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in earlier years, 16 Patents were granted and 68 Designs were registered.

Future Plan of Action:

The Company continues its effort on developing new products and technologies to meet growing customer

expectations. The existing products will be refreshed at regular intervals to suit upcoming trends. In the long term, the Company is focusing on improving driving comfort, fuel efficiency, performance and aesthetics.

Major technology absorption projects undertaken during the last year include:

Sr. No. Technology For Status

1 Development of Infotainment system Development in Progress

2 Brushless DC Motor for Engine Cooling Module Development in Progress

3 Development of Low Carbon Vehicle Technology Program Development in Progress

4 Development of Electric Traction Motor Technology Under Implementation

5 Hydrogen re-circulation blower system on Fuel cell Battery-Hybrid Bus (4x2) family Development in Progress

6 Battery Management System on Bus and Car Hybrids Development in Progress

7 Jute Fiber Composite for Headliners Implemented

8 Development of a Hydra-mount for vibration reduction of vehicles at a particular frequency of resonance of an engine or a cab

Development in Progress Expenditure on R & D

(` in crores)

Expenditure incurred on research and development : 2012-13 2011-12

(a) Revenue Expenditure - charged to Profit and Loss Statement 500.15 243.30

(b) Revenue Expenditure - capitalised 1,142.38 1,127.86

(c) Capital Expenditure 116.78 177.53

1,759.31 1,548.69

R & D cost as a % to Revenue from Operations 3.9% 2.9%

C. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Efforts made towards technology absorption, adaptation and innovation

Initiatives on technological changes with an emphasis on customer orientation has been sharpened. The Company is putting continuous efforts in acquisition, development, assimilation, and utilization of technological knowledge. The Company, in its constant endeavor to improve processes in design and planning in the manufacturing domain, has implemented integration of digital product data into digital manufacturing planning system. Substantial progress has been achieved on various advanced engineering projects.

Projects in this portfolio include development of vehicles running on alternative fuels including CNG, LPG, Ethanol, Bio-Diesel and Hydrogen. The Company focuses on alternate fuels, greenhouse gas reduction and fuel efficiency

improvements. The Company is actively working on various hybrid and electric power trains for hybrid, electric and fuel cell electric vehicles for both commercial and passenger car applications. Various initiatives for power trains were taken up during the year which consisted of performance improvement, development to meet stringent emission norms and refinement. Development of new generation power trains was also initiated during the year. The Company is focusing on new technologies to enhance the safety of the occupants. Safety performance target setting is also done through Computer-Aided-Engineering and testing capabilities.

Benefits derived as a result of the above efforts These initiatives supported the Company’s endeavour in bringing about improvements in existing products and developing new products. The Company was able to emphasize on value analysis / value engineering and innovative cost reduction ideas to cut down the cost.

Directors’ Report (52-65)

CORPORATE OVERVIEW FINANCIAL HIGHLIGHTS STATUTORY REPORTS FINANCIAL STATEMENTS

D. FOREIGN EXCHANGE EARNINGS & OUTGO

Activities relating to exports

The Company exported 50,938 vehicles during the year.

Export initiatives such as goods, products and services exported include

z The Company introduced a host of new products in existing and new markets and showcased our vehicles in major auto shows in strategically important markets.

z The Company executed some big and prestigious Government orders in Kuwait and US.

z Driver Training School started in Bangladesh.

z Mechanic Training Centre started in South Africa and Kenya.

z Body Repair Manual launched.

z Mobile Website launched.

z Electronic Parts Catalogue started.

z Monthly Product Update e-newsletter started.

Development of export markets

The Company focused on introducing various products in new / existing markets of Indonesia, Myanmar, Bangladesh, Saudi Arabia and Tanzania.

Export Plans

The Company plans to export various vehicles in future considering socio-political and macro economic conditions worldwide.

Foreign Exchange Earnings and Outgoings (` in crores)

Earning in foreign currency 4,885.83

Expenditure in foreign currency (including dividend remittance)

3,190.41

9 Development of CNG Turbo Technology for M& HCV Development in Progress

10 Touch Screen Infotainment System with text messaging and navigation capabilities Development in Progress

11 Fully automatic temperature control system for Vista Family Implemented

12 Stain Resistant Fabrics Under Implementation

13 A 2-way intake silencer and a surge tank for reduction of vehicle In-cab noise Under Implementation

Major Technology imports include:

Sr. No. Technology for Year of Import Status

1 Development of Fuel Cell Bus 2011-12 Development and testing in progress

2 Gas Injection technology for LCV, MCV and HCV engines 2009-10 Completed for NA Engines and Productionised

3 Engine Management for Series Hybrid Technology for Buses 2009-10 Under Development

4

Design and Development of infinitely variable transmission based on full toriodal traction-drive variators for various vehicle platforms.

2007-08 Under Development

5 Stop - Start feature for various vehicle Platforms 2009-10 Under Implementation 6 ESP (Electronic Stability Program) for Xenon Euro V

Vehicles 2012-13 Under Development

7 Average fuel economy Display for HCV and LCV platforms 2012-13 Under Development

On behalf of the Board of Directors CYRUS P MISTRY Chairman Mumbai, May 29, 2013

BUSINESS OVERVIEW

The Indian economy continued its downward slide throughout FY 2012-13, recording a lower GDP growth of 5% compared to 6.5% for FY 2011-12. The downward trend was also pronounced on a quarterly basis, as it could be seen in the charts below.

Growth rate in GDP (% change over corresponding period of the previous year)

FY 2011-12 FY 2012-13

Q1 7.5 5.4

Q2 6.5 5.2

Q3 6.0 4.7

Q4 5.1 4.8

6.2 5.0

Source: Ministry of Statistics and Programme implementation

After achieving growth rates of 8.6% in FY 2009-10 and 9.3% in FY 2010-11, the inflationary pressures started mounting. The RBI started tightening the monetary policy, resulting in lower growth rate in the last two years. The moderation in growth is primarily attributable to weakness in industry. The growth in agriculture has also been weak in FY 2012-13, following lower than normal rainfall.

All the three major segments, agriculture and allied, industry and services, have displayed softening trend, quarter over quarter during the last two years.

As the pace of growth started slowing, the Government revenues started shrinking, exposing the economy to a higher fiscal deficit.

The current account deficit also widened. Beginning FY 2011-12, the corporate and infrastructure investment started slowing mainly due to investment bottlenecks and tight monetary policy.

FY 2012-13 was marked by the challenge to the Government to