Código Orgánico De La Producción Comercio E Inversiones

Unless otherwise stated, references in this section to the “Company” or “our Company”, “we”, “our” or “us” are to Timken India Limited. Unless otherwise stated or the context otherwise requires, the financial information used in this section is derived from our Reformatted Audited Financial Statements. This section should be read together with the sections titled “Risk Factors”, “Industry Overview” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The financial year of our Company commences on April 1 of each calendar year and ends on March 31 of the next calendar year. Prior to the 15 month period ended March 31, 2012, the financial year of our Company used to commence from January 1 of each calendar year and end on December 31 of the same calendar year.

Overview

We are one of the leading manufacturers of taper roller bearings and certain components of taper roller bearings in India. (Source: BDB Analysis Report) We also import taper roller bearings, spherical roller bearings, cylindrical roller bearings and specialty ball bearings from Timken Entities located outside India, to supply to our customers. Further, we represent The Timken Company in India for business development activities in emerging markets for its products.

We were formed as a joint venture between Tata Steel Limited and The Timken Company, who we believe are associated with trust and quality across key industries which use our bearings for demanding applications. The Timken Company has being recognised, in the year 2009, as one of “The 100 Most Trustworthy Companies” in the world (Source:www.forbes.com) and has a globally recognised brand name.

We have over 25 years of experience of operating in India. We supply our products across India to OEMs and end users in diverse industries such as rail, light vehicles, off-highway, heavy trucks and auto-aftermarket, industries classified as ‘mobile industries’, and heavy industries, industrial processes, gear drives, energy and industrial distribution, as segments within the ‘process industries’. We also export taper roller bearings to cater to the Timken Entities’ requirements for their international customers in diverse industries such as railways, automotive and off-highway equipments.

In addition, we provide bearing reconditioning and repair, condition monitoring and reliability services for industrial and railway customers. We also provide maintenance and refurbishment services to large industrial equipments used in the metal and energy sectors (“After-Market Services Business”). We represent The Timken Company for business development in markets such as the aerospace and wind energy segments, as well as for non-bearing products such as chains and couplings in India.

We have a manufacturing facility with cellular manufacturing process located at Jamshedpur, Jharkhand. As on March 31, 2012, this facility had an installed capacity of 4,000,000 units and 370,000 units of standard roller bearings and special roller bearings (including components), respectively. The cellular manufacturing process provides us the flexibility of manufacturing any part of our products at short lead time. This facility has been recognised for its quality and safety standards and is BS OHSAS 18001:2007, ISO 14001: 2004, ISO 9001:2008 and ISO/TS 16949 certified, besides being recognised by Association of American Railroads.

In order to expand our services portfolio, we are establishing a green-field operation centre in Raipur, Chhattisgarh for repair of gearboxes largely used in steel, cement, power plants and marine industries. We believe that this facility will enable us to strengthen our After-Market Services Business. This facility is currently being developed and the total capital work-in-progress towards this facility as at December 31, 2012 was ` 11.00 million.

We believe that we have long-term and stable relationships developed over the years with our key suppliers of raw materials and our key customers. Some of our key suppliers are Sanyo Steel Company Limited, Mahindra Sanyo Special Steel Private Limited, Rolex Rings Private Limited, Harsha Engineers Limited, Omni Auto Limited and JMT Auto Limited. We have a dedicated and specialised distribution network pan-India and servicing our customers. Our major customers in India include BHEL, CMI FPE Limited, Dana India Private Limited, Escorts Limited, Esmech Equipment Private Limited, Indian Railways, JSW ISPAT Steel Limited, New Holland Fiat India Private Limited, Spicer India Limited, Tata Hitachi Construction Machinery Company Limited, Tata Steel Limited, Texmaco Rail & Engineering Limited and Titagarh Wagons Limited. Internationally, we supply certain of our products to the Timken Entities.

Our Company’s vision is to improve our customers’ performance globally by applying our knowledge of friction management and power transmission to deliver unparalleled value and innovation. Our core business values of ethics and integrity, innovation, quality and independence help us pursuing our Company’s vision. Our total revenue for the fiscal years ended December 31, 2009, December 31, 2010, the 15 month period ended March 31, 2012 and the nine month period ended December 31, 2012 was ` 3,305.40 million, ` 4,819.75 million, ` 8,510.95 million and ` 5,184.19 million, respectively. Our profit after tax for the fiscal years ended December 31, 2009, December 31, 2010, the 15 month period ended March 31, 2012 and the nine month period ended December 31, 2012 was ` 325.35 million, ` 510.57 million, ` 806.57 million and ` 291.08 million, respectively.

For the fiscal years ended December 31, 2009, December 31, 2010, for the 15 month period ended March 31, 2012 and for the nine month period ended December 31, 2012, 74.9%, 68.9%, 74.7% and 72.9% of our revenue from sale of products and services (net of excise duty), respectively, was from customers located in India who are not Timken Entities, while 23.9%, 30.7%, 25.0% and 27.0% of our revenue from sale of products and services (net of excise duty), respectively, was from sales to Timken Entities.

The Timken Company

We are part of the Timken Group. The flagship company of the Timken Group is The Timken Company, founded over 100 years ago by Henry Timken, who received two patents on the design of a tapered roller bearing. Having its headquarters at Canton, Ohio, The Timken Company is a leader in the bearings industry which applies its deep knowledge of materials, friction management and mechanical power transmission to improve the reliability and efficiency of industrial machinery and equipment all around the world. It manufactures and manages global supply chains for multiple product lines including anti-friction bearings, mechanical power transmission solutions, engineered steel and related precision steel components.

The Timken Company has over 19,000 employees globally and is listed on the NYSE with a market capitalization of USD 5.51 billion as on February 19, 2013. Its net sales amounted to USD 5.0 billion in the calendar year 2012. The Timken Company serves diverse markets such as aerospace, mining, railroads, construction, automotive (including trucks), energy, wind sectors and other after-market sectors. The products supplied by The Timken Company to the mobile industries, process industries aerospace and defence sectors and steel industries contributed 33.6%, 26.8%, 7.0% and 32.6% of its revenue, respectively, during the calendar year 2012.

The Timken Company has operations approximately in 30 countries. During the calendar year 2012, sales of The Timken Company’s products in Europe/ Middle East/ Africa, Asia-Pacific regions, United States, Canada/ Mexico and South America contributed 11.9%, 10.9%, 68.6%, 5.5% and 3.1% of its revenue, respectively. Our Strengths

We believe the following are our competitive strengths: Strong parentage and relationship with the Timken Group

The Timken Company is a Fortune 500 company and has been recognised by Forbes as one of “100 Most Trustworthy Companies” in the year 2009, in an annual survey identifying the 100 businesses on American Exchanges with the most transparent and conservative accounting practices. It has been also rated as one of the “World’s Most Ethical Companies” in 2013 by the Ethisphere Institute. It operates in approximately 30 countries and has been in the friction management business for over 100 years. It has an established brand name and has been recognised by Superbrands. The Timken Company currently holds over 350 patents for manufacturing bearing and associated components. We believe that being part of the Timken Group and the associated right to use the trademark and logo of “TIMKEN”, offers our Company significant branding strength to attract key customers.

We believe our relationship with The Timken Company and the Timken Group enables us to benefit from the Timken Group’s global supply chain to meet customer demand for products that we do not manufacture in India. For the nine month period ended December 31, 2012, 26.5% of our total revenues was attributable to the revenue from sales of products or services (net of excise duty) to the Timken Entities.

The Timken Group provides us with access to management talent and professionals with deep industry knowledge. The acquisitions of The Timken Company in various new and diverse businesses globally, provide us a platform to launch new products and services in India. Pursuant to a technology license agreement dated April 6, 2011 entered into between our Company and The Timken Company, our Company is permitted to use technology owned by The Timken Company, specifically, intellectual property relating to designs, product specifications, methods of manufacturing, service methods and techniques that The Timken Company deems necessary for the manufacture and sale of our products. Further, pursuant to a master services agreement entered between members of the Timken Group, we may seek administrative, sales and marketing, after-sales and service engineering related services from the members of the Timken Group as and when required.

Further, we have entered into a trademark license agreement with The Timken Company pursuant to which we have a non-transferable, non-sub licensable and non-exclusive right to use the trademarks owned or controlled by The Timken Company. Pursuant to a representative agreement, we also market certain products and services of the Timken Group in India.

We believe that this strong relationship with The Timken Company is a significant advantage, and that our Company will continue to benefit from its global presence, brand name and support in the future.

Leading taper roller bearings manufacturer and service provider in India

We are one of the leading manufacturers of taper roller bearings and certain components of taper roller bearings in India (Source: BDB Analysis Report). We offer an extensive line of taper roller bearings which are available to customers across India. We believe our taper roller bearings are uniquely designed with customized geometries and engineered surfaces to provide engineering solutions for harsh and critical applications.

Our global products portfolio is tailor made for certain OEMs so as to meet their specific requirements. The cellular manufacturing process provides us with flexibility of manufacturing smaller volumes of products at short notice. The facility deals with cleaner case carburized steel, using precision-grinding and heat treatment technology, to deliver a long lasting product. This facility also has an innovation centre for detailed analysis, testing, metallurgy and development of new products. It is equipped for business systems development providing global infrastructure support and a network for our After-Market Services Business. It also leverages from The Timken Group’s technology centre in Bengaluru which enables it to maintain its expertise in technological know-how pursuant to the technology license agreement entered between our Company and The Timken Company.

In addition, our After-Market Services Business includes our ‘MILLTEC’ services business entailing on-site maintenance and servicing of steel mills for some of our key customers. The on-site programmes are suited for the recertification, reclaiming and reconditioning processes which enable us to identify customer requirements and provide customised solutions. We also provide an off-site bearing servicing and refurbishment service particularly for rail and large size bearings. We believe this enables us to establish a long-term relationship with the customer throughout the life cycle of the product and we believe it aids in establishing customer loyalty. We also provide on-site and off-site customer training programmes using mobile DTS van and in- training modules which enables us to provide customised solutions leading to customer retention.

We believe that with our diversified product portfolio and technological know-how, we are well positioned to take advantage of new geographical and product market opportunities.

Stable customer base

We supply our bearing products to OEMs in India and export them in terms of the global requirements of the Timken Entities. Our five largest customers, other than the Timken Entities, accounted for about 40.0% of our net domestic sales and about 30.0% of our total revenue for the nine month period ended December 31, 2012. Our major customers in India include BHEL, CMI FPE Limited, Dana India Private Limited, Escorts Limited, Esmech Equipment Private Limited, Indian Railways, JSW ISPAT Steel Limited, New Holland Fiat India Private Limited, Spicer India Limited, Tata Hitachi Construction Machinery Company Limited, Tata Steel Limited, Texmaco Rail & Engineering Limited and Titagarh Wagons Limited. Our relationships with our customers ensure that we are constantly in communication with them and enable our products to meet their exacting specifications. We believe that the strength of our relationships with our customers is attributable to our

consistent performance over long periods and the emphasis that we place on catering to our customers needs, supplemented with our access to technology.

Well qualified management team and strong governance

Manufacturing of bearings and our After-Market Services Business requires a trained management team and highly qualified workforce. Our management team and workforce has more than two decades of experience in the bearing industry. We believe that a motivated and empowered employee base, competitive pay scales and progressive retention policies is the key to our competitive advantage. We have a strong focus on employee development, an exciting work culture, empowerment and competitive compensation policies. We believe that the skills and diversity of our employees give us the flexibility to adapt to the future needs of our business. Further, the Standards of Business Ethics Policy as adopted by The Timken Company and applicable to its subsidiaries, requires the business of our Company to be conducted according to the highest standards of integrity and ethics with due regard to all applicable laws.

Our Board is committed to implementing best practices of corporate governance and achieving a high level of transparency, with a focus on investors’ best interests and the maximisation of shareholder value. Our Board and management periodically review our internal policies and business practices and have been instrumental in building our reputation in the bearing sector in India. We believe that our strong business practices and reputation in the bearing industry enable us to meet the expectations of our customers.

Our Business Strategies

The Timken Company, as part of its global strategy of delivering value to its shareholders, continuously endeavours to (a) apply its knowledge of metallurgy, friction management and mechanical power transmission to create unique solutions used in demanding application, (b) differentiate its businesses and its products, thereby offering a broad array of mechanical power transmission components, high-performance steel and related solutions and services, (c) expand its reach, extend its knowledge, products, services and channels to meet the requirements of its customers globally, and (d) perform with excellence, deliver exceptional results with a passion for superior execution.

In furtherance to The Timken Company’s global strategies, the following are the key elements of our business strategy:

Enhance market share and profitability in chosen sectors

Our Company’s vision is to improve our customers’ performance globally by applying our knowledge of friction management and power transmission to deliver unparalleled value and innovation. We intend to be focussed on high performance applications and accordingly, we have identified sectors in the mobile and process industries such as railway, aerospace, power generation, metal, mining, construction, wind energy, paper, medium and heavy commercial vehicles, agricultural equipment, cement and aerospace as the key markets for the supply of our products. We intend to enhance our market share and profitability in the sectors we have chosen, such as rail, aerospace and power generation, by applying our ability to design customised products, knowledge, expertise and experience to provide value added services and products to our customers. The Indian Railways is the largest rail network in Asia and the world's second largest under one management (Source: http://www.indianrailways.gov.in/railwayboard/view_section.jsp?lang=0&id=0,1,261). We believe that the Indian Railways is taking steps towards indigenization and modernisation of both the passenger and freight segments of its business. In the freight segment, the Ministry of Railways, Government of India, set up a special purpose vehicle, the Dedicated Freight Corridor Corporation of India in 2006 to complete a dedicated freight corridor by 2017 (Source: http://dfccil.org/DFCC/Projects/Project%20 Funding). The wagons to be used, in the dedicated freight corridors, are expected to require high load-bearing applications. In the passenger segment, the modernisation of the coaches by Indian Railways is underway (Source:

www.indianrailways.gov.in/railwayboard/.../Main_Report_Vol_I.pdf). We expect that significant numbers of taper rolling bearings, which we currently produce, will be required for such coaches and wagons.

We believe that the Indian aerospace sector is a growing sector with substantial opportunities. The Timken Company has significant presence in the aerospace sector globally. The Timken Company has secured a purchase order with Hindustan Aeronautics Limited for supply of bearings for the production of their helicopters. Although our role is currently limited to acting as agents of The Timken Company in this regards,

we intend to leverage the capability of The Timken Company to establish ourselves in the Indian aerospace sector.

We believe that the demand for electrical energy in India has been growing at the faster rate and shall increase at higher growth rate to match with the projected growth of the Indian economy. The electrical energy demand for 2021 - 22 has been estimated as 1915 Tera Watt Hours and peak electric demand of 298 Giga Watts (Source:

17th Electric Power Survey of India, Central Electricity Authority). We believe that the average capacity of power generating mills is increasing and these require high-performance bearings. Power generation mills are also expected to require periodical maintenance and replacement of bearings to maximise capacity utilisation. We intend to leverage this opportunity for our products and services portfolio. We further believe that entry of multinational power generation equipment manufacturing companies into India (who may be customers of The Timken Company) has the potential to increase our customer base in India.

Enhance cost efficiency

Our management places emphasis on cost control and improving operating efficiencies. Alloy steel, being one of the primary raw materials required for bearings, is purchased by our vendors from our approved list of global suppliers in order to leverage The Timken Company’s economics of scale. Further, most of our input materials such as rings and cages are procured from our domestic vendors. Our senior management invests efforts in developing local sources for quality raw materials, in order to optimise costs and delivery. Given issues of fluctuation in the commodity prices and the costs towards importing raw materials, we are exploring several mitigating measures including local sourcing of raw materials.