MAHINDRA & MAHINDRA LIMITEDCOMMITTEES OF THE BOARD BOARD OF DIRECTORS Keshub MahindraAudit Committee ChairmanDeepak S. Parekh Anand G. MahindraChairman Vice-Chairman & Managing DirectorNadir B. Godrej Deepak S. ParekhM. M. Murugappan A. K. NandaR. K. Kulkarni Nadir B. Godrej M. M. MurugappanShare Transfer and Shareholders/ Narayanan VaghulInvestors Grievance Committee A. S. GangulyKeshub Mahindra R. K. KulkarniChairman Anupam PuriAnand G. Mahindra Arun Kanti Dasgupta Nominee of Life Insurance Corporation of IndiaBharat Doshi Bharat DoshiA. K. Nanda Executive DirectorR. K. KulkarniRemuneration/Compensation Committee Narayan ShankarNarayanan Vaghul Company SecretaryChairman BankersKeshub Mahindra Bank of America N.A.Nadir B. Godrej Bank of BarodaM. M. Murugappan Bank of India Canara BankLoans & Investment Committee Central Bank of IndiaKeshub Mahindra HDFC Bank LimitedChairman Standard Chartered Bank State Bank of IndiaAnand G. Mahindra Union Bank of IndiaBharat Doshi AuditorsA. K. Nanda Deloitte Haskins & SellsR. K. Kulkarni 12, Dr. Annie Besant Road, Opp. Shiv Sagar Estate, Worli, Mumbai 400 018.Research & Development Committee AdvocatesA. S. GangulyChairman Khaitan & Co., One Indiabulls Centre,Anand G. Mahindra 13th Floor, 841, Senapati Bapat Marg,Nadir B. Godrej Elphinstone Road, Mumbai 400 013.M. M. Murugappan Registered OfficeBharat Doshi Gateway Building, Apollo Bunder, Mumbai 400 001. 1
GROUP EXECUTIVE BOARDAnand G. Mahindra Ramesh IyerVice-Chairman & Managing Director Managing Director - Mahindra & Mahindra Financial Services LimitedBharat DoshiExecutive Director and Group Chief Financial Officer Rajesh Jejurikar Chief Executive - Automotive Division (Automotive Sector)Rajeev DubeyPresident (HR, After-Market & Corporate Services) Sanjay Kalra Chief Executive Officer - Tech Mahindra LimitedPawan GoenkaPresident (Automotive & Farm Equipment Sectors) Harsh Kumar Managing Director - Mahindra Intertrade LimitedHemant LuthraPresident (Systems & Technologies Sector) Romesh Kaul Global Chief Executive Officer - Gears Business, Systech SectorAnoop MathurPresident (Two-Wheeler Sector) Bishwambhar Mishra Chief Executive Officer - Swaraj Division (Farm Equipment Sector)Uday Y. PhadkePresident (Finance, Legal & Financial Services Sector) Gautam Nagwekar Chief Executive - Mahindra Division (Farm Equipment Sector)Ulhas N. YargopPresident (Information Technology Sector) V. S. Parthasarathy Executive Vice President - Finance, M&A and Group CIOAnita ArjundasManaging Director - Mahindra Lifespace Developers Limited & Ramesh RamanathanCEO Real Estate Sector Managing Director - Mahindra Holidays & Resorts India Limited & CEO Hospitality SectorZhooben BhiwandiwalaExecutive Vice President & Managing Partner, Mahindra Partners Pravin Shah Chief Executive - International Operations (Automotive & FarmC. P. Gurnani Equipment Sectors)Chief Executive Officer - Mahindra Satyam Rajan WadheraRuzbeh Irani Chief Executive - Technology, Product Development andExecutive Vice President - Corporate Strategy & Chief Brand Officer Sourcing (Automotive & Farm Equipment Sectors) Contents Directors’ Report .................................................................................................................................................. 3 Management Discussion and Analysis .................................................................................................................. 27 Corporate Governance ......................................................................................................................................... 47 Sustainability ........................................................................................................................................................ 73 Accounts .............................................................................................................................................................. 79 Statement pursuant to Section 212 ..................................................................................................................... 129 Consolidated Accounts ......................................................................................................................................... 1332
MAHINDRA & MAHINDRA LIMITEDDirectors’ ReportDear ShareholdersYour Directors present their Report together with the Inspite of the global financial crisis, India’s economic growthaudited accounts of your Company for the year ended is steadily gaining momentum, led by a very encouraging st re-bound in industrial activity during the year. The sharp31 March, 2010. increase in consumer durables and capital goods productionFinancial Highlights (Rs. in crores) this fiscal is particularly heartening as it indicates strengthening consumer and business confidence in the 2010 2009Gross Income 20595 14983 country.Less: Excise Duty on Sales 1794 1619 Agricultural GDP however, witnessed a decline this yearNet Income 18801 13364Profit before Depreciation, Interest, due to the severe drought experienced during the kharifExceptional items and Taxation 3155 1363 season. Food prices as a consequence, rose alarmingly andLess: Depreciation/Amortisation 371 292 food inflation in India has leapfrogged to challenging levels.Profit before Interest,Exceptional items and Taxation 2784 1071 In these challenging times, the Automotive and FarmLess: Interest (Net) 28 45 Divisions of your Company have clocked one of their bestProfit before Exceptionalitems and Taxation 2756 1026 performances reflecting in substantial growth in the netAdd: Exceptional items 91 10 income of the Company by 40.7% to Rs.18,801 crores inProfit before Taxation 2847 1036 the year under review from Rs.13,364 crores in the FinancialLess: Provision for Tax - Current Tax Year 2009. Consequent to this commendable performance,(including Fringe Benefit Tax) 749 58Less: Provision for Tax - Deferred Tax (Net) 10 141 the profit after tax of the Company for the current yearProfit for the year 2088 837 was Rs.2,088 crores as against Rs.837 crores for theAdd: Profit of Mahindra Holdings & previous year.Finance Limited for the period1st February, 2008 to 31st March, 2008 - 31 ProfitsBalance of profit for the year 2088 868Balance of profit for earlier years 3365 2775 The Profit for the year before Depreciation, Interest,Add: Amount transferred on Exceptional items and Taxation was Rs.3,154.59 crores asAmalgamation of Mahindra Holdings &Finance Limited - 160 against Rs.1,362.97 crores in the previous year, an increaseLess: Transfer to Debenture Redemption of 131.45%. Profit after tax was Rs.2,087.75 crores asReserve 31 30 against Rs.836.78 crores in the previous year clocking anProfits available for appropriation 5422 3773 increase of 149.50%. Your Company continues with itsLess: General Reserve 210 100 Credit of Income-tax on Proposed rigorous cost restructuring exercises and efficiency Dividend of previous year - (4) improvements which have resulted in significant savings Proposed Dividends 550 279 through value engineering, economising, optimisation of Income-tax on Proposed Dividends 74 33Balance carried forward 4588 3365 plant capacity utilisation and cost competitiveness in almost 5
all areas thereby enabling the Company to take full over the previous year’s volume of 1,53,654 vehiclesadvantage of the recovery in the economy. [includes 1,53,653 MUVs and 1 Light Commercial Vehicle (“LCV”)]. The domestic sales volume of 44,438 three-Dividend wheelers was lower by 0.2% as compared to the previousYour Directors are pleased to recommend a dividend of year’s volume of 44,533 three-wheelers.Rs.8.75 per Ordinary (Equity) Share and also a Special The Company’s domestic MUV sales volumes grew byDividend of Rs.0.75 per Ordinary (Equity) Share aggregating 39.4% as against the industry MUV sales growth of 26%.Rs.9.50 per Ordinary (Equity) Share of the face value of The Company strengthened its dominant position in theRs.5 each, payable to those Shareholders whose names domestic MUV segment by increasing its market share toappear in the Register of Members as on the Book Closure 63.3% over the previous year’s market share of 57.2%.Date. The Special Dividend is being recommended in thelight of the very successful listing of Mahindra Holidays & Xylo, which was launched in January, 2009 has been veryResorts India Limited Equity Shares on the Stock Exchanges. well accepted in the market. A total of 27,978 Xylos wereIn recognition of the impressive performance of the sold in the year under review.Company, a substantial increase is being made in the In a very competitive small 4-wheeler cargo segment (0.75proposed dividend as compared to the dividend of Rs.10 Ton), your Company has launched the Maxximo, a small 4per Equity Share paid in the previous year. Also the wheeler cargo vehicle, with 2-cylinder common rail engine,proposed dividend will be paid on a slightly enlarged capital in February, 2010. In the 0.5 Ton Truck load segment, yourbase of Rs.289.21 crores (as against Rs.278.82 crores in Company launched a compact Truck – Gio.the previous year). The equity dividend outgo for theFinancial Year 2009-10, inclusive of tax on distributed profits In the Overseas market, despite difficult economic(after reducing the tax on distributed profits of Rs.17.04 conditions, your Company registered superior growth.crores payable by the subsidiaries on the dividends During the year under review, your Company sold 10,567receivable from them during the current Financial Year) vehicles [including 1,323 vehicles sourced from Mahindrawould absorb a sum of Rs.623.75 crores (as against Navistar Automotives Limited (“MNAL”) and 922 three-Rs.312.06 crores comprising the dividend of Rs.10 per wheelers] in the Overseas market as compared to 8,501Equity Share of Rs.10 each paid for the previous year). vehicles [including 693 vehicles sourced from MNAL and 273 three-wheelers] in the previous year registering aAutomotive Division: growth of 24.3%.Your Company recorded total sales of 2,36,759 vehicles Spare parts sales for the year stood at Rs. 514.96 croresand 45,360 three-wheelers as compared to 1,61,882 (including Exports of Rs. 22.4 crores) as compared tovehicles and 44,806 three-wheelers in the previous year Rs. 362.75 crores (including Exports of Rs.27 crores) in theregistering a growth of 46.3% and 1.2% in vehicles sales previous year, registering a growth of 42%.and three-wheeler sales respectively. Farm Division:On the domestic sales front, your Company sold 2,27,114vehicles [includes 2,14,128 Multi Utility Vehicles (MUVs), Your Company’s Farm Division recorded sales of 1,75,1963,722 small 4 wheelers 0.75 Ton cargo and 9,264 mini 4 tractors as against 1,20,202 tractors sold in the previouswheelers 0.5 Ton cargo] registering a growth of 47.8% year, recording a significant growth of 45.8%. For the6
MAHINDRA & MAHINDRA LIMITEDprevious year figures, the Company has taken into business has been hived-off into a wholly owned subsidiaryconsideration, the merger of Punjab Tractors Limited with (Mahindra Defence Land Systems Private Limited – now styour Company, the appointed date of which was 1 August, rechristened as Defence Land Systems India Private Limited)2008. with effect from 1st July, 2009. Your Company has further signed a Joint Venture Agreement on 30th November, 2009After 3 years of plateauing of the domestic tractor industry with BAE Systems Plc. to form a 74:26 Joint Venture forand despite one of the worst South-West monsoons, this defence land systems products. Once this Joint Venture isyear saw a strong resurgence with the domestic industry operational, it would further expand its product base toclocking sales of 4,00,203 tractors registering a growth of include manufacture of artillery products and combat31.7% over the last year. Your Company outperformed the vehicles in technical assistance with BAE Systems Plc.industry with domestic sales of 1,66,359 tractors, a growthof 46.9% as compared to 1,13,269 tractors sold in the In the Naval Systems business, your Company currentlyprevious year. This has also helped gain market share which manufactures Sea Mines, Decoy Launchers and compositesnow stands at 41.4% as compared to 40.8% in the previous for various naval and other applications.Financial Year, thus completing 27 years of leadership in In the Special Services Group business, your Companythe Indian tractor industry. provides corporate risk management consultancy servicesWith the slow recovery in international markets, especially and assists organisations in maintaining their competitivein the US, tractor industry exports from India continued to edge by protecting Information, Physical and Personnelbe under strain. In contrast, your Company’s exports grew assets through implementing the security strategy27.5% to reach 8,837 tractors as compared to 6,933 encompassing people, process and technology. MSSG hastractors exported in the previous year. been integrated with the MDS Operating Group from 1st April, 2009 in order to synergise the efficiencies withBeyond Agriculture, in the Powergen space under the other businesses of MDS. During the year, this businessMahindra Powerol Brand, your Company sold 48,011 has expanded to Northern and Southern India as well asengines in this Financial Year, as against 52,350 engines in some international markets.the previous year. Your Company retained its leadershipposition in the genset market catering to the telecom space, Management Discussion and Analysis Reportwhile strengthening its presence in the retail segment. A detailed analysis of the Company’s performance isMahindra Defence Systems Division (MDS): discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report.Your Company, through Mahindra Defence Systems (MDS)Operating Group, is engaged in three defence related Corporate Governancebusinesses – a) Land Systems b) Naval Systems and Your Company is committed to transparency in all itsc) Mahindra Special Services Group (“MSSG”). dealings and places high emphasis on business ethics. YourIn the Land Systems business, your Company provides Company received the Best Governed Company 2009armouring solutions for light combat vehicles and SUVs as Award from the Indian Merchants Chamber and the Asianwell as high mobility vehicles for defence, police and Centre for Corporate Governance and Sustainability. Duringparamilitary use. Pursuant to an approval accorded by the the year, CRISIL has re-affirmed the highest level rating, thShareholders by way of Postal Ballot on 4 April, 2009 this (Level 1) for Governance and Value Creation for the fourth 7
year in a row. This rating indicates that the capability of Consequent to the Stock-split, a new International Securitiesthe Company with respect to wealth creation for all its Identification Number (ISIN) INE101A01026 has beenstakeholders while adopting strong Corporate Governance created by the Depositories for the Company’s Equity Sharespractices is the highest. A Report on Corporate Governance of the face value of Rs.5 each.along with a Certificate from the Statutory Auditors of theCompany regarding the compliance of conditions of FinanceCorporate Governance as stipulated under Clause 49 of Despite prolonged global challenges, the Indian economythe Listing Agreement forms part of the Annual Report. showed signs of recovery in most of the Sectors in theShare Capital Financial Year 2009-10. The risk appetite returned toIncrease in Share Capital financial markets as equities and debt raising gainedDuring the year under review, your Company allotted: momentum on the back of abundant liquidity. Even though things looked to be on an upswing, Corporates still faced1) 10,00,000 Ordinary (Equity) Shares of Rs.10 each to the task of sustaining growth amidst volatilities as well as the Trustees of Mahindra & Mahindra Employees’ Stock surging inflation. Option Trust; and2) 93,95,974 Ordinary (Equity) Shares of Rs.10 each to During the year, keeping in mind the volatile times, your Golboot Holdings Limited upon compulsory conversion Company continued to focus on managing cash efficiently. of 93,95,974 Fully and Compulsorily Convertible Even while financing its ongoing modernisation and growth Debentures. initiatives, it was ensured that your Company had abundantSub-division (“Stock-split”) of Face Value of liquidity. Your Company did not need to tap the capitalEquity Shares market and in fact used its strong liquidity at its disposalPursuant to the approval received from the Members of to repay foreign currency loans aggregating USD 94.5the Company by way of Postal Ballot on 11th March, 2010, million without the need for refinancing.your Company has on 31st March, 2010, upon sub-division, As was reported in the previous year’s Director’s Report,issued 2 (Two) Ordinary (Equity) Shares of Rs.5 each fully your Company had, in July, 2008, issued 9.25% p.a.paid-up in the Equity Share Capital of the Company for Unsecured Fully and Compulsorily Convertible Debenturesevery 1 (One) Ordinary (Equity) Share of the face value of (“FCD”), each FCD having a face value of Rs. 745 andRs.10 fully paid-up held by the Members in the Equity convertible into one Equity Share of Rs. 10 each in theShare Capital of the Company as on the Record Date i.e. Company at a price of Rs. 745 per Share. In January,30th March, 2010. 2010, in accordance with the terms of the issue, the FCDsPost allotment of Equity Shares and sub-division of Equity were converted into Equity Shares of the Company andShares as aforesaid, the issued, subscribed and paid-up your Company allotted 93,95,974 Ordinary (Equity) SharesShare Capital of the Company stands at Rs.289.21 crores of Rs.10 each, adding Rs. 700 crores to its Net Worth.comprising of 57,84,34,478 Ordinary (Equity) Shares ofRs.5 each fully paid-up and the Authorised Share Capital Your Company follows a prudent financial policy and aimsof the Company stands at Rs.625 crores comprising of to maintain optimum financial gearing at all times. The1,20,00,00,000 Ordinary (Equity) Shares of Rs.5 each and Company’s total Debt to Equity Ratio was 0.37 as at25,00,000 Unclassified Shares of Rs.100 each. 31st March, 2010.8
MAHINDRA & MAHINDRA LIMITEDYour Company has been rated by CRISIL, ICRA Limited Your Company’s move into the Aerospace segment is(ICRA) and Credit Analysis & Research Limited (CARE) for supported by a renewed demand for economical airits Banking facilities under Basel II norms. During the year, transportation around the world. The Company’sCRISIL reaffirmed its rating of “AA” and revised its rating investment in component capability addresses theoutlook to “AA/ Stable” from “AA/ Negative” for your growing needs of both the civil and defence marketsCompany’s Long Term Facilities under Basel II. During the and in particular the offset opportunities that haveyear, ICRA also reaffirmed its rating of “LAA+” for your triggered world wide interest in Indian Aerospace.Company and also revised its rating outlook from “LAA+/Negative” to “LAA+/Stable” and CARE has maintained a 2. Joint Venture with BAE Systems Plc.Long Term Rating of “CARE AA+”. Through various initiatives, your Company hadCRISIL, ICRA and CARE have all reaffirmed the highest positioned itself to play a major role in the Indianrating for your Company’s Short Term facilities. Your Defence Sector for the manufacture and integrationCompany’s Bankers continue to rate your Company as a of weapon systems and platforms. Your Company hadprime customer and extend facilities/services at prime rates. also been exploring opportunities for partnerships withAcquisitions and other matters companies with globally proven high end defence technologies. With this objective in mind, your1. Acquisition of Aerostaff Australia and Gippsland Company had evaluated various options and identified Aeronautics possibilities for forming separate Joint Ventures/alliances Your Company decided to make a foray into Aerospace with strategic partners. Sector with the intention of penetrating into global aerospace supply chain as a credible registered As mentioned earlier in this Report, your Company manufacturer of components and assemblies with the has entered into a Joint Venture with BAE Systems Plc. leading players in Aerospace and also to become small (“BAE”). BAE is a premier global defence, security and capacity aircraft manufacturer. To meet these goals, aerospace company delivering a full range of products your Company has made 2 acquisitions in Australia as and services for air, land and naval forces, as well as under: advanced electronics, security, information technology solutions and customer support services. Aerostaff Australia (“AA”) manufactures high-precision close-tolerance aircraft components and assemblies for large aerospace Original Equipment 3. Gear Vertical Manufacturers (“OEMs“). Mahindra Gears & Transmissions Private Limited Gippsland Aeronautics (“GA”) is an established brand (“MGTPL”) is a subsidiary of your Company. With a in general aviation and has delivered more than 200 view to derive optimum structuring and operational FAR 23 certified planes in 32 countries. benefits and unlock value in MGTPL, your Company NM5 is a 5-seater Aircraft designing and manufacturing divested 46.66% of the Equity Share Capital in MGTPL project which is being developed by your Company in favour of ICICI Venture Fund during the year. with Hindustan Aeronautics Limited. The NM5 initiative Subsequent to the divestment, the holding of your compliments the product portfolio of GA. Company in MGTPL stands at 53.34%.
4. Demerger of Non Fruit Business of Mahindra shall stand cancelled. Upon the Scheme becoming Shubhlabh Services Limited into the Company effective, the Company shall issue and allot to the Shareholder of MSSL (other than the Company and Mahindra Shubhlabh Services Limited (“MSSL”), MHL) as on the Record Date 34,730 fully paid-up Equity a subsidiary of your Company, is in the business of Shares of Rs.5 each of the Company. Currently, the a) domestic sales and exports of fresh fruit products Scheme is in process of being filed with the Stock and b) production and distribution of Agri Inputs Exchanges and the Honourable High Court of namely Seeds, Seed Potato and Crop Care Products. Judicature at Bombay for approval. MSSL’s Fruits business is currently focused on exports of grapes to Europe. MSSL proposes to expand its 5. Mahindra Forgings Limited Qualified Institutional foray into other Fruits businesses. MSSL has till now Placement and issue of Warrants to the Company steadily developed a footprint in Agri Input business, Mahindra Forgings Limited (“MFL”), a subsidiary of which is strategically an important business to your the Company, raised capital by way of a Qualified Company, as it directly relates with the farmer and Institutional Placement (“QIP”) to Qualified Institutional Farm Tech Prosperity, essential for improving customer Buyers accompanied by a simultaneous issue of bonding, customer loyalty and market penetration of Warrants to your Company, in terms of Securities and your Company. Exchange Board of India (Issue of Capital and Disclosure In view of the Agri Inputs business being a high Requirements) Regulations, 2009. gestation business, MSSL now intends to streamline An amount of Rs.175 crores was raised through a QIP its operations and wants to focus only on the Fruits by issue and allotment of Equity Shares of the face Business and explore strategic options to grow this value of Rs.10 each at a price of Rs.107.75 per Equity business domestically and globally in terms of scale Share to Qualified Institutional Buyers. MFL has also and profitability and going forward, the Agri Inputs allotted 72,99,270 Warrants on a preferential basis to business would be demerged into your Company owing your Company wherein each Warrant entitles the to its strategic importance and funding resources Company to apply for and be allotted one Equity Share required for the same. of MFL of the face value of Rs.10 each at a price of To achieve the above objective, a Scheme of Rs.137 per share, in one or more tranches, at any Arrangement between MSSL and your Company and time after the date of allotment of Warrants but on or their respective Shareholders was announced by your before the expiry of 18 months from the date of th Company and MSSL on 30 March, 2010 which inter allotment of Warrants. The Company has made an alia envisages demerger of the Agri Inputs Business upfront payment of 25% of the aggregate price along with other common assets and liabilities (“Non amounting to approximately Rs.25 crores and has Fruit business”) of MSSL into the Company under the exercised its option to convert 30,00,000 Warrants provisions of sections 391 to 394 of the Companies into Equity Shares. The Company still has an option to Act, 1956. The Appointed Date of the Scheme would convert the balance 42,99,270 Warrants into Equity be 1st January, 2010 and pursuant to the Scheme, Shares by 3rd September, 2011. As a result of the Shares held by the Company and its wholly owned above, the Company’s shareholding in MFL stands at subsidiary, Mahindra Holdings Limited (“MHL”) in MSSL 50.68%.
MAHINDRA & MAHINDRA LIMITED6. Acquisition of Shareholding of Renault s.a.s. in Space, your Company subsequent to the year end Mahindra Renault Private Limited (“MRPL”) and take decided to acquire a majority stake in Reva Electric Car over of the business of MRPL as a going concern Company Private Limited (“Reva”). Established in 1994, Reva launched its first EV in 2001 under the ‘Reva’ The Company had entered into a Joint Venture with brand and further extended it to London in 2004 under Renault s.a.s. (“Renault”) for the manufacture and sale the ‘G-Wiz’ brand. With the help of its strong of the Logan sedan car principally for the Indian market engineering team and frugal mindset, it has developed in 2005. Mahindra Renault Private Limited (“MRPL”), a significant proprietary technology which has enabled subsidiary of the Company had commenced commercial it to create a fleet of EVs worldwide with over 3,000 production of the car badged as Mahindra Renault vehicles on the road in more than 20 countries Logan from February, 2007. including India, the United Kingdom and other The Company had been in discussions with Renault to countries in Europe. arrive at a long term solution to MRPL’s continuing This acquisition would help your Company to losses and subsequent to the year end, your Company compliment its other clean energy initiatives on Hybrid, signed a Framework Agreement with Renault to buyout Hydrogen and Bio-diesel which is an important element Renault’s Shares in MRPL which would result in MRPL in the sustainable mobility strategy of the Company. becoming a wholly owned subsidiary of your Company. Renault would continue to support the Stock Options Company and the Logan through a License Agreement On the recommendation of the Remuneration/ and supply of key components. Through this Compensation Committee of your Company, the Trustees Agreement, your Company would strive to ensure of the Mahindra & Mahindra Employees’ Stock Option continuity and build on the positive customer equity Trust have granted 4,01,770 Stock Options to Eligible that exists for the Logan in India. Employees during the year under review.7. Going Green – Acquisition of Reva Electric Car Details required to be provided under the Securities and Company Private Limited Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 Given the concerns about environment, tighter (“the Guidelines”) are set out in Annexure I to this Report. regulation on emission, debate on greenhouse gases and taxation on emission, the demand for electric- Mahindra & Mahindra Limited Employees Stock Option vehicles (“EV”) is projected to increase many fold. Most Scheme - 2010 global OEMs are working on EV programs and are at Your Company proposes to introduce a new Employee least 1 to 2 years away from commercial production. Stock Option Scheme known as ‘Mahindra & Mahindra Your Company is of the view that it should be focused Limited Employees Stock Option Scheme 2010’ (“New on developing EV capabilities that would assist it to Scheme”). The New Scheme will facilitate grant of Options be ready to exploit this opportunity. to the employees in the form of Stock Options and/ or Keeping in mind the above opportunity and with a Restricted Stock Units (“RSU’s”) and /or other instruments view to consolidate its presence in the Automotive (“Options”) exercisable into Equity Shares. It is proposed
that the Options can be exercised by the employees at a New Certificationsprice equal to or not less than the face value of the Equity The Sustainability Reporting System of your CompanyShares of the Company. The necessary Resolutions seeking provides a framework for environmental initiatives,consent of the Members are being sought as proposed in objectives & targets and helps in continually improving itsthe Notice convening the Annual General Meeting. Air, Water and Waste Management performance. All Plants of Automotive Division have been certified with amendedThe New Scheme has been formulated in accordance with standard for ISO 14001: 2004 & OHSAS 18001. Yourthe Guidelines and other applicable laws. Company’s commitment to environment stems from the Group’s abiding concern for the Stakeholders engagementIndustrial Relations in and around the society. Its nature of operations has aIndustrial Relations remained cordial and harmonious low impact on the environment due to implementation ofthroughout the year. As mentioned in the last year’s Environment Management System which provides a healthyDirectors’ Report, the workmen at the Nashik plant of the work environment to its employees and ensures conductAutomotive Division of the Company resorted to one illegal of environment friendly business.strike in May, 2009. The Management Discussion and Implementation of Occupational Health & SafetyAnalysis Report gives an overview of the developments in Management System Standard has re-enforced theHuman Resources/Industrial Relations during the year. Company’s commitment of Safety and Occupational Health to high levels. OHSAS 18001:2007 is the best existingSafety, Health and Environmental Performance safety practice which is implemented through the amended management system and all the Plants of the AutomotiveHealth and Safety Division have been certified during the year 2009-10. TheYour Company continues to demonstrate a strong individual operational Units of the Automotive Division i.e.commitment towards Safety, Occupational Health and Kandivli, Nashik, Igatpuri, Zaheerabad and Haridwar areEnvironment. Your Company has a well established Safety, also certified. The OHSAS system aims to eliminate orOccupational & Environmental Policy (SH&E). The objectives minimise risk to employees and other interested partiesand targets derived from the Policy are supported by who may be exposed to Occupational Safety risks associatedManagement Programs. with its activities. Occupational Health ExaminationThe Safety, Occupational Health & Environment of its Your Company’s Plants continued its commitment to improveemployees are embedded as core Organisational values of the well being of the employees. During the year 2009-10,the Company. The Policy inter alia covers and ensures safety all employees in Hazardous operations were medicallyof public, employees, plant and equipment, imparts training examined once in six months and other employees fromto all its employees as per training calendar, carries out Non-Hazardous operations were examined once in a year.statutory safety assurance and audits of its facilities as per Environmental Initiatives :legal requirements, conducts regular medical andoccupational check-up of its employees and promotes Air Pollution Managementeco-friendly activities. With a clear view on sustaining green business growth,
MAHINDRA & MAHINDRA LIMITEDthe need for clean environment was given a renewed focus. of the same. Your Company is conscious towardsBy incorporation of new technological upgradations, your environment and ensures environment friendly disposal ofCompany is now in the process of calculating carbon foot e-waste.print of Plants location wise and is taking adequate Greenbelt Developmentmeasures to mitigate the causes attributing to it. TheCompany also has a roadmap to reduce Green House Gas Your Company has community partners at each location(“GHG”) emissions by curtailing travel of its employees to for green belt development. Mahindra Hariyali was one ofclient locations for Meetings and discussions and this is the initiatives which was implemented at the Plants atachieved by promoting the use of Video Conferencing. Mumbai and Kanhe and at dealers & distributors acrossYour Company is constantly imbibing the major India. Your Company’s Plants at various locations haveenvironment sensitisation drives amongst its employees partnered with Non-Governmental Organisations andthrough various events such as celebrations of World various academic institutions all located in and aroundEnvironment Day, World Ozone Day alongwith active Mumbai, Nashik, Igatpuri, Zaheerabad and Haridwar.participation of employee’s families. Your Company has Corporate Social Responsibilityalso implemented ambient and work place air monitoring, From educating a girl child in Udaipur, providing healthcareincreased green zones, alongwith effluent treatment and to inaccessible areas in Uttarkhand, enabling sociallywaste monitoring. disadvantaged youth become self reliant in Pune, toWater and Waste Water Management planting a million trees in India, your Company’s Corporate Social Responsibility (“CSR”) initiatives continue to provideYour Company is committed towards resource conservation strategic interventions that help the Nation help itself.and has taken various initiatives to achieve waste reductionand resource conservation. Your Company has implemented At Mahindra we call it “Transform-nation”.various water management methods such as recycling and CSR continues to be an integral part of the vision of there-use of treated waste water in process. The Company Mahindra Group and this year too, the Company hashas also introduced rainwater harvesting and recharging pledged 1% of its Profit after Tax for CSR initiatives, largelywithin Plant premises and would extend it to other locations to benefit the socially and economically disadvantagedas well. sections of Society.Solid Waste Management Some of the major initiatives your Company has invested in are described below:Your Company’s Plants at Kandivli, Nashik, Igatpuri and Mahindra Pride Schools:Zaheerabad believe in responsible disposal of hazardousand non-hazardous waste. The generation of waste to a Mahindra Pride Schools (“MPS”) unique partnership modelgreater extent has been reduced at source and if adaptable, speeds its graduates’ integration into the workforce, whereit is recycled and reused. Your Company is aggressively they earn not only a salary but also the respect of theirworking towards minimising waste disposal costs and is family and peers. Since inception in March, 2007, 1,720executing various Management programmes at each students from socially disadvantaged communities havelocation such as vermiculture, bio-gas Plants to convert completed the 3 month course at MPS. MPS providesfood waste to manure/cooking gas towards minimisation these youth with livelihood training in sunshine industries 3
i.e. Hospitality, Customer Relationship Management, Gifting Cochlear Implants:Hardware & Networking and Call Centre Training. All By gifting the power of sound through the donation ofstudents are required to undergo mandatory courses in Cochlear Implants, the Mahindra Group has changed theEnglish, Life skills and computer applications. There has life and future of 60 profoundly hearing-impaired,been 100% placement of all students participating in the underprivileged children till date. Operations are performedplacement process. by Dr. Milind Kirtane, India’s leading ENT surgeon and hisNanhi Kali: Team. All beneficiaries are hearing impaired children below the age of 5, belonging to the lower socio-economic strataNanhi Kali, which supports the education of the of Society.disadvantaged girl child has been the flagship programmeof the K. C. Mahindra Education Trust. Nanhi Kali brings Bihar Rehabilitation Project:about a complete transformation, by allowing the girls to The river Kosi wreaked havoc in Bihar in 2008 with floodsattend school and learn with dignity. Nanhi Kali sponsorship causing incalculable loss of life and property besidesprovides not only academic support classes where concepts snatching away the livelihood of lakhs of people in theof Maths, Science and language are taught to the girls but State. Following the same, Mahindra Foundation andalso provides uniforms, school bags, shoes, etc. which free Mahindra Consulting Engineers Limited (“MACE”), aher family from hidden costs of education. The Mahindra subsidiary of the Company have entered into aGroup independently supports 11,000 girls across India. Memorandum of Understanding (“MOU”) with theWith support from thousands of individuals and Corporate Collector, Madhepura District, Bihar to support thedonors, Project Nanhi Kali now supports the education of rehabilitation and reconstruction activities in Pattori Gramover 54,000 underprivileged girl children, in poor urban, Panchayat, Singheswar Block, Madhepura District of Biharremote rural and conflict afflicted tribal communities across for those ravaged by the Kosi floods in 2008. Under the8 States of India. The goal of Nanhi Kali is to provide terms of the MOU, MACE would create the complete socialeducational support to 1,00,000 underprivileged girls by infrastructure in Pattori Gram Panchayat. This2011. comprehensive programme includes the construction ofMahindra All India Talent Scholarships (MAITS): permanent houses with provision of basic infrastructural facilities such as water supply and sanitation.Instituted in 1995, MAITS are awarded to students from Employee Social Options:lower socio-economic strata to enable them to pursue ajob oriented diploma course at a recognised Government Employee Social Options (“ESOPs”) is the uniquePolytechnic Institute in India. Approximately 500 programme at the Mahindra Group where each employeescholarships are given every year for students who undergo can do social work by volunteering in various CSR initiatives.a three year course. As a result in the last Financial Year, Till date, 31,317 employees have volunteered in various1,525 students all over India received financial support initiatives in their local communities. ESOPs were formallythrough MAITS. Till date, 4,772 students have been MAITS launched in 3 new locations of Mahindra Group – MahindraScholars. A survey of students who have graduated indicate Two Wheelers; Pune, Mahindra Two Wheelers; Pithampurthat they have got good jobs and the living standards and and Mahindra Retail; Bangalore.economic status of their families have improved. Some of the notable ESOPs initiatives this year were: 4
MAHINDRA & MAHINDRA LIMITED• The Lifeline Express in Wardha: This was jointly to appraise the Shareholders of the initiatives your Company sponsored and organised by the Farm Division and had taken in reporting its ‘Sustainability’ performance for Mahindra & Mahindra Financial Services Limited, a reviewing its commitments to the Environment and Society, subsidiary of the Company. The Project was held at while generating profits. Wardha and 1,153 surgeries were performed free of During the year under review, the 2nd Sustainability Report cost and 281 Hearing Aids were distributed. ESOPs for the year 2008-09 was published, in accordance with Volunteers spent 13,752 man hours in this activity the latest Guidelines of the internationally accepted Global and 30,575 man hours were spent by volunteers from Reporting Initiative or the GRI standards. Again this year, the Community, thus making it an ideal public-private this Report was externally assured by Ernst & Young and partnership initiative. rated with the highest level of A+ and GRI checked. This• Mahindra Hariyali : A Survey was conducted on the 2nd Report reflects that along with your Company’s business survival rate of trees planted in the Financial Year growth, the Company’s responsibility to its stakeholders 2008-09. According to the Survey, the survival rate has also grown, expanded and intensified. Your Company’s as on 31st May, 2009 of the trees planted during progression in this journey and its commitment to taking the abovementioned period is 79.49%. a more responsible and holistic approach to business is reflected by the facts that a) all commitments made in the• ESOPs AWARDS 2009: is an internal Company award first Report were satisfactorily met and b) a structured and was institutionalised in 2008 to appreciate and Sustainability road map over a 3 and 5 year time horizon promote healthy competition amongst employees and has been drawn, with clear targets for reducing locations. consumption of energy and water and reduction in GHGOther ESOPs activities also included other initiatives in emission and waste. Details of this Group Level Road MapEducation, Health, Environment and Social arenas bringing and further information on various environment relatedlong-lasting impact. 27 initiatives were conducted in initiatives taken by your Company which would help inEducation (such as distributing educational material, IT/ achieving the targets in the Road Map, have beenvocational training, infrastructure development) impacting elaborated elswhere in the Annual Report.24,664 lives. 54 Health initiatives such as medical camps, During the year under review, a Carbon foot-printingblood donation camps, Pulse Polio Campaigns, mobile exercise was undertaken to inventorise GHG emissions fromdispensaries, etc. reached out to over 14,573 people. HIV/ all the Company’s business operations under Scope I, II &AIDS awareness campaigns reached out to over 1,36,560 III emissions as per internationally accepted standards. Thispeople in Nashik. For taking care of the Environment, would enable your Company to baseline data on its1,14,862 trees were planted for Gap Filling in Financial emissions and undertake initiatives towards improvingYear 2009-10. 71 Social initiatives were conducted such as performance in this area. This would be reported in yourvisiting Old Age Homes, interacting with children, Company’s 3rd Sustainability Report, which would beconducting Shraamdan, etc. which reached out to over released shortly.78,003 people. Realising that the equation of business with Environment‘Sustainability’ Initiative and Society is undergoing a radical change, through itsIn the last year’s Directors’ Report, a beginning was made strategic approach of ‘ALTERNATIVE THINKING’ your 5
Company is committed to integrate sustainable (i) in the preparation of the annual accounts, thedevelopment for a sustainable business growth. For a applicable accounting standards have been followed;detailed information on the Annual Sustainability Reports (ii) they have, in the selection of the accounting policies,for the years 2007-08 to 2008-09 please log on to consulted the Statutory Auditors and these have beenwww.mahindra.com/sustainability. applied consistently and reasonable and prudentDirectors judgments and estimates have been made so as to give a true and fair view of the state of affairs of theMr. A. K. Nanda, Executive Director of the Company, after Company as at 31st March, 2010 and of the profit of37 illustrious years of service in the Mahindra Group of the Company for the year ended on that date;which 18 years were as an Executive Director decided to (iii) proper and sufficient care has been taken for thestep down from his executive position with effect from the maintenance of adequate accounting records inclose of 31st March, 2010. accordance with the provisions of the Companies Act,Considering his experience and expertise, Mr. A. K. Nanda 1956 for safeguarding the assets of the Company andwas appointed as an Additional Director of the Company for preventing and detecting fraud and otherwith effect from 1st April, 2010 at the Meeting of the irregularities;Board of Directors of the Company held on 30th March, (iv) the annual accounts have been prepared on a going2010. concern basis.The Board has placed on record its deep appreciation of Subsidiary CompaniesMr. Nanda’s immense contribution and valuable services The subsidiary companies of your Company continue toduring his long association with the Company and contribute to the overall growth of the Company. Majoracknowledged Mr. Nanda’s outstanding experience and subsidiaries such as Mahindra & Mahindra Financial Servicesexpertise in serving the Mahindra Group since 1973 Limited with a 61.96% growth in its consolidated profitsincluding his contribution as Executive Director of the and Mahindra Holidays & Resorts India Limited with aCompany from 1992 onwards. 46.86% growth in its consolidated profits deserve specialThe Company has received a Notice from a Member mention. The consolidated Group Profit for the year aftersignifying his intention to propose Mr. Nanda for the exceptional items, prior period adjustments and tax andoffice of Director at the forthcoming Annual General after deducting minority interests is Rs.2,478.56 crores asMeeting. against Rs.1,405.41 crores earned in the previous year.Mr. Keshub Mahindra, Mr. Anupam Puri, Dr. A. S. Ganguly During the year under review, Mahindra Metal One Steeland Mr. R. K. Kulkarni retire by rotation and, being eligible, Service Centre Limited, Raigad Industrial & Business Parkoffer themselves for re-appointment. Limited, Retail Initiative Holdings Limited, Mahindra Retail Private Limited, Mahindra Technologies Services Inc.,Directors’ Responsibility Statement Mahindra Punjab Tractors Private Limited, MahindraPursuant to section 217(2AA) of the Companies Act, 1956, EcoNova Private Limited, Mahindra Conveyor Systemsyour Directors, based on the representations received from Private Limited, Tech Mahindra (Nigeria) Limited, Techthe Operating Management, and after due enquiry, confirm Mahindra Bahrain Limited S.P.C. and BAH Hotelanlagenthat: AG became subsidiaries of your Company. 6
MAHINDRA & MAHINDRA LIMITEDDuring the year under review, Mahindra Hinoday Industries wholly owned subsidiaries of Mahindra Aerospace PrivateLimited, Metalcastello S.p.A., and Mahindra Technologies Limited which in turn is a subsidiary of your Company.Inc., ceased to be subsidiaries of the Company. Reva Electric Car Company Private Limited also became a subsidiary of your Company.Further, pursuant to an Agreement dated 10th May, 2005,signed between SBC International Inc. [now AT&T The Statement pursuant to section 212 of the CompaniesInternational Inc.] (“AT&T”), Mahindra and Mahindra Act, 1956 containing details of the Company’s subsidiariesLimited (“the Company”), British Telecommunications Plc., is attached.Mahindra-BT Investment Company (Mauritius) Limited The Consolidated Financial Statements of the Company(“MBTM”) and Tech Mahindra Limited (“Tech Mahindra”) and its subsidiaries, prepared in accordance withwhich entitled AT&T to exercise certain Options over Equity Accounting Standard AS21 form part of the Annual Report.Shares of Tech Mahindra on achieving certain Milestonesby Tech Mahindra at a pre-determined price, AT&T exercised In terms of the approval granted by the Central Governmentits Options and acquired 98,70,912 Equity Shares of Tech under section 212(8) of the Companies Act, 1956, copy ofMahindra, aggregating 8.07% of the paid-up Equity Share the Balance Sheet, Profit and Loss Account, Reports of theCapital of Tech Mahindra on 22nd March, 2010 from MBTM. Board of Directors and Auditors of the subsidiaries have not been attached to the Balance Sheet of the Company.Upon the exercise of Options by AT&T, the Shareholding The Company Secretary would make these documentsof the Company alongwith its subsidiary MBTM in Tech available upon receipt of request from any Member of theMahindra stands reduced to 44.01%, resulting in Tech Company interested in obtaining the same. However, asMahindra ceasing to be a subsidiary of the Company with directed by the Central Government, the financial data ofeffect from 22nd March, 2010. the subsidiaries have been separately furnished formingConsequently, the subsidiaries of Tech Mahindra viz. part of the Annual Report. The accounts of the individualMahindra Logisoft Business Solutions Limited, Tech subsidiary companies shall be uploaded on the Website ofMahindra (Americas) Inc., Tech Mahindra GmbH, Tech your Company. These documents would also be availableMahindra (Singapore) Pte. Limited, Tech Mahindra for inspection at the Head Office of the Company and at(Thailand) Limited, Tech Mahindra Foundation, PT Tech the Office of the respective subsidiary companies, duringMahindra Indonesia, CanvasM Technologies Limited, working hours upto the date of the Annual General Meeting.CanvasM (Americas) Inc., Tech Mahindra (Malaysia)SDN.BHD, Tech Mahindra (Beijing) IT Services Limited, Tech AuditorsMahindra (Nigeria) Limited, Tech Mahindra Bahrain Limited Messrs. Deloitte Haskins & Sells, Chartered Accountants,S.P.C. and Venturbay Consultants Private Limited also ceased retire as Auditors of the Company and have given theirto be subsidiaries of the Company with effect from consent for re-appointment. The Shareholders would be nd22 March, 2010. required to elect Auditors for the current year and fix their remuneration.Subsequent to the year end, Mahindra Metal One SteelService Centre Limited has changed its name to Mahindra As required under the provisions of section 224(1B) of theElectrical Steel Limited and Mahindra Aerospace Australia Companies Act, 1956, the Company has obtained a writtenPty. Limited and Aerostaff Australia Pty. Limited became Certificate from the above Auditors proposed to be 7
re-appointed to the effect that their re-appointment, if last few months, as indicated by the sharp rise in capitalmade, would be in conformity with the limits specified in goods production and a normal monsoon forecast for thethe said section. current year, the prognosis for growth in the current fiscal is positive.Public Deposits and Loans/Advances However, the rising cost of commodities and the supplyOut of the total 17,101 deposits of Rs.166.22 crores from constraints on certain critical components are a source ofthe Public and Shareholders as at 31st March, 2010, 205 considerable concern and your Company hopes to counterdeposits amounting to Rs.0.67 crores had matured and this through an intensive and continuous focus on costhad not been claimed as at the end of the Financial Year. controls, product innovation and customer delight.Since then, 93 of these deposits of the value of Rs.0.44crores have been claimed. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and OutgoThe particulars of loans/advances and investment in itsown shares by listed companies, their subsidiaries, Particulars required to be disclosed under the Companiesassociates, etc., required to be disclosed in the Annual (Disclosure of Particulars in the Report of Board of Directors)Accounts of the Company pursuant to Clause 32 of the Rules, 1988 are set out in Annexure II to this Report.Listing Agreement are furnished separately. Particulars of EmployeesCurrent Year The Company had 426 employees who were in receipt of st thDuring the period 1 April, 2010 to 28 May, 2010, 45,821 remuneration of not less than Rs.24,00,000 during thevehicles were despatched as against 34,797 vehicles during year ended 31st March, 2010 or not less than Rs.2,00,000the corresponding period in the previous year. During the per month during any part of the said year. However, assame period, 29,699 tractors were despatched as against per the provisions of section 219(1)(b)(iv) of the Companies24,536 tractors despatched during the corresponding Act, 1956, the Directors’ Report and Accounts are beingperiod in the previous year. sent to all the Shareholders of the Company excluding the Statement of particulars of employees. Any ShareholderEconomies in many parts of the world have started to interested in obtaining a copy of the Statement may writestabilise and recover either from recession or severe slow to the Company Secretary of the Company.down in the past two years. The Indian Economy hasdisplayed remarkable resilience over the course of thedownturn and is expected to grow strongly. The primarydriver of growth in the year under review was the IndustrialSector. The index of industrial production grew 10.1% on a For and on behalf of the Boardyear on year basis between April, 2009 to February, 2010as compared to the 3.1% growth registered in the same KESHUB MAHINDRA thperiod in the last fiscal. With investments picking up in the Mumbai, 29 May, 2010 Chairman 8
MAHINDRA & MAHINDRA LIMITEDANNEXURE I TO THE DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2010Information to be disclosed under the Securities and Exchange Board of India (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines, 1999:(a) Options 1,51,80,898 granted(b) The pricing 1st Tranche 2nd Tranche 3rd Tranche 4th Tranche 5th Tranche 6th Tranche 7th Tranche 8th Tranche 9th Tranche 10th Tranche formula Average Average Discount Discount Average Discount Discount Discount Discount Discount price price of 5.13% of 4.85% price of 5.02% of 4.89% of 4.97% of 5.03% of 4.97% preceding preceding on the on the preceding on the on the on the on the on the the the average average the average average average average average specified specified price price specified price price price price price date - 27th date - 30th preceding preceding date - 14th preceding preceding preceding preceding preceding September, May, the the September, the the the the the 2001 2003 specified specified 2005 specified specified specified specified specified date - 31st date - 30th date - 29th date - 13th date - 30th date - 4th date - 30th May, 2004 May, 2005 May, 2006 September, July, 2007 August, July, 2009 2006 2008 Average price - Average of the daily high and low of the prices for the Company’s Equity Shares quoted on Bombay Stock Exchange Limited during 15 days preceding the specified date. The specified date - Date on which the Remuneration/Compensation Committee decided to recommend to the Mahindra & Mahindra Employees’ Stock Option Trust (Trust), the grant of Options.(c) Options vested 82,90,283(d) Options exercised 45,88,703(e) The total number of 45,88,703 Equity Shares of Rs.10 each. These were transferred from the Trust to the Eligible shares arising as a Employees prior to sub-division of the Face Value of Equity Share from Rs.10 to Rs.5. result of exercise of option(f) Options lapsed 7,57,165(g) Variation of terms At the Sixty-first Annual General Meeting of the Company held on 30th July, 2007, the of options Mahindra & Mahindra Limited Employees Stock Option Scheme was amended to provide for recovery from Eligible Employees, the fringe benefit tax in respect of Options which are granted to or vested or exercised by the Eligible Employees on or after 1st April, 2007.(h) Money realised by Rs.79,24,98,738. This amount was received by the Trust. exercise of options(i) Total number 98,35,030 of options in force
(j) Employee-wise details of options granted to: (i) Senior managerial As per Statement attached personnel (ii) Any other employee who Names Options Names Options receives a grant in any granted granted one year of option during the during the amounting to 5% or more year ended year ended of option granted during 31st March, 31st March, that year 2004* 2005* Mr. Raghunath Murti 15,000 Mr. Pranab Datta 15,240 Mr. Hemant Luthra 15,240 Mr. Rajeev Dubey 15,000** Mr. Ramesh lyer 25,920 Mr. Allen Sequeira 10,160 - - Mr. Prince M. Augustin 5,080 * The Options granted stand augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005. ** Out of these, the Options granted and outstanding as of 30th March 2010, stands augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the sub-division of the Face Value of Equity Share from Rs.10 to Rs.5. (iii) Identified employees who Nil were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant(k) Diluted Earnings Per Share Rs.35.61 (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 ‘Earnings per Share’(l) Where the company has The Company has calculated the employee compensation cost using the intrinsic calculated the employee value of stock options. Had the fair value method been used, in respect of stock compensation cost using the options granted on or after 30th June, 2003, the employee compensation cost intrinsic value of the stock would have been higher by Rs.26.44 crores, Profit after tax lower by Rs.26.44 options, the difference between crores and the basic and diluted earnings per share would have been lower by the employee compensation Rs.0.48 and Rs.0.44 respectively. cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed.
MAHINDRA & MAHINDRA LIMITED(m)Weighted-average exercise Options Grant Date Exercise price Fair value prices and weighted-average fair values of options shall be (Rs.) (Rs.) disclosed separately for options whose exercise price either 4th November, 2009 724.00 414.84 equals or exceeds or is less than the market price of the stock.(n) A description of the method The fair-value of the stock options granted on 4th November, 2009 have been and significant assumptions calculated using Black-Scholes Options pricing Formula and the significant used during the year to assumptions made in this regard are as follows: estimate the fair values of options, including the following weighted-average information: (i) risk-free interest rate, 6.41% (ii) expected life, 2.50 years (iii) expected volatility, 53.56% (iv) expected dividends, and 2.24% (v) the price of the underlying Rs.929.50 share in market at the time of option grant.STATEMENT ATTACHED TO ANNEXURE I TO THE DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2010Name of Senior Managerial Options granted in Options granted in Options granted in Options granted in Options granted inPersons to whom Stock December, 2001* June, 2005** September, 2006 July, 2007 August, 2008Options have been grantedMr. Deepak S. Parekh 20,000 5,000 Nil Nil NilMr. Nadir B. Godrej 20,000 5,000 Nil Nil NilMr. M. M. Murugappan 20,000 5,000 Nil Nil NilMr. Narayanan Vaghul 20,000 5,000 Nil Nil NilDr. A. S. Ganguly 20,000 5,000 Nil Nil NilMr. R. K. Kulkarni 20,000 5,000 Nil Nil NilMr. Anupam Puri 20,000 ***5,000 Nil Nil NilMr. Bharat Doshi 1,00,000 ***10,000 ***11,345 ***8,362 ***29,039Mr. A. K. Nanda 1,00,000 10,000 ***11,345 ***8,362 ***24,890* All the above Options have been exercised.** The Options granted stands augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the 1:1 Bonus Issue made in September, 2005.*** Out of these, the Options granted and outstanding as on 30th March 2010, stands augmented by an equal number of Options and the Exercise Price stands reduced to half on account of the sub-division of Face Value of Equity Share from Rs.10 to Rs.5.
ANNEXURE II TO THE DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2010PARTICULARS AS PER THE COMPANIES (DISCLOSURE OF • Improving capacity utilisation of cylinderPARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) head washing units.RULES, 1988 AND FORMING PART OF THE DIRECTORS’ • Modifying furnace charging sequence.REPORT FOR THE YEAR ENDED 31ST MARCH, 2010 • Optimising temperature settings of airA) Conservation of Energy conditioners considering seasonal The Company has always been conscious of the need changes. for conservation of energy and has been steadily • Modification of Air Handling Ducts in making progress towards this end. Energy paint shop to optimise use of Air Blower conservation initiatives have been implemented at all power consumption. the plants and offices of the Company by undertaking numerous energy conservation projects. (iii) Initiatives Generating Awareness on Energy Consumption (a) During the year, the Company has taken the following initiatives for conservation of energy: • Display of sustainability posters at (i) Engineering Initiatives workplace. • Modification in equipments like oil • Idea generation campaign for electrical pumps and motors coupled with system energy saving. optimisations to reduce energy • Celebration of Energy Conservation Day consumption. on 14th December, 2009 followed by • Replacement of higher HP motor with Energy Conservation Week between 14th lower HP. December, 2009 to 21st December, 2009. • Installation of heat pumps, metal halide • Setting up of Stalls inside the Plant lamps instead of sodium and mercury premises for awareness of Energy vapor lamps. Efficient and Renewable Energy Products. • Installation of natural draft cooling • Reward and recognition for energy saving towers instead of induced draft cooling projects. systems. (b) Additional investments and proposals, if any, • Installation of capacitor banks, automatic being implemented for reduction of consumption timer circuits for lights and fans. of energy: • Installation of heat recovery system at • Waste heat recovery projects in paint shops. ED oven. • Improvement in efficiency of central air • Shift to LPG Heating from Electric Heating. conditioning units. (ii) Process Improvement • Explore application of efficient lighting (LED, Magnetic coupled). • Cycle time reduction of various manufacturing processes. • Use of renewable energy (Solar and Wind).
MAHINDRA & MAHINDRA LIMITED (c) Impact of the measures at (a) & (b) above for for the Maxximo to give the pick-up segment reduction of energy consumption and users a car like driving comfort. consequent impact on the cost of production of Your Company has been working on developing goods: the Scorpio Pick-UP for the US market and in the The measures taken have resulted in lower energy process, has developed/attained significant consumption. In the Automotive Division, the capabilities in the field of emission, safety, security Specific Power consumption per equivalent vehicle and on board diagnostics. The Company has improved by 15% over the previous year. For the confidence of complying to the latest FMVSS same period, the Farm Equipment Sector achieved legislations for model year 2010 and further years. an improvement of 3.21% per equivalent tractor. In the area of sustainable mobility, the Company developed a Micro Hybrid application on the The work done by your Company has received Pick-UP. This was launched on the new Bolero recognition in the form of a number of National Maxi Truck and was received very well by the and State level awards. customers.B) Technology Absorption During the year under review, your Company’s Research & Development: Automotive Division applied for 24 Patents and 8 Design Registrations. 1. Areas in which Research & Development is carried out: Moving on to the Farm Equipment Sector, in the During the year under review, the Automotive domestic market, the Farm Division, during the Division focused technology development efforts year under review, developed and launched the in core areas of engine technology, safety, value “Yuvraj 215”, a 15HP tractor, to meet the needs engineering through the use of modern of the small and marginal farmers. The entire manufacturing processes, alternate material and existing range of tractors, i.e. Bhoomiputra, developing capabilities in automotive electronics. Sarpanch and the flagship Arjun range were The Farm Equipment Sector too, focused on upgraded, offering better fuel efficiency, stability improvement in engine technology and new and comfort. In the same period, the Swaraj product development. Division developed and launched the Swaraj 843 2. Benefits derived as a result of the above efforts: XM (Xtra Mileage) tractor, the 1st new product from the Swaraj stable after its merger with the Some significant achievements for the year under review include the C2 CRDe engine with DOHC Company. which was launched on the Maxximo. The engine In the international space, in the US market, the delivers higher power and better fuel efficiency, Compact series of tractors were launched across thus delivering significant customer benefit and the country, offering advanced features like competitive advantage to your Company. Your Hydrostatic Transmission, allowing the product to Company also developed its first in-house be easily operated by all in the household. Your Gasoline Engine which was launched on the Company developed an Integrated Cabin, which Scorpio targeting the overseas markets. was also introduced in the US market. In China, In the area of Suspension, a hydro-formed frame the 125 HP tractor was launched, significantly and front independent suspension was developed expanding your Company’s tractor range. 3
In the case of Mahindra Powerol, the product 4. Expenditure on R&D range was increased to 320 kVA, at the higher The Company spent Rs.664.86 crores (including end. At the lower end, the 5kVA genset has been Rs.390.72 crores on capital expenditure) on developed and introduced. In AppliTrac, the Research and Development work during the year tracked type self propelled harvester was developed which was approximately 3.23% of the total and introduced in the southern rice belt. turnover. Keeping in view the future technology Technology Absorption, adaptation and innovation: requirements, your Company’s tractor engines are compliant with the upcoming BS (Trem) IIIA 1. Efforts, in brief, made towards technology norms in India and has also undertaken a absorption, adaption and innovation programme to meet the challenging Tier-IV The Company has continued its endeavor to emission norms of USA. absorb advanced technologies for its product range to meet the requirements of a globally During the year in India, the Farm Equipment Sector filed 12 New Patents and 2 New Design competitive market. All of the Company’s Registration applications. Vehicles, Engines and Tractors are compliant with the prevalent regulatory norms in India and also 3. Future plan of action in the countries to which they are exported. The Your Company continues its focus on developing Company has also undertaken programs for new products and technologies to meet the ever development of vehicles which would run on growing customer needs, regulatory alternate fuels like CNG, Bio-diesel, Hydrogen and requirements, competitive pressures and to Electric traction. prepare for the future. Sustainable mobility 2. Benefits derived as a result of the above efforts solutions are a key focus area and your Company • Compliance with new emission norms will continue to aggressively pursue technology introduced in India with effect from 1st April, development in this area. Some of the key thrust 2010. areas in this direction are weight reduction, fuel efficiency improvement and development of • Build a knowledge base for the Company. alternative fuel powertrains. Further, safety related • Launch of Bolero Maxi Truck, Gio, Maxximo technologies are another key area of focus for and Yuvraj. your Company. • Introduction of Micro Hybrid Technology on On the Farm Equipment side, your Company a Pick-UP. remains committed to improving farm • Development of C2 CRDe engine with DOHC. productivity through a variety of product (Tractors • Development of Electric Version of Maxximo. and Implements) and non-product initiatives. The focus will be on delivering new technology to • Development of Integrated Cabin for Tractor. the customer for a multi-fold farm output. • Emphasis on value analysis/value engineering Product upgrades, new products and implements and innovative cost reduction ideas to cut will be focus areas. down costs.4