PATRIMONIO CULTURAL

Company. Our Company has contested on the applicability of ESI for such employees and the issue is pending before the Assistant Regional Director, ESI Corporation, Kolkata

2.00 2.00

Demands arising out of suits filed by shareholders on account of short/ non-refund of application money for which shares have not been allotted and/ or non-receipt of share certificates etc. Our Company’s appeals against these issues are pending before relevant district forums/ state commission/ civil courts

0.51 0.51

Claims for recovery arising out of suit filed by a contractor before the Calcutta High Court

5.80 5.80

In the event that any or all of these contingent liabilities were to materialise, our business, financial condition and results of operations could be materially adversely affected. For further information on such contingent liabilities as defined under Accounting Standard 29: Provisions, Contingent Liabilities and Contingent Assets, issued by the ICAI and notified by the Companies Accounting Standards Rules, see “Reformatted Financial Statements”.

We are involved in certain legal proceedings, any adverse developments which could adversely affect our business, financial condition and results of operations.

There are outstanding legal proceedings against us that are incidental to our business and operations, including certain criminal proceedings pending against us. These proceedings are pending at different levels of adjudication before various courts, tribunals, enquiry officers and appellate tribunals. Such proceedings could divert management time and attention, and consume financial resources in their defence or prosecution. Further, an adverse judgment in any of these proceedings could have an adverse impact on our business, financial condition and results of operations. For further details, see “Legal Proceedings”.

Environmental, health, employee and safety laws and regulations may result in an increase of our costs and a decrease in our profits.

Our business operations are subject to national and state environmental laws and regulations. These laws govern the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous substances and waste and the extent of employee exposure to hazardous substances that may be used in or result from our businesses. We are also subject to laws and regulations governing relationships with employees for minimum wage and maximum working hours, overtime, working conditions, hiring and terminating of employees, contract labour and work permits. Compliance with these laws and regulations require significant capital and other expenditures that we have incurred in the past and will continue to incur in the future.

It is possible that environmental laws in India may become significantly more stringent in the future. Our existing Jamshedpur manufacturing facility, as well as our green-field operations service centre in Raipur (once set up), are inherently at risk of environmental damage, which could subject us to liability in the future from the discharge of pollutants in the environment, inadequate waste disposal or the improper handling of hazardous materials. If any of these facilities are shut down by regulators, we may continue to incur costs to comply with environmental regulations, appealing any decision to close our facilities and paying labour and other costs, while not generating any revenues or manufacturing any products from such facilities.

We may face labour disruptions that would interfere with our operations.

India has stringent labour legislation that protects the interests of workers, including legislation that sets forth detailed procedures for employee removal and dispute resolution and imposes financial obligations to employers. As on December 31, 2012, a high percentage of our employees are members of labour unions. It may be difficult for us to introduce or maintain flexible labour policies and we may be subject to labour unrest, which may delay or disrupt our operations.

In the event of labour unrest resulting in a work stoppage, slowdown or strike, our manufacturing facility may not be able to continue operations at normal levels, or at all. While we believe that we maintain good relationship with our employees, there can be no assurance that we will not experience future disruptions to our operations due to disputes or other problems with our work force which may adversely affect our business. Further, significant suppliers or distributors that we use may experience strikes, work stoppages or other industrial action in the future. Any such event could disrupt our operations, possibly for significant periods of time, result in increased wages and a consequent upsizing of our operating expenses and other costs and have an adverse effect on our business, results of operations or financial condition.

Increased competition in the bearings and friction management industry could result in a reduction in our market share.

The Indian friction management industry is very competitive and we believe that such competition will continue and is likely to increase in the future. We face competition from other Indian manufacturers and importers. Further, the friction management industry in India may experience consolidation and investment by international companies, resulting in the emergence of stronger competitors. Our principal competitors are Indian manufacturers, including SKF India Limited, FAG Bearings India Limited and National Engineering Industries Limited. For further details, see “Our Business – Competition”.

We may also face competition from new entrants who may have more flexibility in responding to changing business and economic conditions. We believe that competition in our businesses can be based on, among other things, pricing, innovation, perceived value, brand recognition, promotional activities, advertising, special events, new product introductions and other activities. It is difficult for us to predict the timing and scale of our competitors’ actions in these areas. We expect competition to continue to be intense as our existing competitors expand their operations and introduce new products. Our failure to compete effectively, including any delay in responding to changes in the industry and market, together with increased spending on advertising, may affect the competitiveness of our products, which may result in a decline in our revenues and profitability.

Our Promoter is an investment company wholly owned by The Timken Company.

Our Promoter, Timken Singapore PTE Limited. is a holding company, wholly owned by The Timken Company, and in the business of making investments in various subsidiary companies, joint ventures and companies promoted by it. Consequently, our business and operations are substantially influenced and controlled by The Timken Company through our Promoter. Indian regulators have, in the past, expressed their reservations about multi-tiered group structures such as ours, and there can be no assurance that our holding structure will continue to pass regulatory scrutiny. For instance, the RBI had, in August 2007, released a consultative paper expressing its concerns over multi-layered company structures involving intermediate holding companies, stating that such structures are not ideal from the purview of investors. In the event Indian regulators introduce stringent compliance measures designed to curtail or regulate multi-layered group structures, our compliance costs may increase, thereby leading to increase in our operating expenses. Further, in the event that the costs of compliance for our existing group structure under any future regulatory framework are not commercially viable, we may be constrained to restructure and reorganise our holding structure which, in addition to increasing our operating expenses, may result in fluctuations of the prices of our Equity Shares.

We have not entered into any definitive agreements to use the net proceeds of the Issue.

We intend to use the net proceeds of the Issue primarily towards our long term capital requirements, working capital requirements and general corporate purposes. In view of the requirements of our business and the dynamic nature of the industry, our Company may have to revise its business plans from time to time and consequently the fund requirements of our Company may also change. Accordingly, as of the date of this Red Herring Prospectus, we have not entered into any definitive or binding agreement for any of the proposed utilisation of the net proceeds of the Issue. For further details, see “Use of Proceeds”. Subject to complying with

policies established by our Board, we will have significant flexibility in the manner in which we invest these proceeds for the short term.

Some of our records relating to forms filed with the RoC required under the provisions of the Companies Act are not traceable.

We are unable to trace copies of a few forms that we have filed with the relevant Registrar of Companies. While we believe that these forms were filed in a timely manner, we have not been able to trace copies of such relevant documents from our records and also from the relevant Registrar of Companies. Further, we received a notice from the cost- audit department of the MCA on February 12, 2013 in relation to the non-submission of a form by our cost auditor, on their appointment. We responded to the notice pursuant to a letter dated February 19, 2013, and have not received further communication from the MCA in this regard, as of the date of this Red Herring Prospectus. We cannot assure you that these form filings will be available in the future or that it will not be subject to any penalty imposed by any regulatory authority in this respect.

Risks relating to India and other general risks

A slowdown in economic growth in India and other countries in which we operate could cause our business to suffer.

Our results of operations and financial condition are dependent on, and have been adversely affected by, conditions in financial markets in the global economy, and, particularly in India and the other countries in which we operate.

The GDP growth rate of India decelerated to 6.5 % in the 12 month period ended March 31, 2012 compared with 8.4% growth in the 12 month period ended March 31, 2011. (Source: Centre for Monitoring Indian Economy, November 2012). According to the RBI's Third Quarter Review of Monetary Policy 2011-2013, the baseline projection of GDP growth rate from the 12 month period ended March 31, 2012 to the 12 month period ended March 31, 2013 was revised downwards from 5.8% to 5.5% and the actual GDP for the second quarter of 12 month period ended March 31, 2013 was 5.3%. The CSO has, pursuant to a press release dated February 28, 2013, estimated that the growth rate in GDP in the third quarter of the twelve month period ended March 31, 2013 is 4.5%, as compared to the third quarter of the twelve month period ended March 31, 2012 (Source: Press release dated February 28, 2013 on “Estimates of Gross Domestic Product for the Third Quarter (October – December) 2012-13” released by the Ministry of Statistics and Programme Implementation, GoI).

The uneven global recovery reflects several underlying issues and consequent risks. First, despite indications of a gathering recovery momentum, the U.S. economy remains dependent on the extension and expansion of monetary and fiscal stimulus in the form of the continuation of near-zero interest rates, quantitative easing and tax reliefs, raising questions on the sustainability of such policy approach and the impact of the eventual unwinding and reversal of these stimuli. In the second half of 2011, the global financial markets experienced significant volatility as a result of, among other things, the downgrading by Standard and Poor’s Rating Group, a division of McGraw-Hill Companies, Inc. (“Standard & Poor’s”) of the long-term sovereign credit rating of the United States to “AA+” from “AAA” on August 5, 2011. On July 13, 2011, Moody’s Investors Services Limited (“Moody’s”) placed the U.S. government under review for a possible credit downgrade, and on August 2, 2011, Moody’s Investors Services Limited confirmed the U.S. government’s existing sovereign rating, but stated that the rating outlook is negative. On July 10, 2012, Fitch Ratings Ltd (“Fitch”) affirmed its existing sovereign rating and outlook of the U.S. government. Should a further downgrade of the sovereign credit ratings of the U.S. government occur, it is foreseeable that the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the U.S. government could also be correspondingly affected by any such downgrade. Instruments of this nature are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market.

In Europe, especially the Eurozone, large budget deficits and rising public debts have triggered sovereign debt finance crises that resulted in the bailouts of Greece, Ireland, Portugal and Spain and elevated the risk of government debt defaults, forcing governments to undertake aggressive budget cuts and austerity measures, in turn underscoring the risk of global economic and financial market volatility. Moreover, in January 2012, Standard & Poor’s downgraded the sovereign ratings of various European Union countries and entities, including France, Austria and the European Financial Stability Facility.

Japan has also experienced deflationary pressure since the early 1990s, made worse by the devastating earthquake and tsunami of March 2011 and the consequent damage to its nuclear industry. In emerging and developing economies, particularly China, India, Brazil and Russia, risks to macroeconomic and financial stability have arisen from the influx of short-term capital, excessive currency movements and pressures on general and asset price inflation. These have necessitated further policy tightening, introduction of liquidity management measures and imposition of some forms of capital controls.

The resulting economic pressure on the economies in which we operate, a general lack of confidence in the financial markets and fears of a further worsening of the economy have affected and may continue to affect the economic conditions in such countries. We cannot assure you that the markets in which we operate will undergo a full, timely and sustainable recovery. The economic turmoil may continue or take place in the future, adversely affect our business, results of operations and financial condition.

Political instability or changes in the GoI could adversely affect economic conditions in India generally and our business, prospects, financial condition and results of operations.

The GoI has traditionally exercised, and continues to exercise, significant influence over many aspects of the economy. Our business, and the market price and liquidity of our Equity Shares, may be affected by interest rates, changes in government policy, taxation, social and civil unrest and other political, economic or social developments in or affecting India. Since 1991, successive Indian governments have pursued policies of economic liberalization and financial sector reforms. However, the rate of economic liberalization could change and we cannot assure you that such policies will be continued. A change in the government or in the government’s future policies could affect business and economic conditions in India and could also adversely affect our business, prospects, financial condition and results of operations.

Indian corporate and other disclosure and accounting standards differ from those observed in other jurisdictions such as U.S. GAAP and IFRS.

Our financial statements are prepared in accordance with Indian GAAP, which differs in significant respects from U.S. GAAP and IFRS. As a result, our financial statements and reported earnings could be significantly different from those which would be reported under U.S. GAAP or IFRS, which may be material to your consideration of the financial information prepared and presented in this Red Herring Prospectus. You should rely on your own examination of our Company, the terms of the Issue and the financial information contained in this Red Herring Prospectus.

Our business may be adversely affected by competition laws in India.

The Competition Act, 2002 (the “Competition Act”), was enacted for the purpose of preventing practices having an appreciable adverse effect on competition in India, and has mandated the Competition Commission of India (the “CCI”) to regulate such anti-competitive practices. Under the Competition Act, any arrangement, understanding or action, whether formal or informal, which causes or is likely to cause an appreciable adverse effect on competition in India are void and may result in substantial penalties. Any agreement among competitors which directly or indirectly determines purchase or sale prices, directly or indirectly results in bid rigging or collusive bidding, limits or controls production, supply, markets, technical development, investment or the provision of services, or shares the market or source of production or provision of services in any manner, including by way of allocation of geographical area or types of goods or services or number of customers in the relevant market is presumed to have an appreciable adverse effect on competition in the relevant market in India and shall be void. Further, the Competition Act prohibits the abuse of dominant position by any enterprise. If it is proved that the contravention committed by a company took place with the consent or connivance or is attributable to any neglect on the part of, any director, manager, secretary or other officer of such company, that person shall be guilty of the contravention and may be punished. If we or any of our employees is penalised under the Competition Act, our business may be adversely affected.

On March 4, 2011, the Government of India notified and brought into force the provisions under the Competition Act in relation to combinations (the “Combination Regulation Provisions”) with effect from June 1, 2011. The Combination Regulation Provisions require that acquisition of shares, voting rights, assets or control or mergers or amalgamations, which cross the prescribed asset and turnover based thresholds, shall be mandatorily notified to and pre-approved by the CCI. In addition, on May 11, 2011, the CCI issued the final Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011, which sets out the mechanism for implementation of the Combination Regulation Provisions

under the Competition Act. The manner in which the Competition Act and the CCI affect the business environment in India may adversely affect our business, financial condition and results of operations.

Our transition to the use of the IFRS converged Indian Accounting Standards may adversely affect our financial condition and results of operations.

We currently prepare our annual and interim financial statements under Indian GAAP. Public companies in India, including us, may be required to prepare annual and interim financial statements under a variation of IFRS. The ICAI has released a near-final version of the Indian Accounting Standards (Ind AS) 101 “First-time Adoption of Indian Accounting Standards” (“IND AS”) on January 1, 2012. On February 25, 2011, the Ministry of Corporate Affairs, GoI (“MCA”), notified that the IND AS will be implemented in a phased manner and stated that the date of implementation of IND AS will be notified by the MCA at a later date. As of date, there is no significant body of established practice on which to draw from in forming judgments regarding the implementation and application of IND AS. Additionally, IND AS has fundamental differences with IFRS and