Annual Report 2003-04 - Hero MotoCorp

ND_L18fontscorrected FIN.qxd 7/26/2004 5:30 PM Page 4HIGHLIGHTS OF THE YEAR 2003-20044 COMPLETION OF 20 GLORIOUS YEARS of Growth,Leadership and Value Creation.THE NO.1 two wheeler company in the world for thethird year in a row.2.07 MILLION Hero Honda motorcycles soldduring the year.OPBT GREW by 14.6 % from Rs.792 Crore to Rs.907Crore. Operating margin (OPBT as a percentage ofnet sales) increased from 15.5%in 2002-03 to15.6% in 2003-04.HERO HONDA SPLENDOR continues to be the largestselling two-wheeler model in the world for the fourthyear in a row.MARKET SHARE INCREASEDTO 48% in motorcycles, 4%gain over the previous year.OVER 1 MILLION UNITS OFSPLENDOR sold during FY2003 - 04SALES VOLUMETOTAL INCOME PROFIT AFTER TAX ROACEIn Lacs In Rs. Crores In Rs. Crores In %

FIG. 3. Waveforms of the stimuli for experiments II CPH and III APHand SPH.B. Method1. StimuliThree phase relationships were used. In the first condition,all components were in cosine phase CPH as in experimentII. This configuration produces the largest possiblepeak factor for a harmonic complex. The repetition rate isclearly visible in the stimulus waveform Fig. 3, top panel.In the second condition, every other component was shifted/2 radians. This alternating phase APH; Patterson, 1987produces a stimulus with a periodic Hilbert envelope atdouble the repetition rate, 2R rep , although the repetition rateof the fine-structure is still R rep Fig. 3, middle panel. Thelast phase configuration was derived using the formula proposedby Schroeder 1970. This reduces the amplitude peakfactor of the waveform markedly Fig. 3, bottom panel. Thesign of the phase in the Schroeder formula does not changethe waveform peak factor. It does change the direction of thechirp in the waveform fine structure. An upward-chirpingtone was chosen because evidence exists to indicate that thiscondition reduces the peak factor of the internal representationof the signal after auditory filtering Smith et al., 1986.This last condition will be referred to as Schroeder phaseSPH.2. Procedure and listenersThe thresholds for each combination of filter conditionand phase were obtained in separate adaptive runs. The procedure,apparatus and listeners were those of experiment II.The CPH conditions were not repeated; the results weretaken directly from experiment II. All thresholds for theother two phase conditions were measured in an identicalmanner as for the CPH thresholds; the order was variedacross subjects.C. ResultsThe results are shown in Fig. 2. The CPH and SPHconditions produce very similar results. A Wilcoxon ranksumtest was applied to the raw data for all filter conditionsand there were no significant differences (p0.2). This appearsto be at variance with the results of Houtsma andSmurzynski 1990 who reported differences in rate discriminationthreshold for CPH and SPH harmonic complexes.However, the combinations of F c and R rep associated withthe LLMP in the current experiment are different from thecombinations where Houtsma and Smurzynski found reliabledifferences between the RDTs of CPH and SPH tones—200Hz at a cutoff frequency of 3.2 kHz or higher. These parameterswould produce a stimulus that falls below the pitchregion revealed by the current study 270 Hz when F c is 3.2kHz. Another difference is that Houtsma and Smurzynskiused wideband masking noise that might have interferredwith the perception of the stimulus. Lowpass noise was usedin the current experiment to avoid interference. Finally, thissmall discrepancy could reflect a difference between theRDT and LLMP tasks.In the two lower filter conditions, performance is betterfor APH stimuli than for CPH or SPH stimuli, and the differenceis significant p0.01, Wilcoxon rank-sum test onthe raw data. AsF c increases, the LLMP increases faster forthe APH stimuli than for the CPH and SPH stimuli, and nothreshold could be measured with the adaptive procedure forthe highest filter condition. Perceptually, for a given repetitionrate, the pitch increases one octave for unresolved APHtones Patterson, 1987; Carlyon and Shackleton, 1994. Nooctave shift has been reported for SPH tones.V. SPECTRAL RESOLVABILITYTwo analyses were performed to determine whether theincrease in the LLMP with frequency region reflected thetransition from resolved to unresolved components. The hypothesisis that a clear pitch is required to do the melodytask, and it can only be produced by resolved harmonics.One definition of resolvability is that the transition occurs ata constant harmonic number Plomp, 1964. The precisevalue of this number varies from 6 to 12 between authors andaccording to the experimental task. Nevertheless, it shouldbe a fixed value. The number of the lowest harmonic in thestimulus associated with each LLMP value was computedfor all combinations of F c and phase. The results are presentedin Fig. 4 upper panel, which shows that the LLMPdoes not correspond to a fixed harmonic number. Moreover,the lowest harmonic is the 14th or 15th in some cases.Shackleton and Carlyon 1994 have proposed modifyingthe ‘‘constant harmonic number’’ rule to introduce a‘‘constant number of components per auditory filter’’ rule.They suggest that the transition region between resolved andunresolved complexes occurs when there are 2 to 3.25 componentswithin the 10-dB bandwidth of the auditory filter, asdefined by Glasberg and Moore 1990. The number of componentsin the auditory filter centered on F c was computedfor stimuli at the LLMP, for each experimental condition.The results are presented in Fig. 4 lower panel whichshows that number of components per filter at the LLMPvaries with F c , and that most of the observed values occur inthe ‘‘unresolved’’ region as defined by Shackleton and Carlyon1994.In summary, these two analyses, which involve relativelylarge estimates of the upper limit of spectral resolution,nevertheless indicate 1 that the LLMP does not correspondto the loss of spectral resolution for either criterion,and 2 the LLMP is typically associated with stimuli havingno resolved components. Further support for these conclu-2078 J. Acoust. Soc. Am., Vol. 109, No. 5, Pt. 1, May 2001 Pressnitzer et al.: Lower limit of melodic pitch 2078

ND_L18fontscorrected FIN.qxd 7/26/2004 5:30 PM Page 6HERO HONDAAnnual Report 2003–20046Dear Members,CHAIRMAN’S LETTERBRIJMOHAN LALLCHAIRMANIHAVE BEEN USING the annual reportas an appropriate medium tocommunicate the performance andprogress of your Company and alsounveil the future plans of theCompany.Making sustained progress throughinvestments and improvements inits functioning is the hallmark of acompany, which is well managedand is committed to its vision andpurpose. In this regard, I ampleased to inform you that HeroHonda in the year 2003–2004completed 20 years of its existenceand during the year added newmilestones to its already existinglong list of achievements so far.In the year under review, HeroHonda sold over 2 millionmotorcycles and recorded a 23%growth over last years' 1.68 millionsales. Not only that, yourCompany's sales growth was higherthan the industry average of 14%.Your company also improved itsmarket share to 48% and 37% inmotorcycles and two–wheelersrespectively. What is more importantto note is that for the third year in arow, the Company retained itsnumber one position as the singlelargest two–wheeler manufacturer inthe world. Splendor, the world'slargest selling brand, for the fourthconsecutive year not only retainedits position but also achieved the 1million sales mark. With 5 newlaunches during the year, the entireproduct range gave a fresh andcontemporary image to thecustomers.It is equally satisfying to note thatthe financial results, which areconsidered to be the best in theindustry for the year, reflect both thesides of the Company'sperformance. That is, they reflectthe revenue earned through salesand also the efficiency with whichresources were managed in theprocess of creating wealth forshareholders.Hero Honda's sales increased by

ND_L18fontscorrected FIN.qxd 7/26/2004 5:30 PM Page 720YEARSWe are proud of the fact that Hero Honda is one of the mostsuccessful two-wheeler joint ventures of Honda world wide. Notonly will the 20 years of relationship be cemented further, Hondais committed to providing full support to Hero Honda. Be itadvance engine technology, new product introductions or anyother related area of the partnership.S. TOSHIDAMANAGING DIRECTOR, CEO REGIONAL OPERATIONS (ASIA OCEANIA)HONDA MOTORS CO. LTD, JAPANJune 2, 20047FOR THE THIRD YEAR IN A ROW, THECOMPANY RETAINED ITS NUMBERONE POSITION AS THE SINGLELARGEST TWO–WHEELERMANUFACTURER IN THE WORLD.SPLENDOR, THE WORLD'S LARGESTSELLING BRAND, FOR THE FOURTHCONSECUTIVE YEAR NOT ONLYRETAINED ITS POSITION BUTACHIEVED THE 1 MILLION SALESMARK14.3 per cent from Rs.5,102Crore in 2002–03 to Rs.5,832Crore in 2003–04. Cost of rawmaterials as a percentage oftotal sales increased from 68.0per cent in 2002–03 to 69.1percent in 2003–04, owing to achange in sales mix and highersteel prices (during the latterpart of the fiscal year).A continuous focus on costmanagement and operatingefficiency has enabled thecompany to marginally improveits OPBDIT margin from 16.7per cent in 2002–03 to 16.8 percent in 2003–04. Operatingprofit (PBT before other income)grew by 14.6 per cent fromRs.792 Crore in 2002–03 toRs.907 Crore in 2003–04.Operating profit marginimproved marginally from 15.5per cent in 2002–03 to 15.6percent in 2003–04. Profit aftertax (PAT) went up by 25.4 percent from Rs.581 Crore in2002–03 to Rs.728 Crore in2003–04. Other Income rose fromRs.92.9 Crore in 2002–03 toRs.165.0 Crore in 2003–04.Return on average capitalemployed (ROACE) of theCompany was 92.8 percent in2003–04, while return on averageequity (ROAE) was 72.9 per centin 2003–04. Above all, yourCompany continues to be a debtfree company.We feel quite happy at theseresults. At the same time we aremaking continuous efforts toreduce costs further throughefficiency and productivity, so thatwe are able to offer products at areasonable price and realize betterprofits. We are not alone in thisendeavour. All the vendors,suppliers and dealers and otherassociates have been contributingtheir bit to achieve the goals of theCompany and we acknowledgetheir continuous co-operation insustaining our leadership position.Most important of all is the support

ND_L18fontscorrected FIN.qxd 7/26/2004 5:30 PM Page 8Chairman’s LetterHERO HONDAAnnual Report 2003–20048THE COMBINATION OF BUSINESSUNDERSTANDING OF HEROHONDA AND TECHNOLOGY OFHONDA MOTOR COMPANY WILLCERTAINLY PROVIDE US ACOMPETITIVE ADVANTAGEPASSPORT HOLDERS ARE IN AWAY SPECIAL MEMBERS OF THEHERO HONDA EXTENDED FAMILY;THEY WILL HAVE ANOPPORTUNITY TO PROMOTE HEROHONDA PRODUCTS AND IN TURNREAP THE BENEFITS OF THEIRRELATIONSHIP WITH THECOMPANYand co-operation we have beenrecieving from our JV Partner,Honda Motor Co., Japan and HeroCycles, Ludhiana, from time totime. You will be pleased to knowthat the technical collaborationbetween Honda and Hero Hondahas been extended for another 10years, that is, up to 2014, whichwill ensure continuous flow ofworld class technology andtechnical assistance for ourproducts and processes. As in thepast, the combination of businessunderstanding of Hero Honda andtechnology of Honda MotorCompany will certainly provide usa competitive advantage.Customer is the purpose of ourenterprise. In order to build alasting relationship with customers,Hero Honda started what is nowpopularly known as the “HeroHonda Passport Program”. Underthis scheme, every customer ofHero Honda, past or present iseligible to enroll as a member.Passport holders are in a wayspecial members of the HeroHonda extended family; they willhave an opportunity to promoteHero Honda products and in turnreap the benefits of theirrelationship with the companyunder the scheme. They can sendreferrals to purchase our products,buy components at authorizeddealers and accumulate points.Every transaction makes themeligible for incentives and giftsdepending on aggregate scores. Asof date, there are about 1.5 millionpassport holders, which is 50%higher than last year's enrolment.In order to serve the customer inevery nook and corner of thecountry, the Company has beenexpanding its network ofdealerships and service points.Today a customer has over 1700contact points for enquiry,purchase, and service of HeroHonda products that include 545dealers and 385 SSPs. In thecoming years, we would like toextend this facility at Taluq levelsalso. For the last few years, spareparts business has beendeveloped as a profit center, whichfor the year under reviewcontributed a turnover of Rs.275Crores. In order to establish on lineconnection with the dealers andcommunicate with them on realtime basis, network infrastructureis being put in place.Similarly your Company has 256suppliers that include 36ancillaries. They work with us intandem and have been deliveringsupplies without hiccups for ourexpanding capacities, which istoday rated at 2.8 million vehiclesper annum. The continuousexpansion in quick succession

ND_L18fontscorrected FIN.qxd 7/26/2004 5:30 PM Page 920YEARS9would not have been possible forus without their solid support.Hero Honda has been able toachieve direct on line facility with15 vendors to begin with and wehave plans to achieve 50%coverage in the current fiscal itself.In order to increase efficiency,supply chain management,supplier relationship managementmodules of SAP ERP are extendedto our suppliers. Initially a fewsuppliers (ten) have been chosenfor this purpose, and the schemewill be extended to others in aphased manner. We have alsobeen continuously extendingtechnical assistance to oursuppliers to enable better qualitycompliance and for effecting costreduction.We are very much aware of yourunstinted support all along for thisorganization and its efforts, whichare directed at creating wealth andprofit. We do not believe in holdingthe surplus beyond requirementand thus have been distributingthem in the form of dividend. Weare happy that we have been ableto declare every year an increasingrate of dividend for ourshareholders. For the fiscal year2003–04, your Board of Directorshas recommended a total of1000% dividend, including the500% Special Interim Dividendalready paid to the Share holders.It gives me great satisfaction toshare with you the fact that ouremployees are quite committed toorganizational growth and theorganization treats them and theirfamilies as stakeholders. Ourproductivity has been showingsteady improvement from our4000 plus member strong team. Ithas been our endeavour to trainthem for better productivity andskill improvements.Hero Honda as a corporate citizenis engaged in community andsocial development activitiesaround its plants. It has been asatisfying experience to see themarked changes in the quality ofpeople of the region due to theseprograms.Coming to the perspective, we feelthat Hero Honda has a great roleto play in the Indian two–wheelerindustry, the second largest in theworld. Current macro economictrends and demographic factorspromise sustained growth indemand. No doubt there arechallenges of increasedcompetition, rising prices of rawmaterials and services anddiscerning choice of customers,which need continuous attention.There is a need to think and act inan innovative manner to discovernew avenues of growth andefficiency. With our capabilitiesbuilt over the years and with theassistance of Honda MotorCompany, we will be able to facethese challenges and create newmilestones as we march ahead.Once again, thank you for yourcontinuous support, for which weall at Hero Honda are trulygrateful.Yours SincerelyBrijmohan LallCHAIRMAN HERO HONDA MOTORS LTD.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 10Managing Director’s MessageHERO HONDAAnnual Report 2003–200410Dear Members,THE POWER OF PARTNERSHIPPAWAN MUNJALMANAGING DIRECTORIT HAS BEEN AN EVENTFUL TWENTYYEARS since the day Honda MotorCo. of Japan and Hero Group ofIndia entered into a Joint Ventureagreement. Hero Honda hastraversed many milestones tobecome the World's No.1 Two-Wheeler Company. Powered bypartnerships - between Honda andHero Group to begin with, theCompany has extended thecollaborative spirit to its ancillaries,vendors, suppliers, distributors,shareholders, employees and otherstakeholders.Management of partnerships hasbeen our strength. This is borne outby the fact that Hero Honda hasemerged as one of the bestperforming companies in thecountry. Honda considers HeroHonda amongst its most thrivingventures across the world. Ourrelationship with our collaboratorhas been excellent throughout. It isappropriate to recount that thispartnership has been responsiblefor the introduction of India's firstfour-stroke motorcycle CD-100,which even today is a legend. It is amatter of great pleasure to informyou that Honda has renewed itstechnical collaboration with HeroHonda for another 10 years, that is,up to 2014.From the very beginning, HeroHonda created ancillaries tomanufacture critical components formotorcycles to ensure overallefficiency. In today's modernmanufacturing system, companiesare increasingly dependent onoutsourcing and thus partnershipshave become all the moreimportant. As a result of our goodsupply chain policies, ancillaries arenow able to supply componentsdirectly on-line for assembly.Our customer interface highlightsanother dimension of successfulpartnership. Dealers as our partnerscarry on the spirit of Hero Honda tothe customers. With many of them,we enjoy a special relationshipbecause they have been associated

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 1120YEARSHero Honda is an example of an ideal partnershipwhere core competencies of two organizations havecome together to create a world leader. With ourcombined strengths and the resolve for constantimprovement, Hero Honda will continue to dominatethe two-wheeler market.BRIJMOHAN LALLCHAIRMAN, HERO HONDA MOTORS LTD11with us for generations. Throughthem we extend the "Joy of Selling"experience to the customer for ourproducts. In terms of customersatisfaction and relationshipmanagement, our PassportProgram has been unique increating a feeling of privilege aswell as loyalty among our valuedcustomers.People working for the organizationare our creative assets. They arethe "lifeline" of the organization, asthey run our plants, and overseeevery aspect of the corporatefunction. If our company isefficient, it can be attributed to thecapability and dedication of ourpeople. We partner with them andtheir families to make theenterprise a happy work place.The Customer is our valuedpartner. In interacting with himand in trying to provide productsand services to him we have learnta great deal about the market'sneeds. His preference of ourproducts has been a continuousinspiration for us to do even betterin terms of creating technologicallyand performance-wise superiorproducts - one after another.Our partnership with thecommunity around ourmanufacturing facilities is in theshape of projects covering ruraldevelopment, education andhealth to raise the quality of life ofpeople. Under the aegis of RamanMunjal Grameen Vikas KendraHero Honda has established amodern hospital and a seniorsecondary school and vocationaltraining center in Dharuhera toserve the community.Finally our efforts have beencontinuous in creating wealth forinvestors. This, after all, is thepartnership that underwrites andunderlines all our corporaterelationships. Our record in thisregard is very noteworthy that thecompany has almost always paiddividends, which are increasing onyear-to-year basis. Ourperformance and consistentgrowth has resulted in a marketcap of over Rs.10000 Croresduring 2003-04 for your Company.It is our firm belief thatpartnerships are capable ofmeeting challenges that may comein the way of realizing the vision oforganization. They tend to pool theskills, spread the ownership of thetask and reduce the risk.Partnerships have achievedunbelievable feats and won thehearts of millions. The key tosuccess is being together as onespirit. The two-decade track recordof your Company just proves thatpoint.I take this opportunity to thank allof you for reposing yourconfidence in Hero Honda, whichhas prospered through an array ofmeaningful partnerships. Yourcompany would like to devote itsexperience and energy to takingthe organization to new heightsand make Hero Honda a World-Class Enterprise - a symbol ofgreat partnership.Pawan MunjalMANAGING DIRECTORHERO HONDA MOTORS LTD.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 12Joint Managing Director’s MessageHERO HONDAAnnual Report 2003–200412CUSTOMER ISTRUE VALUEAKIO KAZUSAJOINT MANAGING DIRECTORDear Members,IT IS A GREAT PLEASURE for me toaddress all of you on the occasionof successful completion of 20years of Hero Honda.Honda follows a time-testedphilosophy of being closer to thecustomer. That is Honda wants totake production to wherever there isa market. Where customer exists -markets exist. On this principleHonda came to India and enteredinto a Joint Venture with HeroGroup in 1984. It was conceived asthe best combination of Honda'stechnology and manufacturingprocesses and Hero Group'sexceptional work culture andunderstanding of Indian market. Itis a matter of great satisfaction thatthe JV today is considered to be agreat success story.A major thrust of Honda in India isto promote indigenization of not onlycomponents and parts but also tocreate managerial capabilities for it.This process would create jobs inthe society and through training weraise the skills. In this respect HeroHonda has done quite well.Following the indigenization ofparts, the effort now is to indigenisethe technology. In other words, weneed to create technologiesappropriate for Indian condition andIndian customer. For this purposelocal Honda R&D and Hero Hondafacilities are strengthened. It hasenabled us to respond to themarket requirements quickly andcome up with the launch of modelsin quick succession. We are alsoable to continuously observe theneeds of Indian customer andtranslate them into productfeatures.For Hero Honda, a customer is notjust an end user but also includesall other stakeholders such asdealers, vendors, employees etc.Our goal has always been to exceedthe customer expectation in termsof performance, quality, service,safety and welfare. Hero Hondaemployees know who is thecustomer for them. They are quite

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 1320YEARSHero Honda has been accorded thestatus of Superbrand in the Motorcyclecategory in India.13motivated. That is why thecompany is able to become No.1two wheeler company in India.Our next step is to work forrecognition of Hero Honda in Asiaand Globally. Honda would like topromote this objective of HeroHonda and make it truly worldclass,not just in terms of volumebut also in terms of quality, costand management.Corporate governance is a wellrecognizedvalue in Hero Honda.The code of transparency inwhatever we do will help build thetrust of all our associates. Anotherarea where our focus is high iscorporate social responsibility. It isan obligation, which Hero Hondahas proactively taken up. Forexample, we produce products,which are environment friendly.We promote safety education andalso social innovation. This isHonda Motors global strategy aswell.Completion of 20 years is a greatoccasion to celebrate. It is also atime-point to look back at our pastperformance and reassess ourfuture goals. In the coming yearsHonda and Hero Honda will worktogether in the area of technology,quality and cost in making theenterprise a World No. 1 in allrespects. Honda's recent renewaltechnical understanding is areassurance to our long-standingcordial relationship with HeroHonda in all its endeavors.With best wishes,Akio KazusaJOINT MANAGING DIRECTORHERO HONDA MOTORS LTD

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 14HERO HONDAAnnual Report 2003–20041420 Yearsof Growth, Leadershipand Value CreationHero Honda Motors Limited1992HONORARY MEMBERSHIPINDIAN INSTITUTE OF INDUSTRIALENGINEERINGAWARDS &RECOGNITIONSTO MR. BRIJMOHAN LALL,CHAIRMANWHILE THE RANKINGS, PERFORMANCEINDICATORS BACKED BY FIGURES AND SPATEOF RECOGNITIONS AMPLY INDICATE OURCURRENT STANDING, IT IS THE BUILT-UPBRAND STRENGTHS AND THE SIZEABLE BASEOF LOYAL CUSTOMERS THAT ENSURE US ASTRONG FOUNDATION FOR OUR FUTURESUCCESS.It is a fulfilling experience to present aportrayal of an outstanding performance,especially so as it coincides with the 20thfounding anniversary of the Company.Hero Honda is today one of the country's“Most Trusted and Admired AutomotiveBrands”.There are three distinct areas where HeroHonda's performance can be regarded asa benchmark, namely technology, growthand wealth creation. Since 1991 thecompany has shared the wealth it createdwith investors in a continuously increasingmanner. From 1999-2000, it has steadilydeclared three-digit dividends, and in2003-04, Hero Honda would be proposinga total dividend of 1000%. Is any furtherstatement at all required, one may wellquery. While the rankings, performanceindicators backed by figures and spate ofrecognitions amply indicate our currentstanding, it is the built-up brand strengthsand the sizeable base of loyal customersthat ensure us a strong foundation for ourfuture success.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 1527th May ‘85FIRST MOTORCYCLEROLLS OUT1994BUSINESSMAN OF THE YEARBUSINESS INDIA GROUP OF PUBLICATIONSMAJORMILESTONES9th June ‘87100,000TH MOTORCYCLE1995NATIONAL AWARDOUT STANDING CONTRIBUTION TO THEDEVELOPMENT OF INDIAN SMALL SCALEINDUSTRY24th August ‘88200,000TH MOTORCYCLE15On the occasion of completing two decades,a nostalgic stroll down the memory lanewould help us to recall the zeal, respect thevalues and reaffirm the policies that havetaken the organisation past many impressivemilestones.A QUICK REWINDWhen a Company takes less than twodecades to become the World's Largest Two-Wheeler Manufacturing Company ( on 1stApril, 2002), then it's a history that's worthrecounting. More so, when it has stayed asWorld No. 1 for three consecutive years!The first page of this history got written on24th January, 1984 when a collaborationagreement brought together two worldleaders: Honda, the international automotiveleader from Japan, and the Hero Group, anestablished volume-manufacturingconglomerate and the world's leadingbicycle makers. This partnership of twodecades, marked by cordial ties and mutualunderstanding, has recently been renewedup to the year 2014.WHILE IT CONTINUES TOBE VERY MUCH ACONCERN EVEN TODAY,SPIRALLING PETROLEUMCOSTS HAD CAUSED ANALARM IN THE 1980S.ONLY BETTER FUELECONOMY COULDPROVIDE THE MUCH-SOUGHTSOLUTION. THE LAUNCHOF THE FOUR-STROKE,FUEL-EFFICIENT, 100CCMOTORCYCLE MADE APERCEPTIBLE IMPACT INTHE COUNTRY.On the Baisakhi day of 13th April, '84, theFoundation Stone was solemnly placedfollowing a havan and prayers at the site.Towards the end of November 1984, thepublic issue of shares was oversubscribed byover ten and half times. In February 1985,there were over seven and a half lakh bookingsfor India's first 100 cc 4-stroke motorcycles.Commencement of commercial productiontook place on 27th May, 1985, the day the firstmotorcycle rolled out. It is a matter of pridethat within a year of starting work on the Plant,the first delivery could take place on 14thJune. The CD 100 soon became the soughtafter bike made famous by itsmemorable campaign with its inimitable by-line"Fill it. Shut it. Forget it." By the end of 1985,the plant was producing well over 6000motorcycles a month.While it continues to be very much a concerneven today, spiralling petroleum costs hadcaused an alarm in the 1980s. Only better fueleconomy could provide the much-soughtsolution. The launch of the four-stroke, fuel

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 16Chronicle of 20 yearsHERO HONDAAnnual Report 2003–20041630th Sept ‘89300,000TH MOTORCYCLE20th Aug ‘90400,000TH MOTORCYCLE29th May ‘91500,000TH MOTORCYCLE1997DISTINGUISHEDENTREPRENEURPHD CHAMBERS OF COMMERCE & INDUSTRY1998BUSINESS LEADER OF THEYEARBUSINESS BARON2000SIR JEHANGIR GHANDY MEDALINDUSTRIAL PEACEXLRI, JAMSHEDPURefficient, 100 cc motorcycle made aperceptible impact in the country. Ridingstrongly on its proven fuel economy andperformance, Hero Honda was expandingdistribution network and at the same timerapidly adding to its plant infrastructure.The brand was well on its way to theposition of market leadership.ROLL CALL OF HONOURSAs a true industry leader, it has numerousand diverse achievements in its portfolio.Besides being the first 100 cc motorcycleto enlist in the BSF ( on 27th October,1988) and the Air Force (29th October,1991), and to serve with numerous StatePolice forces, Hero Honda holds recordsamong others, the World's Largest SellingModel for four successive years for theSplendor since 2000.WHILE ITS PRODUCTSHAVE BEEN WINNINGACCLAIM, THECOMPANY HAS ALSOWON EQUALLYSIGNIFICANTRECOGNITION IN MANYSOFTER AREAS THATARE ASSOCIATED WITHITS PEOPLE, THEIRSAFETY AND WELFARE,QUALITY ANDPRODUCTIVITY ANDENVIRONMENT.On 9th May, 1991, the Company baggedthe coveted Economic Times - HarvardBusiness School award for Good CorporatePerformance coinciding with economicliberalization initiative in the country.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 17L23rd Nov. ‘941 MILLIONTHMOTORCYCLEROLLS OUTThe Company's Chairman, Mr.Brijmohan Lallhas received dozens of prestigious awards,and notable among the recent honours havebeen Ernst & Young's Entrepreneur of theYear (2001), MMA-Business LeadershipAward(2002) and the AIMA's LifetimeAchievement Award for Management(2003), all indicative of quality ofmanagement and its leadership.While its products have been winningacclaim, the Company has also won equallysignificant recognition in many softer areasthat are associated with its people, theirsafety and welfare, quality and productivityand environment. These awards include, forIndustrial Safety ( longest accident freeperiod - Haryana State Labour Dept.), BestWorking Conditions, Best First AidArrangements, Best Maintenance ofEnvironment, Best Performance inAutomobile Sector ( National SafetyCouncil), National Productivity Award fromthe Vice President of India (24th August,2000)and the National Trophy on QualityCircles ( Confederation of Indian Industry -CII ). Quality Circles had been inauguratedat the Plant in 1986 and the same year, theButterfly Circle of Paint Shop had baggedthe World Convention Trophy at Japan.Other laurels such as the 3 Leaves Award ofthe Centre for Science and Environment(CSE) and Outlook Magazine's `Value Creatorof the Year Award 2003' speak for Hero17th April ‘982 MILLIONTHMOTORCYCLE2001ENTREPRENEUR OF THE YEARERNST & YOUNG13th Dec. ‘993 MILLIONTHMOTORCYCLEHonda's corporate sensitivity and responsiblecitizenship.WELL REMEMBEREDIn the course of this journey, there has alsobeen anguish, the poignant times. Mid-1991was such a time when Mr.Raman Kant Munjaldeparted and in early August, Mr.SoichiroHonda passed away. Both of them had playeda pivotal role in the strengthening and successof the partnership. Their zeal and beliefproduced results and has been inspiration tous all, over the years. Raman Kant VidyaMandir (school) opened on 2nd July '92,Raman Munjal Charitable Hospital inauguratedby Mr.Satyanand Munjal on the same date in1999, the Raman Munjal Lecture Seriesorganised in August 2002, all cherish hismemory. And indeed all the Company'smilestones are but monuments in tribute totheir spirit.WE SIMPLY MADE IT !2002ENTREPRENEUR OF THEYEARBUSINESS STANDARDThe priority given and investments made insafety, standards and environmental conditionshave been directly translating into productivityaccomplishment as well as production records.17

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 18Chronicle of 20 yearsHERO HONDAAnnual Report 2003–20041820th Dec. ‘2000SPLENDOR SINGLE LARGESTSELLING TWO WHEELER IN THE WORLD27th April ‘01#1 IN INDIATWO WHEELER COMPANY1ST APRIL ‘02WORLD #1TWO WHEELER COMPANYOn 9th June, '87, the 1,00,000th motorcyclewas produced.AS THE COMPANYEMBARKS ON ITSTHIRD DECADE, MOREINTERESTINGDEVELOPMENTS AREON THE ANVIL. TWONEW BIKES WILL BELAUNCHED DURINGTHE CURRENT FISCAL,HERALDING THE ENTRYOF THE NEXTGENERATIONMOTORCYCLES IN THECOUNTRY.The 2,00,000th motorcycle was produced on24th August, 1988, within fifteen months ofthe first lakh, indeed a remarkable rise!Bhoomi Poojan ceremony for the Second Plantwas performed on 13th April, 1995, and thedaily production fast progressed to touch athousand bikes daily within a year.In the year 2003-04, Two Million Hero HondaMotorcycles were rolled out in a single year, anew production record.Along the journey, the volumes have beenescalating steadily as the Hero Honda brand isdiscerning towards changing customer trendsand offers contemporary features andaesthetics in its every new offering. Today, itcan speak of a 54% motorcycle market share(42% of the Two-wheeler market). Together,Hero Honda and Honda's Indian subsidiary,HMSI are targeting a share of over fifty percentof the Indian two-wheeler market.As the Company embarks on its third decade,more interesting developments are on theanvil. Two new bikes will be launched duringthe current fiscal, heralding the entry of thenext generation motorcycles in the country.CORPORATE EXCELLENCEWith the commissioning of the 2nd plant inGurgaon, in early 1997, Hero Honda now hasthe capacity to manufacture more than Two

ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 1915TH JAN. ‘03CROSSES OVER CUMULATIVE 7MILLION SALES MARK FIRSTINDIAN COMPANYNOV. ‘03SELLS OVER 2 LAC UNITS IN ASINGLE MONTHWORLD RECORD192002GIANT’S INTERNATIONALAWARDBUSINESS & INDUSTRYGIANTS INTERNATIONAL2002BUSINESS LEADERSHIP AWARDMADRAS MANAGEMENT ASSOCIATIONMillion units. Keeping abreast of globaltechnological advancements, the Gurgaonplant is among the most modern motorcyclemanufacturing facilities in the world. HeroHonda has earned the ISO 9001 qualitymanagement certification, the ISO 14001 forenvironmental systems and OHSAS 18001 forwork safety ( Occupational Health and SafetyAssessment Series).ERP-based decision making implementedacross HHML serves as an industrybenchmark. We are one of the Asian referralsfor ERP-SAP modules.Small wonder then that these initiatives haveresulted in Hero Honda being voted as theMost Respected Automobile Company in theBusinessWorld magazine's poll, and also inreceiving the "Company of the Year" award forCorporate Excellence from The EconomicTimes! The customer's verdict reigns supreme.Customers too have voted in the NFO TotalCustomer Satisfaction Awards 2003, withSplendor and CD 100 respectively winning inthe entry and executive segments.WHETHER RAISINGSERVICE STANDARDSOR EXTENDING THEINFLUENCE OF HEROHONDA'S CUSTOMERRELATIONSHIPPROGRAMMES IN THEIRREGION, THEY PLAY AKEY ROLE IN RETENTIONOF MARKET-SHARE.While the Company gains wide recognition forits product and service quality, a lesser knownfacet is its community activities. Providinghand-pumps to villages of the vicinity in waterscarcesouthern Haryana, establishing ofschools and hospitals, conduct of specialisedhealth camps etc. have been some of them.HERO HONDA'S COMMONWEALTHMany among our large and growing fraternityof Dealers have had a long association with us,and they equally cherish the Company's historyand share our values. Spanning across thenation, they number over 1000, includingSales and Service Points. With their respectiveService extensions also taken into account, theservice points would add up to over 1700.Whether raising service standards or extendingthe influence of Hero Honda's CustomerRelationship programmes (HH Passport) intheir region, they play a key role in retention ofmarket-share. It is a matter of pride to statethat the Passport Programme, which wentnational in 2001, has crossed the One and halfmillion membership mark. This initiative offersunique privileges to Hero Honda customers

ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 20Chronicle of 20 yearsHERO HONDAAnnual Report 2003–2004202003BIKE MAKER OF THE YEAROVERDRIVE MAGAZINEMarch ‘04WORLD #1 COMPANY FORTHE 3RD CONSECUTIVEYEAR2004GVC LEVEL 1CORPORATE GOVERNANCECRISILand strives to maintain an enduringrelationship with them.THE BRAND'SASSOCIATION WITHYOUNG CHARISMATICPERSONALITIES SUCHAS INDIA'S MOSTSUCCESSFUL CRICKETCAPTAIN, SOURAVGANGULY AND THEDASHING CINE FIGUREOF HRITHIK ROSHANALSO TARGET THEIMAGINATION OF THEYOUTH.If customer is viewed as queen bee, the entirevalue chain represents the beehive- acollective effort of all the stakeholders withuniform structure and uniform essence.However it is worthwhile to mention thatmaximum cell count is of our vendors andsuppliers who form the major portion of thevalue chain and have been the foundation tothe size Hero Honda has grown in these 20glorious years.YOUTHFUL AND FUTURE-ORIENTEDIndia's first premium sports motorcycle,Karizma launched on 15th May '03, has wonthe BBC Wheels `Bike of the Year 2003'Award. Two more motorcycles with the newtechnology from Honda will be launchedduring this fiscal. In addition, a scooter is to belaunched in the niche segment, again withtechnology provided by Honda.The brand's association with young charismaticpersonalities such as India's most successfulcricket captain, Sourav Ganguly and thedashing cine figure of Hrithik Roshan alsotarget the imagination of the youth. TeamAmbition comprising Saurav, Kaif, Yuvraj, andSehwag is in sync with young aspirations andcommunicate the brand's values among thisaudience.HERO HONDAMOTORCYCLES HAVEMADE A SPECTACULARDEBUT IN MOTORSPORT.KARIZMA SET NEWNATIONAL RECORDS INSPEED, WHICH WERECERTIFIED BY THEFEDERATION OFMOTORSPORT CLUBS OFINDIA. THESELANDMARKS WEREACHIEVED DURING A 24HOUR NON-STOP TRACKRUN PILOTED BY ANINTREPID TEAM FROMOVERDRIVE MAGAZINE,WHICH INCLUDED ITSEDITOR.Other ways to bond with the youth segment

ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 212004BEST VALUE CREATOROUTLOOK MONEY212004LIFETIME ACHIEVEMENTAWARD FOR MANAGEMENTAIMAhave been to sponsor and be associated withmajor cricketing events including ICC cricketevents as global partner. In Nov.'93, the fivenationHero Cup was to mark just thebeginning. Hero Honda is also extensivelyinvolved in promoting golf, soccer, hockey andother games in the country. In fact, thedomestic golfing circuit has been named theHero Honda Golf Tour and Hero HondaMasters, a premium golf tournament is animportant event on the Asian PGAChampionship.Hero Honda motorcycles have made aspectacular debut in Motorsport. Karizma setnew national records in speed, which werecertified by the Federation of Motorsport Clubsof India. These landmarks were achievedduring a 24 hour non-stop track run piloted byan intrepid team from Overdrive magazine,which included its Editor.NEW CHAPTERSThus, the pursuit of Excellence has taken ustowards new terrains on which Hero Hondamust script its further success in the comingdecades.History will continue to be made by those whoshare the spirit of enterprise and look forwardto the sheer excitement, novelty and challengethat's ahead. The success in the marketplace,in managing products and logistics, inrelationships with customers and associates,has always reflected in gains made by variousstakeholders and in even better yields to HeroHonda’s investors. Hero Honda thanks itsstakeholders for their continuous support andfaith, and for sharing in the dreams as well asits effective realisation.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 22HERO HONDAAnnual Report 2003–200422MANAGEMENT DISCUSSION &ANALYSISHERO HONDA MOTORS LIMITED,since its inception hasconsistently created value andmaximized the returns to its shareholders. Table 1 gives the 5–yeartrend in the Company's income,profit after tax (PAT), andprofitability as measured by theratios of PAT to total income, returnon average equity [ROAE] andreturn on average capital employed[ROACE]. Such consistentperformance is rare in a market thatcan be fluctuating and highlycompetitive.In the medium term, our businessfocus will continue to be on growthin sales and profitability therebyensuring gainful returns to theshareholders' funds. For the year2003–04, the company continuedits leadership stance by being theworld's largest two–wheelermanufacturer for the third year in arow. And with it, your Company'sincome nearly reached Rs.6,000Crore.In the domestic arena, yourCompany has further consolidatedits market share, which went upfrom 33% and 44% in 2002–03 to37% and 48% in 2003–04 intwo–wheelers and motorcyclesrespectively. The gap between yourCompany's sale of motorcycles andthat of the nearest competitor hasrisen to over one million. The mostsuccessful model, Splendor and itsTABLE 1 KEY FINANCIALS—INCOME, PROFIT, ROAE AND ROACEIn Rs. Crore1999–00 2000–01 2001–02 2002–03 2003–04Total income 2269 3191 4539 5195 5997PAT 192 247 463 581 728PAT as % of total income 8% 8% 10% 11% 12%ROAE 52% 47% 72% 76% 73%ROACE 66% 65% 95% 99% 93%

ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 2320YEARSIndian two wheeler industry went through aquiet and almost an unnoticed change during1998-99. Motorcycles overtook scooters toemerge as the largest product segmentTHE ECONOMIC TIMESJUNE 30, 199923new version, Splendor+ togetherhave sold over a million in the yearunder review.During the year 2003–04, theCompany's sales exceeded the 2million mark and posted a sale of2.07 million against 1.68 millionlast year – as a consequence thecustomer base has accumulatedup to nearly 10 million, which is arecord for the Indian industry. Thetotal population of two–wheelers inthe country is estimated to beabout 45 million.All these salient achievementsresulted in robust financialperformance all across. We arepleased to present some of the keyfinancial performance parametersof 2003–04.• Total sales grew by 14.3 per centfrom Rs.5,102 Crore in 2002–03 toRs.5,832 Crore in 2003–04.• Ratio of operating profit beforedepreciation, interest and tax(OPBDIT) to net sales increasedfrom 16.7 per cent in 2002–03 to16.8 percent in 2003–04.• OPBDIT grew by 14.7 per cent fromRs.854 Crore in 2002–03 toRs.979 Crore in 2003–04.• Post–tax profit (PAT) grew by 25.4per cent from Rs.581 Crore in2002–03 to Rs.728 Crore in2003–04.• Return on average equity (ROAE),measured as a ratio of PAT toaverage equity during the year, wasat 72.9 per cent in 2003–04.• Return on average capitalemployed (ROACE), measured as aratio of PBIT to average capitalemployed during the year, was at92.8% in 2003–04.This impressive performance hasbeen possible despite intensecompetition in the market, and risein the prices of steel in latter partof the financial year. Following isthe analysis of the two–wheelermarket in 2003–04 and theperformance of Hero Honda interms of marketing, operations andfinancial administration and otherfunctions.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 2520YEARS25deluxe segment with morepowered bikes [125cc]. HeroHonda is keenly observing themarket and will take necessarysteps to protect its growth,market share and leadershipposition.HERO HONDA’S PERFORMANCEHero Honda had a market shareof 48% in motorcycles and 37%in two–wheelers for the year2003–04. It has added another 4percentage points to regain itsmarket share to 2001–02 levelsin motorcycles and has furtherconsolidated its position intwo–wheelers. Chart B shows themarket shares of Hero Honda intwo–wheelers and motorcycles inthe last 5 years.We have continued our strategy ofbroad–basing our product portfoliobased on a series of marketsurveys. Accordingly in the year2003–04, we have launched 5models basically to provideadditional features and also coverniche markets. Our largest sellingmodels i.e. Splendor and Passionput together constitutes a majorportion of our total sales. The onusof providing volume is taken overby other models. The year alsosaw a handsome volume of half amillion sale realized from ournewly launched CD Dawn. Spareparts business, an initiative, whichwe started to ensure genuine partssupply, has yielded a revenue ofRs 275 Crores for the financialyear 2003–04.In the year 2003–04, HeroHonda recorded a sale of 2.07million and registered a growth of23% as compared to all Indiasales growth of 14% inmotorcycles. The company forthe first time crossed the annualsale of 2 million vehicles (ChartC). At the same time, the gapbetween nearest competitors andHero Honda is over 1 millionmotorcycles and we believe thatour strategy of remaining closerto the customers and providingproducts of their choice hasprovided this advantage.In the coming days, thecompetition may adopt newstrategy of bringing bikes withincremental power that is over100cc to take on our successfulmodels. Your Company is veryconscious about the futurechallenges of Indian market andtherefore, will continuously strive tostay ahead with the introduction ofnew products, technology, andservices.PRODUCT LAUNCHESAs mentioned earlier, the Companylaunched 5 new models coveringall the three segments namely

ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 26Management Discussion & AnalysisHERO HONDAAnnual Report 2003–200426HERO HONDA HAS ALREADYLINED UP MODELS FOR THENEXT FIVE YEARS. IN2004–05 TWO NEW MODELSWILL BE INTRODUCED IN THEMARKET. AT AN APPROPRIATETIME, YOUR COMPANY ALSOHAS PLANS TO ENTER THESCOOTER MARKET AS WELL.price, deluxe and premiumsegments.• In April 2003, we launchedCD–Dawn, targeted for entrysegment and enabled customers tohave a very viable transportalternative to public transport witha byline "Public ka NayaTransport". The model in the yearof launch itself has done nearlyhalf a million sales – which is arecord in itself.• In May 2003, we launched afuturistic, power+sport segmentbike, Karizma. The "Jet Set Go"bike is a brilliant aspiration –fulfilling bike – positioned asIndia's first premium sportsmotorcycle. The product hascreated its own niche.• In September 2003, Passion pluswas launched primarily to inspirethe customers with improvedstyling. Originally the product wasintroduced as a style product but todifferentiate from look–alikes thatcame later, the styling has beengreatly modified to lookcontemporary.• In October 2003, the largest sellingand most trusted brand Splendorwas launched with new styling andadditional features. It was receivedwith lot of enthusiasm in themarket.• And in January 2004, Ambition 135was launched to strengthen thepremium segment, which is alsocovered by CBZ* (launched later inApril 2004).Together, these five models nowrepresent the entire range of HeroHonda motorcycles with fresh look,additional features and aremeeting the aspirations of thecustomer class.The result of our new launcheswas quite rewarding. YourCompany now leads in price anddeluxe segments. Hero Honda has14% market share in the premiumsegment.Hero Honda has already lined upmodels for the next five years. In2004–05 two new models will beintroduced in the market. At anappropriate time, your Companyalso has plans to enter the scootermarket as well.CUSTOMER FOCUSThe philosophy of Hero Honda isto delight the customer withproducts and services. Every yearnew set of initiatives is taken toserve the customer even betterand be closer to him. Some ofthese initiatives are proactive andsome are based on feedback fromthe customers.In 2001–02, we were the first oneto introduce two– year warrantyfrom six months. We continue withthat scheme.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 2720YEARSIt (Hero Honda) is a clear brand andvolume leader in motorcycle segment." WHEEL OF FORTUNE"ET AWARDS FOR COPORATE EXCELLENCE - COMPANY OF THE YEARTHE ECONOMIC TIMESAUGUST 21, 200227THE HERO HONDA PASSPORTPROGRAMME, WHICH IS ONEOF THE MOST SUCCESSFULCUSTOMER RELATIONSHIPPROGRAMME CONTINUES TOBE HIGHLY POPULAR ANDSUCCESSFUL. TODAY OVER1.5 MILLION CUSTOMERSHAVE ENROLLED INTO THISPROGRAMMEThe Hero Honda PassportProgramme, which is one of themost successful customerrelationship programmecontinues to be highly popularand successful. Today over 1.5million customers have enrolledinto this programme. Under thisprogramme, customers of HeroHonda products are eligible toenroll at a nominal fee againstwhich they get not only discountson purchase of spare parts,accessories and services but alsoget incentive (bonus) points.Incentive points are given againstreferrals as well. Hero Hondapassport holder is eligible for giftsand special awards, dependingon total accumulated points.The idea of this programme is tocreate nation–wide customerloyalty, make them members ofHero Honda family, who in turnwill become brand ambassadorsto help build up sales andservice through referrals andgood will. Our experience withthe program has been that it hasmore than met our objective andis regarded as a reference casestudy in customer relationshipmanagement.It is our endeavour to have HeroHonda customer as the mostsatisfied customer. Several stepshave been taken in the past toenhance customer satisfaction,which is reflected in the MTCS2004 – a survey conducted byTNS Automotive. According to thesurvey, Hero Honda has recordeda customer satisfaction level of 83.CD Dawn has been rated as thebest bike in the Price segment. CDDawn, Splendor and Passion havea satisfaction score of 84 out ofmaximum 100 points.Many more initiatives have beenplanned for improving thesatisfaction level, which amongothers include expansion ofcurrent reach to small towns /taluq level, legal action againstnon–genuine parts dealers,training of local mechanics forbetter service. In order to spreadthe awareness on safety andenvironment we are planningexpansion of "Safety Riding" toapproximately 150 locations andalso are promoting soundenvironmental practices through'Green dealership' concept.We plan to conduct acomprehensive CustomerSatisfaction study again this yearin partnership with CSMM tounderstand our delivery againstthe customer expectations.OPERATIONSHero Honda has an annual totalinstalled capacity of 2.8 million

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 28Management Discussion & AnalysisHERO HONDAAnnual Report 2003–200428IN THE AREA OFMANUFACTURING, YOURCOMPANY HAS BEENATTEMPTING IMPROVEMENTSAND INNOVATIONS ON ACONTINUOUS BASIS TOACHIEVE EFFICIENCIES ANDPRODUCTIVITY GAINS. DUALTONE PAINTING TECHNOLOGYON MOTORCYCLES WASINTRODUCED FOR THE FIRSTTIME IN INDIA BY HEROHONDA IN 2003–04.from its two plants at Dharuheraand Gurgaon. Both the plants areadvanced manufacturing units. Bymaking additional investments inflexible CNC machines andautomation, the capacity at theseplants is now expanded to 2.8million vehicles per annum. In thelast three years, the productionfrom these plants has doubledfrom 1 million to 2 millionmotorcycles per year, besidesproviding for flexibility tomanufacture many models andtheir variants.The Company’s first plant atDharuhera is engaged in theexclusive manufacture of modelslike CD100, CD100 SS andCD–Dawn, while the second plantat Gurgaon produces more diverserange of motorcycles that cater todeluxe and premium segments.The largest selling model Splendoris produced at both the plants.Dharuhera plant has thedistinction of producing its5 millionth bike on June 17, 2004and both the plants togetherachieved a new milestone ofproducing 10 million bikes. In viewof continuously increasing need forcapacity, your Company isconsidering a third plant, whichwhen happens will be a realizationof our mandate of creating aworld–class manufacture. Locationand viability study are underprogress.In the area of manufacturing, yourCompany has been attemptingimprovements and innovations ona continuous basis to achieveefficiencies and productivity gains.Dual tone painting technology onmotorcycles was introduced for thefirst time in India by Hero Hondain 2003–04. In order to improveupon our plant efficiencies, theCompany has taken a majorinitiative to implement "Just inTime concept (JIT)". For this"Online vendor connectivity"program was implemented. Andunder this, in 2003–04, directonline supplies to assembly lineswere established with 40 vendors.A major learning from thecompetitive market is the effort theCompany had to make in the areaof cost rationalization on acontinuous basis. Cost optimizationwas achieved through various costimprovement projects, use ofalternate fuels and by cutting downon our overheads. A reduction of8.24% was achieved inmanufacturing variable cost in2003–04 over last year.The Company is also a majorcampaigner for safety in factoriesand establishments. For its effortsand event free records, HeroHonda has won National Safety

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 2920YEARS29Awards 2001 & 2002. Similarlyfor clean environment practicesadopted by us, Tata EnergyResearch Institute (TERI) hadawarded Corporate EnvironmentAward in June this year. Twoyears ago, Hero Honda bagged3–Leaves Award from Centre forScience and Environment (CSE)for our clean practices at theplant level – the highest awardfor any two–wheeler Company inthe country.VENDOR MANAGEMENTVendor management is verycritical to Hero Honda as68–70% of the cost ofproduction is accounted bymaterial cost. 256 vendorsincluding 36 ancillaries spreadacross the country are thebackbone of our successfuloperations at both the plants.Our excellent long–termrelationship has beenresponsible for trouble freeproduction and sustainedexpansion for capacity,increasing localization, efficientoutsourcing and cost andinventory control.In terms of efficiency, theCompany is able to access 70%of the materials by value atzero– inventory. For the balancematerial, the average inventoryis about 3–4 days. As ameasure of rationalization ofvendors, the Company is resortingto system purchases and is alsolooking at the possibilities of goingglobal to procure materials. Wefeel enterprises have to adoptthese techniques to become costeffective and price competitive inthe market.Our interaction with our suppliershas been one of partnership. Wehave been helping them withsystems so that, vitalcommunication with the supplychannel is in place. With the helpof the IT division, the Companyhas implemented Supply ChainManagement (SCM) and SupplierRelationship Manangement (SRM)system. Secondly, we also providethem with technical assistance atvarious levels, including qualityaudit visits to ensure even qualityand quality improvements in theirsupplies.Our supply management strategyhas enabled us to achieve costoptimization and also containinflation to bare minimum of lessthan one percent from the year2003–04. This is one area whichmanagement will increasingly havefocus to achieve cost and qualitycompetitiveness for the enterprise.RESEARCH AND DEVELOPMENTYour Company has access to

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 30Management Discussion & AnalysisHERO HONDAAnnual Report 2003–200430THE COMPANY IS CURRENTLYIMPLEMENTING SAP'SSUPPLIER RELATIONSHIPMANAGEMENT (SRM)MODULE & CUSTOMERRELATIONSHIP MANAGEMENT(CRM) TO CONNECT OURDEALERS AND VENDORS FORCARRYING ON BUSINESSELECTRONICALLY. THECOMPANY IS AMONG THEFIRST ONES TO IMPLEMENTTHESE SOLUTIONS ANDCONTINUES TO BE A MODELREFERENCE SITE FOR SAP.Honda R&D, which has worldwideexperience in automobiles and isconsidered to be the best intwo–wheeler technology. Further,Hero Honda has a huge databasefrom market feedback, henceunderstands the Indian conditionsand the requirements of Indiancustomers very well. Hero Hondamarket intelligence combined withHero Honda and Honda R&D hasbeen greatly responsible forbringing out best performing andmost acceptable products in themarkets.At its own R&D center, HeroHonda has put in place thenecessary infrastructure anddeveloped competencies for doingimportant base–work, which helpsconceptualization of the productand later material selection,localization of components andtesting for various launches as perHonda specifications. Anothermajor objective for investing inlocal R&D is to cut down ondevelopment and launch time forthis growing and highly competitivemarket. You may be pleased toknow that your Company's R&D isnow connected to Honda (Japan)online to help design data transferinstantly. All these efforts haveenabled your Company to reduceproduct development time. Thus,the company was able to havelarge number of launches in thelast fiscal year, namely, CD–Dawn,Karizma, Splendor / Passion DiscVersion, Splendor+, Passion Plus,Ambition 135, CBZ* and needlessto mention that many newlaunches are in pipeline.Regulations, is another area whereR&D support is increasinglyrequired. Environment and safetyissues require a lot of R&D inputsto ensure that the products complywith all the necessary norms laiddown by the government from timeto time. Your Company played aconstructive role in working withthe government (MashelkarCommittee) to understand andformulate regulations in the areasof safety, emissions and fuelquality for the automobile sector.INFORMATION TECHNOLOGYHero Honda continues to adoptand implement informationtechnology (IT) for enhancing theoverall efficiencies of theorganization. In keeping with theplans, the Company is currentlyimplementing SAP's SupplierRelationship Management (SRM)module & Customer RelationshipManagement (CRM) to connectour dealers and vendors forcarrying on business electronically.The Company is among the firstones to implement these solutionsand continues to be a modelreference site for SAP. With this

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 3120YEARSIt is not every two wheeler manufacturerthat is able to create the best-selling bikein the world. Hero Honda with its 100 CCSplendor holds that distinction.BUSINESS STANDARDJANUARY 25, 200131YOUR COMPANY ISCONTINUOUSLY UPGRADINGTHE IT INFRASTRUCTURE TOMEET THE BUSINESS NEEDS.THE IT INFRASTRUCTURE ISSTATE–OF–THE–ART ANDAIMS AT HIGH THROUGHPUT,HIGH AVAILABILITY, ANDCAPABLE OF SCALING UP TOACCOMMODATE THECOMPANY'S GROWTH. NEWTECHNOLOGY SOLUTIONSARE EVALUATED AND PUT INPLACE DELIVERING HIGHVALUE TO BUSINESS. YOURCOMPANY CONTINUES TO BEA PIONEER IN THE ADOPTIONOF VARIOUS TECHNOLOGIESAND REMAINS A REFERENCESITE IN THE ASIA PACIFICREGION FOR VARIOUSTECHNOLOGY VENDORS WHOWORK WITH THE COMPANY.implementation, our supplychain solution moves from thecurrent mode of one waysharing of information to acollaborative framework, whichwould enable dealers andvendors to carry out on–linetransaction through a secureInternet connection.As a part of continuousimprovement, the SAP HRmodule was extended to cover'Employee Self Service System'(ESS) where employees directlyaccess their personalinformation related to theirsalaries and other particulars.The same facility has also beenextended to the workers throughkiosk–based systems (touchscreen). Bar coding wasintroduced for automaticrecording of material receipt andproduction data leading togreater accuracy and efficiency.Various other initiatives takenduring the year have gonetowards process improvements,cost reductions and improvingefficiencies.Yet another major initiative takenduring the year was to movetowards electronic storage ofdocuments. Frequentlyaccessed documents are storedcentrally using a documentmanagement software and usersaccess them based on the rolesand rights assigned to them. Otherdocuments are being microfilmedand stored separately. This hasmade document storage simple,saved considerable space, and hasmade access very easy.With the spread of information andextension of connectivity evenoutside the Company, varioussteps have been taken to secureits data and networks. TheCompany has formulated an ITsecurity policy and put it intoaction throughout the organization.Security monitoring exists both atthe technical level (firewalls,intrusion detection & other tools)and at the user level (informationclassification, access rights,defining responsibilities etc).Your Company is continuouslyupgrading the IT infrastructure tomeet the business needs. The ITinfrastructure is state–of–the–artand aims at high throughput, highavailability, and capable of scalingup to accommodate theCompany's growth. Newtechnology solutions are evaluatedand put in place delivering highvalue to business. Your Companycontinues to be a pioneer in theadoption of various technologiesand remains a reference site in theAsia Pacific region for varioustechnology vendors who work with

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 32Management Discussion & AnalysisHERO HONDAAnnual Report 2003–200432IN LINE WITH OURORGANIZATIONAL MANDATE OFBECOMING A "WORLD CLASSMANUFACTURER", WE HAVEMANAGED TO CREATEAWARENESS ON ITSCONCEPTS, TOOLS ANDTECHNIQUES AMONGWORKFORCE ANDEMPLOYEES. WE ARE ALSOENCOURAGING LINEMANAGERS TO PLAY A LEADROLE IN PEOPLEDEVELOPMENT.the Company. Many technologymagazines carry the Hero Hondacase study at regular intervals.This year our offices including thetwo Plants have been connectedthrough Video conferencing. In thecoming year the Company plans toset up an alternate IT site as adisaster recovery site, to take careof any eventuality that may causefailure of the main data centre.HUMAN RESOURCE MANAGEMENTThe Human Resources functionhas concentrated all its effortsunder the broad banner of"Organisation Capability Building";through key initiatives such asDevelopment of Knowledge, Skills& Attitudes (KSA), KnowledgeManagement, Building a learningculture within the organization andseveral more – all aimed atproviding a more futuristic andmatured outlook to the keyresource in Hero Honda, it'sPeople. Parallel to developinginternal people capability, we arealso consciously trying to sourceexceptional talent in core areas ofSales & Marketing, Research &Development and Supply ChainManagement. This effort has bornefruit in terms of infusion of around60 bright, young professionals intothe mainstream activity of theorganization.There is a conscious effort on thepart of the management tocontinuously develop theKnowledge, Skills & Attitudes of itspeople through a variety of Traininginterventions specifically aimed atan individual's need with a specialthrust on enhancingfunctional/domain knowledgeacross disciplines. In line with ourorganizational mandate ofbecoming a "World ClassManufacturer", we have managedto create awareness on itsconcepts, tools and techniquesamong workforce and employees.We are also encouraging linemanagers to play a lead role inPeople Development.In collaboration with IT, HR hasimplemented the SAP Payroll and"Employee Self–Service" (ESS)modules. We are also in theprocess of launching the PeopleDevelopment (PD) & Training andDevelopment (T&D) modules inthe ensuing financial year.There have been several initiativestaken on the employee welfarefront through specific programmesdesigned for the spouses and thechildren of our employees viz:Employee's Spouse programme"Apka Shaandar Humsafar",career–counseling sessions for thechildren. These programmes haveenabled us to reach out to thefamilies of our employees and

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 3320YEARS33provide them with a uniqueopportunity to know about thecompany and its values. It hasalso helped the children of ouremployees in making certainimportant decisions with regardto their career.Best Employers Study 2003conducted by Hewitt Associates.In the financial year 2004–05, weaim to focus our efforts in the areaof fostering creativity & innovationthroughout the organization.TABLE 2 HERO HONDA’S ABRIDGED PROFIT AND LOSS STATEMENTThe efforts of all these need–feltresulted in "EmployeeEngagement" of about 70 percent (considered to be fairlyhigh) for Hero Honda in theIn Rs. Crore03–04 02–03Net Sales from Operations 5832.43 5101.71Material Costs 4030.61 3470.77Rates and Taxes 6.54 9.75Manufacturing Expenses 119.35 108.66Employee Costs 231.52 201.63Selling & Distribution Expenses 338.38 314.84Other expenses and provisions 125.93 132.47Financial expenses –1.35 –1.02Misc. expenditure written off 0.7 9.53Depreciation 73.33 63.39Total Expenditure 4925.01 4310.02OPBDIT 979.40 854.06OPBT 907.42 791.69Other Income 165.04 92.87PBIT 1071.11 883.54PBT 1072.46 884.56Current tax 331.07 298.19Deferred Tax 13.07 5.61PAT 728.32 580.76Note: In order to get a more accurate picture of the Company’s operational performance, OPBDIT has beencalculated net of “other income’’FINANCIALSTable 2 gives a summary of HeroHonda's financial performance for2003–04.Net sales of the Companyincreased by 14.3 per cent fromRs.5,102 Crore in 2002–03 toRs.5,832 Crore in 2003–04. Costof raw materials as a percentage oftotal sales increased from 68.0 percent in 2002–03 to 69.1 percentin 2003–04, owing to a change insales mix and higher steel prices(during the latter part of the fiscalyear).However, despite this, acontinuous focus on costmanagement and operatingefficiency has enabled theCompany to marginally improve itsOPBDIT margin from 16.7 percent in 2002–03 to 16.8 per centin 2003–04. Operating profit (PBTbefore other income) grew by 14.6per cent from Rs.792 Crore in2002–03 to Rs.907 Crore in2003–04. Operating profit marginimproved marginaly from 15.5 percent in 2002–03 to 15.6 percent

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 34Management Discussion & AnalysisHERO HONDAAnnual Report 2003–200434TABLE 3 KEY INDICATORS OF PROFITABILITY03–04 02–03OPBDIT/Sales 16.8% 16.7%OPBT/Sales 15.6% 15.5%PBIT/Sales 18.4% 17.3%PBT/Sales 18.4% 17.3%PAT/Sales 12.5% 11.4%ROACE 92.8% 98.9%ROAE 72.9% 75.6%TABLE 4 EVA & ROACE (POST–TAX)03–04 02–03EVA (Rs. Crores) 569 481EVA/%of cap employed) 49.3% 53.8%ROACE(post tax) 63.2% 65.1%Note: Details of the above calculations have been given in theEVA Statement.in 2003–04. Profit after tax (PAT)went up by 25.4 per cent fromRs.581 Crore in 2002–03 toRs.728 Crore in 2003–04. OtherIncome rose from Rs.92.9 Crore in2002–03 to Rs.165.0 Crore in2003–04. Return on averagecapital employed (ROACE) of theCompany was 92.8 percent in2003–04, while return on averageequity (ROAE) was 72.9 per centin 2003–04.Table–3 shows that the keyindicators of profitability improvedduring the year under review.Moreover, both fixed asset andcurrent asset turnover of theCompany improved during thefinancial year 2003–04. Net fixedassets turnover (sales/average netfixed assets) increased from 10.1in 2002–03 to 10.5 in 2003–04;while current assets turnover(sales/average current assets)increased from 10.2 to 11.8.ECONOMIC VALUE ADDED (EVA)EVA, a measure of corporate valuecreation, indicates whether themanagement of a Companygenerates returns that cover theweighted average cost of capital.By explicitly including the cost ofequity, EVA recognizes that capitalis scarce and investors, who claimthe residual share of a firm'searnings, need to be compensatedadequately for assuming the risk ofinvesting. As Table 4 shows, theEVA has increased from Rs.481Crore in 2002–03 to Rs.569 Crorein 2003–04.DEBT STRUCTUREHero Honda continues to be adebt free company. The unsecuredloan of Rs.175 Crore from thestate government of Haryana onaccount of sales tax deferment, isinterest free, and has no holdingcosts. Net interest payment by theCompany has been negativeduring the last three years.DIVIDEND POLICYMaximising shareholders valuenecessitates that the capitalemployed by a company is usedefficiently and earns a return morethan its cost. Keeping this in mind,your Company has anunambiguous dividend policy –funds in excess of what is neededfor capital investments and relatedstrategic expenses will bedistributed to the shareholders.This is the philosophy that has ledto high dividend payouts for thelast several years. The Companypaid a total dividend of 900 percent in 2002–03 and the Boardhas recommended a TotalDividend of 1000 per cent in2003–04, including a "SpecialInterim Dividend" of 500 per cent– already paid. It may be pertinentto note that the % dividend has

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 3520YEARSIt is tough to break into top ranks of oursurvey of corporate India. ...Maintainingthe third place is Hero Honda Motors,India’s largest maker of Motorcycles.FAR EASTERN ECONIOMIC REVIEWDECEMBER 25, 200335TABLE 5 WORKING CAPITAL MANAGEMENT & LIQUIDITY RATIOS03–04 02–03Inventory Period 14.4 16.1Operating Cycle 19.2 23.2Cash Cycle –28.3 –16.3Current Ratio 0.51 0.70Acid Test Ratio 0.32 0.40Note: The average of inventory, receivables and payables have beentaken for the above calculations of inventory period,operating and cash cycle.always exceeded the previousyear’s % dividend, for any givenyear since 1991.WORKING CAPITAL MANAGEMENTHero Honda has aimed atcontinuous improvement in itsworking capital management. AsTable 5 shows, inventory periodfor the Company has decreasedfrom 16.1 days in 2002–03 to14.4 days in 2003–04. TheCompany initiated a newreceivables policy during theyear, which has helped inbringing down the level ofreceivables. Receivables havedecreased from 7.2 days in2002–03 to 4.8 days in2003–04. Operating cycle of theCompany has decreased from23.2 days in 2002–03 to 19.2days in 2003–04, while Cashcycle has decreased from(–)16.3 days in 2002–03 to(–)28.3 days in 2003–04. Thus,Hero Honda continues to beone of the most efficiententerprises in terms of workingcapital management.CASH FLOWSEfficient working capitalmanagement, coupled withprofitable growth has translatedinto healthy net cash flows fromoperations for the Company.Chart E plots the trend in netcash flow from operations overthe last 5 years.INTERNAL CONTROL & ADEQUACYHero Honda has a proper andadequate system of internal controlto ensure that all assets aresafeguarded and protected againstloss from unauthorized use ordisposition and those transactionsare authorized, recorded andreported correctly.RISKS AND CONCERNSAs the market leader, a possibleslowdown in the two–wheeler, andmotorcycle market constitutes arisk factor for Hero Honda.Growing competition in theindustry, both in terms of newmodels, and price undercutting,too, is a matter of concern, as bothsales realizations and operatingmargins may come underpressure. At the higher end of themarket, imports could constitute athreat, if import duties fall down inthe future. Rising steel prices andother input costs pose a threat tomargins.OUTLOOKThe medium term (three years)outlook for the two–wheelerindustry is positive but volatile. Weanticipate double–digit growth inthe two wheeler and motorcyclemarkets over the next three years.Of course, we believe that GDPand per capita incomes grow at

ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 36Management Discussion and AnalysisHERO HONDAAnnual Report 2003–200436ROBUST AGRICULTURALGROWTH SUPPORTING RURALCONSUMPTION, PROSPECT OFGOOD MONSOON IN THECURRENT YEAR, UPAGOVERNMENTS' PROGRAMMETO PROSPER RURAL AREASAND INFRASTRUCTURE,FAVOURABLE DEMOGRAPHICTRENDS ARE THE FACTORSTHAT ARE MUTUALLYREINFORCING AND WILLINFLUENCE A HANDSOMEGROWTH IN TWO–WHEELERS.THERE WILL BE EXPANSION INTHE CONSUMER CREDIT BYBANKS AND FINANCIALINSTITUTIONSover 7% and 5% respectively. Theestimated average percapitaincome level ranging between550–700 US$ during FY2004–FY2006 is conducive toadoption of two wheelers aspersonal transport mode byhouseholds. Once it reaches US$1000+, then the preference couldbegin to shift towards cars. Lastyear's robust agricultural growthsupporting rural consumption,prospect of good monsoon in thecurrent year, UPA Governments'programme to prosper rural areasand infrastructure, favourabledemographic trends are the factorsthat are mutually reinforcing andwill influence a handsome growthin two–wheelers. There will beexpansion in the consumer creditby banks and financial institutionsbut interest rates may haveupward pressure depending oninflation, which is currently ataround 6%.wheelers is limited. As the marketleader, Hero Honda tooendeavours to achieve adouble–digit growth in sales.CAUTIONARY STATEMENTStatements in this managementdiscussion and analysis describingthe Company's objectives,projections, estimates andexpectations may be 'forwardlooking statements' within themeaning of applicable laws andregulations. Actual results mightdiffer substantially or materiallyfrom those expressed or implied.Important developments that couldaffect the Company's operationsinclude a both, significant changesin political and economicenvironment in India or keymarkets abroad, tax laws, litigation,labour relations and interest costs.We expect the motorcycle marketto grow by about 12–15 per centduring 2004–05. While this is lessthan the growth experienced bythe industry in the last few years, itis important to remember that thevolumes in the industry haveincreased significantly. At present,motorcycles account for over 77per cent of the two–wheelermarket and the scope to growfurther in terms of its share in two

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 3720YEARS37FINANCIAL HIGHLIGHTSIn Rs. Crore1999–00 2000–01 2001–02 2002–03 2003–04Sales (Nos.) 761623 1029510 1425302 1677537 2070147Growth in sales (nos.) – % 43.6 35.2 38.4 17.7 23.4Total income 2269 3191 4539 5195 5997Growth in Total income – % 50.7 40.7 42.3 14.4 15.5Profit before tax 285 377 694 885 1072Profit after tax 192 247 463 581 728Share capital 39.94 39.94 39.94 39.94 39.94Reserves and Surplus 408 589 646 821 1099Total debt 51 66 116 134 175Net fixed assets 374 454 491 517 589Total assets 499 696 802 995 1314Market capitalisation 3874 2816 6670 3758 9797EVA 119 155 374 481 569KEY RATIOS1999–00 2000–01 2001–02 2002–03 2003–04Long term debt/Equity 0.04 0.0 0.0 0.0 0OPBDIT*/Net Sales 13.5 13.2 15.0 16.7 16.8OPBT**/Net Sales–% 11.8 11.7 13.9 15.5 15.6Profit after tax/Tot. income–% 8.5 7.7 10.2 11.2 12.1Return on avg. equity–% 52.2 46.9 72.1 75.6 72.9Return on avg. capital employed–% 66.1 64.9 94.5 98.9 92.8EVA/Capital employed–% 27.6 26.6 51.0 53.8 49.3Dividend per share (Rs.)*** 2.0 3.0 17.0 18.0 20.0Dividend Payout–% 23.1 26.7 75.5 69.8 61.9Earnings per share (Rs.)*** 9.6 12.4 23.2 29.1 36.5Market value/Book value 8.8 4.8 10.0 4.4 8.6Notes:*OPBDIT: Operating Profit before Depreciation, Interest and Tax**OPBT: PBT before Other Income***DPS & EPS: Figures for ‘99-’00 adjusted for shares split in the ratio of 5:1 in March ‘01

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 38HERO HONDAAnnual Report 2003–200438ECONOMIC VALUE ADDEDSTATEMENTWHAT IS EVA?Economic Value Added (EVA ) measures the difference between the return on aCompany's capital and the cost of that capital. In business, the revenue earnedfrom customers is distributed amongst various stakeholders – suppliers for theirgoods and services provided, creditors for their capital lent and employees fortheir services rendered. Depreciation is charged to the revenue account since itsignifies the use of assets, whereas taxes are paid to the government. Theresidual is accounting profit, which belongs to the shareholders. However, theequity capital provided by the shareholders also carries a cost since there is arisk involved in putting money into a business. Thus value is created only whena business earns returns over the cost of all capital, i.e. including the cost of riskcapital. This is precisely what EVA attempts to measure. A positive EVA indicatesthat value has been created for shareholders, whereas a negative EVA signifiesvalue destruction.HOW IS EVA CALCULATED ?EVA = Net Operating Profit after Taxes ( NOPAT) – Cost of Capital Employed (COCE)NOPAT = Profit after taxes but before interest cost. It signifies returns available to thelenders and shareholdersCOCE = Weighted Average Cost of Capital (WACC) (*) Average Capital Employed whereWACC = Post tax cost of debt capital plus cost of equity capitalWeights have been taken at market value for equity capital and at book value forother capital. Cost of debt capital has been taken at actual basis , whereas the costof equity capital has been calculated in the following manner:Cost of equity capital = Cost of risk free capital plus Beta*(Market risk Premium)where Beta measures the sensitivity of the return on a security to the return on a marketportfolio.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 3920YEARS39EVA TRENDAll figures in Rs. Crores99-00 00-01 01-02 02-03 03-04Avg Cap Employed 432 585 734 893 1154Avg Debt/Avg Capital (%) 1.7 1.7 1.9 2.3 2.2Avg Equity/Avg Capital (%) 98.3 98.3 98.1 97.7 97.8Cost of Debt (% post-tax ) 4.5 2.6 1.1 0.9 0.7COST OF EQUITYBeta 0.69 0.58 0.51 0.53 0.90Cost of Risk Free Debt (%) 10.80 10.33 7.38 6.24 5.13Market Premium (%) 10.0 10.0 10.0 10.0 10.0Cost Of Equity (%) 17.7 16.1 12.5 11.5 14.2EVAProfit after Tax 192 247 463 581 728Add: Interest*(1-tax rate) 3 2 1 1 1NOPAT=PAT + Interest*(1-t) 195 248 464 582 729Cost of Capital 76 93 90 101 160EVA 119 155 374 481 569Return on Capital Employed (%) 45.1 42.5 63.2 65.1 63.2Weighted Average Cost of Capital (%) 17.5 15.9 12.3 11.3 13.9EVA/Capital employed (%) 27.6 26.6 51.0 53.8 49.3ENTERPRISE VALUEMarket Capitalisation 3874 2816 6670 3758 9797Add: Debt 51 67 116 134 175Less: Financial Assets 177 333 835 1217 1708EV (Enterprise Value) 3748 2550 5951 2675 8263EV/Yr. End Capital Employed (Times) 7.6 3.8 7.5 2.7 6.3

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 40HERO HONDAAnnual Report 2003–200440DIRECTORS’ REPORTYOUR DIRECTORS are pleased to present their Report together with theAudited Statement of Accounts for the financial year ended March 31,2004.FINANCIAL RESULTSRs. in CroreFor the yearFor the yearended March 31, ended March 31,2004 2003Sales and other Income 5, 997.47 5,194.58Profit before depreciation and finance charges 1, 144.44 946.43Less: Finance charges (1.35) (1.02)Depreciation 73.33 63.39Profit before tax 1,072.46 884.56Less: Provision for tax—Current 331.07 298.19—Deferred 13.07 5.61Profit after tax 728.32 580.76Add: Balance of profit brought forward 335.75 220.48Balance available for appropriation 1,064.07 801.24AppropriationsDividend—Interim 199.69 ——Proposed Final 199.69 359.44Tax on Dividend 51.16 46.05Transfer to General Reserve 75.00 60.00Balance carried to Balance Sheet 538.53 335.75Dividend % 1000 900Basic and Diluted EPS (Rs.) 36.47 29.08

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 4120YEARS41BUSINESS PERFORMANCEThe motorcycle market during2003-04 breached the 4 millionmark even though the competitionintensified both in terms ofproduct launch as also the pricing.The rate of growth of motorcycleshas slowed from 30 per cent in2002-03 to 14 per cent in thecurrent year. The market share ofyour Company in this moderategrowth motorcycle market hasrisen to 48% and as a result itposted impressive financial results.Total income of the Company grewby 15 per cent from Rs. 5,194.58Crores in 2002-03 to Rs. 5,997.47Crores in 2003-04. Pre-tax profit(PBT) increased by 21 per centfrom Rs. 884.56 Crores in 2002-03 to Rs.1,072.46 Crores in 2003-04 and post-tax profit (PAT) grewby 25 percent from Rs.580.76Crores in 2002-03 to Rs.728.32Crores in 2003-04.The Company’s motorcycle salesgrew by a healthy 23 per centfrom 1.68 million motorcycles in2002-03 to 2.07 millionmotorcycles in 2003-04. Duringthe year, over a million units ofSplendor were sold and itcontinues to be the largest sellingmotorcycle model in the world forthe fourth year in a row. YourCompany launched five newmodels targeting the basic/entrysegment as well as the premiumsegment of the market, namely,CD Dawn; Karizma; Splendor+;Passion plus and Ambition 135.Good sales growth wasaccompanied by improvement incost rationalization, better workingcapital management, efficiency inmanufacturing and higherproductivity.We have reasons to be satisfiedwith the performance of theCompany. For three years in a row,Hero Honda continues to be theworld’s single largest two-wheelerCompany. It also continues to bethe leader in the domestic twowheelermarket. The businessperformance of the Company hasbeen discussed in detail in thechapter on managementdiscussion & analysis.DIVIDENDAt Hero Honda, it is our strongbelief that the profits earnedshould be shared with allstakeholders and also be utilizedin creating “shareholders value”.Further, the Company has also seta benchmark with respect todividend payments and believesthat surplus funds over and aboverequirements for capitalinvestments should be distributedto shareholders. The year underreview will go down in the IndianCorporate history as the highestdividend paid by anymanufacturing Company in a yearamounting to a Dividend of 1000%consisting of Special InterimDividend of 500% (Rs.10) alreadypaid. A Final Dividend of 500%(Rs.10) per equity share of Rs.2each aggregating to Rs. 225.27Crores (inclusive of corporatedividend tax of Rs. 25.58 Crores)

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 42Directors’ ReportHERO HONDAAnnual Report 2003–200442has been recommended for yourapproval for the financial yearended March 31, 2004.MATERIAL CHANGES AND COMMITMENTSYour Directors wish to inform withgreat pleasure that the Companyhas renewed its License andTechnical Assistance (LTA)Agreement with its Joint VenturePartner Honda Motor Co., Ltd.,Japan on June 2, 2004 for afurther period of ten years witheffect from June 21, 2004. Apartfrom this, there were no materialchanges and commitmentsaffecting the financial position ofthe Company that have occurredbetween the end of the financialyear of the Company and the dateof signing of this report.BOARD OF DIRECTORSMr. Koji Nakazono was appointedas the Director of the Company inthe casual vacancy caused by theresignation of Mr. YukihiroAoshima, with effect from April 1,2004.The Directors place on record theirgratitude for the services renderedand guidance received from Mr.Aoshima during his tenure asmember of the Board.The Directors heartily welcome Mr.Nakazono to the Board and wishhim success for a fruitfulassociation in the future.Mr. Satoshi Toshida, Mr. SatyanandMunjal, Mr. Om Prakash Gupta,Mr. Mahendra Pal Wadhawan,Directors of the Company, retire byrotation at the ensuing AnnualGeneral Meeting. Mr. SatoshiToshida and Mr. Satyanand Munjalbeing eligible have offeredthemselves for re-appointment.Your Directors recommend theirre-appointment at the ensuingAnnual General Meeting.However Mr. O.P. Gupta and Mr.M.P. Wadhawan though eligible forre-appointment, have requested tobe relieved from this responsibility.Both of them have beenassociated with the Company sinceinception. We take this opportunityto record our deep appreciation forthe immense contribution made bythem, especially in the formativeyears. Their knowledge and richexperience was very useful inlaying strong foundation for theCompany.We wish them good health andhappiness.DIRECTORS’ RESPONSIBILITY STATEMENTTo the best of their knowledge andbelief and according to theinformation and explanationsobtained by them, your Directors

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 4320YEARS43make the following statement interms of Section 217(2AA) of theCompanies Act, 1956:1. that in the preparation of theannual accounts for the year endedMarch 31, 2004, the applicableaccounting standards have beenfollowed;2. that appropriate accountingpolicies have been selected andapplied consistently andjudgements and estimates that arereasonable and prudent have beenmade so as to give a true and fairview of the state of affairs as atMarch 31, 2004 and of the profitof the Company for the financialyear ended March 31, 2004;3. that proper and sufficient care hasbeen taken for the maintenance ofadequate accounting records inaccordance with the provisions ofthe Companies Act, 1956 forsafeguarding the assets of theCompany, and for preventing anddetecting fraud and otherirregularities;4. that the annual accounts for theyear ended March 31, 2004 havebeen prepared on a going concernbasis.MANAGEMENT DISCUSSION ANDANALYSIS REPORTA detailed chapter on,‘Management Discussion andAnalysis’, pursuant to Clause 49 ofthe Listing Agreement is given inthe Annual Report.CORPORATE GOVERNANCEHero Honda believes that theessence of Corporate Governancelies in the phrase ‘Your Company’.It is ‘Your’ Company because itbelongs to you – the shareholders.The Chairman and Directors are‘Your’ fiduciaries and trustees.Their objective is to take thebusiness forward in such a waythat it maximises ‘Your’ long-termvalue. Your Company is committedto benchmark itself with globalstandards in all areas includingappropriate standards for GoodCorporate Governance. Towardsthis end, an effective ‘CorporateGovernance System’ has been putin place in the Company, whichalso ensures that the provisions ofClause 49 of the Listing Agreementare duly complied with. A reporton Corporate Governance alongwith the Auditors’ Certificate on itscompliance is annexed hereto asAnnexure — I.INTERNAL CONTROL SYSTEMSHero Honda has a proper andadequate system of internalcontrols to ensure that all assetsare safeguarded and protectedagainst loss from unauthorised useor disposition and that thetransactions are authorised,recorded and reported correctly.An extensive programme ofinternal audit and managementreviews supplement the internalcontrol. Properly documentedpolicies, guidelines andprocedures are laid down for thispurpose. The internal controlsystem has been designed toensure that the financial and otherrecords are reliable for preparingfinancial and other statements andfor maintaining accountability ofassets.The Company has an AuditCommittee, comprising threeIndependent, Non-Executive andprofessionally qualified Directors,which interacts with the StatutoryAuditors, Internal Auditors, CostAuditors and the Auditee indealing with matters within itsterms of reference. It also, dealswith accounting matters, financialreporting and internal controls.The Committee held six meetingduring the year 2003-04 in thisregard.AWARDS AND RECOGNITIONDuring the year under review, yourCompany was the winner of‘Review 200 – 3rd Rank’ amongstthe top 10 Indian Companies - bythe Far Eastern Economic Review.The Company also won the ‘BestValue Creator among largeCompanies for 2003’ award fromthe ‘Outlook Money’ magazine. Inaddition, the ‘All IndiaManagement Association’conferred the “Lifetime

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 44Directors’ ReportHERO HONDAAnnual Report 2003–200444Achievement Award forManagement (2003)” on yourCompany’s Chairman Mr.Brijmohan Lall Munjal.RATINGSThe rating agency CRISIL hasreaffirmed their rating granted tovarious programme / instrumentsof the Company. The ‘AAA’ (‘tripleA’) rating to Non-ConvertibleDebenture programme, ‘P1+’ (‘Pone plus’) rating for the Company’sCommercial Paper programme, aswell as the ‘FAAA’ (‘F-Triple A’)rating for its Fixed Depositprogramme. The ratings indicatethat the degree of safety withregard to timely payment ofinterest and principal on theinstruments is very strong.Further ICRA has also granted‘LAAA’ (‘L triple A’) rating to Non-Convertible Debenture programme.FIXED DEPOSITSDuring the year under review, theCompany has not accepted anydeposit under Section 58A andSection 58AA of the CompaniesAct, 1956 read with Companies(Acceptance of Deposits) Rules,1975.AUDITORSM/s. A. F. Ferguson & Co.,Chartered Accountants, New Delhi,Auditors of the Company will retireat the conclusion of the ensuingAnnual General Meeting and beingeligible, offer themselves for reappointment.The Company hasreceived a certificate from theauditors to the effect that theirreappointment, if made, would bein accordance with Section224(1B) of the Companies Act,1956. The Board recommendstheir reappointment.AUDITORS’ REPORTAs regards the Auditors’ Report,the respective notes to theaccounts are self explanatory andtherefore, do not call for anycomments.COST AUDITORSThe Board has re-appointed M/s.Ramanathan Iyer & Co., CostAccountants, New Delhi, as theCost Auditors of the Companyunder Section 233B of theCompanies Act, 1956 for thefinancial year 2004-05 andnecessary approval from theGovernment regarding the saidappointment has been received bythe Company. The Cost Auditors'Report for 2003-04 will beforwarded to the CentralGovernment in pursuance of theprovisions of the Companies Act,1956.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 4520YEARS45CONSERVATION OF ENERGY, TECHNOLOGYABSORPTION, FOREIGN EXCHANGE EARNINGSAND OUTGOInformation required under Section217(1)(e) of the Companies Act,1956, read with Companies(Disclosure of Particulars in theReport of the Board of Directors)Rules, 1988 is given as perAnnexure II and forms an integralpart of this Report.LISTINGThe shares of your Company arepresently listed on The StockExchange, Mumbai (BSE); TheNational Stock Exchange of IndiaLtd. (NSE) and the Calcutta StockExchange Association Ltd.(delisting application pending).Given the abysmally low tradingvolumes on all other stockexchanges, barring the BSE andNSE, the Company proposed todelist its shares from the stockexchanges at Delhi, Calcutta,Ahmedabad and Ludhiana andaccordingly necessary approvalwas accorded by the shareholdersin their 20th Annual GeneralMeeting held on August 1, 2003.During the year, The Delhi StockExchange Association Ltd. (DSE)and The Stock Exchange,Ahmedabad (ASE) approveddelisting of securities w.e.f.December 10, 2003 and March18, 2004 respectively. Further,delisting approval from TheLudhiana Stock ExchangeAssociation Limited (LSE) has alsobeen received. The approval fromThe Calcutta Stock ExchangeAssociation Limited (CSE) is inprocess and is expected to bereceived shortly.ENVIRONMENT AND RESOURCE MANAGEMENTHero Honda is an ISO:14001:1996 Company since 1999,and is committed to maintain highenvironmental standards. Its waterand effluent treatment plants areone of the best in India. TheCompany also has an in-houselaboratory for testing watereffluents for ensuring that allregulatory requirements arecomplied with. The treated waterfrom these plants is mostly usedfor manufacturing processes andhorticulture. The Dharuhera planthas a hazardous waste clearancesite to dump such wastes so thatnothing is discharged outside thefactory premises.A) ENVIRONMENTAL MANAGEMENTThe Company has been certifiedfor its environmental managementsystems as per ISO: 14001:1996.The integration of environmentfriendly measures and cleanerproduction practices in thebusiness processes has resulted inbetter efficiency of operations andalso improved the environmentalperformance.B) ENVIRONMENTAL COMPLIANCEThe applicable Environmentalregulations are complied with. TheCompany has defined its ownenvironmental standards, whichare more stringent than theprescribed norms. A state-of-theart Environmental Laboratory hasbeen set up to monitor pollutioncontrol strictly as per standards.C) POLLUTION PREVENTION ANDRESOURCE MANAGEMENTThe Company is committed toconserve resources particularly thepollution causing resources i.e.oils, water, energy, paints andchemicals. A number ofenvironmental managementprograms have been implementedand new practices introduced toensure the optimal consumption ofthese resources. The consumptionof such resources haveconsistently been reduced over thepast years. The carbon emissionon account of motorcycleproduction is calculated andmonitored vigorously to ensurebetter energy performance.We have introduced a state-of-theart technology for setting up ofAluminium Machining Shop, whichhas resulted in low energyconsumption and betterenvironment controls.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 46Directors’ ReportHERO HONDAAnnual Report 2003–200446D) POLLUTION CONTROL MANAGEMENTThe Company is a zero effluentdischarge Company; the inevitableeffluent generated from industrialactivities is treated at the facilitiesand treated effluent is recycled inthe plant. In order to control thenoise pollution, D.G. House hasalso been treated acoustically.E) DISPOSAL OF HAZARDOUS WASTEAt our Dharuhera Plant, anengineered landfill facility hasbeen constructed & incineratorsinstalled for disposal of wasteswhich have been classified ashazardous.F) OTHER INITIATIVESSuppliers and Dealers are integralpart of our supply chain anddistribution system; therefore weconstantly influence them toincorporate environment protectionguidelines in their activities.Your Company greatly valuesconservation of natural resources.We have implemented rain waterharvesting programme at both theplants. The scheme has 10injection wells coveringapproximately 31540 sq. m. ofrooftop area. A leadingenvironmental NGO, Centre forScience and Environment (CSE),New Delhi, has selected ourrainwater-harvesting project at theDharuhera plant as one of themodel project for enhancing publicawareness.The Company is actively involvedin the development of a commonintegrated facility for Disposal ofHazardous Waste in the state ofHaryana.The Company’s Managing Directorhas been the Chairman of NationalEnvironment Committee ofConfederation of Indian Industry(CII) for the year 2003-04 andspearheaded the environmentalinitiatives at the national level.PERSONNELAs on March 31, 2004, the totalnumber of employees on therecords of the Company was4,017. Hero Honda conductsseveral training programmes toupgrade the skills of its workforce.These programmes have a strongpractical approach, and theobjective is to derive tangibleimprovements. Your Directors placeon record their appreciation for thesignificant contribution made by allthe employees, who through theircompetence, hard work, solidarity,co-operation and support, haveenabled the Company to cross newmilestones on a continual basis.Industrial relations, as always, haveremained cordial throughout theyear.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 4720YEARS47PARTICULARS OF EMPLOYEESA Statement showing Particulars ofEmployees as required underSection 217(2A) of the CompaniesAct, 1956 read with theCompanies (Particulars ofEmployees) Rules, 1975 isannexed as Annexure III andforms an integral part of the report.ACKNOWLEDGEMENTSIt is our strong belief that caringfor our business constituents hasand will go a long way in theprogress of the Company. YourDirectors acknowledge withsincere gratitude the co-operationand assistance extended by theCentral Government, StateGovernment(s), FinancialInstitution(s), Bank(s), Customers,Dealers, Vendors and AncillaryUndertakings. The Directors alsoplace on record their appreciationfor the valuable assistance andguidance extended to theCompany by Hero Cycles Ltd. andHonda Motor Co., Ltd., Japan andfor the encouragement andassurance, which our collaboratorhas given for the growth anddevelopment of the Company. TheBoard, also, takes this opportunityto express its deep gratitude forthe continued co-operation andsupport received from its valuedshareholders.For and on behalf of the BoardBrijmohan Lall MunjalCHAIRMAN HERO HONDA MOTORS LTD.New DelhiJuly 14, 2004

ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 48HERO HONDAAnnual Report 2003–200448CORPORATE GOVERNANCEREPORTANNEXURE I TO DIRECTORS’ REPORTINTRODUCTIONHero Honda’s philosophy ofCorporate Governance stems fromits belief that the Company’sbusiness strategy and plans shouldbe consistent with the welfare of allits stakeholders, includingshareholders. Good CorporateGovernance practices enable acompany to attract financial andhuman capital and leverage theseresources to maximize long-termshareholder value, while preservingthe interests of multiplestakeholders, including society atlarge.Corporate Governance rests uponthe four pillars of: transparency, fulldisclosure, independent monitoring andfairness to all, especially to minorityshareholders. Hero Honda hasalways strived to promote goodgovernance practices, which ensurethat:• A competent management team is atthe helm of affairs;• The Board is strong with an optimumcombination of Executive and Non-Executive (including Independent)Directors, who represent the interestof all stakeholders;• The Board effectively monitors themanagement’s progress, takes allkey corporate decisions and iseffectively in control of theCompany’s affairs;• The Board is concerned about theCompany’s shareholders; and• The Management and Employeeshave a stable environment.We believe that the essence ofCorporate Governance lies in thephrase “Your Company”. It is “Your”Company because it belongs to you– the shareholders. The Chairmanand Directors are “Your” fiduciariesand trustees. Their objective is totake the business forward tomaximise “Your” long-term value.The Securities and Exchange Boardof India (SEBI) has specified certainmandatory governance practices,which are incorporated in Clause 49of the Listing Agreement of stock

ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 4920YEARS49TABLE 1 DETAILS ABOUT COMPANY’S BOARD OF DIRECTORS / ATTENDANCE RECORDDirector Number of Attendance Number of Number of Number ofBoard at Last AGM Committee Committee outsidemeetings memberships Chairmanships Directorshipsheld # held held(excluding Private Companies, ForeignCompanies, Section 25 Companies)Held AttendedExecutive DirectorsMr. Brijmohan Lall Munjal 6 6 Yes None None 7Mr. Pawan Munjal 6 6 Yes None None 1Mr. Akio Kazusa 6 4 Yes None None 1Mr. Shinichi Nakayama* 6 4 Yes None None 1Mr. Kazumi Yanagida * 6 1 Yes None None 1Non-Executive DirectorsMr. Satyanand Munjal 6 None No 1 None 4Mr. Om Prakash Munjal 6 4 No None None 9Non-Executive and Independent DirectorsMr. M.P.Wadhawan 6 6 Yes 7 3 3Mr. O.P.Gupta 6 6 Yes 8 4 5Mr. S.P.Virmani 6 6 Yes 2 1 2Mr. N.N.Vohra 6 5 No 1 None NoneMr. Pradeep Dinodia 6 5 Yes 8 3 7Gen. (Retd.) V.P.Malik 6 4 Yes 1 None 1Mr. Satoshi Toshida 6 None No None None NoneMr. Yukihiro Aoshima ** 6 None No None None 1Notes:# Membership includes Chairmanship also.* Mr. Shinichi Nakayama has been appointed as a Director on the Board with effect fromMay 9, 2003, in the casual vacancy caused due to the resignation of Mr. Kazumi Yanagida with effect from April 24, 2003;** Mr. Yukihiro Aoshima resigned from the Board on April 1, 2004 and Mr. Koji Nakazono has been appointed as a Director on the Board with effect from April 1, 2004 inthe casual vacancy caused due to resignation of Mr. Yukihiro Aoshima.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 50Corporate Governance ReportHERO HONDAAnnual Report 2003–200450exchanges. Hero Honda iscommitted to benchmark itselfwith the best standards ofCorporate Governance, not only inform but also in spirit. Thissection, along with the section on‘Management Discussion andAnalysis’ and ‘GeneralShareholder’s Information’constitute Hero Honda’scompliance with Clause 49.BOARD OF DIRECTORSCOMPOSITION OF THE BOARDAs on March 31, 2004, theCompany’s Board of Directorsconsists of fourteen Directors.Four Directors, including theChairman, are Executive, two areNon-Executive and eight are Non-Executive and Independent. Asmore than 50 per cent of theBoard consists of IndependentDirectors, the composition of theBoard is in consonance withClause 49. Details of thecomposition of the Board are givenin Table 1.Four Directors— Mr. BrijmohanLall Munjal (Executive Chairman inthe whole-time employment of theCompany), Mr. Pawan Munjal(Managing Director), Mr.Satyanand Munjal (Non-ExecutiveDirector) and Mr. Om PrakashMunjal (Non-Executive Director)—belong to the promoter family ofthe Hero Group, which owns 26per cent equity in the Company.Two Directors— Mr. Akio Kazusa(Executive Director) andMr. Shinichi Nakayama (ExecutiveDirector)— are nominees of HondaMotor Co., Ltd, Japan, which too,owns 26 per cent equity in theCompany. Subsequent to the yearend, Mr. Yukihiro Aoshima hasresigned and in his place Mr. KojiNakazono has been appointed onthe Board, with effect from April 1,2004.Apart from formulating businessstrategies, The Board regularlyreviews the performance of theCompany and ensures thattargeted objectives are met on aconsistent basis.BOARD MEETINGSDuring 2003-04, the Board ofDirectors met 6 times on April 10,2003; June 4, 2003; July 11,2003; September 30, 2003;October 14, 2003 and January 14,2004 respectively.The longest gap between any twoBoard Meetings did not exceed theperiod of 3 months.DIRECTORS’ATTENDANCE RECORD ANDDIRECTORSHIPSDetails are given in Table 1As per Clause 49 of the ListingAgreement entered into with theStock Exchange(s), anIndependent Director means aDirector who apart from receivingdirector’s remuneration, does nothave any other material pecuniaryrelationship or transactions withthe Company, its promoters, itsmanagement or its subsidiaries,which in the judgement of theBoard may affect theindependence of judgement of thedirector.None of the Directors on the Boardholds the office of Director in morethan 15 companies, nor are theymembers in Committees of theBoard in more than 10Committees or Chairman of morethan 5 Committees. There are nopecuniary relationships ortransactions between the Non-Executive Directors and theCompany, except for the sittingfees drawn by the Non-Executive /Non-Executive and IndependentDirectors for attending themeetings of the Board and itsCommittee(s).INFORMATION SUPPLIED TO THE BOARDBoard members are given agendapapers along with necessarydocuments and information inadvance of each meeting of theBoard and Committee(s). Inaddition to regular business items,the following are regularly placed

ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 5120YEARS51before the Board to the extentapplicable :• Annual Operating plans andbudgets, Capital Budgets, updates;• Purchase and disposal of majorfixed assets;• Quarterly and half yearly results ofthe Company;• Minutes of the Audit Committee andother Committee meetings;• Information on recruitment andremuneration of senior officers justbelow the Board level includingappointment or removal of CFO andCompany Secretary;• Any material defaults in financialobligations to and by the Companyfor substantial non-payments;• Fatal or serious accidents,dangerous occurrences, anymaterial effluent or pollutionproblems;• Transactions that involvesubstantial payment towardsgoodwill, brand equity orintellectual property;• Materially important show cause,demand, prosecution and penaltynotices;• Details of Quarterly foreignexchange exposures and stepstaken by the management to limitthe risks of adverse exchange ratemovement;• Sale of material nature, ofinvestments and assets, which arenot in the normal course ofbusiness;• Details of Joint Ventures andAgreements or variations thereof;• Quarterly Statutory ComplianceReport;• Directors’ Overseas Travellingexpenses;• Non-compliance of any regulatory,statutory nature or listingrequirements and shareholder’sservice such as non-payment ofdividend, delay in share transferetc.;• Investments strategy/plan;• Any issue which involves possiblepublic or product liability claims ofsubstantial nature, including anyjudgement or order which mayhave passed strictures on theconduct of the Company or takenan adverse view regarding anotherenterprise that can have negativeimplications on the Company; and• Significant labour problems andtheir proposed solutions. Also, anysignificant development in HumanResources/Industrial Relations frontlike signing of Wage Agreement,implementation of VoluntaryRetirement Schemes etc.BOARD LEVEL COMMITTEESAUDIT COMMITTEEThe genesis of Hero Honda’s AuditCommittee can be traced back tothe Audit Sub-Committee,constituted in 1987. Since then ithas been dealing with mattersprescribed by the Board ofDirectors on a case-by-case basis.The nomenclature, constitutionand terms of reference of theCommittee were revised onJanuary 16, 2001 and an AuditCommittee was set up as per theprovisions of the Section 292A ofthe Companies Act, 1956 andClause 49 of the Listing Agreementof the Stock Exchange(s). As onMarch 31, 2004, the Committeehad three Non-Executive &Independent Directors inaccordance with the prescribedguidelines. All the members havesound knowledge in the field offinance, accounting and law. The“terms of reference” of the AuditCommittee included the following:• Overseeing the Company’s financialreporting process and disclosure ofits financial information to ensurethat the financial statements arecorrect, sufficient and credible.• Recommending the appointmentand removal of the external auditor,fixation of audit fees and approvingpayments for any other services.• Reviewing with the managementthe annual financial statementswith primary focus on accountingpolicies and practices, compliancewith accounting standards andguidelines of stock exchange(s)etc.• Compliance with Stock Exchangeand legal requirements concerningfinancial statements.• Reviewing the adequacy of internalcontrol systems and the internalaudit function and reviewing the

ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 52Corporate Governance ReportHERO HONDAAnnual Report 2003–200452company’s financial and riskmanagement policies.the case of non-payment ofdeclared dividends) and creditors.• Reviewing the findings of anyinternal investigations by theinternal auditors into matterswhere there is suspected fraud orirregularity or a failure of internalcontrol system of a material natureand reporting the matter to theBoard.The Vice President – Finance,internal auditors, statutory auditorsand cost auditor attend themeetings of the Committee on theinvitation of the Chairman. TheCompany Secretary acts as theSecretary of the Committee.• Reviewing reports furnished by theinternal auditors, discussion withInternal Auditors on any significantfindings and ensuring suitablefollow up thereon.• Discussing with external auditorsbefore the audit commences, of thenature and scope of audit. Alsopost – audit discussion to ascertainDuring the year, six meetings ofthe Audit Committee were held onApril 10, 2003; June 25, 2003;July 11, 2003; September 30,2003; October 14, 2003 andJanuary 14, 2004 respectively indue compliance with the stipulatedprovisions. The attendance recordTABLE 2 DETAILS OF THE AUDIT COMMITTEEDirector Category No. of No. ofmeetings held meetings attendedMr. M.P Wadhawan Chairman 6 6Mr. O.P. Gupta Member 6 6Mr. Pradeep Dinodia Member 6 4Executive Directors. TheCommittee takes into considerationthe best remuneration practicesbeing followed in the industrywhile fixing appropriateremuneration packages. As onMarch 31, 2004, Mr. S.P.Virmaniis the Chairman of the Committee.The other members are Mr.N.N.Vohra and Gen. (Retd.)V.P.Malik. All the members areNon-Executive and IndependentDirectors.During 2003-04, the Committeemet twice on April 10, 2003 andJune 4, 2003. The objective of themeetings was to review the termsof appointment and remunerationof Mr. Shinichi Nakayama, theWhole-time Director of theCompany and revision in BasicSalary of Executive Directorsrespectively. All the membersattended the meetings and theattendance record of members ofthe Committee is given in Table 3.any area of concern.• Directors’ Overseas Travellingexpenses.• Review of Foreign Exchangeexposure.• Reviewing the Company’s financialand risk management policies.• To look into the reasons forsubstantial defaults in thepayments to the depositors,debentureholders, shareholders (inof members of the AuditCommittee is given in Table 2.REMUNERATION COMMITTEEThe Company had set up aRemuneration Committee onJanuary 16, 2001 to review andrecommend the payment ofannual salaries, commission;service agreements and otheremployment conditions ofREMUNERATION POLICYThe remuneration paid toExecutive Directors isrecommended by theRemuneration Committee andapproved by the Board ofDirectors, in the Board meeting,subject to the subsequent approvalby the shareholders at the GeneralMeeting and such otherauthorities, as the case may be.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 5320YEARS53TABLE 3 DETAILS OF THE REMUNERATION COMMITTEEDirector Category No. of meetings No. of meetingsAt the Board meeting, only theNon-Executive and IndependentDirectors participate in thisexercise. The remuneration is fixedconsidering various factors such asqualification, experience, expertise,prevailing remuneration in thecorporate world and the financialposition of the Company. Theremuneration structure comprisesof Basic Salary, Perquisites andallowances, Contribution toprovident fund and other funds.Besides these, a fixed commission@ 1 per cent of net profitcomputed in accordance withSection 198 of the Companies Act,HeldAttendedMr. S.P. Virmani Chairman 2 2Mr. N.N. Vohra Member 2 2Gen. (Retd.) V.P. Malik Member 2 2TABLE 4 REMUNERATION TO EXECUTIVE DIRECTORS1956 is paid as per the terms ofappointment. The Non-ExecutiveDirectors do not draw anyremuneration from the Companyexcept sitting fees of Rs. 5,000 foreach meeting of the Board, AuditCommittee, RemunerationCommittee and Shareholders’Grievance Committee attended bythem. The amount of sitting feeshas also been enhanced toRs. 15, 000 for each such meetingExecutive Directors Salary$ Commission** Total ServiceRs.) Fixed (Rs.) (Rs.) ContractsMr. Brijmohan Lall Munjal 62,24,258 11,09,00,000 11,71,24,258 5 yearsMr. Pawan Munjal 44,47,574 11,09,00,000 11,53,47,574 5 yearsMr. Akio Kazusa 27,05,006 11,09,00,000 11,36,05,006 5 yearsMr. Shinichi Nakayama * 18,64,769 9,94,00,000 10,12,64,769 5 yearsMr. Kazumi Yanagida * 4,30,142 73,00,000 77,30,142 5 years* Mr. Shinichi Nakayama was appointed as a Director on the Board with effect from May 9, 2003 in the casualvacancy caused due to the resignation of Mr. Kazumi Yanagida on April 24, 2003.$ Salary includes Basic Salary, Perquisites and Allowances, Contribution to provident and other funds.**Total Commission is calculated @ 1% of the net profit calculated in accordance with Section 198 of theCompanies Act, 1956.being attended with effect fromOctober 14, 2003 and thereafter inthe Board meeting held onJanuary 14, 2004, the amount ofincidental expenses i.e. Rs. 1,500was clubbed with the sitting feemaking the sitting fee payable toRs. 16,500 for each meeting.REMUNERATION PAID TO DIRECTORSTable 4 and 5 gives details ofremuneration paid to Directors.During 2003-04, the Company didnot advance any loans to any of itsDirectors. As of now, the Companydoes not have any Employee StockOption Plan (ESOP). Further, nonotice period and severance fee isapplicable for the abovementionedExecutive Directors.SHAREHOLDERS’ GRIEVANCE COMMITTEEThis Committee, constituted onJanuary 16, 2001, specificallylooks into redressal ofshareholders’ and investors’grievances arising out of issuesregarding share transfers,dividends, dematerialisation andrelated matters. As on March 31,2004, Mr. O.P.Gupta is theChairman of the Committee. Theother members are Mr. PradeepDinodia and Mr. M.P.Wadhawan.All the members are Non-Executive and IndependentDirectors. Mr. Kazumi Yanagidarelinquished his office with effectfrom April 24, 2003 and thereafterthe Board of Directors in theirmeeting held on September 30,2003 co-opted Mr. M.P.Wadhawanas the member of the Committee.Mr. Ilam C. Kamboj, Company

ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 54Corporate Governance ReportHERO HONDAAnnual Report 2003–200454TABLE 5 REMUNERATION TO NON-EXECUTIVE DIRECTORSNon-Executive Directors Sitting fees Commission TotalSecretary being the ComplianceOfficer is the Secretary of theCommittee.The Company has an efficientsystem of dealing with Investors’Grievances. The Chairman and theManaging Director of the Companytake personal interest in all mattersof concern of investors, as and(Rs.) (Rs.) Rs.)Mr. Om Prakash Munjal 41,500 Nil 41,500Mr. M.P. Wadhawan 1,24,500 Nil 1,24,500Mr. O.P. Gupta 1,29,500 Nil 1,29,500Mr. Pradeep Dinodia 1,09,500 Nil 1,09,500Mr. S.P. Virmani 61,500 Nil 61,500Mr. N.N. Vohra 56, 500 Nil 56,500Gen.(Retd.) V.P. Malik 41, 500 Nil 41,500No sitting fee was payable to Mr. Satyanand Munjal, Mr. Yukihiro Aoshima andMr. Satoshi Toshida, as they have not attended any of the meetings of the Board during the Financial YearTABLE 6 DETAILS OF THE SHAREHOLDERS’ GRIEVANCE COMMITTEEthree times during the year underreview. In these meetings, thestatus of shareholders’ complaints,requests etc. and also lettersreceived from different authoritieswere reviewed.During the year, three meetings ofthe Shareholders’ GrievanceCommittee were held on July 11,Director Category No. of meetings No. of meetingsHeldAttendedMr. O.P. Gupta Chairman 3 3Mr. Pradeep Dinodia Member 3 2Mr. M.P Wadhawan * Member 3 2* inducted as member with effect from September 30, 2003Table 6.Details of Shareholders’ complaintsand their status are given in thesection on “General Shareholder’sInformation”.COMMITTEE OF DIRECTORSApart from these Committees, theCompany also has a Committee ofDirectors. As on March 31, 2004,the Committee comprised of Mr.Brijmohan Lall Munjal—Chairman,Mr. Pawan Munjal—ManagingDirector, Mr. Akio Kazusa—JointManaging Director, Mr. ShinichiNakayama—Director, Mr. RaviSud—Vice President-Finance andMr. Ilam C. Kamboj—CompanySecretary.Constituted in 1985, theCommittee deals with mattersrelating to transfer, transmissionand transposition of shares, issueof new share certificates, review ofdematerialisation of shares, allmatters relating to shares and allother matters as prescribed anddelegated to the Committee by theBoard from time to time.when necessary. The CompanySecretary being the ComplianceOfficer carefully looks into eachissue and reports the same to theShareholders’ GrievanceCommittee. The Committee met2003; September 30, 2003 andJanuary 14, 2004 respectively indue compliance with the stipulatedprovisions. The attendance recordof members of the Shareholders’Grievance Committee is given inThis Committee generally meetsfour times in a month. During theyear under review, 50 meetingswere held.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 5520YEARS55DISCLOSURESRELATED PARTY TRANSACTIONSRelated Parties and transactionswith them as required underAccounting Standard 18 (AS- 18)are furnished under paragraph no.7 of the Notes to the Accountsattached with the financialstatements for the year endedMarch 31, 2004.The transactions with the relatedparties are neither materiallysignificant nor they have potentialconflict with the interests of theCompany at large.DETAILS OF NON-COMPLIANCEThere has neither been any noncomplianceof any legal provisionof applicable law, nor any penalty,stricture imposed by the stockexchanges or SEBI or any otherauthorities, on any matters relatedto capital market during the lastthree years.INSIDER TRADINGIn compliance with the recentlyamended SEBI regulation onprevention of insider trading, theCompany has instituted acomprehensive code of conductfor its management, staff andrelevant business associates. Thecode lays down guidelines, whichadvises them on procedures to befollowed and disclosures to bemade, while dealing with shares ofthe Company and cautioning themon consequences of noncompliances.SHAREHOLDERSAPPOINTMENT / RE-APPOINTMENT OFDIRECTORSMr. Satoshi Toshida, Mr.Satyanand Munjal, Mr. OmPrakash Gupta and Mr. MahendraPal Wadhawan, Directors of theCompany, retire by rotation at theensuing Annual General Meeting.Mr. Satoshi Toshida and Mr.Satyanand Munjal being eligiblehave offered themselves for reappointment.However Mr.O.P.Gupta and Mr. M.P.Wadhawanthough eligible for re-appointment,have requested to be relieved fromthis responsiblity.Mr. Koji Nakazono has beenappointed as Director in the casualvacancy caused due to theresignation of Mr. YukihiroAoshima with effect from April 1,2004.The abbreviated resume of thesaid Directors being re-appointed,is given in the Notice of theAnnual General Meeting.MEANS OF COMMUNICATIONThe Company’s half yearly results(period ended September 30,2003) and annual results (yearended March 31, 2004) havebeen published in English, Hindiand other regional languagenewspapers ( viz. The EconomicTimes, The Financial Express,Business Standard, Nav BharatTimes etc). Results for the quarterended June 30, 2003 andDecember 31, 2003 have beenpublished in English and Hindinewspapers (viz. The EconomicTimes, The Financial Express, NavBharat Times and Jansatta).Further, the Company’s quarterly,half yearly and annual results havealso been sent to the individualshareholders of the Company.Results for each quarter andannual results for the year endedMarch 31, 2004 have beendisplayed on the Company’swebsite at www.herohonda.com.The website also displays officialnews releases and distributionschedule as required by Clause 35of the Listing Agreement.Moreover, pursuant to clause 51 ofthe Listing Agreement, financialinformation like annual andquarterly financial statements,shareholding pattern etc. areavailable on the SEBI web-site,www.sebiedifar.nic.in. TheCompany Secretary being theCompliance Officer ensures thecorrectness and authenticity of theinformation filed in the said website.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:36 PM Page 56Corporate Governance ReportHERO HONDAAnnual Report 2003–200456TABLE 7 DETAILS OF EGM’S & AGM’SYear Location Date Time Special resolution passedEGM2000-01 Dharuhera Plant February 23, 2001 10:30 a.m. • Amendment in Articles of Association, Article 3 and 6(1) modified• Amendment in Object clause of Memorandum of Association• Variation in terms of appointment of Mr. Rahul MunjalAGM2002-03 Air Force August 1, 2003 10:00 a.m. • Delisting of Securities of the Company.Auditorium• Variation in terms of remuneration of Executive DirectorsNew Delhi2001-02 Air Force August 12, 2002 10:00 a.m. • Amendment in Articles of Association. New Article Nos.Auditorium 84 and 113 inserted in place of existing Article Nos. 84 and 113.New Delhi• Increase in the investment limit of F.I.I’s.• Variation in terms of appointment of Mr. Brijmohan Lall Munjal,Chairman and Managing Director.2000-01 Air Force August 10, 2001 10:30 a.m. • Amendment in Articles of Association: Article 1Auditoriumand 84 modified and Article 74A insertedNew Delhi• Re-appointment of Mr. Brijmohan Lall Munjal as Chairmanand Managing DirectorDuring the year ended March 31,2004, various presentations weremade to Analysts and InstitutionalInvestors.Further, the ManagementDiscussion and Analysis (MDA)report, throwing light on theOperations, BusinessPerformance, Financials and otherimportant aspects of theCompany’s functioning, forms apart of the Annual Report.Meetings held during the last threeyears and Special resolutionspassed there at are given in Table7. Pursuant to the provisions ofSection 192A of the CompaniesAct, 1956, there was no matterrequired to be dealt by theCompany to be passed throughpostal ballot.GENERAL BODY MEETINGSDETAILS OF EXTRA-ORDINARY GENERALMEETING (EGM) AND ANNUAL GENERALMEETING (AGM)Location, date and time of General

ND_L18fontscorrected FIN.qxd 7/26/2004 5:36 PM Page 5720YEARS57GENERAL SHAREHOLDERS’ INFORMATIONANNUAL GENERAL MEETINGDate August 17, 2004DayTuesdayTime11:00 A.M.Venue: Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110 010FINANCIAL CALENDARFinancial year April 1 to March 31FOR THE YEAR ENDED MARCH 31, 2004, RESULTS WERE ANNOUNCED ON:First quarter ended June 30, 2003 July 11, 2003Half year ended September 30, 2003 October 14, 2003Third quarter ended December 31, 2003 January 14, 2004Fourth quarter and year ended March 31, 2004 April 12, 2004FOR THE YEAR ENDED MARCH 31, 2005, RESULTS WILL BE ANNOUNCED ON: (TENTATIVE AND SUBJECT TO CHANGE)First quarter ending June 30, 2004July, 2004 (2nd week)Half year ending September 30, 2004October, 2004 (2nd week)Third quarter ending December 31, 2004January, 2005 (2nd week)Fourth quarter and year ending March 31, 2005April, 2005 (2nd week)BOOK CLOSUREThe dates of book closure are from Saturday, July 31, 2004 to Tuesday, August 3, 2004 (both days inclusive).DIVIDEND PAYMENTThe Company has declared 1000 per cent dividend for 2003-04, which includes an interim dividend of 500per cent already paid in the month of February 2004. This is one of the highest dividends by any Company ofthis proportion in India, engaged in manufacturing activity. The final dividend of 500 per cent shall be paid tothose shareholders whose names appear in the Register of members as on Tuesday, August 3, 2004.LISTING ON STOCK EXCHANGESDue to lack of significant trading volumes, the members of the Company on the proposal of the Boardapproved the delisting of its equity shares from all the regional Stock Exchanges except The Stock Exchange,Mumbai and National Stock Exchange of India Limited, Mumbai, in the previous Annual General Meeting heldon August 1, 2003.Subsequent to the approval of the members, the Company’s equity shares have been delisted by the following

ND_L18fontscorrected FIN.qxd 7/26/2004 5:36 PM Page 58Corporate Governance ReportHERO HONDAAnnual Report 2003–200458Stock Exchanges from their respective Exchanges:SL. NO. NAME OF THE STOCK EXCHANGE DATE OF DE-LISTING1. The Delhi Stock Exchange Association Limited (DSE) December 10, 20032. The Stock Exchange, Ahmedabad (ASE) March 18, 20043. The Ludhiana Stock Exchange Association Limited (LSE) March 26, 2004The Delisting approval from The Calcutta Stock Exchange Association Limited (CSE) is expected in due courseof time while the procedural formalities for the same have been complied with.As on March 31, 2004 the shares of the Company are listed on the following exchanges:SL. NO. NAME OF THE STOCK EXCHANGE1. The Stock Exchange, Mumbai, Phiroze Jeejeebhoy Towers, 25th Floor, Dalal Street, Mumbai-400 001.2. National Stock Exchange of India Limited, Exchange Plaza, Plot No. C/1,G Block, Bandra-KurlaComplex, Bandra East, Mumbai - 400 051LISTING FEESListing fees for the year 2004-05 has been paid to the stock exchanges wherein the equity shares are listed bythe first week of April 2004 i.e within the stipulated time.STOCK CODESThe Company’s stock codes at the primary exchanges are:Stock Code Reuters Code BloombergBombay Stock Exchange 500182 HROH.BO HH INNational Stock Exchange HEROHONDA HROH.NS NHH INSTOCK MARKET DATAThe Company’s market capitalisation is included in the computation of the BSE Sensex, BSE -100, BSE-200,BSE -500, S & P CNX Nifty and S&P CNX 500. Monthly high and low quotations as well as the volume ofshares traded at the National Stock Exchange of India Ltd. (NSE) and The Stock Exchange, Mumbai (BSE) isgiven in Table 1.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:36 PM Page 5920YEARS59TABLE 1 SHARE PRICE DATA FOR 2003-04 (IN RS.) (SHARE OF RS. 2 PAID UP VALUE)National Stock ExchangeThe Stock Exchange, MumbaiMonth High Low Volume High Low Volume(In Rs.) (In Rs.) (Nos.) (In Rs.) (In Rs.) (Nos.)APRIL 03 208.00 180.05 19167729 207.60 180.10 7521931MAY 03 239.50 199.25 11889093 239.00 199.60 4445566JUNE 03 257.80 216.00 9958408 256.90 216.00 3179724JULY 03 270.00 234.55 17028625 270.00 234.75 4716376AUG 03 308.00 245.00 11253185 308.00 261.50 4117783SEPT 03 310.25 260.00 9432417 310.90 266.00 3748272OCT 03 355.90 298.10 15132638 356.00 298.05 6155094NOV 03 399.95 338.00 12361151 400.00 354.90 5443769DEC 03 472.00 377.00 18276489 490.00 377.00 6748673JAN 04 499.50 424.15 25386848 500.00 425.00 9839214FEB 04 521.70 425.55 18536116 521.80 423.35 8679893MAR 04 544.40 438.00 26006595 543.70 439.35 12290683CHART A PLOTS COMPANY’S SHARE PRICE MOVEMENT VIS A VIS SENSEX

ND_L18fontscorrected FIN.qxd 7/26/2004 5:36 PM Page 60Corporate Governance ReportHERO HONDAAnnual Report 2003–200460DISTRIBUTION OF SHAREHOLDING/ SHAREHOLDING PATTERNTable 2 lists the Distribution of Shareholding by number of shares held and Shareholding Pattern inpercentage, as on March 31, 2004TABLE 2No. of shares held Folios Shares of Rs. 2 paid up(Rs. 2/- paid up) Numbers % Numbers %Upto 500 37925 72.55 5164490 2.57500-1000 10892 20.84 8328748 4.181001-5000 2832 5.42 5753246 2.885001-10000 232 0.44 1639275 0.8210001-50000 218 0.41 5205568 2.6150001 and above 177 0.34 173596173 86.94TOTAL 52276 100.00 199687500 100.00DISTRIBUTION OF SHAREHOLDING AS ON MARCH 31, 2004 (PURSUANT TO CLAUSE 35 OF THE LISTING AGREEMENT )Categories No. of shares Held (Rs. 2 paid up) Percentage of shareholdingA Promoters’ holding1. Promoters—Indian Promoters 51918710 26.00—Foreign Promoters 51918750 26.002 Persons acting in concert 5904470 2.96A Sub-total 109741930 54.96B. Non-promoters Holding3 Institutional Investorsa. Mutual Funds and UTI 11154579 5.59b. Banks, Financial Institutions, Insurance Companies(Central/ State Government Institutions/ non-governments) 5117518 2.56c. FIIs 48067923 24.07B Sub-total 64340020 32.22C Othersa. Pvt. Corporate Bodies 1970847 0.99b. Indian Public 23113670 11.57c. NRIs /OCBs 189243 0.09d. Foreign Banks 331790 0.17e. Any otherC Sub-total 25605550 12.82B+C Sub-total 89945570 45.04GRAND TOTAL 199687500 100.00

ND_L18fontscorrected FIN.qxd 7/26/2004 5:36 PM Page 6120YEARS61DEMATERIALISATION OF SHARES AND LIQUIDITYAs on March 31, 2004, 40 percent of total share capital, whichforms 83 per cent of the nonpromoters’holding, is held indematerialised form with NSDLand CDSL. During the year underreview, 2951 share certificates,involving 29,88,859 shares of Rs.2 each, were dematerialised by theshareholders. These represent1.50 percent of the total sharecapital of the Company. The jointventure partners hold 52 per centof the total share capital, which isin physical form.OUTSTANDING GDR’S/ADR’S/WARRANTS ORANY CONVERTIBLE INSTRUMENTS CONVERSIONDATE AND LIKELY IMPACT ON EQUITYNot ApplicableDETAILS OF PUBLIC FUNDING OBTAINED IN THELAST THREE YEARSThe Company has not obtainedany public funding in the last threeyears.REGISTRAR & TRANSFER AGENTSAll work related to Share Registry,both in physical form andelectronic form, is handled by theCompany’s Registrar and TransferAgents, whose details are givenbelow:MCS Limited, Sri VenkateshBhawan, W 40, Okhla IndustrialArea, Phase II, New Delhi 110 020Phones: 2638 4909-911,Fax: 2638 4907e-mail: mcsdel@vsnl.comSHARE TRANSFER SYSTEMThe Share transfers are approvedby the Committee of Directorswhich meets regularly on aweekly/fortnightly basis. The totalnumber of shares transferredduring the year 2003-04 was416734, which was completed inthe prescribed period. Sharesunder objection were returnedwithin two weeks time.The shares of the Company aretraded in the ‘compulsory dematmode’ for all investors. Regardingshares sent for transfer in physicalform, the transfer is registeredwithin a week (if in order andcomplete in all respects) and ademat option form is simultaneouslysent to the shareholder forexercising the option to receive theshares in demat form within 30days. On exercise of a valid optionby the shareholder through hisDepository Participant(DP), theshares are confirmed to therespective accounts withdepositories of National SecuritiesDepository Limited (NSDL) andCentral Depository ServicesLimited (CDSL).INVESTORS’ SERVICESThe Company has Board LevelCommittees dealing with investorTable 3 Complaints/requests/reminders received and redressed during 2003-04SL. NO. NATURE OF COMPLAINTS/REQUESTS RECEIVED CLEARED1. Non receipt of shares sent for transfer 98 982. Request for issue of duplicate shares 186 1863. Non receipt of dividend warrant 156 1564. Change of address 538 5385. Mandate cases/bank description 165 1656. No. of cases received for sub division 2028 2016 #7. Miscellaneous (Shares) 820 806 ## 24 requests and 2 complaints were pending as on March 31, 2004, regarding sub-division and other miscellaneous matters and the samewere cleared within the next 15 days.

ND_L18fontscorrected FIN.qxd 7/26/2004 5:36 PM Page 62Corporate Governance ReportHERO HONDAAnnual Report 2003–200462issues, which have been discussedin detail earlier. Table 3 lists thecomplaints/request/remindersreceived and redressed during2003-04. During the financial year,the Company has attended to mostof the investors’ grievances/correspondence within a period of10-15 days from the date ofreceipt of the same.COMPANY’S REGISTERED OFFICE ADDRESS34, Community Centre,Basant Lok, Vasant Vihar,New Delhi 110 057Tel: 2614 2451, 2614 4121Fax: 2615 3913.Website: www.herohonda.comPLANT LOCATIONSGURGAON PLANT37 K.M. StoneDelhi-Jaipur Highway,Sector 33-34, Industrial Area,Gurgaon, Haryana 122 001Tel: 0124 2372 123–130Fax: 0124 2373 141–142DHARUHERA PLANT69 K.M. StoneDelhi-Jaipur HighwayDharuhera, Distt. Rewari,Haryana 121 006Tel: 01274 242 131–135,Fax: 01274 242 399specified in Annexure–3 of theListing Agreement except Clause(b) relating to RemunerationCommittee.INVESTORS’ CORRESPONDENCE MAY BEADDRESSED TOMr. Ilam C. KambojCompany Secretary andCompliance Officere-mail: ickamboj@herohonda.comorat the Registrars’ office.QUERIES RELATING TO THE FINANCIALSTATEMENTS OF THE COMPANY MAY BEADDRESSED TOMr. Ravi Sud, Vice President —Finance,e-mail: ravisud@herohonda.comFor and on behalf of the BoardBrijmohan Lall MunjalCHAIRMAN HERO HONDA MOTORS LTD.New DelhiJuly 14,2004NON-MANDATORY REQUIREMENTSThe Company has not adopted theNon-Mandatory Requirements as

ND_L18fontscorrected FIN.qxd 7/26/2004 5:36 PM Page 6363CERTIFICATETO THE MEMBERS OF HERO HONDA MOTORS LIMITEDWe have examined the compliance of conditions of Corporate Governance by Hero Honda Motors Limited forthe year ended March 31, 2004, as stipulated in clause 49 of the Listing Agreement of the said Company withStock Exchanges.The compliance of conditions of Corporate Governance is the responsibility of the management. Ourexamination was limited to procedures and implementation thereof, adopted by the Company for ensuring thecompliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion onthe financial statements of the Company.In our opinion and to the best of our information and according to the explanations given to us, we certify thatthe Company has complied with the conditions of the Corporate Governance as stipulated in the abovementioned Listing Agreement.We state that in respect of investor grievances received during the year ended March 31, 2004, no investorgrievances are pending for a period exceeding one month against the Company as per the records maintainedby the Company.We further state that such compliance is neither an assurance as to the future viability of the Company nor theefficiency or effectiveness with which the management has conducted the affairs of the Company.For A. F. FERGUSON & CO.CHARTERED ACCOUNTANTSA. K. MAHINDRAPlace : New DelhiPARTNERDate : July 14,2004 (Membership no. 10296)

Directors’ ReportHERO HONDAAnnual Report 2003–200464ANNEXURE II TO DIRECTORS’ REPORTInformation Under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report ofBoard of Directors) Rules, 1988 and forming part of the Directors’ Report for the year ended March 31, 2004 ;I. CONSERVATION OF ENERGYa) Techno-economic viability of few energy saving proposals are being carried out and few proposals have been alreadyimplementeda) Energy conservation measures taken during the financial year 2003-04 and their impactMeasures takenInstallation of HPS DG SetsReplacement of metal Halide lights with HPMV LightsInstallation of RTCS for air conditionersInstallation of “Power Boss” on machinesConversion of existing HWG from LDO to HPS/ FOInterlocking of inlet solenoid valve of machines withpower saving circuitsNatural ventilators on roof at selected areasUse of Boiler Blowdowns to heat boiler feed waterImpactReduction in power generation costReduction in power consumptionReduction in power consumptionReduction in power consumptionReduction in power consumptionReduction in power consumption & air conservationReduction in power consumptionReduction in power consumptionb) Additional Investments and Proposals being implemented for reduction of consumption of energyMeasures takenAdditional installation of HPS DG SetsAdditional natural ventilators on roofEnergy efficient lighting & motorsVFD installation for high powered motors & compressorsPrevention of air leakages to reduce air compressor runningInstallation of temperature controller in cooling towersOptimum loading of genset with respect to daily loadInstallation of Waste heat recovery system to generatehot water for paint shopUse of waste heat boiler on existing DG set exhauststo generate steamImpactReduction in power generation costReduction in power consumptionReduction in power consumptionReduction in power consumptionReduction in power consumptionReduction in power consumptionReduction in power generation costReduction in power consumptionReduction in power consumptionNote: The additional investment cannot be precisely ascertained, and is part of the Repairs and Maintainence; consumables expenditureand investments in fixed assets.c) Impact of measures at a) and b) for reduction of energy consumption and consequent impact on the cost of production ofgoods.It is difficult to quantify the impact of individual projects on the cost of production of goods. The impact of abovementioned initiatives (and also of initiatives taken in past) is clearly visible as decreasing trends of “Energy consumptionand generation cost” over the last couple of years. The power & fuel cost of the Company per vehicle has reduced from Rs.199.28 in 2001-02 to Rs. 143.72 in 2003-04. Similarly, the Company’s electricity consumption (in KWH/Vehicle) forboth the plants taken together has reduced from 81.98 KWH/Vehicle to 62.08 KWH/Vehicle.Hero Honda-64.p65647/26/2004, 3:12 PM

65FORM-AForm for Disclosure of Particulars with respect to Conservation of EnergyFOR DHARUHERA PLANT FY 2003-04 FY 2002-03A. Power and fuel consumption per unit of productionProduct Unit (Motorcycle) 1013835 8236131. Electricitya) Purchased Unit (KWH) 7420905 5858418Amount (Rs.) 2,91,69,290 2,28,58,070Rate/unit (Rs.) 3.93 3.90b) Own generationThrough diesel generator unitSelf (KWH) 22497760 22376204Hired (KWH) Nil NilUnit per-ltr.of Diesel Oil (Cost/unit)Self (KWH/Ltr.) 3.93 3.91Hired (KWH/Ltr.) Nil Nil2. *Furnace Oil, LDO, HPS etc.Quantity (K.Ltrs) 1155.217 1191.051Total amount (Rs.) 1,41,28,205 1,45,73,718Average Rate/Ltr. (Rs.) 12.23 12.24B. Consumption per unit of productionStandards (if any)1) Electricity (KWH/Motorcycle) 29.51 34.282) Furnace Oil, LDO, HPS etc. (Ltr./Motorcycle) 1.14 1.45*being used for the purpose of Boiler used for production of motorcycle.FOR GURGAON PLANTA. Power and fuel consumption per unit of productionProduct Unit (Motorcycle) 1050863 8566641. Electricitya) Purchased Unit (KWH) Nil NilAmount (Rs.) Nil NilRate/unit (Rs.) Nil Nilb) Own generationThrough diesel generator unitSelf (KWH) 34230188 31786197Hired (KWH) Nil NilUnit per-ltr.of Diesel Oil Cost/unitSelf (KWH/Ltr.) 3.89 3.76Hired (KWH/Ltr.) Nil Nil2. **Furnace Oil, LDO, HPS etc.Quantity (K.Ltrs) 783.364 628.681Total amount (Rs.) 1,24,58,210 89,43,533Average Rate/Ltr. (Rs.) 15.90 14.23B. Consumption per unit of production1) Electricity (KWH/Motorcycle) 32.57 37.102) Furnace Oil, LDO, HPS etc. (Ltr./Motorcycle) 0.75 0.73**being used for the purpose of Hot water generatorused for production of motorcycle.Hero Honda-64.p65657/26/2004, 3:12 PM

Directors’ ReportHERO HONDAAnnual Report 2003–200466II.(A)PARTICULARS AS PER FORM BRESEARCH & DEVELOPMENT (R&D)1 Specific areas in which R & D carried out by the Company1.1 New Model Technology Absorption1.2 Indigenisation of CKD Parts1.3 Multi Source Approval1.4 Meeting Legislative Norms1.5 Active Participation in deciding the needs of future Automobile Norms in India2 Benefits derived as a result of the above R & D activities2.1 Launching of CD-Dawn (100 cc - 4 Stroke)Launching of KARIZMA (223 cc - 4 Stroke)Launching of Splendor/ Passion Disc VersionLaunching of Splendor + / Passion PlusLaunching of Ambition 135Launching of CBZ*2.2 Multi source Components2.3 Major new sources added for existing models2.4 Indigenisation (2003-04) – 3 more items have been localized2.5 Compliance to Regulations: -1. New EMI as per AIS 0042. Tele Tale Symbols & Controls as per IS 14413: 19963. Rear View Mirror as per AIS 0014. Bulbs as per IS 1606 (revision 3)5. Installation of lighting and Signalling Devices as per AIS:0096. Pillion Hand Hold as per IS:144957. Fuel Tank as per IS:146818. Horn Installation as per AIS:0149. Brake Hose as per IS:70793 Future plan of action3.1 New model launch3.2 Indigenisation plan of various other parts3.3 Compliance Plan for Future Regulations:-• Mass Emission 2005 norms• Pass Bye Noise (2005 Noise norms)• Deterioration Factor• Idle CO (Standard under finalisation)• New COP Regulation (Procedure & Frequency)• Lighting and Signalling Devices as per AIS 010.• Component Marking (Standard under finalisation)• Anti Theft Device• Reflex Reflector as per AIS:057• Tyres as per AIS:044• High Security Number Plate• Brakes as per IS:14664• Engine Power Management as per IS:14559Hero Honda-64.p65667/26/2004, 3:12 PM

674. Expenditure on R & D(Rupees in crores) Year Ended Year EndedMarch 31, 2004 March 31, 2003i) Capital 7.43 1.56ii) Recurring 9.33 6.97iii) Total R & D expenditure as a percentage of sales (as per P & L A/c) 0.29% 0.17%B) TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATIONCertain more parts which were till date being imported have been developed in India. With the Multiple source development,supply capacities of bought out parts have been increased to meet the increased volume of production. The Company’s R&Dhas developed requisite infrastructure and expertise to develop, test and approve products in-house as per Honda specificationsand acceptance criteria. These facilities are upgrading from time to time ahead of new technology adoptions.The said efforts have led to new model development to increase market share, reduction in devolvement time etc. Further, inthe last five years the Company’s ancillaries have imported technologies regarding Rotary gear, Cold Forging, Pistonmanufacturing, RR & CDI unit, Piston rings etc.III. FOREIGN EXCHANGE EARNINGS AND OUTGOA) EXPORT ACTIVITIES / INITIATIVES TO INCREASE EXPORTS / DEVELOPMENT OF NEW EXPORT MARKETS / EXPORT PLANSDuring the financial year 2003-04 motorcycle exports by the Company grew at an impressive rate of 72% as compared to2002-03. New Models CD Dawn, Splendor + & Passion Plus introduced successfully in the Exports markets also, which led toincrease in sales by 87%. New Markets like Sierra Leone was developed for Motorcycles & Philippines for Components. Specialsupports in service and sales was extended to Srilanka, Bangladesh & Columbia.Export Plans:The Company plans to further increase export sales; explore new markets; provide world class products; highest level ofconsumer satisfaction in service; and to be competitive globally. With the support from Honda Motor Co., Ltd., Japan, to furtherincrease the export volumes in the coming financial year. Further, the introduction of new models shall certainly help in thisendeavour to tap new markets and potential.B) EARNINGS & OUTGOForeign exchange earnings during the period under report was Rs. 118.21 Crore as compared to Rs. 94.91 Crore in theprevious year.On account of Royalty, Technical Guidance Fee, Technical Know-how fee, Export Commission, Travel and other accounts,Advertisement and Publicity, Foreign Exchange Outgo was Rs. 126.74 Crore, as compared to Rs. 104.79 Crore in the previousyear. Besides outgo on account of Dividend was Rs. 145.37 Crore as compared to Rs. 52.96 Crore in the previous year.On account of import of components, spare parts, raw materials and capital goods, the foreign exchange outgo was Rs. 381.50Crore as compared to Rs. 328.79 Crore in the previous year, representing an increase of 16%.Hero Honda-64.p65677/26/2004, 3:12 PM

Hero Honda-64.p65 687/26/2004, 3:12 PMANNEXURE III TO THE DIRECTORS’ REPORTINFORMATION AS PER SECTION 217(2A) OF THE COMPANIES ACT, 1956, READ WITH THE COMPANIES(PARTICULARS OF EMPLOYEES) RULES, 1975 FORMING PART OF THE DIRECTORS’ REPORT FOR THE PERIOD ENDED MARCH 31, 2004Sl. Name of Employee Age Designation Gross Rem. Qualification Experience Shareholding Date of Last employmentNo. (Yrs.) (Nature of Duties) Received (Rs.) (Years) % Employment1. Munjal, Brijmohan Lall 81 Chairman 9,85,06,599 Privately educated 60 — 03.08.1991 Chairman - Hero Cycles Ltd.[Overall management of the affairs ofthe Company]2. Munjal, Pawan 50 Managing Director [Day to day 9,68,85,747 B.E. ( Mech. ) 28 0.04% 01.04.1986 Works Executive -management of the affairsMajestic Auto Ltd.of the Company]3. Kazusa, Akio 52 Joint Managing Director [Day to day 9,49,40,542 Engineering 25 — - 01.06.2002 Manager - Hondamanagement of the affairs (Master Course) Motor Co. Ltd., Japanof the Company]4. Yanagida, Kazumi* 47 Director [Day to day management 9,26,34,342 Law, Meiji University 33 — - 03.12.1999 Manager - Hondaof the affairs of the Company]Motor Co. Ltd., Japan5. Sobti, Atul 50 Sr. Vice President - Marketing & 57,64,307 B.A.(Hons.) 28 — - 16.04.1998 Chief Executive Officer -Sales (Responsible for overall Eco., M.B.A. (IIMA) Elbee Services Ltd.marketing & sales functions)6. Agrawal, K.K. 56 Sr. Vice President - Operations 36,51,938 B.E. (Mech.) 33 — - 30.09.1993 Chief of Operations -[Responsible for overall operationsVespa Car Co. Ltd.functions]7. Malhotra, K.K. 57 Vice President - Materials 26,33,480 B.Sc. ( Engg. ) 35 — - 16.08.1985 Manager (Purchase) - BST Ltd.[Responsible for overallmaterial functions]8. Sud, Ravi 49 Vice President- Finance [Responsible 28,86,017 B.Com (Hons.), 28 — - 25.04.1998 General Managerfor overall finance functions] PGDM (IIMA), (Corporate Finance) -FCS, AICWAEicher Goodearth Ltd.9. Akhouri N.N. 54 Vice President -HRM [Responsiblefor overall Human resourcemanagement functions] 25,05,497 PGDIP(Hons)- PM & 32 — - 15.12.1999 V.P.-Organisational Capability -IR (XLRI), LLBSeagram Manufacturing Ltd.* employed for part of the yearNotes :1. Information has been furnished on the basis of employees employed throughout the financial year, who were in receipt of remuneration for that year which, in the aggregate, was not less thanRs. 24,00,000 (Rupees twenty four lacs) per annum and those employed for the part of the financial year, were in receipt of remuneration for any part of that year at a rate which, in the aggregate,was not less than Rs. 2,00,000 (Rupees two lac) per month. There was no person employed either throughout the financial year or part thereof, who was holding either by himself or alongwith thespouse and dependent children 2% or more of the shares of the Company and drawing remuneration in excess of the remuneration drawn by the Managing Director / Jt. Managing Director / Whole-timeDirector.2. Remuneration includes Basic Salary, Commission paid during the year, Perquisites and other allowances, payments and expenditures incurred on perquisites and Company’s contribution to Provident,Superannuation and Gratuity Funds.3. All appointments are / were on contractual basis.4. Mr. Pawan Munjal is the son of Mr. Brijmohan Lall Munjal. Mr. Om Prakash Munjal and Mr. Satyanand Munjal, Directors of the Company are related as brothers to Mr. Brijmohan Lall Munjal. None ofthe other employees is a relative of any Director of the Company.5. The terms and conditions of employees at Sl. No.1, 2, 3 & 4 are as approved by the Board of Directors and shareholders. The employees at Sl. No.5, 6, 7, 8 & 9 are paid remuneration as per thepolicy / rules of the Company.6. Mr. Kazumi Yanagida who ceased to be the Whole-time Director on 24.04.2003, was paid Rs.9,26,34,342 mainly consisting of commission for the year 2002-03 and return travel expenses during2003-04 after the accounts for the year 2002-03 were audited and approved by the shareholders in the Annual General Meeting.68HERO HONDAAnnual Report 2003–2004Directors’ Report

69AUDITORS’ REPORTTO THE MEMBERS OFHERO HONDA MOTORS LIMITED1. We have audited the attached balance sheet of Hero HondaMotors Limited, as at March 31, 2004 and also the profitand loss account for the year ended on that date annexedthereto and the cash flow statement for the year ended onthat date. These financial statements are the responsibilityof the Company’s management. Our responsibility is toexpress an opinion on these financial statements based onour audit.2. We conducted our audit in accordance with auditingstandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles usedand significant estimates made by management, as well asevaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for ouropinion.3. As required by the Companies (Auditor’s Report) Order,2003 issued by the Central Government of India in terms ofsub-section (4A) of section 227 of the Companies Act,1956, we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said Order.4. Further to our comments in the Annexure referred to above,we report that:i) we have obtained all the information and explanations,which to the best of our knowledge and belief werenecessary for the purposes of our audit;iii) the balance sheet, profit and loss account and cash flowstatement dealt with by this report are in agreement withthe books of account;iv) in our opinion, the balance sheet, profit and lossaccount and cash flow statement dealt with by thisreport comply with the accounting standards referred toin sub-section (3C) of section 211 of the CompaniesAct, 1956;v) on the basis of written representations received from thedirectors and taken on record by the Board of Directors,we report that none of the directors is disqualified as onMarch 31, 2004 from being appointed as a director interms of clause (g) of sub-section (1) of section 274 ofthe Companies Act, 1956;vi) In our opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts give the information required by theCompanies Act, 1956, in the manner so required andgive a true and fair view in conformity with theaccounting principles generally accepted in India:(a) in the case of the balance sheet, of the state ofaffairs of the Company as at 31 March, 2004;(b) in the case of the profit and loss account, of theprofit for the year ended on that date; and(c) in the case of the cash flow statement, of the cashflows for the year ended on that date.FOR A.F. FERGUSON & CO.,CHARTERED ACCOUNTANTSii)in our opinion, proper books of account as required bylaw have been kept by the Company so far as appearsfrom our examination of those books;A.K. MAHINDRAPlace : New DelhiPARTNERDate : April 12, 2004 (Membership No. 10296)Hero Honda-69.p65697/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–200470ANNEXURE REFERRED TO IN PARAGRAPH ‘3’ OF THE AUDITORS’ REPORT TO THEMEMBERS OF HERO HONDA MOTORS LIMITED ON THE ACCOUNTS FOR THE YEARENDED MARCH 31, 2004.(i) (a) The Company has maintained proper records toshow full particulars, including quantitative detailsand situation of fixed assets.(b) As explained to us, the Company has a system ofphysical verification, which is designed to cover allassets over a period of three years and inaccordance therewith, physical verification ofcertain fixed assets of the Company was carried outduring the year. In our opinion, the frequency ofphysical verification is reasonable having regard tothe size of the Company and the nature of its fixedassets. The discrepancies noticed on suchverification were not material and have beenproperly dealt with in the books of account.(c) As the Company has disposed off an insignificantpart of the fixed assets during the year, paragraph4(i)(c) of the Companies (Auditor’s Report) Order,2003 (hereinafter referred to as the Order) is notapplicable.(ii) (a) During the year, the inventories have beenphysically verified by the management, except forstocks lying with third parties at the year end forwhich confirmations have been obtained in most ofthe cases. In our opinion, the frequency ofverification is reasonable.(b) In our opinion and according to the information andexplanations given to us, the procedures of physicalverification of inventories followed by themanagement are reasonable and adequate inrelation to the size of the Company and the natureof its business.(c) On the basis of our examination of the record ofinventories, we are of the opinion that the Companyis maintaining proper records of inventories. Thediscrepancies noticed on physical verification ofinventories as compared to book records were notmaterial and have been properly dealt with in thebooks of account.(iii)According to the information and explanations given tous, the Company has neither taken nor granted any loans,secured or unsecured from/to companies, firms and otherparties covered in the register maintained under Section301 of the Companies Act, 1956. Accordingly,paragraphs 4 (iii)(b), (c) and (d) of the Order are notapplicable.(iv)According to the information and explanations given tous, there are adequate internal control procedurescommensurate with the size of the Company and thenature of its business with regard to purchases ofinventories, fixed assets and with regard to sale of goods.During the course of our audit, no major weakness hasbeen noticed in the underlying internal controls.(v) (a) Based on the audit procedures applied by us andaccording to the information and explanationsgiven to us, the transactions that need to beentered in the register in pursuance of section 301of the Companies Act, 1956 have been so entered.(b) According to the information and explanationsgiven to us, in respect of the transactions enteredin the register maintained in pursuance of section301 of the Companies Act, 1956, and exceedingthe value of Rs. 5 lacs in respect of any partyduring the year are of a specialized nature forwhich there are no alternate sources of supply toenable a comparison of the prices paid.(vi)(vii)(viii)As the Company has not accepted any deposits from thepublic, paragraphs 4 (vi) of the Order is not applicable.In our opinion, the Company has an adequate internalaudit system commensurate with the size and nature ofits business.We have broadly reviewed the books of accountmaintained by the Company pursuant to the Rules madeby the Central Government for the maintenance of costrecords under section 209(1) (d) of the Companies Act,1956 and are of the opinion that, prima facie, theprescribed accounts and records have been made andmaintained. We have not, however, made a detailedexamination of the records with a view to determinewhether they are accurate or complete.(ix) (a) As explained to us, the statutory dues payable bythe Company comprise of provident fund, investoreducation protection fund, employees’ stateinsurance, income-tax, sales tax, wealth tax,customs duty, excise duty, cess, value added tax,Haryana local area development tax. According tothe records of the Company and information andexplanations given to us, the Company is regular inHero Honda-69.p65707/26/2004, 3:08 PM

71(x)(xi)(xii)(xiii)(xiv)(xv)(b)depositing the aforesaid undisputed statutory dueswith the appropriate authorities. There are noundisputed statutory dues as referred to above as atMarch 31, 2004 outstanding for a period of morethan six months from the date they becomepayable.According to the records of the Company andinformation and explanations given to us, there aredues of sales tax and excise duty aggregatingRs. 1.19 crores and Rs. 0.92 crore respectively,which have not been deposited on account ofvarious disputes, the details of which are set out innote ‘9’ of schedule 14. We have further beeninformed that there are no dues in respect ofincome-tax, wealth tax, customs duty and cesswhich have not been deposited on account of anydispute.The Company does not have accumulated losses at theend of the financial year March 31, 2004. Further, theCompany has not incurred any cash losses during thefinancial year ended March 31, 2004 and in thepreceding financial year ended March 31, 2003.Based on our audit procedures and on the informationand explanations given by management, we are of theopinion that the Company has not defaulted in repaymentof dues to banks. The Company has not taken any loansfrom financial institutions and has not issued debentures.As the Company has not granted any loans and advanceson the basis of security by way of pledge of shares,debentures and other securities, paragraph 4 (xii) of theOrder is not applicable.As the Company is not a chit fund/nidhi/mutual benefitfunds/society to which the provisions of special statuterelating to chit fund are applicable, paragraph 4 (xiii) ofthe Order is not applicable.As the Company is not dealing or trading in shares,securities, debentures and other investments,paragraph 4 (xiv) of the Order is not applicable.As informed to us, the Company has not given anyguarantee for loans taken by others from banks orfinancial institutions.(xvi)(xvii)The Company has term loans comprising of sales taxdeferment from the State Government of Haryana to beutilized for the expansion of Company’s manufacturingfacilities. During the year, sales tax deferment amountingto Rs. 50 crores has been applied for the purpose forwhich it was obtained.The Company has taken short term loan from bankscomprising of packing credit and buyers line of creditwhich has been utilized for working capital requirements.The Company also has long term loans comprising ofsales tax deferment as referred to in paragraph 4(xvi)above. The opening balance of such loans amounting toRs. 134.28 crores as on April 1, 2003 and Rs. 50 croresfor the year ended March 31, 2004 have been utilized forexpansion of Company’s manufacturing facilities.(xviii) As the Company has not made preferential allotment ofshares to parties and companies covered in the registermaintained under section 301 of the Act,paragraph 4 (xviii) of the Order is not applicable.(xix)(xx)(xxi)As the Company has not issued any debentures,paragraph 4(xix) of the Order is not applicable.During the year, since the Company has not raised moneyby way of public issue, paragraph 4(xx) of the Order is notapplicable.Based upon the audit procedures performed andinformation and explanations given by the management,we report that no fraud on or by the Company has beennoticed or reported during the course of our audit for theyear ended March 31, 2004.FOR A.F. FERGUSON & CO.,CHARTERED ACCOUNTANTSA.K. MAHINDRAPlace : New DelhiPARTNERDate : April 12, 2004 (Membership No. 10296)Hero Honda-69.p65717/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–200472BALANCE SHEET As at March 31, 2004(Rupees in crores)Schedule As at March As at MarchNo. 31, 2004 31, 2003SOURCES OF FUNDSSHAREHOLDERS’ FUNDSShare capital 1 39.94 39.94Reserves and surplus 2 1,098.87 821.091,138.81 861.03LOAN FUNDSUnsecured 3 174.70 134.28174.70 134.28DEFERRED TAX LIABILITIES 8 90.02 77.16Total 1,403.53 1,072.47APPLICATION OF FUNDSFIXED ASSETS 4Gross block 916.91 786.29Less: Depreciation 345.79 278.42571.12 507.87Capital work in progress 17.69 9.19Net block 588.81 517.06INVESTMENTS 5 1,565.10 1,193.00DEFERRED TAX ASSETS 8 0.68 0.89CURRENT ASSETS, LOANS AND ADVANCES 6Inventories 188.20 200.92Sundry debtors 43.80 141.49Cash and bank balances 37.12 24.33Loans and advances 239.87 109.77508.99 476.51Less: CURRENT LIABILITIES AND PROVISIONSCurrent liabilities 7 1,003.86 681.52Provisions 256.19 434.171,260.05 1,115.69Net current assets (751.06) (639.18)MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted) 9 — 0.70Total 1,403.53 1,072.47Notes to the accounts 13Per our report attachedFOR A.F. FERGUSON & CO.CHARTERED ACCOUNTANTSA.K. MAHINDRAPARTNERMembership Number 10296For and on behalf of the Board of DirectorsBRIJMOHAN LALL MUNJAL CHAIRMANPAWAN MUNJALMANAGING DIRECTORAKIO KAZUSAJOINT MANAGING DIRECTORM.P. WADHAWANDIRECTORNew DelhiApril 12, 2004RAVI SUDILAM C. KAMBOJVICE PRESIDENT - FINANCECOMPANY SECRETARYHero Honda-69.p65727/26/2004, 3:08 PM

73PROFIT AND LOSS ACCOUNT For the year ended March 31, 2004(Rupees in crores)Schedule Year ended Year endedNo. March 31, 2004 March 31, 2003INCOMESales and other income 10 5,997.47 5,194.58EXPENDITUREManufacturing and other expenses 11 4,852.33 4,238.12Depreciation 4 73.33 63.39Interest (net) 12 (1.35) (1.02)Miscellaneous expenditure written off 0.70 9.53Total expenditure 4,925.01 4,310.02Profit for the year before tax 1,072.46 884.56Provision for taxation— current 331.07 298.19— deferred 13.07 5.61Profit after tax 728.32 580.76Balance of profit brought forward 335.75 220.48Balance available for appropriation 1,064.07 801.24APPROPRIATIONSDividend– Interim 199.69 —– Proposed final 199.69 359.44Tax on dividend 51.16 46.05Transfer to general reserve 75.00 60.00Balance carried to balance sheet 538.53 335.751,064.07 801.24Basic and diluted earnings per share face value Rs. 2/-each (in rupees) 36.47 29.08Notes to the accounts 13Per our report attached to the balance sheetFOR A.F. FERGUSON & CO.CHARTERED ACCOUNTANTSA.K. MAHINDRAPARTNERMembership Number 10296New DelhiApril 12, 2004For and on behalf of the Board of DirectorsBRIJMOHAN LALL MUNJAL CHAIRMANPAWAN MUNJALMANAGING DIRECTORAKIO KAZUSAJOINT MANAGING DIRECTORM.P. WADHAWANDIRECTORRAVI SUDVICE PRESIDENT - FINANCEILAM C. KAMBOJCOMPANY SECRETARYHero Honda-69.p65737/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–200474CASH FLOW STATEMENT For the year ended March 31, 2004(Rupees in crores)Year ended Year endedMarch 31, 2004 March 31, 2003A. CASH FLOW FROM OPERATING ACTIVITIESNet profit before tax 1,072.66 884.56Adjustments for:Add: Depreciation 73.33 63.39Exchange differences 0.65 0.13Loss on sale of non-trade investments 12.75 12.53Loss on fixed assets sold/discarded 1.20 3.86Interest - others and financial charges 1.72 1.73Miscellaneous expenditure written off 0.70 9.5390.35 91.17Less: Interest received on long term non-trade investments 9.38 —Interest received on loans, deposits etc. 3.07 2.75Dividend received on investments 18.00 0.41Profit on sale on non-trade investments 127.67 85.34Profit on sale of fixed assets 0.13 0.17158.25 88.67Operating profit before working capital changes 1,004.56 887.06Adjustments for:Add: Increase in trade payables 314.16 62.63Decrease in inventories 12.72 —Increase in security deposits from dealers 1.56 2.09328.44 64.72Less: Increase in trade and other receivables 29.24 11.87Increase in inventories — 22.5629.24 34.43Cash generated from operations 1,303.76 917.35Less: Interest paid 1.73 1.74Direct taxes paid 330.81 296.60332.54 298.34Net cash from operating activities 971.22 619.01B. CASH FLOW FROM INVESTING ACTIVITIESSale of fixed assets 2.86 5.27Inter corporate deposits received back 150.50 43.05Sale of investments 6,569.98 4,713.63Interest received 8.95 2.75Dividend received on investments 18.00 0.416,750.29 4,765.11Less: Purchase of fixed assets 149.01 98.68Inter corporate deposits paid 150.50 43.05Purchase of investments 6,827.16 5,108.057,126.67 5,249.78Hero Honda-69.p65747/26/2004, 3:08 PM

75CASH FLOW STATEMENT (Contd.) For the year ended March 31, 2004(Rupees in crores)Year ended Year endedMarch 31, 2004 March 31, 2003Net cash (used) in investing activities (376.38) (484.67)C. CASH FLOWS FROM FINANCING ACTIVITIESRepayment of long term borrowings 9.67 —Share application money - refundable — 0.02Dividend paid 550.60 236.78Tax on dividend 71.63 —Repayment of customers’ booking advance 0.02 0.03631.92 236.78Less : Proceeds from long term borrowings 50.00 17.84Net cash( used) in financing activities (581.92) (218.94)Increase in cash and cash equivalents 12.92 (84.60)Cash and cash equivalents at the beginning of the year 24.33 108.96Cash and cash equivalents at the end of the yearCash and bank balances 37.12 24.33Unrealised exchange loss/(gain) 0.13 0.0337.25 24.36Notes to the accounts Schedule 13Per our report attached to the balance sheetFOR A.F. FERGUSON & CO.CHARTERED ACCOUNTANTSA.K. MAHINDRAPARTNERMembership Number 10296New DelhiApril 12, 2004For and on behalf of the Board of DirectorsBRIJMOHAN LALL MUNJAL CHAIRMANPAWAN MUNJALMANAGING DIRECTORAKIO KAZUSAJOINT MANAGING DIRECTORM.P. WADHAWANDIRECTORRAVI SUDVICE PRESIDENT - FINANCEILAM C. KAMBOJCOMPANY SECRETARYHero Honda-69.p65757/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–200476SCHEDULES 1 TO 13 ANNEXED TO AND FORMING PART OF THE ACCOUNTS1) SHARE CAPITAL (Rupees in crores)As at March As at March31, 2004 31, 2003AUTHORISED25,00,00,000 (Previous year 25,00,00,000) 50.00 50.00Equity shares of Rs. 2 each4,00,000 (Previous year 4,00,000) Cumulative 4.00 4.00convertible preference shares of Rs. 100 each4,00,000 (Previous year 4,00,000) Cumulative 4.00 4.00redeemable preference shares of Rs. 100 each58.00 58.00ISSUED, SUBSCRIBED AND PAID UP19,96,87,500* (Previous year 19,96,87,500) 39.94 39.94Equity shares of Rs. 2 each fully paid up* Of the above 11,98,12,500 (Previous year 11,98,12,500) shares areallotted as fully paid bonus shares by capitalisation of general reserve.39.94 39.942) RESERVES AND SURPLUS (Rupees in crores)As at March Additions Deductions As at March31, 2003 31, 2004CAPITAL RESERVESOn shares forfeited (# Rs. 4,250) # — — #Share premium account onforfeited shares reissued (## Rs. 25,500) ## — — ##REVENUE RESERVESGeneral reserve 485.34 75.00 — 560.34Surplus, being balance in profit and loss account 335.75 202.78 — 538.53821.09 277.78 — 1,098.873) LOAN FUNDS (Rupees in crores)As at March As at March31, 2004 31, 2003UNSECURED LOANSOther loans and advances - othersSales tax deferment from the State Government of Haryana 174.70 134.28174.70 134.28Hero Honda-69.p65767/26/2004, 3:08 PM

774) FIXED ASSETS (Rupees in crores)GROSS BLOCK (AT COST) DEPRECIATION NET BLOCKAs at Additions Deductions As at As at For the On As at As at As atMarch March March year deductions March March March31,2003 31, 2004 31,2003 31, 2004 31, 2004 31, 2003Land 27.04 – – 27.04 – – – 27.04 27.04Buildings 99.33 13.19 0.12 112.40 15.84 2.98 0.07 18.75 93.65 83.49Plant & machinery 589.32 92.76* 4.78 677.30 234.46 54.13 2.83 285.76 391.54 354.86Furniture, fixtures 17.27 1.81 2.61 16.47 6.73 1.06 1.90 5.89 10.58 10.54and office equipmentVehicles 9.10 0.74 1.88 7.96 2.95 0.81 0.83 2.93 5.03 6.15Computer and dataprocessing machines 28.00 8.82 0.50 36.32 13.03 4.30 0.33 17.00 19.32 14.97TOTAL 770.06 117.32 9.89 877.49 273.01 63.28 5.96 330.33 547.16 497.05Intangible assetsModel fee 16.23 23.19 – 39.42 5.41 10.05 – 15.46 23.96 10.82786.29 140.51 9.89 916.91 278.42 73.33 5.96 345.79 571.12Previous Year 704.52 99.18 17.41 786.29 223.47 63.39 8.44 278.42 507.87Capital work in progress {including capital advances Rs. 8.78 crores (previous year Rs. 3.48 crores)} 17.69 9.19Note :* Includes reduction of Rs. 0.24 crore (Previous year increase Rs. 0.12 crore) due to fluctuation in exchange rates588.81 517.065) INVESTMENTS (Rupees in crores)As at March As at March31, 2004 31, 2003CURRENT INVESTMENTSNon-tradeUnquotedIn Mutual fund units:Debt fund(Units of the face value of Rs. 10 each)Prudential ICICI Mutual Fund27567651 (Previous year 91531842) units in income plan - growth 46.57 154.6490078990 (Previous year 234574805) units in flexible income plan - growth option 98.24 241.73Nil (Previous year 50000000) units in FMP growth yearly series VI — 50.0040087769 (Previous year Nil) units in institutional income plan growth 76.07 —Birla Sunlife Mutual FundNil (Previous year 59160421) units in income plus plan B: growth — 142.505672750 (Previous year Nil) units in income plus institutional plan : growth 15.00 —Nil (Previous year 8001662) units in FMP yearly growth 3 plan B : growth — 8.00Alliance Capital Mutual FundNil (Previous year 5316321) units in income fund - regular growth — 9.99Nil (Previous year 50000000) units in term plans - 378 days - 210602 - growth — 50.00Hero Honda-69.p65777/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–2004785) INVESTMENTS (Contd.) (Rupees in crores)As at March As at March31, 2004 31, 2003HDFC Mutual Fund7023310 (Previous year 38117747) units in income fund - growth 9.20 49.92Nil (Previous year 25000000) units in FIP June 2002 (1) - growth — 25.00DSP Merrill Lynch Mutual Fund459874 (Previous year 28317023) units in bond fund - retail growth 0.90 55.225000000 (Previous year 5000000) units in bond fund - institutional plan- growth 5.00 5.00Standard Chartered Mutual Fund10545260 (Previous year 25583040) units in GSSG GSSIFinvestmentplan - growth option 13.99 33.9417815785 (Previous year Nil) units in dynamic bond fund - growth 20.00 —69135310 (Previous year Nil) units in dynamic bond fund institutional plan B- growth 81.23 —IL & FS Mutual FundNil (Previous year 26889793) units in bond fund - growth plan — 38.81Templeton Mutual FundNil (Previous year 60669635) units in India income builderaccount - institutional plan - growth — 65.00Nil (Previous year 23275950) units in floating rate incomefund-short term plan - growth — 25.00Cholamandalam Mutual FundNil (Previous year 5907576) units in Chola triple ace -bonus — 6.6717272983 (Previous year Nil) units in Chola freedom income STF-Inst.Cum - Bonus 17.65 —Tata Mutual Fund48452909 (Previous year Nil) units in Tata income fund appreciation - bonus 50.00 —HSBC Mutual Fund52401600 (Previous year 14839437) units in institutionalincome fund - investment plan -growth 55.00 15.0019013488 (Previous year Nil) units in income fund-investment plan-growth 20.00 —Sundaram Mutual Fund6905830 (Previous year 6905830) units in bond saver bonus option 7.11 7.11ING Vysya Mutual Fund19884503 (Previous year Nil) units in income fund-institutional-bonus option 20.00 —Hero Honda-69.p65787/26/2004, 3:08 PM

795) INVESTMENTS (Contd.) (Rupees in crores)As at March As at March31, 2004 31, 2003Reliance Mutual Fund10000000 (Previous year Nil) units in fixed term scheme-monthly plan-6-growth option 10.00 —25000000 (Previous year Nil) units in fixed term scheme-annual plan-3-growth option 25.00 —Escorts Mutual Fund9527152 (Previous year Nil) units in income plan-bonus 10.00 —Repurchase Price Rs.621.61 crores (Previous year Rs.1041.80 crores) 580.96 983.53Fund of Funds(Units of the face value of Rs.10 each)Prudential ICICI Mutual Fund50000000 (Previous year Nil) units in cautious plan cumulative option 50.00 —Birla Sunlife Mutual Fund5000000 (Previous year Nil) units in asset allocation conservative plan growth 5.00 —Repurchase Price Rs.56.36 crores (Previous year Rs.Nil) 55.00 —Monthly Income Plan(Units of the face value of Rs.10 each)Prudential ICICI Mutual Fund187804326 (Previous year Nil) units in MIP - cumulative 263.74 —50000000 (Previous year Nil) units in income multiplier regular plan growth 50.00 —I L &F S Mutual Fund29934032 (Previous year Nil) units in growth plan 30.00 —HDFC Mutual Fund25000000 (Previous year Nil) units in long term - growth 25.00 —Templeton Mutual Fund91517630 (Previous year Nil) units in FT India Monthly income plan A growth 137.40 —Reliance Mutual Fund5000000 (Previous year Nil) units in growth plan 5.00 —Tata Mutual Fund20000000 (Previous year Nil) units MIP plus-growth 20.00 —Hero Honda-69.p65797/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–2004805) INVESTMENTS (Contd.) (Rupees in crores)As at March As at March31, 2004 31, 2003HSBC Mutual Fund15000000 (Previous year Nil) units in MIP-savings plan-growth 15.00 —25000000 (Previous year Nil) units in MIP-regular plan-growth 25.00 —DSP Merrill Lynch Mutual Fund21393486 (Previous year Nil) units in savings plus-growth 25.00 —Repurchase Price Rs.613.07 crores (Previous year Rs.Nil) 596.14 —Liquid fund(Units of the face value of Rs.10 each)Prudential ICICI Mutual Fund19059871 (Previous year Nil) units in institutional liquid plan growth 29.76 —32836050 (Previous year Nil) units in liquid plan institutional plus-growth 51.35 —Nil (Previous year 98428768) units in liquid plan — 146.25DSP Merrill Lynch Mutual Fund3233358 (Previous year Nil) units in liquidity fund-growth 5.00 —Birla Sunlife Mutual Fund2919742 (Previous year Nil) units in cash plus institutional plan:growth 5.00 -Nil (Previous year 40064032) units in cash plus-plan A :dividend reinvestment — 43.19Principal Mutual Fund1199798 (Previous year Nil) units in cash management fund liquid option growth plan 1.50 —(Units of the face value of Rs.1000 each)Templeton Mutual FundNil (Previous year 30445) units in liquid treasury management account-growth — 4.55Repurchase Price Rs.92.64 crores (Previous year Rs.194.18 crores) 92.61 193.99Non-tradeIn Equity Shares:Quoted1225000 (Previous year Nil) equity shares of Rs.10 eachfully paid up of Indian Petrochemicals Corporation Limited 20.83 —42583 (Previous year Nil) equity shares of Rs.10 eachfully paid up of Dredging Corporation of India Limited 1.70 —Hero Honda-69.p65807/26/2004, 3:08 PM

815) INVESTMENTS (Contd.) (Rupees in crores)As at MarchAs at March31, 2004 31, 2003790187 (Previous year Nil) equity shares of Rs.10 eachfully paid up of GAIL (India) Limited 15.41 —3378200 (Previous year Nil) equity shares of Rs.10 eachfully paid up of Petronet LNG Limited 5.07 —411002 (Previous year Nil) equity shares of Rs.10 eachfully paid up of Oil and Natural Gas Corporation Limited 30.82 —Market value Rs.80.83 crores (Previous year Rs.Nil) 73.83 —Unquoted *307000 (Previous year Nil) equity shares of Rs.10 eachfully paid up of Power Trading Corporation of India Limited 0.49 —42400 (Previous year Nil) equity shares of Rs.5 eachfully paid up of Biocon Limited 1.34 —*Quoted on The Stock Exchange, Mumbai andNational Stock Exchange of India on April 7, 2004 1.83 —LONG TERM INVESTMENTSNon-tradeQuotedIn Mutual Funds unitsEquity fund(Units of the face value of Rs.10 each)Morgan Stanley Mutual fundNil (Previous year 12862228) units in growth units — 10.50Market value Rs.Nil (Previous year Rs.10.80 crores) — 10.50Unit Trust of India(Units of the face value of Rs.10 each)Nil (Previous year 1524994) units of Unit scheme 1964 — 2.04less : provision for permanent diminution in value — 0.52Market value Rs. Nil (Previous year Rs.1.52 crores) — 1.52In Bonds15501507 (Previous year Nil) 6.75%Tax free US64 bonds of Rs.100 each 161.27 —Market value Rs.168.19 crores (Previous year Rs.Nil)Hero Honda-69.p65817/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–2004825) INVESTMENTS (Contd.) (Rupees in crores)As at March As at March31, 2004 31, 2003TradeUnquotedIn Equity Shares:2715000 (Previous year 2715000) equity shares of Rs.10 eachfully paid up of Hero Honda Finlease Limited 3.46 3.461,565.10 1,193.00(Rupees in crores)CostCostThis year Previous yearThe following investments were purchased during the yearMutual FundsDebt Funds891070520 (Previous year 1461335601) units of the face value of Rs.10 each 1,054.49 1,818.70Monthly Income Plans577909684 (Previous year Nil) units of the face value of Rs.10 each 758.27 —Fund of Funds Scheme55000000 (Previous year Nil) units of the face value of Rs.10 each 55.00 —Equity Funds22263926 (Previous year 15786740) units of the face value of Rs.10 each 54.22 37.86Gilt Funds43054134 (Previous year Nil) units of the face value of Rs.10 each 90.31 —Liquid Funds3153381274 (Previous year 2272740385) units of the face value of Rs.10 each 4,311.96 3,129.09746608 (Previous year 851562) units of the face value of Rs.1000 each 115.98 122.40Equity Shares6153972 (Previous year Nil) equity shares of the face value of Rs.10 each 74.32 —42400 (Previous year Nil) equity shares of the face value of Rs.5 each 1.34 —Bonds15501507 (Previous year Nil) bonds of the face value of Rs.10 each 161.27 —Units144218967 (Previous year Nil) units of the face value of Rs.10 each of 150.00 —Unit Trust of India -Unit Scheme 19646,827.16 5,108.05Hero Honda-69.p65827/26/2004, 3:08 PM

835) INVESTMENTS (Contd.) (Rupees in crores)CostCostThis year Previous yearThe following investments were sold during the yearMutual FundsDebt Funds1118316437 (Previous year 1215971154) units of the face value of Rs.10 each 1,457.06 1,547.36Monthly income plans107260210 (Previous year Nil) units of the face value of Rs.10 each 162.13 —Equity Funds35126154 (Previous year 13812108) units of the face value of Rs.10 each 64.72 35.96Gilt Funds43054134 (Previous year Nil) units of the face value of Rs.10 each 90.31 —Liquid Funds3232625254 (Previous year 2134247585) units of the face value of Rs.10 each 4,408.79 2,939.65777053 (Previous year 821117) units of the face value of Rs.1000 each 120.53 117.85Units145743961 (Previous year Nil) units of the face value of Rs.10 each ofUnit Trust of India -Unit Scheme 1964 151.52 —6,455.06 4,640.82(Rupees in crores)As at MarchAs at March31, 2004 31, 2003Aggregate value of Book Market Book Marketvalue value value valueQuoted investments 235.10 249.02 12.02 12.33Unquoted investments 1,330.00 — 1,180.98 —1,565.10 249.02 1,193.00 12.33Hero Honda-69.p65837/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–2004846) CURRENT ASSETS, LOANS AND ADVANCES (Rupees in crores)As atAs atMarch 31, 2004 March 31, 2003CURRENT ASSETSINVENTORIES #Stores and spares (at cost or under) 14.47 14.41Loose tools (at cost or under) 9.19 10.63Raw materials and components* 121.92 111.67Finished goods *Motorcycles 7.69 22.99Spare parts 23.13 31.85Work in progress * 11.80 9.37188.20 200.92*Lower of cost and net realisable value#Includes goods in transit Rs.15.50 crores (Previous year Rs.29.56 crores)SUNDRY DEBTORSDebts outstanding for a period exceeding six monthsSecured -considered good 0.33 0.36Unsecured -considered good 0.28 0.47-considered doubtful 1.20 1.49Other debtsSecured -considered good 6.23 9.63Unsecured -considered good 36.96 131.0345.00 142.98Less : Provision for doubtful debts 1.20 1.4943.80 141.49CASH AND BANK BALANCESCash in hand 0.24 0.27Cheques in hand 1.62 0.04With scheduled banks:On current accounts 34.78 23.43On deposit accounts# 0.43 0.54With post office (pledged with excise authorities)On deposit account 0.01 0.01On savings account 0.04 0.0437.12 24.33LOANS AND ADVANCES(Unsecured and considered good)Advances recoverable in cash or in kind or for value to be received* 224.66 98.14Income-tax deducted at source 11.50 11.31Interest accrued on investments 3.50 —Deposits with excise authorities on current account 0.21 0.32# Includes Rs.Nil (previous year Rs.0.04 crore) held as margin money towards a guarantee* Due from an officer of the Company Rs.0.01 crore (Previous year Rs.0.02 crore);Maximum amount due during the year Rs.0.02 crore (Previous year Rs.0.03 crore)239.87 109.77Hero Honda-69.p65847/26/2004, 3:08 PM

857) CURRENT LIABILITIES AND PROVISIONS (Rupees in crores)As at March As at March31, 2004 31, 2003CURRENT LIABILITIESAcceptances 79.57 78.50Sundry creditorsTotal outstanding dues of small scaleindustrial undertakings* 0.42 0.16Total outstanding dues of creditors otherthan small scale industrial undertakings 619.00 331.28Other liabilities ** 284.78 253.05Security deposits from dealers 20.09 18.531,003.86 681.52PROVISIONSProposed dividend 199.69 359.44Provision for taxation less payments 11.35 10.90Provision for tax on dividend 25.58 46.05Warranties 19.57 17.78256.19 434.17* The Company does not owe any sum which is outstanding for more than 30 days** Other liabilities do not include any amount outstanding as on March 31,2004 which arerequired to be credited to the Investor Education and Protection Fund (Fund)8) DEFERRED TAX ASSETS AND LIABILITIES (Rupees in crores)As at March As at March31, 2004 31, 2003DEFERRED TAX ASSETSAccrued expenses deductible on payment 0.25 0.25Others 0.43 0.640.68 0.89DEFERRED TAX LIABILITIESAccumulated depreciation 90.02 76.91Others — 0.2590.02 77.169) MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted)(Rupees in crores)As at March As at March31, 2004 31, 2003Deferred revenue expenditure:On leased assets– interest paid on capital advances prior tocommencement of lease — 0.48– installation and commissioning charges — 0.22— 0.70Hero Honda-69.p65857/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–20048610) SALES AND OTHER INCOME (Rupees in crores)Year ended Year endedMarch 31, 2004 March 31, 2003SALES 5,832.43 5,101.71Dividend IncomeOn current investments - Non trade 13.33 —On long term investments - Trade 4.67 0.4118.00 0.41Interest on long term non trade investments 9.38 —Profit on sale of non trade investmentsOn current investments* 106.21 72.81On long term investments 8.71 —114.92 72.81Provision for doubtful debts written back 0.29 —Exchange difference 0.07 0.05Profit on sale of fixed assets 0.13 0.17Miscellaneous income 22.25 19.435,997.47 5,194.58* After adjusting loss on sale of current investments aggregatingRs. 12.75 crores (previous year Rs. 12.53 crores)11) MANUFACTURING AND OTHER EXPENSES (Rupees in crores)Year ended Year endedMarch 31, 2004 March 31, 2003MATERIALS CONSUMEDPurchase of spares etc. for re-sale 173.04 162.33Consumption of raw materials and components 4,013.95 3,514.41Less: - Sale of components to ancillaries on cost to cost basis 170.02 178.303,843.93 3,336.11Less : - Cash discount 0.83 0.603,843.10 3,335.51Add: Opening stockMotorcycles 22.99 15.49Spare parts 31.85 18.53Work in progress 9.37 9.1164.21 43.13Less: Closing stockMotorcycles 7.69 22.99Spare parts 23.13 31.85Work in progress 11.80 9.3742.62 64.21Net consumption 4,037.73 3,476.76Less: Scrap sales 7.12 5.994,030.61 3,470.77OTHER EXPENSES*Payments to and provisions for employees:Salaries, wages, bonus, gratuity and leave encashment benefit 211.13 179.22Contribution to provident and other funds 11.32 8.23Staff welfare expenses 9.07 14.18Hero Honda-69.p65867/26/2004, 3:08 PM

8711) MANUFACTURING AND OTHER EXPENSES (Contd.) (Rupees in crores)Year ended Year endedMarch 31, 2004 March 31, 2003Expenses for manufacturing, administration and sellingStores and tools consumed 39.22 33.37Power and fuel 29.75 25.82Rent 2.58 2.45Repairs and maintenance:Plant and machinery 17.08 14.40Buildings 2.40 1.93Others 0.54 0.48Insurance 6.55 7.12Rates and taxes** 6.54 9.75Packing, forwarding, freight etc. 115.62 98.92Royalty 89.64 68.91Advertisement and publicity 124.46 141.86CommisionExport 5.72 3.76Others 2.94 1.398.66 5.15Donations 2.38 2.03Lease rent 21.23 23.09Other expenses 122.35 125.19Provision for doubtful debts — 1.39Loss on fixed assets sold/discarded 1.20 3.864,852.33 4,238.12* Research and development expenses of Rs. 9.33 crores (Previous year Rs. 6.97 crores)have been charged to respective heads** Includes excise duty provision on finished goods Rs. 1.41 crores (Previous year Rs. 4.15 crores)12) INTEREST (NET) (Rupees in crores)Year ended Year endedMarch 31, 2004 March 31, 2003Interest - others and financial charges 1.72 1.731.72 1.73Less : Interest received on loans, deposits, etc.* 3.07 2.75(1.35) (1.02)*Income tax deducted at source Rs. 0.14 crore (Previous year Rs. 0.97 crore)Hero Honda-69.p65877/26/2004, 3:08 PM

FinancialsHERO HONDAAnnual Report 2003–20048813) NOTES TO THE ACCOUNTS1) SIGNIFICANT ACCOUNTING POLICIESi) Accounting conventionThe financial statements are prepared under the historical cost convention, in accordance with applicable accountingstandards and relevant presentational requirements of the Companies Act,1956.ii)Fixed /Intangible assets and depreciation /amortisationFixed assets are stated at cost less accumulated depreciation. Cost of acquisition is inclusive of freight, duties, taxesand other incidental expenses and in the case of plant and machinery, interest on loan taken for the acquisition ofassets upto the date of commissioning of assets. Roll over charges on forward exchange contracts and loss or gain onconversion of foreign currency liabilities for acquisition of fixed assets are added to or deducted from the cost of theassets.Depreciation is charged on a pro-rata basis at the straight line method rates prescribed in schedule XIV to theCompanies Act,1956 except where the historical cost of a depreciable asset has undergone a change due to increaseor decrease in long term liability on account of exchange fluctuations, the depreciation on the revised unamortiseddepreciable amount is provided prospectively over the residual useful life of the asset. Assets costing less thanRs. 5000 are fully depreciated in the year of purchase.Intangible assets, comprising of expenditure on model fee etc, incurred upto March 31, 2003 and on or after April 1,2003 are being amortised on a straight line method over a period of three and five years respectively.iii)InvestmentsCurrent investments are stated at lower of cost and fair value. Long term investments are stated at cost less provisionfor permanent diminution.iv)InventoriesStores and spares and loose tools are stated at cost or under.Raw materials and components, finished goods and work in progress are valued at cost or net realisable value,whichever is lower.The bases of determining cost for various categories of inventories are as follows:-Stores and spares,loose tools,raw – Weighted average costmaterials and componentsMaterials in transit – Actual costWork in progress and finished goods – Material cost plus appropriateshare of labour, manufacturingoverheads and excise duty.v) Retirement benefitsThe Company has various schemes of retirement benefits such as provident fund, superannuation fund, gratuity fundduly recognised by the income tax authorities and leave encashment benefit fund. The funds are administeredthrough trustees and the contributions are charged against revenue every year.vi)Foreign currency transactionsExchange differences are dealt with as follows :-Transactions in foreign currency are recorded at the exchange rate prevailing at the time of the transaction. In case ofloans taken for the acquisition of fixed assets, the loss or gain on conversion (at the rates prevailing at the year end orat the forward rates where forward cover has been taken) and roll over charges in respect of forward cover is includedin the carrying amount of the related fixed assets and loans.Hero Honda-88.p65887/26/2004, 3:10 PM

89Current assets, (other than inventories) and current liabilities, (other than relating to fixed assets) are restated at therates prevailing at the year end or at the forward rates where forward cover has been taken and the differencebetween the year end rate / forward rate and the exchange rate at the date of the transaction is recognised as incomeor expense over the life of the contract and is taken to the profit and loss account.vii)SalesSale of goods is recognised at the point of despatch of finished goods to the customers. Sale of motorcycles isinclusive of freight and is exclusive of excise duty and sales tax. Sale of spare parts are inclusive of excise duty anddelivery charges but exclusive of sales tax.viii) ScrapScrap sale is accounted for on sale basis.ix)Warranty claimsWarranty costs are provided on accrual basis on the total sales of motorcycles during the year,which are based on pastexperience of claims.x) Research and development expensesResearch and development expenditure of a revenue nature is expensed out under the respective heads of account inthe year in which it is incurred.xi)TaxationThe provision for taxation is ascertained on the basis of assessable profits computed in accordance with theprovisions of the Income Tax Act,1961.Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the differencebetween taxable income and accounting income that originate in one period and are capable of reversal in one ormore subsequent periods.2) CONTINGENT LIABILITIES :(Rupees in crores)i) In respect of income-tax cases pending at variousThis yearPrevious yearstages of appeal with the authorities 0.61 —3) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 105.39 crores(Previous year Rs. 42.87 crores ).4) i) The Company had entered into lease agreements for the rental of plant and machinery. Typically,lease rentals are fora period of five years. As at March 31, 2004, the Company had commitments under the lease agreements of Rs.16.85 crores (Previous year Rs. 35.93 crores).ii)The Company has also entered into operating lease agreements for motor vehicles, dies and data processingmachines. These lease arrangements are cancellable in nature and range between two to four years. The aggregatelease rentals under these arrangements amounting to Rs. 2.45 crores (Previous year Rs. 0.12 crore) have beencharged under “Lease rentals ” in Schedule 11.5) During the year, the Company has implemented Accounting Standard (AS-26) ‘Intangible Assets ’issued by the Institute ofChartered Accountants of India and has accordingly recognized expenditure on model fee aggregating Rs. 23.19 crores as‘Intangible Assets’ under Schedule 5 ‘Fixed Assets’, whereas expenditure on model fee incurred upto March 31, 2003aggregating Rs. 10.82 (Gross Rs. 16.23 crores and accumulated amortisation Rs. 5.41 crores) hitherto accounted for asdeferred revenue expenditure under Schedule 9 ‘Miscellaneous expenditure ’has been recast as ‘Intangible assets’.Hero Honda-88.p65897/26/2004, 3:10 PM

FinancialsHERO HONDAAnnual Report 2003–200490The amortisation of intangible assets amounting to Rs 10.05 crores has been included in depreciation for the year in theprofit and loss account.6) As the Company ’s business activity falls within a single primary business segment viz. Motorcycles and its parts’ thedisclosure requirements of Accounting Standard (AS-17)“Segment Reporting”, issued by The Institute of CharteredAccountants of India are not applicable.7) Related party disclosures under Accounting Standard 18a) Enterprises in which the Company has controlHero Honda Finlease Limitedb) Parties in respect of which the Company is a joint ventureHonda Motor Co., Ltd., JapanHero Cycles LimitedBhadurchand Investments Private LimitedHero Investments Private Limitedc) Key management personnelMr. Brijmohan Lall Munjal – ChairmanMr. Pawan Munjal – Managing DirectorMr. Akio Kazusa – Joint Managing DirectorMr. Shinichi Nakayama – Whole time Director (w.e.f. 9 th May 2003)Mr. Kazumi Yanagida – Whole time Director (Upto 24 th April 2003)d) Enterprises over which key management personnel and their relatives are able to exercise significant influence ;-Brijmohan Lall Associates, A.G.Industries Private Limited, Hero Corporate Services Limited, Highway IndustriesLimited, Honda Trading Corporation, Honda Trading (Thailand) Ltd. Majestic Auto Limited, Munjal Auto IndustriesLimited, Munjal Showa Limited, Rockman Cycle Industries Limited, Sunbeam Auto Limited and Satyam AutoComponents Limited.Transactions with related parties during the yeara) Enterprises in which the Company has control(Rupees in crores)This year Previous yearLease rentals 19.14 22.01Dividend received 4.62 0.41Intercorporate deposits given and repaid 150.50 43.05Interest received on Inter Corporate deposits 0.66 0.03Balance outstanding at the year end-Payables — 0.01b) Parties in respect of which the Company is a joint venture.(Rupees in crores)This year Previous yearRemittance of dividends 290.74 124.60Royalty 89.64 68.91Export commission 5.72 3.76Model Fee 22.09 10.62Technical guidance fee 0.39 0.11Purchase of raw materials,components,spares and capital goods 219.55 297.57Balance outstanding at the year end-Receivables — 0.01-Payables 7.16 17.22Hero Honda-88.p65907/26/2004, 3:10 PM

91c) Key management personnel(Rupees in crores)This year Previous yearRemuneration 1.57 0.75Commission 43.94 36.88Balance outstanding at the year end-Payables (other than commission) 0.14 0.04d) Enterprises over which key management personnel and their relatives are able to exercise significant influence(Rupees in crores)This year Previous yearPurchase of raw materials and components 1,177.09 1,162.81Purchase of fixed assets 4.62 -Sale of components etc 4.14 9.71Sale of fixed assets 0.12 2.93Payment towards rent and other services 3.53 1.60Balance outstanding as at the year end-Receivables 0.27 0.76-Payables 183.67 110.558) EARNINGS PER SHAREThis year Previous yearProfit after taxation as per profit and loss account (Rupees in crores) 728.32 580.76Weighted average number of equity shares outstanding 19,96,87,500 19,96,87,500Basic and diluted earnings per share in rupees 36.47 29.08(face value –Rs.2 per share)9) Information pursuant to clause 4 (ix) (b) of the Companies (Auditor’s Report) Order, 2003 in respect of disputed dues, notdeposited, pending with various authorities (excluding interest)Nature of the Statue Nature of Dues As at March 31, 2003 Forum where dispute is(Rupees in crores)pending1) Sales Tax Laws Sales Tax 1.19 Sales Tax Tribunal2) Central Excise Excise duty 0.92 Commissioner (Appeals)10. ADDITIONAL INFORMATIONa) Details of capacity and production:Class of goods Units Licensed capacity* Installed capacity** Actual Production***This year Previous year This year Previous year This year Previous yearMotorised two wheelers upto350CC engine capacity Nos. 200000 200000 2250000 1800000 2064698 1680277* The Company’s products are exempt from Licensing requirements under New Industrial Policy in terms of Notificationno. S.O. 477 (E) dated 25th July, 1991.** On triple shift basis, as certified by the management and relied on by the auditors being a technical matter.***Includes 49 (previous year 140) motorcycles produced and capitalised during the year.Hero Honda-88.p65917/26/2004, 3:10 PM

FinancialsHERO HONDAAnnual Report 2003–200492b) Particulars in respect of opening stock, purchases, sales and closing stock for each class of goods dealt with by theCompany:Class of goods Units Opening stock PurchasesThis year Previous year This year Previous yearQuantity Value Quantity Value Quantity Value Quantity Value(Rupees in crores) (Rupees in crores) (Rupees in crores) (Rupees in crores)Motorcycles Nos. 8335 22.99 5733 15.49 — — — —Spares - * 31.85 * 18.53 * 173.04 * 162.3354.84 34.02 173.04 162.33Class of goods Units Sales Closing stockThis year Previous year This year Previous yearQuantity Value Quantity Value Quantity Value Quantity Value(Rupees in crores) (Rupees in crores) (Rupees in crores) (Rupees in crores)Motorcycles Nos. 2070147++ 5,553.75 1677535++ 4,862.90 2837 7.69 8335 22.99Spares - * 277.37 * 224.40 * 23.13 * 31.85Miscellaneous * 1.31 14.41Components5,832.43 5,101.71 30.82 54.84* It is not practicable to furnish quantitative information in view of the considerable number of items diverse in size andnature. These items in value individually account for less than 10% of the total value of the purchases, stocks andturnover of the aforesaid spares and miscellaneous components.++ Excluding 49 (previous year 140) motorcycles capitalised.c) Raw materials and components consumed:Class of goods Units This year Previous yearQuantity Value Quantity Value(Rupees in crores)(Rupees in crores)Steel sheets MT 9286.02 47.25 8529.79 44.05Components * 3,796.68 * 3,292.063,843.93 ** 3,336.11 *** It is not practicable to furnish quantitative information of components consumed in view of the considerable number ofitems diverse in size and nature.These items in value individually account for less than 10%of the total value ofcomponents consumed.** Includes Rs.0.12 crore (Previous year Rs.0.45 crore)for motorcycles produced and capitalised during the year.d) CIF Value of imports:Class of goods This year Previous year(Rupees in crores)(Rupees in crores)Capital goods* 56.06 28.24Raw materials 58.90 37.28Components, spare parts and others 266.54 263.27* Excludes reduction of Rs.0.24 crore (Previous year increase of Rs.0.12 crore) capitalised due to fluctuation inexchange rates.Hero Honda-88.p65927/26/2004, 3:10 PM

93e) Value of imported and indigenous raw materials,components and spares consumed and percentage of each to the totalconsumption:Class of goods This year Previous yearRaw materials(Rupees in crores)Value Percentage Value Percentage(Rupees in crores)– Imported 46.52 1.21% 41.48 1.24%– Indigenous 0.73 0.02% 2.67 0.08%Components– Imported 75.73 1.97% 124.58 3.73%– Indigenous 3,720.95 96.80% 3,167.38 94.95%Spares consumed (charged to repairs and maintenance)*3,843.93 100.00% 3,336.11 100.00%– Imported 3.34 29.56% 2.66 19.25%– Indigenous 7.96 70.44% 11.16 80.75%11.30 100.00% 13.82 100.00%*Includes Rs.0.12 crore (Previous year Rs 0.45 crore) for motorcycles produced and capitalised during the year.f) Expenditure in foreign currency (on accrual basis):This year(Rupees in crores)Previous year(Rupees in crores)Royalty 89.64 68.91Technical guidance fee 0.39 0.49Technical know-how fee 22.09 15.50Export commission 5.72 3.76Travel and other accounts 0.94 1.67Advertisement and Publicity 7.96 14.46g) Earnings in foreign currency (on accrual basis):This year(Rupees in crores)Previous year(Rupees in crores)FOB value of exports 117.40 94.06Freight and insurance 0.81 0.85h) Managerial remuneration:*This year(Rupees in crores)Previous year(Rupees in crores)Remuneration 1.57 0.75Commission 43.94 36.88Directors’ sitting fee 0.06 0.0345.57 37.66*Excludes incremental contribution for gratuity, as the contributions are determined for the Company as a whole.Hero Honda-88.p65937/26/2004, 3:10 PM

FinancialsHERO HONDAAnnual Report 2003–200494Computation of net profit in accordance with section 198 of the Companies Act, 1956.This yearPrevious year(Rupees in crores)(Rupees in crores)Profit before taxation as perprofit and loss account 1,072.46 884.53Add:-Managerial remuneration 45.57 37.66Less:-Provision for Bad Debts Written back 0.29 —Profit on sale of non trade long term investments 8.71 —Net profit as per section 349 of the Companies Act,1956 1,109.03 922.19Commission @1% of the above profit for the four directors 44.36 36.88Restricted to 43.94* 36.88*Mr. Kazumi Yanagida, whole time director was in employment with the Company up to April 24, 2003. Mr. ShinichiNakayama joined the Company in place of Mr. Kazumi Yanagida with effect from May 9, 2003. Accordingly, commissionon profit has been apportioned on a pro-rata basis to these whole-time directors and to the other three whole-timedirectors on a full year basis.i) Provision and/or payment in respect of Auditors’ Remuneration :This yearPrevious year(Rupees in crores)(Rupees in crores)a) As auditors (Audit fee) 0.17 0.15b) In other capacity– taxation matters — 0.04– limited review of unaudited financial results 0.12 0.04– corporate governance and other certification 0.02 0.03c) Out of pocket expenses # ## This year Rs. 60,151 (Previous year Rs. 82,738)j) Amount remitted in foreign currencies towards dividends during the year:This yearPrevious yearNo. of No. of equity Dividend No. of No of equity DividendNon-Resident shares held remitted Non-Resident shares held remittedshareholders (Rupees in crores) shareholders (Rupees in crores)2001-2002 - Final — — — 1 51918750 52.962002-2003 - Final 1 51918750 93.45 — — —2003-2004 - Interim 1 51918750 51.92145.37 52.9611. Previous year’s figures have been recast/regrouped wherever necessary.For and on behalf of the Board of DirectorsNew DelhiApril 12, 2004BRIJMOHAN LALL MUNJALPAWAN MUNJALAKIO KAZUSAM.P. WADHAWANRAVI SUDILAM C. KAMBOJCHAIRMANMANAGING DIRECTORJOINT MANAGING DIRECTORDIRECTORVICE PRESIDENT - FINANCECOMPANY SECRETARYHero Honda-88.p65947/26/2004, 3:10 PM

95PART IV OF SCHEDULE VI To The Companies Act, 1956BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILEI. Registration DetailsRegistration No. 17354State Code 55Balance Sheet Date 31.03.2004II. Capital Raised during the year (Rupees in crores)Public Issue Nil Rights Issue NilBonus Issue Nil Private Placement NilIII. Position of Mobilisation and Deployment of Funds (Rupees in crores)Total Liabilities 1313.51 Total Assets 1313.51Sources of FundsApplication of FundsPaid-Up Capital 39.94 Net Fixed Assets 588.81Reserves & Surplus 1098.87 Investments 1565.10Secured Loans Nil Net Current Assets* (840.40)Unsecured Loans 174.70 Misc. Expenditure Nil*Includes Deferred Tax Liability (Net) Rs. 89.34 croresIV. Performance of Company (Rupees in crores)Turnover 5,997.47Total Expenditure 4,925.01Profit before tax 1072.46Profit after tax 728.32Earnings per share (Rs.) 36.47Dividend Rate (%) 1000V. Generic names of Three Principal Products/ Services of Company (as per monetary terms)Item Code No. (ITC Code) 87112003Product Description Motorised two wheelers upto 350cc engine capacityPer our report attachedFOR A.F. FERGUSON & CO.CHARTERED ACCOUNTANTSA.K. MAHINDRAPARTNERMembership Number 10296For and on behalf of the Board of DirectorsBRIJMOHAN LALL MUNJAL CHAIRMANPAWAN MUNJALMANAGING DIRECTORAKIO KAZUSAJOINT MANAGING DIRECTORM.P. WADHAWANDIRECTORNew DelhiApril 12, 2004RAVI SUDILAM C. KAMBOJVICE PRESIDENT - FINANCECOMPANY SECRETARYHero Honda-95.p65957/26/2004, 3:13 PM