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Hero MotoCorp Ltd.

BSE: 500182 Sector: Auto
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OPEN 3673.20
52-Week high 3880.25
52-Week low 2844.40
P/E 25.16
Mkt Cap.(Rs cr) 73,699
Buy Price 3690.55
Buy Qty 17.00
Sell Price 3694.00
Sell Qty 109.00
OPEN 3673.20
CLOSE 3695.95
52-Week high 3880.25
52-Week low 2844.40
P/E 25.16
Mkt Cap.(Rs cr) 73,699
Buy Price 3690.55
Buy Qty 17.00
Sell Price 3694.00
Sell Qty 109.00

Hero MotoCorp Ltd. (HEROMOTOCO) - Director Report

Company director report



Your Directors are pleased to present the Thirty Third Annual Report together with theCompany’s audited financial statements for the financial year ended March 31 2016.


The standalone and consolidated financial highlights of your Company are as follows:

( Rs. crores)

Standalone Consolidated
Particulars For the year ended For the year ended
March 31 2016 March 31 2015 March 31 2016 March 31 2015
Gross Sales 30418.66 29068.24 30434.29 29020.98
Net Sales and other Income 28990.42 28078.04 29002.81 28030.14
Profit before Finance Costs Depreciation & Exceptional Item 4838.13 4034.92 4771.33 3988.85
Less: Finance Cost 2.15 11.09 11.87 11.70
Depreciation & Amortization 441.40 539.97 447.01 540.45
Exceptional Item (Provision for diminution in value of
- 155.04 - 144.73
non-current investment)
Profit Before Tax (PBT) 4394.58 3328.82 4312.45 3291.96
Less: Provision for tax
- Current 960.88 898.91 960.91 899.18
- Deferred 301.33 44.27 301.33 44.27
Profit After Tax (PAT) 3132.37 2385.64 3050.21 2348.51
Share of profit/(loss) of associates - - 39.46 15.15
Minority interest - - (4.11) (1.04)
Profit for the year 3132.37 2385.64 3093.78 2364.70
Add: Balance of profit brought forward 4104.93 3414.14 4077.57 3407.72
Less: On account of Depreciation as per Schedule II of - 22.97 - 22.97
Companies Act 2013.
Add: Profit consequent to change in Group’s Interest - - 46.04 -
Balance available for appropriation 7237.30 5776.81 7217.39 5749.45
- Interim 798.75 599.06 798.75 599.06
- Proposed Final 639.00 599.06 639.00 599.06
Corporate Dividend Tax 292.69 223.76 292.69 223.76
Transfer to General Reserve 250.00 250.00 250.00 250.00
Balance carried to Balance Sheet 5256.86 4104.93 5236.95 4077.57
Dividend (%) 3600 3000 3600 3000
Basic and Diluted Earnings Per Share (EPS) ( Rs. )
- before exceptional items 156.86 127.23 154.93 125.66
- after exceptional items 156.86 119.46 154.93 118.41


During the Financial Year (FY) 2015-16 under review your Company clocked sales of6632322 units over 6631826 units in the previous FY. The total sales of products (netof excise duty) was

Rs. 28160.48 crores as compared to

Rs. 27350.60 crores in FY 2014-15 showing an increase of 2.96%.

During FY 2015-16 net revenue from operations of your Company was

Rs. 28599.30 crores as compared to

Rs. 27585.30 crores in FY 2014-15 registering an increase of 3.67%.

Profit before tax (PBT) after exceptional items was Rs. 4394.58 crores as comparedto Rs. 3328.82 crores in FY 2014-15 showing an increase of 32.02%. Your Company’sProfit after Tax (PAT) was Rs. 3132.37 crores as against Rs. 2385.64 crores in FY2014-15 registering an increase of 31.30%.

Earnings before Interest Depreciation and Taxes (EBIDTA) margins stood at 15.55% in FY2015-16 as compared to 12.84% in FY 2014-15.


Continuing with the past trend your Directors are pleased to recommend for yourapproval a final dividend of Rs. 32 per equity share (1600%) of face value of Rs. 2 eachin addition to an interim dividend of Rs. 40 per equity share (2000%) declared in themonth of March 2016 aggregating a total dividend payout of Rs. 1437.75 crores (excludingtax on dividend) during FY ended March 31 2016. In the previous FY total dividend payoutof Rs. 60 per Equity Share of the face value of Rs. 2 each has been made. Final dividendif approved at the ensuing Annual General Meeting shall be paid to the eligible memberswithin the stipulated time period.


In accordance with the provisions of the Companies Act 2013 (‘the Act’) andAccounting Standard (AS)-21 on the Consolidated Financial Statements read with AS-23 onAccounting for Investments in Associates and AS-27 on Financial Reporting of Interests inJoint Ventures the Audited Consolidated Financial Statement for the FY ended March 312016 is provided in this Annual Report.


A detailed discussion on the business performance and future outlook forms part ofManagement Discussion and Analysis Report which is separately provided and forms part ofthis Annual Report.


During FY 2015-16 there was no change in the nature of Company’s business.


During FY 2015-16 the state of art ‘Garden Factory’ of your Company atNeemrana Rajasthan has expanded to 1.065 million from its earlier capacity level of 0.765million to cater to the growing demand of the scooter segment. Further your Company hasexpanded its capacity by adding a Cathodic Electro Deposition (CED) paint shop and otherbalancing equipment in a record time of nine months. This paint shop is able to handlequick set up change integration.

The ‘Global Parts Centre’ another state of art establishment of your Companyat Neemrana Rajasthan operated at its full capacity thereby creating a unique set up forparts business management across the two wheeler industry.

You would be proud to know that your Company’s first global manufacturing facilitylocated at Villa Rica in the Cauca province of Colombia was inaugurated by Senor JuanManuel Santos the Hon’ble President of Colombia in the month of September 2015. Thisis a landmark event which clearly establishes the rising global stature of the brand Hero.The facility has been designed for an annual capacity of 80000 units and has starteddespatches during FY under review.

The fifth plant of your Company at Halol Gujarat is nearing completion and is slatedto be operational for its Phase I capacities in the second half of FY 2016-17.

Your Company is also working with the Government of Andhra Pradesh for setting up amanufacturing unit at Sricity in Chittoor District in the state of Andhra Pradesh.

The construction of the second overseas plant of your Company at Jessore in Bangladeshwith an annual installed capacity of 1.5 lakhs units is in full swing and operations areplanned to start in the second half of FY 2016-17.


Over the past few years your Company has taken giant strides towards becoming amulti-national and multi-cultural organization with people from countries in Asia Europeand Latin America now being part of the Hero family. This is a process that will continuein the coming years and will play a key role in the pursuit of making ‘Hero’ atruly global organization with its presence in more than 29 countries which it iscommitted to expand to 50 countries by 2020.

Over the years your Company has set global benchmarks in creating world classmanufacturing and operational facilities to ensure that its products are best in class interms of design technology and quality. During FY under review your Company has launchedthe brand ‘Hero’ and its range of products in Nigeria UAE Madagascar CostaRica Panama Bolivia and Dominican Republic. In the coming years your Company plans toconsolidate its operations across South Asia Africa & Middle East and Latin Americawith the introduction of new products.


Achieving a historic landmark in its illustrious journey your Company has formallyinaugurated a world-class ‘Global Centre of Innovation and Technology’(‘the CIT’) at Jaipur Rajasthan. The CIT is the result of a bold vision toposition your Company as the leading source of innovation and green technology. Thisfacility is a giant stride in its relentless endeavour towards strengthening yourCompany’s in-house technology capabilities.

The CIT is a defining step not just for the technical prowess of Hero but also forthe nation’s story to truly blossom on the global stage as a technology powerhouse.Rich in diversity the CIT brings together a multi-national group of automotive expertscreating an environment of engineering excellence and innovation.


HMCL Netherlands B.V. (‘HNBV’)

HNBV a wholly owned subsidiary of your Company was incorporated in Amsterdam as aprivate company with limited liability under the laws of The Netherlands with the primaryobjective of promoting overseas investments. During FY 2015-16 HNBV has invested inoperating companies in Colombia and Bangladesh.

During FY 2015-16 HNBV invested in its subsidiary namely HMCL Colombia S.A.S.(‘HMCLC’) in Colombia an amount of USD 3 million taking the total investmentto USD 13.10 million. HNBV currently holds 51% equity in HMCLC post issuance of 49%equity shares to Woven Holdings LLC. During FY 2015-16 HMCLC has also commenced CKDoperation at its manufacturing plant setup in the industrial city of Cali 300 kmssouthwest of Bogota with the project cost of USD 80 million. During the financial periodended March 31 2016 it has reported a net loss of Rs. 52.66 crores.

HNBV has also invested in a joint venture company in Bangladesh namely HMCL NiloyBangladesh Limited (‘HNBL’) with Nitol Niloy Group Bangladesh and holds 55% ofthe total equity capital. During FY 2015-16 an additional investment of USD 3.08 millionwas made in HNBL taking the cumulative investment to USD 5.34 million. During thefinancial period ended March 31 2016 it has incurred a loss of Rs. 0.47 crores.

During the period ended March 31 2016 HNBV had a consolidated loss of Rs. 53.56crores including those of its subsidiaries as mentioned above.

HMCL (NA) Inc.

Your Company has also invested in its wholly owned subsidiary in Delaware USA namelyHMCL (NA) Inc. which further invested in Erik Buell Racing Inc. (‘EBR’) aDelaware corporation by subscribing to 49% of its equity share capital.

EBR along with its subsidiary Erik Buell Racing LLC an associate of HMCL (NA) Inc.ceased its operations and entered into Assignment for the Benefit of Creditors underChapter 128 of the Wisconsin Statutes (‘Chapter 128 Process’) which is aprocess similar to the bankruptcy laws of USA. In view of the above provision of Rs.150.09 crores being the carrying value of such investment in the books of HMCL (NA) Inc.was made towards the diminution in value of the investment. During the period ended March31 2016 HMCL (NA) Inc. has incurred a loss of Rs. 0.29 crores.

HMCL Americas Inc. (‘HMCLA’)

During FY 2015-16 your Company incorporated an operating company in America namelyHMCL Americas Inc. to pursue various global businesses. HMCLA has been setup with aninitial investment of Rs. 22.22 crores. During financial period ended March 31 2016 HMCLAmericas Inc. has incurred a loss of Rs. 2.12 crores.

HMC MM Auto Limited (‘HMCMMA’)

Your Company has a joint venture with Magneti Marelli S.p.A. Italy namely HMCMMA inIndia set up for the purpose of carrying out manufacturing assembly sale anddistribution of two wheeler fuel injection systems and parts. Your Company holds 60% ofthe equity share capital in HMCMMA. During FY 2015-16 HMCMMA has incurred a loss of Rs.9.09 crores.

Associate Company

Hero FinCorp Ltd. (‘HFCL’)

HFCL an associate of your Company was incorporated in the year 1991. Your Companyholds 48.42% in the equity share capital of HFCL. HFCL is a non-banking finance companyengaged in providing financial services including two wheeler financing and providingcredit to Company’s vendors and suppliers. Over the years it has added several newproducts and customers in its portfolio like SME and commercial loans loan againstproperty etc.

During FY 2015-16 HFCL recorded an income from operations of Rs. 771.28 crores and aprofit of Rs. 81.50 crores.

A statement containing salient features of financial statement of subsidiaries andassociate company forms part of the financials.

Material Subsidiaries

The Board of Directors of your Company (‘the Board’) has approved the policyfor determining Material Subsidiaries. At present your Company does not have a MaterialSubsidiary. The Policy on Material Subsidiary can be viewed on the Company’s websitewww. at the following link:


Your Directors make the following statement in terms of Section 134 of the Act whichis to the best of their knowledge and belief and according to the information andexplanations obtained by them: 1. that in the preparation of the annual accounts for theFinancial Year ended March 31 2016 the applicable accounting standards have beenfollowed along with proper explanation relating to material departures; 2. thatappropriate accounting policies have been selected and applied consistently and judgmentsand estimates that are reasonable and prudent have been made so as to give a true and fairview of the state of Affairs as at March 31 2016 and of the profit and loss of yourCompany for the financial year ended March 31 2016; 3. that proper and sufficient carehas been taken for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act 2013 for safeguarding the assets of your Company and forpreventing and detecting fraud and other irregularities; 4. that the annual accounts forthe Financial Year ended March 31 2016 have been prepared on a going concern basis; 5.that the directors have laid down Internal Financial Controls which were followed by theCompany and that such Internal Financial Controls are adequate and were operatinge3ectively; and 6. that the directors have devised proper systems to ensure compliancewith the provisions of all applicable laws and that such systems are adequate andoperating e3ectively.


Our beloved Chairman Emeritus Late Dr. Brijmohan Lall Munjal continued to guide andmentor your Company till November 1 2015 the day he left us for his heavenly abode. Hisinspirational leadership outstanding business acumen and exemplary courage wereinstrumental in successfully navigating your Company’s extra-ordinary journey –from scratch to becoming a formidable brand and a market leader.

Mr. Pawan Munjal Managing Director

& CEO was elevated as the Chairman Managing Director & CEO of the Companyw.e.f. June 1 2015. The Board at its meeting held on August 8 2016 has recommended thereappointment of Mr. Pawan Munjal as the Chairman Managing Director & CEO of theCompany for a period of five years with e3ect from October 1 2016.

Under his dynamic leadership your Company has gone from strength to strength and is oncourse to expand its global presence to a total of 50 countries by the year 2020. Over thepast several years Mr. Munjal has led your Company in a highly competitive and volatilemarket to not just consolidate its market leadership but also expand its global footprintacross continents emerging as one of the country’s foremost business leaders.

Mr. Munjal is continuing the glorious legacy of Late Dr. Brijmohan Lall MunjalChairman Emeritus and is shaping the future of your Company into a modern technology& innovation-driven organisation.

Ms. Shobana Kamineni has been appointed as an Independent Director of your Company withe3ect from March 27 2015 by the members at their Annual General Meeting held on August31 2015.

In terms of the applicable provisions of the Act and the Articles of Association of theCompany Mr. Suman Kant Munjal Director of the Company retires by rotation at the ensuingAnnual General Meeting and being eligible has offered himself for re-appointment. Briefresume and other details of Mr. Suman Kant Munjal who is proposed to be reappointed as aDirector of your Company have been furnished along with the Explanatory Statement to theNotice of the ensuing Annual General Meeting.

The Board at its meeting held on August 8 2016 has inducted Mr. Vikram S. KasbekarHead of Operations & Supply Chain on the Board of the Company subject to confirmationby the shareholders at the ensuing Annual

General Meeting. Mr. Kasbekar has more than four decades of experience in the field ofoperations supply chain manufacturing and project engineering and has contributedsignificantly to the growth of your Company.

Declarations from Independent Directors

Declarations have been received from the Independent Directors confirming that theymeet the criteria of independence as prescribed in the Act and the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 (‘ListingRegulations’).

In the opinion of the Board Independent Directors fulfil the conditions specified inthe Act Rules made thereunder and Listing Regulations and are independent of themanagement.

Key Managerial Personnel

Mr. Ilam C. Kamboj resigned and ceased to be the Company Secretary and ComplianceOfficer of the Company with e3ect from April 2 2016.

Ms. Neerja Sharma has been appointed as the Company Secretary and Chief ComplianceOfficer of the Company w.e.f. August 8 2016. She has a rich experience of over 25 yearsin governance and compliance as a part of senior leadership teams during her earliertenures. With her appointment your Company has further strengthened the governanceframework and is committed to take the governance function to greater heights.


During FY 2015-16 six meetings of the Board of Directors were held. For details ofthese Board meetings please refer to the Corporate Governance Report on page 81 of thisAnnual Report.


To ensure an e3ective Board evaluation process the Nomination and Remuneration(‘NR’) Committee of your Board has put in place a robust evaluation frameworkfor conducting the exercise with the key steps and practices clearly defined. During FY2015-16 as part of this process customized questionnaires after review by the NRCommittee were circulated to all the Directors. Each Director was required to undertakeassessment of all other Directors including the Chairman.

Performance of the Board was evaluated on various parameters such as compositionstrategy tone at the top risk controls and diversity. Similarly questionnaires forCommittees were also framed on the parameters such as adherence to the terms of referenceand adequate reporting to the Board. Parameters for the Directors included intellectualindependence of the Director participation in formulation of business plans constructiveengagement with colleagues and understanding of risk profile of your Company. The Chairmanof your Company was evaluated on parameters such as leadership style and motivation of theDirectors.

Questionnaires were completed by each Director responses were analyzed and the resultswere subsequently discussed at a meeting of the NR Committee. Recommendations arising fromthis entire process were considered by the Board to improve its overall e3ectiveness andoptimize individual strengths of the Directors.


During FY under review your Company organized familiarisation programmes for theDirectors in accordance with the requirements of Listing Regulations. The Directors werealso provided with relevant documents reports and internal policies to enable them tofamiliarise with your Company’s procedures and practices from time to time besidesregular briefing by the members of the senior leadership team.

Details of familiarisation programmes organized for Independent Directors during FYunder review form part of Corporate Governance Report annexed hereto and are also postedon the Company’s website www.heromotocorp. com and can be viewed on the followinglink:


Pursuant to provisions of the Act the NR Committee of your Board has formulated aRemuneration Policy for the appointment and determination of remuneration of theDirectors Key Management Personnel Senior Management and other employees of yourCompany. The NR Committee has also developed the criteria for determining thequalifications positive attributes and independence of Directors and for making paymentsto Executive and Non-Executive Directors of the Company.

The NR Committee takes into consideration the best remuneration practices in theindustry while fixing appropriate remuneration packages and for administering thelong-term incentive plans such as ESOPs RSUs etc. Further compensation package of theDirectors Key Managerial Personnel Senior Management and other employees is designedbased on the set of principles enumerated in the said policy.

YourDirectorsa3rmthattheremuneration paid to the Directors Key Management PersonnelSenior Management and other employees is as per the Remuneration Policy of your Company.

The Remuneration details of the Directors Chief Financial Officer and CompanySecretary along with details of ratio of remuneration of each Director to the medianremuneration of employees of the Company for the FY under review are provided as AnnexureI.

The Remuneration Policy of your Company is posted on the Company’s and can be viewed on the following link: about-us/key-policies/remuneration-policy.html


In terms of the SEBI (Share Based Employee Benefits) Regulations 2014 as amended fromtime to time (‘SEBI Regulations’) the NR Committee of your Board inter aliaadministers and monitors the Employee Incentive Scheme 2014 of your Company and theEmployee Stock Option plans framed thereunder.

During FY 2015-16 the NR Committee has at its meeting held on March 28 2016allotted 2588 Equity Shares of

Rs. 2 each at a premium of Rs. 2157 per share to the eligible employees of yourCompany pursuant to exercise of options granted under Company’s Employee Stock OptionPlan 2014 framed under the Employee Incentive Scheme 2014. Post allotment of these sharesthe paid up equity share capital of your Company as on March 31 2016 stood at

Rs. 399380176.

Applicable disclosures as stipulated under the SEBI Regulations with regard to theEmployee Stock Option Plan are provided as Annexure II to this Report and areavailable on the Company’s website and can be viewed on thefollowing link: esop.php.

Your Company has received a certificate from M/s Deloitte Haskins & Sells GurgaonHaryana Statutory Auditors that the Employee Incentive Scheme 2014 for grant of stockoptions has been implemented in accordance with the SEBI Regulations and the resolutionpassed by the members in their general meeting. The certificate would be placed at theensuing Annual General Meeting for inspection by the members.


Your Company is committed to benchmarking itself with the global standards of CorporateGovernance. It has put in place an e3ective Corporate Governance system which ensures thatprovisions of the Act and Listing Regulations are duly complied with not only in form butalso in substance.

The Board has also evolved and adopted a Code of Conduct based on the principles ofgood Corporate Governance and best management practices being followed globally. The Codeis available on your Company’s website and can be viewed on thefollowing link: about-us/code-of-conduct.html

In terms of Listing Regulations a report on Corporate Governance along with acertificate from Mr. Arvind Kohli Proprietor (CP No. 2818) M/s Arvind Kohli &Associates Company Secretaries Gurgaon Haryana confirming compliance of the conditionsof corporate governance is annexed hereto and forms part of this Annual Report as AnnexureIII.


An amount of Rs. 250 crores being 7.98% of the profit after tax of the FY under reviewhas been transferred to the General Reserve of the Company.


During FY under review your Company has transferred unpaid/unclaimed dividendamounting to Rs. 2.37 crores for FY 2007-08 to the Investor Education and Protection Fund(IEPF) of the Central Government of India.


No material change and/or commitment a3ecting the financial position of your Companyhave occurred between April 1 2015 and the date of signing of this Report.


In terms of Section 186 of the Act details of investments made during FY 2015-16 areas under. No loan or guarantee has been given during the said period:


Principal Amount (Shares) Principal Amount (Bonds/Debentures) Total
Opening Balance 329.94 375.34 705.28
Addition* 263.76 0.12 263.88
Reduction** - (13.06) (13.06)
Closing Balance 593.70 362.40 956.10

* HMC MM Auto: Rs. 3.60 crores HMCL(NA) Inc.: Rs. Nil HMCL Netherlands B.V.: Rs.40.74 crores HMCL Americas Inc: Rs. 22.22 crores Hero FinCorp Limited: Rs. 197.19crores including MTM adjustment of Bonds: Rs. 0.12 crores.

** Maturity of bonds and amortisation.


Your Company has neither accepted nor renewed any deposits during FY 2015-16 in termsof Chapter V of the Act.


During FY 2015-16 all contracts/ arrangements/transactions entered into by yourCompany with related parties under Section 188(1) of the Act were in the ordinary courseof business and on an arm’s length basis. During FY 2015-16 your Company has notentered into any contracts/arrangements/ transactions with related parties which could beconsidered ‘material’ in accordance with its policy on Materiality of RelatedParty Transactions. Thus there are no transactions required to be reported in form AOC-2.

Further during FY 2015-16 there were no materially significant related partytransactions made by your Company with the Promoters Directors Key Managerial Personnelor other designated persons which might have potential conflict with the interest of theCompany at large.

All Related Party Transactions are placed before the Audit Committee for its approval.There was no matter requiring approval of the Board. During FY under review the AuditCommittee has approved transactions through the omnibus mode in accordance with theprovisions of the Act and Listing Regulations. Related party transactions were disclosedto the Board on regular basis as per AS-18. Details of related party transactions as perAS-18 may be referred to in Note 30 of the Standalone Financial Statements.

The policy on Related Party Transactions is available on the Company’s and can be viewed on the following link:


Your Company follows a comprehensive system of Risk Management and has adopted aprocedure for risk assessment and its minimisation. It ensures that all potential risksare timely defined and mitigated in accordance with the Risk Management Process includingidentification of elements of risk which may threaten the existence of the Company. DuringFY 2015-16 your Company has constituted a Risk Management Committee which closelymonitors the Risk

Management framework in the Company. The Board periodically reviews the Risk Managementframework of the Company.


Your Company has in place a well formulated Vigil Mechanism/Whistle Blower Policy whichprovides a robust framework for dealing with genuine concerns & grievances. During FYunder review six complaints were received and processed. Out of these three complaintshave been investigated & acted upon and rest are under investigation.

During FY 2015-16 no individual was denied access to the Audit Committee for reportingconcerns if any.

The Vigil Mechanism/Whistle Blower Policy of the Company is available on theCompany’s website www.heromotocorp. com and can be viewed on the following link: en-in/about-us/key-policies/vigil-mechanism-policy.html


Your Company has constituted a Corporate Social Responsibility (CSR) Committee whichfunctions under direct supervision of Mr. Pawan Munjal Chairman Managing Director &CEO of your Company who is also the Chairman of the CSR Committee. Other members of theCommittee are Gen. (Retd.) V. P. Malik and Mr. Pradeep Dinodia who are Non-Executive andIndependent Directors of your Company.

Your Company has implemented the CSR Policy duly formulated and recommended by the CSRCommittee to the Board. The CSR policy lays down CSR activities to be undertaken by yourCompany. The CSR activities undertaken by your Company are based on the approved CSRpolicy which is available on the Company’s website and can beviewed on the following link:

The CSR Policy of your Company as adopted by the Board broadly covers the followingfocus areas: a) enhancing environmental and natural capital; b) supporting ruraldevelopment; c) promoting education including skill development; d) providing preventivehealthcare; e) providing sanitation and drinking water; f) creating livelihoods forpeople especially those from disadvantaged sections of society in rural and urban India;g) preserving and promoting sports; h) to carry out the activities at the time of naturalcalamity or engage in Disaster Management System; i) to contribute to the PrimeMinister’s National Relief Fund or any other fund set up by the Central Governmentfor socio-economic development and relief and welfare of the Scheduled Caste theScheduled Tribes other backward classes minorities and women.

During FY under review your Company has spent Rs. 65 crores on its CSR activitieswhich amounts to 2.23% of the average net profits of last three financial years. CSRinitiatives undertaken by your Company along with other details form part of the AnnualReport on CSR activities for FY 2015-16 which is annexed and forms part of this Report asAnnexure IV.


The Audit Committee of your Company comprises of the following Non-Executive andIndependent Directors: 1. Mr. Pradeep Dinodia - Chairman 2. Mr. M. Damodaran - Member 3.Gen. (Retd.) V. P. Malik - Member 4. Dr. Pritam Singh - Member

Further details on the Audit Committee and its terms of reference etc. have beenfurnished in Corporate Governance Report which forms part of this Report as Annexure III.

During FY under review all recommendations of the Audit Committee were accepted by theBoard of Directors of the Company.


Statutory Auditors

M/s Deloitte Haskins & Sells Chartered Accountants Gurgaon (FR No. 015125N)Statutory Auditors were appointed for three financial years up to 34th AGM to be held inFY 2016-17 and in view of the provisions of the Act their appointment needs to beratified annually. Your Company has received an eligibility letter from the Auditors tothe e3ect that the ratification of their appointment would be in accordance with Sections139 and 141 of the Act.

The observations of Statutory Auditors in their Report read with relevant Notes toAccounts are self-explanatory and therefore do not require further explanation. TheAuditors’ Report does not contain any qualification reservation or adverse remark.

Cost Auditors

M/s Ramanath Iyer & Co. Cost Accountants New Delhi (FR No. 000019) wereappointed as the Cost Auditors of the Company for FY 2015-16 to audit the cost accounts ofthe Company in respect of parts business. They have been reappointed as the Cost Auditorsof the Company for FY 2016-17.

Secretarial Auditors

The Board of your Company had appointed Mr. Arvind Kohli Proprietor (CP No. 2818) M/sArvind Kohli & Associates Company Secretaries Gurgaon Haryana to conductSecretarial Audit of your Company during FY 2015-16.

The Secretarial Audit Report for FY 2015-16 is annexed herewith and forms part of thisReport as Annexure V. The Report does not contain any qualification reservation oradverse remark.


Your Company has a proper and adequate system of internal controls. This ensures thatall assets are safeguarded and protected against loss from unauthorised use or dispositionand these transactions are authorised recorded and reported correctly.

An extensive risk based programme of internal audits and management reviews providesassurance to the Board regarding the adequacy and e3cacy of internal controls. Properlydocumented policies guidelines and procedures are laid down for this purpose. Theinternal control system has been designed to ensure that the financial and other recordsare reliable for preparing financial and other statements and for maintainingaccountability of assets.

Your Company has in place an adequate internal financial control framework withreference to financial and operating controls. During FY 2015-16 such controls weretested and no reportable material weakness in the design or operation was observed.


In compliance with the Securities and Exchange Board of India (Prohibition of InsiderTrading) Regulations 2015 (‘the PIT Regulations’) on prevention of insidertrading your Company had instituted a comprehensive Code of Conduct for regulatingmonitoring and reporting of trading by Insiders. The said Code lays down guidelines whichadvise Insiders on the procedures to be followed and disclosures to be made in dealingwith the shares of the Company and cautions them on consequences of non-compliances.

Your Company has further put in place a Code of practices and procedures of fairdisclosures of unpublished price sensitive information. Both the aforesaid Codes are inline with the PIT Regulations.


During FY under review ICRA Limited and CRISIL Limited have rea3rmed the followingratings to the Company:

Rating Pronounced Amount Program/Category Outlook
"[ICRA]AAA" ICRA triple A 1100.0 Crore Line(s) of Credit Long term rating Stable
"[ICRA]A1+" ICRA A one plus 1100.0 Crore Line(s) of Credit Short term rating -
"IrAAA" IR triple A - Issuer rating Stable
"[ICRA]AAA" ICRA triple A 15.0 Crore Non-Convertible Debentures (NCD) Stable
Rating Pronounced Amount Program/Category Outlook
"FAAA/Stable" F triple A Fixed Deposit Programme Stable
"CRISIL AAA/Stable" CRISIL triple A 150 Million NCD Stable
CRISIL AAA/Stable CRISIL triple A 11 Billion Long term rating Stable
CRISIL A1+ CRISIL A one plus 11 Billion Short term rating -


The Business Responsibility Report (‘BRR’) has been prepared and forms partof the Annual Report as Annexure VI. The Report provides a detailed overview ofinitiatives taken by your Company from environmental social and governance perspectives.


The equity shares of your Company are presently listed on the BSE Limited and theNational Stock Exchange of India Limited (NSE).


As on March 31 2016 total number of employees on the records of your Company were7592 as against 7331 in the previous FY.

Your Directors place on record their appreciation for the significant contribution madeby all employees who through their competence dedication hard work co-operation andsupport have enabled the Company to cross new milestones on a continual basis.

A detailed note on ‘People at Hero’ forms part of Management Discussion andAnalysis Report.


In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of

Managerial Personnel) Rules 2014 a statement showing the names and other particularsof the employees of the Company drawing remuneration in excess of the limits set out inthe said rules can be made available on a specific request given to the Company inwriting.


In terms of Sections 92(2) and 134(3)(a) of the Act and rules made thereunder extractsof Annual Return in Form MGT 9 is annexed to this report as Annexure VII.


Information required under Section 134(3)(m) of the Act read with rules madethereunder is annexed to this report as Annexure VIII.


Your Directors state that there being no transactions with respect to following itemsduring FY under review no disclosure or reporting is required in respect of the same:

1. Deposit from the public falling within the ambit of Section 73 of the Companies Act2013 and The Companies (Acceptance of Deposits) Rules 2014.

2. Issue of equity shares with differential rights as to dividend voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of your Company underany scheme save and except ESOS referred to in this Report.

4. Neither the Managing Director nor the Whole-time Director of your Company receiveany remuneration or commission from any of its subsidiaries.

5. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company’s operations in future.

6. Buy back of shares


Your Company has in place a policy on Prevention of Sexual Harassment. This policy isin line with the requirements of The Sexual Harassment of Women at the Workplace(Prevention Prohibition

& Redressal) Act 2013. All employees whether permanent contractual temporaryand trainees are covered under this Policy.

As per the said policy an Internal Complaints Committee is also in place to redresscomplaints received regarding sexual harassment. Following is the summary of complaintsreceived and disposed of during FY under review:

No. of complaints received: Nil

No. of complaints disposed of: NA


I take this opportunity to express my gratitude to the Shareholders & Investors ofthe Company for their unflinching trust and support. On behalf of the Board I would alsolike to thank the Central Government State Governments Financial Institutions BanksCustomers Dealers Vendors and Ancillary Undertakings for their cooperation andassistance. I would like to reiterate our commitment to continue to build our organisationinto a truly world class enterprise in all respects.

For and on behalf of the Board
Pawan Munjal
DIN: 00004223
Date: August 8 2016
Place: New Delhi