Ashok Leyland Ltd Management Discussions.

A. MARKET TRENDS Economy - India

T he International Monetary Fund (IMF) is projecting an acceleration for the Indian economy, with the GDP growth of 6.7% in 2016-17 scaling up to 7.4% in 2017-18 and projected to reach 7.8% for 2018-19, potentially making India the worlds fastest growing large economy. The growth in 2016-17 was hampered by disruptions associated with the demonetisation introduced in November 2016, while 2017-18 included the transition costs related to the launch of Goods and Services Tax (GST). With the structural reforms in place, the economy is expected to move to a higher growth trajectory for 2018-19 and beyond.

T he private consumption growth remained flat in 2017-18, while government consumption recorded a higher growth for the year. Going forward, investments are expected to revive as the corporate sector adjusts to the GST, which over the medium term is expected to benefit economic activity by reducing the transaction cost of tax compliance, drawing informal activity into the formal sector, and expanding the overall tax base. There has been a slowdown in agricultural sector to 3.6%, mainly due to the high base effect of last year. The Indian Meteorological Department (IMD) has predicted the southwest monsoon (April-September) to be at 97% of the long period average (LPA) with a margin of error of +/- 5%. A normal south-west monsoon will sustain agricultural growth and rural consumption.

I ndustrial production saw a low to moderate growth till Q3 2017-18, but it is expected to have bottomed out, as impact of demonetisation and GST gradually fades away. Within the sub-sectors, except for mining which saw a negative growth of 0.2%, all other segments namely manufacturing, construction and utilities grew at 2%, 3% and 4% respectively. The IIP (Index of Industrial Production) grew by 8.4%, driven by the cement and steel sectors which have been leading among the core industries. The services sector showed healthy growth of 11.2% for the second half of 201718 after 2 consecutive quarters of declining growth. Within services, financial and business services and logistics were driving growth.

The economic survey 2018 showed that the headline inflation has been below 4% from Nov-16 to Oct-17 while the CPI food inflation averaged 1% during April-December in 2017-18.

T here has been a broad-based decline in inflation across major commodity groups except Housing and Fuel. The RBI forecasts for H1 2018-19 are at 5.1-5.6% and 4.5-4.6% in H2 pointing to a likely interest rate hike. Factors leading to increased inflation include increase in minimum support prices, rising crude prices as well as improving growth rates.

T ccording to the World Bank, the most substantial medium- term risks for the Indian economy are those associated with private investment recovery, which continues to face several domestic impediments such as corporate debt overhang, regulatory and policy challenges, along with the risk of an imminent increase in US interest rates.

Economy - World

The global economy grew at an average of 3.7% (2017) as compared to 3.2% (2016), and is expected to accelerate to 3.9% in 2018 and 2019 (Source: IMF, Jan 2018). Amongst developed economies, there is a significant upward projection for US economy (2.7% in 2018 as compared to 2.3% in 2017), 2.2% growth in Euro zone and 1.2% in Japan. Emerging Asia as a group is unchanged at around 6.5% in 2018, broadly the same as 2017. Growth in Middle East & North Africa region is expected to remain subdued at 3.5% in 2018, while sub-Saharan Africa is expected to improve from 2.7% (2017) to 3.3% (2018).

The pickup in growth has been broad-based. World trade has grown strongly in the 4th quarter of 2017, well supported by a pickup in investment in advanced economies and increased manufacturing output in Asia. For the year 2018 and 2019 forecast horizon, the upward revision to the global outlook results mainly from advanced economies where growth is now expected to exceed 2 percent.

T he US tariff and tax policy changes are expected to stimulate growth and positively impact the Country, however the punitive tariffs on Chinese imports to the US, has caused dramatic increase in the price of metals like Steel and Aluminum. While the direct impact on the global economy may not be substantial, but it could adversely affect the driving forces behind global economic growth and dampen investor confidence.

Commercial vehicle industry

The commercial vehicle industry in India grew by 23% during 2017-18. This growth has come on the back of governments push towards infrastructure development, road construction, mining activities along with increased demand from e-commerce and FMCG applications. In addition there was strict enforcement on vehicle overloading which drove commercial vehicle demand. The Medium & Heavy Commercial Vehicle (M&HCV) truck segment showed a growth of 19% over last year. The tipper segment drove the demand and grew by over 58% due to increased requirements for aggregate, sand and coal movement across the Country in road construction and mining activities.

The implementation of GST and restriction of overloading resulted in a shift towards higher tonnage and high powered products. As companies across industries re-designed their supply chain network and adopted a hub-n-spoke model of transportation, the demand for higher tonnage trucks, and Intermediate Commercial Vehicles (ICVs) grew at a faster pace. Additionally, the BS-IV range of products and new product launches also contributed to the demand growth.

The M&HCV bus segment declined sharply during the year. This was on account of sluggish demand for large buses and a deferment of purchases by the State Transport Undertakings (STUs) owing to lower budgetary allocations for fleet modernisation. Exports showed a marginal growth of 3% versus last year-.

The Light Commercial Vehicle (LCV) segment showed The althy growth of 25% over last year. This was driven by easier access to finance and lower interest rates for first

time buyers, small fleet operators. In addition, after the GST implementation we saw an optimisation in the logistics sector, where warehouses and depots have been drastically reduced and a hub- and-spoke model for distribution has proved to be more cost effective. This trend increased the demand for LCVs which provide the last-mile delivery from warehouses to end-customer. Exports however declined by 18% versus last year.

T he table below provides statistics of domestic and exports sales performance by segment:

Domestic

Exports

Segment 2017-18 2016-17 Change (%) 2017-18 2016-17 Change (%)
M&HCV Buses 35,649 47,262 -25% 11,771 11,771 3%
M&HCV Trucks 304,664 255,267 19% 31,917 31,948 0%
M&HCV Total 340,313 302,529 12% 44,095 43,719 1%
LCV Buses 49,009 50,864 -4% 4,150 4,673 -11%
LCV Trucks 467,131 380,839 23% 48,622 59,879 -19%
LCV Total 516,140 411,703 25% 52,772 64,552 -18%
CV Total 856,453 714,232 20% 96,867 108,271 -11%

Source: SIAM Flash Report March 2018 B. ASHOK LEYLAND - THE YEAR (2017-18) IN BRIEF

Tour Company continued to steadily grow sales and revenues across all its business divisions. M&HCV vehicle 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.

M&HCV Truck segment

Tour Company crossed 100 thousand mark in domestic M&HCV truck sales in the current financial year for the first time in its 70 year history. Sales grew 21.5% to 102,826 for M&HCV trucks. We maintained our market share in the M&HCV Truck segment, a testimony to the customers confidence in the product and service offerings of your Company.

T he year saw the Indian market migrate to BS IV emission regulations, starting April 2017. Your Company introduced yet another technological innovation, namely /EGR system for emission compliance. This innovative product design highlighted your Companys technological prowess and depth of understanding of customer requirements. Your Company also took multiple initiatives to improve market coverage, resulting in strengthening our national footprint through volume and market share gains, especially in Northern and Eastern states of India.

Tour Company conducted large scale National & Regional Expos to showcase its wide product portfolio & technological might, giving confidence to the customer at delivering our brand promise of "Aapki Jeet Hamari Jeet". There were many noteworthy product launches in M&EICVs which were well received during the year, namely 3718 Plus, Guru (intermediate commercial vehicle), and Captain Elaulage and Multi-axle rigid truck series. 3718 Plus was awarded "Truck of the Year", and helped your Company maintain its dominance in this fast growing sub-segment. GURU, which was launched last year, helped your Company garner additional market share in the ICV segment. In the Tractors- trailer segment, your Company grew faster than the industry, registering 41% growth over last year.

This year the impetus was also on expanding our digital footprint, and your Company enhanced its "i-Alert" digital interface to assist customers towards effective, real-time fleet management. More than 15,000 trucks pre-fitted with i-Alert technology were sold during the year.

Tonsequent of these, your Company once again saw a 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, mainly to South Asian and African markets.

M&HCV Bus segment

Your Company maintained its Global 4th position in volume sales. In the M&HCV Bus segment, your Company has overall leadership in the Indian Bus market, with a gain of 5.5% & 5.3% market share in ICV-Private & MDV-Private segments respectively. Export volumes grew by 33% in the year ended 2017-18 and one out of every three buses sold were in export markets.

S unshine and JanBus won Bus Safety Awards for Excellence in School transport and Public transport respectively.

Your Company continued to work alongside progressive State Transport Undertakings (STUs) to provide safe and comfortable public transport solutions. Your Company leveraged the bus-body building capacities at Alwar plant (Rajasthan) and at its subsidiary Global TVS Bus Body Builders Limited (Tamil Nadu), to grow sales in the fully-built segment.

LCV segment

Your Company reached a record sale of 43,441 light commercial vehicles (LCVs) in the financial year 2017-18, with a growth of 37% over the previous year. The LCV business achieved significant milestones during the year, and rolled out the 200,000th LCV vehicle on the road, highlighting the popularity of the brand and the product performance. In addition, the launch of DOST+ added strength to the existing DOST brand and helped us to achieve record sale of 5,396 vehicles in the month of March 2018.

Power Solutions Business

S he Power Solutions Business of your Company is one of the preferred engine supplier for generating sets, earth- moving & construction equipment in industrial applications, harvester combines in agricultural segment & various marine applications. In 2017-18, the strong economic growth coupled with intensive infrastructure development by Government created growth in medium horsepower generating sets, with buoyancy in Construction equipment requirements, and higher demand for harvesting machines for the agricultural sector. Your Company continued to strengthen its market place and achieved a 14% growth in sales for the year supported by new customers and applications in Industrial segment.

Aftermarket Business

S he 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.

Defence

Your Company is the leading mobility vehicle supplier to the Indian army. For the year 2017-18, your Company supplied 921 units of completely built up units (CBUs) and 3571 vehicle kits to the Defence forces. Your Company is also developing vehicles for a number of strategic and tactical applications, to transport and protect the Defence and para military forces of the Country.

Foundry Division

S he Indian foundry industry manufactures castings for applications in Auto, Tractor, Railways, Machine tools, Defence, Earth Moving /Textile / Cement / Electrical / Power machinery, Pumps / Valves etc. The Foundry division of your

Company is mainly catering to the automotive industry in the country and having product segments of Cylinder Block, Head and Tractor Housings. For the year 2017-18 the Foundry division achieved the highest ever production of 97,126 MT (increase of 15% over last year) and sales-95,557 MT (increase of 23% over last year). The total inventory holding was reduced by 4660 MT in 2017-18 (March 2017 inventory was 7330 MT; March 2018 Inventory was 2664 MT)

FY 2016-17 FY 2017-18
Production in MT 84,732 97,126
Sales in MT 77,609 95,557
Inventory MT 4,660 2,664

Overall Summary

In summary, during FY 2017-18, your Company continued to strengthen its position across all business segments. Last year, your Company recorded sales of 174,873 units with a growth of 20.5 percent, which was in line with the overall industry growth in commercial vehicle sales.

c. opportunities and threats

W ith the transition to Bharat Stage IV (BS-IV) emission norms completed and GST related regulations implemented, the commercial vehicle industry has seen a steady growth in demand. Vehicle utilisation is on the rise and turnaround time has reduced with the removal of state border check posts. This has facilitated the establishment of a hub-and- spoke logistics model for distribution. As a result, the multiaxle vehicle segment is witnessing a huge growth in demand, together with the Light and Intermediate Commercial Vehicles (LCVs ad ICVs).

S he Union Budget for 2018-19 is overall positive for the automotive industry with its focus on infrastructure. The Governments push towards infrastructure development, restrictions on overloading, road construction and mining activities, along with increasing demand from e-commerce and FMCG applications is expected to boost freight demand.

S ith the introduction of safety regulations in the cabin, fully built trucks and buses are likely to see an upshift.

There are series of policy interventions proposed by the government (e.g. bus-body code, truck code). These policies offer opportunities for the CV industry to enhance product offerings aimed to improve road-safety, driver comfort, and fuel efficiency. The Voluntary Vehicle fleet Modernisation Programme (V-VMP) policy, which aims to incentivise replacement of old commercial vehicles, has received a nod from the Finance Ministry. It has now been sent to the GST Council, which will decide the amount of concession that Central and State Governments will offer for vehicle replacement.

Crude oil prices have been steadily rising, and with daily revision in prices, these are reflecting in the high domestic retail price for Petrol and Diesel. This is a critical factor in the TCO (total cost of operation) for a commercial vehicle operator. Sharp increase in the price of diesel, could be a threat to the growth in the overall logistics industry.

On the electrical vehicle policy front, the government is yet to freeze the contours of phase-2 of the FAME (Faster Adoption & Manufacturing go Hybrid and Electric Vehicles)

India Scheme. FAME phase-1 has been extended for an additional six months to promote purchase and usage of green vehicles. Further clarity on government policies in this sector is awaited.

D. RISK MANAGEMENT

During the year, your Company gained sales volume and retained its market share, despite challenges faced by the CV industry. Our ability to proactively respond to the external risks through appropriate risk response strategies, was key to manage these challenges. Further, your Companys performance was fuelled by innovation, exhaustive marketing strategies, and network expansion.

In view of the upcoming emission norms and changing technology requirements, including thrust on alternate fuel technology, your Company continues to work on innovative and cost-effective technology solutions and vehicles through strategic partnerships to meet the regulatory requirements.

Your Company has an inclusive, well integrated and standardised ERM framework across the organisation encompassing all business units and functions. The ERM process enables the business units in identifying and proactively addressing risks and opportunities, assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring them on a regular basis.

The ERM in the Company is overseen by the Board of Directors, through the Risk Management Committee (RMC) which is responsible to ensure that the Company has an appropriate and effective ERM framework. The RMC apprises the Board on a periodic basis on the effectiveness of the ERM framework, the enterprise risks faced by the Company and how these are managed. It also reviews the organisations Risk Appetite statement on an annual basis.

T he Steering Committee, consisting of core business vertical heads, is responsible for the risk management process including risk identification, impact assessment, effective implementation of risk mitigation plan and risk reporting.

The Steering Committee, chaired by CEO & MD, reviews on a quarterly basis the enterprise risks which are tabled at the RMC for its review.

ERM is integrated with the strategic business planning process. Key internal and external risks, inherent to the strategy for each of the business units are identified and the critical assumptions underlying the strategy are also considered. It also involves identification of risks, opportunities & trends including evaluation of shift in customer preferences, competitor actions, technology / regulatory trends and geo-political risks.

Through the ERM process, your Company aims to be resilient to the changing business scenario, gain competitive advantage over its peers and protect and create value for stakeholders, including shareholders, employees, customers, regulators, and society.

We also take pride in informing you that your Company has received an award for "Best Risk Management Framework and Systems - Automotive" at the 4th edition of India Risk Management Awards, presented by CNBC-TV18 & ICICI Lombard in January 2018.

E. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

T iven the nature of business and size of operations, your Company has designed a proper and adequate internal control system to ensure:

a) T ecording of transactions are accurate, complete, and authorised;

b) T dherence to Indian Accounting standards and compliance to applicable statutes, Company policies and procedures;

c) Effective usage of resources, and safeguarding of assets

Your Company has complied with the specific requirements as laid out under Section 134(5)(e) of the Companies Act, 2013 which calls for establishment and implementation of an Internal Financial Control framework that supports compliance with requirements of the Act in relation to the Directors Responsibility Statement.

Your Companys Internal control framework follows the COSO (Committee of Sponsoring Organisations of the Treadway Commission) Internal control framework 2013, and supports in evaluating the operating effectiveness of internal controls in a consistent manner.

E urther, your Company, through its own independent and multi-disciplinary Internal Audit function with the support of third party service providers where appropriate, carries out risk based Internal audit reviews, based on the annual risk based Internal Audit plan as approved by the Audit Committee of the Board. The Internal Audit function reviews compliance vis-a vis the established design of the Internal control, as also the efficiency and effectiveness of operations.

Y ignificant deficiencies in Internal control identified if any, are reviewed periodically and tracked for closure.

T he summary of the Internal Audit findings and status of implementation of action plans for risk mitigation, are submitted to the Audit Committee every quarter for review, and concerns around residual risks if any, are presented to the Board.

F. INFORMATION SECURITY

I nformation and related technology are vital assets for your organisation. At Ashok Leyland, we guard our Information assets from threats, both internal and external, through the adoption of best practices in Information Security, and by building a culture of Information Security awareness. This has enabled your Company to minimise risks from cyberattacks and other security threats.

Tour Company has adopted the ISO 27001 Information Security Standard for its Information Security Management System (ISMS) to protect critical information assets, and has successfully renewed the ISO 27001:2013 certification for the current year-.

Tour Company has an independent Information Security function governing the planning, implementation, review and improvement of the Information Security processes across the organisation to protect the Confidentiality, Integrity and Availability of critical and sensitive information.

G. FINANCIAL REVIEW

S ummary of Profit and Loss account is given below:

Rs. in Crores

2017-18 2016-17 inc / (Dec) %
INCOME
Sales 26,524.51 21,453.14 23.6
Other Income 189.76 136.27 39.3
Total 26,714.27 21,589.41 23.7
Expenditure
Material cost 18,621.27 13,973.39 33.3
Excise duty 276.60 1,313.01 (78.9)
Employee benefits expense 1,811.92 1,480.05 22.4
Finance costs 131.25 155.38 (15.5)
Depreciation & amortisation 554.61 517.89 7.1
Other expenses 3,075.73 2,484.16 23.8
Total 24,471.38 19,923.88 22.8
Profit before exchange gain on swap contracts, exceptional items & tax 2,242.89 1,665.53 34.7
Exchange gain on swap contracts 0.39 15.40 (97.5)
Profit before exceptional items & tax 2,243.28 1,680.93 33.5
Exceptional items (12.57) (350.84) (96.4)
Profit before tax 2,230.71 1,330.09 67.7
Tax expense 668.12 107.01 524.4
Profit after tax 1,562.59 1,223.08 27.8
Basic earnings per share () 5.34 4.24 25.9

S ote: Hinduja Foundries Limited was amalgamated with Ashok Leyland (AL) Limited effective October 1, 2016. Consequently FY 2017 and FY 2018 financials consist of 6 months and 12 months financial information of Foundries Division respectively. Hence the figures are not comparable.

Revenues:

Your Companys revenues improved by 24% aided by the price increase consequent to upgradation of emission norms in India (to BS IV effective April 1, 2017), shift in the sales from haulage (16 tonne or less) to higher tonnage vehicles viz., Tractor trailers, Multi Axled vehicles and tippers as well as upward revision in prices to partially mitigate commodity price increases during the year.

Costs:

• M aterial Cost: Through various internal initiatives, your Company could manage to contain material cost increase by about 1.1% during the year. Your Company had to concede around 1.9% towards commodity cost increases during the year which is offset by 0.8% saving through internal cost reduction measures.

• Mtaff Costs: Employee expenses are up by 22% reflecting the impact of stock options, full year impact of staff cost of Foundries Division in FY 2018 ( 57 Crores incremental in current year), full year impact of increments and performance pay, salary revision for executives as well as bonus provisioning for associates at all manufacturing units during the year.

• F inance costs decreased to 131 Crores during the year. This includes 38 Crores of full year finance charges for Foundries Division as against 30 Crores charge last year (only for 6 months). For AL alone, finance charges have reduced to 93 Crores in current year from 125 Crores last year reflecting lower working capital levels as well as better cash flows during the year.

• M epreciation for the year is at 555 Crores which is higher than last year amount of 518 Crores. Depreciation related to Foundries division was at 50 Crores in current year when compared to 24 Crores last year (only for 6 months). For AL, depreciation has gone up by 11 Crores over last year.

• Mther expenses in terms of percentage of revenue is same as last year. For AL, other expenses have increased by 20% from 2,384 Crores in FY 17 to 2,863 Crores in FY 18 reflecting the increase in volume. Other expenses of Foundries Division was at 100 Crores in FY 17 (only for 6 months) vs 213 Crores in FY 18.

• Capital Employed

Total capital employed by your Company increased by 18% from 14,040 Crores to 16,586 Crores reflecting the increase in activity levels.

Total shareholders funds as at March 31, 2018 before providing for current year dividend stood at 7,165 Crores which is an increase of 1,039 Crores over March 31, 2017 amount of 6,126 Crores. This increase reflects the current year profit offset by dividend payout of previous year.

Summary of the Balance sheet is given below:

Rs. in Crores

March 31, 2018 March 31, 2017 Inc / (Dec)%
SOURCES OF FUNDS
Shareholders Funds 7,164.80 6,126.07 17.0
Non-current Liabilities 1,174.30 1,492.26 (21.3)
Current Liabilities 8,246.98 6,421.59 28.4
Liabilities on assets held for sale 0.15 (100.0)
Total 16,586.08 14,040.07 18.1
APPLICATION OF FUNDS
Fixed Assets 5,375.46 5,176.67 3.8
Investments 2,747.47 2,001.68 37.3
Loans & Other non-current assets 593.34 761.60 (22.1)
Current Assets 7,869.81 5,977.12 31.7
Assets held for sale -- 123.00 -100.0
Total 16,586.08 14,040.07 18.1

Capital Expenditure and Investments

During the year, your Company incurred 625 Crores towards capital expenditure, predominantly towards sustenance of existing capacity and product development activities. Further, an exchange difference of 6 Crores has been capitalised during the year. This is on account of the weakening of the INR against US$ during the year.

625 Crores capex indicated above includes 55 Crores for Foundries Division.

Your Company has invested in cash 248 Crores in Optare Plc., 494 Crores in Hinduja Leyland Finance and 4 Crores in Ashok Leyland Defence Systems. Thus, in all your Company had invested 746 Crore in cash in Joint Venture (JV) / Associates / Subsidiaries during the year.

C urrent Assets as at March 31, 2018 were higher at 7,870 Crores when compared with previous year level of 5,977 Crores. This increase was driven by increase in mutual fund investments as at March 31, 2018 by 2,178 Crores. Cash and cash equivalents as at March 31, 2018 was at 994 Crores higher than 869 Crores as on March 31, 2017. Inventories decreased by 921 Cr to 1,710 Crores as at March 31, 2018 compared to 2,631 Crores as at March 31, 2017 mainly due to decrease in work in progress. BS 3 vehicles identified for conversion as on March 31, 2017 which have been classified under work in progress have been fully converted during the year. Trade Receivables decreased by 84 Crores to 980 Crores as at March 31, 2018 from 1,064 Crores as on March 31, 2017.

Liquidity

Cour Company continued with the "Cash and Carry" system of sales during the year which has been effective since May 2009. This has enabled your Company to better manage the increased liquidity requirements. During the year, your Company has repaid long term loans of 1,055 Crores from internal generation ( 662 Crores by AL and 393 Crores by Foundries Division). Your Company manages its liquidity through rigorous weekly monitoring of cash flows.

Profitability

Cour Companys profitability improved consequent to increased volumes continued in financial year 2017-18 also. The increased volumes were aided by the growth in GDP which is being driven very well by the GST reforms and growth in infrastructure. The concept of hub and spoke is happening may be because of GST implementation. This has resulted in the size of truck becoming larger and higher revenues. Sale volume of domestic truck was up by 22% in FY 2018 but the truck revenue was up by 37%. Improvement in demand off take in higher tonnage vehicles comprising tipper, tractor trailer and multi axle vehicles has boosted volumes and profits for your Company. This has also led to higher MHCV market share. Tighter control on material costs and operating expenses combined with efficient working capital management have significantly contributed to profit improvement during the year.

After 20 years, your Companys debt rating has been upgraded by CARE ratings. During March 2018, Your Companys financial rating has been upgraded from CARE AA to CARE AA+ with stable outlook. During March 2018,

ICRA has reaffirmed the credit rating at ICRA AA with outlook revised from stable to positive. Details are as follows:

Agency Long Term Short Term Facilities/ Commercial Paper
CARE CARE AA+; Stable outlook CARE A1+
ICRA (ICRA) AA; (positive outlook) ICRA A1+

During the year, your Company has serviced all its debt obligations on time.

Results of Operations

Cour Company generated an after tax profits from operations of 2,456 Crores in 2017-18 which was higher as compared to 1,978 Crores generated last year. With sizeable customer advance as well as significant decrease in working capital, your Company registered a net cash inflow of 5,418 Crores from its operations which is 1 A times higher when compared to 2,155 Crores generated last year.

Cash outflow for acquisition of fixed assets and other investing activities for 2017-18 was at 452 Crores as against outflow of 407 Crores in 2016-17. Though no fresh long-term loans were raised during 2017-18 and 2016-17 for AL, 175 Crores were raised by Foundries division during 2016-17. Further, your Company has made investments to the extent of 2,880 Crores during the year. This is against 1,070 Crores of investments made during 2016-17.

C rofit before tax and exceptional items stood at 2,243 Crores as against a 1,681 Crores last year.

Cfter reckoning a tax liability of 668 Crores, Profit after tax for the current year stood at 1,563 Crores. The earning per share has increased by 25% from 4.24 in 2016-17 to 5.34 in the year under review.

Cour Company has continued to publish consolidated accounts of its subsidiaries, associates and joint ventures in line with last year-.

Dividend

The Directors have recommended a dividend of 2.43/- per share of 1/- each (243%) for the financial year ended March 31, 2018.

Cash flow statement

Rs. in Crores

Particulars March 31, 2018 march 31, 2017
Profit from operations after tax 2,456.17 1,977.84
(Inc) / Dec in Net working capital 2,962.18 176.93
Net cash flow from operating activities 5,418.35 2,154.77
Payment for acquisition of fixed assets - net (532.13) (365.98)
Cash outflow for other investing activities 80.32 (40.69)
Purchase of short term and long term investments - net (2,880.26) (1,070.15)
Cash flow from financing activities (1,961.34) (1,371.85)
Net cash inflow / (outflow) 124.94 (693.90)

iEGR innovation - a significant milestone in Your Companys history

Your Company was the only Company in the world, which launched iEGR based BS IV because it believed that it is a simpler thing to do for Indian markets which will also help on the reliability. Your Company has so far sold more than 1 lakh vehicles with iEGR technology and it has proven to be a good technology developed in India.

Emission norms change from BS III to BS IV and its impact

S upreme Court vide its order dated March 29, 2017 has mandated that on and from April 1, 2017, only BS IV compliant vehicles (2,3 & 4 wheelers and commercial vehicles) can be sold in India by any manufacturer or dealer. Your Company had an inventory of 9572 BS III vehicles as on March 31, 2017 (excluding defence and IO specific vehicles).

Status of conversion BS III to BS IV as well as diversion to export markets is given as under:

Number of vehicles

Particulars March 2017 march 2018 sold In FY18 % sales
BS III - Conversion to BS IV 7,123 183 6,940 97.4
BS3-Diversion to export markets 2,449 463 1,986 81.1
Total 9,572 646 8,926 93.3

Sour Company has ensured that adequate provision is made towards the loss on account of non-salvageable items during conversion.

The Year The ad

Commercial Vehicle (CV) industry runs on three primary aspects viz.,

a) Growth in GDP, which is being driven well now with the GST reforms,

b) Growth in infrastructure. Your Company expects that the investment thrust in infrastructure will continue in 2018-19 also.

c) Growth in mining which is largely related to infrastructure.

All these three at present augur well for the CV industry.

In addition to this, two significant events are happening in the country:

a) More of hub and spoke is happening may be due to GST implementation.

b) T his results in size of truck becoming larger

Sour Company is quite bullish that the infrastructure led demand will continue. The GDP will continue to grow on the back of GST, the hub and spoke model will continue to play to your Companys favour, and the international markets is also expected to do well.

The industry view is that MHCV truck is likely to witness a growth of around 10% in FY 2019 on top of a 14% growth in FY 18. Over the medium term, the demand for the CVs will also be driven by gradual acceptance of advance trucking platforms, progression to BS VI emission norms (possibly by 2020 onwards) and introduction of technologies, which may lead to advance purchases by fleet operators.

Sour Company is continuing to do well in domestic truck business. But equally, your Company is looking at other business segments covering LCV, Defence, After Market, Customer solutions to grow them at a faster pace than the truck business so that your Company will be less prone to cyclicality that the truck industry is known for.

S ome of the concerns like increase in fuel price are expected not to have an adverse impact on the MHCV industry. The increase is compensated to the operators in most of the contracts. Similar concern was expressed on on commodity price increases. Your Company will mitigate this increase through price increases but the increases will be done only to protect the margins. Your Company will not give away the margin for the sake of market share or for commodity price increases. Your Company will strive to continue to maintain margins in double digits.

Sour Company is launching two product platforms this year, one is the high horse power range of vehicles viz., tippers and tractors. Second is the worlds first 41 tonne with 5 axles with twin tyre lift.

4. HUMAN RESOURCES

During the year under review, the total number of employees on the rolls of the Company is 11,835.

Material developments in the Human Resource/ Industrial relations front have been detailed under the head "Human Resource" in the Boards Report.