Ashok Leyland Ltd Directors Report.

To the Members,

PERFORMANCE/OPERATIONS

Your Directors have pleasure in presenting the Annual Report of Ashok Leyland Limited (AL/the Company) along with the audited financial statements for the financial year ended March 31, 2018.

FINANCIAL RESULTS

(Rs. in Lakhs)

Standalone

Consolidated

2017-18 2016-17 2017-18 2016-17
Revenue from Operations 2,652,451.19 2,145,314.33 2,990,109.18 2,418,982.20
Other Income 18,976.47 13,627.01 19,988.42 13,069.22
Total Income 2,671,427.66 2,158,941.34 3,010,097.60 2,432,051.42
Profit Before tax 223,071.54 133,008.62 257,766.60 183,326.25
Less: Tax expenses 66,812.58 10,700.90 75,111.55 19,611.91
Profit after tax 156,258.96 122,307.72 182,655.05 163,714.34
Profit/(Loss) from discontinued operations - - (1,273.15) (423.31)
Profit for the period 156,258.96 122,307.72 181,381.90 163,291.03
Balance profit from last year 259,427.47 256,853.43
Transfers:
- F rom Debenture Redemption Reserve to Statement of Profit and Loss 6,250.00 5,250.00
Profit available for appropriation
Appropriation:
Dividend paid during the year (45,653.92) (27,035.83)
Corporate Dividend tax thereon (9,294.07) (5,503.86)
Pursuant to amalgamation - (92,323.21)
Other Comprehensive Income arising from re-measurement of defined benefit obligation (net of tax) (2,252.26) (120.78)
Balance of profit carried to Balance sheet 364,736.18 259,427.47
Earnings per share (Face value of 1/-)
- Basic () 5.34 4.24 6.02 5.51
- Diluted () 5.32 4.24 6.00 5.51

COMPANYS PERFORMANCE

The Commercial vehicle industry in India grew by 23% in the financial year 2017-18 as compared to the same period last year. The Medium & Heavy Commercial Vehicles (M&HCV) segment showed a growth of 12% and Light Commercial Vehicles (LCV) segment showed The althy growth of 25% during the financial year 2017-18 over the same period last year. This growth has come on the back of Governments push towards infrastructure development, road construction, mining activities, and an increased demand from e-commerce and FMCG logistics.

In addition, there was strict enforcement on vehicle overloading in some key states, which also drove commercial vehicle demand.

Your Company continued to steadily grow sales and revenues across all its business divisions. M&HCV sales grew 15.8% to 131,432 units (116,534 in domestic and 14,898 in export markets). LCV achieved record sales of 43,441 vehicles, with a growth of 37% over the previous year. Your Company took multiple initiatives to improve market coverage, resulting in strengthening its footprint across the country, especially in the Northern and Eastern States of India. Your Company achieved market share growth in almost all segments and regions of the Country, leading to a record full year sales of 102,826 M&HCV trucks. In addition, your Company exported 8,000 vehicles, primarily to South Asian and African markets.

The Power Solutions business witnessed a growth of 14% over the previous year, supported by new customers and applications in Industrial segment. The Aftermarket business of your Company has been delivering consistent growth. Spare Parts revenues clocked a 39% growth backed by improved penetration in multiple product groups, enhanced network reach, strategic supply chain Initiatives and deeper customer engagement.

Highlights of performance are discussed in detail in the Management Discussion and Analysis Report attached as Annexure E to this Report.

SHARE CAPITAL

During the year under review, the Share Allotment Committee at their meeting held on June 13, 2017 had issued and allotted 80,658,292 fully paid equity shares of 1/- each to the equity shareholders of the erstwhile Hinduja Foundries Limited (Transferor Company) on the record date fixed for this purpose i.e. Wednesday, June 7, 2017 as per the Scheme of Amalgamation approved by the Honble National Company Law Tribunal, Division Bench, Chennai vide order dated April 24, 2017.

During the year under review, the Nomination and Remuneration Committee (NRC), had issued and allotted 569,175 shares to Mr. Vinod K Dasari, Chief Executive Officer and Managing Director upon exercise of stock options granted under Ashok Leyland Employees Stock Option Plan 2016. On April 11, 2018, the NRC had issued and allotted 37,27,000 shares to Mr. Vinod K Dasari, Chief Executive Officer and Managing Director upon exercise of stock options granted under Ashok Leyland Employees Stock Option Plan 2016.

Consequent to the above, the issued and paid up share capital of the Company stands at 2,930,831,101/- of 1/- each as on the date of the report.

DIVIDEND

The Dividend Distribution Policy framed in line with Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations) is appended to this report and is also uploaded on the Companys website at http:// www.ashokleyland . com/sites/default/files/Listing Regulation/ Dividend Distribution Policy.pdf.

In line with the policy, your Directors are pleased to recommend a dividend of 2.43/- per equity share of 1/- each for the financial year ended March 31, 2018. Payment of dividend is subject to the approval of shareholders at the forthcoming Annual General Meeting (AGM) and would involve a cash outflow of 8,585,850,797.73/- including dividend distribution tax.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY BETWEEN THE END OF THE FINANCIAL Year AND The DATE OF The Report

There are no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this Report.

TRANSFER TO RESERVES

Your Company does not propose to transfer amounts to the general reserve out of the amounts available for appropriation and an amount of 1,562.59 Crores is proposed to be retained in the profit and loss account.

FINANCE

Long Term Funding:

(a) Secured Non-Convertible Debentures

During the year, your Company has fully redeemed NCD Series AL 18 of 100 Crores and AL 20 of 150 Crores on due dates. No fresh NCDs were issued during the year.

(b) Rupee Term Loans

Your Company has prepaid Secured Rupee Term Loan of 350.53 Crores. In addition, your Company repaid Secured Rupee Term Loan of 16.67 Crores on due dates.

(c) External Commercial Borrowings (ECBs)

During the year under review, your Company has repaid ECB loan instalments that fell due, equivalent to USD 83.33 million on the due dates. No fresh ECB loans were availed during the year.

As at March 31, 2018, Long term borrowings stood at 904 Crores as against 1,965 Crores on March 31, 2017.

HUMAN REsOURCEs

Your Company continued to focus on the three levers of people framework - Culture, Capability, and Capacity with focus towards building a high performing, innovative, and caring organisation where it is fun to work for the workforce. An organisation wide employee engagement survey - "Expressions" was introduced couple of years ago to seek employee feedback and build the culture. The dipstick survey on engagement conducted this year to assess the effectiveness by choosing a random, stratified sample of 20% of the total population indicated that the scores have moved significantly over last year.

As your Company steps into seventieth year, the competition is tougher, and the challenges are steeper. To keep abreast of the constantly changing environment, your Company focused on various people development initiatives like Game Changers, Business Leaders Program, Emerging Leaders Program, Young Talent Program etc., across levels based on the refined Competency Framework.

Your Company launched a premium program HIRE (Harnessing Internal Recruitment Expertise) aimed at achieving excellence in recruitment by building a pool of certified hiring managers.

The focus of the program was to bring in consistency in selection process using a scientific methodology.

Your Company hired talented young women from premier institutes and have put them through a long-term Women Leadership Program providing them a platform for learning so that they can take up leadership roles in business in future. Also, to bring in geographical diversity in the organisation, your Company hired Graduate Engineers from various countries and trained them in India.

To imbibe a strong brand, your Company initiated several workshops on Living the Brand - Aapki Jeet, Hamari Jeet. Your Company also rolled out technical learning interventions and workshops for upskilling the work force.

Your Company launched the digital HRM and learning platform of SuccessFactors which provides the employee with an opportunity to learn anytime - anywhere. Programs such as POSH (Prevention of Sexual Harassment) Information Security Awareness, Diversity and Inclusion, BS4 Readiness, etc. were mandated across the organisation. Your Company used digital platform to disseminate the Mission, Vision, Values and Culture that would help the employees to imbibe the Ashok Leyland Way.

Glad to mention that your Company got featured on ET now for "Indias Finest Workplaces". Your Company also received TISS LEAPVAULT CLO 2017 award for the Best Induction Training Program and the BML Munjal Awards for "Business Excellence through Learning and Development".

CORPORATE GOVERNANCE

Your Company is committed to maintain the highest standard of Corporate Governance and adhere to Corporate Governance guidelines, as laid out in the SEBI Listing Regulations. All the Directors and the Senior Management personnel have affirmed in writing their compliance with and adherence to the Code of Conduct adopted by the Company.

The annual report of the Company contains a certificate by the Chief Executive Officer and Managing Director in terms of SEBI Listing Regulations on the compliance declarations received from the Directors and the Senior Management personnel.

The Statutory Auditors of the Company have examined the requirements of Corporate Governance with reference to SEBI Listing Regulations and have certified the compliance, as required under SEBI Listing Regulations. The Certificate in this regard is attached as Annexure D to this Report.

The Chief Executive Officer and Managing Director/Chief Financial Officer (CEO/CFO) certification as required under the SEBI Listing Regulations is attached as Annexure F to this Report.

Related party transactions / disclosures are detailed in Note No.

3.8 of the Notes to the financial statements.

BUSINESS RESPONSIBILITY REPORT

As per Regulation 34 of the SEBI Listing Regulations, a Business Responsibility Report is attached as Annexure K to this Report.

CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Section 129(3) of the Companies Act, 2013 (Act) and SEBI Listing Regulations the consolidated financial statements prepared in accordance with the Indian Accounting Standards prescribed by the Institute of Chartered Accountants of India, is provided in the Annual Report.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

The Company has 23 Subsidiaries, 6 Associates and 2 Joint ventures as on the date of the report.

During the year, the members of Ashok Leyland (UK) Limited, (AL UK) United Kingdom, subsidiary initiated the voluntary winding process and AL UK was dissolved on April 10, 2018.

Automotive Infotronics Limited, Joint Venture dissolved on April 5, 2017 and Ashley Airways Limited, Associate liquidated on December 23, 2017.

During the year under review, the Company has increased its stake in Hinduja Leyland Finance Limited from 57.20% to 61.85% and in Optare PLC from 75.11% to 99.08%.

The Board of Directors at their meeting held on May 18, 2018 approved the Scheme of Amalgamation of its three wholly owned subsidiaries viz., Ashok Leyland Vehicles Limited, Ashley Powertrain Limited and Ashok Leyland Technologies Limited with Ashok Leyland Limited under Sections 230 to 232 of the Act, read with relevant Rules as applicable, subject to various regulatory approvals and the Honourable National Company Law Tribunal, Chennai Bench. The Appointed Date for the Scheme of Amalgamation shall be April 1, 2018.

A report on the performance and financial position of each of the subsidiaries, associates and joint venture companies is provided in the notes to the consolidated financial statements. Pursuant to the provisions of Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statements of the Companys subsidiaries, Associates and Joint Ventures in Form AOC-1 is attached to the financial statements of the Company.

Pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited financial statements in respect of the subsidiaries are available on the website of the Company.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, Mr. A K Das, Non-Executive NonIndependent Director and Mr. Shardul S Shroff, Independent Director stepped down from the Board with effect from July 21, 2017. The Board wishes to place on record its appreciation for the valuable contributions made by them to the Board and the Company during their long tenure.

Mr. Dheeraj G Hinduja, Chairman retires by rotation at the forthcoming AGM and being eligible, offers himself for reappointment. The resolution seeking approval of the members for the re-appointment of Mr. Dheeraj G Hinduja, Chairman have been incorporated in the Notice of the AGM of the Company along with brief details about him.

The Independent Directors of the Company have submitted a declaration under Section 149(7) of the Act, that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as Independent Director during the year.

The terms and conditions of appointment of the Independent Directors are placed on the website of the Company http://www . ashoklevland.com/companies-act-2013-compliance.

The Company has also disclosed the Directors familiarisation programme on its website http://www.ashokleyland.com/sites/ default/files/familiarisatopm programme for Independent Directors-update.pdf.

During the year, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees, commission and reimbursement of expenses incurred by them for attending meetings of the Company.

Pursuant to the provisions of Section 2(51) and 203 of the Act, the Key Managerial Personnel of the Company are Mr. Vinod K. Dasari, CEO & MD, Mr. Gopal Mahadevan, Chief Financial Officer and Mr. N Ramanathan, Company Secretary. There has been no change in Key Managerial Personnel during the year.

AUDITORS

Price Waterhouse & Co Chartered Accountants LLP (FRN 304026E/ E300009) Statutory Auditors of the Company hold office till the conclusion of seventy third Annual General Meeting of the Company.

The Auditors report to the shareholders on the standalone and consolidated financial statement for the year ended March 31, 2018 does not contain any qualification, observation or adverse comment.

COST AUDITORS

Pursuant to the provisions of Section 148(3) of the Act, the Board of Directors had appointed Messers Geeyes & Co.,

(Firm Registration No.: 00044), as Cost Auditors of the Company, for conducting the audit of cost records for the financial year ended March 31, 2018. The audit is in progress and report will be filed with the Ministry of Corporate affairs within the prescribed period. A proposal for ratification of remuneration of the Cost Auditors for the financial year 2017-18 is placed before the shareholders.

SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Act, read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company engaged the services of Ms. B Chandra (CP No. 7859), Company Secretary in Practice, Chennai to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2018. The Secretarial Audit report for the financial year ended March 31, 2018 in Form No. MR-3 is attached as Annexure H to this Report.

The Secretarial Audit report does not contain any qualification, reservation or adverse remark.

The Board confirms the compliance of the Secretarial Standards notified by the Institute of Company Secretaries of India, New Delhi.

EXTRACT OF THE ANNUAL RETURN

Pursuant to the provisions of Section 92(3) of the Act, an extract of Annual Return in Form MGT-9 as on March 31, 2018 is attached as Annexure G to this report.

OTHER LAWS

As per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, your Company has constituted an Internal Complaints Committee. During the year under review, there were no cases received/filed pursuant to the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

BOARD MEETINGS HELD DURING THE YEAR

Five meetings of the Board of Directors were held during the year. The details of the meetings are furnished in the Corporate Governance Report which is attached as Annexure C to this Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134(5) of the Act the Board of Directors, to the best of their knowledge and ability, confirm that:

a) In the preparation of the annual financial statements for the year ended March 31, 2018, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

b) for the financial year ended March 31, 2018, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the Profit of the Company for the financial year ended March 31, 2018;

c) f hat proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) f he annual financial statements have been prepared on a going concern basis;

e) f hat proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively;

f) that proper systems have been devised to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.

REMUNERATION POLICY OF THE COMPANY

The objective of the Remuneration Policy is to attract, motivate and retain qualified and expert individuals that the Company needs in order to achieve its strategic and operational objectives, whilst acknowledging the societal context around remuneration and recognising the interests of Companys stakeholders.

The Companys policy on directors appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the Corporate Governance report, which forms part of the Boards Report.

PARTICULARS OF Employees

Disclosure pertaining to the remuneration and other details as required under Section 197(12) of the Act, and the Rules framed thereunder is enclosed as Annexure B to the Boards Report.

ASHOK LEYLAND EMPLOYEE STOCK OPTION PLAN 2016

During the year under review, NRC issued and allotted 569,175 equity shares of 1/- to Mr. Vinod K Dasari, Chief Executive Officer and Managing Director upon exercise of options under Ashok Leyland Employees Stock Option Plan 2016. Further on April 11, 2018, the NRC allotted 37,27,000 equity shares of 1/- upon exercise of options under Ashok Leyland Employees Stock Option Plan 2016.

During the year under review, the NRC has granted 20,00,000 options convertible into equal number of equity shares of 1/- each to the senior management personnel of the Company.

Disclosures with respect to Employee Stock Option Scheme of the Company is attached as Annexure J.

PARTICULARS OF LOANS, Guarantees AND INVESTMENTS

The particulars of loans, guarantees and investments under Section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, for the financial year 2017-18 are given in Note 3.8 of the Notes to the financial statements.

TRANSACTIONS WITH RELATED PARTIES

The Audit Committee and the Board of Directors have approved the Related Party Transactions Policy and the same has been hosted on the Companys website http://www.ashokleyland.com /sites/default/files/Ashok Leyland Limited-Policy on Related Party Transactions.pdf.

There were no materially significant transactions with Related Parties during the financial year 2017-18 which were in conflict with the interest of the Company. Suitable disclosures as required under Ind AS 24 have been made in Note 3.8 of the Notes to the financial statements.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure I of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The policy is available on the website of the Company.

PERFORMANCE EVALUATION OF THE BOARD, ITS COMMITTEES AND DIRECTORS

Pursuant to the provisions of the Act and SEBI Listing Regulations, the Board of Directors have carried out annual performance evaluation of its own performance, the Directors Individually as well as the evaluation of the working of its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report attached as Annexure C to this report.

COMMITTEES

As on March 31, 2018, the Company has Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk Management Committee, Corporate Social Responsibility Committee, Investment Committee and Technology Committee. During the year, a Share Allotment Committee was formed for the purpose of making allotment to the shareholders of erstwhile Hinduja Foundries Limited arising out of the Scheme of Amalgamation.

Mr. Jose Maria Alapont was inducted as a member of the Investment Committee on November 8, 2017. He was inducted as a member of the Technology Committee and Nomination and Remuneration Committee with effect from May 18, 2018.

Detailed note on the composition of the Board and its Committees are provided in the Corporate Governance Report attached as Annexure C to this Report.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

Pursuant to the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of the SEBI Listing Regulations, the Board of Directors had approved the Policy on Vigil Mechanism/Whistle Blower and the same was hosted on the website of the Company. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee.

Your Company hereby affirms that no Director/Employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year.

Brief details about the policy are provided in the Corporate Governance Report attached as Annexure C to this Report.

DEPOSITS

The Company has not accepted any deposit within the meaning of provisions of Chapter V of the Act read with the Companies (Acceptance of Deposits) Rules, 2014 for the year ended March 31, 2018.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE Regulators Or Courts Or Tribunals

There are no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company.

INTERNAL CONTROL Systems AND Their ADEQUACY

The Company has designed a proper and adequate internal control system to ensure, adherence to Companys policies, assets are safeguarded, and that transactions are accurate, complete and properly authorised prior to recording. Information provided to management is reliable and timely, and statutory obligations are adhered to. Details are provided in Management Discussion and Analysis Report in Annexure E to this report.

RISK MANAGEMENT

Your Company has established a robust Enterprise Risk Management (ERM) framework embodying the principles of COSO ERM framework and ISO 31000:2009 standards to facilitate informed decision making.

ERM process is overseen by the Risk Management Committee of the Board, which is responsible to ensure that the Company has an appropriate and effective framework for managing and reporting enterprise risks.

The Steering Committee, chaired by the CEO & MD, consists of business vertical heads and is responsible for the risk management process including risk identification, impact assessment, effective implementation of risk mitigation plans, and risk reporting.

The details of risk management as practiced by the Company are provided as part of Management Discussion and Analysis Report attached as Annexure E to this Report.

RESEARCH AND DEVELOPMENT, CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company continues to focus on Research and Development activities with specific reference to emission conformance, fuel efficiency, vehicular performance and enhancement of safety, aesthetics and ride comfort. Further development of the engine range and cabin is also a key result area. Expenditure incurred by way of capital and revenue on these activities is shown separately.

Information as required under Section 134(3)(m) of the Act read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo are furnished in Annexure A to this Report.

ACKNOWLEDGEMENT

The Directors wish to express their appreciation for the continued co-operation of the Government of India, Governments of various States in India, bankers, financial institutions, Shareholders, customers, dealers and suppliers and also, the valuable assistance and advice received from the joint venture partners, Elinduja Automotive Limited, the Hinduja Group and all the shareholders. The Directors also wish to thank all the employees for their contribution, support and continued commitment throughout the year.

For and on behalf of the Board of Directors

Chennai Dheeraj G Hinduja
May 18, 2018 Chairman