Placement Document are prepared in conformity
with Indian GAAP. Indian GAAP differs in certain significant respects from IFRS, U.S. GAAP and
other accounting principles and auditing standards with which prospective investors may be familiar
with in other countries. We do not provide a reconciliation of our financial statements to IFRS or U.S.
GAAP. Furthermore, we have not quantified or identified the impact of the differences between Indian
GAAP and IFRS or between Indian GAAP and U.S. GAAP as applied to these financial statements. As
there are significant differences between Indian GAAP and IFRS and between Indian GAAP and U.S.
GAAP, there may be substantial differences in the results of operations, cash flows and financial
positions discussed in this Placement Document if the relevant financial statements were prepared in
accordance with IFRS or U.S. GAAP instead of Indian GAAP. The significant accounting policies
applied in the preparation of these financial statements are as set forth in notes to the audited financial
statements included in this Placement Document. Prospective investors are advised to review the
accounting policies applied in the preparation of these financial statements and consult their own
professional advisors for an understanding of the differences between Indian GAAP and IFRS and
between Indian GAAP and U.S. GAAP and how they might affect the financial information contained
in this Placement Document.

The Institute of Chartered Accountants of India, the accounting body that regulates the accounting
firms in India, has announced a road map for the adoption of, and convergence with, IFRS, pursuant to
which all public companies in India, such as our Company, will be required to prepare their annual and
interim financial statements under IFRS beginning with fiscal period commencing April 1, 2011.
Because there is significant lack of clarity on the adoption of and convergence with IFRS and there is
not yet a significant body of established practice on which to draw in forming judgments regarding its
implementation and application, we have not determined with any degree of certainty the impact that
such adoption will have on our financial reporting. There can be no assurance that our financial
condition, results of operations, cash flows or changes in shareholders' equity will not appear materially
worse under IFRS than under Indian GAAP. As we transition to IFRS reporting, we may encounter
difficulties in the ongoing process of implementing and enhancing our management information
systems. Moreover, there is increasing competition for the small number of IFRS-experienced
accounting personnel available as more Indian companies begin to prepare IFRS financial statements.
There can be no assurance that our adoption of IFRS will not adversely affect our reported results of
operations or financial condition and any failure to successfully adopt IFRS by April 2011 could have
an adverse effect on our stock price.

There may be less company information available in Indian securities markets than securities
markets in more developed countries.

There is a difference between the level of regulation and monitoring of the Indian securities markets
and the activities of investors, brokers and other participants than that of markets in other more
developed economies. SEBI is responsible for monitoring disclosure and other regulatory standards for
the Indian securities markets. SEBI has issued regulations and guidelines on disclosure requirements,
insider trading and other matters. There may, however, be less publicly available information about
Indian companies than is regularly made available by public companies in developed countries, which
could adversely affect the market for our Securities.

Investors may have difficulty enforcing foreign judgments against us or our management.

Our Company is a limited liability company incorporated under the laws of India. All of our directors
and our executive officers are Indian residents. A substantial portion of our assets and the assets of the
directors and executive officers resident in India are located in India. As a result, it may be difficult for
                                                     81
investors to effect service of process upon us or such persons outside India or to enforce judgments
obtained against us or such parties outside India.

Recognition and enforcement of foreign judgments is provided for under Section 13 of the Code of
Civil Procedure, 1908 of India (as amended) (the “Code”) on a statutory basis. Section 13 of the Code
provides that a foreign judgment shall be conclusive regarding any matter directly adjudicated upon
except: (i) where the judgment has not been pronounced by a court of competent jurisdiction; (ii) where
the judgment has not been given on the merits of the case; (iii) where it appears on the face of the
proceedings that the judgment is founded on an incorrect view of international law or a refusal to
recognise the law of India in cases in which such law is applicable; (iv) where the proceedings in which
the judgment was obtained were opposed to natural justice; (v) where the judgment has been obtained
by fraud; or (vi) where the judgment sustains a claim founded on a breach of any law in force in India.
Under the Code, a court in India shall, upon production of any document purporting to be a certified
copy of a foreign judgment presumes that the judgment was pronounced by a court of competent
jurisdiction, unless the contrary appears on record.

India is not a party to any international treaty in relation to the recognition or enforcement of foreign
judgments.

Section 44A of the Code provides that where a foreign decree or judgment has been rendered by a
superior court within the meaning of Section 44A in any country or territory outside India which the
Government of India has by notification declared to be in a reciprocating territory, it may be enforced
in India by proceedings in execution as if the judgment had been rendered by the relevant court in
India. However, Section 44A of the Code is applicable only to monetary decrees not being in the nature
of any amounts payable in respect of taxes or other charges of a like nature or in respect of a fine or
other penalty. For the purposes of this section, foreign judgment means a decree which is defined as a
formal expression of an adjudication which, so far as regards the court expressing it, conclusively
determines the rights of the parties with regard to all or any of the matters in controversy in the suit.

The United Kingdom has been declared by the Government of India to be a reciprocating territory but
the United States has not been so declared. A judgment of a court in a jurisdiction which is not a
reciprocating territory may be enforced only by a fresh suit upon the judgment and not by proceedings
in execution. The suit must be brought in India within three years from the date of the judgment in the
same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India
would award damages on the same basis as a foreign court if an action is brought in India. Furthermore,
it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages
awarded as excessive or inconsistent with public policy or if the judgments are in breach of or contrary
to Indian law. A party seeking to enforce a foreign judgment in India is required to obtain approval
from the RBI to execute such a judgment or to repatriate outside India any amount recovered.

Our business and activities will be regulated by the Competition Act, 2002.

The Indian Parliament has enacted the Competition Act, 2002 (the “Act”) under the auspices of the
Competition Commission of India to prevent business practices from having an adverse effect on
competition, which (other than for certain provisions relating to the regulation of combinations) has
recently become effective. Under the Act, any arrangement, understanding or action, whether or not
formal or informal, which causes or is likely to cause an appreciable adverse effect on competition is
void and attracts substantial penalties. Any agreement which directly or indirectly determines purchase
or sale prices, limits or controls production, shares the market by way of geographical area or market or
number of customers in the market is presumed to have an appreciable adverse effect on competition. It
is unclear as to how the Act and the Competition Commission of India will affect industries in India.
Any application of the Act to us may be unfavourable and may have an adverse effect on our business
and results of operations.

Investors may be subject to Indian taxes arising out of capital gains on the sale of our Securities.

For a discussion of this risk factor, please refer to chapter titled “Taxation”.

A third party could be prevented from acquiring control of us because of the takeover regulations
under Indian law.



                                                      82
Indian takeover regulations contain certain provisions that may delay, deter or prevent a future takeover
or change in control of us. These provisions may discourage or prevent a third party from attempting to
take control of us, even if a change in control would result in the purchase of the Equity Shares at a
premium to the market price or would otherwise be beneficial to the holders of the Equity Shares. For
more information, see “Indian Securities Market — Takeover Code”.

You may be restricted in your ability to exercise pre-emptive rights under Indian law and be diluted
in your ownership position.

Under the Companies Act, 1956, a company incorporated in India must offer holders of its equity
shares pre-emptive rights to subscribe and pay for a proportionate number of shares to maintain their
existing ownership percentages before the issuance of any new equity shares, unless the pre-emptive
rights have been waived by adoption of a special resolution by holders of three-fourths of the equity
shares which would be affected, unless the company has obtained government approval to issue
without such rights. If the law of the jurisdiction you are in does not permit you to exercise your pre-
emptive rights without us filing an offering document or registration statement with the applicable
authority of such jurisdiction, you will be unable to exercise your pre-emptive rights unless we make
such a filing. To the extent that you are unable to exercise pre-emptive rights granted in respect of the
Equity Shares, your proportional interest in us may be reduced.

Risks Relating to this Issue

There may not be an active or liquid market for our Securities, which may cause the price of the
Securities to fall and may limit your ability to sell the Securities.

The offer price of the Securities being issued in this Issue will be determined by us in consultation with
the Joint Global Coordinators and the Book Running Lead Managers based on the Bids received in
compliance with Chapter VIII of the SEBI Regulations, and it may not necessarily be indicative of the
market price of the Securities after this Issue is complete. You may be unable to resell your Securities at
or above the offer price and, as a result, you may lose all or part of your investment. The price at which
the Securities will trade after this Issue will be determined by the marketplace and may be influenced
by many factors, including:

•        our financial results and the financial results of the companies in the businesses we operate in;
•        the history of, and the prospects for, our business and the sectors and industries in which we
         compete;
•        an assessment of our management, our past and present operations, and the prospects for, and
         timing of, our future revenues and cost structures;
•        the present state of our development; and
•        the valuation of publicly traded companies that are engaged in business activities similar to
         ours.

In addition, the Indian stock market has from time to time experienced significant price and volume
fluctuations that have affected the market prices for the securities of Indian companies. As a result,
investors in the Securities may experience a decrease in the value of the Securities regardless of our
operating performance or prospects.

There is no guarantee that the Securities being issued in this Issue will be available for trading on
the BSE or the NSE in a timely manner or at all, and any trading closure at the BSE or the NSE
may adversely affect the trading price of our Securities.

Pursuant to Indian regulations, certain actions must be completed before the Securities being issued in
this Issue can be listed and trading may commence. In accordance with Indian law and practice,
permission for listing of the Securities will not be granted until those Securities have been issued and
allotted. Approval will require all other relevant documents authorising the issuance of Securities to be
submitted. There could be a delay or failure in listing the Securities in BSE and the NSE. Any failure or
delay in obtaining the approval would restrict your ability to dispose of your Securities.

The regulation and monitoring of Indian securities markets and the activities of investors, brokers and
other participants differ, in some cases significantly, from those in Europe and the U.S. The BSE and
the NSE have in the past experienced problems, including temporary exchange closures, broker
defaults, settlements delays and strikes by brokerage firm employees, which, if continuing or recurring,
                                                    83
could affect the market price and liquidity of the securities of Indian companies, including the
Securities, in both domestic and international markets. A closure of, or trading stoppage on, the BSE or
the NSE could adversely affect the trading price of the Securities. Historical trading prices, therefore,
may not be indicative of the prices at which the Securities will trade in the future.

Our stock price may be volatile, and you may be unable to resell your Securities at or above the Issue
price or at all.

The market price of our Securities after this Issue will be subject to significant fluctuations in response
to, among other factors:

•        variations in our operating results and the performance of our business;
•        adverse media reports about us or our industry;
•        regulatory developments in our target markets affecting us, our clients or our competitors;
•        market conditions and perception specific to our industry;
•        changes in financial estimates by securities research analysts;
•        loss of one or more significant clients;
•        the performance of the Indian and global economy;
•        significant developments in India’s economic liberalisation and deregulation policies and the
         fiscal regime; and
•        volatility in the Indian and global securities markets.

Many of these factors are beyond our control. There has been recent volatility in the Indian stock
markets and the price of the Securities could fluctuate significantly as a result of such volatility in the
future.

There are restrictions on daily movements in the price of the Equity Shares, which may adversely
affect a shareholder’s ability to sell, or the price at which it can sell, Equity Shares at a particular
point in time.

We are subject to a daily “circuit breaker” imposed by all stock exchanges in India, which does not
allow transactions beyond specified increases or decreases in the price of the Equity Shares. This
circuit breaker operates independently of the index-based market-wide circuit breakers generally
imposed by SEBI on Indian stock exchanges. The maximum movement allowed in the price of the
Equity Shares before the circuit breaker is triggered is determined by the Stock Exchanges based on the
historical volatility in the price and trading volume of the Equity Shares.

The Stock Exchanges do not inform us of the triggering point of the circuit breaker in effect from time
to time, and may change it without our knowledge. This circuit breaker limits the upward and
downward movements in the price of the Equity Shares. As a result of this circuit breaker, no assurance
may be given regarding your ability to sell your Equity Shares or the price at which you may be able to
sell your Equity Shares at any particular time.

Future issues or sales of shares by us may significantly affect the trading price of the Securities.

A future issue of shares by us or the disposal of shares by any of our major shareholders, or the
perception that such issues or sales may occur, may significantly affect the trading price of the
Securities. Other than the obtaining of consent from shareholders some of our lenders (prior to altering
our capital structure) and any regulatory consent that may be required under applicable law, there are
no restrictions on our ability to issue shares, and there can be no assurance that we will not issue shares
in the future. There are restrictions on daily movement in the price of the shares, which may adversely
affect a shareholders’ ability to sell, or the price at which such shareholder can sell shares at a particular
point in time.

Conditions in the Indian securities market may affect the price or liquidity of the Securities.

The Indian securities markets are smaller than securities markets in more developed economies. Indian
stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities.
Further, the Indian stock exchanges have experienced recent volatility, with the BSE index declining by
almost 50.0% over the second half of 2008 and early part of 2009 and showing significant increases
thereafter. The Indian stock exchanges have also experienced problems that have affected the market
price and liquidity of the securities of Indian companies, such as temporary exchange closures, broker
                                                     84
defaults, settlement delays and strikes by brokers. In addition, the governing bodies of the Indian stock
exchanges have from time to time restricted securities from trading, limited price movements and
restricted margin requirements. Further, disputes have occurred on occasion between listed companies
and the Indian stock exchanges and other regulatory bodies that, in some cases, have had a negative
effect on market sentiment. If similar problems occur in the future, the market price and liquidity of the
Securities could be adversely affected.

An investor will not be able to sell any of the Equity Shares purchased in this Issue other than across
a recognised Indian stock exchange for a period of 12 months from the date of the allotment of the
Equity Shares.

As provided in the SEBI Regulations, QIBs purchasing Equity Shares in the Issue may only sell such
Equity Shares on the Stock Exchanges and may not enter into any off-market trading in respect of these
shares for a period of 12 months from the date of the issue of the Equity Shares in the Issue. We cannot
assure you that this restriction will not have an effect on the selling price of the Equity Shares issued in
this Issue.

There is no existing market for the Warrants and an active market for the Warrants may not develop,
which may cause the price of the Warrants to fall.

The Warrants are a new issue of securities for which there is currently no trading market. No assurance
can be given that an active trading market for the Warrants will develop, or as to the liquidity or
sustainability of any such market. The price of the Warrants also depends on the supply and demand for
the Warrants in the market and the price at which the Warrants are trading at any time may differ from
the underlying valuation of the Warrants because of market inefficiencies. To the extent Warrants are
exercised, the number of Warrants of such issue outstanding will decrease, resulting in a diminished
liquidity for the remaining Warrants of such issue. Further, the Warrants can only be traded in a lot of
Rs. 0.1 million. Therefore, to the extent the demand for the number of Warrants is lesser than the
trading lot, such Warrants shall be illiquid.

The Warrants can be volatile instruments and upon expiry are worthless.

The Warrants are subject to a number of risks, including: (i) sudden and large falls in value; (ii)
changes in the price or market value of the Equity Shares; and (iii) a complete or partial loss of any
investment in the Warrants.

This Placement Document disclose the material risks and other significant aspects of the Warrants.
However, no person should deal in the Warrants unless that person understands the terms and
conditions of the Warrants and the extent of that person's exposure to potential loss. Each prospective
purchaser of Warrants should consider carefully whether the Warrants are suitable in the light of our
circumstances and financial position.

Prospective purchasers of Warrants should consult their own professional advisers to assist them in
determining the suitability of the Warrants for them as an investment.

Future issues or sales of the Shares may significantly affect the trading price of the Warrants and
such issues or sales may not result in an adjustment to the conversion price provisions in the
Conditions and the Trust Deed.

A future issue of Equity Shares by our Company or the disposal of the Equity Shares by any of the
major shareholders of our Company, or the perception that such issues or sales may occur, may
significantly affect the trading price of the Warrants or the Equity Shares. Other than the obtaining of
consent from some of our lenders prior to altering our capital structure, there is no restriction on our
ability to issue Equity Shares, and there can be no assurance that our Company will not issue Equity
Shares or that such issue will result in an adjustment to the conversion price provisions in the
Conditions.

There is no existing market for the NCDs and an active market for the NCDs may not develop, which
may cause the price of the NCDs to fall.

The NCDs are a new issue of securities for which there is currently no trading market and represent our
first issuance of debt securities to QIPs under Chapter XIII-A of the SEBI Regulations. Before this
                                                    85
offering, we have sold non-convertible debentures that have been listed on the WDM segment of the
NSE and BSE. However, there has been limited trading of the privately placed debentures from the
date of their listing on the WDM segment of NSE and BSE. No assurance can be given that an active
trading market for the NCDs will develop, or as to the liquidity or sustainability of any such market,
the ability of holders to sell their NCDs or the price at which holders of the NCDs will be able to sell
their NCDs. If an active market for the NCDs fails to develop or be sustained, the trading price of the
NCDs could fall. Even, if an active trading market were to develop, the NCDs could trade at prices that
may be lower than the initial offering price of the NCDs.

Whether or not the NCDs will trade at lower prices depends on many factors, including: (i) the market
for similar securities; (ii) general economic conditions; and (iii) our financial condition, results of
operations and future prospects.

Changes in interest rates may affect the price of the NCDs.

All securities where a fixed rate of interest is offered, such as the NCDs, are subject to price risk. The
price of such securities will vary inversely with changes in prevailing interest rates, i.e. when interest
rates rise, prices of fixed income securities fall and, when interest rates drop, the prices increase. The
extent of a fall or rise in the prices is a function of the existing coupon, days to maturity and the
increase or decrease in the level of prevailing interest rates. Increased rates of interest, which frequently
accompany inflation, are likely to have a negative effect on the price of the NCDs.

Payments made on the NCDs are subordinated to certain tax and other liabilities preferred by law.

The NCDs will be subordinated to certain liabilities preferred by law such as to claims of the
Government on account of taxes, indebtedness and other liabilities of our Subsidiaries and certain
liabilities incurred in the ordinary course of our business. In particular, in the event of bankruptcy,
liquidation or winding-up, our assets will be available to pay obligations on the NCDs only after all of
those liabilities that rank senior to these NCDs have been paid. In the event of bankruptcy, liquidation
or winding-up, there may not be sufficient assets remaining, after paying amounts relating to these
proceedings, to pay amounts due on the NCDs.

Any downgrading in credit rating of the NCDs may affect their value.

This issue has been rated by ICRA as having an LA+ rating for the issuance of the NCDs. We cannot
guarantee that these ratings will not be downgraded. Such a downgrade in the above credit ratings may
lower the value of the NCDs.




                                                     86
                                 MARKET PRICE INFORMATION

The Equity Shares of the Company are listed and traded on the BSE the NSE, and PSE. The stock
market data presented below is given for the BSE and the NSE separately.

As of March 31, 2010, 222,652,271 Equity Shares were issued and outstanding. As the Equity Shares
are actively traded on the BSE and the NSE, the stock market data has been given separately for each
of these Stock Exchanges. The Equity Shares of the Company are not actively traded on the PSE.

The table set forth below is for the periods that indicate the high and low prices of the Equity Shares of
the Company and also the volumes of trading activity. On April 23, 2010 the closing price of the Equity
Shares of the Company on the BSE was Rs. 274.45 per share and on the NSE was Rs. 274.85 per share
(equity share of face value Rs. 2/- per share).

The high, low and average market prices of the Equity Shares of the Company during the preceding
three years:

                                                    BSE
  Year      Date of High   High Volume on           Date of Low            Low Volume on Date Average
 ending                    (Rs.) date of High                              (Rs.)      of low      for the
 March                            (No. of Equity                                  (No. of Equity   year
   31                                Shares)                                         Shares)       (Rs.)
2008      January 7, 2008 381.55         241,096 August 23, 2007           257.85         183,037 311.11
2009      May 9, 2008      311.15        119,663 January 22, 2009           73.60         840,910 180.56
2010      January 18, 2010 302.20        242.176 April 1, 2009             100.00          106069 222.91
(Source: www.bseindia.com)

                                                    NSE
  Year      Date of High       High       Volume on      Date of Low      Low      Volume on Date Average
 ending                        (Rs.)     date of High                     (Rs.)         of low       for the
 March                                  (No. of Equity                              (No. of Equity    year
   31                                      Shares)                                     Shares)        (Rs.)
2007      Apr 5, 2006          459.55           862,110 Jun 8, 2006       265.70           1,864,131 347.74
2008      Jan 7, 2008          381.60           725,888 Mar 18, 2008      247.60             307,869 308.52
2009      May 9, 2008          311.20           527,999 Jan 22, 2009       73.10           2,009,445 180.66
2010      January 18, 2010     302.45           830,171 April 1, 2009     100.15             289,956 223.03
(Source: www.nseindia.com)

Monthly high and low prices and trading volumes at the end of the day on the Stock Exchanges for the
six months preceding the date of filing of this Placement Document:
                                                       BSE
                                                 Volume                                     Volume
                                                 on date                                    on date      Average
                     High                        of high       Low                           of low      price for
    Month                      Date of High                               Date of Low
                     (Rs.)                       (No. of       (Rs.)                        (No. of     the month
                                                 Equity                                     Equity         (Rs.)
                                                 Shares)                                    Shares)
October 2009         294.40    October 15,        867,878     249.95    October 30,         145,809          273.00
                               2009                                     2009
November             278.70    November 11,       190,450     247.00    November 3,          111,064         267.33
2009                           2009                                     2009
December 2009        274.85    December 1,        171,388     258.70    December 21,          61,301         268.29
                               2009                                     2009
January 2010         302.20    January 18,        242,176     261.75    January 27,          112017          283.79
                               2010                                     2010
February 2010        273.85    February 1,          98748     234.70    February 25,           60819         250.78
                               2010                                     2010


                                                   87
March 2010          274.05   March 8,           232,137     248.20    March 25, 2010     531,585        260.00
                             2010
(Source: www.bseindia.com)

                                                      NSE
                                              Volume                                    Volume
                                              on date                                   on date      Average
                    High        Date of       of high     Low                            of low      price for
    Month                                                              Date of Low
                    (Rs.)        High         (No. of     (Rs.)                         (No. of     the month
                                              Equity                                    Equity         (Rs.)
                                              Shares)                                   Shares)
October 2009        294.20   Oct 15, 2009    2,902,823    250.25     Oct 30, 2009        485,905        272.97

November            279.20   Nov 11,           896,186      247.10   Nov 3, 2009         340,260        267.42
2009                         2009
December 2009       274.90   Dec 1, 2009       667,558      258.80   Dec 21, 2009        257,270        268.35

January 2010        302.45   January 18,        830171      261.40   January 27,          543089        283.82
                             2010                                    2010
February 2010       274.00   February 1,        333443      235.00   February 25,         417023        250.72
                             2010                                    2010
March 2010          274.00   March 8,        1,040,701      249.75   March 25, 2010     1,250,167       260.44
                             2010
(Source: www.nseindia.com)

Market price and other information on January 13, 2010, the first working day following the board
meeting in which approval for raising of long term funds by way of issuance of Equity Shares and / or
such other Securities for an amount not exceeding US$ 150 million, through Qualified Institutional
Placement was passed.

       Date                         BSE                                        NSE
                      Open    High       Low  Close            Open       High     Low        Close
  January 13, 2010    280.00   286.40 277.00 284.75            280.10     286.50 278.00        284.95
 Volume on the date               114,949                                    425,560
(Source : www.bseindia.com, www.nseindia.com)

Details of the volume of business transacted during the last six months on the BSE and the NSE:

Period                                BSE(No. of Equity Shares) NSE (No. of Equity Shares)
October 2009                                          4,049,185                    14,841,780
November 2009                                         3,834,053                    14,025,087
December 2009                                         2,729,984                    11,971,747
January 2010                                          4,114,384                    17,416,438
February 2010                                         2,016,892                     9,387,489
March 2010                                            2,981,013                    12,450,694
(Source: www.nseindia.com, www.bseindia.com)




                                                 88
                                        USE OF PROCEEDS

The total initial proceeds of the Issue will be Rs. 4,493 million. After deducting the Issue expenses of
approximately Rs. 140 million, the net initial proceeds of the Issue will be approximately Rs. 4,353
million assuming no conversion of Warrants into Equity Shares. The aggregate net proceeds of the
Issue, assuming full conversion of Warrants into Equity Shares at the Warrant Exercise Price during the
Warrant Exercise Period will be approximately Rs. 6,121 million. However, the exercise of Warrants is
at the option of Warrantholders and the Company cannot assume that all the Warrantholders will
convert the Warrants into Equity Shares by payment of the Warrant Exercise Price. Non-conversion of
some or all of the Warrants would result in the Company not being able to raise the aggregate net
proceeds of the Issue as aforesaid.

We intend to use the net proceeds of the Issue for our long term funding requirements, and any other
uses as may be permissible under applicable law

In accordance with the policies instituted by the Board and as permissible under applicable laws, our
management will have flexibility in deploying the proceeds received by us from the Issue. Pending
utilization of the net proceeds of the Issue for the purpose described above, we intend to temporarily
invest such proceeds in creditworthy instruments, including debt oriented mutual funds and deposits
with banks. Such investments would be in accordance with applicable laws as well as the investments
as approved by the Board from time to time.




                                                  89
                                       CAPITALIZATION AND INDEBTEDNESS

The Board of Directors has at its meeting on January 12, 2010, approved the Issue and the Company’s
shareholders, pursuant to a special resolution passed by postal ballot on February 27, 2010 approved
the Issue. Upon the completion of the Issue, the Board of Directors or a committee thereof shall pass a
resolution authorising the Allotment of the Equity Shares pursuant to this Issue.

The following table shows, as at March 31, 2009:

•    our actual capitalization and indebtedness on a consolidated basis; and

•    our capitalization on a consolidated basis as adjusted for (i) the Issue pursuant to this Placement
     Documents and (ii) the conversion of all Warrants issued pursuant to this Placement Document
     into Equity Shares at Warrant Exercise Price during the Warrant Exercise Period.

                                                                                     As at March 31, 2009
                                                                            Actual       As Adjusted        As Adjusted**
                                                                                         (Rs. millions)
Loan Funds:
                                                                                          12,495.49
                                                                       10,735.49                             12,495.49
    Secured* .......................................................
                                                                                          11,172.88
                                                                       11,172.88                             11,172.88
    Unsecured*** ...............................................

                                                                       21,908.37          23,668.37          23,668.37
    Total debt .....................................................

Shareholders’ funds:
                                                                                             465.40
                                                                            445.40                              478.40
    Share capital*** ...........................................
                                                                                           9,732.35
                                                                        7,019.35                             11,487.35
    Securities premium ......................................
                                                                                           8,969.82
                                                                        8,969.82                              8,969.82
    Other Reserves and surplus .........................
                                                                                             953.83
                                                                            953.83                              953.83
    Minority interest ...........................................
                                                                                          20,121.40
                                                                       17,388.40                             21,889.40
    Total funds (excluding loan funds) ..........

                                                                                          43,789.77
                                                                       39,296.77         45,557.77
    Total capitalisation .....................................
     *Subsequent to March 31, 2009, our Company issued 10.75% secured redeemable non convertible
     debentures, aggregating to Rs. 3500.00 million, on a private placement basis and repaid the
     secured loan to the extent of Rs. 1,191.92 million

     **Assuming conversion of all warrants issued pursuant to the Warrants.

     ***On April 9, 2010, our Board approved the conversion of 1,250 foreign currency convertible
     bonds out of Tranche 2 into 142,045 Equity Shares (at an aggregate cost value of Rs. 63.40
     million) accounting for 0.06% of our pre-issue share capital. On April 20, 2010, we also redeemed
     balance foreign currency convertible bonds aggregating to US$102.25 million and a redemption
     premium of US$ 29.24 million.

                                                                       90
This table should be read in conjunction with our financial statements and the related notes,
“Management Discussion and Analysis of Financial Conditions and Results of Operations” and other
financial information contained in “Financial Information” in this Placement Document.




                                              91
Build up of Equity Share Capital

Build up of Equity Share capital of the Company

               No. of
                       Face Issue Cumulative Cumulative
  Date of     Equity
                       Value Price Number of paid-up Consideration      Remarks
 allotment    Shares
                       (Rs.) (Rs.)  shares capital (Rs.)
              Allotted
                                                           Cash    First allotment
September
                156     100   100     156       15,600             Subscription      to
 26, 1961
                                                                   MOA1
                                                                   Private placement
 January                                                           of     Shares     to
               6,000 100      100    6,156     615,600     Cash
 20, 1962                                                          Directors, friends
                                                                   and relatives
                                                                   Private placement
  May 8,                                                           of     Shares     to
               3,050 100      100    9,206     920,600     Cash
  1962                                                             Directors, friends
                                                                   and relatives
                                                                   Private placement
September                                                          of     Shares     to
                 50     100   100    9,256     925,600     Cash
 22, 1962                                                          Directors, friends
                                                                   and relatives
                                                                   Issued to SIFCO,
                                                                   USA              for
                                                                   consideration other
 May 21,
               2,380 100      100   11,636    1,163,600  Non Cash than cash pursuant
  1963
                                                                   to their Technical
                                                                   Assistance
                                                                   Contract2
                                                                   Subscribed
 April 23,
                                                                   privately         by
  1963
                                                                   directors, friends
                                                                   and relatives
                                                                   Subscribed
  June 7,
                                                                   privately         by
   1963       12,095 100      100   23,731    2,373,100    Cash
                                                                   promoters       and
                                                                   managing agents
                                                                   Subscribed
 June 15,                                                          privately         by
   1963                                                            friends         and
                                                                   relatives
                                                                   Subscribed
                                                                   privately         by
                                                                   directors,
October 4,
              13,458 100      100   37,189    3,718,900    Cash    promoters,
  1963
                                                                   managing agents,
                                                                   friends         and
                                                                   relatives
                                                                   Subscribed
                                                                   privately         by
                                                                   directors,
November
               6,600 100      100   43,789    4,378,900    Cash    promoters,
16, 1963
                                                                   managing agents,
                                                                   friends         and
                                                                   relatives
                                                                   Subscribed
November                                                           privately         by
              23 076 100      100   66,865    6,686,500    Cash
30, 1963                                                           directors,
                                                                   promoters,

                                                  92
              No. of
                      Face Issue Cumulative Cumulative
 Date of     Equity
                      Value Price Number of paid-up Consideration                   Remarks
allotment    Shares
                      (Rs.) (Rs.)  shares capital (Rs.)
             Allotted
                                                                               managing agents,
                                                                               friends         and
                                                                               relatives
                                                                               Details regarding
 1963 –                                                                        share        capital
              8,755     100    100      75,620        7,562,000      Cash
  1964                                                                         subscription    not
                                                                               available1
January                                                                        Initial      Public
                        100
20, 1964     77,000            100     152,620        15,262,000     Cash      Offering

                                                                               Issued to SIFCO,
                                                                               USA             for
                                                                               consideration other
March 25,
              2,380     100    100     155,000        15,500,000   Non Cash    than cash pursuant
 1964
                                                                               to their Technical
                                                                               Assistance
                                                                               Contract2

Subdivision of equity shares from Rs. 100 each to Rs. 10 each resulting in 1,550,000 shares of Rs.
                                            10 each3

September                                                                      Bonus issue in the
 17, 1976    930,000    10     10     2,480,000 24,800,000            -        ratio of 3:54

June 20,                                                                       Bonus issue in the
  1981      2,480,000 10       10     4,960,000 49,600,000            -        ratio of 1:14

                                                                               Vth           Series
                                                                               Convertible
                                                                               Debentures issued
May 20,
             312,500    10     40     5,272,500 52,725,000           Cash      on a rights basis to
 1987
                                                                               the         existing
                                                                               shareholders in the
                                                                               ratio of 5:80
April 24,               10                                                     Bonus issue in the
 1989       5,272,500          10     10,545,0 00 105,450, 000        -        ratio of 1:14

December                                                                       Rights Issue in the
23, 1989    4,090,700 10       50     14,635,700 146,357,000         Cash      ratio of 1:4

November                                                                       Rights Issue in the
 6, 1992    3,801,950 10       160    18,437,650 184,376,500         Cash      ratio of 1:4

                                                                               IX Series Non
December                                                                       Convertible
14, 1993    1,337,035 10       160    19,774,685 197,746,850         Cash      Debentures
                                                                               Coupon
                                                                               conversion
April 15,                                                                      Rights Issue in the
 1994       6,923,000 10       50     26,697,685 266,976,850         Cash      ratio of 1:3

September                                                                      Preferential issue
 13, 1994   3,500,000 10       156    30,197,685 301,976,850         Cash      to Promoter group5

December                                                                       VIth Series Non
19, 1994    1,209,801 10       50     31,407,486 314,074,860         Cash      Convertible
                                                                               Debentures

                                                 93
               No. of
                       Face Issue Cumulative Cumulative
  Date of     Equity
                       Value Price Number of paid-up Consideration                   Remarks
 allotment    Shares
                       (Rs.) (Rs.)  shares capital (Rs.)
              Allotted
                                                                                Coupon
                                                                                Conversion
 June 16,                                                                       Senior executive
   1995       1,568,600 10     196.93 32,976,086 329,760,860         Cash       stock        Option
                                                                                Scheme6
                                                                                Xth Series non-
 August 1,
                                                                                convertible
  1995
              2,926,450 10       50    35,902,536 359,025,360        Cash       debentures
                                                                                Coupon
                                                                                Conversion
November                                                                        Private placement
 8, 1995      1,800,000 10     117.18 37,702,536 377,025,360         Cash       to         Promoter
                                                                                Group7
              (34,568)   10       -    37,667,968 376,679,680                   Forfeited8
                                                                                Annulment         of
                                                                                equity        shares
                (340)    10       -    37,667,628 376,676,280
                                                                                allotted to non-
                                                                                residents9
October 1,                                                                      Rights Issue in the
             1,882,914 10        560 39,550,542 395,505,420           Cash
   2004                                                                         ratio of 1:20
 April 19,                                                                      GDRs allotted on
 2005 and                                                                       April 19, 2005 and
             3,636,500 10 1,190.38 43,187,042 431,870,420             Cash
  May 5,                                                                        May 5, 2005
   2005
Sub-division of equity shares from Rs.10 each to Rs. 2 each resulting in 215,935,210 shares of Rs. 2
              each pursuant to a resolution of the shareholders dated March 30, 2005
                                                                                 Conversion       of
                                                                                 Warrants attached
December
             4,574,205 2 268.20 220,509,415 441,018,830               Cash       to Shares allotted
 12, 2005
                                                                                 in the 2004 Rights
                                                                                 Issue
March 17,                                                                        Conversion of 1st
             1,753,246 2 336.11 222,262,661 444,525,322               Cash
   2006                                                                          Tranche FCCBs
                                                                                 Conversion of 1st
 April 12,
              389,610 2 336.11 222,652,271 445,304,542                Cash       Tranche FCCBs
   2006
  April 9,                                                                      Conversion of 2nd
              142,045     2    384.12 222,794,316 445,588,632        Cash
   2010                                                                         Tranche

1. The details are not available as the records were burnt in fire which took place in our premises on
April 24, 1998

2. 4,760 Equity Shares of Rs. 100 each were issued as fully paid up for consideration other than cash,
to SIFCO, USA pursuant to a Technical Assistance Contract. These shares were issued in calendar year
1963 and 1964.

3. The shares of face value of Rs. 100 each were subdivided into equity shares of face value of Rs. 10
each vide the approval given the general body at the extraordinary general meeting held on July 2,
1971.

4. Issue of fully paid bonus shares by way of capitalization of Share Premium Account and Reserves.
The details are not available as the records were burnt in a fire which took place in our premises on
April 24, 1998.

5. Equity shares issued at a premium of Rs. 146/- per equity share, against warrants issued to
Promoter/Promoter Group Companies on preferential basis. These shares were allotted to Kalyani
Steels Limited (2,885,000 equity shares), Ajinkya Investment and Trading Company Limited (205,000

                                                 94
equity shares), Koyna Investment and Trading Company (205,000 equity shares) and Cockscomb
Investment and Finance Private Limited (205,000 equity shares). Details of certificate from the
statutory auditors that the securities were issued in accordance with then existing SEBI Guidelines was
not available as the records were burnt in fire which took place in our premises on April 24, 1998.

6. In 1995, the Company provided an interest free loan of Rs.309 million to a company, Kritadnya
Management and Trading Services Private Limited (“KMTS”), which has given an undertaking to hold
the shares solely for the purpose of obligations of the “BFL Executives Welfare and Share Option
Trust” in terms of clause (b) of the proviso to Section 77(2) of the Companies Act, 1956. In this regard,
the Company has allotted 1,568,600 equity shares to KMTS in 1995.

7. A private placement of 18,00,000 shares was done to Promoter group companies. 900,000 shares
were allotted to Surajmukhi Investment & Finance Limited and other 900,000 shares to Chakrapani
Investment & Trades Limited. A certificate from the statutory auditors that the securities were issued in
accordance with then existing SEBI Guidelines was obtained.

8. Pertains to shares forfeited on account of non-payment of calls; 5,426 equity shares were forfeited on
June 30, 1991, of which forfeiture of 2,424 equity shares has been annulled on account of payment of
overdue calls subsequently; 65,730 equity shares were forfeited on November 30, 1993, of which
forfeiture of 34,164 equity shares has been annulled on account of payment of overdue calls
subsequently.

9. Allotment of 340 equity shares to non-residents was annulled in reference to RBI advice against
allotting additional shares under 89 series debentures of VIth series with attached coupon warrants.

10. As on date, the balance in the share premium account is nil on account of transfer of then existing
balance of Rs 2,199.25 million on March 1, 2001 being transferred to BF Utilities Limited under
scheme of demerger approved by the Honourable High Court of judicature at Mumbai vide their order
dated January 17, 2001.

Debt Equity ratio

As of December 31, 2009, DER is 1.29 on a stand-alone basis. Post issue the DER will be 1.09
(assuming subscription of 10,000,000 Equity Shares in the QIP and assuming exercise of 6.500.000
Warrants at the Warrant Exercise Price).

Servicing behaviour on existing debt securities, payment of due interest on due dates on term
loans and debt securities is as under:

As on the date of this Placement Document, the Company has not defaulted in its obligations to pay
either the interest or principal amount towards its existing debt securities or term loans.

Particulars of the debt securities issued (i) for consideration other than cash, whether in whole or
part, (ii) at a premium or discount, or (iii) in pursuance of an option.

The Issuer has not issued any debt securities: (i) for consideration other than cash, whether in whole or
part or (ii) in pursuance of an option.

The Issuer has not issued any debt securities at a premium /discount to date.

Details of agreements relating to financial obligations as of December 31, 2009

                        Nature of                                    Outstanding          Date of Loan
Name of the Bank                         Sanctioned Limit
                         Facility                                      Amount              Agreement
                                       USD       INR Million     USD       INR
                                       Million                   Million   Million
Secured Loans
Bank of India,        Long Term                                                           August 17,
                                         15.00          697.80        7.50       348.90
London                Loan                                                                2004
Standard              Long Term          20.00          930.40      16.00        744.32   February 23,

                                                   95
Chartered Bank,      Loan                                                      2007
Mauritius
Calyon, Singapore    Long Term                                                 June 24, 2008
                                    50.00        2,326.00   50.00   2,326.00
                     Loan
Private placement    Non                                                       December
of NCD               Convertible                 2,500.00           2,500.00   29, 2008
                     Debentures
Private placement    Non                                                       September
of NCD               Convertible                 3,500.00           3,500.00   10, 2009
                     Debentures
Consortium Banks     Working                                                   July 8, 2008
                                                 8,250.00           2,356.40
                     Capital Loan


Unsecured Loans
0.5 % FCCB                                                                     April 15,
                     FCCB           60.00        2,791.20   43.50   2,023.62
Tranche 1                                                                      2005
0.5 % FCCB                                                                     April 15,
                     FCCB           60.00        2,791.20   60.00   2,791.20
Tranche 2                                                                      2005
0 % FCCB                                                                       April 24,
                     FCCB           40.00         1,860.0   40.00   1,860.80
Tranche A                                                                      2006
0 % FCCB                                                                       April 24,
                     FCCB           39.90        1,856.15   39.90   1,856.15
Tranche B                                                                      2006

Sales Tax Deferral   Deferral                                         69.86
Loan                 Loan




                                            96
                                         DIVIDEND POLICY

We generally declare and pay dividends in the fiscal year following the year as to which they relate.
Under the Companies Act, an Indian company pays dividends upon a recommendation by its board of
directors and approval by a majority of the shareholders at the annual general meeting, who have the
right to decrease but not increase the amount of the dividend recommended by the board of directors.
Under the Companies Act, dividends may be paid out of profits of a company in the year in which the
dividend is declared or out of the undistributed profits or reserves of previous fiscal years subject to
compliance of Companies (Declaration of Dividend out of Reserves) Rules, 1975, Companies (Transfer
of Profits to Reserves) Rules, 1975 or out of both. Additionally, our Articles of Association grant
discretion to our Board of Directors to pay interim dividends as in their judgment the position of the
Company justifies. Under the Companies Act, dividends can only be paid in cash to shareholders listed
on the register of Members or those persons whose names are entered as beneficial owners in the
record of the depositary on the date specified as the “record date” or “book closure date”. A listed
company in India may declare and disclose the dividend it issues only on a per share basis.

Warrantholders shall not be entitled to any dividend or any other corporate benefits, which may
be declared or announced by the Company from time to time, until such time that the Warrants
are exercised into the underlying Equity Shares of the Issuer in accordance with these
Conditions.

Equity Shares

The Equity Shares to be issued in this Issue (and arising out of conversion of the Warrants) shall
qualify for any dividend that is declared in respect of financial year in which they have been allotted.
The table below sets forth the details of the dividends declared by the Company on its equity shares
during the last three fiscal years:

                           No. of Equity Shares of       Dividend per Equity           Total Amount of
                            Rs.2 each entitled to        Share of Rs. 2 each           Dividend (Rs. in
 Fiscal Year                      dividends                     (Rs.)                     millions)



 2007                            222,652,271                      3.50                       779.28

 2008                            222,652,271                      3.50                       779.28

 2009                            222,652,271                      1.00                       222.65

SEBI has by its letter no. SMDRP/NSDL/3254/00 dated February 18, 2000 issued a directive that
shares issued by companies should be pari passu in all respects including dividend entitlement.

The amounts paid as dividends in the past are not necessarily indicative of the dividend policy of the
Company or dividend amounts, if any, in the future. The form, frequency and amount of future
dividends will depend on our revenues, cash flows, financial condition (including capital position) and
other factors and shall be at the discretion of our Board and subject to the approval of our shareholders.
The Company does not have a formal dividend policy.

For a summary of certain Indian and United States federal tax consequences of dividend distributions
to shareholders, see the section “Taxation”. For a description of the regulations affecting dividends, see
the section “Description of the Shares – Dividend”.




                                                   97
      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                          RESULTS OF OPERATIONS

Unless otherwise stated, the following discussion and analysis of our financial condition and results of
operations is based on our audited consolidated financial statements as of and for the years ended
March 31, 2007, 2008 and 2009. Our audited consolidated financial statements are prepared in
accordance with Indian GAAP, the accounting standards prescribed by the ICAI and the relevant
provisions of the Companies Act.

Overview

Our Company is the flagship company of the Kalyani group which has significant presence in the
automotive components sector in India. We are one of the largest commercial forging companies in the
world in terms of capacity and revenue, with presence in automotive as well as non-automotive
components sectors. We have wide domain knowledge for the design and engineering of highly critical
automotive and non-automotive components.

We are one of the world’s leading manufacturers and suppliers of forged and machined automotive
chassis and engine components such as crankshafts, front axle beams, connecting rods, steering
knuckles and other components to several of the world’s leading commercial and passenger vehicle
manufacturers. Based on the most recent data available from the Automotive Component
Manufacturers’ Association of India ("ACMA"), for the year ended March 31, 2009, our Company had
the highest export sales among Indian automotive component manufacturers.

Through several strategic acquisitions and investments (including by way of a joint-venture) since
2004, we have established presence in the United States, Germany, Sweden, Scotland and China, and
developed dual-shore manufacturing capacities for many of our production facilities, full-service
supply capabilities and strong design and engineering abilities and achieved greater access to customers
and markets outside of India. We have discontinued the operations of our facility in Scotland and are in
the process of transferring its operations to our plant in Sweden. For the year ended March 31, 2009,
income from our overseas subsidiaries constituted 56.5% of our consolidated total income. We also
own 30.0% equity interest in Tecnica UK Limited, a company engaged in the business of providing
testing and validation services.

We also produce forged and machined components for non-automotive industries such as power
generation (including wind energy), marine, oil and gas, railways and construction. We expect these
non-automotive industries to grow in and outside India in the near future. We intend to grow our
revenues and market share in forged products for such industries by leveraging our existing and new
manufacturing capacities, global presence, experience in metallurgy and metal formation and our
existing customer relationships. Our non-automotive products primarily include crankshafts for the
marine industry and stationery diesel engines, valves, bonnets and chokes for the oil and gas industry
and rotors and shafts for power generator industry, including for windmills.

Our principal Indian production facility is located in Mundhwa, Pune. Including the forging capacities
of our Subsidiaries, our total installed forging capacity is 760,000 MT per annum. The following table
sets forth the forging capacities of our Indian operations and our Subsidiaries outside India (based on a
specific but consistently applied product-mix):

                            Entity                                       MT per annum
    Bharat Forge Limited, India                                            365,000
    FAW Bharat Forge, China                                                135,000
    Bharat Forge Kilsta, Sweden and BFSSL, Scotland*                       100,000
    CDP-Bharat       Forge      and    Bharat     Forge
    Aluminiumtechnik, Germany                                                100,000
    Bharat Forge America, USA                                                 60,000

*          We have discontinued the operations of our facility in Scotland and are in the process of
           transferring its operations to its parent company, Bharat Forge Kilsta, Sweden.




                                                   98
In addition, the installed machining capacities of our Company are set out below:

                     Category                                         Units per annum
 Automotive Crankshafts                                                   840,000*
 Non-automotive Crankshafts                                                10,000
 Front-axle Beam                                                          753,200
*Including a capacity of 80,000 units, which is under installation.

For the year ended March 31, 2009, our consolidated total income was Rs. 48,427.47 million and our
consolidated profit after tax and minority interest was Rs. 582.65 million. For the year ended March 31,
2009, sales of automotive components constituted 78.6% of our consolidated total sales. For the nine
months ended December 31, 2009, our Company’s total income from operations, on an unaudited and
unconsolidated (standalone) basis, was Rs. 12,940.36 million and our Company’s net profit, on an
unaudited and unconsolidated basis, was Rs. 657.87 million.

Factors Affecting Our Results of Operations

A number of factors affect our results of operations including the following:

General Trends in the Automotive Industry

There are a number of significant trends affecting the highly competitive automotive industry. The
automotive industry, especially the commercial vehicle segment, went through a severe downturn
highlighted by an unprecedented drop in industry volumes during the second half of 2008 and the first
half of 2009. Though there are signs of revival, the industry has not fully recovered as yet. The
industry was significantly affected by deteriorating global economic conditions, unstable credit
markets, sharply declining consumer confidence and employment levels and volatile fuel prices. These
factors have weakened the financial strength of many automotive manufacturers. Although the
deterioration of the economy and credit markets impacted the United States and Western Europe most
significantly, the global automotive and automotive components industry was adversely
affected. Along with the general economic decline, the automotive industry, particularly in North
America and Europe, experienced sharp declines in sales, declining production volumes, reduced OEM
market shares, intense global competition, volatile fuel, steel, metal and other commodity prices and
significant pricing pressures. Several suppliers in North America and Europe are facing significant
financial distress, including bankruptcies. OEMs and suppliers are aggressively developing strategies to
reduce costs, which include restructuring of operations, relocating production to low cost regions,
vendor rationalisation and sourcing on a global basis. In addition, consumer demand is showing a shift
towards smaller passenger cars and cross-over vehicles with smaller displacement engines and better
fuel efficiencies in our North American markets, which has led to manufacturers seeking lower
production costs through outsourcing, using lighter materials such as aluminium and vendor
rationalisation. Events such as the global economic downturn, that results in decreased demand in the
automotive industry could have an adverse effect on our business, financial condition and results of
operations. The passenger vehicle volumes in North America and the United States started showing
recovery in the second half of 2009 as a result of measures such as scrappage incentives provided by
the respective governments. The Indian automotive industry has witnessed a recovery which began in
the second half of 2009, as a result of factors such as stimulus packages announced by the Government
of India and declining interest rates.

Purchasing Patterns of our Large Customers

Demand for our products is directly related to automotive vehicle production. Automotive sales and
production can be highly cyclical. The North America and the European automotive industry are
suffering from sharp declines in sales, higher inventories, significant overcapacity, fierce competition,
high fixed cost structures and significant employee pension and health care obligations. This has led to
several manufacturers facing severe financial distress and consequent decrease in orders for automotive
components. During the recent economic downturn, substantially, all of our customers had significantly
lowered vehicle production schedules.

Further, our customers often undertake vendor rationalisation to reduce costs related to procurement
from multiple vendors. Our sales are also affected by inventory levels and manufacturers’ production
levels of automotive manufacturers. We cannot predict when manufacturers will decide to either build

                                                   99
or reduce inventory levels or whether new inventory levels will approximate historical inventory levels.
This may result in variability in our sales. Uncertainty regarding inventory levels may be exacerbated
by favourable consumer financing programs initiated by manufacturers which may accelerate sales that
otherwise would occur in future periods. We also have historically experienced sales declines due to
manufacturers scheduled shut-downs or shut-downs resulting from unforeseen events. As we typically
have fixed production costs, especially in case of our Subsidiaries even relatively modest declines in
our customer's production schedules resulting in reduced orders for components, could have a
significant adverse impact on our profitability.

Availability and Costs of our Key Raw Materials

Commodity prices, especially prices for steel, other metals and fuel, have an impact on our results of
operations. Steel costs accounted for 49.7% of our consolidated total income for the year ended March
31, 2009. Commodity prices are influenced by changes in global economic conditions, industry cycles,
demand-supply dynamics, attempts by individual producers to capture market share and also by
speculation in the market. In addition to market fluctuations, our average selling prices can be affected
by contractual arrangements and hedging strategies, if any.

Our principal raw material is steel. In recent years, worldwide commodity market conditions have
resulted in volatile steel and other metal material prices. Currently and historically, we have been able
to pass on the increase in cost for steel onto our customers. However, our cash flows may be adversely
affected because of a time lag between the date of the procurement of steel and date on which we can
reset the component prices for our customers due to increase in steel prices. In addition, we do not have
an express agreement with some of our customers to pass on the increase in steel prices and we have
been able to do so, on the basis of industry practices. We cannot assure you that we will be able to
continue such policy in the future. We are heavily dependent upon a small number of suppliers for our
supply of steel. The steel procured by our Company for our Indian operations from the Kalyani Group
companies, Kalyani Steel Limited and Kalyani Carpenter Special Steels Limited aggregated to more
than 90% of our total steel consumption for the year ended March 31, 2009. Our Subsidiaries also
source a substantial amount of their requirement of steel from two to three regional steel manufacturers.
Discontinuation of production by these companies, a failure of these suppliers to adhere to the delivery
schedule or the required quality or their inability to meet our requirements, could affect our ability to
procure steel at reasonable prices and adversely affect our production schedule, which may have an
adverse effect on our business, financial condition and results of operations.

Trends in and our Ability to Expand Further our Business in the Non-Automotive Sectors

For the year ended March 31, 2009, our non-automotive business contributed 21.4% to our
consolidated total income. Considering the growth potential of such business, the associated profit
margins and to diversify our revenue stream, we expand our business further in non-automotive sectors
such as power generation (including wind energy), marine, oil and gas, railways and construction.
Given our limited exposure in the non-automotive sectors, it is possible that we may not be able to
anticipate or evaluate business risks or implement our strategies successfully. Our inability to manage
the expansion of our non-automotive business could have an adverse effect on our business, financial
condition and profitability.

Decisions by our customers in the non-automotive sectors to purchase components manufactured by us
would depend upon performance of these sectors. For example, the activity levels in the oil and gas
exploration sectors have been affected in the recent years because of the volatility in the oil prices. The
global growth in transportation demand is expected to be met primarily by oil, though biofuels and
natural gas are gaining market share. Demand for electricity around the world is expected to grow
significantly as well. Consistent with this projection, power generation is expected to remain the largest
and fastest-growing segment of the global energy demand. The power sector in India is experiencing
very high levels of business activity in the recent years because of deregulation carried out by the
Government of India and greater access being provided to the private sector in power generation, which
may not be sustainable. However, most of these sectors were severely affected by the recent global
economic downturn and there is no assurance that such occurrences may not happen in the future.
Continuation or worsening of this downturn could have an adverse effect on our business, financial
condition and profitability.




                                                   100
Operating Costs and Efficiency

Given the nature of our business, operating costs and efficiencies are critical to maintaining our
competitiveness and profitability. Our business is very capital-intensive and it requires us to maintain a
large fixed cost base. Further, there is substantial continuing pressure from major customers to reduce
costs, including the cost of products purchased from outside suppliers. Such reductions are subject to
risk and uncertainties as they are calculated based on negotiations and other external factors beyond our
control. Accordingly, suppliers must be able to reduce their operating costs in order to maintain
profitability. Our profitability is dependent, in part, on our ability to spread fixed production costs over
higher production volume. If we are unable to generate sufficient production cost savings in the future
to offset price reductions, our gross margin and profitability would be adversely affected.

In light of the recent global economic downturn and the consequent reduction in volumes, our
Subsidiaries are continuing to operate at low volumes with low capacity utilisation. We are undertook
and are continuing to take steps to improve the operating performance of the Subsidiaries by decreasing
operational costs and the ‘break-even threshold’. For example, we reduced the number of employees in
2008 and 2009 in our Subsidiaries. We are also implementing further steps such as reducing
manufacturing scrap, improving the ratio of materials in the output to the input and reducing energy
costs to improve operational efficiency of our Subsidiaries. Our objective is to achieve a lower ‘break-
even threshold’ and thus achieve profitability in our Subsidiaries at lower capacity utilisations. If we
are unable to successfully implement our further cost-cutting and rationalisation strategies for our
Subsidiaries, our business, financial condition and results of operations would be adversely affected.

Exchange Rates

We have currency exposures related to buying, selling and financing in currencies other than the local
currencies in which we operate. We report our results of operations in the Indian Rupees, which has
experienced significant fluctuations in recent years. To the extent that we are unable to match income
received in foreign currencies with costs incurred in the same currencies, exchange rate fluctuations in
such currencies could have an adverse effect on our results of operations. The table set forth below
summarises the currency denomination of our sales and costs and our foreign exchange policies:

                                      Sales                       Costs                 Foreign exchange
                                                                                               policy
Our Company                 All sales within India        Almost     all   costs     Our Company has a
                            are made in Indian            incurred are in Indian     natural hedge with
                            Rupees.                       Rupees, except certain     significant       United
                            Sales outside India are       steel supply contracts     States            Dollars
                            primarily made in             which are dominated        denominated sales and
                            United States Dollars,        in Euro and Japanese       indebtedness.
                            Euro     and    British       Yen.                       At times, our Company
                            Pound Sterling.                                          also enters into forward
                                                                                     contracts for a portion
                                                                                     of its sales.
CDP Bharat         Forge,   Most of the sales are         All costs are incurred     CDP Bharat Forge
Germany                     made in Euro with             in Euro.                   enters into forward
                            some sales in United                                     contracts for sales to
                            States Dollars                                           the United States.
Bharat          Forge       All sales are made in         All costs are incurred     -
Alumiuniumtechnik,          Euro.                         in Euro.
Germany
Bharat Forge Kilsta,        Sales are primarily           Costs incurred for steel   Natural hedge with
Sweden                      made in Euro, Swedish         purchases are in Euro.     significant        Euro
                            Krona and British             All other costs are        denominated sales and
                            Pound Sterling.               incurred in Swedish        steel supply contracts.
                                                          Krona.
Bharat Forge Scottish       Sales are primarily           Costs incurred for steel   Natural hedge with
Stampings, Scotland         made in Euro and              purchases are in Euro.     significant        Euro
                            British Pound Sterling.       All other costs are        denominated sales and
                                                          incurred in British        steel supply contracts.
                                                          Pound Sterling.

                                                    101
                                     Sales                       Costs                 Foreign exchange
                                                                                            policy
Bharat Forge America,       Sales are made in            All costs are incurred   -
United States               United States Dollars.       in    United    States
                                                         Dollars.
FAW     Bharat     Forge,   Sales are made in            All costs are incurred   -
China                       Chinese Renminbi.            in Chinese Renminbi.

Critical Accounting Policies and Estimates

Our Company’s financial statements are prepared in accordance with generally accepted accounting
principles in India, the applicable accounting standards issued by the Institute of Chartered Accountants
of India and the relevant provisions of the Companies Act, 1956. Critical accounting policies involve
subjective assumptions and estimates, as well as complex judgments relating to accounting items such
as revenue recognition, work in progress and cost. In each case, the determination of these items
requires management's judgment based on information and financial data that may change in future
periods. Set out below are our Company’s critical accounting policies, which we believe involve the
most significant estimates and judgments used in the preparation of our Company’s financial
statements. There are inherent diversities in the legal and regulatory environment governing accounting
principles of our Company and our Subsidiaries. For a description of the instances of diverse
accounting policies followed by the Subsidiaries, which may materially vary with our Company’s
financial statements, see “⎯ Critical Accounting Policies ⎯ Instances of Diverse Accounting Policies
Followed by Our Subsidiaries.”

Revenue Recognition

    •    Domestic sales are accounted for when dispatched from the point of sale, consequent to
         property in goods being transferred. Export sales are accounted on the basis of dates of bill of
         lading.

    •    Export incentives are accounted for on export of goods if the entitlements can be estimated
         with reasonable accuracy and conditions precedent to the claim is fulfilled.

    •    Interest is accrued over the period of loan or investment, as the case may be.

    •    Dividend is accrued in the year in which it is declared, whereby the right to receive is
         established.

    •    Profit or loss on sale of an investment is recognised on the contract date.

Expenditure on New Projects and Expenditure during Construction

For new projects or for substantial modernisation or expansion of our Company’s existing units,
expenditure incurred, including interest on borrowings and financing costs of specific loans, prior to the
commencement of commercial production is capitalised to the cost of assets.

Foreign Currency Conversion

Foreign currency exposure for long term foreign currency items and for the financing fixed assets
outstanding at the close of the financial year are revalued at the contracted and/or appropriate exchange
rates at the close of the financial year. The gain or loss due to a decrease or an increase in the Indian
Rupee liability because of fluctuation in the exchange rates is recognised in the profit and loss account.

Current assets and other liabilities in foreign currency and foreign currency exposure in respect of
foreign currency loans other than for financing fixed assets outstanding at the close of the financial year
are valued at the contracted and/or appropriate exchange rates at the close of the financial year. The
loss or gain due to the fluctuation of exchange rates is charged to the profit and loss account.

We use foreign exchange forward contracts to hedge our Company’s exposure against movements in
foreign exchange rates. Exchange forward contracts are not used for trading or speculation. Premium or
discounts are recognised over the life of the contracts.

                                                   102
Derivatives or options to hedge foreign exchange risks on future receivables, contingent on future
options built around them, cannot be marked to market on each balance sheet date. Consequently, they
are recognised in the period when the relevant underlying transaction comes into existence or on the
settlement dates, whichever is earlier. However, on simulation of the cut-off date at the close of the
year, losses, if any, are provided for.

Losses and gains of outstanding foreign exchange contracts or derivatives, which cover highly probable
forecast transactions, if determined effective, from the year ended March 31, 2009, are recognised
under hedge reserve in accordance with the principles of hedge accounting and are transferred into the
profit and loss account when the underlying transactions occur. Losses and gains on ineffective
hedging instruments are recognised in the profit and loss account.

Amendments to Accounting Standard 11

This accounting policy detailed above was consistently followed in the past in accordance with
Accounting Standard 11 (AS-11) prescribed by the ICAI. However, such policy was changed
retrospectively, with effect from April 1, 2007, in light of the amendments to AS-11 ⎯“The effects of
changes in foreign exchange rates”. AS-11 prescribed by Companies (Accounting Standards) Rules,
2006 was amended on March 31, 2009. This amendment offered an option to Indian companies to
recognise foreign exchange gains and losses arising on translation of all long term monetary assets and
liabilities acquired up to March 31, 2009, retrospectively from accounting periods commencing after
December 7, 2006 (that is from April 1, 2007 for us) up to March 31, 2011, as capital cost of
acquisition of assets where they relate to acquisition of assets or to a Translation Reserve i.e., “Foreign
Currency Monetary Item Translation Difference Account” (“FCMITDA”) in other cases. The amount
so recognised as capital cost of acquisition of assets is required to be depreciated over the balance life
of the relevant assets and in case of the amount recognised in the FCMITDA, is required to be
amortised over the balance term of the monetary asset or liability but not beyond March 31, 2011.

We have chosen to exercise this option in preparation of our Company’s financial statements for the
year ended March 31, 2009. Accordingly, foreign exchange differences adjusted against the cost of the
assets or capital work-in-progress or accumulated in the FCMITDA and the balance amount in
FCMITDA shall be amortised in the future periods are as under:

a)     Impact of Adjustments made: (Rs. in Million)

                                                            Adjustment
                                                              against
                                                           Assets/Capital
                                                             Work-In-
Exchange (Gain) / Losses                                     Progress            FCMITDA             Total
General Reserve:
For the year ended March 31, 2008 adjusted to                       (297.80)        (105.88)      (403.68)
General Reserve (A)
Profit and Loss Account:
For the year ended March 31, 2009                                   1,394.07          525.60     1,919.67
Less: Depreciation / Amortisation on the above for                     47.50          185.44       232.94
the financial year
Impact on Profit and Loss Account (B)                               1,346.57          340.16     1,686.73
                                            (A-B)                   1,048.77          234.28

b)       Amount to be amortised to Profit and Loss Account in future periods:

          In the year ended March 31, 2010          Rs. 185.44 million
          In the year ended March 31, 2011          Rs. 48.84 million

The transitional adjustment, in respect of retrospective implementation aggregating to Rs. 403.68
million (net of tax Rs. 54.37 million) has been, as required, debited to the general reserve being a gain.
Had this change not been effected, on an unconsolidated basis, the profit for the year would have been
lower by Rs. 1,686.73 million, fixed assets lower by Rs. 1,048.77 million and consequently the
reserves and surplus lower by Rs. 1,048.77 million.

                                                   103
Research and Development Expenditure

Research and development expenditure is charged to revenue under the heads of account in the
financial year in which it is incurred. However, expenditure incurred at the development phase, where
it is reasonably certain that the outcome of such research will be commercially exploited to yield
economic benefits to us, is considered as an intangible asset. Fixed assets purchased for the purpose of
research and development are accounted for in the manner stated under "⎯ Fixed Assets" below.

Borrowing Costs

Interest on borrowings is recognised in the profit and loss account except for interest incurred on
borrowings specifically raised for a project, which are capitalised to the cost of the assets until such
time that the asset is ready to be put to use for its intended purpose except where installation is
extended beyond reasonable or normal time lines.

Depreciation and Amortisation

    •   Premium on leasehold land is amortised over the period of lease and expenditure on power
        transmission line is amortised over a period of seven years.

    •   Depreciation on additions to buildings, plant and machinery, railway sidings, electrical
        installations and aircraft are provided on the basis of “straight line method” in accordance with
        the provisions of Section 205(2)(b) of the Companies Act in the manner and at the rates
        specified in Schedule XIV of the Companies Act.

    •   Depreciation with respect to other assets such as factory equipment, computers, engineering
        instruments, furniture and fittings, office equipment and vehicles are provided on the basis of
        the “written down value” method.

    •   Depreciation on additions to assets during the year is provided on a pro-rata basis from the
        date of acquisition/ installation.

    •   Depreciation on assets sold, discarded or demolished during the year, is provided for at their
        respective rates on a pro-rata basis up to the date on which such assets are sold, discarded or
        demolished.

    •   Depreciation on additions on account of increase in the value of Indian Rupee due to
        revaluation of foreign currency loans is provided for at rates of depreciation over the future
        life of such asset.

Fixed Assets

Fixed assets are stated at their original cost of acquisition including incidental expenses related to
acquisition and installation of the concerned assets. Fixed assets manufactured by us are stated at
manufacturing cost. Fixed assets are shown net of accumulated depreciation (except free hold land) and
amortisation.

Inventories

Cost of inventories are computed to include all cost of purchases, cost of conversion and other costs
incurred in bringing the inventories to their present location and condition. The inventories are valued
in the following manner:

    •   Raw materials and components, stores and spares are valued at cost. The costs are ascertained
        using the weighted average method, except in case of slow moving and obsolete material,
        which is ascertained at the lower of the cost or the estimated realisable value.

    •   Work-in-progress and finished goods are valued at the lower of the cost or the estimated
        realisable value.

    •   Scrap is valued at the estimated realisable value.

                                                  104
    •    Goods in transit are stated at actual cost up to the date of balance sheet.

    •    Dies are amortised over their productive life. Expenditure incurred to repair the dies from time
         to time is charged to profit and loss account.

Employee Benefits

    •    Benefits in the form of provident fund and pension schemes, including defined contributions,
         are accounted for on an accrual basis and charged to the profit and loss account of the year.

    •    Payment for present liability of future payment of gratuity is made to the approved gratuity
         funds, which is covered under the cash accumulation policy of the Life Insurance Corporation
         of India. The employee’s gratuity is a defined benefit funded plan. The present value of the
         obligation under such defined benefit plan is determined based on the actuarial valuation using
         the projected unit credit method as at the date of the balance sheet and the shortfall in the fair
         value of the plan assets is recognised as an obligation.

    •    Defined contributions to the Life Insurance Corporation of India for employees covered under
         the superannuation scheme are accounted for at the rate of 15.0% of such employees’ annual
         salary.

    •    Privilege leave benefits or compensated absences are considered as long term unfunded
         benefits and are recognised on the basis of an actuarial valuation using the projected unit
         credit method determined by an appointed actuary.

    •    Termination benefits such as compensation under the voluntary retirement scheme are
         recognised as a liability in the year of termination.

Investments

    •    Trade investments made by our Company are of a long term nature and hence diminution in
         value of investments if any, are generally not considered to be of permanent nature.

    •    Current investments are valued at cost of acquisition, reduced for provision for diminution, as
         necessary, if any.

Instances of Diverse Accounting Policies Followed by Our Subsidiaries

The instances of diverse accounting policies followed by the Subsidiaries, which may materially vary
with our consolidated financial statements, are set out below.

Dies: For CDP Bharat Forge GmbH, Bharat Forge Kilsta AB, Bharat Forge Scottish Stampings
Limited and Bharat Forge America Inc., dies are considered as fixed assets and amortised by scheduled
depreciation with reference to an assumed economic life as against Bharat Forge Limited’s accounting
policy to treat them as inventory under “current asset” and amortise the cost, as “manufacturing
expenses”, on the basis of actual usage.

FAW Bharat Forge, China, considers moulds (dies) whose unit purchase value is above RMB 200,000
as a part of the fixed assets, and depreciated over the useful life of the dies from 2008. Also, dies
amounting to RMB 26,005,768 out of the opening balance of inventory were transferred to fixed assets
during 2008.

Recognisation of Capital Reserve/Goodwill: The German Accounting Standard (DRS 4) requires that
where there is an acquisition of a subsidiary, at the first instance, the assets and liabilities are
recognised at market value in the first year of consolidation and thereafter, the excess or deficit of the
parent’s portion in the equity in its subsidiary companies is recognised over its carrying cost of
investments as a reserve or goodwill. Though this policy is consistent with IFRS adopted by CDP
Bharat Forge during 2008, it is different from the requirements of Accounting Standard 21
“Consolidated Financial Statements” prescribed by ICAI, which requires recognition of assets and
liabilities, in similar circumstances, at their carrying costs. As a result, fixed assets for Bharat Forge
Aluminiumtechnik are higher by EUR 0.426 million.


                                                    105
Treatment of Capital Reserve (Difference in capital consolidation account): German Accounting
Standard (DRS 4) requires the capital reserve created on consolidation to be apportioned to income
over the life of the assets. After adoption of IFRS during 2008, by CDP Bharat Forge and its
subsidiaries (other than Bharat Forge Beteiligungs GmbH), the balance lying in ‘difference of capital
consolidation’ account has been transferred to the general reserve as against past practice of
recognising part of such balance as ‘other income’ over the life of such asset. However, the net position
of the reserves and surplus remains unchanged.

Employee Benefits Pension: Due to the adoption of IFRS by CDP Bharat Forge and its subsidiaries
(other than Bharat Forge Beteiligungs GmbH), the service cost or the interest cost for pensions are
debited to the profit and loss account and actuarial gains and losses are charged to reserves. The
amount credited to the reserves for 2008 was EUR 14,531. This is different from the practice followed
by our Company where the difference between actuarial valuation is charged to the profit and loss
account.

Impact of the adoption of IFRS by CDP Bharat Forge and its subsidiaries (other than Bharat Forge
Beteiligungs GmbH).

                                                            Increase/(decrease)
                                                     For earlier            For 2008          For earlier years
                                                    years* (EUR)         (Rs. in Million)              *
Particulars                  For 2008 (EUR)                                                    (Rs. in Million)
Depreciation                           545,846           (1,650,519)                  34.78              (105.17)
Employee Benefits                    (191,204)               573,349                (12.18)                 36.53
Other items                            (19,096)             (44,051)                 (1.22)                (2.81)
Deferred taxes                       (100,000)               335,000                 (6.37)                 21.35
Early retired employees                        -             308,881                      -                 19.68
Impact on Profit and
Loss
(Increase) / Decrease                  235,546             (477,340)                 15.01                  (30.42)
* Disclosed as adjustment for the earlier year.

The balance in revaluation reserve for investments earmarked to secure employee claims (security
investment) represents the provision for diminution in the value of security investment amounting to
€359,282, which has been adjusted against the carrying cost of security investment (included in fixed
deposits). These security investments are classified as ‘available for sale’.

Inventories: For Bharat Forge America Inc. and Bharat Forge Kilsta AB, Sweden, the cost of inventory
is determined on the basis of first-in first-out method in contrast to our Company which determines its
inventories on the basis of weighted average.

Our Business Segments

We evaluate and report our financial results in two business segments:

Forging. This is our primary business segment and almost all our products are covered under this
segment. For the years ended March 31, 2009, 2008 and 2007, our revenues from the forging segment
were Rs. 47,676.10 million, Rs. 46,436.72 million and Rs. 41,720.58 million or 98.4%, 97.7% and
97.6% of our consolidated total income, respectively.

General Engineering. The general engineering trading segments consists of a fabrication unit and our
revenues from this segment are minimal. For the years ended March 31, 2009, 2008 and 2007, our
revenues from the general engineering trading segment were Rs. 116.80 million, Rs. 73.96 million and
Rs. 84.84 million, or 0.2%, 0.2% and 0.2% of our consolidated total income, respectively.

Results of Operations

The following table sets forth select financial data from our audited consolidated profit and loss
account for the years ended March 31, 2009, 2008 and 2007, respectively, the components of which are
also expressed as a percentage of total income for such periods.


                                                   106
                                                                 For the Years Ended March 31,
                                                 2009                         2008                     2007
                                                         % of                                                  % of
                                          (Rs. in        Total       (Rs. in     % of Total     (Rs. in        Total
                                         Millions)      Income      Millions)     Income       Millions)      Income
 Income:
 Gross Sales.......................      47,931.85         99.0     47,340.05          99.6    42,762.19        100.0
 Less: Excise Duty ............           1,202.33          2.5      1,726.08           3.6     1,560.19          3.7
 Net Sales...........................    46,729.52         96.5     45,613.97          96.0    41,202.00         96.4
 Operating Income.............            1,010.85          2.1        908.80           1.9       580.98          1.4
 Other Income....................           687.10          1.4        992.93           2.1       969.15          2.3
 Total Income...................         48,427.47        100.0     47,515.70         100.0    42,752.13        100.0

 Expenditure:
 Manufacturing and Other
 Expenses...........................     44,504.40         91.9     40,747.60          85.8    36,386.36         85.1
 Depreciation and
 Amortisation.....................        2,517.32          5.2      2,270.55           4.8     1,881.10          4.4
 Total Expenditure                       47,021.72         97.1     43,018.15          90.7    38,267.46         89.5
 Operating Profit ...............         1,405.75          2.9      4,497.55           9.5     4,484.67         10.5
 Exceptional Item of
 Expenditure ......................       (298.92)         (0.6)             -             -      121.44          0.3
 Profit for the Year
 before Income from
 Associate & Taxation.....                1,106.83          2.3      4,497.55           9.5      4,363.23        10.2
 Income from Associates ..                   (4.58)           -          1.22             -             -           -

 Provision for Taxation .....             (695.74)         (1.4)    (1,589.41)         (3.4)   (1,528.57)        (3.6)

 Net Profit after Taxation                  406.51           0.9     2,909.36            6.1     2,834.66          6.6
   Less: Minority Interest..              (176.14)         (0.4)     (105.87)          (0.2)      (71.22)        (0.2)
 Net Profit after Minority
 Interest ............................      582.65          1.3      3,015.23           6.2      2,905.88         6.8

Income

Our income primarily comprises of the sales (net of excise duty) of forged and machined components,
operating income and other income.

Sales. We derive gross sales from the sale of forged and machined components, job work receipts
(which comprise charges for machining of forged components) and from the sale of manufacturing
scrap. Our net sales are calculated after deducting excise duty paid by us in India from our gross sales.

Operating Income. Our operating income includes income from export incentives, die design and
preparation charges and sale of certified emission reduction units.

     •     Export Incentives

           Our Company is entitled to export incentives on account of our export sales from our Indian
           operations in the form of Duty Entitlement Pass Book (“DEPB”) Licenses issued by the
           Government of India. These DEPB Licenses can either be sold or used to set off duties on
           imports of raw materials, spares and consumables.

     •     Die Design and Preparation Charges

           Die design and preparation charges primarily relate to income earned from preparation of dies
           for our new customers and in respect of new products for our existing customers.


                                                           107
    •   Sale of Certified Emission Reduction Units.

        Our 4.20 MW windmill project in India is registered as a clean development mechanism
        project, which entitles us to earn CER credits. These CER credits can also be sold, and used
        by industrialised countries to meet a part of their emission reduction targets under the Kyoto
        Protocol.

Other Income. Our other income primarily includes dividend income from investments in mutual
funds, interest earned on deposits, miscellaneous receipts, surplus on sale of assets and provisions no
longer required.

Expenditure

Our expenditure consists of manufacturing and other expenses and expenses on depreciation and
amortisation.

Manufacturing and Other Expenses. Our manufacturing and other expenses consist of expenditure on
materials, manufacturing expenses, payments and provisions for employees and other expenses.

    •   Materials

        Our expenditure on materials primarily consists of expenditure on raw materials and
        components used, die blocks and die and tool steel, expenditure on purchase of merchandise
        and finished goods and increase or decrease in stocks.

    •   Manufacturing Expenses

        Our manufacturing expenses primarily consists of stores, spares and tools consumed,
        machining charges, power, fuel and water expenses, and expenses incurred for repair of
        machinery.

    •   Payments and Provisions for Employees

        Our payments and provisions for employees consist of salaries, wages, bonus and allowance,
        contribution to provident fund, staff welfare expenses and social security costs.

    •   Other Expenses

        Our other expenses primarily consist of rent, insurance charges, interest and finance charges,
        losses on foreign exchange fluctuations, freight forwarding charges, directors’ fees and
        travelling expenses, managing and whole time directors’ commission and miscellaneous
        expenses, which include expenses for travel, stationary, printing, telephones and bank charges,
        etc.

Depreciation and Amortisation. Our depreciation and amortisation expenses primarily relate to the
costs associated with the depreciation of our fixed assets.

Income from Associate. Income from associate consists of income or loss from our associate, Tecnica
UK Limited.

Minority Interest. Our minority interest related to our joint venture company in China, FAW Bharat
Forge.

Process of Consolidation of Accounts

Our Indian operations follow a financial year beginning April 1 and ending on March 31. Our
Subsidiaries follow a financial year beginning on January 1 and ending on December 31. The financial
statements of our Subsidiaries are consolidated with our Company’s unconsolidated financial
statements with a lag of one quarter.




                                                 108
Our consolidated financial statements are presented in Indian Rupees. The financial statements of each
of our Subsidiaries is prepared on an unconsolidated basis in their respective local currency, Euro
(EUR) for CDP Bharat Forge and Bharat Forge Aluminium Technik, Swedish Krona (kr) for Bharat
Forge Kilsta, British Pounds Sterling (£) for Bharat Forge Scottish Stampings, Chinese Renminbi
(RMB) for FAW Bharat Forge, United States Dollars (US$) for Bharat Forge America and Indian
Rupees (Rs.) for BF NTPC. Our consolidated financial statements are prepared on the basis of the
following currency translations:

    •    The financial statements of Bharat Forge Daun GmbH, Bharat Forge Aluminiumtechnik and
         Bharat Forge New technologies GmbH are prepared in Euro and consolidated with the
         financial statements of CDP Bharat Forge (collectively, the “CDP Bharat Forge Group”).

    •    The financial statements of Bharat Forge Scottish Stampings prepared in British Pounds
         Sterling are converted into Swedish Krona for the purposes of consolidation with the financial
         statements of Bharat Forge Kilsta. The financial statements of the Bharat Forge Kilsta Group
         (Bharat Forge Kilsta and Bharat Forge Scottish Stampings) prepared in Swedish Krona are
         converted into Euro for the purposes of consolidation with the financial statements of CDP
         Bharat Forge Group.

    •    The financial statements of FAW Bharat Forge prepared in Chinese Renminbi are converted
         into United States Dollars for the purpose of consolidation with the financial statements of
         Bharat Forge Hong Kong after accounting for the minority interest held by FAW Group
         Corporation.

    •    The financial statements of Bharat Forge Hong Kong Group (Bharat Forge Hong Kong and
         FAW Bharat Forge) prepared in United States Dollars are converted into Euro for the
         purposes of consolidation with the financial statements of CDP Bharat Forge Group.

    •    Share of profit or loss from our associate Tecnica UK Limited is consolidated with the
         financial statements of CDP Bharat Forge Group in Euro.

    •    The consolidated financial statements of CDP Bharat Forge Group are prepared in Euro.
         Subsequently, the consolidated financial statements of CDP Bharat Forge Group are converted
         into Indian Rupees and consolidated with the financial statements of Bharat Forge Limited.

    •    The financial statements of Bharat Forge America prepared in United States Dollars are
         converted into Indian Rupees and consolidated with the financial statements of Bharat Forge
         Limited.

    •    The financial statements of BF NTPC are consolidated into Bharat Forge Limited in Indian
         Rupees.

At the time of conversion of the financial statements during the consolidation process, line items of the
profit and loss account are converted using an average exchange rate for the period or year under
consideration, where as items of the balance sheet are converted using the closing exchange rate for the
period or calendar year under consideration. If there is a material variation in the exchange rate as of
March 31 (date of the consolidated balance sheet) and the exchange rate as of December 31 (date of the
balance sheet of the Subsidiaries), the exchange rate on March 31 is used for conversion of amounts in
the balance sheet.

For the Year Ended March 31, 2009 Compared to the Year Ended March 31, 2008

Our results of operations for the year ended March 31, 2009 were primarily driven by the following key
factors:

    •    the global economic and automotive industry downturn;

    •    the increase in revenues from our non-automotive business; and

    •    the effect of changes in various currencies in which we operate as compared to the Euro and
         its consequent effect when converted into Indian Rupees at the time of consolidation and the
         effect of changes in United States Dollars as compared to Indian Rupees, (“Currency
                                                  109
        Translation Effect”). For the year ended March 31, 2009, the average conversion rate of Euro
        and US$ to the Indian Rupee was Rs. 63.71 and Rs. 43.42, respectively, an increase of
        approximately 12.7% and 5.1%, respectively, as compared to the year ended March 31, 2008
        resulting in a significant Currency Translation Effect.

Income. Our total income increased by 1.9% to Rs. 48,427.47 million for the year ended March 31,
2009 from Rs. 47,515.70 million for the year ended March 31, 2008, primarily due to the Currency
Translation Effect while consolidating the financial statements of our Subsidiaries.

Gross Sales. Our gross sales increased by 1.3% to Rs. 47,931.85 million for the year ended March 31,
2009 from Rs. 47,340.05 million for the year ended March 31, 2008. Although our sales volumes
decreased significantly to 326,850 MT for the year ended March 31, 2009 from 406,707 MT for the
year ended March 31, 2008, we recorded an increase in our gross sales as a result of the Currency
Translation Effect while consolidating the financial statements of our Subsidiaries and the increase in
steel price passed through to our customers. In accordance with our agreements with our customers, we
pass on the increase or decrease in raw material prices to our customers which impacts our gross sales
as well as our raw material costs. The sale of manufacturing scrap increased to Rs. 2,843.39 million for
the year ended March 31, 2009 from Rs. 2,394.14 million for the year ended March 31, 2008, primarily
due to the increase in the scrap prices.

Net Sales. Our net sales increased by 2.4% to Rs. 46,729.52 million for the year ended March 31, 2009
from Rs. 45,613.97 million for the year ended March 31, 2008, primarily due to the Currency
Translation Effect while consolidating the financial statements of our Subsidiaries, increase in the raw
material price which was passed through to our customers and a decrease in excise duty paid by our
Company to Rs. 1,202.33 million for the year ended March 31, 2009 from Rs. 1,726.08 million for the
year ended March 31, 2008. The excise duty paid by our Company reduced as a result of a decrease in
the domestic sales of our Company (on an unconsolidated basis) to Rs. 11,763.70 million for the year
ended March 31, 2009 from Rs. 14,081.05 million for the year ended March 31, 2008 and a reduction
in excise duty rates.

Operating Income. Our operating income increased by 11.2% to Rs. 1,010.85 million for the year
ended March 31, 2009 from Rs. 908.80 million for the year ended March 31, 2008, primarily due to
increases in income from export incentives for our Indian operations to Rs. 630.02 million for the year
ended March 31, 2009 from Rs. 547.35 million for the year ended March 31, 2008, and die design and
preparation to Rs. 376.49 million for the year ended March 31, 2009 from Rs. 322.42 million for the
year ended March 31, 2008.

Other Income. Our other income decreased by 30.8% to Rs. 687.10 million for the year ended March
31, 2009 from Rs. 992.93 million for the year ended March 31, 2008, primarily due to a decrease in
interest earned from deposits to Rs. 137.73 million for the year ended March 31, 2009 from Rs. 320.71
million for the year ended March 31, 2008, and a decrease in dividend income from mutual funds to
Rs. 217.02 million for the year ended March 31, 2009 from Rs. 260.55 million for the year ended
March 31, 2008. We recorded significant dividend income from mutual funds and interest income from
deposits in the year ended March 31, 2008 because of the surplus cash available from the proceeds of
the various capital raising undertaken by our Company. However, this cash was utilised by us in the
years ended March 31, 2008 and 2009.

Expenditure. Our total expenditure increased by 9.3% to Rs. 47,021.72 million for the year ended
March 31, 2009 from Rs. 43,018.15 million for the year ended March 31, 2008, primarily due to an
increase in manufacturing and other expenses and the Currency Translation Effect while consolidating
the financial statements of our Subsidiaries. As a percentage of our total income, our total expenditure
increased to 97.1% for the year ended March 31, 2009 from 90.5% for the year ended March 31, 2008.

Manufacturing and Other Expenses. Our manufacturing and other expenses increased by 9.2% to Rs.
44,504.40 million for the year ended March 31, 2009 from Rs. 40,747.60 million for the year ended
March 31, 2008, primarily due to the Currency Translation Effect while consolidating the financial
statements of our Subsidiaries and increases in expenditure on materials, payments to and provisions
for employees and other expenses, which were offset partially by a decrease in manufacturing
expenses.

Materials. Our expenditure on materials increased by 9.2% to Rs. 24,067.85 million for the year ended
March 31, 2009 from Rs. 22,038.99 million for the year ended March 31, 2008, primarily due to the
                                                  110
increase in price of steel and the Currency Translation Effect while consolidating the financial
statements of our Subsidiaries. As a percentage of our total income, our expenditure on materials
increased to 49.7% for the year ended March 31, 2009 from 46.4% for the year ended March 31, 2008.

Manufacturing Expenses. Our manufacturing expenses decreased by 0.2% to Rs. 7,723.47 million for
the year ended March 31, 2009 from Rs. 7,742.15 million for the year ended March 31, 2008, primarily
due to a decrease in the expenditure on stores, spares and tools consumed to Rs. 1,754.35 million for
the year ended March 31, 2009 from Rs. 1,803.06 million for the year ended March 31, 2008, and
machining charges to Rs. 1,408.52 million for the year ended March 31, 2009 from Rs. 1,562.90
million for the year ended March 31, 2008 . However, power, fuel and water expenses increased to Rs.
3,231.17 million for the year ended March 31, 2009 from Rs. 3,164.23 million for the year ended
March 31, 2008, primarily due to an increase in energy rates charged by our suppliers, other
manufacturing expenses increased to Rs. 178.59 million for the year ended March 31, 2009 from Rs.
60.92 million for the year ended March 31, 2008, and building repairs and road maintenance expenses
increased to Rs. 91.29 million for the year ended March 31, 2009 from Rs. 54.15 million for the year
ended March 31, 2008. As a percentage of our total income, our manufacturing expenses decreased to
16.0% for the year ended March 31, 2009 from 16.3% for the year ended March 31, 2008.

Payments and Provisions for Employees. Our payments and provisions for employees increased by
4.6% to Rs. 7,091.59 million for the year ended March 31, 2009 from Rs. 6,780.35 million for the year
ended March 31, 2008, primarily due to the Currency Translation Effect while consolidating the
financial statements of our Subsidiaries partially offset by a reduction in salaries and number of
employees. If the Currency Translation Effect was not accounted for, there would have been a
reduction in payments and provision for employees for the year ended March 31, 2009 as compared to
year ended March 31, 2008. The total number of our employees was 7,352 as of March 31, 2009
compared to 8,346 as of March 31, 2008. As a percentage of our total income, our payments and
provisions for employees increased to 14.6% for the year ended March 31, 2009 from 14.3% for the
year ended March 31, 2008.

Other Expenses. Our other expenses increased by 30.8% to Rs. 5,646.65 million for the year ended
March 31, 2009 from Rs. 4,317.32 million for the year ended March 31, 2008, primarily due to losses
on foreign exchange fluctuation to Rs. 1,037.30 million for the year ended March 31, 2009 from nil for
the year ended March 31, 2008 primarily as a result of the depreciation in the Indian Rupee against the
United States Dollar, an increase in our interest costs primarily due to increased borrowing, and an
increase in miscellaneous expenses to Rs. 1,770.69 million for the year ended March 31, 2009 from Rs.
1,477.04 million for the year ended March 31, 2008 due to the Currency Translation Effect while
consolidating the financial statements of our Subsidiaries. As a percentage of our total income, our
other expenses increased to 11.7% for the year ended March 31, 2009 from 9.1% for the year ended
March 31, 2008.

Depreciation and Amortisation. Depreciation and amortisation expenses increased by 10.9% to Rs.
2,517.32 million for the year ended March 31, 2009 from Rs. 2,270.55 million for the year ended
March 31, 2008, primarily due to an increase in our fixed assets, such as plants, machinery, buildings
and equipment to Rs. 40,270.75 million as of March 31, 2009 from Rs. 30,988.88 million as of March
31, 2008 and additional depreciation on account of capitalisation of currency exchange losses of Rs.
47.50 million as a result of the amendment to Accounting Standard 11, prescribed by the ICAI. As a
percentage of our total income, our depreciation and amortisation costs increased to 5.2% for the year
ended March 31, 2009 from 4.8% for the year ended March 31, 2008.

Exceptional Item of Income/ Expenditure. We incurred exceptional items of expenditure aggregating to
Rs. 298.92 million in the year ended March 31, 2009, consisting of a provision for a customer claim
amounting to Rs. 247.33 million and the cost of redundancies of Rs. 51.59 million, each incurred by
Bharat Forge Scottish Stampings Limited.

Income from Associate. Our income from our associate, Tecnica UK Limited, decreased to a loss of Rs.
4.58 million for the year ended March 31, 2009 from an income of Rs. 1.22 million for the year ended
March 31, 2008, primarily due to losses incurred by Tecnica UK Limited for the year ended March 31,
2008.

Taxation. Our provision for taxation decreased by 56.2% to Rs. 695.74 million for the year ended
March 31, 2009 from Rs. 1,589.41 million for the year ended March 31, 2008, primarily due to a
decrease in provision for current tax liability to Rs. 311.67 million for the year ended March 31, 2009
                                                 111
from Rs. 1,369.08 million for the year ended March 31, 2008 and minimum alternate tax credit of Rs.
157.40 million available in respect of our Indian operations, which shall be adjusted against tax
payments required to be paid in the forthcoming years.

Minority Interest. The losses attributable to the minority shareholders in our joint venture company in
China, FAW Bharat Forge increased to Rs. 176.14 million for the year ended March 31, 2009 from Rs.
105.87 million for the year ended March 31, 2008.

Net Profit After Minority Interest. Our net profit after minority interest decreased by 80.7% to Rs.
582.65 million for the year ended March 31, 2009 from Rs. 3,015.23 million for the year ended March
31, 2008. As a percentage of our total income, our net profit after minority interest decreased to 1.2%
for the year ended March 31, 2009 from 6.4% for the year ended March 31, 2008.

For the Year Ended March 31, 2008 Compared to the Year Ended March 31, 2007

Our results of operations for the year ended March 31, 2008 were primarily driven by the following key
factors:

•        the increase in our Company's production and sales volumes;

•        the full year of operation of FAW Bharat Forge; and

•        the appreciation of the Indian Rupee against various currencies which had a negative impact
         on the exports from our Indian operations and a positive impact on the foreign currency
         denominated loans of our Company.

Income. Our total income increased by 11.1% to Rs. 47,515.70 million for the year ended March 31,
2008 from Rs. 42,752.13 million for the year ended March 31, 2007.

Gross Sales. Our gross sales increased by 10.7% to Rs. 47,340.05 million for the year ended March 31,
2008 from Rs. 42,762.19 million for the year ended March 31, 2007, primarily due to increases in the
sales volumes of our Indian operations. Our sales volumes increased to 406,707 MT for the year ended
March 31, 2008 from 350,194 MT for the year ended March 31, 2007. In addition, our gross sales also
increased as a result of a full year of operation of our Chinese joint venture company, FAW Bharat
Forge for the year ended March 31, 2008 as compared to nine months for the year ended March 31,
2007.

Net Sales. Our net sales increased by 10.7% to Rs 45,613.97 million for the year ended March 31, 2008
from Rs. 41,202.00 million for the year ended March 31, 2007, primarily due to an increase in gross
sales which was partially offset by an increase in excise duty to Rs. 1,726.08 million for the year ended
March 31, 2008 from Rs. 1,560.19 million for the year ended March 31, 2007. The excise duty paid by
us increased as a result of an increase in our Company’s domestic sales (on an unconsolidated basis) to
Rs. 14,081.05 million for the year ended March 31, 2008 from Rs. 12,691.69 million for the year ended
March 31, 2007.

Operating Income. Our operating income increased by 56.4% to Rs. 908.80 million for the year ended
March 31, 2008 from Rs. 580.98 million for the year ended March 31, 2007, primarily due to increases
in income from export incentives to Rs. 547.35 million for the year ended March 31, 2008 from Rs.
296.05 million for the year ended March 31, 2007, primarily as a result of higher exports from our
Company’s Indian operations and due to an increase in DEPB rates during the year ended March 31,
2008.

Other Income. Our other income increased by 2.5% to Rs. 992.93 million for the year ended March 31,
2008 from Rs. 969.15 million for the year ended March 31, 2007, primarily due to an increase in
dividend income from mutual funds to Rs. 260.55 million for the year ended March 31, 2008 from Rs.
162.07 million for the year ended March 31, 2007, and gains from exchange rate fluctuations to Rs.
211.15 million for the year ended March 31, 2008 from Rs. 44.27 million for the year ended March 31,
2007, which was offset by a decrease in interest earned from deposits to Rs. 320.71 million for the year
ended March 31, 2008 from Rs. 537.59 million for the year ended March 31, 2007.




                                                  112
Expenditure. Our total expenditure increased by 12.4% to Rs. 43,018.15 million for the year ended
March 31, 2008 from Rs. 38,267.46 million for the year ended March 31, 2007, primarily due to
increases in our manufacturing and other expenses. As a percentage of our total income, our total
expenditure increased to 90.5% for the year ended March 31, 2008 from 89.5% for the year ended
March 31, 2007.

Manufacturing and Other Expenses. Our manufacturing and other expenses increased by 12.0% to Rs.
40,747.60 million for the year ended March 31, 2008 from Rs. 36,386.36 million for the year ended
March 31, 2007, primarily due to increases in expenditure on materials consumed, manufacturing
expenses, payments to and provisions for employees and other expenses.

Materials. Our expenditure on materials increased by 10.7% to Rs. 22,038.99 million for the year ended
March 31, 2008 from Rs. 19,906.53 million for the year ended March 31, 2007, primarily due to
increases in the consumption of raw materials and components as a result of higher production
volumes. As a percentage of our total income, our expenditure on materials decreased to 46.4% for the
year ended March 31, 2008 from 46.6% for the year ended March 31, 2007.

Manufacturing Expenses. Our manufacturing expenses increased by 13.5% to Rs. 7,742.15 million for
the year ended March 31, 2008 from Rs. 6,823.93 million for the year ended March 31, 2007, due to
increases in power, fuel and water expenses to Rs. 3,164.23 million for the year ended March 31, 2008
from Rs. 2,414.77 million for the year ended March 31, 2007 as a result of an increase in energy prices,
expenditure on stores, spares and tools consumed increased to Rs. 1,803.06 million for the year ended
March 31, 2008 from Rs. 1,723.94 million for the year ended March 31, 2007, and machinery repairs to
Rs. 1,075.17 million for the year ended March 31, 2008 from Rs. 881.95 million for the year ended
March 31, 2007 as a result of increased production volumes. As a percentage of our total income, our
manufacturing expenses increased to 16.3% for the year ended March 31, 2008 from 16.0% for the
year ended March 31, 2007.

Payments and Provisions for Employees. Our payments and provisions for employees increased by
10.0% to Rs. 6,780.35 million for the year ended March 31, 2008 from Rs. 6,164.37 million for the
year ended March 31, 2007, primarily due to an increase in salaries, wages, bonus and allowance to Rs.
5,337.09 million for the year ended March 31, 2008 from Rs. 4,837.90 million for the year ended
March 31, 2007, contribution to the provident fund to Rs. 144.62 million for the year ended March 31,
2008 from Rs. 115.01 million for the year ended March 31, 2007, as a result of increased wages paid to
our employees and an increase in the number of our employees to 8,346 as of March 31, 2008 from
7,934 as of March 31, 2007. As a percentage of our total income, our payments and provisions for
employees decreased to 14.3% for the year ended March 31, 2008 from 14.4% for the year ended
March 31, 2007.

Other Expenses. Our other expenses increased by 23.4% to Rs. 4,317.32 million for the year ended
March 31, 2008 from Rs. 3,499.61 million for the year ended March 31, 2007, primarily due to
increases in miscellaneous expenses to Rs. 1,476,51 million for the year ended March 31, 2008 from
Rs. 1,355.42 million for the year ended March 31, 2007, interest and finance charges to Rs. 1,269.38
million for the year ended March 31, 2008 from Rs. 1,066.95 million for the year ended March 31,
2007, primarily due to an increase in working capital facilities required for increases in production
volumes, interest rates and freight expenses to Rs. 971.20 million for the year ended March 31, 2008
from Rs. 566.91 million for the year ended March 31, 2007, as a result of increased exports from India.
As a percentage of our total income, our other expenses increased to 9.1% for the year ended March 31,
2008 from 8.2% for the year ended March 31, 2007.

Depreciation and Amortisation. Depreciation and amortisation expenses increased by 20.7% to Rs.
2,270.55 million for the year ended March 31, 2008 from Rs. 1,881.10 million for the year ended
March 31, 2007, primarily due to an increase in our fixed assets such as plants, machinery, buildings
and other assets to Rs. 30,988.88 million as of March 31, 2008 from Rs. 26,713.84 million as of March
31, 2007. As a percentage of our total income, our depreciation and amortisation costs increased to
4.8% for the year ended March 31, 2008 from 4.4% for the year ended March 31, 2007.

Exceptional Item of Income/ Expenditure. We recorded exceptional items of expenditure in the year
ended March 31, 2007 aggregating to Rs. 121.44 million, which consisted of expenses of Rs. 67.50
million incurred by us as a result of a retrospective reduction in the rates available under the Target
Plus Scheme for export benefits announced by Government of India and Rs. 53.94 million of non-


                                                  113
recurring expenses incurred towards the establishment of the joint venture company in China, FAW
Bharat Forge.

Income from Associate. Our income from associate increased to Rs. 1.22 million for the year ended
March 31, 2008 from nil for the year ended March 31, 2007, primarily due to income received from
Tecnica UK Limited, in which our Company acquired 30.0% of the equity share capital in April 2007.

Taxation. Our provision for taxation increased by 4.0% to Rs. 1,589.41 million for the year ended
March 31, 2008 from Rs. 1,528.57 million for the year ended March 31, 2007, primarily due to
increases in deferred tax expense to Rs. 152.33 million for the year ended March 31, 2008 from Rs.
142.08 million for the year ended March 31, 2007 and fringe benefit tax to Rs. 68.00 million for the
year ended March 31, 2008 from Rs. 19.95 million for the year ended March 31, 2007.

Minority Interest. The loss attributable to the minority shareholders in our Chinese joint venture
company, FAW Bharat Forge increased to Rs. 105.87 million for the year ended March 31, 2008 from
Rs. 71.22 million for the year ended March 31, 2007.

Net Profit After Minority Interest. Our net profit after minority interest increased by 3.8% to Rs.
3,015.23 million for the year ended March 31, 2008 from Rs. 2,905.88 million for the year ended
March 31, 2007. As a percentage of our total income, our net profit after minority interest decreased to
6.4% for the year ended March 31, 2008 from 6.8% for the year ended March 31, 2007.

Liquidity and Capital Resources

We have a long working capital cycle and we require a significant amount of working capital to finance
the purchase of raw materials and equipments and the manufacturing process before payment is
received from our customers. We have historically met our working capital and other capital
requirements principally from cash provided by operations and financing from banks and financial
institutions in the form of term loans, credit and overdraft facilities.

For the year ended March 31, 2009, our days of sales outstanding (represented as the ratio of sundry
debtors, including the bills discounted in the normal course of business, to total sales in a particular
period multiplied by the number of days in that period), was approximately 75 days, which reflects the
average period for which the sales invoice remains outstanding. For our Indian operations, our days of
sales outstanding is typically high, primarily on account of significantly longer collection cycles for
export sales as compared to domestic sales. A typical indicative collection cycle for our Indian sales is
between 30 to 60 days. However, the typical indicative collection cycle for our Company’s export sales
is much longer, averaging between 150 to 180 days. For our Subsidiaries, our days of sales outstanding
is typically between 45 to 90 days.

US$ 106.00 million and US$ 2.50 million of our Company’s term indebtedness (other than redemption
premium on foreign currency convertible bonds) consisting primarily of foreign currency convertible
bonds issued by our Company becomes due and payable on or before March 31, 2011 and March 31,
2012. We believe that we will have sufficient capital resources from our operations, net proceeds of this
offering of Equity Shares and other financings from banks, financial institutions and other companies
to meet our requirements for the next 12 months. On April 9, 2010, our Board approved the conversion
of 1,250 foreign currency convertible bonds into 142,045 Shares accounting for 0.06% of our pre-Issue
share capital. On April 20, 2010, we also redeemed foreign currency convertible bonds aggregating to
US $ 131.49 million out of which US $ 102.25 million was towards the principal and US $ 29.24
million was towards the redemption premium.

Cash Flows

The table below summarises our cash flows for the years ended March 31, 2009, 2008 and 2007:

                                                                                               For the Year Ended
                                                                                                    March 31,
   (Rs. in Millions)                                                                      2009          2008      2007
   Net cash generated from / (used in) operating
   activities .........................................................................   2,834.74    4,283.76   3,771.10


                                                                          114
   Net cash generated from / (used in) investing
   activities .........................................................................   (1,977.63)   (7,383.47)   (4,473.48)
   Net cash generated from / (used in) financing
   activities .........................................................................      842.80    (3,106.13)    4,159.44
   Cash and cash equivalents at the end of period/year ....                                4,883.40      3,183.49    9,389.33

Cash and cash equivalents increased to Rs. 4,883.40 million as of March 31, 2009 from Rs. 3183.49
million as of March 31, 2008. Cash in the form of bank deposits, current account balances and cash on
hand represents our cash and cash equivalents.

Our operating cash flow fluctuates period to period based on the volume of our operations.

Operating Activities. Net cash generated from operating activities was Rs. 2,834.74 million for the year
ended March 31, 2009. Net cash generated from operating activities consisted of profit before tax and
share in associate of Rs. 1,106.83 million, as adjusted primarily by depreciation and amortisation of Rs.
2,517.32 million, interest payment of Rs. 1,291.36 million, exchange losses of Rs. 740.82 million,
sundry debtors of Rs. 1,269.06 million, current liabilities of Rs. 2,489.58 million, direct tax payment of
Rs. 711.18 million, inventories of Rs. 645.43 million and dividend received of Rs. 217.02 million.

Net cash generated from operating activities was Rs. 4,283.76 million for the year ended March 31,
2008. Net cash generated from operating activities consisted of profit before tax and share in associate
of Rs. 4,497.55 million, as adjusted primarily by depreciation and amortisation of Rs. 2,270.55 million
and interest payment of Rs. 1,269.38 million, direct tax payment of Rs. 1,386.38 million, inventories of
Rs. 1,128.96 million and dividend received of Rs. 260.55 million.

Net cash generated from operating activities was Rs. 3,771.10 million for the year ended March 31,
2007. Net cash generated from operating activities consisted of profit before tax of Rs. 4,363.23
million, as adjusted primarily by current liabilities of Rs. 2,339.87 million, depreciation and
amortisation of Rs. 1,881.10 million and interest payment of Rs. 1,066.95 million, sundry debtors of
Rs. 2,446.50 million, direct tax payment of Rs. 1,233.68 million and inventories of Rs. 1,408.67
million.

Investing Activities. Net cash used in investing activities was Rs. 1,977.63 million for the year ended
March 31, 2009, primarily as a result of capital expenditure of Rs. 5,354.73 million, partially offset by
a sale of investments in mutual funds of Rs. 2,982.08 million and non-operating income of Rs. 377.89
million.

Net cash used in investing activities was Rs. 7,383.47 million for the year ended March 31, 2008,
primarily as a result of capital expenditure of Rs. 7,599.44 million, partially offset by non-operating
income of Rs. 583.32 million and sale of proceeds of assets and adjustment to gross block of Rs.
554.86 million.

Net cash used in investing activities was Rs. 4,473.48 million for the year ended March 31, 2007,
primarily as a result of capital expenditure of Rs. 6,013.15 million, partially offset by non-operating
income of Rs. 703.46 million and sale of proceeds of assets and adjustment to gross block of Rs.
421.24 million.

Financing Activities. Net cash generated from financing activities was Rs. 842.80 million for the year
ended March 31, 2009, primarily consisting of proceeds from loans of Rs. 4,008.88 million, partially
offset by interest payment of Rs. 1,235.35 million, dividend payment (including tax thereon) of Rs.
909.55 million, repayments of Rs. 540.16 million on cash credit and other borrowings from banks and
repayments of Rs. 262.91 million of fixed deposits and unsecured loans.

Net cash used in financing activities was Rs. (3,106.13) million for the year ended March 31, 2008,
primarily as a result of repayments of secured term loans of Rs. 1,374.96 million, interest payments of
Rs. 1,259.01 million and dividend payment (including tax thereon) of Rs. 917.87 million, partially
offset by proceeds from cash credit and other borrowings from banks of Rs. 1,363.87 million.

Net cash generated from financing activities was Rs. 4,159.44 million for the year ended March 31,
2007, primarily consisting of proceeds from fixed deposits and unsecured loans of Rs. 4,931.74


                                                                          115
million, proceeds from cash credit of Rs. 469.24 million, partially offset by interest paid of Rs.
1,067.30 million and dividend payment (including tax thereon) of Rs. 769.76 million.

Capital Commitments

As of March 31, 2009, our consolidated capital commitment, to the extent not provided for, was Rs.
969.97 million (net of advances).

Indebtedness

As of March 31, 2009, we had Rs. 21,908.37 million of aggregate amount of indebtedness outstanding,
on a consolidated basis. The following tables provide categories of our outstanding indebtedness:
                                                                                        (Rs. in millions)
                                                                                   As at March 31,
Particulars                                                               2009             2008            2007
Secured Loans
   Debentures                                                            2,500.00               -                -
   Term Loans                                                            5,115.79          3,148.70       3,654.06
   Cash Credit                                                           1,218.65          1,084.74         700.97
  Others:*
   Pre-shipment Packing Credit-Foreign Currency                            328.82           2574.84         680.92
   Pre-shipment Packing Credit-Rupee                                     1,571.95               -           913.82
   Interest accrued and due on above                                          0.28              0.84          0.68
Total                                                                   10,735.49          6,809.12       5,950.45
Unsecured Loans
   Foreign Currency Convertible Bonds                                    9,302.05          7,301.15       7,974.23
   Sales tax deferral liability under Government of Maharashtra             69.44             69.08          61.28
   Package Scheme of Incentive
   Short Term Loans from Banks under a buyers line of credit                  -              888.17       2,243.95
   for import goods
   Short Term Loans from Banks for Working Capital                       1,398.45            156.17         341.40
   Term Loans from Banks and Financial Institutions                        402.37          1,319.59       1,323.65
   Fixed Deposits matured but unclaimed (From Public and
   Shareholders)                                                              0.57              0.65          0.94
Total                                                                   11,172.88          9,734.81 11,945.45
Total Indebtedness                                                      21,908.37        16,543.93 17,895.90
*Includes secured loans from banks, against hypothecation of stocks of semi finished and finished
goods, raw materials, finished dies and die blocks, work-in-progress, consumable stores and spares
and book debts.

As of December 31, 2009, our Company had Rs. 20,377.45 million of aggregate amount of
indebtedness outstanding, on an unconsolidated basis, as compared to Rs. 18,078.65 million as of
March 31, 2009. This increase was primarily due to the issuance of 10.75% redeemable secured non-
convertible debentures aggregating to Rs. 3,500.00 million on a private placement basis in the second
quarter of the year ending March 2010.

The terms of certain of our borrowings contain restrictive covenants, such as requiring lender consent
amongst other things for incurring further indebtedness, creating further encumbrances on our assets,
disposing of our assets, declaring dividends or incurring capital expenditures beyond certain limits.
Some of these borrowings also contain covenants which limit our ability to make any change or
alteration in our capital structure, make investments, effect any scheme of amalgamation or
restructuring, enlarge or diversify our scope of business. Further, we are also required to comply with
certain financial covenants under our borrowings such as the requirement to maintain a minimum
tangible net worth, interest coverage ratio and achieve the stipulated net cash accruals for each financial
year. There are also management covenants which require the Promoters to maintain certain percentage
of shareholding in the Company. Our borrowings are secured by a charge over our immoveable and
moveable property, and certain of them are secured by a charge on our current assets. See “Risk
Factors”.



                                                   116
Investments

Our investments, on a consolidated basis, as of March 31, 2009, 2008 and 2007 are set out below:

                                                               As of March 31,
                                         2009                        2008                          2007
                                                               (Rs. in Millions)
 Joint Ventures                          0.30                         0.28                         0.25
 Associates                              2.03                         6.00                           -
 Mutual Fund Units                         -                       2,982.08                      2,072.91
 Total                                   2.33                      2,988.36                      2,073.16

Our investments for the year ended March 31, 2009 decreased as we transferred our investments in
mutual fund units to fixed deposits (which are reflected under cash and bank balances in our balance
sheet). Our investments for the year ended March 31, 2008 increased as we transferred our investments
in fixed deposits to mutual fund units.

On an unconsolidated basis, our investments as of December 31, 2009 increased to Rs. 9,379.49
million from Rs. 3,671.99 million as of March 31, 2009 due to investment of funds available from the
proceeds of the issuance of 10.75% redeemable secured non-convertible debentures aggregating to Rs.
3,500.00 million in the second quarter of the year ending March 2010 and transfer of our investments
in fixed deposits to mutual fund units and further investment in subsidiaries.

Contingent Liabilities

Our subsidiaries have not reported any contingent liabilities for the year ending December 31, 2009,
which are not provided for. The contingent liabilities, not provided for, in respect of our Company are
set out below:
                                                                                          (Rs. in Millions)
                                                                                         As of March 31,
                                                                                    2009                 2008
Sales bills discounted of which:                                                       4,575.13           4,430.96
    Bills since realised                                                               1,238.09           1,440.26
    Matured, overdue and outstanding since close of the year                                 —                33.90
Guarantees given by the Company on behalf of other companies
    Balance outstanding                                                                  735.28              270.00
    (Maximum amount)                                                                 (1,520.33)            (740.00)
Claims against the Company not acknowledged as debts to the extent                       391.31              212.05
ascertained
Disputed income tax matters                                                              104.32              197.22
Excise/Service tax demands – matters under dispute                                       277.53              108.18

In addition, our Company has entered into an arrangement with a third party, under which, debts due
from pre-approved buyers are transferred at a discounted value along with risks associated with
‘financial inability to pay’ and ‘country risks’. Consequently, sundry debtors have been eliminated to
that extent. However, all other risks continue to be on account of our Company and will be recognised
if and when they are likely to arise.

Our Company has imported capital goods under the EPCG Scheme prescribed the Government of
India. This scheme allows imports at concessional rates of custom duty and requires the importer to
export a specified quantity of goods over a period of seven years and to maintain an average quantity of
export per year. Non-fulfilment of such obligations may result in confiscation of capital goods imported
under the EPCG Scheme and other penalties. As of March 31, 2009 the total outstanding export
obligations of our Company under the EPCG licenses aggregated to US$251.83 million with the
requirement to maintain an average export of US$128.63 million per annum. We have not been subject
to any penalties on account of failure to meet our export obligations in the past, since the value of
exports undertaken by us has exceeded our export commitments.




                                                   117
Nandi Infrastructure and Related Arrangements

One of our affiliates, BF Utilities Limited (“BFUL”), is, through its wholly-owned subsidiaries, a
shareholder in Nandi Infrastructure Corridor Enterprises Limited (the “Project Company”) which is the
company developing the toll-road near the city of Bangalore (the “Project”). The total cost of Module I
of the first phase of the Project is estimated to be Rs. 8,706 million. Of this amount, Rs. 1,750.00
million was to be funded by shareholders’ contributions, which have since been contributed to the
Project Company. In addition, our Company has agreed to contribute a total amount not exceeding Rs.
757.00 million on account of shortfall, if any, in the proceeds from the sale of land by the Project
Company. The promoters of the Project Company have arranged for share premium of Rs. 1,250.00
million into the Project Company in lieu of the sale of land, and hence there is no obligation on our
Company on this account. Our Company also agreed to fund the overrun, if any, in the cost of
acquisition of private land for the development of Module I and Modules II and III (estimated to cost
Rs. 2,000.00 million and to be completed in 48 and 72 months, respectively, from the date of the
financial closure which was achieved on March 29, 2004), which will be financed out of the internal
accruals of Module I and any shortfall will have to be provided by the sponsors. Our Company has also
undertaken to pay, if called upon by the lenders to the Project Company, an amount not exceeding Rs.
462.70 million as stamp duty for the registration of a legal mortgage over certain land secured by the
Project Company for its indebtedness to those lenders.

Related Party Transactions

We have engaged in the past, and may engage in the future, in transactions with related parties,
including with, our affiliates and certain key management members on an arm’s lengths basis. For
details of our related party transactions, see notes to our audited unconsolidated financial statements.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, derivative instruments or other relationships with
unconsolidated entities or financial partnerships that would have been established for the purpose of
facilitating off-balance sheet arrangements.

Historical Capital Expenditure

During the years ending March 31, 2009, 2008 and 2007, our capital expenditures primarily consisted
of the following:

•   Forging capacity expansion in India and China to set up the 12,500 MT press lines;
•   Machining capacity expansion in Mundhwa;
•   The expansion of our heavy forge division to set up a 4,000 MT open die press at Mundhwa with a
    forging capacity of 60,000 MT per annum, Pune, a 80 MT counterblow hammer with forging
    capacity of 40,000 MT per annum and a ring-rolling facility at Baramati, Pune with a forging
    capacity of 25,000 MT per annum:
•   Purchase of aircraft for corporate use; and
•   Automation projects, balancing of equipment, replacements and foreign exchange gains or losses
    capitalized.

The total capital expenditure incurred by us for these items was approximately Rs. 12,000 million.

Planned Capital Expenditures

Currently, we do not have any significant planned capital expenditures.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss related to adverse changes in market prices, including interest rate risk
and commodities risk. We are exposed to commodity risk, interest rate risk, foreign exchange risk and
credit risk in the normal course of our business.




                                                  118
Interest Rate Risk

We currently have floating rate indebtedness and also maintain deposits of cash and cash equivalents
with banks and other financial institutions and thus are exposed to market risk as a result of changes in
interest rates. As of the year ended March 31, 2009, Rs. 6,883.21 million of our indebtedness consisted
of floating rate indebtedness. Upward fluctuations in interest rates increase the cost of both existing and
new debts. We have entered into a cross currency swap for a period of five years by converting a
portion of our long term Indian Rupee loan liability into an equivalent United States Dollar loan
liability at the prevailing spot rate. Under this structure, we will receive a fixed interest coupon on a
quarterly basis on the rupee amount swapped and will pay floating rate interest (which is subject to a
cap) on the United States Dollar notional amount. On maturity of the swap, we will pay the contracted
United States Dollar loan liability and receive the original rupee amount swapped.

Commodity Risk

In the normal course of business, we purchase our raw materials on a purchase order basis. As a result,
we are exposed to market risk with respect to the prices of these raw materials. We are exposed to
variation in the prices of our raw materials. However, through our commercial agreements with our
customers, we are able to pass on the impact of steel and aluminium prices directly to our customers.
For the year ended March 31, 2009, we did not enter into any hedging contracts in respect of any of our
raw materials. See “Risk Factors – Dependence on a few suppliers and absence of long-term supply
contracts may adversely affect the availability of key inputs at reasonable prices, which may in turn
affect our margins and may have an adverse effect on our business, financial condition and results of
operations”.

Foreign Exchange Risk

Changes in currency exchange rates influence our results of operations. We report our consolidated
financial results in Indian Rupees, while portions of our total income and expenses are generated or
incurred in currencies other than Indian Rupees, such as the Unites States Dollars, Euro, United
Kingdom Pounds, Swedish Krona and Chinese Renminbi. We have a significant amount of exports
from India to North America and Europe. Our Company does not have a significant amount of imports
other than capital goods, which are incurred from time to time as required. We generally do not hedge
against foreign currency risk with respect to our sales contracts. However, we have in the past, from
time to time, entered into forward contracts for some of our exports. For our Company’s uncovered
foreign exchange exposure as of the year ended March 31, 2009, see “Note 6(ii) – Financial Statements
for the Years Ended March 31, 2009 and 2008. For more details on foreign exchange risk, see “Factors
Affecting our Results of Operations – Exchange Rates”.

Credit Risk

We are exposed to credit risk on monies owed to us by our customers. If our customers do not pay us
promptly, or at all, we may have to make provisions for or write-off such amounts. For the year ended
March 31, 2009, Rs. 97.79 million was provided for doubtful debt and advances. See “Risk Factors -
High days of sales outstanding (i.e. the average period for which the sales invoice remains outstanding)
may increase our collection risk, which could adversely affect our liquidity”.




                                                   119
                                     INDUSTRY OVERVIEW

The information in this section has been extracted from various government publications and industry
sources. Neither we nor any other person connected with the Issue have verified this information.
Industry sources and publications generally state that the information contained therein has been
obtained from sources generally believed to be reliable, but that their accuracy, completeness and
underlying assumptions are not guaranteed and their reliability cannot be assured and, accordingly,
investment decisions should not be based on such information.

Unless otherwise indicated, all financial and statistical data relating to the Indian economy in the
following discussion is derived from the RBI Macroeconomics and Monetary Developments 2007–2008
and the RBI Macroeconomic and Monetary Developments 2008–2009.

Indian Economy

The Indian economy has demonstrated steady growth in real gross domestic product (“GDP”) over the
last decade and recorded growth rates of 9.6% and 9.0% in the years ended March 31, 2007 and 2008
respectively. Despite the recent downturn, the Indian economy has exhibited a growth rate of 6.7% in
the year ended March 31, 2009. Further, the growth momentum has increased in recent quarters
supported by a turn-around in industrial production. The index of industrial production (“IIP”)
registered a growth of 16.8% in December 2009 as compared to the same period in the prior year. The
GDP growth for the quarter ended December 2009 was 6.0% as compared to 7.9% in the previous
quarter as a result of poor monsoons. However, given that agriculture currently has a low contribution
towards GDP growth, the outlook for India continues to remain strong. (Source: RBI, Annual Report
2007–2008; Macroeconomic and Monetary Developments in 2008–2009; Macroeconomics and
Monetary Developments–First Quarter Review 2009–2010; Central Statistical Organization)

The Government of India’s Eleventh Five Year Plan, which covers the period from 2007 to 2012, aims
to achieve a sustainable growth rate of 9.0% with an emphasis on a broad-based and inclusive approach
that would improve the quality of life and reduce disparities across regions and communities. (Source:
Government of India, Eleventh Five Year Plan 2007–2012, Volume I)

Global Automotive Industry Overview

The global automotive industry was severely affected by the credit crunch and the global recession in
the latter part of 2008 and the beginning of 2009.

The industry experienced unprecedented and simultaneous slowdown across segments and
geographies. In the period between October and December 2008, most of the automotive markets
witnessed a 40% to 60% drop in volumes as compared to the same period in the prior year, especially
in the commercial vehicles segment. This forced all major OEMs to undertake a series of block
closures to prevent inventory pile-up across the supply chain. However, automotive markets across the
world have started showing signs of stabilization. Volumes have started showing signs of recovery
driven by government intervention.

US Automotive Market

The US is the biggest automotive market in the world. However, it was severely affected by the
economic downturn with sales volumes falling drastically in 2008. The market continued its fall in the
first half of 2009. The sharp and sudden drop in demand forced most OEMs to undertake
unprecedented shut-downs at short notice. Industry sales forecasts as well as individual OEM plans
were modified frequently. Furthermore, a build-up in inventory in the distribution channel also added
to the crisis.

Governments took unprecedented action and stepped in to rescue the market. Besides providing support
to the financial markets, Governments also offered incentive schemes such as “cash for clunkers” in
order to increase automotive demand. The automotive market has stabilized in the recent months and
volumes have shown increase as compared to the same period in the prior year. The graph below sets
forth the United States Light vehicle sales for the periods indicated:



                                                 120
US Light vehicle sales - (‘000 units)
                                                                                        2009         2008

   1,600

                                               1,354                         1,394
   1,400                                                                                                                  1,247
                                                             1,245
                                 ,1
                                1 74                                                          ,1
                                                                                             1 86                 1,262
   1,200                                                                                                  ,1
                                                                                                         1 33
              1,043                                                                                                                                                       1,030
                                                                                                      997
   1,000                                                              925                                                               963
                                         857                                           859                                                                                        894
                                                          819                                                                                 838 838
    800                                                                                                                           746                       747     746
            657           689

    600

    400

    200

    -
             Jan           Feb             M ar             A pr        M ay            Jun             Jul           A ug         Sep           Oct           No v          Dec


(Source: Bloomberg)
As illustrated in the graph above, the “cash for clunkers” incentive program introduced by the United
States government boosted sales of light vehicles in Unites States. The demand levels remained at a
uniform level through out the year despite the closure of the program in September 2009. Sales for
2009 were 10.4 million vehicles, a dcrease of 21.1% as compared to 2008.

The United States medium and heavy commercial segment has been experiencing downturn since 2007
and volumes have decreased from 476,000 for 2007 to 137,000 for 2009. This segment has witnessed
certain some recovery driven by purchases made before the change in emission norms which came into
effect from Jan 1, 2010 and the requirement to replace of legacy fleets. (Source: WardsAuto.Com)

European Automotive Market

Production and demand for commercial vehicles in Europe was largely strong until September 2008
(first nine months of 2008). There were strong projections for sustained growth until 2010 and 2011.
Almost every OEM in Europe was working on aligning its internal capacity as well as that of the
supplier base with this projected growth.

However, following the liquidity crisis starting September 2008, there was a rapid and sharp decline in
orders including incoming orders for future demand. By the end of October 2008, the market started
witnessing unprecedented decline. As a result, OEMs and suppliers were sitting on large inventories.
The passenger car segment also witnessed a reduction in demand. However, driven by Government
incentives and a stabilization of the financial markets, the demand has started showing signs of revival
as exhibited by the rise in new vehicle registrations in the recent months shown in the chart shown
below

New passenger cars registrations in Europe - (‘000 units)

                                                                                        2009         2009

   1,800
                                                 1,628
   1,600                                 1,475
                                                                                     1,427
                                                             1,387                           1,386                                1,356
   1,400          1,275                                                      1,298
                                                         1,221       1,240                                                            1,275 1,231
                                 1,156                                                                                                                      1,150
   1,200                                                                                                                                            1,103
                                                                                                                                                                          1,041
   1,000    938           945                                                                                                                                       906           894
                                                                                                      803                  778
                                                                                                            778    803
    800

    600

    400

    200

        -
              Jan           Feb             M ar            Apr         M ay             Jun            Jul           Aug           Sep          Oct           Nov           Dec



(Source: ACEA–European Automobile Manufacturers Association)

                                                                                         121
Chinese Automotive Market

China is a large market for automotives. It has already surpassed Japan and may overtake the United
States to become the largest automotives market in the world. However, even though there has been
growth, the market has been volatile.

The international financial crisis and its fallout have also affected China resulting in a slowdown in the
automotive industry as well. However as China’s macro-economic conditions improve and enhance
consumer confidence, the Chinese automotive industry may also recover.

Indian Automotive Market

The automotive sector is one of the core industries of the Indian economy. The de-licensing of the
sector in 1991 and the subsequent opening up of 100% foreign direct investment (FDI) under the
automatic route marked the beginning of a new era for the Indian automotive industry. After the
opening up of the sector, almost all the global major automotive players have set up their facilities
in India.

The growth of the Indian middle-class with increasing purchasing power along with the growth of the
economy over the past few years has attracted major global automotive manufacturers to the Indian
market. Moreover, India provides trained work-force at competitive costs making India a favoured
global manufacturing hub. The attractiveness of the Indian markets on one hand combined with the
stagnation of the automotive sector in markets such as Europe, the United States and Japan on the
other, have resulted in shifting of new capacities and flow of capital to the Indian automotive industry
resulting in a significant growth for the domestic automotive industry over the past five years.

Accordingly, the Indian automotive industry has witnessed strong growth with automotive production
increasing from 6.28 million vehicles in the year ended March 31, 2003 to over 11.18 million vehicles
in the year ended March 31, 2009, implying a CAGR of 10%. (Source: Society of Indian Automobile
Manufacturers (SIAM) website www.siamindia.com)

The graph set forth below shows passenger vehicle production in India for periods indicated:

Passenger vehicle production in India (No. of units)



                                                                                               1,838,697
                                                                             1,777,583
                                                    : 13%
                                               CAGR
                                                            1,545,223


                                         1,309,300
                       1,209,876

      989,560




       FY04              FY05              FY06               FY07             FY08              FY09

(Source: Society of Indian Automobile Manufacturers (SIAM) website www.siamindia.com)

The graph set forth below shows commercial vehicle production in India for the periods indicated:



                                                     122
Commercial vehicle segment production in India (No. of units)

                                                                                                                           549,006
                                                                                                519,982




                                                                                                                                                        417,126
                                                                      391,083
                                      353,703



          275,040




            FY04                        FY05                            FY06                      FY07                       FY08                         FY09


(Source: Society of Indian Automobile Manufacturers (SIAM) website www.siamindia.com)

In the year ended March 31, 2009, the Indian automotive industry witnessed turbulent times. In the first
half of year ended March 31, 2009, the industry was affected by higher interest rates and escalating fuel
prices. In the second half of the year ended March 31, 2009, economic slowdown and lower availability
of finance contributed to the sluggish volumes in the sector. The situation significantly deteriorated in
the latter half of the year due to sudden global economic crisis.

As illustrated in the graph below, the Indian automotive industry and in particular the medium and
heavy commercial segment, witnessed a strong recovery in demand from April 2009 onwards driven by
the stimulus packages announced by the government, declining interest rates and increase in industrial
activity. For the ten moths ended January 31, 2010, the segment has grown by 15.9% compared to the
corresponding period in the previous year. The graph below sets forth commercial vehicle production
in India for the periods indicated:

Domestic commercial vehicle production (No. of units)

                                                                                     2009    2008

   35,000

   30,000
                                  25,717                                                                                                               25,973
   25,000           23,502                                                                                                                23,384
                                                      ,1 7
                                                    21 1                            21,396   21,377        20,626        21,445
                                                                  20,395
   20,000                                                    16,999        17,804
                                                                                                  16,487        16,072
                                           14,336
   15,000    12,999          13,021

   10,000                                                                                                                         7,701
                                                                                                                                               4,986        5,800
    5,000

      -
                   A pr          M ay           Jun               Jul           A ug            Sep           Oct          No v              Dec          Jan


(Source: Society of Indian Automobile Manufacturers (SIAM) website www.siamindia.com)

Global Automotive Components Industry Overview

The global automotive industry is the biggest end-user of forged components. The industry has
witnessed consolidation efforts in the past which were motivated by growth. However, the current

                                                                                    123
crisis is expected to lead to a second wave of consolidation influenced by the difficult situation of
automotive OEM companies. OEMs increasingly will emphasize relationships with financially healthy
and strong suppliers that are expected to survive crisis and be stable, long-term partners. Distressed or
highly leveraged suppliers could have difficulty in renewing contracts.

As a result:
•   Large and well capitalized suppliers are expected to gain market share;

•   A large part of the supply base is expected to file for bankruptcy protection; and

•   OEMs are expected to continue to seek more efficient supply chain with fewer global providers.

Other key emerging themes together with their implications are:
Themes                                         Implications
Increasing willingness amongst OEMs to         •   Provides an opportunity to a stable and scale supplier
enter into alliances and partnerships              to supply to the incoming OEM partner if it is not a
                                                   client already
Possible drift in consumer preference          •   In-house technologies of the large car manufacturers
shifting from gas guzzlers to fuel efficient       to give way to increased outsourcing
small cars                                     •   Increasing use of forged products due to power
                                                   compression in smaller lighter / hybrid engines
Greater focus on stringent emission norms      •   Will lead to replacement of castings component with
                                                   forgings components

Indian Automotive Components Industry Overview

India’s automotive components industry manufactures a range of parts required by the automotive
industry for various types of vehicles. The components industry supplies to five major segments which
include:
•    Power train parts (pistons, piston rings, engine valves, crankshafts and connecting rods);

•   Electrical parts (starter motors and generators);

•   Drive, transmission, chassis and steering parts (gears, clutches, front axle beams and steering
    knuckles);

•   Suspension and braking parts (brakes, leaf springs and shock absorbers); and

•   Equipment (headlights and dashboard instruments) and others (sheet metal parts, pressure die
    castings, tyres and tubes).

Key Markets for Indian Automotive Components Manufacturers

Domestic Market

A major source of domestic demand for the automotive component manufacturers is derived from
domestic passenger vehicles and commercial vehicles demand. According to SIAM, for the year ended
March 31, 2009, passenger cars and utility vehicles production grew at CAGR of 13% between the year
ended March 31, 2004 and the year ended March 31, 2009. For the same period commercial vehicles
production registered a CAGR of 9%. (Source: Society of Indian Automobile Manufacturers SIAM
website www.siamindia.com)

Export Markets

The offshore demand for automotive components mainly comprises of global vehicle majors (OEMs)
and Tier 1 manufacturers. As per ACMA, Indian automotive component exports have grown at a
CAGR of approximately 24% per annum to Rs. 16.75 billion in the year ended March 31, 2009 from


                                                   124
Rs. 4.62 billion in the year ended March 31, 2003. (Source: ACMA Annual Report 2008-09,
Automotive Component Manufacturers Association of India, website http://www.acmainfo.com/ )

Key Players in the Indian Automotive Components Space

Major manufacturers in the automotive component industry include Exide Industries, Cummins India,
Bosch Limited, Amtek Auto and Motherson Sumi.

Factors Driving Growth of Indian Automotive Components Manufacturers

Attractiveness of the Domestic Market

The level of demand in the domestic automotive market is an important criterion that affects the
development of automotive components industry. Production activity in the commercial vehicle
segment has increased at a CAGR of 9% during the years ended March 31, 2004 to 2009. In the same
period, the passenger vehicles segment production grew at a CAGR of 13%. (Source: Society of Indian
Automobile Manufacturers (SIAM website www.siamindia.com)

The large base of the Indian automotive market is expected to provide a stable platform for domestic
automotive component makers for sustained growth opportunities. Further, the arrival of multi-national
corporations who have made India as their manufacturing base will add to the demand.

Increase in Outsourcing of Business

Several global automotive manufactures are outsourcing their automotive components requirements to
India due to:
•   comparatively low cost structure in India;

•   margin pressure on global OEMs; and

•   availability of skilled man power

Skilled Manpower and Engineering Skills

India’s manufacturing history and education infrastructure have created solid engineering and design
capabilities, which have led to faster design development and reduced development costs and lead
times. Further, India’s advanced tooling and machining industry has enabled indigenization of capital
equipment, reducing capital costs.

Large Pool of Readily Available Labor at Low Costs

Labor costs in India are comparatively lower than in developed markets. Low labour costs help to keep
the cost of production at comparatively low levels

Increasing Participation in Product Life Cycle Management through Effective Leverage
of Technology

Along with quality at competitive prices, OEMs also seek shorter delivery cycles. This has been
possible through the use of collaborative product management solutions by Indian companies.

Outlook for the Automotive Components Industry: Automotive Mission Plan 2015

The turnover of the Indian automotive industry is projected to grow from US$ 34 billion in 2006, to
reach approximately US$ 122–159 billion by 2016. The total incremental investments by 2016 required
to support this growth is estimated to be approximately US$ 35–40 billion. The total employment
generated in the automotive sector is expected to reach 25 million by 2016 (including indirect
employment). (Source: Department of Heavy Industry, Ministry of Heavy Industry and Public
Enterprise; Website http://www.dhi.nic.in/Final_AMP_Report.pdf)




                                                 125
Indian Forging Industry Overview

The Indian forging industry is an integral part of the Indian components industry. Forging industry
tends to grow in a country in relation to the rate of growth of its gross domestic product. Growth of the
forging industry is primarily linked to the automotive sector. However, forging products are also used
in the non-automotive industries. Industries such as fans and pumps, oil and gas, wind energy, mining
and aerospace are increasingly using forged products for their equipments. Since OEMs prefer to
outsource their forging requirements, the demand for forged components in overseas markets has
increased, which has expanded opportunities for the Indian forging industry. (Source: The Indian
Forging Industry–A Profile, Association of Indian Forging Industry website www.indianforging.com)

Challenges Faced by the Indian Forging Industry

•   Increase in input costs such as raw materials, energy and fuel;

•   Pressure from OEM's to reduce prices;

•   Reluctance of suppliers and end users to compensate for increasing costs;

•   Global automotive industry slowdown;

•   Inadequate testing and validation facilities due to the capital intensive nature of the industry; and

•   Keeping pace with technological advancements and product development.

Competitors in the Forging Industry

The global forging industry is highly competitive and dynamic. Competitors include:

•   International forging companies such as ThyssenKrupp Gerlach GmbH (forging division),
    Germany, Sumitomo Metal Industries Limited (forging division), Japan, Ràba Automotive Group,
    Hungary and SIFCO Industries, Inc., United States.

•   India based forging companies such as Mahindra Forgings and Amtek Auto Ltd., for certain kinds
    of forgings; and forging companies from other low-cost geographies such as Hungary, Mexico and
    Brazil.

Future Outlook for the Indian Forging Industry

India has the potential to become a strategic and global centre for global automotive OEM’s and Tier 1
companies. The automotive industry’s focus is shifting towards India as a global automotive
manufacturing hub. The future of the forging industry is linked to the growth of the automotive
industry. The liberalization of automotive industry has resulted in greater opportunities and greater
demand potential for the future. It is estimated that the Indian automotive component industry is
expected to grow to US$ 40 to 45 billion by 2016. Besides the consumption of forged products
domestically, the growth is also expected to be led by exports which are estimated to be worth US$ 20
to 25 billion by 2016. With such estimates of 15 to 20% growth, the production of forging by 2016
would be approximately US$ 8 billion. Source: Association of Indian Forging Industry Website
www.indianforging.com

Non-Automotive Forging Industry Overview

Forgings find application in various industries other than automotive such as power plants, wind
turbines, earth-moving equipment, marine engines, aerospace and railways. These sectors are globally
witnessing growth primarily driven by:

•   New investments in emerging economies such as India and China;

•   Possible replacement investments in developed economies to overhaul legacy infrastructure and
    comply with new emission standards

                                                   126
The growth potential offered by some segments of the non-automotive sector both globally and in India
is discussed below:

Power

Forged components for the power sector include rotor shafts, precision forged blades for turbines and
components for turbo generators. Key features of this sector are set out below:

•   India’s growing economy requires significant upgrades to its infrastructure. The Planning
    Commission suggests that “investments in infrastructure will need to increase from 5% of GDP to
    9% by the end of the plan period”. This would entail investments of approximately US$500 billion
    across the 11th Plan Period (2007-2012). Approximately US$150 billion of such investments are
    expected to be in the power sector. (Source: Planning Commission, Government of India)

•   The power sector is witnessing new investments for nuclear, hydro and thermal power generation
    which are being launched to meet the demand supply gap. As of September 2009, India had an
    installed power capacity of 152 GW. The government in its “Power for All by 2030” strategy
    wants to increase the installed capacity to 800 GW. Thus, India is expected to add approximately
    600-700 GW of new capacity by 2030. (Source: Central Electricity Authority, Government of
    India; Planning Commission, Government of India)

•   The Government has plans for capacity creation of 78,000 MW during the 11th five year plan
    (2007–2012) and has announced the setting up of nine Ultra Mega Power Projects (“UMPPs”)
    with combined capacity of 36,000 MW. These UMPPs will use supercritical power plant
    equipments as they are more efficient. Further, going forward, all utilities other than UMPPs will
    also have to use supercritical power plant equipments. The Government has made it mandatory
    that equipment for the UMPPs can be provided only by those suppliers who have a manufacturing
    base in India. This will provide a major incentive to the domestic suppliers of the power
    equipment. (Source: Committee on infrastructure, www.infrastructure.gov.in)

Wind Energy

Forged components for the wind energy sector include main shafts, flanges, gear box components and
rings among others. Key features of this sector are set out below:

•   The growth of wind energy as an alternative energy source is being driven by higher fossil fuel
    prices, increasing social and political concern over carbon emissions and climate change, and by
    the changing legislative landscape.

•   Globally, the wind energy sector has experienced an average growth in annual new installations of
    27.6% per year over the last five years. Although it has been affected by the economic crisis,
    forecasts for the years 2009 to 2013 indicate an average growth rate of 15.7% in annual new
    installations. Cumulative capacity at the end of 2013 is expected to be 343 GW. (Source: BTM
    Consult Aps World market update 2008 (2009-2013))

•   In the 11th five year plan (2007–2012), the Government of India is targeting additional installed
    power generation capacity of 10,500 MW through wind energy. (Source:
    www.mnes.nic.in/pdf/11th-plan-proposal.pdf)

Railways

Forged components for the railways include connecting rods, crankshafts, track links, pistons, axles
and camshafts among others. Key features of this sector are set out below:

•   The railway industry is growing primarily as a result of growing global trade and rising fuel costs
    for transportation by road and air. The rise in international trade and domestic cargo has placed a
    great strain on railway infrastructure in India. The Government of India has decided to build
    dedicated freight corridors on the Western and Eastern high-density routes. The investment is
    expected to be approximately Rs. 220,000 million (US$ 5 billion). The overall investment for the
    railway sector during the 11th Plan is Rs. 2,550,000 million. (Source: Committee on infrastructure
    www.infrastructure.gov.in; Planning Commission, Government of India)

                                                 127
Oil & Gas

Forged components for the oil and gas sector includes x-mas tree, well heads, valve bodies, blow out
preventers and fluid bodies. Key features of this sector are set out below:

•   Oil and gas equipment and services companies are experiencing a strong operating environment.
    The rise of international crude oil prices, discovery of oil reserves and production from deepwater
    fields, marginal fields and other previously unviable fields having now become economically
    viable, have resulted in increased demand for offshore oil equipment and services. Higher oil
    prices are also encouraging exploration and production (“E&P”) companies to commit more
    expenditure towards offshore areas (Source: OPEC: Organization of the petroleum exporting
    countries)

•   OPEC has embarked upon significant expansion plans to increase its capacity to ensure that the
    world economy benefits from regular and secure oil supplies. In the medium term, over 100
    projects, with an overall estimated cost of approximately US $120 billion are being undertaken by
    OPEC Member Countries (excluding Iraq). These projects are in addition to all energy
    infrastructure projects, such as pipelines, export terminals and downstream expansion. (Source:
    OPEC: Organization of the petroleum exporting countries)

Marine

Forged components for the marine sector include connecting rods, crankshafts, rudder stock and
propeller shafts among others. Key features of this sector are set out below:


•   The marine sector had been growing steadily over the past five years primarily driven by
    international sea borne trade based upon the growth in economies of emerging companies such as
    India and China, higher freight rates which resulted in new shipbuilding orders.

Aerospace

Forged components for the aerospace sector include structural, airframe and engine parts. Key features
of this sector are set out below:

•   The slowdown in world trade has depressed both passenger travel and air cargo traffic. As the
    world economy recovers, the industry is expected to return to its long term growth trend driven by
    the replacement and refurbishment of legacy fleets with more fuel efficient aircrafts and fleet
    commonality. Boeing forecasts that economic growth between 2009 and 2028 is expected to drive
    demand for air transport, creating a requirement for 29,000 new airplanes, valued at US$ 3.2
    trillion. (Source: Boeing Current Market Outlook 2009)




                                                 128
                                           OUR BUSINESS

Overview

Our Company is the flagship company of the Kalyani group which has significant presence in the
automotive components sector in India. We are one of the largest commercial forging companies in the
world in terms of capacity and revenue, with presence in automotive as well as non-automotive
components sectors. We have wide domain knowledge for the design and engineering of highly critical
automotive and non-automotive components.

We are one of the world’s leading manufacturers and suppliers of forged and machined automotive
chassis and engine components such as crankshafts, front axle beams, connecting rods, steering
knuckles and other components to several of the world’s leading commercial and passenger vehicle
manufacturers. Based on the most recent data available from the Automotive Component
Manufacturers’ Association of India (“ACMA”), for the year ended March 31, 2009, our Company had
the highest export sales among Indian automotive component manufacturers.

Through several strategic acquisitions and investments (including by way of a joint-venture) since
2004, we have established presence in the United States, Germany, Sweden, Scotland and China, and
developed dual-shore manufacturing capacities for many of our production facilities, full-service
supply capabilities and strong design and engineering abilities and achieved greater access to customers
and markets outside of India. We have discontinued the operations of our facility in Scotland and are in
the process of transferring its operations to our plant in Sweden. For the year ended March 31, 2009,
income from our overseas subsidiaries constituted 56.5% of our consolidated total income. We also
own 30.0% equity interest in Tecnica UK Limited, a company engaged in the business of providing
testing and validation services.

We also produce forged and machined components for non-automotive industries such as power
generation (including wind energy), marine, oil and gas, railways and construction. We expect these
non-automotive industries to grow in and outside India in the near future. We intend to grow our
revenues and market share in forged products for such industries by leveraging our existing and new
manufacturing capacities, global presence, experience in metallurgy and metal formation and our
existing customer relationships. Our non-automotive products primarily include crankshafts for the
marine industry and stationery diesel engines, valves, bonnets and chokes for the oil and gas industry
and rotors and shafts for power generator industry, including for windmills.

Our principal Indian production facility is located in Mundhwa, Pune. Including the forging capacities
of our Subsidiaries, our total installed forging capacity is 760,000 MT per annum. The following table
sets forth the forging capacities of our Indian operations and our Subsidiaries outside India (based on a
specific but consistently applied product-mix):

                                Entity                                        MT per annum
  Bharat Forge Limited, India                                                     365,000
  FAW Bharat Forge, China                                                         135,000
  Bharat Forge Kilsta, Sweden and BFSSL, Scotland*                                100,000
  CDP-Bharat Forge and Bharat Forge Aluminiumtechnik,
  Germany                                                                         100,000
  Bharat Forge America, USA                                                        60,000
*        We have discontinued the operations of our facility in Scotland and are in the process of
         transferring its operations to its parent company, Bharat Forge Kilsta, Sweden.
In addition, the installed machining capacities of our Company are set out below:

                     Category                                         Units per annum
  Automotive Crankshafts                                                   840,000*
  Non-automotive Crankshafts                                                 10,000
  Front-axle Beams                                                          753,200
*        Including a capacity of 80,000 units, which is under installation.

For the year ended March 31, 2009, our consolidated total income was Rs. 48,427.47 million and our
consolidated profit after tax and minority interest was Rs. 582.65 million. For the year ended March 31,
2009, sales of automotive components constituted 78.6% of our consolidated total sales. For the nine

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months ended December 31, 2009, our Company’s total income from operations, on an unaudited and
unconsolidated (standalone) basis, was Rs. 12,940.36 million and our Company’s net profit, on an
unaudited and unconsolidated basis, was Rs. 657.87 million.

Competitive Strengths

We believe that we have several competitive strengths that provide us with significant opportunities to
grow our business in the forging industry. Our principal competitive strengths are as follows:

Global Design, Manufacturing and Supply Capabilities

We have 11 manufacturing locations across five countries in three continents, with four in India having
an installed forging capacity of 365,000 MT per annum, four in Europe having an installed forging
capacity of 200,000 MT per annum, one in the United States having an installed forging capacity of
60,000 MT per annum and two in China having an installed forging capacity of 135,000 MT per
annum. We have established a global presence by successfully integrating our four acquisitions and our
joint venture in China. Our global presence gives us the ability to cater to the needs of our customers
from multiple locations, at times designing products at one location while manufacturing them at
another. Our dual-shore capabilities which is our ability to carry out design, engineering and
manufacturing of components at different locations allow us to service customer requirements from
alternate locations, giving the customer the benefit of regular supply and cost-competitive
manufacturing operations.

Full Service Supply Capabilities

We have full-service capabilities across the product cycle including product design and development,
material sourcing, tool manufacturing, forging, machining, heat treatment, testing and validation, all
under one roof for meeting requirements of global OEMs. With most of our customers, we are co-
development partners on new engine programs. We believe we are one of very few forging companies
in the world which offers validation facilities. Our facilities in India are ISO 9001 certified. In
addition, we are currently implementing lean management practices along with technology and quality
improvement techniques with respect to our operations.

Technology and Product Design Capabilities

Over the years, we have developed extensive technology and product design capabilities. We believe
we have wide domain knowledge for the design and engineering of highly critical automotive and non-
automotive components. Our design and engineering facilities comprises IT enabled business processes
such as comprehensive computer aided designing, computer aided manufacturing and computer aided
engineering facilities and design software. Our technology and product design capabilities enable us to
develop new products and respond to customer specifications at short-notice. The product simulation
techniques developed by our engineers help us in optimising the ratio of the materials in the output to
the input and reduce wastage, thus decreasing our costs and ensuring consistency in our output. We
believe that our focus on technology enables us to offer complex high-quality products to our global
customers in a cost-effective manner.

Wide Product Range and Manufacturing Facility

Our product range includes automotive chassis and engine components such as crankshafts, front axle
beams, connecting rods, steering knuckles and non-automotive products such as crankshafts for marine
and stationery diesel engines, valves, bonnets and chokes for the oil and gas industry and rotors and
shafts for power generation industry, including for windmills. Over the years, we have invested
extensively in expanding and upgrading our facilities. Currently, we have production facilities with a
diverse range of manufacturing capabilities such as over 40 automated and semi-automated press lines
ranging from 1,600 MT to 16,000 MT and wide range of hammers including an 80 MTR ton
counterblow hammer, which enable us to produce a wide range of closed and open die forgings. We
believe we are one of the few companies in the world which has two 16,000 MT Weingarten presses in
a single production location. Our facilities enable us to offer a diverse range of product to our
customers across a wide spectrum of products and industries.




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Established Relationships with Premier Global Customers

We have a large customer base in and outside India for automotive as well as non-automotive
applications. We supply products to customers in four major geographic regions - India, the United
States, Europe and Asia Pacific (excluding India). We have a diversified customer base of more than 35
global OEM and Tier 1 companies including the top five commercial and passenger vehicle
manufacturers in the world. We also share a strong relationship with over 30 customers in the non-
automotive industries such as wind energy, power generation, oil and gas, construction and railways.
Over the years, we have leveraged our experience of being a trustworthy supplier of components to
becoming a development partner for many of our customers. In the process, we offer to our customers
our metallurgical design and engineering capabilities and experience in manufacturing to develop the
best-suited designs for the components. This has led to long-term mutually beneficial relationships with
our customers besides giving us a major share of their business.

Diversified Business Model

We have a diversified stream of revenue across geographies and various lines of the forging business.
Our sales for the year ended March 31, 2009, for Europe, India, the United States and Asia Pacific
(excluding India) constituted 52.6%, 22.1%, 15.7% and 9.6%, respectively, of our consolidated total
sales. Sales from our automotive business constituted 78.6% of our consolidated total sales, with the
sales of diesel engine components constituting 29.4%, commercial vehicle chassis components
constituting 27.4% and passenger vehicle engine components constituting 21.8% of our consolidated
total sales. We have been focusing on expanding our non-automotive business and sales from such
components which increased from 17.5% of our consolidated total sales for the year ended March 31,
2008 to 21.4% for the year ended March 31, 2009. In addition, we have a diversified customer base,
with sales to our top 10 customers accounting for 48.5% of our consolidated total sales for the year
ended March, 31, 2009, with no single customer exceeding 10.0%.

Highly Qualified and Motivated Employee Base

We require the application of high levels of technology at key stages of the design, engineering and
manufacturing processes. We have, therefore, been focused on recruiting, training and retaining a
highly skilled employee base. As at February 28, 2010, our Company had 4,987 employees, our wholly
owned Subsidiaries had 978 employees and the joint venture company, FAW Bharat Forge had 1,471
employees, which includes a large talent pool of engineers. This coupled with the on site continuous
learning and training programmes has helped us to develop and adopt new technologies, maintain high
productivity and achieve high speed to market.

Strategy

The key elements of our strategy are as follows:

Continue to Expand our Business in the Non-Automotive Sectors

For the year ended March 31, 2009, the non-automotive business comprised 21.4% of our consolidated
total sales, an increase from 17.5% of our consolidated total sales for the year ended March 31, 2008.
We will endeavour to grow our non-automotive business further so that it contributes a substantial
portion of our revenues. The non-automotive industries are expected to witness increased demand and
growth due to various factors such as new investments in the power, transportation and capital goods
industries in emerging economies such as India and China and replacement investments to replace
legacy infrastructure in developed markets. We recently commissioned a 4,000 MT open die press at
Mundhwa, Pune with a forging capacity of 60,000 MT per annum, a 80 MTR ton counterblow hammer
with forging capacity of 40,000 MT per annum and a ring-rolling facility at Baramati, near Pune
(which was commissioned in January 2010) with a forging capacity of 25,000 MT per annum and
machining capacity for large crankshafts of 10,000 units per annum, to primarily increase our non-
automotive production capacities.

We plan to capitalise on our design, engineering and manufacturing capabilities and our technical
know-how and leverage our relationships with our existing automotive customers to expand our
business further in the non-automotive sectors. The non-automotive sectors and products on which we
intend to focus are set out below:


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                 Sector                                            Products
 Oil and Gas                              Blowout preventers, fluid ends, valve bodies, x-mas tree
                                          and spool bodies
 Power    (Conventional    and    Non     Rotor forgings, hydro turbine rotor, generator shafts and
 Conventional excluding wind energy)      crankshafts for gas engines
 Wind Energy                              Main shafts, gear blanks, bearings and tower flanges
 Marine and Locomotive                    Crankshafts, connecting rods, propeller shafts and portal
                                          axles
 Construction and Capital Goods           Rolls for cement, steel and for other sectors

Further, as a part of our expansion plan for our non-automotive business, we have entered into the
following arrangements with key market players in the sectors set out below:

    •   a joint venture with NTPC Limited, for manufacturing castings, forgings, fittings and high
        pressure pipings required for balance of plant ("BOP") equipment for the power sector and for
        other heavy industries;

    •   two joint ventures with Alstom S.A. for manufacturing super critical power plant equipments,
        which will manufacture the core turbine and generators and the ancillary components; and

    •   a joint venture and shareholder agreement with Areva N.P. for manufacturing heavy forgings
        and castings for the power sector, especially nuclear power plants, and for other heavy
        industries which has expired and is currently under discussion for renewal.

Pursuant to the agreement with Alstom , our joint venture with Alstom is establishing an integrated
plant to manufacture advanced subcritical and supercritical power plant equipment in Mundra, Gujrat.
The joint venture will manufacture turbines, generators and ancillary components.

We intend to increase our presence in non automotive sectors, thereby transforming us from primarily
an automotive component supplier to a full-scale engineering and capital goods company.

Further Diversify our Target Markets, Products Portfolio and Customer Base

We believe that Indian and overseas automotive industry, especially the commercial vehicle segment,
is showing signs of recovery. We will continue to diversify our business model through the following
initiatives:

    •   Geography: We are already present in major continents including North America, Europe and
        Asia (India and China) and will continue to penetrate these markets further and explore new
        geographies. Sales in Europe, India, Asia Pacific (excluding India) and the United States
        constituted 52.6%, 22.1%, 15.7% and 9.6%, respectively, of our consolidated total sales for
        the year ended March 31, 2009. We will continue to look to increase our market share in the
        Indian and the Asia Pacific (excluding India) markets, which have a higher growth potential
        and have not been as adversely impacted by the recent global downturn as North America and
        Europe.

    •   Product portfolio: For the year ended March 31, 2009, sales of diesel engine components,
        commercial vehicle chassis components, passenger vehicle engine components and non-
        automotive components constituted 29.4%, 27.4%, 21.8% and 21.4%, respectively, of our
        consolidated total sales for the year ended March 31, 2009. We intend to expand our product
        portfolio across steel and aluminium forgings for the automotive sector, covering engine as
        well as chassis components. In the automotive sector, we intend to specifically focus on
        forgings for smaller size cars, which has recently experienced increased demand.

    •   Customer base: We intend to strengthen our relationships with our existing customers and
        expand our customer base across geographies and product portfolio. We intend to capitalise on
        our production capacities and stable financial condition to expand into the opportunities
        created by financial distress of several prominent suppliers in North America and Europe.




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Continue to Restructure the Operations of our Overseas Subsidiaries

As a result of the recent global economic downturn, the automotive industry in North America and
Europe continues to face a severe slump. Our overseas subsidiaries are continuing to operate at low
production levels. In the short-term, we intend to improve the operating performance of our
Subsidiaries by decreasing operational costs and the ‘break-even threshold’. For example, we reduced
the number of employees in 2008 and 2009 in our Subsidiaries. We are also implementing other steps
such as reducing manufacturing scrap, improving the ratio of materials in the output to the input and
reducing energy costs to improve operational efficiency of our Subsidiaries. Further, we have
discontinued the operations of our facility in Scotland and are in the process of transferring its
operations to its parent company, Bharat Forge Kilsta, Sweden. Our objective is to achieve a lower
‘break-even threshold’ and thus achieve profitability in our Subsidiaries at low capacity utilisations.

Attract the Highest Level of Talent Available on a Global Basis

While we may undertake reduction in our employee base in the short-term, we continue to place
particular emphasis on attracting and retaining the best talent in the industry. We have implemented
various human resource programmes at every level in our organisation such as treating our employees
as ‘process owners’ and not workers, placing special emphasis on continuous learning, collaborating
with reputed institutes, including the Birla Institute of Technology and Sciences, Pilani and the Indian
Institute of Technology, Mumbai, for on-site higher education and giving performance based awards,
which has helped in developing and retaining our key employees. We believe that it is imperative that
we have a well trained and experienced pool of resources in order to execute our global strategy and
manage the substantial business and capacity growth that is expected. We intend to continue attracting
the appropriate level of talent on a global basis through a mix of recruitment and retention strategies.

Our Business

Our Company has direct and indirect wholly-owned subsidiaries in Germany, Sweden, Scotland, the
United States and Hong Kong. Our Company has a joint venture company in China, in which we own a
52.0% equity interest. On June 19, 2008, our Company incorporated BF-NTPC Energy Systems
Limited as a joint venture company pursuant to an MoU dated February 8, 2008 with NTPC Limited in
which our Company owns 51.0% of the outstanding equity share capital. On January 8, 2010, our
Company incorporated Alstom Bharat Forge Power Limited and Kalyani Alstom Power Limited, in
which our Company holds 49.0% and 51.0% equity interest, respectively.
The following chart shows the corporate structure of our Company, our Subsidiaries and our joint
ventures and associates:




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We manufacture a wide range of forged and machined components, which are value added forged
components produced by us. The majority of our products, such as crankshafts, front axle beams and
components, connecting rods and steering knuckles, are for the automotive industry. We also produce
forged components for non-automotive industries such as power generation (including wind energy),
marine, oil and gas, railways and construction. These products primarily include crankshafts for marine
and stationery diesel engines, valves, bonnets and chokes for the oil and gas industry, rotors and shafts
for power generation industry, including for windmills, and open die forged products such as rollers
and blooming mill rolls.

The break-up of our Company’s sales from different categories of products on an unconsolidated basis
is provided below:
                                                              Gross Sales
                                                         Year ended March 31,
                                       2009                      2008                  2007
                                              % of                    % of                  % of
                                (Rs. in       Gross       (Rs. in     Gross   (Rs. in       Gross
 Products                       Million)      Sales      Million)     Sales   Million)      Sales
 Forged Products
 (Unmachined)                     9,280.41       45.1    10,375.52         47.2     8,078.47          43.3
 Machined Products
 Crankshafts                      6,116.41       29.7      5,747.18        26.2     4,782.00          25.7
 Front Axle Assembly and
 Components                       2,275.90      11.1      3,016.56        13.7     3,184.20           17.1
 Others                           2,902.79      14.1      2,825.70        12.9     2,599.55           13.9
           Total                 20,575.51     100.0     21,964.96       100.0    18,644.22          100.0

We classify the product offerings of our Company into two segments based on the method of forging,
i.e., closed die forgings and open die forgings. For the products of the Subsidiaries, see “Our Business
– Material Subsidiaries and Joint Ventures”.

Our Company's Operations

Closed Die Forging

Closed die forgings account for a major portion of our Company's production. In this process, the hot
metal is closed around a die consisting of two halves. This process is used to make smaller forgings
requiring closer tolerance limits such as axles, connecting rod and crankshafts. The process is
sometimes referred to as impression die forging. Our Company's closed die forging products can be
categorised as engine components, chassis components and others. Primarily, these components include
the following:

Engine Components

Crankshafts. A crankshaft transmits the power generated in the engine's cylinders through the
connecting rod to the main drive of the vehicle. Our Company has the capability to manufacture a wide
variety of crankshafts for various applications such as passenger cars, medium and heavy duty
commercial vehicles, diesel engines and power generating sets. Our Company manufactures
crankshafts in forged and machined form in a weight range of 2 to 2,500 kilograms. Our customers for
crankshafts include global OEMs and Indian commercial vehicle manufacturers.

Connecting Rods. A connecting rod is a rod which transmits motion or power from one moving part to
another, such as the rod connecting the piston to the crankshaft. Our Company is a major supplier of
connecting rods for the diesel engine industry, including automobiles and power generation
applications. Our Company currently manufactures forged connecting rods for global OEMs. Our
Company manufactures connecting rods in a weight range of 2 to 300 kilograms. Our Company has the
capability of manufacturing connecting rods of up to 700 kilograms.

Chassis Components

Front Axle Assembly and Components. Front axle assembly and components comprise the front axle

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beam and steering knuckles. A front axle beam supports the two front wheels of a vehicle. Our
Company is one of the leading suppliers of front axle beams. Our Company manufactures forged and
machined front axle beams in a weight range of 50 to 150 kilograms for a wide range of applications
ranging from light commercial vehicles to heavy trucks. Our Company also manufactures steering
knuckles, which usually includes a spindle and steering arm that allows the front wheels to pivot. Our
Company manufactures forged and machined steering knuckles for OEMs globally in a weight range of
2 to 50 kilograms.

Other Products

Transmission Parts. Our Company manufactures transmission parts for manual as well as automated
transmissions in passenger cars and sports utility vehicles. Our Company is a supplier of a variety of
transmission parts such as input shafts, gears, sleeve transmissions, counter shafts and output shafts
ranging from 0.5 to 10 kilograms.

Oil and Gas Products

Our Company supplies components for the oil and gas industry with products such as valves, chokes,
casing heads, forged valves for high pressure applications, in forged and machined condition. Our
Company currently manufactures oil and gas products ranging from 15 to 500 kilograms.

Facilities

Our Company has full-service capabilities across the product cycle including product design and
development, material sourcing, tool manufacturing, forging, machining, heat treatment, testing and
validation facilities. This reduces our dependence on third-party service providers and enables our
Company to offer our customers a shorter ‘time-to-market’ for our products. Our control over the entire
production process also enables our Company to ensure the quality of our products.

We have 11 plants spread across India, the United States, Europe and China. For a summary of the
facilities of our Subsidiaries and joint venture, see “Our Business – Material Subsidiaries and Joint
Ventures”.

The principal facility of our Company is located at Mundhwa, Pune and other facilities are located at
Chakan and Baramati, near Pune. Our Company received the ISO 9001:2000 certification for iron and
steel forgings and fabricated metal products for both its heavy forgings and machined products and the
ISO/TS 16949/2002 certificate for motor vehicle parts and accessories, iron and steel forgings and
fabricated metal products quality management. In addition, our Company has received the ISO
14001:2004 certificate for its environmental management system. Set forth below is a summary of our
Company’s facilities:

Design and Engineering Facility

Our Company’s design and engineering centre uses IT enabled business processes such as advanced
computer aided design (“CAD”), computer aided manufacturing (“CAM”), computer aided engineering
(“CAE”) and analysis capabilities which accommodate a range of customer specifications. Our
Company utilises a specialised software for generating the tool path and virtual measurements of the
component using integrated co-ordinate measuring machines.

Typically, a customer provides our Company with technical specifications. The drawing of the
component is generated by our Company for customer approval before initiating the development
process. Our Company uses its CAD tools to convert the specifications into a three-dimensional model.
The forging designs are validated and optimised using metal flow simulation and stress analysis
software enabling design engineers to optimise the design and process parameters to ensure higher
operational efficiency and productivity. The metal flow simulation process also enhances the ratio of
the materials in the output to the input. Our Company also conducts analysis to identify critical features
of a product to eliminate potential design failure areas.

The design and engineering facility is connected to the die manufacturing facility through a fibre-optic
network that transmits the results to the die manufacturing facility.



                                                   135
Die Manufacturing Facility

Our Company has an in-house die manufacturing facility where dies are manufactured and repaired.
Our Company uses a fibre-optic network that transmits results from the design and engineering facility
to the die shop facility, which enables a high degree of automation and consistency of output in the die
shop. In addition, our Company manufactures all our dies and tooling using a high speed milling
process.

Presses

Our Company’s closed die forging facilities include two automated 16,000 MT Muller Weingarten
Screw Press lines, which we believe are one of the most advanced lines in the forging industry. In
addition, our Company has various other press lines ranging from 1,600 MT to 12,500 MT capacity.
Our Company recently commissioned a 80 MTR ton Counterblow Hammer at Baramati, near Pune,
with a product weight range of up to 2.5 MT and a length range of up to 4.5 meters to produce
crankshafts, spindles, connecting rods and structural components for locomotive, power generation,
marine, infrastructure and construction industries. In addition, a ring rolling line comprising a 40 MT
pan-caking press at Baramati, Pune was commissioned in January 2010. This line produces gear
blanks, gear rings connectors and bearings for gear boxes in the marine, energy and oil and gas
industries with a product weight range of up to 3 MT and outer diameter of up to 4,500 millimetres.

Our Company’s presses and hammers offer us the capability to produce a range of forgings from 5
kilograms to 2,500 kilograms, enabling our Company to meet customer demands and optimise capacity
utilisation.

Heat Treatment Facility

Certain forged components have to be subjected to heat treatment to achieve the required
specifications. Our Company’s heat treatment facility includes various types of furnaces such as
continuous pusher type furnaces, bogie hearth furnaces and various other batch and continuous furnace
lines, which enable us to subject certain forgings to heat treatment to produce desired properties.

Processing Facility

Our Company’s processing facility comprises of post-forging operations including shot blasting,
straightening, magnetic particle inspection, coining, finishing, shot preening and painting/rust
preventative applications.

Machining Facilities

Machining is the process of removing excess material from the forging to meet the dimensions required
by our Company’s customers. The process of machining converts the forged part into a fully finished
and ready-to-assemble component. Our Company’s highly automated facility machines components
such as crankshafts, front axle beams and steering knuckles for the automotive industry and
components for the oil and gas industry.

Quality Assurance Inspection and Testing Facility

Our Company follows stringent quality assurance practices at every stage of the production process to
meet our customers’ quality standards.

Our Company has invested in inspection and testing facilities including metallurgical, physical,
chemical and standard room testing facilities. These facilities are used for inspecting the relevant
properties in the incoming raw materials as well as end products before they are dispatched to the
customers. Inspection and testing equipment include co-ordinate measuring machines, stress analysers,
automatic crankshaft inspection machines and precision measuring equipment to check the critical
parameters of the end products.

Fatigue Testing and Product Validation Facility

Our Company has an in-house product testing and validation facility. This enables our Company to test
and validate its products in conformity with customer requirements. This significantly reduces the
                                                    136
  product development cycle time and creates a shorter ‘time to market’.

  Open Die Forging

  In the open die forging process, the forging product, referred to as the ‘work piece’, is not completely
  confined as it is shaped by dies. This process is adopted when volume requirements are low. Open die
  forging is usually used for heavy forgings such as shafts, sleeves and disks, where weight of the work
  piece can be more than one MT. Most open die forgings are produced on flat dies. Operations
  performed on open die presses include drawing out or reducing the cross-section of an ingot or billet to
  lengthen it, upsetting or reducing the length of an ingot or billet to a larger diameter, upsetting, drawing
  out and piercing-processes sometimes combined with forging over a mandrel for forging rough-
  contoured rings. Our company produces open die forgings for power plants, wind turbines, oil and gas
  and heavy industries.

  Facility

  Our Company’s open die forging production facilities comprise a forge system with a 1,600 MT double
  column, pull down type, oil hydraulic and computer controlled press integrated with a rail-bound
  manipulator, turntable, automatic die shifting and die clamping. Ingots of up to 17 MT can be handled
  at our open die forging facility.

  Our Company has recently commissioned a new 4,000 MT open die forging press at Heavy Forge
  Division II, Mundhwa, Pune to manufacture turbine rotors, generator shafts, wind turbine shafts, fluid
  ends, spool body and wing valves for the oil and gas, power generation (wind and steam), ship-
  building, construction and general engineering industries. This press can forge single ingots weighing
  up to 70 tons.

  Capacity

  The table below sets forth our Company’s (unconsolidated) installed capacity and level of production
  of major products for the nine months ended December 31, 2009 and for the years ended March 31,
  2009, 2008 and 2007:

                                      Installed Capacity                         Production (Including job work)
                         For the         For the Year ended March           For the
                           nine                     31,                       nine      For the Year ended March 31,
                         months                                             months
                          ended                                              ended
                        December                                           December
                Unit     31, 2009        2009        2008       2007        31, 2009      2009       2008      2007
Steel
Forgings        MT          340,000     252,685    240,000     240,000         90,274      134,428    191,738    165,239
Machined
Products
Crankshafts     Nos.        759,600     759,600    719,635     650,000        286,570      440,511    559,983    522,065
Front Axle
Assembly
and
Components      Nos.        753,200     753,200    753,200     753,100        152,915      309,583    509,417    572,053

  Note:      Actual production includes captive consumption 31,579 MT for the nine months ended
             December 31, 2009, 54,305 MT for the year ended March 31, 2009, 74,687 MT for the year
             ended March 31, 2008 and 69,124 MT for the year ended March 31, 2007.

  Raw Materials

  Steel is the primary raw material used by our Company. The quality of our forged product depends on
  the quality of the steel used. For the year ended March 31, 2009, expenditure on raw materials was
  46.6% of our Company’s total income on an unconsolidated basis. Our Company purchases steel at
  spot market prices primarily from our affiliates, Kalyani Carpenter Special Steels Limited and Kalyani
  Steel Limited. Purchases from these two affiliates constituted more than 90% of our Company's total

                                                      137
steel consumption for the year ended March 31, 2009. Kalyani Carpenter Special Steels Limited has the
capability to produce specialised steel required for the production of non-automotive components and
our Company intends to leverage this capability for the expansion of our non-automotive capacity.

Utilities

Our Company has an approval from the Maharashtra State Electrical Distribution Company Limited
(“MSEDCL”) for the supply of a total of 103.34 MW of electricity for our Company’s plants in
Maharashtra, India. These approvals pertain to our Company’s manufacturing facilities at Mundhwa,
Pune, Chakan near Pune and Satara.

Our Company also owns a wind farm with a power generation capacity of 4.2 MW and one of our
affiliates, BF Utilities Limited owns a wind farm with a power generation capacity of 18.33 MW. The
power generated by these wind farms are supplied to the MSEDCL grid and our Company receives
credit from the MSEDCL equivalent to the units supplied. Our Company then pays BF Utilities
Limited the equivalent of the credit received for power generated at an agreed price, which is currently
less than the tariff charged by the MSEDCL.

Our Company is permitted to draw up to 0.067 million cubic meters of water per day from the Mula
Mutha River and the Mutha Right Bank canal pursuant to an agreement with the Government of
Maharashtra. This agreement entitles our Company to draw water for a period of six years commencing
November 1, 2008.

Sales and Marketing

For the year ended March 31, 2009, on an unconsolidated basis, our Company had domestic sales of
Rs. 10,561.37 million and exports from India of Rs. 10,014.14 million or 50.1% and 47.5% of our
Company's total income, respectively.

Our Company’s customers are predominantly either OEMs or Tier 1 customers. OEMs are producers
of fully assembled vehicles. Tier 1 customers are manufacturers of assemblies and aggregates which
are installed in the vehicle as a complete system. These assemblies and aggregates are made of various
individual automotive components. For example, a machined crankshaft is an automotive component,
whereas an engine is used as a complete system.

As of February 28, 2010, the sales and marketing team of our Company for the domestic and the
international markets consisted of 65 employees. Our Company’s international sales and marketing
team functions as an integrated unit and provides support to global OEM and Tier 1 customers. Some
of our Company’s global customers are also customers of our Subsidiaries. We believe that an
integrated approach enables our Company to enhance our customers relationships by leveraging our
global strengths in the areas of technology, cost and manufacturing capabilities.

Competition

Our Company’s main competitors are:

     •      International forging companies such as ThyssenKrupp GmbH, Germany; Sumitomo Metal
            Industries Ltd. (forging division), Japan; Ràba Automotive Group, Hungary; SIFCO
            Industries, Inc., the United States;

     •      India-based forging companies such as Mahindra Forgings Limited and Amtek Auto Limited,
            for certain kinds of forgings; and

     •      Forging companies from other regions with comparatively lower labour costs, such as
            Hungary, Mexico and Brazil.

Research and Development

We believe that our Company is one of the most technologically advanced forging companies in the
world and the quality of our Company’s products and processes are integral to our ability to retain and
attract customers. Our Company has an in-house research and development facility at Pune. Our

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Company’s research and development efforts seek to reduce costs, make improvements in products and
processes, develop new product capabilities, achieve higher value addition, enhance quality, speed-to-
market and safety benchmarks and achieve higher levels of productivity.

Our Company has entered into a technical know-how and assistance agreement with Metalart
Corporation, Japan for a period of six years commencing on March 31, 2004. This agreement is for
obtaining technical knowledge for the manufacture of small forgings.

Intellectual Property

On July 25, 2000, our Company applied to register the mark “BFL” as a label and was issued
Certificates of Registration, dated March 28 and March 29, 2005, under Section 23(2), Rule 62(I) of the
Trade Marks Act, 1999. This mark has been applied for registration in two classes, namely; Class 7 and
Class 12 under the Trade Marks Act, 1999, and to be used on the products manufactured by our
Company.

On February 27, 2007, our Company received a ‘No Objection Certificate’ for registration of an artistic
work entitled ‘Bharat Forge’ under the Copyright Act, 1957 from the Registrar of Copyrights.

An application dated November 6, 2006 for registering our corporate logo has been made by one of our
affiliates, under Class 6, 7 and 12, which is still pending. Moreover, we have not entered into any
agreement with this affiliate to license or otherwise authorise the use of our corporate logo.

Environment

Our Company has obtained all material environmental consents and licenses necessary for the
operation of its business. Our Company has ISO 14001: 2004 certification for environment
management.

Our Company has been actively pursuing measures that reduce carbon emissions and promote using
“green energy”. The 4.20 MW windmill project of our Company is registered as a clean development
mechanism project with the United Nations Framework on Climate Change. This registration entitles
our Company to earn Certified Emission Reduction (“CER”) credits to the extent that our Company
reduces or avoids greenhouse gas emissions. Each CER represents 1 tonne CO2e (carbon-dioxide
equivalent) which is the universal unit of measurement used to measure global warming potential.
These CERs (also known as carbon credits) can be traded and sold, and used by industrialised countries
to meet a part of their emission reduction targets under the Kyoto Protocol. In the year ended March 31,
2009, 2008 and 2007, our income from the sale of CERS was Rs. 4.34 million, Rs. 39.03 million and
nil, respectively.

Human Resources

We believe that our Company’s success depends to a great extent on our ability to recruit, train and
retain high-quality engineering and technical professionals. At the entry level, our Company hires
college graduates and puts them through a 18-month apprenticeship programme before starting full-
time work. We believe that our Company's strong brand name, market position and competitive
compensation levels give us a significant advantage in attracting and retaining our personnel. Our
Company seeks to retain professional talent through career management and through providing
competitive levels of compensation and a positive working environment.

The table below provides details of our Company's employees as of February 28, 2010:

                     Employee Qualification                                Number of employees
 Professional: Including Engineers, Finance and Accounting
 professionals and Law Graduates                                                      728
 Operating, Administrative and support staff                                        4,259
 Total Employees                                                                    4,987

Our Company’s human resources policies concentrate on four major areas, i.e., creating a talent
pipeline, increasing competency levels of the existing workforce, creating a manager pool through
enhanced training and development activities and enhancing the qualifications and capabilities of

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employees through focused superior education programmes.

We provide our employees with ongoing career development opportunities. Our Company, in
conjunction with the Birla Institute of Technology and Science, Pilani, India, offers our employees the
opportunity to pursue a part-time engineering course for a Bachelor of Science (Manufacturing and
Engineering) degree. Our Company has also entered into an agreement with the Indian Institute of
Technology, Mumbai, to enable our key employees to pursue a two-year full-time Masters of
Technology (Materials, Manufacturing and Modelling) course.

Our Company has also developed a mentorship programme for new recruits. Under this programme,
each new recruit is mentored by an experienced senior executive upon joining our Company.

Insurance

Our Company has insurance coverage which we consider reasonably sufficient to cover general risks
associated with our operations.

Material Subsidiaries and Joint Ventures

CDP Bharat Forge GmbH (“CDP-Bharat Forge”)

Our Company owns 100.0% of CDP-Bharat Forge. CDP-Bharat Forge was incorporated on December
15, 2003 and has its registered office at Ennepetal, near Düsseldorf in Germany. In January 2004, our
Company, through CDP-Bharat Forge, acquired the German operations of Carl Dan Peddinghaus
GmbH and Co., KG (“CDP”). CDP was founded in 1839 and is in the business of supplying forged and
machined components, including forged chassis and engine components and non-automotive systems
in Europe and is known for its design and engineering capabilities. This acquisition enhanced our
presence in the European market, especially in the passenger car segment.

Business of CDP-Bharat Forge

Products

Components manufactured by CDP-Bharat Forge include passenger car engine and chassis
components, such as crankshafts, control arms, components for commercial vehicles, such as pistons,
knuckles and components for construction equipment such as tips, and specialty components for the
railway industry.

Facilities

CDP-Bharat Forge's facilities are located in Ennepetal near Düsseldorf. CDP-Bharat Forge has nine
automated forging press lines ranging from 1,600 MT to 8,000 MT. CDP-Bharat Forge's annual forging
capacity is 90,000 MT. CDP Bharat Forge has received the ISO/TS 16949:2002 certification for the
development and manufacturing of drop forgings, mainly engine and suspension components for
passenger cars and heavy trucks. In addition to this, CDP Bharat Forge has also received certificate for
implementing and using integrated occupational safety and health and environmental management
system in accordance with the BS OHSAS 18001:2007 and OSP 14001:2004 standards for the
production of forged components.

CDP-Bharat Forge has facilities for product design and engineering, tool and die making, forging, heat
treatment and processing.

Raw Materials

Steel is the primary raw material used by CDP-Bharat Forge. CDP-Bharat Forge sources its steel at
prevailing market prices from European steel mills.

Sales and Marketing

CDP-Bharat Forge has a structured key accounts management process to manage its sales and
marketing activities encompassing sales, co-development with its customers and after-sales service.
CDP-Bharat Forge has a direct sales and marketing team as well as employees from cross-functional
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sales support activities such as design, engineering and development.

Competition

CDP-Bharat Forge’s main competitors are Buderus Heiztechnik GmbH, Hirschvogel Automotive
Group and Schoeneweiss and Co. GmbH.

Research and Development

CDP-Bharat Forge’s research and development is aimed at new product development and process
innovation. CDP-Bharat Forge has eleven patents in the areas of material sciences and finished
products.

Management and Employees

CDP-Bharat Forge has a management team headed by experienced managing directors who oversee the
day-to-day operations of CDP-Bharat Forge. As at February 28, 2010, CDP-Bharat Forge had 513
employees.

Bharat Forge Aluminiumtechnik GmbH & Co. KG (“Bharat Forge Aluminiumtechnik”)

In December 2004, our Company, through our Company’s wholly-owned subsidiary, Bharat Forge
Holding GmbH, acquired a 100.0% ownership interest in CDP-Aluminiumtechnik, which was
established in 1997 at Brand Erbisdorf near Dresden, Germany. This acquisition marked our entry into
the aluminium automotive component business. CDP-Aluminiumtechnik was renamed Bharat Forge
Aluminiumtechnik GmbH & Co. KG.

Business of Bharat Forge Aluminiumtechnik

Products

Bharat Forge Aluminiumtechnik supplies aluminium chassis components, such as control arms and
knuckles, to passenger car and motorcycle manufacturers in Europe.

Facilities

Bharat Forge Aluminiumtechnik’s facilities comprise two press lines with an annual capacity of 10,000
MT. Bharat Forge Aluminiumtechnik has received certificate for implementing and using integrated
occupational safety and health and environmental management system in accordance with the OHSAS
18001:2007 and the ISO 14001:2004 standards for the development and manufacture of aluminium
forgings. Bharat Forge Aluminiumtechnik has also received the ISO/TS 16949:2002 certification for
development and manufacture of aluminium forgings for the automotive industry.

Raw Materials

Aluminium is the primary raw material used by Bharat Forge Aluminiumtechnik and it obtains
aluminium from local German suppliers.

Sales and Marketing

Bharat Forge Aluminiumtechnik has integrated its sales and marketing functions with our Company
and its other subsidiaries in order to better serve clients globally.

Competition

Bharat Forge Aluminiumtechnik’s main competitors are Ottofuchs, Hirschvogel, Techla, Stampal and
Raufass.

Management and Employees

Bharat Forge Aluminiumtechnik has a management team headed by experienced managing directors
who oversee its day-to-day operations. As of February 28, 2010, Bharat Forge Aluminiumtechnik had
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95 employees.

Bharat Forge Kilsta AB (“Bharat Forge Kilsta”) and Bharat Forge Scottish Stampings Limited
(“BFSSL”)

In September 2005, our Company, through Bharat Forge Beteilingungs, acquired 100.0% of the shares
of Imatra Kilsta AB along with its wholly owned subsidiary Scottish Stamping Limited, which were
renamed Bharat Forge Kilsta and Bharat Forge Scottish Stampings Limited, respectively. Bharat Forge
Kilsta is among Europe’s leading forging companies and among the largest heavy duty crankshaft
producers in Europe. We have discontinued the operations of BFSSL’s facility in Ayr, Scotland and are
in the process of transferring the operations to our facility in Karlskoga, Sweden. We have entered into
an agreement to sell the land owned and used by BFSSL for its operations. BFSSL recorded a profit ₤
3.75 million in respect of this transfer of business to Bharat Forge Kilsta. Our objective is to continue
to derive the benefits attributable to BFSSL’s operations and reduce the fixed costs associated with
operating a separate unit at Ayr, Scotland.

Business of Bharat Forge Kilsta and BFFSL

Products

Bharat Forge Kilsta and BFSSL serve the European automotive markets. Their main products include
front axle beams, crankshafts, steering knuckles, suspension arms for heavy trucks and passenger cars.

Facilities

Bharat Forge Kilsta’s facilities are located in Karlskoga, Sweden. It has press lines ranging from 2,500
MT to 16,000 MT, which includes an automated 16,000 MT Muller Weingarten Screw Press line.
BFSSL’s operations were located in Ayr, Scotland and it had one 8,000 MT press line and a machining
facility for front axle beams, which are in the process of being shifted to Karlskoga, Sweden. In
addition, a machining facility is available in Karlskoga, Sweden for steering arms. The total capacity of
Bharat Forge Kilsta and BFSSL is 100,000 MT per annum. Bharat Forge Kilsta has received the
ISO/TS 16949:2002 certificate for manufacturing and machining of close die forging. Bharat Forge
Kilsta has also received the ISO 14001:2004 certificate for production of forged, heat treated, surface
treated and machined steel components. The certificate has expired and is in the process of being
renewed.

Raw Materials

Steel is the primary raw material used by Bharat Forge Kilsta and BFSSL. Steel is sourced at prevailing
market prices from European steel mills.

Sales and Marketing

Bharat Forge Kilsta and BFSSL have a structured key accounts management process to manage its
sales and marketing activities, which entail sales, co-development with its customers and after-sales
service. Bharat Forge Kilsta and BFSSL have a direct sales and marketing teams as well as several
employees who are engaged in cross-functional sales support activities such as design, engineering and
development.

The sales of Bharat Forge Kilsta and BFSSL are predominantly within Europe.

Competition

The main competitors of Bharat Forge Kilsta are Thyssenkrupp, Bifrangi S.p.A and Schoeneweiss, and
BFSSL’s main competitors are Rába Axles, Schöneweiss and Forja De Monterrey.

Management and Employees

The day-to-day operations of Bharat Forge Kilsta and BFSSL are headed by a management team which
oversee the day to day operations. As at February 28, 2010, Bharat Forge Kilsta had 243 employees
and BFSSL had 45 employees.


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Bharat Forge America Inc. (“Bharat Forge America”)

Our Company owns 100.0% of Bharat Forge America. Bharat Forge America was incorporated in May
2005 and has its registered office in Lancing, Michigan in the United States.

In June 2005, our Company acquired the assets of Federal Forge Inc. Federal Forge Inc. was founded in
1962 and filed for protection under Chapter 11 of the United States Bankruptcy Code in February 2004.
Bharat Forge America supplies components to major OEMs and Tier 1 customers in the United States.
With this acquisition, we established a manufacturing presence in North America. This acquisition
significantly expanded our dual shore model, especially in light truck segments. Bharat Forge America
has received the ISO/TS 16949:2009 certification for the manufacture of precision steel forgings.

Business of Bharat Forge America

Products

Bharat Forge America’s products include automotive components such as upper and lower control
arms, links, yokes, knuckles and components for other industrial applications such as connecting rods,
counterweights and king pins. It is also in the process of diversifying its product portfolio to
crankshafts and pistons.

Facilities

Bharat Forge America is located in Lansing, Michigan. Its facilities have an annual forging capacity of
60,000 MT per annum.

Bharat Forge America has press lines in the range of 2,500 MT to 6,000 MT, enabling it to offer a wide
spectrum of products. Bharat Forge America is also capable of handling micro-alloy material for high-
end ferrous forging applications. In addition, it has process engineering advantages such as in-house
customised equipment and tool manufacturing and process design capabilities.

Raw Materials

Steel is the primary raw material used by Bharat Forge America and it sources its steel at prevailing
market prices from American steel mills.

Competition

Bharat Forge America’s main competitors are Lake City Forge, Trenton Forge and PMT.

Management and Employees

Bharat Forge America has a management team lead by experienced senior management which oversee
day-to-day operations. As at February 28, 2010, Bharat Forge America had 82 employees.

FAW Bharat Forge (Changchun) Company Limited (“FAW Bharat Forge”)

On March 9, 2006, FAW Bharat Forge (Changchun) Company Limited was established as a joint
venture company between our Company (through its wholly owned Subsidiary, Bharat Forge Hong
Kong) and the FAW Group Corporation, China, one of the largest automotive groups in China. FAW
Bharat Forge commenced operations on April 6, 2006. Our Company holds 52.0% of the equity share
capital of FAW Bharat Forge and the remaining 48.0% is held by the FAW Group. For more details of
the joint venture agreement, see “Joint Ventures”.

Business of FAW Bharat Forge

Products

FAW Bharat Forge is engaged in the manufacture of forged engine and chassis components for
commercial vehicles, buses and light trucks and transmission parts for the Chinese passenger car
industry. FAW Bharat Forge’s range of products and services are offered to the FAW Group
Corporation and other automotive manufacturers within China.
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Facilities

FAW Bharat Forge’s headquarters and operations are located in Changchun, China. The annual
capacity of FAW Bharat Forge is 135,000 MT. FAW Bharat Forge has a wide range of equipment
including hammers, upsetters, hateburs and presses ranging from 1,250 MT to 12,500 MT. FAW
Bharat Forge has received the ISO/TS 16949:2002 certificate for manufacture of forging products used
for automobile industries.

Raw Materials

FAW Bharat Forge sources raw materials at competitive market rates from steel mills in China.

Sales and Marketing

FAW Bharat Forge has a direct sales and marketing team in addition to several employees who are
engaged in cross-functional sales support activities such as design, engineering and development.

Competition

FAW Bharat Forge’s major competitors are Second Automobile Forge Co., and North Automobile
Forge Co.

Management and Employees

As at February 28, 2010, FAW Bharat Forge had 1,471 employees.

Joint Ventures for the Non-Automotive Business

In line with our strategy to expand our non-automotive operations, we have entered into the following
joint-venture arrangements:

    •    Our Company has incorporated a joint venture company, BF-NTPC Energy Systems Limited,
         with a 51.0% equity interest held by our Company and balance held by NTPC Limited for the
         manufacture of castings, forgings, fittings and high pressure pipings required for BOP
         equipment for power plants and other industries. This joint venture has acquired a land parcel
         at Solapur in Maharshtra, India to set-up its manufacturing facility. Our Company is in
         discussions with NTPC to finalise the investment plans and other operational details for this
         joint venture.

    •    Our Company has entered into two joint venture and shareholder agreements with Alstom
         S.A. for setting up units to manufacture supercritical power plant equipments. We have set up
         two joint ventures companies – one for the manufacture of core turbine and generators for
         power plants and the other for manufacture of all the ancillary components. It is proposed that
         these joint ventures will design, engineer and manufacture turbines and generators in the 300-
         800 MW range and will have a total installed capacity of 5,000 MW per annum. Pursuant to
         this agreement, the joint venture with Alstom is establishing an integrated plant to
         manufacture advance subcritical and supercritical power plant equipment and another plants
         for manufacturing ancillary components at Mundra, Gujarat. Our Company holds 49.0%
         equity interest in Alstom Bharat Forge Power Limited, which proposes to manufacture core
         turbines, generators and 51.0% equity interest in Kalyani Alstom Power Limited, which
         proposes to manufacture ancillary components, while Alstom S.A. holds 51.0% and 49.0%
         equity interest in these companies, respectively. As of March 31, 2010 our Company had
         invested Rs. 288.56 million in these two companies, as its equity contribution. We have
         identified and acquired the land parcel where the plants will be located. These joint venture
         companies are in the process of finalising the business and investment plans and other
         operational details.

    •    Our Company has entered into a joint venture and shareholders agreement with Areva N.P. for
         setting up units to manufacture heavy forging and castings for the power sector, particularly
         the nuclear power segment and other heavy industries. The joint venture proposes to set up a
         14,000 MT open die forging press with associated equipment and an integrated steel
         manufacturing facility in this regard. Our Company will hold 51.0% equity interest in the joint
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        venture company, while Areva N.P. will hold 49.0%. Our Company is in discussions with
        Areva N.P. to finalise the business location, investment plans and other operational details for
        this joint venture. This agreement expired on December 31, 2009 and the parties are in
        discussion for its renewal.

For more details of the agreements with Alstom S.A., Areva N.P. and NTPC Limited, please “Joint
Ventures”.

Proposed SEZ Development

The Kalyani group, in a joint venture with Maharashtra Industrial Development Corporation (“MIDC”)
has agreed to establish a multi-product SEZ in Khed and Shirur talukas in the Pune district. Under the
share holders agreement dated July 29, 2009, MIDC has a right to subscribe up to 26% equity share
capital of Khed Economic Infrastructure Private Limited (“KEIPL”), the SPV incorporated to develop
this SEZ and balance 74% is required to be subscribed by our Company or any of it associates or
affiliates. Our Company has invested Rs. 150 million as advance to subscribe for 5% of the equity
share capital of KEIPL. We expect that the balance equity contribution would be met by other entities
belonging to the Kalyani group.




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                         BOARD OF DIRECTORS AND MANAGEMENT

Board of Directors

Our Board of Directors is responsible for our overall management and supervision. Our Chairman and
Managing Director and the Whole-time Directors are responsible for our day-to-day management under
the supervision, direction and control of our Board of Directors.

Our Articles of Association provide that until otherwise determined by a general meeting and subject to
Section 253 of the Companies Act, the number of Directors on our Board of Directors shall not be less
than three (3) and not more than nineteen (19). Clause 49 of our Listing Agreement with the Stock
Exchanges (“Listing Agreement”), requires that at least half of our Board should be Non-Executive
Directors. In addition, clause 49 of our Listing Agreement requires that if our chairman is an executive
member, then at least half of our Board should be independent. Our Board of Directors currently
consists of seventeen (17) Directors, including ten (10) Non-Executive Directors of whom nine (9) are
independent Directors. We have no service contracts with any of our Non-Executive Directors.

All of the Directors appointed by the shareholders, with the exception of the Managing Director and
Mr. Amit B. Kalyani, Executive Director, may be considered for retirement or re-election at each
annual general meeting. Directors who have been on the Board of Directors for the longest period are
the ones considered for retirement.

The table below sets forth the details of the Board of Directors:

Name                                             Designation                              Age


Mr. B.N. Kalyani                                 Chairman and Managing Director           61

Mr. S.M. Thakore                                 Non-executive, Independent               62

Mr. S.D. Kulkarni                                Non-executive, Independent               75

Mr. P.G. Pawar                                   Non-executive, Independent               65

Dr. Uwe Loos                                     Non-executive, Independent               64

Mrs. Lalita D. Gupte                             Non-executive, Independent               61

Mr. Alan Spencer                                 Non-executive, Independent               76

Mr. P.H. Ravikumar                               Non-executive, Independent               58

Mr. Naresh Narad                                 Non-executive, Independent               65

Dr. T. Mukherjee                                 Non-executive, Independent               67

Mr. P.C. Bhalerao                                Non-executive Director                   60

Mr. G.K. Agarwal                                 Deputy Managing Director                 59

Mr. Amit B. Kalyani                              Executive Director                        34

Mr. B.P. Kalyani                                 Executive Director                       47

Mr. S.E. Tandale                                 Executive Director                       41

Mr. P.K. Maheshwari                              Executive Director                        49



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Name                                           Designation                               Age


Mr. Sunil Kumar Chaturvedi                     Executive Director                        47

Brief Biographies of our Directors

Mr. B. N. Kalyani

Mr. B. N. Kalyani, 61, recipient of the prestigious ‘Padmabhushan’ award in 2008, is the Chairman and
Managing Director of our Company. Mr. Kalyani is a Mechanical Engineer from the Birla Institute of
Technology and Science, Pilani, Rajasthan. He also has M.S. degree from the Massachusetts Institute
of Technology, USA. He has 37 years of work experience.

Mr. Kalyani has represented the Confederation of Indian Industry on its various regional committees
and is currently a member of the CII National Council.

Mr. Kalyani is associated with several other institutions. He is the founder Chairman of the Governing
Board of the Indian Institute of Management, Indore; Member of the Executive Committee of Maratta
Chamber of Commerce Industries and Agriculture, Pune; Member, Executive Committee, India
Education Initiative; Chairman, Pratham Pune Education Foundation; and Past Chairman of American
Society of Metals, Pune Chapter. Mr. Kalyani is also a member of the World Economic Forum,
Switzerland. Mr. Kalyani’s contribution to industry have been recognised through awards from
associations such as FIE Foundation in 1991. Mr. Kalyani is the recipient of the Prestigious National
Press Award, 1995.

Mr. Kalyani has been on our Board since March 30, 1993 and as the Chairman and Managing Director
since August 23, 1997.

Mr. S. M. Thakore

Mr. S.M. Thakore, 62, a Solicitor, is a non-executive and Independent Director on the Board. Mr.
Thakore was a partner at a Mumbai based solicitors firm M/s. Bhaishankar Kanga and Girdharlal. In
April 2004, Mr. Thakore joined as a partner of the solicitors firm AZB & Partners. Mr. Thakore left
AZB & Partners in December 2006 to set up a new law firm Talwar Thakore & Associates. He has
over 35 years of work experience. Mr. Thakore has been on the Board of the Company since June 27,
1986.

Mr. S.D. Kulkarni

Mr. S.D. Kulkarni, 75, is a non-executive and Independent Director on the Board. He is a Fellow
Member of The Institute of Chartered Accountants of India. He is a former Managing Director and
Chief Executive Officer of Larsen & Toubro Limited. He has over 46 years of work experience. Mr.
Kulkarni has been on our Board since July 24, 1999.

Mr. P. G. Pawar

Mr. P. G. Pawar, 65, is a non-executive and Independent Director on the Board. He has a B.E. degree
from Birla Institute of Technology and Science, Pilani, Rajasthan. He has 41 years of work experience.
Mr. Pawar has been on our Board since May 24, 2005.

Dr. Uwe Loos
Dr. Uwe Loos, 64, a non-executive and Independent Director on the Board is a German National. He is
a Graduate Engineer and holds a Ph.D. Dr. Loos was a member of the management board of Porsche
A.G. (1993) for production and logistics and was responsible for the introduction and implementation
of a programme to establish a worldwide competitiveness in manufacturing. Dr. Loos joined FAG, a
leading ball bearing manufacturer in 1998 and was appointed Chairman of the board. Dr. Loos also
served as the Chairman on the board of DEKRA and is currently a member of the various advisory and
supervisory boards in the automotive industry. Dr. Loos has been on our Board since August 1, 2005.


                                                 147
Mrs. Lalita D. Gupte

Mrs. Lalita D. Gupte, 61, is a non-executive and an independent director of our Company since
December 5, 2006. She holds a bachelor's degree in economics and a master's degree in management
studies. Mrs. Gupte is currently the chairperson of ICICI Venture Funds Management Company
Limited. In October 2006, she retired as joint managing director and member of the board of ICICI
Bank Limited. Mrs. Gupte is on the Board of several companies and educational institutions and has
received several awards and recognititions such as the Astiva Award for Lifetime Achievement (2007),
the Kesari Gaurav Sanman Award (2007) for significant contributions in the field of banking and the
Economic Times award for corporate excellence for business woman of the year 2004-2005, among
others.

Mr. Alan Spencer

Mr. Alan Spencer, 76, is a non-executive and Independent Director on the Board. He is a British
national with M.A. from Balliol College, Oxford. He is a consultant in the automotive field with
knowledge of production processes for automotive original equipment and automotive supplier
component production techniques and has been associated with Ford Motors Company for 39 years.
Mr. Spencer has been on our Board since January 21, 2008..

Mr. P.H. Ravikumar

Mr. P.H. Ravikumar, 58, is a non-executive and Independent Director on the Board. Mr. Ravikumar
has a bachelors degree in commerce and CAIIB, AIB from London. He has also done a senior diploma
in French. He has total work experience of 36 years in banking and financial services. Mr. Ravikumar
has been on our Board since May 20, 2009.

Mr.Naresh Narad

Mr. Naresh Narad, 65, hold a bachelor’s degree in arts, LL.B. and a veteran I.A.S. Civil Servant. Mr.
Naresh Narad is a non-executive and Independent Director on the Board. Mr. Naresh Narad has held
various important positions in the Government of India and Government of Madhya Pradesh. Mr.
Naresh Narad has been on our Board since July 24, 2009.

Dr. T. Mukherjee

Dr. T. Mukherjee, 67, is a non-executive and Independent Director on the Board. He is M. Met. and
Ph.D. Dr. Mukherjee, a veteran metallurgist, has authored 134 papers in his career spanning four
decades. He has been a visiting lecturer at University of Sheffield, U.K. and Adjunct Professor at I.I.T.
Kharagpur. He is also a recipient of various prestigious awards. Dr. Mukherjee has total work
experience of 42 years. Dr. T. Mukherjee has been on our Board since January 23, 2010.

Mr. P. C. Bhalerao

Mr. P.C. Bhalerao, 60, has a B.E., an M.B.A. and a D.T.M. He is a non-executive Director on the
Board. Mr. Bhalerao has over 31 years of work experience. Mr. Bhalerao has been on our Board since
April 1, 1998. On and from August 1, 2005, he was designated as a non-executive Director on the
Board.

Mr. G. K. Agarwal

Mr. G. K. Agarwal, 59, is the Deputy Managing Director of the Company and has a B.E. (Mechanical)
and MBA. He has over 36 years of work experience. Mr. Agarwal has been on our Board since April
1, 1998. He was designated as a Deputy Managing Director from May 23, 2006.

Mr. Amit Kalyani

Mr. Amit Kalyani, 34, is an Executive Director of the Company. The son of Mr. B. N. Kalyani, Mr.
Amit Kalyani is B.E. (Mech.). He joined Kalyani Steels Limited in 1997 and was deputed to Carpenter
Technology Corporation, USA for technical training and to oversee technology transfer to the joint
venture viz. Kalyani Carpenter Special Steels Limited. On successful completion of this assignment he

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returned to India to join the Company in 1998 as the vice president and chief technology officer. He
has over 12 years of work experience. Mr. Amit Kalyani has been on our Board since May 11, 2004.

Mr. B. P. Kalyani

Mr. B.P. Kalyani, 47, is an Executive Director of the Company. He has a B.E. (Production
Engineering), VJTI, Mumbai, an M.B.A. in finance from New York University, New York, U.S.A. and
an M.S. (Mech.) Columbia University, New York, U.S.A. He has over 27 years of work experience.
Mr. B. P. Kalyani has been on our Board since May 23, 2006.

Mr. S. E. Tandale

Mr. S. E. Tandale, 41, is an executive Director of the Company. He is responsible for the international
business of the Company. He has a B.E. (Mech) degree and has approximately 18 years of work
experience. Mr. Tandale has been on our Board since May 23, 2006.

Mr. P. K. Maheshwari

Mr. P. K. Maheshwari, 49, is an Executive Director of the Company. He has a B.Com. and holds a post
graduate diploma in business management from IIM, Ahmedabad, Gujarat. Mr. Maheshwari is a
Fellow Member of the Institute of Chartered Accountants of India. His responsibilities extend to
various companies within the Kalyani Group including strategic financing, mergers and acquisitions,
handling joint venture relationships amongst others. He has over 25 years of experience with leading
consulting firms and industrial houses. Mr. Maheshwari has been on our Board since May 23, 2006.

Mr. Sunil K. Chaturvedi

Mr. Sunil K. Chaturvedi, 47, is an Executive Director of the Company. He is a commerce graduate and
chartered accountant. He joined the Indian Administrative Service, Government of India, in August
1988 and worked in various capacities till January 31, 2008. Mr. Chaturvedi joined the Company with
effect from February 1, 2008 as chief operating officer, capital goods division. He has over 24 years of
work experience. Mr. Chaturvedi has been on our Board since May 20, 2008.

Remuneration of Executive Directors

The following table sets forth the remuneration paid to our executive Directors for fiscal 2009:

Name     of      the   Salary      and      Provident Fund        Commission (in       Total (in Rs.)
Director               Perquisites (in      and       Super       Rs.)
                       Rs.)                 Annuation Fund
                                            (in Rs.)

Mr.B.N.Kalyani                25,764,729            5,453,652           15,000,000           46,218,381

Mr. G. K. Agarwal             12,297,032            2,268,000             4,750,000          19,315,032

Mr.Amit B.Kalyani              8,809,676            1,620,000             4,750,000          15,179,676

Mr.B.P.Kalyani                 4,311,435                786,919           3,000,000            8,098,354

Mr.S.E.Tandale                 4,618,817                786,919           4,500,000            9,905,736

Mr.P.K.Maheshwari              4,843,688                867,919           3,000,000            8,711,607

Mr.Sunil                       8,638,010            1,402,258             4,000,000          14,040,268
K.Chaturvedi

Compensation of Non-Executive Directors

The following table sets forth the remuneration paid to our non-executive Directors for fiscal 2009:

                                                  149
Name of the Director       Sitting Fees(in Rs.)       Commission(in Rs.)         Total(in Rs.)

Mr.P.H.Ravikumar                            30,000                    400,000                    430,000

Late Mr. S.S.Marathe                        55,000                    400,000                    455,000

Mr.S.M.Thakore                              25,000                    500,000                    525,000

Mr.S.D.Kulkarni                             50,000                    650,000                    700,000

Mr.P.G.Pawar                                50,000                    500,000                    550,000

Dr.Uwe Loos                                 15,000                    300,000                    315,000

Mr.P.C.Bhalerao                             45,000                    500,000                    545,000

Mrs.Lalita D.Gupte                          10,000                    450,000                    460,000

Mr.Alan Spencer                             20,000                    300,000                    320,000

Directors’ Interest

All the Directors, including independent Directors, may be deemed to be interested to the extent of
fees, if any, payable to them for attending meetings of the Board or a committee thereof as well as to
the extent of other remuneration and reimbursement of expenses payable to them. The executive
Directors are interested to the extent of remuneration paid to them for services rendered as officers or
employees of the Company.

The Directors, including independent Directors, may also be regarded as interested in the Equity
Shares, if any, held by them and also to the extent of any dividend payable to them and other
distributions in respect of the Equity Shares. The Directors, including independent Directors, may also
be regarded as interested in the Equity Shares held by the companies, firms and trust, in which they are
interested as directors, members, partners, trustees.

The total of the interests of our Directors in our Equity Shares as of March 31, 2010 are set out in the
table below.

                                                                    No. of Equity Shares of Rs.2 each
Name of the Director
                                                                        held as of March 31, 2010



Mr. B. N. Kalyani                                                                  39,025

Mr.P.H.Ravikumar                                                                    2,000

Mr.S.M.Thakore                                                                     24,650

Mr.S.D.Kulkarni                                                                     2,740

Mr. G.K. Agarwal                                                                    2,455

Mr. Amit B. Kalyani                                                               350,200

Mr. B.P. Kalyani                                                                    3,130

Except as otherwise stated in this Placement Document, the Company has not entered into any contract,

                                                  150
agreements, arrangements during the preceding two years from the date of this Placement Document in
which the Directors are interested directly or indirectly and no payments have been made to them in
respect of these contracts, agreements, arrangements which are proposed to be made with them. Except
for a loan of Rs. 790,000 given to Mr. S.E. Tandale, none of the Directors have taken any loan from the
Company.

Borrowing Powers of the Board

Pursuant to a resolution passed by the shareholders of the Company at the AGM on July 24, 2009 and
in accordance with provisions of the Companies Act, the Board has been authorised to borrow money
from time to time not exceeding Rs. 15,000 million over and above the aggregate of the Company’s
paid-up share capital and free reserves.

Key Managerial Personnel

Our Key Managerial Personnel apart from the Executive Directors are as follows:

Name                                           Designation                   Age            Date of Joining

Mr.M.V. Mavalankar                Director, Technical                        56               May 3, 2004

Mr.Chetan K.                      Director, Quality                          48             March 31, 2005

Mr.D.R.Moorthy                    Executive Vice President, Corporate        57              April 29, 1987
                                  Affairs

Mr. S.G.Joglekar                  Senior Vice President, Finance and         52           November 14, 1999
                                  CFO

Mr.Beejal Desai                   Senior Vice President, Legal and           43               July 1, 2008
                                  Company Secretary

Mr. M.U.Takale                    Senior Vice President, Forge               49            November 2, 1982
                                  Modernisation Division

Mr. H.K.N. Swamy                  Senior Vice President, Machine Tool        61             January 18, 1995
                                  Building

Mr. S.B. Manel                    Senior Vice President, Heavy Forge         60              August 9, 2006
                                  Division

Mr. Amar Kaul                     Senior Vice President, Machined            39             March 29, 2004
                                  Component Division-II

Mr. S. B. Naik                    Vice President, Machined Component         52             January 23, 1994
                                  Division-I

Mr.S.S.Pargaonkar                 Vice President, Materials                  48           September 15, 2005

Dr. S. V. Bhave                   Vice President, Human Resource             56              March 6, 2006

Mr.S.B.Pustake                    Vice President, Operations, Baramati       53              April 9, 2009

Mr. Satish Kumar                  Vice President-General Engineering         60            October 22, 2009
                                  Division

Corporate Governance

In accordance with the Listing Agreement executed with the Stock Exchanges, nine (9) Directors of our

                                                 151
seventeen (17) member Board are independent. During the period September 28, 2008 to July 23, 2009
our Board of Directors had one less independent director due to the demise of our independent director,
late Mr. S. S. Marathe. We are currently in compliance with the provisions of clause 49 of the Listing
Agreement. The Company has appointed requisite number of Directors effective July 24, 2009, in full
compliance with Corporate Governance requirements under clause 49 of the listing agreement.

Board Committees

The Board of Directors is responsible for constituting, assigning, co-opting and fixing the terms of
service for committee members of various committees. Recommendations of the committees are
submitted to our Board of Directors for approval. Quorum for meetings is either two members or one-
third of the members of the committees, whichever is higher. In case of the committees below, two
members constitute quorum.

(i)        Audit Committee

Members as of March 31, 2010

          Name of the Director                     Category                        Status

    Mr. P.G.Pawar                        Independent                    Chairman
    Mr. P.H. Ravikumar                   Independent                    Member
    Mr. S.D. Kulkarni                    Independent                    Member
    Mr. S.M.Thakore                      Independent                    Member
    Mr. P.C.Bhalerao                      Non- Executive                Member

The Audit Committee is comprised of four independent Directors and one non-executive Director. The
Audit Committee met 5 (five) times during the fiscal year ended March 31, 2010, on January 23, 2010,
October 23, 2009, August 11, 2009, July 24, 2009 and May 20, 2009.

The Director responsible for the finance function, the head of internal audit and the representative of
the statutory auditors and internal auditors are regularly invited to the Audit Committee meetings. Mr.
Beejal Desai Sr. Vice President (Legal) & Company Secretary, is the Secretary to the Committee.

Scope and terms of reference

The scope of the Audit Committee is defined under Clause 49 of the Listing Agreement and the
provisions of the Act. The Audit Committee acts as a link between the management, the statutory, cost
and internal auditors and the Board of Directors and oversees the financial reporting process.

Role of the Audit Committee:

The functions of the Audit Committee of the company include the following:

•      Oversight of the company's financial reporting process and the disclosure of its financial
       information to ensure that the financial statement is correct, sufficient and credible.

•      Recommending to the Board, the appointment, re-appointment and if required, the replacement or
       removal of the statutory auditor and the fixation of audit fees.

•      Approval of payment to statutory auditors for any other services rendered by the statutory
       auditors.

•      Reviewing, with the management, the annual financial statements before submission to the Board
       for approval, with particular reference to:

•      Matters required to be included in the Director's Responsibility Statement to be included in the
       Board's report in terms of clause (2AA) of Section 217 of the Companies Act, 1956.

                                                  152
•    Changes, if any, in accounting policies and practices and reasons for the same.

•    Major accounting entries involving estimates based on the exercise of judgment by management.

•    Significant adjustments made in the financial statements arising out of audit findings.

•    Compliance with listing and other legal requirements relating to financial statements.

•    Disclosure of any related party transactions.

•    Qualifications in the draft audit report.

•    Reviewing, with the management, the quarterly financial statements before submission to the
     Board for approval.

•    Reviewing, with the management, performance of statutory and internal auditors and the
     adequacy of the internal control systems.

•    Reviewing the adequacy of internal audit function, if any, including the structure of the internal
     audit department, staffing and seniority of the official heading the department, reporting structure
     coverage and frequency of internal audit.

•    Discussion with internal auditors on any significant findings and follow up thereon.

•    Reviewing the findings of any internal investigations by the internal auditors into matters where
     there is suspected fraud or irregularity or a failure of internal control systems of a material nature
     and reporting the matter to the, Board.

•    Discussion with statutory auditors before the audit commences, about the nature and scope of
     audit as well as post-audit discussion to ascertain any area of concern.

•    To look into the reasons for substantial defaults in the payment to the depositors, debenture
     holders, shareholders (in case of non payment of declared dividends) and creditors and

•    Reviewing any changes in the accounting policies or practices as compared to the last completed
     financial year and commenting on any deviation from the Accounting Standards.

The Audit Committee is empowered, pursuant to its terms of reference, to:

•    Investigate any activity within its terms of reference and to seek any information it requires from
     any employee and

•    Obtain legal or other independent professional advice and to secure the attendance of outsiders
     with relevant experience and expertise, when considered necessary.

The Company has systems and procedures in place to ensure that the Audit Committee mandatorily
reviews:

•    Management discussion and analysis of financial condition and results of operations.

•    Statement of significant related party transactions (as defined by the Audit Committee), submitted
     by management.

•    Management letters /letters of internal control weaknesses issued by the statutory auditors.

•    Internal audit reports relating to internal control weaknesses.

•    The appointment, removal and terms of remuneration of the chief internal auditor.

•    Whenever applicable, the uses/applications of funds raised through public issues, rights issues,

                                                     153
         preferential issues by major category (capital expenditure, sales and marketing, working capital,
         etc.) as part of the quarterly declaration of financial results and

•        If applicable, on an annual basis, statement certified by the statutory auditors, detailing the use of
         funds raised through public issues, rights issues, preferential issues for purposes other than those
         stated in the offer document/prospectus/ notice.

•        In addition, the Audit Committee of the company is also empowered to review the financial
         statements, in particular, the investments made by the unlisted subsidiary companies, in view of
         the requirements under Clause 49.

(ii)        Shareholders’ / Investors Grievances Committee

Members


                      Name of the Director                            Category                 Status

       Mr. S.D. Kulkarni                                        Independent              Chairman
       Mr. B. N. Kalyani
                                                                Promoter, Executive      Member
       (Chairman and Managing Director)
       Mr. P.C. Bhalerao                                        Non-Executive            Member

The Investors Grievances Committee comprises three members; Mr. S.D. Kulkarni (Chairman),
independent Director, Mr. B. N. Kalyani (Managing Director) and Mr. P.C. Bhalerao (non-executive
Director). The Investors Grievances Committee met twice during the fiscal year ended March 31, 2010
on January 23, 2010 and October 23, 2009.

Scope and Terms of Reference

The Investors Grievances Committee was constituted in terms of the mandatory requirement of Clause
49 of the Listing Agreement to look into the redressal of grievances of investors like transfer of shares,
non receipt of share certificates, non-receipt of annual report, non-receipt of dividend warrants, monies
on matured debentures etc.

(iii)       Remuneration Committee

Our Company has not constituted a Remuneration Committee. Our Board of Directors and the Finance
Committee constituting of Mr. B. N Kalyani, Mr. S. D. Kulkarni, Mr. P. C Bhalerao and Mr. Amit
Kalyani determines the commission payable to our Directors, commission to non-executive Directors
and performance related bonus to the Chairman and Managing Director and executive Directors, paid
in the form of commission.

Policy on Disclosures and Internal Procedure for Prevention of Insider Trading

Pursuant to the SEBI (Prohibition of Insider Trading) Regulations 1992, a Securities Dealing Code for
prevention of insider trading is in place. The objective of the code is to prevent purchase and/or sale of
shares of the Company by an insider on the basis of unpublished price sensitive information. Under this
Code, Designated Persons (Directors, Advisors, Officers and other concerned employees/persons in a
particular cadre) are prevented from dealing in the Company's shares during the closure of Trading
Window. To deal in securities beyond specified limit of shares or amount, permission of Compliance
Officer is also required. All the Designated Employees are also required to disclose related information
annually and periodically as defined in the Code.

Mr. Beejal Desai, our Company Secretary, has been designated as the Compliance Officer.




                                                       154
                 PRINCIPAL SHAREHOLDERS AND DEBENTURE HOLDERS

The Company was incorporated as “Bharat Forge Company Limited” on June 19, 1961 under the
Companies Act. The name of the Company was changed to Bharat Forge Limited by a special
resolution and the fresh certificate of incorporation pursuant to change of name was granted on April
30, 1986. The Company’s registered office is located at Mundhwa, Pune Cantonment, Pune 411 036,
Maharashtra, India.

The following table contains information as of March 31, 2010 concerning the shareholding pattern of
our Company:

 Category of      No. of    Total No.     Total No. of             Total          Shares pledged or
Shareholders      Share     of Shares    Shares held in     Shareholding as a        otherwise
                 holders                 Dematerialized      % of total No. of      encumbered
                                             Form                 Shares
                                                             As a     As a %      Number      As a
                                                             % of        of          of       % of
                                                            (A+B) (A+B+C)          shares     Total
                                                                                             No. of
                                                                                             Shares
(A)
Shareholding
of Promoter
and Promoter
Group
 (1) Indian
Individuals /
Hindu
Undivided
Family                  7      813115             813065       0.37        0.37
Bodies
Corporate             15     97089055            2257102     43.61        43.61
Sub Total
 (2) Foreign
Total
shareholding
of Promoter
and Promoter
Group (A)             22     97902170            3070167     43.97        43.97
(B) Public
Shareholding
 (1)
Institutions
Mutual Funds /
UTI                   40     14282807           14277907       6.42        6.41
Financial
Institutions /
Banks                 22     14362636           14355061       6.45        6.45
Insurance
Companies               5     9854992            9854992       4.43        4.43
Foreign
Institutional
Investors             76     26896735           26894890     12.08        12.08
Sub Total            143     65397170           65382850     29.37        29.37
 (2) Non-
Institutions
Bodies
Corporate           1047     22107980           13661795       9.93        9.93

 Category of

                                                155
 Shareholders
Individuals
Individual
shareholders
holding
nominal share
capital up to
Rs. 1 lakh         68862     25861366         21842495       11.62      11.62
Individual
shareholders
holding
nominal share
capital in
excess of Rs. 1
lakh                  37      7736579          7627279        3.47       3.47
Any Others
(Specify)
Clearing
Members              285       334274            334274       0.15       0.15
Trusts                97      2713225             63250       1.22       1.22
Non Resident
Indians             1224       590307           576057        0.27       0.27
Sub Total          71552     59343731         44105150       26.65      26.65
Total Public
shareholding
(B)                71695   124740901         109488000       56.03      56.02
Total (A)+(B)
                   71717   222643071         112558167      100.00     100.00
(C) Shares
held by
Custodians
and against
which
Depository
Receipts have
been issued            1          9200               9200        -     0.00
Total                                                                                  0     0.00
(A)+(B)+(C)        71718   222652271         112567367           -     100.00

The following table contains information as of March 31, 2010 concerning each person in the public
category, who we know beneficially owns 1% or more of our equity shares:
        Name of the shareholder                 Number of shares          As a % of (A+B+C)
LIFE INSURANCE CORPO. OF INDIA                          22900683                          10.29
KRITADNYA MANAGEMENT &
                                                             8431225                          3.79
TRADING SER. P. LTD.
JANUS CONTRARIAN FUND                                        6906937                          3.10
THE NEW INDIA ASSURANCE
                                                             5320126                          2.39
COMPANY LIMITED
COPTHALL MAURITIUS INVESTMENT L                              3188785                          1.43
FEDERATED KAUFMANN FUND                                      3009050                          1.35
RELIANCE CAPITAL TRUSTEE CO. LTD                             2642465                          1.19
AGF EMERGING MARKETS FUND                                    2352063                          1.06
TOTAL                                                       54751334                         24.59

Top Ten debenture Holders as on March 31, 2010

Sr.                     Name of Debenture holder                                No of Debentures
No.
 1    Life Insurance Corporation of India                                                    2,500
 2    Axis Bank Ltd                                                                          2,250

                                               156
3    Central Bank Of India                                            300
4    Allahabad Bank                                                   200
5    United India Insurance Co Ltd                                    200
6    Birla Sunlife Insurance Co Ltd                                   150
7    Bank Of Maharashtra                                              150
8    Dena Bank                                                        100
9    Chattisgarh State Electricity Board Gratuity and Pension Fund    100
     Trust
10   General Insurance Corporation Of India                             50
     Total                                                           6,000




                                               157
            TERMS AND CONDITIONS OF THE NON-CONVERTIBLE DEBENTURES

The following other than the words in italics constitutes the Terms and Conditions of the Non-
Convertible Debentures and will appear on the reverse of each NCD Consolidated Certificate (as
defined below):

The issue of 1760, 10.75 per cent. secured redeemable non-convertible debentures of the face value of
Rs. 1,000,000 each due each due in 3 yearly installments starting at the end of 4th year to the end of 6th
year, in the ratio of 35:35:30 (the “NCDs”) of Bharat Forge Limited (the “Issuer”), was authorized by
a resolution of the Board of Directors of the Issuer on January 12, 2010. The NCDs are constituted and
will be secured by a trust deed (the “Debenture Trust Deed”) to be executed between the Issuer and
Bank of Maharashtra as trustee for the holders of the NCDs (the “Debenture Trustee”), which term
shall, where the context so permits, include all other persons for the time being acting as Debenture
Trustee. The statements in these terms and conditions (the “Conditions”) include summaries of, and
are subject to, the detailed provisions of the Debenture Trust Deed. The holders of the NCDs are
entitled to the benefit of the Debenture Trust Deed and are bound by, and are deemed to have notice of,
all the provisions of the Debenture Trust Deed.

1.         Status

           The NCDs constitute direct and secured obligations of the Issuer and shall rank pari passu
           inter se and without any preference or priority among themselves. Subject to any obligations
           preferred by mandatory provisions of the law prevailing from time to time, the NCDs shall
           also, as regards the principal amount of the NCDs, interest, redemption premium and all other
           monies secured in respect of the NCDs, rank pari passu with all other present direct and
           secured obligations of the Issuer. The claims of the NCD Holders shall be superior to the
           claims of the unsecured creditors of the Issuer (subject to any obligations preferred by
           mandatory provisions of the law prevailing from time to time).

2.         Form, Denomination, Title and Listing

       Form

(i)             The allotment of NCDs in this Issue shall only be in a dematerialized form (i.e., not in the
       form of physical certificates but be fungible and be represented by the statement issued through the
       electronic mode). The Issuer has made depository arrangements with National Securities
       Depository Limited (“NSDL”) and Central Depository Services (India) Limited (“CDSL”, and
       together with NSDL, the “Depositories”) for the issue of NCDs in dematerialised form. Subject to
       Condition 2.1.2, the NCD holders will hold the NCDs in dematerialised form and deal with the
       same in accordance with the provisions of the Depositories Act, 1996 /rules as notified by the
       Depositories from time to time.

(ii)            The NCDs holders may rematerialize the NCDs at any time after allotment, in accordance
       with the provisions of the Depositories Act, 1996 /rules as notified by the Depositories from time
       to time.

       Denomination

           The denomination of each NCD is Rs.1,000,000.

           In case of NCDs that are rematerialized and held in physical form, the Issuer will issue one
           certificate to the NCD holder for the aggregate amount of NCDs that are rematerialized and
           held by such NCD holder (each such certificate a “NCD Consolidated Certificate”). In
           respect of the NCD Consolidated Certificates, the Issuer will, upon receipt of a request from
           the NCD holder within 5 business days of such request, split such NCD Consolidated
           Certificates into smaller denominations in accordance with the Articles of Association, subject
           to a minimum denomination of one NCD (“Market Lot”). No fees would be charged for
           splitting any NCD Consolidated Certificates; however, stamp duty payable, if any, would be
           borne by the NCD holder. The request for split of a NCD Consolidated Certificate should be
           accompanied by the original NCD Consolidated Certificate which will, upon issuance of the
           split NCD Consolidated Certificates, be cancelled by the Issuer.

                                                     158
       Title

           In case of: (i) NCDs held in the dematerialized form, the person for the time being appearing
           in the register of beneficial owners of a Depository as the holder of an NCD, and (ii) NCDs
           held in physical form, the person for the time being appearing in the Register of NCD holders
           as the holder of an NCD shall be treated for all purposes by the Issuer, the Debenture Trustee,
           the Depositories and all other persons dealing with such person as the holder thereof and its
           absolute owner for all purposes (whether or not it is overdue and regardless of any notice of
           ownership, trust or any interest in it or any writing on, theft or loss of the NCD Consolidated
           Certificate issued in respect of the Warrant and no person will be liable for so treating the
           holder. In these Conditions, “NCD holder” and “holder” means the person in whose name an
           NCD is registered.

           Title to the NCDs shall pass only by transfer and registration as described in Condition 3.

       Listing

           The NCDs will be listed on the Wholesale Debt Market segments of the National Stock
           Exchange of India Limited (the “NSE”) and the Bombay Stock Exchange Limited (the “BSE”
           and together with the NSE, the “Stock Exchanges”).

3.         Transfers of NCDs; Issue of NCD Consolidated Certificates

       Register

           The Issuer shall maintain at its registered office (or such other place as permitted by law) a
           register of NCD holders (the “Register of NCD holders”) containing such particulars as
           required by Section 152 of the Companies Act. In terms of Section 152A of the Companies
           Act, the Register of NCD holders maintained by a Depository for any NCDs in dematerialized
           form under Section 11 of the Depositories Act shall be deemed to be a Register of NCD
           holders for the purposes of this Condition 3.1.

       Transfers

           Subject to Conditions 3.3 and 3.4:

(i)             In case NCDs held in the dematerialized form, transfers of NCDs may be effected only
       through the Depository(ies) through which such NCDs to be transferred are held, in accordance
       with the provisions of the Depositories Act, 1996 /rules as notified by the Depositories from time
       to time.

(ii)            In case of NCDs held in physical form, transfers of NCDs may be effected only by
       delivery of the NCD Consolidated Certificate issued in respect of that NCD, with the form of
       transfer on the back thereof duly completed and signed by the holder or his duly authorized
       attorney, to the specified office of the Registrar. No transfer of title of an NCD will be valid unless
       and until entered on the Register of NCD holders.

       No transfer except on Stock Exchange for one year

       The NCDs shall not be sold for a period of one year from the date of Allotment except on the floor
       of the Stock Exchanges.

       Transfer after any record date for interest payment or the Maturity Date

       (i)     If a request for transfer of the NCD is not received by the Registrar before any Record
       Date for Interest Payment (as defined in Condition 6.1.2), the interest payable on such Interest
       Payment Date (as defined in Condition 4.1) shall be paid to the seller and not to the buyer.

       (ii)     If a request for transfer of the NCD is not received by the Registrar before the Maturity
       Date, the redemption proceeds of the NCDs shall be paid to the seller and not to the buyer.


                                                      159
             In such cases, any claims shall be settled inter se between the parties and no claim or action shall
             lie against the Issuer.

             Formalities Free of Charge

             Registration of a transfer of NCDs and issuance of new NCD Consolidated Certificates will be
             effected without charge by or on behalf of the Issuer, but upon payment (or the giving of such
             indemnity as the Issuer may require) in respect of any tax or other governmental charges which
             may be imposed in relation to such transfer, and the Issuer being satisfied that the regulations
             concerning transfers of NCDs have been complied with.

        4.       Interest

             Interest Rate

(i)          The NCDs shall bear interest from and (including) the Date of Allotment at the rate of 10.75 per
             cent. per annum calculated by reference to the principal amount thereof and payable semi annually
             from the deemed date of allotment (each an “Interest Payment Date”). The interest will paid after
             the end of 6 months from the Date of Allotment (i.e on the first date of the 7th month).

(ii)         The first payment of interest will be made on October 28, 2010 in respect of the period from and
             including the Date of Allotment to (but excluding) October 28, 2010.

(iii)        The amount of interest payable on any Interest Payment Date shall be calculated on an actual-by-
             365 days a year basis on the face value of the principal amount outstanding on the NCDs. Interest
             shall be calculated on a 366 days’ basis in case of a leap year wherein the month of February has
             29 days.

(iv)         An additional interest at the rate of 2 per cent. over and above the rate of interest of 10.75 per cent.
             per annum shall be applicable in case of default in payment of interest or in redemption of the
             principal amount.

(v)          Interest shall be payable on the application money for the NCDs in respect of all valid applications,
             including refunds (subject to deduction of income tax under the provisions of the Income Tax Act,
             1961, or any other statutory modification or re-enactment thereof, as applicable) to all applicants
             from the date of realization of the cheque(s)/demand draft(s) up to one day prior to the deemed
             date of allotment. This interest shall be calculated on an actual-by-365 days a year basis. The
             interest on application money shall be paid along with the refund orders where entire subscription
             amount is refunded and where an applicant is allotted lesser NCDs than applied for, the interest on
             application money shall be paid along with the refund of excess amount paid on application.

             Accrual of Interest

             Each NCD shall cease to bear interest from the Maturity Date (as defined in Condition 5.1) unless,
             upon due presentation thereof, payment of principal is improperly withheld or refused, in which
             event interest will continue to accrue as provided in these Conditions.

        5.   Redemption and Cancellation

             Unless previously redeemed as provided herein, the Issuer will redeem the NCDs at par at
             35:35:30per cent. of their principal amount on April 28, 2014, April 28, 2015 and April 28, 2016
             (the “Maturity Date”). The Issuer or the NCD holder may not redeem the NCDs at any time prior
             to the Maturity Date, except as provided in Condition 7 below.

             The Issuer shall redeem the NCDs at par in three installments form the date of allotment as under:

             At the end of 4th year – 35%
             At the end of 5th year - 35%
             At the end of 6th year – 30%

             All NCDs that are redeemed will forthwith be cancelled.


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6.   Payments

     Principal, installment and Interest

     (i)           Payment of principal and instalments will be made to:

            (i)        in case of NCDs held in the dematerialized form, to the person appearing in the
                       register of beneficial owners of a Depository as the beneficial owner of an NCD; and

            (ii)       in case of NCDs held in physical form, to the person appearing in the Register of
                       NCD holders on the Maturity Date.

     (ii)          Payment of interest will be made to:

            (i)        in case of NCDs held in the dematerialized form, to the person appearing in the
                       register of beneficial owners of a Depository as the beneficial owner of an NCD; and

            (ii)       in case of NCDs held in physical form, to the person appearing in the Register of
                       NCD holders on the date falling 15 days prior (the “Record Date for Interest
                       Payment”) to the relevant Interest Payment Date.


Payment of principal, premium and interest will be made through the Electronic Clearing Service
(ECS), Direct Credit, Real Time Gross Settlement (RTGS) or National Electronic Funds Transfer
(NEFT) as per the applicable norms prescribed by the Reserve Bank of India.

Payments on Sundays and public holidays

If the Interst Date/ Installment Payment Date/ Maturity Date falls on a Sunday or a public holiday or
any other holiday in Mumbai notified in terms of the Negotiable Instruments Act, 1881, then the
principal, interest and installement, as the case may be, would be paid on the next working day and
would be the due date.

Such payment on the next working day shall not constitute non-payment on the due date.

Applicable laws

All payments are subject in all cases to any applicable laws and regulations, but without prejudice to
the provisions of Condition 5.2. No commissions or expenses shall be charged to the NCD holders in
respect of such payments.

Taxation

Payment of interest will be subject to deduction of income tax under the provisions of Income-Tax Act,
1961 or any statutory modification or re-enactment thereof for the time being in force or any other
duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of
India or any authority thereof or therein having power to tax.

7.          Security

     The principal amount of the NCDs, redemption premium and any other monies payable by the
     Issuer in respect of the NCDs will be secured by first pari passu charge on the asssets of the
     Company as identified in the Debenture Trust Deed such that a fixed asset cover of 1.25 times is
     maintained till the date of maturity. Consent has been taken from existing debenture holders for
     creation of first pari passu charge over the immoveable property.

     Security Creation

     Security will be created within 90 days from the date of allotment. A penal interest of 2% will be
     charged from date of allotment till the date of security creation, if the Company fails to create the
     security within the stipulated time. Further if the company fails to create the security after the

                                                          161
     extended time of 60 days, the investors reserves the right to re-call the investment/NCD along with
     all outstanding.

8.           Events of Default

     The Trustee at its discretion may, and if so required in writing by the holders of not less than 25
     per cent. in principal amount of the NCDs then outstanding or if so directed by an Extraordinary
     Resolution shall (subject to being indemnified and/or secured by the NCD holders to its
     satisfaction), give notice to the Issuer that the NCDs are, and they shall accordingly thereby
     become, due and repayable at their Early Redemption Amount if any of the events listed in Clause
     8.2 (each, an “Event of Default”) has occurred.

     Each of the following events shall be an Event of Default:

     (i)         Default is made in any payment of the principal or payment in respect of the NCDs or any
                 of them when due. In case of default in redemption when due, the Issuer shall be liable to
                 pay additional interest at 2% over and above the rate of 12.75 per cent. per annum;

     (ii)        Default is made in any payment of any interest in respect of the NCDs or any of them
                 when due and such failure continues for a period of 90 days. In case of default in payment
                 of interest when due, the Issuer shall be liable to pay additional interest at 2% over and
                 above the rate of 10.75 per cent. per annum;

     (iii)       The Issuer fails to create the security as identified in the Debenture Trust Deed within a
                 period of 90 days after allotment ("Initial Period"), the period stipulated for creation of
                 the security. In case of default in creation of security, the Issuer shall be liable to pay
                 penal interest at the rate of 2% from the date of allotment till the date of creation of the
                 security. If within an additional period of 90 days after the Initial Period, the Issuer fails
                 to create the security, the Debentures may be cancelled at the instance of the
                 Debentureholdes. In case of a recall, the Company shall pay all principal amount along
                 with interest accrued till date within a preiod of 30 days from the date on which the
                 Debentureholders recall the amount.

     (iv)        The Issuer does not perform or comply with one or more of its other obligations in
                 relation to the NCDs or the Debenture Trust Deed which default is incapable of remedy
                 or, if in the opinion of the Debenture Trustee capable of remedy, is not remedied within
                 15 days after written notice of such default shall have been given to the Issuer by the
                 Debenture Trustee;

     (v)         the Issuer is (or is deemed by law or a court to be) insolvent or bankrupt or unable to pay
                 (in the opinion of the Debenture Trustee) a material part of its debts, or stops, suspends or
                 threatens to stop or suspend payment of all or (in the opinion of the Debenture Trustee) a
                 material part of (or of a particular type of) its debts, proposes or makes any agreement for
                 the deferral, rescheduling or other readjustment of all or (in the opinion of the Debenture
                 Trustee) a material part of (or all of a particular type of) its debts (or of any part which it
                 will or might otherwise be unable to pay when due), proposes or makes a general
                 assignment or an arrangement or composition with or for the benefit of the relevant
                 creditors in respect of any of such debts or a moratorium is agreed or declared in respect
                 of or affecting all or any part of (or of a particular type of) the debts of the Issuer;

     (vi)        a distress, attachment, execution or other legal process is levied, enforced or sued out on
                 or against any material part of the property, assets or revenues of the Issuer and is not
                 discharged or stayed within 45 days;

     (vii)       an order is made or an effective resolution passed for the winding-up or dissolution,
                 judicial management or administration of the Issuer , or the Issuer ceases or threatens to
                 cease to carry on all or substantially all of its business or operations, except for the
                 purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or
                 consolidation on terms approved by an Extraordinary Resolution of the NCD holders;

     (viii)      an encumbrancer takes possession or an administrative or other receiver or an
                 administrator is appointed of the whole or (in the opinion of the Trustee) any substantial
                                                       162
                  part of the property, assets or revenues of the Issuer (as the case may be) and is not
                  released, stayed, quashed or dismissed within 60 days;

      (ix)        the Issuer commences a voluntary proceeding under any applicable bankruptcy,
                  insolvency, winding up or other similar law now or hereafter in effect, or consent to the
                  entry of an order for relief in an involuntary proceeding under any such law, or consent to
                  the appointment or taking possession by a receiver, liquidator, assignee (or similar
                  official) for any or a substantial part of its property or take any action towards its re-
                  organisation, liquidation or dissolution;

      (x)         it is or will become unlawful for the Issuer to perform or comply with any one or more of
                  its obligations under any of the NCDs or the Debenture Trust Deed;

      (xi)        any step is taken by governmental authority or agency or any other competent authority,
                  with a view to the seizure, compulsory acquisition, expropriation or nationalisation of all
                  or (in the opinion of the Trustee) a material part of the assets of the Issuer which is
                  material to the Issuer;

      (xii)       any event occurs which under the laws of any relevant jurisdiction has an analogous
                  effect to any of the events referred to in any of the foregoing paragraphs.

      If any Event of Default or any event which, after the notice, or lapse of time, or both, would
      constitute an Event of Default has happened, the Issuer shall, forthwith give notice thereof to the
      Debenture Trustee in writing specifying the nature of such event of default or of such event.

      The security created in favour of the Debenture Trustee under the Debenture Trust Deed shall
      become enforceable by the Debenture Trustee upon the occurrence of an Event of Default.

9.            Meetings of NCD holders, modification, waiver and substitution

              The regulations with regard to meetings of NCD holders will be in the form given in
              Annexures ‘C’ & ‘D’ to the Companies (Central Government’s) General Rules and Forms,
              1956, except as modified by these Conditions.

              The terms and conditions attached to the NCDs, including these Conditions, may be varied,
              modified or abrogated with the consent, in writing, of those holders of the NCDs who hold at
              least three-fourth of the outstanding amount of the NCDs or with the sanction accorded
              pursuant to a resolution passed at a meeting of the NCD holders under the series, provided that
              nothing in such consent or resolution shall be operative against the Issuer where such consent
              or resolution modifies or varies the terms and conditions of the NCDs which are not
              acceptable to the Issuer.

10.           Future Borrowings

              The Issuer shall be entitled, from time to time, to make further issue of NCDs and/or other
              debenture and /or such other instruments to the public, shareholders of the Issuer and/or avail
              of further financial and/or guarantee facilities from financial institutions, banks and/or any
              other person on the security or otherwise of its properties without the consent of the Debenture
              Trustee or the NCD holder if they maintain the asset cover of 1.25 times as stipulated all the
              times and with the confirmation of Debenture Trustee.

11.           Notices

              The notices to the NCD holders required to be given by the Issuer or the Trustees shall be
              deemed to have been given if sent by ordinary post to the sole/first allottee or sole/first
              registered holder of the NCD, as the case may be. All notices to be given by NCD holders
              shall be sent by registered post or by hand delivery to the Issuer at its Registered Office.

12.           Replacement of NCDs

              If any rematerialized NCD is mutilated, defaced, destroyed, stolen or lost, it may be replaced
              at the specified office of the Registrar upon payment by the claimant of such costs as may be
                                                       163
      incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer
      or the Registrar may require. Mutilated or defaced NCDs must be surrendered before
      replacements will be issued.

13.   Buy back of NCDs

      The Issuer may from time to time, subject to applicable law and necessary approvals, buyback
      NCDs on terms and conditions to be decided by the Issuer.

14.   Governing Law and Jurisdiction

      The NCDs and the Debenture Trust Deed are governed by, and shall be construed in
      accordance with, the laws of India and any dispute arising out of or in connection with the
      NCDs shall be subject to the exclusive jurisdiction of courts at Mumbai.

15.   Rating Rationale

      By its letter dated February 24, 2010, ICRA has assigned a rating of “LA+” (pronounced L
      Double A plus) with a stable outlook to this issue of NCDs by the Issuer. This rating indicates
      the. The rated instrument carries low credit risk.

      Set out below is an extract of the rating rationale adopted by ICRA:

      “The operating environment for Bharat Forge’s automotive business has seen improvement
      led by strong recovery in demand for commercial vehicles (CV) in the domestic market and
      initial signs of recovery in exports to the U.S. CV and passenger vehicle (PV) market. While
      the business outlook has improved for most of Bharat Forge’s business segments, the outlook
      on European auto segment remains weak in view of collapsing demand in the heavy CV
      sector, which dominates company’s exposure in the European market. While a stronger
      recovery in these markets may be some time away, company’s initiatives to develop new
      products for existing clients supported by manpower rationalisation efforts is likely to support
      improvement in financial performance in the medium term. The company’s non-automotive
      businesses are also showing signs of improvement though ramp up in production is likely to
      be gradual than immediate. The ratings continue to incorporate BFL’s dominant position in
      the global automotive forgings industry, especially in the CV chassis and engine component
      space, its large scale of operations, strong and diversified customer base across auto and non-
      automotive segments & geographies and its technical capabilities. With proposed investments
      in power sector equipment manufacturing through JVs with NTPC, Alstom and Areva, BFL is
      likely to remain in investment mode over the medium term despite its plans to cut back on
      capital expenditure in the existing automotive business.

      During the last 12 months, BFL’s overseas subsidiaries have been in a restructuring phase
      and have witnessed deterioration in performance owing to significant under utilization of
      capacities. Though weak operating performance of some of its subsidiaries and the stretched
      working capital cycle is likely to keep credit metrics moderately stretched, proposed equity
      infusion plans would provide some comfort. BFL has US$ 183.4 million of Foreign Currency
      Convertible Bonds (FCCBs) outstanding as on March 2009, of which US$ 103.5 is expected to
      be redeemed in April 2010. The liquidity profile in the short term remains comfortable with
      adequate cash; the company is also in the process of re-financing some of its obligations to
      longer dated maturity, which should improve the liquidity further.

      Scale, Market Position & Diversification – BFL is the second largest automotive forgings
      company in the world next to ThyssenKrupp with an installed capacity over 760,000 TPA. The
      company’s twelve manufacturing facilities are spread across India, Europe, North America
      and China. Together with its subsidiaries, the company supplies chassis and engine
      components for CV and Passenger Vehicles (PV) to all major global OEMs and Tier 1
      companies. Across CV and PV segments, top five OEMs in the world form part of BFL’s
      customer base. BFL’s global leadership position, large scale of operations (facilitating
      economies of scale), technological edge and diversified business model has enabled the
      company to emerge as a strong player in the global forging industry and maintain its
      competitive position. Over the years, BFL has significantly strengthened its business profile

                                               164
from being a supplier of chassis components in the domestic market to a company with
diversified product profile, geographic coverage and diverse clientele. BFL has achieved this
through mix of acquisitions (all in the international markets) and organic expansion in India.
BFL’s geographic diversification helped the company in FY 2007-08 when the adverse impact
of slowdown in the CV segment in US and India was offset to a great extent by growth in
European markets and passenger vehicle and non-automotive segments in the US. However,
while such diversification is a credit positive over the long term, due to the synchronized
nature of the recent economic downturn across developed economies, geographical
diversification have not helped BFL in recent periods.

BFL derives business from three continents – Europe, North America and Asia. Its presence in
Europe is through exports from India and its acquisitions – CDP Bharat Forge and Bharat
Forge Aluminiumtechnik in Germany, Bharat Forge Kilsta in Sweden and Bharat Forge
Scottish Stampings in Scotland. Its presence in North America is through Bharat Forge
America and exports from India. In China, BFL has joint venture with First Auto Works
(FAW) where it holds majority (52%) stake. Revenues from Europe constitute the bulk of
BFL’s consolidated revenues (52%) while India, U.S. and Asia Pacific (excluding India)
operations contributed 22%, 16% and 10% to overall sales, respectively in FY09. BFL is a
dominant player in the CV chassis and engine component space with significant market share
in Europe, North America and India. However, its market share in the passenger car
component space is marginal.

Revenue Growth – After a year of stable growth and benefits of diversification accruing in
FY08, BFL’s consolidated operating performance was severely impacted in FY09 on account
of sharp deterioration in demand from automotive sector across the geographies in which
BFL operates. The company’s standalone sales declined by around 30% (in tonnage terms) in
FY09 over the previous year. Most of BFL’s overseas subsidiaries operated at below 40%
capacity utilisation during the CY2009 with decline in volumes being sharp for some its
subsidiaries, whose prospects are largely linked to the European CV market.

The automotive industry in Europe, especially the CV segment is expected to remain subdued
over the medium term and considering BFL’s significant dependence on this segment, the
outlook continues to remain subdued in the near term. Weak demand from these markets
would however be partly mitigated by the improvement being witnessed by the domestic CV
industry on a sequential basis and initiation of non-automotive business.

Cost Structure & Profitability – Steel is the major raw material input in manufacturing
automotive components and constitutes around 45-50% of BFL’s cost structure. The company
procures steel from two of its group companies – Kalyani Steel and Kalyani Carpenter, which
together meet almost 85% of the BFL’s annual requirement. To safeguard its margins, the
company has price escalation clause in its contracts with all its major customers. However, in
the recent time, company’s exposure to foreign currency fluctuations through exports and
foreign currency debt has been key factor impacting margins. This coupled with large
unutilised capacities across manufacturing facilities had impacted profitability indicators in
FY09. In terms of profitability, company’s operating margins have again stabilised at around
22-23% in the current year on standalone level, which is in line with some of its peers in the
domestic market. At a consolidated level, as well there has been some improvement in margins
on a sequential basis. The company has implemented manpower rationalization efforts across
its overseas subsidiaries and in India, which is likely to start yielding results from Q1FY11.
While there is one-time redundancy cost in the current year, it will help company’s realign its
cost structure in line with expected future production levels.

Financial Policy & Capital Structure – In the non-automotive business, BFL has been in an
investment phase over the past two years. The company has invested approximately Rs. 5.6
billion during this period in setting capacities in the non-automotive space. The non-
automotive investments have been funded through a combination of FCCB proceeds and long-
term debt raised during the last year. As result of investments, revaluation of foreign currency
debt and weak internal accruals during the period, BFL’s credit profile has weakened during
the last financial year with increase in gearing to 1.52x (Mar-09) on consolidated basis. The
company’s coverage indicators have also deteriorated in comparison to the previous year as
evidenced by TD/OPBDIT of 4.6x and NCA/TD (%) of 10%. With investments in JVs for
power sector equipment taking concrete shape, BFL is likely to remain in investments phase
                                         165
        till FY13. To fund these significant investments, BFL has announced plans to raise equity
        capital as well in addition to long-term debt. Going forward, the financial profile will depend
        on improvement of the performance of overseas subsidiaries and investment plans.”

                      TERMS AND CONDITIONS OF THE WARRANTS

The following other than the words in italics are the Terms and Conditions of the Warrants and will
appear on the reverse of each Warrant Consolidated Certificate (as defined below).

The issue of 6,500,000 Warrants (the “Warrants”) each exchangeable for one (1) Equity Share of face
value of Rs. 2 each of Bharat Forge Limited, was authorized by a resolution of the Board of Directors
of the Issuer on January 12, 2010 and a resolution of the shareholders of the Issuer on February 27,
2010. The registered office of the Issuer is at Mundhwa, Pune Cantonment, Pune 411 036, Maharashtra
(the “Registered Office”).

1.      Status

        The Warrants constitute direct, unsubordinated, unconditional and unsecured obligations of
        the Issuer and shall at all times rank pari passu and without any preference or priority among
        themselves and shall also rank pari passu with all other present and future direct and
        unsubordinated, unconditional and unsecured obligations of the Issuer (subject to any
        obligations preferred by mandatory provisions of the law prevailing from time to time).

2.      Form, Denomination, Title and Listing

2.1     Form

        The allotment of Warrants in this Issue shall only be in a dematerialized form (i.e., not in the
        form of physical certificates and be represented by the statement issued through the electronic
        mode). The Issuer has made depository arrangements with National Securities Depository
        Limited (“NSDL”) and Central Depository Services (India) Limited (“CDSL”, and together
        with NSDL, the “Depositories”) for the issue of Warrants in dematerialised form. Subject to
        Condition 2.1.2, the Warrantholders will hold the Warrants in dematerialised form and deal
        with the same in accordance with the provisions of the Depositories Act, 1996 and the rules as
        notified by the Depositories from time to time.

        The Warrantholders may rematerialize the Warrants at any time after allotment, in accordance
        with the provisions of the Depositories Act, 1996 and the rules as notified by the Depositories
        from time to time.

        The Warrants are subject to the provisions of the Companies Act and the Memorandum of
        Association and Articles of Association of the Company. In addition, the Warrants shall also
        be subject to applicable laws, guidelines, notifications and regulations relating to the issue of
        capital and listing of securities issued from time to time by the Government of India, SEBI,
        RBI and other authorities.

2.2     Denomination

        Each Warrant is exchangeable for 1 Equity Share only at the Warrant Exercise Price.

        In case of Warrants that are rematerialized and held in physical form, the Issuer will issue one
        certificate to the Warrants holder for the aggregate amount of Warrants that are rematerialized
        and held by such Warrantholder (each such certificate, a “Warrant Consolidated
        Certificate”). In respect of the Warrant Consolidated Certificates, the Issuer will, upon receipt
        of a request from the Warrantholder within 5 business days of such request, split such Warrant
        Consolidated Certificates into smaller denominations in accordance with the Articles of
        Association, subject to a minimum denomination of one Warrant (“Market Lot”). No fees
        would be charged for splitting any Warrant Consolidated Certificate; however, stamp duty
        payable, if any, would be borne by the Warrantholder. The request for split of a Warrant
        Consolidated Certificate should be accompanied by the original Warrant Consolidated



                                                 166
      Certificate which will, upon issuance of the split Warrant Consolidated Certificates, be
      cancelled by the Issuer.

2.3   Title

      In case of: (i) Warrants held in the dematerialized form, the person for the time being
      appearing in the register of beneficial owners of a Depository as the holder of a Warrant, and
      (ii) Warrants held in physical form, the person for the time being appearing in the Register of
      Warrantholders as the holder of a Warrant shall be treated for all purposes by the Issuer, the
      Depositories and all other persons dealing with such person as the holder thereof and as its
      absolute owner for all purposes (whether or not it is overdue and regardless of any notice of
      ownership, trust or any interest in it or any writing on, theft or loss of the Warrant
      Consolidated Certificate issued in respect of the Warrant and no person will be liable for so
      treating the holders. In these Conditions, “Warrantholder” and “holder” means the person in
      whose name a Warrant is registered.

      Title to the Warrants shall pass only by transfer and registration as described in Condition 3.

2.4   Listing

      The Warrants are to be listed on the Bombay Stock Exchange Limited (the “BSE”), the
      National Stock Exchange of India Limited (the “NSE”) and the Pune Stock Exchange Limited
      (the “PSE”, and together with the BSE and the NSE, the “Stock Exchanges”).

3.    Transfers of Warrants; Issue of Warrant Consolidated Certificates

3.1   Register

      The Issuer shall maintain at its registered office (or such other place as permitted by law) a
      register of Warrantholders (the “Register of Warrantholders”). The Register of
      Warrantholders maintained by a Depository for any Warrants in dematerialised form shall be
      deemed to be a Register of Warrantholders for the purposes of this Condition 3.1.

3.2   Transfers

      Subject to Conditions 3.3 and 3.4:

      In case of Warrants held in the dematerialized form, transfers of Warrants may be effected
      only through the Depository(ies) through which such Warrants to be transferred are held, in
      accordance with the provisions of the Depositories Act, 1996 and rules as notified by the
      Depositories from time to time.

      In case of Warrants held in physical form, transfers of Warrants may be effected only by
      delivery of the Warrant Consolidated Certificate issued in respect of that Warrant, with the
      form of transfer on the back thereof duly completed and signed by the Warrantholder or his
      duly authorized attorney, to the specified office of the Registrar. No transfer of title of a
      Warrant will be valid unless and until entered on the Register of Warrantholders.

      Transfers of interests in the Warrants in the dematerialized form will be effected in
      accordance with the rules of the relevant Depositories.

      The Warrants have not been and will not be registered under the U.S. Securities Act of 1933,
      as amended, and may not be offered, sold or otherwise transferred in the United States absent
      registration or an exemption from registration under such act. The Warrants are not being
      offered or sold in the United States.

3.3   No transfer except on Stock Exchange for one year

      The Warrants shall not be sold for a period of one year from the date of Allotment except on
      the floor of the Stock Exchanges.

3.4   Restricted Transfer Period
                                                167
        No Warrantholder can require the transfer of a Warrant to be registered after any Exercise
        Notice has been delivered in respect of the Warrant.

3.5     Formalities Free of Charge

        Registration of a transfer of Warrants and issuance of new Warrant Consolidated Certificates
        will be effected without charge by or on behalf of the Issuer, but upon payment (or the giving
        of such indemnity as the Issuer may require) in respect of any tax or other governmental
        charges which may be imposed in relation to such transfer, and the Issuer being satisfied that
        the regulations concerning transfers of Warrants have been complied with.

4.      Rights of Warrantholders

4.1     Subject to Conditions 3.2, 3.3 and 3.4, the Warrants shall be transferable and transmittable in
        the same manner and to the same extent and be subject to the same restrictions and limitations
        and other related matters as in the case of Equity Shares.

4.2     The Warrantholders shall have no other rights or privileges except as expressly provided in
        these Conditions.

4.3     On exercise and subsequent allotment of Equity Shares, the Warrantholders shall enjoy the
        rights and privileges of equity shareholders of the Issuer and not of Warrantholders.

4.4     The Warrants shall not confer upon the holders thereof any right to receive any notice of the
        meeting of the Shareholders of the Issuer or Annual Report of the Issuer and or to attend/vote
        at any of the general meetings of the shareholders of the Issuer.

4.5     The Warrantholders shall not be entitled to any dividend, distribution or any other corporate
        benefits, which may be declared or announced by the Issuer from time to time, until such time
        that the Warrants are converted into the underlying Equity Shares in accordance with these
        Conditions.

5.      Exercise Right and Exercise Period

5.1     Exercise Right

5.1.1   Each Warrant entitles the Warrantholder to subscribe, at the option of the Warrantholder by
        way of exercise of the Warrant at any time during the Warrant Exercise Period (as defined
        below) at the Warrant Exercise Price (as adjusted in accordance with Condition 6), in the
        manner set forth in Condition 5.4 and otherwise on the terms and subject to this Condition 5,
        to one fully paid Equity Share (the “Exercise Right”).

5.1.2   The Exercise Right shall be available: (i) in case of Warrants held in the dematerialized form,
        to the person for the time being appearing in the register of beneficial owners of a Depository
        as the holder of a Warrant, and (ii) in case of Warrants held in physical form, to the person for
        the time being appearing in the Register of Warrantholders, at the time of exercise of the
        Exercise Right.

5.1.3   An Exercise Right may only be exercised in respect of one or more Warrants. Upon the valid
        exercise of Exercise Rights in relation to any Warrant and the fulfilment by the Issuer of all its
        obligations in respect thereof, the relevant Warrantholder shall have no further rights in
        respect of such Warrant and the obligations of the Issuer in respect of the Warrant shall be
        extinguished.

5.2     Warrant Exercise Period

5.2.1   The Exercise Right may be exercised, at the option of the Warrantholder thereof, at any time
        during normal business hours on and after April 29, 2010 up to 5:00 p.m. in Mumbai on April
        28, 2013 (but in no event thereafter) (the “Warrant Exercise Period”). Any Warrant which
        has not been exercised on or before 5:00 p.m. on April 28, 2013 will lapse, become void and
        cease to be valid and any amounts paid towards them to date will stand forfeited.
                                                  168
5.3     Warrant Exercise Price

        The holder for the time being of each Warrant will have the right, by way of exercise of the
        Exercise Right attaching to such Warrant, at any time during the Warrant Exercise Period, to
        subscribe for fully-paid Equity Shares at a price per Equity Share (the “Warrant Exercise
        Price”) equal to Rs. 272 or such adjusted amount as, in accordance with Condition 6, is
        applicable (disregarding any retroactive adjustment not then reflected in the Warrant Exercise
        Price, but without prejudice to the Issuer’s obligations in respect thereof) on the Warrant
        Exercise Date (as defined in Condition 5.4.1 (iv)).

        An Exercise Right may only be exercised in respect of one or more Warrants. If more than one
        Warrant held by the same holder is exercised at any one time by the same holder, the number
        of Equity Shares to be issued upon such exercise will be calculated on the basis of the
        aggregate number of Warrants to be exercised.


5.4     Procedure for Exercise of Warrants

5.4.1   Exercise Notice

        (i)     To exercise the Exercise Right, the Warrantholder thereof must complete, execute
                and deposit at his own expense during normal business hours at the registered office
                of the Issuer a notice of Exercise (a “Exercise Notice”) in the form obtainable during
                the Warrant Exercise Period from the registered office of the Issuer or the website of
                the Issuer at www.bharatforge.com. The form of the Exercise Notice may be
                obtained from any of the aforesaid locations during the period from the date of
                Allotment of Warrants until the termination of the Warrant Exercise Period. The duly
                completed Exercise Notice must be accompanied with: (i) a cheque/demand draft
                drawn in favour of the escrow account opened by the Company for this purpose
                payable at Mumbai for the aggregate amount of the Warrant Exercise Price in respect
                of all the Warrants sought to be converted pursuant to the Exercise Notice and the
                amounts specified in Condition 5.4.1(ii) (the “Other Costs” and together with the
                Warrant Exercise Price, the “Exercise Amount”); and (ii) (a) in case of Warrants
                held in the dematerialized form, a photocopy of the delivery instruction referred to in
                Condition 5.4.2, duly authenticated by the depository participant; or (b) in case of
                Warrants held in physical form, the Warrant Consolidated Certificate issued in
                respect of that Warrant, with the form of transfer on the back thereof duly completed
                and signed by the Warrantholder or his duly authorized attorney.

        (ii)    On the Warrant Exercise Date, the Warrantholder is also required to make the
                payment of:

                (a)       all (if any) such stamp, issue, registration or other similar taxes or duties
                          arising on exercise of the relevant Warrants in the place in which such
                          Warrants is or are deposited for exercise thereof or in consequence of the
                          delivery of Warrant Consolidated Certificates for the Equity Shares to be
                          issued on such exercise to or to the order of a person other than the
                          exercising Warrantholder or the person specified in the Exercise Notice as
                          his standing proxy or other nominee as the Issuer may request at the time of
                          the said deposit of the relevant Warrants; the expenses of, and the
                          submission of any necessary documents required in order to effect, dispatch
                          of certificates for Equity Shares and any other securities, property or cash to
                          be delivered upon exercise to a place other than the Registered Office of the
                          Issuer;

                (b)       If the amount received by the Issuer in respect of an exercising
                          Warrantholder’s purported payment of the Exercise Amount relating to all
                          of the relevant Warrants is less than the full amount of the Exercise Amount,
                          the Issuer shall not treat the amount so received or any part thereof as
                          payment of the Exercise Amount, or any part thereof and, accordingly, the
                          whole of such amount shall remain in a escrow account opened by the
                                                 169
                         Company for this purpose to be maintained by the Issuer unless and until a
                         further payment is made in an amount sufficient to cover the deficiency. If
                         the Issuer does not receive the payment of the Exercise Amount relating to
                         the exercise of particular Warrants within 14 days after the Exercise Date in
                         respect of such Warrants, the Issuer may (but is not obliged to), in its
                         discretion and without liability to itself return such Warrants and the
                         relevant Exercise Notice and refund the monies paid in respect of the
                         Exercise Amount to the exercising Warrantholder at the risk and expense of
                         such Warrantholder.

        (iii)   An Exercise Notice deposited outside the normal business hours or on a day which is
                not a business day at the place of the specified office of the Registrar shall for all
                purposes be deemed to have been deposited with the Registrar during the normal
                business hours on the next business day following such day.

        (iv)    The exercise date in respect of a Warrant (the “Warrant Exercise Date”) must fall at
                a time when the Exercise Right attaching to that Warrant is expressed in these
                Conditions to be exercisable and will be deemed to be the date of the surrender of the
                Warrant Consolidated Certificate in respect of such Warrant and delivery of such
                Exercise Notice. A Exercise Notice once delivered shall be irrevocable and may not
                be withdrawn unless the Issuer consents to such withdrawal.

5.4.2   Delivery of Equity Shares

        (i)     Upon exercise by a Warrantholder of its Exercise Right, the Issuer will, on or with
                effect from the relevant Exercise Date and within 15 days of the Warrant Exercise
                Date, cause the relevant securities account of the Warrantholder exercising his
                Exercise Right or of his/their nominee, to be credited with such number of relevant
                Equity Shares to be issued upon exercise and shall further cause the name of the
                concerned Warrantholder or its nominee to be registered accordingly, in the record of
                the beneficial holders of Equity Shares, maintained by the depository.

        (ii)    The allotment of Equity Shares pursuant to exercise of Warrants in this Issue shall
                only be in a dematerialized form (i.e., not in the form of physical certificates but be
                fungible and be represented by the statement issued through the electronic mode).
                The holders thereof will hold the Equity Shares so allotted in dematerialised form
                and deal with the same in accordance with the provisions of the Depositories Act,
                1996 and rules as notified by the Depositories from time to time.

        (iii)   The Equity Shareholders may rematerialize the Equity Shares at any time after
                allotment, in accordance with the provisions of the Depositories Act, 1996 and rules
                as notified by the Depositories from time to time.

        (iv)    All Equity Shares issued upon exercise of Warrants shall be fully-paid and non-
                assessable or shares of any class or classes resulting from any subdivision,
                consolidation or re-classification of those Equity Shares which as between
                themselves have no preference in respect of dividends or amounts payable in the
                event of any voluntary or involuntary liquidation or dissolution of the Issuer and shall
                entitle the holders thereof to participate in full in all dividends and other distributions
                paid or made on the Equity Shares the record date for which falls on or after the
                relevant Exercise Date. Such Equity Shares will in all other respects rank pari passu
                with the Equity Shares in issue on the relevant Exercise Date (except for any right the
                record date for which precedes such Exercise Date and any other right excluded by
                mandatory provisions of applicable law). The Equity Shares to be issued upon the
                exercise of the Exercise Right shall also be listed on the Stock Exchanges.

        (v)     If the Warrant Exercise Date in relation to any Warrant shall be on or after the record
                date for any issue, distribution, grant, offer or other event as gives rise to the
                adjustment of the Warrant Exercise Price pursuant to Condition 6, but before the
                relevant adjustment becomes effective under the relevant Condition, upon the
                relevant adjustment becoming effective, the Issuer shall procure the issue to the
                exercising Warrantholder (or in accordance with the instructions contained in the
                                                 170
                 Exercise Notice (subject to applicable exchange control or other laws or other
                 regulations)), such additional number of Equity Shares (in addition to the Equity
                 Shares issued on exercise of the relevant Warrants) as is equal to the number of
                 Equity Shares which would have been required to be issued on exercise of such
                 Warrant if the relevant adjustment to the Warrant Exercise Price had been made and
                 become effective on or immediately after the relevant record date.

        (vi)     If the Exercise Right in respect of more than one Warrant is exercised at any one time
                 such that Equity Shares to be issued on exercise are to be registered in the same
                 name, the number of such Equity Shares to be issued in respect thereof shall be
                 calculated on the basis of the aggregate number of such Warrants being so exercised
                 and rounded down to the nearest whole number of Equity Shares. Fractions of Equity
                 Shares will not be issued on exercise but the Issuer will, including without limitation
                 in the event of a consolidation or re-classification of Equity Shares by operation of
                 law or otherwise occurring after April 29, 2010 which reduces the number of Equity
                 Shares outstanding, the Issuer will upon exercise of the Warrants pay in cash (in INR
                 by means of a INR cheque drawn on a bank in Mumbai) the sum equal to such
                 portion of the Warrant Exercise Price of the Warrant or Warrants evidenced by the
                 Warrant Consolidated Certificate deposited in connection with the exercise of
                 Exercise Rights, as corresponds to any fraction of an Equity Share not issued if such
                 sum exceeds INR 10.00. Any such sum shall be paid not later than three business
                 days after the relevant Warrant Exercise Date.

6.      Adjustments to Warrant Exercise Price

        Pursuant to the provisions under the SEBI Regulations, the Warrant Exercise Price will be
        subject to adjustments in the following events (each an “Adjustment Event”):

6.1     Consolidation, Subdivision or Reclassification

        Adjustment: If and whenever there shall be an alteration to the nominal value of the Equity
        Shares as a result of consolidation, subdivision or reclassification, the Warrant Exercise Price
        shall be adjusted by multiplying the Warrant Exercise Price in force immediately before such
        alteration by the following fraction:


                                                   A
                                                   B

        Where:

        A        is the nominal amount of one Equity Share immediately after such alteration; and

        B        is the nominal amount of one Equity Share immediately before such alteration.

        Effective Date of Adjustment: Such adjustment shall become effective on the date the
        alteration takes effect or, in the case of an alteration to the nominal value of the Equity Shares
        as a result of consolidation, if a record date is fixed therefor immediately after such record
        date.

6.2     Capitalisation of Profits or Reserves

6.2.1   Adjustment: If and whenever the Issuer shall issue any Equity Shares credited as fully paid to
        the holders of Equity Shares (“Shareholders”) by way of capitalisation of profits or reserves
        (including any share premium account) including, Equity Shares paid up out of distributable
        profits or reserves and/or share premium account (except any Scrip Dividend) and which
        would not have constituted a Capital Distribution, the Warrant Exercise Price shall be adjusted
        by multiplying the Warrant Exercise Price in force immediately before such issue by the
        following fraction:

                                                   A

                                                  171
                                                   B

         Where:
                  A     is the aggregate nominal amount of the issued Equity Shares immediately
                        before such issue; and

                  B     is the aggregate nominal amount of the issued Equity Shares immediately after
                        such issue.

         Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of
         such Equity Shares or if a record date is fixed therefor, immediately after such record date.

6.2.2    Adjustment: In the case of an issue of Equity Shares by way of a Scrip Dividend where the
         Current Market Price of such Equity Shares on the date of the first public announcement of the
         terms of such Scrip Dividend exceeds the amount of the Relevant Cash Dividend or the
         relevant part thereof and which would not have constituted a Capital Distribution, the Warrant
         Exercise Price shall be adjusted by multiplying the Warrant Exercise Price in force
         immediately before the issue of such Equity Shares by the following fraction:

                                                 A+B
                                                 A+C

         Where:

         A        is the aggregate nominal amount of the issued Equity Shares immediately before such
issue;

         B        is the aggregate nominal amount of the Equity Shares issued by way of such Scrip
                  Dividend multiplied by a fraction of which (i) the numerator is the amount of the
                  whole, or the relevant part, of the Relevant Cash Dividend and (ii) the denominator is
                  the Current Market Price of the Equity Shares issued by way of Scrip Dividend in
                  respect of each existing Equity Share in lieu of the whole, or the relevant part, of the
                  Relevant Cash Dividend; and

        C         is the aggregate nominal amount of Equity Shares issued by way of such Scrip
Dividend;

         or by making such other adjustment as an Independent Investment Bank shall certify to the
         Warrantholders is fair and reasonable.

         Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of
         such Equity Shares or if a record date is fixed therefor, immediately after such record date.

6.3      Capital Distributions and Extraordinary Dividend

         Adjustment: If and whenever the Issuer shall pay or make any Capital Distribution to the
         Shareholders, the Warrant Exercise Price shall be adjusted by multiplying the Warrant
         Exercise Price in force immediately before such Capital Distribution by the following fraction:

                                                 A-B
                                                  A

         Where:

         A        is the Current Market Price of one Equity Share on the last Trading Day preceding the
                  date on which the Capital Distribution is publicly announced; and

         B        is the Fair Market Value on the date of such announcement of the portion of the
                  Capital Distribution attributable to one Equity Share.



                                                  172
      Effective Date of Adjustment: Such adjustment shall become effective on the date that such
      Capital Distribution is actually made or if a record date is fixed therefor, immediately after
      such record date. For the avoidance of doubt, when the Capital Distribution is by means of a
      Relevant Cash Dividend, only such portion of the cash dividend which exceeds the Threshold
      Percentage (the “excess portion”) shall be regarded as a Capital Distribution and only the
      excess portion shall be taken into account in determining the Fair Market Value of the portion
      of the Capital Distribution attributable to one Equity Share.

6.4   Rights Issues of Equity Shares or Options over Equity Shares

      Adjustment: If and whenever the Issuer shall issue Equity Shares to all or substantially all
      Shareholders as a class by way of rights, or issue or grant to all or substantially all
      Shareholders as a class by way of rights, of options, warrants or other rights to subscribe for or
      purchase or otherwise acquire any Equity Shares, in each case at less than 90 per cent. of the
      Current Market Price per Equity Share on the last Trading Day preceding the date of the
      announcement of the terms of the issue or grant, the Warrant Exercise Price shall be adjusted
      by multiplying the Warrant Exercise Price in force immediately before such issue or grant by
      the following fraction:

                                                A+B
                                                A+C

      Where:

      A        is the number of Equity Shares in issue immediately before such announcement;

      B         is the number of Equity Shares which the aggregate amount (if any) payable for the
                Equity Shares issued by way of rights or for the options or warrants or other rights
                issued by way of rights and for the total number of Equity Shares comprised therein
                would subscribe for or purchase or otherwise acquire at such Current Market Price
                per Equity Share; and

      C         is the aggregate number of Equity Shares issued or, as the case may be, comprised in
                the issue or grant.

      Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of
      such Equity Shares or issue or grant of such options, warrants or other rights (as the case may
      be) or where a record date is set, the first date on which the Equity Shares are traded ex-rights,
      ex-options or ex-warrants (as the case may be).

6.5   Rights Issues of Other Securities

      Adjustment: If and whenever the Issuer shall issue any securities (other than Equity Shares,
      non-convertible debentures or options, warrants or other rights to subscribe for or purchase or
      otherwise acquire any Equity Shares) to all or substantially all Shareholders as a class by way
      of rights or grant to all or substantially all Shareholders as a class by way of rights, of options,
      warrants or other rights to subscribe for or purchase any securities (other than Equity Shares
      non-convertible debentures or options, warrants or other rights to subscribe or purchase or
      otherwise acquire Equity Shares), the Warrant Exercise Price shall be adjusted by multiplying
      the Warrant Exercise Price in force immediately before such issue or grant by the following
      fraction:

                                                A-B
                                                 A

      Where:

      A        is the Current Market Price of one Equity Share on the last Trading Day preceding
               the date on which such issue or grant is publicly announced; and



                                                 173
      B        is the Fair Market Value on the date of such announcement of the portion of the rights
               attributable to one Equity Share.

      Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of
      such Equity Shares or issue or grant of such options, warrants or other rights (as the case may
      be) or where a record date is set, the first date on which the Equity Shares are traded ex-rights,
      ex-options or ex-warrants, as the case may be.

6.6   Issues at less than Current Market Price

      Adjustment: If and whenever the Issuer shall issue (otherwise than as mentioned in Condition
      6.4 (Rights Issues of Equity Shares or Options over Equity Shares) above) wholly for cash any
      Equity Shares (other than Equity Shares issued upon the exercise of the Exercise Rights or on
      the exercise of any other rights of conversion into, or exchange or subscription for, Equity
      Shares) or shall issue or grant (otherwise than as mentioned in Condition 6.4 (Rights Issues of
      Equity Shares or Options over Equity Shares) above) wholly for cash any options, warrants or
      other rights to subscribe or purchase or otherwise acquire Equity Shares in each case at a price
      per Equity Share which is less than the Current Market Price on the last Trading Day
      preceding (1) in all cases other than a Preferential Allotment of Equity Shares the date on
      which the Board decides to open the issue; and (2) in case of a Preferential Allotment, the date
      on which the shareholders approve such issue, the Warrant Exercise Price shall be adjusted by
      multiplying the Warrant Exercise Price in force immediately before such issue by the
      following fraction:

                                               A+B
                                                C

      Where:

      A         is the number of Equity Shares in issue immediately before the issue of such
                additional Equity Shares or the grant of such options, warrants or other rights to
                subscribe for or purchase or otherwise acquire any Equity Shares;

      B         is the number of Equity Shares which the aggregate consideration receivable (if any)
                for the issue of such additional Equity Shares would purchase at such Current
                Market Price per Equity Share; and

      C         is the number of Equity Shares in issue immediately after the issue of such
                additional Equity Shares.

      References to additional Equity Shares in the above formula shall, in the case of an issue or
      grant by the Issuer of options, warrants or other rights to subscribe or purchase or otherwise
      acquire Equity Shares, mean such Equity Shares to be issued, or otherwise made available,
      assuming that such options, warrants or other rights are exercised in full at the initial exercise
      price (if applicable) on the date of issue or grant of such options, warrants or other rights.
      Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of
      such additional Equity Shares or, as the case may be, the issue or grant of such options,
      warrants or other rights.

6.7   Other Issues at less than Current Market Price

      Adjustment: Save in the case of an issue of securities arising from a conversion or exchange of
      other securities in accordance with the terms applicable to such securities themselves falling
      within this Condition 6.7 (Other Issues at less than Current Market Price), if and whenever
      the Issuer (otherwise than as mentioned in Conditions 6.4 (Rights Issues of Equity Shares or
      Options over Equity Shares), 6.5 (Rights Issues of Other Securities) or 6.6 (Issues at less than
      Current Market Price)), or (at the direction or request of or pursuant to any arrangements with
      the Issuer) any other company, person or entity shall issue any securities (other than the
      Warrants) which by their terms of issue carry rights of conversion into, or exchange or
      subscription for, Equity Shares to be issued by the Issuer on conversion, exchange or
      subscription at a consideration per Equity Share which is less than the Current Market Price

                                                174
      on the last Trading Day preceding the (1) in all cases other than a Preferential Allotment of
      Equity Shares the date on which the Board decides to open the issue; and (2) in case of a
      Preferential Allotment, the date on which the shareholders approve such issue,, the Warrant
      Exercise Price shall be adjusted by multiplying the Warrant Exercise Price in force
      immediately before such issue by the following fraction:

                                              A+B
                                              A+C

      Where:

      A         is the number of Equity Shares in issue immediately before such issue;

      B         is the number of Equity Shares which the aggregate consideration (if any) receivable
                by the Issuer for the Equity Shares to be issued, or otherwise made available, on
                conversion or exchange or on exercise of the right of subscription attached to such
                securities would purchase at such Current Market Price per Equity Share; and

      C         is the maximum number of Equity Shares to be issued on conversion or exchange of
                such securities or on the exercise of such rights of subscription attached thereto at
                the initial conversion, exchange or subscription price or rate.

      Effective Date of Adjustment: Such adjustment shall become effective on the date of issue of
      such securities.

6.8   Modification of Rights of Conversion etc.

      Adjustment: If and whenever there shall be any modification of the rights of conversion,
      exchange or subscription attaching to any such securities as are mentioned in Condition 6.7
      (Other Issues at less than Current Market Price) (other than in accordance with the terms of
      such securities) so that the consideration per Equity Share (for the number of Equity Shares
      available on conversion, exchange or subscription following the modification) is reduced and
      is less than the Current Market Price on the last Trading Day preceding the date of
      announcement of the terms for such modification, the Warrant Exercise Price shall be adjusted
      by multiplying the Warrant Exercise Price in force immediately before such modification by
      the following fraction:

                                                  A+B
                                                  A+C

      Where:

      A         is the number of Equity Shares in issue immediately before such modification;

      B         is the number of Equity Shares which the aggregate consideration (if any) receivable
                by the Issuer for the Equity Shares to be issued, or otherwise made available, on
                conversion or exchange or on exercise of the right of subscription attached to the
                securities, in each case so modified, would purchase at such Current Market Price
                per Equity Share or, if lower, the existing conversion, exchange or subscription price
                of such securities; and

      C         is the maximum number of Equity Shares to be issued, or otherwise made available,
                on conversion or exchange of such securities or on the exercise of such rights of
                subscription attached thereto at the modified conversion, exchange or subscription
                price or rate but giving credit in such manner as an Independent Investment Bank,
                consider appropriate (if at all) for any previous adjustment under this Condition 6.8
                (Modification of Rights of Conversion etc.) or Condition 6.7 (Other Issues at less
                than Current Market Price).

      Effective Date of Adjustment: Such adjustment shall become effective on the date of
      modification of the rights of conversion, exchange or subscription attaching to such securities.

                                               175
6.9    Other Offers to Shareholders

       Adjustment: If and whenever the Issuer or (at the direction or request of or pursuant to any
       arrangements with the Issuer) any other company, person or entity issues, sells or distributes
       any securities in connection with which offer the Equity Shareholders generally (meaning for
       the purposes of these presents the holders of at least 60 per cent. of Equity Shares outstanding
       at the time such offer is made) are entitled to participate in arrangements whereby such
       securities may be acquired by them (except where the Warrant Exercise Price falls to be
       adjusted under Condition 6.4 (Rights Issues of Equity Shares or Options over Equity Shares),
       Condition 6.5 (Rights Issues of Other Securities), Condition 6.6 (Issues at less than Current
       Market Price) or Condition 6.7 (Other Issues at less than Current Market Price)), the Warrant
       Exercise Price shall be adjusted by multiplying the Warrant Exercise Price in force
       immediately before such issue by the following fraction:

                                               A-B
                                                A

       Where:

       A        is the Current Market Price of one Equity Share on the last Trading Day preceding
                the date on which such issue is publicly announced; and

       B        is the Fair Market Value on the date of such announcement of the portion of the rights
                attributable to one Equity Share.

       Effective Date of Adjustment: Such adjustment shall become effective on the date of issue,
       sale or distribution of the securities.

6.10   Delisting

       In the event the Equity Shares are no longer listed or admitted to trading on the BSE and NSE
       (a “Delisting”) or if either of the Stock Exchanges is notified of a proposed open offer in
       relation to a Delisting, the Warrant Exercise Price shall be adjusted to the amount representing
       the difference between the Floor Price and the Warrant Issue Price.

6.11   Other Events

       If the Issuer determines that an adjustment should be made to the Warrant Exercise Price as a
       result of one or more events or circumstances not referred to in this Condition 6 (Adjustments
       to Warrant Exercise Price), the Issuer shall, at its own expense, consult an Independent
       Investment Bank, to determine as soon as practicable what adjustment (if any) to the Warrant
       Exercise Price is fair and reasonable to take account thereof, if the adjustment would result in
       a reduction in the Warrant Exercise Price, and the date on which such adjustment should take
       effect and upon such determination by the Independent Investment Bank such adjustment (if
       any) shall be made and shall take effect in accordance with such determination, provided that
       where the circumstances giving rise to any adjustment pursuant to this Condition 6
       (Adjustments to Warrant Exercise Price) have already resulted or will result in an adjustment
       to the Warrant Exercise Price or where the circumstances giving rise to any adjustment arise
       by virtue of circumstances which have already given rise or will give rise to an adjustment to
       the Warrant Exercise Price, such modification (if any) shall be made to the operation of the
       provisions of this Condition 6 (Adjustments to Warrant Exercise Price) as may be advised by
       the Independent Investment Bank to be in their opinion appropriate to give the intended result.

       For the purposes of these Conditions:

       “Alternative Stock Exchange” means at any time, in the case of the Equity Shares, if they are
       not at that time listed and traded on at least one of the Stock Exchanges, the principal stock
       exchange or securities market on which the Shares are then listed or quoted or dealt in;




                                                176
“Capital Distribution” means any dividend or distribution (whether of cash or of assets in
specie) by the Issuer for any financial period (whenever paid or made and however described)
declared after the Issue Date (and for these purposes a distribution of assets in specie includes
without limitation an issue of shares or other securities credited as fully or partly paid (other
than Equity Shares credited as fully paid to the extent an adjustment to the Warrant Exercise
Price is made in respect thereof under Condition 6.2.1 by way of capitalisation of reserves)
and including any Scrip Dividend to the extent of the Relevant Cash Dividend unless:

(i) (and to the extent that) in the case of a Relevant Cash Dividend or a distribution in specie,
when taken together with any other dividend or distribution previously made or paid in respect
of the same fiscal year, it is not made or paid at a rate exceeding 37.5 per cent. of the
standalone distributable profits of the Issuer (the “Threshold Percentage”); or

(ii) (and to the extent that) in the case of a distribution in specie only it does not, when taken
together with any other dividend or distribution previously made or paid in respect of all
periods after March 31, 2009, exceed the aggregate of the consolidated net profits for such
periods (less the aggregate of any consolidated net losses) attributable to Shareholders after
deducting minority interests and preference dividends (if any) but (1) deducting any amounts
in respect of any asset previously credited to the Issuer’s reserves (in respect of any period or
date up to and including March 31, 2009) pursuant to any revaluation of such asset, where
amounts arising on the disposal of such asset have contributed to such profits and (2)
deducting any exceptional and extraordinary items, (and for the avoidance of doubt after
excluding any amount arising as a result of any reduction in registered capital, share premium
account or capital redemption reserve), in each case calculated by reference to the audited
consolidated profit and loss accounts for such periods of the Issuer; or

(iii) it comprises a purchase or redemption of Equity Shares by or on behalf of the Issuer,
where the weighted average price (before expenses) on any one day in respect of such
purchases does not exceed the Current Market Price of the Equity Shares on the NSE or the
equivalent quotation sheet of an Alternative Stock Exchange, as the case may be, by more than
5 per cent. either (1) on that date, or (2) where an announcement has been made of the
intention to purchase Equity Shares at some future date at a specified price, on the Trading
Day immediately preceding the date of such announcement and, if in the case of either (1) or
(2), the relevant day is not a Trading Day, the immediately preceding Trading Day.

In making any such calculation, such adjustments (if any) shall be made as an Independent
Investment Bank may consider appropriate to reflect (a) any consolidation or subdivision of
the Equity Shares, (b) issues of Shares by way of capitalisation of profits or reserves, or any
like or similar event or (c) the modification of any rights to dividends of Equity Shares.
 “Closing Price” for the Equity Shares for any Trading Day shall be the last reported
transaction price on the NSE or, as the case may be, the equivalent quotation sheet of an
Alternative Stock Exchange for such day.

“Current Market Price” means, in respect of a Equity Share at a particular date, the
arithmetic average of the Closing Prices for one Equity Share (being an Equity Share carrying
full entitlement to dividend) for the ten consecutive Trading Days ending on the Trading Day
immediately preceding such date; provided that if at any time during the said ten Trading Day
period the Equity Shares shall have been quoted ex-dividend and during some other part of
that period the Equity Shares shall have been quoted cum-dividend then:

(i)      if the Equity Shares to be issued in such circumstances do not rank for the dividend
         in question, the quotations on the dates on which the Equity Shares shall have been
         quoted cum-dividend shall for the purpose of this definition be deemed to be the
         amount thereof reduced by an amount equal to the Fair Market Value of the amount
         of that dividend per Equity Share; or

(ii)     if the Equity Shares to be issued in such circumstances rank for the dividend in
         question, the quotations on the dates on which the Equity Shares shall have been
         quoted ex-dividend shall for the purpose of this definition be deemed to be the
         amount thereof increased by the Fair Market Value of the amount of that dividend
         per Equity Share;

                                          177
       and provided further that if the Equity Shares on each of the said ten Trading Days have been
       quoted cum-dividend in respect of a dividend which has been declared or announced but the
       Equity Shares to be issued do not rank for that dividend, the quotations on each of such dates
       shall for the purpose of this definition be deemed to be the amount thereof reduced by an
       amount equal to the Fair Market Value of that dividend per Equity Share.

       “Fair Market Value” means, with respect to any assets, security, option, warrants or other
       right on any date, the fair market value of that asset, security, option, warrant or other right as
       determined by an Independent Investment Bank provided that (i) the fair market value of a
       cash dividend paid or to be paid per Equity Share shall be the amount of such cash dividend
       per Equity Share determined as at the date of announcement of such dividend; (ii) where
       options, warrants or other rights are publicly traded in a market of adequate liquidity (as
       determined by such Independent Investment Bank) the fair market value of such options,
       warrants or other rights shall equal the arithmetic mean of the daily closing prices of such
       options, warrants or other rights during the period of five trading days on the relevant market
       commencing on the first such trading day such options, warrants or other rights are publicly
       traded.

       “Independent Investment Bank” means an independent investment bank of international
       repute (acting as expert) selected by the Issuer and notified to the Warrantholders in
       accordance with Condition 10.

       “Preferential Allotment” shall mean preferential allotment under Chapter VII of the SEBI
       ICDR Regulations, as may amended, modified or replaced.

       “Relevant Cash Dividend” means any cash dividend specifically declared by the Issuer.

       “Relevant Stock Exchange” means at any time, in respect of the Equity Shares, the Stock
       Exchanges or the Alternative Stock Exchange.

       “Scrip Dividend” means any Equity Shares issued in lieu of the whole or any part of any
       Relevant Cash Dividend being a dividend which the Shareholders concerned would or could
       otherwise have received and which would not have constituted a Capital Distribution (and for
       the avoidance of doubt to the extent that no adjustment is to be made under Condition 6.3 in
       respect of the amount by which the Current Market Price of the Equity Shares exceeds the
       Relevant Cash Dividend or part thereof) but without prejudice to any adjustment required in
       such circumstances to be made under Condition 6.2.

       “Trading Day” means a day when the Stock Exchanges or, as the case may be an Alternative
       Stock Exchange is open for trading business, provided that if no Closing Price is reported for
       one or more consecutive dealing days such day or days will be disregarded in any relevant
       calculation and shall be deemed not to have been dealing days when ascertaining any period
       of trading days.

6.12   The Warrant Exercise Price may not be reduced so that, on exercise of Warrants, Equity
       Shares would fall to be issued at a discount to their par value.

6.13   Minor Adjustments

       On any adjustment, the relevant Warrant Exercise Price, if not an integral multiple of one
       Rupee, shall be rounded down to the nearest Rupee. No adjustment shall be made to the
       Warrant Exercise Price where such adjustment (rounded down if applicable) would be less
       than one per cent. of the Warrant Exercise Price then in effect. Any adjustment not required to
       be made, and any amount by which the Warrant Exercise Price has not been rounded down,
       shall be carried forward and taken into account in any subsequent adjustment. Notice of any
       adjustment shall be given to Warrantholders in accordance with Condition 9 (Notices) as soon
       as practicable after the determination thereof.

6.14   Cumulative Adjustments



                                                 178
        Where more than one event which gives or may give rise to an adjustment to the Warrant
        Exercise Price occurs within such a short period of time that in the opinion of an Independent
        Investment Bank, the foregoing provisions would need to be operated subject to some
        modification in order to give the intended result, such modification shall be made to the
        operation of the foregoing provisions as may be advised by such Independent Investment
        Bank to be in their opinion appropriate in order to give such intended result.

6.15    Employee Stock Option

        No adjustment will be made to the Warrant Exercise Price when Equity Shares or other
        securities (including rights or options) are issued, offered or granted to employees (including
        directors) of the Issuer or any subsidiary of the Issuer or any other eligible persons pursuant to
        any Employee Stock Option Scheme (and which Employee Stock Option Scheme is in
        compliance with the listing rules of the Stock Exchanges).

6.16    Notice of Change in Exercise Price

        The Issuer shall give notice to the Warrantholders in accordance with Condition 10 of any
        change in the Warrant Exercise Price. Any such notice relating to a change in the Warrant
        Exercise Price shall set forth the event giving rise to the adjustment, the Warrant Exercise
        Price prior to such adjustment, the adjusted Warrant Exercise Price and the effective date of
        such adjustment.

        For the avoidance of doubt, nothing in this Condition 6 shall obligate the Issuer to disclose
        any information which is not public information to the Warrantholders or where it is not
        legally permissible to disclose such information.

6.17    Minimum Warrant Exercise Price

        Notwithstanding the provisions of this Condition, the Warrant Exercise Price shall not be
        reduced (except pursuant to Conditions 6.1, 6.2, 6.4, 6.5 and 6.11) to an amount such that the
        sum of the Warrant Issue Price and the adjusted Warrant Exercise Price is less than the Floor
        Price or such other reduced floor price as may be permitted by the Stock Exchanges as a result
        of any adjustment made hereunder, and in such case the reduction shall be limited to the Floor
        Price or such other reduced floor price as may be permitted by the Stock Exchanges.

6.18    Reference to “fixed”

        Any reference in these Conditions to the date on which a consideration is "fixed" shall, where
        the consideration is originally expressed by reference to a formula which cannot be expressed
        as an actual cash amount until a later date, be construed as a reference to the first day on
        which such actual cash amount can be ascertained.

6.19    Miscellaneous

6.1.1   No adjustment will be made to the Warrant Exercise Price when any Equity Shares are issued
        following the exercise of the Warrants.

6.1.2   No adjustment involving an increase in the Warrant Exercise Price in this Condition 6
        (Adjustments to Warrant Exercise Price) will be made, except in the case of a consolidation of
        the Equity Shares as referred to in Condition 6.1 (Consolidation, Subdivision or
        Reclassification) above.

6.20    Consolidation, Amalgamation or Merger of the Issuer

        In the case of any consolidation, arrangement, amalgamation or merger of the Issuer with any
        other corporation (other than a consolidation, amalgamation or merger in which the Issuer is
        the continuing corporation), or in the case of any sale or transfer of all, or substantially all, of
        the assets of the Issuer, or in the case of any creation of a holding company owning all shares
        of the Issuer by way of exchange for all outstanding shares of the Issuer or transfer of all the
        outstanding shares of the Issuer into the holding Issuer, the Issuer shall forthwith notify the
        Warrantholders of such event in accordance with Condition 9 (Notices) and (so far as legally
                                                   179
        possible) cause the corporation or the holding company resulting from such consolidation,
        amalgamation, merger, share exchange or share transfer or the corporation which shall have
        acquired such assets, as the case may be, to execute such instruments or other documents or
        assurances as may be necessary legally to ensure that the holder of each Warrant then
        remaining unexercised shall have the right (during the period such Warrant shall remain
        unexercised) by exercising such Warrant to be issued the class and amount of shares and other
        securities and property receivable upon such consolidation, amalgamation, merger, sale,
        transfer, share exchange or share transfer by a holder of the number of Equity Shares which
        would have become liable to be issued upon exercise of such Warrant immediately prior to
        such consolidation, amalgamation, merger, sale, transfer, share exchange or share transfer
        (such instruments or other documents or assurances to provide for adjustments which shall be
        as nearly equivalent as may be practicable to the adjustments provided for in the foregoing
        provisions of this Condition 6 (Adjustments to Warrant Exercise Price)) and the above
        provisions of this Condition 6 (Adjustments to Warrant Exercise Price) shall apply in the same
        way to any subsequent consolidations, amalgamations, mergers, sales, transfers, share
        exchanges or share transfers. If the Issuer is a party to any transaction referred to above in
        which it is not the continuing corporation, it shall use its best endeavours to obtain all consents
        that may be necessary or appropriate under law to enable the continuing corporation to give
        effect to the Warrants.

7.      Undertakings

7.1     The Issuer undertakes that, so long as any Warrant remains unexercised:

7.1.1   it will use its best endeavours (a) to obtain and maintain a listing of the Warrants on the Stock
        Exchanges, (b) to maintain a listing for all the issued Equity Shares on the Stock Exchanges,
        and (c) to obtain and maintain a listing for all the Equity Shares issued on the exercise of the
        Exercise Rights attaching to the Warrants on the Stock Exchanges and if the Issuer is unable
        to obtain or maintain such listing, to use its best endeavours to obtain and maintain a listing
        for all the Equity Shares on an Alternative Stock Exchange as the Issuer may from time to
        time determine and will forthwith give notice to the Warrantholders in accordance with
        Condition 10 of the listing or delisting of the Equity Shares (as a class) by any such stock
        exchange;

7.1.2   it will reserve, free from any other encumbrances, pre-emptive or other similar rights, out of
        its authorised but unissued ordinary share capital the full number of Equity Shares liable to be
        issued on exercise of the Warrants and will ensure that all such Equity Shares will be duly and
        validly issued as fully-paid;

7.1.3   it will pay the expenses of the issue or delivery of, and all expenses of obtaining listing for,
        Equity Shares arising on exercise of the Warrants, including but not limited to stamp duties,
        issue expenses, registration fees and taxes;

7.1.4   it will not make any reduction of its ordinary share capital or any uncalled liability in respect
        thereof or of any share premium account or capital redemption reserve fund (except, in each
        case, as permitted by law);

7.1.5   it will not make any offer, issue or distribute or take any action the effect of which would be to
        reduce the Warrant Exercise Price below the face value of the Equity Shares, provided always
        that the Issuer shall not be prohibited from purchasing its Equity Shares to the extent
        permitted by law; and

7.1.6   it will not take any corporate or other action described in Condition 6 (except pursuant to
        Conditions 6.1, 6.2, 6.4, 6.5 and 6.11) unless, the total aggregate decrease in the Warrant
        Exercise Price that would result from all corporate actions or other actions provided in
        Condition 6 would not result in the sum of the Warrant Issue Price and the Warrant Exercise
        Price being lower than the Floor Price, except as provided in Condition 7.1.7 below.

7.1.7   if the Issuer takes any corporate or other action described in Condition 6 (other than corporate
        or other actions described in conditions 6.1, 6.2, 6.4, 6.5 and 6.11), such that the total
        aggregate decrease in the Warrant Exercise Price that would result from all corporate actions
        or other actions provided in Condition 6 would result in the sum of the Warrant Issue Price
                                                  180
          and the Warrant Exercise Price being lower than the Floor Price, it shall, prior to giving effect
          to such corporate or other action, obtain approval of the Stock Exchanges for the decrease in
          the Warrant Exercise Price. Further, it shall not take any subsequent corporate or other action
          (other than corporate or other actions described in conditions 6.1, 6.2, 6.4, 6.5 and 6.11)
          described in Condition 6 unless, the total aggregate decrease in the Warrant Exercise Price
          that would result from all corporate actions or other actions provided in Condition 6 would not
          result in the sum of the Warrant Issue Price and the Warrant Exercise Price being lower than
          the reduced floor price as may be permitted by the Stock Exchanges.

8.        Further Issues

          The Issuer may from time to time without the consent of the Warrantholders create and issue
          new further securities either having the same terms and conditions as the Warrants in all
          respects so that such further issue shall be consolidated and form a single series with the
          outstanding securities of any series (including the Warrants) or upon such terms as the Issuer
          may determine at the time of their issue.

9.        Notices

9.1       If, at any time prior to the expiration of the Warrants and prior to their exercise, any of the
          following events shall occur:

9.1.1     any action which would require an adjustment pursuant to Condition 6, or

9.1.2     a dissolution, liquidation or winding up of the Issuer (other than in connection with a
          consolidation, merger, or sale of all or substantially all of its property, assets, and business as
          an entirety) shall be proposed

          then in any one or more of said events, the Issuer shall give notice in writing of such event to
          the Warrantholders in accordance with Condition 9.2. Failure to publish or mail such notice or
          any defect therein or in the publication or mailing thereof shall not affect the validity of any
          action taken in connection with such dividend, distribution, or subscription rights, or proposed
          dissolution, liquidation or winding up.

      9.2 The notices required to be given shall be deemed to have been given if sent by registered post
          or hand delivery to the sole/first allottee or sole/first registered holder of the Warrant, the
          Registered Office of the Issuer or the Trustee, as the case may be..

10.       Replacement of Warrants

          If any rematerialized Warrant is mutilated, defaced, destroyed, stolen or lost, it may be
          replaced at the specified office of the Registrar upon payment by the claimant of such costs as
          may be incurred in connection therewith and on such terms as to evidence and indemnity as
          the Issuer or the Registrar may require. Mutilated or defaced Warrant must be surrendered
          before replacements will be issued.

11.       Amendments and supplements

          (i)       These Conditions may be amended without the consent of the Warrantholders to cure
                    ambiguities and defects or make amendments of a formal, minor or technical nature
                    and make other changes that do not affect the Warrantholders.

          (ii)      These Conditions may be amended with the written consent of not less than three
                    fourths of the Warrantholders in respect of all other matters except the preceding and
                    except for increasing the Warrant Exercise Price or decreasing the Warrant Exercise
                    Period or entitlement. Consent of all the Warrantholders is required to increase the
                    Warrant Exercise Price or decrease the Warrant Exercise Period or entitlement.

          (iii)     Once an amendment has been approved in writing by the Warrantholders, the
                    amendment shall be given effect to.


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12.   Successors

      These Conditions will inure to the benefit of and be binding upon the Company and the
      Warrantholders and their respective successors and no other person will have any right or
      obligation stated above.

13.   Severability

      If any provision of these Conditions are determined to be invalid or unenforceable in whole or
      in part, such invalidity or unenforceability shall attach only to such provision or the applicable
      part of such provision and the remaining part of such provision and all other provisions of
      these Conditions shall continue to remain in full force and effect.

14.   Governing Law and Jurisdiction

      The Warrants are governed by, and shall be construed in accordance with, the laws of India
      and any dispute arising out of or in connection with the Warrants shall be subject to the
      exclusive jurisdiction of courts at Mumbai.




                                                182
                                          JOINT VENTURES

 I. FAW Bharat Forge (Changchun) Company Limited (“FAW Bharat Forge”)

    Our Company along with its wholly owned indirect Subsidiary, Bharat Forge Hong Kong Limited
    previously named Lucrest Limited (“Lucrest”) had set up a joint venture with China FAW Group
    Corporation (“FAW”) on March 9, 2006 by way of Joint Venture Agreement (“JVA”). Our
    Company holds 52.0% of the limited liability joint venture company in China (“FAW Bharat
    Forge”) and the remaining 48.0% is held by the FAW Group. Under the JVA our Company amongst
    other things has the following obligations:

    •   When requested by the FAW Bharat Forge, to assist FAW Bharat Forge in the purchase at
        market prices of equipment, supplies and materials manufactured inside or outside China and
        ensure that they are of proper quality or quality for the conduct of its business.

    •   To assist FAW Bharat Forge in obtaining foreign exchange loans from banks outside China.

    •   To assist FAW Bharat Forge in recruiting expatriate personnel.

    •   To assist FAW Bharat Forge in generating export opportunities.

    •   To assist FAW Bharat Forge to handle all such matters entrusted by the JVCo from time to time.

    •   Assist in the sale of products of FAW Bharat Forge. In the event FAW Bharat Forge wishes to
        supply any of its products to existing customers of Lucrest or our Company based outside China,
        FAW Bharat Forge is obliged to use the customer channels of Lucrest or our Company as the
        case may be. FAW Bharat Forge shall pay a marketing commission for such services. The
        existing customer contracts of our Company as on the date of the JVA will continue to be
        serviced by the Company. FAW Bharat Forge may make sales to our Company’s existing
        customers in China provided that such sale does not adversely affect such existing contracts of
        our Company.

        FAW Bharat Forge is engaged in the manufacture of forged engine and chassis components for
        commercial vehicles, buses and light trucks and transmission parts for the Chinese passenger car
        industry. FAW Bharat Forge’s range of products and services is offered to the FAW Group
        Corporation and other automotive manufacturers within China.

II. BF-NTPC Energy Systems Limited

    Our Company has incorporated a limited liability joint venture company, BF-NTPC Energy Systems
    Limited (“BF NTPC”), with a 51.0% equity interest held by our Company and balance held by
    NTPC Limited by way of an MOU dated February 8, 2008. The MOU specified that it shall be valid
    only until the creation of the joint venture and hence the same has now expired.

    BF NTPC proposes to engage in the manufacturing of castings, forgings, fittings and high pressure
    pipings required for Balance of Plant (“BOP”), equipment for power plants and other industries. This
    Company has not commenced operations. The Company has acquired a piece of land at Solapur in
    Maharashtra, India to set up itsmanufacturing facility. However, our Company is in discussions with
    NTPC Limited to finalise the business, investment plans and other operational details for this joint
    venture.

III. Joint Venture Company between our Company and Areva NP

    Our Company entered into a joint venture and shareholders agreement with Areva NP ( “Areva”) on
    August 7, 2009 for incorporating a new joint venture company (“JV”). Our Company will hold
    51.0% equity interest in the joint venture company, while Areva N.P. will hold 49.0%. Our Company
    is in discussions with Areva N.P. to finalise the business location, investment plans and other
    operational details for this joint venture.
    Under the joint venture agreement our Company has inter alia the following rights and joint
    obligations with Areva:

                                                   183
    •   To work with the best interest of the JV as their paramount objective;
    •   To work in manner profitable to JV company;
    •   To nominate the Chief Executive Officer from amongst its nominee directors.

    The JV company is being set up for the purpose of manufacturing, marketing and sales and any
    activities connected with forgings, castings and stampings of metals, machined parts, moulds, any
    semi- finished product in steel melting shop for industries such as the nuclear power sector.

    The joint venture and shareholders agreement has now expired and our Company and Areva are in
    the process of negotiations for the execution of the renewal of the same.

IV. Joint Venture between our Company and Alstom Power System GmbH

    Our Company has entered into a Memorandum of Understanding (“MOU”) with Alstom Power
    System GmbH on September 23, 2008 for incorporation of a company (“Alstom BFL”). Our
    Company has set up two joint venture companies (“JV”) – one for the manufacture of core turbine
    and generators for power plants in Alstom Bharat Forge Power Limited (“JV-A”) and the other for
    manufacture of all the ancillary components (“JV-B”) in Kalyani Alstom Power Limited. Pursuant to
    the MoU, our Company has now entered into two separate shareholders agreement dated November
    26, 2009 with Alstom Power Holdings S.A (“Alstom”) for JV-A and JV-B separately.

    Shareholders Agreement for JV-A

    Alstom and our Company have agreed to subscribe to the equity shares of the JV-A in the ratio of
    51:49 respectively

    Under the JVA, our Company has inter alia the following joint obligations along with Alstom;

    •   To not register any transfer of equity shares unless effected in accordance with the provisions of
        the JV-A and the cross termination agreement entered into between our Company, Alstom
        Power Holdings SA, JV-A and JV-B
    •   The shareholder group which holds more than 50% shares shall have the right to appoint the
        CEO of the Board.
    •   They will operate with the objective of being profitable on the basis of business plan(s) to be
        agreed upon by the Parties.

    The board of directors of the JV-A will have 2 nominee directors of our Company and 3 nominee
    directors of Alstom.

    The equity shares held by the shareholders in the JV-A have been locked in for a period of 10 years
    from the effective date or such period as agreed by mutual written consent between our Company
    and Alstom. Subject to the lock-in period a party is permitted to sell their shares in the JV Company
    only after providing the other party with the right of first refusal to purchase such share.

    Each of the shareholders also has a right to appoint a special auditor.

    Shareholders Agreement for JV-B

    Our Company and Alstom have agreed to subscribe to the equity shares of the JV-B in the ratio of
    51:49 respectively

    Under the JV-B, our Company has inter alia the following joint obligations along with Alstom;

    •   To appoint an auditor for the JV company as agreed between the shareholder groups.
    •   To not register any transfer of equity shares unless effected in accordance with the provisions of
        the JV -B.
    •   The shareholder group which holds more than 50% shares shall have the right to appoint the
        CEO of the Board.
    •   To cooperate and consult with each other and keep each other and keep the best interest of JV-A
        as our paramount objective.

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Further, the Board of directors of the JV-B will have 3 nominee directors of our Company and 2
nominee directors of Alstom.

The equity shares held by the shareholders in the JV-B have been locked in for a period of 10 years
from the effective date or such period as agreed by mutual written consent by our Company and
Alstom. Subject to the lock-in period a party is permitted to sell their shares in the JV-B only after
providing the other party with the right of first refusal to purchase such share.

Each of the shareholders also has a right to appoint a special auditor.




                                                 185
                                     ISSUE PROCEDURE

Below is a summary intended to present a general outline of the procedure relating to the application
payment, Allocation and Allotment of the Securities. The procedure followed in the Issue may differ
from the one mentioned below and the investors are assumed to have apprised themselves of the same
from the Company or the Joint Global Coordinators and Book Running Lead Managers. The investors
are advised to inform themselves of any restrictions or limitations that may be applicable to them. Also
see “Selling Restrictions”.

Qualified Institutions Placements

The Issue is being made to QIBs in reliance upon Chapter VIII of the SEBI Regulations through the
mechanism of QIP. Under Chapter VIII of the SEBI Regulations, a listed company in India may issue
equity shares /fully convertible debentures/partly convertible debentures/non-convertible debentures
with warrants or any other security (other than warrants) which are convertible into or exchangeable
with equity shares at a later date to QIBs, provided that:

•   equity shares of the same class of such company are listed on a stock exchange in India that has
    nation-wide trading terminals for a period of at least one year as on the date of issuance of notice
    to its shareholders for convening the meeting; and

•   such company complies with the minimum public shareholding requirements set out in the listing
    agreement with the stock exchange referred to above.

At least 10% of the Equity Shares issued to QIBs must be allotted to mutual funds, provided that, if this
portion, or any part thereof to be allotted to mutual funds remains unsubscribed, it may be allotted to
other QIBs. QIB has been specifically defined under Regulation 2(1)(zd) of the SEBI Regulations.

Investors are not allowed to withdraw their Bids after the closure of the Issue.

Additionally, there is a minimum pricing requirement under the SEBI Regulations. The Warrant
Exercise Price shall not be less than the average of the weekly high and low of the closing prices of the
related Equity Shares quoted on the stock exchange during the two weeks preceding the relevant date.

The “relevant date” referred to above, for the allotment of the Equity Shares, will be the date of the
meeting in which the Board or the Committee of Directors duly authorized by the Board of the
Company decides to open the Issue and for the Warrants be the date of the meeting in which the board
of directors of the Company decides to open the Issue of the Warrants, and “stock exchange” means
any of the recognized stock exchanges in which the equity shares of the issuer of the same class are
listed and on which the highest trading volume in such shares has been recorded during the two weeks
immediately preceding the relevant date.

In terms of the SEBI Regulations, an investor can subscribe to the combined offering of NCDs
with Warrants or to the individual instrument i.e. either NCDs or Warrants.

The Company has applied for and received the in-principle approval of the Stock Exchanges under
Clause 24 (a) of its Listing Agreements for the listing of the Securities on the Stock Exchanges. The
Company has also filed a copy of the PreliminaryPlacement Document with the Stock Exchanges.

The Securities will be allotted within twelve months from the date of the shareholders’ resolution
approving the QIP. The Equity Shares issued pursuant to the QIP must be issued on the basis of a
placement document that shall contain all material information including the information specified in
Schedule XVIII of the SEBI Regulations and SEBI Debt Regulations, as applicable. The placement
document is a private document provided to select investors through serially numbered copies and is
required to be placed on the website of the concerned stock exchanges and of the issuer with a
disclaimer to the effect that it is in connection with an issue to QIBs and no offer is being made to the
public or to any other category of investors. A copy of the Placement Document is required to be filed
with the SEBI for record purposes within 30 days of the Allotment of the securities.

Pursuant to the provisions of Section 67 of the Companies Act, for a transaction that is not a public
offering, an invitation or offer may not be made to more than 49 persons.

                                                   186
The minimum number of allottees for each qualified institutional placement shall not be less than:

•     two, where the issue size is less than or equal to Rs.2.5 billion; and

•     five, where the issue size is greater than Rs.2.5 billion.

No single allottee shall be allotted more than 50% of the issue size.

QIBs that belong to the same group or that are under common control shall be deemed to be a single
allottee.

The aggregate of the proposed qualified institutional placement and all previous qualified institutional
placements made in the same financial year shall not exceed five times the net worth of the issuer as
per the audited balance sheet of the previous financial year. The issuer shall furnish a copy of the
Placement Document to each stock exchange on which its Equity Shares are listed.

Securities allotted to a QIB pursuant to a qualified institutional placement shall not be sold for a period
of one year from the date of Allotment except on the floor of a recognized stock exchange in India.

The Company has received the in-principle approval of the Stock Exchanges under Clause 24(a) of the
Listing Agreements. The Company has also filed a copy of the Preliminary Placement Document with
the Stock Exchanges.

Issue Procedure

1.        The Company and the Joint Global Coordinators and Book Running Lead Managers shall
          circulate serially numbered copies of the Preliminary Placement Document and the
          Application Form, either in electronic form or physical form, to not more than 49 QIBs.

2.        The list of QIBs to whom the Application Form is delivered shall be determined by the Joint
          Global Coordinators and Book Running Lead Managers in consultation with the Company.
          Unless a serially numbered Preliminary Placement Document along with the Application
          Form is addressed to a particular QIB, no invitation to subscribe shall be deemed to
          have been made to such QIB. Even if such documentation were to come into the possession
          of any person other than the intended recipient, no offer or invitation to offer shall be deemed
          to have been made to such person.

3.        QIBs may submit an Application Form, including any revisions thereof, during the Bidding
          Period to the Joint Global Coordinators and Book Running Lead Managers.

4.        Application Form

4A.       Application Form for Warrants: QIBs will be required to indicate the following in the
          Application Form:

          a.        Name of the QIB to whom Warrants are to be Allotted;

          b.        Number of Warrants Bid for; and

          c.        The details of the depository account(s) to which the Warrants should be credited.

4B.       Application Form for NCDs: QIBs will be required to indicate the following in the
          Application Form:

          a.        Name of the QIB to whom NCDs are to be Allotted;

          b.        Number of NCDs Bid for; and

          c.        The details of the depository account(s) to which the NCDs and/or NCDs should be
                    credited.

                                                      187
4C.        Application Form for Equity Shares: QIBs will be required to indicate the following in the
           Application Form:

      a.   Complete official name of the QIB to whom Equity Shares are to be allotted;

      b.   Number of Equity Shares Bid for;

      c.   Price at which they offer to apply for the Equity Shares, at or above the minimum price
           calculated in accordance with Regulation 85 of the SEBI Regulations (the “Floor Price”),
           which for this Issue, is Rs. 271.93 ; and

      d.   Depository account details to which the Equity Shares should be credited.

Note:      Each eligible sub account of an FII will be considered as an individual QIB and separate
           forms would be required from each such sub account for submitting Bids.

           Note: QIBs as defined in Regulation 2(1)(zd) of the SEBI Regulations will be eligible to
           subscribe to the Securities being allotted in accordance with Chapter VIII of the SEBI
           Regulations. Please note that in accordance with the approval of the Foreign Investment
           Promotion Board dated April 1, 2010foreign institutional investors registered with the
           SEBI will be permitted to subscribe to the Warrants. However, foreign instuitutional
           investors are not permitted to subscribe to the NCDs.

5.         Once a duly filled Application Form is submitted by a QIB, such Application Form constitutes
           an irrevocable offer and cannot be withdrawn after the Bid Closing Date. The Bid Closing
           Date shall be notified to the Stock Exchanges and the QIBs shall be deemed to have been
           given notice of such date after the receipt of the Application Form.

           An eligible Bid by a Mutual Fund shall first be considered for allocation proportionately in the
           Mutual Fund Portion. In the event that the demand is greater than 10,000,000 Equity Shares,
           allocation shall be made to Mutual Funds on a proportionate basis to the extent of the Mutual
           Funds Portion. The remaining demand by Mutual Funds shall, as part of the aggregate demand
           by QIB Bidders, be made available for allocation proportionately out of the remainder of the
           QIB Portion, after excluding the allocation in the Mutual Fund Portion.

           The Bids made by the asset management companies or custodian of Mutual Funds shall
           specifically state the names of the concerned schemes for which the Bids are made. In case of
           a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund
           registered with SEBI and such Bids in respect of more than one scheme of the Mutual Fund
           will not be treated as multiple Bids provided that the Bids clearly indicate the scheme for
           which the Bid has been made.

           As per the current regulations, the following restrictions are applicable for investments by
           Mutual Funds:

           No Mutual Fund scheme shall invest more than 10% of its net asset value in Equity Shares or
           equity related instruments of any company provided that the limit of 10% shall not be
           applicable for investments in index funds or sector or industry specific funds. No Mutual Fund
           under all its schemes should own more than 10% of any company’s paid-up capital carrying
           voting rights.

           Bidders are advised to ensure that any single Bid from them does not exceed the investment
           limits or maximum number of Equity Shares that can be held by them under applicable law.

6          Once the Application Form is submitted by the QIB, the same is not permitted to be
           withdrawn after the Bid Closing Date. The Bid Closing Date shall be notified to the Stock
           Exchanges and the QIBs shall be deemed to have been given notice of such date after the
           receipt of the Application Form.

7.         Upon the receipt of the Application Form, the Company shall determine the final terms of the
           Securities to be issued in consultation with the Joint Global Coordinators and Book Running
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        Lead Managers. On determination of the final terms of the Securities the Joint Global
        Coordinators and Book Running Lead Managers will send the CAN to the QIBs who have
        been Allocated Securities. The dispatch of the CAN shall be deemed a valid, binding and
        irrevocable contract for the QIBs to pay the entire NCD Issue Price, the Share Issue Price and
        the Warrant Issue Price (as applicable) for all the Securities Allocated to such QIB. The CAN
        shall contain details such as the number of Securities Allocated to the QIB and payment
        instructions including the details of the amounts payable by the QIB for Allotment of the
        Securities in its name and the Pay-In Date as applicable to the respective QIB. Please note
        that the allocation of the Securities will be at the absolute discretion of the Company and
        will be based on the recommendation of the Joint Global Coordinators and Book
        Running Lead Managers

        Pursuant to receiving a CAN, each QIB shall be required to make the payment of the entire
        application monies for the Securities indicated in the CAN at the applicable Share Issue Price,
        NCD Issue Price, and Warrant Issue Price (as applicable), by high value cheques or through
        electronic transfer to the designated bank account of the Company by the Pay- In Date as
        specified in the CAN sent to the respective QIBs.

        Upon receipt of the application monies from the QIBs, the Company shall Allot Securities as
        per the details in the CAN to the QIBs. The Company shall not Allot Securities to more than
        49 QIBs. The Company will intimate to the Stock Exchanges the details of the Allotment.

7.      After receipt of the in-principle approval of the Stock Exchanges, the Company shall credit
        the Securities into the Depository Participant accounts of the respective QIBs.

8.      The Company shall then apply for the final trading and listing permissions from the Stock
        Exchanges.

9.      The Securities that have been credited to the Depository Participant accounts of the QIBs shall
        be eligible for trading on the Stock Exchanges only upon the receipt of final trading and listing
        approvals from the Stock Exchanges.

10.     Upon receipt of intimation of final trading and listing approval from the Stock Exchanges, the
        Company shall inform the QIBs who have received an Allotment of the receipt of such
        approval. The Company shall not be responsible for any delay or non-receipt of the
        communication of the final trading and listing permissions from the Stock Exchanges or any
        loss arising from such delay or non-receipt. Final listing and trading approvals granted by the
        Stock Exchanges are also placed on their respective websites. QIBs are advised to apprise
        themselves of the status of the receipt of the permissions from the Stock Exchanges or the
        Company.

Qualified Institutional Buyers

Only QIBs as defined in Regulation 2(1)(zd) of the SEBI Regulations, and not otherwise excluded
pursuant to Regulation 86(b) of Chapter VIII of the SEBI Regulations, are eligible to invest.

Currently, under Regulation 2(1)(zd) of the SEBI Regulations, a QIB means:

•       Public financial institutions as defined in section 4A of the Companies Act;
•       Scheduled commercial banks;
•       Mutual funds registered with SEBI;
•       Foreign institutional investors and sub-account registered with SEBI, other than a sub-account
        which is a foreign corporate or foreign individual;
•       Multilateral and bilateral development financial institutions;
•       Venture capital funds registered with SEBI;
•       Foreign venture capital investors registered with SEBI;
•       State industrial development corporations;
•       Insurance companies registered with Insurance Regulatory and Development Authority;
•       Provident Funds with minimum corpus of Rs.250 million;
•       Pension Funds with minimum corpus of Rs.250 million; and


                                                 189
•        National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23,
         2005 of the Government of India published in the Gazette of India.
•        insurance funds set up and managed by army, navy or air force of the Union of India.

Under Regulation 86(2) of the SEBI Regulations, no Allotment shall be made, either directly or
indirectly, to any QIB who is a promoter or any person related to the promoter(s) of the Company. For
this purpose, any QIB who has all or any of the following rights shall be deemed to be a person related
to the promoters:

•    rights under a shareholders’ agreement or voting agreement entered into with promoters of the
     Company or persons related to the promoters of the Company;
•    veto rights; or
•    the right to appoint a nominee director on the Board of the Company,

unless a QIB has acquired any of these rights in its capacity as a lender to the Company and such QIB
does not hold any Equity Shares in the Company.

FIIs are permitted to participate through the portfolio investment scheme in the issue of Warrants
and Equity Shares. FIIs are not permitted to subscribe to the NCDs.

No single FII can hold more than 10% of the post Issue paid-up capital of the Company. In respect of
an FII investing in our Equity Shares on behalf of its eligible sub accounts, the investment on behalf of
each eligible sub account shall not exceed 10% of the Company’s total issued capital or 5% of the total
issued capital of the Company in case such eligible sub account is a foreign corporate or an individual.

Currently, the aggregate FII holding in the Company cannot exceed 24% of the total issued capital of
the Company. With the approval of our Board and that of the shareholders by way of a special
resolution, the aggregate FII holding limit can be enhanced up to 100%; Pursuant to a resolution dated
March 30, 2005 of the shareolders of the Company, the FII holding limit in our Company has been
increased to 40%.

The Company and the Joint Global Coordinators and Book Running Lead Managers are not
liable for any amendment or modification or change to applicable laws or regulations, which may
occur after the date of this Placement Document. QIBs are advised to make their independent
investigations and satisfy themselves that they are eligible to apply. QIBs are advised to ensure
that any single application from them does not exceed the investment limits or maximum number
of Securities that can be held by them under applicable law or regulation or as specified in this
Placement Document. Further, QIBs are required to satisfy themselves that their Application
Forms would not eventually result in triggering a tender offer under the Takeover Code.

A minimum of 10 per cent of each of the Securities in this Issue shall be Allotted to Mutual
Funds. If no Mutual Fund is agreeable to take up the minimum portion as specified above, such
minimum portion or part thereof may be Allotted to other QIBs by the Company.

Note: Affiliates or associates of the Joint Global Coordinators and Book Running Lead Managers
who are QIBs may participate in the Issue in compliance with applicable laws and may be
allocated a higher number of Securities on a discretionary basis.

Application Form

QIBs shall only use the serially numbered Application Form supplied by the Joint Global Coordinators
and Book Running Lead Managers in either electronic form or by physical delivery for the purpose of
making a Bid (including revision of Bid) in terms of this Preliminary Placement Document.

By making a Bid (including the revision thereof) for the Securities pursuant to the terms of this
Preliminary Placement Document, each QIB will be deemed to have made the following
representations and warranties and the representations, warranties and agreements made under the
sections and paragraphs “Notice to Investors – Representation by Investors”, “Distribution and
Solicitation Restrictions” and “Transfer Restrictions” of this Placement Document:

1.   The QIB confirms that it is a QIB in terms of Regulation 2(1)(zd) of the SEBI Regulations, has a

                                                  190
     valid and existing registration under the applicable laws in India (as applicable) and is eligible to
     participate in this Issue;

2.   The QIB confirms that it is not a Promoter and is not a person related to the Promoters, either
     directly or indirectly, and its Bid does not directly or indirectly represent the Promoter or Promoter
     Group or persons related to the Promoter;

3.   The QIB confirms that it has no rights under a shareholders agreement or voting agreement with
     the Promoter or persons related to the promoters, no veto rights or right to appoint any nominee
     director on the Board of the Company other than that acquired in the capacity of a lender not
     holding any Equity Shares of the Company which shall not be deemed to be a person related to the
     Promoter;

4.   The QIB has no right to withdraw its Bid after the Bid Closing Date;

5.   The QIB confirms that if allotted Securities pursuant to the Issue, the QIB shall not, for a period of
     one year from Allotment, sell the Equity Shares so acquired otherwise than on the floor of any
     recognised stock exchange in India;

6.   The QIB confirms that the QIB is eligible to Bid and hold any of the Securities so allotted. The
     QIB further confirms that the holding of the QIB, does not and shall not, exceed the level
     permissible as per any applicable regulations applicable to the QIB;

7.   The QIB confirms that the Bids would not eventually result in triggering a tender offer under the
     Takeover Code;

8.   That to the best of its knowledge and belief together with other QIBs in the Issue that belong to the
     same group or are under common control, the Allotment to the QIB shall not exceed 50% of the
     Issue Size. For the purposes of this statement:

     a.   The expression “belongs to the same group” shall be interpreted by applying the concept of
          “companies under the same group” as provided in sub-section (11) of Section 372 of the
          Companies Act; and

     b.   “Control” shall have the same meaning as is assigned to it by clause (1)(c) of Regulation 2 of
          the Takeover Code.

9.   The QIB shall not undertake any trade in the Securities credited to its Depository Participant
     account until such time that the final listing and trading approvals for the Securities are issued by
     the Stock Exchanges.

QIBS WOULD NEED TO PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, THEIR
DEPOSITORY PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION
NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE BID CUM APPLICATION
FORM. QIBS MUST ENSURE THAT THE NAME GIVEN IN THE BID CUM APPLICATION
FORM IS EXACTLY THE SAME AS THE NAME IN WHICH THE DEPOSITORY
ACCOUNT IS HELD. FOR THIS PURPOSE, ELIGIBLE SUB ACCOUNTS OF AN FII
WOULD BE CONSIDERED AS AN INDEPENDENT QIB.

Demographic details such as address and bank account will be obtained from the Depositories as per
the Depository Participant account details given above.

The submission of an Application Form by the QIBs shall be deemed a valid, binding and irrevocable
offer for the QIB to pay the entire Issue Price for its Securities of Allotment (as indicated by the CAN)
and becomes a binding contract on the QIB, upon issuance of the CAN by the Company in favour of
the QIB.

Submission of Application Form

All Applicants shall clearly indicate, whether the application is for subscribing to (i) the combined
offering of NCDs with Warrants; or (ii) for subscribing to either NCDs or Warrants.


                                                   191
All Application Forms must be duly completed with information including the name of the QIB, the
final terms and the number of NCDs and/ or Warrants applied for. The Application Form shall be
submitted to the Joint Global Coordinators and Book Running Lead Managers either through electronic
form or through physical delivery at the following address:

Axis Bank Limited                  Citigroup Global Markets            Kotak Mahindra Capital
Maker Towers F, 11th Floor,        India Private Limited               Company Limited
Cuffe Parade, Colaba,              8th Floor, Bakhtawar,               1st Floor, Bakhtawar
Mumbai 400 005                     Nariman Point,                      229 Nariman Point
Contact Person: Mr. Manish Jain    Mumbai 400 021                      Mumbai 400 021
Email:                             Contact Person: Jitendra Parmani    Contact Person: Chandrakant
manish.jain@axisbank.com           Email: bfl.qip@citi.com             Bhole
                                                                       Email: bfl.qip@kotak.com


The Joint Global Coordinators and Book Running Lead Managers shall not be required to provide any
written acknowledgement of the same.

Pricing and Allocation

Build up of the book

The QIBs subscribing to the Securities shall submit their Bids (including the revision thereof) for the
Securities, as applicable, within the Bidding Period to the Joint Global Coordinators and Book Running
Lead Managers.

The QIBs subscribing to the combined offering of NCDs with Warrants shall submit their Bids
(including the revision thereof) separately for the NCDs and the Warrants within the Bidding Period to
the Joint Global Coordinators and Book Running Lead Managers.

Price discovery, terms and allocation

The Company, in consultation with the Joint Global Coordinators and Book Running Lead Managers,
shall determine the Share Price, Warrant Issue Price and the NCD Issue Price which shall be at or
above the Floor Price to be determined in accordance with Chapter VIII of the SEBI Regulations.

Method of Allocation

The Company shall determine the Allocation in consultation with the Joint Global Coordinators and
Book Running Lead Managers on a discretionary basis and in compliance with Chapter VIII of the
SEBI Regulations.

Application Forms received from the QIBs at or above the Share Issue Price/ NCD Issue Price/Warrant
Issue Price (as applicable) shall be grouped together to determine the total demand. The Allocation of
the Securities to all such QIBs will be made at the Share Issue Price/ NCD Issue Price/ Warrant Issue
Price (as applicable). Allocation to Mutual Funds for up to a minimum of 10 per cent of the applicable
issue size shall be undertaken subject to valid Bids being received at or above the applicable issue
price.

THE DECISION OF THE COMPANY AND THE JOINT GLOBAL COORDINATORS AND
BOOK RUNNING LEAD MANAGERS IN RESPECT OF ALLOCATION SHALL BE
BINDING ON ALL QIBs. QIBs MAY NOTE THAT ALLOCATION OF SECURITIES IS AT
THE SOLE AND ABSOLUTE DISCRETION OF THE COMPANY AND QIBS MAY NOT
RECEIVE ANY ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID APPLICATION
FORMS AT OR ABOVE THE NCD ISSUE PRICE/ WARRANT ISSUE PRICE (AS
APPLICABLE). NEITHER THE COMPANY NOR THE JOINT GLOBAL COORDINATORS
AND BOOK RUNNING LEAD MANAGER IS OBLIGED TO ASSIGN ANY REASONS FOR
SUCH NON-ALLOCATION.

All Application Forms duly completed along with payment and a copy of the PAN card or PAN
allotment letter shall be submitted to the Joint Global Coordinators and Book Running Lead Managers

                                                 192
as per the details provided in the respective CAN.

CAN

Based on the Application Forms received, the Company and the Joint Global Coordinators and Book
Running Lead Managers, in their sole and absolute discretion, decide the list of QIBs to whom the
serially numbered CAN shall be sent, pursuant to which the details of the Securities Allocated to them
and the details of the amounts payable for Allotment of such Securities in their respective names shall
be notified to such QIBs. Additionally, the CAN will include details of the bank account(s) for transfer
of funds if done electronically, address where the application money needs to be sent, Pay-In Date as
well as the probable designated date (“Designated Date”), being the date of credit of the Securities to
the QIB’s account, as applicable to the respective QIBs.

The eligible QIBs would also be sent a serially numbered Placement Document either in electronic
form or by physical delivery along with the serially numbered CAN.

The dispatch of the serially numbered Placement Document and the CAN to the QIB shall be deemed a
valid, binding and irrevocable contract for the QIB to furnish all details that may be required by the
Joint Global Coordinators and Book Running Lead Managers and to pay the entire Share issue Price,
NCD Issue Price and/ or Warrant Issue Price (as applicable) for all the Securities Allocated to such
QIB.

Company Account for Payment of Application Money

The Company has opened special bank accounts (the “Escrow Bank Accounts”) for the Securities
with Axis Bank Limited in terms of the arrangement between the Company, the Joint Global
Coordinators and Book Running Lead Managers and Axis Bank Limited (acting as an escrow bank).
The QIB will be required to deposit the entire amount payable for the Securities allocated to it by the
Pay-In Date as mentioned in the respective CAN.

If the payment is not made favouring the Escrow Bank Accounts within the time stipulated in the
CAN, the Application Form and the CAN of the QIB are liable to be cancelled.

In case of cancellations or default by the QIBs, the Company and the Joint Global Coordinators and
Book Running Lead Managers has the right to reallocate the Securities at the applicable issue price
among existing or new QIBs at their sole and absolute discretion, subject to the compliance with the
requirement of ensuring that the Application Forms are sent to not more than 49 QIBs.

Payment Instructions

The payment of application money shall be made by the QIBs in the name of "Bharat Forge Limited -
- QIP Shares Escrow Account", “Bharat Forge Limited– QIP NCDs Escrow Account” and “Bharat
Forge Limited– QIP Warrants Escrow Account” (as applicable) as per the payment instructions
provided in the CAN.

QIBs may make payment only through electronic fund transfer.

Note: Payment of the amounts through cheques will be rejected.

Designated Date and Allotment of Securities

1.       The Securities will not be Allotted unless the QIBs pay the Share Issue Price, NCD Issue Price
         and the Warrant Issue Price (as applicable) to the Escrow Bank Accounts as stated above.

2.       In accordance with the SEBI Regulations, Securities will be issued and Allotment shall be
         made only in the dematerialized form to the Allottees. Allottees will have the option to re-
         materialize the Securities, if they so desire, as per the provisions of the Companies Act and the
         Depositories Act.

3.       The Company reserves the right to cancel the Issue at any time up to Allotment without
         assigning any reasons whatsoever.


                                                     193
4.       Post Allotment and credit of Securities into the QIBs Depository Participant account, the
         Company would apply for final trading/listing approvals from the Stock Exchanges.

5.       In the unlikely event of any delay in the Allotment or credit of Securities, or receipt of trading
         or listing approvals or cancellation of the Issue, no interest or penalty would be payable by the
         Company.

6.       The Escrow Bank shall not release the monies lying to the credit of the Escrow Bank
         Accounts to the Company, until such time as the Company delivers to the Escrow Bank
         documentation regarding the final approval of the Stock Exchanges, for the listing and trading
         of the Securities.


Submission to SEBI

The Company shall submit the Placement Document to SEBI within 30 days of the date of Allotment
for record purposes.

Other Instructions

Permanent Account Number or PAN

Each QIB should mention its PAN allotted under the I.T. Act. Applications without this information
will be considered incomplete and are liable to be rejected. It is to be specifically noted that applicants
should not submit the GIR number instead of the PAN as the Application Form is liable to be rejected
on this ground.

Right to Reject Applications

The Company, in consultation with the Joint Global Coordinators and Book Running Lead Managers,
may reject Bids, in part or in full, without assigning any reasons whatsoever. The decision of the
Company and the Joint Global Coordinators and Book Running Lead Managers in relation to the
rejection of Bids shall be final and binding.

Securities in dematerialised form with NSDL or CDSL

The Allotment of each of the Securities in this Issue shall be only in dematerialized form (i.e., not in
the form of physical certificates but be fungible and be represented by the statement issued through the
electronic mode).

1.       A QIB applying for Securities must have at least one beneficiary account with a Depository
         Participant of either NSDL or CDSL prior to making the Bid.

2.       Securities Allotted to a successful QIB will be credited in electronic form directly to the
         relevant beneficiary account (with the Depository Participant) of the QIB.

3.       Securities in electronic form can be traded only on the stock exchanges having electronic
         connectivity with NSDL and CDSL. The Stock Exchanges have electronic connectivity with
         CDSL and NSDL.

4.       The trading of each of the Securities would be in dematerialized form only for all QIBs in the
         demat segment of the respective Stock Exchanges.

5.       The Company will not be responsible or liable for the delay in the credit of any of the
         Securities due to errors in the Application Form or otherwise on part of the QIBs.

Procedure for Exercise of Warrants

Warrantholders shall have the Exercise Right to convert their Warrants into Equity Shares at any time
during the Warrants Exercise Period at Warrant Exercise Price. For further details, see “Terms and
Conditions of the Warrants”.


                                                   194
                                    PLACEMENT AND LOCK-UP

Agreement for Placement

The Joint Global Coordinators and Book Running Lead Managers have entered into a Agreement with
the Company (the “Placement Agreement”), pursuant to which the Joint Global Coordinators and
Book Running Lead Managers have agreed to procure subscriptions for the Securities by the Qualified
Institutional Buyers, pursuant to Chapter VIII of the SEBI Regulations and outside the United States, in
offshore transactions in reliance upon Regulation S under the Securities Act.

The Placement Agreement contains customary representations and warranties, as well as indemnities
from the Company and is subject to termination in accordance with the terms contained therein.

Applications shall be made to list the Securities issued pursuant to the Issue and admit them to trading
on the Stock Exchanges. No assurance can be given as to the liquidity or sustainability of the trading
market for such Securities, the ability of holders of the Securities to sell their Securities or the price at
which holders of the Securities will be able to sell their Securities.

This Placement Document has not been, and will not be, registered as a prospectus with the RoC and,
no Securities issued pursuant to the Issue will be offered in India or overseas to the public or any
members of the public in India or any other class of investors, other than QIBs.

In connection with the Issue, the Joint Global Coordinators and Book Running Lead Managers (or their
respective affiliates) may, for their own accounts, subscribe for the securities or enter into asset swaps,
credit derivatives or other derivative transactions relating to the Securities issued pursuant to the Issue
at the same time as the offer and sale of such Securities, or in secondary market transactions. As a
result of such transactions, the Joint Global Coordinators and Book Running Lead Managers may hold
long or short positions in such Securities. These transactions may comprise a substantial portion of the
Issue and no specific disclosure will be made of such positions. Affiliates of the Joint Global
Coordinators and Book Running Lead Managers may purchase Securities and be allocated Securities
for proprietary purposes and not with a view to distribution or in connection with the issuance of P-
Notes. See section titled “Off-shore Derivative Instruments (P-Notes)” in this Placement Document.

Some of the Joint Global Coordinators and Book Running Lead Managers and their affiliates may
engage in transactions with and perform services for, the Company and its subsidiaries, group
companies or affiliates in the ordinary course of business and have engaged, or may in the future
engage, in commercial banking and investment banking transactions with the Company and its
subsidiaries, group companies or affiliates, for which they have received and may in the future receive,
compensation.

Lock-up

We, our Promoters and the promoter group of our Company have agreed that we will not issue, offer,
lend, pledge, sell, grant any option to purchase or otherwise dispose of any Equity Shares or securities
convertible into or exchangeable or exercisable for any Equity Shares, or publicly announce any
intention to do so, without the prior written consent of the Joint Global Co-ordinators and Bookrunning
Lead Managers for a period of 90 days after the Bid Closing Date, except issuances pursuant to the
conversion of any of our convertible securities outstanding on the date of this Placement Document.




                                                    195
                     DISTRIBUTION AND SOLICITATION RESTRICTIONS

The distribution of this Placement Document and the offer, sale or delivery of the Securities in this
Issue is restricted by law in certain jurisdictions. Persons who come into possession of this Placement
Document are advised to take legal advice with regard to any restrictions that may be applicable to
them and to observe such restrictions. This Placement Document may not be used for the purpose of an
offer or sale in any circumstances in which such offer or sale is not authorised or permitted.

General

No action has been or will be taken in any jurisdiction by the Company or the Joint Global
Coordinators and Book Running Lead Managers that would permit a public offering of the Securities
or the possession, circulation or distribution of this Placement Document or any other material relating
in us or the Securities in this Issue in any jurisdiction where action for the purpose is required.
Accordingly, the Securities in this Issue may not be offered or sold, directly or indirectly and neither
this Placement Document nor any other offering material or advertisements in connection with the
Securities imposed no be issued pursuant to this Issue may be distributed or published, in or from any
country or jurisdiction except under circumstances that will result in compliance with any applicable
rules and regulations of any such country or jurisdiction and will not impose any obligations on the
Company or the Joint Global Coordinators and Book Running Lead Managers. The Issue will be made
in compliance with the SEBI ICDR Regulations. Each subscriber of the Securities in the Issue will be
required to make, or to be deemed to have made, as applicable, the acknowledgments and agreements
as described under “Transfer Restrictions”.

Australia

This Placement Document is not a disclosure document under Chapter 6D of the Corporations Act
2001 (Cth) (the “Australian Corporations Act”), has not been lodged with the Australian Securities &
Investments Commission and does not purport to include the information required of a disclosure
document under the Australian Corporations Act. (i) The offer of Securities under the Placement
Document is only made to persons to whom it is lawful to offer Securities without disclosure to
investors under Chapter 6D of the Australian Corporations Act under one or more exemptions set out
in Section 708 of the Australian Corporations Act; (ii) the Placement Document is made available in
Australia to persons as set forth in clause (i) above; and (iii) by accepting this offer, the offeree
represents that the offeree is such a person as set forth in clause (ii) above and agrees not to sell or offer
for sale within Australia any Securities sold to the offeree within 12 months after their transfer to the
offeree under the Placement Document.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented Prospectus
Directive 2003/71/EC (each, a “Relevant Member State”), the Joint Global Coordinators and the Book
Running Lead Managers has represented, warranted and agreed that they have not made and will not
make an offer of any Securities in this Issue to the public in that Relevant Member State prior to the
publication of this Placement Document in relation to the Securities in this Issue which has been
approved by the competent authority in that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent authority in the Relevant Member State,
all in accordance with the Prospectus Directive, other than the offers contemplated in this Placement
Document in a Relevant Member State after the date of such publication or notification, and except that
they may make an offer of any Securities to the public in that Relevant Member State at any time under
the following exemptions under the Prospectus Directive, if they have been implemented in that
Relevant Member State:

(a) to legal entities which are authorised or regulated to operate in the financial markets or, if not so
authorised or regulated, whose corporate purpose in solely to invest in securities;

(b) to any legal entity which has two or more of (i) an average of at least 250 employees during the last
financial year; (ii) a total balance sheet of more than €43,000,000; and (iii) an annual turnover of more
than €50,000,000, as shown in its last annual or consolidated account; and

(c) to fewer than 100 natural or legal persons (other than qualified investors as defined below); or

                                                    196
(d) in any other circumstances falling within Article 3(2) of the Prospectus Directive, subject to
obtaining the prior consent of the Joint Global Coordinators and the Book Running Lead Managers for
any such offer, provided that no such offer of Securities issued pursuant to this Issue shall result in a
requirement for the publication by the Company or the Joint Global Coordinators and the Book
Running Lead Managers of a prospectus pursuant to Article 3 of the Prospectus Directive.

Each purchaser of Securities described in this Placement Document located within a Relevant Member
State will be deemed to have represented, acknowledged and agreed that it is a “qualified investor”
within the meaning of Article 2(1)(e) of the Prospectus Directive.

For the purposes of this provision, the expression “an offer of any Securities to the public” in relation
to any Securities in any Relevant Member State means the communication in any form and by any
means of sufficient information on the terms of the Issue and any Securities to be issued pursuant to the
Issue so as to enable an investor to decide to acquire any such Securities, as the same may be varied in
that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant
Member State, and the expression “Prospectus Directive” means Directive 2003/71/EC and includes
any relevant implementing measure in each Relevant Member State.

In the case of any Securities in this Issue being offered to a financial intermediary as that term is used
in Article 3(2) of the Prospectus Directive, the Joint Global Coordinators and the Book Running Lead
Managers will use its reasonable endeavours, by the inclusion of appropriate language in the Placement
Document, to procure that such financial intermediary will be deemed to have represented,
acknowledged and agreed that the Securities acquired by it in the Issue have not been acquired on a
non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to,
persons in circumstances which may give rise to an offer of any Securities in this Issue to the public
other than their offer or resale in a Relevant Member State to qualified investors as so defined who are
not financial intermediaries or in circumstances in which the prior consent of the Joint Global
Coordinators and the Book Running Lead Managers has been obtained to each such proposed offer or
resale.

Hong Kong

This Placement Document has not been delivered for registration to the Registrar of Companies in
Hong Kong and its contents have not been reviewed by any regulatory authority in Hong Kong.
Accordingly: (i) the Securities may not be offered or sold in Hong Kong by means of any document
other than to persons who are "professional investors" within the meaning of the Securities and Futures
Ordinance (Cap. 571) of Hong Kong (“SFO”) and the Securities and Futures (Professional Investor)
Rules made thereunder or in other circumstances which do not result in the document being a
"prospectus" within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong or which do not
constitute an offer to the public within the meaning of the Companies Ordinance; and (ii) no person
may issue any invitation, advertisement or other document relating to the Securities whether in Hong
Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by,
the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other
than with respect to the Securities which are or are intended to be disposed of only to persons outside
Hong Kong or only to "professional investors" within the meaning of the Securities and Futures
Ordinance and the Securities and Futures (Professional Investor) Rules made thereunder.

The Joint Global Coordinators and Book Running Lead Managers have not issued, or had in their
possession for the purposes of issue, and will not issue, or have in their possession for the purposes of
issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the
Securities, which is directed at, or the contents of which are likely to be accessed or read by, the public
in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with
respect to Securities which are or are intended to be disposed of only to persons outside Hong Kong or
only to “professional investors” as defined in the SFO and any rules made under the SFO.

Kuwait

The Securities have not been authorized or licensed for Offering, marketing or sale in the State of
Kuwait. The distribution of the Placement Document and the Issue and sale of the Securities in the
State of Kuwait is restricted by law unless a license is obtained from the Kuwaiti Ministry of

                                                   197
Commerce and Industry in accordance with Law 31 of 1990.

Qatar

The Securities have not been offered, sold or delivered, and will not be offered, sold or delivered at any
time, directly or indirectly, in the state of Qatar in a manner that would constitute a public Offering.
This Placement Document has not been reviewed or registered with Qatari Government Authorities,
whether under Law No. 25 (2002) concerning investment funds, central bank resolution No. 15 (1997),
as amended, or any associated regulations. Therefore, this Placement Document is strictly private and
confidential, and is being issued to a limited number of sophisticated investors, and may not be
reproduced or used for any other purposes, nor provided to any person other than recipient thereof.

Singapore

The Joint Global Coordinators and the Book Running Lead Managers has acknowledged that this
Placement Document has not been registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, the Joint Global Coordinators and the Book Running Lead Managers has represented and
agreed that they have not offered or sold any Securities issued pursuant to this Issue or caused such
Securities to be made the subject of an invitation for subscription or purchase and will not offer or sell
such Securities issued pursuant to this Issue or cause such Securities to be made the subject of an
invitation for subscription or purchase, and have not circulated or distributed, nor will they circulate or
distribute, this Placement Document or any other document or material in connection with the offer or
sale, or invitation for subscription or purchase, of such Securities issued pursuant to this Issue, whether
directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section
274 of the Securities and Futures Act, Chapter 289 of Singapore (“SFA”), (ii) to a relevant person
pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the
conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with
the conditions of, any other applicable provision of the SFA.

Note:

Where Securities in this Issue are subscribed or purchased under Section 275 by a relevant person
which is:

  (a)     a corporation (which is not an accredited investor) (as defined in Section 4A of the SFA) the
          sole business of which is to hold investments and the entire share capital of which is owned by
          one or more individuals, each of whom is an accredited investor; or

  (b)     a trust (where the trustee is not an accredited investor) whose sole purpose is to hold
          investments and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and
interest (howsoever described) in that trust shall not be transferred within 6 months after that
corporation or that trust has acquired the Securities pursuant to an offer made under Section 275
except:

  (i)     to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to
          any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the
          SFA;

  (ii)    where no consideration is or will be given for the transfer;

  (iii)   where the transfer is by operation of law; or

  (iv)    as specified in Section 276(7) of the SFA.

United Kingdom
The Joint Global Coordinators and Book Running Lead Managers:

(a)       have not offered or sold, and prior to the expiry of a period of six months from the issue date
          of any Securities, will not offer or sell any securities of the Company to persons in the United
                                                    198
         Kingdom except to “qualified investors” as defined in section 86(7) of the Financial Services
         and Markets Act 2000 (“FSMA”) or otherwise in circumstances which have not resulted in an
         offer to the public in the United Kingdom;

(b)      have complied and will comply with all applicable provisions of FSMA with respect to
         anything done by it in relation to the Securities in, from or otherwise involving the United
         Kingdom; and

(c)      in the United Kingdom, will only communicate or cause to be communicated an invitation or
         inducement to engage in investment activity (within the meaning of section 21 of the FSMA)
         to persons that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus
         Directive who (i) have professional experience in matters relating to investments falling
         within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion)
         Order 2005, as amended (the “Order”); and/or (ii) are high net worth entities falling within
         Article 49(2)(a) to (d) of the Order; and (iii) other persons to whom it may otherwise lawfully
         be communicated (all such persons together being referred to as “relevant persons”). This
         Placement Document and its contents are confidential and should not be distributed, published
         or reproduced (in whole or in part) or disclosed by recipients to any other persons in the
         United Kingdom. Any person in the United Kingdom that is not a relevant person should not
         act or rely on this document or any of its contents.

United States of America

The Securities are being offered and sold outside of the United States in reliance on Regulation S. The
Securities have not been and will not be registered under Securities Act and may not be offered or sold
or otherwise transferred within the United States except in certain transactions exempt from the
registration requirements of the Securities Act. No offers or sales ae being made in the United States in
this Issue.

United Arab Emirates

This Placement Document is not intended to constitute an offer, sale or delivery of shares or other
securities under the laws of the United Arab Emirates (the “UAE”). The Securities have not been and
will not be registered under Federal Law No. 4 of 2000 Concerning the Emirates Securities and
Commodities Authority and the Emirates Security and Commodity Exchange, or with the UAE Central
Bank, the Dubai Financial Market, the Abu Dhabi Securities market or with any other UAE exchange.
The Issue, the Securities and interests therein do not constitute a public offer of securities in the UAE
in accordance with the Commercial Companies Law, Federal Law No. 8 of 1984 (as amended) or
otherwise. This Placement Document is strictly private and confidential and is being distributed to a
limited number of investors and must not be provided to any person other than the original recipient,
and may not be reproduced or used for any other purpose. The interests in the Securities may not be
offered or sold directly or indirectly to the public in the UAE.

Each purchaser of the Securities will be deemed to have made the acknowledgements, representations
and agreements described in the section titled “Transfer Restrictions”.




                                                  199
                                   TRANSFER RESTRICTIONS

Purchasers of the Securities in this Issue are not permitted to sell the Equity Shares for a period
of one year from the date of allotment, except through the Stock Exchanges. Investors are
advised to consult their legal advisors prior to making any resale, pledge or transfer of the Equity
Shares and also to refer to the section “Distribution and Solicition Restrictions”.

Subject to the foregoing, each purchaser of the Equity Shares issued pursuant to this Issue, by accepting
delivery of this document, will be deemed to have represented and agreed as follows:

•   you have received a copy of the Placement Document and such other information as you deem
    necessary to make an informed decision and that you are not relying on any other information or
    the representation concerning the Company or the Equity Shares and neither the Company nor any
    other person responsible for this document or any part of it or the Joint Global Coordinators and
    Book Running Lead Managers will have any liability for any such other information or
    representation;

•   you are purchasing the Equity Shares in an offshore transaction meeting the requirements of Rule
    903 or 904 of Regulation S and you agree that you will not offer, sell, pledge or otherwise transfer
    such Equity Shares except in an offshore transaction complying with Regulation S or pursuant to
    any other available exemption from registration under the Securities Act and in accordance with all
    applicable securities laws of the states of the United States and any other jurisdiction, including
    India;

•   you are authorised to consummate the purchase of the Equity Shares in compliance with all
    applicable laws and regulations;

•   you acknowledge (or if you are a broker-dealer acting on behalf of a customer, your customer has
    confirmed to you that such customer acknowledges) that such Equity Shares have not been and
    will not be registered under the Securities Act;

•   you certify that either (A) you are, or at the time the Equity Shares are purchased will be, the
    beneficial owner of the Equity Shares and are located outside the United States (within the
    meaning of Regulation S) or (B) you are a broker-dealer acting on behalf of your customer and
    your customer has confirmed to you that (i) such customer is, or at the time the Equity Shares are
    purchased will be, the beneficial owner of the Equity Shares, and (ii) such customer is located
    outside the United States (within the meaning of Regulation S); and

•   the Company, Joint Global Coordinators and Book Running Lead Managers, their respective
    affiliates and others will rely upon the truth and accuracy of your representations, warranties,
    acknowledgements and undertakings set out in this document, each of which is given to (a) the
    Joint Global Coordinators and Book Running Lead Managers on their own behalf and on behalf of
    the Company, and (b) to the Company, and each of which is irrevocable and, if any of such
    representations, warranties, acknowledgements or undertakings deemed to have been made by
    virtue of your purchase of the Equity Shares are no longer accurate, you will promptly notify the
    Company.

•   you acknowledge that the Company and the Joint Global Coordinators and Book Running Lead
    Managers, our respective affiliates and others will rely upon the truth and accuracy of the
    foregoing acknowledgements, representations and agreements and agrees that if any of such
    acknowledgements, representations or agreements deemed to have been made by virtue of your
    purchase of the Equity Shares are no longer accurate, you will promptly notify us and the Joint
    Global Coordinators and the Book Running Lead Managers.

Any resale or other transfer or attempted resale or other transfer, made other than in compliance with
the abovestated restrictions will not be recognised by the Company.




                                                  200
                                  INDIAN SECURITIES MARKET

The information in this section has been extracted from publicly available documents from various
sources, including the SEBI, the BSE and the NSE, and has not been prepared or independently
verified by the Company or the Joint Global Coordinators and Book Running Lead Managers, or any
of their respective affiliates or advisors.

The Indian Securities Market

India has a long history of organized securities trading.       In 1875, the first stock exchange was
established in Mumbai.

Stock Exchange Regulation

India’s stock exchanges are regulated primarily by the SEBI, as well as by the Government acting
through the Ministry of Finance, Capital Markets Division, under the SCRA and SCRR, which, along
with the rules, bye-laws and regulations of the respective stock exchanges, regulate the recognition of
stock exchanges, the qualifications for membership and the manner in which contracts are entered into
and enforced between members.

The Securities and Exchange Board of India Act, 1992, as amended (the “SEBI Act”), granted powers
to the SEBI to regulate the Indian securities markets, including stock exchanges and other
intermediaries in the capital markets, to promote and monitor self-regulatory organizations, to prohibit
fraudulent and unfair trade practices and insider trading and to regulate substantial acquisitions of
shares and takeovers of companies. The SEBI has also issued guidelines and regulations concerning
minimum disclosure requirements by public companies, rules and regulations concerning investor
protection, insider trading, substantial acquisition of shares and takeovers of companies, buyback of
securities, delisting of securities, employee stock option schemes, stockbrokers, underwriters, mutual
funds, foreign institutional investors, credit rating agencies and other capital market participants. The
SEBI has the power to amend the Listing Agreements and bye-laws of stock exchanges in India. Any
amendment of the bye-laws by the stock exchanges requires the prior approval of the SEBI.

Listing

The listing of securities on recognised Indian stock exchanges is regulated by the SCRA, the SCRR and
the listing agreements of the respective stock exchanges. Under the SCRR, the governing body of each
stock exchange is empowered to suspend trading of or dealing in a listed security for breach by a listed
company of its obligations under such listing agreement, subject to such company receiving prior
notice of such intent of the stock exchange.

The provisions of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations,
2009, as amended (the “Delisting Regulations”) and the SCRR govern voluntary and compulsory
delisting of equity shares of listed Indian companies from any of the recognized stock exchanges. A
company may voluntarily delist from a stock exchange provided that (a) the securities of the company
have been listed for a minimum period of three years on any recognized stock exchange, (b) the
delisting has been approved by two-thirds of the public shareholders, and (c) the company, the
promoter and/or the director of the company provide an exit opportunity and purchase the outstanding
securities from those holders who wish to sell them at a price determined in accordance with the
Delisting Regulations, provided further that the condition in (c) above may be dispensed with by the
SEBI if the securities remain listed on the NSE or the BSE.

In the event a company seeks to voluntarily delist from a stock exchange, it is required to provide an
exit opportunity to the other shareholders (the “Delisting Offer”) and seek the in-principle approval of
the stock exchange. This exit opportunity involves a price discovery process known as the “book
building process”. A Delisting Offer can be launched by any promoter seeking to delist the securities of
the company. The Delisting Offer needs to be supported by a resolution approved by the board of
directors and a resolution approved by three-fourths of the shareholders of the listed company through
a postal ballot. In addition, the special resolution of the shareholders can be acted upon if, and only if,
the votes cast by public shareholders in favour of the proposal amount are at least two times the number
of votes cast by public shareholders against it (promoters and holders of depository receipts are
considered non-public shareholders). Following the approval of the shareholders, the promoter would

                                                   201
issue a public announcement (i.e. a public notice) in relation to the Delisting Offer. The offer price
shall have a floor price which shall be determined in the manner provided in the Delisting Regulations.

The Delisting Regulations and the SCRR also provide the stock exchanges the power to delist the
securities of companies on certain grounds, including if a company is incurring losses during the
preceding three consecutive years and has negative net worth; the trading in the securities of the
company has remained suspended for a minimum period of six months; the securities of a company
have remained infrequently traded during the preceding three years; the company or any of its
promoters or directors have been convicted for failure to comply with any provisions of the SEBI Act
or the Depositories Act or rules and regulations made thereunder and awarded a punishment of not less
than three years; or there has been failure to raise the public shareholdings within a specified time to
the minimum level applicable to the company under its listing agreement. Any order for compulsory
delisting can be made only after considering representations received from aggrieved persons. These
regulations also provide that in the event that the securities of a company are delisted by a stock
exchange, the fair value of securities shall be determined by an independent valuer appointed by the
stock exchange from a panel of experts selected by the stock exchange. If a listed company is delisted
by the stock exchange, the listed company can file an appeal before the Securities Appellate Tribunal.
The Delisting Regulations do not permit the listing of Equity Shares once delisted for a period of 5
years (in a voluntary delisting) and 10 years (if the stock exchanges initiate the delisting).

The Company has entered into Listing Agreements with the Stock Exchanges. These agreements
require, inter alia, that the Company adhere to certain corporate governance requirements, including
ensuring the minimum number of independent Directors on the Board, and composition of various
committees such as audit committee and Shareholders’/ Investors’ Grievance Committee and are
subject to continuing disclosure requirements.

Any non-compliance with the terms and conditions of the listing agreements with the Stock Exchanges
may entail the delisting of the Equity Shares from such stock exchanges, which will affect future
trading of those Equity Shares.

Minimum Level of Public Shareholding

All listed companies are required to ensure that their minimum level of public shareholding remains at
or above 25%, however, this requirement does not apply to those companies who in the past had
offered at least 10% of the issue size to the public pursuant to Rule 19(2)(b) of the SCRR, or to
companies that have reached a size of 20 million or more in terms of the number of outstanding listed
shares and Rs.10 billion or more in terms of market capitalisation. Such listed companies are required
to maintain the minimum level of public shareholding at 10% of the total number of issued shares of a
class or kind for the purposes of listing. Failure to comply with this clause in the listing agreement may
result in such the delisting of such listed company’s shares pursuant to the terms of the Delisting
Regulations and may result in penal action being taken pursuant to the SEBI Act.

Disclosures under the Companies Act and SEBI Regulations

Under the Companies Act, a public offering of securities in India must be made by means of a
prospectus, which must contain information specified in the Companies Act and the SEBI Regulations.
The prospectus must be filed with the Registrar of Companies having jurisdiction over the place where
a company’s registered office is situated, which in the Company’s case is currently the RoC located at
Pune, Maharashtra. A company’s directors and promoters may be subject to civil and criminal liability
for misrepresentation in a prospectus. The Companies Act also sets forth procedures for the acceptance
of subscriptions and the allotment of securities among subscribers and establishes maximum
commission rates for the sale of securities. SEBI has issued detailed guidelines concerning disclosure
by public companies and investor protection.

Public limited companies are required under the Companies Act and the SEBI Regulations to prepare,
file with the RoC and circulate to their shareholders audited annual accounts which comply with the
Companies Act’s disclosure requirements and regulations governing their manner of presentation and
which include sections pertaining to corporate governance, related party transactions and the
management’s discussion and analysis as required under the listing agreement. In addition, a listed
company is subject to continuing disclosure requirements pursuant to the terms of its listing agreement
with the relevant stock exchange and are required to inform stock exchanges immediately regarding
any price-sensitive information.
                                                   202
Indian Stock Exchanges

There are now approximately 19 stock exchanges in India. Most of the stock exchanges have their own
governing board for self-regulation. A number of these exchanges have been directed by SEBI to file
schemes for demutualisation as a measure of moving towards greater investor protection.

The BSE and the NSE together hold a dominant position among the stock exchanges in terms of the
number of listed companies, market capitalisation and trading activity.

With effect from April 1, 2003, the stock exchanges in India operate on a trading day plus two, or T+2,
rolling settlement system. At the end of the T+2 period, obligations are settled with buyers of
securities paying for and receiving securities, while sellers transfer and receive payment for securities.
For example, trades executed on a Monday would typically be settled on a Wednesday. In order to
contain the risk arising out of the transactions entered into by the members of various stock exchanges
either on their own account or on behalf of their clients, the stock exchanges have designed risk
management procedures, which include compulsory prescribed margins on the individual broker
members, based on their outstanding exposure in the market, as well as stock-specific margins from the
members.

To restrict abnormal price volatility, the SEBI has instructed stock exchanges to apply the fol1owing
price bands calculated at the previous day’s closing price (there are no restrictions on price movements
of index stocks):

Market Wide Circuit Breakers. In order to restrict abnormal price volatility in any particular stock, the
SEBI has instructed the stock exchanges to apply daily circuit breakers, which do not allow
transactions beyond certain price volatility. An index based market-wide (equity and equity
derivatives) circuit breaker system has been implemented and the circuit breakers are applied to the
market for movement by 10%, 15% and 20% for two prescribed market indices: the BSE Sensex for
the BSE and the Nifty for the NSE (the “NSE Nifty”), whichever is breached earlier. If any of these
circuit breaker thresholds are reached, trading in all equity and equity derivatives markets nationwide is
halted.

Price Bands. In addition to the market-wide index based circuit breakers, there are currently in place
varying individual scrip wise bands (except for scrips on which derivative products are available or
scrips included in indices on which derivative products are available) of 20% either ways for all other
scrips.

BSE

The BSE was established in 1875. Pursuant to the BSE (Corporatization and Demutualization) Scheme
2005 of SEBI, with effect from August 19, 2005, the BSE has been incorporated and is now a company
under the Companies Act.

The BSE has switched over to an on-line trading network since May 1995 and has today expanded this
network to over 349 cities in India. As at November 2009, the BSE had 1,005 members, comprising
173 individual members, 809 Indian companies and 23 FIIs. Only a member of the BSE has the right to
trade in the stocks listed on the BSE. As on February 28, 2010, there were 4,970 listed companies
(excluding permitted companies) and 7,974 scrips listed and trading on the BSE and the estimated
market capitalization of stocks trading on the BSE was Rs. 59,035.14 billion. In February 2010, the
average daily turnover on the BSE was Rs. 41.25 billion. As on February 28, 2010, the BSE had 15,519
trader work stations spread over 324 cities.
 (Source: BSE)

NSE

The NSE was established by financial institutions and banks to provide nationwide on-line satellite-
linked screen-based trading facilities with market makers and electronic clearing and settlement for
securities including Government securities, debentures, public sector notes and units. Deliveries for
trades executed “on-market” are exchanged through the National Securities Clearing Corporation
Limited. NSE does not categorise shares into groups as in the case of BSE, except in respect of the
trade-to-trade category.


                                                   203
On its recognition as a stock exchange under the SCRA in April 1993, the NSE commenced operations
in the wholesale debt market segment in June 1994. The capital market (equities) segment commenced
operations in November 1994 and operations in the derivatives segment commenced in June 2000.
NSE launched the NSE 50 Index, now known as S&P CNX NIFTY, on April 22, 1996 and the Mid-cap
Index on January 1, 1996. The securities in the NSE 50 Index are highly liquid.

As on February 28, 2010, there were 1,461 companies listed and 1,342 companies available for trading
on the NSE, and the estimated market capitalization of stocks trading on the NSE was Rs. 57,553.05
billion. In February 2010, the average daily turnover on the NSE was Rs. 122.57 billion. The NSE
launched the NSE 50 index, now known as S&P CNX NIFTY, on April 22, 1996 and the Mid-cap
Index on January 1, 1996. As at November, 2009, the market capitalisation of the NSE was
approximately Rs. 50,248 billion. With a wide network in major metropolitan cities, screen based
trading, a central monitoring system and greater transparency, the NSE has lately recorded high
volumes of trading. (Source: NSE)

Trading Hours

Trading on both the BSE and the NSE normally occurs Monday through Friday, between 9:00 a.m. and
3:30 p.m. The BSE and the NSE are closed on public holidays.

Stock Market Indices

S&P CNX Nifty is a diversified 50 stock index accounting for 21 sectors of the economy. It is used for
a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.
S&P CNX Nifty is owned and managed by India Index Services and Products Limited (IISL), which is
a joint venture between the NSE and CRISIL.

The two indices which are generally used in tracking the aggregate price movements on BSE are
SENSEX and BSE 100 Index. The BSE Sensitive Index, or the Sensex, consists of listed shares of 30
large market capitalization companies. The companies are selected on the basis of market
capitalization, liquidity and industry representation. Sensex was first compiled in 1986 with the fiscal
year ended March 31, 1979. The BSE 100 Index (formerly the BSE National Index) contains listed
shares of 100 companies including the 30 in Sensex with 1983-1984 as the base year.

Internet-Based Securities Trading and Services

SEBI approved internet trading in January 2000. Internet trading takes place through order routing
systems, which route client orders to exchange trading systems for execution. This permits clients to
trade using brokers’ Internet trading systems. Stock brokers interested in providing this service are
required to apply for permission to the relevant stock exchange and also have to comply with certain
minimum conditions stipulated by the SEBI.
Takeover Code
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed
by the Takeover Code which prescribes certain thresholds or trigger points that give rise to certain
obligations thereunder.
Certain provisions of the Takeover Code are as follows:

Any acquirer (meaning a person who, directly or indirectly, acquires or agrees to acquire equity shares
or voting rights in a company, either by himself or with any person acting in concert) who acquires
equity shares or voting rights that would entitle him to more than 5%, 10%, 14%, 54%, 74% or 90% of
the equity shares or voting rights in a company (together with the company’s equity shares or voting
rights, if any, already held by such acquirer) is required to disclose the aggregate of his equity
shareholding or voting rights in that company to the company (which in turn is required to disclose
such shareholding to each of the stock exchanges on which the company’s equity shares are listed) and
to each of the stock exchanges on which the company’s equity shares are listed within two days of (a)
the receipt of allotment information; or (b) the acquisition of equity shares or voting rights, as the case
may be. The term “shares” has been defined under the Takeover Code to shares in the share capital of
a company carrying voting rights and includes any other security which entitles a person to acquire
shares with voting rights but does not include preference shares.


                                                   204
A person who, together with persons acting in concert with him, holds 15% or more but less than 55%
of the equity shares or voting rights in any company is required to disclose any purchase or sale
representing 2% or more of the equity shares or voting rights of that company (together with the
aggregate shareholding after such acquisition or sale) to that company and the stock exchanges on
which the company’s equity shares are listed within two days of the purchase or sale and is also
required to make annual disclosure of his holdings to that company (which in turn is required to
disclose such shareholding to each of the stock exchanges on which the company’s equity shares are
listed).

Promoters or persons in control of a company are also required to make annual disclosure of their
holding in a specified manner. The company is also required to make annual disclosure of holdings of
its promoters or persons in control as on March 31 of the respective year and as of the record date for
payment of dividend to each of the stock exchanges on which its equity shares are listed.

The SEBI has recently amended the Takeover Code to make it mandatory for the promoters and
promoter group of listed companies to disclose the creation and enforcement of a pledge on the equity
shares held by such persons.

An acquirer cannot acquire equity shares or voting rights which (taken together with the existing equity
shares or voting rights, if any, held by him or by persons acting in concert with him) would entitle such
acquirer to exercise 15% or more of the voting rights in a company, unless such acquirer makes a
public announcement offering to acquire a further minimum of 20% of the equity shares of the
company at a price not lower than the price determined in accordance with the Takeover Code. A copy
of the public announcement is required to be delivered, on the date on which such announcement is
published, to SEBI, the company and the stock exchanges on which the company’s equity shares are
listed.

No acquirer who, together with persons acting in concert with him, has acquired, in accordance with
law, 15% or more but less than 55% of the shares or voting rights in a company, shall acquire, either by
himself or through or with persons acting in concert with him, additional shares or voting rights that
would entitle him to exercise more than 5% of the voting rights in any financial year ending March 31,
unless such acquirer makes a public announcement offering to acquire a further minimum of 20% of
the equity shares of the target company at a price not lower than the price determined in accordance
with the Takeover Code.

An acquirer who, together with persons acting in concert with him, has acquired, in accordance with
law, 55% or more but less than 75% of the equity shares or voting rights in a company (or, where the
company concerned had obtained the initial listing of its shares by making an offer of at least 10% of
the issue size to the public pursuant to Rule 19(2)(b) of the SCRR, less than 90% of the shares or
voting rights in the company) may not, either by itself or through persons acting in concert with it,
acquire any additional equity shares or voting rights in the company, unless such acquirer makes an
open offer to acquire a minimum of 20% of the shares or voting rights which it does not already own in
the company, provided that an acquirer together with persons acting in concert may acquire additional
shares or voting rights entitling him to up to 5% voting rights in a company without making a public
announcement if (i) the acquisition is made through open market purchase on the stock exchanges or
the increase in the shares or voting rights is pursuant to a buy-back of shares by the target company and
(ii) the post acquisition shareholding of the acquirer and persons acting in concert does not exceed
75%.

Where an acquirer who (together with persons acting in concert) holds 55% or more, but less than 75%
of the shares or voting rights in a target company (or, where the concerned company had obtained the
initial listing of its shares by making an offer of at least 10% of the issue size to the public pursuant to
Rule 19(2)(b) of the SCRR, less than 90% of the shares or voting rights in the company), intends to
consolidate its holdings while ensuring that the public shareholding in the target company does not fall
below the minimum level permitted by the listing agreement with the stock exchanges, the acquirer
may do so by making an open offer in accordance with the Takeover Code. Such open offer would be
required to be made for the lesser of (i) 20% of the voting capital of the company, or (ii) such other
lesser percentage of the voting capital of the company as would, assuming full subscription to the open
offer, enable the acquirer (together with persons acting in concert), to increase the holding to the
maximum level possible, which is consistent with the target company meeting the requirements of
minimum public shareholding specified in the listing agreement with the stock exchanges.


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In addition, regardless of whether there has been any acquisition of equity shares or voting rights in a
company, an acquirer cannot directly or indirectly acquire control over a company (for example, by
way of acquiring the right to appoint a majority of the directors or to control the management or the
policy decisions of the company) unless such acquirer makes a public announcement offering to
acquire a minimum of 20% of the voting equity shares of the company. In addition, the Takeover Code
introduces the “chain principle” by which the acquisition of a holding company will obligate the
acquirer to make a public offer to the shareholders of each subsidiary company which is listed.

Further, if an acquisition made pursuant to an open offer results in the public shareholding in the target
company being reduced below the minimum level required under the listing agreement with the stock
exchanges, the acquirer would be required to take steps to facilitate compliance by the target company
with the relevant provisions of the listing agreement with the stock exchanges, within the time period
prescribed therein.

The Takeover Code sets out the contents of the required public announcements as well as the minimum
offer price. The minimum offer price depends on whether the shares of the company are “frequently”
or “infrequently” traded (as defined in the Takeover Code). In case the shares of the company are
frequently traded, the offer price shall be the higher of:

•   the negotiated price under the agreement for the acquisition of shares in the company;

•   the highest price paid by the acquirer or persons acting in concert with him for any acquisitions,
    including through an allotment in a public, preferential or rights issue, during the 26-week period
    prior to the date of public announcement; and

•   the average of the weekly high and low of the closing prices of the shares of the company quoted
    on the stock exchange where the shares of the company are most frequently traded during the 26-
    week period prior to the date of public announcement, or the average of the daily high and low of
    the prices of the shares as quoted on the stock exchange where the shares of the company are most
    frequently traded during the two weeks preceding the date of public announcement, whichever is
    higher.

The Takeover Code permits conditional offers as well as an acquisition and consequent delisting of the
shares of a company and provides specific guidelines for the gradual acquisition of shares or voting
rights. Specific obligations of the acquirer and the board of directors of the target company in the offer
process have also been specified. Acquirers making a public offer are also required to deposit in an
escrow account a percentage of the total consideration which amount will be forfeited in the event that
the acquirer does not fulfil his obligations.

The general requirements to make such a public announcement do not, however, apply entirely to
bailout takeovers when a promoter (i.e. a person or persons in control of the company, persons named
in any offer document as promoters and certain specified corporate bodies and individuals) is taking
over a financially weak company but not a “sick industrial company” pursuant to a rehabilitation
scheme approved by a public financial institution or a scheduled bank. A “financially weak company”
is a company which has at the end of the previous financial year accumulated losses which have
resulted in the erosion of more than 50% but less than 100% of the total sum of its paid up capital and
free reserves as at the beginning of the previous financial year. A “sick industrial company” is a
company registered for more than five years which has at the end of any financial year accumulated
losses equal to or exceeding its entire net worth.

The Takeover Code, subject to certain conditions specified in the Takeover Code, exempts certain
specified acquisitions from the requirement of making a public offer, including, among others, the
acquisition of shares (1) by allotment in a public issue or a rights issue, (2) pursuant to an underwriting
agreement, (3) by registered stockbrokers in the ordinary course of business on behalf of clients, (4) in
unlisted companies, (5) pursuant to a scheme of reconstruction or amalgamation, (6) pursuant to a
scheme under Section 18 of the SICA, (7) resulting from transfers between companies belonging to the
same group of companies or between promoters of a publicly listed company and relatives, (8) by way
of transmission through inheritance or succession, (9) resulting from transfers by Indian venture capital
funds or foreign venture capital investors registered with SEBI, to promoters of a venture capital
undertaking or venture capital undertaking pursuant to an agreement between such venture capital
funds or foreign venture capital investors with such promoters or venture capital undertaking, (10) by

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the Government of India controlled companies, unless such acquisition is made pursuant to a
disinvestment process undertaken by the Government of India or a State Government, (11) change in
control by takeover/restoration of the management of the borrower company by the secured creditor in
terms of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002, (12) acquisition of shares by a person in exchange of equity shares received under a public
offer made under the Takeover Code and (13) in terms of guidelines and regulations relating to
delisting of securities as specified by SEBI. The Takeover Code does not apply to acquisitions in the
ordinary course of business by public financial institutions either on their own account or as a pledgee.
An application may also be filed with the takeover panel seeking exemption from the open offer
requirements of the Takeover Code. Pursuant to a recent amendment, a listed company can apply to
the SEBI to waive requirements under the Takeover Code in relation to an acquisition of a listed
company in circumstances where the board of the listed company has been taken over by the
Government of India and there is a plan for a transparent and competitive process for the operations of
the listed company.

In addition, Chapter III of the Takeover Code, the holders of American Depository Receipts or Global
Depository Receipts that are entitled to exercise voting rights on the shares underlying such depository
receipts would be required to make an open offer when they cross the prescribed thresholds of
shareholding under the Takeover Code.

Insider Trading Regulations

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, as
amended (“Insider Trading Regulations”), have been notified by SEBI to prevent insider trading in
India by prohibiting and penalising insider trading in India. The Insider Trading Regulations prohibit
an “insider” from dealing, either on his own behalf or on behalf of any other person, in the securities of
a company listed on any stock exchange when in possession of unpublished price-sensitive
information. The terms “unpublished” and “price sensitive information” are defined by the Insider
Trading Regulations. The Insider Trading Regulations define an insider to mean any person who (i) is
or was connected with the company or is deemed to have been connected with the company and who is
reasonably expected to have access to unpublished price sensitive information in respect of securities of
a company or (ii) has received or has had access to such unpublished price sensitive information.

Unpublished means information which is not published by the Company or its agents and is not
specific in nature. The Insider Trading Regulations clarify that speculative reports in print or electronic
media shall not be considered as published information. Price sensitive information means any
information which relates directly or indirectly to a company and which if published is likely to
materially affect the price of securities of the company, such as the periodical financial results of the
company, intended declaration of dividends (both interim and final), issue of securities or buy-back of
securities. Under the Insider Trading Regulations, no insider shall communicate or counsel or procure,
directly or indirectly, any unpublished price-sensitive information to any other person who while in
possession of such unpublished price-sensitive information shall not deal in securities.

The Insider Trading Regulations make it compulsory for listed companies and certain other entities
associated with the securities market to establish an internal code of conduct to prevent insider trading
and also to regulate disclosure of unpublished price-sensitive information within such entities so as to
minimize misuse of such information. To this end, the Insider Trading Regulations provide a model
code of conduct. Further, the Insider Trading Regulations specify a model code of corporate disclosure
practices to prevent insider trading which must be implemented by all listed companies.

The Insider Trading Regulations require any person who holds more than 5% of the outstanding shares
or voting rights in any listed company to disclose to the company the number of shares or voting rights
held by such person on becoming such holder within two working days of:

•   the receipt of intimation of allotment of shares; or

•   the acquisition of the shares or voting rights, as the case may be.

On a continuing basis, under the Insider Trading Regulations, any person who holds more than 5% of
the shares or of the voting rights in any listed company is required to disclose to the company, the
number of shares or voting rights held by him and any change in shareholding or voting rights, (even if

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such change results in the shareholding falling below 5%) if there has been change in such holdings
from the last disclosure made, provided such change exceeds 2% of the total shareholding or voting
rights in the company. Such disclosure is required to be made within two working days of:

•   the receipt of intimation of allotment of the shares; or

•   the acquisition or the sale of the shares or voting rights, as the case may be.

All the directors, officers, and designated employees are prohibited from entering into opposite
transactions during a period of six months and not to take any position in derivative transactions and
abide by 30 days holding period in case of subscription in the primary market (IPO). SEBI has recently
clarified that six months restriction for directors and employees to transact in shares of a company is
only intended for trading on stock exchanges and is not applicable to the exercise of Employee Stock
Options (ESOPs) and the sale of these shares. The employees can subscribe to ESOPs even if they have
sold shares in the previous six months. The restriction on market purchases for the next six months
would be applicable once shares bought through ESOPs are sold. Employees can sell shares in cases of
emergency on approval from the company’s compliance department. Employees are free to trade in the
Nifty or Sensex futures, subject to the company’s code of conduct.

Depositories

In August 1996, the Indian Parliament enacted the Depositories Act which provides a legal framework
for the establishment of depositories to record ownership details and effect transfers in electronic book-
entry form. SEBI has framed the Securities and Exchange Board of India (Depositories and
Participants) Regulations, 1996, as amended which provide for the formation of such depositories, the
registration of participants as well as the rights and obligations of the depositories, participants, the
company, the beneficial owners and the issuers. The depository system has significantly improved the
operations of the Indian securities markets.

Trading of securities in book-entry form commenced in December 1996. In January 1998, SEBI
notified scripts of various companies for compulsory dematerialized trading by certain categories of
investors such as foreign institutional investors and other institutional investors and has also notified
compulsory dematerialized trading in specified scrips for all retail investors. SEBI has subsequently
significantly increased the number of scrips in which dematerialized trading is compulsory for all
investors. However, even in the case of scrips notified for compulsory dematerialized trading,
investors, other than institutional investors, may trade in and deliver physical shares on transactions
outside the stock exchange where there are no requirements to report such transactions to the stock
exchange and on transactions on the stock exchange involving lots of less than 500 securities.

SEBI has also provided that the issue and allotment of shares in initial public offerings and/or the
trading of shares shall only be in electronic form, and the company gives an option to subscribers,
shareholders or investors either to receive the security certificates or to hold the securities in book-entry
form with a depository.

Under the Depositories Act, every person subscribing to securities offered by an issuer has an option to
either receive the security certificates or hold the securities with a depository

Transfers of shares in book-entry form require both the seller and the purchaser of the equity shares to
establish accounts with Depository Participants registered with the depositaries established under the
Depositories Act. Upon delivery, the shares shall be registered in the name of the relevant depositary
in the Company’s books and this depositary shall enter the name of the investor in its records as the
beneficial owner, thus effecting the transfer of beneficial ownership. The beneficial owner shall be
entitled to all rights and benefits of a shareholder and be subject to all liabilities in respect of his shares
held by a depositary. Every person holding equity shares of the company and whose name is entered as
a beneficial owner in the records of the depository is deemed to be a member of the concerned
company.

The Companies Act compulsorily provides that Indian companies making any initial public offerings of
securities for or in excess of Rs.100 million should issue the securities in dematerialized form.

Derivatives

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Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was
amended in February 2000 and derivative contracts were included within the term “securities,” as
defined by the SCRA. Trading in derivatives in India takes place either on separate and independent
derivatives exchanges or on a separate segment of an existing stock exchange. The derivative exchange
or derivative segment of a stock exchange functions as a self regulatory organization under the
supervision of the SEBI. Derivatives products have been introduced in a phased manner in India.




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                              DESCRIPTION OF THE SECURITIES

Set forth below is certain information relating to the share capital of the Company including a brief
summary of some of the provisions of the Memorandum and Articles of Association of the Company
and the Companies Act relating to the rights attached to its NCDs, the Warrants and the Equity Shares.

General

The authorized capital of the Company is Rs. 1,050,000,000.00 divided into 300,000,000 Equity
Shares of Rs. 2/- each 43,000,000 cumulative preference shares of Rs.10/- each and 2,000,000
unclassified shares of Rs.10/- each. As of the date of this Placement Document, 222,794,316 Equity
Shares of Rs. 2/- each fully paid-up were outstanding.

Articles of Association

The Company is governed by its Articles of Association.

Description of Equity Shares

Dividend

Under the Companies Act, unless the board recommends the payment of a dividend, the shareholders at
an annual general meeting have no power to declare any dividend. Subject to certain conditions
specified in the Companies Act, no dividend can be declared or paid by a company for any financial
year except out of the profits of the company determined in accordance with the provisions of the
Companies Act or out of the undistributed profits or reserves of previous fiscal years or out of both,
arrived at in accordance with the provisions of the Companies Act. Under the Articles of Association,
the shareholders at a general meeting may declare a lower, but not higher, dividend than that
recommended by the Board. Pursuant to a recent amendment to the Listing Agreement, listed
companies are required to declare and disclose their dividends on per share basis only. The dividend
recommended by the Board and approved by the shareholders at an annual general meeting is
distributed and paid to shareholders in proportion to the paid-up value of their Equity Shares as at the
book closure date for which such dividend is payable. In addition, the board may declare and pay
interim dividends. Under the Companies Act, dividends can only be paid in cash to shareholders listed
on the register of shareholders on the date which is specified as the “record date” or “book closure
date”. No shareholder is entitled to a dividend while unpaid calls on any of his Equity Shares are
outstanding.

Dividends must be paid within thirty days from the date of the declaration and any dividend that
remains unpaid or unclaimed after that period must be transferred within seven days to a special unpaid
dividend account held at a scheduled bank. Any money that remains unpaid or unclaimed for seven
years from the date of such transfer must be transferred by the Company to the Investor Education and
Protection Fund established by the Government and thereafter any claim with respect thereto will lapse.

Under the Companies Act, a company may pay a dividend in excess of 10% of its paid-up capital in
respect of any fiscal year, out of the profits of that financial year only after it has transferred to its
reserves a certain percentage of its profits for that year ranging between 2.50% and 10% depending on
the percentage of dividend proposed to be declared in that year. The Companies Act and the
Companies (Transfer of Profits to Reserves) Rules, 1975 further provide that if the profit for a year is
insufficient, the dividend for that year may be declared out of accumulated profits from previous years
which have been transferred to reserves, subject to certain conditions prescribed under those
legislations.

Subject to applicable provisions of the Foreign Exchange Management Act, 1999 and the rules and
regulations issued thereunder, as amended, all dividends and other distributions declared and payable
on the Equity Shares may be paid by the Company to the holder thereof in Indian Rupees and may be
converted into foreign currency and freely transferred out of the Republic of India without the necessity
of obtaining any governmental or regulatory authorisation or approval in the Republic of India or any
political subdivision or taxing authority thereof.




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Capitalisation of Reserves

The Company’s Articles of Association permit the Company by a resolution of the shareholders in a
general meeting to resolve in certain circumstances that certain amounts standing to the credit of
certain reserves or securities premium can be capitalized by the issue of fully paid bonus shares or by
crediting shares not fully paid-up with the whole or part of any sum outstanding. Bonus shares must be
issued pro rata to the amount of capital paid-up on existing shareholdings.

Any issue of bonus shares by a listed company would be subject to the regulations issued by the SEBI.
The relevant SEBI Regulations prescribe that no company shall, pending conversion of convertible
securities, issue any shares by way of bonus unless a similar benefit is extended to the holders of such
convertible securities, through a proportionate reservation of shares. Further, in order to issue bonus
shares a company should not have defaulted in the payment of interest or principal in respect of fixed
deposits and interest on existing debentures or principal on redemption thereof and should have
sufficient reason to believe that it has not defaulted in respect of any statutory dues of the employees.
The declaration of bonus shares in lieu of a dividend cannot be made. A bonus issue may be made out
of free reserves built out of genuine profits or securities premium collected in cash and not from
reserves created by revaluation of fixed assets.

The issue of bonus shares must take place within fifteen days from the date of approval by the board, if
the articles of association of a company do not require such company to seek shareholders’ approval for
capitalisation of profits or reserves for making bonus issues. If a company is required to seek
shareholders’ approval for capitalisation of profits or reserves for making bonus issues, then the bonus
issue should be implemented within two months from the date of the board meeting wherein the
decision to issue bonus shares was taken subject to shareholders’ approval.

Pre-emptive Rights and Alteration of Share Capital

Subject to the provisions of the Companies Act, the Company can increase its share capital by issuing
new shares. Such new shares must be offered to existing shareholders registered on the record date in
proportion to the amount paid-up on those shares at that date. The offer shall be made by notice
specifying the number of shares offered and the date (being not less than fifteen days from the date of
the offer) after which the offer, if not accepted, will be deemed to have been declined. After such date
the Board may dispose of the shares offered in respect of which no acceptance has been received, in
such manner as they think most beneficial to the Company. The offer is deemed to include a right
exercisable by the person concerned to renounce the shares in favor of any other person provided that
the person in whose favor such shares have been renounced is approved by the Board in their absolute
discretion.

However, under the provisions of the Companies Act, new shares may be offered to any persons,
whether or not those persons include existing shareholders, if a special resolution to that effect is
passed by the shareholders of the company in a general meeting. The issue of the Equity Shares
pursuant to this Issue has been approved by a special resolution of the Company’s shareholders and
such shareholders have waived their pre-emptive rights with respect to such Equity Shares.

The Articles provide that the Company may in a general meeting, from time to time increase its capital
by the creation of new shares and may consolidate or sub-divide its share capital, convert all or any of
its fully paid-up equity shares into stock and reconvert that stock into fully paid-up equity shares or
cancel equity shares which have not been taken up by any person. The Company may also from time
to time by special resolution reduce its share capital.

The Articles also provide that if at any time the Company’s share capital is divided into different
classes of shares, the rights attached to any one class (unless otherwise provided by the terms of issue
of the shares of that class) may be varied with the consent in writing of the holders of three-fourth of
the issued shares of that class, or with the sanction of a special resolution, passed at a separate meeting
of the holders of the shares of that class.

Preference Shares

The preference shares of the Company do not confer any further rights to participate in the Company’s
profits or assets. Holders of preference shares are not entitled to vote at general meetings of the
Company except where the dividend due on such capital has remain unpaid:
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(i)    in the case of cumulative preference shares, in respect of an aggregate period of not less than
       two years preceding the date of commencement of the meeting; and

(ii)   in the case of non cumulative preference shares, either in respect of a period of not less than two
       years or in respect of an aggregate period of not less than three years comprised in the six years
       ending with the expiry of the financial year immediately preceding the commencement of the
       meeting.

Under the Companies Act, the Company may issue redeemable preference shares but (i) no such shares
shall be redeemed except out of profits of the Company which would otherwise be available for
dividends or out of the proceeds of a fresh issue of shares made for the purposes of the redemption; (ii)
no such shares shall be redeemed unless they are fully paid; (iii) the premium, if any, payable on
redemption shall have been provided for out of the profits of the Company or out of the Company’s
securities premium account, before the shares are redeemed; (iv) where any such shares are redeemed
otherwise than out of the proceeds of a fresh issue, there shall, out of profits which would otherwise
have been available for dividends, be transferred to a reserve fund, to be called the Capital Redemption
Reserve Account, a sum equal to the nominal amount of the shares redeemed; (v) the provisions of the
Companies Act relating to the reduction of the share capital of a company shall apply as if such reserve
account were paid-up share capital of such company. Preference shares must be redeemable before the
expiry of a period of 20 years from the date of their issue; and (vi) the Capital Redemption Reserve
Accounts may be applied by the Company in paying up un-issued shares of the Company to be issued
to the members as fully paid bonus shares.

General Meetings of Shareholders

The Company must hold its annual general meeting each year within 15 months of the previous annual
general meeting, unless extended by the Registrar of Companies at the request of the Company for any
special reason.

The Board of Directors may convene an extraordinary general meeting of shareholders when necessary
or at the request of a shareholder or shareholders holding in the aggregate not less than 10% of the
paid-up capital of the Company. Written notices convening a meeting setting out the date, place and
agenda of the meeting must be given to members at least 21 days prior to the date of the proposed
meeting. A general meeting may be called after giving shorter notice if consent is received from all
shareholders entitled to vote, in the case of an annual general meeting, and from shareholders holding
not less than 95% of the paid-up capital of the Company in the case of any other general meeting.
Currently, the Company gives written notices to all members and, in addition, gives public notice of
general meetings of shareholders in a daily newspapers of general circulation in the region of registered
office of the Company. General meetings are generally held at Pune. The quorum for a general meeting
of the Company is five members personally present.

A company intending to pass a resolution relating to matters such as, but not limited to, amendment in
the objects clause of the memorandum, buy-back of shares under the Companies Act, giving loans or
extending guarantee in excess of limits prescribed under the Companies Act, and guidelines issued
thereunder, are required to obtain the resolution passed by means of a postal ballot instead of
transacting the business in the general meeting of the company. A notice to all the shareholders shall
be sent along with a draft resolution explaining the reasons therefore and requesting them to send their
assent or dissent in writing on a postal ballot within a period of 30 days from the date of posting the
letter.

Voting Rights

At a general meeting upon a show of hands, every member holding shares and entitled to vote and
present in person has one vote. Upon a poll the voting rights of each shareholder entitled to vote and
present in person or by proxy is in the same proportion as the capital paid-up on each share held by
such holder bears to the total paid-up capital of the company. Voting is by show of hands, unless a poll
is ordered by the Chairman of the meeting or demanded by shareholder or shareholders holding at least
10% of the voting rights in respect of the resolution or by those holding paid-up capital of at least
Rs.50,000. The Chairman of the meeting has a casting vote.

Ordinary resolutions may be passed by simple majority of those present and voting. Special resolutions
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require the vote of three-fourth of the members present and voting. Special resolutions require that the
votes cast in favour of the resolution by those present and voting must be at least three times the votes
cast against the resolution. The Companies Act provides that to amend the articles of association, a
special resolution is required to be passed in a general meeting. Certain instances, including change in
the name of the company, reduction of share capital, approval of variation of rights of special classes of
shares and dissolution of the company require a special resolution.

A shareholder may exercise his voting rights by proxy to be given in the form provided by the Articles.
The instrument appointing a proxy is required to be lodged with the Company at least 48 hours before
the time of the meeting. A shareholder may, by a single power of attorney, grant a general power of
representation regarding several general meetings of shareholders. Any shareholder of the Company
may appoint a proxy. A proxy shall not vote except on a poll and does not have a right to speak at
meetings. A corporate shareholder is also entitled to nominate a representative to attend and vote on its
behalf at general meetings, who shall not be deemed a proxy. Such an authorised representative can
vote in all respects as if a member, including on a show of hands and a poll.

The Companies Act allows for a company to issue shares with differential rights as to dividend, voting
or otherwise subject to certain conditions prescribed under applicable law. In this regard, the laws
require that for a public company to issue shares with differential voting rights, the company must have
had distributable profits in terms of the Companies Act for a period of three immediately preceding
financial years, the company has not defaulted in filing annual accounts and annual returns for the
immediately preceding three years , the Articles of Association of the company allow for the issuance
of such shares with differential voting rights and such other conditions set forth in the Companies
(Issue of Share Capital with Differential Voting Rights) Rules, 2001.

Convertible Securities/Warrants

The Company may issue from time to time debt instruments that are partly and fully convertible into
Shares and/or warrants to purchase Shares.

Register of Shareholders and Record Dates

The Company is obliged to maintain a register of shareholders at its registered office or with the
approval of its shareholders by way of a special resolution and with prior intimation to the Registrar of
Companies at some other place in the same city. The Company recognizes as shareholders only those
persons whose names appear on the register of shareholders and cannot recognize any person holding
any share or part of it upon any express, implied or constructive trust, except as permitted by law. In
the case of shares held in physical form, transfers of shares are registered on the register of
shareholders upon lodgement of the share transfer form duly complete in all respects accompanied by a
share certificate or, if there is no certificate, the letter of allotment in respect of shares transferred
together with duly stamped transfer forms. In respect of electronic transfers, the depository transfers
shares by entering the name of the purchaser in its books as the beneficial owner of the shares. In turn,
the name of the depository is entered into the Company’s records as the registered owner of the shares.
The beneficial owner is entitled to all the rights and benefits as well as the liabilities with respect to the
shares held by a depository.

For the purpose of determining the shareholders, the register may be closed for periods not exceeding
forty five days in any one year or thirty days at any such times, as the Board may deem expedient in
accordance with the provisions of the Companies Act. Under the listing agreements of the Stock
Exchanges on which the Company’s outstanding shares are listed, the Company may, upon at least
seven working days’ advance notice to such stock exchanges, set a record date and/or close the register
of shareholders in order to ascertain the identity of shareholders. The trading of shares and the delivery
of certificates in respect thereof may continue while the register of shareholders is closed.

Under the Companies Act, the Company is also required to maintain a register of debenture holders.

Directors

The Articles of Association of the Company provides that the number of directors of the Company
shall not be less than three and not be more than seventeen. We have received the approval of the
Central Government to increase the number of directors on our Board to 19 vide their letter no. SRN
No. A-70987086-CL.VII dated January 21, 2010 on the terms and conditions mentioned therein. The
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directors shall be appointed by the Company in the general meeting subject to the provisions of the
Companies Act and the Articles of Association.

The Company may by ordinary resolution increase or reduce the number of its directors subject to the
provisions of section 259 of the Companies Act. The directors have the power to appoint any other
persons as an additional director to the board of directors but any director so appointed shall hold office
only up to the date of the next following annual general meeting of the Company but shall be eligible
for election at such meeting. Subject to the provisions of section 313 of the Companies Act the board of
directors shall also have the power to appoint any person to act as an alternate director for a director
during the latter’s absence for a period of not less than three months. A director is not required to hold
any qualification shares. Pursuant to the Companies Act, not less than two-thirds of the total numbers
of directors shall be persons whose period of office is subject to retirement by rotation and one third of
such directors, or if their number is not three or a multiple of three, then the number nearest to one-
third, shall retire from office at every annual general meeting. The directors to retire would be those
who have been the longest in the office since their last appointment.

Annual Report and Financial Results

The Company’s audited financial statements for the relevant financial year, the directors’ report and
the auditors’ report (collectively the “Annual Report”) must be laid before the Annual General
Meeting. These also include certain other financial information of the Company, a corporate
governance section and management’s discussion and analysis and are made available for inspection at
the Company’s registered office during normal working hours for 21 days prior to the Annual General
Meeting.

Under the Companies Act, the Company must file the Annual Report with the Registrar of Companies
within 30 days from the date of the Annual General Meeting. As required under the Listing
Agreement, six copies are required to be sent to the BSE and the NSE as soon as they are issued. The
Company must also publish its financial results in at least one English language daily newspaper
circulating in the whole or substantially the whole of India and also in a newspaper published in the
language of the region where the registered office of the Company is situated.

The Company files certain information on-line, including its Annual Report, quarterly financial results,
report on corporate governance and the shareholding pattern statement and such other statements,
information and reports as may be specified by the SEBI from time to time, in accordance with the
requirements of the Listing Agreement.

Transfer of Shares

Shares held through depositaries are transferred in the form of book entries or in electronic form in
accordance with the regulations laid down by the SEBI. These regulations provide the regime for the
functioning of the depositaries and the participants and set out the manner in which the records are to
be kept and maintained and the safeguards to be followed in this system. Transfers of beneficial
ownerships of shares held through a depositary are exempt from stamp duty.

The SEBI requires that for trading and settlement purposes , the Company’s Shares be in book-entry
form for all investors, except for transactions that are not made on a stock exchange and transactions
that are not required to be reported to the stock exchange

The Company’s Equity Shares are freely transferable, subject only to the provisions of the Companies
Act under which, if a transfer of Equity Shares contravenes the SEBI provisions or the regulations
issued under it or the SICA or any other similar law, the Indian Company Law Board may, on an
application made by the company, an investor or the SEBI , direct a rectification of the register of
records. If a company without sufficient cause refuses to register a transfer of shares within two months
from the date of which the instrument of transfer is delivered to the company, the transferee may
appeal to the Indian Company Law Board seeking to register the transfer of equity shares. The
Company Law Board may, in its discretion, issue an interim order suspending the voting rights
attached to the relevant equity shares before completing its investigation of the alleged contravention.
Under the Companies (Second Amendment) Act, 2002, the Indian Company Law Board will be
replaced with the National Company Law Tribunal. Pursuant to the Listing Agreement, in the event
the Company has not effected the transfer of shares within one month or where the Company has failed
to communicate to the transferee any valid objection to the transfer within the stipulated time period of
                                                   214
one month, the Company is required to compensate the aggrieved party for the opportunity loss caused
during the period of delay. The Companies Act provides that the shares or debentures of the public
listed company (such as the Company) shall be freely transferable. The Company’s Articles of
Association provide for certain restrictions on the transfer of shares, including granting power to the
board of directors in certain circumstances, to refuse to register or acknowledge transfer of shares or
other securities issued by the Company. However, to the extent that the provisions of the Articles of
Association are in conflict with any of the provisions of the Companies Act, the Companies Act shall
prevail. Further, under the Companies Act, the enforceability of these transfer restrictions is unclear.

Acquisition by the Company of its own Shares

A company is prohibited from acquiring its own shares unless the consequent reduction of capital is
effected by an approval of at least 75% of its shareholders voting on the matter in accordance with the
Companies Act and is also sanctioned by the High Court of Judicature at the city where the company’s
registered office is situated. Moreover, subject to certain conditions, a company is prohibited from
giving whether directly or indirectly and whether by means of a loan, guarantee, the provision of
security or otherwise, any financial assistance for the purpose of or in connection with a purchase or
subscription made or to be made by any person of or for any shares in the company or its holding
company. However, pursuant to certain amendments to the Companies Act, a company has been
empowered to purchase its own shares or other specified securities out of its free reserves, or the
securities premium account or the proceeds of any shares or other specified securities (other than the
kind of shares or other specified securities proposed to be bought back) subject to certain conditions,
including:

•   the buy-back should be authorised by the Articles of Association of the company;

•   a special resolution has been passed in the general meeting of the company authorising the buy-
    back ;

•   the buy-back is limited to 25% of the total paid-up capital and free reserves provided that the buy-
    back of equity shares in any financial year shall not exceed 25% of its total paid-up equity capital
    in that year;

•   the ratio of debt owed by the company is not more than twice the capital and free reserves after
    such buy-back;

•   all the shares or other specified securities for the buy-back are fully paid-up; and

•   the buy-back is in accordance with the Securities and Exchange Board of India (Buy-Back of
    Securities) Regulations , 1998.

The second condition mentioned above would not be applicable if the buy-back is for less than 10% of
the total paid-up equity capital and free reserves of the company and provided that such buy-back has
been authorised by the board of directors of the company. Further, a company buying back its securities
is not permitted to buy -back any securities for a period of one year from the buy-back or to issue new
securities for six months from the buy-back date. Every buy-back has to be completed within a period
of one year from the date of passing of the special resolution or resolution of the Board as the case may
be.

A company buying back its securities is required to extinguish and physically destroy the securities so
bought back within seven days of the last date of completion of the buy-back.

The company is also prohibited from purchasing its own shares or specified securities through any
subsidiary company including its own subsidiary companies through any investment company (other
than a purchase of shares in accordance with a scheme for the purchase of shares by trustees of or for
shares to be held by or for the benefit of employees of the company) or if the company is defaulting on
the repayment of deposit or interest, redemption of debentures or preference shares or payment of
dividend to a shareholder or repayment of any term loan or interest payable thereon to any financial
institution or bank, if the company is listed and wishes to buy-back its shares or specified securities for
the purpose of delisting its shares or specified securities or in the event of non-compliance with certain
other provisions of the Companies Act.

                                                   215
Liquidation Rights

Subject to the rights of creditors, workmen, statutory creditors and of the holders of any other shares
entitled by their terms of issue to preferential repayment over the Equity Shares, in the event of a
winding up of the Company, the holders of the Equity Shares are entitled to be repaid the amounts of
capital paid-up or credited as paid-up on such Equity Shares. All surplus assets after payments due to
workmen, statutory creditors, and secured and unsecured creditors belong to the holders of the equity
shares in proportion to the amount paid up or credited as paid-up on such shares respectively at the
commencement of the winding-up.

Subject to applicable provisions of the Foreign Exchange Management Act, 1999 and the rules and
regulations issued thereunder, as amended, all amounts payable with respect to Equity Shares upon
liquidation of the Company may be paid by the Company to the holder thereof in Indian Rupees and
may be converted into foreign currency and freely transferred out of the Republic of India without the
necessity of obtaining any governmental or regulatory authorisation or approval in the Republic of
India or any political subdivision or taxing authority thereof.

Description of the NCDs

The NCDs constitute direct and secured obligations of the Company. Subject to any obligations
preferred by mandatory provisions of the law prevailing from time to time, the NCDs shall also, as
regards the principal amount of the NCDs, all interest, redemption premium (as applicable) and all
other monies secured in respect of the NCDs, rank pari passu with all other present direct and secured
obligations of the Company. The claims of the NCD holders shall be superior to the claims of the
unsecured creditors of the Company (subject to any obligations preferred by mandatory provisions of
the law prevailing from time to time).

Register of NCD holders

The Company shall maintain at its registered office (or such other place as permitted by law) a register
of NCD holders containing such particulars as required by Section 152 of the Companies Act. In terms
of Section 152A of the Companies Act, the register of NCD holders maintained by a Depository under
Section 11 of the Depositories Act shall be deemed to be a register of NCD holders. For further details
see “Terms and Conditions of the Non-Convertible Debentures”.

Transfers

In case of NCDs held in the dematerialized form, transfers of NCDs may be effected only through the
Depository(ies) through which such NCDs to be transferred are held, in accordance with the provisions
of the Depositories Act, 1996/ rules thereunder as notified by the Depositories from time to time. In
case of NCDs held in the physical form, transfers of NCDs may be effected only by delivery of the
NCD certificate issued in respect of that NCD. Transfer of NCDs may be subject to certain restricted
transfer periods. For further details in relation to transfers of NCDs see “Terms and Conditions of the
Non-Convertible Debentures”.

Buy back of NCDs

The Company may from time to time, subject to applicable law and necessary approvals, buyback
NCDs on terms and conditions to be decided by the Company.

Description of the Warrants

The Warrants entitle the Warrantholder to apply for one (1) Equity Shares for each Warrant held at the
Warrant Exercise Price at any time during the Warrant Exercise Period.

Register of Warrantholders

The Company shall maintain at its registered office (or such other place as permitted by law) a register
of Warrantholders. The register of Warrantholders maintained by a Depository shall be deemed to be a
register of Warrantholders. For further details see “Terms and Conditions of the Warrants”.



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Transfers

In case of Warrants held in the dematerialized form, transfers of Warrants may be effected only
through the Depository(ies) through which such Warrants to be transferred are held, in accordance with
the provisions of the Depositories Act, 1996 /rules as notified by the Depositories from time to time. In
case of Warrants held in the physical form, transfers of Warrants may be effected only by delivery of
the Warrant certificate issued in respect of that Warrant. Transfer of the Warrants may be subject to
certain restricted transfer periods. For further details in relation to transfers of Warrants see “Terms and
Conditions of the Non-Convertible Debentures”.

The Warrants are governed by, and shall be construed in accordance with, the laws of India.




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                                              TAXATION

The information provided below sets out the possible tax benefits available to the security holder of an
Indian Company in a summary manner only and is not a complete analysis or listing of all potential tax
consequences of the purchase, ownership and disposal of equity shares, under the current tax laws
presently in force in India. Several of these benefits are dependent on the Company or its Security
holder fulfilling the conditions prescribed under the relevant tax laws. Hence the ability of the
Company or its Security holders to derive the tax benefits is dependent upon fulfilling such conditions,
which based on business imperatives it faces in the future, it may not choose to fulfil. It is not
exhaustive or comprehensive and is not intended to be a substitute for professional advice. Investors
are advised to consult their own tax consultant with respect to the tax implications of an investment in
the Securities particularly in view of the fact that certain recently enacted legislation may not have a
direct legal precedent or may have a different interpretation on the benefits, which an investor can
avail.

Indian Taxation

The following is a summary of the material Indian tax consequences of owning and disposing of
Securities purchased in this Issue.

YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE INDIAN TAX
IMPLICATIONS AND CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING
OF SECURITIES IN YOUR PARTICULAR SITUATION.

I. Tax Benefits available to debenture holders

A. Resident debenture holders

1. Interest on NCD received by Debenture Holders would be subject to tax at the normal rates of tax in
accordance with and subject to the provisions of the I.T. Act. No income tax is deductible at source as
per the provisions of section 193 of the I.T Act on interest on debentures in respect of the following:
(a) In case the payment of interest on debentures to resident individual debenture holder in the
aggregate during the financial year does not exceed Rs.2,500;
(b) When the Assessing Officer issues a certificate on an application by a debenture holder on
satisfaction
that the total income of the debenture holder justifies no/lower deduction of tax at source as per the
provisions of Section 197(1) of the I.T. Act; and that Certificate is filed with the Company.
(c) When the resident debenture holder (not being a company or a firm or a senior citizen) submits a
declaration in the prescribed Form 15G verified in the prescribed manner to the effect that the tax on
his estimated total income of the previous year in which such income is to be included in computing his
total income will be nil as per the provisions of section 197A (1A) of the I.T. Act. Under section 197A
(1B) of the I.T. Act, Form 15G cannot be submitted nor considered for exemption from deduction from
tax at source if the aggregate of income of the nature referred to in the said section, viz. dividend,
interest, etc as prescribed therein, credited or paid or likely to be credited or paid during the Previous
year in which such income is to be included exceeds the maximum amount which is not chargeable to
tax; as may be prescribed in each year’s Finance Act.
(d) On any securities issued by a company in a dematerialized form listed on recognized stock
exchange in
India. (w.e.f. 1.06.2008).

2. Under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed debenture is
treated as a long term capital asset if the same is held for more than 12 months immediately preceding
the date of its transfer.

Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being
listed securities are subject to tax at the rate of 10% of capital gains calculated without indexation of
the cost of acquisition The capital gains will be computed by deducting expenditure incurred in
connection with such transfer and cost of acquisition of the debenture from the sale consideration.


                                                   218
In case of an individual or HUF, being a resident, where the total income as reduced by the long term
capital gains is below the maximum amount not chargeable to tax (i.e. Rs. 160,000 in case of all
individuals, to Rs. 190,000 in case of women and to Rs.240,000 in case of senior citizens), the long
term capital gains shall be reduced to the extent of and only the balance long term capital gains will be
subject to the flat rate of taxation in accordance with and the proviso to sub-section (1) of section 112
of the I.T. Act read with CBDT Circular 721 dated September 13, 1995.

In addition to the aforesaid tax, in the case of domestic companies where the income exceeds Rs.
10,000,000 a surcharge of 10% of such tax liability is also payable. Similarly, in the case of foreign
companies where the income exceeds Rs. 10,000,000 a surcharge of 2.5% of such tax liability is also
payable. A a 2% education cess and 1% secondary and higher education cess on the total income tax is
payable by all categories of taxpayers.

3. Short-term capital gains on the transfer of listed debentures, where debentures are held for a period
of not more than 12 months would be taxed at the normal rates of tax in accordance with and subject to
the provisions of the I.T. Act. The provisions related to minimum amount not chargeable to tax and
education cess described at para 2 above would also apply to such short-term capital gains.

4. In case the debentures are held as stock in trade, the income on transfer of debentures would be taxed
as
business income or loss in accordance with and subject to the provisions of the I.T. Act.

B Non Resident Indians
1. A non resident Indian has an option to be governed by Chapter XII-A of the I.T. Act, subject to the
provisions contained therein which are given in brief as under:
(a) Under section 115E of the I.T. Act, income from debentures acquired or purchased with or
subscribed to in convertible foreign exchange will be taxable at 20% (plus, education cess and
secondary & higher education cess), whereas, long term capital gains on transfer of such Debentures
will be taxable at 10% (plus education cess and secondary & higher education cess). Short-term capital
gains will be taxable at the normal rates of tax in accordance with and subject to the provisions
contained therein.
(b) Under section 115F of the I.T. Act, subject to the conditions and to the extent specified therein, long
term capital gains arising to a non-resident Indian from transfer of debentures acquired or purchased
with or subscribed to convertible foreign exchange will be exempt from capital gain tax if the net
consideration is invested within six months after the date of transfer of the debentures in any specified
asset or in any saving certificates referred to in clause (4B) of section 10 of the I.T. Act in accordance
with and subject to the provisions contained therein.
(c) Under section 115G of the I.T. Act, it shall not be necessary for a non-resident Indian to file a return
of income under section 139(1) of the I.T. Act, if his total income consists only of investment income
and/or long term capital gains earned on transfer of such investment acquired out of convertible foreign
exchange, and the tax has been deducted at source from such income under the provisions of Chapter
XVII-B of the I.T. Act in accordance with and subject to the provisions contained therein.
(d) Under section 115H of the I.T. Act, where a non-resident Indian becomes a resident in India in any
subsequent year, he may furnish to the Assessing Officer a declaration in writing along with return of
income under section 139 for the assessment year for which he is assessable, to the effect that the
provisions of Chapter XII-A shall continue to apply to him in relation to the investment income (other
than on shares in an Indian Company) derived from any foreign exchange assets in accordance with
and subject to the provisions contained therein. On doing so, the provisions of Chapter XII-A shall
continue to apply to him in relation to such income for that assessment year and for every subsequent
assessment year until the transfer or conversion into money of such assets.

2. In accordance with and subject to the provisions of section 115I of the I.T. Act, Non-Resident Indian
may opt not to be governed by the provisions of Chapter XII-A of the I.T. Act. In that case, please refer
to para A (2, 3 and 4) for the tax implications arising on transfer of debentures.

3. Under Section 195 of the I.T. Act, the company is required to deduct tax at source at the rate of 20%
on investment income and at the rate of 10% on any long-term capital gains and as referred to in
section 115E. At the normal rates for Short Term Capital Gains if the payee Debenture Holder is a Non
Resident Indian.
The provisions related to education cess described at para 2 above would also apply to such
income/gains.


                                                    219
4. As per section 90(2) of the I.T. Act read with the circular no. 728 dated October 30, 1995 issued by
the CBDT, in the case of a remittance to a country with which a Double Tax Avoidance Agreement
(DTAA) is in force, the tax should be deducted at the rate provided in the Finance Act of the relevant
year or at the rate provided in the DTAA, whichever is more beneficial to the assessee.

5. Alternatively, to ensure non deduction or lower deduction of tax at source, as the case may be, the
Debenture Holder should furnish a certificate under section 197(1) or 195(3) of the I.T. Act, from the
Assessing Officer.

II. Tax Benefits available to warrant holders

A. Resident warrantholder

1. Under Section 10(32) of the IT Act, any income of minor children clubbed in the total income of the
parent under Section 64(1A) of the IT Act, will be exempt from tax to the extent of Rs.1,500 per minor
child whose income is so included.

2. The characterization of the gains/losses, arising from sale of warrants, as capital gains or business
income would depend on the nature of holding in the hands of the warrantholder and various other
factors.

3. Under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed warrant is
treated as a long term capital asset if the same is held for more than 12 months immediately preceding
the date of its transfer.

Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being
listed securities are subject to tax at the rate of 10% of capital gains calculated without indexation of
the cost of acquisition or at 20% of capital gains calculated with indexation of the cost of acquisition.
The capital gains will be computed by deducting expenditure incurred in connection with such transfer
and cost of acquisition of the warrant from the sale consideration.

In case of an individual or HUF, being a resident, where the total income as reduced by the long term
capital gains is below the maximum amount not chargeable to tax (i.e. Rs. 160,000 in case of all
individuals, to Rs. 190,000 in case of women and to Rs.240,000 in case of senior citizens), the long
term capital gains shall be reduced to the extent of and only the balance long term capital gains will be
subject to the flat rate of taxation in accordance with and the proviso to sub-section (1) of section 112
of the I.T. Act read with CBDT Circular 721 dated September 13, 1995.

In addition to the aforesaid tax, in the case of domestic companies where the income exceeds Rs.
10,000,000 a surcharge of 10% of such tax liability is also payable. Similarly, in the case of foreign
companies where the income exceeds Rs. 10,000,000, a surcharge of 2.5% of such tax liability is also
payable. A 2% education cess and 1% secondary and higher education cess on the total income tax is
payable by all categories of taxpayers.

4. Short-term capital gains on the transfer of listed warrants, where warrants are held for a period of not
more than 12 months would be taxed at the normal rates of tax in accordance with and subject to the
provisions of the I.T. Act. The provisions related to minimum amount not chargeable to tax and
education cess described at para 3 above would also apply to such short-term capital gains.

5. Warrantholders are entitled to claim exemption in respect of tax on long term capital gains under
Section 54EC of the IT Act, if the amount of capital gains is invested in certain specified bonds /
securities within six months from the date of transfer, subject to the fulfillment of the conditions
specified therein. The maximum investment permissible on and after April 1, 2007 for the purposes of
claiming the exemption in the above bonds, by any person in a financial year, is Rs. 5 million.
However, according to Section 54EC(2) of the IT Act, if the warrantholder transfers or converts the
notified bonds into money within a period of three years from the date of their acquisition, the amount
of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year
in which such bonds are transferred or otherwise converted into money.

6. Warrantholders that are individuals or Hindu undivided families can avail of an exemption under
Section 54F of the IT Act, by utilization of the sales consideration arising from the sale of the
Company’s warrants held for a period of more than 12 months, for purchase / construction of a
                                                   220
residential house within the specified time period and subject to the fulfillment of the conditions
specified therein.

B Non-resident warrantholders – other than Foreign Institutional Investors

1. Under Section 10(32) of the IT Act, any income of minor children clubbed with the total income of
the parent under Section 64(1A) of the IT Act, will be exempt from tax to the extent of Rs.1,500 per
minor child whose income is so included.

2. The characterization of the gains/losses, arising from sale of warrants, as capital gains or business
income would depend on the nature of holding in the hands of the warrantholder and various other
factors.

3. The long-term capital gains accruing to a warrantholder of the Company, being a non-resident, on
sale of the Company’s warrants in a transaction carried out through a recognized stock exchange in
India, would be taxed at 20% (plus applicable surcharge and education cess).

4. The short-term capital gains accruing to a warrantholder of the Company on sale of the Company’s
shares in a transaction carried out through a recognized stock exchange in India tax is chargeable at
30% plus education cess, in the case of a non-corporate warrantholder and at 40% pluis applicable
surcharge and education cess in the case of a corporate warrantholder.

5. Under the provisions of Section 90(2) of the IT Act, if the provisions of the DTAA between India
and the country of residence of the non-resident are more beneficial, then the provisions of the DTAA
shall be applicable.

6. The warrantholders are entitled to claim exemption in respect of tax on long term capital gains of the
IT Act under Section 54EC of the IT Act, if the amount of capital gains is invested in certain specified
bonds / securities within six months from the date of transfer subject to the fulfillment of the conditions
specified therein. The maximum investment permissible for the purposes of claiming the exemption in
the above bonds by any person in a financial year is Rs. 5 million. However, according to Section
54EC(2) of the IT Act, if the shareholder transfers or converts the notified bonds into money within a
period of three years from the date of their acquisition, the amount of capital gains exempted earlier
would become chargeable to tax as long term capital gains in the year in which such bonds are
transferred or otherwise converted into money.

7. Individual warrantholders can avail of an exemption under Section 54F by utilization of the warrants
consideration arising from the sale of company’s warrant held for a period more than 12 months, for
purchase/construction of a residential house within the specified time period and subject to the
fulfillment of the conditions specified therein.

C. Tax Deduction at Source

No income-tax is deductible at source from income by way of capital gains under the present
provisions of the IT Act, in case of residents. However, as per the provisions of section 195 of the IT
Act, any income by way of capital gains, payable to non residents, may be eligible to the provisions of
with-holding tax, subject to the provisions of the relevant tax treaty. Accordingly income tax may have
to be deducted at source in the case of a non- resident at the rate under the domestic tax laws or under
the tax treaty, whichever is beneficial to the assessee unless a lower withholding tax certificate is
obtained from the tax authorities.]

III. Tax Benefits available to Shareholders

For these purposes, “Non-Resident” means a person who is not a resident in India. For purposes of the
IT Act, an individual is considered to be a resident of India during any financial year if he or she is in
India in that year for:

(a)   a period or periods amounting to 182 days or more; or

(b)   a period or periods amounting to 60 days or more and within the four preceding years he/she has
      been in India for a period or periods amounting to 365 days or more; or

                                                   221
(c)   in the case of a citizen of India who leaves India as a member of the crew of an Indian ship or
      for the purposes of employment outside India, the words “60 days” in paragraph (b) above shall
      be substituted by words “182 days”; or

(d)   in the case of a citizen of India or a person of Indian origin living abroad who visits India, the
      words “60 days” in paragraph (b) above shall be substituted by words “182 days”.

A company is resident in India if it is formed and incorporated in accordance with the Companies Act
and has its registered office in India or the control and management of its affairs is situated wholly in
India. A firm or other association of persons is resident in India except where the control and
management of its affairs is situated wholly outside India.

The following is based on the provisions of Indian tax laws as of the date hereof, which are subject to
change, possibly on a retrospective basis.

This summary is not intended to constitute a complete analysis of the Indian tax consequences to
any particular Non-Resident holders. Individual tax consequences of an investment in Equity
Shares may vary for Non-Residents in various circumstances, and potential investors should
therefore consult their own tax advisers as to the tax consequences of such purchase, ownership
and disposition under the tax laws of India, the jurisdiction of their residence and any tax treaty
between India and their country of residence. The IT Act is revised by the annual Finance Act
every fiscal year. The provisions of the tax laws summarized below are based on the Finance Act
2009.

Taxation of Dividends

Dividends on shares received from an Indian company on which dividend distribution tax has been
paid are exempt from tax in the hands of the shareholders. However, the Indian Company distributing
dividends is subject to a distribution tax at the rate of 16.995%. In terms of the IT Act, any expenditure
incurred to earn the dividend income is not allowable expenditure for deduction of expenses.
Distributions of bonus shares and rights to subscribe for equity shares to Non-Residents are not a
taxable event under Indian tax laws.

Income Tax Laws and Tax Treaty Benefits

The taxation of non resident in India shall be governed by the provisions of the IT Act and the tax
treaty between India and the jurisdiction of the Non Residents (“Tax Treaty”). As per Section 90 (2) of
IT Act, the provisions of IT Act would apply to the extent they are more beneficial than the provisions
of applicable tax treaty.

Taxation of Capital Gains

The Tax Treaty between India and countries like the U.S. and U.K. do not limit India’s ability to
impose tax on capital gains. However, capital gains on the sale of Securities purchased in this Issue by
residents of certain other countries like Mauritius and Singapore will not be taxable in India by virtue
of the provisions contained in the Tax Treaty between India and these countries.

Equity Shares held by a Non-Resident investor for a period of more than 12 months shall be treated as
long-term capital assets and the amount of gain on sale of such Equity Shares will be treated as long-
term capital gain. If the Equity Shares are held for a period of 12 months or less than 12 months, the
capital gain arising on the sale thereof is to be treated as short-term capital gain.

The amount of gain on the disposition of an equity share must be computed by converting the cost of
acquisition and full value of the consideration received as a result of such disposition into the same
foreign currency as was initially utilised for acquisition, and the capital gains so computed in foreign
currency shall be reconverted into Rupees. In respect of securities of Indian Company, purchased in
foreign currency, the cost of acquisition is not allowed to be increased on account of inflation i.e.
Indexation benefit is not available in such a case.

Long-Term Capital Gains


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In the event that the benefits of the Tax Treaty are not available to the Non Residents or the applicable
Tax treaty permits the taxation of capital gain in India incidence of tax would be as follows:

•     Long term capital gains being gains on sale of listed Indian securities held for a period of more
      than twelve months would not be taxable in India provided Securities Transaction Tax (“STT”) has
      been paid on the same;

•     Long term capital gains realized on sale of listed Indian securities not routed through a recognised
      stock exchange in India and therefore not subject to STT would be taxed at the rate of 10.56%. The
      rate for short term capital gains on such transactions for non resident companies is 42.23% and for
      FIIs is 31.67%.

•     Long term capital gains on the sale of unlisted securities will be taxed at the rate of 21.12% and
      short term capital gains on such transaction shall be taxed at the rate of 42.23%.

Short-Term Capital Gains

•     Short-term capital gains being gains on sale of listed Indian securities held for a period of twelve
      months or less will be taxed at the rate of 15.84% provided STT has been paid on the same;

•     In the event that sale is otherwise than on a stock exchange and as a result no STT is paid, short-
      term gain is subject to tax at the rate of 42.23% in case of non resident company and 30.90% in
      case of non resident individual.

STT

All transactions entered on a recognized stock exchange in India will be subject to Securities
Transaction Tax (“STT”) levied on the transaction value.


•     Delivery based transactions

In case of purchase/sale of listed equity shares which is settled by way of actual delivery or transfer of
the equity share, STT will be levied at the rate of 0.125% on both the buyer and seller of the equity
share.

•     Non-delivery based transactions

In case of sale of equity shares settled otherwise than by way of actual delivery or transfer of the equity
share, STT will be levied at the rate of 0.025% on the seller of the equity share.

•     Taxability of STT

In case of income being treated as trading income, STT paid can be claimed as deductible expenditure
in computing taxable income from business.

Characterisation of the income of the Investor

It may be noted that there are contradicting judicial rulings on characterization of income of a fund
regularly trading in shares and securities in India and the confusion is expected to be clarified by the
revenue authorities by providing guidance for such characterisation by way of a circular. Pending such
clarification, in case the income of the Investor is characterized as business income and it is regarded to
have a permanent establishment in India, the income could be taxed at the rate of 42.23%.

Tax Deduction at Source

Generally, tax, surcharge and education cess on the capital gain if any, are withheld at the source by the
purchaser/person paying for the equity shares in accordance with the relevant provisions of the IT Act.

IV. Wealth Tax


                                                   223
No Indian wealth tax will be payable with respect to the Securities.

The foregoing does not purport to be a complete analysis of the potential tax considerations
relating to the Issue, and should not be construed as tax advice/opinion. Prospective investors
should consult their own tax advisors as to the particular tax considerations applicable to them
relating to the purchase, ownership and disposition of the Equity Shares, including the
applicability of the local tax laws or non-tax laws, any changes in applicable tax laws and any
pending or proposed legislation or regulations.




                                                  224
                                      LEGAL PROCEEDINGS

Save as described below, the Company believes that the Company and its Subsidiaries are not involved
in any legal proceedings and in the opinion of the Company no proceedings are threatened, which may
have, or have had during the 12 months preceding the date of this Placement Document, material
adverse effect on the Company’s business, financial position, profitability or results of operations.

Company

(a) Commissioner of Central Excise, Pune has issued a show cause notice cum demand dated August
    30, 2007 in relation to excise duty payable on sales tax amount retained by our Company in
    August 2007. The amount involved is Rs. 52.52 million along with interest. Our Company has
    filed a reply on November 15, 2007 and is awaiting a personal hearing.

(b) Joint Commissioner of Customs has issued a show cause notice dated March 15, 2005 under
    section 124 of the Customs Act, 1962, in relation to the alleged incorrect classification of “steering
    knuckles” and the consequent alleged incorrect drawback of Rs. 50.97 million retained by the
    Company. Our Company has filed an appeal against the above order at the Customs Excise and
    Gold (Control) Appellate Tribunal and is currently pending.

(c) The Commissioner of Customs has issued a show cause notice dated November 25, 2008 under
    section 124 of the Customs Act, 1962 against the Company alleging that certain export obligations
    were not met by the latter and threatening to confiscate goods of assessable value Rs.287.12
    million. These export obligations were imposed on the Company in return for the waiver of
    customs duty for the import of raw material by the Company. The amount involved in this case is
    Rs. 252.70 million with interest and penalty. The Directorate General of Foreign Trade has issued
    a letter dated March 23, 2010, directing them to refer the matter to the Norms Committee.
    Currently, the Customs has given an abeyance upto May 5, 2010.

(d) The Maharashtra General Kamgar Mahasangh, Mumbai has filed a statement of claim dated
    January 7, 2009 against our Company before the Industrial Court in Pune, alleging that the
    Company has not absorbed all its contract labourers and has not provided them with all the
    benefits due to regular employees. Our Company has filed a written statement and the case is
    currently pending.

(e) On February 12, 2008, our Company received a letter from the Enforcement Directorate,
    Department of Revenue, Ministry of Finance, Government of India (“ED”) under section 37 of the
    Foreign Exchange Management Act, 1999 (“FEMA”), requesting for certain details regarding the
    FCCB and the GDRs issued by our Company. Our Company, has responded to this by way of a
    letter dated April 2, 2008. The ED, by a letter dated July 7, 2008, had asked for additional
    information in relation to Foreign Currency Convertible Bonds and Global Depository Receipts.
    Our Company has responded to the same through a letter dated July 18, 2008 attaching the
    information requested for. Pursuant to this our Company has appeared before the ED on September
    18, 2008 and on October 18, 2008 and responded to all queries posed by the ED. The ED has not
    raised any queries since the hearing on October 18, 2008.

(f) Mr. Dilip Namdeo Dherange & others (“Petitioners”) have filed Writ Petition (Public Interest
    Litigation) (“PIL”) No. 37/ 2010 in the Bombay High Court against the Maharashtra Industrial
    Development Corporation and others, where our Company and Khed Economic Infrastructure
    Private Limited are also the respondents. The Petitioners are the land owners from village Gulani,
    Varude Tal. Khed, District. Pune. The lands owned by such Petitioners are proposed to be acquired
    for setting up a Special Econominc Zone (“SEZ”) project . The Petitioners have challenged the
    following;

    (i) the constitutional validity of SEZ Act, 2005 and SEZ Rules, 2006;
    (ii) the Notification No. IDC-2007/ (201)/ Industry-14 dt.14-7-2006 issued under the Maharashtra
          Industrial Development Act, 1961 & Public Notice No. SJL /LA/SR-3/2006 dated December
          17, 2009 for acquisition of the said land for the SEZ project; and
    (iii) the process of acquisition of lands under the Maharashtra Industrial Development Act, 1961 ,
          SEZ Act, 2005 & Rules, 2006 and Guidelines applicable for setting up of multi-product SEZ,
          Environment Protection Act, 1985 and Environment Impact Assessment Rules and
          Notification thereto,
                                                   225
    (iv) the order of Approval No. SEZ-2008/CR-120/IND dated August 27, 2008 issued by State of
         Maharashtra in favour our Company & Khed Economic Infrastructure Limited.

    The PIL came up for hearing before the Hon’ble Chief Justice of Bombay High Court and the
    Bombay High Court has asked all the respondents including our Company & Khed Economic
    Infrastructure Limited to file the affidavit-in-reply. The PIL is currently pending for admission in
    the High Court.

(g) Maharashtra General Kamgar Mahasangh, Mumbai (“MGKM”) has filed a complaint bearing
    number (ULP) 236/2008 on behalf of the contract workers against our Company and others
    alleging that our Company is engaged in unfair labour practices. The Company had, due to
    recession, through their contractors reduced their manpower by giving them leaves without pay.
    MGKM has filed this complaint in the Industrial Court, Pune to direct our Company and others to
    maintain status-quo in respect of the concerned workers. The matter is currently pending.

(h) The Pune Cantonment Board (“PCB”) issued bills dated February 14, 2008 (in respect of the
    period 2007-2008), September 12, 2008 (in respect of the period 2008-2009) and July 28, 2009 (in
    respect of the period 2009-2010) requiring our Company to pay amounts of Rs. 36,934,798, Rs.
    51,669,536 and Rs. 66,589,348 respectively, as property tax inclusive of arrears. Our Company
    filed a civil appeal along with a miscellaneous application challenging the assessment of property
    tax under the bill dated February 14, 2008. Our Company has also filed a civil appeal along with a
    stay application challenging the assessment of the property tax under the bill dated September 12,
    2008. The stay application was dismissed by the District Judge-15, Pune, by an order dated
    November 26, 2008. Our Company subsequently filed a writ petition before the Bombay High
    Court challenging the order of the District Judge-15, Pune, which was disposed off by the Bombay
    High Court by an order dated July 10, 2009. By the said order, our Company was directed to
    deposit a sum of Rs. 28,054,525, being the amount disputed in the petition, and to deposit any
    amounts disputed under subsequent bills that the PCB might raise. By a common order dated
    February 18, 2010, the District Judge-9, Pune dismissed the appeals filed by our Company. Our
    Company filed an application before the District Judge, Pune seeking a stay on the order dated
    February 18, 2010 as our Company was proposing to file an appeal against the said order before
    the Bombay High Court. By an order dated February 20, 2010, the said application was allowed.
    By an order dated April 6, 2010, the order dated February 20, 2010 has been further extended until
    April 30, 2010.




                                                 226
                                     GENERAL INFORMATION

(1)    The Company was incorporated in the Republic of India under corporate identification number
       L25209PN1961PLC012046. The registered office of the Company is at Mundhwa, Pune
       Cantonment, Pune 411 036, Maharashtra. The name of the Company was changed to Bharat
       Forge Limited by a special resolution and the fresh certificate of incorporation consequent upon
       change of name was granted on April 30, 1986.

(2)    For the main objects of the Company please refer to the Memorandum of Association of the
       Company.

(3)    Copies of the Memorandum and Articles of Association of the Company will be available for
       inspection during usual business hours on any weekday between 11.00 a.m. to 1.00 p.m. (except
       Saturdays and public holidays) at the Company’s registered office.

(4)    The Issue of the the Securities was authorised by the Board of Directors on January 12, 2010 and
       by the shareholders of the Company by the resolution passed by Postal Ballot on February 27,
       2010. The terms of the offering and the Issue of the Securities were approved by resolutions of
       the Committee of Directors passed on April 26, 2010.

(5)    The Company shall apply for in-principle approval to list the Securities on the BSE, the NSE
       and the PSE, as applicable.

(6)    The Company has obtained all consents, approvals and authorisations in India required in
       connection with the Issue.

(7)    There has been no material adverse change in the financial or trading position of the Company
       and its subsidiaries taken together as a whole since March 31, 2009 and no material adverse
       change in the financial position or prospects of the Company and its subsidiaries taken together
       as a whole since March 31, 2009.

(8)    Except as disclosed in this Placement Document at page 225, none of the Company or any of its
       subsidiaries is involved in any litigation or arbitration proceedings or any regulatory
       investigations relating to claims or amounts which are material in the context of the Issue nor, so
       far as the Company is aware, is any such litigation or arbitration pending or threatened.

(9)    The consolidated and the unconsolidated financial statements of the Company as at and for the
       three years ended March 31, 2007, 2008 and 2009 as set out in this Placement Document have
       been audited by the Company’s Statutory Auditors, M/s. Dalal & Shah, Chartered Accountants.

(10)   The Company is not aware of the existence of any natural or legal persons who/which, directly
       or indirectly, severally or jointly, exercise or could exercise control over the Company other than
       its Promoter.

(11)   Neither the Company nor any another company in which it has a direct or indirect holding of
       more than 50% has acquired or is holding the Company’s Shares.

(12)   The Company confirms that it is in compliance with the minimum public shareholding
       requirements as required under the terms of the Listing Agreements with the Stock Exchanges.

(13)   The Floor Price for the Issue is Rs. 271.93 per Security, calculated in accordance with the
       provisions of Chapter VIII of the SEBI Regulations, as certified by M/s. Dalal & Shah, Auditors
       of the Company.




                                                   227
                              INDEPENDENT ACCOUNTANTS

Dalal & Shah, Chartered Accountants, have audited the consolidated and unconsolidated financial
statements of the Company as of and for the years ended March 31, 2007, 2008 and 2009.




                                             228
                                 FINANCIAL STATEMENTS
Bharat Forge Limited

Sr. No.                                      Content                                          Page
                                                                                               No.
   1.     Auditors Report on and the Audited Consolidated Profit and Loss Statement,        F-1
          Balance Sheet and Statement of Cash Flows of the Company as of and for the
          financial year ended March 31, 2009 along with the notes and schedules
          thereto.
   2.     Auditors Report on and the Audited Consolidated Profit and Loss Statement,        F-31
          Balance Sheet and Statement of Cash Flows of the Company as of and for the
          financial year ended March 31, 2008 along with the notes and schedules
          thereto.
   3.     Auditors Report on and the Audited Consolidated Profit and Loss Statement,        F-58
          Balance Sheet and Statement of Cash Flows of the Company as of and for the
          financial year ended March 31, 2007 along with the notes and schedules
          thereto.
   4.     Auditors Report on and the Audited Unconsolidated Profit and Loss Statement,      F-85
          Balance Sheet and Statement of Cash Flows of the Company as of and for the
          financial year ended March 31, 2009 along with the notes and schedules
          thereto.
   5.     Auditors Report on and the Audited Unconsolidated Profit and Loss Statement,      F-139
          Balance Sheet and Statement of Cash Flows of the Company as of and for the
          financial year ended March 31, 2008 along with the notes and schedules
          thereto.
   6.     Auditors Report on and the Audited Unconsolidated Profit and Loss Statement,      F-188
          Balance Sheet and Statement of Cash Flows of the Company as of and for the
          financial year ended March 31, 2007 along with the notes and schedules
          thereto.
   7.     Auditors Report on and the Balance Sheet and the Profit and Loss Statement of     F-240
          CDP Bharat Forge GmbH as of and for the year ended December 31, 2009
          along with the condensed notes and schedules thereto.
   8.     Auditors Report on and the Balance Sheet and the Profit and Loss Statement of     F-256
          Bharat Forge Aluminiumtechnik GmbH & Co. KG as of and for the year
          ended December 31, 2009 along with the condensed notes and schedules
          thereto.
   9.     Auditors Report on and the Balance Sheet and the Profit and Loss Statement of     F-270
          Bharat Forge Kilsta AB as of and for the year ended December 31, 2009 along
          with the condensed notes and schedules thereto.
   10.    Auditors Report on and the Balance Sheet and the Profit and Loss Statement of     F-282
          Bharat Forge Scottish Stampings Limited as of and for the year ended
          December 31, 2009 along with the condensed notes and schedules thereto.
   11.    Auditors Report on and the Balance Sheet of Bharat Forge America Inc. as of       F-294
          December 31, 2009 and December 2008 and the related statement of
          operations, shareholders’ equity and cash flows for the years then ended, along
          with the condensed notes and schedules thereto.
   12.    Auditors Report on and the Balance Sheet and the Profit and Loss Statement of     F-314
          FAW Bharat Forge (Changchun) Company Limited as of and for the year
          ended December 31, 2009 along with the notes and schedules thereto.




                                               229
To The Board of Directors
Bharat Forge Limited
Report of the auditors on the consolidated financial statements

1) We have examined the attached Consolidated Balance Sheet of Bharat Forge Limited and its
                                   st
subsidiaries and associate as at 31 March, 2009, and the Consolidated Profit and Loss account
and the Consolidated Cash flow Statement for the year then ended.

2) These financial statements are the responsibility of Bharat Forge Limited’s management. Our
responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with generally accepted auditing standards in India. Those
Standards require that we plan and perform the audit to obtain reasonable assurance whether the
financial statements are prepared, in all material respects, in accordance with an identified
financial reporting framework and are free of material misstatements. An Audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement. We
believe that our audit provides a reasonable basis for our opinion.

3) The financial statements of the foreign subsidiaries and associate , which are drawn up for the
                         st
financial year ended 31 December 2008, viz. CDP Bharat Forge GmbH and its subsidiaries
(CDP BF), whose consolidated financial statements reflect total assets of EUR 230.28 million
(Previous Year EUR 46.28 million), total Revenues of EUR 407.79 million (Previous Year EUR
197.97 million) and total net cash inflow/(outflow) of EUR 11.40 million (Previous Year EUR 5.53
million) and Bharat Forge America Inc, whose financial statements reflect total assets of US
$ 21.53 million (Previous Year US $ 12.60 million) and total revenues of US $ 38.24 million
(Previous Year US$ 44.91 million) and total net cash inflow/(outflow) of US $ 0.76 million
(Previous Year US$ 0.88 million), which are drawn up for the year ended on 31st December
2008, have been audited by independent firms of Accountants under the laws of the country of
their incorporation. Our opinion, in so far as it relates to the amounts included in respect of these
subsidiaries, is based on their report.

4) We have audited the financial statements of BF NTPC Energy Systems Limited which are
drawn upto 31st March 2009, whose total assets of Rs. 8.69 Million, total revenues of Rs Nil and
total net inflows/(outflows) flows are Rs 0.87 Million.

5) We report that the consolidated financial statements have been prepared by the Company in
accordance with the requirements Accounting Standards issued by the Institute Of Chartered
Accountants of India viz. Accounting Standard (AS) 21 “Consolidated Financial Statements”, the
Accounting Standard Interpretations and amendments issued thereto, to the extent applicable for
the year ended 31st March, 2009 and on the basis of the separate audited financial statements of
Bharat Forge Limited and it’s aforementioned subsidiaries and associate included in the
consolidated financial statements.

6) Matters of Emphasis reported upon by the Auditors of Subsidiaries:

i) The Auditors of FAW Bharat Forge (Changchun) Co. Ltd. have, without qualifying their opinion,
emphasized a matter in the audit report which is reproduced below:

Without qualifying our opinion we draw attention to that, based on the investor's agreement,
China FAW Group Corporation should transfer the net assets of FAW FORGE as its investment.
                                                          2
But the title of the property and plant (about 19,416.78 m ) amounting to RMB 8,778,351.54, land
                       2
(about 39,375.00 m ), amounting to RMB 25,257,626.94 (accounting to 17.25% of committed
investment, RMB 197,332,705.00) haven't been transferred to the company till our report issued.




                                                F-1
ii) The Auditors of Bharat Forge America Inc. have without qualifying their opinion, have
emphasized a matter in respect of the threat to the Going Concern assumption in the audit report
which is reproduced below:

As discussed in the Note 9 B (Reference to Consolidated Financial Statements under this report),
the North American automotive industry is experiencing significant financial difficulty and is
projecting significantly lower production volumes than prior years. The Company and its
operations continue to be affected by these industry conditions, which indicated that the company
may be unable to continue to act as a going concern. Management's future plans in response to
these conditions are described in Note 9 B. The accompanying financial statements do not
include any adjustments that might be necessary should the company be unable to continue as a
Going concern.

iii) The Auditors of Bharat Forge Scottish Stampings Ltd. a wholly owned subsidiary of CDP BF,
have without qualifying their opinion, have emphasized a matter in respect of the threat to the
Going Concern assumption in the audit report which is reproduced below:

In forming our opinion on the financial statements, which are not qualified, we have considered
the adequacy of the disclosure made in note 9 (c ) (i) (Reference to Consolidated Financial
Statements under this report), concerning the ongoing review by the company's ultimate parent
company of the company's business, including the possible closure of the business and the
potential impact on the company’s ability to continue as a going concern. The company is reliant
for its working capital on funds provided by its immediate and ultimate parent companies. These
conditions, along with the other matters explained in the note to the financial statements, indicate
the existence of a material uncertainty which may cast significant doubt on the company's ability
to continue as a going concern. The financial statements do not include the adjustments that
would result if the company were unable to continue as a going concern.

7) On the basis of the information and explanation given to us and on the consideration of the
separate audit reports on individual audited financial statements of Bharat Forge Limited and it’s
aforesaid subsidiaries, we are of the opinion that:

a)      The Consolidated Balance sheet read together with other notes thereon, gives a true and
        fair view of the consolidated state of affairs of Bharat Forge Limited and its subsidiaries
        associate as at 31st March, 2009; and
b)      The Consolidated Profit and Loss account read together with other notes thereon, gives a
        true and fair view of the consolidated results of operations of Bharat Forge Limited and its
        subsidiaries and associate for the year then ended; and
c)      The Consolidated Cash Flow Statement read together with notes thereon, gives a true
        and fair view of the consolidated cash flows of Bharat Forge Limited and its subsidiaries
        and associate for the year then ended.

                                                                              For and on behalf of
                                                                                  DALAL & SHAH
                                                                            Chartered Accountants


                                                                                   ANISH AMIN
                                                                                         Partner
                                                                            Membership No.40451
Pune: May 20, 2009




                                                F-2
Bharat Forge Limited
Consolidated Balance Sheet as at 31st March, 2009                                  (Rs. in Million)
                                                                                                  As at
                                                                                           31st March,
                                                     Schedule                                      2008
I. SOURCES OF FUNDS:

1. Shareholders' Funds:
(a) Share Capital                                      "A"          445.40                      445.40
(b) Reserves and Surplus                               "B"       15,989.17                   16,095.62
                                                                             16,434.57       16,541.02
2. Loan Funds:
(a) Secured Loans                                      "C"       10,735.49                    6,809.12
(b) Unsecured Loans                                    "D"       11,172.88                    9,734.81
                                                                             21,908.37       16,543.93

3. Minority Interest                                                           953.83           701.92

4. Deferred Tax Adjustment:
(a) Deferred Tax Liabilities                                      2,060.24                    1,577.62
(b) Deferred Tax Assets                                           (217.02)                    (209.00)
                                                                              1,843.22        1,368.62

Total                                                                        41,139.99       35,155.49

II. APPLICATION OF FUNDS:

1. Fixed Assets:
(a) Gross Block                                                  40,270.75                   30,988.88
(b) Less: Depreciation                                           15,594.43                   13,227.91
(c) Net Block                                              "E"   24,676.32                   17,760.97
(d) Capital work-in-progress                                      3,218.95                    5,841.59
                                                                             27,895.27       23,602.56

2. Goodwill arising on Capital Consolidation                                      4.54            4.54

3. Technical Know-how                                      "F"                    2.10            4.18

4. Investments                                         "G"                        2.33        2,988.36

5. Current Assets,
Loans and Advances:                                    "H"
(a) Inventories                                                   7,916.46                    7,271.03
(b) Sundry Debtors                                                5,313.09                    6,717.94
(c) Cash and Bank Balances                                        4,883.40                    3,183.49
(d) Other Current Assets                                          1,419.92                    1,255.41
(e) Loans and Advances                                            5,783.57                    6,353.54
                                                                 25,316.44                   24,781.41
Less: Current Liabilities
and Provisions:                                            "I"
(a) Liabilities                                                   8,537.93                   11,360.57
(b) Provisions                                                    3,542.81                    4,864.99
                                                                 12,080.74                   16,225.56
Net Current Assets                                                           13,235.70        8,555.85
                                      carried over                           41,139.94       35,155.49



                                                     F-3
Bharat Forge Limited
Consolidated Balance Sheet as at 31st March, 2009                                   (Rs. in Million)
                                                                                                   As at
                                                                                            31st March,
                                                         Schedule                                   2008

                                          brought over                      41,139.94         35,155.49

6. Miscellaneous Expenditure
(to the extent not written
off or adjusted)                                           "I(i)"                 0.05                     -

Total                                                                       41,139.99         35,155.49
NOTES FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS:                                          "L"


As per our attached report of even date
For and on behalf of                                                 On behalf of the Board of Directors
DALAL & SHAH                                                         B. N. KALYANI
Chartered Accountants                                                Chairman & Managing Director



ANISH AMIN                                 BEEJAL DESAI              G. K. AGARWAL
Partner                                    Company Secretary         Deputy Managing Director
Membership No. 40451
Pune: May 20, 2009                         Pune: May 20, 2009




                                                         F-4
Bharat Forge Limited
Consolidated Profit and Loss Account for the year ended 31st March, 2009                      (Rs. in Million)
                                                                                                    Previous
                                                          Schedule                                      Year
INCOME:

Sales, Gross                                               "J (a)"    47,931.85                    47,340.05
Less : Excise Duty                                                     1,202.33                     1,726.08
Net Sales                                                             46,729.52                    45,613.97

Operating Income                                           "J (b)"     1,010.85                       908.80
                                                                                  47,740.37        46,522.77

Other Income                                               "J (c)"                   687.10           992.93
                                                                                  48,427.47        47,515.70

EXPENDITURE:

Manufacturing and other expenses                            "K "      44,504.40                    40,747.60

Depreciation and amortisation                              "K (a) "    2,517.32                     2,270.55
                                                                                  47,021.72        43,018.15
Operating Profit                                                                   1,405.75         4,497.55
Exceptional Item of Expenditure (See Note 5)                                       (298.92)                -
Profit for the year before Income from Associate &
Taxation                                                                           1,106.83         4,497.55

Income from Associate                                                                (4.58)              1.22
Provision for Taxation :
Current Tax (Including Wealth Tax Rs 2.20 million
Previous year Rs.2.00 million)                                          311.67                      1,369.08
Less: MAT credit Available for Set off in subsequent
years                                                                  (157.40)                            -
Deferred Tax                                                             488.47                       152.33
Fringe Benefit Tax                                                        53.00                        68.00
                                                                                    695.74          1,589.41
Net Profit after taxation                                                           406.51          2,909.36

Less: Minority Interest                                                            (176.14)         (105.87)
Net Profit after Minority Interest                                                   582.65         3,015.23
As per last Account                                                                6,753.08         5,052.45
                                                                                   7,335.73         8,067.68

Adjustments relating to earlier years :
Excess/ (Short) provision for taxation and tax
payments                                                                            (29.04)            (9.70)
Energy Charges                                                                            -            (4.83)
Impact on adoption of International Financial
Reporting Standards
by Subsidiaries (See Note 4(f)(1))                                                    30.42                -
Profit available for Appropriation                                                 7,337.11         8,053.15
                                           carried over                            7,337.11         8,053.15




                                                          F-5
Bharat Forge Limited
Consolidated Profit and Loss Account for the year ended 31st March, 2009 (contd.)(Rs. in Million)
                                                                                           Previous
                                                   Schedule                                      Year
                                                  brought over             7,337.11         8,053.15
APPROPRIATIONS:
Capital Redemption Reserve Account                                                -            100.00
Debenture Redemption Reserve                                                  26.10                 -
General Reserve                                                              120.00            280.00

Dividend on Preference Shares                                           -                        7.14
Tax on above Dividend                                                   -                        1.21
                                                                                    -            8.35
Proposed Dividend                                                 222.65                       779.28
Tax on Proposed Dividend                                           37.84                       132.44
                                                                              260.49           911.72
Balance carried to Balance Sheet                                            6,930.52         6,753.08

Earning Per Share
(Face value of Rs. 2/-)
  Basic                                                                         2.62             13.44
  Diluted                                                                       2.62             13.44

NOTES FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS:                                     "L"


As per our attached report of even date
For and on behalf of                                                 On behalf of the Board of Directors
DALAL & SHAH                                                         B. N. KALYANI
Chartered Accountants                                                Chairman & Managing Director



ANISH AMIN                                BEEJAL DESAI               G. K. AGARWAL
Partner                                   Company Secretary          Deputy Managing Director
Membership No. 40451
Pune: May 20, 2009                        Pune: May 20, 2009




                                                    F-6
Bharat Forge Limited
Consolidated Cash Flow Statement for the year ended 31st March, 2009                      (Rs. in Million)

Sr. No. Particulars                                                                 2008-09         2007-08
   A CASH FLOW FROM OPERATING ACTIVITIES :
        Profit before tax                                                           1,102.25        4,498.77
        Add /(Less) : Share of (Profit)/Loss in Associate                               4.58           (1.22)
                                                                                    1,106.83        4,497.55

       Adjustments For :
       Interest / Depreciation / Other Non Cash Expenses
       i) Depreciation and amortisation                                             2,517.32        2,270.55
       ii) Amount written off against technical know-how                                2.08            2.08
       iii) Loss on assets sold, demolished, discarded                                  3.52           18.24
       iv) Provision for doubtful debts & advances                                     97.79            5.56
       v) Adjustments in respect of earlier years:
             Excess/ (Short) provision for taxation and tax refunds                   (29.04)               -
             Impact on adoption of International Financial Reporting Standards          51.77               -
             by Subsidiaries                                                                                -
             Energy Charges                                                                -           (4.83)
             Deferred Tax Asset Written Off                                                -           (9.70)
       vi) Bad debts, irrecoverable advances, and sundry balances written off          38.00           39.48
       vii) Proportionate deferred revenue expenses written off                         5.06             3.30
       viii) Interest paid                                                          1,291.36        1,269.38
       ix) Exchange Loss                                                              740.82                -
       Total                                                                        4,718.68        3,594.06

       Interest / Dividend / Other Income Adjustments
       i) Interest Received                                                         (137.73)        (320.71)
       ii) Dividend                                                                 (217.02)        (260.55)
       iii) Profit on sale of investments                                            (23.14)          (2.06)
       iv) Surplus on sale of assets                                                  (2.04)          (3.63)
       v) Provisions no longer required                                             (160.34)         (24.01)
       Total                                                                        (540.27)        (610.96)

       OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES                              5,285.24        7,480.65

       Changes in Working Capital
       (Increase) / Decrease in Current Assets :
       i) Inventories                                                               (645.43)      (1,128.96)
       ii) Sundry debtors                                                           1,269.06        (195.58)
       iii) Other current assets and Loans and advances                               (49.51)     (1,036.46)
                                                                                      574.12      (2,361.00)
       Increase / (Decrease) in Current Liabilities :
           Liabilities                                                             (2,489.58)         444.62
                                                                                   (2,489.58)         444.62
       Total                                                                       (1,915.46)     (1,916.38)

       CASH GENERATED FROM OPERATIONS                                               3,369.78        5,564.27

       Direct taxes paid                                                            (711.18)      (1,386.38)

       CASH FROM OPERATING ACTIVITIES                                               2,658.60        4,177.89

           Less: Minority Interest                                                  (176.14)        (105.87)

       NET CASH FROM OPERATING ACTIVITIES                                    (A)    2,834.74        4,283.76


                                                        F-7
Bharat Forge Limited
Consolidated Cash Flow Statement for the year ended 31st March, 2009 (contd.) (Rs. in Million)

Sr. No. Particulars                                                                 2008-09         2007-08
   B CASH FLOW FROM INVESTMENT ACTIVITIES :
       i) (Increase)/Decrease in Investment in Mutual funds                         2,982.08        (909.18)
       ii) Investment in Joint ventures                                                  3.95          (0.03)
       iii) Investment in Associates                                                        -          (4.78)
       iv) Capital Expenditure                                                    (5,354.73)      (7,599.44)
       v) Sale proceeds of assets / adjustments to gross block                        (38.54)         554.86
       vi) Interest Capitalised                                                         51.72          (8.22)
       vii) Non Operating Income                                                      377.89          583.32
       Total                                                                      (1,977.63)      (7,383.47)
       NET CASH USED IN INVESTING ACTIVITIES                               (B)    (1,977.63)      (7,383.47)
  C    CASH FLOW FROM FINANCING ACTIVITIES :
       Increase / (Decrease) in Share Capital / Borrowings
       i) Preference shares                                                               -         (100.00)
       ii) Secured loans - Term Loans                                              4,008.88       (1,374.96)
       iii) Fixed deposits, unsecured loan                                         (262.91)         (741.65)
       iv) Cash credit & other borrowings from banks                               (540.16)         1,363.87
       Total                                                                       3,205.81         (852.74)
       Adjustments to Net Worth
       i) Difference in Capital Consolidation                                              -         (50.20)
       ii) Foreign Currency Translation Reserve                                      204.87          (36.37)
       iii) Revaluation Reserve for Security Investment                              (24.23)               -
       iv) Minority interest                                                         251.91          386.63
       v) Goodwill arising on consolidation                                                -          (4.54)
       vi) Transitional Adjustments on adoption of
       Accounting Standard ( AS 15) Revised - Employee Benefits                            -        (380.25)
       vii) Debenture Issue Expenses                                                 (23.22)               -
       viii) Exchange (Gain) / Loss adjusted to Carrying cost of asset              (297.80)               -
       ix) Foreign Currency Monetary Item Translation Difference Account            (340.16)               -
       x) Adjustment on adoption of International Financial Reporting Standards        10.52               -
       Total                                                                        (218.11)         (84.73)
       Interest Paid
       i) Interest Paid                                                           (1,183.63)      (1,259.01)
       ii) Capitalised                                                               (51.72)            8.22
       Total                                                                      (1,235.35)      (1,250.79)
       Dividend including tax thereon                                               (909.55)        (917.87)

       NET CASH USED IN FINANCING ACTIVITIES                               (C)       842.80       (3,106.13)

       Net change in cash and cash equivalents                       (A+B+C)       1,699.91       (6,205.84)
       Cash and cash equivalents as at 01.04.08 (opening balance)                  3,183.49        9,389.33

        Cash and cash equivalents as at 31.03.09 (closing balance)                 4,883.40        3,183.49
As per our attached report of even date
For and on behalf of                                                   On behalf of the Board of Directors
DALAL & SHAH                                                           B. N. KALYANI
Chartered Accountants                                                  Chairman & Managing Director

ANISH AMIN                               BEEJAL DESAI                  G. K. AGARWAL
Partner                                  Company Secretary             Deputy Managing Director
Membership No. 40451
Pune: May 20, 2009                       Pune: May 20, 2009

                                                    F-8
Bharat Forge Limited
Schedule "A" to "L" annexed to and forming part of the Consolidated Financial Statements for
the year ended on 31st March, 2009
Schedule "A" Share Capital
                                                                                    (Rs. in Million)
                                                                                                     As at
                                                                                               31st March,
                                                                                                     2008
Authorised:

    300 000 000 Equity Shares of Rs.2/- each                                       600.00              600.00

     43 000 000 Cumulative Preference Shares of Rs.10/- each                       430.00              430.00

      2 000 000 Unclassified Shares of Rs.10/- each                                 20.00            20.00
                                                                                 1,050.00         1,050.00

Issued:

    222 828 621 Equity Shares of Rs.2/- each (See Note A & B below)                445.66              445.66
                                                                                   445.66              445.66
Subscribed:

    222 652 271 Equity Shares of Rs.2/- each fully paid                            445.31              445.31

        172 840 Add: Forfeited Equity Shares (amount paid up)                        0.09                0.09
                Total                                                              445.40              445.40



Notes: Of the above Shares:

A   Prior to Sub division of Share Capital:

    (i) 47 600 Equity Shares of Rs.10/- each were issued as fully paid up for consideration other than
        cash, pursuant to a contract.

    (ii) 8 682 500 Equity Shares of Rs.10/- each were issued as fully paid Bonus Shares by way of
         capitalisation of Share Premium Account and Reserves.

    (iii) 1 568 600 Equity Shares of Rs.10/- each were issued at a premium of Rs.186.93 per share,
          under Senior Executives Stock Cum Share Option Scheme .

    (iv) The Company had issued 3,636,500 Equity Shares of Rs.10/- each (later sub-divided into
         18,182,500 Equity Shares of Rs.2/- each) in April and May, 2005 represented by 3 636 500
         Global Depository Receipts (GDRs) (on sub division 18,182,500 GDRs) evidencing "Master
         GDR Certificates" at a price of U.S.$ 27.50 per GDR (including premium). GDRs outstanding
         at the close of the year are 9,200. Out of the total amount of Rs. 4,235 million net of
         expenses, Rs. 3,425 million has been utilised towards the object of the issue and balance of
         Rs. 810 million have been temporarily deployed by Investments in Fixed Deposits with Banks
         at the close of the year.

    (v) The Company had also issued Foreign Currency Convertible Bonds (FCCBs) aggregating
        U.S.$.199.90 million optionally convertible at an initial price specified in offering circular (see
        note 18). As the initial price is subject to adjustments specified in the offering circular and
        inability to assess the proportion of conversion, no amounts have been shown under Issued
        Equity Share Capital, in respect of Equity Shares deemed to be issued on exercise of
        conversion by bondholders. Outstanding Bonds at the close of the year aggregated
        Rs.9,302.05 million.

                                                      F-9
B   Subsequent to Sub-division of the Equity Share Capital:

    (i) 2 340 Equity shares of Rs. 2/- each out of the previous issue of Equity Shares on a Right
        basis together with 234 detachable warrants entitled to subscription of 1 170 Equity Shares of
        Rs. 2/- each, have been kept in abeyance pending adjudication of title to the pre right holding.

    (ii) 389 610 Equity Shares were issued and allotted on April 12, 2006 at a premium of Rs.
         334.105 per share on Conversion of U.S.$ 3 000 000, 0.50% Foreign Currency Convertible
         Bonds (FCCBs) Tranche-1 in terms of Offering Circular dated 15th April, 2005.




                                                 F-10
Bharat Forge Limited
Schedule "B" Reserves and Surplus                                                  (Rs. in Million)
                                                                                                      As at
                                                                                                31st March,
                                                                                                      2008
Capital Reserve:
i) Special Capital Incentive (Under the 1988 Package
Scheme of Incentives)
As per last Account                                                      2.50                             2.50
ii) Capital Surplus arising from early retirement of
Sales tax deferral liability/ Loan under package
Scheme of Incentive of Government of Maharashtra
As per last Account                                           78.56                                     88.67
Less: Transferred to General Reserve                           8.64                                     10.11
                                                                        69.92                           78.56
                                                                                   72.42                81.06

Difference of capital Consolidation Adjusted to
General Reserve (See Note 4 (d))                                                        -              128.04

Revaluation Reserve for Security Investments (See
Note 4(f)(2))                                                                     (24.23)                    -

Capital Redemption Reserve Account:
As per last Account                                                    300.00                          200.00
Set aside during the year from Profit & Loss Account
on redemption of Preference Shares                                           -                         100.00
                                                                                  300.00               300.00
Securities Premium Account :
As per last Account                                                   7,042.57                        7,042.57
Less: Debenture Issue Expenses
in terms of Section 78 of the Companies Act,1956.                       23.22                                -
                                                                                 7,019.35             7,042.57

Foreign Currency Translation Reserve                                              253.41                62.88

Debenture Redemption Reserve:
Set aside during the year                                                          26.10                     -

General Reserve:
 As per last Account                                                  1,727.99                        1,688.88
 Add: Transferred from Capital Reserve                                    8.64                           10.11
                                                                      1,736.63                        1,698.99
 Less: Transitional Adjustment on Adoption of
 Accounting Standard (AS-15) Revised " Employee
 Benefits "                                                                  -                         251.00
 Less: Adjustment on Account of Exercise of Option on
 Amendment to Accounting Standard ( AS-11)
 " The effects of changes in foreign exchange rates "
 Exchange differences(Gain)adjusted against the
 Carrying cost of the Assets                                           297.80                                -
 Less: Exchange differences ( Gain) transferred to
 FCMITDA                                                                105.88                               -
 Add: Tax effect adjustment                                              54.37                               -
                                              carried over            1,387.32                        1,447.99
                                              carried over                       7,647.05             9,062.54


                                                       F-11
 Bharat Forge Limited
Schedule "B" Reserves and Surplus (contd.)                                        (Rs. in Million)
                                                                                                As at
                                                                                        31st March,
                                                                                                2008
                                              brought over               7,647.05          9,062.54
                                              brought over   1,387.32                      1,447.99
 Add: Adjustments on adoption of International Financial
 Reporting Standards by Subsidiaries                           10.52                                -
 Standards by Subsidiaries
 Add: Difference on Capital Consolidation Adjusted on
 adoption of International Financial Reporting
 Standards by Subsidiaries                                    128.04                               -
 Add: Set aside from Profit & Loss Account                    120.00                          280.00
                                                                         1,645.88           1,727.99
Foreign Currency Monetary Item Translation
Difference Account (FCMITDA) :

Exchange differences relating to long term Monetary items
Transferred from General Reserve                               105.88                               -
Add: Arising during the year                                 (525.60)                               -
Less : Amortised during the year                               185.44                               -
                                                                         (234.28)                   -

Surplus as per Annexed Account
 Surplus as per Annexed Account                                          6,930.52           6,753.08

                                                    Total               15,989.17          16,095.62




                                                     F-12
Bharat Forge Limited
Schedule "C" Secured Loans                                              (Rs. in Million)
                                                                                         As at
                                                                                   31st March,
                                                                                         2008
Debentures :
2 500 (--) 11.95% Redeemable Secured
      Non-Convertible Debentures
      (2009-2017) Rs.1 000 000/- each                                  2,500.00                 -

Term Loans:
Foreign Currency Term Loans :

From Bank of Baroda, London                                             253.60             132.70

From Bank of India, London                                              507.20             497.63

From Bank of Baroda, London                                                   -            398.10

From Bank of India, New York                                                  -            199.05

From Calyon, Singapore                                                 2,536.00                 -

From Bank of India, New York                                            390.06             226.92

From Commerzbank AG                                                     114.65             106.70

From Comerica Bank                                                            -             21.31

From Skandinaviska Enskilda Banken AB                                   496.02             791.07

From Hypo Vereins Bank                                                     6.74             18.83

From Standard Chartered Bank                                            811.52             756.39

                                                                       7,615.79        3,148.70

Others :

From Banks, against hypothecation of Stocks of
Semi finished and Finished goods, Raw materials,
Finished Dies and Die Blocks, Work-in-Progress,
Consumable Stores and Spares, Book Debts etc.

Cash Credit                                                1,218.65                    1,084.74
Preshipment Packing Credit-Foreign Currency                  328.82                    2,574.84
Preshipment Packing Credit -Rupee                          1,571.95                           -
Interest accrued and due on above                              0.28                        0.84
                                                                       3,119.70        3,660.42

                                                   Total              10,735.49        6,809.12




                                                   F-13
Bharat Forge Limited
Schedule "D" Unsecured Loans                                           (Rs. in Million)
                                                                                         As at
                                                                                   31st March,
                                                                                         2008
Foreign Currency Convertible Bonds ( FCCBs)
0.5% Tranche 1 FCCBs , outstanding U.S. $ 43.5 million     2,206.32                   1,731.74

0.5% Tranche 2 FCCBs, outstanding U.S. $ 60.0 million      3,043.20                   2,388.60

0% Tranche A FCCBs , outstanding U.S. $ 40.0 million       2,028.80                   1,592.40

0% Tranche B FCCBs , outstanding U.S. $ 39.9 million       2,023.73                   1,588.41
                                                                       9,302.05       7,301.15
Sales tax deferral liability under Government of
Maharashtra Package Scheme of Incentives                                  69.44            69.08

Short Term Loans from Banks under a buyers
line of Credit for import of goods, etc.                                       -          888.17

Short Term Loans from Banks for Working Capital                        1,398.45           156.17

Term Loans from Banks & Financial Institutions                          402.37        1,319.59

Fixed Deposits matured but unclaimed :

From Public :                                                 0.56                          0.63

From Shareholders                                             0.01                          0.02
                                                                           0.57             0.65

                                                   Total              11,172.88       9,734.81




                                                   F-14
Bharat Forge Limited
Schedule "E": Fixed Assets
                                                                                                                                   (Rs. in Million)
                                           GROSS BLOCK                                       DEPRECIATION                           NET BLOCK
                                         Additions
                                    During the Year                                        Recoupments
                                       and Foreign                                           and Foreign
                                          currency                                              currency
                           Upto      exchange rate     Deductions      As at       Up to   exchange rate     For the     Up to       As at        As at
    FIXED ASSET         31/03/08       adjustments During the Year 31/03/09     31/03/08    adjustments         year 31/03/09     31/03/09     31/03/08
1  Land, Free hold         240.65             14.56              -    255.21           -                -          -         -      255.21       240.65
2  Land, Lease hold         82.17              7.45           0.95     88.67           -                -          -         -       88.67        82.17
3  Buildings             2,269.84          1,207.48           0.06 3,477.26       467.01             8.18      87.98    546.81    2,930.45     1,802.83
4  Plant & Machinery 23,315.12             6,992.01          73.88 30,233.25   11,110.02          118.25    1,806.59 12,798.36   17,434.89    12,205.10
5  Dies & Fixtures         185.06            213.00              -    398.06       13.46           (7.58)      26.24     47.28      350.78       171.60
6  Railway Sidings           0.45                 -              -      0.45        0.43                -          -      0.43        0.02         0.02
7  Electrical
   Installations           297.70            35.51               -   333.21       122.20                -     25.33    147.53      185.68        175.50
 8 Factory Equipments      367.88            91.09               -   458.97       131.57                -     72.75    204.32      254.65        236.31
 9 Engineering
   Instruments               0.09                 -              -      0.09        0.09                -          -      0.09           -            -
10 Furniture & Fittings    218.32             36.43           0.34    254.41      103.92           (0.42)      22.91    127.25      127.16       114.40
11 Office Equipments        48.38              2.69              -     51.07       22.71                -       3.78     26.49       24.58        25.67
12 Vehicles & Aircraft   2,129.40            176.97          27.73 2,278.64       245.07           17.18      146.90    374.79    1,903.85     1,884.33
13 Power Line                7.14                 -              -      7.14        7.14                -          -      7.14           -            -
14 Intangible Assets       371.83            226.09           0.65    597.27      110.81           (2.85)      61.40    175.06      422.21       261.02
15 Software                  2.64              1.74              -      4.38        0.63           (0.38)       1.22      2.23        2.15         2.01
16 Other equipments      1,452.21            389.77           9.31 1,832.67       892.85           17.60      261.40 1,136.65       696.02       559.36
                   Total30,988.88          9,394.79         112.92 40,270.75   13,227.91          149.98    2,516.50 15,594.43   24,676.32    17,760.97


    Previous Year's
    Total              26,713.84           4,694.92         419.88 30,988.88   10,808.59         (149.20)   2,270.12 13,227.91   17,760.97




Schedule "F" Technical Know-how                                                                                          (Rs. in Million)
                                                                                                                                           As at
                                                                                                                                     31st March,
                                                                                                                                           2008
Acquired by the Company:
As per last account                                                                                                     4.18                     6.26
Less: Written off                                                                                                       2.08                     2.08
                                                                                                Total                   2.10                     4.18




Schedule "G" Investments


Long Term:
In Joint Ventures                                                                                                       0.30                0.28
In Associates                                                                                                           2.03                6.00
In Mutual Fund Units                                                                                                       -            2,982.08
                                                                                                Total                   2.33            2,988.36




                                                                           F-15
Bharat Forge Limited
Schedule "H" Current Assets, Loans and Advances:                                            (Rs. in Million)
                                                                                                          As at
                                                                                                   31st March,
                                                                                                           2008
a) Inventories, as valued and certified
by the Managing Director:

Stores, Spares and Loose Tools (at cost) *                                 921.05                       677.05
Die Blocks & Die & Tool Steel (at cost)                                    525.86                       565.35
Raw Materials & Components (at cost) *                                   1,645.77                     1,851.72
Work-in-Progress (at lower of cost or realisable
value)                                                                   2,560.08                     2,521.63
Finished Goods (at lower of cost or selling price )                      1,015.41                       513.72
Dies (at cost, less amortisation) & Dies under
fabrication *                                                            1,231.67                     1,115.37
Scrap (at estimated realisable value)                                       16.62                        26.19

                                                                                     7,916.46         7,271.03

b) Sundry Debtors, Unsecured: (unless
otherwise stated) ( Net of Bills Discounted with
Banks):
(i) Over six months:
Good                                                                     1,291.49                       815.39

Doubtful                                                       113.24                                    17.59
Less: Provision                                                113.24                                    17.59
                                                                                -                            -
                                                                         1,291.49                       815.39
(ii) Other
Good                                                                     4,021.60                     5,902.55
Doubtful                                                        36.56                                    34.42
Less: Provision                                                 36.56                                    34.42
                                                                                -                            -
                                                                         4,021.60                     5,902.55
                                                                                     5,313.09         6,717.94
c) Cash and Bank Balances:

Cash on Hand                                                                0.94                          0.89
Bank Balances:
With Scheduled Banks:
In Cash Credit and Current Accounts                             605.59                                  621.64
In Fixed Deposits                                             3,327.64                                1,491.95
Interest funded on Cumulative Fixed Deposits                      0.01                                    0.01
                                                              3,933.24                                2,113.60

With Other Banks Outside India:
In Current account                                             277.37                                   407.46
In Fixed Deposits**                                            671.85                                   661.54
                                                               949.22                                 1,069.00
                                                                         4,882.46                     3,182.60
                                                                                     4,883.40         3,183.49
                                        carried over                                18,112.95        17,172.46




                                                       F-16
Bharat Forge Limited
Schedule "H" Current Assets, Loans and Advances: (contd.)                                                     (Rs. in Million)
                                                                                                                          As at
                                                                                                                   31st March,
                                                                                                                           2008
                                          brought over                                           18,112.95            17,172.46
d) Other Current Assets:
Interest receivable                                                                     42.03                             67.53
Dividend from Mutual Fund receivable                                                        -                              0.89
Other Current Assets                                                                   604.44                            390.70
Energy Credit receivable-Wind Mill                                                       2.52                             15.81
Certified Emission Reduction Units receivable                                            4.33                              4.54
Export incentives receivable                                                           766.60                            775.94
                                                                                                   1,419.92            1,255.41
e) Loans and Advances, Unsecured, Good:
(Unless otherwise stated)
Loan to a Company                                                                      309.09                            309.09
Advances recoverable in cash or in kind or for
value to be received
Good                                                                   1,905.37                                        2,163.33

Doubtful Advances                                          20.35                                                          20.35
Less: Provision                                            20.35                                                          20.35
                                                                               -                                              -
                                                                                     1,905.37                          2,163.33

Expenditure to date on Projects pending
adjustment on completion/conclusion.                                                   210.24                              92.91

Security Deposit for Supply/ Purchase of Power                                         211.45                            211.28

Balances with Customs, Central Excise
Departments etc.                                                                       306.07                            280.35
MAT credit Available for Set off                                                       157.40                                 -
Tax paid in advance                                                                  2,683.95                          3,296.58
                                                                                                  5,783.57             6,353.54
                                                  Total                                          25,316.44            24,781.41

*    Slow moving and obsolute Inventory is valued at Cost or Estimated realisable value whichever is lower.
**   Fixed Deposits include Rs. 66.38 million (Euro 0.98 million) earmarked to secure employees claims due to agreements for
     early retirement against insolvency.




                                                            F-17
Bharat Forge Limited
Schedule "I" Current Liabilities and Provisions                                         (Rs. in Million)
                                                                                                       As at
                                                                                                31st March,
                                                                                                        2008
(a) LIABILITIES:
Acceptances                                                           1,414.97                     2,364.20
Sundry Creditors:
Dues to Micro and Small Enterprises                            1.57                                   10.86
Dues to Other than Micro and Small Enterprises             6,860.03                                8,898.95
                                                                      6,861.60                     8,909.81
Advance against Orders                                                   84.34                        19.98
Investors Education & Protection Fund, since deposited                       -                         0.02
Unclaimed Redeemed Preference Share Capital                               0.01                         0.01
Unclaimed Dividends                                                      15.14                        12.97
Interest accrued but not due on loans                                   161.87                        53.58
                                                                                  8,537.93        11,360.57
(b) PROVISIONS:
For Long Term Employee Benefits                                         940.11                       651.92
For Taxation                                                          2,342.21                     3,301.35
For Proposed Dividend                                                   222.65                       779.28
For Tax on Proposed Dividend                                             37.84                       132.44
                                                                                  3,542.81         4,864.99
Total                                                                            12,080.74        16,225.56

Schedule "I(i)" Miscellaneous Expenditure:
(To the extent not written off or adjusted)

Preliminary Expenses                                                                  0.05                 -
                                                  Total                               0.05                 -




                                                    F-18
Bharat Forge Limited
Schedule "J" Sales, Operating & Other Income:                                        (Rs. in Million)
                                                                                             Previous
                                                                                                  Year
(a) Sales (Net of returns, rebates etc.)                         44,942.38                   44,684.74
    Job Work Receipts                                               146.08                      261.17
    Sale of Manufacturing scrap                                   2,843.39                    2,394.14
                                                                             47,931.85       47,340.05

(b) Operating Income

   Export Incentives                                               630.02                      547.35
   Die Design and Preparation Charges                              376.49                      322.42
   Sale of Certified Emission Reduction Units                        4.34                       39.03
                                                                              1,010.85         908.80

(c) Other Income :

   Income on assignment of Sales Tax benefit                             -                      28.66

   Dividend Income from Investment in Mutual Funds                 217.02                      260.55

   Profit on Sale of Non Trade, Current Investments                 23.14                        2.06

   Interest on Deposits etc. : (Gross, tax deducted
      Rs. 13.54 million, (Previous year Rs. 20.86 million)         137.73                      320.71

   Miscellaneous Receipts                                          146.53                       84.26

   Profit from First Consolidation                                       -                      57.70

   Gain Foreign Exchange Fluctuations , net                              -                     211.15

   Surplus on Sale of Assets                                          2.04                       3.63

   Bad debts recovered                                                0.30                       0.20

    Provision for Doubtful Debts and advances
written back                                                 -                                   4.14
   Less: Write backs on account of amounts
written off during the year, as per contra                   -                                   4.14
                                                                        -                           -
     Provisions no longer required                                 160.34                       24.01
                                                                                687.10         992.93
                                           Total                             49,629.80      49,241.78




                                                      F-19
Bharat Forge Limited
Schedule "K" Manufacturing and Other Expenses:                                             (Rs. in Million)
                                                                                                    Previous
                                                                                                         Year
(1) Materials:
Raw Materials & Components consumed                                      23,896.11                 21,745.99

Die Blocks, Die & Tools Steel Consumed                                     998.47                     752.32

Merchandise & Finished goods Purchased                                        3.68                     84.62

Excise Duty on year end Inventory
On Closing Stock                                                 1.27                                    3.30
Less on Opening Stock                                            3.30                                    4.04
                                                                            (2.03)                     (0.74)
(Increase)/Decrease in Stocks:
Stocks at Close:
Work-in-Progress                                              2,560.08                              2,521.63
Finished Goods                                                1,015.41                                513.72
Die Room Inventory                                            1,231.67                              1,115.37
Scrap                                                            16.62                                 26.19
                                                              4,823.78                              4,176.91
Less: Stocks at Commencement:
Work-in-Progress                                              2,521.63                              1,983.97
Finished Goods                                                  513.72                                566.83
Die Room Inventory                                 1,115.37                                         1,054.38
Less: Reclassified as
Fixed Asset                                         181.51                                                 -
                                                                933.86                              1,054.38
Scrap                                                            26.19                                 28.53
                                                              3,995.40                              3,633.71
                                                                          (828.38)                  (543.20)

                                                                                     24,067.85     22,038.99
(2) Manufacturing Expenses:
Stores, Spares & Tools consumed                                           1,754.35                  1,803.06
Octroi duty                                                                  12.76                     21.72
Machining charges                                                         1,408.52                  1,562.90
Power, Fuel & Water                                           3,274.91                              3,196.15
Less: Credit for Energy Generated                                43.74                                 31.92
                                                                          3,231.17                  3,164.23
Other Manufacturing Expenses                                                178.59                     60.92
Building Repairs & Road Maintenance                                          91.29                     54.15
Machinery Repairs                                                         1,046.79                  1,075.17
                                                                                      7,723.47      7,742.15
(3) Payments to & Provisions for
Employees:
Salaries, Wages, Bonus, Allowances, etc.                                  5,513.33                  5,337.09
Contribution to Provident & Other
Funds and Schemes                                                           158.13                    144.62
Social Security Costs                                                     1,122.98                    990.44
Welfare Expenses                                                            297.15                    308.20
                                                                                      7,091.59      6,780.35
                                    carried over                                     38,882.91     36,561.49




                                                       F-20
Bharat Forge Limited
Schedule "K" Manufacturing and Other Expenses (contd.)                                         (Rs. in Million)
                                                                                                           Previous
                                                                                                                Year
                                  brought over                                               38,882.91     36,561.49
(4) Other Expenses:
Rent                                                                               172.30                     184.54
Rates & Taxes                                                                       32.47                      34.61
Insurance (Including Key Man Insurance)                                            101.58                      96.73
Commission & Discount                                                              136.12                     122.18
Interest & Finance Charges:
Interest:
On Debentures, including Bonds                                         99.71                                   23.25
On Fixed Loans                                                        112.34                                  110.25
Others                                                                752.46                                  831.65
                                                                      964.51                                  965.15

Discounting charges:                                                  326.85                                  304.23
                                                                                  1,291.36                  1,269.38
Miscellaneous Expenses including Traveling
expenses,
Printing, Stationery, Postage, Telephones,
Bank charges etc.                                                                 1,770.69                  1,477.04
Donations                                                                             2.57                      5.96
Loss on Foreign Exchange Fluctuation                                              1,037.30                         -
Freight Forwarding charges etc.                                                     899.55                    971.20
Royalty                                                                               7.73                      9.90
Directors' Fees and Traveling Expenses                                                5.53                      1.12
Managing and Whole Time Directors'
Commission                                                                          39.00                         68.50
Commission to Directors other than Managing
and Whole Time Directors                                                              4.00                         7.50
Loss on assets sold, discarded & scrapped                                             3.52                        18.24
Bad debts, irrecoverable advances and sundry
balances written off                                                      38.00                                   43.62
Less: Provision made in earlier years in
respect of
amounts written off during the year, adjusted
as pet contra                                                                 -                                    4.14
                                                                                    38.00                         39.48
Provision for doubtful debts and advances                                           97.79                          5.56
Amount Written off against Technical Know-
how                                                                                   2.08                         2.08
EVRS Compensation Written off :
i) Proportionate Deferred Revenue Expenses                                    -                                 2.34
ii) Incurred during the year                                               5.06                                 0.96
                                                                                      5.06                      3.30
                                                                                              5,646.65      4,317.32
                                                                                             44,529.56     40,878.81
Less: Expenses capitalised                                                                       25.16        131.21
                                              Total                                          44,504.40     40,747.60

Schedule "K (a)" Depreciation and Amortisation :
Depreciation *                                                                                2,516.37      2,270.12
Amount Written off against Lease hold Land                                                        0.95          0.43
                                         Total                                                2,517.32      2,270.55
*   Excludes Rs. 0.13 Million Consolidated as Pre-operative expenditure
                                                           F-21
Bharat Forge Limited
Schedule "L" Notes Forming Part of The Consolidated Financial Statements:
1      i) The consolidated financial statements include results of all the subsidiaries of Bharat Forge
       Limited and interalia their Subsidiaries and associates. The names, country of incorporation or
       residence, proportion of ownership interest and reporting dates are as under:


Subsidiaries:

                                                                                  Parent's ultimate
                                                                      Country of   holding as on Financial year
Name of the company                                                 Incorporation 31st March 2009    ends on
CDP Bharat Forge GmbH : -                                              Germany         100%         31/Dec/08
 and its wholly owned subsidiary
i. Bharat Forge Holding GmbH                                          Germany            100%*          31/Dec/08
    and its wholly owned subsidiary
    - BF Aluminiumtechnik GmbH & Co KG :-                             Germany            100%*          31/Dec/08
    and its wholly owned subsidiary
    - BF Aluminiumtechnik Verwaltungs GmbH                            Germany            100%*          31/Dec/08
 ii. Bharat Forge Beteiligungs GmbH                                   Germany            100%*          31/Dec/08
and its wholly owned subsidiary
a. Bharat Forge Kilsta AB Sweden                                       Sweden            100%*          31/Dec/08
    and its wholly owned subsidiary
    - Bharat Forge Scottish Stampings Ltd.                            Scotland           100%*          31/Dec/08
b. Bharat Forge Hong Kong Limited                                    Hong Kong           100%*          31/Dec/08
   and its Joint Venture Subsidiary
   - FAW Bharat Forge (Changchun) Company Ltd.                         China              52%*          31/Dec/08
 iii. Bharat Forge Daun GmbH                                          Germany            100%*          31/Dec/08
  iv. B F New Technologies GmbH                                       Germany            100%*          31/Dec/08

Bharat Forge America Inc.                                               U.S.A.           100%           31/Dec/08

BF NTPC Energy Systems Limited Since 19th June 2008                      India            51%           31/Mar/09

* held through subsidiaries


Associate:
                                                                                  Parent's ultimate Financial year
                                                                      Country of   holding as on       ends on
Name of the company                                                 Incorporation 31st March 2009
Tecnica UK Limited                                                       UK             30%           31/Dec/08
(shares held through subsidiary)


ii)    CDP Bharat Forge GmbH has, through a 35% equity participation positioned itself to exercise significant
       influence over Talbahn GmbH a Company which manages infrastructure facilities. Since there are no
       significant transactions and consequently the financial impact on the consolidated group financial statements
       being negligible, the same has not been consolidated.
iii)   Consolidated Financial Statement include the results of BF NTPC Energy Systems Limited, consolidated for
       the first time since it has become subsidiary w.e.f. 19th June 2008, though the effect of such consolidation is
       negligible.
iv) The Company considers Kalyani Carpenter Special Steels Ltd. (KCSSL) as it associate by virtue of its ability
    to exercise significant influence over the financial and operating policies and decisions of the KCSSL despite
    the company not holding any part of the Equity Share Capital and hence would not have any financial
    implications in these consolidated Financial statements.




                                                         F-22
Bharat Forge Limited
Schedule "L" Notes Forming Part of The Consolidated Financial Statements (contd.)
2   The consolidated financial statements are prepared on the following basis:
    i)     Considering that Financial Statements of the Subsidiaries have been prepared under International
           Financial Reporting Standard (for CDP Bharat Forge GmbH and its subsidiaries) and under US GAAP
           (for Bharat Forge America Inc), these Consolidated financial statements have been prepared
           substantially in the same format adopted by the parent to the extent possible, as required by the
           Accounting Standard AS 21 "Consolidated Financial Statements" issued by the Companies Accounting
           Standard Amendment Rules, 2006
    ii)    The operations of the subsidiaries are not considered as an integral part of the operations of the parent.
           Hence, all Monetary and Non Monetary Assets and Liabilites have been translated at the exchange rate
           prevailing at the close of the subsidiaries financial year (ie. 31st December 2008). Income and
           Expenditure have been translated at the daily average rate of exchnage prevailing for the subsidiaries
           financial year. Translation losses and gains on the above are carried to "Foreign Currency Translation
           Reserve" for future adjustments. Foreign Exchange rates so applied are adjusted for any subsequent
           material fluctuations as compared to rates prevailing on 31st March 2009.
    iii)   The financial statements of the Company and its subsidiary companies have been consolidated on a
           line-by-line basis by adding together the book value of like items assets, liabilities, income and expenses
           after eliminating intra- group balances and intra-group transactions resulting in unrealized profits and
           losses. The excess or deficit of parent's portion of equity in subsidiary companies over its carrying cost
           on investments in subsidiary companies, if any, is treated as a capital reserve or goodwill respectively.
    iv) In calendar year 2008, CDP Bharat Forge GmbH and its wholly owned subsidiaries (other than Bharat
        Forge Beteiligungs GmbH) has prepared their consolidated accounts under IFRS as against the past
        practice of preparing the same under German GAAP. Bharat Forge America Inc has prepared their
        financial statements under US GAAP. No adjustments have been made to the financial statements of the
        Subsidiaries on account of diverse accounting policies followed by them under respective GAAPs.
        However the diverse accounting policies followed by the subsidiaries and changes from German GAAP
        to IFRS to the extent they would materially impact these consolidated financial statements have been
        detailed in Note 4 below.
    v)  The financial statements are prepared on the following basis: The financial statements in respect of
        subsidiary companies other than BF NTPC Energy Systems Ltd. are drawn for the year ended 31st
        December, 2008, whereas the financial statements of the company are drawn for the year ended 31st
        March, 2009. The effect of significant transactions and other events that occur between 1st January,
        2009 and 31st March, 2009 are considered in the consolidated financial statements if it is of material
        nature. Material transactions with all subsidiaries taken together between the period 1st January, 2009
        and 31st March, 2009 have been given effect on account of the inconsistent reporting periods, but which
        are eliminated in the consolidation, are as given below:
                                                                                                  (Rs. in Million)
Transaction                                                                                              Amount
Investment in Subsidiary                                                                                  270.96
3   Notes of these Consolidated Financial Statements are intended to serve as a means of informative disclosure
    and a guide to better understanding of the consolidated position of the companies. Recognising this purpose,
    the company has disclosed only such Notes from the individual financial statements, which fairly present the
    needed disclosures. Practical considerations made it desirable to exclude Notes to Financial Statements,
    which in the opinion of the management, could be better viewed, when referred from the individual Financial
    Statements of Bharat Forge Ltd.
4   Significant Accounting Policies followed by Bharat Forge Limited are annexed to the independent Financial
    Statements. Due to inherent diversities in the legal and regulatory environment governing accounting
    principles, the accounting policies would be better understood when referred from the individual Financial
    Statements.
    However the following are instances of diverse accounting policies followed by the subsidiaries, which may
    materially vary with these consolidated financial statements.
    a) Dies : In respect of CDP Bharat Forge GmbH (CDP BF), Bharat Forge Kilsta AB (BFK), Bharat Forge
    Scottish Stampings Limited (BFSSL) and Bharat Forge America Inc (BFA) Dies are considered as Fixed
    Assets and amortised by scheduled depreciation with reference to an assumed economic life as against the
    parents accounting policy to treat them as a Inventory under "Current Asset" and amortise the cost, as
    "manufacturing expenses" ,on the basis of actual usage.
    b)     FAW Bharat Forge (Changchun) company Ltd.
           From this year, Moulds (dies) whose unit purchase value is above RMB 200 000 are considered as a
           part of fixed asset, to be depreciated over useful life of dies. Also dies of RMB 26 005 768 out of opening
           balance of inventory are transferred to fixed assets during the current year.

                                                         F-23
Bharat Forge Limited
Schedule "L" Notes Forming Part of The Consolidated Financial Statements (contd.)
    c)   Recognisation of Capital Reserve/ Goodwill: The German Accounting Standard (DRS 4) requires, in
         case of acquisition of a Subsidiary, at the first instance, to recognise the Assets and Liabilities at Market
         value in the first year of consolidation and thereafter to recognise the excess or deficit of the parents
         portion in the equity in subsidiary companies over its carrying cost of investments in subsidiaries as a
         Reserve or Goodwill. Though this policy is consistent with IFRS adopted by CDP BF during the year, it is
         in contrast to the requirements of Accounting Standard 21 "Consolidated Financial Statements", which
         requires recognition of Assets and Liabilities, in similar circumstances, at their carrying costs. As a result
         fixed assets for Bharat Forge Aluminumtechnik are higher by Euro 0.426 million
    d)   Treatment of Capital Reserve (difference in capital consolidation account): The said German Accounting
         Standard (DRS 4) requires the capital reserve created on consolidation to be apportioned to income
         over the life of the assets. After adoption of IFRS during the current year, by CDP Bharat Forge GmbH
         and its subsidiaries (other than Bharat Forge Beteiligungs GmbH), the balance lying in 'Difference of
         Capital Consolidation' has been transferred to the General Reserve as against past practice of
         recognising part of such balance as 'other income' over life of such asset. However the net position of
         the reserves and surplus remains unchanged.
    e)   Employee benefits Pension: In view of adoption of IFRS by CDP Bharat Forge GmbH and its
         subsidiaries (other than Bharat Forge Beteiligungs GmbH), the service cost / interest cost for pension
         are debited to Profit and Loss account and actuarial gains and losses are charged to Reserves. The
         amount credited to the reserves for year 2008 is Euro 14 531. This is in contrast to the practice followed
         by the parent where the difference between actuarial valuation is charged to Profit and Loss account.
    f)   Impact on account of adoption of IFRS by CDP Bharat Forge GmbH and its subsidiaries (other than
         Bharat Forge Beteiligungs GmbH)
    1.
                 Particulars                                            Increase / (decrease)
                                                                     For earlier       For the         For earlier
                                                   For the year       years *            year           years *
                                                     (Euro)            (Euro)        (Rs. million)    (Rs. million)

Depreciation                                               545,846     (1,650,519)            34.78          (105.17)
Employee benefits                                        (191,204)         573,349          (12.18)             36.53
Other items                                               (19,096)        (44,051)           (1.22)            (2.81)
Deferred taxes                                           (100,000)         335,000           (6.37)             21.35
Early retired employees                                          -         308,881                -             19.68
Impact on Profit and Loss (Increase) /
Decrease                                                  235,546        (477,340)            15.01           (30.42)

*   Disclosed as adjustment in respect of earlier year

    2    The balance in revaluation reserve for investments earmarked to secure employee claims (security
         investment) represents the provision for dimunition in of value of security investment amounting to Euro
         359 282, which has been adjusted against the carrying cost of security investment (included in fixed
         deposits under Schedule H of the consolidated financial statements). These security investments are
         classified as 'available for sale'.
         Inventories: In respect of Bharat Forge America Inc. and Bharat Forge Kilsta AB, Sweden The cost of
         inventory is determined on the basis of first-in-first-out (FIFO) method in contrast to Bharat Forge Ltd.
         which determines on the basis of weighted average.
5   Exceptional item of expenditure includes:
    a)   Settlement of Customer claim amounting to Rs. 247.33 Million acknowledged by Bharat Forge Scottish
         Stampings Limited
    b)   Cost of redundancies of Rs. 51.59 Million incurred by Bharat Forge Scottish Stampings Limited
6   The subsidiaries have not reported any transactions with related parties, other than with the consolidated
    Group. Hence disclosures in this regard are fairly reflected in the Statement of Related Party Transactions
    annexed to Schedule "L" to the independent financial statements of Bharat Forge Ltd. and those made by the
    Joint Venture subsidiary FAW Bharat Forge (Changchun) Company Ltd. which are attached hereto.




                                                            F-24
Bharat Forge Limited
Schedule "L" Notes Forming Part of The Consolidated Financial Statements (contd.)
7    Consolidated Contingent liability not provided for: The subsidiaries have not reported any contingent liabilities
     which are not provided for and outstanding at the close of their financial year. Hence, the contingent liabilities
     not provided for in respect of the parent are representative of the consolidated group and can be directly
     viewed in Note 1 to the independent financial statements of the parent.
8    Consolidated Capital commitments to the extent not provided for, net of advances as at 31st March, 2009 Rs.
     969.97 Million. (Previous year Rs. 2 236.96 Million) .
9    Significant notes to financial statements of subsidiaries which provide a better understanding to these
     financial statements


A)         FAW Bharat Forge (Changchun) Company Limited:
     i)    As per the joint venture contract entered into with China FAW group Corporation (minority shareholder)
           for establishment of FAW Bharat Forge (Changchun) Company Ltd., the minority share holder injected
           net assets into joint venture company. However, the legal title of the property and land amounting to
           RMB 34.026 Million has not been transferred in the name of joint venture company.
           As per the discussion with the management of the joint venture company, the titles are in the process of
           being transferred.
     ii)   FAW Bharat Forge (Changchun) company Ltd. owes the investor, China FAW Group Corporation, RMB
           10 922 340 towards the rent payable for land use right.
B)   Bharat Forge America Inc (BFA):
     The financial statements of BFA have been prepared with the assumption of continuation of the Company as
     a going concern. This is based on the fact that despite continued losses and an unprecedented downturn in
     the automotive sector in BFA’s principal market, viz., North America, the Management of BFA believes that
     there is an opportunity for it to continue its operations as a going concern. To realize this opportunity, its
     management is working on an action plan that includes:
     1.    BFA has upgraded some of the legacy production lines with new, flexible, automated production lines
           that require less down time for the tool changes between products. This will allow BFA to reduce
           production costs through decreased setup times and increased automation. The flexibility of the
           machines to be reconfigured without significant costs will also allow BFA to service a larger number of
           contracts and customers.
     2.    As a continuing process, BFA is actively reviewing costs on a part-by-part basis and with this additional
           information, management of BFA believes it will be able to better deploy resources to projects that will
           provide the greatest return. In addition, this will allow management of BFA to focus on parts and areas of
           the business that need additional restructuring.
     3.    Management of BFA is in the process of negotiating price increases with several customers.
     4.    BFA is making efforts to expand its sales base among a larger group of customers and into new
           segments of the parts market in an effort to maintain more stable profitability and production levels with
           less reliance on one single customer.
     5.    Significant investment has occurred to launch new products.
     6.    As a result of the continued investments in capital equipment, BFA has the capacity for growth and no
           additional capital expenditures would be required. Further, the management of BFA has carried out an
           impairment test on the assets of BFA as per US GAAP which were subjected to the audit procedures by
           their auditors. As per the result of this test, there was no impairment in the value of its assets which was
           required to be recognized in the Profit and Loss account.

C) Bharat Forge Scottish Stampings Limited (BFSSL):
Basis of preparation
The current turmoil in the European automotive market had its adverse impact on the financial performance of
BFSSL, leading to consideration of various options by its parent companies, including its potential closure, during
the consultation period initiated by BFSSL, which concludes on 3rd June 2009. As the outcome of the review of
BFSSL’s business is unknown, there is a material uncertainty, which cats significant doubts on BFSSL’s ability to
continue as a going concern and, therefore, to continue to realize its assets and discharge its liabilities in the
normal course of business. However, based on the support provided by its parent companies and implementation
of various measures of cost reduction, the management believes that it will continue to operate as a going
concern.


                                                         F-25
Bharat Forge Limited
Schedule "L" Notes Forming Part of The Consolidated Financial Statements (contd.)
While Bharat Forge Limited’s decision on the future of BFSSL remains in progress, on the basis of the indicated
support the directors consider it is appropriate to prepare the accounts on a going concern basis. As with any
company placing reliance on other group entities for financial support, the directors of BFSSL acknowledge that
there can be no certainty that this support will continue either during this time or thereafter should the business
continue to operate although, at the date of approval of these financial statements, they have no reason to believe
that it will not do so within the limits set out above.
Accordingly, the financial statements do not include any adjustments that would result from the basis of
preparation being inappropriate.

As per our attached report of even date
For and on behalf of                                                         On behalf of the Board of Directors
Dalal & Shah                                                                 B. N. Kalyani
Chartered Accountants                                                        Chairman & Managing Director



Anish Amin                                      Beejal Desai                 G. K. Agarwal
Partner                                         Company Secretary            Deputy Managing Director
Membership No. 40451
Pune: May 20, 2009                              Pune: May 20, 2009




                                                      F-26
Bharat Forge Limited
Disclosure of Transaction with Related Parties as required by the Accounting Standard–18
                                                                               2008-09                   2007-08
                                                                            (Rs. in Million)          (Rs. in Million)
                                                                                    Outstanding                Outstanding
                                                                                        amounts                     amounts
                                                                                       carried in                  carried in
                                                                        Transacti        Balance Transaction        Balance
Name of Related Parties                   Nature of Transaction         on Value           Sheet      Value            Sheet

Axle Branch Company FAW Jiefang          Forging Sales                           -              -         0.34          0.16
Automobile Co., Ltd
Changchun FAW Automobile Parts           Forging Sales                       0.41               -         0.52              -
Industrial Co., Ltd
Changchun FAW Jiaxin Heat Treatment Forging Sales                            8.59               -        48.45              -
& Plating Technological CO., Ltd
                                         Procurement of spare parts             -            0.26         1.81          0.43
Changchun FAW Equipment Technology Forging Sales                             1.42            6.43         0.53          4.39
Manufacturing Co., Ltd
                                         Procurement of spare parts          0.66               -            -             -
                                         Maintenance                            -               -         0.05             -
Changchun FAW Jianshe Industrial Co Ltd Accounts Payable                        -            3.63            -          0.82
                                         Spare Parts Sale                    0.01               -            -             -
Changchun FAW Regeneration and Reuse Forging Sales                         126.30            0.22            -             -
Co., Ltd
                                         Waste sales                            -               -        63.35          0.62
                                         Procurement of spare parts             -               -         3.09             -
                                         Procurement of Labor                0.01               -            -             -
                                         Insurance Products
Changchun FAW Tool & Equipment Co. Ltd. Forging & Waste Sales               69.95              -             -             -
                                         Procurement of Die                126.33          67.20             -             -
Changchun FAW Tooling Co., Ltd           Forging Sales                          -              -         11.35             -
                                         Procurement of Mould                   -              -         77.79         25.96
Changchun FAW-SIHUAN Automobile CO., Forging Sales                           1.46              -          4.27             -
Ltd. Wheel Company
Changchun FAW Landi Automatic            Procurement of spare parts          1.12               -             -             -
Engineering Co., Ltd.
Changchun Gear Factory of FAW CAR Co., Forging Sales                        75.55          15.89         33.26         12.38
Ltd
China FAW Group Corporation ( FAW)       Other Payables                         -               -           -         207.49
Die Manufacturing Co., Ltd of FAW        Waste sales                         0.25               -           -              -
Drive shaft Branch Company of Fawer      Forging Sales                     308.27               -      144.68           0.98
Automobile Part Co., Ltd
                                         Labor Service                          -               -        0.19               -
FAW Jiefang Automobile Co.,              Forging Sales                     935.50               -      485.27               -
Ltd(Procurement Division)
                                         Procurement of section steel    1,887.45         556.26       867.45         224.28
FAW Jiefang Automobile Co., Ltd.         Forging Sales                     150.78          88.12            -              -
Transmission Company
FAW Yidun Gearbox Co., Ltd               Forging Sales                          -              -            -           2.56
FAW Power Energy Branch Company          Procurement of Energy             384.01         324.30       229.25         124.27
                                         Forging Sales                          -              -         0.23              -
                                         Spare Parts Sale                    0.11              -            -              -
FAW School--run Industrial Company       Procurement of Services                -           0.30            -           0.05
FAW Volkswagen Automobile Co., Ltd       Forging Sales                          -           1.76         1.15              -
FAW Import & Exports Corporation         Procurement of section steel       84.71          64.54         0.04           0.04
FAW Jiefang Gearbox Co., Ltd             Forging Sales                          -              -        25.78              -
FAW Shangdong Refitted Automobile        Account Receivable                     -           1.80            -           0.72
Factory
FAW Special—Purpose Auto Co., Ltd        Forging Sales                      29.59          16.18         17.77          7.53
FAW Foundry Co., Ltd. Foundry Model      Forging & Waste Sales              16.72              -             -             -
Tooling Plant
                                         Procurement of Die & steel         65.61          69.73              -             -
                                         parts
Harbin Light--duty truck Factory of FAW  Forging Sales                      83.04          24.43         40.14         10.18
                                         Indemnity                              -                            -          0.02
Inspection Center of FAW                 Account Payable                        -            0.72            -          0.03
Material Supply Station of Changchun FAW Account Payable                        -            0.07            -          0.03

No.1 Motor Vehicle Industry School-Run    Procurement of printing            0.28               -             -             -
Company
Pumps Branch Company of Fawer             Forging Sales                      2.74            0.85         2.46              -
Automobile Part Co., Ltd
Qiming Information Technology Co., Ltd    Network Service                    1.09               -            -             -
Shock Absorbers Branch Company of         Forging Sales                     80.37            1.82        33.45          0.85
Fawer Automobile Part Co., Ltd

                                                          F-27
                                                                             2008-09                  2007-08
                                                                         (Rs. in Million)          (Rs. in Million)
                                                                                 Outstanding                Outstanding
                                                                                     amounts                     amounts
                                                                                    carried in                  carried in
                                                                     Transacti        Balance Transaction        Balance
Name of Related Parties                   Nature of Transaction      on Value           Sheet      Value            Sheet
Standard Components Branch Company of Procurement of section steel        1.14               -       0.96            0.03
Fawer Automobile Part Co., Ltd
Technical Center of FAW                   Forging Sales                  23.58               -       2.14                -
The Die Manufacturing Co., Ltd. of FAW    Forging Sales                       -              -       0.49            0.06
The First Branch Company of Changchun Forging Sales                       0.05               -       0.14                -
FAW Automobile Parts Industrial Co., Ltd
The Gongxing Cast Industrial Co., Ltd. of Forging & Waste Sales          12.53               -       0.82                -
Changchun FAW
                                          Spare Parts Sale                0.02               -           -               -
                                          Procurement of spare parts      0.09               -           -               -
                                          Procurement of Maintenance          -           1.24       2.30            1.32
                                          Services
The Gongxing Die Manufacturing Industrial Procurement of Mould / Die      2.21            2.37       0.71            0.34
Co., Ltd. of Changchun FAW
                                          Maintenance                         -              -       0.20                -
Work Meal Center of Changchung FAW        Procurement of Work Meal        8.66            8.62       5.80            3.53
The Mould and Tooling Factory of FAW      Forging Sales                       -              -       1.82                -
Casting Co., Ltd
                                          Procurement of Mould                -              -      20.68            4.73
Wuxi Diesel Oil Branch Company of FAW Advances                                -              -           -           3.25
Jiefang Automobile Co Ltd




                                                         F-28
Bharat Forge Limited
Annexure referred to in Note No.27 of Notes forming part of the Financial Statements
Segment Reporting as required by Accounting Standard 17:                       (Rs. in Million)

Sr.                                                                                            Year ended         Year ended
No.     Particulars                                                                       31st March, 2009   31st March, 2008
      1 Segment Revenue:
        a Forgings                                                                               47,676.10         46,436.72
        b Gen. Engg. Trading etc.                                                                   116.80             73.96
        Total                                                                                    47,792.90         46,510.68
        Less: Inter Segment Revenue- at cost                                                         56.83             26.94
        Net Sales/Income from Operations                                                         47,736.07         46,483.74


      2 Segment Results:
        Profit/(Loss) (before tax and interest from each segment)
        a Forgings                                                                                5,597.00          6,876.54
        b Gen. Engg. Trading etc.                                                                    25.40             15.13
        Total                                                                                     5,622.40          6,891.67
        Less:
        1 Interest                                                                                1,291.36          1,269.38
        2 Other un-allocable expenditure net of un-allocable income                               2,925.29          1,124.74
        Total Profit Before Tax & Exceptional Items                                               1,405.75          4,497.55
        Exceptional items
        - Customer claim and Manpower Redundancy cost                                             (298.92)                 -
        Profit before Tax                                                                         1,106.83          4,497.55


      3 Total carrying amount of segment assets:
       a Forgings                                                                                42,029.83         39,229.38
       b Gen.Engg.Trading etc.                                                                      199.49            118.87
       c Unallocable
         - unutilised Fund raised during the year                                                 3,383.26          4,530.87
         - others                                                                                 7,608.10          7,501.93
       Total                                                                                     53,220.68         51,381.05


      4 Total amount of segement liabilities:
        a Forgings                                                                                8,261.29         12,049.43
        b Gen.Engg.Trading etc.                                                                      15.35             10.27
        c Unallocable                                                                             3,804.05          4,165.86
        Total                                                                                    12,080.69         16,225.56


      5 Capital Employed (Segment assets - Segment Liabilities)
        a Forgings                                                                               33,768.54         27,179.95
        b Gen.Engg.Trading etc.                                                                     184.14            108.60
        c Unallocable:
          - unutilised Fund temporarily deployed                                                  3,383.26          4,530.87
          - others                                                                                3,804.05          3,336.07
        Total                                                                                    41,139.99         35,155.49


      6 Total cost incurred during the year to acquire segment assets that are expected
        to be used during more than one period:
        a Forgings                                                                                8,560.40          2,139.99
        b Gen.Engg.Trading etc.                                                                       0.70              0.68
        c Unallocable                                                                               833.69          2,554.25
        Total                                                                                     9,394.79          4,694.92


      7 Depreciation
        a Forgings                                                                                2,017.20          1,897.41
        b Gen.Engg.Trading etc.                                                                       1.69              1.53
        c Unallocable                                                                               498.43            371.61
        Total                                                                                     2,517.32          2,270.55



                                                             F-29
    Bharat Forge Limited
Annexure referred to in Note No.27 of Notes forming part of the Financial Statements
Segment Reporting as required by Accounting Standard 17 (contd.)              (Rs. in Million)

    8 Secondary information in respect of Geographical segment on the basis of
      location of customers:

     a Within India                                                                   10,561.37             12,354.97
     b Outside India                                                                  37,179.00             34,167.80

The Company has identified its business segments as its primary reporting format which comprises of Forgings
and General Engineering. The main segment is Forgings. All products made by the Company essentially emanate
from forgings and therefore it is reported as an independent business segment. General Engineering is a
fabrication unit which constitutes a miniscule portion of the Company's activities.
Above consolidated results for the year includes the result of subsidiary companies viz. CDP Bharat Forge
GmbH, BF America Inc., U.S.A. and BF NTPC Energy Systems Ltd.




                                                          F-30
To The Board of Directors
Bharat Forge Limited
Report of the auditors on the consolidated financial statements

We have examined the attached Consolidated Balance Sheet of Bharat Forge Limited and its
subsidiaries and associate as at 31st March, 2008, and the Consolidated Profit and Loss account and
the Consolidated Cash flow Statement for the year then ended.

These financial statements are the responsibility of Bharat Forge Limited’s management. Our
responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with generally accepted auditing standards in India. Those Standards require
that we plan and perform the audit to obtain reasonable assurance whether the financial statements
are prepared, in all material respects, in accordance with an identified financial reporting framework
and are free of material misstatements. An Audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement. We believe that our audit provides a reasonable basis for our opinion.

The financial statements of the foreign subsidiaries and associate , which are drawn up for the
financial year ended 31st December 2007, viz. CDP Bharat Forge GmbH and its subsidiaries ,
whose consolidated financial statements reflect total assets of EUR 46.28 million (Previous Year EUR
45.59 million), total Revenues of EUR 197.97 million (Previous Year EUR 192.92 million) and total
net cash outflows of EUR 5.53million (Previous Year EUR 1.92 million), Bharat Forge America Inc,
whose financial statements reflect total assets of US $ 12.60 million (Previous Year US$ 12.93
million) and total revenues of US $ 44.91 million(Previous Year US$ 44.20 million) and total net cash
flows of US$ 0.88 million(Previous Year US$ 0.01 million) and Bharat Forge Beteilingungs GmbH
and its subsidiaries and associate, whose consolidated financial statements reflect total assets of
EUR 90.15 million (Previous Year EUR 81.29 million) and total revenues of EUR 208.32 million
(Previous Year EUR 182.09 million) and total net cash out flows of EUR 3.91 million (Previous Year
16.94 million), which are drawn up for the year ended on 31st December 2007, have been audited by
independent firms of Accountants under the laws of the country of their incorporation. Our opinion, in
so far as it relates to the amounts included in respect of these subsidiaries, is based on their report.

We report that the consolidated financial statements have been prepared by the Company in
accordance with the requirements Accounting Standards issued by the Institute Of Chartered
Accountants of India viz. Accounting Standard (AS - 21) “Consolidated Financial Statements”, the
Accounting Standard Interpretations and amendments issued thereto, to the extent applicable for the
year ended 31st March, 2008 and on the basis of the separate audited financial statements of Bharat
Forge Limited and it’s aforementioned subsidiaries and associate included in the consolidated
financial statements.

Auditors of Bharat Forge Beteilingungs GmbH have without qualifying their opinion, made a reference
in the audit report in respect of contingent liability which is reproduced below:

“During the year the Company experienced operational issues due to the failure of the crankshaft in
the 8000T press in February. This resulted in the loss of about a month’s production. As a
consequence of this breakdown, a customer has intimated a significant claim for reimbursement of all
costs, expenses, loss and damage incurred by an alleged failure to deliver. The company is reviewing
the position with the customer and, based on the progress of discussions, the directors do not believe
that a material liability will arise to the company. However as is not uncommon with claims of this
nature, there can be no guarantee as to the final outcome of the claim. As it is not possible to predict
with any degree of certainty the outcome of this matter, no provision for any liability that may result has
been made in the financial statements. The directors have not disclosed an estimate of the financial
impact of this claim as they consider that this disclosure might be prejudicial to the Company ‘s
interests.”

On the basis of the information and explanation given to us and on the consideration of the separate
audit reports on individual audited financial statements of Bharat Forge Limited and it’s aforesaid
subsidiaries and associates, we are of the opinion that:



                                                   F-31
a)     The Consolidated Balance Sheet read together with other notes thereon, gives a true and fair
       view of the consolidated state of affairs of Bharat Forge Limited and its subsidiaries and
       associate as at 31st March, 2008; and
b)     The Consolidated Profit and Loss account read together with other notes thereon, gives a true
       and fair view of the consolidated results of operations of Bharat Forge Limited and its
       subsidiaries and associate for the year then ended; and
c)     The Consolidated Cash Flow Statement read together with notes thereon, gives a true and fair
       view of the consolidated cash flows of Bharat Forge Limited and its subsidiaries and associate
       for the year then ended.

                                                                               For and on behalf of
                                                                                   DALAL & SHAH
                                                                             Chartered Accountants

                                                                                     ANISH AMIN
                                                                                           Partner
                                                                              Membership No.40451
MUMBAI: 20th May, 2008.




                                               F-32
Bharat Forge Limited
Consolidated Balance Sheet as at 31st March, 2008                                    (Rs. in Million)
                                                                                                As at
                                                                                          31st March,
                                                       Schedule                                 2007
I. SOURCES OF FUNDS:
1. Shareholders' Funds:
   (a) Share Capital                                     "A"         445.40                    545.40
   (b) Reserves and Surplus                              "B"      16,095.62                 14,352.56
                                                                              16,541.02     14,897.96
2. Loan Funds:
   (a) Secured Loans                                     "C"       6,809.12                  5,950.45
   (b) Unsecured Loans                                   "D"       9,734.81                 11,945.45
                                                                              16,543.93     17,895.90

3. Minority Interest:                                                           701.92        315.29

4. Deferred Tax Adjustment:
   (a) Deferred Tax Liabilities                                    1,385.33                  1,197.74
   (b) Deferred Tax Assets                                         (209.00)                    (91.02)
                                                                               1,176.33      1,106.72

                                                       TOTAL                  34,963.20     34,215.87

II. APPLICATION OF FUNDS:

1. Fixed Assets:
   (a) Gross Block                                                30,988.88                 26,713.84
   (b) Less: Depreciation                                         13,227.91                 10,808.59
   (c) Net Block                                         "E"      17,760.97                 15,905.25
   (d) Capital work-in-progress                                    5,841.59                  3,537.27
                                                                              23,602.56     19,442.52

2. Goodwill arising on Consolidation                                               4.54             –

3. Technical Know-how                                    "F"                       4.18          6.26

4. Investments:                                          "G"                   2,988.36      2,073.16

5. Current Assets, Loans and Advances:                   "H"
   (a) Inventories                                                 7,271.03                  6,142.07
   (b) Sundry Debtors                                              6,717.94                  6,567.40
   (c) Cash and Bank Balances                                      3,183.49                  9,389.33
   (d) Other Current Assets                                        1,255.41                    905.91
   (e) Loans and Advances                                          6,353.54                  4,681.36
                                                                  24,781.41                 27,686.07
  Less: Current Liabilities and Provisions:              "I"
  (a) Liabilities                                                 11,552.86                 11,246.74
  (b) Provisions                                                   4,864.99                  3,747.74
                                                                  16,417.85                 14,994.48
  Net Current Assets                                                           8,363.56     12,691.59
                                       carried over                           34,963.20     34,213.53




                                                      F-33
Bharat Forge Limited
Consolidated Balance Sheet as at 31st March, 2008 (contd.)                                    (Rs. in Million)
                                                                                                          As at
                                                                                                    31st March,
                                                            Schedule                                      2007
                                            brought over                               34,963.20      34,213.53

6. Miscellaneous Expenditure
   (to the extent not written off or adjusted)                "I(i)"                           –            2.34
                                                             TOTAL                     34,963.20       34,215.87
NOTES FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS                                           "L"

As per our attached report of even date
For and on behalf of                                                       On behalf of the Board of Directors
DALAL & SHAH                                                               B. N. KALYANI
Chartered Accountants                                                      Chairman & Managing Director



ANISH AMIN                                       ASHISH BORADKAR           S. S. MARATHE
Partner                                          Asst. Company Secretary   Director
Membership No. 40451
Mumbai: May 20, 2008                             Mumbai: May 20, 2008




                                                           F-34
Bharat Forge Limited
Consolidated Profit and Loss Account for the year ended 31st March, 2008                   (Rs. in Million)
                                                                                                  Previous
                                                          Schedule                                    Year
INCOME:

Sales, Gross                                                "J (a)"   47,340.05                 42,762.19
Less : Excise Duty                                                     1,726.08                  1,560.19
Net Sales                                                             45,613.97                 41,202.00

Operating Income                                            "J (b)"     908.80                     580.98
                                                                                  46,522.77     41,782.98

Other Income                                                "J (c)"                  992.93        969.15
                                                                                  47,515.70     42,752.13

EXPENDITURE:

Manufacturing and other expenses                             "K"      40,747.60                 36,386.36

Depreciation and amortisation                               "K (a)"    2,270.55                  1,881.10
                                                                                  43,018.15     38,267.46
Operating Profit                                                                   4,497.55      4,484.67
Exceptional Item of Expenditure                                                           –        121.44
Profit for the year before income from Associate &
taxation                                                                           4,497.55       4,363.23

Income from Associate                                                                  1.22              –
Provision for Taxation:
   Current Tax (Including Wealth Tax Rs 2.00 million
   Previous year Rs.5.03 million)                                      1,369.08                   1,366.54
   Deferred Tax                                                          152.33                     142.08
   Fringe Benefit Tax                                                     68.00                      19.95
                                                                                   1,589.41       1,528.57
Net Profit after taxation                                                          2,909.36       2,834.66

  Less : Minority Interest                                                         (105.87)        (71.22)

Net Profit after Minority Interest                                                 3,015.23       2,905.88

As per last Account                                                                5,052.45       3,290.39
                                                                                   8,067.68       6,196.27

Adjustments relating to earlier years :
  Excess/ (Short) provision for taxation and tax
  refunds                                                                             (9.70)           4.22
  Energy Charges                                                                      (4.83)        (14.14)
  Excess Depreciation written back                                                         –          37.23
  Profit available for Appropriation                                               8,053.15       6,223.58
                                           carried over                            8,053.15       6,223.58




                                                          F-35
Bharat Forge Limited
Consolidated Profit and Loss Account for the year ended 31st March, 2008(contd.)(Rs. in Million)
                                                                                                Previous
                                                         Schedule                                    Year
                                          brought over                            8,053.15       6,223.58
APPROPRIATIONS:
Capital Redemption Reserve Account                                                 100.00               –
General Reserve                                                                    280.00          250.00

Dividend on Preference Shares                                          7.14                          8.25
Tax on above Dividend                                                  1.21                          1.16
                                                                                      8.35           9.41
Proposed Dividend                                                    779.28                        779.28
Tax on Proposed Dividend                                             132.44                        132.44
                                                                                    911.72         911.72
Balance carried to Balance Sheet                                                  6,753.08       5,052.45

Earning Per Share
(Face value of Rs. 2/-)

  Basic                                                                              13.44          13.13
  Diluted                                                                            13.44          13.13

NOTES FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS :                                      "L"

As per our attached report of even date
For and on behalf of                                                 On behalf of the Board of Directors
DALAL & SHAH                                                         B. N. KALYANI
Chartered Accountants                                                Chairman & Managing Director

ANISH AMIN                                 ASHISH BORADKAR           S. S. MARATHE
Partner                                    Asst. Company Secretary   Director
Membership No. 40451
Mumbai: May 20, 2008                       Mumbai: May 20, 2008




                                                         F-36
Bharat Forge Limited
Consolidated Cash Flow Statement for the year ended 31st March, 2008 (Rs. in Million)

Sr. No. Particulars                                                            2007-08      2006-07
   A    CASH FLOW FROM OPERATING ACTIVITIES :
        Profit before tax