LETTER OF OFFER Dated February 24, 2010 For Equity

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					                                                                                                                  LETTER OF OFFER
                                                                                                                Dated February 24, 2010
                                                                                             For Equity Shareholders of the Company only




 (The Company was originally incorporated as Swaraj Vehicles Limited on July 26, 1983, as a public limited company under the Companies Act, 1956, as
 amended (the ―Companies Act‖). The name of our Company was subsequently changed to its present name ‗Swaraj Mazda Limited‘ and a fresh
 certificate of incorporation approving the change of name to ‗Swaraj Mazda Limited‘ was granted to our Company on November 27, 1984, by the
 Registrar of Companies, Punjab.) For details of changes in the name of the Company, see ―History and Certain Corporate Matters - Incorporation‖ on
 page 61.

                                   Registered Office: Village Asron, District Nawanshahar – 144 533 (Punjab), India
                                        Corporate Office: 204-205, Sector 34-A, Chandigarh – 160 022, India
                                                   Tel: (91 172) 2647 700 Fax: (91 172) 2615 111
                                          Company Secretary and Compliance Officer: Mr. Gopal Bansal
                                          Email: gbansal@swarajmazda.net Website: www.swarajmazda.net

               FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF THE COMPANY ONLY
                                             LETTER OF OFFER
ISSUE OF 3,984,946 EQUITY SHARES OF RS. 10 EACH AT A PREMIUM OF RS. 190 PER EQUITY SHARE AGGREGATING
Rs. 7,969.89 LACS TO THE EQUITY SHAREHOLDERS ON RIGHTS BASIS IN THE RATIO OF 19 EQUITY SHARES FOR
EVERY 50 EQUITY SHARES HELD ON THE RECORD DATE I.E. FEBRUARY 10,2010 (“ISSUE”). THE ISSUE PRICE FOR
THE EQUITY SHARES IS 20 TIMES OF THE FACE VALUE OF THE EQUITY SHARES.

                                                              GENERAL RISKS
Investments in equity and equity related securities involve a degree of risk and investors should not invest any funds in this Issue unless they
can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment
decision in the Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the
risks involved. The securities being offered in the Issue have not been recommended or approved by the Securities and Exchange Board of
India (the ―SEBI‖) nor does the SEBI guarantee the accuracy or adequacy of this document. Investors are advised to refer to the ―Risk
Factors‖ on page xi before making an investment in this Issue.

                                                  ISSUER‟S ABSOLUTE RESPONSIBILITY
The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with
regard to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Letter of Offer is true and
correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held
and that there are no other facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any
such opinions or intentions misleading in any material respect.

                                                                LISTING
The existing Equity Shares of the Company are listed on the Bombay Stock Exchange Limited (the ―BSE‖) and the National Stock Exchange
of India Limited (the ―NSE‖). The Company has received ―in-principle‖ approvals from the BSE and the NSE for listing the Equity Shares
from this Issue by their letters dated September 30, 2009 and October 16, 2009, respectively. For the purposes of the Issue, the Designated
Stock Exchange shall be the BSE.

               LEAD MANAGER TO THE ISSUE                                                       REGISTRAR TO THE ISSUE




JM Financial Consultants Private Limited                                  Link Intime India Private Limited
141, Maker Chambers III                                                   C-13, Pannalal Silk Mills Compound
Nariman Point                                                             L.B.S Marg, Bhandup (West)
Mumbai - 400 021                                                          Mumbai - 400 078
India                                                                     India
Tel: (91 22) 6630 3030                                                    Tel: (91 22) 2596 0320
Fax: (91 22) 2204 7185                                                    Fax: (91 22) 2596 0329
Email: swarajmazda.rights@jmfinancial.in                                  Email: sml.rights@linkintime.co.in
Website: www.jmfinancial.in                                               Website: www.linkintime.co.in
Contact Person: Ms. Lakshmi Lakshmanan                                    Contact Person: Mr. Praveen Kasare
SEBI Registration No: INM000010361                                        SEBI Registration No: INR000004058

                                                           ISSUE PROGRAMME
                                                     LAST DATE FOR REQUEST FOR SPLIT
              ISSUE OPENS ON                                                                                       ISSUE CLOSES ON
                                                            APPLICATION FORMS
                 March 3, 2010                                      March 10, 2010                                    March 17, 2010
                                                        TABLE OF CONTENTS

SECTION I - GENERAL ............................................................................................................................. i
    DEFINITIONS AND ABBREVIATIONS ............................................................................................. i
    OVERSEAS SHAREHOLDERS .......................................................................................................... vi
    PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA ........... viii
    FORWARD LOOKING STATEMENTS ............................................................................................. x
SECTION II – RISK FACTORS ............................................................................................................... xi
SECTION III - INTRODUCTION ............................................................................................................. 1
    SUMMARY OF THE ISSUE ................................................................................................................. 1
    SUMMARY FINANCIAL INFORMATION ....................................................................................... 2
    GENERAL INFORMATION ................................................................................................................ 8
    CAPITAL STRUCTURE ......................................................................................................................13
    OBJECTS OF THE ISSUE ...................................................................................................................17
    STATEMENT OF TAX BENEFITS ....................................................................................................29
SECTION IV – ABOUT THE COMPANY ..............................................................................................35
    INDUSTRY OVERVIEW .....................................................................................................................35
    OUR BUSINESS ....................................................................................................................................42
    HISTORY AND CERTAIN CORPORATE MATTERS ...................................................................61
    OUR MANAGEMENT .........................................................................................................................64
SECTION V – FINANCIAL INFORMATION ....................................................................................... F1
    AUDITORS’ REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR
    ENDED MARCH 31, 2009 ................................................................................................................... F1
    LIMITED REVIEW REPORT AND FINANCIAL STATEMENTS FOR THE SIX MONTHS
    ENDED SEPTEMBER 30, 2009 ........................................................................................................ F32
    ACCOUNTING RATIOS AND CAPITALISATION STATEMENT ..............................................71
    STOCK MARKET DATA FOR EQUITY SHARES OF THE COMPANY ....................................73
    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
    RESULTS OF OPERATIONS .............................................................................................................75
    FINANCIAL INDEBTEDNESS ...........................................................................................................81
SECTION VI – LEGAL AND OTHER INFORMATION ......................................................................84
    OUTSTANDING LITIGATION AND DEFAULTS ..........................................................................84
    MATERIAL DEVELOPMENTS .........................................................................................................94
    GOVERNMENT AND OTHER APPROVALS ..................................................................................97
    OTHER REGULATORY AND STATUTORY DISCLOSURES .....................................................98
SECTION VII - TERMS OF THE ISSUE ..............................................................................................105
SECTION VIII – STATUTORY AND OTHER INFORMATION ......................................................129
    DECLARATION .................................................................................................................................131
                                             SECTION I - GENERAL
                                       DEFINITIONS AND ABBREVIATIONS

Unless the context otherwise indicates, the following terms have the meanings set forth in this section. All
references to acts, rules, regulations or other applicable laws and policies, shall be deemed to include all
amendments thereto:

DEFINITIONS

Term                                    Description
―we‖, ―us‖, ―our‖, ―the Company‖        Swaraj Mazda Limited
or ―our Company‖, ―the Issuer‖,
―Swaraj Mazda‖ or ―SML‖

Company Related Terms

Term                                    Description
Articles or Articles of Association     The articles of association of the Company
Agreement                               Joint venture agreement dated October 5, 1984 between our Company, Punjab
                                        Tractors Limited, Mazda Motor Corporation and Sumitomo Corporation
Auditors                                The statutory auditors of the Company, namely Price Waterhouse
Board or Board of Directors             The Board of Directors of the Company
CDC-PTL                                 CDC PTL Holdings Limited
CDC-FS                                  CDC-Financial Services (Mauritius) Limited
Chairman                                The chairman of the Board of Directors, namely, Mr. S.K. Tuteja
Director(s)                             Director(s) of the Company, unless otherwise specified
Gunung                                  Gunung Coach Sdn Bhd, Malaysia
Isuzu                                   Isuzu Motors Limited
Mazda                                   Mazda Motor Corporation
Memorandum or Memorandum of             The memorandum of association of the Company
Association
PSIDC                                   Punjab State Industrial Development Corporation
Promoter                                Sumitomo Corporation
PTL                                     Punjab Tractors Limited
SKS                                     SKS Coachbuilders SDN Bhd
Registered Office                       The registered office of the Company, located at village Asron, Distt. Nawanshahar
                                        – 144 533 (Punjab), India
Sumitomo Corporation                    Sumitomo Corporation, Japan


Issue Related Terms

Term                                  Description
Business Day                          Any day, other than a Saturday or a Sunday, on which commercial banks in Mumbai
                                      are open for business
                                      The application (whether physical or electronic) used by an ASBA Investor to make
Application Supported         by
                                      an application authorizing the SCSB to block the application amount in his/her
Blocked Amount or ASBA
                                      specified bank account maintained with the SCSB
ASBA Investor                         Equity Shareholders proposing to subscribe to the Issue through the ASBA Process


                                                               i
Term                                  Description
                                      and who:
                                      a) holds the Equity Shares of the Issuer in dematerialized form as on Record Date and
                                      has applied for Right Entitlements and / or additional Equity Shares in dematerialized
                                      form;
                                      b) has not renounced his / her Right Entitlements in full or in part;
                                      c) is not a Renouncee; and
                                      d) is applying through a bank account maintained with a SCSB
Bankers to the Issue                  Axis Bank Limited and Standard Chartered Bank Limited
Composite Application Form or         The form used by an Investor to make an application for allotment of Equity Shares in
CAF                                   the Issue
Controlling Branches of the           Such branches of the SCSBs which coordinate with the Lead Manager, the Registrar
SCSBs                                 to the Issue and the Stock Exchanges, a list of which is provided on
                                      http://www.sebi.gov.in/pmd/scsb.html
Consolidated Certificate              In case of holding of Equity Shares in physical form, our Company would issue one
                                      certificate for the Equity Shares allotted to one folio
Compliance Officer                    Mr. Gopal Bansal, Company Secretary
Designated Stock Exchange             The Bombay Stock Exchange Limited
Designated Branch(es)                 Such branch(es) of the SCSBs, which shall collect application forms used by ASBA
                                      Investors and a list of which is available on http://www.sebi.gov.in/pmd/scsb.html
Draft Letter of Offer                 The draft letter of offer dated September 16, 2009 filed with the SEBI
Equity Shares                         The Equity Shares of our Company having a face value of Rs. 10 unless otherwise
                                      specified in the context thereof
Equity Shareholders                   A holder(s) of Equity Shares as on the Record Date
Investor(s)                           The Equity Shareholders of the Company on the Record Date, i.e. February 10, 2010
                                      and the Renouncees
Issue                                 Issue of 3,984,946 Equity Shares of Rs. 10 each at a premium of Rs. 190 per Equity
                                      Share aggregating Rs. 7,969.89 lacs to the Equity Shareholders on a rights basis in the
                                      ratio of 19 Equity Shares for every 50 Equity Shares held on the Record Date i.e.
                                      February 10, 2010
Issue Closing Date                    March 17, 2010
Issue Opening Date                    March 3, 2010
Issue Price                           Rs. 200 per Equity Share
Issue Proceeds                        The proceeds of the Issue that are available to the Company
JM Financial                          JM Financial Consultants Private Limited
Lead Manager                          JM Financial
Letter of Offer                       This letter of offer dated February 24, 2010 filed with the Stock Exchanges after
                                      incorporating comments received from the SEBI on the Draft Letter of Offer
Listing Agreement                     The Company‘s equity listing agreement entered into with the Stock Exchanges
Record Date                           February 10, 2010
Refund through           electronic   Refunds through ECS, Direct Credit, RTGS or NEFT, as applicable
transfer of funds
Registrar to the Issue                Link Intime India Private Limited
Renouncee(s)                          Any person(s) who has / have acquired Rights Entitlements from Equity Shareholders
Rights Entitlement                    The number of Equity Shares that an Equity Shareholder is entitled to in proportion to
                                      the number of Equity Shares held by the Equity Shareholder on the Record Date
Self Certified Syndicate Bank         It is a Banker to an Issue registered under the Securities and Exchange Board of India
or SCSB                               (Bankers to an Issue) Regulations, 1994, which offers the service of making an ASBA
                                      application and is recognised by the SEBI


                                                                 ii
Term                             Description
SAF(s)                           Split Application Form(s)
Securities                       The Equity Shares offered in this Issue
Stock Exchange(s)                The BSE and NSE where the Equity Shares of the Company are presently listed, and
                                 where the Equity Shares to be issued pursuant to the Issue are proposed to be listed

Conventional / General Terms

Term                               Description
Act or Companies Act               The Companies Act, 1956
CAGR                               Compound Annual Growth Rate
CDSL                               Central Depository Services (India) Limited
Cenvat                             The Central Value Added Tax
CESTAT                             The Customs, Excise, Service Tax Appellate Tribunal
CII                                Confederation of Indian Industry
CKD                                Completely Knocked Down
Criminal Procedure Code            The Criminal Procedure Code, 1973
Depositories                       NSDL and CDSL
Depositories Act                   The Depositories Act, 1996
Distt.                             District
ECS                                Electronic clearing service
EPS                                Earnings per Share
ERP                                Enterprise Resource Planning
ESI                                Employees State Insurance
FEMA                               Foreign Exchange Management Act, 1999
FERA                               Foreign Exchange Regulation Act, 1973
Financial Year or Fiscal or FY     Period of twelve months ended March 31 of that particular year
IFRS                               International Financial Reporting Standards
Indian GAAP                        The generally accepted accounting principles in India
Industrial Policy                  The industrial policy and guidelines issued thereunder by the Ministry of Industry,
                                   Government of India
IPC                                The Indian Penal Code, 1860
I.T Act                            The Income Tax Act, 1961
ITAT                               Income Tax Appellate Tribunal
Modvat                             Modified Value Added Tax
NAV                                Net Asset Value
NEFT                               National Electronic Fund Transfer
NRE Account                        Non-Resident External Account
NRO Account                        Non-Resident Ordinary Account
PAT                                Profit after Tax
RTGS                               Real Time Gross Settlement
SEBI                               Securities and Exchange Board of India
SEBI Act                           The Securities and Exchange Board of India Act, 1992
SEBI Guidelines                    The Securities and Exchange Board of India (Disclosure and Investor Protection)
                                   Guidelines, 2000, which have been rescinded on August 26, 2009


                                                         iii
Term                      Description
SEBI (ICDR) Regulations   The Securities and Exchange Board of India (Issue of Capital and Disclosure
                          Requirements) Regulations, 2009
Securities Act            United States Securities Act of 1933
Takeover Code             Securities and Exchange Board of India (Substantial Acquisition of Shares and
                          Takeovers) Regulations, 1997
US GAAP                   The generally accepted accounting principles in United States
Wealth Tax Act            The Wealth Tax Act, 1957

Industry Related Terms

Term                       Description
Bhp                        Brake horsepower
CNG                        Compressed Natural Gas
CO2                        Carbon di-oxide
CV                         Commercial Vehicles
EMS                        Environment Management System
GVW                        Gross Vehicle Weight
LCV                        Light Commercial Vehicles
M&HCV                      Medium and Heavy Commercial Vehicles
OHS                        Occupational Health and Safety
UV                         Utility Vehicles

Abbreviations

Term                      Description
AGM                       Annual General Meeting
AS                        Accounting Standards, as issued by the Institute of Chartered Accountants of India
BSE                       The Bombay Stock Exchange Limited
CDSL                      Central Depository Services (India) Limited
DP                        Depository Participant
EGM                       Extraordinary General Meeting
ESI                       Employee State Insurance
FDI                       Foreign Direct Investment
FI                        Financial Institutions
FII(s)                    Foreign Institutional Investors registered with the SEBI under applicable laws
GDP                       Gross Domestic Product
GOI                       Government of India
HUF                       Hindu Undivided Family
IC                        Investment Company
ICAI                      Institute of Chartered Accountants of India
IRR                       Internal Rate of Return
KM                        Kilometre
Mn                        Million
MoU                       Memorandum of Understanding


                                                   iv
Term     Description
NR       Non Resident
NRI(s)   Non Resident Indian(s)
NSDL     National Securities Depository Limited
NSE      The National Stock Exchange of India Limited
OCB      Overseas Corporate Body
OECD     Organisation for Economic Co-operation and Development
RBI      The Reserve Bank of India
ROC      Registrar of Companies, Punjab, Himachal Pradesh and Chandigarh
STT      Securities Transaction Tax
UTI      Unit Trust of India
US$      United States Dollar
w.e.f.   With effect from




                                v
                                       OVERSEAS SHAREHOLDERS

The distribution of this Letter of Offer and the issue of Equity Shares on a rights basis to persons in certain
jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons
into whose possession this Letter of Offer may come are required to inform themselves about and observe
such restrictions. The Company is making this Issue of Equity Shares on a rights basis to the Equity
Shareholders of the Company and will dispatch the Letter of Offer and Composite Application Form
(―CAF‖) to the shareholders who have an Indian address.

No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for
that purpose, except that this Letter of Offer has been filed with the SEBI for observations. Accordingly, the
Equity Shares may not be offered or sold, directly or indirectly, and this Letter of Offer may not be
distributed, in any jurisdiction, except in accordance with legal requirements applicable in such jurisdiction.
Receipt of this Letter of Offer will not constitute an offer in those jurisdictions in which it would be illegal to
make such an offer and, in those circumstances, this Letter of Offer must be treated as sent for information
only and should not be copied or redistributed. Accordingly, persons receiving a copy of this Letter of Offer
should not, in connection with the issue of the Equity Shares or the Rights Entitlements, distribute or send
this Letter of Offer in or into the United States or any other jurisdiction where to do so would or might
contravene local securities laws or regulations. If this Letter of Offer is received by any person in any such
territory, or by their agent or nominee, they must not seek to subscribe to the Equity Shares or the Rights
Entitlements referred to in this Letter of Offer.

Neither the delivery of this Letter of Offer nor any sale hereunder, shall under any circumstances create any
implication that there has been no change in the Company‘s affairs from the date hereof or that the
information contained herein is correct as at any time subsequent to this date.

European Economic Area Restrictions

In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a ―Relevant Member State‖), an offer of the Equity Shares to the public may not be made in
that Relevant Member State prior to the publication of a prospectus in relation to the Equity Shares 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 that Relevant Member State, all in
accordance with the Prospectus Directive, except that an offer of Equity Shares to the public in that Relevant
Member State at any time may be made:
(a)      to legal entities which are authorized or regulated to operate in the financial markets or, if not so
         authorized or regulated, whose corporate purpose is solely to invest in securities;
(b)      to any legal entity which has two or more of (1) an average of at least 250 employees during the last
         financial year; (2) a total balance sheet of more than Euro 43,000,000 and (3) an annual net turnover
         of more than Euro 50,000,000, as shown in its last annual or consolidated accounts; or
(c)      in any other circumstances which do not require the publication by us of a prospectus pursuant to
         Article 3 of the Prospectus Directive.

Provided that no such offer of Equity Shares shall result in the requirement for the publication by the
Company or any JGC of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an ―offer of Equity Shares to the public‖ in relation to
any Equity Shares in any Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the Equity Shares to be offered so as to enable an investor
to decide to purchase or subscribe the Equity Shares, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member State and the expression ―Prospectus
Directive‖ means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant
Member State.



                                                        vi
This European Economic Area selling restriction is in addition to any other selling restriction set out below.

United Kingdom Restrictions

This document is only being distributed to and is only directed at (i) persons who are outside the United
Kingdom, or (ii) to investment professionals falling within Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 (the ―Order‖), or (iii) high net worth entities, and other
persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all
such persons together being referred to as ―relevant persons‖). The Equity Shares are only available to, and
any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Equity Shares will be
engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this
document or any of its contents.

                                  NO OFFER IN THE UNITED STATES

The rights and the securities of the Company have not been and will not be registered under the United States
Securities Act of 1933 (the ―Securities Act‖), or any U.S. state securities laws and may not be offered, sold,
resold or otherwise transferred within the United States of America or the territories or possessions thereof
(the ―United States‖ or ―U.S.‖) or to, or for the account or benefit of, ―U.S. persons‖ (as defined in
Regulation S under the Securities Act (―Regulation S‖)), except in a transaction exempt from the registration
requirements of the Securities Act. The rights referred to in this Letter of Offer are being offered in India, but
not in the United States. The offering to which this Letter of Offer relates is not, and under no circumstances
is to be construed as, an offering of any Equity Shares or rights for sale in the United States or as a
solicitation therein of an offer to buy any of the said Equity Shares or rights. Accordingly, the Letter of Offer
and the enclosed CAF should not be forwarded to or transmitted in or into the United States at any time.

Neither the Company nor any person acting on behalf of the Company will accept subscriptions or
renunciation from any person, or the agent of any person, who appears to be, or who the Company or any
person acting on behalf of the Company has reason to believe is, either a ―U.S. person‖ (as defined in
Regulation S) or otherwise in the United States when the buy order is made. Envelopes containing a CAF
should not be postmarked in the United States or otherwise dispatched from the United States or any other
jurisdiction where it would be illegal to make an offer under the Letter of Offer, and all persons subscribing
for the Equity Shares and wishing to hold such Equity Shares in registered form must provide an address for
registration of the Equity Shares in India. The Company is making this issue of Equity Shares on a rights
basis to Equity Shareholders of the Company and the Letter of Offer and CAF will be dispatched to Equity
Shareholders who have an Indian address. Any person who acquires rights and the Equity Shares will be
deemed to have declared, represented, warranted and agreed, (i) that it is not and that at the time of
subscribing for the Equity Shares or the Rights Entitlements, it will not be, in the United States when the buy
order is made, (ii) it is not a ―U.S. person‖ (as defined in Regulation S), and does not have a registered
address (and is not otherwise located) in the United States, and (iii) is authorised to acquire the rights and the
Equity Shares in compliance with all applicable laws and regulations.

The Company reserves the right to treat as invalid any CAF which: (i) does not include the certification set
out in the CAF to the effect that the subscriber is not a ―U.S. person‖ (as defined in Regulation S), and does
not have a registered address (and is not otherwise located) in the United States and is authorized to acquire
the rights and the Equity Shares in compliance with all applicable laws and regulations; (ii) appears to the
Company or its agents to have been executed in or dispatched from the United States; (iii) where a registered
Indian address is not provided; or (iv) where the Company believes that CAF is incomplete or acceptance of
such CAF may infringe applicable legal or regulatory requirements; and the Company shall not be bound to
allot or issue any Equity Shares or Rights Entitlement in respect of any such CAF.




                                                       vii
        PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA

Financial Data

Unless stated otherwise, the financial information and data in this Letter of Offer is derived from our
Company‘s financial statements which are included in this Letter of Offer and set out in the section
―Financial Information‖ on page F1. Our Company‘s fiscal year commences on April 1 and ends on March
31 of the following calendar year.

In this Letter of Offer, any discrepancies in any table between the total and the sums of the amounts listed are
due to rounding-off, and unless otherwise specified, all financial numbers in parenthesis represent negative
figures.

Our Company is an Indian listed company and prepares its financial statements in accordance with Indian
GAAP and the Companies Act. Neither the information set forth in our financial statements nor the format in
which it is presented should be viewed as comparable to information prepared in accordance with US GAAP,
IFRS or any accounting principles other than principles specified in the Indian GAAP. Indian GAAP differs
significantly in certain respects from IFRS and US GAAP. We urge you to consult your own advisors
regarding such differences and their impact on the financial data. The degree to which the financial
statements included in this Letter of Offer will provide meaningful financial information is entirely dependent
on the reader‘s familiarity with these accounting practices. Any reliance by persons not familiar with these
accounting practices on the financial disclosures presented in this Letter of Offer should accordingly be
limited.

All references to ―India‖ contained in this Letter of Offer are to the Republic of India, all references to the
―US‖ or the ―U.S.‖ or the ―USA‖, or the ―United States‖ are to the United States of America, its territories
and possessions, and all references to ―UK‖ or the ―U.K.‖ are to the United Kingdom of Great Britain and
Northern Ireland, together with its territories and possessions.

Currency and units of presentation

The Company prepares and publishes its financial statements in Indian Rupees. All references to ―Rupees‖,
―Indian Rupees‖, ―INR‖ or ―Rs.‖ are to Indian Rupees, the official currency of the Republic of India, all
references to ―US$‖ are to United States Dollars, the official currency of the United States of America, all
references to ―EURO‖ or ―€‖ are to the official currency of the European Union, and all references to ―JP¥‖
are to the official currency of Japan.

Please note:
One million is equal to                                 1,000,000 / 10 lacs
One billion is equal to                                 1,000 million / 100 crores
One lac is equal to                                     100 thousand
One crore is equal to                                   10 million / 100 lacs

Exchange Rates

Rupee and United States Dollar Exchange Rates

The following table sets forth, for the periods indicated, information with respect to the exchange rate
between the Rupee and the United States Dollar (in Rupees per United States Dollar). No representation is
made that the rupee amounts actually represent such United States Dollar amounts or could have been or
could be converted into United States Dollars at the rates indicated, any other rate or at all.

 Year ended March 31               Year/ Month End             Average               High               Low
 2005                                         43.75              44.95               46.46             43.36
 2006                                         44.61              44.28               46.33             43.30
 2007                                         43.59              45.29               46.95             43.14


                                                      viii
 Year ended March 31                       Year/ Month End              Average    High               Low
 2008                                                 39.97               40.24    43.15             39.27
 2009                                                 50.95               45.91    52.06             39.89

 Month
 April, 2009                                               50.22          50.06    50.53             49.49
 May, 2009                                                 47.29          48.53    49.83             47.19
 June, 2009                                                47.87          47.77    48.91             46.84
 July, 2009                                                48.16          48.48    49.40             47.79
 August, 2009                                              48.88          48.34    48.98             47.54
 September, 2009                                           48.04          48.44    49.06             47.96
 October, 2009                                             46.96          46.72    47.86             45.91
 November, 2009                                            46.48          46.57    47.13             46.09
 December, 2009                                            46.68          46.63    46.85             46.22
 January, 2010                                             46.37          45.96    46.65             45.36
(Source: Reserve Bank of India – http:// www.rbi.org.in)

Rupee and Japanese Yen Exchange Rates

The following table sets forth, for the periods indicated, information with respect to the exchange rate
between the Rupee and the Japanese Yen (in Rupees per 100 Japanese Yen). No representation is made that
the rupee amounts actually represent such Japanese Yen amounts or could have been or could be converted
into Japanese Yen at the rates indicated, any other rate or at all.

 Year ended March 31                       Year/ Month End              Average    High               Low
 2005                                                 40.84               41.82    43.79             39.56
 2006                                                 38.01               39.13    41.60             36.91
 2007                                                 37.00               38.80    41.54             36.27
 2008                                                 40.08               35.29    41.90             32.69
 2009                                                 51.87               46.03    55.58             38.15

 Month
 April, 2009                                               51.85          50.82    52.63             49.58
 May, 2009                                                 48.89          50.23    52.09             48.89
 June, 2009                                                50.01          49.48    51.46             48.12
 July, 2009                                                50.57          51.33    53.56             49.47
 August, 2009                                              52.70          50.96    52.70             49.16
 September, 2009                                           53.35          52.88    53.75             52.30
 October, 2009                                             51.63          51.76    53.16             50.57
 November, 2009                                            53.89          52.28    54.38             51.46
 December, 2009                                            50.51          52.05    53.20             50.51
 January, 2010                                             51.59          50.31    51.83             49.07
(Source: Reserve Bank of India - http://www.rbi.org.in)

Industry and Market Data

Unless stated otherwise, industry, demographic and market data used throughout this Letter of Offer has been
obtained from industry publications, data on websites maintained by private and public entities, data
appearing in reports by market research firms and other publicly available information. These resources
generally state that the information contained therein has been obtained from sources believed to be reliable
but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Such data
involves risks, uncertainties and numerous assumptions and is subject to change based upon various factors,
including those discussed in the section titled ―Risk Factors‖ on page xi. Accordingly, investment decisions
should not be based upon such information.




                                                                   ix
                                  FORWARD LOOKING STATEMENTS

All statements contained in this Letter of Offer that are not statements of historical fact constitute ‗forward
looking statements‘. Readers can identify forward-looking statements by terminology such as ―may‖ ―will‖,
―aim‖, ―is likely to result‖, ―believe‖, ―expect‖, ―will continue‖, ―anticipate‖, ―estimate‖, ―intend‖, ―plan‖,
―contemplate‖, ―seek to‖, ―future‖, ―objective‖, ―goal‖, ―project‖, ―should‖, ―will pursue‖ and similar
expressions or variations of such expressions. Similarly, statements that describe the Company‘s strategies,
objectives, plans or goals are also forward looking statements.

All forward looking statements (whether made by the Company or any third party) are subject to risks,
uncertainties and assumptions about the Company that could cause actual results to differ materially from
those contemplated by the relevant forward looking statement. Important factors that could cause actual
results to differ materially from the Company‘s expectations include but are not limited to:

      general economic conditions;
      currency and exchange rate fluctuations;
      our ability to compete successfully;
      our ability to satisfy changing customer demands;
      our ability to successfully expand into new segments and geographies;
      our ability to address risks relating to product liability, warrants and recall costs; and
      our ability to reduce our cost of production and increase our operational efficiency.

For a further discussion of factors that could cause the Company‘s actual results to differ, see the sections
titled ―Risk Factors‖ and ―Our Business‖ on pages xi and 42, respectively. By their nature, certain market
risk disclosures are only estimates and could be materially different from what actually occurs in the future.
As a result, actual future gains or losses could materially differ from those that have been estimated. Neither
the Company nor the Lead Manager nor any of their respective affiliates or advisors have any obligation to
update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect
the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In
accordance with the SEBI / Stock Exchanges requirements, the Company and Lead Manager will ensure that
Investors in India are informed of material developments until the time of the grant of listing and trading
permission by the Stock Exchanges.




                                                        x
                                          SECTION II – RISK FACTORS

An investment in equity and equity related securities involves a high degree of risk and you should not invest
any funds in this Issue unless you can afford to take the risk of losing your investment. You should carefully
consider all of the information in this Letter of Offer, including the risks and uncertainties described below,
before making an investment. If any of the following risks, or other risks that are not currently known or are
now deemed immaterial, actually occur, our business, financial condition and results of operations could
suffer, the trading price of the Securities could decline and you may lose all or part of your investment. The
financial and other implications or material impact of risks concerned, wherever quantifiable, have been
disclosed in the risk factors mentioned below. However, there are some risk factors where the impact is not
quantifiable and hence has not been disclosed below. The ordering of the risk factors is intended to facilitate
ease of reading and reference and does not in any manner indicate the importance of one risk factor over
another.

This Letter of Offer contains forward-looking statements that involve risks and uncertainties. The Company’s
actual results could differ materially from those anticipated in these forward-looking statements as a result of
certain factors, including the considerations described below and elsewhere in this Letter of Offer.

You are advised to read the following risk factors carefully before making an investment in the Securities
offered in this Issue. You must rely on your own examination of the Company and this Issue, including the
risks and uncertainties involved. The Equity Shares have not been recommended or approved by the SEBI nor
does the SEBI guarantee the accuracy or adequacy of this Letter of Offer.

Internal Risk Factors

1.         There are certain criminal proceedings against the Company, our Managing Director, one of our
           Directors and certain employees of our Company and there can be no assurance that these matters
           will be decided favourably and if determined adversely may impact our business and results of
           operations.

           The following table summarizes the criminal litigation against our Company, Managing Director,
           Directors and employees:

      S              Parties              Nature of       Applicable sections     Number of        Aggregate
     No.            Involved              criminal          under which the       Litigation         amount
                                          litigation      litigation is ongoing                     involved
                                                                                                  (Rs. in lacs )
     1.       Company,      Managing   Violation of the           406                 1          Not
              Director, Director and   I.P.C                                                     ascertainable
              employees
     2.       Managing Director and    Violation of the    383, 384, 403, 406,        1          Not
              employees                I.P.C               409, 415, 418, 419,                   ascertainable
                                                              420 and 506
     3.       Our employee             Violation of the      302 and 120-B            1          Not
                                       I.P.C                                                     ascertainable
 Total                                                                                           Not
                                                                                                 ascertainable

           Details of the criminal litigation involving our Company, Managing Director and one of our Directors
           are provided below:

           Criminal proceeding against our Company, Managing Director, Director and employees

           A criminal complaint has been filed by Sankalp Motors Private Limited against our Company, Mr. Yash
           Mahajan, our Managing Director, Mr. Harkirat Singh, a Director of our Company and Mr, Gopal
           Bansal, Mr. S.C. Ghosh and Mr. Sanjay Jha, our employees before the Judicial Magistrate, Alipore

                                                          xi
     (―JMA‖), alleging criminal breach of trust, cheating, criminal conspiracy and non-settlement of claims
     amounting to Rs. 11.76 lacs. The matter was instituted under Sections 406, 420 and 120-B of the Indian
     Penal Code, 1860 (―I.P.C‖). The JMA by an order dated June 19, 2008, did not take cognizance of the
     allegations under Sections 420 and 120-B of the I.P.C but issued process for criminal breach of trust
     under Section 406 of the I.P.C. Further, our Company filed a quashing petition against the order of the
     JMA, before the High Court at Kolkata (―Kolkata HC‖) and by an order dated September 18, 2008, the
     Kolkata HC has stayed the proceedings before the JMA.

     Criminal proceeding against our Managing Director and employees of the Company

     A criminal complaint was filed by Mr. Vijay Pal Adhana against Mr. Yash Mahajan, our Managing
     Director and Mr. K.B Prasad, Mr. Naval Sharma and Mr. Jasmeet Singh, our employees of the Company
     before the Judicial Magistrate, Palwal (―JMP‖) alleging that our Company misused the cheques
     amounting to Rs. 86.20 lacs, which were issued by him as security against certain vehicles sold to him.
     The matter was instituted under Sections 383, 384, 403, 406, 409, 415, 418, 419, 420 and 506 of the
     I.P.C. The Deputy Superintendent of Police (―DSP‖), Palwal conducted an inquiry and furnished a
     report stating that the complainant owed our Company Rs. 269.00 lacs and had issued post-dated
     cheques which were dishonoured due to unavailability of funds. Pursuant to the report, the JMP by an
     order dated September 1, 2008, issued summoning order against certain of our officials. Our Company
     had filed a quashing petition on behalf of our Managing Director and Mr. K.B Prasad before the Punjab
     and Haryana High Court (―P&H HC‖). The P&H HC has, by an order dated February 12, 2009, stayed
     further proceeding before the JMP. In addition, an anticipatory bail application was filed by our
     Company on behalf of Mr. Jasmeet Singh and Naval Sharma, which was admitted and allowed by the
     P&H HC by an order dated December 2, 2008.

     Criminal proceeding against our employee

     Under Sections 302 and 120-B of the I.P.C, Ms. Malti alleged that Mr. Pradeep Sharma, zonal manager
     of our Company and others had murdered her son. The police registered a case against the accused and a
     bail application was filed by our employee before the Sessions Judge, Barabanki, which was dismissed
     by an order dated January 31, 2009. Aggrieved by the order of the Sessions Judge, Barabanki, our
     employee filed another bail application before the High Court and was granted bail by an order dated
     February 17, 2009. The matter is currently pending before the Session Judge, Barabanki.

     Any adverse order in relation to the aforementioned criminal litigation could have could have an adverse
     effect on our Company‘s business and results of operations. For further details of the criminal litigation,
     please see the section titled ―Outstanding Litigation and Defaults – Litigation against our Company –
     Criminal Cases‖ on page 84.

2.   We have incurred negative cash flows in Fiscal 2009

     In Fiscal 2009, we incurred negative cash flow from our operating activities of Rs. 2,614.02 lacs though
     we generated a profit after tax of Rs. 478.76 lacs. The negative cash flows for Fiscal 2009 were on
     account of increase in inventory and working capital requirements. For further details, please see the
     section titled ―Financial Information – Auditors’ Report and Audited Financial Statements for the
     year ended March 31, 2009‖ on page F30.

3.   Our statutory auditors have qualified their audit report on our financial statements.

     The financial statement of our Company includes the notes explaining that through issue of excise
     notification no. 11/95 dated March 16, 1995, the Government sought to lapse Rs. 488.00 lacs out of
     MODVAT Credit Receivable balance as on March 16, 1995. Petition by the Company and others with
     the Delhi High Court challenging the said notification on grounds of law and equity was allowed by the
     Supreme Court by an order dated January 28, 1999. The Finance Act, 1999 (the ―Finance Act‖), has,
     however, brought in retrospective amendment w.e.f. March 16, 1995 in the Central Excise Act,
     empowering the Central Government to lapse such MODVAT. On legal advice obtained by the Company

                                                      xii
     to seek redressal against the action of the Government, the Company has filed a writ petition before the
     Delhi High Court on the ground that the Government action violates the doctrine of promissory estoppels
     / expectation principle besides other grounds. The Court has already admitted the petition. Accordingly,
     pending Company‘s petition and decision thereupon, the amount of Rs. 488.00 lacs though adjusted in
     excise records has not been provided in the books of account. For further details, please see the section
     titled ―Financial Information – Auditor’s Report and Audited Financial Statements for the year ended
     March 31, 2009‖ and ―Financial Information – Limited Review Report and Financial Statements for
     the six months ended September 30, 2009‖ on pages F1 and F32, respectively.

4.   Our Company is involved in certain litigation proceedings and we cannot assure you that we will
     succeed in these actions.

     There are outstanding litigation involving our Company, pending at different levels of adjudication
     before different judicial fora, including high courts, district courts and tax tribunals. Should any new
     developments arise, such as a change in Indian law or rulings against our Company by appellate courts
     or tribunals, our Company may need to make provisions in its financial statements, which could
     adversely affect its business results. Furthermore, if the verdict in such litigation is unfavorable to our
     Company and if we are required to pay all or a portion of the disputed amounts, there could be a
     material adverse effect on our Company‘s business and profitability. The details of the litigation
     involving our Company, as on February 23, 2010, are detailed as under:

     Cases against our Company


                   Category                    Number of Litigation             Aggregate amount involved
                                                                                      (Rs. in lacs )
       Income tax                                        5                                             245.31
       Excise and service tax                            17                                            135.70
       Sales tax                                         7                                             266.85
       Civil                                             10                                             11.84
       Consumer                                          27                                            205.18
       Labour                                            7                                              10.20
       Total                                             73                                            875.08

     For further details of the matters against the Company, please see the section titled ―Outstanding
     Litigation and Defaults – Litigation against our Company‖ on page 84.

5.   We are dependent on a limited number of vendors for the supply of critical components and raw
     materials used in the manufacture of our products and any disruption in our supply chain may
     adversely affect our sales and results of operations.

     We depend on external vendors for the supply of components, assemblies, aggregates and certain raw
     materials used in the manufacture of our products. As on December 31, 2009, we were procuring raw
     materials and components from 382 vendors. Further, we are dependent on a limited number of 10
     vendors, which include Merritor, HVS (India) Limited and Axles India Limited for certain types of
     axles, GNA Udyog Limited for propeller shafts, ZF for power steering systems, Bosch for fuel injection
     systems, Punjab Tractors Limited for transmission gears and Valeo Clutch Limited and Ceekay Daikan
     Limited for clutches and on Swaraj Engines Limited for certain engine components. Furthermore, for
     our non-air conditioned buses, the bus body, which is mounted on our chassis, is sourced from two (2)
     third party vendors, JCBL Limited and Sita Singh & Sons, and the cargo boxes, used in our trucks, are
     sourced from a single vendor, JCBL Limited. For details of our top three (3) vendors, please see the
     section titled ―Our Business – Raw Materials and Components‖ on page 55.

     We collaborate closely with many of our vendors in order to secure a reliable supply of raw materials
     and components. However, failure by our vendors to adhere to the technical specifications, quality
     requirements, and production and delivery schedules could disrupt our manufacturing process.

                                                      xiii
     Furthermore, some components used in our vehicles are available only from a single vendors and cannot
     be quickly or inexpensively re-sourced to another vendor due to long lead times and new contractual
     commitments that may be required by another supplier in order to provide the components or materials.
     For example, the front axle and fuel injector used in our CVs is supplied only by Bharat Forge and
     Bosch, respectively. In November 2009, we experienced supply disruptions in procuring the fuel
     injection system as a result of certain damage caused at the Bosch facilities at Jaipur due to a fire in the
     nearby Indian Oil Corporation depot. Due to the work stoppages and resulting unavailability of fuel
     injection pumps, we had to switch production from diesel vehicles to CNG vehicles as such vehicles do
     not require fuel injection pumps and the dispatch of our Euro II and III diesel vehicles was delayed.
     Similarly in October 2009, we experienced a delay in the supply of certain types of tyres from the plant
     of J.K. Tyres in Kankroli resulting from work stoppages, which cased a delay in the dispatch of our
     vehicles to our customers.

     In addition, as compared to some of our competitors, our volumes are not large enough for the vendors
     to set a dedicated manufacturing unit for us. This, as a result, can impact the regular supply of some of
     the key components. Any significant problems with our supply chain in the future could affect our
     results of operations in an adverse manner.

6.   Our expansion project at the Nawanshahar plant may not be completed, in the timeframe or at cost
     levels originally anticipated, and may not achieve the intended economic results.

     In Fiscal 2007, we commenced our expansion project consisting of the establishment of a second vehicle
     manufacturing facility and a new in-house bus body facility at our Nawanshahar plant. The expansion
     project is being undertaken in two (2) phases. While we are in advanced stages of implementing the first
     phase of the expansion project and both facilities have become operational in Fiscal 2009, the second
     phase is likely to commence in Fiscal 2012. For details of the schedule of implementation, please see the
     section titled ―Objects of the Issue – Expansion Project at our Company’s Nawanshahar plant –
     Schedule of Implementation‖ on page 23.

     This expansion project and any other future projects could be delayed by failure to receive regulatory
     approvals, political unrest, technical difficulties, human, technological or other resource constraints, or
     for other unforeseen reasons, events or circumstances. These projects may incur significant cost
     overruns and may not be completed on time or at all. Any delays in land development and construction
     or difficulties in obtaining timely supply of design, technology and know-how, and plant, machinery and
     equipments may adversely affect the implementation of the expansion project. In addition, as a
     consequence of project delays, cost overruns, changes or lack of demand for our products or for other
     reasons, we may not achieve the economic benefits expected of the expansion project and our failure to
     obtain expected economic benefits could adversely affect our business, financial condition and results of
     operations.

7.   We rely on technology transfers from Isuzu to continue to improve our products and our inability to
     renew our technology transfer agreements with Isuzu or to enter into similar agreements with other
     parties will adversely affect our business.

     We have entered into technical assistance agreements with Isuzu for the manufacture of buses and trucks
     in the M&HCV segment, thereby allowing us to widen our product portfolio. Currently, our luxury air-
     conditioned buses in the M&HCV segment are being developed on the Isuzu chassis. Our technical
     assistance agreements with Isuzu are valid until December 31, 2012, and these technical assistance
     agreements may be automatically renewed for a further period of one year, however, there can be no
     assurance that Isuzu will elect to renew these agreements and they might decide to terminate the
     agreements. We can provide no assurance that we will continue to be able to enter into similar
     agreements in the future with Isuzu or with other companies, or otherwise obtain transfers of technology
     to continue to broaden our product portfolio, on terms favourable to us or at all, which may have an
     adverse effect on our business, financial condition and results of operations.




                                                      xiv
8.   We import engines and transmission from Isuzu to manufacture products on the Isuzu chassis and
     any disruption in supply or our inability to import such critical components from Isuzu at favorable
     terms, or at all, will adversely affect our business.

     Pursuant to our technology transfer agreements, we import engines and transmission from Isuzu to
     manufacture products on the Isuzu chassis. Currently, our luxury air-conditioned buses in the M&HCV
     segment are being developed on the Isuzu chassis. Any interruption in the import or supply of engines or
     transmission from Isuzu, or any defects in such components, will have an adverse effect on production at
     our manufacturing facility and thus adversely affect our business. Further, there can be no assurance that
     Isuzu will elect to renew these agreements or that we will be able to import critical components from
     Isuzu at favourable terms, or at all, in the future.

9.   We may continue to be controlled by our Promoter, who by virtue of their aggregate shareholding
     collectively own a substantial portion of our issued Equity Shares, as a result of which, the remaining
     shareholders may not be able to affect the outcome of shareholder voting.

     As on the date of this Letter of Offer, our Promoter shareholding stands at 53.52%. Our Promoter will
     continue to own a substantial portion of our issued Equity Shares. Further, our Promoter has also
     undertaken to subscribe to the unsubscribed portion, if any, of this Issue. Consequently, the collective
     holding of our Promoter may increase above its current holding which may result in our Promoter and
     group companies being in a position to influence the result of the shareholders voting and may enable
     them to take actions that may conflict with the interests of some of our shareholders.

10. We have certain contingent liabilities not provided for which may adversely affect our financial
    condition.

     The following table sets forth our contingent liabilities as of the dates indicated:

                                                                                                         (Rs. in lacs)
       Particulars                     As on September 30,       As on March 31, 2009       As on March 31, 2008
                                              2009
       1.  Claims against the
           Company not
           acknowledged as debts:
                 Sales Tax Cases                       250.92                    252.89                   248.23
                 Excise Cases                          203.76                    178.18                   171.40
                 Income Tax Cases                      188.82                    192.25                   276.21
                 Civil Cases                            10.25                     18.86                    12.70
           Total                                      653.75                    642.18                   708.54
       2. Bank Guarantee                             1,270.48                  1,006.38                   331.94
       3. Letter of Credit                           1,005.94                  1,358.31                 2,681.07
       4. Capital Commitment (Net                    1,812.11                    443.71                   240.00
           of Advances)
       Total (1 + 2 + 3 + 4)                         4,742.28                  3,450.58                 3,961.55

     For further details see the sections titled ―Financial Information – Auditors’ Report and Audited
     Financial Statements for the year ended March 31, 2009‖, ―Financial Information – Limited Review
     Report and Financial Statements for the six months ended September 30, 2009‖ and ―Outstanding
     Litigation and Defaults – Contingent liabilities not provided for as on March 31, 2008, March 31,
     2009 and September 30, 2009‖ on pages F19, F45 and 84, respectively. To the extent that any of these
     or future contingent liabilities become actual liabilities, it would adversely affect our results of
     operations and financial condition.

11. We do not own intellectual property rights to certain of products and our brand name, and any failure
    to enforce our rights could have an adverse effect on our business prospects



                                                        xv
     Our products are sold under the marks ―Swaraj Mazda‖ and ―Isuzu‖. We do not own intellectual
     property rights relating to certain of our products. We have the right to use the name / trademark
     ―Swaraj‖ in our corporate name and branding of our commercial vehicles and spare parts until January
     6, 2011. Subsequently, we have to completely discontinue using the name / trademark Swaraj in any
     form or combination in our corporate name and branding the commercial vehicles and spare parts
     manufactured by our Company. Further, under the joint venture agreement entered into between our
     Company, Punjab Tractors Limited (―PTL‖), Mazda Corporation (―Mazda‖) and Sumitomo
     Corporation (―Sumitomo‖), our Company has been given the right to use the Mazda name in the name
     of our Company. The said joint venture agreement has been terminated pursuant to Mazda and PTL
     ceasing to be shareholders in our Company. Our Company has been using the brand name ―Mazda‖ in
     good faith. However, we cannot assure you that we will be able to continue to use the brand name
     ―Mazda‖ in the future and we may be refrained from using the brand name ―Mazda‖.

     In such a situation, we cannot assure you that we will be able to enforce our rights if any person or
     company uses our brand name to promote his / their products. If we are not ultimately successful in
     enforcing our rights with respect to our brand name and our products for any reason, we may experience
     a material adverse effect on our competitive position and our business.

12. We intend to utilize a part of the net proceeds of the Issue towards financing our ongoing Expansion
    Project at our Nawanshahar plant and we may not be able to effectively utilize our increased
    production capacity pursuant the Expansion Project, which may adversely effect our results of
    operations.

     We intend to utilize the Rs. 1,800.00 lacs of the net proceeds of the Issue towards financing Phase I of
     our ongoing expansion project at our Nawanshahar plan (―Expansion Project‖) and Rs. 5,000.00 lacs of
     the net proceeds of the Issue towards the repayment of loan taken from Allahabad Bank in relation to the
     Expansion Project. For details of our Expansion Project, please see the section titled ―Objects of the
     Issue – Expansion Project at our Company’s Nawanshahar plant‖ on page 18.

     In Fiscal 2008 our installed capacity was 12,000 units per annum and our capacity utilization was
     93.68%. Consequent to the establishment of a second vehicle manufacturing facility and a new in-house
     bus body facility under Phase I of our Expansion Project during the end of Fiscal 2009, our installed
     capacity increased to 18,000 units per annum and our capacity utilization for Fiscal 2009 declined to
     45.36% compared to 93.68% in Fiscal 2008. The decline was primarily on account of an overall industry
     decline in demand for commercial vehicles during Fiscal 2009 as well as expansion in capacity during
     the end of Fiscal 2009 due to which the production from the newly established facilities was not
     reflected for the entire year. For further details, please see the section titled ―Our Business – Our Plant
     - Capacity and Capacity Utilisation‖ on page 54.

     Pursuant to the Expansion Project, our production capacity is expected to increase to 24,000 units per
     annum. Consequent to an increase in our production capacity due to our Expansion Project, our capacity
     utilization may further decline on account of, among other things, a fall or stagnation in demand for our
     commercial vehicles due to worsening general economic conditions and tightening in the availability of
     finance, poor customer response to our vehicles and disruption in production. Such an impact on our
     capacity utilization may adversely effect our results of operations.

13. General economic conditions including the availability of financing to customers have had and could
    continue to have an adverse effect on our business, financial condition and results of operations.

     Similar to the rest of the commercial vehicles (―CV‖) manufacturing industry, we are substantially
     affected by general economic conditions in India, which is our principal market. The demand for CVs in
     the Indian market is influenced by factors including the growth rate of the Indian economy, availability
     of credit, interest rates, freight rates and fuel prices. Furthermore, spending on public transport and
     economic activity in sectors such as healthcare, education and defence, impacts the demand for CVs,
     specifically passenger carriers. Any adverse change in interest rates, inflation and / or fuel prices could
     impact general economic conditions in India and could lead to a further decline in the demand for CVs

                                                      xvi
     in the Indian market, which could affect our sales and future results of operations in an adverse manner.
     In addition, tightening of credit markets may adversely impact our customer‘s ability to finance the
     purchase of new CVs or our supplier‘s ability to provide us with raw materials and components. More
     recently, adverse changes in economic factors, including slowdown in industrial production, increase in
     fuel prices, higher inflation in the first half of Fiscal 2009, reduction in availability of vehicle financing,
     and higher interest rates, have impacted the demand for CVs. As a result, our sales were significantly
     impacted in Fiscal 2009, and there can be no assurance that the Indian economy will not experience a
     downturn and a further weakening of economic activity.

     Additionally, the global financial markets in the recent past have experienced a period of unprecedented
     turmoil, including the bankruptcy, restructuring or sale of certain financial institutions. Indian markets
     have also experienced the contagion effect of the global financial turmoil. As a result of the downturn in
     the Indian and global economy, and the turmoil in the financial markets, financing for CVs had become
     more difficult to obtain for our customers. Furthermore, interest rates in India had also risen thereby
     increasing the cost of such financing. The Prime Lending Rate for the public sector banks in the last
     week of September 2008 was between 13.75% to 14.00% (Source: Reserve Bank of India’s bulletin
     dated November 12, 2008, available on http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx). We can
     give no assurance as to when financing will be readily available for CV products from third party
     sources or when the interest rates in India will be materially reduced. The absence of reasonable and
     more readily available finance for our CVs could adversely affect our sales, financial condition and
     results of operations.

     Furthermore, any downgrade in the sovereign debt rating of India for domestic and international debt by
     international rating agencies may adversely impact our ability to raise additional financing and the
     interest rates and commercial terms on which such additional financing is available, which could have a
     material adverse effect on our results of operations and financial condition.

14. We face significant competition which could adversely affect our sales and results of operations.

     The Indian CV industry is highly competitive. We face strong competition from domestic manufacturers
     as well as foreign CV manufacturers who are increasing their presence by establishing joint ventures
     with local partners. These tie-ups and joint ventures are expected to change the dynamics of the CV
     industry leading to increased competition and accelerated product development. International players
     bring with them decades of international experience, global scale, advanced technology and significant
     financial resources. Furthermore, new or existing competitors may exert pricing pressures on some or all
     of our product segments and /or offer vehicles with improved features and services. Competition in the
     CV market is likely to further intensify and there can be no assurance that we will be able to implement
     our future strategies in a way that will mitigate the effects of increased competition. Our ability to
     maintain our competitiveness will be fundamental to our future success in existing and new markets and
     if we are unable to compete successfully, our market share may decline, materially adversely affecting
     our results of operations and financial condition. For further details regarding our competitors, including
     the market share of the Company, please see the section titled ―Our Business – Competition‖ on page
     57.

15. Unavailability of and increase in the cost of raw materials and components may have a material
    adverse effect on our results of operations and financial condition.

     In Fiscal 2009, expenditures on raw materials and components represented 98.43% of our manufacturing
     cost. The principal components required for the manufacture of CVs are made out of raw materials
     including forging steel, cast iron, steel sheets and plates, non-ferrous material like aluminium and
     copper, rubber and plastics. Our business is subject to the risk of price increases and periodic delays in
     delivery of raw materials. Further, the costs at which we procure certain of our raw materials and inputs
     may be impacted due to an increase in the prices of the relevant commodities. If the cost of raw
     materials rise, or if we are unable to recover these costs through cost saving measures or are not able to
     pass on all the cost increases to our customers through higher prices, our results of operations and
     financial condition could be adversely affected. Furthermore, because of intense price competition and

                                                       xvii
     fixed costs, we may not be able to adequately address changes in input prices even if they are
     foreseeable.

16. Our future success depends on our ability to satisfy changing customer demands by offering
    innovative, competitive and technologically advanced products.

     The CV market in India is highly competitive and we face challenges in ensuring that our new and
     existing models appeal to our customers. Our competitors may gain significant advantage if they are
     able to offer products satisfying customer needs earlier or better than we are able to, which could
     adversely affect our sales and results of operations. We are also subject to the risks generally associated
     with new product introductions, including lack of market acceptance and delays in product
     development. There can be no assurance that customers will be receptive to our products and related
     technologies in the future or that the market acceptance of our products will meet our expectations, in
     which case we will be unable to realize the intended economic benefit of our investments and our
     financial condition and results of operations could be adversely affected.

17. We are subject to risks associated with expansion into new segments and markets.

     We have adopted a number of growth strategies to expand our CV business, including the expansion of
     our product offerings, and further enhancement of our distribution network and customer base. As a
     consequence of our recent technical assistance agreement with Isuzu Motors Limited (―Isuzu‖), we have
     forayed into manufacture of luxury air-conditioned buses in the Medium and Heavy Commercial
     Vehicles (―M&HCV‖) segment. Similarly, increasing our presence across India by expanding our
     dealer network in the relevant states and enhancing our customer base is one of the principal elements of
     our growth strategy. Presently, our marketing operations are spread across India through a network of 89
     dealers as on December 31, 2009 and for further details regarding our dealer network, please refer to the
     section titled ―Our Business – Sale and Distribution of Vehicles‖ on page 48. These strategies involve
     certain risks and uncertainties, and we can provide no assurance that we will be able to implement these
     strategies successfully, on schedule or within budget, if at all. The costs involved in entering and
     establishing ourselves in new segments and markets that we are not familiar with, and expanding our
     operations into such segments and markets may be higher than expected. Our products may not be
     accepted or we may not be successful in capturing market share in any of new product segment / market
     that we enter into which could adversely impact our results of operations. Furthermore, if market
     conditions further deteriorate or if operations do not generate sufficient funds, we may decide to delay or
     cancel some aspects of our growth strategies which may materially and adversely affect our growth
     prospects and future results of operations.

18. We rely on our distribution network for marketing, sale and distribution of our products and
    underperformance of our distribution network may adversely affect our sales and results of
    operations.

     Our products are sold and serviced through a network of dealers and authorised service centres across
     India and we rely on these networks of authorized dealers for marketing, sale and distribution of our
     products and providing after sales service. We believe that we exercise due diligence in appointing our
     authorised dealers and provide them with adequate support so that they perform to our expectations.
     However, there can be no assurance that our expectations will be met and any failure on part of our
     authorised dealers in performing their functions and providing high quality service to customers could
     adversely affect our reputation, sales and results of operations. Furthermore, there can also be no
     assurance that our current dealers will continue to do business with us or we will be able to attract
     additional dealers to our network. We do not enter into long-term agreements with our dealers and our
     dealers are under no obligation to continue their association with us. If we do not succeed in maintaining
     the stability of our distribution network and attracting additional high-quality dealers to our distribution
     network, our market share may decline, which may affect the results of our operations and financial
     condition.



                                                     xviii
19. The loss or shutdown of operations at any of our manufacturing facilities or any accidents or
    damages to our manufacturing equipment, plant and machinery or information technology systems
    may have a material adverse effect on our business, financial condition and results of operations.

     Our plant is located at village Asron, Nawanshahar, Punjab and we have three (3) manufacturing
     facilities at this plant. These manufacturing facilities are subject to operating risks, such as the
     breakdown or accidents or failure of equipment, power supply or processes, performance below
     expected levels of output or efficiency, obsolescence, labour disputes, strikes, lock-outs, natural
     disasters and industrial accidents. Our manufacturing facilities are also subject to operating risk arising
     from compliance with the directives of relevant government authorities. The occurrence of any of these
     risks could significantly affect our operations by causing production to shut down or slow down.

     Furthermore, we are dependent on our information technology systems for managing key business
     processes such as product design and development, customer and dealer management, transaction
     processing, accounting and production. Any failure in our information technology systems may
     adversely impact our ability to manufacture our products, manage our dealers and provide service to our
     customers, any of which may have a material adverse effect on our reputation, business, financial
     condition and results of operations.

20. Our business is cyclical in nature and a substantial decrease in our sales during certain quarters
    could have a material adverse impact on our financial performance.

     Sale volumes of our passenger vehicle vehicles are cyclical in nature. Sales of our passenger carrier
     vehicles used in schools are at peak during the period March to August of each year as during these
     months, educational institutions mostly conclude their annual procurement of buses. Also our sales to
     government departments, both Central and State, are seasonal in nature as most of the government
     departments complete their procurements against budgetary allocation before March 31 each fiscal year.
     As a result, our financial results for one quarter are not necessarily indicative of the results to be
     expected for any other period.

21. We are subject to risks of assuming product liability, warranty and recall costs which may adversely
    affect our results of operations and financial condition.

     We are subject to risks and costs associated with product liability, warranty and recall should we supply
     defective products, components, parts, or related after-sales services, which could generate adverse
     publicity and adversely affect our business, results of operations and financial condition. If any of our
     products are found to be defective, we may be required to undertake corrective actions or recall our
     products. Further, any defect in our products or after-sales services provided by authorized dealers or
     third parties could also result in customer claims for damages. Such actions and claims could require us
     to expend considerable resources in correcting these problems and could adversely affect demand for
     our products. Furthermore, defects in our products or spare parts may be covered under warranties
     provided by us. Additionally, defective product complaints may also cause damage to our brand name
     and may affect our reputation and brand image.

22. Our success is largely dependent on our ability to recruit, train and retain qualified employees.

     We depend on our ability to attract, retain and motivate highly skilled and qualified employees. As on
     December 31, 2009, we had a total of 950 full time employees (including trainees) consisting of 377
     employees in the management cadre, 92 employees in the junior management cadre, 24 support staff and
     457 workers. In addition to our full-time employees, we hire contract workers from time to time, to
     assist us in various aspects of our business and as on December 31, 2009, we had a total of 295 contract
     workers. For further details regarding our employees, please see the section titled ―Our Business –
     Employees‖ on page 56. An increasing attrition level amongst such people and our inability to attract,
     hire, train and retain employees could have a material adverse effect on our business and operation.



                                                      xix
23. Cost of compliance with safety or emission standards relating to our products or our manufacturing
    facilities, or other environmental and governmental regulation, may adversely affect our business and
    results of operations.

     As a CV manufacturing company, we are subjected to extensive governmental regulations regarding
     vehicle emission levels, noise, safety and levels of pollutants generated by our production facilities.
     Also, there is significant potential that consumer demands will increasingly take into account fuel
     efficiency and emissions. These regulations in India and elsewhere are likely to become more stringent
     and the cost of complying with these regulations may be significant. While we are pursuing various
     technologies in order to meet the required standards, the costs of compliance with these required
     standards can be significant to our operations as we may have to incur substantial capital expenditure
     and research and development costs to upgrade our products and our manufacturing facilities, as a result
     of which our results of operations may be adversely affected.

24. Our future success depends on our ability to reduce our cost of production and thereby increase our
    operational efficiency and we cannot assure you that our cost reduction measures will achieve the
    planned operational efficiencies we seek.

     Reducing our cost of production is essential to our business strategy in a highly competitive market
     environment. Our cost reduction strategy focuses on, among other things, increasing the levels of
     localization for our new product introductions, improving raw material and component sourcing, vendor
     participation in cost reduction, continuing focus on sharing basic vehicle platforms among multiple
     models in order to spread development costs, and reducing selling, general and administrative costs over
     maximum models and variants. Our measures to increase our operational efficiency may not yield
     results in the future, which may adversely affect our results of operations.

25. Our indebtedness, and the conditions and restrictions imposed on us by our financing agreements
    could adversely affect our ability to conduct our business.

     As on March 31, 2009, we had Rs. 22,028.69 lacs of secured and unsecured loans. We may incur
     additional debt in the future, including as part of our expansion plans. However, we may be unable to
     obtain sufficient financing on terms satisfactory to us, or at all. Rising interest rates may make credit
     more difficult to obtain. Our level of indebtedness could have other important consequences, including
     requiring us to dedicate a portion of our operating cash flow to making periodic principal and interest
     payments on our debt thereby limiting our ability to pay dividends in the future, sell/ transfer assets or
     fund future working capital, capital expenditures, research and development, and technology processes
     and other general business requirements.

     Furthermore, some of our loan agreements set limits on and / or require us to obtain lender consents
     before, among other things, undertaking certain projects, issuing new securities, changing management,
     merging, consolidating, selling significant assets, creating subsidiaries, changing shareholding structure,
     amending any of our constitutional documents materially or making certain investments. While in the
     past our lenders have not denied such consent, there can be no assurance that we will be able to comply
     with these financial or other covenants or that we will be able to obtain the consents necessary for our
     future growth plans. An event of default under any loan agreements, including our failure to service our
     indebtedness, if not cured or waived, could have a material adverse effect on our financial condition and
     results of operations.

26. There are certain restrictive covenants under the technical assistance agreements that may affect our
    ability to conduct business.

     Under the terms of the technical assistance agreements with Isuzu, the technical information and
     information relating thereto, which is disclosed to the Company is considered to be of a confidential
     nature and the Company is not permitted to disclose, transmit, dispose or part with any portion of the
     confidential information to any third party without the prior written consent of Isuzu, except to the
     extent such confidential information is required by permitted dealers for sale or repair or by permitted

                                                      xx
     suppliers for manufacturing subject to the execution of a non-disclosure agreement with such permitted
     dealer or permitted supplier. Further, the confidential information can be used only for the assembly,
     manufacture, sale, testing and repair of the licensed vehicles and licensed components. The technology
     agreement provides that the confidentiality clause will remain in force for a period of 10 years after the
     expiration or termination of the agreement.

     The technical assistance agreement also does not grant any right, interest or title to the Company to any
     trademark, tradename, design mark, logo or any other mark of Isuzu, except to the extent of the
     Company using such trademarks on a royalty- free, non-exclusive and non-transferrable basis. Further,
     the Company cannot make any changes in the licensed vehicles or licensed components without the
     prior written consent of Isuzu. The Company and Isuzu have also expressly acknowledged that except as
     specifically licensed to our Company, Isuzu owns or has licenses to, to the exclusion of our Company,
     all rights, title and interest in the technical information, the model vehicle, model components and Isuzu
     components, as they exist now and in the future, and in related information that may be provided by
     Isuzu. Such restrictive covenants may affect our ability to conduct our business operations.

27. The financing agreement(s) executed by us in relation to the loan availed by us from Allahabad
    Bank, which is intended to be repaid out of the Net Proceeds of the Issue, imposes certain conditions
    and restrictions on us that may affect our ability to conduct our business.

    Our Company entered into a term loan agreement dated March 27, 2009 with the Allahabad Bank for a
    term loan of Rs. 6,000.00 lacs. The term loan carries an interest of 12% per annum and is repayable in
    two (2) quarterly instalments of Rs. 500.00 lacs, beginning September 2009 and five (5) quarterly
    instalments of Rs. 1,000.00 lacs, beginning March 2010. The loan is secured by a first equitable
    mortgage / hypothecation charge over the entire fixed assets of our Company, ranking pari passu with
    other lenders. Under the terms and conditions of the term loan agreement, our Company is prohibited
    from paying our Directors, guarantors or any other person standing as guarantor, any commission,
    brokerage, fees or any such payment in any other form for their having given such guarantee or
    continuing such guarantee. Our Company must also ensure that the loan / advance funds are not utilized
    for any other purpose than the purpose for which they have been obtained and that the funds are not
    diverted / siphoned for any other purpose or to any other concern or sister concern. For further details of
    the loan availed from the Allahabad Bank and other indebtedness of the Company, please see the section
    titled ―Financial Indebtedness – Details of Secured Borrowings – Term Loans‖ on page 81.

28. Our funding requirements and deployment of the net proceeds of the Issue are based on management
    estimates that may vary from actual fund requirements and may be subject to revision, cancellation or
    addition which could adversely impact the objects of the Issue, including the implementation of the
    expansion project at Nawanshahar plant.

     The fund requirements and the intended use of the net proceeds of the Issue as described in the section
     titled ―Objects of the Issue – Requirement of Funds and Use of Net Proceeds‖ on page 17 are based on
     management estimates and our current business plan, and have not been appraised by any bank or
     financial institution or other independent third party. In view of the competitive and dynamic nature of
     the CV industry, we may have to revise our expenditure and fund requirements as a result of variations
     in the cost structure, changes in estimates, exchange rate fluctuations and external factors, which may
     not be within the control of our management may entail rescheduling, revising or cancelling the planned
     expenditure and fund requirement, and increasing or decreasing the expenditure for a particular purpose
     from our planned expenditure at the discretion of our management. In addition, the estimated fund
     deployment schedule and schedule of implementation is based on management‘s current expectations
     and is subject to change due to various factors, some of which may not be in our control.

     Furthermore, the outlay in relation to our ongoing expansion project at the Nawanshahar plant in Punjab
     has been estimated based on pro forma invoices / quotations received from various parties and
     management estimates. Quotations received may undergo change as a result of, among other things,
     variations in the cost of key inputs, their validity, changes in estimates, exchange rate fluctuations and
     external factors, which may not be within the control of our management. Consequently, our actual

                                                     xxi
     procurement cost may vary from the amounts indicated. Any revision, cancellation or addition of the
     fund requirements on any of the objects of the Issue shall be effected only after obtaining necessary
     approval(s) from the shareholders of the Company or any regulatory authority, if required.

29. Increasing risks to the CV industry due to a rise in diesel fuel prices could adversely affect our sales,
    results of operations and financial condition.

     In the CV segment, fuel costs represent a significant portion of the operating cost of such vehicles. Fuel
     prices in India have historically been regulated by the government of India. However, due to a surge in
     global prices of crude oil, the retail price of petroleum based products in India, including diesel,
     increased substantially in the first half of Fiscal 2009. Though there has been stabilization in prices, any
     substantial increase in the price of diesel in the future may adversely affect the competitiveness of diesel
     fuel powered vehicles as compared to other vehicles or other modes of transportation, which could result
     in a decrease in demand for diesel fuel powered vehicles in India, and thereby adversely affect our sales,
     business and results of operations.

30. We may be adversely affected by labour unrest.

     Our employees are represented by a labour union and are currently covered by a memorandum of
     settlement relating inter alia to wages and emoluments valid up to March 31, 2010. While, we consider
     our labour relations with our employees to be cordial, we may in future be subject to labour unrest
     which may delay or disrupt our operations and sales and distribution of our CVs. In addition, we may
     not be able to satisfactorily renegotiate the terms of the memorandum of settlement when it expires on
     March 31, 2010. If there are work stoppages or lockouts at our facilities or at the facilities of our major
     suppliers occur or continue for a long period of time, our business, financial condition or results of
     operations may be adversely affected.

31. Any further issuance of Equity Shares by us may dilute your shareholding and adversely affect the
    trading price of our Equity Shares.

     Any further issuance of a substantial number of Equity Shares by us could dilute your shareholding.
     Furthermore, Sumitomo Corporation, our Promoter, has a shareholding of 53.52%. Furthermore, our
     Promoter has also undertaken to subscribe to the unsubscribed portion, if any, of this Issue.
     Consequently, the collective holding of our Promoter may increase above its current holdings. The
     market price of the Equity Shares could be affected by sales of a large number of the Equity Shares by
     Sumitomo Corporation or another of our major shareholders or by a perception that such sales may
     occur.

     As a purchaser of the Equity Shares, you may experience dilution to your shareholding to the extent that
     we conduct future equity or convertible equity offerings. Such dilutions can adversely affect the market
     price of the Equity Shares.

32. Our insurance coverage may not be adequate to protect us against all potential losses to which we
    may be subject and this may have a material adverse effect on our business.

     While we believe that we maintain insurance coverage in amounts consistent with industry norms, there
     can be no assurance that any claim under our insurance policies will be honoured fully or timely.
     Accordingly, to the extent we suffer loss or damage that is not covered by insurance or which exceeds
     our insurance coverage, our business, financial condition and results of operations may be adversely
     affected.

33. We have entered into lease agreements in relation to 24 properties which may not be renewed and we
    may lose possession of the leased properties

     We have entered into lease agreements in relation to 24 properties, including certain of our regional /
     zonal offices and other premises. For details of properties leased by us, please see the section titled ―Our

                                                      xxii
     Business – Properties‖ on page 58. Our lease deed(s) with respect to (a) House No. 53, Sector 2,
     Panchkula, a guest house of the Company has terminated on December 31, 2009, (b) Gadhvi Farm,
     Survey No. 228/5, Pirana-Miroli Road, District Ahmedabad, Gujarat, a stockyard, has terminated on
     November 30, 2009, (c) Sandoli More, Behind Pratibha Cold Storage, Faizabad Road, Barabanki,
     Lucknow, Uttar Pradesh, a stockyard, terminated on August 30, 2008, and (d) Plot No. 633/1, Rangpuri,
     New Delhi, a stockyard, terminated on October 31, 2008. We cannot assure you that the leases for our
     properties will not expire without renewal or that the lessors of such properties will not terminate such
     leases prior to the expiry of the lease period in the event of any breach of the terms of allotment. If any
     of the leases is terminated or expires and is not renewed, we may be unable to continue operations at the
     leased site.

     Furthermore, if we enter into lease deeds or license agreements for our office premises and stock yards
     that are not adequately registered with the concerned Sub-Registrar of Assurances. Such lease deeds or
     license agreements will not be admissible as evidence in a court of law and our legal recourse based on
     these unregistered lease deeds or license agreements will be limited.

34. Currency and exchange rate fluctuations could adversely affect our results of operations

     We import a small part of capital equipment, raw materials and components, and also sell our vehicles in
     various countries outside India. These transactions are denominated in foreign currencies, primarily the
     US Dollar, Euro and the Japanese Yen. On account of fluctuations in foreign currencies we have
     experienced gains and losses on transactions denominated in foreign currencies. Furthermore, continued
     depreciation of the Indian Rupee could result in further foreign exchange losses. We have experienced
     and expect to continue to experience foreign exchange losses and gains, and there can be no assurance
     that risks arising out of fluctuations in the value of the Indian Rupee against the US Dollar, Euro and the
     Japanese Yen can be mitigated.

35. Our Promoter has equity interests in affiliated companies that manufacture products that are related
    to our business.

     Our Promoter has equity interests or other investments in other companies that manufacture products
     that are related to our business, such as Hino Motors Vietnam Limited, a company based in Vietnam
     which manufactures CVs. There may be conflicts of interest in addressing business opportunities and
     strategies in circumstances where our interests differ from other companies in which our Promoter has
     an interest.

External Risk Factors

36. Changes in policies of the Government of India (“GoI”) could adversely impact our results of
    operations and financial condition.

     Our manufacturing facilities are located in India and a substantial portion of our revenue is derived from
     sales of our products in the Indian market. Consequently, our Company itself, and the market price and
     liquidity of its shares, may be affected by policy changes in India. For example, change in export
     policies, imposition of foreign exchange controls, rising interest rates, increases in taxation or the
     creation of new regulations could have a detrimental effect on the Indian economy generally and our
     Company in particular.

     Political instability or a change in economic liberalization and deregulation policies could seriously
     harm business and economic conditions in India generally and our business in particular.

     The GoI has in recent years sought to implement economic reforms, and the current Government has
     implemented policies and undertaken initiatives that continue the economic liberalization policies
     pursued by previous governments. For example, the GoI has announced its general intention to continue
     India‘s current economic and financial sector deregulation policies and encourage infrastructure
     projects. However, the roles of the GoI and the state governments in the Indian economy as producers,

                                                     xxiii
     consumers and regulators have remained significant and there can be no assurance that liberalization
     policies will continue in the future. Any significant change in such liberalization and deregulation
     policies could adversely affect business and economic conditions in India generally and our results of
     operations and financial condition in particular. Furthermore, we are also impacted by political
     instability in the states where we operate.

     Furthermore, India‘s obligation under its World Trade Organisation Agreement could lower the present
     level of tariffs on imports of components and vehicles particularly with respect to cars in completely
     built units and/or completely knocked down units, which could adversely affect our sales and results of
     operations.

37. Delays in construction of improved roadways in India may adversely affect the demand for our
    products.

     Our business prospects are based on the assumption that new and large roadway projects in India being
     undertaken by the Government of India and various state governments will proceed according to plan.
     Improved roadways in India will not only reduce the time of travel but also costs. If these roadway
     projects are not completed as per plan or at all, the demand for our current and new vehicles may not
     achieve the level that we anticipate and, accordingly, may adversely affect our sales and results of
     operations.

38. An increase in the competitiveness of alternative modes of transport in India could adversely affect
    the demand for our products.

     The railways in India have historically offered an alternative to transport of goods by road. In the recent
     past, the railways have increasingly offered carriage of freight at competitive rates. Further, the new
     initiatives from railways such as development of dedicated freights corridors could improve the
     competitiveness of railways in the movement of freight. If the time taken by the railways to transport
     goods and/or its competitiveness further improves, our potential customers may decide to use the
     railways to transport goods from one place to the other, which may have an adverse effect on the
     demand for CVs in India.

39. Any increase in taxes and other levies imposed by the GoI or state governments in India on the
    acquisition or ownership of CVs, may have a material adverse effect on the demand for our products,
    results of operations and financial condition.

     Taxes and levies imposed by the GoI and state governments that affect our business include excise duty
     on the manufacture of CVs, custom duty on the import of raw materials, sales tax, service tax, value
     added tax, road and registration tax. These taxes and levies affect the cost of production and therefore
     the demand for our products. Any increase in the rate of these taxes and levies or the imposition of new
     taxes or levies in the future may have an adverse effect on the demand for our products and its results of
     operations. Furthermore, any restrictions or levies imposed by the GoI on the use of CVs such as
     congestion charges or other traffic control measures may adversely affect the demand for our products in
     the future.

40. Terrorist attacks or war involving India or other countries could adversely affect business sentiment
    and the financial markets and adversely affect our business.

     Terrorist attacks may adversely affect global equity markets and economic growth as well as the Indian
     economy, stock markets and our business. Such acts of violence or terrorism could have a direct
     negative impact on us or an indirect impact on us by, for example, affecting our customers, the financial
     markets or the economies in which we operate. This, in turn, could have a material adverse effect on the
     market for securities of Indian companies, including the Equity Shares. The consequences of any
     terrorist attacks are unpredictable, and we may not be able to foresee events that could have an adverse
     effect on our business.


                                                     xxiv
41. The extent and reliability of Indian infrastructure could adversely impact our results of operations
    and financial condition.

     India‘s physical infrastructure is less developed than that of many developed nations and problems with
     its port, rail and road networks, electricity grid, communication systems or any other public facility
     could disrupt our normal business activity. Any deterioration of India‘s physical infrastructure would
     harm the national economy, disrupt the transportation of goods and supplies, and add costs to doing
     business in India. These problems could interrupt our business operations, which could have a material
     adverse effect on our results of operations and financial condition.

42. If natural disasters occur in India, our results of operations and financial condition could be
    adversely affected.

     India has experienced floods, earthquakes, tsunamis, cyclones and droughts in recent years. Such natural
     catastrophes could disrupt our operations, production capabilities, distribution chains or damage our
     facilities located in India. For example, in December 2004, Southeast Asia, including the eastern coast
     of India, experienced a tsunami and in October 2005, the State of Jammu and Kashmir experienced an
     earthquake, both of which caused significant loss of life and property damage.

     Additionally, in the event of a drought, the state governments in which our facilities are located could
     cut or limit the supply of water to our facilities, thus adversely affecting our production capabilities, and
     reducing the volume of products we can manufacture and consequently reducing our revenues. We
     cannot assure prospective investors that such events will not occur in the future, or that our results of
     operations and financial condition will not be adversely affected.

43. Significant differences exist between Indian GAAP and other accounting principles, such as US
    GAAP and IFRS, which may be material to investors’ assessments of our financial condition. If
    applicable, our failure to successfully adopt IFRS required effective April 2011 could have a material
    adverse effect on our stock price.

     Our financial statements are prepared in accordance with Indian GAAP. We have not attempted to
     quantify the impact of IFRS or US GAAP on the financial data included in this Letter of Offer, nor do
     we provide a reconciliation of our financial statements to those of US GAAP or IFRS. US GAAP and
     IFRS differ in significant respects from Indian GAAP. Accordingly, the degree to which the financial
     statements included in this Letter of Offer will provide meaningful information is entirely dependent on
     the reader‘s level of familiarity with Indian accounting practices. Any reliance by persons not familiar
     with Indian accounting practices on the financial disclosures presented in this Letter of Offer should
     accordingly be limited.

     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, among other, 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 if applicable, any failure to successfully adopt IFRS by
     April 2011 could have a material adverse effect on our stock price.


                                                      xxv
44. You may not receive the Securities that you subscribe for in this Issue until fifteen days after the date
    on which this Issue closes, which will subject you to market risk.

     The Securities you purchase in this Issue will not be credited to your demat account with depository
     participants until approximately 15 days from the Issue Closing Date. You can start trading such
     Securities only after receipt of listing and trading approvals in respect thereof. There can be no
     assurance that the Securities allocated to you will be credited to your demat account, or that trading in
     the Securities will commence within the specified time periods.

Notes to Risk Factors
           Issue of 3,984,946 Equity Shares of Rs. 10 each at a premium of Rs. 190 per Equity Share
           aggregating to an amount of Rs. 7,969.89 lacs to the equity shareholders on rights basis in the ratio
           of 19 Equity Shares for every 50 Equity Shares held on the Record Date i.e. February 10, 2010. The
           Issue Price for Equity Shares is 20 times of the face value of the Equity Share.

           The net worth (shareholders‘ funds) of the Company was Rs. 10, 326.23 lacs as on September 30,
           2009 according to the unaudited financial statements, which have been subjected to a limited review
           by the auditors, included in this Letter of Offer on page F32. The net worth (shareholders‘ funds) of
           the Company was Rs. 9,652.78 lacs as on March 31, 2009 according to the audited financial
           statements included in this Letter of Offer on page F1.

           The details of transactions by the Company with the Promoter or group companies during the period
           beginning April 1, 2008 and ending on January 20, 2010, and the nature and amount of such
           transactions is given below:

                                                                                                      (Rs. in lacs)
  S. No.         Details                   April 1, 2008 to         April 1, 2009 to           Cumulative
                                           March 31, 2009           January 20, 2010             Value
             Purchase of components                                                                    2,377.23
                                                      1,516.31                  860.92
      1.     / spares
      2.     Purchase of fixed assets                   252.36                   20.44                    272.80
      3.     Discounting charges                         10.98                    2.92                     13.90
      4.     Dividend paid (Gross)                      236.67                   84.19                    320.86
   Total                                              2,016.32                  968.47                  2,984.79
   Total
           Our Company does not have any subsidiaries.

           There are no financing arrangements whereby the Promoter, its directors, the promoter group, the
           Directors of the Company and their relatives have financed the purchase by any other person of
           securities of the Company during the period of six (6) months immediately preceding the date of
           filing the Letter of Offer with the SEBI.

           The Company has not made any loans or advances to any Directors or persons or companies in
           which the Directors are interested.




                                                       xxvi
                                         SECTION III - INTRODUCTION
                                           SUMMARY OF THE ISSUE

The following is a summary of the Issue. This summary should be read in conjunction with, and is qualified
in its entirety by, more detailed information in the section titled ―Terms of the Issue‖ on page 105.

Equity Shares offered by our Company                  3,984,946 Equity Shares of Rs. 10 each

Rights Entitlement for Equity Shares                  19 Equity Shares for every 50 Equity Shares held on the
                                                      Record Date, i.e. February 10, 2010

Record Date                                           February 10, 2010

Issue Price per Equity Share                          Rs. 200

Equity Shares outstanding prior to the Issue          10,486,700 Equity Shares of Rs. 10 each

Equity Shares outstanding after the Issue             14,471,646 Equity Shares of Rs. 10 each

Use of Issue proceeds                                 See the section titled ―Objects of the Issue- Requirement
                                                      of Funds and Use of Net Proceeds‖ on page 17.
Terms of the Issue                                    See the section titled ―Terms of the Issue‖ on page 105.




                                                     1
                                      SUMMARY FINANCIAL INFORMATION

The following tables set forth the Company‘s summary balance sheet and profit & loss account based on the
Company‘s financial statements as at and for the period ended September 30, 2009 on which the Auditor has
issued a limited review report and the Company‘s summary balance sheet, profit and loss account and cash
flow statement based on the Company‘s financial statements as at and for the period ended March 31, 2009
on which the Auditor has issued an audit report.

The Company‘s summary statements presented below should be read in conjunction with the financial
statements, notes and significant accounting policies thereto included in ―Financial Information – Auditors’
Report and Audited Financial Statements for the year ended March 31, 2009‖, ―Financial Information –
Limited Review Report and Financial Statements for the six months ended September 30, 2009‖ and
―Management’s Discussion and Analysis of Financial Condition and Results of Operations‖ on pages F1,
F32 and 75, respectively.

BALANCE SHEET AS AT 30TH SEPTEMBER, 2009
                                                                                                          (Rs. in lacs)
                                                                     As at                                  As at
                                                                30th Sept.2009                         31st Mar.2009

 SOURCES OF FUNDS

 Shareholders' Funds
  Share Capital                                   1,049.38                               1,049.38
  Reserves & Surplus                              9,276.85                               8,603.40
                                                                      10,326.23                                 9,652.78
 Loan Funds
  Secured Loans                                                        8,818.71                                15,128.69

  Unsecured Loans                                                      7,900.00                                 6,900.00
                                                                      27,044.94                                31,681.47
 APPLICATION OF FUNDS
 Fixed Assets
   Gross Block                                   16,142.61                              13,499.46
   Less : Depreciation                            3,969.57                               3,553.92
   Net Block                                                          12,173.04                                 9,945.54
  Capital Work-in-Progress                                               569.47                                 2,839.72

 Deferred Tax Assets (Net)                                                 9.96                                  279.96
 Current Assets, Loans and
 Advances
  Inventories                                    16,181.89                              14,929.19
  Sundry Debtors                                 10,898.10                              14,633.32
  Cash and Bank Balances                          1271.01                                  700.89
  Other Current Assets                              182.37                                 189.17
  Loans and Advances                              2,773.76                               3,032.54
                                                 31,307.13                              33,485.11
  Less :
 Current Liabilities and Provisions
   Current Liabilities                           15,262.41                              13,349.00
   Provisions                                     1,752.25                               1,519.86
                                                 17,014.66                              14,868.86
   Net Current Assets                                                 14,292.47                                18,616.25
                                                                      27,044.94                                31,681.47




                                                     2
PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED 30TH
SEPTEMBER, 2009
                                                                     (Rs. in lacs)
                                                  Period Ended        Period Ended
                                                  30th Sept.2009    30th Sept.2008
INCOME
Sales                                                   33,543.15         40,663.58


Less : Excise Duty                                       2,550.08          4,188.22
Net Sales Revenue                                       30,993.07         36,475.36
Other Operating Income                                     233.83            333.20
Total                                                   31,226.90         36,808.56

EXPENDITURE
Manufacturing and Other Expenses                        28,834.20         34,075.58
Finance Charges(Net)                                     1,033.59            638.57
Depreciation / Amortisation                                415.65            224.83

Total                                                   30,283.44         34,938.98

Profit for the period before Tax Expense                   943.46          1,869.58
Tax expense/(Saving)
   - Current Tax                                           169.00            435.00
   - Current Tax Earlier Years                              11.18                 -
   - Deferred Tax                                          270.00            190.00
   - Fringe Benefits Tax                                      -               25.00
   - MAT Credit Entitlement                              (180.18)                 -
Profit for the period after Tax Expense                    673.46          1,219.58
Balance brought forward from                             1,727.94          1,458.22
previous year
Profit available for Appropriation                       2,401.40          2,677.80

APPROPRIATIONS
Balance Carried to Balance Sheet                         2,401.40          2,677.80
                                                         2,401.40          2,677.80
Earning Per Share
 - Basic/Diluted Earning Per Share (Rs.)                     6.42              11.63




                                            3
BALANCE SHEET AS AT 31ST MARCH, 2009                                              (Rs. in lacs)

                                                        As at                         As at
                                                   31st Mar.2009                 31st Mar.2008

SOURCES OF FUNDS

Shareholders' Funds
 Share Capital                          1,049.38                      1,049.38
 Reserves & Surplus                     8,603.40                      8,308.67
                                                          9,652.78                      9,358.05
Loan Funds
 Secured Loans                                          15,128.69                       1,356.87

 Unsecured Loans                                         6,900.00                      12,900.00
                                                        31,681.47                      23,614.92
APPLICATION OF FUNDS
Fixed Assets
  Gross Block                          13,499.46                      4,863.88
  Less : Depreciation                   3,553.92                      2,991.12
  Net Block                                               9,945.54                      1,872.76
 Capital Work-in-Progress                                 2,839.72                      8,090.59
 Capital Spares                                                  -                          3.21
Deferred Tax Assets (Net)                                   279.96                        164.96
Current Assets, Loans and
Advances
 Inventories                           14,929.19                     12,349.80
 Sundry Debtors                        14,633.32                     18,560.06
 Cash and Bank Balances                   700.89                        914.28
 Other Current Assets                     189.17                        457.95
 Loans and Advances                     3,032.54                      2,521.15
                                       33,485.11                     34,803.24
 Less :
Current Liabilities and Provisions
  Current Liabilities                  13,349.00                     19,285.26
  Provisions                            1,519.86                      2,034.58
                                       14,868.86                     21,319.84
  Net Current Assets                                    18,616.25                      13,483.40
                                                        31,681.47                      23,614.92




                                           4
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2009

                                                                                   (Rs. in lacs)
                                                        Year Ended                   Year Ended
                                                       31st Mar.2009              31st Mar.2008
INCOME
Sales                                                        59,983.81                  75,882.81
Less : Excise Duty                                            5,898.58                   9,339.36
Net Sales Revenue                                            54,085.23                  66,543.45
Other Operating Income                                          610.01                     598.75
Total                                                        54,695.24                  67,142.20

EXPENDITURE
Manufacturing and Other Expenses                             51,888.94                  61,768.44
Finance Charges(Net)                                          1,808.77                   1,173.42
Depreciation / Amortisation                                     583.92                     330.07

Total                                                        54,281.63                  63,271.93

Profit for the year before Tax Expense                         413.61                    3,870.27
Tax expense/(Saving)
   - Current Tax                                                 41.22                   1,380.00
   - Deferred Tax                                             (115.00)                    (90.00)
   - Fringe Benefits Tax                                         49.85                      60.00
   - MAT Credit Entitlement                                    (41.22)                          -
Profit for the year after Tax Expense                           478.76                   2,520.27
Balance brought forward from the
                                                              1,458.22                   1,312.74
previous year
Profit available for Appropriation                            1,936.98                   3,833.01

APPROPRIATIONS
Proposed Dividend                           157.30                       576.77
Dividend Tax and Surcharge                   26.73              184.03    98.02            674.79
General Reserve                                                  25.00                   1,700.00
Balance Carried to Balance Sheet                              1,727.95                   1,458.22
                                                              1,936.98                   3,833.01
Earning Per Share
 - Basic/Diluted Earning Per Share (Rs.)                          4.57                       24.03




                                             5
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2009
                                                                                                                     (Rs.in lacs)
                                                                                    Year ended                    Year ended
                                                                                    March
                                                                                    31,2009                       March 31, 2008

A. CASH FLOW FROM OPERATING ACTIVITIES

   Net Profit Before Tax expense                                                          413.61                        3,870.27
       Adjustments For :

        Depreciation                                                      583.92                        330.07
        Foreign Exchange Fluctuation                                       12.24                          63.74
        Interest Expense                                                1,744.48                      1,036.79
        Interest Income                                                  (92.96)                       (22.61)
        Provision for Doubtful Debts & Advances                           128.06                        395.38
        Provision for Retirement Benefits                                 176.74                        240.85
        Provision for Warranty                                          (160.34)                          40.00
        Provision for Wealth Tax                                            0.69                         (0.40)
        Liabilities/Provisions no longer required written
       back                                                             (115.51)                        (78.71)
                                                                                        2,277.32                        2,005.11

Operating Profit Before Working Capital Changes                                         2,690.93                        5,875.38
        Adjustments for :
        Decrease / (Increase) in Sundry Debtors                          3,828.02                        249.68
        Decrease / (Increase) in Other Current Assets                      268.78                        258.69
        Decrease / (Increase) in Loans & Advances                        (235.93)                       (48.38)
        Decrease / (Increase) in Inventories                           (2,579.39)                    (3,616.77)
        (Decrease) / Increase in Current Liabilities                   (6,222.04)      (4,940.56)      1,285.59        (1,871.19)

CASH GENERATED FROM / (USED IN) OPERATIONS                                             (2,249.63)                       4,004.19
      Less: Direct Tax Paid (net of refunds)                                               306.10                       1,163.69
      Less: Wealth Tax Paid                                                                  0.64                           0.60
      Less: Fringe Benefits Tax Paid                                                        57.65                          50.92
 NET CASH GENERATED FROM / (USED IN)
 OPERATING ACTIVITIES                                                                  (2,614.02)                       2,788.98

B.CASH FLOW FROM INVESTING ACTIVITIES :
     Purchase of Fixed Assets                                                          (2,783.21)                     (5,393.57)
     Interest Received                                                                      90.99                          21.70

    NET CASH USED IN INVESTING ACTIVITIES                                              (2,692.22)                     (5,371.87)

C.CASH FLOW FROM FINANCING ACTIVITIES

        Unsecured Loans taken during the year                           7,131.13                     13,331.42
        Unsecured Loans repaid during the year                          7,131.13                 -    8,460.04          4,871.38

        Secured Loans taken / (repaid) during the year                                  7,780.88                      (1,602.33)

       Dividend Paid                                                                     (567.82)                       (563.28)
       Dividend Tax                                                                       (98.02)                        (98.02)
       Interest Paid                                                                   (2,013.38)                     (1,392.24)
     NET CASH INFLOW FROM FINANCING
     ACTIVITIES                                                                         5,101.66                        1,215.51

   Net Increase in Cash and Cash Equivalents                                            (204.58)                      (1,367.38)
   Cash and Cash Equivalents (#1) (A)                                                     905.22                        2,272.81
   Cash and Cash Equivalents (#2) (B)                                                     700.64                          905.43

    Notes:-
      # 1 Cash and Bank Balances (C)                                                      914.28                        2,272.81
less. Cash Credit Accounts (being treated as financing activity)                           (9.06)                              -


                                                                   6
                                                                                           905.22                             2,272.81

      # 2 Cash and Bank Balances (D)                                                       700.89    *                        914.28 *
less. Cash Credit Accounts (being treated as financing activity)                                -                               (9.06)
   Cash and Cash Equivalents (E)                                                           700.89                              905.22

   *Net of unrealised foreign exchange gain of Rs. 0.25 lacs (Previous year Rs.0.21 lacs unrealised foreign exchange loss)

   A     Cash and Cash Equivalents as at 01.04.2008 for the year ended March 31,2009 and as at 01.04.2007 for the year ended March 31,
         2008;
   B     Cash and Cash Equivalents as at 31.03.2009 for the year ended March 31, 2009 and as at 31.03.2008 for the year ended March 31,
         2008
   C     Cash and Bank Balances as at 01.04.2008 for the year ended March 31,2009 and as at 01.04.2007 for the year ended March 31,
         2008;
   D     Cash and Bank Balances as at 31.03.2009 for the year ended March 31, 2009 and as at 31.03.2008 for the year ended March 31,
         2008;
   E     Cash and Cash Equivalents as at 31.03.2009 for the year ended March 31, 2009 and as at 31.03.2008 for the year ended March 31,
         2008.

Note:

1. The above "Cash Flow Statement" has been prepared under the Indirect method as set out in the Accounting
   Standard -3 on Cash Flow Statements.

2. Figures in bracket indicates cash outflows.

3. Previous year figures have been regrouped and recasted wherever necessary to conform to the current year classification




                                                                   7
                                      GENERAL INFORMATION


Dear Shareholder(s),

Pursuant to the resolution passed by the Board of Directors of the Company at its meeting held on March 19,
2009, it has been decided to make the following offer to the Equity Shareholders of the Company, with a right
to renounce:

ISSUE OF 3,984,946 EQUITY SHARES OF RS. 10 EACH FOR CASH AT A PREMIUM OF RS. 190
PER EQUITY SHARE AGGREGATING Rs. 7,969.89 LACS TO THE EQUITY SHAREHOLDERS
ON RIGHTS BASIS IN THE RATIO OF 19 EQUITY SHARES FOR EVERY 50 EQUITY SHARES
HELD ON THE RECORD DATE i.e. FEBRUARY 10, 2010. THE ISSUE PRICE OF EACH EQUITY
SHARE IS 20 TIMES THE FACE VALUE OF THE EQUITY SHARE.

The Issue has also been approved by the shareholders of the Company at the extraordinary general meeting of
the Company held on July 2, 2009.

For details in payment methods, please see the section titled “Terms of the Issue – Principal Terms of the
Equity Shares – Terms of Payment” and “Terms of the Issue – Mode of Payment” on pages 105 and 114,
respectively.

Registered Office of the Company

Swaraj Mazda Limited
Village Asron
District Nawanshahar – 144 533
Punjab, India
Registration No. 5516
Corporate Identification No.: L50101PB1983PLC005516

The Company is registered at the Registrar of Companies, Punjab, Chandigarh and Himachal Pradesh located
at:

Corporate Bhawan, Plot No.4 B
Sector 27 B, Madhya Marg
Chandigarh – 160 019, India

The existing Equity Shares of the Company are listed on the Stock Exchanges.

For details of the Board of directors of the Company, please see the section titled ―Our Management‖ on
page 64.

Company Secretary and Compliance Officer

Mr. Gopal Bansal

Swaraj Mazda Limited
204 – 205, Sector 34-A
Chandigarh – 160 022
India
Tel: (91 172) 2647 700
Fax: (91 172) 2647 805
Email: gbansal@swarajmazda.net



                                                     8
Investors may contact the Compliance Officer or the Lead Manager for any pre-Issue / post-Issue related
matters.

Auditors

Price Waterhouse
Chartered Accountants
Building 8, Tower B
7th and 8th Floor
DLF Cyber City
Gurgaon – 122002
Haryana, India
Tel: (91 124) 4620 000
Fax: (91 124) 4620 620
Firm Registration Number (FRN No.): 301112E

Lead Manager to the Issue

JM Financial Consultants Private Limited
141, Maker Chambers III
Nariman Point
Mumbai - 400 021
Maharashtra, India
Tel: (91 22) 6630 3030
Fax: (91 22) 2204 7185
Email: swarajmazda.rights@jmfinancial.in
Investor Grievance ID: grievance.ibd@jmfinancial.in
Contact Person: Ms. Lakshmi Lakshmanan
Website: www.jmfinancial.in
SEBI Registration No.: INM000010361

Statement of responsibilities as the Lead Manager to the Issue

JM Financial is the sole Lead Manager to the Issue and all the responsibilities relating to the co-ordination
and other activities in relation to the Issue shall be performed by them.

Legal Advisor to the Issue

Amarchand & Mangaldas & Suresh A. Shroff & Co.
Amarchand Towers
216, Okhla Industrial Estate, Phase III
New Delhi - 110 020, India
Tel: (91 11) 2692 0500
Fax: (91 11) 2692 4900

Bankers to the Issue

Axis Bank Limited
SCF – 13 - 114, Phase – 7
Mohali – 160 062, India
Tel: (91 172) 4680 909 / 4680 900
Fax: (91 172) 4680 999
Email: gargi.sud@axisbank.com / yogesh.gaba@axisbank.com
Contact Person: Ms. Gargi Sood / Mr. Yogesh Gaba


                                                      9
Website: www.axisbank.com
SEBI Registration No.: INBI00000017

Standard Chartered Bank Limited
No.270 DN Road
Cash Management Services
Ground Floor, Fort
Mumbai - 400 001
Tel: (91 22) 2268 3955
Fax: (91 22) 2209 6067
Email: joseph.george@sc.com / ramesh.joshi@sc.com
Contact Person: Mr. Joseph George / Mr. Ramesh Joshi
Website: : www.standardchartered.com
SEBI Registration No.: INBI00000885

Self Certified Syndicate Banks

The list of banks that have been notified by the SEBI to act as SCSB for the ASBA Process are provided on
www.sebi.gov.in/pmd/scsb.html.

Credit Rating

This being an Issue of Equity Shares, no credit rating is required.

Monitoring Agency

No monitoring agency is required to be appointed by the Company for the Issue.

Appraisal Reports

None of the purposes for which the Net Proceeds are proposed to be utilized have been financially appraised
by any bank or financial institution.

Principal terms of loans and assets charged as security

Please see the section titled ―Financial Indebtedness‖ on page 81.

Listing of Securities

The Equity Shares of our Company were initially listed on the BSE in the year 1985 pursuant to an initial
public offering by our Company. Subsequently, in 2003, the Equity Shares of our Company were listed on the
NSE. We have received ―in-principle‖ approvals for listing of the Equity Shares to be issued pursuant to this
Issue from the BSE and the NSE by letters dated September 30, 2009 and October 16, 2009, respectively. We
will make applications to the Stock Exchanges for permission to deal in and for an official quotation in
respect of the Equity Shares being offered in terms of the Letter of Offer. If the permission to deal in and for
an official quotation is not granted for the Equity Shares by the Stock Exchanges, our Company shall
forthwith repay, without interest, all monies received from the Investors pursuant to the Letter of Offer. If
such money is not repaid within eight (8) days after our Company becomes liable to repay it (i.e. 15 days after
Issue Closing Date or the date of refusal by the Stock Exchanges, whichever is earlier) our Company and
every Director of the Company who is an officer in default shall, on and from expiry of eight (8) days, be
jointly and severally liable to repay the money, with interest as prescribed under Section 73 of the Companies
Act.




                                                       10
Issue Schedule

The subscription will open upon the commencement of the banking hours and will close upon the close of
banking hours on the dates mentioned below:

 Issue Opening Date:                                                                          March 3, 2010
 Last date for receiving requests for SAFs:                                                  March 10, 2010
 Issue Closing Date:                                                                         March 17, 2010

The Board may however decide to extend the Issue period, as it may determine from time to time, but not
exceeding 30 days from the Issue Opening Date.

Impersonation

As a matter of abundant caution, attention of the Investors is specifically drawn to the provisions of sub-
section (1) of Section 68A of the Companies Act which is reproduced below:

―Any person who makes in a fictitious name an application to a company for acquiring, or subscribing for,
any shares therein, or otherwise induces a company to allot, or register any transfer of shares therein to him,
or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend
to five years‖.

Allotment Letters / Refund Orders

Our Company will issue and dispatch letters of allotment /share certificates /demat credit and /or letters of
regret along with refund order, as applicable, or credits the Equity Shares to the respective beneficiary
accounts, if any, within a period of 15 days from the Issue Closing Date. If the refund orders are not repaid
within eight (8) days from the date the Company becomes liable (i.e. 15 days from the Issue Closing Date or
the date of refusal by the Stock Exchange(s), whichever is earlier) the Company shall pay that money with
interest for the delayed period as prescribed under Section 73 of the Companies Act.

Investors residing at any of the centers where clearing houses are managed by the Reserve Bank of India
(―RBI‖) will get refunds through Electronic Clearing Service (―ECS‖) except where Investors are otherwise
disclosed as applicable / eligible to get refunds through direct credit and real time gross settlement (―RTGS‖).

In case of those Investors who have opted to receive Equity Shares in dematerialized form using electronic
credit under the depository system, advice regarding their credit of the securities shall be given separately.
Investors to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary
post intimating them about the mode of credit of refund within 15 days of the Issue Closing Date. The
Investors shall have an option either to receive the security certificates or to hold the securities in
dematerialized form with a depository.

In case of those Investors who have opted to receive Equity Shares in physical form and the Company issues
letter of allotment, the corresponding share certificates will be kept ready within three (3) months from the
date of allotment thereof or such extended time as may be approved by the Company Law Board under
Section 113 of the Companies Act or other applicable provisions, if any. Investors are requested to preserve
such letters of allotment, which would be exchanged later for the share certificates. For more information,
please see the section titled ―Terms of the Issue‖ on page 105.

The letter of allotment / refund order exceeding Rs. 1,500.00 would be sent by registered post / speed post to
the sole / first Investors registered address. Refund orders up to the value of Rs. 1,500.00 would be sent under
certificate of posting. Such refund orders would be payable at par at all places where the applications were
originally accepted. The same would be marked ‗Account Payee only‘ and would be drawn in favour of the
sole / first Investor. Adequate funds would be made available to the Registrar to the Issue for this purpose.



                                                      11
Declaration by Board on creation of separate account

The Board of Directors declares that funds received against this Issue will be transferred to a separate bank
account other than the bank account referred to sub-section (3) of Section 73 of the Companies Act.

Minimum Subscription

If our Company does not receive the minimum subscription of 90% of the Issue, our Company shall forthwith
refund the entire subscription amount received within 15 days from Issue Closing Date. If there is a delay in
the refund of subscription by more than eight (8) days after the date from which our Company becomes liable
to pay the subscription amount (i.e. 15 days after the Issue Closing Date or the date of refusal by the Stock
Exchanges, whichever is earlier) our Company shall pay interest for the delayed period at the rates prescribed
under Sections 73 (2) and (2A) of the Companies Act.

Compliance with the Listing Agreement

The Company has complied with the provisions of the listing agreement entered into with the Stock
Exchanges (―Listing Agreement‖) and no action has been initiated by the Stock Exchanges against the
Company, for non-compliance with any provision of the Listing Agreement.




                                                     12
                                                CAPITAL STRUCTURE

Our share capital as on the date of filing of this Letter of Offer is set forth below.

                                                                                                (Rs.in lacs, except per share data)

                                                                            Aggregate Value at        Aggregate Value at
                                                                               Face Value                Issue Price
 A.      Authorized Share Capital*
         40,000,000 Equity Shares of Rs.10 each                                          4,000.00

 B.      Issued, Subscribed and Paid-up Capital before the
         Issue
         10,486,700 Equity Shares of Rs. 10 each, fully paid-up                       1,048.67**

 C.      Present Issue in terms of the Letter of Offer***
         3,984,946 Equity Shares of Rs. 10 each                                            398.49                   7,969.89

 D.      Paid-up Equity Capital after the Issue
         14,471,646 Equity Shares of Rs. 10 each                                      1,447.16**

 E.      Securities Premium Account
         Before the Issue                                                                     Nil
         After the Issue                                                                 7,571.40
* The authorized share capital of the Company was increased from Rs. 2,000.00 lacs (divided into 20,000,000 Equity Shares) to Rs.
4,000.00 lacs (divided into 40,000,000 Equity Shares) pursuant to an EGM dated July 2, 2009.
** It excludes the forfeited amount of Rs. 0.71 lac.
***The present Issue has been authorized by a resolution of the Board of Directors dated March 19, 2009.

Notes to the Capital Structure

1.        The Promoter has confirmed that it intends to subscribe to the full extent of their Rights Entitlement
          in the Issue. Subject to compliance with the Takeover Code, the Promoter and promoter group
          reserve their right to subscribe for Equity Shares in this Issue by subscribing for renunciation, if any,
          made by any other shareholder. The Promoter has provided an undertaking dated January 20, 2010
          to our Company to apply for additional Equity Shares in the Issue, to the extent of the unsubscribed
          portion of the Issue. As a result of this subscription and consequent allotment, the Promoter and
          promoter group may acquire Equity Shares over and above their Rights Entitlement in the Issue,
          which may result in an increase of the shareholding being above the current shareholding with the
          Rights Entitlement of Equity Shares under the Issue. This subscription and acquisition of additional
          Equity Shares by the Promoter and promoter group through this Issue, if any, will not result in
          change of control of the management of the Company and shall be exempt in terms of proviso to
          Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the requirements indicated
          in ―Objects of the Issue – Requirement of Funds and Use of Net Proceeds‖ on page 17), there is no
          other intention/purpose for this Issue, including any intention to delist our Company, even if, as a
          result of allotments to the Promoter and promoter group, in this Issue, the Promoter‘s shareholding
          in our Company exceeds their current shareholding. The Promoter and promoter group shall
          subscribe to such unsubscribed portion as per the relevant provisions of the law. Allotment to the
          Promoter and promoter group of any unsubscribed portion, over and above their Rights Entitlement
          shall be done in compliance with the Listing Agreement and the Takeover Code, as amended, from
          time to time.

          The Promoter has provided the following undertaking vide its letter dated January 20, 2010.

          ―The subscription by the Promoters and / or members of the promoter group for the Equity Shares in
          the Issue and the allotment of the Equity Shares will be in continuous compliance with the minimum
          public shareholding requirement specified under Clause 40A of the Listing Agreement with the Stock
          Exchanges (“Listing Agreement”) and the Company will take such steps as may be necessary to

                                                               13
            ensure such compliance with Clause 40A of the Listing Agreement, including but not limited to
            issuance of Equity Shares to the public through a prospectus, offer for sale of Equity Shares by the
            Promoter to the public through a prospectus, sale of Equity Shares held by the Promoter through the
            secondary market and any other step which does not adversely affect the interest of minority
            shareholders.‖

            The above will be done in compliance with the SEBI (ICDR) Regulations, the Takeover Code and
            the Listing Agreement.

2.          Shareholding Pattern of our Company

            Shareholding pattern of our Company as on December 31, 2009:

 Category    Category of Shareholders        Number of        Total           Number of        Total Shareholding as a        Shares Pledged or otherwise
  Code                                      Shareholders    Number          Shares Held in       percentage of total                 encumbered
                                                            of shares       dematerialized        number of shares
                                                                                form
                                                                                                   As a         As a    Number of As a percentage
                                                                                               percentage of percentage  shares
                                                                                                   A+B        A+B+C
      (I)                (II)                   (III)         (IV)               (V)               (VI)           (VII)         (VIII)         (IX)=(VIII)/(IV)
                                                                                                                                                    *100
      (A)    Shareholding of Promoter and Promoter
             Group
      1      Indian
      A      Individuals/Hindu                   0                      0                 0                  0            0               0                0.00
             Undivided Family
      B      Central Government/State            0                      0                 0                  0            0               0                0.00
             Government
      C      Bodies Corporate                    0                      0                 0                 0             0               0                0.00
      D      Financial Institutions/Banks        0                      0                 0                  0            0               0                0.00
      E      Any Other (specify)                 0                      0                 0                  0            0               0                0.00
             Sub-Total (A) (1)                   0                      0                 0                  0            0               0                0.00
      2      Foreign
      A      Individuals(Non-Resident            0                      0                 0                  0            0               0                0.00
             Individuals/ Foreign
             Individuals)
      B      Bodies Corporate                    1           5,612,953           5,612,953                                                0                0.00
                                                                                                      53.524       53.524
      C      Institutions                               0            0                   0                 0            0                 0                0.00
      D      Any Other (specify)                        0            0                   0                 0            0                 0                0.00
             Sub-Total (A) (2)                          1    5,612,953           5,612,953                                                0                0.00
                                                                                                      53.524       53.524
             Total Shareholding of                      1    5,612,953           5,612,953                                                0                0.00
             Promoter and Promoter                                                                    53.524       53.524
             Group A = (A)(1)+(A)(2)
(B)          Public Shareholding                                                                                                         NA                NA
      1      Institutions                                                                                                                NA                NA
      A      Mutual Funds/UTI                           9      920,546            918,996                                                  -                 -
                                                                                                          8.778     8.778
      B      Financial Institutions/Banks               1         6,450                6,450                                               -                  -
                                                                                                          0.062     0.062
      C      Central Government/State                   0               0                 0                   0                            -                  -
             Government(s)                                                                                                0
      D      Venture Capital Fund                       0            0                  0                    0            0                -                  -
      E      Insurance Companies                        0            0                  0                    0            0                -                  -
      F      Foreign Institutional                      3      976,417            975,567                                                  -                  -
             Investors                                                                                    9.311     9.311
      G      Foreign Venture Capital                    0               0                 0                   0                            -                  -
             Investors                                                                                                    0


                                                                  14
 Category     Category of Shareholders      Number of       Total           Number of       Total Shareholding as a       Shares Pledged or otherwise
  Code                                     Shareholders   Number          Shares Held in      percentage of total                encumbered
                                                          of shares       dematerialized       number of shares
                                                                              form
       H      Any Other (specify)                     0               0               0                 0                           -               -
                                                                                                                      0
                   Sub-Total (B) (1)                 13    1,903,413           1,901,013                                            -               -
                                                                                                  18.151      18.151
       2      Non-Institutions                                                                                                   NA               NA
       A      Bodies Corporate                      224      282,545            276,894                                            -                -
                                                                                                     2.694     2.694
       B      Individuals
       I      Individual Shareholders             9,433    1,216,110            719,841                                             -               -
              holding nominal Share                                                               11.597      11.597
              Capital value up to Rs. 1
              lakh
       Ii     Individual Shareholders                 8      207,571            207,571                                             -               -
              holding nominal Share                                                                  1.979     1.979
              Capital value In excess of
              Rs. 1 lakh
       C      Any Other (specify)                     0               0               0                                             -               -
                                                                                                      0.00      0.00
       I      Foreign Body Corporate                  3    1,063,464           1,063,464                                            -               -
                                                                                                  10.141      10.141
       Ii     Non Resident Individuals            1,041      200,642             67,642                                             -               -
                                                                                                     1.913     1,913
       Iii    Trust & Foundations                     2               2               2                                             0               0
                                                                                                      0.00      0.00
                   Sub-Total (B) (2)             10,711    2,970,334           2,335,414                                            -               -
                                                                                                  28.325      28.325
              Total Public Shareholding          10,724    4,873,747           4,236,427                                         NA               NA
              (B)= (B)(1)+(B)(2)                                                                  46.476      46.476
              Total (A)+(B)                      10,725   10,486,700           9,849,380          100.00      100.00               -                -
(C )          Share held by Custodian                 0            0                   0               0           0             NA               NA
              and against which
              Depository Receipts have
              been issued
              Grand Total (A)+(B)+(C )           10,725   10,486,700           9,849,380          100.00      100.00                -               -



3.           The details of the shareholding of the Promoter and the promoter group companies

                                 Name                                     Number of Equity                                Percentage
                                                                              Shares
 Promoter
 Sumitomo Corporation                                                                 5,612,953                                                53.52
 Promoter group
 Nil                                                                                        Nil                                                  Nil
 Total                                                                                5,612,953                                                53.52

4.           The details of shareholders holding over 1% as on December 31, 2009

                                 Name                                     Number of Equity                                Percentage
                                                                              Shares
 Promoter
 Sumitomo Corporation                                                                 5,612,953                                                53.52
 Total                                                                                5,612,953                                                53.52
 Others
 CDC Financial Services (Mauritius) Limited                                                972,983                                              9.27
 Reliance Capital Trustee Company Limited- A/c Reliance
                                                                                           909,722                                              8.67
 Tax saver


                                                                15
                         Name                              Number of Equity                     Percentage
                                                               Shares
 Actis Agribusiness Limited                                             811,258                                   7.73
 Isuzu Motors Limited                                                   209,000                                   1.99

5.       There have been no transactions in Equity Shares of our Company by the Promoter, in the last one
         (1) year.

6.      The Equity Shares held by our Promoter are not currently pledged.

7.      The present Issue being a rights issue, as per Regulation 34(c) of the SEBI (ICDR) Regulations, the
        requirement of promoters‘ contribution and lock-in are not applicable.

8.       We have not issued any Equity Shares or granted any options under any employee stock option
         scheme or employees stock purchase scheme.

9.       There are no outstanding warrants, options or rights to convert debentures, loans or other instruments
         convertible into Equity Shares.

10.      We have not issued any Equity Shares for consideration other than cash or out of revaluation
         reserves.

11.      The Equity Shares of our Company are fully paid up and there are no partly paid up Equity Shares as
         on the date of this Letter of Offer.




                                                      16
                                               OBJECTS OF THE ISSUE

The net proceeds of the Issue, after deduction of Issue related expenses, are estimated to be approximately Rs.
7,847.14 lacs (―Net Proceeds‖).

The Net Proceeds will be utilized by our Company to fund its ongoing expansion project at the Nawanshahar
plant in Punjab (the ―Expansion Project‖) and general corporate purposes. The intended use of the Net
Proceeds is set forth below:

          Financing the Expansion Project;
          Repayment of loan taken from Allahabad Bank in relation to the Expansion Project; and
          General corporate purposes.

The objects clause of the Memorandum of Association enables our Company to undertake its existing
activities and the activities for which the funds are being raised by our Company in this Issue.

Proceeds of the Issue

The details of the proceeds of the Issue are summarized in the following table:
                                                                                                                       (Rs.in lacs)
S. No.    Description                                                                                   Amount
1         Gross Proceeds of the Issue                                                                   7,969.89
2         Estimated Issue Expenses                                                                       122.75
3         Net Proceeds of the Issue                                                                     7,847.14

Requirement of Funds and Use of Net Proceeds

Our Company intends to use the Net Proceeds of the Issue towards financing Phase I of the Expansion
Project, repayment of loan taken from Allahabad Bank in relation to the Expansion Project and general
corporate purposes.

The intended use of the Net Proceeds is set forth below:
                                                                                                                      (Rs. in lacs)
Description          Estimated Cost           Amount                 Amount to be              Amount to be Deployed
                                           Deployed as on             Deployed
                                           December 31,                                   Amount to be          Amount to be
                                              2009 (1)                                   funded through        funded through
                                                                                        the Net Proceeds       Other Means of
                                                                                                                   Finance
                                                                                                                (excluding the
                                                                                                                Net Proceeds)
Financing      the           26,000.00             11,438.41             14,561.59               1,800.00             12,761.59
Expansion
Project
Repayment       of            5,000.00                      -              5,000.00              5,000.00                         -
loan taken from
Allahabad Bank
in relation to the
Expansion
Project(2)
General                                -                    -                       -            1,047.14                         -
corporate
purposes
Total                                                                                            7,847.14
     1)   As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010.
     2)   As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, as on December 31, 2009, of a
          loan amount of Rs. 6,000.00 lacs, the Company has repaid Rs. 1,000.00 lacs. The remaining Rs. 5,000.00 lacs are proposed
          to be funded through the Net Proceeds.



                                                                17
With regards to the financing requirements, excluding the Net Proceeds as above, our Company has made
firm arrangements of finance through verifiable means towards 75% of the financing requirements, excluding
the amount to be raised through the proposed Issue and existing identifiable internal accruals, in compliance
with Regulation (5) VII (D) (1) of Part E of Schedule VIII of the SEBI (ICDR) Regulations. Please refer to ―-
Expansion Project at our Company’s Nawanshahar plant – Funding Arrangement‖ below of this section
titled ―Objects of the Issue‖ on page 24 for further details.

The fund requirements and the intended use of the Net Proceeds as described herein are based on
management estimates, and have not been independently appraised by any bank or financial institution or
other independent third party. In view of the competitive and dynamic nature of the CV industry, our
Company may have to revise its expenditure and fund requirements as a result of variations in the cost
structure, changes in estimates, exchange rate fluctuations and external factors, which may not be within the
control of its management. This may entail rescheduling, revising or cancelling the planned expenditure and
fund requirement and increasing or decreasing the expenditure for a particular purpose from its planned
expenditure at the discretion of our Company‘s management. In addition, the fund deployment schedule and
schedule of implementation as described herein are based on the management‘s current expectations and are
subject to change due to various factors, some of which may not be in our Company‘s control. Any revision,
cancellation or addition of the fund requirements on any of the objects of the Issue shall be effected only after
obtaining necessary approval(s) from the shareholders of our Company or any regulatory authority, if
required.

There are no material existing or anticipated transactions in relation to the utilization of the Net Proceeds or
estimated cost as above with the Promoter, the Directors, our Company‘s key management personnel or
companies promoted by the Promoter. Furthermore, neither the Promoter nor the Directors have any interest
in the Expansion Project or the activities for which the funds are being raised by our Company in this Issue.

In case of variations in the actual utilization of funds earmarked for the purposes set forth above, surplus
funds, if any, available in respect of a particular purpose may be utilized to finance the fund requirements for
any of the other purposes for which funds are being raised in this Issue.

Expansion Project at our Company‟s Nawanshahar plant

In Fiscal 2007, our Company commenced its Expansion Project consisting of the establishment of a second
vehicle manufacturing facility (the ―Vehicle Manufacturing Facility II‖) and a new in-house bus body
facility (the ―Bus Body Facility‖) on 128 acres of Company owned land at its Nawanshahar plant. The
Expansion Project is being undertaken in two (2) phases and the total project cost is estimated at Rs.
26,000.00 lacs. Our Company has entered into technical assistance agreements in connection with the
Expansion Project. For details refer to the section titled ―History and Certain Corporate Matters - Technical
assistance agreements between Isuzu and our Company‖ on page 63.

Power is presently supplied to our Company‘s Nawanshahar plant by the Punjab State Electricity Board
(―PSEB‖). Our Company also has captive power generation by diesel generator sets of 5 MW to ensure un-
interrupted power supply in case of any power breakdown. The Company intends to source the additional
power requirements of the Expansion Project from the PSEB. Furthermore, our Company intends to continue
to use water supplied to the plant from three (3) submersible turbines and overhead tank to meet the needs of
its Expansion Project.

Project Cost

The break-down of the project cost of our Company‘s Expansion Project is set forth below in the following
table:




                                                       18
                                                                                                                       (Rs. in lacs)
                                                          Phase I                                  Phase II
                                    Amount
                                                         Estimated              Total               Total
                                 Deployed as on                                                                       Total
                                                        Amount to be          Estimated           Estimated
                                 December 31,                                                                      Project Cost
                                                         Deployed (2)          Outlay             Outlay (2)
                                    2009 (1)
                                      (A)                     (B)            (C = A + B)              (D)           (E = C + D)
I. Vehicle Manufacturing
     Facility II
 – Land        development                1,106.61               664.71            1,771.32             367.06           2,138.38
     and construction
 – Procurement           of                  24.17                      -             24.17                    -             24.17
     design,     technology
     and know-how
 – Plant, machinery and                   1,053.64               564.41            1,618.05           3,935.86           5,553.91
     utilities
 – Others (3)                                19.96                    -               19.96             825.00             844.96
 Total                                    2,204.38             1,229.12            3,433.50           5,127.92           8,561.42

II. Bus Body Facility
 – Land         development               4,131.19               125.32            4,256.51              97.37           4,353.88
      and construction
 – Procurement            of                262.08                  33.43            295.51                    -           295.51
      design,     technology
      and know-how
 – Plant, machinery and                   3,354.59               523.72            3,878.31           2,479.71           6,358.02
      utilities
 – Others (3)                               136.17                    -              136.17             295.00             431.17
 Total                                    7,884.03               682.47            8,566.50           2,872.08          11,438.58

III. Working Capital Margin               1,350.00             1,650.00            3,000.00           3,000.00           6,000.00

Total (I+II+III)                         11,438.41             3,561.59          15,000.00           11,000.00          26,000.00

    1)   As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010.
    2)   Based on pro-forma invoices / quotations received and management estimates. Includes charges relating to installation,
         commissioning and erection, duties, taxes and other overheads, where applicable.
    3)   “Others” primarily includes costs relating to procurements of computers, furniture and vehicles. For the estimated outlay,
         “Others” includes costs of development of components and contingency as estimated by the management.

Phase I of the Expansion Project

Phase I of the Expansion Project commenced in Fiscal 2007 and involved the setting-up of the Vehicle
Manufacturing Facility II and Bus Body Facility. The Company is in advanced stages of implementing this
phase of the Expansion Project and both facilities became operational in Fiscal 2009 with the Company‘s
installed capacity increasing from 12,000 vehicles in Fiscal 2008 to 18,000 vehicles in Fiscal 2009. The
remaining portion of Phase I of the Expansion Project will primarily involve the completion of construction
of civil infrastructure at both the facilities and purchase of additional equipments and tools for fabrication,
welding, assembly, material handling and metal forming.

Out of the total estimated outlay of Rs. 15,000.00 lacs in relation to Phase I of the Expansion Project, Rs.
3,433.50 lacs is the estimated outlay for the Vehicle Manufacturing Facility II, Rs. 8,566.50 lacs is the
estimated outlay for Bus Body Facility and Rs. 3,000.00 lacs is the estimated working capital margin. As per
the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, an amount of Rs.
11,438.41 lacs has already been deployed as on December 31, 2009 under Phase I of the Expansion Project.
The balance portion of Rs. 3,561.59 lacs relating to Phase I is expected to be deployed by Fiscal 2011 and is
proposed to be financed from the Net Proceeds and the Company‘s debt arrangements. Please see the section
titled ―– Expansion Project at our Company’s Nawanshahar plant – Funding Arrangement‖ of this section
titled ―Objects of the Issue‖ on page 24.

                                                               19
The balance amount to be deployed in relation to Phase I has been estimated based on pro-forma invoices /
quotations received from various parties, certain contracts and management estimates.

The remaining construction costs relating to building of civil facilities such as a spare parts department,
training centre and wash rooms, additions to the canteen building and installation of kitchen equipments, and
laying of a test track and RCC (Reinforced Cement Concrete) road system at the Vehicle Manufacturing
Facility II under Phase I of the Expansion Project has been estimated as Rs. 664.71 lacs based on estimates
dated June 24, 2009 by the Planners Group.

Detailed below are certain significant pro-forma invoices / quotations received from various parties for the
supply of plant, machinery and utilities under Phase I of the Expansion Project in relation to the Vehicle
Manufacturing Facility II:

S.No.     Name of the Vendor             Type of Machine                   Quantity         Estimated Cost              Date of
                                                                           (Nos.) (1)       (Rs. in lacs) (2)         Quotation
1         Praja Mechanicals (P)          Chassis     Turn     Over            1                 113.47             June 12, 2009
          Ltd.                           Device System
2         Mechlonic    Engineers         Fixture for assembly of                4                 104.72           June 3, 2009
          Pvt. Ltd.                      cabinet
3         Chicago Pneumatic Sales        Electrical Multi Spindle               3                 84.71            May 30, 2009
                                         Fastening System
4         Mechlonic        Engineers     Spot              Welding              6                 69.74            June 3, 2009
          Pvt. Ltd.                      Transformer        (Model
                                         "OS-100") and related
                                         accessories
5         Planners Group                 Hanging structure for                  -                 55.41            June 24, 2009
                                         lifting and handling of
                                         vehicle cabins / assembly
                                         of vehicles on the main
                                         line
6         Protech Solutions              Digital / Inverter Based               5                 24.34            June 16, 2009
                                         MIG Welding Machine
7         J.R. Enterprises               X-Y Aluminium Rail                     5                 17.35            May 6, 2009
                                         System
8         Inder Enterprises              Safe track system                      7                 12.21            June 16, 2009
9         Punjab Tractors Ltd.           Diesel Forklift                        1                  8.83            March 16, 2009
10        Fluidyne          Control      Liquid         Dispensing              2                  7.18            June 18, 2009
          Systems (P) Ltd.               System

     1)    Quantity is based on management estimates.
     2)    Includes charges relating to installation, commissioning and erection, duties, taxes and other overheads, where applicable.

The remaining costs for land development relating to the extension of the bus body assembly shed at the Bus
Body Facility under Phase I of the Expansion Project has been estimated as Rs. 34.92 lacs based on an
estimate dated June 24, 2009 from the Planners Group. Furthermore, the remaining construction costs relating
to the civil construction of the bus body assembly shed, partial construction of the FRP (Fiber Reinforced
Plastic) component production shed, and building of additional wash rooms at the Bus Body Facility under
Phase I of the Expansion Project has been estimated as Rs. 90.40 lacs based on estimates dated June 24, 2009
from the Planners Group.

Furthermore, with regards to the procurement of design, technology and know-how under the remaining
portion of Phase I of the expansion of the Bus Body Facility, the Company has entered into a license
production and parts supply agreement with Zhongtong Bus Holding Co. Limited, China for certain bus body
products. The estimated cost relating to fees for use of technical information, cost of fixtures and other
implement costs that are still to be incurred is estimated as Rs. 33.43 lacs.




                                                                  20
Detailed below are certain significant pro-forma invoices / quotations received from various parties for the
supply of plant, machinery and utilities under Phase I of the Expansion Project in relation to the Bus Body
Facility:

S.No.     Name of the Vendor              Type of Machine                     Quantity          Estimated Cost             Date of
                                                                              (Nos.) (1)        (Rs. in lacs) (2)        Quotation
1         Divine Machines Pvt. Ltd.       Sliding Base Type Roll                 1                  151.05             June 19, 2009
                                          Forming Line
2         ISGEC HACO Metal                CNC Press Brake (Model                   4                 113.65            June 16, 2009
          Forming Machinery Pvt.          ERMS-30135)
          Ltd.
3         Advance Ventilation Pvt.        Exhaust Extraction with                  2                  30.85            June 16, 2009
          Ltd.                            Motorized         return,
                                          automatic disconnection
                                          and balancer
4         Fairdeal Agencies               350 Amps capacity IGBT                  11                  27.76            June 9, 2009
                                          Invertor         Control
                                          CO2/MAG          Welding
                                          Machine and accessories
5         ISGEC HACO Metal                Hydraulic Shear TS-3006                  2                  21.50            June 16, 2009
          Forming Machinery Pvt.
          Ltd.
6         Asian Electronics Ltd.          4x54W Highbay                          250                  21.48            June 29, 2009
7         J.R. Enterprises                Air supply equipments                   -                   20.15            May 28, 2009
8         Hindustan        Hydraulics     NC Hydraulic Shearing                   1                   19.92            June 1, 2009
          Private Ltd.                    Machine (Model GS-
                                          3106)
9         Indian   Oil    Corporation     2x20 KL Tanks and                        1                  15.11            May 29, 2009
          Ltd.                            Pumps,       and   allied
                                          facilities
10        Khusboo Scientific Pvt.         Salt Spray Tester (Model                 1                  13.46            June 15, 2009
          Ltd.                            .610 / 1000)

     1)    Quantity is based on management estimates.
     2)    Includes charges relating to installation, commissioning and erection, duties, taxes and other overheads, where applicable.

Phase II of the Expansion Project

On completion of Phase I, the Company expects to commence implementation of Phase II of the Expansion
Project with a view to further expand the Vehicle Manufacturing Facility II and Bus Body Facility. The
expansion will focus on upgrading the Vehicle Manufacturing Facility II to produce cabins and cargo boxes
for cargo applications for the M&HCV segment, and expanding the production capacity at the Bus Body
Plant by setting-up new machines, paint lines and manufacturing amenities. Phase II of the Expansion Project
is expected to be completed by Fiscal 2014. Upon completion of the Expansion Project, the production
capacity is expected to increase to 24,000 units per annum.

The estimated outlay for Phase II is expected to be Rs. 11,000.00 lacs, of which Rs. 5,127.92 lacs is the
estimated outlay for the Vehicle Manufacturing Facility II, Rs. 2,872.08 lacs is the estimated outlay for Bus
Body Facility and Rs. 3,000.00 lacs is the estimated working capital margin. As per the certificate of
Shamsher & Co., Chartered Accountants dated January 19, 2010 the Company has not incurred any
expenditure with respect to the Vehicle Manufacturing Facility II and the Bus Body Facility as on December
31, 2009 under Phase II of the Expansion Project.

The outlay in relation to Phase II has been estimated based on pro-forma invoices/ quotations received from
various parties and management estimates. The Company has not entered into any contracts in relation to the
estimated amount to be deployed.

The costs for land development in relating to the Vehicle Manufacturing Facility II under Phase II of the
Expansion Project has been estimated as Rs. 61.62 lacs based on an estimate dated June 24, 2009, from the

                                                                  21
Planners Group. Furthermore, construction costs relating to the laying of floors for storage areas, construction
of additional wash rooms, further extending the test track and RCC (Reinforced Cement Concrete) road
system and reinforcing the seasonal nallah crossing between the Vehicle Manufacturing Facility II and Bus
Body Facility has been estimated as Rs. 305.45 lacs based on estimates dated June 24, 2009 from the Planners
Group.

Detailed below are certain significant pro-forma invoices / quotations received from various parties for the
supply of plant, machinery and utilities under Phase II of the Expansion Project in relation to the Vehicle
Manufacturing Facility II:

S.No.     Name of the Vendor              Type of Machine                     Quantity         Estimated Cost             Date of
                                                                              (Nos.) (1)       (Rs. in lacs) (2)        Quotation
1         Siemens Ltd.                    132 KV Switchyard                      1                 471.38             May 25, 2009
2         Mechlonic Engineers Pvt.        Spot Welding                          24                 278.98             June 3, 2009
          Ltd                             Transformer (Model"OS-
                                          100") and related
                                          accessories
3         Sudhir Gensets Limited          1010 KVA Cumins Open                    3                  276.17           May 29, 2009
                                          / Silent DG Set with
                                          Enclosure
4         Mechlonic Engineers Pvt.        Fixture for assembly of                 10                 261.80           June 3, 2009
          Ltd.                            cabinet
5         Planners Group                  Hanging structure for                    -                 167.03           June 24, 2009
                                          lifting and handling of
                                          vehicle cabins/ assembly
                                          of vehicles on the main
                                          line
6         Siemens Ltd.                    132 KV transmission line                1                  139.36           July 3, 2009
                                          (1.7 Km)
7         Precision Testing               Spray and Bake Booth                    2                  121.89           June 16, 2009
          Machines Pvt. Ltd.
8         Chicago Pneumatic Sales         Electrical Multi Spindle                3                  83.96            May 30, 2009
                                          Fastening System
9         Asian Electronics Ltd.          4x54W Highbay                          850                 73.02            June 29, 2009
10        ETE Electrogears Pvt.           PCC Panel - Double Bus                  2                  69.68            May 27, 2009
          Ltd.                            Bar System

     1)    Quantity is based on management estimates.
     2)    Includes charges relating to installation, commissioning and erection, duties, taxes and other overheads, where applicable.

The costs for the construction of a road system, technical offices and completion of the FRP (Fiber
Reinforced Plastic) component production shed in relating to the Bus Body Facility under Phase II of the
Expansion Project has been estimated as Rs. 97.37 lacs based on estimates dated June 24, 2009 from the
Planners Group.

Detailed below are certain significant pro-forma invoices / quotations received from various parties for the
supply of plant, machinery and utilities under Phase II of the Expansion Project in relation to the Bus Body
Facility:

S.No.     Name of the Vendor              Type of Machine                     Quantity         Estimated Cost             Date of
                                                                              (Nos.) (1)       (Rs. in lacs) (2)        Quotation
1         Soham Surface Coatings          Dip Pre-Treatment and                  1                 625.93             June 16, 2009
          Pvt. Ltd.                       Painting Plant for Cargo
                                          Box and Bus Body
                                          Structural Components
2         ISGEC HACO Metal                500 T Hydraulic Press                   3                  514.07           June 20, 2009
          Forming Machinery Pvt.
          Ltd.
3         Divine Machines Pvt. Ltd.       Sliding Base Type Roll                  2                  302.09           June 19, 2009


                                                                  22
S.No.           Name of the Vendor              Type of Machine                     Quantity         Estimated Cost             Date of
                                                                                    (Nos.) (1)       (Rs. in lacs) (2)         Quotation
                                                Forming Line
4               Praja Mechanicals Private       Paint Shop Conveyor                     1                  158.32           June 22, 2009
                Limited
5               Fairdeal Agencies               350 Amps capacity IGBT                  51                 128.72           June 9, 2009
                                                Invertor Control
                                                CO2/MAG Welding
                                                Machine and accessories
6               Precision Testing               Spray and Bake Booth                    2                  120.69           June 16, 2009
                Machines Pvt. Ltd.
7               Electronica Hitech              CNC Pipe Bending                        1                  98.31            June 15, 2009
                Engineering Pvt Ltd             Machine
8               ISGEC HACO Metal                CNC Press Brake                         3                  85.24            June 16, 2009
                Forming Machinery Pvt.          EERMS-30135
                Ltd.
9               Nilkamal BITO Storage           Pallet Storage System                   2                  65.67            June 25, 2009
                System Pvt Ltd.
10              Bir Associates                  Fire Hydrant System                     1                  61.38            June 16, 2009

          1)     Quantity is based on management estimates.
          2)     Includes charges relating to installation, commissioning and erection, duties, taxes and other overheads, where applicable.

The outlay in relation to Phase I and Phase II has been estimated based on pro-forma invoices / quotations
received from various parties and management estimates. Quotations received may undergo change as a result
of, among other things, variations in the cost of key inputs, validity, changes in estimates, exchange rate
fluctuations and external factors, which may not be within the control of the Company‘s management.
Consequently, the Company‘s actual procurement costs may vary from the ones indicated above. Please refer
to the risk factor titled ―Risk Factors – Internal Risk Factors - Our funding requirements and deployment
of the net proceeds of the Issue are based on management estimates that may vary from actual fund
requirements and may be subject to revision, cancellation or addition which could adversely impact the
objects of the Issue, including the implementation of the expansion project at Nawanshahar plant‖ on page
xxi.

Schedule of Implementation

The expected schedule of implementation for the remaining portion of Phase I of the Expansion Project and
Phase II, as estimated by the Company‘s management, is given below:

    Particulars                                                                          Expected Completion (On or Prior to)


                                                                                   Remaining portion of                    Phase II
                                                                                        Phase I
    I.         Vehicle Manufacturing Facility II
     –         Land development and construction                                              February 2011                     March 2013
     –         Plant, machinery and utilities                                                   March 2011                      March 2014

    II.        Bus Body Facility
     –         Land development and construction                                                  June 2010                   January 2013
     –         Procurement of design, technology and know-how                                     April 2010                December 2012
     –         Plant, machinery and utilities                                                    March 2011                      May 2013

Means of Finance

The project cost of Rs. 26,000.00 lacs in relation to the Expansion Project is proposed to be financed through
equity of Rs. 8,000.00 lacs and debt of Rs. 18,000.00 lacs.




                                                                        23
Funding Arrangement

The funding for the Expansion Project is proposed to be met as follows:
                                                                                                                    (Rs. in lacs)
 Particulars                                                                                                              Amount

 Project Cost                                                                                          A                26,000.00

 Amount Deployed as on December 31, 2009                                                               B             11,438.41 (1)

 Amount to be Deployed                                                                              C=A-B               14,561.59
 Of which:
 Amount to be funded through the Net Proceeds                                                                            1,800.00
 Amount to be funded through Other Means of Finance (excluding the Net Proceeds)                                        12,761.59

 Arrangements regarding the Other Means of Finance (excluding the Net Proceeds)
        Sanction from Canara Bank vide sanction letter dated July 15, 2009                                              11,000.00
        Sanction from Mizuho Corporate Bank vide sanction letter dated July 20, 2009                                     7,000.00
    1)   As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010.

In case of any shortfall / cost overrun for the above project, the Company intends meeting the funding
requirements through its future internal accruals and additional debt arrangements.

Deployment of Funds

The break-up of the funds deployed as on December 31, 2009, as per the certificate of Shamsher & Co.,
Chartered Accountants dated January 19, 2010, and schedule of the balance fund deployment with regards to
the Expansion Project, as estimated by the Company‘s management, has been set forth below in the following
table:

                                                                                                                    (Rs. in lacs)
 Particulars                                                Phase I                                          Phase II
                                      Amount                 Estimated Amount to be                 Estimated Amount to be
                                   Deployed as on                    Deployed                               Deployed
                                   December 31,            Remaining         Fiscal 2011           Fiscal 2012      Beyond
                                      2009 (1)             Fiscal 2010                                            Fiscal 2012
 Vehicle Manufacturing                   2,204.38                  301.83           927.29              250.00        4,877.92
 Facility II
 Bus Body Facility                         7,884.03                 229.30             453.17          270.00         2,602.08
 Working capital margin                    1,350.00                      -           1,650.00          800.00         2,200.00
 Total                                    11,438.41                 531.13           3,030.46        1,320.00         9,680.00
    1)   As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010.

As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, of the total amount
deployed as on December 31, 2009, Rs. 6,000.00 lacs was funded through a loan taken from Allahabad Bank
vide a term loan agreement dated March 27, 2009 and the balance Rs. 5,438.41 lacs was funded through a
loan taken from Mizuho Corporate Bank vide original loan agreement dated February 28, 2007. Please refer
to the section titled ―Financial Indebtedness‖ on page 81 for further details. The Company intends to use Rs.
5,000.00 lacs of the Net Proceeds to repay the loan taken from Allahabad Bank in relation to the
aforementioned Expansion Project.

Repayment of loans taken from Allahabad Bank in relation to the Expansion Project

The Company intends to use Rs. 5,000.00 lacs of the Net Proceeds to repay loan taken from Allahabad Bank
in relation to the Expansion Project.

The following are the details of the loan from Allahabad Bank in which repayment is proposed:


                                                               24
                                                                                                                       (Rs. in lacs)
 Bank       Date of     Natur    Interest     Usage of     Amount         Loan        Repayme         Amoun        Restrictive
           Sanction      e of                  Loan        Sanction      Amount       nt Terms         t to be     Covenants
            Letter/     Loan                                 ed /       Outstandi                     repaid
             Loan                                           drawn        ng as on                       from
           Agreeme                                          down        December                      the Net
              nt                                                         31, 2009                     Procee
                                                                                                          ds
Allahab   Sanction      Term     Allahaba    Funding       6,000.00    5,000.00 (2)   Repayabl        5,000.0     The Company
ad Bank   letter        loan     d Bank‘s    the              (2)
                                                                                      e in two            0       is prohibited
          dated                  Prime       expenditu                                instalment                  from paying
          March                  Lending     re in                                    s of Rs.                    our directors,
          16, 2009               Rate per    connectio                                500.00                      guarantors or
          and term               annum       n with the                               lacs                        any        other
          loan                   with        Expansio                                 quarterly,                  persons
          agreemen               monthly     n Project.                               beginning                   standing      as
          t     dated            rests. As                                            Septembe                    guarantors,
          March                  per the                                              r     2009                  any
          27, 2009               term                                                 and five                    commission,
           (1)
                                 loan                                                 quarterly                   brokerage, fees
                                 agreeme                                              instalment                  or any such
                                 nt, the                                              s of Rs.                    payment       in
                                 prevalent                                            1,000.00                    any other form
                                 Prime                                                lacs,                       for        their
                                 Lending                                              beginning                   having given
                                 Rate was                                             March                       such guarantee
                                 12.00%                                               2010.                       or continuing
                                 per                                                                              such
                                 annum.                                                                           guarantee.
                                                                                                                  Further,     the
                                                                                                                  Company must
                                                                                                                  also     ensure
                                                                                                                  that         the
                                                                                                                  loan/advance
                                                                                                                  funds are not
                                                                                                                  be utilized for
                                                                                                                  any        other
                                                                                                                  purpose than
                                                                                                                  the purpose for
                                                                                                                  which they are
                                                                                                                  obtained and
                                                                                                                  that the funds
                                                                                                                  are          not
                                                                                                                  diverted/sipho
                                                                                                                  ned for any
                                                                                                                  other purpose
                                                                                                                  or to any other
                                                                                                                  concern       or
                                                                                                                  sister concern.
    1)    In terms of the sanction letter dated March 16, 2009, Allahabad Bank converted an unsecured short term loan granted to the
          Company into a term loan. The Company subsequently entered into a term loan agreement dated March 27, 2009 with
          Allahabad Bank with respect to the aforementioned term loan.
    2)    As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010.

The table below summarizes the break up of utilization of the above mentioned loan for Phase I of the
Expansion Project as per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010:

                                                                                                                        (Rs. in lacs)
 Particulars                                                                                                     Amount

 (A) Land development and construction                                                                                    2,488.22

 (B) Procurement of design, technology and know-how                                                                           79.79

 (C) Plant, machinery and utilities:
                    Electrical installations and generator sets                                                             748.68


                                                                25
 Particulars                                                                                    Amount

                     Paint shop equipments                                                                 558.72
                     Electric hoist and overhead cranes                                                    472.05
                     Conveyor system                                                                       459.91
                     Jigs, fixtures & dies                                                                 119.24
                     Material handling equipments                                                          311.03
                     Welding equipments                                                                    276.04
                     Tools and equipments                                                                  239.50
                     Inspection instruments and testing equipments                                          87.90
                     Mechanical installations                                                              149.21
 Total (C)                                                                                               3,422.28

 (D) Others                                                                                                  9.71

 Total (A+B+C+D)                                                                                         6,000.00

As confirmed by the certificate from Shamsher & Co., Chartered Accountants dated January 19, 2010, the
Company has utilized the aforementioned loan for the purposes for which it was sanctioned.

As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, as on December 31,
2009, the Company has repaid Rs. 1,000.00 lacs towards the aforementioned loan which was funded from the
Company‘s internal accruals. The next repayment instalment of Rs. 1,000.00 lacs is to be made at the
beginning of March 2010. In the interim period, until the Net Proceeds are received, the Company intends to
utilize its internal resources for such repayments.

The Company may repay the above mentioned borrowings on or prior to the scheduled due dates of the
respective loans.

For further details on the Company‘s indebtedness, please refer to the section titled ―Financial Indebtedness‖
on page 81.

General Corporate Purposes

The Company intends to deploy the balance Net Proceeds aggregating to Rs. 1,047.14 lacs, toward general
corporate purposes, including but not restricted to meeting working capital requirements, capital expenditure,
repayment of debts, or any other purposes as approved by the Board. The Company‘s management, in
accordance with the policies of the Board, will have flexibility in utilizing the proceeds earmarked for general
corporate purposes.

Utilization of Net Proceeds

The year-wise break down of the Net Proceeds to be utilized is set forth below in the following table:

                                                                                                      (Rs. in lacs)
Description                                                                   Fiscal 2010            Fiscal 2011
Financing the Expansion Project                                                    450.00               1,350.00
Repayment of loan taken from Allahabad Bank in relation to the Expansion         5,000.00                      -
Project
General corporate purposes                                                                               1,047.14

Issue Related Expenses

The Issue related expenses include, among others, fees of the Lead Managers, printing and distribution
expenses, legal fees, advertisement expenses, statutory fees, registrar and depository fees. The estimated Issue
related expenses are as follows:


                                                         26
  S.No.                        Activity Expense                        Amount      Percentage of     Percentage
                                                                      (Rs. lacs)       Total        of Issue Size
                                                                                    Estimated
                                                                                       Issue
                                                                                   Expenditure
 1.       Fees of the Lead Manager                                         37.00          30.14%           0.46%
 2.       Fees to Registrar to the Issue                                    2.50           2.04%           0.03%
 3.       Fees to the Legal Advisors                                       26.50          21.59%           0.33%
 4.       Fees to the Bankers to the Issue                                     -                -               -
 5.       Other Expenses (Printing and stationary, distribution and        56.75          46.23%           0.71%
          postage, advertisement and marketing expense etc.)
          Total Estimated Issue Expenses                                  122.75         100.00%           1.54%


Working Capital Requirement, Industrial Regulations and Special Tax Benefits

The Net Proceeds will not be used to meet the Company‘s working capital requirements. There are no
industry regulations specific to the activities for which the funds are being raised by the Company in this
Issue, other than those currently applicable to the business of our Company.

For details on special tax benefits available to the Company and its shareholders, if any, please refer to the
section titled ―Statement Of Tax Benefits – Special Tax Benefits – Special Tax Benefits Available To The
Company‖ and ―Statement Of Tax Benefits – Special Tax Benefits – Special Tax Benefits Available To The
Shareholders Of The Company‖ on page 30.

Interim Use of the Net Proceeds

The management of the Company, in accordance with the policies formulated by the Board from time to time,
will have flexibility in deploying the Net Proceeds. Pending utilization of the Net Proceeds for the purposes
described above, the Company intends to temporarily invest the funds in high quality debt instruments
including deposits with banks and / or mutual funds. Such investments will be approved by the Board or its
committee from time to time, in accordance with its investment policies.

Monitoring of Utilization of Funds

In accordance with Regulation 16 of the SEBI (ICDR) Regulations, as the Issue size does not exceed Rs.
50,000.00 lacs, there is no requirement of appointing a monitoring agency for this Issue to monitor the
utilization of the Net Proceeds.

Our Board will monitor the utilization of the Net Proceeds. The Company will disclose the utilization of the
Net Proceeds, including interim use, under a separate head in its balance sheet till such time the Net Proceeds
have been utilized, clearly specifying the purpose for which such proceeds have been utilized. The Company
will also, in its balance sheet for the applicable fiscal periods, provide details, if any, in relation to all such
Net Proceeds that have not been utilized, thereby also indicating investments, if any, of such currently
unutilized Net Proceeds.

Pursuant to Clause 49 of the Listing Agreement, the Company shall on a quarterly basis disclose to the Audit
Committee the uses and applications of the Net Proceeds. On an annual basis, the Company shall prepare a
statement of funds utilized for purposes other than those stated in this Letter of Offer and place it before the
Audit Committee. Such disclosure shall be made only until such time that all the Net Proceeds have been
utilized in full. The statement shall be certified by the statutory auditors of the Company. In terms of Clause
43A of the Listing Agreement, the Company will furnish to the Stock Exchanges on a quarterly basis, a
statement indicating material deviations, if any, in the use of proceeds from the objects stated in this Letter of
Offer. Further, this information shall be furnished to the stock exchanges along with the interim or annual

                                                          27
financial results submitted under Clause 41 of the Listing Agreement and shall be published in the
newspapers simultaneously with the interim or annual financial results, after placing it before the Audit
Committee in terms of Clause 49 of the Listing Agreement.




                                                   28
                                    STATEMENT OF TAX BENEFITS


The Board of Directors
Swaraj Mazda Limited
204 - 205, Sector 34 –A,
Chandigarh – 160 022,
India


We hereby report that the enclosed statement, prepared by Swaraj Mazda Limited [hereinafter referred
to as the ―Issuer‖], states the possible tax benefits available to the Issuer and its members under the
provisions of the Income Tax Act, 1961 and the Wealth Tax Act, 1957, presently in force in India.
Several of these benefits are dependent on the Issuer or its members fulfilling the conditions prescribed under
the relevant provisions of the respective tax laws. Hence, the ability of the Issuer or its members to derive the
tax benefits is dependent upon fulfilling such conditions, which based on the business imperatives,
the Issuer may or may not choose to fulfill.

The benefits discussed in the Annexure are not exhaustive and the preparation of the contents stated
is the responsibility of the Issuer‘s management. We are informed that this statement is only intended
to provide general information to the investors and hence is neither designed nor intended to be a substitute
for professional tax advice. In view of the individual nature of the tax consequences and the changing tax
laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax
implications arising out of their participation in the issue.

We do not express any opinion or provide any assurance as to whether:-

 i. the Issuer or its members will continue to obtain these benefits in future; or
ii. the conditions prescribed for availing the benefits, where applicable have been/ would be met

The contents of the enclosed statement are based on the information, explanations and representations
obtained from the Issuer and on the basis of the understanding of the business activities and operations of the
Issuer and the interpretation of the current tax laws in force in India. A shareholder is advised to consider in
his/her/its own case the tax implications of an investment in the Equity Shares.

For and on behalf of
PRICE WATERHOUSE
Chartered Accountants


V. Nijhawan
Partner
Membership No: F87228
Place: New Delhi
Date: September 4, 2009




                                                       29
Capitalised terms used in this section have the meaning set forth herein. The following key tax benefits are
available to the Company and the prospective shareholders under the current direct tax laws in India.

The tax benefits listed below are the possible benefits available under the current tax laws presently in force
in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions
prescribed under the relevant tax laws. Hence, the ability of the Company or its shareholders to derive the
tax benefits is dependent upon fulfilling such conditions, which based on business imperative it faces in the
future, it may or may not choose to fulfill. This statement is only intended to provide the tax benefits to the
company and its shareholders in a general and summary manner and does not purport to be a complete
analysis or listing of all the provisions or possible tax consequences of the subscription, purchase, ownership
or disposal etc. of shares. In view of the individual nature of tax consequence and the changing tax laws,
each investor is advised to consult his/her own tax adviser with respect to specific tax implications arising out
of their participation in the issue.

SPECIAL TAX BENEFITS

1.     SPECIAL TAX BENEFITS AVAILABLE TO THE COMPANY
As per Section 35(2AB), weighted deduction @150% is available on Research & Development expenditure
(except on land and building). Section 35(2)(ia) provides for a 100% deduction for the capital expenditure on
scientific research, incurred in any previous year other than on land. These deductions/benefits are not
cumulative and are available only upon compliance of conditions and procedures prescribed in the aforesaid
sections read with rules.

2.    SPECIAL TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY
There are no special tax benefits available to the Shareholders of the Company.

GENERAL TAX BENEFITS

1. Key benefits available to the Company under the Income Tax Act, 1961 (“the Act”)

BUSINESS INCOME:

a) Depreciation:

    The Company is entitled to claim depreciation on specified tangible and intangible assets owned by it
    and used for the purpose of its business under Section 32 of the Act. In case of new machinery or plant
    that is acquired by the company (other than ships and aircrafts), the company is entitled to a further sum
    equal to twenty per cent of the actual cost of such machinery or plant subject to conditions specified in
    Section 32 of the Act.

b) MAT Credit:

    As per Section 115JAA(1A) of the Act, the company is eligible to claim credit for Minimum Alternate
    Tax (―MAT‖) paid for any assessment year (at 15% of book profit under section 115JB of the Act from
    assessment year 2010-11 and 10% till assessment year 2009-10) against normal income-tax payable in
    subsequent assessment years.

    MAT credit shall be allowed for any assessment year to the extent of difference between the tax payable
    as per the normal provisions of the Act and the tax paid under section 115JB for that assessment year.
    Such MAT credit is available for set-off up to 10 years from assessment year 2010-11 and 7 years till
    assessment year 2009-10, succeeding the assessment year in which the MAT credit arises.




                                                       30
2. Key benefits available to the Members of the Company

2.1 Resident Members

a) Dividend income:

     Dividend (both interim and final), if any, received by the resident shareholders from a Domestic
     Company shall be exempt from tax under Section 10(34) read with Section 115O of the Act.

b)      Capital Gains:

a) i)     Long Term Capital Gain (LTCG)

     LTCG means capital gain arising from the transfer of a capital asset being Share held in a company or
     any other security listed in a recognized stock exchange in India or unit of the Unit Trust of India or a
     unit of a mutual fund specified under clause (23D) of section 10 or a Zero coupon bond held by an
     assessee for more than 12 months.
     In respect of any other capital assets, LTCG means capital gain arising from the transfer of an asset, held
     by an assessee for more than 36 months.

     ii) Short Term Capital Gain (STCG)

   STCG means capital gain arising from the transfer of capital asset being Share held in a company or any
   other security listed in a recognized stock exchange in India or unit of the Unit Trust of India or a unit of
   a mutual fund specified under clause (23D) of section 10 or a Zero coupon bonds, held by an assessee for
   12 months or less.
   In respect of any other capital assets, STCG means capital gain arising from the transfer of an asset, held
   by an assessee for 36 months or less.
b) LTCG arising on transfer of equity shares of a company or units of an equity oriented fund (as defined
   which has been set up under a scheme of a mutual fund specified under Section 10(23D)) are exempt
   from tax under Section 10(38) of the Act provided the transaction is chargeable to securities transaction
   tax (STT) and subject to conditions specified in that section.
c) As per section 48 of the Act and subject to the conditions specified in that section, LTCG arising on
   transfer of capital assets, other than bonds and debentures (excluding capital indexed bonds issued by the
   Government) and depreciable assets, is to be computed by deducting the indexed cost of acquisition and
   indexed cost of improvement from the full value of consideration.
   As per section 112 of the Act, LTCG is taxed @ 20% plus applicable surcharge thereon and 3%
   Education and Secondary & Higher education cess on tax plus Surcharge (if any) (hereinafter referred to
   as applicable Surcharge and Education Cess and Secondary & Higher Education Cess). However, if such
   tax payable on transfer of listed securities or units or Zero coupon bonds exceed 10% of the LTCG,
   without indexation benefit, the excess tax shall be ignored for the purpose of computing the tax payable
   by the assessee.
d) As per section 111A of the Act, STCG arising on sale of equity shares or units of equity oriented mutual
   fund (as defined which has been set up under a scheme of a mutual fund specified under Section
   10(23D)), are subject to tax at the rate of 15% (plus applicable Surcharge and Education Cess and
   Secondary & Higher Education Cess) provided the transaction is chargeable to STT. No deduction under
   chapter VIA shall be allowed from such income.
e) STCG arising on sale of equity shares or units of equity oriented mutual fund (as defined which has been
   set up under a scheme of a mutual fund specified under Section 10(23D)), where such transaction is not
   chargeable to STT, shall be taxable at the rate of 30% (plus applicable Surcharge and Education Cess and
   Secondary & Higher Education Cess).
f) As per section 71 read with section 74 of the Act, short term capital loss arising during a year is allowed
   to be set-off against short term as well as long term capital gains.
   Balance loss, if any, shall be carried forward and set-off against any capital gains arising during
   subsequent 8 years.


                                                       31
g) As per section 71 read with section 74 of the Act, long term capital loss arising during a year is all owed
   to be set-off only against long term capital gains. Balance loss, if any, shall be carried forward and set-off
   against long term capital gains arising during subsequent 8 years.
h) As per section 54EC of the Act, capital gains arising from the transfer of a long term capital asset (i.e.
   shares being long term in nature which have not been subject to Security Transaction Tax) shall be
   exempt from capital gains tax if such capital gains are invested within a period of 6 months after the date
   of such transfer in specified bonds issued by the following and subject to the conditions special therein:
   • National Highway Authority of India constituted under Section 3 of National Highway Authority of
        India Act, 1988
   • Rural Electrification Corporation Limited, a company formed and registered under the Companies
        Act, 1956
   If only part of the capital gains is reinvested, the exemption shall be proportionately available. However,
   if the new bonds are transferred or converted into money within three years from the date of their
   acquisition, the amount so exempted shall be taxable as Capital Gains in the year of transfer/conversion.
   As per this section, the investment in the Long Term Specified Asset cannot exceed 50 lac rupees.
i) As per Section 54F of the Act, LTCG arising to an Individual/Hindu Undivided Family (HUF) from
   transfer of shares (i.e. shares being long term in nature which have not been subject to Security
   Transaction Tax) shall be exempt from tax if net consideration from such transfer is utilized within a
   period of one year before, or two (2) years after the date of transfer, for purchase of a new residential
   house, or for construction of residential house within three years from the date of transfer and subject to
   conditions and to the extent specified therein.
j) Profit or gains arising from transfer of a capital asset is chargeable to tax as per section 45 of the Act
   except where transfer of shares is covered under section 47(iii) i.e. transfer of shares by way of a gift or a
   will or an irrevocable trust.

2.2 Non-Resident Members

a) Dividend Income:

    Dividend (both interim and final), if any, received by the non-resident shareholders from a Domestic
    Company shall be exempt from tax under Section 10(34) read with Section 115O of the Act.

b) Capital gains:

    Benefits outlined in paragraph 2.1(b) above are also available to a non-resident shareholder except that as
    per first proviso to Section 48 of the Act, the capital gains arising on transfer of shares of an Indian
    Company need to be computed by converting the cost of acquisition, expenditure incurred in connection
    with such transfer and full value of the consideration received or accruing as a result of the transfer, into
    the same foreign currency in which the shares were originally purchased. The resultant gains thereafter
    need to be reconverted into Indian currency. The conversion needs to be at the prescribed rates prevailing
    on dates stipulated. Further, the benefit of indexation as provided in second proviso to section 48 is not
    available to non-resident shareholders.

c) Tax Treaty Benefits:

    As per Section 90 of the Act, the shareholder can claim relief in respect of double taxation, if any, as per
    the provision of the applicable double taxation avoidance agreement entered into by the Government of
    India with the country of residence of the non-resident investor.

2.3 Special provisions in case of non-resident Indians in respect of income / LTCG from specified
    foreign exchange assets under Chapter XII-A of the Act.

i. Non-Resident Indian (NRI) means a citizen of India or a person of Indian origin who is not a resident.
   Person is deemed to be of Indian origin if he, or either of his parents or any of his grand parents, were
   born in undivided India.


                                                       32
   ii. Specified foreign exchange assets include shares of an Indian company which is
       acquired/purchased/subscribed by NRI in convertible foreign exchange.
 iii. Income from investments [other than dividend exempt under section 10 (34)] and LTCG [other than gain
       exempt under section 10 (38)] from assets other than foreign exchange assets shall be taxable @ 20%
       (plus applicable Surcharge and Education Cess and Secondary & Higher Education Cess). No deduction
       in respect of any expenditure or allowance or deductions under chapter VI-A shall be allowed from such
       income.
  iv. As per section 115E of the Act, LTCG arising from transfer of specified foreign exchange assets shall be
       taxable @ 10% (plus applicable Surcharge and Education Cess and Secondary & Higher Education
       Cess).
   v. As per section 115F of the Act, LTCG arising on transfer of a foreign exchange asset shall be exempt in
       case net consideration from such transfer is invested in the specified assets or savings certificates within
       six months from the date of such transfer, subject to the extent and conditions specified in that section.
  vi. As per section 115G of the Act, in case total income of a NRI consists only of investment income/LTCG
       from such foreign exchange asset/specified asset and tax thereon has been deducted at source in
       accordance with the Act, then, it shall not be necessary for a NRI to file return of income under Section
       139(1) of the Act.
 vii. As per section 115H of the Act, where a person who is a NRI in any previous year, becomes assessable
       as a resident in India in respect of the total income of any subsequent year, he may furnish a declaration
       in writing to the assessing officer, along with his return of income under section 139 of the Act for the
       assessment year in which he is first assessable as a resident, to the effect that the provisions of the
       chapter XII-A shall continue to apply to him in relation to investment income derived from the specified
       assets i.e. any foreign exchange asset, for that year and subsequent years until such assets are transferred
       or converted into money.
viii. As per section 115I of the Act, the NRI can opt not be governed by the provisions of chapter XII-A for
       any assessment year by furnishing return of income for that assessment year under section 139 of the
       Act, declaring therein that the provisions of this chapter shall not apply, in which case the other
       provisions of the income tax act shall apply.

 2.4 Foreign Institutional Investors (FIIs)

 a) Dividend Income:
    Dividend (both interim and final), if any, received by the shareholder from the domestic company shall
    be exempt from tax under Section 10(34) read with Section 115O of the Act.

 b) Capital Gains:
    i) As per Section 115AD of the Act, income (other than income by way of dividends referred to in
        Section 115O) received in respect of securities (other than units referred to in Section 115AB) shall
        be taxable at the rate of 20% (plus applicable Surcharge and Education Cess and Secondary &
        Higher Education Cess). No deduction in respect of any expenditure/allowance shall be allowed
        from such income.
    ii) As per Section 115AD of the Act, capital gains arising from transfer of securities shall be taxable as
        follows:
             STCG arising on transfer of securities where such transaction is chargeable to STT, shall be
             taxable at the rate of 15% (plus applicable Surcharge and Education Cess and Secondary &
             Higher Education Cess) as per section 111-A of the Act.
             STCG arising on transfer of securities where such transaction is not chargeable to STT, shall be
             taxable at the rate of 30% (plus applicable Surcharge and Education Cess and Secondary &
             Higher Education Cess).
             LTCG arising on transfer of a long term capital asset, being an equity share in a company or a
             unit of an equity oriented fund, where such transaction is chargeable to STT is exempt from tax
             under Section 10(38) of the Act.
             LTCG arising on transfer of securities where such transaction is not chargeable to STT, shall be
             taxable at the rate of 10% (plus applicable Surcharge and Education Cess and Secondary &
             Higher Education Cess). The indexation benefit shall not be available while computing the
             capital gains.

                                                         33
     iii) Benefit of exemption under Section 54EC of the Act shall be available as outlined in Paragraph
          2.1(B)(h) above.

c)   Tax Treaty Benefits:
     As per Section 90 of the Act, a shareholder can claim relief in respect of double taxation, if any, as per
     the provision of the applicable double taxation avoidance agreements entered into by the Government of
     India with the country of residence of the non-resident investor.

2.5 Mutual Funds
    As per the provisions of Section 10(23D) of the Act, any income of mutual funds registered under the
    Securities and Exchange Board of India, Act, 1992 or Regulations made there under, mutual funds set up
    by public sector banks or public financial institutions and mutual funds authorized by the Reserve Bank
    of India, would be exempt from income-tax, subject to the prescribed conditions.

3.   Wealth Tax Act, 1957
     Shares in a company, held by a shareholder are not treated as an asset within the meaning of Section
     2(ea) of the Wealth Tax Act, 1957, hence, wealth tax is not applicable on shares held in a company.

Notes:

a) All the above benefits are as per the current tax law and will be available only to the sole/first names holder
in case the shares are held by joint holders.
b) In respect of non-resident investors, the tax rates and the consequent taxation mentioned above shall be
further subject to any benefits available under the relevant Double Tax Avoidance Agreement (DTAA), if
any, between India and the country of residence of the non-resident investor.
c) Impact of proposals in the Direct Taxes Code Bill, 2009 has not been considered as the same has not
become an Act as yet.




                                                       34
                                        SECTION IV – ABOUT THE COMPANY
                                              INDUSTRY OVERVIEW

The information in this section is obtained from industry publications, data on websites maintained by private
and public entities, data appearing in reports by market research firms and other publicly available
information. These resources generally state that the information contained therein has been obtained from
sources believed to be reliable but that their accuracy and completeness are not guaranteed and their
reliability cannot be assured.

In this section, bracketed numbers indicate losses / negative figures. For the convenience of readers, certain
amounts reported in US dollars have also been converted into Rupees at the exchange rate of US$1 = Rs.
45.68, which was the Reserve Bank of India reference rate for Rupee on January 13, 2010 as per the RBI.

The Indian Economy

According to the Handbook of Statistics on the Indian Economy (September 15, 2009) published by the RBI,
India had a population of approximately 1.1 billion in Fiscal 2009 with a GDP of approximately US$ 731.04
billion (estimates). The following table sets forth the key indicators of the Indian economy:

                                                                        (Annual percentage change, except for foreign exchange reserves)
                                                          Key Indicators of the Indian Economy
                                                        Fiscal      Fiscal        Fiscal     Fiscal                   Fiscal       Fiscal
                                                         2009        2008          2007       2006                     2005         2004
 GDP growth (1)                                          6.7%        9.0%          9.6%       9.4%                     7.5%         8.5%
 Index of Industrial Production                          2.8%        8.5%         11.6%       8.2%                     8.4%         7.0%
 Growth(2)
 Foreign Exchange Reserves (in                          252.0             309.7        199.2           151.6           141.5        113.0
 US$ billions)
________
1) GDP at Factor Cost (Constant Prices). Data for: Fiscal 2007 is provisional/ for Fiscal 2008 is based on quick estimates/ for Fiscal 2009
   is based on revised estimates;
2) Growth in Index of industrial production (General). Data for Fiscal 2008 is provisional;
 (Source: Handbook of Statistics on the Indian Economy, RBI, September 15, 2009, available on http://www.rbi.org.in)

The recent global economic slowdown has impacted the Indian economy, especially during the second half of
Fiscal 2009. According to a recent article, India‘s GDP growth for the last quarter of Fiscal 2009 was 5.8%
compared to 8.6% for the same period in Fiscal 2008. Going forward, factors such as strong rural demand,
lagged impact of monetary and fiscal stimuli, softening of domestic input prices, investment demand from
brown-field projects and some restructuring initiatives are expected to have a positive impact on the
economy. (Source: RBI Bulletin (May 2009)). Moreover, the result of the general elections that were declared
in May 2009 has led to formation of a stable central government which is expected to augur well for the
Indian economy.

Recent developments in equity markets also indicate growing investor confidence in the Indian economy.
Investment flow through FII route in the first three months of the Fiscal 2010 has been US$ 6,269 million. FII
Investments for the first six months of 2009 was US$ 5,026 million, including a record single day net
purchase of US$ 1,062 million on May 20, 2009 as a positive reaction to the results of the general elections.
(Source: SEBI, http://www.sebi.gov.in)

The Indian Automotive Industry

Introduction

The automotive industry also provides direct and indirect employment to 13 million people and contributes to
nearly 17% of total indirect taxes (Source: Report of Working Group of Automotive Industry - Eleventh Five
Year        Plan        (2007-        2012)       dated       August,       2006,        available       on
http://planningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_automaive.pdf).        The     Automotive

                                                                   35
Mission Plan aims at doubling the contribution of automotive sector in GDP to 10% by taking the turnover to
US$ 145 billion in 2016. (Source: Automotive Mission Plan 2006-2016, Ministry of Heavy Industries &
Public     Enterprises      Government        of      India,    December,       2006      available     on
http://www.siamindia.com/upload/AMP.pdf)

The Indian automotive industry is highly competitive with a number of global and Indian companies present
in the market. Foreign companies are present in India either through joint ventures with local partners,
wholly/partially owned technology tie-ups or as subsidiaries of their parent companies. Most players are
present in more than one segment. The industry is also witnessing diversification by players into other
segments.

Classification of Vehicles in India

Vehicles with four or more wheels can be classified into passenger vehicles and commercial vehicles.
Passenger vehicles can be further segmented into Passenger Cars, having a seating capacity of up to six
persons excluding the driver, Utility Vehicles (or ―UVs‖), have a seating capacity of 7 to 12 persons
excluding the driver and Multi-Purpose Vehicles (or ―MPVs‖), which are van-type vehicles that have
maximum mass not exceeding 3.5 tonne.

From the end use perspective, CVs can be categorised into passenger carriers and goods carriers. The CV
market can be further segmented into Light Commercial Vehicles (or ―LCVs‖), which are generally classified
as those vehicles that have a maximum mass of below 7.5 tons, and M&HCVs which are generally classified
as those vehicles that have a maximum mass of above 7.5 tons.

[Note: Based upon Society of Indian Automobile Manufacturers (“SIAM”) (Flash) Report on Production and
Sales for March 2009]

Sales Trends

The following table sets forth the sales trends of the Indian Automotive Industry for the past five (5) fiscal
years:

                            Indian Automotive Industry – Sales Trends (Domestic + Exports)
                                                (Number of Vehicles)
Category           Fiscal 2010         Fiscal 2009         Fiscal       Fiscal       Fiscal            Fiscal       Fiscal
                   (Apr –Dec)          (Apr –Dec)           2009         2008        2007              2006         2005
Passenger
                          1,698,551            1,359,047     1,887,619     1,768,283     1,578,431    1,318,809   1,227,974
Vehicles
Commercial
                           383,315               324,222       426,795       549,488       517,302     391,264      348,370
Vehicles
Three
                           439,848               380,526       497,793       506,006       547,806     367,872      374,657
Wheelers
Two
                          7,628,337            6,363,634     8,441,844     8,068,991     8,491,978    7,569,573   6,576,172
Wheelers
Total                   10,150,051             8,427,429    11,254,051    10,892,768    11,135,517    9,647,518   8,527,173
(Source: SIAM Report on Comparative Production, Domestic Sales for March 2009, March 2008, March 2006 and December 2009)

Sales (domestic as well as exports) of the Indian automotive industry grew from 8,527,173 vehicles in Fiscal
2005 to 11,254,051 vehicles in Fiscal 2009, at a compounded growth rate of 7.2%. This growth has been
driven by several factors including a growing economy, increasing purchasing power of the Indian middle
class, new product launches and vehicle finance schemes from automobile manufacturers and financial
institutions, and increased focus on exports. Of the total sales, exports contributed 13.6% in Fiscal 2009
compared to 7.4% in Fiscal 2005. Exports have grown at a compounded growth rate of 24.9%, while
domestic sales have grown at a compounded growth rate of 5.3% during the same period. In the four or more


                                                            36
wheels category, the passenger vehicle industry forms the largest constituent with total sales of 1,887,619
vehicles in Fiscal 2009, of which 82.2% were domestic sales.

The Indian CV Industry

Introduction

The Indian CV industry had a moderate beginning because of the controls imposed by the government
licensing regime that had dominated the Indian economic scene till the 1980‘s. Consequently, the
manufacturing capabilities of most of the CV players in India had remained constrained. Post liberalization
the industry has moved in line with the Indian economy.

The total sales of the CV market grew at a compounded growth rate of 16.4% to reach 549,488 vehicles in
Fiscal 2008 from 348,370 vehicles in Fiscal 2005. Sales growth during this period was supported by factors
including strong economic growth, commissioning of road constructions projects, falling interest rates and
availability of vehicle finance. In Fiscal 2009 sales declined by 22.3% to reach 426,795 vehicles due to a
variety of reasons including the global financial crisis leading to a slowdown in economic growth in India,
tightening in availability of credit for customers, hardening of interest rates and increase in fuel prices. Out of
total CV sales in Fiscal 2009, 42,673 vehicles or 10.0% were exports. Both domestic sales and exports
registered negative growth of 21.7% and 27.7% respectively in Fiscal 2009. (Note: Based upon the SIAM
(Flash) Report on Production and Sales for March 2009)

However Fiscal 2010 appears to be the year of recovery as sales of CV for the nine months ended December
31, 2009 grew by 18.23% to 383,315 units compared to 324,222 units for the same period ended on
December 31, 2008. (Note: Based upon the SIAM (Flash) Report on Production and Sales for December
2009)

Key Segments

From the end use perspective, the CV market can be categorised into passenger carriers and goods carriers.
The CV market can be further segmented into LCVs, having maximum mass below 7.5 tons, and M&HCV,
having maximum mass of above 7.5 tons.

Sales Trends

The following table sets forth the segmental sales trends of the Indian CV market for the past five (5) fiscal
years:

                           Indian CV Industry – Segmental Sales Trends (Domestic + Exports)
                                                 (Number of Vehicles)
Category (based on                Fiscal 2010   Fiscal 2009     Fiscal     Fiscal       Fiscal      Fiscal      Fiscal
maximum mass)                     (Apr –Dec)    (Apr –Dec)      2009       2008         2007        2006        2005
1) Passenger Carriers
  1.1) LCV                          26,606        24,120         32,271     34,139       28,871      24,786   21,465
    -    Up to 5 tons               9,961         8,048          10,507     10,382        7,821       9,144      10,261
    -    Exceeding 5 tons,          16,645        16,072         21,764     23,757       21,050      15,642      11,204
         but less than 7.5 tons
         (1)




  1.2) M&HCV                        32,676        31,615         42,441     48,662       37,907      33,602      30,261
    -    Exceeding 7.5 tons,        7,388         5,460           7,168      6,240        4,913       4,855       2,515
         but less than 12 tons
         (1)




                                                           37
                            Indian CV Industry – Segmental Sales Trends (Domestic + Exports)
                                                  (Number of Vehicles)
Category (based on                 Fiscal 2010    Fiscal 2009       Fiscal       Fiscal        Fiscal       Fiscal         Fiscal
maximum mass)                      (Apr –Dec)     (Apr –Dec)        2009         2008          2007         2006           2005
    - Exceeding 12 tons,             25,232         26,134           35,230       42,422        32,994       28,747         27,671
        but less than 16.2
        tons (1)
                                        56             21                 43              -            -             -         75
     -    Exceeding 16.2 tons


Total Passenger Carrier
(1.1+1.2)                            59,282          55,735         74,712       82,801       66,778        58,388         51,726


2) Goods Carrier
   2.1) LCV                          185,571        144,146          194,118     218,674       194,265      144,936        114,925
     -    Upto 5 tons                157,940        120,581          163,578     182,852       154,022       99,156         66,131
     -    Exceeding 5 tons,          27,631          23,565           30,540      35,822        40,243       45,780         48,794
          but less than 7.5 tons
          (1)




   2.2) M&HCV                        138,462        124,341        157,965       248,013       256,259      187,940        181,719
     -    Exceeding 7.5 tons,        30,577          21,914           29,486      43,088        37,596       33,629         29,446
          but less than 12 tons
          (1)

     -    Exceeding 12 tons,         36,737          37,791           48,189      67,704        70,513       67,968         73,717
          but less than 16.2
          tons
     -    Exceeding 16.2             71,148          64,636           80,290     137,221       148,150       86,343         78,556
          tons(2)


Total Goods Carrier                  324,033        268,487          352,083     466,687       450,524      332,876        296,644
(2.1+2.2)


Total CV Sales (1 + 2)               383,315        324,222          426,795     549,488       517,302      391,264        348,370
1) Ranges where the Company currently has a presence.
2) Includes Goods Carriers - Haulage Tractors.
(Source: SIAM Report on Comparative Production, Domestic Sales for December 2009, March 2009, March 2008 and March 2006)

For the nine months ended December 31, 2009 the LCV sales grew by 26.10% to 212,177 units from 168,266
for the nine months ended December 31, 2008. Similarly, M&HCV sales grew by 9.73% from 155,956 for
the nine months ended December 31, 2008 to 171,138 units during the nine months ended December 31,
2009. (Note: Based upon SIAM (Flash) Report on Production and Sales for December 2009)

Between Fiscal 2005 and Fiscal 2009, while the LCV segment grew at a compounded growth rate of 13.5%,
the M&HCV segment declined by 1.4%. In the LCV segment, passenger carriers and goods carries developed
at a compounded growth rate of 10.7% and 14.0%, respectively. During the period, goods carriers with a
tonnage of up to 5 tons registered the highest growth (compounded growth rate of 25.4%) followed by
passenger carriers with a tonnage of between 5 and 7.5 tons (compounded growth rate of 18.1%). (Note:
Based upon the SIAM (Flash) Report on Production and Sales for March 2009)

In the M&HCV segment, while passenger carriers grew at a compounded growth rate of 8.8% and the goods
carrier market declined by 3.4% between Fiscal 2005 and Fiscal 2009. During the same period, the maximum
growth was registered by passenger carriers with a tonnage of between 7.5 to 12 tons (compounded growth

                                                              38
rate of 29.9%) followed by passenger carriers with a tonnage of between 12 and 16.2 tons (compounded
growth rate of 6.2%). Goods carriers with a tonnage of between 7.5 and 12 tons experienced marginal growth
compared to de- growth in the 12 to 16.2 tons range. (Note: Based upon the SIAM (Flash) Report on
Production and Sales for March 2009)

The overall passenger carrier market grew at a compounded growth rate of 9.6% between Fiscal 2005 and
Fiscal 2009, compared to a 4.4% growth registered by the goods carrier market for the same period. In the last
five (5) fiscal years, passenger carriers increased their market share in the ranges where our Company
operates. Furthermore, as discussed in the aforementioned paragraphs, the passenger carriers registered strong
growth in the ranges where our Company operates. The charts below set forth the segmental break-up of our
range of CVs and the compounded growth rates in our range of passenger carriers between Fiscal 2005 and
Fiscal 2009:




1)  SML’s range includes (i) in passenger carriers – (a) Exceeding 5 tons, but less than 7.5 tons, (b) Exceeding 7.5 tons, but less than
    12 tons and (c) Exceeding 12 tons, but less than 16.2 tons, and (ii) in goods carriers – (a) Exceeding 5 tons, but less than 7.5 tons,
    and (b) Exceeding 7.5 tons, but less than 12 tons.
(Source: SIAM Flash Report (Media) for March 2009, March 2008 and March 2006)

Competitive Landscape

Most of the players in the CV industry are present in both the passenger and goods carrier categories. The key
players in the CV industry include Ashok Leyland, Eicher Motors, Force Motors, Mahindra & Mahindra,
Tata Motors, Swaraj Mazda and Hindustan Motors. Some of the international players in the CV space include
Mercedes-Benz India, Tatra Vectra Motors and Volvo.

Key Factors affecting demand for CVs

     Economic Growth and Increased Spending on Public Transport: Overall freight movement in the
     country is a function of industrial and agricultural growth. High growth in GDP reflects higher economic
     activity, which typically results in transportation of more freight and hence higher demand for CVs.

     Indian‘s economic outlook is expected to remain positive with growth in key user segments such as
     construction, infrastructure and engineering. Moreover, the result of the general elections that were
     declared in May, 2009 has led to formation of stable central government which is expected to augur well
     for the Indian economy. Furthermore, the growing tourism sectors along with the rising needs of India‘s
     middle class, who increasingly seek comfortable road transport, is likely to positively impact the CV
     industry, especially the demand for passenger carriers. In many major cities, another factor promoting the
     demand for passenger carriers is the recent focus of public transport policy on improved bus transport,
     including more and better buses. A recent development is the new high-capacity, express bus system
     proposed for Bangalore and Delhi. The government has recently extended support to states for purchase
     of buses, including low/semi-low floor buses, under the Jawaharlal Nehru National Urban Renewal
     Mission (―JNNURM‖). In addition, several state governments and state organizations have begun/ are
     planning to upgrade their vehicle fleets in the coming years, which is likely to further stimulate the
     passenger carrier market.

                                                                   39
Increased Procurement from Healthcare, Education and Defence Sectors: Increased economic
activity in sectors such as healthcare, education and defence impacts the demand for CVs, specifically
passenger carriers.

In the healthcare sector, the expected rise in demand for quality patient transportation facilities especially
from private hospitals is likely to lead to a corresponding increase in demand for customized ambulances.
Similarly, private schools and educational institutions are increasingly demanding comfortable buses
which meet specific safety norms. The expectant revamp of vehicle fleet by armed forces is also likely to
present a significant opportunity for CV manufacturers.

Interest Rates and Availability of Finance: Sale of CVs, as most other automobiles, is dependant on
prevailing interest rates and the availability of retail finance. Higher interest rates and stringent lending
norms can adversely affect demand. On the other hand, lower interest rates stimulate demand. Small
truck operators in the unorganised sector tend to be more vulnerable to interest rate fluctuations and
lending norms as compared with large-fleet operators.

The growth in CV sales prior to Fiscal 2009 was led by reduced interest rates and relatively easy
availability of finance. The hardening of interest rates and lending norms during Fiscal 2009 impacted
demand during the period. In a move to alleviate the pressure of India‘s credit market due to impact of
global liquidity constraints, the RBI undertook a series of reductions in the reserve ratios and the policy
rates during the latter part of Fiscal 2009. Furthermore, in order to boost demand in the CV industry, the
government announced an extension of the validity of accelerated depreciation benefit till September,
2009 and arrangements whereby public sector banks would provide a special line of credit to non-
banking finance companies for extension of CV loans. It remains to be seen how rapidly and effectively
these measures translate into lower interest rates and easier availability of credit.

Improvement in Road Infrastructure: Improvement in road infrastructure is expected to enable a more
effective distribution of goods and increase in passenger movement across the country and hence higher
demand for automobile vehicles. Increased government focus on roads and highway development
through, among other initiatives, the National Highways Development project (including the Golden
Quadrilateral project) to upgrade and strengthen national highways, spending by various state
governments to widen state roads and implementation of road construction programmes, augurs well for
the CV industry. Such a network may enable further market share gains for road transport over railways.
On the other hand, competition and new initiatives from railways, such as reducing unit cost to improve
efficiency and dedicated freight corridor, may keep a check on rising share of roads in freight movement.

Taxes and Duties: Reduction in excise duties and the introduction of VAT regime can act as catalyst for
higher demand of automobiles. A cut in excise duty reduces prices, which, if passed on, enhances the
affordability for buyers.

Restriction on Overloading: While legislation on overloading of goods exists, strict compliance and
enforcement of such legislation is generally lacking in India. Stricter enforcement of such legislation can
stimulate demand as transporter may need to buy more vehicles. In a judgement delivered on November
9, 2005, the Supreme Court passed an order banning the practice followed by some state governments, of
issuing gold cards/tokens that allow the holders to overload their trucks after payment of fixed charges.
The judgement impacted the demand for CVs, especially in Fiscal 2006 and 2007. Stricter enforcement
of such restrictions going forward could translate into a one-time additional demand of CV.

Profitability of Transport Operators: The demand for CVs is driven to a considerable extent by the
profitability of transport operators. The profitability of transport operators remains very sensitive to
freight rates and diesel prices. Freight rates are determined by two factors: the quantity of goods to be
moved and the number of trucks around to move the goods. Although diesel prices in India continue to
be artificially supported at lower levels by the government, any increase in fuel price results in higher
operating cost. This impacts the margins of the operators especially if freight rates remain stagnant.


                                                   40
Regulation of Safety and Emission Standards: Tightening of emission and safety standards not only
increases the costs of acquisition of automobiles, but also increases the demand for ‗compliant‘ vehicles
and accelerates the replacement cycles for older vehicles. Over the years there has been a trend towards
greater cognisance of vehicle emissions standards in India with consumer demand taking increasing
account of fuel efficiency and emissions. For instance the buses procured under the JNNURM are
required to be in line with the auto fuel policy approved by government of India in 2002, which lays
down roadmap of tighter emission norms up to 2010 i.e. introduction of Bharat Stage-III and Stage-IV
vehicles. More recently, there has been an increasing demand for CNG vehicles for passenger and goods
carriers in both the private and public sectors. A gas grid of approximately 8,000 kilometers (in addition
to existing 7,000 kilometers) is expected to be completed by 2010 which would lead to increased
availability of CNG thus leading to increased demand for CNG driven vehicles.

The recent global financial crisis, reduction in availability of vehicle financing and higher interest rate
has impacted the demand for CVs in India, particularly in the second half of Fiscal 2009. According to
the SIAM, sales (domestic and exports) for CVs fell from 309,095 vehicles during the second half of
Fiscal 2008 to 178,170 vehicles during the second half of Fiscal 2009. In line with overall decline in
demand of CVs during the second half of Fiscal 2009, our Company also experienced a fall in sale of
CVs which severally impacted net revenue and overall performance of operations during Fiscal 2009.




                                                 41
                                              OUR BUSINESS

Overview

We are a commercial vehicle (―CV‖) manufacturer engaged in the design, development, manufacture,
assembly, marketing and distribution of passenger carriers and goods carriers for the transportation industry.
Our current product portfolio covers passenger carriers and goods carriers with a Gross Vehicle Weight
(―GVW‖) range of 5.7 tons to 12 tons. Furthermore, in the passenger carrier segment, we also offer buses
with up to 41-person seating capacity and a GVW of 16.2 tons.

We were incorporated in 1983 and in 1984 we signed a joint venture agreement for the manufacture of LCVs
with, Punjab Tractor Limited, India, (―PTL‖) Mazda Motor Corporation, Japan (―Mazda‖) and Sumitomo
Corporation, Japan (―Sumitomo‖). We commenced commercial operations in 1986 with the introduction of
our first cargo LCV truck with a GVW of 6 tons, followed by a 26 seater bus, both of which were based on
the design procured from Mazda (―Mazda design‖). Over the years, on the strength of our research and
development efforts, we have expanded our product portfolio both in respect of passenger carriers and goods
carriers. In the passenger carrier category, we currently offer non-air conditioned and air conditioned bus
models with a seating capacity ranging from 10 to 41 seats. In the goods carrier category we currently have
seven (7) core truck models with a GVW range of 6.1 tons to 7.5 tons in the LCV segment and 8.0 tons to
12.0 tons in the M&HCV segment with several variants. In addition, we manufacture special application
vehicles in the passenger and goods carrier categories which include a variety of ambulances, troop carriers,
dumper / garbage removal vehicles, water tankers, recovery vans and police vans.

Recently, we have forayed into manufacture of luxury air-conditioned buses. The production of luxury buses
in the M&HCV segment has been developed on the Isuzu chassis pursuant to technical assistance agreements
with Isuzu. For the manufacture of bus bodies we have obtained design and technical know-how from
Gunung Coach Sdn Bhd, Malaysia (―Gunung‖) for both the LCV and M&HCV segments. Gunung has also
supplied us with relevant designs, jigs, fixtures and tools along with technical personnel to assist us in the
absorption of technology and enhance our production capabilities. For the production of the body of our
luxury executive coaches in the LCV segment, we have procured design and technology from SKS
Coachbuilders SDN Bhd, Malaysia (―SKS‖).

We have three (3) manufacturing facilities located at our plant in village Asron, district Nawanshahar, Punjab,
near Ropar. With the installation of our second vehicle manufacturing facility and our new in-house bus body
facility at our Nawanshahar plant, our manufacturing capacity has increased to 18,000 vehicles by March 31,
2009. We also have a centre for research and development located at our plant which has been set-up to
study, develop and evolve new technologies for our products. Over the years we have leveraged our research
and development abilities to expand our range of offerings, indigenise technologies, localize imported
products and manufacture quality vehicles that meet evolving emission norms in India, such as Bharat Stage –
II and Bharat Stage - III.

We sell our vehicles to retail customers through our dealer network, and to government departments, both
central and state, and bulk customers through direct orders. We also export our vehicles to countries like
Bangladesh, Sri Lanka, Nepal and Ghana through distributors in these countries. In Fiscal 2009, 85%, 7% and
8% of our unit sales were made to retail customers, government departments and bulk customers, and the
export market, respectively. Our marketing operations are spread across India through a network of 89 dealers
as on December 31, 2009.

Sumitomo Corporation, one of the three (3) original promoters of our Company, the other two (2) being PTL
and Mazda, has increased its equity stake to 53.52 % after acquiring the shareholding of PTL and Mazda. As
on date of this Letter of Offer, neither PTL nor Mazda have any shareholding in our Company. Sumitomo is a
global conglomerate with eight (8) business units covering metal products, transportation and construction
systems, infrastructure, media, network and lifestyle, chemicals and electronics, mineral resources and
energy, general products and real estate, and finance and logistics. We believe that these relationships with
Sumitomo, our Promoter, and our technical alliance with Isuzu allow us to leverage and tap into their
respective resources, expertise and technical knowledge.

                                                      42
Our Strengths

We believe that our business has the following key strengths.

Strong in-house research and development capability

Since our inception we have placed strong emphasis on developing our in-house research and development
capabilities. Our centre for research and development is located at our Nawanshahar plant and currently we
have a team of 30 engineers who are engaged in developing new vehicle platforms and products across our
product segments. We commenced commercial operations with the introduction of a cargo LCV truck with a
GVW of 6 tons, followed by a 26 seater bus, both of which were based on the Mazda design. Since then our
in-house research and development initiatives have resulted in the expansion of our product portfolio, and
successful absorption and indigenization of technology. In the goods carrier category we have added three (3)
more wheel bases and currently have seven (7) core truck models with a GVW range of 6.1 tons to 7.5 tons in
the LCV segment and 8.0 tons to 12.0 tons in the M&HCV segment with several variants. In the passenger
carrier category we have designed five (5) models of buses in-house and currently offer bus models with a
seating capacity of 10 to 41 seats. We have also developed an offering of 20 special application vehicles
through our own research and development.

Since 1987, the Government of India has accorded us recognition as an in-house research and development
unit. Over the years, our research and development initiatives have not only enabled us to indigenise
technologies, localize parts and components used in the manufacture of our vehicles thereby reducing our
reliance on imports, but has also enabled us to develop new products and variants including three (3) models
of trucks and four (4) models of buses running on alternative fuels such as Compressed Natural Gas (―CNG‖)
and upgrade our engine platforms to comply with the Bharat Stage - II, Bharat Stage - III emissions standards.

We believe that our in-house research and development capabilities enable us to develop new products that
meet the needs of our customers and manufacture quality vehicles that meet evolving emission norms.

Ability to design, develop and manufacture customized products

Over the years, we have developed eight (8) customized vehicles to meet the needs of our customers
including soil testing vans, mobile blood banks, display vans, fire tenders, animal rescue vans, delivery vans,
low floor buses for the Delhi Metro and bomb disposal vans. Currently, we have a team of 20 designers who
are supported by engineers and technicians from our research and development center. We design and
develop our application vehicles keeping in mind our target customers as well as the market requirements and
compliance with various regulatory, safety and emission norms. We believe our ability to design, develop and
manufacture customized products enables us to meet the specific requirements of our bulk customers, and
position us quickly respond to market opportunities and changing trends in the segments we operate in.

Strong and experienced management

Our senior management team, including certain of our Directors, has substantial experience in the CV
industry and has been instrumental in the growth of our organization. For instance, our Managing Director,
Mr. Yash Mahajan, has more than 36 years of experience in the automobile industry. Furthermore, our senior
management team, includes Mr. B.S. Devgun (Special Advisor to Managing Director) who has 44 years of
experience in the automobile industry, Mr. R.P. Sehgal (Executive Director – Works) who has 40 years of
experience in the automobile industry, Mr. Lakhinder Singh (Associate Vice President – R&D) who has 33
years of experience in the automobile industry, Mr. Gopal Bansal (Senior Vice President – Finance &
Company Secretary) who has 29 years of experience in finance and secretarial matters including project
financing and Mr. K.B. Prasad (Vice President – Marketing), who has 35 yeas of experience in the
engineering and automobile industry.
 We have witnessed low attrition of our key management personnel and believe that the continued association
of many members of our senior management team with the Company has contributed positively to the
development of our business. We believe that our executives working with our senior management are also

                                                      43
well equipped to face the challenges of growth within our Company and our industry. We believe that our
management team is well placed to provide result producing strategic leadership, direction and execution
skills to improve our current operations and take advantage of emerging opportunities in the industry.

Strong marketing teams

We sell our vehicles to retail customers through our dealer network, and to government departments, both
central and state, and bulk customers through direct orders. Our marketing operations are spread across India
through our zonal / regional offices which manage our network of 89 dealers as of December 31, 2009. Our
dealer network consists of 29 dealers in Northern India, 32 dealers in Southern India, 12 dealers in Western
India, 7 dealers in Central India and 9 dealers in Eastern India as of December 31, 2009. We directly deal
with government departments, both central and state, as well as bulk customers from our corporate office in
Chandigarh through a dedicated sales and marketing team who follow-up with existing customers for repeat
orders and tracks new customers for their requirements of vehicles which fit into our product portfolio. We
export our vehicles to countries like Bangladesh, Sri Lanka, Nepal and Ghana through distributors in these
countries and have set-up a dedicated export cell in our corporate office in Chandigarh for the purpose.

We believe that our marketing teams possess in-depth knowledge of our products and customer requirements,
and aspire to provide customers with the best services. With their knowledge of customer‘s needs and wide
industry experience, our marketing teams assist us in the development of our product offerings to ensure that
our final products meet the expectations of our customers and are accompanied by effective after sales
support services. Our marketing strategy focuses on promoting our products by educating the customer on the
beneficial features of our vehicles, leveraging our marketing arrangements such as our alliances with Canara
Bank and Federal Bank and providing effective after sales services. We believe that this has helped create a
loyal base of customers who associate our vehicles with reliability and value.

Business association with Sumitomo and technical alliance with Isuzu

Our technical assistance agreements with Isuzu, a Japanese manufacturer of CVs, has opened a gateway for
us to Isuzu‘s vehicle / engine range covering CNG, Liquefied Petroleum Gas (―LPG‖) and hybrid versions
for both passenger and goods carriers. We currently manufacture two models of luxury air conditioned buses
under the Isuzu platform, one in the 27 seater range and one in the 41 seater range. Additionally, we will also
benefit from Isuzu‘s expertise in research and development, technology, manufacturing and quality systems
for future product developments / launches. Furthermore, we have and continue to benefit from our close
business linkage with Sumitomo which is a global conglomerate with eight (8) business units covering metal
products, transportation and construction systems, infrastructure, media, network and lifestyle, chemicals and
electronics, mineral resources and energy, general products and real estate, and finance and logistics. For
instance, by purchasing certain automotive components for the production of our vehicles and spares from
Sumitomo we benefits from the logistical and purchase synergies from our association with Sumitomo. For
Fiscal 2009, such purchase of components and spares aggregated Rs. 1,516.31 lacs. We believe that these
relationships with Sumitomo, our Promoter, and our technical alliance with Isuzu allows us to leverage and
tap into their respective expertise and technical knowledge.

Our Strategy

We have the following strategies to develop our business and continue to grow further.

Expanding our product offerings

We offer a range of passenger and goods carriers in both the LCV and M&HCV segments. We believe that
our in-house research and development capabilities, ability to design, develop and manufacture customized
products and our technical alliance with renowned companies such as Isuzu will further enable us to expand
our product offerings in segments / ranges which, we believe, have potential for strong growth. We believe
that our understanding of customer preferences and well developed in-house research and development
capabilities has enabled us to anticipate emerging customer requirements and develop suitable products that
provide a strong value proposition to our customers.

                                                      44
In the passenger carrier category, we have recently forayed into the manufacture of luxury air-conditioned
coaches. We intend to launch models of air-conditioned luxury buses and coaches targeted at the tourism
industry and long distance inter-city travel. Furthermore, to meet the expected demand for comfortable public
road transport in cities, we intend to introduce low / semi-low floor city buses with optional air conditioning.
Similarly, in the goods carrier category we plan to introduce various upgrade and special trucks. We plan to
continue to customize and manufacture special purpose vehicles to meet the requirements of our customers
with a special focus on the growing health, education and retail sectors.

Expanding our manufacturing facilities

We commenced the establishment of our second vehicle manufacturing facility and a new in-house bus body
facility at our Nawanshahar plant beginning in Fiscal 2007. Both facilities became operational during Fiscal
2009 and our manufacturing capacity increased to 18,000 vehicles as on March 31, 2009. As part of our
growth strategy and with a view to take advantage of emerging business opportunities, we plan to further
expand these facilities with the objective of optimizing the utilization of the design infrastructure at these
facilities, introducing new manufacturing amenities required for enhancing our product portfolio and
expanding overall vehicle production capacities. For more information on the facilities and our future
expansions, please see the section titled ―– Our Plant‖ under this section titled ―Our Business‖ on page 53.
We believe that the expansion of these manufacturing facilities will help us manufacture our planned
portfolio of products and tap emerging business opportunities in the CV industry.

Further enhancing our distribution network and customer base

We have established a network of 29, 32 and 7 dealers in Northern, Southern and Central India as of
December 31, 2009, and are continually focusing on exploring opportunities to further penetrate in Western
and Eastern India by expanding our dealer network in the relevant states through new dealer appointments
that conform to our standards. For further details of our dealer network in India, please refer to the section
titled ―– Sale and Distribution of Vehicles‖ under this section titled ―Our Business‖ on page 48. We plan to
consolidate our presence across all regions in India and will continue to assist our existing dealers in
enhancing their performance and improving their sales and service networks. We seek to increase our
business with our existing customers and expand our customer base by developing suitable products that
provide a strong value proposition, leveraging our relationships and reference lists, and providing outstanding
after sales services to ensure durable satisfaction to the end users of our products.

Continuing focus on high quality standards and enhancing customer satisfaction

One of our principal goals has all along been and will continue to be to achieve high quality standards for our
products and services. We have been certified as an ISO 9001:2008 company for the design and manufacture
of LCVs, medium commercial vehicles and special purpose vehicles. Our bus body facility has been
recognized by the Automotive Research Authority of India, Pune for bus body building. We induct vendors
as regular sources only after the completion of an assessment process and have established procedures for
ensuring quality control of components sourced from such vendors. Our quality assurance programs include
random testing of production samples, frequent re-calibration of production equipment, analysis of post-
production vehicle performance and ongoing dialogue with workers to reduce production errors. We plan to
continue to focus on maintaining and upgrading the quality standards relating to our production processes and
procurements.

We believe that our sales and service network has enabled us to provide timely feed back on the performance
of our vehicles which has enabled us to continue improving the quality of our products and services, and we
plan to strengthen our dealer network and offices across India to further improve our responsiveness to
market and customer service needs.




                                                      45
Continuing focus on cost management

We believe that we have always been an extremely cost conscious enterprise and we believe in maintaining a
high degree of financial discipline in the conduct of our business affairs. We have put in place workmen
reward schemes to encourage their full involvement and active participation in our constant endeavours aimed
towards improvement of productivity, quality and cost reduction. We plan to continue to manage our costs
efficiently to offer competitively priced, high quality vehicles. Our cost reduction strategy will focus on,
among other things, increasing the levels of localization for our new product introductions, improving raw
material and component sourcing, vendor participation in cost reduction exercises, continuing focus on
sharing basic vehicle platforms among multiple models in order to monetise research and development costs
more effectively, and reducing selling, general and administrative costs over maximum models and variants.

Our Product Portfolio

Our current product portfolio covers passenger carriers and goods carriers in the GVW range of 5.7 tons to 12
tons. Furthermore, in the passenger carrier segment, we also offer buses with a 41-person seating capacity
with a GVW of 16.2 tons which have recently been introduced by us in the market. In addition, we
manufacture special application vehicles in the passenger and goods carrier categories which include a variety
of ambulances, troop carriers, dumper placers / garbage removal vehicles, water tankers, recovery vans and
police vans.

The following table sets forth the segmental unit sales of our vehicles for Fiscal 2009 and 2008:

Category                                                                                  Fiscal              Fiscal
                                                                                           2009                2008
Passenger Carriers                                                                        4,860               6,388
Goods Carriers                                                                            3,160               4,884
Total Sales                                                                               8,020              11,272

Passenger carriers

In the passenger carrier category, we currently offer non-air conditioned buses and air conditioned buses and
coach models with a seating capacity ranging from 10 to 41 seats. Our current offerings of passenger carriers
have a GVW range of 5.7 tons to 6.4 tons in the LCV segment and 8.0 tons to 16.2 tons in the M&HCV
segment.

Our non-air conditioned buses are supplied in standard, semi-deluxe and deluxe versions. We use our in-
house vehicle manufacturing facilities to manufacture the chassis of all our passenger carriers. While we have
the in-house capabilities of producing the bodies for our non-air conditioned buses, we currently procure the
bodies from two (2) different third party vendors who build such bodies as per the designs and specifications
prescribed by us.

We have recently forayed into the manufacture of luxury air conditioned buses and coaches, for which we
have set-up a second vehicle manufacturing facility and a new in-house bus body manufacturing facility at
our plant at village Asron, Nawanshahar, Punjab. The production of our luxury air-conditioned buses in the
M&HCV category has been developed on the Isuzu chassis pursuant to technical assistance agreements with
Isuzu. For the manufacture of bus bodies in the LCV and M&HCV category, we have already obtained design
and technical know-how, relevant designs, jigs, fixtures and tools. In addition, for the production of the body
of our luxury executive coaches in the LCV category, we have also procured the design and technology.

The following table sets forth brief details of our current product portfolio of non-air conditioned and air
conditioned buses in the passenger carrier category:

                          Current Product Portfolio in the Passenger Carrier Category
Category                                                    Number of Seats             GVW Range (in tons)
Non-air Conditioned Buses
    1. Standard buses (1)                                 18 to 41 ordinary seats          6.4 to 8.0 tons
    2. Semi-deluxe buses (1)                             14 to 32 high back seats          6.4 to 8.0 tons

                                                      46
                              Current Product Portfolio in the Passenger Carrier Category
Category                                                        Number of Seats                         GVW Range (in tons)
    3. Deluxe buses (1)                                       10 to 24 reclining seats                    6.4 to 8.0 tons

Air Conditioned Buses and Coaches
    4. Luxury executive coaches (2)                                     13 reclining seats                    5.7 tons
    5. Luxury buses (2)                                               16 to 27 reclining seats             6.4 to 8.0 tons
    6. Luxury buses (2)                                                 41 reclining seats                    16.2 tons
Notes:
     1)   Available in Bharat Stage – II and Bharat Stage – III versions with diesel and CNG options.
     2)   Available in Bharat Stage – III version with diesel option only.

Goods carriers

In the goods carrier category, we currently offer seven (7) core truck models with a GVW range of 6.1 tons to
7.5 tons in the LCV segment and 8.0 tons to 12.0 tons in the M&HCV segment. Within this range, we offer
several vehicle variants including cabin chassis (without the cargo box), fixed side decks and high decks. We
manufacture our goods carriers in a ready to use condition at our vehicle manufacturing facilities in our
Nawanshahar plant.

The following table sets forth brief details of our current product portfolio in the goods carrier category:

                                Current Product Portfolio in the Goods Carrier Category
 Models                                                                                                 GVW Range (in tons)
 LCV
    1. Sartaj (1)                                                                                                      6.1 tons
    2. Premium (1)                                                                                                     6.4 tons
    3. Prestige (1)                                                                                                    7.5 tons
 M&HCV
    4. Supreme (1)                                                                                                     8.0 tons
    5. Super (1)                                                                                                       8.8 tons
    6. Samrat (1)                                                                                                     10.2 tons
    7. Super 12 (2)                                                                                                   12.0 tons
Notes:
     1)   Available in Bharat Stage – II and Bharat Stage – III versions with diesel and CNG options.
     2)   Available in Bharat Stage – II and Bharat Stage – III with diesel option only

Special application vehicles

We manufacture special application vehicles in both the passenger and goods carrier categories in accordance
with the specifications, designs and layouts requested by our customers.

The following table sets forth brief details of our range of special application vehicles and their usage:

 Products                                                               Usage
 Ambulances including cardiac ambulances and critical care              Hospitals
 ambulances/ Dental vans/ Mobile clinics
 Four-wheel drive                                                       For defence services both for cargo and passenger
 Troop carriers/ Police and prisoner vans                               Army/ Law Enforcement
 Dumpers/ Garbage removal vehicles                                      Tipping materials in the construction industry/
                                                                        sanitation
 Water tankers                                                          Water transportation
 Fire tenders                                                           Fire departments
 Recovery vans                                                          Towing vehicles
 Aluminium delivery boxes                                               Food / perishable transport

Product Warranty

Our vehicles carry a 12 month warranty for any defects in material and workmanship from the date of
delivery of the vehicle to the end-user customer. Vehicles are serviced at our dealer locations for any

                                                                 47
requirement and replacement covered under warranty. We regularly carry out inspections of facilities,
infrastructure and availability of genuine spare parts at our dealer / service outlets to ensure that the end-users
of our products receive efficient and prompt attention and service.

Our engines typically carry a two (2) year warranty from the date of delivery. The warranty covers defects in
manufacturing, material and workmanship by the Company.

Sale and Distribution of Vehicles

We sell our vehicles to retail customers through our dealer network, and to government departments, both
central and state, and bulk customers through direct orders. We also export our vehicles to countries like
Bangladesh, Sri Lanka, Nepal and Ghana through distributors in these countries. In Fiscal 2009, 85%, 7% and
8% of our unit sales were made to the retail customers, government departments and bulk customers, and
exports, respectively.

At present, our marketing operations are spread across India through a network of 89 dealers as on December
31, 2009. The following table indicates our current dealership network in India:

      State             S. No.                         Dealership Name                              City
  Andhra Pradesh
                        1        A.V. Motors                                                Hyderabad
                        2        Jayalakshmi Motors                                         Rajahmundry
                        3        Kesar Motors                                               Visakhapatnam
                        4        Jayalakshmi Motors                                         Kadappa
                        5        Sri Venkateswara Motors                                    Tirupati
                        6        Divya Engineering & Body Building Industries               Mehboobnagar
                        7        Sri Pinakini Motors                                        Nellore
                        8        Combined Motors                                            Adilabad

Delhi
                        9        Inder Singh & Co.                                          Delhi
                        10       Metaltech Motors Private Limited                           Delhi

Goa
                        11       Chowgule Industries                                        Goa

Gujarat
                        12       Aastha Motors                                              Ahmedabad
                        13       Shiv Shakti Motors                                         Rajkot
                        14       Jay Jalaram Motors                                         Anand
                        15       S.J.M. Motors                                              Baroda

Haryana
                        16       Bhatia Auto Store                                          Rohtak
                        17       Global Motors                                              Jind
                        18       HKS Automobile                                             Faridabad

                        19       Akash Automobiles                                          Ambala
                        20       Bimla Motors                                               Hissar
                        21       Dayal Motors                                               Yamunanagar

Himachal Pradesh
                        22       Bee Gee Automobiles                                        Solan



                                                         48
         State   S. No.                        Dealership Name               City
                 23       Suman Motors                                Shimla
                 24       Sai Motors                                  Mandi
                 25       SK Dhiman & sons                            Kangra
                 26       Varsha Automobiles                          Hamirpur

J& K
                 27       Prince Motors                               Sri Nagar
                 28       Maya Motors Private Limited                 Jammu
                 29       Ney Shatok Motors                           Leh

Jharkhand
                 30       D.S. Industries Corporation                 Ranchi

Karnataka
                 31       K.H.T. Agencies                             Bangalore
                 32       S.K. International Motors Private Limited   Bangalore
                 33       Auto House                                  Mysore
                 34       Vinay Agencies                              Hospet
                 35       Span Enterprises                            Hubli
                 36       Century Automobiles                         Mangalore

Kerala
                 37       Maxim Trades Private Limited                Cochin
                 38       Nirmala Automobiles Private Limited         Trivandrum
                 39       Eric Motors Private Limited                 Kottayam
                 40       Premium Auto Services                       Calicut
                 41       Monal Motors                                Kannur
                 42       PSN Motors Private Limited                  Malapuram
                 43       Omega Auto House                            Waynad

Madhya Pradesh
                 44       Raipur Motor Engineering Works              Raipur
                 45       My Car (India) Private Limited              Bhopal
                 46       Dugar Distributors Private Limited          Indore
                 47       Eros Motors Private Limited                 Jabalpur
                 48       Vikram Motors                               Gwalior

Maharashtra

                 49       Chowgule Industries                         Kolhapur
                 50       Mahavir Motors                              Nasik
                 51       Kamthe Auto Agencies (Pune)                 Pune
                 52       Patil Motors                                Ahmednagar
                 53       Shri Chakradhar Agricultural Corporation    Amravati
                 54       Shree Vijeet Motors Private Limited         Aurangabad
                 55       Eros General Agencies                       Nagpur

Punjab
                 56       Kissan Tractors                             Jalandhar
                 57       Northern Auto                               Amritsar

                                                 49
          State   S. No.                      Dealership Name                                City
                  58       Agro Sales & Tractors Private Limited                      Ludhiana

Rajasthan
                  59       Hindustan Tractors                                         Jaipur
                  60       Sarwangi Automobiles                                       Sri Ganganagar

Sikkim
                  61       Khokhan Auto                                               Gangtok

Tamil Nadu
                  62       AR.A.S. Autolines Private Limited                          Chennai
                  63       Chakraa Automobiles                                        Chennai
                  64       Krystal Motors                                             Salem
                  65       Vinayaka Auto Sales & Service                              Madurai
                  66       Shilpa Automech                                            Trichy
                  67       Rehoboth Motors                                            Tirnuvelli
                  68       Pondicherry General Motors & Accessories Private Limited   Pondicherry
                  69       Abirami Motors                                             Palladam
                  70       A.R. Automobiles                                           Villupuram
                  71       Abirami Automobiles                                        Tirpur
                  72       Bright Auto Service System Private Limited                 Erode

Tripura
                  73       J.K. Motors                                                Agartala

Uttar Pradesh
                  74       Mittal Motors                                              Ghaziabad
                  75       Prakash Motors                                             Agra
                  76       Shivam Motors                                              Dehradun
                  77       Nainital Auto Wheels Private Limited                       Haldwani
                  78       Shyam Automobiles Limited                                  Noida
                  79       Singhal Sales Corporation                                  Aligarh
                  80       Kirti Enterprises                                          Gorakhpur
                  81       Ritu Motors                                                Allahabad
                  82       NPK Motors Private Limited                                 Mahura
                  83       S.G. Automotives                                           Lucknow

West Bengal
                  84       Khokhan Auto Distributors                                  Siliguri
                  85       Automobile House                                           Kolkata
                  86       Durga Machinery Mart                                       Malda
                  87       Nippon Motors Sales & Service Private Limited              Asansol
                  88       Sri Krishna Automobile                                     24 Parganas
                  89       Subhendu Enterprise                                        Burdwan




                                                  50
Retail customers

Our vehicles are sold to retail customers through a nation wide network of dealer outlets controlled by our
corporate office in Chandigarh, and zonal / regional offices located in Ahmedabad, Bangalore, Hyderabad,
Chennai, Pune, Kolkata, Lucknow, Bhopal and Cochin. Our retail customers include single truck operators,
small fleet owners, cargo transport companies, tourist operators and contract travel operators.

Our corporate office at Chandigarh and our zonal / regional offices manage our stock yards in various
locations, process dealer orders and ensure timely delivery of vehicles from stock yards to dealer locations.
Dealers generally raise their indents as per their requirement on a monthly basis. The indents are then
processed by our zonal / regional offices, consolidated at the corporate office and then forwarded to the plant
for production planning and execution. We generally extend selective credit facilities to our dealers as a part
of our strategy to increase market penetration based on relevant experience with the concerned dealer.

As on December 31, 2009, we had 89 dealers for sales and service of our vehicles. We choose our dealers
based on their local reputation, financial strength, experience in vehicle sales, capabilities in providing sale
and service infrastructure, and marketing and management capabilities. One of the key focus areas of our
marketing policy is to ensure that the personnel at dealer locations are fully trained to handle sale and service
of our vehicles and their skills are upgraded on a continuous basis.

Our retail marketing strategy focuses on identification of target customers, assessment of their needs and
financial ability to purchase our vehicles. After considering factors such as our competitor‘s strengths in a
matching product, pricing and after sale support practices, an in-depth assessment, involving active
participation of key corporate disciplines including research and development, technology, manufacturing and
material services, is undertaken to ascertain our capability to develop and thereafter undertake manufacture of
a new product / variant, capable of satisfying customers aspirations and also coping up with competitors.
Besides direct communication with certain of our retail customers through our zonal / regional offices, we
also rely on our dealers to provide us with feedback from our retail customers. The efforts and initiatives of
our dealers are further strengthened through the involvement and active participation of our marketing
personnel from the procurement of orders to their successful conclusion.

Government and bulk customers

We also sell our vehicles directly to central / state government departments and organizations including the
defense services, ministry of health, state police departments and state transport corporations. A majority of
our sales to our government departments, both central and state, are conducted in response to tenders floated
from time to time towards purchase of CVs depending upon their requirements. In addition to government
departments, we also sell our vehicles directly to bulk customers including transport logistic companies,
hospitals, educational institutions and corporates including retail chain companies. The vehicles we sell to
bulk customers are generally customized to suit their individual requirements.

Our government and bulk customers are directly dealt by us from our corporate office in Chandigarh through
a dedicated sales team. This team regularly follows-up with our existing government and bulk customers for
repeat orders and, taking advantage of emerging opportunities, tracks new customers for their requirements of
vehicles which fit into our product portfolio. After assessment and ascertainment of their needs and
specifications, we maintain regular contact with the prospective buyers to win their confidence and trust in
our ability to supply quality products at reasonable costs within the time frame indicated by them. Our sales
team acts as a bridge between our bulk customers and our research and development / production teams by
not only tracking the new product requirements of our customers, but also in generating new product ideas.

Exports

We also export our vehicles to countries such as Bangladesh, Sri Lanka, Nepal and Ghana through
distributors in these countries. We have a dedicated export cell which maintains regular contact with our
export customers and liaises with distributors in foreign countries. Our service and research and development
personnel regularly visit these countries to take stock of the performance of our vehicles through direct

                                                       51
contacts with the end-users. These visits also help ensure that our overseas distributors maintain their
facilities as per our requirements and genuine spare parts are available so that efficient and prompt after sale
services are provided to our customers in these countries.

After Sales Services

Our after sales support services focuses on speedy redressal of customer grievances and queries, and making
spare parts readily available at reasonable prices with maximum convenience to the customer.

Our customer satisfaction cell, located at our corporate office in Chandigarh, maintains regular contact with
end-users regarding product performance, customer grievances and dealer conduct. Our service engineers and
mechanics, posted at our zonal / regional offices, visit customers to take care of any product related matters.
They also regularly inspect dealer infrastructure so as to ensure that our dealers are meeting our customer
service standards.

We require our dealers to be equipped with adequate infrastructure to address the needs of the customers and
we regularly take appropriate initiatives and steps to encourage our dealers to upgrade their workshops to
provide prompt and efficient after sales services and ensure easy availability of all requisite tooling and spare
parts for our vehicles. In addition to the services available with our dealers at their locations, we also
encourage them to set-up service centers to provide after sales services to customers not only in the cities /
towns where their offices are located but also at other strategic locations to enable customers to have access to
support services while in transit. We have established the Swaraj Mazda Training Centre at our Nawanshahar
plant to enhance product knowledge and improve productivity, maintenance and customer satisfaction
targeted for dealers and their service staff.

Our Spare Part Business

As a part of our after sales services, we sell spare parts including engine components, transmission
components, electric system components, brakes and steerings to our dealers who, in turn, provide the same
to our customers. In addition, spare parts are sold to distributors who in turn sell the same to retail stores. This
allows our customers with easy direct access to our spare parts through retail stores in addition to our dealer
outlets. We manufacture some of these parts indigenously and procure others from vendors.

Marketing Arrangements

We have entered into certain arrangements to expand our reach and promote sale of our products by
establishing alliances with Canara Bank and Federal Bank. The details of such marketing arrangements are
provided below:

Memorandum of Understanding with Canara Bank

 For instance, we entered into a memorandum of understanding with Canara Bank on March 16, 2009 and
have nominated Canara Bank as one of our preferred financiers for financing certain eligible customers for
purchasing our vehicles. In terms of the agreement, Canara Bank co-ordinate with our dealers in their
endeavours to promote sale of company vehicles to eligible customers by offering appropriate financial
packages to them, including product structuring, down payment tenure of loan and effective rate of interest,
on best efforts basis. Our Company and Canara Bank have agreed to form a central coordination team which
would focus on areas like product structure, interest rates, resource allocation, central communication,
training, etc, so as to monitor the performance of the arrangement, in an effective manner. The arrangement
further provides for various sales and promotion activities to be undertaken at the location of our dealers or at
Canara Bank branches or at other locations under the arrangement. Furthermore, under the arrangement, our
Company has agreed to provide to each customer financed under the scheme by Canara Bank a discount in
the invoice of Rs. 3,000 per vehicle of four tyre models and Rs. 5,000 per vehicle of six (6) tyre models at
dealer points and two (2) additional free service per vehicle, post disbursal by Canara Bank. The purchasers
also get a special three (3) years warranty on engines. The memorandum of understanding is valid until
March 15, 2010.

                                                        52
Arrangement with Federal Bank

Our Company entered into an arrangement with the Federal Bank pursuant to a letter dated April 7, 2009,
with respect to the financing of vehicles manufactured by our Company. Under this arrangement, our
Company has agreed to provide 1% of the loan amount as subvention on the loans financed by Federal Bank
and Federal Bank has agreed to sanction loans at an interest rate that is 0.25% lower than its card rates, for the
entire period for which the loan is availed from the Federal Bank. This arrangement authorizes our Company
to use the name of Federal Bank in advertisement materials with its prior consent. The arrangement is valid
for a period of one (1) year.

Our Plant

Our plant is located at village Asron, Nawanshahar in Punjab, India and has three (3) manufacturing facilities.

Vehicle Manufacturing Facility I: Our first vehicle manufacturing facility was established in 1985. The
facility is primarily used for the production of the Sartaj, Premium, Prestige, Supreme, Super, Samrat and
Super-12 in the goods carrier category, and chassis for certain models of our standard, semi-deluxe and
deluxe buses, and special application passenger carriers.

Vehicle Manufacturing Facility II, Bus Body Facility and Phase I of the Expansion Project: With the
execution of technical assistance agreements with Isuzu for the production of chassis for cargo trucks and
luxury buses in the M&HCV segment, and technology procured from Gunung for the manufacture of bus
bodies in both the LCV and M&HCV segments, and SKS for the production of the body of luxury executive
coaches in the LCV segment, we commenced Phase I of our Expansion Project consisting of the
establishment of a second vehicle manufacturing facility (the ―Vehicle Manufacturing Facility II‖) and a
new in-house bus body manufacturing facility (the ―Bus Body Facility‖) at our Nawanshahar plant beginning
in Fiscal 2007. We are in advanced stages of implementing this phase of the Expansion Project with both
facilities having become operational in Fiscal 2009.

Our Company is implementing its Expansion Project in order to expand its product portfolio to capitalize on
the emerging business opportunities in the Indian CV sector. Accordingly, Phase I of our Expansion Project
has enabled us to foray into the manufacture of air-conditioned luxury buses and coaches, based on the Isuzu
platform, targeted at the tourism industry and long distance inter-city travel. An overview of the Vehicle
Manufacturing Facility II and Bus Body Facility established under Phase I of the Expansion Project is given
below:

         Our Vehicle Manufacturing Facility II, which is adjacent to our vehicle manufacturing facility I,
         became operational during Fiscal 2009. The facility is currently being used to assemble M&HCV
         chassis for the passenger carrier category.

         Our Bus Body Facility became operational during Fiscal 2009 and is designed to manufacture bus
         bodies through in-house manufacturing chain from the production of Bus Body shell to painting,
         docking on the vehicle chassis and fitment of seats interiors, panels and other fitments. This facility
         can manufacture bus bodies of our entire range of luxury air-conditioned buses.

As per the certificate of Shamsher & Co., Chartered Accountants dated January 19, 2010, a total of Rs.
11,438.41 lacs has already been deployed under Phase I of the Expansion Project as on December 31, 2009.
The balance portion of Rs 3,561.59 lacs relating to Phase I is expected to be deployed by Fiscal 2011 and is
proposed to be financed from the Net Proceeds and our debt arrangements. For further details, please see the
section titled ―Objects of the Issue – Project Cost‖ on page 18.




                                                       53
Capacity and Capacity Utilisation

The following table sets forth the installed capacity and production levels at our Nawanshahar plant as on
Fiscal 2009 and 2008:

Particulars                                                         Fiscal 2009                                               Fiscal 2008
Installed capacity (number of units per annum) (1)                       18,000                                                    12,000
Production (number of units) (2)                                          8,164                                                    11,241
Capacity Utilization (%) (3)                                            45.36%                                                    93.68%
Notes:
     1)   On double shift basis. Includes production for internal use.
     2)   Includes 17 and 27 buses produced during test run in Fiscal 2009 and Fiscal 2008 respectively.
     3)   Capacity utilisation calculated as the production in a given year divided by the installed capacity in that year.

As indicated above, our Company‘s capacity utilization declined from 93.68% in Fiscal 2008 to 45.36% in
Fiscal 2009 primarily on account of an overall industry decline in demand for commercial vehicles during
Fiscal 2009. In order to facilitate its foray into the manufacture of luxury air-conditioned buses in the
M&HCV segment based on Isuzu platform, the Company commenced its Expansion Project consisting of the
establishment of a second vehicle manufacturing facility and a new in-house bus body manufacturing facility
at its Nawanshahar plant beginning in Fiscal 2007. Both facilities became operational in Fiscal 2009 under
Phase I of the Expansion Project due to which the installed capacity increased to 18,000 units in Fiscal 2009
from 12,000 units in Fiscal 2008. However, as the capacity expansion to 18,000 units was completed during
the end of Fiscal 2009, production from these facilities is not reflected for the entire year. Due to the above
reasons the capacity utilization was lower in Fiscal 2009 compared to Fiscal 2008.

Common Utilities

Power: Power is presently supplied to our plant by the Punjab State Electricity Board (―PSEB‖) at 11 KV.
We also have captive power generation by diesel generator sets of 5 MW to ensure un-interrupted power
supply in case of any power breakdown. As production in our plant increases to full capacity, we would
require additional power load for our operations which we plan to source from PSEB.

Water: Water is supplied to the plant from three (3) submersible turbines. Water is stored in over head tanks
before it is distributed to our facilities at the plant.

Phase II of the Expansion Project

On completion of Phase I, we expect to commence Phase II of the Expansion Project with a view to further
expand the Vehicle Manufacturing Facility II and Bus Body Facility. The expansion will focus on upgrading
the Vehicle Manufacturing Facility II to produce cabins and cargo boxes for cargo applications in the
M&HCV segment and expanding the production capacity at the Bus Body Plant by setting-up new machines,
paint lines and manufacturing amenities. Phase II will enable the Company to manufacture cargo applications
in the heavy cargo vehicle segment and meet the expected demand for comfortable public road transport in
cities, through the introduction of low / semi-low floor city buses with optional air conditioning. Phase II of
the Expansion Project is expected to be completed by Fiscal 2014. On completion of the Expansion Project,
the production capacity is expected to increase to 24,000 units per annum.

The estimated outlay for Phase II is expected to be Rs. 11,000.00 lacs. As per certificate dated January 19,
2010 from Shamsher & Co., Chartered Accountants, as on December 31, 2009, we have not incurred any
expenditure with respect to the Vehicle Manufacturing Facility II and the Bus Body Facility under Phase II of
the Expansion Project. The outlay in relation to Phase II has been estimated based on pro-forma invoices/
quotations received from various parties and management estimates. In view of the highly competitive and
dynamic nature of the industry in which we operate, we may have to revise our expansion plans including
changing the expected outlay and rescheduling our expenditure programmes. For further details, please see
the section titled ―Risk Factors - Internal Risk Factors - Our expansion project at the Nawanshahar plant
may not be completed, in the timeframe or at cost levels originally anticipated, and may not achieve the
intended economic results.‖ and ―Objects of the Issue‖ on pages xiv and 17, respectively.

                                                                   54
Raw Materials and Components

Raw materials and components consumed constitute a major portion of our manufacturing costs. The
principal components required for the manufacture of CVs are made out of raw materials including forging
steel, cast iron, steel sheets & plates, non-ferrous material like aluminium and copper, rubber and plastics.

Our in-house manufacturing facilities produce sub-assemblies and assemblies for the production of LCVs.
Over the years, we have developed vendors who supply us components and parts as per our requirements.
These include components for in-house manufacture of engine and assemblies covering transmission, axle,
chassis and cargo box for our vehicle. For the in-house assembly of the vehicle cabin, except for a certain
parts such as panel doors, pan assembly floor, pillars and panel roof which we import, all other parts made out
of steel sheets are sourced from vendors developed by us in the vicinity of our plant. In respect of passenger
carriers and special application vehicles, we rely on two (2) vendors developed by us for supplying us with
relevant bodies. We outsource fuel injection system, brake system, steering assemblies and electrical system
as per our specifications as well as other items such as tyres, tubes, rims, batteries, paints and chemicals.

For the manufacture of chassis in the M&HCV range pursuant to our technical alliance with Isuzu, we
procure engines and transmission assemblies in a ready-to-fit condition. We also outsource major assemblies
covering axles, brake system, steering and chassis. For in-house manufacture of bus bodies, we procure steel
tubes, fibreglass reinforced plastic materials, aluminium sheets, glasses. For the interior of the body, we
outsource seats, interior panels, air-conditioners and other related fittings.

The following table sets forth a break-down of the raw materials and components consumed in Fiscal 2009
and Fiscal 2008:
                                                                                                     (Rs. in lacs)
Particulars                                          Fiscal 2009                                    Fiscal 2008
CKD kits                                                1,447.94                                       1,759.18
Tyres, tubes and rims                                   3,045.13                                       3,820.58
Cargo boxes                                               775.16                                         840.01
Batteries                                                 220.05                                         306.40
Others                                                38,565.46                                      47,160.32
Total                                                 44,053.74                                      53,886.49

We imported 4.38% of our requirement of raw material and components in Fiscal 2009. Our imports
primarily consist of CKD kits. In Fiscal 2009, 95.62% of our requirements of raw material and components
were domestically sourced.

The following table sets forth the value of imported and indigenous raw material and components consumed
for Fiscal 2009 and Fiscal 2008:

Particulars                                               Fiscal 2009                     Fiscal 2008
                                                            %           Rs. lacs            %           Rs. lacs
Imported                                                  4.38         1,930.24           5.15         2,774.20
Indigenous                                               95.62        42,123.50          94.85        51,112.29
Total                                                   100.00        44,053.74         100.00        53,886.49

We have a well established vendor base to provide necessary components in a timely manner and in adequate
quantities. Our vendors supply us necessary components on an order-by-order basis. Selected vendors are
evaluated for commercial and technical competence prior to commencement of supply. Samples are
thoroughly checked and tested as per our specifications and the performance of suppliers is monitored
through pilot production batches. We induct suppliers as regular sources only after such examination and
assessment is complete to our satisfaction.

Further, for certain of our components, we are dependent on a limited number of vendors which include
Merritor, HVS (India) Limited and Axles India Limited for certain types of axles, GNA Udyog Limited for
propeller shafts, ZF for power steering systems, Bosch for fuel injection systems, Punjab Tractors Limited for

                                                      55
transmission gears and Valeo Clutch Limited and Ceekay Daikan Limited for clutches and on Swaraj Engines
Limited for certain engine components.

JCBL Limited, Sita Singh & Sons Private Limited and Bosch Limited were the top three (3) vendors in terms
of purchases as a percentage of our Company‘s gross turnover in Fiscal 2009. The purchases as a percentage
of the Company‘s gross turnover accounted for by JCBL Limited, Sita Singh & Sons Private Limited and
Bosch Limited in Fiscal 2009 was 9.31%, 8.98% and 4.15%, respectively.

Please see the section titled ―Risk Factors - Internal Risk Factors - We are dependent on a limited number
of vendors for the supply of critical components and raw materials used in the manufacture of our
products and any disruption in our supply chain may adversely affect our sales and results of operations. ‖
on page xiii.

Certifications and Quality Assurance

We have been certified as an ISO 9001:2008 company from Perry Johnson Registrars, Inc. to design and
manufacture LCVs, medium commercial vehicles and special purpose vehicles such as buses, ambulances
and water tankers. Further, our bus body facility has been recognized by the Automotive Research Authority
of India, Pune for bus body building. Our quality assurance programs include random testing of production
samples, frequent re-calibration of production equipment, analysis of post-production vehicle performance
and ongoing dialogue with workers to reduce production errors.

Employees

As on December 31, 2009, we had a total of 950 full time employees (including trainees) consisting of 377
employees in the management cadre, 92 employees in the junior management cadre, 24 support staff and 457
workers. In addition to our full-time employees, we hire from time to time contract workers to assist us in
various aspects of our business. As of December 31, 2009, we had a total of 295 contract workers. The terms
of engagement for our contract workers are different than that of our full time employees.

Unions: Our regular workers at our factory are organized in the Swaraj Mazda Workers Union. Wage
agreements with this trade union are typically negotiated every four years. We concluded wage negotiations
in November 2006 and the wage settlement is effective from April 1, 2006 to March 31, 2010. We believe our
relations with our workforce are cordial and there have not yet been any incidence of a strike or lock- out
since inception.

Research and Development

Since inception, we have placed strong emphasis on developing our in-house research and development
capabilities, which we believe, has been instrumental in our growth. We commenced commercial operations
with the introduction of a LCV truck with a GVW of 6 tons in 2 wheel bases, followed by a 26 seater bus,
both of which were based on the Mazda design. Since then our in-house research and development initiatives
have resulted in the expansion of our product portfolio, and absorption and indigenization of the transfer of
technology. In the goods carrier category we have added three more wheel bases and currently have seven (7)
core truck models with a GVW range of 6.1 tons to 7.5 tons in the LCV segment and 8.0 tons to 12.0 tons in
the M&HCV segment with several variants. In the passenger carrier category we have developed a majority
of our buses in-house and currently offer different bus models with a seating capacity of 10 to 41 seats. We
have also developed a wide offering of special application vehicles through our own development initiatives
and efforts.

Since 1987, the Government of India has accorded us recognition as an in-house research and development
unit. Over the years, our research and development initiatives have not only enabled us to indigenise
technologies, localize parts and components used in the manufacture of our vehicles thereby reducing our
reliance on imports, but has also enabled us to develop new products and variants including vehicles running
on alternative fuels such as CNG and upgrade our engine platforms to comply with the Bharat Stage - II,
Bharat Stage - III emissions standards. More recently our significant achievements include the development

                                                     56
of trucks with GVWs of up to 12.0 tons, development of 4 wheel drive vehicles, manufacture of left hand
drive vehicles for export, launch of buses with higher seating capacities of up to 41 seats.

Our research and development activities emphasize designing and developing new products keeping in mind
market standards, customer requirements, cost of production and compliance with applicable regulations and
safety norms. Our research and development activities are currently focused on the design, development and
localization of trucks and buses based on the Isuzu platform and the development of engines which are Bharat
Stage IV compliant.

Our centre for research and development is located at our Nawanshahar plant. Currently, we have a team of
30 engineers who are engaged in developing new vehicle platforms and products across our product segments
supported by a team of 20 designers. In Fiscal 2009 and Fiscal 2008 we spent a total of Rs. 1,897.77 lacs, and
Rs. 543.73 lacs, respectively on research and development.

Competition

We face competition primarily from domestic CV manufacturers. We also face competition from foreign CV
manufacturers, which have increased, or are expected to increase, their participation in the Indian market
through technology transfers, joint ventures or wholly-owned subsidiaries. In the passenger carrier category
we primarily face competition from Ashok Leyland, Eicher Motors, Force Motors, Mahindra & Mahindra and
Tata Motors in our current range of LCVs and from Ashok Leyland, Eicher Motors, Tata Motors and Volvo
Buses India in our current range of M&HCVs. Similarly, in the goods carrier category we primarily face
competition from Ashok Leyland, Eicher Motors, Force Motors, Mahindra & Mahindra and Tata Motors in
our current range of LCVs and from Ashok Leyland, Eicher Motors and Tata Motors in our current range of
M&HCVs. The table below summarizes the market share of each of the competitor in the industry segment
that we operate in as on December 31, 2009.

                                          Goods Carrier                                Passenger Carrier
  Name of the Company             M&HCV                 LCV                      M&HCV                   LCV
                              (7.5 to 12 tonnes) (5 to 7.5 tonnes)         (7.5 to 16.2 tonnes)    (5 to 7.5 tonnes)
 Tata Motors                             47.13%             68.63%                        45.68%              63.22%
 Eicher Motors                           39.35%             13.68%                         4.46%              10.43%
 Mahindra & Mahindra                         N/A            11.89%                           N/A              11.89%
 Swaraj Mazda                              9.45%             5.39%                         4.92%               9.05%
 Force Motors                                N/A             0.40%                           N/A               0.69%
 Ashok Leyland                             4.08%             0.00%                        43.20%               4.72%
 Volvo Buses India                           N/A               N/A                         1.27%                 N/A

Source: SIAM Report on Comparative Production, Domestic Sales for December 2009

We have designed our products to suit the specific requirements of the Indian market based on specific
customer needs such as safety, driving comfort, fuel efficiency and durability. We believe that our vehicles
are suited to the general conditions of Indian roads and local climate and meet the needs of our customers.

Intellectual Property

Our products are sold under the marks ―Swaraj Mazda‖ and ―Isuzu‖. We do not own intellectual property
rights relating to our products. We have the right to use the name / trademark ―Swaraj‖ in our corporate name
and branding of our commercial vehicles and spare parts until January 6, 2011. Subsequently, we have to
completely discontinue using the name / trademark Swaraj in any form or combination in our corporate name
and branding the commercial vehicles and spare parts manufactured by our Company. Further, under the joint
venture agreement entered into between our Company, PTL, Mazda and Sumitomo, our Company has been
given the right to use the Mazda name in the name of our Company. The said joint venture agreement has
been terminated pursuant to Mazda and PTL ceasing to be shareholders in our Company. Our Company has
been using the brand name ―Mazda‖ in good faith. For further details, please see the section titled ―Risk


                                                             57
Factors – Internal Risk Factors - Risks Associated with our Business - We do not own intellectual property
rights to our products and brand name and any failure to enforce our rights could have an adverse effect
on our business prospects‖ on page xv.

We have been granted registration of the design of our ―Prestige Bus‖ on October 17, 2007 under the Designs
Act, 2000.

Health, Safety and Environment

We are subject to environmental regulations applicable to our manufacturing facilities and are committed to
complying with applicable health, safety and environmental regulations and other requirements in our
operations.

We maintain and operate our pollution control facilities and conduct other environmental protection activities,
including the control and disposal of hazardous substances. We have installed effluent treatment plants at
each of our manufacturing facilities for treatment of industrial and domestic effluents. For handling all solid
wastes, we are in the process of commissioning an incinerator which shall convert all solid wastes to non-
polluting ash. In the future, we may incur increased costs and additional charges associated with
environmental compliance, the impact of new environmental laws and regulatory standards, or the availability
of new technologies.

We recognize the safety of our workforce with paramount importance and our plant has facilities and
qualified staff to handle basic medical facilities, should the need arise. We have also established joint
management worker health and safety committees that meet regularly throughout the year for purposes of
facilitating a two - way communication that aide in the reduction of injury rate, occupational diseases, lost
days and absenteeism and work related fatalities.

Insurance

We obtain specialized insurance for our manufacturing facilities and other risks covering our assets and
operations. Our insurance policies consist of coverage for risks relating to physical loss or damage. We obtain
insurance for outside processing materials, stock at our manufacturing facilities including imported and other
items, raw materials and semi-finished goods.

We also obtain an outgoing materials policy where our goods in transit from our plant such as spare parts are
insured against all risks. Furthermore, our stocks and goods held in trust at our zonal / regional offices,
stockyards and other places are also insured. We also obtain insurance for money and/ or cash stored or
collected by our zonal / regional offices or which is in transit from the office to banks.

Under our general product liability insurance policy, we are indemnified against any legal liability to pay
damages for third party claims arising out of bodily injury or property damage caused by any of our products
in transit. We also maintain a standard fire and special perils policy, which covers loss and damage due to fire
and similar perils to our buildings, plant and machineries, furniture, fixtures, fittings and stocks. However, we
do not maintain any third party liability insurance coverage for our chassis in transit.

Properties

Owned properties. Our registered office and plant is located at village Asron, Distt. Nawanshahar, Punjab,
India. We also own the premises occupied by our zonal office in Ahmedabad, having its address as 2nd Floor
Theltej Road, Near Drive-in-Cinema, Drive in Shopping Centre, Ahmedabad, Gujarat, and our spare parts
department in Ropar.

Leased properties. We lease certain properties that we utilize as offices, stockyards and workshop. The details
of these properties are as follows:



                                                       58
    A. Offices

          Office              Address                         Date of Agreement                Date of expiry

Kolkata            Ground Floor, 215/B, Jodhpur                  March 17, 2008               October 31, 2010
                   Park, Kolkata – 700 068, West
                   Bengal

Chandigarh         204-205,   Sector        34-A,              January 13, 1999               January 12, 2014
                   Chandigarh
Pune               Survey No. 52/1/1, Plot No. 16,                July 11, 2007                 June 30, 2022
                   1st Floor, Aggarwal Arcade,
                   Chandan Nagar, Pune – 411
                   014, Maharashtra

Hyderabad          Flat No. 301, Esteem House, D.             September 26, 2007             September 30, 2012
                   No. 6-3-456/20, Dwarkapuri
                   Colony,       Punja     Gutta,
                   Hyderabad - 500 004, Andhra
                   Pradesh

Lucknow            2/174-B, Vijay Khand, Gomti                  January 18, 2008              October 14, 2010
                   Nagar, Lucknow – 226 010,
                   Uttar Pradesh

Delhi              C – 24, Malviya Nagar, New                    May 10, 2008                   April 30, 2011
                   Delhi – 110 017

Bhopal             227, Balbir Bhawan (Behind                  November 3, 2006               November 5, 2010
                   Sargam Cinema), Zone II, MP
                   Nagar, Bhopal – 462 011,
                   Madhya Pradesh

Bengaluru          1st Floor, House No. 468, 39th C             October 31, 2007             November 30, 2010
                   Cross, 10th Main Road, 5th
                   Block, Jayanagar Bengaluru,
                   560 041, Karnataka

Cochin             Tharikkakara, North Village,                   June 5, 2009                  May 30, 2012
                   Re.    Sy.    No.     511/15,
                   Kalamassery Municipality ward
                   no. XXV, Door No. 185, Kerala

Chennai            Adwave Rower, T. Nagar, 9,               Informal arrangement with Mahindra & Mahindra with
                   South Boag Road, Chennai –              M&M raising quarterly bills of approximately Rs. 1.06 lacs
                   600 017, Tamil Nadu


    B. Workshop

Workshop                        Address                       Date of Agreement                Date of expiry

Panchkula              148 – 149, Industrial Area,               May 30, 2001                   May 31, 2016
                       Phase I, Panchkula – 134
                       109, Haryana




                                                      59
     C. Stockyards

Stockyard                        Address                     Date of Agreement      Date of expiry

Cochin                SY. No. 196/1.7 in block 37 of           June 30, 2009        May 31, 2012
                      Aluva, West Village, Aluva
                      Taluk, Ernakulam

Chennai               No.    40/2B  and      40/2C,            March 1, 2008      February 28, 2011
                      Sriperumbdur           Taluk,
                      Kancheepuram District, Tamil
                      Nadu

Lucknow               Plot No. 30A, New Vasundhara           November 19, 2009     October 14, 2010
                      Society, Govindpuram, Village
                      Mohinuddinpur, Sitapur Road,
                      Lucknow

Siliguri              Shivnagar, Darjeeling More,             October 31, 2008     March 31, 2011
                      Siliguri, West Bengal

Vijayawada            Survey   No.    365/1,    Sri            April 4, 2008       March 31, 2010
                      Ramachandra            Nagar,
                      Vijayawada – 520 008, Andhra
                      Pradesh

Pune                  Gat No. 399, Pune Nagar Road,          February 24, 2006    September 30, 2011
                      Lonikand, Pune – 412 216,
                      Maharashtra

Hubli                 Survey No. 237/4/B, Gokul                 May 1, 2007         April 30, 2010
                      Village, Tarihal Industrial
                      Estate Road, Hubli, Karnataka

Mohali                Plot No. D-157, Phase VIII,              June 10, 2009         June 9, 2010
                      Mohali, Punjab

Ranchi                Plot No. 164, Ratu Road,                 July 11, 2009        June 30, 2012
                      Kamre, Ranchi Jharkhand


     D. Guest house

Guest house                      Address                      Date of Agreement      Date of expiry

New Delhi            C – 24, Malviya Nagar, New                  July 31, 2007        July 31, 2010
                     Delhi – 110 017

Chandigarh           House No. 1131, Sector 33 C,              January 15, 2009    December 31, 2014
                     Chandigarh

Panchkula            House No. 165, Sector 6,                    June 26, 2006       June 30, 2011
                     Panchkula

Panchkula            H. No. 147, Sector 2, Panchkula,         December 31, 2009    December 31, 2018
                     Haryana

Ropar                House No. 283, Zail Singh Nagar,            April 15, 2009      April 14, 2010
                     Ropar, Punjab




                                                        60
                         HISTORY AND CERTAIN CORPORATE MATTERS

Incorporation

Our Company was initially incorporated as Swaraj Vehicles Limited on July 26, 1983 as a public limited
company under the Companies Act. The name of our Company was subsequently changed to its present name
‗Swaraj Mazda Limited‘ and a fresh certificate of incorporation consequent to the change of name was
granted to our Company on November 27, 1984 by the RoC.

Changes in Shareholding

Our Company was initially promoted and incorporated as Swaraj Vehicles Limited by Punjab State Industrial
Development Corporation Limited (―PSIDC‖) and PTL. PSIDC had held a letter of intent for the
manufacture of LCVs and our Company was incorporated to implement the said light commercial vehicles
project. PSIDC and PTL then held 60% and 40% of the issued and paid up equity capital of our Company,
respectively.

Our Company entered into a joint venture agreement dated October 5, 1984 with PTL, Mazda and Sumitomo
for setting up facilities for the manufacture and sale of certain models of the Mazda vehicles (―Agreement‖).
Pursuant to the Agreement, our Company entered into a technical transfer agreement of the same date with
Mazda. Upon the Agreement coming into effect, our Company was required to change its name to Swaraj
Mazda Limited. Under the terms of the Agreement, PTL was required to subscribe to 1,950,000 equity shares
of our Company amounting to 29% of the issued and paid-up capital of our Company, Mazda was required to
subscribe to 780,000 equity shares of our Company amounting to 15.6% of the issued and paid-up capital of
our Company and Sumitomo was required to subscribe to 520,000 equity shares of our Company amounting
to 10.4% of the issued and paid-up capital of our Company.

In 2003, PSIDC entered into a share purchase agreement with PTC, CDC-PTL Holdings Limited (―CDC-
PTL‖) and CDC Financial Services (Mauritius) Limited (―CDC-FS‖), pursuant to which CDC-PTL Holdings
Limited and CDC Financial Services (Mauritius) Limited acquired the entire shareholding of PSIDC in PTL,
constituting 23.49% of the total voting capital of PTL. As required under the Takeover code, CDC-PTL and
CDC-FS made an open offer to purchase up to 2,097,340 fully paid up Equity Shares of our Company
representing 20% of the total voting capital of our Company. Pursuant to the open offer, CDC-PTL acquired
43,206 Equity Shares of our Company.

Further, in 2004, pursuant to a voluntary open offer CDC-PTL and CDC-FS acquired 811,258 Equity Shares
of our Company.

In 2005, Sumitomo acquired 1,573,000 equity shares of PTL representing 15% of its shareholding in our
Company and further acquired from Mazda its entire equity shareholding of 1,638,000 shares in our
Company. Subsequently, in 2009, Sumitomo acquired the remaining shareholding of PTL in our Company
and increased its shareholding in our Company to 53.52%.

Changes in Registered Office

At the time of incorporation our registered office was situated at Phase IV, SAS Nagar, Mohali – 160 055. On
September 30, 1993, our Registered Office was shifted to village Asron, Distt. Nawanshahar – 144 533,
Punjab, where it is presently located.

Major Events

 Year                  Event
 1984                  Our Company entered into a Joint Venture Agreement with PTL, Mazda & Sumitomo.
 1986                  Our Company commenced commercial operations.
 1994                  Our Company was declared a sick company under Sick Industrial Companies (Special
                       Provisions) Act, 1985 (―SICA‖).


                                                     61
 Year                   Event
 1995                   The scheme for the revival / rehabilitation of our Company was approved by the BIFR.

 1997                   Our Company ceased to be a sick industrial company under SICA on the basis of positive
                        net worth.
 1999                   Bharat Stage I emission norms complied with.
 2001                   The cumulative sales of our vehicles crossed 50,000 vehicles.
 2005                             Sumitomo purchases 15% of the equity share capital of our Company from PTL.
                                  Sumitomo purchases 15.6% of the equity share capital of our Company from
                                  Mazda.
 2006                             Our Company obtained permission from the government for setting up new
                                  manufacturing facilities at the existing site.
                                  Our Company entered into technical assistance agreements with Isuzu.
                                  Aggregate vehicles sale crossed 1, 00,000 in August.
 2007                   We commenced the trial production of our luxury buses.
 2008                   We launched our ultra luxury buses in July.
 2009                   Sumitomo raises its shareholding in our Company to 53.52% by purchasing the entire
                        equity holding of PTL in our Company.

Listing

The Equity Shares of the Company were initially listed on the BSE in the year 1985 pursuant to an initial
public offering by the Company. Subsequently, the Equity Shares of our Company were listed on the NSE in
the year 2003. The Equity Shares of our Company are presently listed on the Stock Exchanges.

The Equity Shares of our Company were also listed on the Ludhiana Stock Exchange and the Delhi Stock
Exchange but were subsequently delisted in 2004. The Company opted for voluntary delisting under Clause
5.2 of the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003 (the ―Delisting
Guidelines‖), which provides for companies that continue to have their securities listed on any stock
exchange(s) having nationwide trading terminals, to opt for voluntary delisting from any stock exchange in
India. The Company decided to opt for voluntary delisting from the Ludhiana Stock Exchange and the Delhi
Stock Exchange as it was of the view that (a) its securities were already listed on the BSE and the NSE, which
provided its members with an extensive nationwide network for trading of their securities, (b) the bulk of the
dealings by the Company took place on the BSE and the NSE, and (c) there was no trading in the Company‘s
securities on the Ludhiana Stock Exchange and the Delhi Stock Exchange. Therefore, as there was no
significant tangible benefit to the members of the Company from continued listing on the Ludhiana Stock
Exchange and the Delhi Stock Exchange, the Company decided to opt for voluntary delisting. Approval for
the delisting of the Company securities was received from the Ludhiana Stock Exchange and the Delhi Stock
Exchange pursuant to letters dated June 16, 2004 and March 31, 2004, respectively.

The objects of our Company are:

The main objects of our Company as contained in our Memorandum of Association are as follows:

1.   To carry on all or any of our business of manufacturers, assemblers, producers, importers, exporters,
     buyers, sellers, stockists, suppliers, distributors, wholesale/retail dealers, repairers and lessors, of
     mobile vehicles for transport of men and material, self propelled or otherwise, including commercial
     vehicles, buses, motor cars, jeeps, trailers and conveyances of all kinds and description suitable for use
     on land and their motive power-units, transmissions, propulsion systems, chassis, bodies and all
     assemblies, components, accessories, tools thereof.

2. To operate and deal in garages, warehouse and other facilities, spare-parts, fuels and lubricants for such
    mobile vehicles, their energy-sources and the good carried therein.

3. To design, assemble, manufacture or otherwise deal in equipments and instruments concerning all types
   of mobile vehicles.


                                                        62
Change in our Memorandum of Association

 Date                         Particulars

 July 2, 2009                 The authorized share capital of the Company was increased from 2,000 lacs (divided
                              into 20,000,000 Equity Shares) to Rs. 4,000 lacs (divided into 40,000,000 Equity
                              Shares).

Board for Industrial and Financial Reconstruction (“BIFR”)

During 1991-93, the rupee underwent a sizeable devaluation and as a result there was a substantial increase in
the cost of imported raw materials used in the production our vehicles. Consequently, our Company‘s
operations were adversely affected and we were declared a sick company by the BIFR on April 5, 1994 under
Section 3 (1)(o) of the SICA. Our Company designed a scheme for rehabilitation which was sanctioned by
the BIFR on September 27, 1995. The scheme focussed on the means to reduce the cost of imported materials
through faster indigenization and reduction of other items of expenditure and improvement in productivity.
Pursuant to the said scheme, our Company ceased to be a sick company in 1997.

Subsidiaries

Our Company currently does not have any subsidiary.

Material Agreements

Detailed below are summaries of key agreements entered into by our Company:

Technical assistance agreements between Isuzu and our Company

Our Company has entered into two (2) technical assistance agreements dated June 30, 2006 and December
25, 2006 with Isuzu, pursuant to which Isuzu has granted our Company a license to use certain technical
information and to obtain certain assistance from them for the manufacture and assembly of specified
vehicles and components for certain models. Our Company is required to pay a lump sum royalty in three (3)
instalments to Isuzu for access to this technical information and assistance. Set forth below are the salient
features of both the technical assistance agreements:

Technical information: Isuzu is required to furnish to our Company, the current technical information to
enable our Company to manufacture or assemble the Licensed Vehicles and Licensed Component in the form
used by Isuzu in its own manufacture and assembly of the specified vehicles and components.

―Licensed Vehicle‖ means bus chassis assembled or manufactured by our Company utilizing all or any
portion of the technical information furnished by Isuzu to our Company.

―Licensed Component‖ means any components or parts that are installed on or used in the servicing and
maintenance of any licensed vehicle manufactured by our Company utilizing all or any portion of the
technical information.

Technical assistance: Under the technical assistance agreements, Isuzu is required to provide appropriate
technical assistance in relation to the assembly and manufacturing processes of the Licensed Vehicles and
Licensed Components.

Term: The technical and assistance agreements shall remain in effect until December 31, 2012. They shall be
automatically renewed for a period of one (1) year, unless the other party gives a written notice not to renew
the technical and assistance agreements.




                                                      63
                                            OUR MANAGEMENT

Board of Directors

Under our Articles of Association we cannot have less than three (3) Directors or more than 12 Directors,
unless otherwise determined by a general meeting. We currently have 11 Directors and two (2) alternate
directors on our Board.

The following table sets forth details regarding our Board as on the date of filing of this Letter of Offer.

Name, Designation, Occupation, DIN          Address             Nationality   Age           Other Directorships
            and Term

Mr. S.K. Tuteja                         S-307, Second           Indian        64    Indian Companies
                                        Floor,
Non-Executive, Independent Chairman     Panchsheel                                    1.    Small Industries
                                        Park, New Delhi                                      Development Bank of India;
S/o Late Shri Lekh Raj Tuteja                                                         2.    HMT Limited;
                                                                                      3.    National Bulk Handling
Occupation: Retired Government                                                              Corporation;
Employee                                                                              4.    India Energy Exchange
                                                                                            Limited;
DIN: 00594076                                                                         5.    Axis Private Equity Limited;
                                                                                      6.    Mundra Port and Special
Term: Liable to retire by rotation                                                          Economic Zone Limited;
                                                                                      7.    Adani Logistics Limited;
                                                                                      8.    Adani Power Limited;
                                                                                      9.    Abhishek Industries Limited;
                                                                                      10.   Shree Renuka Infraprojects
                                                                                            Limited;
                                                                                      11.   Shri Renuka Sugars Limited;
                                                                                      12.   Sohrab Spinning Limited;
                                                                                      13.   Precision Pipes and Profiles
                                                                                            Company Limited;
                                                                                      14.   SVIL Mines Limited;
                                                                                      15.   Tiger Cold Chain Private
                                                                                            Limited;
                                                                                      16.   Pegasus               Assets
                                                                                            Reconstruction (P) Limited;
                                                                                      17.   A2Z      Maintenance      &
                                                                                            Engineering Services (P)
                                                                                            Limited;
                                                                                      18.   A2Z Infrastructure Private
                                                                                            Limited; and
                                                                                      19.   A2Z Powercom Private
                                                                                            Limited.

                                                                                    Foreign Companies

                                                                                            Nil


Mr. Yash Mahajan                        . # 3. Sector 7,        Indian        72    Indian Companies
Managing Director                       Panchkula,
                                        Haryana                                       1.    Pidilite Industries Limited;
S/o Late Shri Amar Nath Mahajan                                                             and
                                                                                      2.    Aptech Limited.
Occupation: Service

DIN: 00066570

                                                           64
Name, Designation, Occupation, DIN          Address              Nationality   Age            Other Directorships
            and Term


Term: For a period of five years from
June 1, 2006

Mr. Y. Watanabe                         165, sector 6,           Japanese      58                     Nil
                                        Panchkula,
Whole-time Director                     Haryana

S/o Mr. Toyoji Watanabe

Occupation: Service

DIN: 00795194

Term: For a period of five (5) years
from July 1, 2009

Mr. Harkirat Singh                      No. 86, Phase II,        Indian        72                     Nil
                                        Mohali, Punjab
Independent Director

S/o Mr. Tara Singh

Occupation: Retired

DIN: 00120756

Term: Liable to retire by rotation

Mr. Steven Enderby                      Actis Global             British       47    Indian Companies
                                        Services Private
Non-Executive Director                  Limited                                        1.     Halonix Limited;
                                        The Mira                                       2.     AVTEC Limited;
S/o Mr. David John Enderby              Corporate Suites                               3.     Actis    Advisers    Private
                                        Block – D,                                            Limited;
Occupation: Service                     Ground Floor                                   4.     Tema India Limited; and
                                        1 & 2 Ishwar                                   5.     MFE India Limited.
DIN: 00171101                           Nagar,
                                        New Delhi                                    Foreign Companies
Term: Liable to retire by rotation
                                                                                       1.     Specialist Gases, Sri Lanka;
                                                                                       2.     Ceylon Oxygen, Sri Lanka;
                                                                                       3.     MFE                Formwork
                                                                                              Technology, Malaysia; and
                                                                                       4.     John Keells Holdings, Sri
                                                                                              Lanka.

Mr. A.K. Thakur                         Flat No. 402,            Indian        68    Indian Companies
                                        Nav Durga,
Independent Director                    Govandi Station                                  1.    Rama Industries Limited;
                                        Road, Deonar,                                    2.    Peerless        Securities
S/o Mr. Abhaya Pada Thakur              Chembur,                                               Limited; and
                                        Mumbai                                           3.    SVIL Mines Limited.
Occupation: Chartered Accountant
                                                                                     Foreign Companies
DIN: 00031778
                                                                                               Nil
Term: Liable to retire by rotation


                                                            65
Name, Designation, Occupation, DIN       Address              Nationality   Age            Other Directorships
            and Term



Mr. P.K. Nanda                       4, Neville Court,                            Indian Companies
                                     Grove End                Indian        76        1. JMG Corporation Limited;
Independent Director                 Road, St. Johns                                  2. GE Capital Investments
                                     Wood, London,                                        Private Limited; and
S/o Late Mr. Mohan Lal Nanda         U.K.                                             3. Vascular           Concepts
                                                                                          Limited;
Occupation: Business consultant
                                                                                            Foreign Companies
DIN: 00213613                                                                         1.    Omega Laser Systems
                                                                                            Limited; and
Term: Liable to retire by rotation                                                    2.    Vascular      Concepts
                                                                                            Limited.


Mr. Pankaj Bajaj                     AB 45,                   Indian        37
                                     Mianwali Nagar,                                        Nil
Non-Executive Director               Rohtak Road,
                                     Paschim Vihar,
S/o Mr. A.D. Bajaj                   New Delhi

Occupation: Service

DIN: 00337925

Term: Liable to retire by rotation

Mr. M. Tabuchi                       2-34-11,                 Japanese      52    Indian companies
                                     Midorigaoka,
Non-Executive Director               Yachiyo-shi                                            Nil
                                     Chiba, Japan
S/o Mr. Takeshi Tabuchi                                                           Foreign companies
                                                                                       1. Sumisho Motor Finance
Occupation: Service                                                                        Corporation;
                                                                                       2. SC-ABEAM Automotive
DIN: 02620335                                                                              Consulting;
                                                                                       3. Sumitomo Mitsui Auto
Term: Liable to retire by rotation                                                         Service Company, Limited;
                                                                                           and
                                                                                       4. Kiriu Corporation.
Mr. H. Yamaguchi                     # 74, Friends            Japanese      54    Indian companies
Non-Executive Director               Colony, New                                      1. Sumitomo Corporation
                                     Delhi                                                 India Private Limited;
S/o Late Mr. Hiroko Yamaguchi                                                         2. J.J. Impex (Delhi) Private
                                                                                           Limited; and
Occupation: Service                                                                   3. NKC Conveyor India
                                                                                           Private Limited.
DIN: 02220950
                                                                                  Foreign companies
Term: Liable to retire by rotation
                                                                                             Nil

Mr. T. Hashimoto                     1-13-6,                  Japanese      50
                                     Nishiogi-kita,                                          Nil
Non-Executive Director               Suginami-ku,
                                     Tokyo, Japan
S/o Mr. Kiichi Hashimoto



                                                         66
Name, Designation, Occupation, DIN          Address            Nationality   Age          Other Directorships
            and Term



Occupation: Service

DIN: 00795276

Term: Liable to retire by rotation

Mr. Tatsuo Kato                          78, Jor Bagh,         Japanese      48    Indian Companies
                                         New Delhi- 110                                1. SumitomoCorporation
Alternate Director to Mr. M. Tabuchi     033                                               India Private Limited; and
                                                                                       2. J.J. Impex (Delhi) Private
S/o Mr. Takeshi Kato                                                                       Limited.

Occupation: Service                                                                Foreign Companies

DIN: 01785885                                                                               Nil

Term: Liable to retire by rotation

Mr. Taro Nanko                           C 2/8, Vasant         Japanese      42    Indian Companies
                                         Vihar, New                                    1. Denso India Limited; and
Alternate Director to Mr. T. Hashimoto   Delhi-110048                                  2. J.J. Impex (Delhi) Private
                                                                                           Limited.
S/o Mr. Shinsuke Nanko
                                                                                   Foreign Companies
Occupation: Service
                                                                                            Nil
DIN: 01879475

Term: Liable to retire by rotation

None of our Directors are related to each other.

Profiles of our Directors

Mr. S.K. Tuteja is our non-executive Chairman. He holds a master‘s degree in commerce from Delhi
University. Mr. Tuteja joined the Indian Administrative Services (IAS) in 1968 and retired from the IAS in
2005 as Secretary, Food and Public Distribution, Government of India. Mr. Tuteja‘s service career with the
Government in Punjab and at the Centre covered key assignments in various government departments. He
was the Chairman of the Punjab State Electricity Board from July 1997 to December 1998, the Chairman of
the Central Warehousing Corporation from July 2005 to January 2008 and the Chairman of the Pay
Commission of the Government of Punjab from November 2006 to April 2009. Mr. Tuteja has over 40 years
of experience in diverse fields which include district administration, education, industry, trade, commerce,
finance and company matters. He joined our Board on June 20, 1998 and was appointed as a non-executive
Independent Chairman of the Company on June 29, 2005.

Mr. Yash Mahajan is our Managing Director. He holds a bachelor‘s degree in commerce from Punjab
University. Mr. Mahajan is a UK trained and qualified Chartered Accountant and became a fellow member of
the Institute of Chartered Accountants (England and Wales) in 1963. He also became an associate member of
the Institute of Chartered Accountants of India in the year 1967. Mr. Mahajan started his professional career
with Balmer Lawrie and Company Limited in 1963 as a member of the executive staff, designated as the
Accounts Manager and joined Union Carbide India Limited in 1971 as Manager on Special Assignment. In
1973, he joined Punjab Tractors Limited as director finance and was appointed joint managing director in
1978. He was appointed managing director in 1981, elevated to the position of vice-chariman and managing
director and group chief executive in 1998, a position he held until May, 2006. He received the gold award of

                                                          67
the Institute of Marketing and Management (―IMM‖), for the 1979 IMM-Toshiba Marketing Man of the Year
for the organized sector. He was also selected in the year 2000 as one of the thirty outstanding entrepreneurs
for the Ernst and Young Entrepreneur of the Year Award. Mr. Mahajan joined our Company as one of the
first three directors on August 25, 1983 and was appointed Managing Director in November, 1983 and was
re-appointed as managing director on May 31, 2006. Mr. Mahajan has over 45 years of experience covering
all facets of corporate operations which include accounts, costing, finance, legal and secretarial, general
administration, industrial relations and human resource development, material services, marketing, joint
ventures, business and project management.

Mr. Y. Watanabe is our whole-time Director. He holds a bachelor‘s degree in foreign study from Sophia
University, Japan. Mr. Watanabe joined Sumitomo Corporation in 1975 and since then has held several
overseas assignments in Kenya, Spain and France. Mr. Watanabe, who joined our Board as non-executive
director in September, 2005 and was a key member of Sumitomo Corporation‘s core team for the Indian
project. He was appointed a whole-time Director of the Company with effect from July 1, 2009. Mr.
Watanabe has several years of experience in overseas marketing and management functions.

Mr. Harkirat Singh is an independent director on our Board. He holds a master‘s degree in economics from
Punjab University. Mr. Singh joined the Life Insurance Corporation of India (LIC) in April, 1961, held
various positions in LIC such as divisional manager, regional manager and the zonal manager and retired as
an executive director in 1995 after 34 years of service. He has attended advance courses in Finance and
Management in UK and Japan including a three month training course at the Royal Institute of Public
Administration in the year 1980. He has served on the boards of Mukund Steel, Shree Cements and the State
Financial Corporations of Uttar Pradesh, Jammu & Kashmir, Punjab and Himachal Pradesh. Mr. Singh has
over 48 years of experience in insurance, finance, business management and corporate affairs. He joined our
Board on January 10, 1990.

Mr. Steven Enderby is a non executive director on our Board. He holds a degree in economics from Queens
University, Belfast and is a qualified chartered accountant. Mr. Enderby joined Actis Advisers Private
Limited in 1990 and is currently a partner based in Delhi. He has over 18 years of experience. He joined our
Board on January 31, 2006.

Mr. A.K. Thakur is an independent director on our Board. He holds a degree in commerce from Calcutta
University and is a qualified chartered accountant. He joined Unit Trust of India in 1978 and retired as an
executive director after 23 years of service. Mr. Thakur has over 40 years of experience in areas such as
accounts, finance, investment and corporate affairs. He is currently a practicing chartered accountant and is
also an advisor to Ray and Ray Consultants Private Limited. He joined our Board on January 31, 2006.

Mr. P.K. Nanda is an independent director on our Board. He holds a degree in commerce from Kanpur
University and is a qualified chartered accountant. Mr. Nanda has held several key managerial positions with
multi national companies, both in India and abroad such as Remington Rand, Philips Electronics India and
Metal Box India. He was appointed as the chairman and managing director of Metal Box India in 1970. He
was also the founder president of the Confederation of Indian Industry (CII) and has also served as a member
of committees of Confederation of British Industry and United Kingdom South Africa Trade Association. He
has also been a guest lecturer at the International Management Institute, Geneva. He is also a business
consultant focusing on international business strategy. Mr. Nanda has over 50 years of experience in the areas
such as finance, corporate affairs, international trade and commerce, business strategy. He joined our Board
on July 29, 2006.

Mr. Pankaj Bajaj is a non-executive director on our Board. He holds a Bachelor‘s degree in law
from Hemvati Nandan Bahuguna Garhwal University, Uttarakhand (1996) and pursued an executive
management program from University of Maryland in the year 2000. Mr. Bajaj is a fellow member of the
Institute of Chartered Accountants of India (FCA), associate member of the Institute of Company Secretaries
of India (ACS) and associate member of the Institute of Cost and Works Accountants of India (AICWA). He
started his career in 1995 with Deloitte Haskins & Sells. He joined Sumitomo Corporation India Private
Limited in 1997 as company secretary. He currently holds the post of corporate officer and company
secretary and handles diversified corporate department responsibilities for the company which operates across

                                                     68
a spectrum of sectors including automobiles, chemicals and electronics. Mr. Bajaj has over 14 years of
experience in areas such as corporate planning, legal and secretarial matters, corporate finance, risk
management, taxation and internal controls. He joined our Board on July 29, 2006.

Mr. M. Tabuchi is a non-executive director on our Board. He holds a graduate degree in economics from
Kyoto University, Japan in 1980. He joined Sumitomo Corporation in 1980 and over the years, Mr. Tabuchi
has worked in many departments for Sumitomo Corporation such as railway products, forging and casting,
transportation equipment and ship, aerospace and transportation systems. He currently holds the post of
general manager, automotive division 1 of Sumitomo Corporation in Tokyo, Japan. Mr. Tabuchi has over 28
years of experience in the automobile and manufacturing industry. He joined our Board on May 28, 2009.

Mr. H. Yamaguchi is a non-executive director on our Board. He holds a graduate degree in economics from
Kobe University, Japan (1977). Mr. Yamaguchi joined Sumitomo Corporation in 1977. He has also worked
for Sumitomo Corporation in Myanmar, Singapore and Vietnam and was appointed the managing director of
Thang Long Industrial Park Company (Vietnam) in 1977. He is currently the chairman and managing director
of Sumitomo Corporation India Private Limited. Mr. Yamaguchi has over 30 years of experience in areas
such as motor vehicles, industrial parks, logistics and insurance. He joined our Board on May 28, 2009.

Mr. T. Hashimoto is a non-executive director on our Board. He holds a graduate degree in arts and science
from University of Tokyo in 1982. He has also pursued the management development programme from
Columbia University, New York and Harvard University, Boston in 1993. He joined Sumitomo Corporation
in 1982 and had worked in the motor vehicles department and automotive components and equipment
section. In 1997, he was appointed as the manager of the automotive components and equipment section of
Sumitomo Corporation of America. He currently holds the post of Assistant to General Manager, Automotive
Division 2 of Sumitomo Corporation in Tokyo. Mr. Hashimoto has over 26 years of experience in the
automobile industry. He joined our Board on May 28, 2009.

Mr. Tatsuo Kato is the alternate director to Mr. M. Tabuchi. He holds a graduate degree in economics from
Kobe University. He joined Sumitomo Corporation in 1985. He is currently on the board of directors of
Sumitomo Corporation India Private Limited. He has over 24 years of experience in the automobile industry.
He joined our Board on September 4, 2009.

Mr. Taro Nanko is the alternate director to Mr. T. Hashimoto. He holds a graduate degree in law from
Waseda University. He joined Sumitomo Corporation in 1990 and currently holds the position of senior
general manager, (automotive department), Sumitomo Corporation, India. He has over 19 years of experience
in the automobile industry. He joined our Board on September 4, 2009.

Shareholding of the Directors of the Company

The following table details the shareholding of the Directors in their personal capacity as on the date of this
Letter of Offer.

                          Name of Director(s)                                   Number of
                                                                               Equity Shares
                                                                                (Pre-Issue)
Mr. Yash Mahajan                                                                  17, 307*

* Includes the Equity Shares held by the relatives.

Except as stated above, none of the other Directors hold any Equity Shares in the Company.

Interests of our Directors

All our Directors may be deemed to be interested to the extent of the fees payable to them for attending
meetings of the Board or a committee thereof, and to the extent of reimbursement of expenses payable to
them.

                                                      69
Our Directors have not entered into any arrangement or understanding with major shareholders, customers,
suppliers or other parties, pursuant to which they have been appointed as the Director of our Company.

Our Directors do not have any interest in any Objects of the Issue for which the Issue Proceeds are proposed
to be utilized.

All our Directors may be interested in the Equity Shares already held by them or that may be allotted to them
pursuant to the Issue and / or that may be allotted to companies, firms and trusts in which they are directors,
members, partners or trustees, as the case may be. Except as disclosed below, none of our Directors have any
interest in any property acquired or proposed to be acquired by our Company in the last two (2) years.

Our Company had entered into a 15 year lease agreement dated January 13, 1999, with Mr. R. L. Goyal, Mr.
Ashok Kumar and Mr. Ashish for our corporate office located at 204-205, Sector 34-A, Chandigarh. Mr.
Ashish, one of the co-owners of the premises, is the son of Mr. S.K. Tuteja.

The Director(s) may have further interest to the extent of any dividend payable to them and other distributions
in respect of the Equity Shares

Our Directors have not entered into any service contracts with our Company, pursuant to which they would
be entitled to any benefits upon the termination of their service.




                                                      70
                               SECTION V – FINANCIAL INFORMATION
                AUDITORS’ REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR
                                      ENDED MARCH 31, 2009

                                           AUDITOR'S REPORT
                                TO THE MEMBERS OF SWARAJ MAZDA LIMITED

1.   We have audited the attached Balance Sheet of Swaraj Mazda Limited, as at March 31, 2009, and the related Profit
     and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed
     under reference to this report. These financial statements are the responsibility of the company‘s management. Our
     responsibility is to express an opinion on these financial statements based on our audit.

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

3.   As required by the Companies (Auditor‘s Report) Order, 2003, as amended by the Companies (Auditor‘s Report)
     (Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of
     ‗The Companies Act, 1956‘ of India (the ‗Act‘) and on the basis of such checks of the books and records of the
     company as we considered appropriate and according to the information and explanations given to us, we give in the
     Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4.   Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

     (a) We have obtained all the information and explanations, which to the best of our knowledge and belief were
         necessary for the purposes of our audit;
     (b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from
         our examination of those books;
     (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement
         with the books of account;
     (d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report
         comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;
     (e) On the basis of written representations received from the directors, and taken on record by the Board of Directors,
         none of the directors is disqualified as on March 31, 2009 from being appointed as a director in terms of clause (g)
         of sub-section (1) of Section 274 of the Act;
     (f) Attention is invited to non provision of Rs.488 lacs in respect of MODVAT credit receivable as explained in Note
         2 on Schedule N. Had the said amount been provided, the net current assets and profit for the year would have
         been lower by the corresponding amount.
     (g) In our opinion and to the best of our information and according to the explanations given to us, the said financial
         statements together with the notes thereon and attached thereto give in the prescribed manner the information
         required by the Act and subject to our comments in para (f) above, give a true and fair view in conformity with
         the accounting principles generally accepted in India:
         i.       in the case of the Balance Sheet, of the state of affairs of the company as at March 31, 2009;
         ii.      in the case of the Profit and Loss Account, of the profit for the year ended on that date; and
         iii.     in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
                                                                         V. Nijhawan
                                                                         Partner
                                                                         Membership No: F87228
                                                                         For and on behalf of
       Place: New Delhi                                                  PRICE WATERHOUSE
       Date: May 28, 2009                                                Chartered Accountants


                                                             F1
ANNEXURE TO AUDITORS‟ REPORT

[Referred to in paragraph 3 of the Auditors‘ Report of even date to the members of Swaraj Mazda Limited on the financial
statements for the year ended March 31, 2009]

1.   (a) The company is maintaining proper records showing full particulars including quantitative details and situation of
         fixed assets.

     (b) The fixed assets are physically verified by the management according to a phased programme designed to cover
         all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the
         company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically
         verified by the management during the year and no material discrepancies between the book records and the
         physical inventory have been noticed.

     (c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has
         not been disposed off by the company during the year.

2.   (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the
         year. In respect of inventory lying with third parties, these have substantially been confirmed by them. In our
         opinion, the frequency of verification is reasonable.

     (b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable
         and adequate in relation to the size of the company and the nature of its business.

     (c) On the basis of our examination of the inventory records, in our opinion, the company is maintaining proper
         records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records
         were not material.

3. (a)   The company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the
         register maintained under Section 301 of the Act.

     (b) The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the
         register maintained under Section 301 of the Act.

4.       In our opinion and according to the information and explanations given to us, having regard to the explanation
         that certain items purchased are of special nature for which suitable alternative sources do not exist for obtaining
         comparative quotations, there is an adequate internal control system commensurate with the size of the company
         and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. Further, on the
         basis of our examination of the books and records of the company, and according to the information and
         explanations given to us, we have neither come across nor have been informed of any continuing failure to correct
         major weaknesses in the aforesaid internal control system.

5. (a)   In our opinion and according to the information and explanations given to us, the particulars of contracts or
         arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained
         under that section.

     (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance
         of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any party during
         the year have been made at prices which are reasonable having regard to the prevailing market prices at the
         relevant time.

6.       The company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the
         Act and the rules framed there under.

7.       In our opinion, the company has an internal audit system commensurate with its size and nature of its business.

8.       We have broadly reviewed the books of account maintained by the company in respect of products where,
         pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been
         prescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the



                                                             F2
         prescribed accounts and records have been made and maintained. We have not, however, made a detailed
         examination of the records with a view to determine whether they are accurate or complete.

9. (a)   According to the information and explanations given to us and the records of the company examined by us, in our
         opinion, the company is generally regular in depositing the undisputed statutory dues including provident fund,
         investor education and protection fund, employees‘ state insurance, income-tax, sales-tax, value added tax, wealth
         tax, service tax, customs duty, excise duty, cess and other material statutory dues as applicable with the
         appropriate authorities.

  (b)    According to the information and explanations given to us and the records of the company examined by us, the
         particulars of dues of income-tax, sales-tax, value added tax, wealth tax, service tax, customs duty, excise duty
         and cess as at March 31, 2009 which have not been deposited on account of a dispute are stated in Note 1(a) on
         Schedule N.

10.      The company has no accumulated losses as at March 31, 2009 and it has not incurred any cash losses in the
         financial year ended on that date or in the immediately preceding financial year.

11.      According to the records of the company examined by us and the information and explanation given to us, the
         company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the
         balance sheet date.

12.      The company has not granted any loans and advances on the basis of security by way of pledge of shares,
         debentures and other securities.

13.      The provisions of any special statute applicable to chit fund /nidhi /mutual benefit fund/ societies are not
         applicable to the company.

14.      In our opinion, the company is not a dealer or trader in shares, securities, debentures and other investments.

15.      In our opinion, and according to the information and explanations given to us, the company has not given any
         guarantee for loans taken by others from banks or financial institutions during the year.

16.      In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans
         have been applied for the purposes for which they were obtained.

17.      On the basis of an overall examination of the balance sheet of the company, in our opinion and according to the
         information and explanations given to us, there are no funds raised on a short-term basis which have been used for
         long-term investment.

18.      The company has not made any preferential allotment of shares to parties and companies covered in the register
         maintained under Section 301 of the Act during the year.

19.      The company has not issued any debentures during the year and there are no debentures outstanding as at the year
         end.

20.      The company has not raised any money by public issues during the year.

21.      During the course of our examination of the books and records of the company, carried out in accordance with the
         generally accepted auditing practices in India, and according to the information and explanations given to us, we
         have neither come across any instance of fraud on or by the company, noticed or reported during the year, nor
         have we been informed of such case by the management.

                                                                                  V. Nijhawan
                                                                                  Partner
                                                                                  Membership No.: F87228
                                                                                  For and on behalf of
Place: New Delhi                                                                  Price Waterhouse
Date: May 28, 2009                                                                Chartered Accountants




                                                             F3
BALANCE SHEET AS AT 31ST MARCH, 2009                                                                                   (Rs. in lacs)

                                                                               As at                                       As at
                                     Schedule                             31st Mar.2009                               31st Mar.2008

SOURCES OF FUNDS

Shareholders' Funds
 Share Capital                           A               1,049.38                                      1,049.38
 Reserves & Surplus                      B               8,603.40                                      8,308.67
                                                                                   9,652.78                                  9,358.05
Loan Funds
 Secured Loans                           C                                        15,128.69                                  1,356.87

 Unsecured Loans                         D                                         6,900.00                                 12,900.00
                                                                                  31,681.47                                 23,614.92
APPLICATION OF FUNDS
Fixed Assets                             E
  Gross Block                                           13,499.46                                      4,863.88
  Less : Depreciation                                    3,553.92                                      2,991.12
  Net Block                                                                        9,945.54                                  1,872.76
 Capital Work-in-Progress                                                          2,839.72                                  8,090.59
 Capital Spares                                                                           -                                      3.21
Deferred Tax Assets (Net)                F                                           279.96                                    164.96
Current Assets, Loans and                G
Advances
 Inventories                                            14,929.19                                     12,349.80
 Sundry Debtors                                         14,633.32                                     18,560.06
 Cash and Bank Balances                                    700.89                                        914.28
 Other Current Assets                                      189.17                                        457.95
 Loans and Advances                                      3,032.54                                      2,521.15
                                                        33,485.11                                     34,803.24
 Less :
Current Liabilities and Provisions       H
  Current Liabilities                                   13,349.00                                     19,285.26
  Provisions                                             1,519.86                                      2,034.58
                                                        14,868.86                                     21,319.84
  Net Current Assets                                                              18,616.25                                 13,483.40
                                                                                  31,681.47                                 23,614.92
Significant Accounting Policies          M
Notes to Accounts                        N
This is the Balance Sheet referred
to in our report of even date.       The Schedules referred to above form an integral part of the Balance Sheet.

For and on behalf of                                                     FOR AND ON BEHALF OF THE BOARD
PRICE WATERHOUSE
Chartered Accountants

V.NIJHAWAN                                                                                       S.K.TUTEJA
Partner                                                                                          Chairman
M.No. F87228

                                                   GOPAL BANSAL                                  YASH MAHAJAN
                                                   Sr. Vice President - Finance                  Managing Director
                                                   & Company Secretary

New Delhi, May 28, 2009                                                                          New Delhi, May 28, 2009




                                                                    F4
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2009

                                                                                                                           (Rs. in lacs)
                                                                           Year Ended                                        Year Ended
                                    Schedule                              31st Mar.2009                                31st Mar.2008
INCOME
Sales                                                                            59,983.81                                      75,882.81

(Refer Note 2 on Schedule M and 10(b) on Schedule N)
Less : Excise Duty                                                                5,898.58                                       9,339.36
Net Sales Revenue                                                                54,085.23                                      66,543.45
Other Operating Income                    I                                         610.01                                         598.75
Total                                                                            54,695.24                                      67,142.20

EXPENDITURE
Manufacturing and Other Expenses         J                                       51,888.94                                      61,768.44
Finance Charges(Net)                     L                                        1,808.77                                       1,173.42
Depreciation / Amortisation              E                                          583.92                                         330.07

Total                                                                            54,281.63                                      63,271.93

Profit for the year before Tax Expense                                             413.61                                        3,870.27
Tax expense/(Saving) (Refer Note 10 on Schedule M)
   - Current Tax                                                                     41.22                                       1,380.00
   - Deferred Tax (Refer Note 8 on Schedule N)                                    (115.00)                                        (90.00)
   - Fringe Benefits Tax                                                             49.85                                          60.00
   - MAT Credit Entitlement (Refer Note 22 on Schedule N)                          (41.22)                                              -
Profit for the year after Tax Expense                                               478.76                                       2,520.27
Balance brought forward from the
                                                                                  1,458.22                                       1,312.74
previous year
Profit available for Appropriation                                                1,936.98                                       3,833.01

APPROPRIATIONS
Proposed Dividend                                           157.30                                     576.77
Dividend Tax and Surcharge                                   26.73                  184.03              98.02                      674.79
General Reserve                                                                      25.00                                       1,700.00
Balance Carried to Balance Sheet                                                  1,727.95                                       1,458.22
                                                                                  1,936.98                                       3,833.01
Earning Per Share (Refer Note 7 on Schedule N )
 - Basic/Diluted Earning Per Share (Rs.)                                              4.57                                           24.03

Significant Accounting Policies          M
Notes to Accounts                        N

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

For and on behalf of                                                      FOR AND ON BEHALF OF THE BOARD
PRICE WATERHOUSE
Chartered Accountants

V.NIJHAWAN                                                                                      S.K.TUTEJA
Partner                                                                                         Chairman
M.No. F87228

                                                  GOPAL BANSAL                                  YASH MAHAJAN
                                                  Sr. Vice President - Finance                  Managing Director
                                                  & Company Secretary

New Delhi, May 28, 2009                                                                         New Delhi, May 28, 2009




                                                                     F5
SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE A                                                                                                                      (Rs. in lacs)
                                                                                     As at                                         As at
                                                                                31stMar.2009                                   31st Mar.2008



SHARE CAPITAL
Authorised
2,00,00,000 Equity Shares ( Previous Year 2,00,00,000)
                                                                                     2,000.00                                         2,000.00
of Rs. 10/- each


Issued, Subscribed and Paid-up
1,04,86,700 * Equity Shares (Previous Year
1,04,86,700 of Rs. 10/- each fully paid up
                                                                                     1,048.67                                         1,048.67
Add: Forfeited Shares [Amount paid up on 13,300                                          0.71                                             0.71
Equity Shares (Previous Year 13,300) of Rs.10/-
each ]
                                                                                     1,049.38                                         1,049.38




* Includes 100 Equity Shares (Previous Year 100) of Rs. 10/- each fully paid up and held by an NRI but not
allotted pending clearance from the Reserve Bank of India.



Of the above, 5,612,953 (Previous year 4,140,953) equity shares are held by Sumitomo Corporation, Japan the holding Company.



SCHEDULE B                                                                                                                      (Rs. in lacs)
                                                                                    As at                                           As at
                                                                                31stMar.2009                                   31st Mar.2008


RESERVES AND SURPLUS


Capital Reserve                                                                         15.00                                              15.00
(Refer Note 11 on Schedule M)
General Reserve

Balance brought forward                                            6,835.45                                  5,188.85

 Less: Adjustment for change in Accounting Policies            -                                               53.40
(Refer Note 20 on Schedule N)


Add:Transferred from Profit & Loss Account                           25.00                                   1,700.00

                                                                                     6,860.45                                         6,835.45


Profit and Loss Account                                                              1,727.95                                         1,458.22

                                                                                     8,603.40                                         8,308.67




                                                                          F6
SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE C                                                                                                                  (Rs. in lacs)
                                                                                 As at                                             As at
                                                                         31st Mar.2009                                    31st Mar.2008


SECURED LOANS
From Banks
    - Long Term Loan*                                                          6,000.00                                                -
    - Short Term Loan**                                                        2,500.00                                                -
    - Cash Credit**                                                            6,628.69                                         1,356.87
                                                                              15,128.69                                         1,356.87


Notes :
* The loan is secured by subservient equitable mortgage / hypothecation charge over the entire fixed assets of
the Company. Repayable within one year Rs.2,000 lacs ( Previous year Rs. Nil).



**    The limits sanctioned by the bankers are secured by a first charge by way of hypothecation of the Company's
     Current Assets i.e Stocks, Bills Receivable, Book Debts and other movables of the Company and also by way of
     a second mortgage and charge on the Company's immovable property. The said second charge is yet to be
     created by the Company.

 The Company had in an earlier year taken loans from Financial Institutions against first charge on its movable
and immovable property. The said loans have since been repaid. However, the charges in respect of these loans
are in the process of being vacated.




SCHEDULE D                                                                                                               (Rs. in lacs)
                                                                            As at                                         As at
                                                                       31st Mar.2009                                 31st Mar.2008


UNSECURED LOANS
From Banks

      - Long Term Loan*                                                               -                                        6,000.00
      - Short Term Loan                                                        6,900.00                                        6,900.00

                                                                               6,900.00                                       12,900.00
* During the year, the Company has converted its unsecured long term loan into secured long term loan taken from bank.
 Repayable within one year Rs. Nil (Previous year Rs. 6,000 lacs)




                                                                         F7
SCHEDULE FORMING PART OF THE ACCOUNTS
SCHEDULE E

FIXED ASSETS            (Refer Notes 3, 4,12 and 14 on Schedule M )                                                                                                            (Rs. In lacs)

DESCRIPTION                                     GROSS BLOCK                                           DEPRECIATION / AMORTISATION                                       NET BLOCK
                            As at           Additions        Adjustments         As at        As at          For the       Adjustments         As at            As at          As at
                          01.04.2008          during                           31.03.2009   01.04.2008        year                           31.03.2009       31.03.2009     31.03.2008
                                             the year
Tangible Assets

Freehold Land                    48.74                  -                  -        48.74                -             -                 -                -        48.74                48.74


Building                        899.91           4,782.94                  -     5,682.85         479.78       136.18                    -       615.96         5,066.89               420.13


Plant & Machinery             2,499.10           2,951.31                  -     5,450.41        1,648.74      242.48                    -      1,891.22        3,559.19               850.36


Jigs and Fixtures               387.47            321.00                   -       708.47         337.31        38.10                    -       375.41           333.06                50.16


Furniture, Fixtures &           248.48              20.65                  -       269.13         155.79        13.49                    -       169.28            99.85                92.69
Office Equipments


Computers                       234.04              84.84             10.28        308.60         166.49        51.45             10.28          207.66           100.94                67.55


Vehicles                        546.14            222.83              10.84        758.13         203.01        83.62             10.84          275.79           482.34               343.13


Intangible Assets

Technical Know-How                     -          273.13                   -       273.13                -      18.60                    -         18.60          254.53                    -


Total                         4,863.88           8,656.70             21.12     13,499.46        2,991.12      583.92             21.12         3,553.92        9,945.54            1,872.76

Previous Year                 4,590.58            274.55               1.25      4,863.88        2,662.30      330.07              1.25         2,991.12        1,872.76




                                                                                            F8
CAPITAL WORK-IN-PROGRESS (CWIP)
Capital Advance                                                                                                                                                    -     88.97

Direct Capital Expenditure                                                                                                                              2,289.62       6,024.72
Indirect expenditure pending allocation :
 -Interest Cost                                                                                                                                           130.25        361.03
 -Other expenditure                                                                                                                                       419.85       1,615.87

Total CWIP                                                                                                                                              2,839.72       8,090.59
Notes:
1. Indirect other expenditure pending allocation includes salary, power charges, travelling, foreign technician expenses, testing expenses,
   & other administrative expenses and is net of amount recovered from sale [(net of excise duty Rs. 10.26 lacs (Previous year Rs. 13.23 lacs)] of
   vehicle produced during test run Rs. 81.38 lacs (Previous year Rs. 81.57 lacs) .
2. Interest capitalised during the year Rs. 532.08 lacs (Previous year Rs. Nil) as per AS-16 notified under Section 211(3C) of the Companies Act,1956




                                                                                                          F9
SCHEDULES FORMING PART OF THE ACCOUNTS

SCHEDULE F                                                                                                                                                                (Rs. in lacs)


                                                                                                        As at 31st Mar.2009                                           As at 31st Mar.2008
DEFERRED TAX (LIABILITIES ) / ASSETS
(Refer Note 10 on Schedule M & Note 8 on Schedule N)

Deferred Tax (Liability) / Assets
- At the beginning of the year                                                           164.96                                                       47.46
Add: Adjustment for change in Accounting Policies                                             -                                                       27.50
(Refer Note 20 on Schedule N)
- Adjustment during the year                                                             115.00                       279.96                          90.00                          164.96
                                                                                                                      279.96                                                         164.96

SCHEDULE G                                                                                                                                                                      (Rs. in lacs)

                                                                                                          As at 31st Mar.2009                                            As at 31st Mar.2008


CURRENT ASSETS, LOANS & ADVANCES

CURRENT ASSETS

INVENTORIES
(Refer Note 5 on Schedule M)

Raw Materials & Components                                                                                          6,446.43                                                       5,552.63
Raw Material - Goods in Transit                                                                                       638.17                                                         700.52
Stores and Spare Parts                                                                                                 90.74                                                          78.74
Loose Tools                                                                                                            32.56                                                          49.09
Work in Progress *                                                                                                  1,562.45                                                       1,289.93
Finished Goods
- Vehicles **                                                                           5,655.03                                                   4,258.86
- Spares                                                                                  503.81                    6,158.84                         420.03                        4,678.89

                                                                                                                   14,929.19                                                      12,349.80

* - Includes Work in Progress during test run production amounting to Rs. 83.03 lacs (Previous year Rs. 651.58 lacs).
** - Includes Finished goods of vehicles produced during test run production amounting to Rs. 1132.16 lacs (Previous year Rs. 896.15 lacs) valued at material cost.



                                                                                                        F 10
SUNDRY DEBTORS
(Considered good unless otherwise stated)

Debts outstanding for more than six months:
- Secured                                                                 12.00                   10.14
- Unsecured [ Including Rs.605.40 lacs considered
doubtful (Previous Year Rs.503.12 lacs)]              953.49                         761.92
Less: Provision for doubtful debts                    605.40             348.09      503.12      258.80

                                                                         360.09                  268.94
Other debts:
- Secured                                                                495.49                  328.28
- Unsecured [ Including Rs. 26.60 lacs considered
doubtful (Previous Year Rs. 30.16 lacs)]            13,804.34                      17,993.00
Less: Provision for doubtful debts                      26.60          13,777.74       30.16   17,962.84

                                                                       14,633.32               18,560.06




                                                                F 11
SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE G (Continued)                                                                                  (Rs. in lacs)

                                                                     As at 31st Mar.2009              As at 31st Mar 2008
CASH AND BANK BALANCES

Cash in hand                                                                      29.58                                 27.27
[Includes Stamps in Hand Rs. 1.35 lacs
(Previous Year Rs. 1.35 lacs)]
Balances with Scheduled Banks on :
   - Current Accounts                                     421.35                            661.65
   - Cash Credit Accounts                                      -                              9.06
   - Unpaid /Unclaimed Dividend Accounts                  122.97                            114.03
   - Fixed Deposits                                       126.99                 671.31     102.27                   887.01
    (Pledged as Margin money with banks against
     issue of letters of credit and bank guarantees)
                                                                                 700.89                              914.28
OTHER CURRENT ASSETS
(Unsecured considered good unless otherwise stated)
Prepaid Expenses                                                                  10.24                               13.33
Export Incentives Receivables                                                    178.93                              444.62
(Refer Note 2 on Schedule M)
                                                                                 189.17                              457.95
LOANS AND ADVANCES
(Unsecured considered good unless otherwise stated)
Advances recoverable in cash or in kind or
for value to be received                                1,745.19                           1,708.76
[Including Rs 10.45 lacs considered doubtful
(Previous Year Rs.10.45 lacs)]
Less: Provision for doubtful advances                      10.45               1,734.74      10.45                 1,698.31
Security Deposits                                         138.57                            130.97
[Including Rs. 0.36 lacs considered doubtful
(Previous Year Rs. 0.36 lacs)]
Less: Provision for doubtful deposits                       0.36                 138.21       0.36                   130.61
Balances with Excise Authorities                                                 884.13                              692.23
(Refer Note 2 on Schedule N)

MAT Credit Entitlement (Refer Note 22 on Schedule N)                              41.22                                     -
Advance Tax                                                                      234.24                                     -
(Net of Provision Rs. 7,099.48 lacs)
                                                                               3,032.54                           2,521.15
SCHEDULE H                                                                                              (Rs. in lacs)
                                                                           As at                            As at
                                                                      31st Mar.2009                    31st Mar.2008
CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES

 Acceptances *                                                                 1,767.87                            5,104.64
 Sundry Creditors                                                              9,620.83                           12,200.61
  (Refer Note 16 on Schedule N)
 Customer Advances                                                               992.81                              640.22
 Unclaimed Dividends                                                             122.97                              114.03
 Other Liabilities                                                               812.12                            1,225.76
 Interest accrued but not due on short term loan                                  32.40                                   -

                                                                             13,349.00                            19,285.26

PROVISIONS
 Provision for Taxation (Net of Advance Tax Rs.7025.65 lacs )                         -                               32.61
 Fringe Benefits Tax                                                               7.20                               15.00
 Wealth Tax                                                                        0.65                                0.60
 Proposed Dividend                                                               157.30                              576.77


                                                                   F 12
 Tax on Proposed Dividend                                                           26.73                                           98.02
 Retirement benefits                                                             1,025.32                                          848.58
  (Refer Note 6 on Schedule M & Note 20 on Schedule N)
 Warranty                                                                          302.66                                          463.00
  (Refer Note 8 on Schedule M & Note 4(b) on Schedule N)
                                                                                    1,519.86                                      2,034.58
                                                                                   14,868.86                                     21,319.84
* Secured to the extent of Rs.781.61 lacs(Previous Year Rs. 1,740.37 lacs) against hypothecation of Raw Material & Components.




                                                                     F 13
SCHEDULES FORMING PART OF THE ACCOUNTS

SCHEDULE I                                                                                                             (Rs. in lacs)

                                                                           Year Ended                                 Year Ended
                                                                           31st Mar.2009                              31st Mar.2008
OTHER OPERATING INCOME
Sale of Scrap                                                                        224.11                                    208.29
Export Incentives (Refer Note 2 on Schedule M)                                       196.00                                    241.94
Liabilities/Provisions no longer required written back                               115.51                                     78.71
Royalty                                                                               61.25                                     63.33
Miscellaneous Income                                                                  13.14                                      6.48
                                                                                     610.01                                    598.75

SCHEDULE J                                                                                                                (Rs. in lacs)
                                                                           Year Ended                                    Year Ended
                                                                             31st Mar.2009                             31st Mar.2008
MANUFACTURING AND OTHER
EEXPENSES
Materials consumed
Raw materials and components consumed*                                            44,053.74                                 53,886.49
(Refer Note 11 on schedule N)
Movement of Finished goods and Work in Progress
Opening Stock
-Finished goods                                          4,678.89                                          3,914.77
-Work-in-Progress                                        1,289.93                                            605.54
                                                         5,968.82                                          4,520.31
Add : Purchases of finished goods                        2,510.63                                          2,566.11
                                                         8,479.45                                          7,086.42
Less : Closing Stock
-Finished goods                                          6,158.84                                          4,678.89
-Work-in-Progress                                        1,562.45                                          1,289.93
                                                         7,721.29                    758.16                5,968.82          1,117.60

Total Consumption                                                                 44,811.90                                 55,004.09
Less : Vehicles Capitalised                                                           89.19                                     17.17
Add : Increase in excise duty on finished goods                                       34.23                                     36.78
Net Consumption                                                                   44,756.94                                 55,023.70
Operating, Administrative and Other
Expenses (as per Schedule K)                                                        7,132.00                                 6,744.74
                                                                                  51,888.94                                 61,768.44
* Includes Exchange loss on Foreign Currency transactions Rs. 381.46 lacs (Previous Year Rs.179.89 lacs)




                                                                      F 14
SCHEDULE FORMING PART OF THE ACCOUNTS
SCHEDULE K                                                                                                (Rs. in lacs)
                                                                                Year Ended                      Year Ended
                                                                               31st Mar.2009             31st Mar.2008
OPERATING, ADMINISTRATIVE & OTHER EXPENSES

Salaries,Wages and Bonus                                                              2,867.02                      2,369.36
(Refer Note 6 on Schedule M and 19 & 20 on Schedule N)
Contribution to Provident and Other Funds                                              464.70                        348.79
(Refer Note 6 on Schedule M & 20 on Schedule N)
Workmen and Staff Welfare                                                              214.47                        195.96
Consumption of Stores, Spares and Tools                                                114.81                        136.64
(Refer Note 12 (b) on Schedule N)
Repair and Maintenance:
- Machinery                                                                             15.58                         22.67
- Building                                                                              21.76                         30.62
- Others                                                                                20.49                         11.94
Power and Fuel                                                                         333.62                        354.66
Rent                                                                                   156.38                        122.84
(Refer Note 13 on Schedule M & Note 18 on Schedule N)
Rates and Taxes                                                                         63.03                         23.05
Legal and Professional                                                                 138.09                        118.22
(Refer Note 9 on Schedule N)
Insurance                                                                                40.79                         65.72
Printing, Stationery, Postage and Telephone                                             112.16                        105.72
Travelling and Conveyance                                                               489.05                        382.77
Provision for Doubtful Debts                                                            128.06                        395.38
Marketing,Sales and Promotion Expenses                                                1,575.06                      1,858.09
(Refer Note 4 on Schedule N)
Royalty                                                                                  1.80                             -
Research and Development                                                               106.30                         93.20
(Refer Note 7 on Schedule M & 21 on Schedule N)
Directors' Sitting Fee                                                                  11.40                              9.90
Exchange loss / (gain) on Foreign Currency
Transactions (Refer Note 9 on Schedule M)                                                85.97                       (17.09)
Miscellaneous expenses                                                                  171.96                        132.25
                                                                                      7,132.50                      6,760.69
Less : Expenditure transferred to Fixed Assets                                            0.50                         15.95
(Refer Note 3 on Schedule M)
                                                                                      7,132.00                      6,744.74


SCHEDULE L                                                                                                 (Rs. in lacs)
                                                                                Year Ended               Year Ended
                                                                               31st Mar.2009              31st Mar.2008
FINANCE CHARGES/INCOME
(Refer Note 12 on Schedule M )
Interest on Loans *                                                                   1,744.48                      1,036.79
Interest Others                                                                          55.56                         63.33
Bank Charges                                                                            101.69                         95.91
                                                                                      1901.73                       1196.03
LESS :
Interest on Fixed Deposits(Gross)                             10.33                               4.49
[Tax deducted at source Rs. 1.97 lacs
(Previous Year Rs. 0.91 lacs)]
Interest on Excise Duty Refund                                79.74                                  -
Interest on Income Tax refund                                     -                              12.37
Interest Others                                                2.89                      92.96    5.75                 22.61
                                                                                      1,808.77                      1,173.42
* Net of interest recovered from customers Rs. Nil (Previous year Rs.10.11 lacs)




                                                                        F 15
SCHEDULES FORMING PART OF THE ACCOUNTS

SCHEDULE M

SIGNIFICANT ACCOUNTING POLICIES


1) ACCOUNTING CONVENTION
   The Financial Statements are prepared to comply in all material aspects with the applicable accounting principles in
   India, the applicable Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 and the
   relevant provisions of the Companies Act, 1956.

2) REVENUE RECOGNITION
   Sales are recognized on transfer of significant risks and rewards to the customer that usually takes place on dispatch of
   goods to the customer from the factory/ stockyard/ storage area. In case of export sales, revenue is recognized as on
   the date of bill of lading, being the effective date of transfer of significant risks and rewards to the customer. Export
   benefits are accounted for on accrual basis.
3) FIXED ASSETS / INTANGIBLE ASSETS
   Fixed assets are recorded at cost of acquisition. Cost includes freight, duties, taxes and expenses incidental to
   acquisition and installation of fixed assets. In case of self-constructed fixed assets, appropriate overheads including
   salaries & wages are allocated to the cost of the asset. The Cost of Capital Spares is capitalized along with the cost of
   the related Asset.

    Intangible assets comprising of Technical know how, product designs, prototypes etc. either acquired or internally
    developed are stated at cost. In case of internally generated intangible assets, appropriate overheads including salary
    and wages are allocated to the cost of the asset.

    Capital work in Progress includes cost of assets at site, direct and indirect expenditure incidental to construction,
    advances made for acquisition of capital assets and interest on the funds deployed for construction.

4) DEPRECIATION / AMORTISATION
   Depreciation on tangible fixed assets is provided on a Straight-Line Method on a monthly pro-rata basis at the rates
   and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except on following assets which are
   being depreciated at the rates mentioned below:
    Motor cars and air conditioners          -         25.00%
    Computers                                -         33.33%
    All assets costing up to Rs. 5,000/- are being fully depreciated in the year of purchase.
    Capital spares are amortized in a systematic manner over a period not exceeding the useful life of the asset to which
    they relate.
    Intangible assets are amortised on a Straight-Line Method on a monthly pro-rata basis over a period of three to ten
    years based on the estimated useful life of the assets.

5) INVENTORIES
   Inventories are valued at lower of cost or net realizable value. Cost for the purpose of valuation is calculated on a
   quarterly weighted average method. In respect of Finished Goods & Work-in-Progress, applicable manufacturing
   overheads and other costs incurred in bringing the items of inventory to their present location and condition are also
   included. Excise duty is included in finished goods valuation.
6) EMPLOYEE BENEFITS
   (a) Post-employment benefit plans
   i. Defined Contribution Plans - The Company contributes to the appropriate authorities its share of the Employees‘
   Provident & Pension Fund and Employee State Insurance, which is charged to Profit and Loss Account every year.
   The Company has created trust which has taken Master policy with the Life Insurance Corporation of India to cover its
   liability towards employees‘ Superannuation. Annual contribution of Superannuation is charged to Profit and Loss
   Account every year



                                                            F 16
    ii. Defined Benefit Plans - The estimated liability towards Gratuity and Leave Encashment is being provided for based
    on the actuarial valuation carried out at the year-end using Projected Unit Credit Method. Actuarial gains and losses
    are recognized in full in the Profit and Loss Account for the period in which they occur.

    The Company has created trust which has taken Master policy with the Life Insurance Corporation of India to cover its
    liability towards employees‘ Gratuity. The Gratuity obligation recognized in the Balance Sheet represents the present
    value of the defined benefit obligation as adjusted for unrecognized past service cost and as reduced by the fair value
    of Gratuity Fund.

    (b) Short term employment benefits
    The undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered by
    employees is recognized during the period when the employee renders the services. These benefits include
    compensated absences and performance incentives.

7) RESEARCH & DEVELOPMENT
   Revenue expenditure on Research and Development is charged to the Profit and Loss Account in the year in which it
   is incurred. Capital expenditure on Research and Development is shown as an addition to fixed assets and depreciated
   at the rate as applicable to respective assets.

8) WARRANTY EXPENSES
   Provision for warranty is made in the accounts on the basis of past experience and technical evaluation in respect of
   vehicles sold.

9) FOREIGN CURRENCY TRANSACTIONS
   Foreign currency transactions are recorded at exchange rates prevailing at the date of transaction. Exchange
   differences, if any, arising on settlement of transactions are recognized as income or expense in the year in which they
   arise.

    At the Balance Sheet date all monetary assets and monetary liabilities denominated in foreign currency are reported at
    the exchange rates prevailing at the Balance Sheet date and the resultant exchange difference, if any, is recognized in
    the Profit & Loss Account.

10) TAXATION
    Tax Expense, comprising current tax, deferred tax & fringe benefit tax is included in determining the net profit for the
    year. The current tax & fringe benefit tax has been computed in accordance with relevant tax rates and tax laws.
    Minimum Alternate Tax (MAT) paid in excess of normal income tax is recognised as asset (MAT Credit entitlement)
    only to the extent, there is reasonable certainty that company shall be liable to pay tax as per the normal provisions of
    the Income Tax Act,1961 in future.

    In accordance with Accounting Standard – 22 ‗Accounting for Taxes on Income‘, notified under Section 211(3C) of
    the Companies Act, 1956, the deferred tax for timing differences between the book and the tax profits for the year is
    accounted for using the tax rates and laws that have been enacted or substantially enacted as on the Balance Sheet
    date. However, in the year of transition, the accumulated deferred tax (liabilities) / assets at the beginning of the year
    has been recognized with a corresponding charge to the General Reserve.

    Deferred tax assets arising from temporary timing differences are recognized to the extent there is a reasonable /
    virtual certainty that the assets can be realised in the future and are reviewed for the appropriateness of their respective
    carrying values at each Balance Sheet date.

11) GOVERNMENT GRANTS
    Grants in the form of Capital/Investment subsidy are treated as Capital Reserve.
12) BORROWING COSTS
    Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are
    capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which
    they are incurred.

13) LEASES
    As lessee:


                                                             F 17
    Lease rental in respect of assets taken on "Operating Lease" are charged to Profit & Loss account on straight-line basis
    over the lease term.

14) IMPAIRMENT OF ASSETS
    In accordance with Accounting Standard – 28 on ‗Impairment of Assets‘, notified under Section 211(3C) of the
    Companies Act, 1956, recoverable amount of relevant assets is computed and compared with the carrying amount for
    determining impairment loss, if any at the Balance Sheet date in case there is an indication that any asset may be
    impaired.

15) PROVISIONS AND CONTINGENCIES
    Provisions are recognized when the Company has a present obligation as a result of past events, for which it is
    probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a
    reliable estimate of the amount can be made. Provisions required to settle are reviewed regularly and are adjusted
    where necessary to reflect the current best estimates of the obligation. Where the Company expects a provision to be
    reimbursed, the reimbursement is recognized as a separate asset, only when such reimbursement is virtually certain.
    Contingent liabilities are disclosed after an evaluation of the facts and legal aspects of the matters involved.




                                                           F 18
SCHEDULES FORMING PART OF THE ACCOUNTS

Schedule N

NOTES TO ACCOUNTS

    1.    There are Contingent Liabilities in respect of:

         a) Claims against the Company not acknowledged as debts:


  Name of the           Nature of dues             Amount (Rs.)           Period to which    Forum where the dispute
    statute                                                                  the amount            is pending
                                                                                relates
  Central Sales     Demand raised for          Rs.218.23 lacs            1st April 2000 to   Sales Tax Appellate
  Tax Act,          difference in the rate     (Rs.87.30 lacs            30th September      Tribunal, Chandigarh.
  1956              of tax.                    deposited by the          2000
                                               Company)
  Central Sales     Vehicles impounded         Rs.9.65 lacs (Surety      May, 2001           High Court of Punjab &
  Tax Act,          & demand raised due        bond and Rs. 2.42 lacs                        Haryana (Appeal filed by
  1956              to discrepancy in /        deposited by the                              the Company)
                    inadequacy of              Company)
                    documents.
  Punjab VAT        Vehicles impounded         Rs.2.10 lacs (Surety      March, 2008         Deputy Excise and Taxation
  Act, 2005         & demand raised due        bond and Rs. 0.53 lacs                        Commissioner cum Joint
                    to discrepancy in /        deposited by the                              Director Enforcement,
                    inadequacy of              Company)                                      Patiala.
                    documents.
  Punjab VAT        Vehicles impounded         Rs. 1.57 Lacs (Surety     August, 2007        Deputy Excise and Taxation
  Act, 2005         & demand raised due        bond and Rs. 0.39                             Commissioner cum Joint
                    to discrepancy in /        lacs deposited by the                         Director Enforcement,
                    inadequacy of              company)                                      Patiala.
                    documents.
  Karnataka         Demand raised by           Rs. 1.97 lacs (Rs. 0.99   December, 2007      Assistant Commissioner of
  Value Added       Sales tax Authorities      lacs deposited by the                         Commercial Taxes, Hubli
  Tax, 2003         for late submission of     company)
                    Return.

  Gujarat Sales     Demand raised due to       Rs. 11.78 lacs (Rs.       2001-02             Deputy Commissioner of
  Tax Act           discrepancy in             2.37 lacs deposited &                         Sales Tax, Gujarat
                    documents.                 Rs. 9.25 lacs has been
                                               given as bank
                                               guarantee by the
                                               company)
  Haryana           Demand raised by           Rs. 4.22 Lacs             2005-06             Excise & Taxation Officer
  Value Added       Sales Tax Authority,                                                     cum Assessing Authority,
  Tax Act,          Panchkula against non                                                    Panchkula
  2003              submission of Form D
                    & D1.
  Central Sales     Demand raised by           Rs. 3.37 Lacs             2005-06             Excise & Taxation Officer
  Tax Act,          Sales Tax Authority,                                                     cum Assessing Authority,
  1956              Panchkula against Non                                                    Panchkula
                    submission of C forms




                                                               F 19
Central       Denial of benefit of       Rs147.66 lacs (already    1995-96 to 1996-      The case has been referred
Excise Act,   notification for fuel      deposited by the          97                    back by Supreme Court of
1944          efficiency to chassis      Company)                                        India to Customs Excise and
              for Motor Vehicles.                                                        Service Tax Appellate
                                                                                         Tribunal (CESTAT)



Central       Demand raised to re-       Rs 4.25 lacs (Includes    01 April, 2000 to     The case has been referred
Excise Act,   determine the              penalty Rs. 2.12 lacs)    31 March, 2004        back by Customs Excise and
1944          assessable value of                                                        Service Tax Appellate
              components supplied                                                        Tribunal (CESTAT) to
              to spare parts division                                                    Commissioner (Appeals)
              under Rule 7 of
              Valuation Rules.
Central       Demand raised on           Rs. 1.76 lacs (amount     01 April, 2003 to     Custom Excise and Service
Excise Act,   non-receipt of material    of penalty)               31 October, 2003      Tax Appellate Tribunal
1944          sent to job workers                                                        (CESTAT)
              within 180 days under
              Rule 4(5a) of Cenvat
              Credit rules.
Central       Demand raised in           Rs. 9.92 lacs(Rs. 1.30    April‘ 2002 to        Custom Excise and Service
Excise Act,   context with Service       lacs deposited by the     Mar‘ 2005.            Tax Appellate Tribunal
1944          tax on royalty received    Company, includes                               (CESTAT)
              on account of use of       penalty of Rs 6.62
              brand name of SML.         lacs)

Central       Demand raised for          Rs. 3.19 lacs (includes   01 January, 2004 to   Custom Excise and Service
Excise Act,   non-inclusion of cost      penalty amounting to      30 September,         Tax Appellate Tribunal
1944          of publicity items sold    Rs 0.30 lacs)             2004                  (CESTAT)
              to dealers on trading
              basis as part of
              Transaction Value.
Central       Denial of utilization of   Rs. 5.70 lacs             2005-06               Custom Excise and Service
Excise Act,   service tax credit for     (inclusive of penalty                           Tax Appellate Tribunal
1944          the payment of service     Rs. 2.85 lacs)                                  (CESTAT)
              tax liability on behalf
              of foreign collaborator
Central       Inadmissible Service       Rs. 5.70 lacs             2005-06               Appeal by the Company to be
Excise Act,   tax credit utilized for    (inclusive of penalty                           filed before Custom Excise
1944          payment of service tax     Rs. 2.85 lacs)                                  and Service Tax Appellate
              liability resulting in                                                     Tribunal (CESTAT)
              short payment of
              service tax liability.
Income Tax    Disallowance of            Rs.36.74 lacs for the     1991-92               High Court of Punjab &
Act, 1961     provision for bad and      assessment year 1992-                           Haryana (Appeal filed by the
              doubtful debts             93 (representing the                            Department)
                                         amount of provision)
Income Tax    Demand raised under        Rs.22.02 lacs for the     1997-98               High Court of Punjab &
Act, 1961     section 234 B & C by       assessment year 1998-                           Haryana (Appeal filed by
              assessing authority        99 (Rs.22.02 lacs                               the Company).
                                         deposited by the
                                         Company)

Income Tax    Demand raised for          Rs. 3.43 lacs for the     2003-04               Appeal filed by the
Act, 1961     excess deduction           assessment year 2004-                           Company before ITAT,
              claimed u/s 80HHC on       05.                                             Chandigarh
              account of DEPB

Income Tax    Demand raised for non      Rs. 28.51 lacs for the    1986-87               Appeal filed by Department

                                                       F 20
Act, 1961        deduction of TDS on        Assessment Year                               before Punjab & Haryana
                 payment of Fee for         1987-88                                       High Court
                 Technical Services/
                 Royalty
Income Tax       Demand raised on           Rs. 101.55 lacs          2004-05              Major relief granted by
Act, 1961        disallowance of            Assessment year                               CIT(A). Appeal against partial
                 expenses, loading of       2005-06 (Rs. 62.00                            disallowances filed before
                 statutory dues on          lacs deposited by the                         ITAT both by the Company
                 Work-in-Progress u/s       Company)                                      and the Department
                 145(A) and weighted
                 R&D deduction.
Civil            Claim filed by finance     Rs. 12.70 lacs claimed   1997                 Appeal filed by the Company
Recovery suit    company for non            by Luxmi General                              before High Court at Chennai.
                 supply of vehicles by      Finance
                 the dealer even after
                 receiving money
Civil            Suit filed by the bank     Rs. 4.16 lacs            2008                 Civil Judge Senior Division,
Recovery suit    for recovery of amount                                                   Gurgaon
                 sanctioned to one of
                 the customer for
                 purchase of a Swaraj
                 Mazda vehicle.

Distt.           Award given by the         Rs. 2.0 lacs             2008                 Appeal filed by the
Consumer         District Consumer                                                        Company before State
Forum            forum, Bilaspur,                                                         Commission, Himachal
                 against complaint filed                                                  Pardesh against the order of
                 by the customer for                                                      District Consumer forum,
                 replacement of                                                           Bilaspur
                 defective engine.


      b) Bank Guarantees given by the Company and outstanding as on 31.03.2009 amounting to Rs. 1,006.38 lacs
         (Previous Year Rs. 331.94 lacs).

      c) Letters of Credit issued on behalf of the Company by its bankers and outstanding as on 31.03.2009 amounting
         to Rs. 1,358.31 lacs (Previous Year Rs. 2,681.07 lacs).

 2.   Through issue of excise notification no 11/95 dated March 16, 1995 Government sought to lapse Rs. 488 lacs out
      of Modvat Credit Receivable balance as on March 16, 1995. Petition by the Company and others with the Delhi
      High Court challenging the said notification on grounds of law and equity was allowed by the Supreme Court vide
      order dated January 28, 1999. The Finance Act, 1999 has, however, brought in retrospective amendment w.e.f.
      March 16, 1995 in the Central Excise Act, empowering the Central Government to lapse such modvat. On legal
      advice obtained by the Company to seek redressal against the action of the Government, the Company has filed
      writ petition before the Delhi High Court on the ground that the Government action violates the doctrine of
      promissory estoppel/expectation principle beside other grounds. The Court has already admitted the petition.
      Accordingly, pending Company‘s petition and decision thereupon, the amount of Rs. 488 lacs though adjusted in
      excise records has not been provided in the books of account.

 3.   Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)
      Rs. 443.71 lacs (Previous Year Rs. 240.00 lacs).

 4.   (a) Market promotion expenses (Schedule K) includes Commission on Sales amounting to Rs. 98.70 lacs
      (Previous Year Rs. 84.15 lacs).

            (b) Provision For Warranty*                                      2008-09         2007-08
                                                                            Rs. In lacs     Rs. In lacs
                Opening Balance                                                463.00         423.00
                Additions During the Year                                      226.00         303.00

                                                            F 21
                    Utilized during the year                                           386.34     263.00
                    Closing Balance                                                    302.66     463.00

           *As per warranty policy, the Company is required to provide free repair and replacement of parts required due to
           manufacturing defects which appear during the warranty period.

      5.   As the Company‘s business activities fall within a single primary business segment, viz., ―Commercial Vehicles
           and Spares‖, the disclosure requirement of Accounting Standard (AS) – 17 ―Segment Reporting‖ is not applicable.

      6.   In accordance with Accounting Standard on (AS 18) "Related Party Disclosures", the disclosure in respect of
           transactions with the company's related parties are as follows:
             i. Holding / Associate Company                    Sumitomo Corporation, Japan
             (Holding w.e.f January 06, 2009) *
             ii. Key Management Personnel *                    Mr. Yash Mahajan – Managing Director
                                                               Mr. K Nakajima - Whole-time Director
           *As identified and certified by the Management

            iii. Transactions with Sumitomo Corporation:


                                                                         2008-2009              2007-2008
                                                                         Rs. In lacs            Rs. In lacs

 a.              Purchase of components/spares                            1,516.31               3,222.50
 b.              Purchase of fixed assets                                  252.36                 29.66
 c.              Discounting charges                                       10.98                  22.41
 d.              Dividend paid (Gross)                                     236.67                 236.67


 Balance outstanding at year end – Payable                                 736.70                1,712.55

iv. Payments to Key Management Personnel:
                                                                         2008-2009              2007-2008
                                                                         Rs. in lacs            Rs. in lacs

 a.              Remuneration (Refer Note 19 on Schedule N):
                 Mr. Yash Mahajan                                         184.88*                 87.13

                 Mr. K. Nakajima                                           58.35                  92.41

 b.              Other Payments
                Rent paid to Mr. Yash Mahajan                          9.69                        Nil
                Aggregate balances outstanding at year
                                                                      11.95                       82.21
                end – Payables
                                                  st               st
* Includes arrears Rs. 88.27 lacs for the period 1 June, 2006 to 31 March, 2008.

      7.   Earning Per Share (EPS):

                                                                               31-03-2009       31-03-2008
       Profit attributable to equity shareholders (Rs. in lacs)                     478.76       2,520.27

       Weighted average number of equity shares outstanding during             10,486,700       10,486,700
       the year. [excluding 13,300 forfeited equity shares (Previous
       Year 13,300)]


                                                                  F 22
 Basic/Diluted Earning Per Share (Rs.)                                       4.57             24.03
 Face Value per share (Rs.)                                                 10.00             10.00

8.   In view of Accounting Standard (AS) -22 ―Accounting for Taxes on Income‖, the Company has accounted for
     deferred tax as follows:
                                                                                          Amount (Rs. in lacs)
       Particulars                                   Balance as at     Expense /(Saving)   Balance as at
                                                      01.04.2008        during the year     31.03.2009
      A) Deferred Tax Liabilities
      (i) Tax impact of difference between carrying
      amount of fixed assets in the financial                275.39                871.93        1147.32
      statements and income tax returns
                                                           [196.70]               [78.69]       [275.39]
      Sub Total                                              275.39                871.93        1147.32
                                                           [196.70]               [78.69]       [275.39]

      (B) Deferred Tax Assets

      (i) Tax impact of expenses charged in the
      financial statements but allowable as                       175.64                 (42.85)            218.49
      deductions in future years under income tax.
                                                                [114.81]                [(60.83)]         [175.64]
      (ii) Tax impact of expenditure disallowed under
      section 40(a)(ia) and 43B of the Income Tax                 264.71                 (84.11)            348.82
      Act
                                                                [129.35]              [(135.36)]          [264.71]
      (iii) Tax impact of loss as per normal
      provisions of Income Tax Act,1961                                 -               (859.97)            859.97

                                                                      [-]                     [-]               [-]
      (iv) Adjustment on account of change in                           -                       -                 -
      accounting policy (Refer Note 20 on Schedule
      N)
                                                                  [27.50]                [27.50]                [-]

      Sub Total                                                   440.35                (986.93)           1427.28
                                                                [271.66]              [(168.69)]          [440.35]

                         Deferred Tax Assets (B-A)                164.96                (115.00)            279.96
                                                                  [74.96]               [(90.00)]         [164.96]

     The Deferred Tax saving (net) for the current year aggregating to Rs. 115 lacs (Previous Year Rs. 90 lacs) has
     been credited to the Profit & Loss Account.
     Note: Figures shown in parenthesis [ ] relate to previous year.

9.   Auditors‟ Remuneration:
                                                                   2008-2009            2007-2008
                                                                   Rs. In lacs          Rs. in lacs
      Statutory Audit Fee                                            18.50                18.50
      Tax Audit Fee                                                   5.00                 5.00
      Other Audit Services / Certification                            8.50                 8.50

      Reimbursement of Out of Pocket Expenses                          1.04                 1.28
                                                                      33.04                33.28




                                                        F 23
Information with regard to Licensed Capacity, Installed Capacity*, Production, Sales and Stocks:

    10.
           a. Capacities                 Unit of Measurement             Installed Capacity (Per Annum)

            On-road automobiles                                          31.03.2009       31.3.2008
           (having four or more          Nos.                                18,000*         12,000*
           wheels such as light,
           medium and heavy
           commercial vehicles)

          * On double shift basis as certified by the management and relied upon by auditors being technical matter.
          * Includes production for internal use.
          Licensed Capacity: Not Applicable

          b. Production, Sales and Stocks of Finished Goods:
                                                 2008-2009                              2007-2008
                                         Qty.(Nos.)          Rs. In lacs          Qty.(Nos.)     Rs. In lacs
           VEHICLES
           Opening Stock                           670         4,258.86                  708            3,541.14
           Production                           8,164*         -                     11,241*             -
           Sales                              8,022**         55,240.40             11,274**           71,328.46
           Vehicles Capitalised                      6         -                           5             -
           Vehicle Scrapped                          5         -                           -             -
           Closing Stock                       801***          5,655.03               670***            4,258.86

*Includes 17 buses (Previous Year 27) produced during test run.
**Includes 2 buses (Previous Year 2) sold during test run which is netted off from assets capitalised.
*** Includes 35 buses (Previous Year 25) produced during test run.

          SPARES
                                                        2008-2009                       2007-2008
                                                       (Rs. in lacs)                   (Rs. in lacs)

           Opening Stock                                                420.04                         373.63

           Purchases                                                   2,510.63                   2,566.11

           Sales                                                       4,743.41                   4,554.35

           Closing Stock                                                503.81                         420.04

          Note: It is not possible to furnish quantitative information in respect of Spares in view of large number of items
          of varied nature.

    11. Raw Material & Components Consumed:
                                          2008-2009                                 2007-2008
                                  Qty. (Nos.)     Rs. in lacs                Qty. (Nos.)      Rs. in lacs
         CKD Kits                       8,164       1,447.94                     11,241        1,759.18
         Tyres, Tube & Rims          164,882        3,045.13                    228,075        3,820.58
         Cargo Boxes                    1,664         775.16                       2,226         840.01
         Batteries                      8,335         220.05                     11,528          306.40
         Others                                    38,565.46                                  47,160.32
         Total                                     44,053.74                                  53,886.49

          i)       In view of varied nature of large number of items, it is not possible to furnish quantitative information on
                   components.


                                                             F 24
    ii)     The figure of others is a balancing figure based on total consumption shown in Schedule J and includes
            adjustments for excess/shortage found on physical verification.

    iii)    Quantities and values of all items except CKD kits (where actuals are taken) represent issues from stores
            made during the period.

12. Value of imported and indigenous Raw Material & Components, Stores &                        Spares consumed and
    percentage of each to total consumption:

    a.      Raw Material & Components:
                                                 2008-2009                             2007-2008
                                         %            Rs. in lacs              %            Rs. in lacs
             Imported                       4.38        1,930.24                  5.15       2,774.20
             Indigenous                    95.62       42,123.50                 94.85      51,112.29
                                         100.00           44,053.74             100.00       53,886.49

    b.      Stores & Spares:
                                                2008-2009                      2007-2008
                                         %            Rs. in lacs               %        Rs. in lacs
             Imported                      6.61              7.59                 7.22             9.87
             Indigenous                   93.39           107.22                 92.78          126.77
                                         100.00           114.81                100.00          136.64

13. C.I.F. Value of Imports:
                                                              2008-2009                      2007-2008
                                                                Rs. in lacs                Rs. in lacs
     Raw Material & Components                                    2,168.29                       3906.87
     Spares & Stores (Including Capital Spares)                      76.22                          8.84
     Capital Goods                                                  794.17                        122.47
                                                                  3,038.68                       4,038.18

14. Earnings in Foreign Currency:

                                                               2008-2009                         2007-2008
                                                    Nos        Rs. in lacs           Nos         Rs. in lacs
     Exports including Deemed Exports of            409          2,266.94            585           3,242.21
     Vehicles at FOB Value
     Export of Spare Parts                                             94.76                          91.84

                                                                 2,361.70                          3,334.05


15. Expenditure in Foreign Currency (on payment basis - net of tax):

                                                               2008-2009                        2007-2008
                                                               Rs. in lacs                      Rs. in lacs
     Traveling                                                         21.49                         21.79

     Know-how                                                          41.66                         37.56
     Discounting Charges                                               15.19                         11.56
     Technician Fees                                                   65.29                         76.56
                                                                      143.63                        147.47

16. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than
    45 days as at 31st March, 2009 and 31st March, 2008. This information as required to be disclosed under the


                                                     F 25
    Micro, Small and Medium Enterprises Development Act, 2006 has been determined on the basis of information
    available with the Company.

17. The Company has a system for maintenance of information and documents as required by the transfer pricing
    regulation under Sections 92-92F of the Income Tax Act, 1961, as applicable. Since the law requires existence of
    such information and documentation to be contemporaneous in nature, the Company also updates its information
    and documentation for international transactions entered into with the associated enterprises during the financial
    year. The management is of the opinion that its international transactions are at arms length so that the aforesaid
    legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that
    of provision for taxation.

18. The Company has taken certain premises under operating lease arrangements. The lease period varies from 3 to
    15 years with the option to extend the same with mutual consent. The total lease rental recognized as expense
    aggregate to Rs. 156.38 lacs (Previous Year Rs.122.84 lacs).

  Future minimum lease payments under non-cancellable operating leases:
                                                        2008-2009                   2007-2008
                                                          Rs. In lacs                     Rs. In lacs

     Not later than one year                                      5.35                        7.17

19. Managerial Remuneration * (Refer Note 6 on Schedule N) :
                                                                             2008-2009         2007-2008
                                                                             Rs. in lacs       Rs. in lacs

     1.        Remuneration:
     i)        Salaries and Allowances                                          120.00         85.80
     ii)       Commission                                                        11.95         82.21
     iii)      Contribution to Provident & Other Funds                           18.60         10.14
     iv)       Other Perquisites                                                  4.41          1.39
                                                                                154.96        179.54
     2.        Computation of net profit in accordance with Sec. 309(5) of the Companies Act, 1956
               for the calculation of commission

               Profit Before Tax                                                    413.61        3,870.27
     Add       Depreciation charged in accounts                                     583.92          330.07
               Provision for doubtful debts                                         128.06          395.38
               Director‘s remuneration                                              243.23          179.54
               Director‘s sitting fee                                                11.40            9.90
                                                                                  1,380.22        4,785.16
     Less      Depreciation as per section 350 of the Companies                     555.68          293.85
               Act,1956
     Less      Provision for doubtful debt written back                              29.35           50.33
                                                                                    795.19        4,440.98
               Maximum Commission to Managing Director @ 1%                           4.00           37.80
               (as approved by Members. Restricted to Rs. 4.00 lacs as
               total remuneration approved by Ministry of Corporate
               Affairs, Government of India is Rs. 96.72 lacs).
               Maximum Commission to Whole time Director @ 1%                         7.95           44.21
               (Within the overall limit of Rs. 48.00 lacs being 100%
               of annual salary as approved by Members)

     *Notes:

     i. Contribution to Provident and other funds does not include contribution towards gratuity & leave
     encashment, as the separate figures for the directors are not available.

     ii. Other Perquisites does not include premium in respect of personal accident insurance, as the
     separate figures for the directors are not available.



                                                       F 26
         iii. Remuneration of Whole time Director is subject to approval of Ministry of Corporate Affairs,
         Government of India.

         iv. Arrears of Remuneration paid to Managing Director during the year for the period 1 st June, 2006
         to 31st March, 2008 as approved by members is as below:

          Particulars                                           (Rs. in lacs)
          Salaries and Allowances                                         64.20
          Commission                                                       6.61
          Contribution to Provident & Other Funds                         10.56
          Other Perquisites                                                6.90
          Total                                                           88.27

   20. The Company had adopted in the previous year Accounting Standard-15 ‗Employee Benefits‘ (Revised 2005)
       notified under Section 211(3C) of the Companies Act, 1956. Consequent upon its adoption, in accordance with
       the transitional provisions contained in the Accounting Standard, the net difference of Rs. 53.40 lacs (after
       adjustment for deferred tax of Rs. 27.50 lacs) between the liability in respect of Gratuity and Leave Encashment
       existing on the date of adoption and the liability that would have been recognized at the same date under the
       previous Accounting Standard, was adjusted in the previous year against the opening balance of General Reserve.
       Disclosures as per AS - 15 (Revised) ‗Employee Benefits‘ for year ended March 31, 2009:

   I    Defined Contribution Plans:
        Provident Fund & Superannuation
        During the year the company has recognised the following amounts in the Profit and Loss Account –

                                                                                                                Rs. Lacs
                                                                                            2008-09             2007-08
         Employers Contribution to Provident Fund & Pension Fund*                            220.47              158.26
         Superannuation*                                                                      53.01               45.60

   II  State Plans
       Employees State Insurance Scheme
       During the year the company has recognised the following amounts in the Profit and Loss Account-
                                                                                              Rs. Lacs
                                                                                     2008-09            2007-08
         Employees State Insurance Scheme*                                               7.73              3.18
   *Included in Contribution to Provident and Other Funds in Schedule K

   III Defined Benefit Plans
       a) Contribution to Gratuity Fund – Life Insurance Corporation of India
       b) Leave Encashment
                                                      2008-09                             2007-08
Actuarial Assumptions                          Leave           Gratuity             Leave         Gratuity
                                           Encashment                             Encashment

                                            (Unfunded)          (Funded)          (Unfunded)      (Funded)
Mortality Table                              LIC 1994-          LIC 1994-         LIC 1994-96     LIC 1994-
                                              96 Ultimate       96 Ultimate           Ultimate    96 Ultimate
Attrition Rate                                  5.00% p.a        5.00% p.a           5.00% p.a     5.00% p.a

Imputed Rate of Interest                        7.50% p.a        7.50% p.a           8.00% p.a     8.00% p.a

Salary Rise                                     5.00% p.a        5.00% p.a           5.00% p.a     5.00% p.a

Return on Plan Assets                                 N.A.       9.30% p.a               N.A.      9.25% p.a




                                                         F 27
Remaining Working Life                         20.69 Years        20.26 Years       21.31 Years     19.32 Years



Change in the present value of                                                                       Rs. Lacs
obligation
Defined benefit obligation as at April               254.20            560.65            203.57          442.43
1, 2008
Service cost                                          73.78             47.36             59.52            37.85

Interest cost                                         14.74             38.84             15.00            33.67

Actuarial loss/(gain)                                 53.96            116.12               8.33           89.81

Benefits paid                                      (115.34)           (85.61)            (32.22)         (43.11)

Defined benefit obligation as at March               281.34            677.36            254.20          560.65
31, 2009

Change in fair value of plan

Fair value of plan assets as at April 1,                               222.84                            208.77
2008
Expected return on plan assets                                          19.37                              19.06

Contributions by employer                                               56.41                              37.61
Actuarial (loss)/gain                                                   (0.55)                              0.52
Benefits paid                                                         (85.61)                            (43.11)

Fair value of plan assets as at March                                  212.46                            222.84
31, 2009


Reconciliation of present value of
defined benefit obligation and the
fair value of assets
Present value of obligation as at                                      677.36                            560.65
March 31, 2009
Fair value of Plan Assets as at the end                                212.46                            222.84
of period funded status
Present value of unfunded obligation                                   464.90                            337.81
as at March 31,2009
Expenses recognised in the Profit
and Loss Account *

Current Service Cost                                  73.78             47.36             59.52            37.85

Interest Cost                                         14.74             38.84             15.00            33.67
Expected return on plan assets                             -          (19.37)                  -         (19.06)
Net actuarial loss/ (gain) recognized                 53.96            116.67               8.33           89.29
Total Expenses recognised in the                     142.48            183.50             82.85          141.75
Profit & Loss Account
    * Included in Salaries, Wages and Bonus & Contribution to Provident and Other Funds in Schedule K.
The major categories of plan assets as a percentage of total plan assets as at March 31, 2009 are as follows:



                                                           F 28
Government of India Securities                                      Nil
Insurer Managed Funds                                              100%

Note: The estimates of future salary increase, considered in actuarial variation, take account of inflation,
seniority, promotion and other relevant factors such as supply and demand in the employment market.

Short term employment benefits

The undiscounted amount of short term employee benefits expected to be paid in exchange for services
rendered by employees is recognized during the period when the employee renders the services. These
benefits include compensated absences and performance incentives.

   21. Research and Development Costs :
                                                                                       Rs. in Lacs
                                                                            2008-09            2007-08
        a. Revenue Expenditure
        Salaries & Wages                                                      132.12              98.94
        Contribution to Provident and other funds                               6.61               6.25
        Materials                                                             138.75              55.94
        Testing & Analytical                                                  100.01              81.19
        Travelling                                                             33.35              31.16
        Membership & Subscription                                              14.59              12.34
        Software                                                                   -               5.61
        Telephone, Insurance, AMC, Magazines & General                          9.31               6.56
        utilities
        Total                                                                 434.74             297.99
        b. Capital Expenditure
             - Capitalised                                                    109.09              64.13
             - Work-in-Progress                                             1,353.94             181.61

   22. Current tax expense comprise of Rs. 41.22 lacs (Previous year Rs. Nil), being charge for Minimum Alternate Tax
       under section 115JB of the Income Tax Act, 1961. The Company has recognized MAT Credit Entitlement of Rs.
       41.22 lacs (Previous year Nil) grouped under Loans and Advances (Schedule G), in accordance with Guidance
       Note issued by the Institute of Chartered Accountants of India.

   23. Detail in respect of dividend remitted during the year in foreign currency :

       a) Number of Non-resident Shareholders: 1 (Previous Year Nil )
       b) Number of Shares held: 209,000 (Previous Year Nil)
       c) Amount remitted during the year: Rs. 1,149,500 (Previous Year Nil)

   24. Previous year figures have been regrouped / reclassified wherever considered necessary to conform to current
       year‘s classification.




                                                          F 29
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2009
                                                                                                                  (Rs.in Lacs)
                                                                                Year ended                      Year ended
                                                                                     March
                                                                                    31,2009                     March 31, 2008

A. CASH FLOW FROM OPERATING ACTIVITIES

   Net Profit Before Tax expense                                                     413.61                           3,870.27
       Adjustments For :

        Depreciation                                                  583.92                          330.07
        Foreign Exchange Fluctuation                                   12.24                            63.74
        Interest Expense                                            1,744.48                        1,036.79
        Interest Income                                              (92.96)                         (22.61)
        Provision for Doubtful Debts & Advances                       128.06                          395.38
        Provision for Retirement Benefits                             176.74                          240.85
        Provision for Warranty                                      (160.34)                            40.00
        Provision for Wealth Tax                                        0.69                           (0.40)
        Liabilities/Provisions no longer required written
       back                                                         (115.51)                          (78.71)
                                                                                   2,277.32                           2,005.11

Operating Profit Before Working Capital Changes                                    2,690.93                           5,875.38
        Adjustments for :
        Decrease / (Increase) in Sundry Debtors                      3,828.02                          249.68
        Decrease / (Increase) in Other Current Assets                  268.78                          258.69
        Decrease / (Increase) in Loans & Advances                    (235.93)                         (48.38)
        Decrease / (Increase) in Inventories                       (2,579.39)                      (3,616.77)
        (Decrease) / Increase in Current Liabilities               (6,222.04)     (4,940.56)         1,285.59        (1,871.19)

CASH GENERATED FROM / (USED IN) OPERATIONS                                        (2,249.63)                          4,004.19
      Less: Direct Tax Paid (net of refunds)                                          306.10                          1,163.69
      Less: Wealth Tax Paid                                                             0.64                              0.60
      Less: Fringe Benefits Tax Paid                                                   57.65                             50.92
 NET CASH GENERATED FROM / (USED IN)
 OPERATING ACTIVITIES                                                             (2,614.02)                          2,788.98

B.CASH FLOW FROM INVESTING ACTIVITIES :
     Purchase of Fixed Assets                                                     (2,783.21)                        (5,393.57)
     Interest Received                                                                 90.99                             21.70

    NET CASH USED IN INVESTING ACTIVITIES                                         (2,692.22)                        (5,371.87)

C.CASH FLOW FROM FINANCING ACTIVITIES

        Unsecured Loans taken during the year                       7,131.13                       13,331.42
        Unsecured Loans repaid during the year                      7,131.13               -        8,460.04          4,871.38

        Secured Loans taken / (repaid) during the year                             7,780.88                         (1,602.33)

       Dividend Paid                                                                (567.82)                          (563.28)
       Dividend Tax                                                                  (98.02)                           (98.02)
       Interest Paid                                                              (2,013.38)                        (1,392.24)
     NET CASH INFLOW FROM FINANCING
     ACTIVITIES                                                                    5,101.66                           1,215.51

   Net Increase in Cash and Cash Equivalents                                        (204.58)                        (1,367.38)
   Cash and Cash Equivalents as at 01.04.2008 (#1)                                    905.22                          2,272.81
   Cash and Cash Equivalents as at 31.03.2009 (#2)                                    700.64                            905.43

    Notes:-
      # 1 Cash and Bank Balances as at 01.04.2008                                    914.28                           2,272.81
less. Cash Credit Accounts (being treated as financing activity)                      (9.06)                                 -
                                                                                     905.22                           2,272.81

      # 2 Cash and Bank Balances as at 31.03.2009                                    700.89    *                      914.28 *
less. Cash Credit Accounts (being treated as financing activity)                          -                             (9.06)

                                                                     F 30
   Cash and Cash Equivalents as at 31.03.2009                                              700.89                                   905.22

   *Net of unrealised foreign exchange gain of Rs. 0.25 lacs (Previous year Rs.0.21 lacs unrealised foreign exchange loss)

Note:
1. The above "Cash Flow Statement" has been prepared under the Indirect method as set out in the Accounting
   Standard -3 on Cash Flow Statements .

2. Figures in bracket indicates cash outflows.

3. Previous year figures have been regrouped and recasted wherever necessary to conform to the current year classification


This is the Cash Flow Statement referred to in our report of
even date

For and on behalf of                                                 FOR AND ON BEHALF OF THE BOARD
PRICE WATERHOUSE
Chartered Accountants



V.NIJHAWAN                                                           GOPAL BANSAL                           S.K.TUTEJA
Partner                                                              Sr. Vice President -Finance            Chairman
M.No. F87228                                                         & Company Secretary



                                                                                                            YASH MAHAJAN
                                                                                                            Managing Director

New Delhi, May 28, 2009                                                                                   New Delhi, May 28, 2009




                                                                        F 31
      LIMITED REVIEW REPORT AND FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
                                  SEPTEMBER 30, 2009

      LIMITED REVIEW REPORT TO THE BOARD OF DIRECTORS OF SWARAJ MAZDA LIMITED
1.      We have reviewed the accompanying balance sheet of Swaraj Mazda Limited as at September 30, 2009; and
        the related statement of profit and loss and cash flows for the period ended September 30, 2009 and
        September 30, 2008. These financial statements have been approved by the board of directors of the
        company and are the responsibility of the company‘s management. Our responsibility is to issue a report on
        these financial statements based on our review.
2.      We conducted our review in accordance with the Standard on Review Engagements (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 provide less assurance than an audit. We have not performed an audit and,
        accordingly, we do not express an audit opinion.
4.      Attention is invited to non provision of Rs.488 lacs in respect of Modvat Credit Receivable as explained in
        Note 2 on Schedule N. Had the said amount been provided, the net current assets and profit for the period
        would have been lower by the corresponding amount.
5.      Based on our review conducted as above and subject to our comments in para 4 above, nothing has come to
        our attention that causes us to believe that the accompanying financial statements do not give a true a nd fair
        view (or ‗are not presented fairly, in all material respects‘) in accordance with the Accounting Standards
        notified pursuant to the Companies (Accounting Standards) Rules, 2006 as per Section 211(3C) of the Companies
        Act, 1956.




                                                                          V. Nijhawan
                                                                          Partner
                                                                          Membership No. – F87228
                                                                          For and on behalf of
 Place: New Delhi                                                         Price Waterhouse
 Date: January 22, 2010                                                   Chartered Accountants




                                                        F 32
BALANCE SHEET AS AT 30TH SEPTEMBER, 2009                                                                               (Rs. in lacs)

                                                                                 As at                                    As at
                                     Schedule                               30th Sept.2009                           31st Mar.2009

SOURCES OF FUNDS

Shareholders' Funds
 Share Capital                           A               1,049.38                                      1,049.38
 Reserves & Surplus                      B               9,276.85                                      8,603.40
                                                                                  10,326.23                                  9,652.78
Loan Funds
 Secured Loans                           C                                         8,818.71                                 15,128.69

 Unsecured Loans                         D                                         7,900.00                                  6,900.00
                                                                                  27,044.94                                 31,681.47
APPLICATION OF FUNDS
Fixed Assets                             E
  Gross Block                                           16,142.61                                     13,499.46
  Less : Depreciation                                    3,969.57                                      3,553.92
  Net Block                                                                       12,173.04                                  9,945.54
 Capital Work-in-Progress                                                            569.47                                  2,839.72

Deferred Tax Assets (Net)                F                                             9.96                                    279.96
Current Assets, Loans and                G
Advances
 Inventories                                            16,181.89                                     14,929.19
 Sundry Debtors                                         10,898.10                                     14,633.32
 Cash and Bank Balances                                  1,271.01                                        700.89
 Other Current Assets                                      182.37                                        189.17
 Loans and Advances                                      2,773.76                                      3,032.54
                                                        31,307.13                                     33,485.11
 Less :
Current Liabilities and Provisions       H
  Current Liabilities                                   15,262.41                                     13,349.00
  Provisions                                             1,752.25                                      1,519.86
                                                        17,014.66                                     14,868.86
  Net Current Assets                                                              14,292.47                                 18,616.25
                                                                                  27,044.94                                 31,681.47
Significant Accounting Policies          M
Notes to Accounts                        N
This is the Balance Sheet referred
to in our report of even date.       The Schedules referred to above form an integral part of the Balance Sheet.

For and on behalf of                                                       FOR AND ON BEHALF OF THE BOARD
PRICE WATERHOUSE
Chartered Accountants

V.NIJHAWAN                                         GOPAL BANSAL                                  YASH MAHAJAN
Partner                                            Sr. Vice President – Finance                  Managing Director
M.No. F87228                                       & Company Secretary



New Delhi, 22nd January, 2010                                                                    Chandigarh, 22nd January, 2010




                                                                    F 33
PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED 30TH
SEPTEMBER, 2009
                                                                                                                            (Rs. in lacs)
                                                                           Period Ended                                     Period Ended
                                     Schedule                              30th Sept.2009                               30th Sept.2008
INCOME
Sales                                                                             33,543.15                                      40,663.58

(Refer Note 2 on Schedule M and 10(b) on Schedule N)
Less : Excise Duty                                                                 2,550.08                                       4,188.22
Net Sales Revenue                                                                 30,993.07                                      36,475.36
Other Operating Income                    I                                          233.83                                         333.20
Total                                                                             31,226.90                                      36,808.56

EXPENDITURE
Manufacturing and Other Expenses         J                                        28,834.20                                      34,075.58
Finance Charges(Net)                     L                                         1,033.59                                         638.57
Depreciation / Amortisation              E                                           415.65                                         224.83

Total                                                                             30,283.44                                      34,938.98

Profit for the period before Tax Expense                                            943.46                                        1,869.58
Tax expense/(Saving) (Refer Note 10 on Schedule M)
   - Current Tax                                                                     169.00                                         435.00
   - Current Tax Earlier Years (Refer Note 22 on Schedule N)                          11.18                                              -
   - Deferred Tax (Refer Note 8 on Schedule N)                                       270.00                                         190.00
   - Fringe Benefits Tax                                                                -                                            25.00
   - MAT Credit Entitlement (Refer Note 22 on Schedule N)                          (180.18)                                              -
Profit for the period after Tax Expense                                              673.46                                       1,219.58
Balance brought forward from                                                       1,727.94                                       1,458.22
previous year
Profit available for Appropriation                                                 2,401.40                                       2,677.80

APPROPRIATIONS
Balance Carried to Balance Sheet                                                   2,401.40                                       2,677.80
                                                                                   2,401.40                                       2,677.80
Earning Per Share (Refer Note 7 on Schedule N )
 - Basic/Diluted Earning Per Share (Rs.)                                               6.42                                           11.63

Significant Accounting Policies          M
Notes to Accounts                        N

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

For and on behalf of                                                      FOR AND ON BEHALF OF THE BOARD
PRICE WATERHOUSE
Chartered Accountants

V.NIJHAWAN                                         GOPAL BANSAL                                   YASH MAHAJAN
Partner                                            Sr. Vice President – Finance                   Managing Director
M.No. F87228                                       & Company Secretary



New Delhi, 22nd January, 2010                                                                     Chandigarh, 22nd January, 2010




                                                                   F 34
SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE A                                                                                                                      (Rs. in lacs)
                                                                                       As at                                        As at
                                                                                  30th Sept.2009                               31st Mar.2009


SHARE CAPITAL
Authorised
4,00,00,000 Equity Shares ( Previous Year 2,00,00,000)
                                                                                         4,000.00                                2,000.00
of Rs. 10/- each


Issued, Subscribed and Paid-up
 1,04,86,700 * Equity Shares (Previous Year
                                                                                         1,048.67                                1,048.67
1,04,86,700) of Rs. 10/- each fully paid up
Add: Forfeited Shares [Amount paid up on 13,300                                                 0.71                                  0.71
Equity Shares (Previous Year 13,300) of Rs.10/- each ]
                                                                                     1,049.38                                    1,049.38

* Includes 100 Equity Shares (Previous Year 100) of Rs. 10/- each fully paid up and held by an NRI but not
allotted pending clearance from the Reserve Bank of India.

Of the above, 5,612,953 (Previous year 5,612,953) equity shares are held by Sumitomo Corporation, Japan the holding Company.



SCHEDULE B                                                                                                                      (Rs. in lacs)
                                                                                       As at                                        As at
                                                                                  30th Sept.2009                               31st Mar.2009


RESERVES AND SURPLUS

Capital Reserve                                                                       15.00                                        15.00
(Refer Note 11 on Schedule M)


General Reserve
Balance brought forward                                        6,860.45                                      6,835.45
Add: Transferred from Profit & Loss Account                        -                                          25.00
                                                                                     6,860.45                                    6,860.45


Profit and Loss Account                                                              2,401.40                                    1,727.95

                                                                                     9,276.85                                    8,603.40




                                                                       F 35
SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE C                                                                                                              (Rs. in lacs)
                                                                            As at                                        As at
                                                                       30th Sept.2009                               31st Mar.2009


SECURED LOANS
From Banks
    - Long Term Loan*                                                     5,500.00                                     6,000.00
    - Short Term Loan**                                                       -                                        2,500.00
    - Cash Credit**                                                       3,318.71                                     6,628.69
                                                                          8,818.71                                    15,128.69


Notes :
* The loan is secured by subservient equitable mortgage / hypothecation charge over the entire fixed assets of
the Company. Repayable within one year Rs. 3,500.00 lacs ( Previous year Rs. 2,000.00 lacs).



**    The limits sanctioned by the bankers are secured by a first charge by way of hypothecation of the Company's
     Current Assets i.e Stocks, Bills Receivable, Book Debts and other movables of the Company and also by way of
     a second mortgage and charge on the Company's immovable property. The said second charge is yet to be
     created by the Company.

 The Company had in an earlier year taken loans from Financial Institutions against first charge on its movable
and immovable property. The said loans have since been repaid. However, the charges in respect of these loans
are in the process of being vacated.



SCHEDULE D                                                                                                           (Rs. in lacs)
                                                                            As at                                        As at
                                                                       30th Sept.2009                               31st Mar.2009


UNSECURED LOANS
From Banks

      - Short Term Loan                                                   7,900.00                                    6,900.00

                                                                          7,900.00                                    6,900.00




                                                                        F 36
SCHEDULE FORMING PART OF THE
ACCOUNTS
SCHEDULE E

FIXED ASSETS          (Refer Notes 3, 4,12 and 14 on Schedule M )                                                                                        (Rs. In lacs)

DESCRIPTION                           GROSS BLOCK                                    DEPRECIATION / AMORTISATION                                NET BLOCK
                                               Adjust                                        For     Adjust
                         As at       Additions ments             As at               As at   the     Ments   As at                            As at          As at
                      01.04.2009       During                 30.09.2009         01.04.2009     period                30.09.2009         30.09.2009      31.03.2009
                                        the
                                       period

Tangible Assets

Freehold Land                48.74               -        -         48.74                   -          -          -             -               48.74          48.74


Building                 5,682.85           361.35        -      6,044.20             615.96      99.58           -       715.54              5,328.66      5,066.89

Plant &
Machinery                5,450.41      2,170.31           -      7,620.72            1,891.22    191.35           -     2,082.57              5,538.15      3,559.19


Jigs and Fixtures          708.47            60.61        -        769.08             375.41      23.30           -       398.71               370.37         333.06

Furniture, Fixtures
&                          269.13             9.83        -        278.96             169.28       7.87           -       177.15               101.81          99.85
Office Equipments


Computers                  308.60            13.14        -        321.74             207.66      30.47           -       238.13                83.61         100.94


Vehicles                   758.13            27.91        -        786.04             275.79      47.61           -       323.40               462.64         482.34


Intangible Assets
Technical Know-
How                        273.13                -        -        273.13              18.60      15.47           -         34.07              239.06         254.53


Total                   13,499.46      2,643.15           -     16,142.61            3,553.92    415.65           -     3,969.57          12,173.04         9,945.54

Previous Year            4,863.88      8,656.70      21.12      13,499.46            2,991.12    583.92      21.12      3,553.92              9,945.54



CAPITAL WORK-IN-PROGRESS (CWIP)

Capital Advance                                                                                                                                  0.50                -

Direct Capital Expenditure                                                                                                                    403.65        2,289.62
Indirect expenditure pending allocation :
 -Interest Cost                                                                                                                                33.82          130.25
  -Other
                                                                                                                                              131.50          419.85
expenditure

Total CWIP                                                                                                                                    569.47        2,839.72
Notes:
1. Indirect other expenditure pending allocation includes salary, power charges, travelling, foreign technician expenses, testing expenses,
   & other administrative expenses and is net of amount recovered from sale [(net of excise duty Rs. 1.92 lacs (Previous year Rs. 10.26 lacs)] of
    vehicle produced during test run Rs. 22.97 lacs (Previous year Rs. 81.38 lacs) .
2. Interest capitalised during the year Rs. 65.79 lacs (Previous year Rs. 532.08) as per AS-16 notified under Section 211(3C) of the Companies
Act,1956




                                                                              F 37
SCHEDULES FORMING PART OF THE ACCOUNTS

SCHEDULE F                                                                                                                     (Rs. in lacs)
                                                                                    As at                                       As at
                                                                               30th Sept.2009                              31st Mar.2009
DEFERRED TAX (LIABILITIES ) / ASSETS
(Refer Note 10 on Schedule M & Note 8 on Schedule N)

Deferred Tax (Liability) / Assets
- At the beginning of the period/ year                          279.96                                     164.96
7- Adjustment during the period/ year                         (270.00)                      9.96           115.00                       279.96
                                                                                            9.96                                        279.96

SCHEDULE G                                                                                                                  (Rs. in lacs)
                                                                                    As at                                       As at
                                                                               30th Sept.2009                              31st Mar.2009

CURRENT ASSETS, LOANS & ADVANCES

CURRENT ASSETS

INVENTORIES
(Refer Note 5 on Schedule M)

Raw Materials & Components                                                              6,346.03                                      6,446.43
Raw Material - Goods in Transit                                                           464.15                                        638.17
Stores and Spare Parts                                                                     77.18                                         90.74
Loose Tools                                                                                43.26                                         32.56
Work in Progress *                                                                      1,524.65                                      1,562.45
Finished Goods
- Vehicles **                                                 7,153.03                                   5,655.03
- Spares                                                                                7,726.62           503.81                     6,158.84
                                                                573.59

                                                                                      16,181.89                                      14,929.19

* - Includes Work in Progress during test run production amounting to Nil (Previous year Rs. 83.03 lacs).
** - Includes Finished goods of vehicles produced during test run production amounting to Rs. 909.01 lacs (Previous year Rs.
1,132.16 lacs) valued at material cost.

SUNDRY DEBTORS
(Considered good unless otherwise stated)

Debts outstanding for more than six months:
- Secured                                                                                   1.00                                          12.00
- Unsecured [ Including Rs.644.41 lacs considered
doubtful (Previous Year Rs. 605.40 lacs)]                     1,043.18                                     953.49
Less: Provision for doubtful debts                              644.41                   398.77            605.40                       348.09

                                                                                         399.77                                         360.09
Other debts:
- Secured                                                                                562.16                                         495.49
- Unsecured [ Including Rs. 16.51 lacs considered
doubtful (Previous Year Rs. 26.60 lacs)]                      9,952.68                                 13,804.34
Less: Provision for doubtful debts                               16.51                  9,936.17           26.60                     13,777.74

                                                                                      10,898.10                                      14,633.32




                                                                 F 38
SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE G (Continued)                                                                                       (Rs. in lacs)
                                                                                   As at                         As at
                                                                              30th Sept.2009                31st Mar.2009
CASH AND BANK BALANCES

Cash in hand                                                                            14.93                         29.58
[Includes Stamps in Hand Rs. 1.35 lacs
(Previous Year Rs. 1.35 lacs)]
Balances with Scheduled Banks on :
   - Current Accounts                                        961.53                               421.35
   - Unpaid /Unclaimed Dividend Accounts                     122.79                               122.97
   - Fixed Deposits                                          171.76                   1,256.08    126.99             671.31
[Includes Rs. 161.32 lacs (Previous Year Rs. 117.00 lacs)
Pledged as Margin money with banks against
 issue of letters of credit and bank guarantees]
                                                                                      1,271.01                       700.89
OTHER CURRENT ASSETS
(Unsecured considered good unless otherwise stated)
Prepaid Expenses                                                                        12.71                         10.24
Export Incentives Receivables                                                          169.66                        178.93
(Refer Note 2 on Schedule M)
                                                                                       182.37                        189.17
LOANS AND ADVANCES
(Unsecured considered good unless otherwise stated)
Advances recoverable in cash or in kind or
for value to be received                                    1,637.34                             1,745.19
[Including Rs 10.45 lacs considered doubtful
(Previous Year Rs.10.45 lacs)]
Less: Provision for doubtful advances                         10.45                   1,626.89     10.45           1,734.74
Security Deposits                                            118.82                               138.57
[Including Rs. 0.36 lacs considered doubtful
(Previous Year Rs. 0.36 lacs)]
Less: Provision for doubtful deposits                          0.36                    118.46       0.36             138.21
Balances with Excise Authorities                                                       561.10                        884.13
(Refer Note 2 on Schedule N)

MAT Credit Entiltlement (Refer Note 22 on Schedule N)                                  221.40                         41.22
Advance Tax                                                                            245.91                        234.24
(Net of Provision Rs. 7,279.66 lacs)
(Previous Year Rs. 7,099.48 lacs)
                                                                                      2,773.76                      3,032.54
SCHEDULE H                                                                                                   (Rs. in lacs)
                                                                                   As at                         As at
                                                                              30th Sept.2009                31st Mar.2009
CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES

 Acceptances *                                                                       1,244.61                      1,767.87
 Sundry Creditors                                                                   12,486.51                      9,620.83
  (Refer Note 16 on Schedule N)
 Customer Advances                                                                     670.11                        992.81
 Unclaimed Dividends                                                                   122.79                        122.97
 Other Liabilities                                                                     738.39                        812.12
 Interest accrued but not due on short term loan                                         -                            32.40

                                                                                    15,262.41                     13,349.00
PROVISIONS
 Fringe Benefits Tax                                                                     -                             7.20
 Wealth Tax                                                                              -                             0.65
 Proposed Dividend                                                                     157.30                        157.30




                                                                       F 39
 Tax on Proposed Dividend                                                                   26.73                                      26.73
 Retirement benefits                                                                     1,192.01                                   1,025.32
  (Refer Note 6 on Schedule M & Note 20 on Schedule N)
 Warranty                                                                                 376.21                                      302.66
  (Refer Note 8 on Schedule M & Note 4(b) on Schedule N)
                                                                                         1,752.25                                   1,519.86
                                                                                       17,014.66                                   14,868.86
* Secured to the extent of Rs. 175.64 lacs(Previous Year Rs. 781.61 lacs) against hypothecation of Raw Material & Components.

SCHEDULES FORMING PART OF THE ACCOUNTS

SCHEDULE I                                                                                                                       (Rs. in lacs)
                                                                                       Period Ended                             Period Ended
                                                                                       30th Sept.2009                           30th Sept.2008
OTHER OPERATING INCOME
Sale of Scrap                                                                                    109.71                                  148.96
Export Incentives (Refer Note 2 on Schedule M)                                                    73.81                                  120.30
Liabilities/Provisions no longer required written back                                            11.65                                   28.52
Royalty                                                                                           33.36                                   31.90
Miscellaneous Income                                                                               5.30                                    3.52
                                                                                                 233.83                                  333.20

SCHEDULE J                                                                                                                          (Rs. in lacs)
                                                                                        Period Ended                              Period Ended
                                                                                        30th Sept.2009                           30th Sept.2008
MANUFACTURING AND OTHER EXPENSES
Materials consumed
Raw materials and components consumed*                                                        24,889.54                               29,477.70
(Refer Note 11 on schedule N)
Movement of Finished goods and Work in Progress
Opening Stock
-Finished goods                                                     6,158.84                                       4,678.89
-Work-in-Progress                                                   1,562.45                                       1,289.93
                                                                    7,721.29                                       5,968.82
Add : Purchases of finished goods                                   1,253.45                                       1,515.20
                                                                    8,974.74                                       7,484.02
Less : Closing Stock
-Finished goods                                                     7,726.62                                       5,361.51
-Work-in-Progress                                                   1,524.65                                       1,287.53
                                                                    9,251.27                   (276.53)            6,649.04              834.98

Total Consumption                                                                             24,613.01                               30,312.68
Add : Increase in excise duty on finished goods                                                  132.67                                   51.64
Net Consumption                                                                               24,745.68                               30,364.32
Operating, Administrative and Other
Expenses (as per Schedule K)                                                                   4,088.52                                3,711.26
                                                                                              28,834.20                               34,075.58
* Includes Exchange loss on Foreign Currency transactions Rs. 23.03 lacs (Previous Year Rs. 223.07 lacs)




                                                                       F 40
SCHEDULE FORMING PART OF THE ACCOUNTS
SCHEDULE K                                                                                       (Rs. in lacs)
                                                                       Period Ended             Period Ended
                                                                       30th Sept.2009           30th Sept.2008
OPERATING, ADMINISTRATIVE & OTHER EXPENSES

Salaries,Wages and Bonus                                                      1,611.16                 1,455.63
(Refer Note 6 on Schedule M and 19 & 20 on Schedule N)
Contribution to Provident and Other Funds                                       269.02                   206.08
(Refer Note 6 on Schedule M & 20 on Schedule N)
Workmen and Staff Welfare                                                       126.12                   101.42
Consumption of Stores, Spares and Tools                                          29.70                    54.06
(Refer Note 12 (b) on Schedule N)
Repair and Maintenance:
- Machinery                                                                       7.54                     8.88
- Building                                                                       11.07                     7.13
- Others                                                                         16.24                     5.68
Power and Fuel                                                                  201.16                   191.67
Rent                                                                             73.74                    85.17
(Refer Note 13 on Schedule M & Note 18 on Schedule N)
Rates and Taxes                                                                  59.70                    26.84
Legal and Professional                                                           93.01                    46.28
(Refer Note 9 on Schedule N)
Insurance                                                                        19.01                    20.17
Printing, Stationery, Postage and Telephone                                      54.78                    63.48
Travelling and Conveyance                                                       254.24                   211.88
Provision for Doubtful Debts                                                     40.57                   110.85
Marketing,Sales and Promotion Expenses                                        1,061.80                   967.43
(Refer Note 4 on Schedule N)
Royalty                                                                           1.80                        -
Research and Development                                                         74.32                    50.53
(Refer Note 7 on Schedule M & 21 on Schedule N)
Directors' Sitting Fee                                                            6.90                     4.50
Exchange loss / (gain) on Foreign Currency
Transactions (Refer Note 9 on Schedule M)                                         1.83                    14.15
Miscellaneous expenses                                                           74.81                    79.67
                                                                              4,088.52                 3,711.50
Less : Expenditure transferred to Fixed Assets                                       -                     0.24
(Refer Note 3 on Schedule M)
                                                                              4,088.52                 3,711.26

SCHEDULES FORMING PART OF THE ACCOUNTS
SCHEDULE L                                                                                       (Rs. in lacs)
                                                                       Period Ended             Period Ended
                                                                       30th Sept.2009           30th Sept.2008
FINANCE CHARGES/INCOME
(Refer Note 12 on Schedule M )
Interest on Loans                                                               900.87                   587.92
Interest Others                                                                  33.61                    27.00
Bank Charges                                                                    111.49                    29.19
                                                                              1,045.97                   644.11
LESS :
Interest on Fixed Deposits(Gross)                        1.91                            3.02
[Tax deducted at source Rs. 0.18 lacs
(Previous Period Rs. 0.50 lacs)]
Interest on Excise Duty Refund                           8.67                              -
Interest Others                                          1.80                    12.38   2.52              5.54
                                                                              1,033.59                   638.57




                                                                F 41
SCHEDULES FORMING PART OF THE ACCOUNTS

SCHEDULE M

SIGNIFICANT ACCOUNTING POLICIES


1) ACCOUNTING CONVENTION
   The Financial Statements are prepared to comply in all material aspects with the applicable accounting principles in
   India, the applicable Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 and the
   relevant provisions of the Companies Act, 1956. The Company has followed the same accounting policies for
   preparation of interim financial statements for six months period ended September 30, 2009 as those followed in
   preparation of financial statements for the year ended March 31, 2009.

2) REVENUE RECOGNITION
   Sales are recognized on transfer of significant risks and rewards to the customer that usually takes place on dispatch of
   goods to the customer from the factory/ stockyard/ storage area. In case of export sales, revenue is recognized as on
   the date of bill of lading, being the effective date of transfer of significant risks and rewards to the customer. Export
   benefits are accounted for on accrual basis.
3) FIXED ASSETS / INTANGIBLE ASSETS
   Fixed assets are recorded at cost of acquisition. Cost includes freight, duties, taxes and expenses incidental to
   acquisition and installation of fixed assets. In case of self-constructed fixed assets, appropriate overheads including
   salaries & wages are allocated to the cost of the asset. The Cost of Capital Spares is capitalized along with the cost of
   the related Asset.

    Intangible assets comprising of Technical know how, product designs, prototypes etc. either acquired or internally
    developed are stated at cost. In case of internally generated intangible assets, appropriate overheads including salary
    and wages are allocated to the cost of the asset.

    Capital work in Progress includes cost of assets at site, direct and indirect expenditure incidental to construction,
    advances made for acquisition of capital assets and interest on the funds deployed for construction.

4) DEPRECIATION / AMORTISATION
   Depreciation on tangible fixed assets is provided on a Straight-Line Method on a monthly pro-rata basis at the rates
   and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except on following assets which are
   being depreciated at the rates mentioned below:
    Motor cars and air conditioners          -         25.00%

    Computers                                -         33.33%

    All assets costing up to Rs. 5,000/- are being fully depreciated in the year of purchase.

    Capital spares are amortized in a systematic manner over a period not exceeding the useful life of the asset to which
    they relate.
    Intangible assets are amortised on a Straight-Line Method on a monthly pro-rata basis over a period of three to ten
    years based on the estimated useful life of the assets.

5) INVENTORIES
   Inventories are valued at lower of cost or net realizable value. Cost for the purpose of valuation is calculated on a
   quarterly weighted average method. In respect of Finished Goods & Work-in-Progress, applicable manufacturing
   overheads and other costs incurred in bringing the items of inventory to their present location and condition are also
   included. Excise duty is included in finished goods valuation.

6) EMPLOYEE BENEFITS
   (a) Post-employment benefit plans



                                                            F 42
    i. Defined Contribution Plans - The Company contributes to the appropriate authorities its share of the Employees‘
    Provident & Pension Fund and Employee State Insurance, which is charged to Profit and Loss Account every year.
    The Company has created trust which has taken Master policy with the Life Insurance Corporation of India to cover its
    liability towards employees‘ Superannuation. Annual contribution of Superannuation is charged to Profit and Loss
    Account every year

    ii. Defined Benefit Plans - The estimated liability towards Gratuity and Leave Encashment is being provided for based
    on the actuarial valuation carried out at the year-end using Projected Unit Credit Method. Actuarial gains and losses
    are recognized in full in the Profit and Loss Account for the period in which they occur.

    The Company has created trust which has taken Master policy with the Life Insurance Corporation of India to cover its
    liability towards employees‘ Gratuity. The Gratuity obligation recognized in the Balance Sheet represents the present
    value of the defined benefit obligation as adjusted for unrecognized past service cost and as reduced by the fair value
    of Gratuity Fund.

    (b) Short term employment benefits
    The undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered by
    employees is recognized during the period when the employee renders the services. These benefits include
    compensated absences and performance incentives.

7) RESEARCH & DEVELOPMENT
   Revenue expenditure on Research and Development is charged to the Profit and Loss Account in the year in which it
   is incurred. Capital expenditure on Research and Development is shown as an addition to fixed assets and depreciated
   at the rate as applicable to respective assets.


8) WARRANTY EXPENSES
   Provision for warranty is made in the accounts on the basis of past experience and technical evaluation in respect of
   vehicles sold.

9) FOREIGN CURRENCY TRANSACTIONS
   Foreign currency transactions are recorded at exchange rates prevailing at the date of transaction. Exchange
   differences, if any, arising on settlement of transactions are recognized as income or expense in the year in which they
   arise.

    At the Balance Sheet date all monetary assets and monetary liabilities denominated in foreign currency are reported at
    the exchange rates prevailing at the Balance Sheet date and the resultant exchange difference, if any, is recognized in
    the Profit & Loss Account.

10) TAXATION
    Tax Expense, comprising current tax, deferred tax & fringe benefit tax is included in determining the net profit for the
    year. The current tax & fringe benefit tax has been computed in accordance with relevant tax rates and tax laws.
    Minimum Alternate Tax (MAT) paid in excess of normal income tax is recognised as asset (MAT Credit entitlement)
    only to the extent, there is reasonable certainty that company shall be liable to pay tax as per the normal provisions of
    the Income Tax Act,1961 in future.

    In accordance with Accounting Standard – 22 ‗Accounting for Taxes on Income‘, notified under Section 211(3C) of
    the Companies Act, 1956, the deferred tax for timing differences between the book and the tax profits for the year is
    accounted for using the tax rates and laws that have been enacted or substantially enacted as on the Balance Sheet
    date. However, in the year of transition, the accumulated deferred tax (liabilities) / assets at the beginning of the year
    has been recognized with a corresponding charge to the General Reserve.

    Deferred tax assets arising from temporary timing differences are recognized to the extent there is a reasonable /
    virtual certainty that the assets can be realised in the future and are reviewed for the appropriateness of their respective
    carrying values at each Balance Sheet date.



                                                             F 43
11) GOVERNMENT GRANTS
    Grants in the form of Capital/Investment subsidy are treated as Capital Reserve.

12) BORROWING COSTS
    Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are
    capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which
    they are incurred.

13) LEASES
    As lessee:
    Lease rental in respect of assets taken on "Operating Lease" are charged to Profit & Loss account on straight-line basis
    over the lease term.

14) IMPAIRMENT OF ASSETS
    In accordance with Accounting Standard – 28 on ‗Impairment of Assets‘, notified under Section 211(3C) of the
    Companies Act, 1956, recoverable amount of relevant assets is computed and compared with the carrying amount for
    determining impairment loss, if any at the Balance Sheet date in case there is an indication that any asset may be
    impaired.

15) PROVISIONS AND CONTINGENCIES
    Provisions are recognized when the Company has a present obligation as a result of past events, for which it is
    probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a
    reliable estimate of the amount can be made. Provisions required to settle are reviewed regularly and are adjusted
    where necessary to reflect the current best estimates of the obligation. Where the Company expects a provision to be
    reimbursed, the reimbursement is recognized as a separate asset, only when such reimbursement is virtually certain.
    Contingent liabilities are disclosed after an evaluation of the facts and legal aspects of the matters involved.




                                                           F 44
SCHEDULES FORMING PART OF THE ACCOUNTS

Schedule N

NOTES TO ACCOUNTS

    1.    There are Contingent Liabilities in respect of:

         a) Claims against the Company not acknowledged as debts:


 Name of the           Nature of dues             Amount (Rs.)          Period to which    Forum where the dispute is
   statute                                                                 the amount             pending
                                                                              relates
 Central Sales     Demand raised for          Rs.218.23 lacs           1st April 2000 to   Sales Tax Appellate Tribunal,
 Tax Act,          difference in the rate     (Rs.87.30 lacs           30th September      Chandigarh.
 1956              of tax.                    deposited by the         2000
                                              Company)
 Central Sales     Vehicles impounded         Rs.9.65 lacs (Surety     May, 2001           High Court of Punjab &
 Tax Act,          & demand raised due        bond and Rs. 9.65 lacs                       Haryana (Appeal filed by the
 1956              to discrepancy in /        deposited by the                             Company)
                   inadequacy of              Company)
                   documents.
 Punjab VAT        Vehicles impounded         Rs.2.10 lacs (Surety     March, 2008         Deputy Excise and Taxation
 Act, 2005         & demand raised due        bond and Rs. 0.53 lacs                       Commissioner cum Joint
                   to discrepancy in /        deposited by the                             Director Enforcement,
                   inadequacy of              Company)                                     Patiala.
                   documents.
 Punjab VAT        Vehicles impounded         Rs. 1.57 Lacs (Surety    August, 2007        Deputy Excise and Taxation
 Act, 2005         & demand raised due        bond and Rs. 0.39                            Commissioner cum Joint
                   to discrepancy in /        lacs deposited by the                        Director Enforcement,
                   inadequacy of              company)                                     Patiala.
                   documents.
 Gujarat Sales     Demand raised due to       Rs. 11.78 lacs (Rs.      2001-02             Gujarat Value Added Tax
 Tax Act           discrepancy in             2.37 lacs deposited &                        Tribunal, Ahmedabad.
                   documents.                 Rs. 9.25 lacs has been
                                              given as bank
                                              guarantee by the
                                              company)
  Haryana          Demand raised by           Rs. 4.22 Lacs            2005-06             Excise & Taxation Officer
 Value Added       Sales Tax Authority,                                                    cum Assessing Authority,
 Tax Act,          Panchkula against non                                                   Panchkula
 2003              submission of Form D
                   & D1.
 Central Sales     Demand raised by           Rs. 3.37 Lacs            2005-06             Excise & Taxation Officer
 Tax Act,          Sales Tax Authority,                                                    cum Assessing Authority,
 1956              Panchkula against Non                                                   Panchkula
                   submission of C forms

 Central           Denial of benefit of       Rs147.66 lacs (already   1995-96 to 1996-    The case has been referred
 Excise Act,       notification for fuel      deposited by the         97                  back by Supreme Court of
 1944              efficiency to chassis      Company)                                     India to Customs Excise and
                   for Motor Vehicles.                                                     Service Tax Appellate
                                                                                           Tribunal (CESTAT)



 Central           Demand raised to re-       Rs 4.25 lacs (Includes   01 April, 2000 to   The case has been referred
 Excise Act,       determine the              penalty Rs. 2.12 lacs)   31 March, 2004      back by Customs Excise and
 1944              assessable value of                                                     Service Tax Appellate

                                                              F 45
              components supplied                                                        Tribunal (CESTAT) to
              to spare parts division                                                    Commissioner (Appeals)
              under Rule 7 of
              Valuation Rules.
Central       Demand raised in           Rs. 9.92 lacs(Rs. 1.30    April‘ 2002 to        Custom Excise and Service Tax
Excise Act,   context with Service       lacs deposited by the     March‘ 2005.          Appellate Tribunal (CESTAT)
1944          tax on royalty received    Company, includes
              on account of use of       penalty of Rs 6.62
              brand name of SML.         lacs)


Central       Demand raised for          Rs. 3.19 lacs (includes   01 January, 2004 to   Custom Excise and Service Tax
Excise Act,   non-inclusion of cost      penalty amounting to      30 September,         Appellate Tribunal (CESTAT)
1944          of publicity items sold    Rs 0.30 lacs)             2004
              to dealers on trading
              basis as part of
              Transaction Value.
Central       Denial of utilization of   Rs. 5.70 lacs                  2005-06          Custom Excise and Service Tax
Excise Act,   service tax credit for     (inclusive of penalty                           Appellate Tribunal (CESTAT)
1944          the payment of service     Rs. 2.85 lacs)
              tax liability on behalf
              of foreign collaborator
Central       Inadmissible Service       Rs. 5.70 lacs                  2005-06          Appeal by the Company to be
Excise Act,   tax credit utilized for    (inclusive of penalty                           filed before Custom Excise and
1944          payment of service tax     Rs. 2.85 lacs)                                  Service Tax Appellate Tribunal
              liability resulting in                                                     (CESTAT)
              short payment of
              service tax liability.
Central       Wrong utilization of       Rs. 19.61 lacs                 2007-08          Commissioner (Appeals)
Excise Act,   CENVAT credit on           (inclusive of penalty
1944          service tax on royalty.    Rs. 9.81 lacs)

Central       Demand raised for          Rs. 1.94 lacs             October-2004 to       The Supreme Court
Excise Act,   non-inclusion of cost                                March-2005
1944          of publicity items sold
              to dealers on trading
              basis as part of
              Transaction Value.
Central       Demand raised for          Rs. 5.79 (includes        April-2005 to Jan-    Custom Excise and Service Tax
Excise Act,   non-inclusion of cost      penalty of Rs 2.90        2006                  Appellate Tribunal (CESTAT)
1944          of publicity items sold    lacs)
              to dealers on trading
              basis as part of
              Transaction Value.
Income Tax    Disallowance of            Rs.36.74 lacs for the     1991-92               High Court of Punjab &
Act, 1961     provision for bad and      assessment year 1992-                           Haryana (Appeal filed by the
              doubtful debts             93 (representing the                            Department)
                                         amount of provision)
Income Tax    Demand raised under        Rs.22.02 lacs for the     1997-98               High Court of Punjab &
Act, 1961     section 234 B & C by       assessment year 1998-                           Haryana (Appeal filed by the
              assessing authority        99 (Rs.22.02 lacs                               Company).
                                         deposited by the
                                         Company)

Income Tax    Demand raised for non      Rs. 28.51 lacs for the    1986-87               Appeal filed by Department
Act, 1961     deduction of TDS on        Assessment Year                                 before Punjab & Haryana
              payment of Fee for         1987-88                                         High Court
              Technical Services/
              Royalty


                                                         F 46
Income Tax      Demand raised on             Rs. 101.55 lacs           2004-05               Major relief granted by CIT(A).
Act, 1961       disallowance of              Assessment year                                 Appeal against partial
                expenses, loading of         2005-06 (Rs. 62.00                              disallowances filed before
                statutory dues on            lacs deposited by the                           ITAT both by the Company and
                Work-in-Progress u/s         Company)                                        the Department
                145(A) and weighted
                R&D deduction.
Civil           Claim filed by finance       Rs. 4.09 lacs             1997                  Appeal filed by the Company
Recovery suit   company for non                                                              before High Court (Double
                supply of vehicles by                                                        Bench) at Chennai.
                the dealer even after
                receiving money
Civil           Suit filed by the bank       Rs. 4.16 lacs             2008                  Civil Judge Senior Division,
Recovery suit   for recovery of amount                                                       Gurgaon
                sanctioned to one of
                the customer for
                purchase of a Swaraj
                Mazda vehicle.

Distt.          Award given by the           Rs. 2.00 lacs             2008                  Appeal filed by the Company
Consumer        District Consumer                                                            before State Commission,
Forum           forum, Bilaspur,                                                             Himachal Pardesh against the
                against complaint filed                                                      order of District Consumer
                by the customer for                                                          forum, Bilaspur
                replacement of
                defective engine.



       b) Bank Guarantees given by the Company and outstanding as on 30.09.2009 amounting to Rs. 1,270.48 lacs
          (Amount as at March 31, 2009 Rs. 1,006.38 lacs).

       c) Letters of Credit issued on behalf of the Company by its bankers and outstanding as on 30.09.2009 amounting
          to Rs. 1,005.94 lacs (Amount as at March 31, 2009 Rs. 1,358.31 lacs).

  2.   Through issue of excise notification no 11/95 dated March 16, 1995 Government sought to lapse Rs. 488 lacs out
       of Modvat Credit Receivable balance as on March 16, 1995. Petition by the Company and others with the Delhi
       High Court challenging the said notification on grounds of law and equity was allowed by the Supreme Court vide
       order dated January 28, 1999. The Finance Act, 1999 has, however, brought in retrospective amendment w.e.f.
       March 16, 1995 in the Central Excise Act, empowering the Central Government to lapse such modvat. On legal
       advice obtained by the Company to seek redressal against the action of the Government, the Company has filed
       writ petition before the Delhi High Court on the ground that the Government action violates the doctrine of
       promissory estoppel/expectation principle beside other grounds. The Court has already admitted the petition.
       Accordingly, pending Company‘s petition and decision thereupon, the amount of Rs. 488 lacs though adjusted in
       excise records has not been provided in the books of account.

  3.   Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)
       Rs. 1,812.11 lacs (Amount as at March 31, 2009 Rs. 443.71 lacs).

  4.   (a) Market promotion expenses (Schedule K) includes Commission on Sales amounting to Rs. 53.68 lacs
       (Previous period Rs. 65.13 lacs).

                                                                              Period Ended      Year ended
             (b) Provision For Warranty*
                                                                               30.09.2009       31.03.2009
                                                                               Rs. In lacs      Rs. In lacs
                 Balance at the beginning of the period/ year
                                                                                 302.66           463.00
                 Additions During the period/ year
                                                                                 172.62           226.00
                 Utilized during the period/ year
                                                                                 99.07            386.34
                 Balance at the end of the period/ year
                                                                                 376.21           302.66

                                                                F 47
           *As per warranty policy, the Company is required to provide free repair and replacement of parts required due to
           manufacturing defects which appear during the warranty period.

      5.   As the Company‘s business activities fall within a single primary business segment, viz., ―Commercial Vehicles
           and Spares‖, the disclosure requirement of Accounting Standard (AS) – 17 ―Segment Reporting‖ is not applicable.

      6.   In accordance with Accounting Standard on "Related Party Disclosures" (AS 18), the disclosure in respect of
           transactions with the company's related parties are as follows:

            i. Holding / Associate Company                        Sumitomo Corporation, Japan
            (Holding w.e.f January 06, 2009) *
            ii. Key Management Personnel *                        Mr. Yash Mahajan – Managing Director
                                                                  Mr. Y Watanabe - Whole-time Director
                                                                  Mr. K Nakajima - Whole-time Director
           *As identified and certified by the Management

            iii. Transactions with Sumitomo Corporation:

                                                                                Rs. In lacs           Rs. In lacs
                                                                               Period Ended          Period Ended
                                                                                 30.09.09              30.09.08

 a.              Purchase of components/spares                                    564.30                945.61
 b.              Purchase of fixed assets                                          20.44                  -
 c.              Discounting charges                                               0.90                  5.86
 d.              Dividend paid (Gross)                                                 -                236.67
                                                                          As at 30.09.2009         As at 31.03.2009
 Balance outstanding – Payable                                                    173.32                736.70

iv. Payments to Key Management Personnel:

                                                                           Rs. In lacs              Rs. In lacs
                                                                          Period Ended             Period Ended
                                                                            30.09.09                 30.09.08

 a.              Remuneration (Refer Note 19 on Schedule N):

                 Mr. Yash Mahajan                                                57.53                151.02*

                 Mr. Y. Watanabe (w.e.f 1st July, 2009)                          17.94                   -
                                            th
                 Mr. K. Nakajima(up to 30 June, 2009)                            17.94                 42.00
                 Other Payments
 b.
                 Rent paid to Mr. Yash Mahajan                                     -                   9.69
                                                                         As at 30.09.2009         As at 31.03.2009
                 Aggregate balances outstanding                      18.00                             11.95
                                                    st                    st
* Includes arrears Rs. 88.27 lacs for the period 1 June, 2006 to 31 March, 2008.

      7.   Earning Per Share (EPS):
                                                                                   Period Ended    Period Ended
                                                                                     30.09.09        30.09.08
       Profit attributable to equity shareholders (Rs. in lacs)                       673.46         1,219.58



                                                                  F 48
 Weighted average number of equity shares outstanding during             10,486,700         10,486,700
 the period. [excluding 13,300 forfeited equity shares (Previous
 period 13,300)]
 Basic/Diluted Earning Per Share (Rs.)                                        6.42             11.63
 Face Value per share (Rs.)                                                   10.00            10.00


8.   In view of Accounting Standard –22 ―Accounting for Taxes on Income‖ , the Company has accounted for
     deferred tax as follows:
                                                                                           Amount (Rs. in lacs)
       Particulars                                        Balance as at         Expense (Saving)   Balance as at
                                                           01.04.2009           during the period   30.09.2009
      A) Deferred Tax Liabilities
      (i) Tax impact of difference between carrying
                                                                   1147.32                 143.78         1291.10
      amount of fixed assets in the financial
      statements and income tax returns
                                                                   [275.39]              [871.93]        [1147.32]

      Sub Total                                                     1147.32                143.78          1291.10
                                                                   [275.39]              [871.93]        [1147.32]



      (B) Deferred Tax Assets

      (i) Tax impact of expenses charged in the
      financial statements but allowable as                         218.49                  (9.00)         227.49
      deductions in future years under income tax.
                                                                   [175.64]              [(42.85)]        [218.49]
      (ii) Tax impact of expenditure disallowed under
                                                                    348.82                (55.13)          403.95
      section 40(a)(ia) and 43B of the Income Tax
      Act
                                                                   [264.71]              [(84.11)]        [348.82]
      (iii) Tax impact of loss as per normal
                                                                    859.97                 190.35          669.62
      provisions of Income Tax Act,1961
                                                                        [-]             [(859.97)]        [859.97]

      Sub Total                                                     1427.28                126.22          1301.06
                                                                   [440.35]             [(986.93)]       [1427.28]

                          Deferred Tax Assets (B-A)                 279.96                 270.00             9.96
                                                                   [164.96]             [(115.00)]        [279.96]

     The Deferred Tax Expense (net) for the current period aggregating to Rs. 270 lacs has been debited to the Profit &
     Loss Account.
     Note: Figures shown in parenthesis [ ] relate to the year ended March 31, 2009.




                                                        F 49
      9.   Auditors‟ Remuneration:
                                                                               Period Ended               Period Ended
                                                                                 30.09.09                   30.09.08
                                                                                Rs. In lacs                Rs. in lacs
            Statutory Audit Fee                                                      11.75                        9.25
            Tax Audit Fee                                                            3.00                         2.50
            Other Audit Services / Certification                                     16.75                        5.50

            Reimbursement of Out of Pocket Expenses                                  0.70                         0.77
                                                                                     32.20                    18.02


10.        Information with regard to Licensed Capacity, Installed Capacity*, Production, Sales and Stocks:


            a. Capacities                     Unit of                 Installed Capacity (Per Annum)
                                              Measurement
             On-road automobiles (having                              30.09.2009             31.03.2009
            four or more wheels such as
                                              Nos.                         18,000*                  18,000*
            light, medium and heavy
            commercial vehicles)

           * On double shift basis as certified by the management and relied upon by auditors being technical matter.
           * Includes production for internal use.
           Licensed Capacity: Not Applicable


           b. Production, Sales and Stocks of Finished Goods:
                                                       Period ended                             Year ended
                                                          30.09.09                                31.03.09
                                            Qty.(Nos.)               Rs. In lacs     Qty.(Nos.)           Rs. In lacs
                    VEHICLES
            Opening Stock                               801            5,655.03               670           4,258.86
            Production                                4,802*           -                 8,164*               -
            Sales                                    4,548**          31,200.81         8,022**           55,240.40
            Vehicles Capitalised                           -           -                        6             -
            Vehicle Scrapped                               -           -                        5             -
            Closing Stock                       1,055***               7,153.03          801***             5,655.03

*Includes 2 buses (Previous Year 17) produced during test run.
**Includes 9 buses (Previous Year 5) produced during test run out of which 1 bus (Previous Year 2) has                   been netted off
from assets capitalised.
*** Includes 28 buses (Previous Year 35) produced during test run.




                                                               F 50
SPARES
                                                     Period Ended                   Year Ended
                                                       30.09.09                      31.03.2009
                                                     (Rs. in lacs)                  (Rs. in lacs)

         Opening Stock                                                503.81                        420.04


         Purchases                                                  1,253.46                      2,510.63


         Sales                                                      2,342.34                      4,743.41


         Closing Stock                                                573.59                        503.81

     Note:        It is not possible to furnish quantitative information in respect of
                  Spares in view of large number of items of varied nature.

  11. Raw Material & Components Consumed:
                                                  Period Ended                         Period Ended
                                                        30.09.09                               30.09.08
                                          Qty. (Nos.)       Rs. in lacs          Qty. (Nos.)         Rs. in lacs
         CKD Kits                               4,802           985.19                5,400                961.53
         Tyres, Tube & Rims                    89,763         1,634.74              108,556           1,983.22
         Cargo Boxes                              945           409.23                1,177                569.25
         Batteries                              5,068           109.54                5,509                154.38
         Others                                              21,750.84                               25,809.32
         Total                                               24,889.54                               29,477.70

     i)           In view of varied nature of large number of items, it is not possible to furnish quantitative information on
                  components.

     ii)          The figure of others is a balancing figure based on total consumption shown in Schedule J and includes
                  adjustments for excess/shortage found on physical verification.

     iii)         Quantities and values of all items except CKD kits (where actuals are taken) represent issues from stores
                  made during the period.

  12. Value of imported and indigenous Raw Material & Components, Stores & Spares consumed and
      percentage of each to total consumption:

     a.           Raw Material & Components:
                                                          Period Ended                            Period Ended
                                                               30.09.09                                   30.09.08
                                                 %                 Rs. in lacs          %                 Rs. in lacs
                     Imported                   5.18           1,289.40                4.72           1,390.70
                     Indigenous                94.82          23,600.14               95.28           28,087.00
                                              100.00          24,889.54               100.00          29,477.70




                                                             F 51
    b.       Stores & Spares:
                                                  Period Ended                             Period Ended
                                                       30.09.09                                   30.09.08
                                         %              Rs. in lacs               %             Rs. in lacs
              Imported                    -                 -                    10.18               5.50
              Indigenous               100.00             29.70              89.82                  48.56
                                       100.00             29.70             100.00                  54.06


13. C.I.F. Value of Imports:
                                                                  Period Ended                  Period Ended
                                                                     30.09.09                      30.09.08

                                                                    Rs. in lacs                  Rs. in lacs
     Raw Material & Components                                          707.48                         1,189.26
     Spares & Stores (Including Capital Spares)                           3.05                              46.04

     Capital Goods                                                       33.65                              60.82
                                                                        744.18                         1,296.12


14. Earnings in Foreign Currency:
                                                                Period Ended                    Period Ended
                                                                    30.09.09                          30.09.08
                                                   Nos.            Rs. in lacs           Nos.          Rs. in lacs
     Exports including Deemed Exports of            213              1,042.43            267                1,316.69
     Vehicles at FOB Value
     Export of Spare Parts                                              48.19                                  48.40

                                                                     1,090.62                               1,365.09


15. Expenditure in Foreign Currency (on payment basis - net of tax):
                                                                Period Ended                    Period Ended
                                                                     30.09.09                         30.09.08
                                                                   Rs. in lacs                         Rs. in lacs

     Traveling                                                           1.38                                  15.61

     Know-how                                                                -                                 41.66
     Discounting Charges                                                 5.11                                  13.21
     Technician Fees                                                    25.46                                  49.51
                                                                        31.95                               119.99

16. There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than
    45 days as at 30th September, 2009 and 31st March, 2009. This information as required to be disclosed under the
    Micro, Small and Medium Enterprises Development Act, 2006 has been determined on the basis of information
    available with the Company.



                                                     F 52
17. The Company has a system for maintenance of information and documents as required by the transfer pricing
    regulation under Sections 92-92F of the Income Tax Act, 1961, as applicable. Since the law requires existence of
    such information and documentation to be contemporaneous in nature, the Company also updates its information
    and documentation for international transactions entered into with the associated enterprises during the financial
    year. The management is of the opinion that its international transactions are at arms length so that the aforesaid
    legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that
    of provision for taxation.

18. The Company has taken certain premises under operating lease arrangements. The lease period varies from 3 to
    15 years with the option to extend the same with mutual consent. The total lease rental recognized as expense
    aggregate to Rs. 73.74 lacs (Previous Period Rs. 85.17 lacs).

     Future minimum lease payments under non-cancellable operating leases:
                                                                As at                          As at
                                                              30.09.2009                   31.03.2009
                                                               Rs. In lacs                   Rs. In lacs

     Not later than one year                                      7.23                          5.35


19. Managerial Remuneration * (Refer Note 6 on Schedule N) :
                                                                               Period            Period
                                                                               Ended             Ended
                                                                              30.09.09          30.09.08
                                                                             Rs. in lacs        Rs. in lacs
     1.       Remuneration:
     i)       Salaries and Allowances                                                60.00              60.00
     ii)      Commission                                                             18.00              36.00
     iii)     Contribution to Provident & Other Funds                                10.98                 8.10
     iv)      Other Perquisites                                                       4.43                 0.65
                                                                                     93.41             104.75
     2.       Computation of net profit in accordance with Sec. 309(5) of the Companies Act, 1956
              for the calculation of commission


              Profit Before Tax                                                     943.46          1,869.58
     Add      Depreciation charged in accounts                                      415.65             224.83
              Provision for doubtful debts                                           40.57             110.85
              Director‘s remuneration                                                93.41             193.02
              Director‘s sitting fee                                                  6.90                 4.50
                                                                                  1,499.99          2,402.78
     Less     Depreciation as per section 350 of the Companies                      399.19             212.04
              Act,1956
     Less     Provision for doubtful debt written back                               11.66              28.52
                                                                                  1,089.14          2,162.22
              Maximum Commission to Managing Director @ 1%                            9.00              18.00
              (as approved by Members) amounts to Rs. 10.89 lacs
              (Previous period Rs. 21.62 lacs). However, commission
              actually provided in books of accounts on estimation
              basis is Rs. 9.00 lacs (Previous period Rs. 18.00 lacs).


                                                       F 53
                    Maximum Commission to Whole time Directors @ 1%                          9.00             18.00
                    as approved by Members) amounts to Rs. 10.89 lacs
                    (Previous period Rs. 21.62 lacs). However, commission
                    actually provided in books of accounts on estimation
                    basis is Rs. 9.00 lacs (Previous period Rs. 18.00 lacs).


          *Notes:

          i. Contribution to Provident and other funds does not include contribution towards gratuity & leave
          encashment, as the separate figures for the directors are not available.

          ii. Other Perquisites does not include premium in respect of personal accident insurance, as the
          separate figures for the directors are not available.

          iii. Arrears of Remuneration paid to Managing Director during the period ended September 30, 2008
          for the period 1st June, 2006 to 31st March, 2008 as approved by members is as below:

           Particulars                                            (Rs. in lacs)
           Salaries and Allowances                                          64.20
           Commission                                                          6.61
           Contribution to Provident & Other Funds                          10.56
           Other Perquisites                                                   6.90
           Total                                                            88.27

20. Disclosures as per AS - 15 (Revised) ‗Employee Benefits‘ for half year ended September 30, 2009:
    I    Defined Contribution Plans:
         Provident Fund & Superannuation
         During the year the company has recognised the following amounts in the Profit and Loss Account
                                                                                                       Rs. Lacs
                                                                                        Period Ended                Period Ended
                                                                                               30.09.09               30.09.08
          Employers Contribution to Provident Fund & Pension Fund*                                  120.62                 97.23
          Superannuation*                                                                            23.40                 25.64


    II   State Plans
         Employees State Insurance Scheme
         During the half year, the company has recognised the following amounts in the Profit and Loss Account-
                                                                                                       Rs. Lacs
                                                                           Period Ended         Period Ended
                                                                                  30.09.09             30.09.08
          Employees State Insurance Scheme*                                           4.89                   3.22
    *Included in Contribution to Provident and Other Funds in Schedule K




                                                           F 54
   III Defined Benefit Plans
        a) Contribution to Gratuity Fund – Life Insurance Corporation of India
        b) Leave Encashment
                                                    Period Ended 30.09.09              Year Ended 31.03.09

Actuarial Assumptions                        Leave               Gratuity          Leave         Gratuity
                                           Encashment                            Encashment

                                            (Unfunded)           (Funded)        (Unfunded)     (Funded)
Mortality Table                              LIC 1994-           LIC 1994-       LIC 1994-96    LIC 1994-
                                              96 Ultimate        96 Ultimate         Ultimate   96 Ultimate
Attrition Rate                                  5.00% p.a         5.00% p.a         5.00% p.a    5.00% p.a

Imputed Rate of Interest                        7.75% p.a         7.75% p.a         7.50% p.a    7.50% p.a

Salary Rise                                     6.00% p.a         6.00% p.a         5.00% p.a    5.00% p.a

Return on Plan Assets                                 N.A.        9.25% p.a             N.A.     9.30% p.a

Remaining Working Life                        20.96 Years        20.01 Years      20.69 Years   20.26 Years



Change in the present value of                                                                  Rs. Lacs
obligation
Defined benefit obligation at                       281.34            677.36           254.20       560.65
beginning of period/ year
Service cost                                         44.60             28.87            73.78        47.36

Interest cost                                        10.24             25.98            14.74        38.84

Actuarial loss/(gain)                                32.71             74.45            53.96       116.12

Benefits paid                                      (34.08)           (13.90)         (115.34)       (85.61)

Defined benefit obligation at the end               334.81            792.76           281.34       677.36
of period/ year

Change in fair value of plan

Fair value of plan assets as at                                       212.46                        222.84
beginning of period/ year
Expected return on plan assets                                          9.50                         19.37

Contributions by employer                                                   -                        56.41
Actuarial (loss)/gain                                                 (0.32)                         (0.55)
Benefits paid                                                        (13.90)                        (85.61)

Fair value of plan assets at the end of                               207.74                        212.46
period/ year

Reconciliation of present value of
defined benefit obligation and the
fair value of assets


                                                          F 55
Present value of obligation at the end                                 792.76                                677.36
of period/ year

Fair value of Plan Assets as at the end                                207.74                                212.46
of period funded status
Present value of unfunded obligation                                   585.02                                464.90
at the end of period/ year

Expenses recognised in the Profit
and Loss Account *

Current Service Cost                                  44.60                28.87             73.78            47.36

Interest Cost                                         10.24                25.98             14.74            38.84
Expected return on plan assets                             -           (9.50)                    -           (19.37)
Net actuarial loss/ (gain) recognized                 32.71                74.76             53.96           116.67
Total Expenses recognised in the                      87.55            120.11               142.48           183.50
Profit & Loss Account
    * Included in Salaries, Wages and Bonus & Contribution to Provident and Other Funds in Schedule K.
The major categories of plan assets as a percentage of total plan assets as at September 30, 2009 are as
follows:
Government of India Securities                                       Nil
Insurer Managed Funds                                              100%

Note: The estimates of future salary increase, considered in actuarial variation, take account of inflation,
seniority, promotion and other relevant factors such as supply and demand in the employment market.

Short term employment benefits

The undiscounted amount of short term employee benefits expected to be paid in exchange for services
rendered by employees is recognized during the period when the employee renders the services. These
benefits include compensated absences and performance incentives.


   21.Research and Development Costs :
                                                                      Period Ended              Period Ended
                                                                              30.09.09                 30.09.08
                                                                            Rs. in Lacs              Rs. in Lacs
         a. Revenue Expenditure
         Salaries & Wages                                                           82.66                 70.11
         Contribution to Provident and other funds                                   4.51                  4.12
         Materials                                                                  54.46                 46.06
         Testing & Analytical                                                       65.50                 41.10
         Travelling                                                                  7.54                 16.96
         Membership & Subscription                                                   2.08                  4.59
         Telephone, Insurance, AMC, Magazines & General                              8.54                  4.16
         utilities
         Total                                                                     225.29                187.10


                                                           F 56
     b. Capital Expenditure
         - Capitalised                                                     50.34                 -
         - Work-in-Progress                                                56.53            124.40


22. Current tax expense comprise of Rs. 180.18 lacs (Previous period- Nil), being charge for Minimum Alternate Tax
    (MAT) under section 115JB of the Income Tax Act, 1961. The Company has recognized MAT Credit Entitlement
    of Rs. 180.18 lacs (Previous period- Nil) grouped under Loans and Advances (Schedule G), in accordance with
    the Guidance Note issued by the Institute of Chartered Accountants of India.

    ‗Current Tax for earlier year‘ represents adjustment of MAT provision for the Assessment Year 2009-10 on
    account of revision in MAT provisions of the Income Tax Act, 1961 retrospectively as per the Finance Act, 2009.

23. Detail in respect of dividend remitted during the period in foreign currency :

    a)   Amount remitted during the period: Nil (Previous Year Rs. 1,149,500)
    b) Number of Non-resident Shareholders: Nil (Previous Year 1 )
    c)   Number of Shares held: 209,000 (Previous Year 209,000)

24. Previous period figures have been regrouped / reclassified wherever considered necessary to conform to current
    period‘s classification.




                                                       F 57
CASH FLOW STATEMENT FOR THE PERIOD ENDED 30TH SEPTEMBER, 2009
                                                                                                                    (Rs. in Lacs)
                                                                              Period ended                      Period ended
                                                                           September 30, 2009                 September 30, 2008

A. CASH FLOW FROM OPERATING ACTIVITIES

   Net Profit Before Tax expense                                                       943.46                           1,869.58
       Adjustments For :

        Depreciation                                             415.65                             224.83
        Foreign Exchange Fluctuation                               11.53                            129.50
        Interest Expense                                         900.87                             587.92
        Interest Income                                         (12.38)                              (5.54)
        Provision for Doubtful Debts & Advances                    40.57                            110.85
        Provision for Retirement Benefits                        166.68                             120.00
        Provision for Warranty                                     73.55                             (4.00)
        Provision for Fringe Benefit Tax written back             (0.20)                                  -
        Provision for Wealth Tax                                  (0.03)                                  -
       Liabilities/Provisions no longer required written
        back                                                    (11.66)                             (28.52)
                                                                                     1,584.58                           1,135.04

Operating Profit Before Working Capital Changes                                      2,528.04                           3,004.62
        Adjustments for :
        Decrease / (Increase) in Sundry Debtors                3,706.30                          (2,509.44)
        Decrease / (Increase) in Other Current Assets              6.80                              245.34
        Decrease / (Increase) in Loans & Advances                450.64                            (546.94)
        Decrease / (Increase) in Inventories                 (1,252.70)                          (1,286.42)
        (Decrease) / Increase in Current Liabilities           2,108.75              5,019.79      3,308.98            (788.48)

CASH GENERATED FROM OPERATIONS                                                       7,547.83                            2216.14
     Less: Direct Tax Paid (net of refunds)                                            191.67                             302.96
     Less: Wealth Tax Paid                                                               0.62                               0.60
     Less: Fringe Benefits Tax Paid                                                      7.00                              45.30
    NET CASH GENERATED FROM OPERATING
ACTIVITIES                                                                           7,348.54                           1,867.28

B. CASH FLOW FROM INVESTING ACTIVITIES :
      Purchase of Fixed Assets                                                       (481.40)                           (971.64)
      Interest Received                                                                 12.20                               5.04

    NET CASH USED IN INVESTING ACTIVITIES                                            (469.20)                           (966.60)

C. CASH FLOW FROM FINANCING ACTIVITIES

        Unsecured Loans taken during the period               3,000.00                            1,508.80
        Unsecured Loans repaid during the period              2,000.00               1,000.00     3,000.00             (1,491.20)

        Secured Loans taken / (repaid) during the period                            (6,309.97)                          3,936.38

     Dividend Paid                                                                     (0.18)                           (559.55)
     Dividend Tax                                                                           -                            (98.02)
     Interest Paid                                                                   (999.07)                           (824.26)
 NET CASH INFLOW FROM /(USED IN) FINANCING
ACTIVITIES                                                                          (6,309.22)                            963.35

    Net Increase in Cash and Cash Equivalents                                          570.12                           1,864.03
   Cash and Cash Equivalents as at beginning of the period
(#1)                                                                                   700.89                             905.22
   Cash and Cash Equivalents as at end of the period (#2)                            1,271.01                           2,769.25




   Notes:-
     # 1 Cash and Bank Balances                                                        700.89                             914.28


                                                                  F 58
less. Cash Credit Accounts (being treated as financing activity)                                 -                                   (9.06)
Cash and Cash Equivalents – Opening Balance                                                   700.89                                905.22

      # 2 Cash and Bank Balances                                                            1,271.01                              2,769.25
less. Cash Credit Accounts (being treated as financing activity)                                -                                        -
   Cash and Cash Equivalents – Closing Balance                                              1,271.01                              2,769.25


Note:
1. The above "Cash Flow Statement" has been prepared under the Indirect method as set out in the Accounting
   Standard -3 on Cash Flow Statements .

2. Figures in bracket indicates cash outflows.

3. Previous year figures have been regrouped and recasted wherever necessary to conform to the current year classification


This is the Cash Flow Statement referred to in our report of
even date

For and on behalf of                                               FOR AND ON BEHALF OF THE BOARD
PRICE WATERHOUSE
Chartered Accountants



V.NIJHAWAN                                                         GOPAL BANSAL                               YASH MAHAJAN
Partner                                                            Sr. Vice President -Finance                Managing Director
M.No. F87228                                                       & Company Secretary


New Delhi, 22nd January, 2010                                                                               Chandigarh, 22nd January, 2010




                                                                       F 59
                       ACCOUNTING RATIOS AND CAPITALISATION STATEMENT

Accounting Ratios

The following tables set forth certain accounting and other ratios based on our Company‘s financial statements
as at and for the period ended September 30, 2009 on which the Auditor has issued a limited review report, and
the Company‘s financial statements as at and for the period ended March 31, 2009 on which the Auditor has
issued an audit report. The aforementioned financial statements are included in the sections titled ―Financial
Information – Auditor’s Report and Audited Financial Statements for the year ended March 31, 2009‖ and
―Financial Information – Limited Review Report and Financial Statements for the six months ended
September 30, 2009‖ on pages F1 and F32, respectively.

Particulars                                                 As on September 30, 2009                As on March 31, 2009

Weighted average number of equity shares                                        10,486,700                         10,486,700
outstanding during the period (excluding 13,300
forfeited equity shares)
Basic / Diluted Earning Per Share (Rs.)                                                6.42                                  4.57

Return on Net Worth (%)                                                              6.52%                                 4.96%


Net Asset Value Per Share (Rs.)                                                      98.47                                  92.05


The Ratios have been computed as below:

       Earning Per           Net profit attributable to Equity Shareholders (excluding extraordinary items, if any)
       Share (Basic)                Weighted Average number of Equity Shares outstanding during the year
       (Rs.)


       Earning Per Share       Net profit attributable to Equity Shareholders (excluding extraordinary items, if any)
       (Diluted) (Rs.)          Weighted Average number of Diluted Equity Shares outstanding during the year


       Return On Net           Net profit attributable to Equity Shareholders (excluding extraordinary items, if any)
       worth (%):                        Net Worth at the end of the year (excluding revaluation reserves)


       Net Asset Value                 Net Worth at the end of the year (excluding revaluation reserves)
       per Share (Rs.)               Weighted Average number of Equity shares outstanding during the year


Capitalization Statement
                                                                                                                      (Rs. in lacs)
Particulars                                                                Pre-Issue as on            Adjusted for the Issue
                                                                         September 30, 2009
Borrowing
- Short – Term Debt                                                                    11,218.71                      11,218.71
- Long – Term Debt                                                                       5,500.00                       5,500.00
Total Debt                                                                             16,718.71                      16,718.71


Shareholders' funds
Equity Share Capital                                                                     1,049.38                       1,447.87
Reserves & Surplus                                                                       9,276.85                     16,848.25
Total Shareholders Funds                                                               10,326.23                      18,296.12




                                                             71
Particulars                                                       Pre-Issue as on          Adjusted for the Issue
                                                                September 30, 2009
Total Debt / Equity Ratio                                                          1.62                      0.91
Long-term Debt / Equity ratio                                                      0.53                      0.30


The Ratios have been computed as below:


      Total Debt /                           Short Term Debt + Long Term Debt
      Equity Ratio
                                     Equity (i.e., Equity Share Capital + Reserves & Surplus)


      Long Term Debt /                                   Long Term Debt
      Equity Ratio
                                     Equity (i.e., Equity Share Capital + Reserves & Surplus)




                                                    72
                  STOCK MARKET DATA FOR EQUITY SHARES OF THE COMPANY

Our Company‘s Equity Shares are currently listed on the Stock Exchanges. Stock market data for our Equity
Shares has been given separately for the BSE and NSE. Our Equity Shares were voluntarily delisted from the
Ludhiana Stock Exchange, pursuant to a letter dated June 16, 2004 received from the Ludhiana Stock Exchange.
Similarly, our Equity Shares were voluntarily delisted from the Delhi Stock Exchange, pursuant to a letter dated
March 31, 2004 received from the Delhi Stock Exchange. For details of listing and delisting of our Equity
Shares, refer to the section titled ―History and Certain Corporate Matters - Listing‖ on page 62. As our
Company‘s Equity Shares are actively traded on the Stock Exchanges, stock market data has been given
separately for each of these Stock Exchanges.

The high and low closing prices recorded on the Stock Exchanges for the preceding three (3) Fiscals and the
number of Equity Shares traded on the days the high and low prices were recorded are stated below.

BSE

                                                  Volume
                                                                                         Volume on          Average
                                                 on date of
Year ending                                                     Low                      date of low        price for
                High (Rs.)      Date of High     high (no.                Date of Low
 March 31                                                       (Rs.)                    (no.      of       the year
                                                 of Equity
                                                                                         shares)              (Rs.)
                                                  Shares)
                                  April 25,                                 March 3,
    2009            335.00                                269   105.00                              10          242.08
                                   2008                                       2009
                                  May 11,                                  January 21,
    2008            362.50                              2,917   257.00                             470          313.66
                                   2007                                       2008
                                  April 10,                                 August 7,
    2007            367.80                                919   206.00                              50          282.21
                                   2006                                       2006
(Source: www.bseindia.com)

NSE

                                                  Volume                                 Volume on          Average
Year ending                                      on date of     Low                      date of low        price for
                High (Rs.)      Date of High                              Date of Low
 March 31                                        high (no.      (Rs.)                    (no.      of       the year
                                                 of shares)                              shares)              (Rs.)
                                  April 28,                                 March 16,
    2009            335.00                                118   105.00                             775          243.06
                                   2008                                        2009
                                  April 24,                                January 22,
    2008            360.10                              3,637   250.00                             225          313.91
                                   2007                                        2008
                                  April 10,                                  June 15,
    2007            372.95                                833   211.05                            2,633         281.73
                                   2006                                        2006
(Source: www.nseindia.com)

The high and low prices and volume of Equity Shares traded on the respective dates during the last six (6)
months is as follows:

BSE

  Month,         High         Date of High     Volume on        Low       Date of low    Volume on          Average
   Year          (Rs.)                         date of high     (Rs.)                    date of low      price for the
                                                 (no. of                                   (no. of        month (Rs.)
                                                 shares)                                   shares)
January         331.00       January 4,            131          274.65   January 29,         746             300.36
2010                         2010                                        2010
December          334.80     December 31,        10,019         268.00   December 8,       1,641             295.21
2009                         2009                                        2009
November          281.45     November 19,        10,485         200.20   November 3,        237              244.57
2009                         2009                                        2009
October           236.30     October 21,          5,958         209.00   October 30,        119              219.83
2009                         2009                                        2009
September         221.90     September 8,           5           205.75   September 10,      219              213.84
2009                         2009                                        2009
August            229.95     August 31,            350          206.25   August 3,          100              217.07
2009                         2009                                        2009
(Source: www.bseindia.com)


                                                           73
NSE

  Month,          High        Date of High     Volume on       Low       Date of low    Volume on      Average
   Year           (Rs.)                        date of high    (Rs.)                    date of low    price for
                                                 (no. of                                  (no. of     the month
                                                 shares)                                  shares)        (Rs.)
January          339.00      January 4,            830         276.95   January 28,        1,688        301.48
2010                         2010                                       2010
December                     December 31,        10,427        266.05   December 7,        230         295.84
                 334.50
2009                         2009                                       2009
November                     November 19,        25,272        195.30   November 4,         41         243.90
                 282.35
2009                         2009                                       2009
October                      October 23,           150         202.40   October 30,       1,095        218.85
                 231.20
2009                         2009                                       2009
September                    September 10,         315         209.10   September 15,      966         215.50
                 222.70
2009                         2009                                       2009
August                       August 31, 2009       909         207.50   August 21,         520         216.82
                 230.00
2009                                                                    2009
(Source: www.nseindia.com)

Shares are the same on more than one (1) day, the day on which there has been higher volume of trading has
been considered for the purposes of this section.

In the event the high and low price of the Equity Shares are the same on more than one (1) day, the day on
which there has been higher volume of trading has been considered for the purposes of this section.




                                                          74
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                              OPERATIONS

The following discussion of the Company’s financial condition and results of operations should be read in
conjunction with the sections titled “Financial Information – Auditor’s Report and Audited Financial
Statements for the year ended March 31, 2009” and “Financial Information – Limited Review Report and
Financial Statements for the six months ended September 30, 2009” on pages F1 and F32, respectively.

For the purpose of this section, unless the context requires otherwise, references to “Fiscal 2009” and “Fiscal
2008” are to the financial year ended March 31 of the relevant year and references to “year” are to the
financial year of the Company.

This section contains forward-looking statements that involve risks and uncertainties. The Company’s actual
results may differ materially from those discussed in such forward-looking statements as a result of various
factors, including those described under the sections titled “Risk Factors” and “Forward-Looking
Statements” on pages xi and x, respectively.

Overview of the Results of our Operations for the Six Months Ended September 30, 2009

The following tables set forth selected financial information of the Company, including as a percentage of total
income, for the six months ended September 30, 2009 and September 30, 2008 based on the Company‘s
unaudited financial statements as at and for the six month period ended September 30, 2009 and for the six
month period ended September 30, 2008 on which the Auditor has issued a limited review report. This
discussion should be read in conjunction with the section titled ―Financial Information - Limited Review
Report and Financial Statements for the six months ended September 30, 2009‖ on page F32.

 Particulars                                                                September 30, 2009                  September 30, 2008
                                                                         (Rs. in lacs)   % of Total           (Rs. in lacs)   % of
                                                                                           Income                            Total
                                                                                                                            Income
   Sale Volumes (No. of vehicles)                                                 4,547                              5,454
   Net Sales Revenues                                                         30,993.07          99.25%         36,475.36     99.09%
   Other Operating Income (1)                                                    233.83           0.75%             333.20     0.91%
 Total Income                                                                 31,226.90         100.00%         36,808.56   100.00%
 Manufacturing and Other Expenses
   Materials Consumed (2)                                                     24,745.68          79.25%          30,364.32        82.50%
   Employee Costs                                                              2,006.30           6.42%           1,763.13         4.79%
   Other Expenditure (3)                                                       2,082.22           6.67%           1,948.13         5.29%
   Finance Charges (net)                                                       1,033.59           3.31%             638.57         1.73%
   Depreciation/ Amortization                                                    415.65           1.33%             224.83         0.61%
 Total Expenditure                                                            30,283.44          96.98%          34,938.98        94.92%
 Profit Before Tax                                                               943.46           3.02%           1,869.58         5.08%
 Provision for Taxation
         Current Tax                                                              169.00           0.54%            435.00         1.18%
         Current Tax Earlier Years                                                 11.18           0.04%                 -              -
         Deferred Tax Charge / (Credit)                                           270.00           0.86%            190.00         0.52%
         Fringe Benefit Tax                                                          -                  -            25.00         0.07%
         MAT Credit Entitlement                                                 (180.18)          -0.58%                 -              -
 Total Tax Expense / (Credit)                                                     270.00           0.86%            650.00         1.77%
 Net Profit After Tax                                                             673.46           2.16%          1,219.58         3.31%

Notes:
1. Other operating income includes sale of scrap, export incentives, liabilities / provisions no longer required to be written back, royalty
     and miscellaneous income.
2. Materials consumed include, raw materials and components consumed, movement of finished goods and work in progress.
3. Other expenditure includes consumption of stores, spares and tools, marketing sales and promotion expenses etc.


Six months ended September 30, 2009 compared to the six months ended September 30, 2008




                                                                    75
Total Income

Our total income consists of net sales revenues and other operating income. Our total income declined by
15.16% for the six months ended September 30, 2009 compared to the six months ended September 30, 2008,
primarily on account of a 15.03% decrease in our net sales revenue.

Net Sales Revenue

Our net sales revenue decreased by Rs. 5,482.29 lacs, or 15.03%, to Rs. 30,993.07 lacs for the six months ended
September 30, 2009 from Rs. 36,475.36 lacs for the six months ended September 30, 2008. The decline in net
sales revenue was primarily on account of a decline in CV sales from 5,454 units for the six months ended
September 30, 2008 to 4,547 units for the six months ended September 30, 2009, mainly arising because of a
continued overall fall in the demand for CVs which began during the second half of Fiscal 2009 resulting from a
variety of macro economic factors including higher interest rates, a reduction in the availability of vehicle
finance, and decrease in disbursement of loans for financing of CVs.

Other Operating Income

Other operating income decreased to Rs. 233.83 lacs for the six months ended September 30, 2009 from Rs.
333.20 lacs for the six months ended September 30, 2008 primarily on account of a decline in the income from
the sale of scrap and export incentives.

Total Expenditure

Our total expenditure decreased by 13.32% to Rs. 30,283.44 lacs for the six months ended September 30, 2009
from Rs. 34,938.98 lacs for the six months ended September 30, 2008. As a percentage of total income, the total
expenditure increased from 94.92% for the six months ended September 30, 2008 to 96.98% for the six months
ended September 30, 2009.

The following table presents our total expenditure for the six months ended September 30, 2009 and the six
months ended September 30, 2008.

 Particulars                                                                       Total Expenditure
                                                                                September        September
                                                                                 30, 2009         30, 2008
                                                                                       (Rs. in lacs)
 Manufacturing and Other Expenses (A)
       Materials Consumed                                                          24,745.68     30,364.32
       Employee Costs                                                               2,006.30      1,763.13
       Other Expenditure                                                            2,082.22      1,948.13
 Finance Charges (net) (B)                                                          1,033.59        638.57
 Depreciation/ Amortization (C)                                                       415.65        224.83
 Total Expenditure (A + B + C)                                                     30,283.44     34,938.98

Manufacturing and Other Expenses

Manufacturing and other expenses consist of materials consumed, employee costs and other expenditure.
Manufacturing and other expenses decreased by 15.38% from Rs. 34,075.58 lacs for the six months ended
September 30, 2008 to Rs. 28,834.20 lacs for the six months ended September 30, 2009. As a percentage of total
income of the Company, our total expenditure increased from 94.92% for the six months ended September 30,
2008 to 96.98% for the six months ended September 30, 2009 primarily on account of a 13.79% increase in
employee costs due to an addition of employees for the expansion project at our Company‘s Nawanshahar plant
and a rise in the compensation package of our employees.

Materials Consumed

Materials consumed as a percentage of total income declined to 79.25% for the six months ended September 30,
2009 from 82.50% for the six months ended September 30, 2008. In absolute terms, manufacturing cost
decreased by 18.50% to Rs. 24,745.68 lacs for the six months ended September 30, 2009 compared to Rs.
30,364.32 lacs for the six months ended September 30, 2008. Our manufacturing cost primarily consists of raw
materials and components consumed, which declined by 15.56% from Rs. 29,477.70 lacs for the six months

                                                      76
ended September 30, 2008 to Rs. 24,889.54 lacs for the six months ended September 30, 2009. The decline was
mainly due to decline in production volumes in line with the decline in net sales.

Employee Cost

Our employees cost consist of salaries, wages and bonus, contribution to provident and other funds, and
payments towards workmen and staff welfare. For the six months ended September 30, 2009, salaries, wages
and bonus, contribution to provident and other funds, and payments towards workmen and staff welfare
increased by 10.68%, 30.54% and 24.35% respectively, compared to the six months ended September 30, 2008.
The increase was mainly due to addition of employees for the expansion project at our Company‘s Nawanshahar
plant and rise in the compensation package of our employees. Consequently, our employee cost increased by
13.79%, from Rs. 1,763.13 lacs for the six months ended September 30, 2008 to Rs. 2,006.30 lacs for the six
months ended September 30, 2009, and represented 4.79% and 6.42% of total income for the six months ended
September 30, 2008 and the six months ended September 30, 2009, respectively.

Other Expenditure

 Other expenditure includes operating, administrative and other expenses other than employee cost. Some of the
key expenditures covered under this head are marketing expenses, fuel expenses and travelling expenses. For the
six months ended September 30, 2009, the marketing expenses increased by 9.75% from Rs. 967.43 lacs for the
six months ended September 30, 2008 to Rs. 1,061.80 lacs for the six months ended September 30, 2009. For
the six months ended September 30, 2009, the travelling expenses increased by 19.99%, from Rs. 211.88 lacs
for the six months ended September 30, 2008 to Rs. 254.24 lacs for the six months ended September 30, 2009.
Legal and professional expenses, and rates and taxes also increased by 108.85% to reach Rs. 152.71 lacs for the
six months ended September 30, 2009 compared to six months ended September 30, 2008. The increase in our
marketing expenses was on account of extra marketing costs incurred by the Company in response to the severe
market conditions including incentivisation. Likewise the increase in our travelling expenses was on account of
extra traveling undertaken by marketing personnel. Our overall, other expenditure increased by 6.88% from Rs.
1,948.13 lacs in for the six months ended September 30, 2008 to Rs. 2,082.22 lacs for the six months ended
September 30, 2009.

Finance Charges (Net)

Finance charges increased by 61.86% for the six months ended September 30, 2009, from Rs. 638.57 lacs for
the six months ended September 30, 2008 to Rs. 1,033.59 lacs for the six months ended September 30, 2009,
and represented 1.73% and 3.31% of the total income for the six months ended September 30, 2008 and for the
six months ended September 30, 2009, respectively. The rise in finance charges was on account of charge of
interest in relation to the expansion project at our Company‘s Nawanshahar plant to our Company‘s profit and
loss account, which in the corresponding period was capitalized as the project was under set-up stage.

Depreciation / Amortization

Depreciation/amortization increased by 84.87% for the six months ended September 30, 2009, from Rs. 224.83
lacs for the six months ended September 30, 2008 to Rs. 415.65 lacs and represented 0.61% and 1.33% of total
income for the six months ended September 30, 2008 and for the six months ended September 30, 2009,
respectively. This increase was primarily due to charge of additional depreciation in respect of new fixed assets
in relation to the expansion project at our Company‘s Nawanshahar plant

Tax Expense / (Credit)

For the six months ended September 30, 2009, we had a lower tax expense of Rs. 270.00 lacs as compared to a
tax expense of Rs. 650.00 lacs for the six months ended September 30, 2008 on account of decrease in taxable
income.

Net Profit After Tax

As a result of the foregoing, our net profit after tax decreased by 44.78% for the six months ended September
30, 2009 from Rs. 1,219.58 lacs for the six months ended September 30, 2008 to Rs. 673.46 lacs. As a
percentage of total income, the net profit after tax decreased to 2.16% for the six months ended September 30,
2009 from 3.31% for the six months ended September 30, 2008.

                                                       77
 Overview of the Results of our Operations for Fiscal 2009 and Fiscal 2008

 The following tables set forth selected financial information of the Company, including as a percentage of total
 income, for Fiscal 2009 and Fiscal 2008, based on the Company‘s financial statements on which the Auditor has
 issued an audit report. This discussion should be read in conjunction with the section titled ―Financial
 Information – Auditor’s Report and Audited Financial Statements for the year ended March 31, 2009‖ on
 page F1 of this Letter of Offer.

    Particulars                         Fiscal 2009                                            Fiscal 2008
                                      (Rs. in           % of Total
                                                                                  (Rs. in lacs)             % of Total Income
                                       lacs)             Income
    Sale Volumes (No. of                 8,020                                                     11,272
    vehicles)
    Net Sales Revenues              54,085.23                      98.88                       66,543.45                        99.11
    Other Operating Income              610.01                      1.12                           598.75                        0.89
    (1)


 Total Income                       54,695.24                        100                       67,142.20                          100
 Manufacturing and Other Expenses
                                                                   81.83                          55,023.70                     81.95
    Materials Consumed (2)          44,756.94
    Employees Cost                   3,546.19                       6.48                           2,914.11                      4.34
    Other Expenditure (3)             3,585.81                      6.55                           3,830.63                      5.70
    Finance Charges (net)             1,808.77                      3.31                           1,173.42                      1.75
    Depreciation/                       583.92                      1.07                            330.07                       0.49
    Amortization
 Total Expenditure                  54,281.63                      99.24                          63,271.93                     94.24

 Profit Before Tax                      413.61                      0.76                           3,870.27                      5.76

 Provision for Taxation
    -Current Tax                         41.22                      0.08                           1,380.00                      2.05
    -Deferred Tax Charge /            (115.00)                     -0.21                            (90.00)                     -0.13
    (Credit)
    -Fringe Benefit Tax                  49.85                      0.09                              60.00                      0.09
    -MAT Credit                        (41.22)                     -0.08                               0.00                      0.00
    Entitlement
 Total Tax Expense /                   (65.15)                     -0.12                           1,350.00                      2.01
 (Credit)
 Net Profit After Tax                   478.76                      0.88                           2,520.27                      3.75
  Notes:
  i. Other operating income includes sale of scrap, export incentives, liabilities/provisions no longer required to be written back, royalty
      and miscellaneous income.
 ii. Materials consumed include, raw materials and components consumed, movement of finished goods and work in progress.
iii. Other expenditure includes consumption of stores, spares and tools, marketing sales and promotion expenses etc.

 Fiscal 2009 Compared to Fiscal 2008

 The recent global financial crisis, reduction in availability of vehicle financing and higher interest rate has
 impacted the demand for CVs in India, particularly in the second half of Fiscal 2009. According to the SIAM,
 sales (domestic and exports) for CVs fell from 309,095 vehicles during the second half of Fiscal 2008 to
 178,170 vehicle during the second half of Fiscal 2009. In line with overall decline in demand of CVs during the
 second half of Fiscal 2009, our Company also experienced a fall in sale of CVs which severally impacted net
 revenue and overall performance of operations during Fiscal 2009.

 Total Income

 Our total income consists of net sales revenues and other operating income. Our total income declined by
 18.54% in Fiscal 2009 compared to Fiscal 2008, primarily on account of an 18.72% decrease in our net sales.

 Net Sales Revenue


                                                                     78
Our net sales revenue decreased by Rs. 12,458.22 lacs, or 18.72%, to Rs. 54,085.23 lacs in Fiscal 2009 from Rs.
66,543.45 lacs in Fiscal 2008. The decline in net sales was primarily on account of a decline in CV sales from
11,272 units in Fiscal 2008 to 8,020 units in Fiscal 2009, mainly during the second half of Fiscal 2009, arising
largely because of an overall fall in the demand for CVs. The fall in demand for CVs was primarily on account
of a variety of macro economic factors including a slowdown in domestic growth, higher interest rates, a
reduction in the availability of vehicle finance, and decrease in disbursement of loans for financing of CVs.

Other Operating Income

Other operating income includes income from sale of scrap, export incentives relating to DEPB, liabilities no
longer required written back, royalties received by us in respect of use of corporate name for sale of lubricants
by companies engaged in the business of manufacture and marketing of these lubricants and sundry items. Other
operating income increased to Rs. 610.01 lacs in Fiscal 2009 from Rs. 598.75 lacs in Fiscal 2008. The decline in
income from export incentives and royalty payments in Fiscal 2009 was offset by an increase in the income
from sale of scrap, liabilities / provisions no longer required written back.

Total Expenditure

Our total expenditure decreased by 14.21% to Rs. 54,281.63 lacs in Fiscal 2009 from Rs. 63,271.93 lacs in
Fiscal 2008. As a percentage of total income, the total costs increased from 94.24% in Fiscal 2008 to 99.24% in
Fiscal 2009.

The following table presents our total expenditure for Fiscal 2009 and 2008.

Particulars                                                            Total Expenditure
                                                              Fiscal 2009                        Fiscal 2008
                                                                          (Rs. in lacs)
Manufacturing and Other Expenses (A)
-Materials Consumed                                                     44,756.94                55,023.70
-Employees Cost                                                          3,546.19                 2,914.11
-Other Expenditure                                                       3,585.81                 3,830.63
Finance Charges (Net) (B)                                                1,808.77                 1,173.42
Depreciation/ Amortization (C)                                             583.92                   330.07
Total Expenditure (A+B+C)                                               54,281.63                63,271.93

Manufacturing and Other Expenses
Manufacturing and other expenses consist of materials consumed, employee costs and other expenditure.
Manufacturing and other expenses decreased by 15.99% from Rs. 61,768.44 lacs in Fiscal 2008 to Rs. 51,888.94
lacs in Fiscal 2009. As a percentage of total income of the Company, it increased from 92.00% in Fiscal 2008 to
94.87% in Fiscal 2009 primarily on account of a 21.69% increase in employee costs due to an increased
requirement of employees for the expansion project at our Company‘s Nawanshahar plant and a rise in the
compensation levels of the Company‘s permanent employees and senior management in Fiscal 2009 as
compared to Fiscal 2008.

Materials Consumed
Materials consumed as a percentage of total income declined to 81.83% in Fiscal 2009 from 81.95% in Fiscal
2008. In absolute terms, manufacturing cost decreased by 18.66% to Rs. 44,756.94 lacs in Fiscal 2009 compared
to Rs. 55,023.70 lacs in Fiscal 2008. Our manufacturing cost primarily consists of raw materials and
components consumed, which declined by 18.25% from Rs. 53,886.49 lacs in Fiscal 2008 to Rs. 44,053.74 lacs
in Fiscal 2009 due to decline in production volumes in line with the decline in net sales

Employee Cost

Our employees cost consist of salaries, wages and bonus, contribution to provident and other funds, and
payments towards workmen and staff welfare. In Fiscal 2009, salaries, wages and bonus, contribution to
provident and other funds, and payments towards workmen and staff welfare increased by 21.00%, 33.23% and
9.44% respectively, compared to Fiscal 2008. The increase was mainly due to increased requirement of
employees primarily for our expansion project at the Nawanshahar Plan and a rise in the compensation levels of


                                                       79
our permanent employees and senior management. Consequently, our employee cost increased by 21.69%, from
Rs. 2,914.11 lacs in Fiscal 2008 to Rs. 3,546.19 lacs in Fiscal 2009, and represented 4.34% and 6.48% of total
income for the years ended March 31, 2008 and 2009, respectively.

Other Expenditure

Other expenditure includes operating, administrative and other expenses other than employee cost. Some of the
key expenditures covered under this head are Marketing Expenses, Stores, Fuel Expenses and Travelling
Expenses. In Fiscal 2009, the Marketing Expenses declined by 15.23% from Rs. 1,858.09 lacs in Fiscal 2008 to
Rs. 1,575.06 lacs in Fiscal 2009. Similarly, in Fiscal 2009, the Fuel Expenses declined by 5.93%, from Rs.
354.66 lacs in Fiscal 2008 to Rs. 333.62 lacs in Fiscal 2009. The decline in our Marketing Expenses was on
account of reduction in sale volumes and cost reduction measures on our part. The decline in Fuel Expenses,
despite an increase in fuel costs during Fiscal 2009, was mainly due to reduced requirements from our
manufacturing facilities due to a decrease in production volume compared to Fiscal 2008. Our overall ‗other
expenditure‘ declined by 6.39% from Rs. 3,830.63 lacs in Fiscal 2008 to Rs. 3,585.81 lacs in Fiscal 2009.
Finance Charges (Net)

Finance charges increased by 54.15% in Fiscal 2009, from Rs. 1,173.42 lacs in Fiscal 2008 to Rs. 1,808.77 lacs
in Fiscal 2009, and represented 1.75% and 3.31% of the total income for Fiscal 2008 and Fiscal 2009
respectively. The rise in finance charges was due to higher levels of borrowings including a short term loan of
Rs. 2,500 lacs and a cash credit of Rs. 6,628.69 lacs, on account of decline in cash generation caused by sharp
drop in sales post September, 2008 and hike in interest rates.
Depreciation / Amortization

Depreciation/amortization increased by 76.9% in Fiscal 2009, from Rs. 330.07 lacs in Fiscal 2008 to Rs. 583.92
lacs and represented 1.07% and 0.49% of total income for Fiscal 2009 and Fiscal 2008, respectively. This
increase was primarily due to purchase of new fixed assets relating to the expansion of our manufacturing
facilities and setting up of our new in-house bus body plant. Our gross block increased to Rs. 13,499.46 lacs as
on March 31, 2009 from Rs. 4,863.88 lacs as on March 31, 2008.

Tax Expense / (Credit)

In Fiscal 2009 we had a tax credit of Rs. 65.15 lacs as compared to a tax expense of Rs. 1,350.00 lacs in Fiscal
2008. The tax credit in the Fiscal 2009 was primarily due to deferred tax asset calculated as per Accounting
Standard 22, arising because of a negative taxable income due to higher tax depreciation allowance on capital
expenditure and R&D expenditure.

Net Profit after Tax

As a result of the foregoing, our net profit after tax decreased by 81.00% in Fiscal 2009 from Rs. 2,520.27 lacs
in Fiscal 2008 to Rs. 478.76 lacs. As a percentage of total income, the net profit after tax decreased to 0.88% in
Fiscal 2009 from 3.75% in Fiscal 2008.




                                                       80
                                                 FINANCIAL INDEBTEDNESS


1.    Details of Secured Borrowings

The facilities with respect to our Company‘s secured borrowings on December 31, 2009 are as follows:

A.      Term Loans

Sl.       Name of           Facility         Interest     Repayment schedule               Security                 Amount
No.        lender                            rate (%)                                                           Outstanding as
                                                                                                               on December 31,
                                                                                                                      2009
1.       Allahabad        Term loan              12.00    Two (2) instalments of    First         Equitable    Rs. 5,000.00 lacs
         Bank             of      Rs.                     Rs.     500.00     lacs   mortgage              /
                          6,000.00                        quarterly,    beginning   hypothecation charge
                          lacs                            September 2009 and        over the entire fixed
                                                          five (5) instalments of   assets of our Company,
                                                          Rs.    1,000.00    lacs   ranking pari passu
                                                          quarterly,    beginning   with other lenders
                                                          March 2010
2.       Canara           Term loan              12.25    Rs. 4,000.00 lacs to be   First pari-passu charge            -
         Bank*            of      Rs.                     repaid     within    20   on entire fixed assets
                          11,000.00                       quarterly instalments,    of the Company with
                          lacs                            beginning June 2010       other lenders
                                                          and Rs. 7,000.00 lacs
                                                          to be repaid within 20
                                                          quarterly instalments,
                                                          beginning June 2014

3.       Mizuho           Term loan            MIBOR      One       (1)      year   First pari-passu charge            -
         Corporate        of      Rs.        +500 basis   moratorium and 10         on plant and machinery
         Bank*            7,000.00               points   equal    half   yearly    of    the     Company,
                          lacs                            instalments, beginning    equitable mortgage on
                                                          from the end of 18        land and building,
                                                          months            from    which would be shared
                                                          drawdown                  on pari passu basis
                                                                                    ranking with other
                                                                                    lenders

*The facilities have not yet been availed.

B.      Working Capital Facilities

 Sl.         Name of lender                  Facility            Interest rate             Security                 Amount
 No.                                                                 (%)                                      Outstanding as on
                                                                                                              December 31, 2009
1.        Consortium                   12,700.00      lacs,   Canara     Bank   -    First charge by way      Rs. 6,773.77 lacs
          agreement       with         including      fund    11.75; and             of hypothecation of
          Canara Bank and              based and non-fund     Indian     Overseas    current assets and
          Indian     Overseas          based limits of Rs.    Bank -10.00            other      movables,
          Bank dated January           7,000 lacs and Rs.                            both present and
          23,     1993,      as        5,700          lacs,                          future and also by
          amended by the               respectively                                  way of collateral a
          supplemental                                                               first charge on our
          working       capital                                                      Company‘s
          consortium                                                                 immovable       and
          agreement      dated                                                       movable property
          January 28, 2009




                                                                  81
2.    Details of Unsecured Borrowings

The facilities with respect to our Company‘s unsecured borrowings as on December 31, 2009 are as follows:


Sl.         Name of                       Facility            Interest rate         Repayment                   Amount
No.          lender                                               (%)                schedule             Outstanding as on
                                                                                                         December 31, 2009
1.       Mizuho              Short term loan of Rs.               7.00        Repayable on demand        Rs. 6,900.00 lacs
         Corporate           7,000.00 lacs
         Bank

2.       Deutsche            Credit facilities including             -          STL – maximum 6            -
         Bank*               overdraft (―OD‖), short                            months
                             term loan (―STL‖), bills                           BD – maximum 90 days
                             discounting          (―BD‖),                       LC – validity / usage
                             letters     of         credit,                     maximum 180 / 180 days
                             guarantees, pre export                             Guarantees maximum of
                             advance (―PEA‖), export                            12 months
                             bills purchase (―EBP‖)                             Invoice   financing  –
                             and invoice financing                              maximum 90 days
                             aggregating       to      Rs.                      PEA / EBP – maximum
                             3,000.00 lacs                                      90 days
3.       Standard            Facilities       including        6.70 - 7.30      WCDL – maximum 12          Rs. 2,000.00 lacs
         Chartered           working capital demand                             months
         Bank                loan          (―WCDL‖),                            OD – maximum up to 1
                             overdraft(―OD‖),                                   day
                             receivables        service,                        Receivables service –
                             payment undertaking, pre                           maximum up to 120 days
                             and post shipment credit                           Payment undertaking -
                             aggregating     to     Rs.                         maximum up to 180 days
                             2,000.00 lacs                                      Pre shipment credit –
                                                                                maximum up to 180 days
                                                                                Post shipment credit –
                                                                                maximum up to 180 days

*The facility has not yet been availed.

The Company has not defaulted in relation to the aforementioned secured and unsecured borrowings.

Additionally, under the terms of certain arrangements, our Company has undertaken not to do any of the
following without the prior written consent of the lenders, including:

           to enter into any scheme of expansion, merger, amalgamation, compromise or reconstruction;
           to sell, lease or transfer all or substantial portion of its fixed assets;
           to change / modify the existing shareholding pattern;
           to change our ownership or constitution or entities controlling us;
           to change our shareholding, management or majority of directors;
           to vary the shareholding of our directors and principal shareholders;
           to change the general nature of our business;
           to make any material amendments to our constitutional documents;
           to offer any corporate guarantee to any company;
           to allow to be withdrawn any monies brought in by the promoter and directors or relatives and friends
           of the promoters and directors;
           to invest any funds by way of deposits and loans, or in the share capital of any other concern;
           to borrow or obtain credit facilities of any description from other banks or money lenders; and
           to enter into any hire purchase arrangement.




                                                                   82
3.    Details of Bank Guarantees

In addition to the details of the financial indebtedness, the details of bank guarantees given by the Company as
on September 30, 2009 is provide below:


                                                                                    Amount outstanding as on
S.                                                           Date of the bank
                     Beneficiary Name                                                 September 30, 2009
No.                                                             guarantee
                                                                                         (Rs. in lacs)
       Deputy Sales Tax Commissioner-Government of
 1     Jammu & Kashmir                                  February 10, 2004                                  4.00
       Deputy Sales Tax Commissioner- Government of
 2     Jammu & Kashmir                                  February 10, 2004                                  2.00
 3     Director Supplies & Disposal, Haryana            February 19, 2004                                 10.00
 4     Ministry of Defence, Govt of India- New Delhi    September 26, 2007                                 2.94
 5     Commissioner Commercial Tax-Ahmedabad            December 31, 2007                                  9.26
 6     DTE General of Ordinance Services-New Delhi      March 12, 2008                                    54.45
 7     Director Mech. Transport Air HQ New Delhi        April 8, 2008                                     14.66
       Commandant (Coord) Adm, Dte,HQ,DG, BSF-
 8     New Delhi                                        May 28, 2008                                       1.20
 9     President of India GoI, DGBSF                    September 5, 2008                                  4.19
       Gujarat State Disaster Management Authority-
10     Gandhinagar                                      October 16, 2008                                 272.94
       Gujarat State Disaster Management Authority-
11     Gandhinagar                                      November 6, 2008                                  71.48
       Gujarat State Disaster Management Authority-
12     Gandhinagar                                      November 6, 2008                                  71.48
       Gujarat State Disaster Management Authority-
13     Gandhinagar                                      November 6, 2008                                  64.99
       Gujarat State Disaster Management Authority-
14     Gandhinagar                                      November 6, 2008                                  64.99
       Dte General of Ordance, Hq. of MOD(Army)- New
15     Delhi                                            January 13, 2009                                  27.07
       P&AO, Department of Road Transport &
16     Highways, New Delhi                              January 13, 2009                                  67.03
17     DDO, FHQ BSF-New Delhi                           January 13, 2009                                   0.49
18     Uttarakhand Transport Corporation                March 18, 2009                                    20.00
       Housing & Urban Development Department-
19     Bhubaneshwar                                     March 21, 2009                                    20.00
20     Urban Development Department -Jharkhand          March 21, 2009                                    30.00
       MD U.P State Road Transport Corporation-
21     Lucknow                                          March 23, 2009                                    45.30
       MD UP State Road Transport Corporation-
22     Lucknow                                          March 23, 2009                                    34.70
23     Commissioner Raipur Municipal Corporation        March 26, 2009                                    46.37
24     Deputy Transport Commissioner-Agartala           May 15, 2009                                      25.00
25     Delhi Metro Rail Corporation-Delhi               May 15, 2009                                      60.00
26     Patna Municipal Corporation- Patna               May 22, 2009                                      11.00
27     State Urban Development Authority- Chandigarh    June 26, 2009                                     25.00
28     Ranchi Municipal Corporation-Ranchi              July 13, 2009                                     64.33
29     Dhanbad Municipal Corporation- Dhanbad           July 13, 2009                                     65.25
30     Jamshedpur Notified Area Committee- Jamshedpur   July 13, 2009                                     46.61
31     Himachal Road Transport Corporation- Shimla      September 23, 2009                                15.75
32     Himachal Road Transport Corporation- Shimla      September 23, 2009                                18.00
       Total                                                                                           1,270.48




                                                        83
                           SECTION VI – LEGAL AND OTHER INFORMATION
                             OUTSTANDING LITIGATION AND DEFAULTS

Except as described below, there are no outstanding litigations including, suits, criminal or civil prosecutions
and taxation related proceedings against our Company and our Directors that would have a material adverse
effect on our business. Further, there are no defaults, non-payment of statutory dues including, institutional/
bank dues and dues payable to holders of any debentures, bonds and fixed deposits that would have a material
adverse effect on our business other than unclaimed liabilities against our Company and our Directors as of the
date of this Letter of Offer.

Our Company is not involved in any fresh or pending litigation against in the last 10 years where the aggregate
amount involved is more than either 1% of the net worth of our Company or 1% of the total revenue of our
Company as per the last audited financial year.

Further, except as disclosed below our Company is not involved in any criminal litigation or litigation involving
moral turpitude.

Set forth below are details of the outstanding or pending litigation against our Company and details of
proceedings filed by our Company.

Contingent liabilities not provided for as on September 30, 2009, March 31, 2009 and March 31, 2008

                                                                                                         (Rs. in lacs)
 Particulars                            As on September 30,      As on March 31, 2009      As on March 31, 2008
                                               2009
     1.    Claims against the
           Company not
           acknowledged as debts:
                     Sales Tax Cases                   250.92                   252.89                      248.23
                     Excise Cases                      203.76                   178.18                      171.40
                     Income Tax Cases                  188.82                   192.25                      276.21
                     Civil Cases                        10.25                    18.86                       12.70
     Total                                            653.75                   642.18                      708.54
 2. Bank Guarantee                                   1,270.48                 1,006.38                      331.94
 3. Letter of Credit                                 1,005.94                 1,358.31                    2,681.07
 4. Capital Commitment (Net of                       1,812.11                   443.71                      240.00
     Advances)
 Total (1 + 2 + 3 + 4)                               4,742.28                 3,450.58                    3,961.55

Litigation against our Company

1.        Criminal Cases

There are three (3) criminal proceedings against our Company. The aggregate financial implication in these
proceedings is not quantifiable. These criminal litigation are as follows:

1.        Mr. Vijay Pal Adhana filed a criminal complaint (No.306 of 2008) dated April 21, 2008 against our
          Managing Director Mr. Yash Mahajan, Mr. K.B Prasad, Mr. Naval Sharma and Mr. Jasmeet Singh
          (employees of our Company) before the JMP alleging that our Company misused the cheques
          amounting to Rs. 86.20 lacs issued by him as a security against the vehicles sold to him. The matter
          was instituted under Sections 383, 384, 403, 406, 409, 415, 418, 419, 420 and 506 of the I.P.C. The
          JMP ordered an inquiry to be conducted by DSP, Palwal. The DSP furnished a report stating that it had
          been found that the complainant owed our Company Rs. 269.00 lacs and had issued post dated cheques
          which were dishonoured due to unavailability of funds. Pursuant to the report, the JMP issued
          summoning order dated September 1, 2008 against the officials of our Company. Our Company had
          filed a quashing petition (No. 30984 of 2008) on behalf of Mr. Yash Mahajan and Mr. K.B Prasad
          dated November 25, 2008 before the P&H HC. The High Court by its order dated February 12, 2009
          stayed further proceeding before the trial court. Further, an anticipatory bail application (No. 31643 of
          2008) dated December 1, 2008 was filed by our Company on behalf of Mr. Jasmeet Singh and Naval


                                                        84
         Sharma which was admitted and allowed by the High Court by an order dated December 2, 2008. The
         matter is currently pending and the next date of hearing is April 9, 2010.

2.       Sankalp Motors Private Limited had filed a criminal complaint (C-3913/08) against our Company, our
         Managing Director, Mr. Yash Mahajan, Mr. Harkirat Singh, a Director of our Company, Mr, Gopal
         Bansal, Mr. S.C. Ghosh and Mr. Sanjay Jha (employees of our Company) before the JMA alleging
         criminal breach of trust, cheating, criminal conspiracy and non settlement of claims amounting to Rs.
         11.76 lacs. The matter was instituted under Section 406, 420 and 120-B of the I.P.C. The JMA by an
         order dated June 19, 2008, did not take any cognizance of cheating and criminal conspiracy but issued
         process against our Directors and officials for criminal breach of trust. Our Company has filed a
         quashing petition (No. 3282 of 2008) dated September 8, 2008 against the said order before the Kolkata
         HC. The Kolkata HC by its order dated September 18, 2008 stayed the proceedings of the trial court.
         The matter is currently pending.

3.       Ms. Malti, had filed first information report dated July 24, 2008 against Mr. Pradeep Sharma, zonal
         manager of our Company and others alleging that her son had been murdered by the accused. The
         police registered a case (No. 350 of 2008) against the accused. Mr. Pradeep Sharma filed a bail
         application (No. 01 of 2009) before the Session Judge, Barabanki who by an order dated January 31,
         2009 dismissed the application. Aggrieved by the order, Mr. Pradeep Sharma filed another bail
         application on January 9, 2009, before the Lucknow High Court and by an order dated February 17,
         2009 was granted the bail. The matter is currently pending before the Sessions Judge, Barabanki.

2.       Income Tax cases

There are five (5) income tax proceedings pending against our Company for certain assessment years. The
aggregate financial implication in these proceedings is Rs. 245.31 lacs. These income tax matters are as follows.

         Assessment year 1987-88

1.       The Assessing Authority, Chandigarh (―AA‖) had passed an order against our Company and issued a
         demand notice for the payment of Rs. 28.51 lacs on account of non deduction of tax at source (―TDS‖)
         on dearness allowances (―DA‖) paid to foreign engineers deputed by Mazda Motor Corporation, Japan
         in terms of the technical assistance and joint venture agreement with our Company. Our Company filed
         an appeal against the order before the Commissioner of Income Tax (Appeals) (―CIT (A)‖). The CIT
         (A) by an order dated April 3, 1989 held that no TDS is deductible on reimbursement of expenses.
         Aggrieved by the order, the Income Tax Officer, (―ITO‖) had filed an appeal (No.1098/CHANDI/89)
         before the Income Tax Appellate Tribunal, Chandigarh who by an order dated February 21, 1995
         dismissed the appeal. Aggrieved by the order dated February 21, 1995, the ITO has filed an appeal (No.
         162 of 1996) before the High Court. The case is currently pending.

         Assessment year 1992-93:

1.       The Assessing Authority (―AA‖) had issued an order dated February 28, 1995 against our Company
         disallowing the provision amounting to Rs. 36.74 lacs for bad and doubtful debts treated as an expense.
         Our Company filed an appeal (No. 693/94-95) before the Commissioner, Income Tax (Appeals) (―CIT
         (A)‖) dated March 28, 1995 against the order. The CIT (A) by its order dated September 4, 1995
         rejected our appeal. Aggrieved by the order, our Company filed an appeal (No. 1321/CHANDI/1995)
         dated October 10, 1995 before the Income Tax Appellant Tribunal, Chandigarh (―ITAT‖). The ITAT
         by its order dated February 28, 2003 held that the provision for bad and doubtful debts should be
         treated as an expense. Aggrieved by the order dated February 28, 2003 the Commissioner of Income
         Tax, Chandigarh has filed an appeal (No. 324 of 2004) dated February 24, 2004 before the High Court.
         The case is currently pending.

         Assessment year 1998-99:

1.       The AA had issued an order dated May 31, 1999 against our Company for the payment of Rs. 18.82
         lacs as interest on delay in depositing advance tax. Our Company filed an appeal dated July 5, 1999
         before the CIT (A) bearing no. 138/P/99-2000. The CIT (A) by its order dated July 5, 2000 allowed our
         appeal. Aggrieved by the order of the CIT(A) the Joint Commissioner of Income Tax filed an appeal
         (No. 805/CHANDI/2000) dated October 20, 2000 before the ITAT, Chandigarh. The ITAT by its order

                                                       85
       dated December 17, 2004 allowed the appeal of the Joint Commissioner of Income Tax. Our Company
       has deposited Rs. 22.02 lacs along with interest. Aggrieved by the order of the ITAT our Company has
       filed an appeal (No. 406 of 2005) dated August 17, 2005 before the High Court. The matter is currently
       pending.

       Assessment year 2005-2006:

1.     The Additional Commissioner of Income Tax, Chandigarh issued an order dated December 28, 2007
       raising a demand of Rs. 185.51 lacs against our Company Aggrieved by the order of the Additional
       Commissioner of Income Tax, our Company filed an appeal (No.239/P/07-08]) before the CIT (A)
       contesting all the additions and disallowances made. The CIT (A) by its order dated November 28,
       2008, allowed all the major additions except the weighted deduction of 150% of the expenditure
       incurred on in-house research and development unit on the ground that though our Company is
       recognized as in-house research and development unit, but the approval for claiming such deduction in
       a procedural form is pending. Aggrieved by this order, our Company had filed an appeal stating that we
       are entitled to claim weighted deduction as we are duly recognized as in-house R&D unit and the said
       recognition is valid up to March 31, 2010. Further, the income tax department has also challenged the
       order of the CIT (A) before the ITAT, Chandigarh. The quantum of tax involved is Rs. 101.55 lacs.
       The matter is currently pending.

       Assessment year 2006 - 2007:

1.     The Additional Commissioner of Income Tax, Chandigarh, issued an order dated December 23, 2009,
       raising a demand of Rs. 94.79 lacs against our Company on account of additions and disallowance of
       weighted deduction of 150 % of expenditure incurred on an in-house research and development unit.
       Our Company had filed an appeal before CIT(A) on January 11, 2010. The matter is currently pending.

3.     Excise and Service Tax cases

There are 17 excise and service tax proceedings pending against our Company. The aggregate financial
implication in these proceedings is Rs. 135.70 lacs. These proceedings are as follows.

1.     The Excise Department had issued a show cause notice (No. 490/phg/ST/07/7153) dated January 4,
       2008 to our Company demanding Rs. 3.30 lacs on the ground that the royalty received by our Company
       from M/s. Tide Water for using the name of ―Swaraj Mazda Limited‖ should be assessed under the
       category ―Management Consultancy‖. Our company filed a reply on February 21, 2008 before the
       Commissioner, Central Excise - Jalandhar. The Commissioner Central Excise by an order (No.
       8/CE/Jal/08) dated February 22, 2008 dismissed the appeal. Aggrieved by the order our Company filed
       an appeal (No. 1120 of 2008) dated June 2, 2008 before CESTAT-New Delhi who on July 17, 2008
       granted a stay to our Company. The matter is currently pending.

2.     The Excise Department had issued a show cause notice (No. V-15(87) CE/SML/82/2004/329-330)
       dated January 24, 2005 to our Company demanding an amount of Rs. 3.18 lacs. The show cause notice
       sought to levy excise duty on sale of complimentary items by our Company to the dealer. Our
       Company filed its reply on April 15, 2005 before the Assistant Commissioner, Central Excise,
       Phagwara. (―Assistant Commissioner‖) The Assistant Commissioner by an order (No. 76/CE/AC/05)
       dated August 29, 2005 vacated the demand. Aggrieved by the order, the Excise Department filed an
       appeal (No. 166 of 2005) dated December 15, 2005 before Commissioner (Appeals), Jalandhar. Our
       Company had filed cross objection application dated August 26, 2006 against this appeal. The
       Commissioner-Appeals vide order (No. 43 of 2007) dated February 14, 2007 allowed the appeal filed
       by the Excise Department and confirmed the demand. Aggrieved by the order our Company filed an
       appeal (No. 1417 of 2007) dated May 17, 2007 before the CESTAT-New Delhi. CESTAT by an order
       dated December 14, 2008 has granted stay to our Company until disposal of the appeal. The matter is
       currently pending.

3.     The Excise Department had issued a show cause notice (No. V-15(87)CE/SML/88/2005/8325) dated
       October 24, 2005 to our Company seeking to levy Rs. 1.94 lacs as excise duty on the sale of
       complimentary items by our Company to the dealer. Our Company filed its reply on January 27, 2006
       to the Assistant Commissioner. The Assistant Commissioner by an order dated April 27, 2006 vacated
       the demand and the Excise Department filed an appeal (No. 164 of 2007) dated May 25, 2007 before

                                                    86
     Commissioner (Appeals), Jalandhar. Our Company had filed cross objection application dated August
     13, 2007 against this appeal. The Commissioner (Appeals) by an order (No. 29 of 2008) dated January
     30, 2008 rejected the appeal filed by the Excise Department. Aggrieved by the order the Excise
     Department filed an appeal (No. 875 of 2008) before CESTAT, New Delhi. The CESTAT vide order
     (No. 606-609/2008) dated August 12, 2008 dismissed the appeal and the Excise Department has filed
     civil appeal (No. 1522 of 2009) before the Supreme Court. The matter is currently pending.

4.   The Excise Department had issued a show cause notice (No. V-15(87)CE/SML/59/2006/1747-48)
     dated May 2, 2006 to our Company. The show cause notice sought to levy excise duty on sale of
     complimentary items by our company to dealer and imposed a demand of Rs. 2.90 lacs. Our Company
     filed its reply on January 7, 2007 to the Assistant Commissioner. The Assistant Commissioner by an
     order (No. 3/CE/AC/08) dated January 15, 2008 denied any relief and confirmed the demand.
     Aggrieved by the order, our Company filed an appeal (No. 212 of 2008) dated March 20, 2008 before
     Commissioner (Appeals), Jalandhar. The Commissioner (Appeals) by order (No. 703 of 2008) dated
     November 4, 2008 allowed our appeal. Aggrieved by the order the Excise Department filed an appeal
     (No. 106 of 2009) dated January 9, 2009 before the CESTAT, New Delhi. The matter is currently
     pending.

5.   The Excise Department had issued three show cause notices (No. V-15 (87)CE/SML/497/2006-
     07/4520) dated October 25, 2007, (No.15(87)CE/SML/48/2007/1436) dated March 3, 2008 and
     (No.15(87)CE/SML/83/08/5878) dated September 26, 2008 seeking to levy excise duty amounting to
     Rs. 1.90 lacs on sale of complimentary items by our Company to dealers. Our Company filed two
     replies dated January 29, 2008 and March 9, 2009 before the Assistant Commissioner. The Assistant
     Commissioner by an order dated March 31, 2009 vacated the demand. The matter is currently pending.

6.   The Excise Department had issued a show cause notice (No. V- 15(87)CE/SML /29/2004/533) dated
     February 1, 2005 to our Company seeking to levy excise duty of Rs. 2.12 lacs seeking to levy excise
     duty on the amount recovered by our Company as transport charges. Our Company filed its reply on
     August 29, 2005 before the Assistant Commissioner. The Assistant Commissioner by an order dated
     August 31, 2005 denied any relief and confirmed the demand. Aggrieved by the order, our Company
     filed an appeal (No. 355 of 2005) dated December 14, 2005 before the Commissioner (Appeals),
     Jalandhar. The Commissioner-Appeals by an order dated January 30, 2007 partly allowed the demand.
     Aggrieved by the order of Commissioner (Appeals) our Company filed an appeal (No. 1181 of 2007)
     dated May 3, 2007 before CESTAT. CESTAT by an order (No. 944 of 2008) dated December 8, 2008
     forwarded the issue to Commissioner (Appeals). The Commissioner (Appeals) by an order dated April
     24, 2009 confirmed the demand. The Excise Department has also filed an application dated February 2,
     2009 for rectification of mistake before CESTAT. Our Company has filed an appeal (No. 2140 of
     2009) before the CESTAT, New Delhi, against the order dated April 24, 2009, for vacation of demand.
     Our Company has deposited an amount of Rs. 2.12 lacs as the CESTAT has disposed off our
     Company‘s stay application by an order (No. 1065/09) dated October 23, 2009. The matter is currently
     pending.

7.   The Excise Department had issued a show cause notice (No. V-15(87)CE/Swaraj/114/06/45) dated
     April 3, 2007 to our Company demanding an amount of Rs. 2.84 lacs. Our Company filed reply dated
     March 19, 2008 before the Assistant Commissioner who by an order dated May 30, 2008 denied any
     relief and confirmed the demand. Aggrieved by the order, our Company filed an appeal (No. 851 of
     2008) dated August 6, 2008 before the Commissioner (Appeals), Jalandhar. The Commissioner
     (Appeals) by an order (No. 23/2009) dated January 30, 2009 confirmed the demand and we filed an
     appeal dated April 29, 2009 before the CESTAT. The matter is currently pending before the CESTAT.

8.   The       Excise     Department       had  issued     a     show      cause    notice   (No.     ST-
     13/PHG/STC/SwarajMazda/4/04/9063) dated December 8, 2004 to our Company seeking to levy
     service tax amounting to Rs. 11.25 lacs on account of the royalty paid to Mazda from August 16, 2002
     until March 31, 2003. Our Company filed reply dated February 21, 2005 to the Assistant
     Commissioner. The Assistant Commissioner had called our Company for a personal hearing in relation
     to this issue and the matter is pending.

9.   The Excise Department had issued a show cause notice (No. V-15 (87) CE/AC/SML/134/04/9517)
     dated December 31, 2004 seeking to re-determine the value of the components supplied to Swaraj
     Engine Limited by our Company and demanding an amount of Rs. 4.40 lacs. Our Company filed reply

                                                 87
      dated April 15, 2005 before the Assistant Commissioner, Phagwara who by an order dated August 31,
      2005 denied any relief and confirmed the demand. Aggrieved by the order, our Company filed an
      appeal (No. 854 of 2005) dated October 21, 2005 before the Commissioner (Appeals), Jalandhar. The
      Commissioner (Appeals) vide order (No. 121 of 2006) dated March 29, 2006 allowed our appeal. The
      Excise Department filed an appeal (No. 2378 of 2006) dated July 14, 2006 before CESTAT who by an
      order (No. 635 of 2006) dated August 11, 2006 rejected the appeal filed by the Excise Department.

10.   The Excise Department had issued a show cause notice (No. 87/CE/JC/ADJ/7/5131) dated September
      13, 2007 to our Company seeking an amount of Rs. 8.21 lacs on account of delay in payment of excise
      duty on clearance of input as such. Our Company filed reply dated January 29, 2008 before the Joint
      Commissioner, Central Excise Jalandhar. The matter is currently pending with the Joint Commissioner
      Excise, Jalandhar.

11.   The Excise Department had issued a show cause notice (No. 87/CE/SML/PHG/110/08/8332) dated
      December 23, 2008 to our Company demanding an amount of Rs. 4.38 lacs on the grounds that our
      Company was not entitled to the claim setting of the service tax against the canteen services provided
      to our employees. By an order dated January 29, 2010, the Deputy Commissioner, Central Excise,
      disallowed a portion of our claim amounting to Rs. 2.13 lacs and also confirmed the demand raised. In
      addition, the interest on the disallowed amount was confirmed and a penalty amounting to Rs. 2.13 lacs
      was imposed. Our Company is in the process of filing an appeal against the order dated January 29,
      2010.

12.   The Excise Department had issued a show cause notice (No. 87/CE/SML/PHG/110/08/8125) dated
      December 12, 2008 to our Company demanding an amount of Rs. 1.85 lacs on the grounds that our
      Company was not entitled to the claim setting of the service tax against the premium paid on insurance
      of our employees. Our Company is under process of filing the reply to the Assistant Commissioner,
      Central Excise, Ropar.

13.   The Excise Department had issued a show cause notice (No. 87/CE/SML/PHG/108/08/8909) dated
      January 14, 2009 to our Company levying an amount of Rs. 0.98 lacs as education cess (secondary and
      higher) on automobile cess. Our Company is under process of filing the reply to the Assistant
      Commissioner, Central Excise, Ropar. The matter is currently pending.

14.   The Excise Department had issued two (2) show cause notices (No. ST-13/PHG/SCN/SML/IPR/2590)
      dated April 17, 2008 and (No.V(ST)15/JC/Adj/35/2008/5301) dated October 17, 2008 to our Company
      demanding an aggregate amount of Rs.12.60 lacs. The show cause notices allege wrong utilization of
      CENVAT credit on Intellectual Property Rights. Our Company has filed a reply dated January 12, 2009
      to the Joint Commissioner, Central Excise, Jalandhar. The Additional Commissioner has confirmed the
      demand by an order dated August 12, 2009. Our Company filed an appeal (No. 89/2009) before the
      Commissioner (Appeals) who has, by an order dated December 11, 2009, granted the stay in favour of
      our Company. The matter is currently pending.

15.   The     Excise      Department      has    issued   a     show     cause     notice     (No.      IV-
      30(22)D/SwarajMazda/Tech/RPR/09/25) dated April 9, 2009 to our Company demanding an amount of
      Rs. 2.15 lacs on the ground of recovering the Automobile Cess on clearance of buses for road testing.
      Our Company is in the process of filing the reply to the Assistant Commissioner, Central Excise,
      Ropar. The matter is currently pending.

16.   The Excise Department had issued seven (7) show cause notices against our Company raising an
      aggregate demand of Rs. 71.08 lacs. The Central Excise Department has sought seeking to re-
      determine the value of the components supplied to Swaraj Engine Limited by our Company. A hearing
      was held before the Joint Commissioner on July 23, 2009 and the decision is awaited.

17.   The Excise Department had issued show cause notice dated November 11, 2008 against our Company
      raising a demand of Rs. 0.74 lacs alleging under payment of service tax.

4.    Sales Tax cases

      There are seven (7) sales tax proceedings pending against our Company. The aggregate financial
      implication in these proceedings is Rs. 266.85 lacs. These sales tax cases are as follows.

                                                   88
1.   The Excise and Taxation officer cum Assessing Authority (―Assessing Authority‖), Panchkula had
     issued a notice (D No.746/05-06) dated March 31, 2009 for the assessment year 2005-06 against our
     Company for an amount of Rs. 7.59 lacs alleging non submission of concessional rate forms (―C/D
     forms‖) under the Haryana Value Added Tax and Central Sales Tax. Our Company vide letter dated
     April 30, 2009 requested the Assessing Authority for the extension of time to submit the required
     forms. Our Company is currently in the process of submitting the C/D forms.

2.   The Excise and Taxation Officer, Balongi, District Mohali had impounded the vehicle of our Company
     on account of the wrong tax payers identification number 03191039643 mentioned on the documents
     of the vehicle. Our Company submitted surety bond dated August 21, 2007 and subsequently the
     vehicle was released. The Excise and Taxation Officer raised a demand vide order dated October 9,
     2007 for an amount of Rs. 1.58 lacs by imposing a penalty due to mentioning of wrong TIN number.
     Our Company deposited 25% of the penalty imposed amounting to Rs. 0.39 lacs for filing the appeal.
     Aggrieved by the order, our Company filed an appeal (No. 4131/2007) dated November 6, 2007 before
     the Deputy Excise and Taxation Commissioner. The matter is currently pending.

3.   The Excise and Taxation Officer, Balongi, District Mohali impounded the spare parts imported by our
     Company. Our Company submitted a surety bond dated November 16, 2007 and subsequently the
     department released the impounded spare parts. The Excise and Taxation Officer issued a demand
     notice vide its order dated February 16, 2008 for an amount of Rs. 2.10 lacs on account of penalty
     imposed. Our Company deposited 25% of the penalty imposed amounting to Rs. 0.52 lacs for filing the
     appeal. Aggrieved by the order, our Company filed an appeal (No. 4327 of 2008) dated March 18, 2008
     before the Deputy Excise and Taxation Commissioner. The matter is currently pending.

4.   The Assistant Commercial Revenue Commissioner Ahmedabad, Gujarat raised a demand vide its order
     (No. 11579) dated March 22, 2007 imposing a penalty of Rs. 11.78 lacs against our Company. Our
     Company filed a reply dated April 20, 2007 before the commissioner who rejected our reply and issued
     an order (No. 816) dated May 4, 2007. Aggrieved by the order our Company filed an appeal dated June
     20, 2007 before the Deputy Commissioner (Appeals), Ahmedabad who by an order dated August 10,
     2008 rejected our appeal. Aggrieved by the order our Company filed another appeal (No. 673/8 of
     2008) dated November 19, 2008 before the Gujarat Value Added Tax Tribunal, Ahmedabad, Gujarat.
     Our Company has also deposited an amount of Rs. 2.37 lacs on the account of the penalty imposed.
     The matter is currently pending.

5.   The Excise and Taxation Officer Chandigarh issued an assessment order dated December 14, 2000
     raising a demand of Rs. 15.59 lacs on account of local sales tax and an amount of Rs. 202.63 lacs on
     account of central sales tax against our Company for the assessment period April 1, 2000 to September
     30, 2000. The total demand amounts to Rs. 218.22 lacs. Aggrieved by the order, our Company filed an
     appeal dated January 11, 2001 before the Deputy Excise and Taxation Commissioner Chandigarh.
     Deputy Excise and Taxation Commissioner cum Appellate Authority by its order dated June 20, 2002
     rejected our appeal. Aggrieved by the order dated June 20, 2002 our Company filed another appeal
     dated August 16, 2002 before the Sales Tax Appellate Tribunal, Chandigarh. The matter is currently
     pending.

6.   The Excise and Taxation Officer ICC Jharmari, Lalru, District Patiala issued a notice (No. 73) dated
     May 7, 2001 against our Company impounding six vehicles on account of verification of the
     transaction of the vehicles. Our Company filed a reply dated June 5, 2001 along with the surety bonds
     for the release of the vehicles. The officer issued an order dated July 11, 2001 imposing a penalty of
     Rs. 9.65 lacs. Aggrieved by the notice, our Company filed an appeal dated September 7, 2001 with the
     Joint Director (Enforcement) cum Deputy Excise and Taxation Commissioner, Patiala and deposited an
     amount of Rs. 2.42 lacs. The Joint Director (Enforcement) cum Deputy Excise and Taxation
     Commissioner dismissed our appeal by an order dated April 21, 2005. Aggrieved by the order our
     Company filed an appeal dated September 22, 2005 before the Sales Tax Tribunal, Punjab, Chandigarh.
     The Sales Tax Tribunal by its order dated April 5, 2006 rejected our appeal. Aggrieved by the order our
     Company filed an appeal dated August 29, 2007 before the High Court. We received a notice from the
     Excise and Taxation Officer, Mohali, on August 31, 2009 directing us to pay Rs. 9.65 lacs and we have
     deposited Rs. 7.23 lacs, as we had previously deposited Rs. 2.42 lacs, with the Excise and Taxation
     Officer, Mohali on the same date. The appeal has been admitted and the matter is currently pending.



                                                  89
7.      The Sales Tax Officer, Lucknow, issued an order dated July 22, 2008, raising a demand of Rs. 15.93
        lacs on account of re-assesment for the year 1993-94. Our Company deposited Rs. 4.00 lacs on
        December 14, 2009 for filing the appeal with Deputy Commissioner Sales Tax, Lucknow. The matter
        is currently pending.

Further, there are 10 civil cases, seven (7) labour related proceedings and 27 consumer cases pending against
our Company before different judicial fora and tribunals that are not material. A majority of these proceedings
relate to workmen‘s compensation, illegal termination of services and delivery of defective vehicles. The
aggregate value of the claims filed against us is approximately Rs. 227.22 lacs.

Litigation filed by our Company

There are 17 criminal proceedings filed by our Company under Section 138 of the Negotiable Instruments Act
pertaining to dishonour of cheques. The aggregate amount involved in these proceedings is Rs. 524.44 lacs.

a.      Criminal complaints filed by our Company under the Negotiable Instruments Act

1.      Our Company has filed a criminal complaint (No. 13685 of 2007) dated November 2, 2007 against Mr.
        Har Prasad Dogra before the Chief Judicial Magistrate (―CJM‖), Chandigarh for dishonour of cheque
        amounting to Rs. 78 lacs. The CJM had issued non bailable arrest warrant against Mr. Har Prasad
        Dogra, who appeared before the CJM and was granted bail. The matter is currently pending before the
        CJM and the next date of hearing is April 15, 2010.

2.      Our Company has filed a criminal complaint (No. 597 of 2006) dated June 10, 2006 against M/s Verma
        Motors, Hamirpur and Mr. Sanjay Verma before the CJM, Chandigarh for dishonour of cheque
        amounting to Rs. 5.00 lacs. The CJM had issued bailable arrest warrant against Mr. Sanjay Verma. The
        matter is currently pending before the CJM and the next date of hearing is April 28, 2010.

3.      Our Company has filed a criminal complaint (No. 12869 of 2007) dated November 1, 2007 against Mr.
        Harjeet Singh Bala before the CJM, Chandigarh for dishonour of three (3) cheques amounting to an
        aggregate of Rs. 60.00 lacs. The CJM had issued bailable arrest warrant against Mr. Harjeet Singh Bala
        who appeared before the CJM and was granted bail. The matter is currently pending before the CJM
        and the next date of hearing is May 27, 2010.

4.      Our Company has filed a criminal complaint (No. 14125 of 2007) dated November 27, 2007 against
        Mr. Rakesh Kukar before the CJM, Chandigarh for dishonour of cheque amounting to Rs. 4.54 lacs.
        The CJM had issued a summoning order against Mr. Rakesh Kukar. In addition, Mr. Rakesh Kukar has
        filed a quashing petition (Criminal Misc. No. M33170 of 2009) against the complaint filed by our
        Company before the P&H HC. The matter is currently pending and the next date of hearing before the
        CJM is March 3, 2010 and before the P&H HC is March 11, 2010.

5.      Our Company has filed a criminal complaint (No. 596 of 2006) dated June 10, 2006 against M/s
        Ahmad Automobiles, Sri Nagar and Mr. Irfan Ahmad before the CJM, Chandigarh for dishonour of
        cheque amounting to Rs. 6.10 lacs. The CJM had issued non bailable arrest warrant against Mr. Irfan
        Ahmad. The matter is currently pending before the CJM and the next date of hearing is April 28, 2010.

6.      Our Company has filed a criminal complaint (No. 12890 of 2008) dated July 5, 2008 against M/s Sai
        Automobiles, Mr. Ashok Thakor and Ms. Savitri Thakor before the CJM Chandigarh for dishonour of
        two (2) cheques amounting to an aggregate of Rs. 32.40 lacs. The CJM had issued bailable arrest
        warrants against Mr. Ashok Thakor and Ms. Savitri Thakor. Mr. Ashok Thakor appeared before the
        CJM and was granted bail. Mr. Ashok Thakor and Ms. Savitri Thakore, M/s Sai Automobiles have
        filed a petition (Criminal Misc. No. 24566 of 2009) in the High Court for quashing the complaint filed
        by our Company. The matter is currently pending and the next date of hearing before the CJM is April
        7, 2010 and before the P&H HC is February 25, 2010.

7.      Our Company has filed a criminal complaint (No. 23738 of 2008) dated December 18, 2008 against
        M/s Patil Motors and Mr. Bhagwan Vinayak Patil before the CJM, Chandigarh for dishonour of cheque
        amounting to Rs. 9.45 lacs. The CJM had issued a summoning order to Mr. Bhagwan Vinayak Patil.
        The matter is currently pending before the CJM and the next date of hearing is May 21, 2010.



                                                      90
8.    Our Company has filed a criminal complaint (No. 22554 of 2008) dated November 6, 2008 against M/s
      Mahajan Brothers, Mr. Anil Mahajan and Mr. Sain Das Mahajan before the CJM, Chandigarh for
      dishonour of two (2) cheques amounting to an aggregate of Rs. 42.00 lacs. The CJM had issued
      summoning order against M/s Mahajan Brothers, Mr. Anil Mahajan and Mr. Sain Das Mahajan. The
      matter is currently pending before the CJM and the next date of hearing is May 5, 2010.

9.    Our Company has filed a criminal complaint (No. 948 of 2009) dated January 30, 2009 against M/s
      National Tractor Traders, Mr. Mehul Kirtibhai Patel, Ms. Sandhya Ben M Patel, Mr. Anuj Bhai Patel
      and Ms. Toral Ben Patel before the CJM, Chandigarh for dishonour of two (2) cheques amounting to an
      aggregate amount of Rs. 14.44 lacs. All the accused were granted bail. Mr. Anuj Bhai Patel and Ms.
      Toral Ben Patel have filed a petition (Criminal Misc. No. 35169 of 2009) before the P&H HC for
      quashing the complaint filed by our Company in relation to them. The matter is currently pending and
      the next date of hearing before the CJM is April 13, 2010 and the next date of hearing before the P&H
      HC is May 5, 2010.

10.   Our Company has filed a criminal complaint dated March 27, 2009 against M/s Sohal Motors, and Mr.
      Amarjeet Singh Sohal before the CJM Chandigarh for dishonour of three (3) cheques amounting to Rs.
      90.00 lacs. The CJM had issued summoning order against Mr. Amarjeet Singh Sohal. The matter is
      currently pending before the CJM and the next date of hearing is February 24, 2010.

11.   Our Company has filed a criminal complaint dated April 4, 2009 against M/s Dugar Distributors and
      Mr. Anil Dugar before the CJM Chandigarh for dishonour of a cheque amounting to Rs. 6.66 lacs. The
      CJM had issued bailable arrest warrants against Mr. Anil Dugar. The matter is currently pending before
      the CJM and the next date of hearing is May 2, 2010.

12.   Our Company has filed three (3) criminal complaints dated November 30, 2007 against Mr. Vijay Pal
      Adhana before the CJM Chandigarh for dishonour of 12 cheques amounting to Rs. 86.20 lacs. Mr.
      Vijay Pal Adhana appeared before the CJM and was granted bail. The matter is currently pending
      before the CJM and the next date of hearing is May 18, 2010.

13.   Our Company has filed two (2) criminal complaints dated September 27, 2007 against Mr. Vijay Pal
      Adhana before the CJM Chandigarh for dishonour of eight (8) cheques amounting to an aggregate of
      Rs. 60.00 lacs. Mr. Vijay Pal Adhana appeared before the CJM and was granted bail. The matter is
      currently pending before the CJM and the next date of hearing is May 13, 2010.

14.   Our Company has filed a criminal complaint (No. 3643 of 2009) dated May 2, 2009 against M/s Shree
      Bhagwati Motors and Mr. Om Prakash Agarwal before the CJM Chandigarh for dishonour of a cheque
      amounting to Rs. 8.42 lacs. The CJM has issued a summoning order against Mr. Om Prakash Agarwal.
      The matter is currently pending before the CJM and the next date of hearing is August 16, 2010.

15.   Our Company has filed a criminal complaint (No. 9156 of 2009) dated September 18, 2009, against
      Mr. Mehul Kirtibhai Patel, Ms. Sandhya Ben M Patel and M/s National Tractor Traders before the
      CJM, Chandigarh for dishonour of cheque amounting to Rs. 10.00 lacs. The CJM had issued a
      summoning order against all the accused. The matter is currently pending before the CJM and the next
      date of hearing is June 4, 2010.

16.   Our Company has filed a criminal complaint (No. 722 of 2009) dated October 16, 2009, against M/s
      National Tractor Traders, Mr. Mehul Kirtibhai Patel and Ms. Sandhya Ben M Patel before the CJM,
      Chandigarh for dishonour of cheque amounting to Rs. 6.23 lacs. The CJM had issued a summoning
      order against all the accused. The matter is currently pending before the CJM and the next date of
      hearing is February 26, 2010.

17.   Our Company has filed a criminal complaint (No. 484 of 2010) dated November 24, 2009, against M/s
      National Tractor Traders, Mr. Mehul Kirtibhai Patel and Ms. Sandhya Ben M Patel before the CJM,
      Chandigarh for dishonour of cheque amounting to Rs. 5.00 lacs. The CJM had issued a summoning
      order against all the accused. The matter is currently pending before the CJM and the next date of
      hearing is March 12, 2010.

b.    Excise cases



                                                   91
The Central Excise Department, Government of India (―Excise Department‖) had by its notification (No. 11 of
95) dated March 16, 1995 stated that that unutilized CENVAT balance of Rs. 488.00 lacs would be forfeited.
Our Company had filed a writ petition (No. 4754 of 95) dated September 18, 1995 before the High Court, New
Delhi. The writ petition was forwarded to the Supreme Court on November 22, 1997 and the Supreme Court
vide its order dated January 28, 1999, held that Central Excise Department had no power to forfeit the unutilized
balance. Subsequently, the government amended the Finance Act was empowering the Government to forefeit
the unutilized CENVAT balance with retrospective effect. Our Company filed a writ petition (No. 1824 of
2000) dated March 28, 2000 before the High Court, New Delhi against challenging the Finance Act. The matter
is currently pending with High Court.

Litigation against Our Directors

Litigation involving Mr. S.K. Tuteja

There is no litigation involving Mr. S.K. Tuteja.

Litigation involving Mr. Yash Mahajan

For litigation involving Mr. Yash Mahajan, our Managing Director, please see ―– Litigation involving our
Company – Criminal Cases‖ above under this section titled ―Outstanding Litigation and Defaults‖ on pages 84
and 85, respectively.

Litigation involving Mr. Y. Watanabe

There is no litigation involving Mr. Y. Watanabe.

Litigation involving Mr. Harkirat Singh

For litigation involving Mr. Harkirat Singh, an Independent Director, please see ―– Litigation involving our
Company – Criminal Cases‖ above under this section titled ―Outstanding Litigation and Defaults‖ on page 85.

Litigation involving Mr. Steven Enderby

There is no litigation involving Mr. Steven Enderby.

Litigation involving Mr. A.K. Thakur

There is no litigation involving Mr. A.K. Thakur.

Litigation involving Mr. P.K. Nanda

There is no litigation involving Mr. P.K. Nanda.

Litigation involving Mr. Pankaj Bajaj

There is no litigation involving Mr. Pankaj Bajaj.

Litigation involving Mr. M. Tabuchi

There is no litigation involving Mr. M. Tabuchi.

Litigation involving Mr. H.Yamaguchi

There is no litigation involving H. Yamaguchi.

Litigation involving Mr. T. Hashimoto

There is no litigation involving Mr. T. Hashimoto.


                                                       92
Litigation involving Mr. Tatsuo Kato

There is no litigation involving Mr. Tatsuo Kato.

Litigation involving Mr. Taro Nanko

There is no litigation involving Mr. Taro Nanko.

Litigation involving Subsidiaries

Our Company has no subsidiaries.
Details of violations of securities laws or willful defaults by our Company, Directors and Promoter

Our Company, Directors and Promoter have further confirmed that they have not been declared as willful
defaulters by the RBI or any other governmental authority. As disclosed above in this section in relation to
lawsuits, there are no violations of securities laws committed by them in the past or are pending against them.

Past notices / investigations / proceedings / penalties / orders by the SEBI involving the Company

Our Company received a notice dated October 21, 2003, from the SEBI calling upon our Company to show
cause in relation to an alleged violation of Sub-Regulation (3) of Regulation 8 of the Takeover Code regarding a
delay of 78 days on the part of the Company in complying with the said sub-regulation of the Takeover Code,
and imposition of penalty as prescribed in clause (b) of Section 15A of the Securities and Exchange Board of
India Act, 1992 for the aforementioned violation. Our Company was subsequently discharged from the
adjudication proceedings without imposition of any penalty pursuant to an order dated April 30, 2004 passed by
the adjudicating officer under Rule 5(1) of the Securities and Exchange Board of India (Procedure of Holding
Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995.




                                                       93
                                                 MATERIAL DEVELOPMENTS

I.

      1.      Information as required by the Government of India, Ministry of Finance circular No. F2/5/SE/76 dated
              February 5, 1977, as amended by their circular of even number dated March 8, 1977 and in accordance
              with sub-item (B) of item X of Regulation (5) of Part E of the SEBI (ICDR) Regulations.

              Working Results of the Company

           Financial Results for the period between April 1, 2009 and December 31, 2009                   Rs. in lacs
           Net Sales / Income from Operations                                                              49,724.01
           Other Operating Income                                                                                352.31
           Total Income                                                                                    50,076.32
           Profit before Depreciation, Interest and tax                                                     3,909.84
           Interest                                                                                         1,480.65
           Depreciation / Amortization                                                                           648.13
           Profit before tax                                                                                1,781.06
           Tax expense / Saving                                                                                  520.00
           Net profit after tax for the period                                                              1,261.06

           There are no material changes and commitments, which are likely to affect the financial position of the
           Company since December 31, 2009 (i.e. last date up to which updated financial information is incorporated
           in the Letter of Offer).

      2.      a) Week end prices of Equity Shares of the Company for the last four (4) weeks on the BSE and NSE
                 are as provided below:

                      Week Ended on                             Closing Rate BSE            Closing Rate NSE
                                                                       (Rs.)                       (Rs.)
                      February 16, 2010                               234.35                      235.00
                      February 9, 2010                                256.35                      256.30
                      February 2, 2010                                302.75                      299.25
                      January 25, 2010                                286.10                      286.00

              b) Highest and lowest price of the Equity Shares of the Company for the last four (4) weeks on the
                 BSE and NSE are as provided below:

                                    Highest                    Date                Lowest          Date
                                     (Rs.)                                          (Rs.)
                      BSE           313.90                February 3, 2010         234.35    February 16, 2010
                      NSE           312.45                February 3, 2010         235.00    February 16, 2010

              (c) The market price of the Equity Shares of the Company on February 23, 2010 was Rs. 227.95 and
                  Rs. 226.00 on the BSE and the NSE, respectively.

II.           Our Company has filed its unaudited financial results for the quarter ended December 31, 2009
              with the Stock Exchanges in accordance with the requirements under the Listing Agreement.




                                                                      94
                                                                                                         (Rs. in lacs)
                                                                                                            Year
                                                       3rd Quarter Ended        Nine Months Ended          Ended
                                                     31.12.2009  31.12.2008 31.12.2009 31.12.2008        31.03.2009
                                                                        Unaudited                         Audited
a) Net Sales / Income from Operations                 18,730.94     4,191.26    49,724.01   40666.62      54,085.23
b) Other Operating Income                               118.48         98.62      352.31       431.82        610.01
Total Income from Operations                          18,849.42     4,289.88    50,076.32   41098.44      54,695.24

EXPENDITURE
a) (Increase) / decrease in stock in trade and
work-in-progress                                         762.14    (5,560.78)    (635.17)   (6,189.36)    (1,718.24)
b) Consumption of raw materials                       13,503.28      8,198.37   38,395.82   37,676.07     43,964.55
c) Purchase of traded goods                              656.22        691.32    1,906.67     2,206.52      2,510.63
d) Employees cost                                      1,113.76        886.34    3,124.06     2,649.47      3,546.19
e) Depreciation / amortization                           232.48        188.74      648.13       409.57        583.92
f) Other expenditure                                   1,296.88        854.44    3,375.10     2,805.57      3,585.81

Total Expenditure                                     17,564.76     5,258.43    46,814.61   39,557.84     52,472.86

Profit/ (Loss) before interest and tax                 1,284.66     (968.55)     3,261.71    1,540.60      2,222.38

Interest                                                447.06        584.62     1,480.65    1,224.19      1,808.77

Profit/ (Loss) before tax                               837.60     (1,553.17)    1,781.06      316.41        413.61

                                                                                                             (65.15)
Tax expense / (saving)                                  250.00      (503.38)      520.00       146.62

Net Profit / (Loss) after tax for the period             587.60    (1,049.79)    1,261.06      169.79        478.76
Paid-up equity share capital (Face value Rs. 10/-)     1,049.38      1,049.38    1,049.38    1,049.38      1,049.38
Reserves (excluding Revaluation Reserves) as per
balance sheet of previous accounting year                      -            -           -            -     8,603.40

BASIC / DILUTED EARNING/ (LOSS) PER
SHARE (Rs.)                                                 5.6        (10.0)        12.0         1.6             4.6
(Not Annualised)

PUBLIC SHAREHOLDING
- Number of shares                                    48,73,747    48,73,747    48,73,747   48,73,747     48,73,747
- Percentage of shareholding                             46.5%        46.5%        46.5%       46.5%         46.5%


PROMOTERS AND PROMOTER GROUP
SHAREHOLDING
   a) Pledged / encumbered
   - Number of shares                                      NA                        NA                          NA
   - Percentage of shares (as a % of the total
shareholding of the Promoter & promoter group)             NA                        NA                          NA

   - Percentage of shares (as a % of the total
share capital of the Company)                              NA                        NA                          NA

   b) Non-Encumbered
   - Number of Shares                                 56,12,953                 56,12,953                 56,12,953
   - Percentage of shares (as a % of the total
shareholding of Promoter & promoter group)               100%                      100%                       100%



                                                          95
                                                                                                                     Year
                                                        3rd Quarter Ended        Nine Months Ended                  Ended
                                                      31.12.2009  31.12.2008 31.12.2009 31.12.2008                31.03.2009
                                                                         Unaudited                                 Audited
   - Percentage of shares (as a % of the total
share capital of the Company)                              53.5%                         53.5%                          53.5%

The above results were taken on record by the Board of Directors in their meeting held at New Delhi on 29th January, 2010
and have been subjected to a ‗Limited Review‘ by the Auditors of the Company.

The Company is primarily engaged in the business of Commercial Vehicles and its parts. As the basic nature of these
activities is governed by the same set of risk and returns, these constitute and have been grouped as single segment in the
above disclosure as per Accounting Standard 17 dealing with ―Segment Reporting‖.

Through issue of Excise Notification No. 11/95 dated March 16, 1995, Government sought to lapse Rs. 4.88 crores out of
Modvat Credit receivable balance as on March 16, 1995. Petition by the Company and others with the Delhi High Court
challenging the said Notification on grounds of law and equity was allowed by the Supreme Court vide order dated January
28, 1999. The Finance Act, 1999 has, however, brought in retrospective amendments w.e.f. March 16, 1995 in the Central
Excise Act, empowering the Central Government to lapse such Modvat. On legal advise obtained by the Company to seek
redressal against the action of the Government, the Company has filed writ petition before the Delhi High Court on the
ground that the Government action violates the doctrine of promissory estoppel / expectation principle besides other
grounds. The court has already admitted the petition. Accordingly, pending Company‘s petition and decision thereupon, the
amount of Rs. 4.88 crores though adjusted in Excise Records has not been provided in the books of account.

During the quarter, the Company received two (2) complaints from the shareholders which were duly resolved. There are no
complaints remaining unresolved as at the beginning and end of the quarter.

Previous period figures have been regrouped / recast, wherever necessary to confirm to current period classification.


                                                                                                          for and on behalf of
                                                                                                       the Board of Directors



                                                                                                            (Yash Mahajan)
                                                                                                          Managing Director




                                                             96
                               GOVERNMENT AND OTHER APPROVALS

The following regulations primarily govern the operations of our Company:

    1.   Central Motors Vehicles Rules, 1989;
    2.   Auto Fuel Policy, 2003; and
    3.   Essential Commodities Act, 1955.

In addition to the above, our Company is required to ensure compliance with various environmental laws such
as the Water (Prevention and Control of Pollution) Act, 1974, the Air (Prevention and Control of Pollution) Act,
1981, the Environment Protection Act, 1986 and the Hazardous Wastes (Management, Handling and
Transboundary Movement) Rules, 2008.

Our Company has received the necessary consents, licenses, permissions and approvals from the government
and various governmental agencies required for its present business and except as mentioned below, no further
material approvals are required for carrying on its present business.

The objects clause of the Memorandum of Association enables our Company to undertake its existing activities.

Pending Approvals:

Neither has the Company made any application for obtaining any approval nor are there any approvals that are
pending before any governmental or regulatory authority, as on the date of filing this Letter of Offer.




                                                      97
                      OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Issue

Pursuant to the resolution passed by the Board of Directors of our Company at its meeting held on March 19,
2009, it has been decided to make the rights offer to the Equity Shareholders of our Company with a right to
renounce.

The Issue has also been approved by the shareholders of the Company at the extraordinary general meeting of
the Company held on July 2, 2009.

Prohibition by the SEBI

Neither the Company, nor the Directors nor the Promoter nor the person(s) in control of the Promoter nor the
promoter group companies, have been prohibited from accessing or operating in the capital markets under any
order or direction passed by the SEBI. Further, neither the Promoter nor the Company nor our group companies
have been declared as willful defaulters by RBI / Government authorities.

Except Mr. A.K. Thakur, who serves on the board of trustees of Sahara Mutual Fund (SEBI Registration No.
MF/030/96/0), none of the Directors of the Company are associated with the capital markets in any manner.

Eligibility for the Issue

The Company is an existing company registered under the Companies Act whose Equity Shares are listed on the
BSE and the NSE. The Company is eligible to make this Issue in terms of Chapter IV of the SEBI (ICDR)
Regulations.

Compliance with Part E of Schedule VIII of the SEBI (ICDR) Regulations

The Company is in compliance with the provisions specified in Part E of Schedule VIII of the SEBI (ICDR)
Regulations.

Disclaimer Clause of SEBI

AS REQUIRED, A COPY OF THE DRAFT LETTER OF OFFER WASSUBMITTED TO SEBI. IT IS
TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THE DRAFT LETTER OF
OFFER TO SEBI SHOULD NOT, IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME
HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY
EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH
THE ISSUE IS PROPOSED TO BE MADE, OR FOR THE CORRECTNESS OF THE STATEMENTS
MADE OR OPINIONS EXPRESSED IN THE DRAFT LETTER OF OFFER. THE LEAD MANAGER,
JM FINANCIAL CONSULTANTS PRIVATE LIMITED HAS CERTIFIED THAT THE
DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE GENERALLY ADEQUATE AND
ARE IN CONFORMITY WITH SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS)
REGULATIONS, 2009 FOR DISCLOSURE AND INVESTOR PROTECTION IN FORCE FOR THE
TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED
DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY
RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT
INFORMATION IN THE DRAFT LETTER OF OFFER, THE LEAD MANAGER IS EXPECTED TO
EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS
RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD
MANAGER HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED SEPTEMBER
16, 2009, WHICH WILL READ AS FOLLOWS:

1.   WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO
     LITIGATION SUCH AS COMMERCIAL DISPUTES, DISPUTES WITH COLLABORATORS,
     ETC. AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE


                                                    98
     ANNEXURE HERETO IN CONNECTION WITH THE FINALISATION OF THE DRAFT
     LETTER OF OFFER PERTAINING TO THE SAID ISSUE;

2.   ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY,
     ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT
     VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE,
     PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE
     DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE
     COMPANY, WE CONFIRM THAT:

     A. THE DRAFT LETTER OF OFFER FILED WITH SEBI IS IN CONFORMITY WITH THE
        DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;

     B. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE ISSUE AS ALSO THE
        REGULATIONS, GUIDELINES, INSTRUCTIONS ETC., ISSUED BY SEBI, THE
        GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE
        BEEN DULY COMPLIED WITH; AND

     C. THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE TRUE, FAIR AND
        ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION
        AS TO INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN
        ACCORDANCE WITH THE REQUIREMENTS OF THE SEBI (ISSUE OF CAPITAL AND
        DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND OTHER APPLICABLE
        LEGAL REQUIREMENTS.

3.   WE CONFIRM THAT ALL THE INTERMEDIARIES NAMED IN THE DRAFT LETTER OF
     OFFER ARE REGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID;

4.   WE HAVE SATISFIED OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO
     FULFIL THEIR UNDERWRITING COMMITMENTS - NOT APPLICABLE;

5.   WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTERS HAS BEEN OBTAINED FOR
     INCLUSION OF THEIR SECURITIES AS PART OF THE PROMOTERS‟ CONTRIBUTION
     SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF THE
     PROMOTERS‟ CONTRIBUTION SUBJECT TO LOCK-IN, WILL NOT BE DISPOSED / SOLD/
     TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE
     OF FILING THE DRAFT LETTER OF OFFER WITH SEBI TILL THE DATE OF
     COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT LETTER OF OFFER-
     NOT APPLICABLE;

6.   WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD OF
     INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009,
     WHICH RELATES TO SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS
     CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES
     AS TO COMPLIANCE WITH THE CLAUSE HAVE BEEN MADE IN THE DRAFT LETTER OF
     OFFER - NOT APPLICABLE;

7.   WE UNDERTAKE SUB-REGULATION (4) OF REGULATION 32 AND CLAUSE (C) AND (D) OF
     SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND EXCHANGE BOARD
     OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009
     SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE
     TO ENSURE THAT PROMOTERS‟ CONTRIBUTION AND SUBSCRIPTION FROM ALL FIRM
     ALLOTTEES WOULD BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE
     ISSUE. WE UNDERTAKE THAT AUDITORS‟ CERTIFICATE TO THIS EFFECT SHALL BE
     DULY SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS
     HAVE BEEN MADE TO ENSURE THAT PROMOTERS‟ CONTRIBUTION SHALL BE KEPT IN
     AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE
     RELEASED TO THE COMPANY ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE -
     NOT APPLICABLE;



                                       99
8.   WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE ISSUER FOR WHICH THE
     FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE „MAIN OBJECTS‟
     LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHER
     CHARTER OF THE ISSUER AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED
     OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS
     MEMORANDUM OF ASSOCIATION;

9.   WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE
     THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE
     BANK ACCOUNT AS PER THE PROVISIONS OF SECTION 73(3) OF THE COMPANIES ACT,
     1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID BANK ONLY AFTER
     PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE
     LETTER OF OFFER. WE FURTHER CONFIRM THAT THE AGREEMENT ENTERED INTO
     BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS
     THIS CONDITION – NOTED FOR COMPLIANCE;

10. WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE DRAFT LETTER OF OFFER
    THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE SHARES IN DEMAT
    OR PHYSICAL MODE;

11. WE CERTIFY THAT ALL APPLICABLE DISCLOSURES MANDATED IN THE SECURITIES
    AND EXCHANGE BAORD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE
    REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION TO
    DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE THE
    INVESTOR TO MAKE A WELL INFORMED DECISION;

12. WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE DRAFT
    LETTER OF OFFER:

     a.   AN UNDERTAKING FROM THE COMPANY THAT AT ANY GIVEN TIME THERE SHALL
          BE ONLY ONE DENOMINATION FOR THE SHARES OF THE COMPANY; AND

     b.   AN UNDERTAKING FROM THE COMPANY THAT IT SHALL COMPLY WITH SUCH
          DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY SEBI FROM TIME TO TIME.

13. WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO
    ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA
    (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE
    MAKING THE ISSUE;

14. WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS BEEN
    EXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS BACKGROUND OR
    THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS STANDS, THE RISK
    FACTORS, PROMOTERS EXPERIENCE, ETC.; AND

15. WE ENCLOSE A CHECKLIST CONFIRMING REGULATION-WISE COMPLIANCE WITH
    THE APPLICABLE PROVISIONS OF THE SEBI (ISSUE OF CAPITAL AND DISCLOSURE
    REQUIREMENTS) REGULATIONS, 2009, CONTAINING DETAILS SUCH AS THE
    REGULATION NUMBER, ITS TEXT, THE STATUS OF COMPLIANCE, PAGE NUMBER OF
    THE DRAFT LETTER OF OFFER WHERE THE REGULATION HAS BEEN COMPLIED WITH
    AND OUR COMMENTS, IF ANY.

The filing of this Letter of Offer does not, however, absolve the Company from any liabilities under Section 63
or Section 68 of the Companies Act or from the requirement of obtaining such statutory or other clearance as
may be required for the purpose of the proposed Issue. The SEBI further reserves the right to take up, at any
point of time, with the Lead Manager any irregularities or lapses in this Letter of Offer.

Caution




                                                     100
The Company and the Lead Manager accept no responsibility for statements made otherwise than in this Letter
of Offer or in any advertisement or other material issued by the Company or at the instance of the Company and
that anyone placing reliance on any other source of information would be doing so at his own risk.

Investors who invest in the Issue will be deemed to have been represented by the issuer company and Lead
Manager and their respective directors, officers, agents, affiliates and representatives that they are eligible under
all applicable laws, rules, regulations, guidelines and approvals to acquire equity shares of our company, and are
relying on independent advice / evaluation as to their ability and quantum of investment in this issue

The Lead Manager and the Company shall make all information available to the Equity Shareholders and no
selective or additional information would be available for a section of the Equity Shareholders in any manner
whatsoever including at presentations, in research or sales reports etc. after filing of this Letter of Offer with the
SEBI.

Disclaimer with respect to jurisdiction

This Letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and
regulations thereunder. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate
court(s) in New Delhi / Chandigarh, India only.

Selling Restrictions

The distribution of this Letter of Offer and the issue of Equity Shares on a rights basis to persons in certain
jurisdictions outside India may be restricted by legal requirements prevailing in those jurisdictions. Persons into
whose possession this Letter of Offer may come are required to inform themselves about and observe such
restrictions. The Company is making this Issue of Equity Shares on a rights basis to the shareholders of the
Company and will dispatch the Letter of Offer and CAFs to shareholders who have provided an Indian address.

No action has been or will be taken to permit this Issue in any jurisdiction where action would be required for
that purpose, except that the Letter of Offer has been filed with the SEBI. Accordingly, the Equity Shares may
not be offered or sold, directly or indirectly, and this Letter of Offer may not be distributed in any jurisdiction,
except in accordance with legal requirements applicable in such jurisdiction. Receipt of this Letter of Offer will
not constitute an offer in those jurisdictions in which it would be illegal to make such an offer and, those
circumstances, this Letter of Offer must be treated as sent for information only and should not be copied or
redistributed. Accordingly, persons receiving a copy of this Letter of Offer should not, in connection with the
issue of the Equity Shares or the rights entitlements, distribute or send the same in or into the United States or
any other jurisdiction where to do so would or might contravene local securities laws or regulations. If this
Letter of Offer is received by any person in any such territory, or by their agent or nominee, they must not seek
to subscribe to the Equity Shares or the rights entitlements referred to in this Letter of Offer.

Neither the delivery of this Letter of Offer nor any sale hereunder, shall under any circumstances create any
implication that there has been no change in the Company‘s affairs from the date hereof or that the information
contained herein is correct as of any time subsequent to this date.

United States Restrictions

NEITHER THE RIGHTS ENTITLEMENTS NOR THE SECURITIES THAT MAY BE PURCHASED
PURSUANT HERETO HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE ―SECURITIES ACT‖), OR ANY U.S. STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, RESOLD OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OF
AMERICA OR THE TERRITORIES OR POSSESSIONS THEREOF (THE ―UNITED STATES‖ OR THE
―U.S.‖) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ―US PERSONS‖ (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT (―REGULATION S‖)), EXCEPT IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE RIGHTS
REFERRED TO IN THIS LETTER OF OFFER ARE BEING OFFERED IN INDIA, BUT NOT IN THE
UNITED STATES. THE OFFERING TO WHICH THIS LETTER OF OFFER RELATES IS NOT, AND
UNDER NO CIRCUMSTANCES IS TO BE CONSTRUED AS, AN OFFERING OF ANY SHARES OR
RIGHTS FOR SALE IN THE UNITED STATES OR AS A SOLICITATION THEREIN OF AN OFFER TO
BUY ANY OF THE SAID SHARES OR RIGHTS. ACCORDINGLY, THIS LETTER OF OFFER SHOULD
NOT BE FORWARDED TO OR TRANSMITTED IN OR INTO THE UNITED STATES AT ANY TIME.

                                                         101
NEITHER THE COMPANY NOR ANY PERSON ACTING ON BEHALF OF THE COMPANY WILL
ACCEPT SUBSCRIPTIONS OR RENUNCIATIONS FROM ANY PERSON, OR THE AGENT OF ANY
PERSON, WHO APPEARS TO BE, OR WHO THE COMPANY OR ANY PERSON ACTING ON BEHALF
OF THE COMPANY HAS REASON TO BELIEVE IS, EITHER A ―U.S. PERSON‖ (AS DEFINED IN
REGULATION S) OR OTHERWISE IN THE UNITED STATES. ANY PERSON SUBSCRIBING TO THE
EQUITY SHARES OFFERED HEREBY WILL BE DEEMED TO REPRESENT THAT SUCH PERSON IS
NOT A U.S. PERSON (AS DEFINED IN REGULATION S) OR OTHERWISE IN THE UNITED STATES
AND HAS NOT VIOLATED ANY U.S. SECURITIES LAWS IN CONNECTION WITH THE EXERCISE.

European Economic Area Restrictions

In relation to a Relevant Member State of the European Economic Area which has implemented the Prospectus
Directive at any relevant time, the Company has not made and will not make an offer of the Equity Shares to the
public in that Relevant Member State prior to the publication of a prospectus in relation to the Equity Shares
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 that Relevant Member
State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the
Relevant Implementation Date, make an offer of Equity Shares to the public in that Relevant Member State at
any time:

(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 is solely to invest in securities; or

(b)     to any legal entity which has two or more of (1) an average of at least 250 employees during the last
        financial year; (2) a total balance sheet of more than €4,30,00,000 and (3) an annual net turnover of
        more than €5,00,00,000, as shown in its last annual or consolidated accounts; or

(c)     to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus
        Directive), subject to obtaining the prior consent of the lead manager; or

(d)     in any other circumstances which do not require the publication by the Company of a prospectus
        pursuant to Article 3 of the Prospectus Directive.

For the purpose of this provision, the expression an ―offer of Equity Shares to the public‖ in relation to any
Equity Shares in any Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the Equity Shares to be offered so as to enable an Investor to
decide to purchase or subscribe for the Equity Shares, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member State and the expression ―Prospectus Directive‖
means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

This European Economic Area selling restriction is in addition to any other selling restriction set out below.

United Kingdom Restrictions

This Letter of Offer is only being distributed to and is only directed at (i) persons who are outside the United
Kingdom, or (ii) to investment professionals falling within Article 19(5) of the Order, or (iii) high net worth
entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of
the Order (all such persons together being referred to as ―relevant persons‖). The Equity Shares are only
available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Equity
Shares will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or
rely on this document or any of its contents.

Designated Stock Exchange

The Designated Stock Exchange for the purposes of this Issue will be the BSE.

Disclaimer Clause of the BSE

The BSE has given pursuant to its letter number DCS/PREF/JA/IP-RT/1016/9-10 dated September 30, 2009,
permission to our Company to use BSE‘s name in this Letter of Offer as one of the Stock Exchanges on which

                                                       102
this Company‘s securities are proposed to be listed. The BSE has scrutinized this Letter of Offer for its limited
internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The BSE does
not in any manner: (i) warrant, certify or endorse the correctness or completeness of any of the contents of this
Letter of Offer; or (ii) warrant that this Company‘s securities will be listed or will continue to be listed on the
Exchange; or (iii) take any responsibility for the financial or other soundness of this Company, its Promoters, its
management or any scheme or project of this Company; and it should not for any reason be deemed or construed
that this Letter of Offer has been cleared or approved by the BSE. Every person who desires to apply for or
otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and
analysis and shall not have any claim against the BSE 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.

Disclaimer Clause of the NSE

As required, a copy of this Letter of Offer has been submitted to the National Stock Exchange of India Limited
(the ―NSE‖). NSE has, pursuant to its letter number NSE/LIST/120773-7 dated October 16, 2009 given
permission to the Issuer to use the NSE‘s name in this Letter of Offer as one of the Stock Exchanges on which
the Issuer‘s securities are proposed to be listed. The NSE has scrutinized this Letter of Offer for its limited
internal purpose of deciding on the matter of granting the aforesaid permission to the Issuer. It is to be distinctly
understood that the aforesaid permission given by NSE should not in any way be deemed or construed to mean
that the Letter of Offer has been cleared or approved by NSE; nor does it in any manner warrant, certify or
endorse the correctness or completeness of any of the contents of this Letter of Offer; nor does it warrant that
the Issuer‗s securities will be listed or will continue to be listed on the NSE; nor does it take any responsibility
for the financial or other soundness of the Issuer, its Promoter, its management or any scheme or project of the
Issuer.

Every person who desires to apply for or otherwise acquire any securities of the Issuer may do so pursuant to
independent inquiry, investigation and analysis and shall not have any claim against NSE 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 any other reason whatsoever.

Filing

The Draft Letter of Offer was filed with the SEBI, Plot No. C 4-A, ‗G‘ Block, Bandra Kurla Complex, Bandra
(East), Mumbai 400 051, India for its observations and the SEBI has given its observations by a letter dated
December 16, 2009, which have been duly incorporated in the Letter of Offer. The Letter of Offer has been filed
with the Designated Stock Exchange as per the provisions of the Companies Act.

Issue Related Expenses

The expenses of the Issue payable by the Company include brokerage, fees and reimbursement to the Lead
Manager, Auditors, Legal Advisor, Registrar to the Issue, printing and distribution expenses, publicity, listing
fees, stamp duty and other expenses and will be met out of the Issue Proceeds.

 S.No.                         Activity Expense                         Amount        Percentage of   Percentage of
                                                                      (Rs. in lacs)       Total        Issue Size
                                                                                       Estimated
                                                                                          Issue
                                                                                      Expenditure
 1.       Fees of the Lead Manager                                            37.00         30.14%            0.46%
 2.       Fees to Registrar to the Issue                                       2.50          2.04%            0.03%
 3.       Fees to the Legal Advisors                                          26.50         21.59%            0.33%
 4.       Fees to the Bankers to the Issue                                        -               -                -
 5.       Other Expenses (Printing and stationary, distribution and           56.75         46.23%            0.71%
          postage, advertisement and marketing expense etc.)
          Total Estimated Issue Expenses                                    122.75         100.00%            1.54%

Investor Grievances and Redressal System

The Company has adequate arrangements for redressal of investor complaints. Well-arranged correspondence
system developed for letters of routine nature. The share transfer and dematerialization for the Company is

                                                           103
being handled by the in-house registrar and share transfer agent. Letters are filed category wise after having
attended to. Redressal norm for response time for all correspondence including shareholders complaints is
within 10-12 days.

The contact details of the share registrars are:

MCS Limited
Sri Venkatesh Bhawan
F-65, 1st Floor
Okhla Industrial Area, Phase- I
New Delhi - 110 020
India
Tel : (91 11 4140 4149)
Fax : (91 11 4170 9881)

Status of Complaints

(a)      Total number of complaints received during Fiscal 2009: 30
(b)      No. of shareholders complaints as on December 31, 2009: There were no pending complaints as on
         December 31, 2009.
(d)      Status of the complaints: There were no pending complaints.
(e)      Time normally taken by it for disposal of various types of Investor grievances: 10 to 12 days.

Investor Grievances arising out of this Issue

The Company‘s investor grievances arising out of the Issue will be handled by Link Intime India Private
Limited who are the Registrar to the Issue. The Registrar will have a separate team of personnel handling only
post-Issue correspondence.

The agreement between the Company and the Registrar provides for retention of records with the Registrar for a
period of one (1) year from the last date of dispatch of Allotment Advice / share certificate / refund orders to
enable the investors to approach the Registrar for redressal of their grievances.

All grievances relating to the Issue may be addressed to the Registrar to the Issue giving full details such as folio
number, name and address, contact telephone / cell numbers, email id of the first Investor, number and type of
shares applied for, CAF serial number, amount paid on application and the name of the bank and the branch
where the application was deposited, along with a photocopy of the acknowledgement slip. In case of
renunciation, the same details of the Renouncee should be furnished.

The average time taken by the Registrar for attending to routine grievances will be seven (7) days from the date
of receipt. In case of non-routine grievances where verification at other agencies is involved, it would be the
endeavour of the Registrar to attend to them as expeditiously as possible. The Company undertakes to resolve
the Investor grievances in a time bound manner.

Investors may contact the Compliance Officer / Company Secretary in case of any pre-Issue / post -Issue
related problems such as non-receipt of allotment advice / share certificates / demat credit / refund orders
etc. His address is as follows:

Mr. Gopal Bansal
Swaraj Mazda Limited
204 – 205, Sector 34-A
Chandigarh – 160 022
India
Tel: (91 172 264 7700)
Fax: (91 172 261 5111)
Email: gbansal@swarajmazda.net




                                                        104
                                  SECTION VII - TERMS OF THE ISSUE

The Equity Shares proposed to be issued on rights basis, are subject to the terms and conditions contained in the
Letter of Offer, the enclosed CAF, the Memorandum of Association and Articles of Association of the
Company, the provisions of the Companies Act, the terms and conditions as may be incorporated in the Foreign
Exchange Management Act, 1999 (―FEMA‖), guidelines issued by the SEBI, guidelines, notifications and
regulations for issue of capital and for listing of securities issued by GoI and/or other statutory authorities and
bodies from time to time, terms and conditions as stipulated in the allotment advice or security certificate and
rules as may be applicable and introduced from time to time.

Authority for the Issue

This Issue is being made pursuant to a resolution passed by the Board of Directors of the Company under
section 81(1) of the Companies Act at its meeting held on March 19, 2009. The Issue has also been approved by
the shareholders of the Company at the extraordinary general meeting of the Company held on July 2, 2009.

Basis for the Issue

The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose
names appear as beneficial owners as per the list to be furnished by the Depositories in respect of the Equity
Shares held in the Electronic Form and on the Register of Members of the Company in respect of the Equity
Shares held in physical form at the close of business hours on the Record Date i.e. February 10, 2010, fixed in
consultation with the Stock Exchanges.

Rights Entitlement

As your name appears as beneficial owner in respect of Equity Shares held in the electronic form or appears in
the register of members as an Equity Shareholder of the Company as on the Record Date, i.e., February 10,
2010, you are entitled to the number of Equity Shares as set out in Part A of the enclosed CAFs.

PRINCIPAL TERMS OF THE EQUITY SHARES

Face Value

Each Equity Share will have a face value of Rs. 10.

Issue Price

Each Equity Share shall be offered at an Issue Price of Rs. 200 for cash at a premium of Rs. 190 per Equity
Share. The Issue Price has been arrived at in consultation between the Company and the Lead Manager.

Entitlement Ratio

The Equity Shares are being offered on rights basis to the Equity Shareholders in the ratio of 19 Equity Shares
for every 50 Equity Share held on the Record Date.

Terms of Payment

Full amount of Rs. 200 per Equity Share is payable on application.

Fractional Entitlements

For Equity Shares being offered on a rights basis under the Issue, if the shareholding of any of the Equity
Shareholders is less than three (3) Equity Shares or is not in multiples of 50, the fractional entitlement of such
Equity Shareholders shall be ignored. Equity Shareholders whose fractional entitlements are being ignored will
be given preference in the allotment of one (1) additional Equity Share each, if such Equity Shareholders have
applied for additional Equity Shares.



                                                       105
For example, if an Equity Shareholder holds between eight (8) and 10 Equity Shares, he will be entitled to three
(3) Equity Shares on a rights basis. He will also be given a preference for allotment of one (1) additional Equity
Shares if he has applied for the same.

Those Equity Shareholders holding less than three (3) Equity Shares will therefore be entitled to zero Equity
Share under this Issue and shall be despatched a CAF with zero entitlement. Such Equity Shareholders are
entitled to apply for additional Equity Shares. However, such Equity Shareholders cannot renounce their
entitlement to apply for additional Equity Shares in favour of any other person. A CAF with zero entitlement
will be non-negotiable / non-renunciable.

For example, if an Equity Shareholder holds between one (1) and two (2) Equity Shares, he will be entitled to
nil Equity Shares on a rights basis. He will be given a preference for allotment of one (1) additional Equity
Share, if he has applied for the same.

Ranking

The Equity Shares being issued shall be subject to the provisions of our Memorandum of Association and
Articles of Association. The Equity Shares shall rank pari passu, in all respects including dividend, with our
existing Equity Shares.

Listing and trading of Equity Shares proposed to be issued

The Company‘s existing Equity Shares are currently traded on the Stock Exchanges under the ISIN
INE294B01019. The fully paid up Equity Shares proposed to be issued on a rights basis shall be listed and
admitted for trading on the Stock Exchanges under the existing ISIN for fully paid Equity Shares of the
Company.

The listing and trading of the Equity Shares shall be based on the current regulatory framework applicable
thereto. Accordingly, any change in the regulatory regime would accordingly affect the schedule.

All steps for the completion of the necessary formalities for listing and commencement of trading of the Equity
Shares allotted pursuant to the Issue shall be taken within seven (7) working days from the finalization of the
basis of allotment. The Company made an application for ―in-principle‖ approval for listing of the Equity Shares
in accordance with Clause 24(a) of the Listing Agreement to the BSE and the NSE through letters dated
September 16, 2009 and has received such approval from the BSE pursuant to the letter (bearing no.
DCS/PREF/JA/IP-RT/1016/9-10) dated September 30, 2009 and from the NSE pursuant to letter (bearing no.
NSE/LIST/120773-7) dated October 16, 2009.

Rights of the Equity Shareholder

Subject to applicable laws, the Equity Shareholders of our Company shall have the following rights:

         Right to receive dividend, if declared;
         Right to attend general meetings and exercise voting powers, unless prohibited by law;
         Right to vote in person or by proxy;
         Right to receive offers for rights shares and be allotted bonus shares, if announced;
         Right to receive surplus on liquidation;
         Right to free transferability of Equity Shares; and
         Such other rights as may be available to a shareholder of a listed public company under the Companies
          Act and Memorandum of Association and Articles of Association.

General Terms of the Issue

Market Lot

The Equity Shares of the Company are tradable only in dematerialized form. The market lot for Equity Shares in
dematerialized mode is one. In case of holding of Equity Shares in physical form, the Company would issue to
the allottees one (1) certificate for the Equity Shares allotted to each folio (―Consolidated Certificate‖).




                                                       106
Joint Holders

Where two (2) or more persons are registered as the holders of any Equity Shares, they shall be deemed to hold
the same as joint tenants with the benefit of survivorship subject to the provisions contained in the Articles of
Association.

Nomination

In terms of Section 109A of the Companies Act, nomination facility is available in case of Equity Shares. The
Investor can nominate any person by filling the relevant details in the CAF in the space provided for this
purpose.

In case of Equity Shareholders who are individuals, a sole Equity Shareholder or the first named Equity
Shareholder, along with other joint Equity Shareholders, if any, may nominate any person(s) who, in the event
of the death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the Equity
Shares. A person, being a nominee, becoming entitled to the Equity Shares by reason of the death of the original
Equity Shareholder(s), shall be entitled to the same advantages to which he would be entitled if he were the
registered holder of the Equity Shares. Where the nominee is a minor, the Equity Shareholder(s) may also make
a nomination to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the
event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon
the sale of the Equity Shares by the person nominating. A transferee will be entitled to make a fresh nomination
in the manner prescribed. Fresh nominations can be made only in the prescribed form available on request at the
registered office of the Company or such other person at such addresses as may be notified by the Company.
The Investor can make the nomination by filling in the relevant portion of the CAF.

Only one (1) nomination would be applicable for one (1) folio. Hence, in case the Equity Shareholder(s) has
already registered the nomination with the Company, no further nomination needs to be made for Equity Shares
that may be allotted in this Issue under the same folio.

In case the allotment of Equity Shares is in dematerialized form, there is no need to make a separate
nomination for the Equity Shares to be allotted in this Issue. Nominations registered with respective
Depositary Participant (“DP”) of the Investor would prevail. Any Investor desirous of changing the
existing nomination is requested to inform its respective DP.

Notices

All notices to the Equity Shareholder(s) required to be given by the Company shall be published in one (1)
English national daily with wide circulation, one (1) Hindi national daily with wide circulation and/or, will be
sent by ordinary post/registered post/speed post to the registered holders of the Equity Shares from time to time.
Additional Subscription by the Promoter

The Promoter has confirmed that it intends to subscribe to the full extent of their Rights Entitlement in the Issue.
Subject to compliance with the Takeover Code, the Promoter and promoter group reserve their right to subscribe
for Equity Shares in this Issue by subscribing for renunciation, if any, made by any other shareholder. The
Promoter has provided an undertaking dated January 20, 2010, to our Company to apply for additional Equity
Shares in the Issue, to the extent of the unsubscribed portion of the Issue. As a result of this subscription and
consequent allotment, the Promoter and promoter group may acquire Equity Shares over and above their Rights
Entitlement in the Issue, which may result in an increase of the shareholding being above the current
shareholding with the Rights Entitlement of Equity Shares under the Issue. This subscription and acquisition of
additional Equity Shares by the Promoter and promoter group through this Issue, if any, will not result in change
of control of the management of the Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii)
of the Takeover Code. As such, other than meeting the requirements indicated in ―Objects of the Issue –
Requirement of Funds and Use of Net Proceeds‖ on page 17), there is no other intention / purpose for this
Issue, including any intention to delist our Company, even if, as a result of allotments to the Promoter and
promoter group, in this Issue, the Promoter‘s shareholding in our Company exceeds their current shareholding.
The Promoter and promoter group shall subscribe to such unsubscribed portion as per the relevant provisions of


                                                        107
the law. Allotment to the Promoter and promoter group of any unsubscribed portion, over and above their Rights
Entitlement shall be done in compliance with the Listing Agreement and the Takeover Code from time to time.
For details, please see the section titled ―– Basis of Allotment‖ under this section titled ―Terms of the Issue‖ on
page 112.

Procedure for Application

The CAF for Equity Shares would be printed in black ink for all Equity Shareholders. In case the original CAFs
are not received by the Investor or is misplaced by the Investor, the Investor may request the Registrars to the
Issue, for issue of a duplicate CAF, by furnishing the registered folio number, DP ID Number, Client ID
Number and their full name and address.

Please note that the request for a duplicate CAF should reach the Registrar to the Issue, within 12 days of the
Issue Opening Date. Investors should note that those who are making the application in the duplicate form
should not utilize the original CAF for any purpose, including renunciation, even if the original CAF is received
or found subsequently. If any Investor violates any of these requirements, they will face the risk of rejection of
both the applications. Neither the Company nor the Registrar to the Issue will be responsible for postal delays or
loss, if any, of a duplicate CAF in transit.

Acceptance of the Issue

You may accept the Issue and apply for the Equity Shares offered, either in full or in part, by filling Part A of
the enclosed CAFs and submit the same along with the application money payable to the Bankers to the Issue or
any of the collection branches as mentioned on the reverse of the CAFs before the close of the banking hours on
or before the Issue Closing Date or such extended time as may be specified by the Board of Directors of the
Company in this regard. Investors at centres not covered by the branches of collecting banks can send their
CAFs together with the cheque drawn at par on a local bank at Mumbai / demand draft payable at Mumbai to
the Registrar to the Issue by registered post / speed post. Such applications sent to anyone other than the
Registrar to the Issue are liable to be rejected. For further details on the mode of payment, please see the
sections titled ―- Mode of Payment for Resident Equity Shareholders / Investors‖ and ―- Mode of Payment for
Non-Resident Equity Shareholders / Investors‖ under this section titled ―Terms of the Issue‖ on page 125.

Option available to the Equity Shareholders

The CAFs will clearly indicate the number of Equity Shares that the Equity Shareholder is entitled to.

If the Equity Shareholder applies for an investment in Equity Shares, then he can:

      Apply for his Rights Entitlement of Equity Shares in part;

      Apply for his Rights Entitlement of Equity Shares in part and renounce the other part of the Equity
      Shares;

      Apply for his Rights Entitlement of Equity Shares in full;

      Apply for his Rights Entitlement in full and apply for additional Equity Shares; and

      Renounce his Rights Entitlement in full.

Additional Equity Shares

You are eligible to apply for additional Equity Shares over and above your Rights Entitlement, provided that
you have applied for all the Equity Shares offered without renouncing them in whole or in part in favour of any
other person(s). Applications for additional Equity Shares shall be considered and allotment shall be made at the
sole discretion of the Board, subject to sectoral caps and in consultation if necessary with the Designated Stock
Exchange and in the manner prescribed under the section titled ―– Basis of Allotment‖ under this section titled
―Terms of the Issue‖ on page 112.

If you desire to apply for additional Equity Shares, please indicate your requirement in the place provided for
additional Equity Shares in Part A of the CAF. The Renouncee applying for all the Equity Shares renounced in
their favour may also apply for additional Equity Shares.

                                                       108
Where the number of additional Equity Shares applied for exceeds the number available for allotment, the
allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange.

Renunciation

This Issue includes a right exercisable by you to renounce the Equity Shares offered to you either in full or in
part in favour of any other person or persons. Your attention is drawn to the fact that the Company shall not allot
and/or register and Equity Shares in favour of more than three persons (including joint holders), partnership
firm(s) or their nominee(s), minors, HUF, any trust or society (unless the same is registered under the Societies
Registration Act, 1860 or the Indian Trust Act, 1882 or any other applicable law relating to societies or trusts
and is authorized under its constitution or bye-laws to hold Equity Shares, as the case may be).

Any renunciation from Non-resident Indian Shareholder(s) to Resident Indian(s) is subject to the renouncer(s) /
renouncee(s) obtaining the approval of the FIPB and/or necessary permission of the RBI under the FEMA and
such permissions should be attached to the CAF. Applications not accompanied by the aforesaid approvals are
liable to be rejected. Additionally, any renunciation by any Equity Shareholder resident in/outside India to any
non-resident is prohibited.

By virtue of the Circular No. 14 dated September 16, 2003 issued by the RBI, Overseas Corporate Bodies
(―OCBs‖) have been derecognized as an eligible class of investors and the RBI has subsequently issued the
Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs))
Regulations, 2003. Accordingly, the existing Equity Shareholders of the Company who do not wish to subscribe
to the Equity Shares being offered but wish to renounce the same in favour of Renouncee shall not renounce the
same (whether for consideration or otherwise) in favour of OCB(s).

Part ‗A‘ of the CAF must not be used by any person(s) other than those in whose favour this offer has been
made. If used, this will render the application invalid. Submission of the enclosed CAF to the Banker to the
Issue at its collecting branches specified on the reverse of the CAF with the form of renunciation (Part ‗B‘ of the
CAF) duly filled in shall be conclusive evidence for the Company of the person(s) applying for Equity Shares in
Part ‗C‘ of the CAF to receive allotment of such Equity Shares. The Renouncees applying for all the Equity
Shares renounced in their favour may also apply for additional Equity Shares. Part ‗A‘ of the CAF must not be
used by the Renouncee(s) as this will render the application invalid. Renouncee(s) will have no further right to
renounce any Equity Shares in favour of any other person.

Procedure for renunciation

To renounce all the Equity Shares offered to a shareholder in favour of one Renouncee

If you wish to renounce the offer indicated in Part ‗A‘, in whole, please complete Part ‗B‘ of the CAF. In case of
joint holding, all joint holders must sign Part ‗B‘ of the CAF. The person in whose favour renunciation has been
made should complete and sign Part ‗C‘ of the CAF. In case of joint Renouncees, all joint Renouncees must sign
this part of the CAF.

To renounce in part/or renounce the whole to more than one person(s)

If you wish to either accept this offer in part and renounce the balance or renounce the entire offer under this
Issue in favour of two (2) or more Renouncees, the CAF must be first split into requisite number of forms.
Please indicate your requirement of SAFs in the space provided for this purpose in Part ‗D‘ of the CAF and
return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the
last date of receiving requests for SAFs. On receipt of the required number of SAFs from the Registrar, the
procedure as mentioned in paragraph above shall have to be followed.

In case the signature of the Equity Shareholder(s), who has renounced the Equity Shares, does not agree with the
specimen registered with the Company, the application is liable to be rejected.

Renouncee(s)

The person(s) in whose favour the Equity Shares are renounced should fill in and sign Part ‗C‘ of the CAF and
submit the entire CAF to the Bankers to the Issue on or before the Issue Closing Date along with the application

                                                        109
money in full.

Change and / or introduction of additional holders

If you wish to apply for Equity Shares jointly with any other person(s), not more than three (3), who is/are not
already a joint holder with you, it shall amount to renunciation and the procedure as stated above for
renunciation shall have to be followed. Even a change in the sequence of the name of joint holders shall amount
to renunciation and the procedure, as stated above shall have to be followed.

However, this right of renunciation is subject to the express condition that the Board of Directors of the
Company shall be entitled in its absolute discretion to reject the request for allotment from the Renouncee(s)
without assigning any reason thereof.

Instructions for Options

The summary of options available to the Equity Shareholder is presented below. You may exercise any of the
following options with regard to the Equity Shares offered, using the enclosed CAF:

                Option Available                                                Action Required
1.      Accept whole or part of your Rights            Fill in and sign Part A (All joint holders must sign)
        Entitlement without renouncing the balance.
2.      Accept your Rights Entitlement in full and     Fill in and sign Part A including Block III relating to the
        apply for additional Equity Shares             acceptance of entitlement and Block IV relating to additional
                                                       Equity Shares (All joint holders must sign)
3.      Renounce your Rights Entitlement in full to    Fill in and sign Part B (all joint holders must sign) indicating the
        one person (Joint Renouncees are considered    number of Equity Shares renounced and hand it over to the
        as one).                                       Renouncee. The Renouncee must fill in and sign Part C (All joint
                                                       Renouncees must sign)
4.      Accept a part of your Rights Entitlement and   Fill in and sign Part D (all joint holders must sign) requesting for
        renounce the balance to one or more            SAFs. Send the CAF to the Registrar to the Issue so as to reach
        Renouncee(s)                                   them on or before the last date for receiving requests for SAFs.
                                                       Splitting will be permitted only once.
                        OR
                                                       On receipt of the SAF take action as indicated below.

        Renounce your Rights Entitlement to all        For the Equity Shares you wish to accept, if any, fill in and sign
        the Equity Shares offered to you to more       Part A.
        than one Renouncee
                                                       For the Equity Shares you wish to renounce, fill in and sign Part
                                                       B indicating the number of Equity Shares renounced and hand it
                                                       over to the Renouncee. Each of the Renouncee should fill in and
                                                       sign Part C for the Equity Shares accepted by them.
5.      Introduce a joint holder or change the         This will be treated as a renunciation. Fill in and sign Part B and
        sequence of joint holders                      the Renouncee must fill in and sign Part C.

Please note that:

        Part ‗A‘ of the CAF must not be used by any person(s) other than the Equity Shareholder to whom this
        Letter of Offer has been addressed. If used, this will render the application invalid.

        Request for SAF should be made for a minimum of one (1) Equity Share or, in either case, in multiples
        thereof and one (1) SAF for the balance Equity Shares, if any.

        Request by the Investor for the SAFs should reach the Company on or before March 10, 2010.

        Only the Equity Shareholder to whom this Letter of Offer has been addressed shall be entitled to
        renounce and to apply for SAFs. Forms once split cannot be split further.

        SAFs will be sent to the Investor (s) by post at the applicant‘s risk.


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Availability of duplicate CAF

In case the original CAF is not received, or is misplaced by the Investor, the Registrar to the Issue will issue a
duplicate CAF on the request of the Investor who should furnish the registered folio number/ DP and Client ID
number and his / her full name and address to the Registrar to the Issue. Please note that the request for
duplicate CAF should reach the Registrar to the Issue within 12 days from the Issue Opening Date. Please note
that those who are making the application in the duplicate form should not utilize the original CAF for any
purpose including renunciation, even if it is received/ found subsequently. If the Investor violates such
requirements, he / she shall face the risk of rejection of both the applications.

Application on Plain Paper

An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate
CAF may make an application to subscribe to the Issue on plain paper, along with Demand Draft, net of bank
and postal charges payable at Mumbai, which should be drawn in favour of the ―Swaraj Mazda – Rights Issue‖
and the Equity Shareholders should send the same by registered post / speed post directly to the Registrar to the
Issue.

The envelope should be superscribed ―Swaraj Mazda – Rights Issue‖ and should be postmarked in India. The
application on plain paper, duly signed by the Investors including joint holders, in the same order as per
specimen recorded with the Company, must reach the office of the Registrar to the Issue before the Issue
Closing Date and should contain the following particulars:

         Name of Issuer, being Swaraj Mazda Limited;
         Name and address of the Equity Shareholder including joint holders;
         Registered Folio Number/ DP and Client ID no.;
         Number of Equity Shares held as on Record Date;
         Number of Equity Shares entitled to;
         Number of Equity Shares applied for;
         Number of additional Equity Shares applied for, if any;
         Total number of Equity Shares applied for;
         Total amount paid at the rate of Rs. 200 per Equity Share;
         Particulars of cheque / draft;
         Savings / Current Account Number and name and address of the bank where the Equity Shareholder
         will be depositing the refund order; and
         Except for applications on behalf of the Central or State Government and the officials appointed by the
         courts, PAN number of the Investor and for each Investor in case of joint names, irrespective of the
         total value of the Equity Shares applied for pursuant to the Issue;
         A representation that the Equity Shareholder is not a ―U.S. Person‖ (as defined in Regulation S under
         the Securities Act);
         Signature of the Equity Shareholders to appear in the same sequence and order as they appear in the
         records of the Company; and
         Additionally, Non Resident applicants shall include the following:

    ―I / We understand that neither the Rights Entitlement nor the Equity Shares have been, and will not be,
    registered under the US Securities Act or any United States state securities laws, and may not be offered,
    sold, resold or otherwise transferred within the United States or to the territories or possessions thereof or
    to, or for the account or benefit of, ―U.S. Persons‖ (as defined in Regulation S under the US Securities Act),
    except in a transaction exempt from, or in a transaction not subject to, the registration requirements of the
    US Securities Act. The Equity Shares referred to in this application are being offered in India but not in the
    United States of America. The offering to which this application relates is not, and under no circumstances
    is to be construed as, an offering of any shares or warrants or rights for sale in the United States, or the
    territories or possessions thereof, or as a solicitation therein of an offer to buy any of the said shares or
    warrants or rights. Accordingly, this application should not be forwarded to or transmitted in or to the
    United States at any time, except in a transaction exempt from, or in a transaction not subject to, the
    registration requirements of the US Securities Act. None of the Company, the Registrar, the Lead Manager
    or any other person acting on behalf of the Company will accept subscriptions from any person, or the agent
    of any person, who appears to be, or who the Company, the Registrar, the Lead Manager or any other


                                                       111
      person acting on behalf of the Company has reason to believe is, a resident of the United States and to
      whom an offer, if made, would result in requiring registration of this application with the United States
      Securities and Exchange Commission.

      I / We will not offer, sell or otherwise transfer any of the Equity Shares, which may be acquired by us in
      any jurisdiction or under any circumstances in which such offer or sale is not authorized or to any person to
      whom it is unlawful to make such offer, sale or invitation except under circumstances that will result in
      compliance with any applicable laws or regulations. We satisfy, and each account for which we are acting
      satisfies, all suitability standards for investors in investments of the type subscribed for herein imposed by
      the jurisdiction of our residence.

      I / We understand and agree that the Equity Shares may not be reoffered, resold, pledged or otherwise
      transferred except in an offshore transaction in compliance with Regulation S, or otherwise pursuant to an
      exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act.‖

Please note that those who are making the application otherwise than on original CAF shall not be entitled to
renounce their rights and should not utilize the original CAF for any purpose including renunciation even if it is
received subsequently. If the Investor violates such requirements, he/she shall face the risk of rejection of both
the applications. The Company shall refund such application amount to the Investor without any interest
thereon.

Last date of Application

The last date for submission of the duly filled in CAF is March 17, 2010.

If the CAF together with the amount payable is not received by the Banker to the Issue/ Registrar to the Issue on
or before the close of banking hours on the aforesaid last date or such date as may be extended by the Board/
Committee of Directors, the invitation to offer contained in the Letter of Offer shall be deemed to have been
declined and the Board/ Committee of Directors shall be at liberty to dispose off the Equity Shares hereby
offered, as provided under the section titled ―– Basis of Allotment‖ under this section titled ―Terms of the
Issue‖ on page 112.

Basis of Allotment
Subject to the provisions contained in the Letter of Offer, the Articles of Association of the Company and the
approval of the Designated Stock Exchange, the Board will proceed to allot the Equity Shares in the following
order of priority:

(a)       Full allotment to those Equity Shareholders who have applied for their Rights Entitlement either in full
          or in part and also to the Renouncee(s) who has / have applied for Equity Shares renounced in their
          favour, in full or in part.

(b)       If the shareholding of any of the Equity Shareholders is less than three (3) Equity Shares or not in
          multiples of 50, the fractional entitlement of such Equity Shareholders shall be ignored. Equity
          Shareholders whose fractional entitlements are being ignored will be given preference in the allotment
          of one (1) additional Equity Share each, if such Equity Shareholders have applied for additional Equity
          Shares. Allotment under this head shall be considered if there are any un-subscribed Equity Shares after
          allotment under (a) above. If the number of Equity Shares required for allotment under this head are
          more than the number of Equity Shares available after allotment under (a) above, the allotment would
          be made on a fair and equitable basis in consultation with the Designated Stock Exchange.

(c)      Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as
         part of the Issue and have also applied for additional Equity Shares. The allotment of such additional
         Equity Shares will be made as far as possible on an equitable basis having due regard to the number of
         Equity Shares held by them on the Record Date, provided there is an under-subscribed portion after
         making full allotment in (a) and (b) above. The allotment of such Equity Shares will be at the sole
         discretion of the Board / Committee of Directors in consultation with the Designated Stock Exchange,
         as a part of the Issue and will not be a preferential allotment.

(d)       Allotment to Renouncees who having applied for all the Equity Shares renounced in their favour, have
          applied for additional Equity Shares provided there is surplus available after making full allotment

                                                        112
        under (a), (b) and (c ) above. The allotment of such Equity Shares will be at the sole discretion of the
        Board/Committee of Directors in consultation with the Designated Stock Exchange, as a part of the
        Issue and not preferential allotment.

        After taking into account allotment to be made under (a) above, if there is any unsubscribed portion,
        the same shall be deemed to be ‗unsubscribed‘ for the purpose of regulation 3(1)(b) of the Takeover
        Code which would be available for allocation under (b), (c) and (d) above. The Promoter has confirmed
        that it intends to subscribe to the full extent of their Rights Entitlement in the Issue. Subject to
        compliance with the Takeover Code, the Promoter and promoter group reserve their right to subscribe
        for Equity Shares in this Issue by subscribing for renunciation, if any, made by any other shareholder.
        The Promoter has provided an undertaking dated January 20, 2010 to our Company to apply for
        additional Equity Shares in the Issue, to the extent of the unsubscribed portion of the Issue. As a result
        of this subscription and consequent allotment, the Promoter and promoter group may acquire Equity
        Shares over and above their Rights Entitlement in the Issue, which may result in an increase of the
        shareholding being above the current shareholding with the Rights Entitlement of Equity Shares under
        the Issue. This subscription and acquisition of additional Equity Shares by the Promoter and promoter
        group through this Issue, if any, will not result in change of control of the management of the Company
        and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other
        than meeting the requirements indicated in the section titled ―Objects of the Issue – Requirement of
        Funds and Use of Net Proceeds‖ on page 17), there is no other intention/purpose for this Issue,
        including any intention to delist our Company, even if, as a result of allotments to the Promoter and
        promoter group, in this Issue, the Promoter‘s shareholding in our Company exceeds their current
        shareholding. The Promoter and promoter group shall subscribe to such unsubscribed portion as per the
        relevant provisions of the law. Allotment to the Promoter and promoter group of any unsubscribed
        portion, over and above their Rights Entitlement shall be done in compliance with the Listing
        Agreement and the Takeover Code from time to time.

Procedure for Application through the Applications Supported by Blocked Amount (“ASBA”) Process

This section is for the information of the ASBA Investors proposing to subscribe to the Issue through the
ASBA Process. The Company and the Lead Manager are not liable for any amendments or modifications
or changes in applicable laws or regulations, which may occur after the date of this Letter of Offer.
Equity Shareholders who are eligible to apply under the ASBA Process are advised to make their
independent investigations and to ensure that the CAF is correctly filled up.

The list of banks who have been notified by the SEBI to act as SCSB for the ASBA Process are provided on
http://www.sebi.gov.in/pmd/scsb.html. For details on designated branches of SCSB collecting the CAF, please
refer the above mentioned SEBI link.

Equity Shareholders who are eligible to apply under the ASBA Process

The option of applying for Equity Shares in the Issue through the ASBA Process is only available to Equity
Shareholders of the Company on the Record Date and who:

    Are holding the Equity Shares in dematerialised form and have applied towards his/her Rights Entitlements
    or additional Equity Shares in the Issue in dematerialised form;
    Have not renounced his/her Rights Entitlements in full or in part;
    Are not a Renouncee;
    Are applying through a bank account maintained with one of the SCSBs.

CAF

The Registrar will despatch the CAF to all Equity Shareholders as per their Rights Entitlement on the Record
Date for the Issue. Those Equity Shareholders who wish to apply through the ASBA payment mechanism will
have to select for this mechanism in Part A of the CAF and provide necessary details.

Equity Shareholders desiring to use the ASBA Process are required to submit their applications by selecting the
ASBA Option in Part A of the CAF only or in plain paper application and indicate that they wish to apply
through the ASBA payment mechanism. On submission of the CAF after selecting the ASBA Option in Part A
or plain paper applications indicating application through the ASBA payment mechanism, the Equity

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Shareholders are deemed to have authorized (i) the SCSB to do all acts as are necessary to make the CAF in the
Issue, including blocking or unblocking of funds in the bank account maintained with the SCSB specified in the
CAF or the plain paper, transfer of funds to the separate bank account maintained by the Company as per the
provisions of section 73(3) of the Companies Act, on receipt of instruction from the Registrar to the Issue after
finalization of the basis of Allotment; and (ii) the Registrar to the Issue to issue instructions to the SCSB to
remove the block on the funds in the bank account specified in the CAF or plain paper, upon finalization of the
basis of Allotment and to transfer the requisite funds to the separate bank account maintained by the Company
as per the provisions of Section 73(3) of the Companies Act.

Application in electronic mode will only be available with such SCSB who provides such facility. The Equity
Shareholder shall submit the CAF / plain paper application to the SCSB for authorizing such SCSB to block an
amount equivalent to the amount payable on the application in the said bank account maintained with the same
SCSB. However, no more than five (5) applications (including CAF and plain paper application) can be
submitted per bank account in the Issue. In case of withdrawal / failure of the Issue, the Lead Manager, through
the Registrar to the Issue, shall notify the SCSBs to unblock the blocked amount of the Equity Shareholder
applying through ASBA within one (1) day from the day of receipt of such notification.

Acceptance of the Issue

You may accept the Issue and apply for the Equity Shares either in full or in part, without renouncing the
balance, by filling Part A of the respective CAFs sent by the Registrar, selecting the ASBA process option in
Part A of the CAF and submit the same to the SCSB before the close of the banking hours on or before the Issue
Closing Date or such extended time as may be specified by the Board of Directors of the Company in this
regard.

Mode of payment

The Equity Shareholder applying under the ASBA Process agrees to block the entire amount payable on
application with the submission of the CAF, by authorizing the SCSB to block an amount, equivalent to the
amount payable on application, in a bank account maintained with the SCSB.

After verifying that sufficient funds are available in the bank account provided in the CAF, the SCSB shall
block an amount equivalent to the amount payable on application mentioned in the CAF until it receives
instructions from the Registrars. Upon receipt of intimation from the Registrar, the SCSBs shall transfer such
amount as per Registrar‘s instruction allocable to the Equity Shareholders applying under the ASBA Process
from bank account with the SCSB mentioned by the Equity Shareholder in the CAF. This amount will be
transferred in terms of the SEBI (ICDR) Regulations, into the separate bank account maintained by the
Company as per the provisions of Section 73(3) of the Companies Act. The balance amount remaining after the
finalization of the basis of allotment shall be either unblocked by the SCSBs or refunded to the Investors by the
Registrar on the basis of the instructions issued in this regard by the Registrar to the Issue and the Lead
Managers to the respective SCSB.

The Equity Shareholders applying under the ASBA Process would be required to block the entire amount
payable on their application at the time of the submission of the CAF.

The SCSB may reject the application at the time of acceptance of CAF if (i) the bank account with the SCSB
details of which have been provided by the Equity Shareholder in the CAF does not have sufficient funds
equivalent to the amount payable on application mentioned in the CAF or (ii) more than five (5) applications
(including CAF and plain paper application) are submitted per account held with the SCSB in the Issue.
Subsequent to the acceptance of the application by the SCSB, the Company would have a right to reject the
application only on technical grounds.

Options available to the Equity Shareholders applying under the ASBA Process

The summary of options available to the Equity Shareholders is presented below. You may exercise any of the
following options with regard to the Equity Shares, using the respective CAFs received from Registrar:




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                        Option Available                                        Action Required

1.   Accept whole or part of your Rights Entitlement         Fill in and sign Part A of the CAF (All joint holders
     without renouncing the balance.                         must sign)

2.   Accept your Rights Entitlement in full and apply for    Fill in and sign Part A of the CAF including Block III
     additional Equity Shares                                relating to the acceptance of entitlement and Block
                                                             IV relating to additional Equity Shares (All joint
                                                             holders must sign)

The Equity Shareholder applying under the ASBA Process will need to select the ASBA option process in
the CAF and provide required necessary details. However, in cases where this option is not selected, but
the CAF is tendered to the SCSB with the relevant details required under the ASBA process option and
SCSB blocks the requisite amount, then that CAF would be treated as if the Equity Shareholder has
selected to apply through the ASBA process option.

Additional Equity Shares

You are eligible to apply for additional Equity Shares over and above the number of Equity Shares that you are
entitled too, provided that you have applied for all the Equity Shares (as the case may be) offered without
renouncing them in whole or in part in favour of any other person(s). Applications for additional Equity Shares
shall be considered and allotment shall be made at the sole discretion of the Board, in consultation with the
Designated Stock Exchange and in the manner prescribed under the section titled ―—Basis of Allotment‖ under
this section titled ―Terms of the Issue‖ on page 112.

If you desire to apply for additional Equity Shares please indicate your requirement in the place provided for
additional Securities in Part A of the CAF.

Renunciation under the ASBA Process

Renouncees cannot participate in the ASBA Process.

Application on Plain Paper

An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate
CAF and who is applying under the ASBA Process may make an application to subscribe to the Issue on plain
paper. Equity Shareholders applying on the basis of a plain paper application are required to indicate their
choice of applying under the ASBA Process.

The envelope should be superscribed ―Swaraj Mazda – Rights Issue‖ and should be postmarked in India. The
application on plain paper, duly signed by the Investors including joint holders, in the same order as per
specimen recorded with the Company, must reach the Designated Branch / corporate branch of the SCSBs
before the Issue Closing Date and should contain the following particulars:

         Name of Issuer, being Swaraj Mazda Limited;
         Name and address of the Equity Shareholder including joint holders;
         Registered Folio Number / DP and Client ID no.;
         Number of Equity Shares held as on Record Date;
         Number of Equity Shares entitled;
         Number of Equity Shares applied for;
         Number of additional Equity Shares applied for, if any;
         Total number of Equity Shares applied for;
         Total amount paid at the rate of Rs. 200 per Equity Share;
         Particulars of cheque / draft;
         Except for applications on behalf of the Central or State Government and the officials appointed by the
         courts, PAN number of the Investor and for each Investor in case of joint names, irrespective of the
         total value of the Equity Shares applied for pursuant to the Issue;



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          Authorizing such SCSB to block an amount equivalent to the amount payable on the application in
          such bank account maintained with the same SCSB;
          A representation that the Equity Shareholder is not a ―U.S. Person‖ (as defined in Regulation S under
          the Securities Act);
          Signature of the Equity Shareholders to appear in the same sequence and order as they appear in the
          records of the Company; and
          Additionally, Non Resident applicants shall include the following:

      ―I / We understand that neither the Rights Entitlement nor the Equity Shares have been, and will not be,
      registered under the US Securities Act or any United States state securities laws, and may not be offered,
      sold, resold or otherwise transferred within the United States or to the territories or possessions thereof or
      to, or for the account or benefit of, ―U.S. Persons‖ (as defined in Regulation S under the US Securities Act),
      except in a transaction exempt from, or in a transaction not subject to, the registration requirements of the
      US Securities Act. The Equity Shares referred to in this application are being offered in India but not in the
      United States of America. The offering to which this application relates is not, and under no circumstances
      is to be construed as, an offering of any shares or warrants or rights for sale in the United States, or the
      territories or possessions thereof, or as a solicitation therein of an offer to buy any of the said shares or
      warrants or rights. Accordingly, this application should not be forwarded to or transmitted in or to the
      United States at any time, except in a transaction exempt from, or in a transaction not subject to, the
      registration requirements of the US Securities Act. None of the Company, the Registrar, the Lead Manager
      or any other person acting on behalf of the Company will accept subscriptions from any person, or the agent
      of any person, who appears to be, or who the Company, the Registrar, the Lead Manager or any other
      person acting on behalf of the Company has reason to believe is, a resident of the United States and to
      whom an offer, if made, would result in requiring registration of this application with the United States
      Securities and Exchange Commission.

      I / We will not offer, sell or otherwise transfer any of the Equity Shares, which may be acquired by us in
      any jurisdiction or under any circumstances in which such offer or sale is not authorized or to any person to
      whom it is unlawful to make such offer, sale or invitation except under circumstances that will result in
      compliance with any applicable laws or regulations. We satisfy, and each account for which we are acting
      satisfies, all suitability standards for investors in investments of the type subscribed for herein imposed by
      the jurisdiction of our residence.

      I / We understand and agree that the Equity Shares may not be reoffered, resold, pledged or otherwise
      transferred except in an offshore transaction in compliance with Regulation S, or otherwise pursuant to an
      exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act.‖

Option to receive Securities in Dematerialized Form

EQUITY SHAREHOLDERS UNDER THE ASBA PROCESS MAY PLEASE NOTE THAT THE
EQUITY SHARES OF THE COMPANY UNDER THE ASBA PROCESS CAN ONLY BE ALLOTTED
IN DEMATERIALIZED FORM AND TO THE SAME DEPOSITORY ACCOUNT IN WHICH THE
EQUITY SHARES ARE BEING HELD ON RECORD DATE.

General instructions for Equity Shareholders applying under the ASBA Process

(a)       Please read the instructions printed on the respective CAF carefully.

(b)       Application should be made on the printed CAF only and should be completed in all respects. The CAF
          found incomplete with regard to any of the particulars required to be given therein, and/or which are
          not completed in conformity with the terms of this Letter of Offer are liable to be rejected. The CAF /
          plain paper application must be filled in English.

(c)       The CAF / plain paper application in the ASBA Process should be submitted at a Designated Branch of
          the SCSB and whose bank account details are provided in the CAF and not to the Bankers to the Issue /
          collecting banks (assuming that such collecting bank is not a SCSB), to the Company or Registrar or
          Lead Manager to the Issue.

(d)       All applicants, and in the case of application in joint names, each of the joint applicants, should
          mention his/her PAN number allotted under the I.T Act, irrespective of the amount of the application.

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        Except for applications on behalf of the Central or State Government and the officials appointed by the
        courts, CAFs / plain paper applications without PAN will be considered incomplete and are liable
        to be rejected.

(e)     All payments will be made by blocking the amount in the bank account maintained with the SCSB.
        Cash payment is not acceptable. In case payment is affected in contravention of this, the application
        may be deemed invalid and the application money will be refunded and no interest will be paid thereon.

(f)     Signatures should be either in English or Hindi or in any other language specified in the Eighth
        Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression
        must be attested by a Notary Public or a Special Executive Magistrate under his / her official seal. The
        Equity Shareholders must sign the CAF / plain paper application as per the specimen signature
        recorded with the Company or Depositories.

(g)     In case of joint holders, all joint holders must sign the relevant part of the CAF / plain paper application
        in the same order and as per the specimen signature(s) recorded with the Company. In case of joint
        applicants, reference, if any, will be made in the first applicant‘s name and all communication will be
        addressed to the first applicant.

(h)     All communication in connection with application for the Equity Shares, including any change in
        address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of
        allotment in this Issue quoting the name of the first / sole applicant Equity Shareholder, folio numbers
        and CAF number.

(i)     Only the person or persons to whom the Equity Shares have been offered and not renouncee(s) shall be
        eligible to participate under the ASBA process.

Do’s:

a.      Ensure that the ASBA Process option is selected in part A of the CAF and necessary details are filled
        in. In case of non-receipt of the CAF, the application can be made on plain paper indicating application
        through the ASBA payment mechanism with all necessary details as indicated under the heading
        ―Application on Plain Paper‖ under this section titled ―Terms of the Issue‖on page 115.

b.      Ensure that you submit your application in physical mode only. Electronic mode is only available with
        certain SCSBs and not all SCSBs and you should ensure that your SCSB offers such facility to you.

c.      Ensure that the details about your Depository Participant and beneficiary account are correct and the
        beneficiary account is activated as Equity Shares will be allotted in the dematerialized form only.

d.      Ensure that the CAFs / plain paper application are submitted at the SCSBs and details of the correct
        bank account have been provided in the CAF.

e.      Ensure that there are sufficient funds (equal to {number of Equity Shares as the case may be applied
        for} X {Issue Price of Equity Shares, as the case may be}) available in the bank account maintained
        with the SCSB mentioned in the CAF before submitting the CAF to the respective Designated Branch
        of the SCSB.

f.      Ensure that you have authorised the SCSB for blocking funds equivalent to the total amount payable
        on application mentioned in the CAF / plain paper application, in the bank account maintained with the
        respective SCSB, of which details are provided in the CAF / plain paper application and have signed
        the same.

g.      Ensure that you receive an acknowledgement from the SCSB for your submission of the CAF / plain
        paper application in physical form or electronic mode.

h.      Except for applications on behalf of the Central or State Government and the officials appointed by the
        courts, each applicant should mention their PAN allotted under the I.T Act.




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i.        Ensure that the name(s) given in the CAF / plain paper application is exactly the same as the name(s)
          in which the beneficiary account is held with the Depository Participant. In case the CAF / plain paper
          applicationis submitted in joint names, ensure that the beneficiary account is also held in same joint
          names and such names are in the same sequence in which they appear in the CAF / plain paper
          application.

j.        Ensure that the Demographic Details are updated, true and correct, in all respects.

Don’ts:

1)        Do not apply on duplicate CAF after you have submitted a CAF to a Designated Branch of the SCSB.

2)        Do not pay the amount payable on application in cash, by money order or by postal order.

3)        Do not send your physical CAFs / plain paper applications to the Lead Manager to the Issue / Registrar
          / collecting banks (assuming that such collecting bank is not a SCSB) / to a branch of the SCSB which
          is not a Designated Branch of the SCSB / Company; instead submit the same to a Designated Branch
          of the SCSB only.

4)        Do not submit the GIR number instead of the PAN as the application is liable to be rejected on this
          ground.

5)        Do not instruct your respective banks to release the funds blocked under the ASBA Process.

6)        Do not submit more than five (5) applications (including CAF and plain paper application) per bank
          account maintained with the SCSB for the Issue.

Grounds for Technical Rejection under the ASBA Process

In addition to the grounds listed under ―- Grounds for Technical Rejection‖ under this section titled ―Terms of
the Issue‖ on page 124, applications under the ABSA Process are liable to be rejected on the following grounds:
a)    Application for Rights Entitlements or additional shares in physical form.
b)    DP ID and Client ID mentioned in CAF / plain paper application not matching with the DP ID and Client
      ID records available with the Registrar.
c)    Sending CAF / plain paper application to the Lead Manager / Registrar / collecting bank (assuming that
      such collecting bank is not a SCSB) / to a branch of a SCSB which is not a Designated Branch of the
      SCSB / Company.
d)    Renouncee applying under the ASBA Process.
e)    Insufficient funds are available with the SCSB for blocking the amount.
f)    Funds in the bank account with the SCSB whose details are mentioned in the CAF / plain paper
      application having been frozen pursuant to regulatory orders.
g)    Account holder not signing the CAF / plain paper application or declaration mentioned therein.
h)    Submitting the GIR number instead of the PAN.
i)    Application on split form.
j)    Do not submit more than five (5) applications (including CAF and plain paper application) per bank
      account maintained with the SCSB for the Issue.
Depository account and bank details for Equity Shareholders applying under the ASBA Process

IT IS MANDATORY FOR ALL THE EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA
PROCESS TO RECEIVE THEIR EQUITY SHARES IN DEMATERIALISED FORM. ALL EQUITY
SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS SHOULD MENTION THEIR
DEPOSITORY PARTICIPANT‟S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION
NUMBER AND BENEFICIARY ACCOUNT NUMBER IN THE CAF / PLAIN PAPER APPLICATION.
EQUITY SHAREHOLDERS APPLYING UNDER THE ASBA PROCESS MUST ENSURE THAT THE


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NAME GIVEN IN THE CAF / PLAIN PAPER APPLICATION IS EXACTLY THE SAME AS THE
NAME IN WHICH THE DEPOSITORY ACCOUNT IS HELD. IN CASE THE CAF / PLAIN PAPER
APPLICATION IS SUBMITTED IN JOINT NAMES, IT SHOULD BE ENSURED THAT THE
DEPOSITORY ACCOUNT IS ALSO HELD IN THE SAME JOINT NAMES AND ARE IN THE SAME
SEQUENCE IN WHICH THEY APPEAR IN THE CAF / PLAIN PAPER APPLICATION.

Equity Shareholders applying under the ASBA Process should note that on the basis of name of these
Equity Shareholders, Depository Participant‟s name and identification number and beneficiary account
number provided by them in the CAF / plain paper application, the Registrar to the Issue will obtain
from the Depository demographic details of these Equity Shareholders such as address, bank account
details for printing on refund orders and occupation (“Demographic Details”). Hence, Equity
Shareholders applying under the ASBA Process should carefully fill in their Depository Account details
in the CAF / plain paper application.

These Demographic Details would be used for all correspondence with such Equity Shareholders including
mailing of the letters intimating unblock of bank account of the respective Equity Shareholder. The
Demographic Details given by Equity Shareholders in the CAF / plain paper application would not be used for
any other purposes by the Registrar. Hence, Equity Shareholders are advised to update their Demographic
Details as provided to their Depository Participants.

By signing the CAFs / plain paper applications, the Equity Shareholders applying under the ASBA Process
would be deemed to have authorized the Depositories to provide, upon request, to the Registrar to the Issue, the
required Demographic Details as available on its records.

Letters intimating allotment and unblocking or refund (if any) would be mailed at the address of the
Equity Shareholder applying under the ASBA Process as per the Demographic Details received from the
Depositories. Refunds, if any, will be made directly to the bank account in the SCSB and which details are
provided in the CAF/plain paper application and not the bank account linked to the DP ID. Equity
Shareholders applying under the ASBA Process may note that delivery of letters intimating unblocking of
bank account may get delayed if the same once sent to the address obtained from the Depositories are
returned undelivered. In such an event, the address and other details given by the Equity Shareholder in
the CAF / plain paper application would be used only to ensure dispatch of letters intimating unblocking
of bank account.

Note that any such delay shall be at the sole risk of the Equity Shareholders applying under the ASBA
Process and none of the Company, the SCSBs or the Lead Managers shall be liable to compensate the
Equity Shareholder applying under the ASBA Process for any losses caused due to any such delay or
liable to pay any interest for such delay.

In case no corresponding record is available with the Depositories that matches three (3) parameters, namely,
names of the Equity Shareholders (including the order of names of joint holders), the DP ID and the beneficiary
account number, then such applications are liable to be rejected.

Transfer of Funds

The Registrar to the Issue shall instruct the relevant SCSB to unblock the funds in the relevant ASBA bank
accounts for (i) transfer of requisite funds to the separate bank account maintained by the Company as per the
provisions of section 73(3) of the Companies Act, (ii) rejected / unsuccessful ASBAs.

In case of failure or withdrawal of the Issue, on receipt of appropriate instructions from the Lead Manager
through the Registrar to the Issue, the SCSBs shall unblock the bank accounts latest by the next day of receipt of
such information.

Underwriting

The present Issue is not underwritten.




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Issue Schedule

 Issue Opening Date:                                                                                March 3, 2010
 Last date for receiving requests for SAFs:                                                        March 10, 2010
 Issue Closing Date:                                                                               March 17, 2010

The Board may however decide to extend the Issue period as it may determine from time to time but not
exceeding 30 days from the Issue Opening Date.
Allotment Advices / Refund Orders

The Company will issue and dispatch allotment advice / share certificates / demat credit and /or letters of regret
along with refund order or credit the allotted Equity Shares to the respective beneficiary accounts, if any, within
a period of 15 days from the Issue Closing Date. If such money is not repaid within eight (8) days from the day
the Company becomes liable to repay it, (i.e. 15 days after the Issue Closing Date or the date of the refusal by
the Stock Exchange(s), whichever is earlier) the Company and every Director of the Company who is an officer
in default shall, on and from expiry of eight (8) days, be jointly and severally liable to pay the money with
interest as prescribed under Section 73 of the Companies Act.
Investors residing at any of the centers where clearing houses are managed by the RBI will get refunds through
Electronic Clearing Service (―ECS‖) except where Investors are otherwise disclosed as applicable/eligible to get
refunds through direct credit and real time gross settlement (―RTGS‖).

In case of those Investors who have opted to receive Equity Shares in dematerialized form using electronic
credit under the depository system, advice regarding their credit of the securities shall be given separately.
Investors to whom refunds are made through electronic transfer of funds will be sent a letter through ordinary
post intimating them about the mode of credit of refund within 15 days of the Issue Closing Date.

In case of those Investors who have opted to receive Equity Shares in physical form and the Company issues
letter of allotment, the corresponding share certificates will be kept ready within three (3) months from the date
of allotment thereof or such extended time as may be approved by the Company Law Board under Section 113
of the Companies Act or other applicable provisions, if any. Investors are requested to preserve such letters of
allotment, which would be exchanged later for the share certificates. For more information, see ―Terms of the
Issue‖ on page 105.

The letter of allotment / refund order exceeding Rs. 1,500.00 would be sent by registered post/speed post to the
sole / first Investors registered address. Refund orders up to the value of Rs. 1,500.00 would be sent under
certificate of posting. Such refund orders would be payable at par at all places where the applications were
originally accepted. The same would be marked ‗Account Payee only‘ and would be drawn in favour of the
sole/first Investor. Adequate funds would be made available to the Registrar to the Issue for this purpose.

Payment of Refund

Mode of making refunds

The payment of refund, if any, would be done through any of the following modes:

1.   ECS / NECS – Payment of refund would be done through ECS / NECS for Investors having an account at
     any of the centers specified by the RBI. This mode of payment of refunds would be subject to availability of
     complete bank account details including the MICR code as appearing on a cheque leaf, from the
     Depositories. The payment of refunds is mandatory for Investors having a bank account at any centre where
     ECS / NECS facility has been made available by the RBI (subject to availability of all information for
     crediting the refund through ECS / NECS), except where the Investor, being eligible, opts to receive refund
     through National Electronic Fund Transfer (―NEFT‖), direct credit or RTGS.

2.   NEFT – Payment of refund shall be undertaken through NEFT wherever the Investors‘ bank has been
     assigned the Indian Financial System Code (IFSC), which can be linked to a MICR, if any, available to that
     particular bank branch. IFSC Code will be obtained from the website of RBI as on a date immediately prior
     to the date of payment of refund, duly mapped with MICR numbers. Wherever the Investors have registered
     their nine digit MICR number and their bank account number while opening and operating the demat
     account, the same will be duly mapped with the IFSC Code of that particular bank branch and the payment
     of refund will be made to the Investors through this method.

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3.   Direct Credit – Investors having bank accounts with the Bankers to the Issue shall be eligible to receive
     refunds through direct credit. Charges, if any, levied by the relevant bank(s) for the same would be borne by
     the Company.

4.   RTGS – Investors having a bank account at any of the centres specified by the RBI where such facility has
     been made available and whose refund amount exceeds Rs. 10.00 lacs, have the option to receive refund
     through RTGS. Such eligible Investors who indicate their preference to receive refund through RTGS are
     required to provide the IFSC code in the CAF. In the event the same is not provided, refund shall be made
     through ECS. Charges, if any, levied by the refund bank(s) for the same would be borne by the Company.
     Charges, if any, levied by the Investor‘s bank receiving the credit would be borne by the Investor.

5.   For all other Investors, including those who have not updated their bank particulars with the MICR code,
     the refund orders will be despatched under certificate of posting for value up to Rs. 1,500.00 and through
     Speed Post/ Registered Post for refund orders of Rs. 1,500.00 and above. Such refunds will be made by
     cheques, pay orders or demand drafts drawn in favour of the sole/first Investor and payable at par.

6.   Credit of refunds to Investors in any other electronic manner permissible under the banking laws, which are
     in force, and is permitted by the SEBI from time to time.

Printing of Bank Particulars on Refund Orders

As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement,
the particulars of the Investor‘s bank account are mandatorily required to be given for printing on the refund
orders. Bank account particulars will be printed on the refund orders/refund warrants which can then be
deposited only in the account specified. The Company will in no way be responsible if any loss occurs through
these instruments falling into improper hands either through forgery or fraud.

Allotment advice / Share Certificates / Demat Credit

Allotment advice/ share certificates/ demat credit or letters of regret will be dispatched to the registered address
of the first named Investor or respective beneficiary accounts will be credited within 15 days, from the Issue
Closing Date. In case the Company issues allotment advice, the relative shared certificates will be dispatched
within one (1) month from the date of the allotment. Allottees are requested to preserve such allotment advice (if
any) to be exchanged later for share certificates.

Option to receive Equity Shares in Dematerialized Form

Investors to the Equity Shares of the Company issued through this Issue shall be allotted the securities in
dematerialized (electronic) form at the option of the Investor. The Company signed a tripartite agreement with
NSDL on June 12, 2000, which enables the Investors to hold and trade in securities in a dematerialized form,
instead of holding the securities in the form of physical certificates. The Company has also signed a tripartite
agreement with CDSL on June 21, 2000, which enables the Investors to hold and trade in securities in a
dematerialized form, instead of holding the securities in the form of physical certificates.

In this Issue, the allottees who have opted for Equity Shares in dematerialized form will receive their Equity
Shares in the form of an electronic credit to their beneficiary account as given in the CAF, after verification with
a depository participant. Investor will have to give the relevant particulars for this purpose in the appropriate
place in the CAF. Allotment advice, refund order (if any) would be sent directly to the Investor by the Registrar
to the Issue but the Investor‘s depository participant will provide to him the confirmation of the credit of such
Equity Shares to the Investor‘s depository account. CAFs, which do not accurately contain this information, will
be given the Equity Shares in physical form. No separate CAFs for Equity Shares in physical and/or
dematerialized form should be made. If such CAFs are made, the CAFs for physical Equity Shares will be
treated as multiple CAFs and is liable to be rejected. In case of partial allotment, allotment will be done in demat
option for the Equity Shares sought in demat and balance, if any, will be allotted in physical Equity Shares.

INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF THE COMPANY CAN BE
TRADED ON THE STOCK EXCHANGES ONLY IN DEMATERIALIZED FORM.

Procedure for availing the facility for allotment of Equity Shares in this Issue in the electronic form is as under:

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      Open a beneficiary account with any depository participant (care should be taken that the beneficiary
      account should carry the name of the holder in the same manner as is exhibited in the records of the
      Company. In the case of joint holding, the beneficiary account should be opened carrying the names of the
      holders in the same order as with the Company). In case of Investors having various folios in the Company
      with different joint holders, the Investors will have to open separate accounts for such holdings. Those
      Equity Shareholders who have already opened such beneficiary account(s) need not adhere to this step.

      For Equity Shareholders already holding Equity Shares of the Company in dematerialized form as on the
      Record Date, the beneficial account number shall be printed on the CAF. For those who open accounts later
      or those who change their accounts and wish to receive their Equity Shares pursuant to this Issue by way of
      credit to such account, the necessary details of their beneficiary account should be filled in the space
      provided in the CAF. It may be noted that the allotment of Equity Shares arising out of this Issue may be
      made in dematerialized form even if the original Equity Shares of the Company are not dematerialized.
      Nonetheless, it should be ensured that the depository account is in the name(s) of the Equity Shareholders
      and the names are in the same order as in the records of the Company.

      Responsibility for correctness of information (including Investor‘s age and other details) filled in the CAF
      vis-à-vis such information with the Investor‘s depository participant, would rest with the Investor. Investors
      should ensure that the names of the Investors and the order in which they appear in CAF should be the same
      as registered with the Investor‘s depository participant.
      If incomplete / incorrect beneficiary account details are given in the CAF the Investor will get Equity
      Shares in physical form.
      The Equity Shares allotted to applicants opting for issue in dematerialized form, would be directly credited
      to the beneficiary account as given in the CAF after verification. Allotment advice, refund order (if any)
      would be sent directly to the applicant by the Registrar to the Issue but the applicant‘s depository
      participant will provide to him the confirmation of the credit of such Equity Shares to the applicant‘s
      depository account.

      Renouncees will also have to provide the necessary details about their beneficiary account for allotment of
      Equity Shares in this Issue. In case these details are incomplete or incorrect, the application is liable to be
      rejected.

General instructions for Investors

(a)       Please read the instructions printed on the enclosed CAF carefully.

(b)       Application should be made on the printed CAF, provided by the Company except as mentioned under
          the head ―- Application on Plain Paper‖ under this section titled ―Terms of the Issue‖ on page 111
          and should be completed in all respects. The CAF found incomplete with regard to any of the
          particulars required to be given therein, and/ or which are not completed in conformity with the terms
          of the Letter of Offer are liable to be rejected and the money paid, if any, in respect thereof will be
          refunded without interest and after deduction of bank commission and other charges, if any. The CAF
          must be filled in English and the names of all the Investors, details of occupation, address, father‘s /
          husband‘s name must be filled in block letters.

          The CAF together with cheque / demand draft should be sent to the Bankers to the Issue / collecting
          bank or to the Registrar to the Issue and not to the Company or Lead Manager to the Issue. Investors
          residing at places other than cities where the branches of the Bankers to the Issue have been authorized
          by the Company for collecting applications, will have to make payment by Demand Draft payable at
          Mumbai of an amount net of bank and postal charges and send their CAFs to the Registrar to the Issue
          by registered post / speed post. If any portion of the CAF is / are detached or separated, such
          application is liable to be rejected.

          Applications where separate cheques / demand drafts are not attached for amounts to be paid for
          Equity Shares are liable to be rejected.

(c)       Except for applications on behalf of the Central and State Government and the officials appointed by
          the courts, all Investors, and in the case of application in joint names, each of the joint Investors, should

                                                         122
      mention his / her PAN number allotted under the I.T Act, irrespective of the amount of the application.
      CAFs without PAN will be considered incomplete and are liable to be rejected.

(d)   Investors are advised that it is mandatory to provide information as to their savings / current account
      number and the name of the bank with whom such account is held in the CAF to enable the Registrar to
      the Issue to print the said details in the refund orders, if any, after the names of the payees. Application
      not containing such details is liable to be rejected.

(e)   All payment should be made by cheque / demand draft only. Application through the ASBA process as
      mentioned above is acceptable. Cash payment is not acceptable.In case payment is effected in
      contravention of this, the application may be deemed invalid and the application money will be
      refunded and no interest will be paid thereon.

(f)   Signatures should be either in English or Hindi or in any other language specified in the Eighth
      Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression
      must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The
      Equity Shareholders must sign the CAF as per the specimen signature recorded with the Company.

(g)   In case of an application under power of attorney or by a body corporate or by a society, a certified true
      copy of the relevant power of attorney or relevant resolution or authority to the signatory to make the
      relevant investment under this Issue and to sign the application and a copy of the Memorandum and
      Articles of Association and / or bye laws of such body corporate or society must be lodged with the
      Registrar to the Issue giving reference of the serial number of the CAF. In case the above referred
      documents are already registered with the Company, the same need not be a furnished again. In case
      these papers are sent to any other entity besides the Registrar to the Issue or are sent after the Issue
      Closing Date, then the application is liable to be rejected. In no case should these papers be attached to
      the application submitted to the Bankers to the Issue.

(h)   In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as
      per the specimen signature(s) recorded with the Company. Further, in case of joint Investors who are
      Renouncees, the number of Investors should not exceed three. In case of joint Investors, reference, if
      any, will be made in the first Investor‘s name and all communication will be addressed to the first
      Investor.

(i)   Application(s) received from NRs / NRIs, or persons of Indian origin residing abroad for allotment of
      Equity Shares shall, inter alia, be subject to conditions, as may be imposed from time to time by the
      RBI under FEMA in the matter of refund of application money, allotment of Equity Shares, subsequent
      issue and allotment of Equity Shares, interest, export of share certificates, etc. In case a NR or NRI
      Equity Shareholder has specific approval from the RBI, in connection with his shareholding, he should
      enclose a copy of such approval with the CAF.

(j)   All communication in connection with application for the Equity Shares, including any change in
      address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of
      allotment in this Issue quoting the name of the first/sole Investor, folio numbers and CAF number.
      Please note that any intimation for change of address of Equity Shareholders, after the date of
      allotment, should be sent to the Registrar and Transfer Agents of the Company, in the case of Equity
      Shares held in physical form and to the respective depository participant, in case of Equity Shares held
      in dematerialized form.

(k)   SAFs cannot be re-split.

(l)   Only the person or persons to whom Equity Shares have been offered and not Renouncee(s) shall be
      entitled to obtain SAFs.

(m)   Investors must write their CAF number at the back of the cheque /demand draft.

(n)   Only one mode of payment per application should be used. The payment must be by cheque / demand
      draft drawn on any of the banks, including a co-operative bank, which is situated at and is a member or
      a sub member of the Bankers Clearing House located at the centre indicated on the reverse of the CAF
      where the application is to be submitted.

                                                     123
(o)       A separate cheque / draft must accompany each CAF. Outstation cheques / demand drafts or post-dated
          cheques and postal / money orders will not be accepted and applications accompanied by such cheques
          / demand drafts / money orders or postal orders will be rejected. The Registrar will not accept payment
          against application if made in cash. (For payment against application in cash please refer point (e)
          above).

(p)       No receipt will be issued for application money received. The Bankers to the Issue / collecting bank/
          Registrar will acknowledge receipt of the same by stamping and returning the acknowledgment slip at
          the bottom of the CAF.

Grounds for Technical Rejections

Investors are advised to note that applications are liable to be rejected on technical grounds, including the
following:

      Amount paid does not tally with the amount payable for;
      Bank account details (for refund) are not given;
      Age of first Investor not given;
      Except for CAFs on behalf of the Central or State Government and the officials appointed by the courts,
      PAN number not given for application of any value;
      In case of CAF under power of attorney or by limited companies, corporate, trust, relevant documents are
      not submitted;
      If the signature of the Equity Shareholder does not match with the one given on the CAF and for
      renouncee(s) if the signature does not match with the records available with their depositories;
      If the Investors desires to have Equity Shares in electronic form, but the CAF does not have the Investor‘s
      depository account details;
      CAFs are not submitted by the Investors within the time prescribed as per the CAF and the Letter of Offer;
      CAFs not duly signed by the sole/joint Investors;
      CAFs by OCBs;
      CAFs accompanied by Stockinvest;
      In case no corresponding record is available with the depositories that matches three parameters, namely,
      names of the Investors (including the order of names of joint holders), the Depositary Participant‘s identity
      (DP ID) and the beneficiary‘s identity;
      CAFs that do not include the certification set out in the CAF to the effect that the subscriber is not a ―U.S.
      person‖ (as defined in Regulation S), and does not have a registered address (and is not otherwise located)
      in the United States and is authorized to acquire the rights and the securities in compliance with all
      applicable laws and regulations;

      CAFs which have evidence of being executed in / dispatched from the US;
      CAFs by ineligible non-residents (including on account of restriction or prohibition under applicable local
      laws) and where a registered address in India has not been provided;
      CAFs where the Company believes that CAF is incomplete or acceptance of such CAF may infringe
      applicable legal or regulatory requirements;
      In case the GIR number is submitted instead of the PAN;
      Applications by renouncees who are persons not competent to contract under the Indian Contract Act, 1872,
      including minors;
      Multiple CAFs, including cases where an Investor submits CAFs along with a plain paper application;




                                                          124
    Applications where separate cheques/ demand drafts are not attached for amounts to be paid for Equity
    Shares.
Please read the Letter of Offer and the instructions contained herein and in the CAF carefully before filling in
the CAF. The instructions contained in the CAF are each an integral part of the Letter of Offer and must be
carefully followed. CAF is liable to be rejected for any non-compliance of the provisions contained in the Letter
of Offer or the CAF.

Mode of payment for Resident Equity Shareholders / Investors

    All cheques / drafts accompanying the CAF should be drawn in favour of the collecting bank (specified on
    the reverse of the CAF), crossed ‗A/c Payee only‘ and marked ‗Swaraj Mazda - Rights Issue‘; and
    Investors residing at places other than places where the bank collection centres have been opened by the
    Company for collecting applications, are requested to send their CAFs together with Demand Draft for the
    full application amount, net of bank and postal charges favouring the Bankers to the Issue, crossed ‗A/c
    Payee only‘ and marked ‗Swaraj Mazda - Rights Issue‘ payable at Mumbai directly to the Registrar to the
    Issue by registered post so as to reach them on or before the Issue Closing Date. The Company or the
    Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any.

Investment by FIIs

In accordance with the current regulations, the following restrictions are applicable for investment by FIIs:

The Issue of Equity Shares under this Issue to a single FII should not exceed 10% of the post-issue paid up
capital of the Company. In respect of an FII investing in the Equity Shares on behalf of its sub-accounts the
investment on behalf of each sub-account shall not exceed 5% of the total paid up capital of the Company. In
accordance with foreign investment limits applicable to the Company, the total FII investment cannot exceed
24% of the total paid up capital of the Company. The limit may be increased further if the shareholders so
consent by way of a special resolution. The shareholders of the Company pursuant to an EGM dated August 28,
2004 increased the limit of FII shareholding in the Company to 49%.

Investment by NRIs

Investments by NRIs are governed by the Portfolio Investment Scheme under Regulation 5(3)(i) of the Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000.

Procedure for Applications by Mutual Funds

A separate application can be made in respect of each scheme of an Indian mutual fund registered with the SEBI
and such applications shall not be treated as multiple applications. The applications made by asset management
companies or custodians of a mutual fund should clearly indicate the name of the concerned scheme for which
the application is being made.

Mode of payment for Non-Resident Equity Shareholders / Investors

As regards the application by non-resident Equity Shareholders, the following conditions shall apply:

         Individual non-resident Indian applicants can obtain application form at the following address:

         Link Intime India Private Limited
         C-13, Pannalal Silk Mills Compound
         L.B.S Marg, Bhandup (West)
         Mumbai - 400 078
         India
         Tel: (91 22) 2596 0320
         Fax: (91 22) 2596 0329
         Email: sml.rights@linkintime.co.in
         Website: www.linkintime.co.in
         Contact Person: Mr. Praveen Kasare


                                                       125
         Payment by non-residents must be made by demand draft payable at Mumbai / cheque payable drawn
         on a bank account maintained at Mumbai or funds remitted from abroad in any of the following ways:

         Application with repatriation benefits

                  By Indian Rupee drafts purchased from abroad and payable at Mumbai or funds remitted from
                  abroad (submitted along with Foreign Inward Remittance Certificate); or

                  By cheque / draft on a Non-Resident External Account (NRE) or FCNR Account maintained
                  in Mumbai; or

                  By Rupee draft purchased by debit to NRE/FCNR Account maintained elsewhere in India and
                  payable in Mumbai; or FIIs registered with the SEBI must remit funds from special non-
                  resident rupee deposit account; or

                  Non-resident investors applying with repatriation benefits should draw cheques/drafts in
                  favour of ‗Swaraj Mazda Limited – Rights Issue – NR‘ and must be crossed ‗account payee
                  only‘ for the full application amount, net of bank and postal charges.

         Application without repatriation benefits

                  As far as non-residents holding Equity Shares on non-repatriation basis are concerned, in
                  addition to the modes specified above, payment may also be made by way of cheque drawn on
                  Non-Resident (Ordinary) Account maintained in Mumbai or Rupee Draft purchased out of
                  NRO Account maintained elsewhere in India but payable at Mumbai. In such cases, the
                  allotment of Equity Shares will be on non-repatriation basis.

                  All cheques/drafts submitted by non-residents applying on a non-repatriation basis should be
                  drawn in favour of ‗Swaraj Mazda Limited – Rights Issue – NR‘ and must be crossed ‗account
                  payee only‘ for the full application amount, net of bank and postal charges. The CAFs duly
                  completed together with the amount payable on application must be deposited with the
                  collecting bank indicated on the reverse of the CAFs before the close of banking hours on or
                  before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF.

                  Investors may note that where payment is made by drafts purchased from NRE / FCNR / NRO
                  accounts as the case may be, an Account Debit Certificate from the bank issuing the draft
                  confirming that the draft has been issued by debiting the NRE / FCNR / NRO account should
                  be enclosed with the CAF. Otherwise the application shall be considered incomplete and is
                  liable to be rejected.

                  New demat account shall be opened for holders who have had a change in status from resident
                  Indian to NRI.
Notes:

         In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the
         investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to I.T
         Act.

         In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the
         Equity Shares cannot be remitted outside India.

         The CAF duly completed together with the amount payable on application must be deposited with the
         collecting bank indicated on the reverse of the CAFs before the close of banking hours on or before the
         Issue Closing Date. A separate cheque or bank draft must accompany each CAF.

         In case of an application received from non-residents, allotment, refunds and other distribution, if any,
         will be made in accordance with the guidelines / rules prescribed by RBI as applicable at the time of
         making such allotment, remittance and subject to necessary approvals.



                                                       126
Impersonation

As a matter of abundant caution, attention of the Investors is specifically drawn to the provisions of sub-
section (1) of Section 68A of the Companies Act which is reproduced below:

“Any person who makes in a fictitious name an application to a Company for acquiring, or subscribing for,
any shares therein, or otherwise induces a Company to allot, or register any transfer of shares therein to
him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may
extend to five years”.

Dematerialized dealing

Our Company has entered into agreements dated June 12, 2000 and June 21, 2000 with NSDL and CDSL,
respectively, and its Equity Shares bear the ISIN INE294B01019.

Payment by Stockinvest

In terms of RBI Circular DBOD No. FSC BC 42/24.47.00/2003- 04 dated November 5, 2003, the Stockinvest
Scheme has been withdrawn. Hence, payment through Stockinvest would not be accepted in this Issue.

Disposal of application and application money

No acknowledgment will be issued for the application moneys received by the Company. However, the Bankers
to the Issue / Registrar to the Issue receiving the CAF will acknowledge its receipt by stamping and returning
the acknowledgment slip at the bottom of each CAF.

The Board reserves its full, unqualified and absolute right to accept or reject any application, in whole or in part,
and in either case without assigning any reason thereto.

In case an application is rejected in full, the whole of the application money received will be refunded.
Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money
due on Equity Shares allotted, will be refunded to the Investor within a period of 15 days from the Issue Closing
Date. If such money is not repaid within eight (8) days from the day the Company becomes liable to repay it, the
Company and every Director of the Company who is an officer in default shall, on and from expiry of eight (8)
days, be jointly and severally liable to repay the money with interest as prescribed under Section 73 of the
Companies Act.

For further instruction, please read the CAF carefully.

Utilization of Issue Proceeds

The Board of Directors declares that:

(i)      All monies received out of this Issue shall be transferred to a separate bank account other than the bank
         account referred to sub-section (3) of Section 73 of the Companies Act;

(ii)     Details of all monies utilized out of the Issue shall be disclosed under an appropriate separate head in
         the balance sheet of our Company indicating the purpose for which such monies have been utilized;
         and

(iii)    Details of all unutilized monies out of the Issue, if any, shall be disclosed under an appropriate separate
         head in the balance sheet of our Company indicating the form in which such unutilized monies have
         been invested.

(iv)     The Company may utilize the funds collected in the Issue only after the basis of allotment is finalized.

Undertakings by the Company

1.       The complaints received in respect of the Issue shall be attended to by the Company expeditiously and
         satisfactorily.

                                                          127
2.       All steps for completion of the necessary formalities for listing and commencement of trading at all
         Stock exchanges where the securities are to be listed will be taken within seven (7) working days of
         finalization of basis of allotment.

3.       The funds required for making refunds to unsuccessful applicants as per the modes disclosed shall be made
         available to the Registrar to the Issue by the Company.

4.       The Company undertakes that where refunds are made through electronic transfer of funds, a suitable
         communication shall be sent to the Investor within 15 days of the Issue Closing Date, giving details of
         the banks where refunds shall be credited along with amount and expected date of electronic credit of
         refund.

5.       Adequate arrangements shall be made to collect all ASBA applications and to consider then similar to
         non-ASBA applications while finalising the Basis of Allotment.

6.       At any given time there shall be only one denomination for the shares of the Company.

7.       We shall comply with such disclosure and accounting norms specified by the SEBI from time to time.

Minimum Subscription

If the Company does not receive the minimum subscription of 90% of the Issue, the Company shall forthwith
refund the entire subscription amount received within 15 days from the Issue Closing Date. If such money is not
repaid within eight (8) days from the day the Company becomes liable to repay it, (i.e. 15 days after the Issue
Closing Date or the date of the refusal by the Stock Exchange(s), whichever is earlier) the Company and every
Director of the Company who is an officer in default shall, on and from expiry of eight (8) days, be jointly and
severally liable to repay the money with interest as prescribed under sub-section (2) and (2A) of Section 73 of
the Companies Act.

Important
     Please read this Letter of Offer carefully before taking any action. The instructions contained in the
     accompanying CAF are an integral part of the conditions of this Letter of Offer and must be carefully
     followed; otherwise the application is liable to be rejected.

     All enquiries in connection with this Letter of Offer or accompanying CAF and requests for SAFs must be
     addressed (quoting the Registered Folio Number / DP and Client ID number, the CAF number and the name
     of the first Equity Shareholder as mentioned on the CAF and superscribed ‗Swaraj Mazda Limited – Rights
     Issue‘ on the envelope and postmarked in India) to the Registrar to the Issue at the following address:

     Link Intime India Private Limited
     C-13, Pannalal Silk Mills Compound
     L.B.S Marg, Bhandup (West)
     Mumbai - 400 078
     India
     Tel: (91 22) 2596 0320
     Fax: (91 22) 2596 0329
     Email: sml.rights@linkintime.co.in
     Website: www.linkintime.co.in
     Contact Person: Mr. Praveen Kasare

     It is to be specifically noted that this Issue of Equity Shares is subject to the risks and uncertainities
     mentioned in the section titled ―Risk Factors‖ on page xi.

The Issue will remain open for a minimum 15 days. However, the Board will have the right to extend the Issue
period, as it may determine from time to time, but not exceeding 30 days from the Issue Opening Date.




                                                       128
                      SECTION VIII – STATUTORY AND OTHER INFORMATION

Option to subscribe

Other than the present Issue, and except as disclosed in the section titled ―Terms of the Issue‖ on page 105, the
Company has not given any person any option to subscribe to the Equity Shares of the Company.

The Investors shall have an option either to receive the security certificates or to hold the securities in
dematerialized form with a depository.

Material Contracts and documents for inspection

The following contracts (not being contracts entered in to in the ordinary course of business carried on by the
Company or entered into more than two (2) years before the date of this Letter of Offer) which are or may be
deemed material have been entered or are to be entered in to by the Company. These contracts and also the
documents for inspection referred to hereunder, may be inspected at the Registered Office of the Company
situated at village Asron, Distt. Nawanshahar – 144 533 (Punjab), from 10.00 a.m. to 1.00 p.m., on working
days, from the date of this Letter of Offer until the date of closure of the Issue.

1.       Memorandum and Articles of Association of the Company.

2.       Certificate of Incorporation of the Company dated July 26, 1983.

3.      Consents of the Directors, Auditors, Company Secretary, Lead Manager to the Issue, Bankers to the
        Issue, Legal Advisor to the Issue and Registrar to the Issue to include their names in the Letter of Offer
        to act in their respective capacities.

4.      Copy of the resolution of the Board of Directors dated March 19, 2009 approving this Issue.

5.      Copy of the shareholder resolution dated July 2, 2009 approving this Issue.

6.       Engagement letter dated May 8, 2009 received from the Company appointing JM Financial Consultants
         Private Limited to act as Lead Manager to the Issue.

7.       Agreement dated September 14, 2009 entered into by the Company with the Lead Manager to the
         Issue.

8.       Memorandum of Understanding dated August 29, 2009 entered into with the Registrar to the Issue.

9.       Annual Reports of Fiscal 2005, 2006, 2007, 2008 and 2009.

10.      Limited review report dated January 22, 2010 issued by the auditor of the Company.

11.      Prospectus dated April 10, 1985 issued by our Company.

12.      In-principle listing approval dated September 30, 2009 and October 16, 2009 from the BSE and NSE
         respectively.

13.      Due diligence certificate dated September 16, 2009 to SEBI from the Lead Manager to the Issue.

14.      SEBI interim observation letter (Ref. No. CFD/DIL/SP/EB/180088/2009) dated October 16, 2009 and
         our reply dated October 29, 2009.

15.      SEBI observation letter (Ref. No. CFD/DIL/ISSUES/SP/EB/187502/2009) dated December 16, 2009,
         and our in-seriatim reply dated January 25, 2010.

16.      Tripartite Agreement dated June 12, 2000 between the Company, NSDL & MCS Limited for offering
         depository option to the Investors.

                                                      129
17.   Tripartite Agreement dated June 21, 2000 between the Company, CDSL & MCS Limited for offering
      depository option to the Investors.




                                              130
                                              DECLARATION
 No statement made in this Letter of Offer contravenes any of the provisions of the Companies Act, 1956, as
amended and the rules made thereunder. All the legal requirements connected with the issue as also the
guidelines, instructions, etc., issued by the SEBI, Government and any other competent authority in this behalf,
have been duly complied with. Furthermore, we certify that all the disclosures made in this Letter of Offer are
true and correct.

SIGNED BY ALL THE DIRECTORS OF THE COMPANY

Mr. S.K. Tuteja
Non-Executive, Independent Chairman



__________________

Mr. Yash Mahajan
Managing Director



__________________

Mr. Y. Watanabe
Whole time Director



__________________

Mr. Harkirat Singh
Independent Director



__________________

Mr. Steven Enderby
Non-Executive Director



__________________

Mr. A.K. Thakur
Independent Director



__________________
Mr. P.K. Nanda
Independent Director



__________________



                                                      131
Mr. Pankaj Bajaj
Non-Executive Director



__________________


Mr. M. Tabuchi
Non-Executive Director



__________________

Mr. H.Yamaguchi
Non-Executive Director



__________________

Mr. T. Hashimoto
Non-Executive Director



__________________

Mr. Taro Nanko
Alternate Director to Mr. T. Hashimoto



__________________

Mr. Tatsuo Kato
Alternate Director to Mr. M. Tabuchi



__________________




                                                                       _____________________
                                                                              Mr. Gopal Bansal
                                         Senior Vice President – Finance & Company Secretary
Place: New Delhi
Date: February 24, 2010




                                         132