Mahindra & Mahindra Ltd

Dear Shareholders

Your Directors present their Report together with the audited accounts of your Companyfor the year ended 31^st March, 2011.

Financial Highlights

India’s economic performance in the Financial Year 2011 had both positive andnegative elements to it. The economy grew a very creditable 8.5% backed by strong growthin all three Sectors - Agriculture, Industry and Services. However, despite significantmonetary tightening by the Reserve Bank of India, inflationary pressures persistedthroughout the year, drawing attention to the factors and policies that continue toconstrain productive capacities in the economy.

Yields in the Agricultural Sector in India, for instance, are significantly lower thanthose in other countries, for a wide range of crops. Recognising the criticality ofensuring food security, at aflordable prices for all, the Government of India has taken aseries of initiatives focused on enhancing the productive capacities of both farms andfarmers. Mahindra Samriddhi, an initiative of the Farm Division of your Company, is makinga small but significant contribution in this regard.

Financial Performance

In these challenging times, the Automotive and Farm Divisions of your Company havesecured their best performance for the second year in a row reflecting in substantialgrowth in the net income of the Company by 26.60% to Rs. 23,803 crores in the year underreview from Rs.18,801 crores in the previous year.

Consequent to this remarkable performance, the Profit for the year before Depreciation,Interest, Exceptional items and Taxation recorded an increase of 19.37% at Rs. 3,766crores as against Rs. 3,155 crores in the previous year. Similarly, Profit after taxclocked an increase of 27.51% at Rs. 2,662 crores as against Rs. 2,088 crores in theprevious year. Your Company continues with its rigorous cost restructuring exercises andefficiency improvements which have resulted in significant savings through continued focuson cost controls, process eficiencies and product innovations that exceed customerexpectations in all areas thereby enabling the Company to maintain Profitable growth inthe current economic scenario.

Dividend

Your Directors are pleased to recommend a dividend of Rs.10.50 per Ordinary (Equity)Share and also a Special Dividend of Re.1 per Ordinary (Equity) Share aggregating Rs.11.50per Ordinary (Equity) Share of the face value of Rs.5 each, payable to those Shareholderswhose names appear in the Register of Members as on the Book

Closure Date. The Special Dividend is being recommended in view of the Profit made bythe Company on the sale of its entire holdings in Owens Corning (India) Limited. Theproposed dividend will be paid on an enlarged capital base of Rs.306.99 crores (as againstRs.289.21 crores in the previous year). The equity dividend outgo for the Financial Year2010-11, inclusive of tax on distributed Profits (after reducing the tax on distributedProfits of Rs.17.98 crores payable by the subsidiaries on the dividends receivable fromthem during the current Financial Year) would absorb a sum of Rs.802.64 crores (as againstRs.623.75 crores comprising the dividend of Rs.8.75 per Ordinary (Equity) Share and also aSpecial Dividend of Rs.0.75 per Ordinary (Equity) Share aggregating Rs.9.50 per Ordinary(Equity) Share of the face value of Rs.5 each paid for the previous year).

Automotive Division:

Your Company’s Automotive Division recorded total sales of 2,89,333 vehicles and64,740 three-wheelers as compared to 2,36,759 vehicles and 45,360 three-wheelers in theprevious year registering a growth of 22.2% and 42.7% in vehicle sales and three-wheelersales respectively.

On the domestic sales front, your Company sold 2,74,793 vehicles [including 2,30,110Multi Utility Vehicles (MUVs), 35,493 small 4-wheelers 0.75 Ton cargo/passenger and 9,190mini 4 wheelers 0.5 Ton cargo/passenger] registering a growth of 21% over the previousyear’s volumes of 2,27,114 vehicles [including 2,14,128 MUVs, 3,722 small 4-wheelers0.75 Ton cargo and 9,264 mini 4 wheelers 0.5 Ton cargo]. The domestic sales volumes of62,142 three-wheelers was higher by 39.8% as compared to the previous year’s volumeof 44,438 three-wheelers.

Your Company’s MUV sales volume grew by 7.5% and your Company continued itsleadership of the domestic MUV market by posting a market share of 60.9%. All products ofyour Company’s Passenger MUV portfolio performed very well. Bolero volumes grew by17.8% over the previous year and Bolero is currently India’s largest selling MUV forfive consecutive years. Scorpio and Xylo volumes also posted an impressive growth of 19.1%and 14.6% respectively.

In February, 2010, your Company had launched Maxximo in a very competitive small4-wheeler cargo segment (0.75 Ton). During the first full year of sales, Maxximo hasimpressively established itself in the market, with a sales volume of 35,464 vehicles anda market share of 19.1%.

With an aim to strengthen its product portfolio and to offer better products, yourCompany has launched four new products viz. Genio, Maxximo Mini Van, Compact Cab–GioPassenger and Thar which have received good response from the customers.

In the Overseas market, your Company registered a volume growth of 62.2% over theprevious year. This growth was driven by volume growth in SAARC, Chile and South Africa.During the year under review, your Company sold 14,540 vehicles [including 305 vehiclessourced from Mahindra Navistar Automotives Limited ("MNAL")] and 2,598three-wheelers in the Overseas market as compared to 10,567 vehicles [including 1,323vehicles sourced from MNAL] and 922 three-wheelers in the previous year.

Spare parts sales for the year stood at Rs.666.97 crores (including Exports of Rs.28.3crores) as compared to Rs.514.96 crores (including Exports of Rs.22.4 crores) in theprevious year, registering a growth of 29.5%.

Farm Division:

Your Company’s Farm Division (including Swaraj Division) recorded sales of2,14,325 tractors as against 1,75,196 tractors sold in the previous year, recording asignificant growth of 22.3%.

In the Financial Year 2011, the Indian tractor industry witnessed consecutive secondyear of high growth. The domestic market recorded sales of 4,80,377 tractors as comparedto 4,00,203 tractors in the previous year, recording a growth of 20%.

Your Company outperformed the tractor industry with domestic sales of 2,02,513 tractorsas compared to 1,66,359 tractors in the previous year recording a growth of 21.7%. Thishas also helped your Company to improve its market share which now stands at 42% ascompared to 41.4% in the previous financial year, thus completing 28 years of leadershipin the Indian tractor industry. Your Company’s tractor exports grew by 33.7% to reach11,812 tractors as compared to 8,837 tractors exported in the previous year.

Beyond agriculture, in the power generation space under the Mahindra Powerol Brand,your Company sold 27,748 engines in the current financial year as against 48,011 enginesin the previous year. Volumes were severely affected due to adverse market conditions inthe Telecom Sector. Your Company, while retaining its leadership position in the gensetmarket catering to the telecom space, has focused its presence in the retail segment andhas also introduced new products like inverters.

Mahindra Defence Systems Division (MDS):

Mahindra Defence Systems (MDS), a Division of your Company is engaged in two businesses– a) Mahindra Defence Naval Systems (MDNS) and b) Mahindra Special Services Group(MSSG).

In the Naval Systems business, your Company currently manufactures Sea Mines, TorpedoLaunchers, Decoy Launchers and Composites for various Naval and other applications fromits Plant based in Chinchwadgaon, Pune. MDNS has been servicing diverse customers byproviding systems and sophisticated components. The Naval Systems business hasconsiderable potential and is poised for a major growth in the field of different types ofSea Mines, Torpedo Decoy Systems and Radar Systems.

In the Special Services Group business, your Company provides corporate risk managementconsultancy services, assisting organisations in maintaining their competitive edge byprotecting Information, Physical and Personnel Assets through implementing the securitystrategy encompassing people, process and technology. During the year, MSSG has beensuccessful in registering and maintaining the business growth across various industryverticals through a wide range of service offerings in the Corporate Security Risklandscape in India thereby enabling over 150 major corporate customers to secure theirpeople, assets, information and reputation.

MSSG has witnessed tremendous growth opportunities in the areas of Governance and FraudRisk Management during the year. MSSG’s marketing and brand promotion activities havebeen strengthened with increased manpower and as a result, MSSG has been able to make itsbrand visible in many cities across India.

Management Discussion and Analysis Report

A detailed analysis of the Company’s performance is discussed in the ManagementDiscussion and Analysis Report, which forms part of this Annual Report.

Corporate Governance

Your Company has a rich legacy of ethical governance practices most of which were inplace even before they were mandated. Your Company is committed to transparency in all itsdealings and places high emphasis on business ethics. During the year, CRISIL hasre-affirmed the highest level rating, (Level 1) for Governance and Value Creation for thefifth year in a row. This rating indicates that the capability of the Company with respectto wealth creation for all its stakeholders while adopting strong Corporate Governancepractices is the highest.

A Report on Corporate Governance alongwith a Certificate from the Statutory Auditors ofthe Company regarding the compliance of conditions of Corporate Governance as stipulatedunder Clause 49 of the Listing Agreement forms part of this Annual Report.

Share Capital

Increase in Share Capital

During the year under review, your Company has allotted:

1) 1,81,52,597 Ordinary (Equity) Shares of Rs.5 each upon conversion of ForeignCurrency Convertible Bonds into Shares/Global Depositary Receipts (GDRs), each GDRrepresented by one Ordinary (Equity) Share of Rs.5 each, and

2) 1,73,53,034 Ordinary (Equity) Shares of Rs.5 each to the Trustees of Mahindra &Mahindra Employees’ Stock Option Trust.

Subsequent to the year end, your Company allotted 34,730 Ordinary (Equity) Shares ofRs.5 each to International Finance Corporation, the Shareholder of Mahindra ShubhlabhServices Limited ("MSSL") in the share exchange ratio of 1 fully paid-upOrdinary (Equity) Share of Rs.5 each for every 190 fully paid-up shares of Rs.10 each heldin MSSL pursuant to the Scheme of Arrangement between MSSL and the Company and theirrespective Shareholders ("the Scheme"). The Scheme became effective on 15^thApril, 2011.

Post allotment of Equity Shares as aforesaid, the issued, subscribed and paid-up ShareCapital of the Company stands at Rs.307 crores comprising of 61,39,74,839 Ordinary(Equity) Shares of Rs.5 each fully paid-up.

Finance

The overall global growth showed traction in the Financial Year 2011 with FinancialYear 2012 promising further improvement, despite the temporary setback arising out ofnatural calamities in Japan. However globally, monetary and fiscal policies are showing atightening trend. The developments in Middle East and North Africa coupled with vagariesof global weather have resulted in oil and food prices casting a shadow over forecasts ongrowth, inflation and policy actions. India’s growth during Financial Year 2011 wasstrong and various indicators of demand like auto sales, exports, credit offtake and cargomovements in recent months show continued upward trends. However, inflation continues tobe a worry for monetary and fiscal policy makers. While the Government of India did nottake any major adverse measures in Union Budget for Financial Year 2012, the Reserve Bankof India has since March, 2010 raised key policy rates by 350 bps. For the Indian Economy,the Financial Year 2012 could be a challenging year as corporates face commodity priceincrease and demand gets threatened by rising interest rates.

Your Company continued to focus on managing cash efficiently and ensured that it hadadequate liquidity and back up lines of credit. During the year, your Company initiatedsuitable actions based on financial conditions, to facilitate conversion of debt intoequity and raised fresh debt to finance its growth plans.

Your Company had outstanding Foreign Currency Convertible Bonds ("FCCBs")aggregating USD 189.50 million at the beginning of the year. It issued a notice on 8^thOctober, 2010 for early redemption of its outstanding FCCBs aggregating USD 141.20million. Prior to the notice for early redemption, the bondholders had opted forconversion of FCCBs aggregating USD 48.30 million into Shares/GDRs. Your Company’scall met with a resounding success with FCCBs aggregating USD 140.10 million representing99.2% of the outstanding FCCBs of USD 141.20 million being converted into Shares/ GDRs.

Consequently during the year, your Company has on conversion of FCCBs aggregating USD188.40 million allotted 18.15 million Shares (including Shares underlying GDRs) to thebondholders, who exercised the option to convert these FCCBs into such Shares/ GDRs.Accordingly, your Company’s FCCB debt of Rs. 850.85 crores outstanding on its booksas at the beginning of the financial year stands extinguished thereby strengthening thecredit profile of your Company.

Your Company has also repaid foreign currency loan aggregating Rs. 176 crores andNon-Convertible Redeemable Debentures ("NCDs") of Rs. 200 crores during theyear. It has successfully raised External Commercial Borrowings aggregating USD 150million from banks at attractive terms and at benchmark pricing.

Your Company follows a prudent financial policy and aims to maintain optimum financialgearing at all times. The Company’s total Debt to Equity Ratio was 0.23 as at 31^stMarch, 2011.

Your Company has been rated by CRISIL, ICRA Limited (ICRA) and Credit Analysis &Research Limited (CARE) for its banking facilities under Basel II norms. During the year,CRISIL upgraded the rating for Long Term Banking facilities to "AA+/Stable" fromthe earlier "AA/ Stable". During the year, ICRA and CARE have maintained a LongTerm Rating of "LAA+/Stable" and "CARE AA+" respectively.

CRISIL, ICRA and CARE have all reaffirmed the highest rating for your Company’sShort Term facilities. Your Company’s Bankers continue to rate your Company as aprime customer and extend facilities/services at prime rates.

Acquisitions and other matters

1) Acquisition of Ssangyong Motor Company Limited ("SYMC")

Your Company acquired SYMC, a premier manufacturer of sports utility vehicles("SUV") and recreational vehicles ("RV") in Korea. The total cost ofacquisition of SYMC was KRW 5,22,50,00,00,000 (approximately US$ 463 million) with KRW4,27,09,52,35,000 (approximately US$ 378 million) payable for new stocks and KRW95,40,47,65,000 (approximately US$ 85 million) in corporate bonds for an equity stake ofaround 70% in SYMC.

SYMC was founded in 1954 and has been manufacturing automobiles for more than fivedecades. SYMC has a strong domestic network of over 130 dealers and exports to over 90countries through over 1,200 dealers.

SYMC has been undergoing a corporate rehabilitation process since February, 2009 andthe court receivership has now concluded upon court approval and the corporaterehabilitation process has been terminated in March, 2011.

This acquisition will help your Company to emerge as a competitive global utilityvehicle player by leveraging on your Company’s competence in sourcing and marketingstrategy and SYMC’s strong global presence. Your Company is committed to nurturingthe Ssangyong brand in global markets while preserving its Korean heritage. It is intendedthat SYMC will continue to function as an independent entity with primarily a KoreanManagement. The acquisition will offer financial stability to SYMC and will work tofurther strengthen SYMC’s product portfolio across the globe.

The strong complementarities between SYMC and your Company’s portfolio of productsand technology provide an opportunity to create distinct positioning. The wide sales anddistribution networks and complementary product lines will provide access to many overseasmarkets for both the companies.

2) EPC Industrie’ Limited – The Farm Division of your Company hasbeen working in the wider agriculture domain through Mahindra Shubhlabh Services Limitedand through various Mahindra Samriddhi centres across the country. Farm Division’svision is to "Deliver FarmTech Prosperity" and in line with this vision, your

Company has decided to foray into the Micro-irrigation industry. Micro-irrigationbrings various Benefits to the farmer, such as reduced requirement of water, fertilizers,electricity, labour, etc. with increase in productivity. Entry into the micro-irrigationbusiness is an important step towards realisation of the Division’s vision. It alsosignifies your Company’s commitment to conserve the most precious natural resourceviz. Water. More than 80% of available water in India is consumed in agriculture. Microirrigation is a water efficient irrigation technology which has been identified as one ofthe major focus area by the Agricultural Department.

Thus, keeping the opportunities in Agricultural Sector in mind, your Company hasacquired 38% of the paid-up Equity Share Capital through a Preferential Allotment in EPCIndustrie’ Limited (EPC), a company listed on the Bombay Stock Exchange Limited.Pursuant to the above acquisition, the Company is in the process of making an Open Offerunder the Securities and Exchange Board of India (Substantial Acquisition of Shares andTakeovers) Regulations, 1997 ("Takeover Code") to the Shareholders of EPC for20% of the enhanced Share Capital of EPC as per the terms of the Takeover Code.

EPC established in 1981 is based in Nasik, Maharashtra and is known for its qualityproducts. EPC has grown as one of the top five companies in India in the micro-irrigationspace.

Your Company already has a very strong presence in the Tractor and Farm machinerybusiness and with the current entry in the micro – irrigation business, your Companywould be in a position to serve the farmer in a much better way and create a strongdifferentiation for the brand "Mahindra".

3) Demerger of the Non Fruit Business of Mahindra Shubhlabh Services Limitedinto your Company - The Honourable High Court of Judicature at Bombay has approved theScheme of Arrangement between Mahindra Shubhlabh Services Limited ("MSSL") andyour Company and their respective Shareholders which inter alia envisages demerger of theAgri Inputs Business along with other common assets and liabilities ("Non Fruitbusiness") of MSSL into the Company.

4) Strategic Sale of part of the Company’s Shareholding in MahindraConsulting Engineers Limited ("MACE") to SAFEGE – a France basedMulti Disciplinary Consultancy Company – MACE, a subsidiary of the Company isengaged in engineering, project advisory and infrastructure consulting activities coveringurban infrastructure, water, wastewater, waste management, environment, urban planning,industrial infrastructure, transportation, rural infrastructure, etc.

MACE entered into a strategic partnership with SAFEGE, France and post induction of thestrategic partner, your Company holds 54.16% of the Equity Share Capital of MACE, whilst30.83% is held by SAFEGE and balance 15.01% is held by Mahindra Consulting EngineersEmployees Stock Option Trust and /or its beneficiaries. SAFEGE activities are synergeticwith thrust and growth areas identified for Indian Engineering and Infrastructureconsultancy. "MACE-SAFEGE" partnership will be a strategic vehicle to developbusiness in India, neighbouring countries and the Middle East and Asia besides otherinternational markets in identified areas of activities. Through this strategicpartnership, MACE will also offer support to SAFEGE’s International Assignments andMACE would be well poised to handle large domestic projects in India requiringinternational expertise.

5) Joint Venture with Arabia Holdings Limited and Ras-Al-Khaimah TransportInvestments Co. LLC - Through its Mahindra Defence Systems Division (MDS), yourCompany has over the past eight years acquired a leadership position in India in the fieldof research, design, development and manufacture of armoured and light military vehicles.In order to address the large and growing market for uparmoured vehicles globallyespecially in West Asia, Central Asia and Africa, in June, 2010, your Company had enteredinto a Joint Venture with Arabia Holdings Limited and Ras-Al-Khaimah Transport InvestmentsCo. LLC through its wholly owned subsidiary Mahindra Overseas Investment Company(Mauritius) Limited to form a Joint Venture company viz. "Mahindra Emirates VehicleArmouring FZ LLC" or "MEVA" in the Emirate of Ras-Al-Khaimah in the UAE forarmouring of vehicles.

Your Company holds a 51% stake in MEVA which would design and develop ballistic kitsfor vehicle protection. The other Joint Venture partners would provide necessaryinfrastructural support to MEVA for establishing the operations in the Emirate ofRas-Al-Khaimah. MEVA intends to launch a number of MDS armoured vehicles such as theMarksman, the uparmoured Scorpio, Cash in Transit Van, etc. which have been verysuccessful in India. MEVA will also be doing armouring of non-MDS vehicles such as Toyota,Nissan, etc.

Stock Options

Pursuant to the approval of the Members at the previous Annual General Meeting held on28^th July, 2010, your Company has adopted and introduced Mahindra &Mahindra Limited Employees Stock Option Scheme - 2010 ("New Scheme"). On therecommendation of the Remuneration/Compensation Committee of your Company, the Trustees ofthe Mahindra & Mahindra Employees’ Stock Option Trust have granted 32,16,758Stock Options to Eligible Employees under the New Scheme. During the year under review, nonew Options have been granted under the Mahindra & Mahindra Limited Employees StockOption Scheme - 2000.

Details required to be provided under the Securities and Exchange Board of India(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are setout in Annexure I to this Report.

Industrial Relations

Industrial Relations generally remained cordial and harmonious throughout the year,apart from a one day illegal tool down strike by the Nashik Plant Workmen to press fortheir demands for increase in wages and for upgradation for a section of workmen. The lossof production for that day was compensated within the same week and the Company did notsu3er any loss. On the contrary, the highest ever production was recorded in the month ofMarch, 2011.

The Management Discussion and Analysis Report gives an overview of the developments inHuman Resources/Industrial Relations during the year. In a restructuring exercise torightsize the work force, your Company has, during the year under review acceptedVoluntary Retirement from 146 employees at Kandivali Plant of the Farm Division. YourCompany has set an example of harmonious industrial relationship by celebrating the 40^thAnniversary of uninterrupted existence of Union at Kandivali Plant of the Farm Division.

Safety, Health and Environmental Performance

Health and Safety

Your Company continues to demonstrate a strong commitment towards Safety, Health andEnvironment and as a part of the same, following measures and actions were taken duringthe year under review. Your Company has a well-established Safety, Occupational Health& Environmental Policy. Objectives and Targets derived from the Policy are supportedby Management Programs.

The Safety & Occupational Health of its employees are embedded as coreorganisational values of the Company. The Policy inter alia covers and ensures safety ofpublic, employees, plant and equipment, ensures compliance on a monthly basis, impartstraining to all its employees as per training calendar, carries out statutory safetyassurance and audits of its facilities as per legal requirements, conducts regular medicaland occupational check-up of its employees and promotes health-friendly sustainableactivities.

Fire Service Day and Safety Week are being celebrated, Safety Audits/ Inspectionalongwith Safety awareness training with benchmarks on safety performance are conducted.Your Company’s Plants continued their commitment to improve the well being of itsemployees and contract workmen by organising Occupational Health Examination Camps,medical check-ups, etc.

Through stakeholder’s engagement and employee’s involvement, your Companydemonstrates its road map on the fundamentals of Planet, People and Profit. Various pathbreaking projects have been implemented by your Company in the areas of Air PollutionManagement, Water and Waste Water Management, Solid Waste Management and GreenbeltDevelopment.

New Certifications

The Sustainability Reporting System provides framework for your Company’senvironmental initiatives, sets objectives and targets and helps in continually improvingits air quality by controlling emissions, water pollution and minimising waste from itsprocesses. All Plants of the Automotive Division have been certified with amended standardfor ISO 14001: 2004 & OHSAS 18001:2007. Your Company’s commitment to environmentstems from the Mahindra Group’s abiding concern for Stakeholder engagement in andaround the Society. Its nature of operations has a low impact on the environment byimplementing Environment Management System wherein a healthy work environment is providedto its employees and environment friendly businesses are conducted. Besides, to bringcross cultural sensitivity of the Company’s business associates, promotional activitytowards Green Supply Chain Management has also been initiated.

Implementation of Occupational Health & Safety Management System standard hasre-enforced the Company’s commitment of Safety and Occupational Health to the highestlevels. OHSAS 18001:2007 is the existing best safety practices standard which isimplemented through the amended Management System and all Plants of the AutomotiveDivision have been certified during the year 2010-11. The OHSAS system aims to eliminateor minimise risk to employees and other interested parties who may be exposed toOccupational Safety risks associated with its activities. Sustainable development ispromoted across the Division through sharing of best practices in the fields of Safety,Occupational Health & Environment.

Corporate Social Responsibility

Through its various Corporate Social Responsibility ("CSR") initiatives, theMahindra Group is enabling entire communities to ‘RISE’. With a vision oftransforming the lives of youth from socially weaker and economically disadvantagedsections of society, the Mahindra Group has established various scholarships and othereducational initiatives which help empower these communities. In addition, other CSRinitiatives such as Project Hariyali in the area of environment and supporting‘Lifeline Express’ in the area of health continue to drive positive change inthe lives of communities.

CSR continues to be an integral part of the vision of the Mahindra Group and this yeartoo, your Company has pledged 1% of its Profit after Tax for CSR initiatives, largely toBenefit the socially and economically disadvantaged sections of Society.

Some of the major initiatives your Company has invested in are described below:

A. Nanhi Kali

Nanhi Kali is a sponsorship program that supports the education of disadvantaged girlchildren in India. Through the Nanhi Kali sponsorship, underprivileged girls are providednot only academic support but also uniforms, school bags, shoes, etc. which allow thegirls to attend school with dignity. Through the support of 8,000 donors, the Nanhi Kaliproject is supporting the education of 70,000 underprivileged girls in 9 states in India.The largest donor is the Mahindra Group which supports the education of 23,000

B. Mahindra Pride Schools

2,400 students from socially weaker sections of Society have been provided withlivelihood training at Mahindra Pride School in Pune. The training is provided for thosewho wish to gain employment in the Hospitality Sector, Information Technology Sector forBPOs and KPOs and the Retail Sector. The composition of students consists of scheduledcaste and scheduled tribe youth, most of whom have not even completed their education.After completing their training, 100% of the students have been placed in lucrative jobs.The second Mahindra Pride School was opened in Chennai early this year. This school wouldtrain approximately 600 students in a year.

C. Scholarships & Grants

Mahindra All India Talent Scholarships was awarded to students from lower socioeconomic strata of society who wish to pursue job oriented Diploma Courses in GovernmentPolytechnics. The K. C. Mahindra Scholarships for Post-Graduate studies abroad provideinterest free loan scholarships to various deserving students. Your Company is alsosupporting 15 Mumbai Public

Schools which provide quality English medium public education to students from lowersocio economic strata of Society.

Employee Social Options

Your Company is tapping the potential hidden within each one of its employees to make asustainable society; one which is healthier, cleaner, greener and more literate. TheMahindra Workforce is a powerhouse of inexhaustible energy where people work with passionin abundance and also for the betterment of the Society. Through your Company’sEmployee Social Options (ESOPs) program many Mahindra employees are contributing towardsmaking difference to Society. Your Company’s ESOPs program encourages employees insupporting volunteering projects based on the needs of underprivileged communities in andaround their places of work. Employees generate ideas for projects, prepare annualactivity plans, implement each activity and monitor results. To fund these Employeeinitiatives, each Sector donates 0.5 percent of its Profit after tax to the ESOPs CentralCSR fund.

During the year under review, 15,147 employees volunteered in various initiativescontributing 73,509 man-hours in various social initiatives in and around their localcommunities. Some of the notable ESOPs initiatives this year were the Lifeline Express inFarrukhabad for performing surgeries free of cost, Mahindra Hariyali for planting onemillion trees, ESOPs Awards – 2010, etc. Your Company’s ESOPs activities alsoincluded initiatives in Education, Health, Environment and others having short term aswell as long term impact on the beneficiaries.

‘Sustainability’ Initiative

Your Company embarked on the sustainability journey in November, 2007 and over theselast four years has laid a foundation for developing a sustainable enterprise. Consciousefforts have been made to consider the impact of the Company’s business on theenvironment and its responsibility towards the communities in which it operates, besidesfocussing on economic progress. During the year, your Company’s triple bottom lineperformance for 2009-10 was published in accordance with the latest guidelines of theinternationally accepted Global Reporting Initiative or the GRI standards and like in caseof the previous two Reports, this Report was externally assured by Ernst & Young withan A+ rating and GRI checked. The Report for the year 2010-11 is under preparation andwill be released shortly.

During the year 2009-10, a Carbon foot-printing exercise was undertaken to inventoriseGHG emissions from all your Company’s business operations under Scope I, II and IIIemissions as per internationally accepted standards. This has enabled the Company toestablish a baseline on emissions. This will be an ongoing exercise and continuousreduction in the GHG intensity of all products and processes, will be the Company’sconstant endeavour. The focus all along has been on transparent and comprehensivereporting, due to which your Company has been ranked in the list of top 10 companies inIndia by the Carbon Disclosure Leadership Index 2010 and the Standard & Poor ESG IndiaIndex 2010. Your Company also secured a second place in the Green Business LeadershipAwards 2010-11, instituted by Financial Express and Emergent Ventures. Being conscious ofthe fact that the Company’s products touch many lives and livelihoods in many waysand that the progress of many communities is linked to the Company’s success, with acontinued use of the strategic approach of ‘ALTERNATIVE THINKING’, your Companyis committed to creating a sustainable enterprise.

Directors

Mr. Anand G. Mahindra, Mr. Bharat Doshi, Mr. Nadir B. Godrej and Mr. M. M. Murugappanretire by rotation and, being eligible, offer themselves for re-appointment.

Directors’ Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors, based on therepresentations received from the Operating Management, and after due enquiry, confirmthat: (i) in the preparation of the annual accounts, the applicable accounting standardshave been followed; (ii) they have, in the selection of the accounting policies, consultedthe Statutory Auditors and these have been applied consistently and reasonable and prudentjudgments and estimates have been made so as to give a true and fair view of the state ofaffairs of the Company as at 31^st March, 2011 and of the Profit of the Companyfor the year ended on that date;

(iii) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

(iv) the annual accounts have been prepared on a going concern basis.

Subsidiary Companies

The subsidiary companies of your Company continue to contribute to the overall growthof the Company. Major subsidiaries such as Mahindra & Mahindra Financial ServicesLimited with a 38.49% growth in its consolidated Profits and Mahindra Lifespace DevelopersLimited with a 37.81% growth in its consolidated Profits deserve special mention. Theconsolidated Group Profit for the year after exceptional items, prior period adjustmentsand tax and after deducting minority interests is Rs.3,079.73 crores as against Rs.2,478.56 crores earned in the previous year.

During the year under review, Mahindra Aerospace Australia Pty. Limited, AerostaffAustralia Pty. Limited, Mahindra Reva Electric Vehicles Private Limited (earlier known asReva Electric Car Company Private Limited), Bristlecone Consulting Limited, AnthuriumDevelopers Limited, Watsonia Developers Limited, Gipp Aero Investments Pty. Limited,Gippsaero Pty. Limited, GA8 Airvan Pty. Limited, GA200 Pty. Limited, Airvan FlightServices Pty. Limited, Gipp Aero International Pty. Limited, Nomad TC Pty. Limited,Mahindra Emirates Vehicle Armouring FZ-LLC, Mahindra Solar One Private Limited, MahindraBPO Services Private Limited, Mahindra Aerostructures Private Limited, Ssangyong MotorCompany Limited, Ssangyong European Parts Center B.V., Ssangyong Motor (Shanghai) Co.Limited, Ssangyong (Yizheng) Auto Parts Manufacturing Co. Limited and Mahindra EPCServices Private Limited became subsidiaries of your Company.

During the year under review, ID-EE S.r.l. and Mahindra Solar One Private Limitedceased to be subsidiaries of the Company.

The Statement pursuant to Section 212 of the Companies Act, 1956 containing details ofthe Company’s subsidiaries is attached.

In accordance with the General Circular issued by the Ministry of Corporate Affairs,Government of India, the Balance Sheet, Profit and Loss Account and other documents of thesubsidiary companies are not being attached with the Balance Sheet of the Company. TheCompany will make available the Annual Accounts of the subsidiary companies and therelated detailed information to any Member of the Company who may be interested inobtaining the same. Further, the Annual Accounts of the subsidiaries would also beavailable for inspection by any Member at the Head OFFce of the Company and at the OFFceof the respective subsidiary companies, during working hours upto the date of the AnnualGeneral Meeting.

Consolidated Financial Statements

The Consolidated Financial Statements of the Company and its subsidiaries, prepared inaccordance with Accounting Standard AS21 form part of this Annual Report.

The Consolidated Financial Statements presented by the Company include the financialresults of its subsidiary companies, associates, joint ventures, etc.

Auditors

Messrs. Deloitte Haskins & Sells, Chartered Accountants, retire as Auditors of theCompany and have given their consent for reappointment. The Members would be required toelect Auditors for the current year and fix their remuneration.

As required under the provisions of Section 224(1B) of the Companies Act, 1956, theCompany has obtained a written Certificate from the above Auditors proposed to bere-appointed to the effect that their re-appointment, if made, would be in conformity withthe limits specified in the said section.

Cost Auditors

As per the Order of the Central Government and in pursuance of Section 233B of theCompanies Act, 1956, your Company carries out an audit of its cost records. The due datefor filing of the Cost Audit Report with the Ministry of Corporate Affairs for thefinancial year ended 31^st March, 2010 was 30^th September, 2010. ThisReport was filed on 24^th September, 2010. The Board of Directors of yourCompany has upon recommendation of the Audit Committee appointed M/s. N. I. Mehta &Co., Cost Accountants to audit the cost accounts of the Company for the financial yearending 31^st March, 2012, subject to the approval of the Central Government. Asrequired under the provisions of Section 224(1B) of the Companies Act, 1956, the Companyhas obtained a written confirmation from M/s. N. I. Mehta & Co. to the effect thatthey are eligible for appointment as Cost Auditors under Section 233B of the CompaniesAct, 1956.

Public Deposits and Loans/Advances

Out of the total 14,047 deposits of Rs. 93.09 crores from the Public and Shareholdersas at 31^st March, 2011, 190 deposits amounting to Rs. 0.82 crores had maturedand had not been claimed as at the end of the Financial Year. Since then, 63 of thesedeposits of the value of Rs. 0.45 crores have been claimed.

The particulars of loans/advances and investment in its own shares by listed companies,their subsidiaries, associates, etc., required to be disclosed in the Annual Accounts ofthe Company pursuant to Clause 32 of the Listing Agreement are furnished separately.

Current Year

During the period 1^st April, 2011 to 29^th May, 2011, 50,216vehicles were despatched as against 47,022 vehicles during the corresponding period in theprevious year. During the same period, 40,971 tractors were despatched as against 30,302tractors despatched during the corresponding period in the previous year.

With both input costs and interest rates rising, the economic environment issignificantly more challenging today than it was a year ago. However, the Company expectsto meet these challenges, through its intense and continuous focus on cost controls,innovation, product quality and market diversification.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

Particulars required to be disclosed under the Companies (Disclosure of Particulars inthe Report of Board of Directors) Rules, 1988 are set out in Annexure II to this Report.

Particulars of Employees

The Company had 113 employees who were in receipt of remuneration of not less than Rs.60,00,000 during the year ended 31^st March, 2011 or not less than Rs. 5,00,000per month during any part of the said year. However, as per the provisions of Section219(1) (b)(iv) of the Companies Act, 1956, the Directors’ Report and Accounts arebeing sent to all the Members of the Company excluding the Statement of particulars ofemployees. Any Member interested in obtaining a copy of the Statement may write to theCompany Secretary of the Company.

ANNEXURE II TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31^ST MARCH, 2011

PARTICULARS AS PER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OFDIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED31^ST MARCH, 2011

A) Conservation of Energy

Your Company has always been conscious of the need for conservation of energy and hasbeen steadily making progress towards this end. Energy conservation initiatives have beenimplemented at all the plants and offices of the Company by undertaking numerous energyconservation projects.

Your Company ensures strict compliance with all statutory requirements at all itsplants/ units and takes several voluntary steps like Zero Discharge, reduced consumptionof water, deploying reduce, recycle and reuse approach and takes various other steps asexplained under sustainability initiatives of the Company.

Your Company has also implemented following activities to ensure better environment:

• Reduce Green Gas Emission.

• Increased green zones.

• Effective effluent treatment.

• Waste monitoring and reduction.

• Recycling and reuse of waste/used water such that there is virtually no waterdischarge.

• Reducing solid waste and Eco friendly waste disposal.

• Saving of natural resources like water, fuel, etc.

• Ambient and work place air monitoring.

(a) During the year, the Company has taken the following initiatives for conservationof energy:

(i) Engineering Initiatives

• Installation of heat recovery equipment for furnaces and ovens.

• Use of Piped Natural Gas in place of electrical heating for heat treatment andindustrial washing.

• Installation of LPG flux saver in ovens.

• Multiple initiatives to maintain power factor and hence gain incentive/rebatefrom power supply company.

• Installation of energy efficient screw chiller for Paint Shop and central airconditioning.

• Introduction of energy efficient pumps.

• Installation of VFDs (Variable frequency drives) at select locations.

• Auto switching on-off timer for surrounding lights and boundary lights.

• Theme called "C³= CUT COST OF COMPRESSED AIR" taken up andimplemented in many projects e.g. Installation of smaller capacity air compressors forfeeding compressed air to limited areas on non-production days, timer operated valves forair lines, dedicated low pressure lines for cleaning.

• Installation of solar panels and LED lights.

• Installation of metal halide lamps instead of sodium/mercury vapour lamps.

• Rainwater harvesting.

• Installation of natural draft cooling towers instead of induced draft coolingsystems.

(ii) Process Improvement

• Cycle time reduction of various manufacturing processes through introduction ofnew technology and process improvement.

• Optimising temperature settings on HVAC units, considering seasonal changes.

• Improve capacity utilisation in Paint Shop through modification of skids andtrolley.

• Installation of spring loaded water taps at main canteen.

(iii) Initiatives Generating Awareness on Energy Consumption.

• Extensive involvement of shop floor operating teams in improvement activitiesand projects. Some examples are -

• Periodic checking of Pressure Regulators, Air Leakage audits.

• Shift from continuous to intermittent operation of motors (where possible).

• Optimisation of overhead lights.

• Display of sustainability posters on workplace.

• Display and sale of Energy efficient products for employees.

• Booklet on "Resource Conservation" is published for internalcirculation.

• Guest lecture and quiz competition on "Sustainable Growth through EnergyConservation".

• Extend energy conservation campaigns to suppliers and to nearby schools andcolleges.

• Celebration of World earth day.

• Reward and recognition for energy saving projects.

(b) Additional investments and proposals, if any, being implemented for reduction ofconsumption of energy

• Baltimore efficient Cooling Tower.

• ASU heating with heat recovery from Top coat and Surfacer Oven objects in PaintShops.

• Improvement in efficiency of air conditioning units.

• Application of efficient Magnetic coupled lighting.

• VFD for Pumps.

• Heat Pump for Washing Machine heating.

• PNG hot water Generator for Washing Machine heating.

(c) Impact of the measures at (a) & (b) above for reduction in energy consumptionand consequent impact on the cost of production of goods.

The measures taken have resulted in lower energy consumption. In the AutomotiveDivision, the specific power consumption improved by 4.3% over the previous year and theFarm Division achieved an improvement of 6.1%.

During the current year, the Company has won several awards at National/ State/Regional level for energy management and Environment protection.

1. Areas in which Research & Development is carried out:

During the year under review, the Automotive Division focused on technology upgradationin core areas of engine technology, safety, value engineering through the use of modernmanufacturing processes, alternate material and developing capabilities in automotiveelectronics. The Farm Division focused on retaining fuel efficiency advantage whilemeeting the upcoming engine emission norms on total range of the engines with improvementin engine technology and carrying out new product development. Also beyond tractor,efforts were focused on development of a range of mechanisation solutions.

2. Benefits derived as a result of the above efforts:

Some significant achievements in the Automotive Division include the launch of Genio,Gio Cab and Maxximo Van.

Genio is the next generation 1.2 tonne pick-up powered by a modern CRDe engine. TheGenio comes with many safety features which are a first in the pickup category in India.To name a few - LSPV brakes which adjust the braking pressure depending on the load of thevehicle, ELR (Emergency Locking Retract) seat belts for the driver and co-driver, Radialtubeless tyres which do not burst in case of a puncture and adjustable steering andimmobiliser.

The Company also launched India’s most aflordable four wheeler Compact Cab Gio,equipped with modern styling, car like comfort and safety features. With a driver + 6seating configuration, the Gio Cab is set to redefine last mile public transportationacross India.

The Maxximo Van with the advanced C2 CRDe engine was launched in April, 2011. Thestylish van with spacious 8-seats promises best-in-class comfort is set to re-define theentry-level Contract Carriage and Stage Carriage segments.

Moving on to the Farm Division, in the domestic market, the Company has successfullylaunched the Arjun Multi Application Tractor, strengthening your Company’s positionin the segment of greater than 50HP. In addition, refresh models across the domestic rangewere launched during the course of the year. Engines of all tractor models have beenupgraded to meet the upcoming Bharat Term IIIA emission norms. New models/variants withreduction in fuel consumption as well as comfort factors like power steering wereintroduced.

In the international space, the integrated cabin tractor was extended to 70 HP segment– Model 7060. Compact tractor is also very well accepted in the US market and therange has been expanded by offering 3 new different transmission options – Gear,Hydrostatic transmission and Power shuttle.

In the mechanisation space, the next generation loader with bucket having superiorreach, advanced rotavator optimised for Indian conditions and localised rice transplanterare some of the key developments that will Benefit the consumer in the time to come.

The in-house engine development effort resulted in higher kVA engines adding to theMahindra Powerol portfolio. Going beyond regular applications, the in-house developedengines are finding unique applications, including powering the Brahmos missile launcher,thus contributing to national security. During the year, Auto and Farm Divisions filed 35new patents, while 4 patents were granted.

3. Future plan of action

Your Company continues its efforts on developing new products and technologies to meetthe ever growing customer needs, regulatory requirements, competitive pressures and toprepare for the future. Sustainable mobility solutions are a key focus area and yourCompany will continue to aggressively pursue technology development in these areas. Someof the key thrust areas in this direction are weight reduction by using alternatematerials, designing modularity to take care of variants, VAVE (Value Analysis ValueEngineering) approach for meeting cost pressures. Development and adaptation of safetytechnologies also remain a key focus area. On the Farm Division side, the Company remainscommitted to offering Farm Tech Prosperity to all stakeholders.

4. Expenditure on R&D

The Company spent Rs.739.25 crores (including Rs.349.68 crores on Capital Expenditure)for Research and Development work during the year, which was approximately 2.85% of thetotal turnover.

Besides the above, the Research and Development Expenditure incurred by the Companysince 2004-05 in recognised R & D units is as follows:

1. Efforts, in brief, made towards technology absorption, adaption andinnovation

Your Company has continued its endeavour to absorb advanced technologies for itsproduct range to meet the requirements of a globally competitive market. All of theCompany’s Vehicles, Engines and Tractors are compliant with the prevalent regulatorynorms in India and also in the countries to which they are exported. Your Company ismaking good progress in its programs for development of vehicles which would run onalternate fuels like CNG, Bio-diesel, Hydrogen and Electric traction. The Acquisition of amajority stake in Mahindra Reva Electric Vehicles Private Limited has substantially helpedyour Company to leapfrog in EV technology capability.

2. Benefits derived as a result of the above efforts

• Compliance with new emission norms introduced in India with effect from 1^stApril, 2010.

• Launch of Genio Pick up, Gio Cab, Maxximo Van, THAR, Arjun Multi ApplicationTractor, next generation loader, localised rice transplanter and other implements suitablefor Indian conditions.

• Build a knowledge base for the Company.

• Emphasis on value analysis/value engineering and innovative cost reduction ideasto cut down costs.

3. Imported Technology for the last 5 years

C) Foreign Exchange Earnings and Outgo

The Company continues to strive to improve its export earnings. Further details inrespect of exports are set out elsewhere in the Annual Report.

The information on foreign exchange earnings and outgo is furnished in the Notes onAccounts.

Loans and advances in nature of loans to subsidiaries:

Loans and advances in the nature of loans to Associates:

Except as indicated above, the Company has not made any loans and advances in thenature of loans to associates or loans and advances in the nature of loans where there isno repayment schedule or repayment beyond seven years or no interest or interest belowsection 372A of the Companies Act, 1956.