Annual Report - Bajaj Auto - 2009-2010

BAJAJ AUTO LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

To
The Member

Introduction:

The directors present their third annual report and the audited statements
of accounts for the year ended 31 March 2010.



The highlights are as under:-

Units 2009-10 2008-09
(Nos) (Nos)

Two-wheelers 2,511,643 1,919,625
Three wheelers 340,937 274,529
Total 2,852,580 2,194,154
Of which Exports 891,002 772,519

Financials:

Rs. In Million

2009-10 2008-09

Net sales & other income 120,435 89,323

Gross profit before exceptional items,
interest & depreciation 27,151 13,140

Exceptional items:

VRS compensation 1,833 1,833

Valuation losses of derivative
hedging instruments (218) 218

Interest 60 210

Depreciation 1,365 1,298

Profit before taxation 24,111 9,581

Provision for taxation 7,075 3,016

Profit after tax 17,036 6,565

Disposable surplus 17,001 6,545

Proposed dividend (inclusive of
dividend tax) 6,748 3,724

Transfer to General Reserve 1,703 2,821

Balance carried in Profit & Loss
Account 8,550 -

Earnings per share (Rs.) 117.7 45.2

Dividend:

The directors recommend for consideration of the shareholders at the
ensuing annual general meeting, payment of a dividend of Rs.40 per share,
(400 per cent) for the year ended 31 March 2010. The amount of dividend and
the tax thereon aggregates to Rs. 6,748.5 million.

Dividend paid for the year ended 31 March 2009 was Rs.22 per share (220 per
cent). The amount of dividend and the tax thereon aggregated to Rs. 3,724
million.

Operations:

The operations of the company are elaborated in the annexed Management
Discussion and Analysis Report.

Capacity expansion & New Projects:

The company plans to increase its capacity of two and three wheelers from
the current 4,260,000 numbers per annum to 4,980,000 numbers per annum by
31 March 2011.

The 4 wheel vehicle development work is under progress and commercial
launch of the first product from this platform is scheduled for 2012.

The techno-economic feasibility of the 4-wheeler Project and related
agreements between partners, Bajaj, Renault & Nissan will be concluded at a
suitable stage of this platform development.

Research & development and technology absorption:

During the year under review, your company continued to invest
substantially in R & D facilities, resulting in the enhancement of its
infrastructure for design, prototyping & testing.

The year 2009-10 was a satisfying year, with R&D being involved in the
creation of a number of new products and helping your company to gain
market share. Many important products, which demonstrated the technical
prowess of the company, were launched during the year under review. These
were Pulsar 220 F, Pulsar 180 UG, Pulsar 150 UG, Pulsar 135 LS and Discover
DTS-si.

Your company continues to focus on expanding its design and testing teams,
which has enabled it to make the new generation products.

The developments in this area are set out in greater detail in the annexed
Management Discussion and Analysis Report.

The expenditure on research and development during 2009-10 and in the
previous year was:

Rs. In Million

2009-10 2008-09

i. Capital (including technical know-how) 312.3 310.8

ii. Recurring 1,035.3 837.9

Total 1,347.6 1,148.7

iii. Total research and development
expenditure as a percentage of sales,
net of excise duty 1.17 1.36

Conservation of energy:

As a part of continuing efforts to conserve various resources, following
steps were taken to conserve energy:

* Electrical energy saving was achieved by introduction of light emitting
diode (LED) street lights and LED mid-bay lamps; use of compact fluorescent
lamps for office lighting; efficient usage of compressor and installation
of transparent roof sheets for optimum utilisation of natural lights;

* Water saving was achieved by usage of recycled water, drip irrigation /
sprinkler system for gardening, revising water change frequency of paint
booth water circulation system; regulating pump on-off timing through
timers and replacement of old underground water pipes above-ground pipes to
avoid wastage of water due to leakage;

* Liquified petroleum gas (LPG) saving was achieved by reduction in number
of initial heat up occurrences from two to one for continuous gas
carburising (CGC) furnace; installation of waste heat recovery system for
pre-heating of combustion air in paint shop; reduction in hot water
temperature for pre-treatment process and single shift running for
production upto 60K at Pantnagar.

Impact of measures taken:

As a result of the initiatives taken for conservation of energy and natural
resources, the company has effected an overall reduction in consumption as
under:-

Reduction achieved in

2009-10 (%) 2008-09 (%)
Electrical energy 17 23
Water 27 11
LPG 12 44

Investment / savings:

Investment for energy conservation activities Rs.8.1 million Saving
achieved through above activities Rs.15.1 million.

Foreign exchange earning & outgo:

The company continued to be a net foreign exchange earner during the year.

Total foreign exchange earned by the company during the year under review
was Rs.32,690 million, compared to Rs. 26,819 million during the previous
year.

Total foreign exchange outflow during the year under review was Rs. 4,616
million as against Rs. 7,286 million during the previous year.

The above outflow includes an investment of Rs.16 million (Previous Year
Rs. 1,378 million) made in its 100% subsidiary, Bajaj Auto International
Holdings BV. Netherlands for increasing its stake in KTM Power Sports AG
from 31.72% to 31.92%. It further includes an investment of Rs.811 million
(Previous Year Nil) made in its subsidiary, PT Bajaj Auto Indonesia.

Industrial relations:

Industrial relations with staff and workmen across the plant at Akurdi,
Waluj, Chakan and Pantnagar remained cordial.

The year 2010, being a Silver Jubilee year for the Waluj factory, various
events like cultural activities of employees and their family members,
sports competitions, tree plantation, blood donation etc. were conducted.

One workman of the Waluj plant received the Kamgar Bhushan' Award and six
workmen received the Gunwant Kamgar' Award, declared by the Government of
Maharashtra for the year 2009.

Subsidiaries:

PT. Bajaj Auto Indonesia (PT BAI), is a majority shareholding (98.94%)
subsidiary of Bajaj Auto Limited. The subsidiary assembles and markets
Pulsars in Indonesia. During the year, the Pulsar upgrades were introduced
in Indonesia. So far, there are more than 38,000 satisfied customers,
owning Bajaj motorcycles in Indonesia.

Product portfolio will be expanded under Pulsar brand with Pulsar 135 LS in
the first quarter of 2010-11. Indonesia, being a light weight high
acceleration step-through market (bebek), Pulsar 135 LS will be positioned
competitively to upgrade from bebek for the thrill seeking youngsters.

During the year under review, sales and service showrooms were expanded to
cover 23 provinces, across 7 major islands.

In an effort to bring down the customs duties, the subsidiary has localised
some of the assembly operations. It would continue to pursue the
localisation of sub- assemblies further in 2010-11.

With the addition of Pulsar 135 LS to the model line up and with increased
local sub-assembly operations, the subsidiary would be in a position to
reduce its losses in 2010-11.

Bajaj Auto International Holdings BV, Netherlands (BAIHBV):

During the year under review, BAIHBV invested further Euro 250,290 to
increase its stake in KTMPS to 31.92%.

The first product developed under the joint development program between KTM
and BAL was showcased in Milan Motorshow in November 2009 and was received
well. The product will go on sale in 2010-11.

Reinforcing its commitment to KTM and signifying the strategic importance
of KTM brand & products, Bajaj invested a further Euro 20 Million in April
2010 in KTM through BAIHBV taking its stake in KTM to 35.67%.

Corporate social responsibility:

During the year 2009-10, Bajaj Auto continued its Affirmative Action Plan &
Corporate Social Responsibility initiatives in various fields. Activities
in this area are set out in greater detail in the CSR Report.

Directors:

J.N. Godrej, S.H. Khan, Suman Kirloskar and Naresh Chandra retire from the
board by rotation this year and being eligible, offer themselves for re-
appointment.

Rahul Bajaj, Madhur Bajaj and Rajiv Bajaj have been re-appointed as
Chairman, Vice Chairman and Managing Director for a further term of five
years commencing from 1 April 2010 and ending 31 March 2015.

Directors' responsibility statement:

As required by sub-section (2AA) of section 217 of the Companies Act, 1956,
directors state:

* that in the preparation of annual accounts, the applicable accounting
standards have been followed along with proper explanation relating to
material departures.

* that the directors have selected such accounting policies and applied
them consistently and made judgments and estimates that are reasonable and
prudent, 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 that period.

* that the directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
company and for preventing and detecting fraud and other irregularities.

* that the annual accounts have been prepared on a going concern basis.

Consolidated financial statements:

The directors also present the audited consolidated financial statements
incorporating the duly audited financial statements of the subsidiaries,
viz. PT. Bajaj Auto Indonesia and Bajaj Auto International Holdings BV,
Netherlands and as prepared in compliance with the accounting standards and
listing agreement as prescribed by SEBI.

Information in aggregate for each subsidiary company is disclosed
separately in the consolidated balance sheet.

Statutory disclosures:

The company has received an exemption from the central government under
section 212 (8) of the Companies Act, 1956 with regard to attaching of the
balance sheet, profit and loss account and other documents of its
subsidiary companies, viz. PT Bajaj Auto Indonesia and Bajaj Auto
International Holdings BV, Netherlands for the year 2009-10. The summary of
the key financials of the company's subsidiaries is included in this annual
report.

The annual accounts of the subsidiary companies and the related detailed
information will be made available to the members of the company and its
subsidiary companies, seeking such information at any point of time. The
annual accounts of the subsidiary companies will be kept for inspection by
any member of the company at its registered office and also at the
registered office of the concerned subsidiary company.

As required under the provisions of sub-section (2A) of section 217 of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
Rules 1975 as amended, particulars of the employees are set out in an
Annexure to the directors report. As per provisions of section 219
(1)(b)(iv) of the said Act, these particulars will be made available to any
shareholder on request.

Particulars regarding technology absorption, conservation of energy and
foreign exchange earning and outgo required under section 217(1)(e) of the
Companies Act, 1956 and Companies (Disclosure of Particulars in the report
of board of directors) Rules, 1988 have been given in preceding paragraphs.

Directors' Responsibility Statement as required by section 217(2AA) of the
Companies Act, 1956 appears in a preceding paragraph.

Certificate from auditors of the company regarding compliance of conditions
of corporate governance is annexed to this report as Annexure 1.

A cash flow statement for the year 2009-10 is attached to the balance
sheet.

Corporate governance:

Pursuant to clause 49 of the listing agreement with stock exchanges, a
separate section titled Corporate Governance' has been included in this
annual report, along with the reports on Management Discussion and Analysis
and General Shareholder Information.

All board members and senior management personnel have affirmed compliance
with the code of conduct for the year 2009-10. A declaration to this effect
signed by the Chief Executive Officer (CEO) of the company is contained in
this annual report.

The CEO and Chief Financial Officer (CFO) have certified to the board with
regard to the financial statements and other matters as specified in clause
49 of the listing agreement and the said certificate is contained in this
annual report.

Secretarial standards of ICSI:

Secretarial standards issued by the Institute of Company Secretaries of
India (ICSI) from time to time are currently recommendatory in nature. Your
company is, however, complying with the same.

Group:

Pursuant to an intimation from the Promoters, the names of the Promoters
and entities comprising 'Group' as defined under the Monopolies and
Restrictive Trade Practices ('MRTP') Act, 1969 are disclosed in the Annual
Report for the purpose of Regulation 3(1)(e) of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997.

Auditors' report:

The observations made in the Auditors' Report, read together with the
relevant notes thereon are self-explanatory and hence, do not call for any
comments under section 217 of the Companies Act, 1956.

Auditors:

The members are requested to appoint Messers Dalal & Shah, Chartered
Accountants, as auditors for the period from the conclusion of the ensuing
annual general meeting till the conclusion of the next annual general
meeting and to fix their remuneration.

Mr. A.P. Raman, cost accountant, Pune has been appointed as cost auditor to
conduct the said audit for the year 2010-11, and the government approval in
this regard has been received.

On behalf of the board of directors

Rahul Bajaj
Chairman

Date : 12 May 2010

Report on Corporate Social Responsibility (CSR):

The CSR activities of Bajaj Group are guided by the vision and philosophy
of its Founding Father, Shri Jamnalal Bajaj, who enunciated the value of
Trusteeship in business and laid the foundation stone for its ethical and
value-based functioning.

The core elements of CSR activities include ethical functioning, respect
for all stake-holders, protection of human rights and care for the
environment.

The Company and Bajaj Group generally implements the above initiatives
through its employees, Welfare Funds and Group NGOs / Trusts / Charitable
Bodies operating at various locations in the country. It also enlists the
help of non-Group NGOs, Local Authorities, Business Associations and Civil
Society, wherever deemed necessary.

Some of the major initiatives taken up during the year under review are
summarised below :-

A. By the Company:

Code of conduct and affirmative action:

Your company believes that its success is interlinked with the well-being
of all sections of the society and equal opportunity for all sections. The
company continues to ensure no discrimination of any type to socially
disadvantaged sections in the work place. In the year under review, the
company recruited 1182 new employees, of which 161 (13.62%) belong to
weaker sections, in line with the affirmative action planned by the
company. In the previous year, the same was 6.58%.

Education:

Under the Public Private Partnership program (PPP), the company has
undertaken to upgrade 2 Industrial Training Institutes (ITI) in Pune and
one in Pantnagar. During the year, your company took actions to ensure
better quality of output from the Institute and also followed up with the
concerned agencies for approval of Institute Development Plan. At Ramgarh
in Pantnagar, the new structure is coming up and will be available for the
current year.

Economically weaker, brilliant, underprivileged children, who qualify for
the coaching of IIT entrance examination, are encouraged to seek financial
assistance.

Health:

The Anti Retroviral Treatment Centre (ART centre) set up by your company at
Yeshwantrao Chavan Municipal Hospital (YCM Hospital) has registered 3500
patients with 1900 cases under ART Centre. This centre is now a bench-mark
for new centres and is the largest-one run by industry. The Director
General, NACO visited the ART centre and later CII awarded its recognition
to Bajaj Auto for its initiatives and long-time commitment in the matter.

B. Through Charitable and other Trusts, NGOs and Group Companies:

In addition to the activities carried out by the Group Companies, numerous
charitable and rural development activities are carried out through its
various Trusts / NGOs etc. Some of those are highlighted below:

1. Jamnalal Bajaj Foundation (JBF - Foundation):

Activities carried out by JBF are highlighted as under:

AWARDS:

The Foundation gives 4 Awards annually - each of the value of Rs.5 lakhs.
Of these, three are given to individuals in India for outstanding
contribution in the fields of constructive work on Gandhian lines,
application of science and technology for rural development and uplift and
welfare of women and children. The fourth one is an International Award -
given to individuals other than Indian citizens from foreign countries for
their contribution to the promotion of Gandhian values outside India.

RURAL DEVELOPMENT:

The Foundation has been undertaking rural development work in select
villages of Wardha District, Maharashtra (since 1987) and in Shikohabad,
Dist. Firozabad, U.P. (since 1992).

The activities are undertaken on the basis of the need of the local people.
Special emphasis is given on health, family welfare, immunisation, supply
of potable drinking water, sanitation and alternative source of renewable
energy.

OTHER CHARITABLE ACTIVITIES:

* Employment Generation Programmes:

Programmes of employment generation in the rural area have helped the
women-folk and scheduled castes and the poorer sections to develop self-
confidence in themselves.

* School under National Child Labour Project:

Schools running with the financial support of National Child Labour Project
(GOI), are monitored and controlled by JBF. 200 students and 20 staff
members are part of these 4 schools.

* Balwadi (Child Training Centre):

Balwadi is a pre-school, where under-privileged children are taught by
trained teachers. The Foundation is running 24 Balwadis i.e. Bal Sanskar
Kendra in rural areas for poor children below six years of age. It also
runs free computer training classes, tailoring classes and stitching
classes for poor and needy people.

* Community Awareness Campaign & Health Camp:

The Foundation carried out people-to-people base awareness programmes about
population control, usage of toilet, health, hygiene etc. and organised
health camps for women and handicapped persons.

2. Jankidevi Bajaj Gram Vikas Sanstha (JBGVS):

During the year under review, JBGVS undertook a number of development
initiatives for economic and environment development, health care and
prevention of HIV / AIDS, basic education and literacy, women empowerment
and social development.

Activities carried out by JBGVS for community development and empowerment
of women are highlighted below:

Rural Development:

The company continued with its rural development activities in Pune and
Aurangabad districts of Maharashtra through JBGVS. JBGVS aims at integrated
development of 43 selected villages, to be carried out by the villagers
under their own leadership and through unified efforts forged by Government
and local organisations with JBGVS acting as a catalyst. From April, 2010,
it plans to increase the number of villages to 61, which includes 11
villages of Sikar District, Rajasthan, birth place of Late Jamnalal Bajaj,
founder of the Bajaj Group and additional 13 villages in Pune & Aurangabad
districts.

Healthcare:

It conducted about 60 health check-up camps, including camps held in
conjunction with Kamalnayan Bajaj Hospital at Aurangabad. JBGVS runs a
mobile clinic, in 20 villages in Pune with a lady doctor and a nurse to
provide primary health care services at the doorstep of the poor.

Tribal Development:

A tribal development project, for 1000 tribal families, called Aamrai was
launched on 21 August 2009. Rahul Bajaj, Chairman, BAL launched the
project. This seven year project involves planting and tending of 27,000
mango trees and 18,000 amla trees on 900 acres of tribal wasteland and
distribution of goats, buffaloes & vermi-compost beds for 100 landless
tribal families. It is a Rs.3.50 crore project to be done over seven years
in partnership with National Bank for Agriculture & Rural Development
(NABARD). The project is expected to generate about Rs.4 crores annually
from 8th year onwards and substantially improve the quality of life of 1000
tribal families.

3. Trusts for Colleges:

* Shiksha Mandal, Wardha founded in 1914 by Late Shri Jamnalal Bajaj runs
seven colleges with around 10,000 students on its rolls. These include
colleges for commerce, science, agriculture, engineering polytechnic and
rural studies. Its mission is to provide high quality education at an
affordable cost & to inculcate socially desirable values. One of its
Colleges, the Jankidevi Bajaj College of Science has recently been selected
by the University Grants Commission as a College with Potential for
Excellence. Ten of its students appeared in the University merit list.

Two of its colleges have received UGC grants to run remedial coaching
classes and training for competitive exams for SC/ST students.

A new Bajaj College of Engineering, funded by a Rs 25 crore donation from
the Bajaj trusts is in the process of being formed.

It is the only educational institution chosen as a resource NGO by the
Maharashtra Government for implementing a Rs.600 crore project aimed at
increasing farmer incomes in Vidarbha.

* Bajaj Science Centre was started in 2007 as a place for middle and high
school children to enjoy science by doing it. For the last two years, one
of its students has bagged a medal in the national level Homi Bhabha Bal
Vaigyanik competition. Its new Rs 5 crore complex has been funded by the
Bajaj trusts and the fees at the center are subsidised at Rs 100/month.

* Gandhi Vichar Parishad runs a 6 month PG Diploma course on Gandhian
thought, which attracts students from all over India and recently from
abroad too. It organised an international seminar in November 2009 on the
occasion of the centennial of the publication of Gandhiji's 'Hind Swaraj'.

4. Bajaj Allianz Insurance Companies:

Bajaj Allianz initiated a special awards ceremony' and gave away
Recognition Awards to disabled / physically challenged' individuals under
different categories ranging from sports, entertainment, business,
employment and national service. It was a step to recognise and make a
difference to the lives of the physically challenged in India.

5. Kamalnayan Bajaj Hospital:

Kamalnayan Bajaj Hospital, located in Aurangabad in Marathwada region, is
providing super speciality and tertiary care medical facilities, not
available elsewhere in this region. Bajaj Auto with its group companies, is
supporting the Trust, named - MMRI (Marathwada Medical & Research
Institute), which runs the hospital. In the last one year, hospital has
expanded its capacity from 150 beds to 250 beds and major part of the
expansion has been for general category patients. Recently, it has added
cancer treatment facilities, including Linac Accelerator & Brachy therapy.
Also added are MRI 1.5 Tesla equipment, new generation Siemens Cath Lab for
heart patients, latest ophthalmology equipment and other advanced
facilities.

The hospital has been providing annually relief for close to 55,000
patients on OPD basis and close to 7,000 patients, who are admitted to
hospital for various treatments. It also provides intensive care unit and
cardiac care unit, with a capacity of 22 beds and generally with an
occupancy rate of more than 95%.

The hospital also runs a programme of providing relief to Below Poverty
Line (BPL) and Economically Weaker Section (EWS) of the society with free /
subsidised treatment. It holds camps in the villages of the district of
Aurangabad and close to 400 BPL patients have been treated at a cost of Rs.
41 lakhs.

The Trust is in the process of starting a Nursing College in 2010-11.

The Group has another 20 Trusts, which are also engaged in many CSR
initiatives. Thus, what is listed above is not exhaustive, but only
illustrative to give a glimpse of the importance being given by the company
and the Group towards CSR.

A publication of the Group 'Beyond Profits - Philanthropic Activities of
the Bajaj Group', setting out in greater detail the CSR activities of the
Group can be made available to any shareholder on request.

Constituents of Group' as defined in MRTP Act, 1969 for the purposes of
SEBI (SAST) Regulations, 1997:

Persons constituting group within the definition of 'group' as defined in
the Monopolies and Restrictive Trade Practices Act, 1969, for the purpose
of Regulation 3(1)(e) of the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997,
include the following:

Name of the Person / Entity:

1. Anant Bajaj
2. Deepa Bajaj
3. Geetika Bajaj
4. Kiran Bajaj
5. Kriti Bajaj
6. Kumud Bajaj
7. Madhur Bajaj
8. Minal Bajaj
9. Nimisha Bajaj
10. Niraj Bajaj
11. Niravnayan Bajaj
12. Pooja Bajaj
13. Rahul Kumar Bajaj
14. Rajivnayan Bajaj
15. Rishab Bajaj
16. Ruparani Bajaj
17. Sanjali Bajaj
18. Sanjivnayan Bajaj
19. Shefali Bajaj
20. Shekhar Bajaj
21. Siddhant Bajaj
22. Sunaina Kejriwal
23. Manish Kejriwal
24. Aryaman Kejriwal
25. Neelima Bajaj Swamy
26. Aditya Swamy
27. Bachhraj and Company Pvt. Ltd.
28. Bachhraj Factories Pvt. Ltd.
29. Bajaj Allianz Financial Distributors Ltd.
30. Bajaj Allianz General Insurance Company Ltd.
31. Bajaj Allianz Life Insurance Company Ltd.
32. Bajaj Auto Employees' Welfare Funds
33. Bajaj Auto Finance Ltd.
34. Bajaj Auto Holdings Ltd.
35. Bajaj Auto Ltd.
36. Bajaj Electricals Ltd.
37. Bajaj Financial Securities Ltd.
38. Bajaj Financial Solutions Ltd.
39. Bajaj Finserv Ltd.
40. Bajaj Holdings & Investment Ltd.
41. Bajaj International Pvt. Ltd.
42. Bajaj Sevashram Pvt. Ltd.
43. Baroda Industries Pvt. Ltd.
44. Hercules Hoists Ltd.
45. Hind Musafir Agency Ltd.
46. Jamnalal Sons Pvt. Ltd.
47. Kamalnayan Investment & Trading Pvt. Ltd.
48. Madhur Securities Pvt. Ltd.
49. Mukand Engineers Ltd.
50. Mukand Ltd.
51. Niraj Holdings Pvt. Ltd.
52. Rahul Securities Pvt. Ltd.
53. Sanraj Nayan Investments Pvt. Ltd.
54. Shekhar Holdings Pvt. Ltd.
55. Shishir Holdings Pvt. Ltd.
56. The Hindustan Housing Co Ltd.
57. Anant Trading Company
58. Bachhraj Trading Company
59. Bajaj Trading Company
60. Rishabh Trading Company
61. Anant Trust
62. Aryaman Trust
63. Deepa Trust
64. Geetika Trust
65. Kriti Trust
66. Minal Trust
67. Neelima Trust
68. Nimisha Trust
69. Niravnayan Trust
70. Rishabnayan Trust
71. Sanjali Trust
72. Siddhant Trust

Note: Shareholdings of HUFs, are held in the names of the respective
individuals in the capacity of Karta. Hence, HUFs are not separately listed
hereinabove.

Management Discussion and Analysis:

As we know, 2008-09 was a very difficult year for the world economy. The
stock, money and financial markets crashed, and with it the real sectors,
in what was the worst global depression since the 1930s. Every developed
country suffered negative GDP growth. And with it, economic and social
pain.

Among the major emerging markets, China and India continued to grow - but
at significantly lower rates. In India, for instance, after three
consecutive years of growing at over 9%, GDP growth fell to 6.7% in 2008-
09. Demand growth reduced sharply across all sectors; in many to the
negative territory. Discretionary purchases were hit the hardest. It is not
surprising, therefore, that automobile and two-wheeler sales tapered off.

The good news for China and India was that the two emerging market giants
shrugged off the downturn remarkably quickly. After three quarters of
declining growth, both nations stemmed the rot, and got back into their
stride. To be sure, GDP growth was muted compared to the past. However, for
China to achieve 8.7% in 2009 and India to record 7.2% to 7.5% GDP growth
in 2009-10 says a great deal about the capabilities of these two nations in
steering through the crisis.

In India, growth has been particularly robust in the two-wheeler market,
which increased in volume by 24% in 2009-10.

Bajaj Auto Limited (Bajaj Auto', BAL' or the Company') did very well. It
sold over 2.5 million motorcycles and, in doing so, the Company earned
21.7% EBITDA margin, which was the highest in the industry. Bajaj Auto's
performance highlights for 2009-10 are given below:

It needs to be emphasised that the Company's excellent operational and
financial performance is not merely due to increasing overall growth in
motorcycle demand in India. Over the last few years, Bajaj Auto has been
developing a brand-centred strategy.

The front end' is guided by the Company's strategy of differentiation, to
continuously specialise its brand positioning in motorcycles. In the
process, Bajaj Auto has positioned its motorcycle brands in the utility,
price, value and sports categories. The basic proposition is that while
products may generate market share, it is brands that provide pricing power
and create higher profits.

The back end' - R&D, quality, production efficiency, logistics and
throughput - is guided by TPM, which the Company calls The Prime Mover'
towards excellence.

2009-10 saw the coming together of the front end and the back-end. It is
this alignment which has resulted in Bajaj Auto growing faster than the
market, gaining market share, and earning the highest profit rate in the
industry.

Highlights for 2009-10 versus 2008-09: Bajaj Auto standalone:

* 2009-10 has been a record year for Bajaj Auto in terms of highest ever
sales, exports, profits and margins.

* Net sales and other operating income grew by 35% to Rs.119.21 billion.

* The year saw record sales of 2.85 million units - over 2.5 million
motorcycles and 340,937 three-wheelers.

* Exports rose by 15% to 891,002 units.

* The Company's operating EBITDA stood at Rs.25.93 billion - a growth of
116% over last year. The operating EBITDA margin was 21.7% of net sales and
other operating income for 2009-10.

* Operating profit before tax (PBT) grew by 170% to Rs.22.89 billion.

* Profit after tax (PAT) grew by 160% to Rs.17.03 billion.

* Surplus cash and cash equivalents in the Company's balance sheet as on 31
March 2010 stood at Rs.32.6 billion, versus Rs.9.3 billion on 31 March
2009.

Markets:

Motorcycles: Overall:

There are two tales of motorcycles in India. The first is well known: the
steady growth of motorcycle sales throughout the country, and its
overwhelming dominance in the two-wheeler market.

As from 7.10 million units in 2006-07, motorcycle sales fell to 6.54
million units in 2007-08, and then rose very marginally to 6.81 million
units in 2008-09. The year under review has been outstanding. Sales has
increased by 24.1% - the best ever growth since 2002-03, and over a much
higher base. Indeed, sales in 2009-10 was 18.9% higher than even the
previous peak during 2006-07. Motorcycles continue to account for over 80%
of total two-wheeler sales. For the Company, therefore, it is the two-
wheeler that matters.

How has Bajaj Auto fared? Table 1 gives the data for the last seven years.

Table 1 : Bajaj Auto's Sales of Motorcycles (Domestic + Exports):

Year ended 31 March Market * Market BAL BAL's
(In Million growth (In growth
Numbers) Million)
Numbers)

2004 4.317 14.9% 1.024 17.9%
2005 5.218 20.9% 1.450 41.6%
2006 6.201 18.8% 1.912 31.9%
2007 7.100 14.5% 2.379 24.4%
2008 6.544 -7.8% 2.140 -10.1%
2009 6.806 4.0% 1.908 -10.8%
2010 8.444 24.1% 2.507 31.4%

* Market' refers to domestic sales plus exports of motorcycles of all
manufacturers in India.

The Company sold over 2.5 million motorcycles in India and the rest of the
world. It increased its sales by 31.4% - or 7.3 percentage points higher
than the market as a whole, i.e. domestic sales plus exports of motorcycle
of all manufacturers in India.

Table 2 gives movement in market share for domestic motorcycles. Here, too,
Bajaj Auto's motorcycle sales in 2009-10 grew faster than the market -
39.7% for the Company, versus 25.8% in the aggregate.

Table 2: Bajaj Auto's Growth in Domestic Market Share for Motorcycles:

Year ended Market Market BAL BAL's BAL's
31 March (In Million growth (In growth market
numbers) Million share
numbers)

2006 5.815 17.1% 1.747 31.7% 30.0%
2007 6.554 12.7% 2.079 19.0% 31.7%
2008 5.768 -12.0% 1.658 -20.3% 28.7%
2009 5.835 1.2% 1.276 -23.0% 21.9%
2010 7.341 25.8% 1.782 39.7% 24.3%

Motorcycles: Domestic Sales:

However, underscore the second tale of motorcycles. This is the story of
the changing preference of Indian consumers. It needs some explanation.

Over the last five years, the Company's management has been communicating
about the change in consumer preferences for motorcycles. The gist of it
has been:

* Indian consumers - urban as well as a rural - have become better off.
They have been enjoying greater purchasing power than before; and have
begun to demand greater design inputs, better looks, feel, comfort and
adventure for the products that they buy. And are willing to pay for these
attributes.

* As a consequence, the consumers are upgrading. Across the board, a
motorcycle is becoming a lifestyle statement. Boring and fuel efficient no
longer works; exciting and fuel efficient does - rapidly so, in ever
increasing strides.

* In addition, there is a growing body of motor-bike users who want to
purchase powerful models for the pure thrill of biking.

The data prove this very clearly. Consider the following product
segmentation:

* Commuter Standard (STD): Comprising Bajaj Auto's Platina; Hero Honda's CD
series; and TVS' Star.

* Commuter Deluxe (DLX): The key brands here are Bajaj Auto's Discover;
Hero Honda's Splendor, Passion and Glamour; Honda Motorcycle & Scooters
India's (HMSI's) Shine; and TVS' Fiero.

* Sports: This includes Bajaj Auto's Pulsar; Hero Honda's CBZ, Hunk and
Karizma; HMSI's Unicorn and Stunner; TVS's Apache; and Yamaha's R15 and
FZ16.

How do the market shares of these categories stack up in India?

Commuter STD:

The share of this bottom-of-the-pyramid' category has been falling
steadily, as Chart B1 shows.

For India as a whole, the share of Commuter STD motorcycles has fallen year
after year, from 43% of the market (in terms of volume) in 2005-06 to 19%
in 2009-10. So, too, has Bajaj Auto's composition: from 54% of the
Company's total sales in 2005-06 to 24% in 2009-10.

It is not just a matter of falling segment share. The Commuter STD category
comprises low pricing power, low margin, low profit products. Bajaj Auto
believes that there is more brand premium to be reaped - and higher profits
generated - by being a significant player or leader in the other two
categories.

Commuter DLX:

Unlike the Commuter STD segment, this category is not only growing every
year, but also constitutes the major chunk of India's motorcycle market.
Chart B2 plots the data. From a high base of 48% of the market in 2005-06,
the Consumer DLX segment has grown to 64% in 2009-10 - or close to two-
thirds of the total number of bikes sold. Bajaj Auto, through its Discover
DTS-Si, has increased its presence from 25% of the total number of
motorcycles sold by the Company in 2005-06 to 45% in 2009-10.

With the launch of Bajaj Auto's Discover DTS-Si, the Company is selling an
average of 80,000 vehicles per month in this category. Discover is now a
one million plus brand.

Sports:

This segment is showing rapid growth. From 9% market share in 2005-06, it
has risen to 17% in 2009-10. According to many, this will be the fastest
growing segment in the times to come, given the disproportionate growth of
purchasing power in the hands of middle-class urban India, especially age
group of 20-30 years. With its Pulsar range, Bajaj Auto has grown faster -
from 21% of its total volume of motorcycles in 2005-06 to 31% in 2009-10.
Bajaj Auto is the clear market leader in this category.

This is an exciting segment in more ways than one. It is about aspiration;
power; freedom; enjoyment; and the sheer pleasure of riding a great bike.
The Company believes that for India as a whole, the segment will continue
increasing its share of the market; and so too will Bajaj Auto.

In this category, the new Pulsar 135 LS has been very successful in the
market. Designed in the Pulsar character of aggression, the bike has been
crafted with an eye to detail. Its light sports nature has bought more
people into Pulsar fold, who would otherwise have been intimidated by the
full size Pulsars. Together with the 135 LS, the Pulsar will also become a
one million brand.

The strategic shift in favour of the bigger and sportier Discover and
Pulsar models has not only created a powerful image for the Company's
offerings, but also generated higher margins.

Motorcycles: Awards:

Bajaj Auto has won several awards for its motorcycles in the course of the
year - recognition of the Company's commitment to brands, advertising,
technology and product appeal. These are given below:

AWARDS MODEL AWARD BODY - AWARD

For Product Pulsar 135LS ET NOW-Zigwheels, Bike of the Year
and Technology
ET NOW-Zigwheels, Technology of
the Year - 4 Valve

UTV Bloomberg-AutoCar, Bike of the
Year

UTV Bloomberg-AutoCar, Viewer's

Choice Bike of the Year

DISCOVER ET NOW-Zigwheels, 100cc Bike of
the Year

DTS-Si ET NOW-Zigwheels, Most Value for
Money Bike of the Year

NDTV Profit-Car India & Bike
India,

Motorcycle of the Year, up to
125 cc

Kawasaki Indian Motorcycle of The Year,
Ninja 250 R 2009

ET NOW-Zigwheels, 250cc Bike of
the Year

NDTV Profit-Car India & Bike
India,

Motorcycle of the Year, up to
250 cc

NDTV Profit-Car India & Bike
India, Two-Wheeler of the Year

CNBC-Overdrive, Bike of the Year

Business Standard Motoring, Bike
of the Year 2010

For Brand and Bajaj Auto Global Youth Marketing Forum 2010:
Communication
Most Popular Two-Wheelers Among
Youth

Bajaj Auto Brand Equity: 2nd Most Trusted
Brand for Auto Two-Wheelers

Discover DTS-Si NDTV Profit-Car India & Bike
India, Best Integrated Campaign,
Two-Wheelers

Discover DTS-Si CNBC-Overdrive, Best Storyboard
Commercial

Discover DTS-Si Auto India, Best Advertising

Pulsar Silver Effie for Pulsar Mania Ad

Pulsar ABBY: Best film in Auto Category
for the Fastest Indian'

Pulsar Mania AME Award for Effective Use of
Branded

Content: Pulsar MTV StuntMania

XCD 135 ABBY: Best film in Auto Category
for the Twisted Sisters'

Exports:

Bajaj Auto continues to be the country's largest exporter of two and three-
wheelers. During 2009-10, the Company's international sales achieved an
all-time high of 891,002 vehicles - which was 15% more than the sales
recorded in the previous year.

In 2009-10, exports accounted for Rs.32.46 billion (US$ 682 million), or
28% of the Company's total net sales. Table 3 gives the data.

It is worth noting that three-wheeler exports now account for almost 50% of
total three-wheeler sales.

Table 3: Product-wise Exports of Bajaj Auto (in numbers):

Product 2008-09 2009-10 Growth

Motorcycles 631,383 725,023 15%
Total two-wheelers 633,463 726,115 15%
Three-wheelers 139,056 164,887 19%
Total vehicles 772,519 891,002 15%

The export business enjoys a healthy geographical spread.

The increased presence in Africa was primarily due to growth in Nigeria,
Uganda, Angola and Kenya. Bajaj Auto has initiated a major brand-building
effort in Africa for the Boxer, which involves creating exclusive branded
outlets for the customers in terms of sales and after-sales services.

Sales in South Asia (excluding India) grew by 4%. The slowdown in Sri Lanka
for three of the four quarters was more than compensated by growth in
Bangladesh. Due to the fall-out of the financial crisis, South-East Asia
had a negative growth of 14%. The Company's subsidiary in Indonesia, PT
BAI, clocked sales of 11,954 units.

Although the Company's sales to Latin America recovered in latter half of
2009-10, the year as a whole was worse than before. Adverse economic
conditions led to the region's sales de-growing by 7%. However, given Bajaj
Auto's strong brand presence in these markets, it is expected that the
Company will increase sales as the Latin American markets improve in 2010-
11.

Three-Wheelers:

In 2008-09, Bajaj Auto had witnessed a 12% drop in domestic sales. 2009-10
saw a reversal. Like motorcycles, the Company's domestic sales of three-
wheelers also picked up. Thanks to this, as well as growing export demand
(see Table 3 above), the overall decline of three-wheeler sales that
occurred in 2008-09 has become a thing of the past.

2009-10 saw a 24% growth in the number of Bajaj Auto three-wheelers sold -
up from 274,529 units in 2008-09 to 340,937 in 2009-10. As always, the
Company remains the leading three-wheeler player from India with a market
share of over 55%. Table 4 gives the data.

Table 4: Three-Wheeler Sales and Share of Bajaj Auto (in numbers):

of which domestic

2008-09 2009-10 2008-09 2009-10

Passenger carriers:

Industry sales 415,411 522,167 268,489 349,662

Bajaj Auto sales 264,332 331,707 125,276 166,822

Bajaj Auto market share 63.6% 63.5%

Goods carriers:

Industry sales 82,382 91,483 81,230 90,706

Bajaj Auto sales 10,197 9,230 10,197 9,228

Bajaj Auto market share 12.4% 10.1%

Total 3-wheelers:

Industry sales 497,793 613,650 349,719 440,368

Bajaj Auto sales 274,529 340,937 135,473 176,050

Bajaj Auto market share 55.1% 55.6%

Operations:

Plants:

During the first half of 2009-10, a number of improvement activities were
initiated at the shop floor level across all plants of the Company. Thanks
to these initiatives, Bajaj Auto could produce 32% higher volume of output
without any significant investments. Table 5 gives the plant-wise
capacities for the last two years.

Table 5: Plant-wise capacities (in numbers):

Plant 2008-09 2009-10

Waluj 1,860,000 1,860,000
Chakan 1,200,000 1,200,000
Pantnagar 900,000 1,200,000
Total 3,960,000 4,260,000

Pantnagar:

Bajaj Auto's production at its Pantnagar plant, Uttarakhand, has been on
the rise. In 2009-10, it produced 577,947 vehicles, up by 82% compared to
2008-09. Average production at Pantnagar for January-March 2010 was 60,000
per month versus 30,000 per month a year earlier. The plant is now geared
to produce 80,000 units per month in April-June 2010, and then ramp up to
120,000 vehicles per month by September-December 2010. Keeping this in
mind, the supply chain activities are also getting geared up.

To maximise tax benefits available at Uttarakhand, the Company has shifted
products like Discover and Pulsar 135 to Pantnagar.

Waluj:

Waluj celebrated its 25th birthday in 2009-10. It also started production
of the Discover and successfully ramped up the output. Waluj is now the
export hub of Bajaj Auto. Of the 891,002 units of two-and three-wheelers
exported in 2009-10, about 80% was produced at Waluj. The plant is now
ready to meet even higher exports - up to 1 million units of two-wheelers
and three-wheelers.

Waluj won an award: Plant Best In Class Manufacturing Leadership Award for
Two-Wheelers' by the Stars of Industry Group.

Chakan:

Given its core competence in high-end products, Chakan produced various
upgrade versions of Pulsar. It is now ready to deliver the new KTM bikes.
Chakan was awarded the Super Platinum Award for Manufacturing Excellence'
by Economic Times-Frost & Sullivan.

Table 6 gives the data on which products are manufactured in what plant.

Table 6: Activities Across the Various Plants:

Plant Products

Waluj Boxer, Platina, Discover and three-wheelers
Chakan Pulsar, Avenger and Discover
Pantnagar Platina, Platina 125, Discover and Pulsar 135

Research and Development (R&D):

2009-10 was an important year. Bajaj Auto's R&D departments were involved
with the creation of number of new products, which have helped the Company
to acquire more significant market presence. In addition, it has done
considerable work in process engineering.

Products:

* Pulsar 220 F: The Pulsar 220 F was re-defined to be the best performing
sports bike in India. It became the fastest Indian bike. Work was done to
enhance its power while reducing its fuel consumption. The bike was also
made more affordable.

* Pulsar 180 UG: The bike was loaded with new features and style along with
higher performance. It has, in effect, expanded the greater than 150 cc
segment.

* Pulsar 150 UG: Pulsar 150 - the backbone of the Pulsar brand - was
upgraded with a more powerful engine and new features like clip on handle
bars and tank flaps. These features have made the Pulsar 150 the best
seller in its category.

* Pulsar 135 LS: The Pulsar 135 LS was built to create a light sports
offering in the Pulsar family. It was designed to be true to the Pulsar
character of aggression, technological predisposition and outstanding
style. This bike is powered by a 4V DTS-i engine which is the first of its
kind. The four valves allow the engine to breathe well, generating superb
performance, while DTS-i gives it excellent fuel economy.

* Discover DTS-si : Discover DTS-si was the bike where R&D blended the
advantages of the twin plug ignition and swirl motion of the incoming
charge in a 100 cc category engine to create India's most fuel efficient
motorcycle. R&D worked upon all aspects of the engine and vehicle design to
maximise the gains in fuel economy along with a crisp throttle response.

The success of these products has put Bajaj Auto in a strong position. R&D
is now working on next generation bikes to maintain this momentum.

Processes:

R&D has been working on improving its operations in number of areas, such
as:

* Manpower: Expanding the team size in areas of design, analysis and
validation to keep up with the rapidly expanding aspirations of the
Company.

* Facilities: Enhancing R&D's design, computing and test facilities. A
notable addition has been a world class NVH (Noise, Vibration and
Harshness) laboratory, which has been commissioned. This will give Bajaj
Auto the ability to make even more refined products.

* Technology: R&D has developed the 4V DTS-i technology for outstanding
engine performance. Design optimisation has enabled it to be used on the
Pulsar 135 LS, which competes at a lower price point. The DTS-i is
controlled by a new generation CDI (Capacitor Discharge Ignition), which
takes continuous load and temperature inputs to compute the optimum timing
of each spark plug.

TPM:

Bajaj Auto started its Total Productive Maintenance initiative ten years
ago with its manufacturing plants. In March 2007, it achieved a milestone
of having all its manufacturing facilities awarded as TPM Excellence
Category -1' winners by JIPM (Japan Institute of Plant Maintenance).

Last year, TPM and quality initiatives at vendor plants gathered further
momentum. Since inception of Bajaj Auto's Vendor Quality and Vendor TPM
awards, the tally of Quality and TPM award winners is as follows:

1. Quality award Bronze': 2009-10: 24 winners (cumulatively, 108)
2. Quality award Silver': 2009-10: 30 winners (cumulatively, 89)
3. Quality award Gold': 2009-10: 16 winners (cumulatively, 44)
4. Quality award Platinum': 2009-10: 3 winners (cumulatively, 3)
5. BAL TPM' award: 2009-10: 11 winners (cumulatively, 29)

In other words:

* Over 50% of BAL's vendors have achieved a status of supplying zero defect
components to the Company's plants for six straight months at least once
during last four years (Bronze').

* Almost 40% achieved zero defect supplies for 12 straight months
(Silver').

* 25% have had zero defect supplies for 24 straight months (Gold').

* Three vendors have supplied zero defect components for more than 36
straight months (Platinum').

On 7 April 2010, Bajaj Auto adopted a wider and more encompassing concept
of TPM. It is the acronym for The Prime Mover' towards excellence - to
build and continuously improve its core competencies. With this in mind,
Bajaj Auto created a Company-wide TPM Kick-off'. This initiative, the
first of its kind in India, will align all key businesses and activities of
the Company.

Bajaj Auto's core competencies rest on its values of innovation, perfection
and speed. TPM is expected to build and continuously improve its core
competencies, as also its entire supply chain including its suppliers and
dealers.

Subsidiaries:

Bajaj Auto International Holdings BV (BAIH BV):

As mentioned earlier, a 100% Netherlands based subsidiary of Bajaj Auto
(Bajaj Auto International Holdings BV) was formed to focus on international
ventures, including possible acquisitions. In 2007-08, BAIH BV invested
Euro 98.36 million to acquire 24.45% equity stake in KTM Power Sports AG of
Austria, Europe's second largest sport motorcycle manufacturer. It is a
Vienna Stock Exchange listed company. In the course of 2008-09, BAIH BV
increased its ownership of KTM shares to 31.72% at a cost of Euro 21.26
million. During 2009-10, BAIH BV invested further Euro 250,290 to increase
its stake to 31.92%.

Reinforcing its commitment to KTM and signifying the strategic importance
of KTM brand and products, Bajaj Auto, through BAIH BV, invested a further
of Euro 20.16 million in April 2010 and increased its ownership of KTM's
shares to 35.67%.

With this, the total investment in KTM stands at Euro 140.03 million.

The first product developed under the joint development programme between
KTM and Bajaj Auto was showcased at the Milan Motorshow in November 2009,
and was received well. The product will go on sale in 2010-11.

PT Bajaj Indonesia (PT BAI):

PT BAI was incorporated in 2006-07 as a subsidiary in Indonesia with an
issued and subscribed capital of US$ 12.5 million (Rs.562 million). During
2009-10, Bajaj Auto added further capital by US$ 17 million, thus
increasing its total stake to 98.9% in PT BAI.

The subsidiary assembles and markets Pulsars in Indonesia. At present, PT
BAI assembles semi-knocked down parts. In the second half of 2010-11, it is
expected to assemble complete knocked down parts, which attract lower
customs duties in Indonesia. April 2010 saw PT BAI introducing the Pulsar
135.

PT BAI has not yet broken even, though losses have reduced. Loss for 2009-
10 was Rs.159 million at the PBT level, versus a loss of Rs. 615 million
last year.

Financials:

Table 7 gives the summarised profit and loss statement.

Table 7 Abridged Profit and Loss Statement:

Rs. In Million

2008-09 2009-10

Operations:

Sales 90,497 121,181

Less: Excise duty 6,127 6,096

Net sales 84,370 115,085

Other operating income 3,734 4,125

Total operating income 88,104 119,210

Cost of materials consumed, net of
expenditures capitalised 64,491 80,548

Share of material cost 73.2% 67.6%

Stores and tools 604 671

Share of stores and tools 0.7% 0.6%

Labour cost 3,544 3,995

Share of labour cost 4.0% 3.4%

Factory and administrative expenses 3,145 3,418

Share of factory and administrative expenses 3.6% 2.9%

Sales and after sales expenses 4,297 4,652

Share of sales and after sales expenses 4.9% 3.9%

Total expenditure 76,081 93,284

Operating profit 12,023 25,926

Operating profit as a share of total
operating income 13.6% 21.7%

Voluntary Retirement Scheme 1,833 1,833

Mark to market loss / (-) reversal 218 -218

Revised operating profit 9,972 24,311

Revised operating profit as a share of
total income 11.3% 20.4%

Interest 210 60

Depreciation 1,298 1,365

Net operating profit 8,464 22,886

Non-operating income:

Income 1,219 1,225

Expenses 102 -

Non-operating income, net 1,117 1,225

Profit before taxation 9,581 24,111

Provision for taxation 3,016 7,075

Profit after taxation 6,565 17,036

Operating Working Capital and ROCE:

In the difficult year of 2008-09, the Company's management consciously took
a call to support its vendors by significantly reducing payment cycle.
This, and the rise in debtors, showed up in an increase in operating
working capital as at 31 March 2009.

That has changed significantly for the better in 2009-10. The vendor
payment cycle has been normalised, and debtors tightened. Operating working
capital has now turned negative - to (-) Rs.6.95 billion.

Moreover, the Company has seen a significant increase in its return on
operating capital. From 55% pre-tax return on operating capital employed in
2008-09, the ratio has risen to 253% for 2009-10. As Table 8 shows, this
has been driven by two factors:

* First, a Rs.14.42 billion increase in Bajaj Auto's operating profits
after interest and depreciation, compared to the previous year.

* Second, a Rs.5.90 billion reduction in working capital vis-a-vis 2008-09.

Table 8: Return on Operating Capital:

Rs. In Million

As at As at
31 March 2009 31 March 2010

Fixed assets 15,481 15,211

Capital Advances 844 793

Technical know-how 163 -

Working capital -1,050 -6,952

Total 15,438 9,052

Operating profit after interest
and depreciation 8,464 22,886

Pre-tax return on operating
capital employed 55% 253%

Consolidation of Accounts and Segment Reporting:

Bajaj Auto has consolidated the financial statements of subsidiaries in
accordance with the relevant accounting standards issued by Institute of
Chartered Accountants of India. The summary of the consolidated profit and
loss account for 2009-10 and 2008-09 is given in Table 9 below.

Table 9: Segment Revenue and Segment Results:

Rs. In Million

Segment Revenue 2008-09 2009-10

Automotive 88,148 119,742

Investment and others 1,219 1,225

Total 89,367 120,967

Less: Intersegment revenue - -

Total 89,367 120,967

Segment Results 2008-09 2009-10

Profit/(loss) from each segment before
interest and tax:

Automotive 7,366 21,855

Investment and others 1,117 1,225

Total 8,483 23,080

Less: Interest 219 67

Profit before tax 8,264 23,013

Cautionary Statement:

Statements in Management Discussion and Analysis describing the Company's
objectives, projections, estimates and expectations may be forward
looking' within the meaning of applicable laws and regulations. Actual
results might differ materially from those expressed or implied.