Sundaram Brake Linings Limited Our Company Was Originally Incorporated As Sundaram Abex Limited on September 5, 1974 Under the Companies Act, 1956

LETTER OF OFFER May 15, 2009 For Equity Shareholders of our Company only

Sundaram Brake Linings Limited Our Company was originally incorporated as Sundaram Abex Limited on September 5, 1974 under the Companies Act, 1956. The name of our Company was changed to “Sundaram Brake Linings Limited” pursuant to the provisions of Section 21 of the Companies Act, 1956 and special resolution passed by the members at the extra-ordinary general meeting held on June 12, 1995. Our Company received a fresh certificate of incorporation on June 23, 1995. (For further details, see “Our History and Main Objects” on page 46 of this Letter of Offer) Registered Office: 180, Anna Salai, Chennai 600 006; Factory and Office: Padi, Chennai 600 050. Tel: +91-44-4220 5300; Fax: +91-44-4220 5572; Website: www.tvsbrakelinings.com ; Email: [email protected] Company Secretary and Compliance Officer: Mr. R. Mani Parthasarathy FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF OUR COMPANY ONLY

LETTER OF OFFER ISSUE OF 1,221,075 EQUITY SHARES WITH A FACE VALUE OF RS. 10 EACH AT AN ISSUE PRICE OF RS.122 PER EQUITY SHARE (INCLUDING A PREMIUM OF RS.112 PER EQUITY SHARE, PAYABLE IN CASH) AGGREGATING RS.148,971,150 ON RIGHTS BASIS IN THE RATIO OF 9 FULLY PAID-UP EQUITY SHARES FOR EVERY 20 FULLY PAID-UP EQUITY SHARES OF RUPEES 10/- EACH HELD BY EXISTING EQUITY SHAREHOLDERS OF OUR COMPANY ON THE RECORD DATE i.e. MAY 21, 2009, (“ISSUE”). THE ISSUE PRICE IS 12.2 TIMES OF THE FACE VALUE OF EQUITY SHARE. FOR MORE DETAILS, PLEASE REFER TO THE SECTION TITLED “TERMS OF ISSUE” BEGINNING ON PAGE 142 OF THIS LETTER OF OFFER. GENERAL RISKS Investments in equity and equity related securities involve a degree of risk and Investors should not invest any funds in the Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in the Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document. Investors are advised to refer to the section titled “Risk Factors” on page vi of this Letter of Offer before making an investment in this Issue. ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Letter of Offer is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing Equity Shares of our Company are listed on National Stock Exchange of India Limited (“NSE”) (the Designated Stock Exchange), and Madras Stock Exchange Limited (“MSE”). Our Company has received “in-principle” approval from NSE and MSE for listing the Equity Shares arising from this Issue vide letter dated March 30, 2009 and March 23, 2009 respectively. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

Spark Capital Advisors (India) Private Limited Integrated Enterprises (India) Limited “Reflection”, New No.2, Leith Castle Center Street, II Floor, “Kences Towers”No.1, Ramakrishna Street, North Santhome High Road, Santhome, Chennai 600 028 Usman Road, T Nagar, Chennai 600 017 Tel: +91-44-4344 0000; Fax: +91+44-4344 0090 Phone: +91-44-2814 0801; Fax: +91-44-2814 2479 Contact Person: Mr. K. Ganesh Contact Person: Mr. Suresh Babu Email: [email protected] Email: [email protected] Website: www.sparkcapital.in Website: www.iepindia.com SEBI Reg. No.: INM000011138 SEBI Reg. No.: INR000000544

ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS ISSUE CLOSES ON June 3 , 2009 June 8 , 2009 June 17, 2009 TABLE OF CONTENTS

SECTION I- GENERAL ...... I DEFINITIONS AND ABBREVIATIONS...... I CERTAIN CONVENTIONS; PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA ...... IV FORWARD-LOOKING STATEMENTS ...... V SECTION II- RISK FACTORS ...... VI RISK FACTORS ...... VI SECTION III – INTRODUCTION ...... 1 SUMMARY OF OUR INDUSTRY ...... 1 SUMMARY OF OUR BUSINESS ...... 3 THE ISSUE ...... 4 SUMMARY FINANCIAL INFORMATION ...... 5 GENERAL INFORMATION ...... 9 CAPITAL STRUCTURE ...... 14 OBJECTS OF THE ISSUE ...... 18 BASIS FOR ISSUE PRICE ...... 21 STATEMENT OF TAX BENEFITS ...... 23 SECTION IV – ABOUT US...... 29 INDUSTRY OVERVIEW ...... 29 OUR BUSINESS ...... 34 OUR HISTORY AND MAIN OBJECTS ...... 46 OUR MANAGEMENT ...... 48 OUR PROMOTERS AND PROMOTER GROUP ...... 54 DIVIDEND POLICY ...... 65 REGULATIONS AND POLICIES ...... 66 SECTION V – AUDITORS REPORT AND FINANCIAL INFORMATION ...... 70 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 108 SECTION VI – LEGAL AND OTHER INFORMATION ...... 123 OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS ...... 123 GOVERNMENT APPROVALS AND LICENSES ...... 129 SECTION VII - OTHER REGULATORY AND STATUTORY DISCLOSURES ...... 133 TERMS OF THE ISSUE ...... 142 SECTION VIII – MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION ...... 164 SECTION IX – OTHER INFORMATION ...... 174 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ...... 174 DECLARATION ...... 175

SECTION I- GENERAL

DEFINITIONS AND ABBREVIATIONS

Term Description “We”, “us”, “our”, “Issuer”, Unless the context otherwise indicates or implies, refers to Sundaram Brake “the Company” and “our Linings Limited, a public limited company under the Companies Act, 1956 Company”. having its registered office at 180, Anna Salai, Chennai 600 006.

Company Related Terms

Term Description Articles Articles of Association of our Company Statutory auditors of our Company being Sundaram & Srinivasan, Chartered Auditors Accountants Board of Directors of our Company as constituted from time to time including Board/ Board of Directors any committee thereof Chairman & Managing Director K. Mahesh Memorandum Memorandum of Association of our Company Unless the context otherwise requires, refers to entities mentioned in the section Promoters and Promoter Group titled “Our Promoters and Promoter Group” on page 54 of this Letter of Offer Registered Office of the Company 180, Anna Salai, Chennai 600 006

Issue Related Terms

Term Description The Abridged Letter of Offer to be sent to the eligible Shareholders of the Abridged Letter of Offer Company with respect to this Issue in accordance with SEBI Guidelines Any shareholder/investor/other person who makes an application in this Issue in Applicant accordance with this Letter of Offer The aggregate of monies payable on application by the Applicant, being the aggregate money payable at Rs. 122 per share towards the entitlement of Equity Application Money Shares Bankers to this Issue HDFC Bank Limited CAF Composite Application Form As defined in SEBI (DIP) Guidelines, 2000 and amended thereafter, and Collection Centre mentioned in the CAF Company Secretary & Compliance Officer R. Mani Parthasarathy In case of multiple physical shares, our Company would issue one consolidated Consolidated Certificate certificate for the Equity Shares allotted under one folio Depositories NSDL and CDSL Depositories Act Depositories Act, 1996 as amended from time to time Designated Stock Exchange NSE LOF Letter of Offer DLOF Draft Letter of Offer dated March 18, as filed with SEBI and Stock Exchanges Equity Share Capital or Share Capital Share capital of our Company as at a specific date Equity Share(s) of our Company having a face value of Rs. 10, being fully paid-up, Equity Share(s) or Share(s) unless specifically mentioned otherwise

i Term Description Equity Shareholder(s)/ Shareholders The holder of Equity Share(s) The holder(s) of Equity Shares of our Company as on the Record Date, i.e. May 21, 2009and Renouncees, who are eligible to apply for and receive their Rights Investor(s) Entitlement, subject to applicable law Issue Issue of 1,221,075 Equity Shares with a face value of Rs. 10 each at an Issue Price of Rs.122 per Equity Share (including a premium of Rs.112 per Equity Share, payable in cash) aggregating Rs.148,971,150 on rights basis in the ratio of 9 fully paid-up Equity Shares for every 20 fully paid-up Equity Shares of Rs.10/- each held by existing Equity Shareholders of our Company on the Record Date i.e. May 21, 2009. For more details, please refer to the section titled “Terms of Issue” beginning on page 142 of this Letter of Offer June 17, 2009 or such extended date as may be decided by the Board of Directors of our Company. In any case, it will not be more than 30 days from the Issue Issue Closing Date Opening Date Issue Opening Date June 3, 2009 Issue Price Rs. 122 per Equity Share, being 12.2 times the face value of each Equity Share Lead Manager or Lead Manager to the Issue Spark Capital Advisors (India) Private Limited The record date fixed by our Company for the purpose of this Issue, being May 21, Record Date 2009 Registrar to the Issue or Integrated Enterprises (India) Limited Registrar Renouncees The persons who have acquired Rights Entitlements from Equity Shareholders The number of Equity Shares that a shareholder is entitled to, on the basis of the ratio decided, (in our case 9 Equity Shares for every 20 Equity Shares) in Rights Entitlement proportion to his / her shareholding in our Company

Conventional and General Terms/ Abbreviations

Term Description Act/ Companies Act The Companies Act, 1956 and amendments thereto FY / Fiscal Financial Year ending March 31, unless otherwise specified. Indian GAAP Generally Accepted Accounting Principles in India ROC / Registrar of The Registrar of Companies, Block 6, Second Floor, Shastri Bhavan, 26, Companies Haddows Road, Chennai 600006 SEBI (SAST) Regulations / Securities and Exchange Board of India (Substantial Acquisition of Shares and SAST / SEBI Takeover Takeovers) Regulations, 1997 and subsequent amendments made from time to Code / Takeover Code Time The Securities and Exchange Board of India Act, 1992, as amended from time to SEBI Act, 1992 Time SEBI DIP Guidelines The SEBI (Disclosure and Investor Protection) Guidelines, 2000, as amended /SEBI Guidelines from time to time Stock Exchanges NSE and MSE, individually or collectively as the context may require

Business/Industry Related Terms

Term Description ACMA Automotive Component Manufacturers Association of India ADR Australian Design Rules CBB Composite Brake Blocks DOE Design of Experiments ECGC Export Credit and Guarantee Corporation

ii Term Description FMEA Failure Mode Effect Analysis FMVSS Federal Motor Vehicle Safety Standards and Regulation HCV Heavy Commercial Vehicles ISO International Organization for Standardization JIT Just In Time KVA Kilo Volt Amperes LCV Light Commercial Vehicles MT Metric Tonnes OEM Original Equipment Manufacturers QFD Quality Function Deployment SABS South African Bureau of Standards SIAM Society of Indian Automobile Manufacturers

Abbreviations

Term Description CAGR Compounded Annual Growth Rate CDSL Central Depository Services (India) Limited EPS Earnings Per Share FCNR Foreign Currency Non Resident FDI Foreign Direct Investment HUF Hindu Undivided Family ICAI The Institute of Chartered Accountants of India IIT Indian Institute of Technology KMP Key Management Personnel Mn Million MOU Memorandum of Understanding NA Not Applicable NAV Net Asset Value NR Non Resident NRE Non Resident External NRI Non Resident Indian NRO Non Resident Ordinary NSDL National Securities Depository Limited P/E Ratio Price/Earnings Ratio PAN Permanent Account Number allotted under the Income Tax Act, 1961 PAT Profit after Tax PG Post Graduate RBI The Reserve Bank of India RONW Return on Net Worth Rs. Indian Rupees RTGS Real Time Gross Settlement US$ United States Dollar VAT Value Added Tax

iii

CERTAIN CONVENTIONS; PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA

Financial Data

Unless stated otherwise, the financial information used in the Letter of Offer is derived from our Company’s restated financial statements for the nine month period ended December 31, 2008 and the fiscal years ended 2008, 2007, 2006, 2005 & 2004 and are prepared in accordance with the Companies Act, 1956 and applicable SEBI DIP Guidelines, as stated in the Audit Report dated March 17, 2009 of our Statutory Auditors Sundaram & Srinivasan, Chartered Accountants, Chennai 600 018, included in the Letter of Offer.

Unless stated otherwise, throughout the Letter of Offer, all figures have been expressed in Rs. crores, though certain numbers are also expressed in Rs. lakhs, Rs. million and in Rs. billion. References to the singular also refers to the plural and one gender also refers to any other gender, wherever applicable, and the words “lakh” means “100 thousand” and the word “million” or “mn” means “10 lakh” and the word “crore” means “10 million” or “100 lakh” and the word “billion” means “1,000 million” or “100 crores”.

Our fiscal year commences on April 1 and ends on March 31 of the next year. Unless stated otherwise, reference herein to a FY/fiscal /financial year (e.g. fiscal 2008), is to the fiscal year ended March 31 of a particular year.

Currency of Presentation

All references to “Rupees”, “INR” or “Rs.” are to Indian Rupees, the official currency of the Republic of India.

In this Letter of Offer, any discrepancies in any table between the total and the sum of the amounts listed may be due to rounding off.

Industry and Market Data

Unless stated otherwise, market and industry data used throughout this Letter of Offer has been obtained from industry publications, government sources and based on our estimates / assumptions. Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe industry / market data used in this Letter of Offer is reliable, it has not been independently verified.

iv FORWARD-LOOKING STATEMENTS

We have included statements in the Letter of Offer which contain words or phrases such as “will”, “aim”, “is likely to result”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue” and similar expressions or variations of such expressions, that are “forward looking statements”.

All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our Company’s expectations include but are not limited to:

(a) General economic and business conditions in the markets in which we operate and in the local, regional and national economies;

(b) Increasing competition in or other factors affecting the industry segments in which our Company operates;

(d) Our ability to meet our capital expenditure requirements and/or increase in capital expenditure;

(e) Fluctuations in operating costs and impact on the financial results;

(f) Our ability to attract and retain qualified personnel;

(g) Changes in technology in future;

(h) Changes in political and social conditions in India or in countries that we may enter, the monetary policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

(i) The performance of the financial markets in India and globally; and

(j) Any adverse outcome in the legal proceedings in which we may be involved.

For a further discussion of factors that could cause our actual results to differ, please refer to the section titled “Risk Factors” and sections titled “Our Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on pages vi, 34 and 108 respectively of the Letter of Offer. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither our Company nor the Lead Manager nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI / Stock Exchange requirements, our Company and Lead Manager will ensure that investors in India are informed of material developments until the time of the grant of listing and trading permission by the Stock Exchanges for the Equity Shares being offered through this Issue.

v SECTION II- RISK FACTORS

RISK FACTORS

An investment in Equity Shares involves a degree of risk. Prior to investing, investors should carefully consider the risks described below, in addition to other information contained in this Letter of Offer, before making any investment decisions relating to our Equity Shares. Investors should carefully consider all the information contained in the section titled “Auditors Report and Financial Information” on page 70 of this Letter of Offer, for information related to the financial performance of our Company. The occurrence of any of the following events could have a material adverse effect on our business, results of operation, financial condition and prospects and cause the market price of our Equity Shares to fall significantly and you may lose all or part of your investment.

These risks are not the only ones that we face. Our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. Unless otherwise stated in the relevant risk factors set forth below, we are not in a position to specify or quantify the financial or other implications of any of the risks mentioned herein.

Materiality:

The Risk Factors have been determined on the basis of their materiality. The following factors have been considered for determining the materiality: 1. Some events may not be material individually but may be found material collectively. 2. Some events may have material impact qualitatively instead of quantitatively. 3. Some events may not be material at present but may be having material impact in future

INTERNAL RISK FACTORS

1. Settlement Agreements with certain banks would lead to outgo of cash that could otherwise have been available to the Company.

Certain derivative transactions purported to have been entered into in the name of the Company by two officials of the Company with some banks during the fiscal 2007 and fiscal 2008 were disputed by the Company. The Company has entered into settlements with such banks and has so far honoured its commitments under such settlements. In respect of one of the settlements, if the Company defaults in any of its financial commitments under the said settlement, the entire amount claimed by the Bank equivalent to Rs.109.48 crores would become payable. Any such defaults could have a material adverse effect on our business, financial condition and results of operations.

2. Our Company is involved in litigation proceedings and cannot assure you that it will prevail in these actions.

Our Company is involved in certain legal proceedings and claims in relation to certain civil, taxation and other matters incidental to our business and operations. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. We cannot assure you that these legal proceedings will be decided in our favour. Any adverse decision may have an effect on our business and results of operations. Brief details of litigation involving our company are tabulated as under:

Cases filed against our Company:

Approximate amount Matters Total Number of pending cases/ show involved -if quantifiable S.No. pending cause notices/ summons (in Rs. crores) 1. Central Excise 4 0.04 2. Service Tax 1 0.05 3. Labour 2 0.04 Total 7 0.13

Cases filed by our Company:

Total Number of pending Approximate amount cases/ show cause notices/ involved (if quantifiable) S.No. Matters pending summons in Rs. crores 1. Excise 2 0.02 2. Sales tax 2 0.11 3. Service Tax 1 0.00 Total 5 0.14

For more information regarding these legal proceedings, please refer to the section titled “Outstanding Litigations and Material Developments” on page 123 of this Letter of Offer.

3. As on December 31, 2008, we had contingent liabilities of Rs. 3.64 crores which are not provided for, and which may adversely affect our financial performance, if crystallized.

The contingent liabilities of our Company as on December 31, 2008, as certified by the Statutory Auditors, are as follows: (in Rs. crores) Particulars As on December 31, 2008 Estimated value of contracts remaining to be executed on Capital Account 1.80 Sales Tax liability contested / being contested in appeal. In case of a favourable decision, the liability may not arise 0.15 Liability towards labour cases 0.04 Bank Guarantees for domestic sales & others 1.64 Letters of Credit / Comfort - Total 3.64

We cannot assure you that any or all of our contingent liabilities as on December 31, 2008 will not become direct liabilities. In the event any or all of these contingent liabilities and commitments become direct liabilities it may have an adverse effect on our business, financial condition and results of operations.

4. The objects for which the funds are raised through the Issue have not been appraised by any bank / financial institution and are based on internal estimates.

The objects of the Issue for which the funds are being raised have not been appraised by any bank or financial institution. In the absence of any such independent appraisal, the requirement of funds raised through the Issue as stated in the section titled “Objects of the Issue” on page 18 of the Letter of Offer, is based on our estimates and the deployment of these funds is at the discretion of our management and Board of Directors.

5. Our inability to upgrade to the latest technology may adversely affect our growth, market position and profitability.

The industry in which we operate is technology intensive. Players in the automobile industry are faced with a constant demand for new designs, materials and new products at competitive prices. Knowledge of nascent technologies and the ability to implement them to meet market requirements provides a competitive advantage. Our inability to upgrade / access the latest technology may adversely affect our growth, market position and profitability. We cannot be certain that we will successfully anticipate or respond to future technological developments in a timely manner and on a continued basis, and such inability may have a material adverse effect on our business, financial condition and results of operations.

vii 6. We face stiff competition from the unorganized sector in the aftermarket segment which impacts our operations and profitability.

Pricing is one of the factors that play an important role in our customers' selection of our products especially in the replacement market/aftermarket. Stiff competition from a variety of competitors in the un-organized sector may adversely impact our operations and profitability.

7. Intensifying competition could materially and adversely affect our sales and results of operations.

The Indian automotive components and the friction material industry are highly competitive. We face strong competition in the Indian market from domestic as well as foreign friction material manufacturers. Improving infrastructure, rise in the standard of living & disposable income of the general populace in the last few years is attracting a number of players who have established operations in India. Domestic competition may further intensify in the future. There can be no assurance that we will be able to implement our future strategies in a way that will mitigate the effects of increased competition. Factors affecting competition include product quality and features, innovation and product development time, ability to control costs, pricing, reliability, safety and customer service. Moreover, greater competition and slowdown in the automobile industry could result in increased inventory due to lower vehicle sales, which may result in a further downward price pressure and adversely affect our financial condition and results of operations. Our ability to maintain our competitiveness will be fundamental to our future success in existing and new markets. There can be no assurances that we will be able to compete successfully in the global automotive industry in the future.

8. Availability of capital for capital expenditure.

Ours is a capital intensive business and we need to constantly upgrade our plants and equipment to continue meeting the demands of our customers. We also need to add equipments for expansion and for balancing. Investments made in a certain technology might not give the commensurate results if the norms governing technology are reversed. Thus investment in research and development and the ability to modify products to meet the changing needs of customers is essential for survival and growth in the industry. Timely availability of adequate funding is important for us to meet our capital expenditure requirements. Further, any adverse movement of interest rates would add to our borrowing costs.

9. Any shortfall/non availability of key raw materials could affect our results of operations.

Our manufacturing operations are dependent on the timely availability of raw materials and other key resources such as power and fuel. Some of the raw material products that are used in our production facilities are procured from outside India. Key raw materials used in the production process include asbestos, fibre, filler, resin, binding material and metal powder. The raw materials and consumables that are internationally sourced include asbestos, chemicals and other materials. Any disruption in the availability of these key resources may adversely affect our manufacturing operations and results of operations. The following table gives out the proportion of total raw materials as a percentage of Sales.

For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Raw material consumed (in Rs. crores) 67.73 91.76 93.91 67.10 61.43 51.84 Raw material consumed (% of Total Income) 49.20% 48.41% 49.50% 46.25% 45.87% 43.22%

viii The following table gives out the proportion of imported raw materials as a percentage of the Total Raw Material Consumed:

For the For the For the For the For the For the 9 year year year year year months ended ended ended ended ended ended Imported Items 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Asbestos & Other Materials (%) 14.20% 14.80% 16.50% 16.30% 16.30% 18.40% Chemicals (%) 5.30% 8.40% 8.60% 6.20% 6.10% 7.90% Imported raw materials consumed (%) 19.50% 23.20% 25.10% 22.50% 22.40% 26.30%

10. Increases in input prices and other costs may have a material adverse impact on our results of operations.

The principal raw materials required for the production of various products of our Company include asbestos, fibre, filler, resin, binding material and metal powder. As a resource-intensive manufacturing operation, we are exposed to a variety of market risks, including the effects of changes in commodity prices. We monitor and manage these exposures as an integral part of our overall risk management program, which recognizes the unpredictability of markets and seeks to reduce the potentially adverse effects on our business. Nevertheless, changes in input prices cannot always be predicted or hedged. The costs at which we procure some of our raw materials and inputs have been impacted due to the recent increase in the prices of commodities, especially petroleum and aluminum based inputs. In addition to cost reduction measures, we also attempt to manage such increases through increases in the prices of our products. For the OEM segment in particular, there can be no assurance that we will be able to pass on all cost increases to our customers or that such price increases will not result in reduced sales volumes. In addition, because of intense price competition and fixed costs, we may not be able to adequately address changes in input prices even if they are foreseeable. Substantial changes in these prices could have a substantial adverse effect on our financial condition and results of operations. Furthermore, our results of operations are also impacted on account of inflation resulting in an increase in costs including employee costs.

11. Underperformance of our distribution channels and disruptions in our supply chain may adversely affect our sales and results of operations.

We monitor the performance of our dealers and distributors in the aftermarket segment and provide them with support so as to ensure that they perform to our expectations. There can be no assurance, however, that our expectations will be met and the under-performance by our dealers or distributors could adversely affect our sales and results of operations.

We rely on third parties to supply us with the raw materials, parts and components used in the manufacture of our products. Even though we are not dependent on sole suppliers for any of the input materials, our ability to procure supplies in a cost effective and timely manner is subject to various factors, some of which are not always within our control. While we manage our supply chain as part of our vendor management process, any significant problems with our supply chain in the future could affect our results of operations in an adverse manner.

12. Our future success depends on our ability to satisfy changing customer demands by offering innovative and competitive products.

Our competitors can gain significant advantage if they are able to offer products satisfying customer needs earlier or better than we are able to, which could adversely impact our sales and results of operations. There can be no assurance that customers will be receptive to our products in the future or that market acceptance of our future products will meet our expectations, in which case we may not be able to realize the intended economic benefits of our investments and our results of operations may be adversely affected.

13. We face foreign currency risk due to export income and volatile global financial markets.

The exchange rate between the Indian Rupee and other currencies constantly fluctuates. The volatility in global financial/currency markets may have an adverse impact on our business since our business involves both the import as well as export of goods. Any adverse fluctuations in the exchange rate of the rupee vis-à-vis the US$ or other foreign currencies in which our imports or exports are denominated, or our inability to effectively manage the currency fluctuations, would impact the profitability of our Company.

For the 9 months For the year For the year For the year For the year For the year ended ended ended ended ended ended December 31, March 31, March 31, March 31, March 31, March 31, Particulars 2008 2008 2007 2006 2005 2004 Export Sales (in Rs. crores) 55.32 61.98 54.89 54.82 58.78 52.51 Export Sales (% of Income from Product Sales) 40.31% 33.03% 29.04% 37.88% 44.27% 43.85%

14. The loss, shutdown or slowdown of operations at any of the Company’s facilities or the failure of information technology systems, could have a material adverse effect on our business, financial condition and results of operations.

The Company’s facilities are subject to operating risks, such as the breakdown or failure of equipment, power supply interruptions, facility obsolescence or disrepair, labour disputes, natural disasters and industrial accidents. The occurrence of any of these events could affect the Company’s operations by causing production at one or more facilities to shut down or slow down. None of the Company’s manufacturing facilities has experienced shutdowns which have had a material adverse effect on our business, financial condition and results of operations in the last five years. Although the Company takes reasonable precautions to minimize the risk of any significant operational problems at its facilities, no assurance can be given that one or more of the factors mentioned above will not occur, which could have a material adverse effect on our business, financial condition and results of operations.

15. Alleged defects in our products could lead to negative publicity, financial loss and erosion of our customer- base in the OEM segment.

Some of the products produced by us are critical to the operations of our customers' businesses. An alleged defect in our products could result in a claim against us for damages. Such a claim could be brought even if prima facie we are not responsible for such alleged defect. Furthermore, any such claims could serve to erode our brand image and reputation and may affect our client base.

16. Our Company has entered into several loan agreements that contain customary restrictive covenants, placing certain limitations on our Company .

Our Company has availed working capital and term loan facilities from State Bank of India, for which its immovable and movable properties have been offered as security. With respect to these loans, we have executed agreements with our lenders and by virtue of these agreements we are bound by certain restrictive covenants. These restrictive covenants inter alia require us to take the prior consent of the lenders for amending our capital structure, creating a charge on our assets, undertaking mergers or amalgamations, expansion or diversification of our business and the like. We have obtained / applied for the consent of our lenders in relation to the Issue. For details of loan agreements and the consents / applications in relation to the same, please refer to the paragraph titled “Financial Indebtedness” on page 153 of the Letter of Offer.

x 17. Any mishaps or accidents at our facilities could lead to property damage, production loss and accident claims.

Any mishap or accident in any manufacturing facility could result in damages that may cause a loss to our Company. Our Company could suffer a dip in production, receive adverse publicity and could be forced to invest valuable resources in defending such damages, both in terms of time and money. Although there have been few accidents, we cannot guarantee the total absence of work related or other accidents at our plants. Furthermore, while issues arising from such accidents, such as compensation and liability, have been amicably settled without any adverse impact on production or damage to our facilities, we cannot guarantee that such settlement will take place at all times in the future or that accidents may not result in litigation and regulatory action against us.

The instances of accidents involving labour and workmen since January 2007 in our plants have been tabulated as under:

Material Impact on Description Date Production February 8, No material impact on Minor injury to a worker during trial work on a drilling machine 2007 production Minor cut injury to a worker during loading of product in No material impact on Grinding Machine March 3, 2007 production Company apprentice met with an accident while he was No material impact on unloading the finished pieces from the machinery May 22, 2007 production Company apprentice met with an accident while he was loading September 5, No material impact on mix 2007 production Back injury sustained by a worker during climbing up on the No material impact on mezzanine floor March 20, 2008 production Crush injury sustained by a worker on the fingers while September 29, No material impact on adjusting plunger in the Grinding Machine 2008 production Cut injury sustained by a worker while moving mould in a October 20, No material impact on trolley 2008 production

18. Certain type of risks may not be covered under our existing insurance policies, since these may be uninsurable or economically unviable.

We have insurance in place for our material assets. Certain types of losses, however, may be either uninsurable or economically unviable. Further, the amount of our insurance coverage may be less than the replacement cost of all the insured property and may not be sufficient to cover all our financial losses arising out of an uninsured risk. There are many events that could cause significant damages to our operations, or expose us to third-party liabilities, whether known to us or otherwise, for which we may not be adequately insured. Further, our insurance premium for future policies could also increase, which would increase our operating costs and adversely affect our margins. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition and results of operations.

19. We do not have any long term supply agreements or arrangements with any of our customers.

There are a limited set of customers in our business, that is, the automobile manufacturers. Competition is intense, as we compete with suppliers both in the organized and unorganized segments. We do not have any binding supply obligations or long-term supply agreements or arrangements with any of our customers. As a result, we face intense competition and failure to retain our market share at profitable margins can result in erosion of margins and impact the results of our operations.

xi 20. We are dependent on our group companies for our business.

We are primarily Tier II suppliers to the automobile manufacturers and sell our products to Tier I suppliers some of whom are our Promoter Group companies. We are therefore, dependent for a part of our business on our group companies. There can be no assurance that they will continue to source from us. Also since our fortunes are linked to their financial well being, there can be no assurances made on their financial performance. The table below gives out the proportion of business we derive from our Promoter Group companies.

For the For the For the For the For the For the 9 year year year year year months ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Sales through Promoter Group companies (in Rs. crores) 44.24 67.66 63.42 41.92 32.71 29.64 Sales through Promoter Group companies (% of Total Income) 32.13% 49.15% 33.46% 22.10% 22.55% 22.13%

21. Our Promoters have in the past managed companies manufacturing products in the same/similar lines of business as our Company and hence conflict of interest situations may arise.

Our Promoters are also managing companies manufacturing products for the automotive segment. We cannot assure that they would not promote/manage further companies/entities which would compete with us directly in the marketplace in the future. We cannot assure that our Promoters would act in the best interests of our Company at all times, and may take decisions/actions which may conflict with the interests of the minority shareholders of our Company.

22. Failure to estimate optimal manufacturing capacities could adversely affect our growth/profitability.

Estimation of optimal manufacturing capacities for various products is critical to our operations. Should we for any reason, not invest in capacity expansion in the future, the same could result in stagnation in our sales and could impact our ability to add new customers / maintain our market share. Conversely, in the event we over- estimate the future demand, we may have excess capacity, resulting in under utilization of assets and/or sales of surplus products at lower margins/loss, which would have a material adverse effect on our margins, profitability and results of operations.

23. We would continue to be controlled by our Promoters and Promoter Group after the Issue, who by virtue of their aggregate shareholding collectively own a substantial portion of our issued Equity Shares, as a result of which, the remaining shareholders would not be able to influence the outcome of most of the matters requiring shareholder voting.

Our Promoters and Promoter Group will continue to collectively own a substantial portion of our issued Equity Shares. Two of our Promoters and an individual from Promoter Group, have given an undertaking to subscribe to the unsubscribed portion, if any in this Rights Issue in order to ensure a minimum subscription of 90% of the Issue. Consequent to all the above mentioned factors, our Promoters and Promoter Group may continue to exercise substantial control over us and, inter alia , may have the power to elect our Directors and/or influence the outcome of proposals for corporate action requiring approval of our Board of Directors or shareholders, such as lending and investment policies, revenue budgets, capital expenditure, dividend policy and strategic acquisitions/joint ventures.

xii 24. Future issuances or sales of the Equity Shares could significantly affect the trading price of the Equity Shares.

The future issuance of Equity Shares by our Company or the disposal of a significant number of Equity Shares of our Company by its Promoters or significant shareholders or the perception that such issuance or sales may occur may significantly affect the trading price of the Equity Shares.

25. You will not receive the Equity Shares you purchase in the Issue immediately after you pay for them, which will subject you to market risk.

For shareholders holding shares in demat mode, the Equity Shares purchased in this Rights Issue will not be credited immediately to their demat accounts with depository participants and for shareholders holding in physical form, completion of dispatch of physical share certificates may not be completed until approximately fifteen days from the Issue Closing Date. You can start trading your Equity Shares only after receipt of listing and trading approvals in respect of these shares which will require additional time after the credit of Equity Shares into your demat account. Since our Company’s Equity Shares are already listed on the stock exchanges, you will be subject to market risk from the date you pay for the Equity Shares to the date they are listed.

26. We have entered into related party transactions with entities in which our Promoters and Promoter Group are interested parties. Such transactions could be open to multiple interpretations, including being construed as being in unfavourable to our Company.

We have entered into related party transactions with entities in which the Promoters and Promoter Group of our Company are interested parties. Such related party transactions could be open to multiple interpretations, including being construed as adverse to our Company, on account of the nature of interest involved. For further details, please refer to section titled "Auditors Report and Financial Information – Related Party Transactions" on page 98 of the Letter of Offer.

27. Seasonality of Business

Seasonality exists only on the OEM side of the business which contributed 39.53% of revenues during the nine month period ended December 31, 2008. A marginal element of seasonality is observed which can be attributed to the seasonality of the automobile industry, which is the key customer segment for us. Typically sales of two wheelers peak during the festive season (October to December) while the sales for tractors increase during the monsoon season. Increased sales of goods & passenger vehicles are observed closer to September & March and also during the festive season. We believe we are relatively insulated from seasonality in our overall business due to the presence of a significant chunk of the aftermarket revenues in both domestic and overseas markets. The aftermarket business would need to be serviced irrespective of the sales of new vehicles. The aftermarket business also helps us in mitigating the business risks related to seasonality and cyclicality.

28. 7 of our 38 Promoter Group Companies have incurred losses.

Of our 38 Promoter Group Companies, 7 have reported losses in some of their respective last three audited financial years. We have availed exemptions as per provisions of clause 6.39 of SEBI Guidelines, after having satisfied the conditions mentioned in the above provision, with respect to disclosure of information required under clauses 6.10.3 of the SEBI Guidelines. Further, we confirm that other than the disclosures made in the Letter of Offer nothing material has changed in respect of disclosures made by us at the time of our previous issue made in October 1995.

29. Limited trading in the shares of our Company and as such the exit options available to the equity shareholders may be limited.

The Equity Shares of our Company are listed on the NSE and MSE. The annualized trading turnover in the shares of our Company during the preceding six calendar months prior to the month in which the Issue was approved by the Board of Directors of our Company is less than five percent (by number of shares) of the weighted average number of shares listed during the said six months period. Hence, the equity shares of our

xiii Company are infrequently traded on NSE as per the explanation to sub-regulation (5) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The last trading in the scrip of our Company at MSE took place on December 21, 2001 at a price of Rs 98.50 and MSE vide its letter dated May 11, 2009 has confirmed the same. There can be no assurance that an active trading market for the Company’s equity shares will revive or be sustained and as such the exit options available to the equity shareholders may be limited.

xiv EXTERNAL RISK FACTORS

1. General economic conditions could have a significant adverse impact on our sales and results of operations.

The Indian automotive industry is substantially affected by general economic conditions in India. The demand for automobiles in the Indian market is influenced by factors like the growth rate of the Indian economy, availability of credit, level of disposable income among Indian consumers, interest rates, freight rates and fuel prices. In the past, economic slowdowns have harmed manufacturing industries including the automobile and automobile components manufacturing industry. There can be no assurance that the Indian economy will not experience a downturn, and weakening of economic activity in the future and that the current slowdown will not last for a prolonged period of time. Increase in interest rates, increase in inflation rates and/or increase in fuel prices are examples of developments that could impact general economic conditions in India and could lead to a decline in the demand for automobiles in the Indian market as well as impact our costs, which could significantly affect our sales and future results of operations in an adverse manner. More recently, adverse changes in economic factors including slowdown in industrial production, increase in fuel prices, higher inflation, reduction in availability of vehicle finance and higher interest rates have impacted the demand for passenger and commercial vehicles. Such factors have impacted and are likely to continue to have an impact on the sales, product mix, costs and results of operations of automotive manufacturers and automotive components manufacturers, including us.

2. Fluctuations in operating results and other factors may result in decreases in Equity Share price.

Stock markets have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Equity Shares. There may be significant volatility in the market price of our Equity Shares. If our Company is unable to meet market or investor expectations in relation to our financial performance, investors could sell our Equity Shares when it becomes apparent that the expectations of the market may not be realised, resulting in a decrease in the market price of our Equity Shares. In addition to our Company’s operating results, changes in financial estimates or recommendations by analysts, governmental investigations and litigation, speculation in the press or investment community, the possible effects of a war, terrorist and other hostilities, changes in general conditions in the economy or the financial markets could cause the market price of Equity Shares to fluctuate substantially.

3. Absence of entry barriers.

Apart from high initial capital investments and requirement of customer relationships, there are no significant entry barriers, regulatory or otherwise, for setting up an automotive component/friction materials plant. Due to absence of such entry barriers, many players from the organized as well as the un-organized sector may enter this industry. The entry of several new large organized players may result in excess capacity, competition and resultant price pressure on the products.

4. Global economic, political and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.

External factors such as potential terrorist attacks, terror threats, pandemics, acts of war or geopolitical and social turmoil in many parts of the world could prevent or hinder our ability to do business, increase our costs and negatively affect our stock price. For example, increased instability may adversely impact the desire of employees and customers to travel, the reliability and cost of transportation, our ability to obtain adequate insurance coverage at reasonable rates or require us to incur increased costs for security measures for our operations. These uncertainties make it difficult for us and our customers to accurately plan future business activities. More generally, these geopolitical social and economic conditions could result in increased volatility in India and worldwide financial markets and economy.

xv 5. Cyclical nature of the Automobile Industry.

Our Company’s fortunes are linked to those of the automobile industry, which is cyclical in nature. Demand generally peaks between January and March, although there is a decrease in demand in February just before release of the Indian fiscal budget. Demand is usually lean from April to July and picks up again from September onwards, with a decline in December due to year end. The automotive industry has been cyclical in the past and we expect this cyclicality to continue. The demand for automobiles has a significant impact on the demand for and prices of products manufactured by our Company. A fall in the demand and/or prices would adversely impact the financial performance of our Company.

6. After the Issue, the price of our Equity Shares maybe highly volatile, or an active trading market for our Equity Shares may not develop or sustain.

The prices of our Equity Shares on the Indian stock exchanges may fluctuate after the Issue as a result of several factors, including:

a) volatility in the Indian and global securities markets; b) our results of operations and financial condition; c) performance of our competitors, the automotive and the automotive components industry and the perception in the market about investments in the automotive industry and in companies that derive primary business from automotive companies; d) adverse media reports on our Company or the Indian automotive industry; e) changes in the estimates of our performance or recommendations by financial analysts; f) significant developments in India's economic liberalization and deregulation policies; and significant developments in India's fiscal and environmental regulations; g) there can be no assurance that an active trading market for our Equity Shares will develop or be sustained after the Issue

7. Natural disasters.

It is possible that natural disasters, particularly those that directly affect the areas in which the facilities and other operations of our Company are located, could result in substantial damage to the manufacturing facilities and other assets and adversely affect the Company’s operations and financial results.

8. Terrorist attacks and other acts of violence or war involving India and other countries could adversely affect the financial markets, result in loss of client confidence, and adversely affect our business, results of operations and financial condition.

Terrorist attacks, such as the ones that occurred in New York and Washington, D.C., on September 11, 2001, New Delhi on December 13, 2001, London on July 7, 2005, Mumbai on July 7, 2006 and on November 26, 2008 and other acts of violence or war, including those involving India, or other countries, may adversely affect Indian and worldwide financial markets. These acts may also result in a loss of business confidence and have other consequences that could adversely affect our business, results of operations and financial condition. More generally, an increased volatility in the financial markets can have an adverse impact on the economies of India and other countries, including economic recession.

9. Regional conflicts in the Indian sub-continent could adversely affect the Indian economy and cause our business to suffer.

The Indian sub-continent has from time to time experienced instances of civil unrest and hostilities among neighbouring countries. Events of this nature in the future, as well as social and civil unrest within other countries, could influence the Indian economy and could have a material adverse effect on the general business sentiment in the country.

xvi 10. The extent and reliability of Indian infrastructure could adversely impact the Company’s results of operations and financial condition.

India’s physical infrastructure is less developed than that of many developed nations and problems with its port, rail and road networks, electricity grid, communication systems or any other public facility could disrupt the Company’s normal business activity. Any deterioration of India’s physical infrastructure would harm the national economy, disrupt the transportation of goods and supplies, and add costs to doing business in India. These problems could interrupt the Company’s business operations, which could have a material adverse effect on the Company’s results of operations and financial condition.

11. Changes in policies of the Government of India could adversely impact the Company’s results of operations and financial condition.

The Company’s production facilities are located in India, and a significant portion of its revenue is derived from sales of our products in the Indian market. Consequently, the Company itself, and the market price and liquidity of its shares, may be affected by policy changes in India. For example, the imposition of foreign exchange controls, rising interest rates, increases in taxation or the creation of new regulations could have a detrimental effect on the Indian economy generally and the Company in particular.

There is no certainty that the elections to the 15 th Lok Sabha would provide the country with a stable government that can last its full term. Political instability or a change in economic liberalization and deregulation policies could seriously harm business and economic conditions in India generally and our business in particular.

The Government of India has in recent years sought to implement economic reforms, and the current Government has implemented policies and undertaken initiatives that continue the economic liberalization policies pursued by previous Governments. For example, the Indian Government has announced its general intention to continue India’s current economic and financial sector deregulation policies and encourage infrastructure projects. However, the roles of the Government of India and the State Governments in the Indian economy as producers, consumers and regulators have remained significant and there can be no assurance that liberalization policies will continue in the future. Any significant change in such liberalization and deregulation policies could adversely affect business and economic conditions in India generally and the Company’s results of operations and financial condition in particular.

Notes to Risk Factors

1. The net worth of the Company before the Issue was Rs. 73.88 crores as of the nine months ended December 31, 2008 and Rs. 70.08 crores as of March 31, 2008 as per the audited restated financial statements of the Company included in this Letter of Offer.

2. The net asset value per Equity Share was Rs. 272.29 as of the nine months ended December 31, 2008 and Rs. 258.27 as of March 31, 2008 as per the audited restated financial statements of the Company included in this Letter of Offer.

3. Average cost of acquisition of Equity Shares of our Company by our Promoters is as under:

Average cost of acquisition of Equity Promoters S.No. Shares(Rs./share) 1. T.V. Sundram Iyengar & Sons Limited 21.92 2. Southern Roadways Limited 27.76 3. Sundaram Industries Limited 23.75

4. We have entered into certain related party transactions as disclosed in the section titled "Auditors Report and Financial Information – Related Party Transaction" on page 98 of the Letter of Offer.

xvii 5. For details of interests of our Directors and KMP please refer to the section titled "Our Management" on page 48 of this Letter of Offer.

6. For details of the interests of our Promoters and Promoter Group, please refer to the section titled "Our Promoters and Promoter Group" on page 54 of this Letter of Offer.

7. Any clarification or information relating to the Issue shall be made available by the Lead Manager and our Company to the investors at large and no selective or additional information would be available for a section of investors in any manner whatsoever. Investors may contact the Lead Manager for any complaints, information or clarifications pertaining to the Issue. The Lead Manager is obliged to provide the same to Investors.

8. Before making an investment decision in respect of the Issue, Investors are advised to read the entire Letter of Offer and refer to the section titled "Basis for Issue Price" on page 21 of this Letter of Offer.

9. Please refer to the paragraph titled "Basis of Allotment" on page 153 of this Letter of Offer for details of the basis of allotment.

We and the Lead Manager are obliged to keep this Letter of Offer updated and inform the public of any material change/development till the listing and trading of the Equity Shares offered under the Issue commences.

xviii SECTION III – INTRODUCTION

SUMMARY OF OUR INDUSTRY

Industry Overview

Indian Automotive Industry: Introduction

Indian Automobile Industry classification:

Indian Automobile industry can be broadly classified as under:

1. Commercial Vehicles - A commercial vehicle is a type of vehicle that is used for carrying goods or passengers. 2. Passenger Vehicles - A passenger vehicle is a type of vehicle designed primarily for the carriage of people. 3. Two Wheelers and Three Wheelers - A two / three wheeler refer to vehicles that run on two / three wheels such as scooters / mopeds / motorcycles and auto rickshaw.

Source: ACMA, SIAM and Report of Working Group on Automotive Industry, Eleventh Five Year Plan 2007-2012.

Indian Auto Component Industry: An overview

Indian auto component industry is quite comprehensive with around 500 firms in the organised sector producing practically all parts and more than 10,000 firms in small unorganised sector, in tierized format. The industry, over the years, developed the capability of manufacturing all components required to manufacture vehicles, which is evident from the high levels of indigenization achieved in the vehicle industry as well as the components developed for the completely Indian made vehicles like the Tata Indica, Tata Indigo, Mahindra Scorpio, Bajaj Pulsar, TVS Victor and TVS Star. The component industry has now holistic capability to manufacture the entire range of auto- components e.g. Engine parts, Drive & Transmission Parts, Suspension & Braking Parts, Electricals, Body and Chassis Parts, Equipment etc.

Source: ACMA and Automotive Mission Plan 2006-2016.

Indian Auto Component Industry classification:

A brief overview of some of the segments of auto component industry is given below:

1. Fuel injection systems and carburettors - Includes components like fuel pumps, carburettors, filters, elements, delivery valve and nozzles.

2. Powertrain components - Includes parts like crankshafts, camshafts, connecting rods, flywheel ring gears and timing chains. These products are largely OEM based.

3. Piston and piston parts – Includes parts like pistons, piston rings and pins.

4. Engine valves and parts - Includes parts like engine valves, valve guides, valve tappets and valve collect.

5. Cooling system and parts - Includes parts like radiator, water pumps assembly, radiator caps, fan assembly and water thermostat.

1 6. Steering assembly and components - Includes steering systems like rack and pinion, and re-circulating ball.

7. Suspension system and components - Includes parts like shock-absorbers and leaf spring.

8. Brakes and components - Includes brakes assembly and brake linings.

9. Lighting equipment - Includes parts like headlights, spot lights, flashlights and bulbs.

10. Sheet metal parts - Body parts form the bulk of the output that goes to the Original Equipment. This includes parts like mufflers and exhaust systems, which have limited life, derive their demand from replacement markets.

For further details, please refer to the section titled “Industry Overview” on page 29 of the Letter of Offer.

2 SUMMARY OF OUR BUSINESS

Business

Overview

We are part of the US$ 4 billion TVS Group of Companies and are engaged in the business of manufacturing and selling Automotive, Non Automotive and Industrial Friction materials predominantly used in the automotive industry (commercial vehicles, cars, jeeps, two wheelers, and tractors) and railways.

Our Company was promoted in 1974 as a joint venture between T. V. Sundram Iyengar & Sons Limited, its subsidiaries Southern Roadways Limited and Sundaram Industries Limited and Abex Corporation of USA to produce asbestos based friction materials. Our Company went into commercial production in the year 1976 and commenced exports to USA in 1978.

We absorbed the base asbestos-free technology and adopted a planned R&D strategy that involved evolving economically viable alternatives to suit Indian conditions without importing substitutes to asbestos fibre. This enabled development of asbestos-free friction materials, which are cost effective to the consumer and are environment friendly. In 1986, we commenced commercial production of asbestos-free friction material and subsequently developed asbestos-free heavy duty brake linings for Indian trucks and for exports to hard currency countries.

Our products can be classified under 5 broad categories:

a. Brake Linings - Brake Linings are friction surfaces that work between two metal surfaces in order to avoid metal to metal contact. b. Insitu Brake Shoes - A Brake shoe is part of the braking system, which carries the brake lining or the brake block. The Insitu process used for this product results in better adhesion and zero failure on poor bonding & poor adhesive application. c. Clutch Facings - Clutch facings are friction discs that are used for smooth clutch engagement & disengagement. d. Disc Brake pad - The assembly of lining and braking plate is called a brake pad. e. Railway Brake Blocks - Railway brake blocks are fitted on wagons, coaches & freight application carriers on the axles.

We operate in the OEM and the aftermarket segment. In the OEM segment, our products are sold to automotive companies that are engaged in the production of HCV, LCV, Passenger Cars, Tractors, Two-wheelers and Railway coaches and Tier I suppliers. In the aftermarket segment we cater to the market for friction material products that need to be replaced due to wear and tear. We have a presence in both the domestic as well as international markets. Our export business primarily caters to the aftermarket business segment.

We have our manufacturing units in four locations viz, one in Padi,Chennai, two units in TSK Puram, Mustakurichi and one in Mahindra World City SEZ, Chengalpet (near Chennai). Of these, two plants are dedicated exclusively to manufacturing asbestos-free brake linings and pads. The production facilities in Padi, Chennai houses our corporate office including various business units and support functions such as Sales, Marketing, Finance, R&D, Human Resources and Quality.

For the year ended March 31, 2008, we closed with a total income of Rs.189.56 crores and a profit after tax of Rs. 12.15 crores. For the nine month period ended December 31, 2008, we achieved a total income of Rs. 137.67 crores with a profit after tax of Rs. 6.20 crores.

For further details, please refer to the section titled “Our Business” on page 34 of the Letter of Offer.

3 THE ISSUE

Summary of the Terms of Issue

Equity Shares to be Issued 1,221,075 Equity Shares of face value Rs. 10/- each Rs. 122 per Equity Share (including a premium of Rs.112 per Equity S hare, payable in Issue Price cash).The Issue Price is 12.2 times of the face value of Equity Share. 9 fully paid up Equity Shares for every 20 fully paid up Equity Shares held by the Rights Entitlement existing Equity Shareholder of our Company on the Record Date, i.e. May 21, 2009,. Issue size Rs.148,971,150 Record Date May 21, 2009 Equity Shares outstanding 2,713,500 prior to the Issue Equity Shares outstanding 3,934,575 after the Issue For details please refer to section titled “Terms of Issue” on page 142 of this Terms of Issue Letter of Offer

Terms of Payment

Due Date Amount On Right Issue Entire Issue Price i.e., an amount of Rs. 122 per Equity Share, including the share application premium of Rs.112 per Equity Share, is to be paid at the time of application

4 SUMMARY FINANCIAL INFORMATION

Selected Financial Information of Sundaram Brake Linings Limited

The following tables set forth our selected financial information derived from our restated financial statements for the nine month period ended December 31, 2008 and the fiscal years ended 2008, 2007, 2006, 2005 and 2004. The financial statements have been prepared in accordance with Indian GAAP, the Companies Act and SEBI DIP Guidelines and restated as described in the Auditors Report of Sundaram & Srinivasan, Chartered Accountants dated March 17, 2009 and included in the section titled “Auditors Report and Financial Information” on page 70 of this Letter of Offer, and this table should be read in conjunction with the financial statements mentioned therein and the notes thereto.

STATEMENT OF ASSETS AND LIABILITIES (AS RESTATED)

(in Rs. crores)

For the 9 For the For the For the For the months year year year year For the year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 FIXED ASSETS Gross Block 124.97 123.50 117.34 100.08 90.77 84.18 Less: Depreciation 53.34 48.88 43.11 38.61 34.69 30.85 Net Block 71.63 74.62 74.23 61.47 56.08 53.33 Capital WIP - - 0.19 0.09 0.05 0.19

Investments 0.53 0.53 0.53 0.53 0.00 0.00

Current assets, Loans and advances Inventories 11.14 11.53 9.81 8.43 6.70 5.78 Sundry debtors 44.71 48.03 51.17 39.55 34.28 27.86 Cash and bank balances 1.87 2.99 1.55 1.15 1.74 1.63 Loans and advances 11.36 7.15 5.93 5.85 5.22 4.98 Other Current Assets - - - TOTAL (A) 141.24 144.85 143.41 117.07 104.07 93.77

LIABILITIES AND PROVISIONS

Secured loans 28.56 33.43 43.36 30.79 26.48 20.83 Unsecured loans - - 0.49 1.29 2.84 2.80

Current Liabilities 25.61 26.04 20.33 14.34 11.40 14.66

Provisions Provision for Tax - - 0.35 0.65 0.14 - Provision for Dividend (including dividend distribution tax) - 1.90 0.95 1.55 1.55 1.22 Deferred Tax liability 13.19 13.40 13.02 13.40 13.53 12.38

TOTAL (B) 67.36 74.77 78.50 62.02 55.94 51.89

NET WORTH (A-B) 73.88 70.08 64.91 55.05 48.13 41.88 Net worth Represented by Share Capital 2.71 2.71 2.71 2.71 2.71 2.71

Reserves & Surplus 71.17 67.37 62.20 52.47 45.42 39.17

Less : Deferred Revenue Expenditure ------(to the extent not written off or Adjusted) Misc. Expenditure - - - 0.13 - - (to the extent not written off or Adjusted)

Net Worth 73.88 70.08 64.91 55.05 48.13 41.88

6 STATEMENT OF PROFIT AND LOSSES (AS RESTATED)

(in Rs. crores) For the For the For the For the For the For the 9 months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

INCOME Products Manufactured by the Company 135.76 186.02 187.52 143.23 131.48 118.43 Products traded in by the Company 1.48 1.63 1.51 1.50 1.29 1.32 Income from Product Sales 137.24 187.65 189.03 144.73 132.77 119.75 Other Income 0.21 0.39 0.60 0.37 0.32 0.34 Increase(Decrease) in Inventories 0.23 1.52 0.10 (0.00) 0.85 (0.12) Total Income (A) 137.68 189.56 189.73 145.10 133.94 119.97

EXPENDITURE Raw material consumed 67.73 91.76 93.91 67.10 61.44 51.85 Employee Cost 17.88 20.71 20.66 16.54 14.75 15.89 Other Manufacturing expenses 20.05 23.90 21.12 17.46 15.82 14.70 Administrative Expenses 5.25 12.47 11.27 9.57 10.45 8.78 Selling & Distribution Expenses 10.75 13.53 13.77 11.84 10.83 9.85 Interest 1.90 2.81 2.59 2.04 1.44 1.91 Depreciation 4.47 5.77 4.74 4.22 3.85 3.64

Total Expenditure (B) 128.03 170.95 168.07 128.76 118.58 106.62

PROFIT BEFORE TAX (A-B) 9.65 18.62 21.66 16.34 15.36 13.35

Provision for taxes Current tax 3.53 5.77 8.07 5.65 4.07 3.80 Deferred tax (0.21) 0.38 (0.38) (0.13) 1.14 0.46 FBT 0.13 0.31 0.20 0.43 - -

PROFIT AFTER TAX 6.20 12.16 13.77 10.39 10.15 9.09 ADJUSTMENTS ------

Total of adjustments after tax impact ------

NET PROFIT FOR THE PERIOD/YEAR AS RESTATED 6.20 12.16 13.77 10.39 10.15 9.09 Profit and loss account 4.16 4.69 4.35 3.34 3.11 1.84 (at the beginning of the year) Extraordinary Items (net of tax) 2.40 5.08 - - - - Net profit after Extraordinary Items 7.96 11.77 18.12 13.73 13.26 10..93

APPROPRIATION Prior Period Tax 0.25 0.82 0.18 Transfer to General Reserve 5.71 9.38 6.04 6.02 4.89 Transfer to Capital Redemption Reserve 0.00 0.00 0.00 0.00 0.00

7 Dividend Preference - - - - - Equity 1.63 3.52 2.71 2.71 2.44 Tax on dividend 0.28 0.52 0.38 0.37 0.32 TOTAL - 7.61 13.42 9.38 9.92 7.83 Balance carried forward 7.96 4.16 4.70 4.35 3.34 3.10

8 GENERAL INFORMATION

Dear Shareholder(s),

Pursuant to the resolution passed by the Board of Directors of our Company at its meeting held on February 6, 2009, it has been decided to make the following offer to the Equity Shareholders of our Company, with a right to renounce:

ISSUE OF 1,221,075 EQUITY SHARES WITH A FACE VALUE OF RS. 10 EACH AT AN ISSUE PRICE OF RS.122 PER EQUITY SHARE (INCLUDING A PREMIUM OF RS.112 PER EQUITY SHARE, PAYABLE IN CASH) AGGREGATING RS.148,971,150 ON RIGHTS BASIS IN THE RATIO OF 9 FULLY PAID-UP EQUITY SHARES FOR EVERY 20 FULLY PAID-UP EQUITY SHARES HELD BY EXISTING EQUITY SHAREHOLDERS OF OUR COMPANY ON THE RECORD DATE i.e. May 21, 2009 (“ISSUE”).

THE ISSUE PRICE IS 12.2 TIMES OF THE FACE VALUE OF EQUITY SHARE. FOR MORE DETAILS, PLEASE REFER TO THE SECTION TITLED “TERMS OF ISSUE” ON PAGE 142 OF THIS LETTER OF OFFER.

IMPORTANT

• This offer is being made only to those Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the Depositories in respect of the Equity Shares held in the electronic form and in the Register of Members of our Company in respect of the Equity Shares held in physical form as on the Record Date i.e. May 21, 2009 fixed in consultation with the Designated Stock Exchange(s) i.e. NSE

• Your attention is drawn to the section titled “Risk Factors” on page vi of this Letter of Offer.

• Please ensure that you have received the CAF with this Letter of Offer. In case the original CAF is not received, lost or misplaced by the shareholder, the Registrar will issue a duplicate CAF on the request of the shareholder who should furnish the registered folio number/DP ID/client ID number and his/her full name and address to the Registrar. Please note that those applicants who are making the application in the duplicate CAF should not utilize the original CAF for any purpose including renunciation, even if it is received/ found subsequently. In case the original and the duplicate CAFs are lodged for subscription, allotment will be made on the basis of the duplicate CAF and the original CAF will be ignored

• Please read this Letter of Offer and the instructions contained herein and in the CAF carefully, before filling in the CAF. The instructions contained in the CAF are an integral part of this Letter of Offer and must be carefully followed. Applications are liable to be rejected if they are not in conformity with the terms of this Letter of Offer or the CAF.

• All enquiries in connection with this Letter of Offer or CAF should be addressed to the Registrars to the Issue, Integrated Enterprises (India) Limited, II Floor, “Kences Towers”, No.1, Ramakrishna Street, North Usman Road, T Nagar, Chennai 600 017, Phone: +91-44-28140801 – 808, Fax: +91-44- 28142479, Email: [email protected] quoting the Registered Folio Number/Depository Participant (DP) Number, Client ID Number and the CAF Number as mentioned in the CAF.

• The Issue will remain open for a minimum period of 15 days. If extended, it will be kept open for a maximum period of 30 days.

The funds received against the Issue will be kept in separate bank account(s) and our Company will not have any access to such funds unless it satisfies the Designated Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of the Issue has been received by our Company. If our Company does not receive the minimum subscription of 90% of the Issue, the entire subscription shall be

9 refunded to the applicants within 15 days from the date of closure of the Issue. Our Promoters and Promoter Group have confirmed that they would subscribe to their respective entitlements in this Rights Issue in full. Further, two of our Promoters i.e. T.V. Sundram Iyengar & Sons Limited and Sundaram Industries Limited and Mr. K. Mahesh, part of Promoter Group have confirmed that they will also subscribe to such number of additional Equity Shares as may be required, beyond their entitlement, if the Issue is undersubscribed, to enable the completion of the Rights Issue, in accordance with the provisions of SEBI (Disclosure of Investor Protection) Guidelines, 2000 and other applicable laws. Subscription by the Promoters and Promoter Group to the extent of their entitlement in this Issue and acquisition of additional Equity Shares by, if any, by the Promoters and Promoter Group , will not result in change of control of the management of our Company and shall be exempted in terms of provision to Regulation 3(1)(b)(ii) of the Takeover Code.

Registered office of our Company

180, Anna Salai, Chennai 600 006

Factory and Corporate office of our Company

Padi, Chennai 600 050 Tel: +91-44-42205300 Fax: +91-44-42205572 Website: www.tvsbrakelinings.com Email: [email protected] Company Secretary and Compliance Officer: Mr. R. Mani Parthasarathy

Company Identification Number (CIN): L34300TN1974PLC006703

Registrar of Companies

Our Company, bearing Registration Number 18-6703, is registered with the Registrar of Companies, Tamil Nadu at Chennai, located at Block 6, Second Floor, Shastri Bhavan, 26, Haddows Road, Chennai 600006.

Listing

The Equity Shares of our Company are listed on the NSE and MSE and traded on BSE as a permitted security.

Board of Directors

Our Board of Directors as on the date of the filing of this Letter of Offer with SEBI comprises of: 1. Mr. K. Mahesh, Chairman and Managing Director 2. Mr. K. Ramesh, Director 3. Mr. T. Kannan, Director 4. Mr. P. S. Raman, Director 5. Mr. Ashok V. Chowgule, Director

For more details regarding the profile of our Management please refer to the section titled “Our Management” on page 48 of this Letter of Offer.

Company Secretary and Compliance Officer Mr. R. Mani Parthasarathy Sundaram Brake Linings Limited, Padi, Chennai 600 050 Tel: +91-44-42205405 Fax: +91-44-42205572 Email: [email protected]

10 Investors may contact the Company Secretary and Compliance Officer for any pre-Issue/post-Issue related matters.

Lead Manager to the Issue Spark Capital Advisors (India) Private Limited “Reflection”, New No.2, Leith Castle Center Street, Santhome High Road, Santhome, Chennai 600 028 Tel: +91-44-4344 0000; Fax: +91-44-4344 0090 Contact Person: Mr. K. Ganesh Email: [email protected] Website: www.sparkcapital.in SEBI Reg. No.: INM000011138

Registrar to the Issue and Share Transfer Agents for our Company Integrated Enterprises (India) Limited II Floor, “Kences Towers” No.1, Ramakrishna Street, North Usman Road, T.Nagar, Chennai 600 017 Phone: +91-44-28140801 – 808, Fax: +91-44-28142479 Contact Person: Mr. Suresh Babu Email: [email protected] Website: www.iepindia.com SEBI Reg. No.: INR000000544

Note: Investors are advised to contact the Registrar to the Issue and/or Company Secretary / Compliance Officer, Mr. R. Mani Parthasarathy in case of any pre-Issue/post-Issue related grievances such as non-receipt of the Draft Letter of Offer / Letter of Offer/Abridged Letter of Offer / Letter of allotment/ share certificate(s)/ refund orders/demat credit/electronic refund.

Legal Advisors for the Issue HSB Partners ‘Sreyas Virat’, II Floor, New No.26 (Old No.13/14) III Cross Road, R. A. Puram, Chennai 600 028 Phone: +91-44-24355217 Fax: +91-44-24355257 Email: [email protected] Contact Person: Mr. T. K. Bhaskar

Bankers to the Issue

HDFC Bank Ltd BTI Ops Department Maneckji Wadia Building,3rd Floor Nanik Motwani Marg Fort,Mumbai - 400 001. Phone:+91-22-66573748 Fax: +91-22-22700024 Email: [email protected] Contact Person Mr Uday Dixit

Statutory Auditors of our Company Sundaram & Srinivasan Chartered Accountants 23, CP Ramaswamy Road Alwarpet, Chennai, Chennai-600 018

Bankers to our Company State Bank of India Limited

11 Address: Industrial Finance Branch, Anna Salai, Chennai 600 002 Tel: +91-44-65513171; +91-44-28603171 Fax: +91-44-28600572: +91-44-28603177 Email: [email protected] Contact Person: Mr. R. Ingersal

Statement of Allocation of Responsibilities

Spark Capital Advisors (India) Private Limited is the sole Lead Manager to the Issue. The details of responsibilities are as follows:

S.No. Activities 1. Capital structuring with relative components and formalities such as type of instruments, etc. 2. Drafting and Design of the Draft Letter of Offer/ Letter of Offer document and of advertisement/publicity material including newspaper advertisements and brochure/memorandum containing salient features of the Draft Letter of Offer/ Letter of Offer document. The designated Lead Manager shall ensure compliance with the Guidelines for Disclosure and Investor Protection and other stipulated requirements and completion of prescribed formalities with Stock Exchange, Registrar of Companies and SEBI. 3. Marketing of the Issue, which will cover, inter alia, formulating marketing strategies, preparation of publicity budget, arrangements for selection of (i) ad-media, (ii) centers of holdin g conferences of brokers, investors etc. (iii) bankers to the Issue, (iv) collection centers (v) brokers to the Issue , distribution of publicity and Issue material including application form, Draft Letter of Offer/ Letter of Offer and brochure, and deciding on the quantum of Issue material. 4. Selection of various agencies connected with the Issue, namely Registrars to the Issue , printers, bankers and advertisement agencies. 5. Follow-up with bankers to the Issue to get estimates of collection and advising the Issue r about closure of the Issue, based on the correct figures. 6. The post-Issue activities will involve essential follow-up steps, which must include finalisation of basis of allotment/weeding out of multiple applications, listing of instruments and d ispatch of certificates and refunds, with the various agencies connected with the work such as registrars to the Issue , bankers to the Issue, and bank handling refund business. Even if many of these post-Issue activities would be handled by other intermediaries, the designated Lead Manager shall be responsible for ensuring that these agencies fulfil their functions and enable him to discharge this responsibility through suitable agreements with the Issuer Company.

Credit Rating

This being a Rights Issue of Equity Shares, no credit rating is required. Our Company has not made issue of any securities/instruments in the last three financial years and hence there have been no requirements for a credit rating.

Grading

This being a Rights Issue, no grading is required.

Debenture Trustees

This being a Rights Issue of Equity Shares, appointment of debenture trustees is not applicable.

Monitoring Agency

As the size of this Issue does not exceed Rs. 50,000 lakh, appointment of a monitoring agency under clause 8.17 of the SEBI DIP Guidelines is not required.

Appraising Entity

Not Applicable

Impersonation

Attention of the applicants is specifically drawn to the provisions of subsection (1) of section 68A of the Act which is reproduced below:

“Any person who makes in a fictitious name, an application to a company for acquiring, or subscribing for, any shares therein, or otherwise induces the Company to allot, or register any transfer of shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years”.

Underwriting / Standby arrangements

The present Issue is not underwritten. Neither our Company, Promoters, Directors of our Company, nor the Lead Manager to the Issue have entered into any buy-back, standby or similar arrangements for any of the securities being issued through this Letter of Offer.

Minimum Subscription

If our Company does not receive the minimum subscription of 90% of the Issue on the date of the closure of the Issue, the entire subscription shall be refunded to the applicants within 15 days from the date of closure of the Issue. If there is delay in the refund of subscription by more than 8 days after our Company becomes liable to pay the subscription amount (i.e. 15 days after closure of the Issue), our Company will pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of section 73 of the Companies Act, 1956.

Under-subscription of the Issue will be determined after considering the number of shares applied as per the entitlement plus additional shares applied for by the existing Shareholders and the renouncees. Our Promoters and Promoter Group have confirmed that they would subscribe to their respective entitlements in this Rights Issue in full. Further, two of our Promoters i.e. T.V. Sundram Iyengar & Sons Limited and Sundaram Industries Limited and Mr. K. Mahesh, part of Promoter Group have confirmed that they will also subscribe to such number of additional Equity Shares as may be required, beyond their entitlement, if the Issue is undersubscribed, to enable the completion of the Rights Issue, in accordance with the provisions of SEBI (Disclosure of Investor Protection) Guidelines, 2000 and other applicable laws. Subscription by the Promoters and Promoter Group to the extent of their entitlement in this Issue and acquisition of additional Equity Shares by, if any, by the Promoters and Promoter Group, will not result in change of control of the management of our Company and shall be exempted in terms of proviso to Regulation 3(1) (b) (ii) of the Takeover Code. In the event that the post-Issue shareholding of public falls below 25% of the post-Issue capital of our Company, our Promoters and Promoter Group undertake to maintain the “minimum level of public shareholding” in accordance with clause 40A of the Listing Agreement.

In case the permission to deal in and for an official quotation of the Equity Shares is not granted by the Stock Exchanges, the Issuer shall forthwith repay without interest, all monies received from the applicants in pursuance of the Letter of Offer and if such money is not repaid within eight days after the day from which the Issuer is liable to repay it, the Issuer shall pay interest as prescribed under section 73 (2) / 73 (2A) of the Companies Act, 1956.

Note: The funds received against the Issue will be transferred to a separate bank account other than the bank account referred to in sub-section (3) of section 73 of the Act.

13 CAPITAL STRUCTURE

Our share capital as on the date of filing of this Letter of Offer with SEBI (before and after the Issue) is set forth below:

Aggregate value at Issue Nominal/Aggregate Price Particulars Value(Rs.) (Rs.) A. Authorized Capital 50,00,000 Equity Shares of Rs10 each 50,000,000 B. Issued and Subscribed Capital before the Issue 27,135,000 27,13,500 Equity Shares of Rs10 each C. Present Issue of 1,221,075 fully Paid-Up Equity Shares of Rs. 10 each being offered to the Equity Shareholders through the Letter of Offer 12,210,750 148,971,150 D. Paid-up Equity Capital after the Issue fully Paid-Up Equity Shares of Rs. 10 each 39,345,750 E. Securities Premium Account Before the Issue 33, 283, 000 After the Issue 170,043,400

Notes to the Capital Structure

1. We have availed exemptions as per provisions of clause 6.39 of SEBI Guidelines, after having satisfied the conditions mentioned in the above provision, with respect to disclosure of information required under sub- clauses (a), (b), (c), (d) and (e) of clause 6.8.3 of the SEBI Guidelines. Further, we confirm that other than the disclosures made in the Letter of Offer nothing material has changed in respect of disclosures made by us at the time of our previous issue made in October 1995.

2. Shareholding pattern of our Company as on March 31, 2008

No. of % of post Total no. of % of pre- Equity Rights Category Shares held pre- Issue Shares post Issue Code Category of Shareholders Issue capital Rights Issue capital* Shareholding of Promoter and (A) Promoter Group

(1) Indian Individuals/ Hindu Undivided (a) Family 568,654 20.96% 824,548 20.96% Central Government/ State (b) Government(s) - 0.00% - 0.00% (c) Bodies Corporate 1,078,510 39.75% 1,563,840 39.75% (d) Financial Institutions/ Banks - 0.00% - 0.00% Any Other - 0.00% - 0.00% (e) (specify) - Sub-Total (A)(1) 1,647,164 60.70% 2,388,388 60.70% (2) Foreign Individuals (Non-Resident (a) Individuals/ Foreign Individuals) - 0.00% - 0.00% (b) Bodies Corporate - 0.00% - 0.00%

14 (c) Institutions - 0.00% - 0.00% (d) Any Other (specify) - 0.00% - 0.00% Sub-Total (A)(2) - 0.00% - 0.00% Total Shareholding of Promoter and Promoter Group (A)= (A)(1) + (A)(2) 1,647,164 60.70% 2,388,388 60.70% (B) Public Shareholding (1) Institutions (a) Mutual Funds/ UTI 71,710 2.64% 103,980 2.64% (b) Financial Institutions/ Banks 50 0.00% 73 0.00% Central Government/ State (c) Government(s) - 0.00% - 0.00% (d) Venture Capital Funds - 0.00% - 0.00% (e) Insurance Companies 59,816 2.20% 86,733 2.20% (f) Foreign Institutional Investors - 0.00% - 0.00% (g) Foreign Venture Capital Investors - 0.00% - 0.00% (h) Any Other (specify) - 0.00% - 0.00% Sub-Total (B)(1) 131,576 4.85% 190,785 4.85% (2) Non-institutions 0.00% - 0.00% (a) Bodies Corporate 61,979 2.28% 89,870 2.28% Individuals - - Individual shareholders holding nominal share capital up to Rs. 1 lakh. 822,871 30.33% 1,193,163 30.33% Individual shareholders holding nominal share capital in excess of (b) Rs. 1 lakh. 49,910 1.84% 72,370 1.84% (c) Any Other (specify) - 0.00% - 0.00% Sub-Total (B)(2) 934,760 34.45% 1,355,402 34.45% Total Public Shareholding (B) = (B)(1) + (B)(2) 1,066,336 39.30% 1,546,187 39.30% TOTAL (A)+(B) 2,713,500 100.00% 3,934,575 100.00% Shares held by Custodians and against which Depository Receipts (C) have been issued - - GRAND TOTAL (A)+(B)+(C) 2,713,500 100.00% 3,934,575 100.00% *Assuming all shareholders apply for and are allotted Equity Shares in the Rights Issue

3. Details of the shareholding of the Promoters and Promoter Group as on the date of filing of the Letter of Offer with SEBI is as follows:

Name of Entities No. of Equity Shares Percentage Southern Roadways Limited 330,000 12.16% T.V. Sundram Iyengar & Sons Ltd 326,760 12.04% K. Mahesh 179,416 6.61% Sundaram Industries Limited 150,000 5.53% Alagar Farms Private Limited 135,100 4.98% Rajarajeswari Farms Private Limited 122,750 4.52% K. Ramesh 110,081 4.06% Suresh Krishna - HUF 100,000 3.69% Krishna Mahesh 77,181 2.84% Shrikirti Mahesh 35,454 1.31% Shripriya Mahesh 28,154 1.04% Shrimathi Mahesh 16,588 0.61%

15 Name of Entities No. of Equity Shares Percentage Aplomb Investments Limited 13,900 0.51% Urmila Ramesh 7,620 0.28% Mridula Ramesh 6,960 0.26% Mala Ramesh 6,600 0.24% Suresh Krishna 480 0.02% Arathi Krishna 120 0.00% Total 1,647,164 60.70%

4. Average cost of acquisition of Equity Shares by our Promoters is as under

S.No. Promoters Average cost of acquisition of Equity Shares(Rs.) 1 T.V. Sundram Iyengar & Sons Limited 21.92 2. Southern Roadways Limited 27.76 3. Sundaram Industries Limited 23.75

5. Details of Equity Shares bought back

Our Company has not bought back any Equity Shares since inception.

6. Details of the transactions in Equity Shares by the Promoters and the Promoter Group during the last 6 months

The Promoters and Promoter Group and Directors of our Company have not purchased or sold the Equity Shares of our Company during the 6 months period preceding the date of filing the Letter of Offer with SEBI.

7. Top 10 Shareholders

a. As on date of filing of the Letter of Offer with Stock Exchanges (May 15, 2009)

S.No. Particulars No. of Equity Shares Percentage 1. Southern Roadways Limited 330,000 12.16% 2. T.V. Sundram Iyengar & Sons Limited 326,760 12.04% 3. K. Mahesh 179,416 6.61% 4. Sundaram Industries Limited 150,000 5.53% 5. Alagar Farms (P) Limited 135,100 4.98% 6. Rajarajeswari Farms (P) Limited 122,750 4.52% 7. K Ramesh 110, 081 4.06% 8. Suresh Krishna Kartha HUF 100,000 3.69% 9. Krishna Mahesh 77,181 2.84% 10. ICICI Prudential Tax Plan 71,600 2.64% Total 1,602,888 59.07%

b. 10 days prior to date of filing of the Letter of Offer with Stock Exchanges (May 5, 2009)

S.No. Particulars No. of Equity Shares Percentage 1. Southern Roadways Limited 330,000 12.16 % 2. T.V. Sundram Iyengar & Sons Limited 326,760 12.04% 3. K. Mahesh 179,416 6.61% 4. Sundaram Industries Limited 150,000 5.53% 5. Alagar Farms (P) Limited 135,100 4.98% 6. Rajarajeswari Farms (P) Limited 122,750 4.52% 7. K. Ramesh 110,081 4.06%

16 S.No. Particulars No. of Equity Shares Percentage 8. Suresh Krishna Kartha HUF 100,000 3.69% 9. Krishna Mahesh 77,181 2.84% 10. ICICI Prudential Tax Plan 71,600 2.64% Total 1,602,888 59.07 %

c. 2 years prior to date of filing of the Letter of Offer with Stock Exchanges (May 15, 2007)

S.No. Particulars No. of Equity Shares Percentage 1. Southern Roadways Limited 330,000 12.16% 2. T.V. Sundram Iyengar & Sons Limited 326,760 12.04% 3. K. Mahesh 179,416 6.61% 4. Sundaram Industries Limited 150,000 5.53% 5. Alagar Farms (P) Limited 135,100 4.98% 6. ICICI Prudential Tax Plan 130,000 4.79% 7. Rajarajeswari Farms (P) Limited 122,750 4.52% 8. K. Ramesh 110,081 4.06% 9. Suresh Krishna Kartha HUF 100,000 3.69% 10. Krishna Mahesh 77,181 2.84% Total 1,661,288 61.22%

Promoters Contribution and Lock-in

The present Issue being a rights Issue, as per extant SEBI guidelines, the requirement of promoters’ contribution and lock-in are not applicable.

Issues for consideration other than cash

Our Company issued 225,000 Equity Shares for consideration other than cash to Abex Corporation in January 31, 1976 for the technology support that Abex Corporation was providing our Company.

17 OBJECTS OF THE ISSUE

Our Company intends to utilize the proceeds of the Issue towards the following purpose:

• Augmentation of working capital requirements of the Company

The main objects clause of our Memorandum of Association enables us to undertake our existing activities and the activities for which funds are being raised by us through the Issue. Further, we confirm that the activities which we have been carrying out till date are in accordance with the objects clause of our Memorandum of Association.

Project Cost

We intend to utilise the funds raised from the Issue as follows:

S. No. Objects in Rs. crores as a % of the total Issue Size A. Working capital requirements 14.24 95.60% B. Issue Expenses 0.65 4.40% Total 14.89 100.00%

Means of Financing

S. No. Particulars Amount in Rs. crores 1. Rights Issue proceeds 14.89

The entire requirements of the objects detailed above are intended to be funded from the Issue Proceeds. Therefore no other means of financing is envisaged.

The above fund requirements and deployment are based on the estimates of our management and have not been appraised by any bank or financial institution or independent third party. These fund requirements are based on the current business plan of our Company. We operate in a highly competitive and dynamic industry, and may have to revise our business plan from time to time on account of new projects that we may pursue or to formulate a response to revised market or economic circumstances. In case of any variations in the actual utilization of funds earmarked for the above activities, increased fund deployment for a particular activity may be met with by other funding sources, including surplus funds, if any, available.

The details of the fund requirements are as follows:

A. Augmentation of working capital requirements of the Company

The proceeds from this Rights Issue will be mainly used to augment the working capital requirements of our Company to meet the needs arising out of growth in our business. The detailed calculation of the working capital requirement which is to be funded through the proceeds of the issue is as under:

Estimates as on March 31, 2010 Amount in Rs. crores A. Current Assets Inventories 10.00 Receivables 49.00 Other Current Assets 22.00 Total Current Assets (A) 81.00

B. Current Liabilities Creditors 13.00 Other Liabilities 9.00

18 Estimates as on March 31, 2010 Amount in Rs. crores Total Current Liabilities (B) 22.00 Working Capital 59.00 Less: Margin (25%) 14.75 Net Working Capital 44.25 Working capital facility from Banks 30.00 Proceeds of the Issue 14.25 * The margin required for the working capital of the Company will be funded through the internal accruals of the Company

We currently enjoy working capital facility- (fund based limit to the extent of Rs. 30 crores and non fund based limit to the extent of Rs.3 crores) from State Bank of India, Industrial Finance Branch, Chennai.

Basis of estimation of working capital requirement

Particulars No. of days Inventories 36 Debtors 88 Creditors 51

B. Issue expenses

The total expenses of the Issue are estimated to be approximately Rs. 0.65 crores. The Issue related expenses include, among others, Issue management fees, registrar fees, printing and distribution expenses, auditor fees, legal fees, advertisement expenses, stamp duty, depository charges and listing fees to the stock exchanges. The total expenses for the Issue are estimated not to exceed 4.36 % of the size of the Rights Issue. The following table provides a break up of estimated Issue expenses:

Estimated As a percentage As a percentage Amount of Total Issue of Total Issue Year (in Rs. crores) Expenses Size Statutory Advertisement 0.05 7.69% 0.33% Advisors’ fee 0.40 61.54% 2.69% SEBI filing and Stock Exchange Listing fees 0.01 1.54% 0.07% Postage, Printing and Stationery 0.10 15.38% 0.67% Others including Registrar fees, Contingencies etc. 0.09 13.85% 0.60% Total 0.65 100.00% 4.36%

Deployment of Net Issue proceeds towards objects of the Issue

We confirm that no amount has been spent as on date towards any of the purposes where the Net Issue Proceeds are proposed to be deployed.

Balance deployment of Net Issue proceeds

Since the entire funds would be utilized before March 31, 2010, the year wise break up of expenditure to be incurred is not given.

19 Interim use of Issue proceeds

In the event our Company receives at least the minimum subscription of 90% of the Issue size, and pending utilization of Issue proceeds for the purposes set forth in the Letter of Offer, our management, in accordance with the policies set up by the Board, will have flexibility in deploying the proceeds received from the Issue. Depending on options available, we may also consider temporarily investing the funds in high quality interest bearing instruments / deposits with banks for the necessary duration and / or to temporarily deposit the funds in cash credit accounts with banks, for reducing overdraft, repaying other loans and save interest costs. The Issue proceeds will not be deployed in equity or in equity related instruments. Such investments would be in accordance with investment policies approved by the Board from time to time.

Monitoring of utilization of Issue proceeds

There is no requirement for appointment of a monitoring agency in terms of clause 8.17 of the SEBI DIP Guidelines. The Audit Committee of our Company will monitor the utilization of the proceeds of the Issue. Our Company will disclose the utilization of Issue proceeds under a separate head in its financial statements along with details for Fiscal 2010 clearly specifying the purpose for which such proceeds have been utilized. Our Company, in its financial statements for Fiscal 2010,will provide details, if any, in relation to all such proceeds of the Issue that have not been utilized thereby also indicating investments, if any, of such unutilized proceeds of the Issue in our Company’s financial statements for the relevant Financial Years commencing from Fiscal 2010.

Pursuant to clause 49 of the Listing Agreement, our Company shall on a quarterly basis disclose to the Audit Committee the uses and applications of the proceeds of the Issue. On an annual basis, our Company shall prepare a statement of funds utilised for purposes other than those stated in the Letter of Offer and place it before the Audit Committee. Such disclosure shall be made only until such time that all the proceeds of the Issue have been utilised in full. The statement shall be certified by the statutory auditors of our Company. Furthermore, in accordance with clause 43A of the Listing Agreement we shall furnish to the Stock Exchanges on a quarterly basis, a statement including material deviations if any, in the utilisation of the process of the Issue from the objects of the Issue as stated above. This information will also be published in newspapers simultaneously with the interim or annual financial results, after placing the same before the Audit Committee/Board.

No part of the Issue proceeds will be paid by our Company as consideration to Promoters, Directors, KMP, Associate, Affiliates or members of the Promoter Group except otherwise in the ordinary course of business.

20 BASIS FOR ISSUE PRICE

Qualitative Factors

• Diversified Product Portfolio : We are an auto component manufacturer primarily focusing on brake lining products. Our product range includes a variety of brake linings, brake shoes, clutch facings and railway brake blocks. We supply our products to major automobiles manufactures in India and also cater to the replacement market.

• Diversified Revenue Profile: We cater to the needs of most of the leading automobile manufacturers in India as also the replacement market in India and overseas.

• Focus on R&D, expansion and innovation : We believe that our continued emphasis on Research & Development has enabled our Company to provide high quality components.

• Large Customer Base: We have built significant relationships with major automobiles manufacturers and Tier I suppliers.

For further details, please refer to the section titled “Our Business” on page 34 of the Letter of Offer.

Quantitative Factors

Information presented in this section is derived from our restated financial statements, prepared in accordance with Indian GAAP

1. Earnings Per Share(EPS)

Year Rupees Weight Year ended March 31, 2006 38.30 1 Year ended March 31, 2007 50.76 2 Year ended March 31, 2008 26.08 3 Weighted Average 36.34

The Annualized EPS for nine months period ended December 31, 2008 is Rs. 18.69

2. Price/Earning (P/E) ratio in relation to the Issue Price of Rs . 122

a. Based on EPS of Rs. 26.08 for the year ended March 31, 2008, the P/E Ratio is 4.68 b. Based on Weighted Average EPS of Rs. 36.34 for the past 3 years, the P/E Ratio is 3.36

a. Industry P/E

Particulars P/E Highest 49.30 Lowest 3.10 Industry Composite 12.60 Source: Capital Market Vol. XXIV/05 dated May 04 – May 17, 2009 Category: Auto Ancillaries

3. Return on Net Worth

Year RONW (%) Weight Year ended March 31, 2006 18.83% 1 Year ended March 31, 2007 21.22% 2 Year ended March 31, 2008 10.10% 3 Weighted Average 15.26%

The Return on Net Worth for the nine month period ended December 31, 2008 is 5.15%

4. Minimum Return on Increased Net Worth required for maintaining pre-Issue EPS : 8.28%

5. Net Asset Value

Net Asset Value per Equity Share represents shareholders’ equity less miscellaneous expenses as divided by number of Equity Shares Net Asset Value per Equity Share as at March 31, 2006 is Rs. 202.86 Net Asset Value per Equity Share as at March 31, 2007 is Rs. 239.21 Net Asset Value per Equity Share as at March 31, 2008 is Rs. 258.27

Net Asset Value per Equity Share after the Issue is Rs. 225.65

Issue Price per Equity Share: Rs.122

6. Comparison of Accounting Ratios – Based on the current market capitalization and the nature of services they provide, the comparison of accounting ratios for the closest comparable listed competitors in India is given below.

Book Comparable listed Face value per EPS RONW Value/Share Indian company share(Rs.) (Rs.) P/E (%) (Rs.) Rane Brake Lining Limited 10 9.50 12.0 24.30% 87.5 Hindustan Composites Limited 10 1.60 49.30 6.80% 22.30 Source: Capital Market Vol. XXIV/05 dated May 04 – May 17, 2009

22 STATEMENT OF TAX BENEFITS

Auditor’s Report

Sundaram Brake Linings Limited Padi, Chennai – 600 050

Dear Sirs,

Statement of Possible Tax Benefits available to Sundaram Brake Linings Limited and its Shareholders

We hereby report that the enclosed annexure states the possible income-tax benefits available to the Company and its shareholders under the current tax laws in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant provisions of the statute. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which based on business imperatives the Company faces in the future, the Company may or may not choose to fulfil.

The benefits discussed below are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue.

We do not express any opinion or provide any assurance as to whether: • the Company or its shareholders will continue to obtain these benefits in future; or • the conditions prescribed for availing the benefits have been / would be met with.

The contents of this annexure are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company

For Sundaram & Srinivasan Chartered Accountants

Per M. Padhmanabhan Membership. No. F.13291

Place: Chennai Date: March 17, 2009

23 STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE COMPANY AND ITS SHAREHOLDERS

The tax benefits listed below are the possible benefits available under the current tax laws in India. Several of these benefits are dependent on the Company or its Shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence, the ability of the Company or its Shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which based on business imperatives it faces in the future, it may not choose to fulfill.

GENERAL TAX BENEFITS

I. INCOME TAX

A. To the Company:

1. The Company will be entitled to claim depreciation allowance at the prescribed rates on tangible and intangible assets under section 32 of the Income Tax Act, 1961 (hereinafter is referred as “Act”). Subject to Company qualifying with the conditions as stated in section 32 (1) (iia) of Act as amended with effect from 01.04.2005, in respect of Plant & Machinery (other than Ships or Aircraft) acquired or installed after 31 st day of March 2005, additional depreciation @ 20% shall be allowed.

2. The company is eligible under section 35DDA of the Act to a deduction equal to one-fifth of certain specific and qualifying expenditure, for a period of five successive years subject to the limits provided and conditions specific therein.

3. Income by way of dividend (as referred to in Sec 115-O of the Act) received from other domestic companies will be exempt from tax.

4. The Company is entitled to deduction of a sum equal to one and one-half times of the expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the Department of Scientific and Industrial Research in accordance with the provisions of Section 35 (2AB) of the Act.

5. The Company is entitled to the following Special Tax Benefits for the Plant established at Mahindra World City in Special Economic Zone, Chengalpet in 2006-07:

a. Hundred per cent of profits and gains from the export from the SEZ unit for a period of five consecutive assessment years beginning with the assessment year in which the unit begins to manufacture, viz., from Assessment Year 2007-08 to 2011-12 and fifty per cent of such profits and gains for further five assessment years;

b. for the next five consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be created and utilized –

i. for the purposes of acquiring new machinery or plant which is first put to use before the expiry of three years next following the previous year in which the reserve was created; and ii. until the acquisition of new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India.

6. The Company is entitled to deduction on donations made as per the provisions of section 80 G of the Act.

A. Benefits to the Members of the Company :-

B. 1. Residents:

24 1. By virtue of Section 10(34) of the Act, dividend declared by the Company referred to in section 115-O of the Act is exempt from tax.

2. Under Section 10(38) of the Act, long term capital gain arising to the shareholder from transfer of a long term capital asset being an equity share in the company (i.e. capital asset held for a period of twelve months or more) being a transaction entered into through a recognized stock exchange in India and which is chargeable to Securities Transaction Tax, shall be exempt from tax. Under Section 111A of the Act, short term capital gains arising from transfer of capital assets, being an equity share in the Company and entered into through a recognized Stock Exchange and , which is subject to Securities Transaction Tax will be taxable under the Act @ 15% (plus applicable Surcharge and Education cess).

3. Subject to the Long term capital gains, other than those mentioned in (b) above, As per the provisions of Section 112(1) (a) and (b) read with proviso to Section 112(1) of the Act, long-term capital gains on transfer of the shares by an Individual, Hindu Undivided Family and Domestic Companies, computed without indexation of cost of acquisition, would be taxed at the concessional rate of 10% (plus applicable Surcharge and Education Cess) in accordance with the provisions of section 112 of the Act and @ 20% in case the same is computed subject to indexation benefit. In case of individuals and HUF’s, where the total taxable income as reduced by short/long-term capital gain is below the basic exemption limit, the short/long-term capital gain will be reduced to the extent of the shortfall and only the balance short/long- term capital gain will be subjected to such tax in accordance with the provisions of Section 111A and sub- Section (1) of Section 112 of the Act.

4. Subject to the Long term capital gains, other than those mentioned in (b) above, in accordance with and subject to the conditions and to the extent specified in Section 54EC of the Act, long-term capital gains tax arising on transfer of the shares of the Company shall be exempt from capital gains tax to the extent the gains are invested within six months from the date of transfer in the purchase of long-term specified assets and are held for a period of three years.

5. Subject to the Long term capital gains, other than those mentioned in (b) above, in accordance with, and subject to the conditions and to the extent specified in Section 54ED of the Act, long-term capital gains tax arising on transfer of the shares of the Company shall be exempt from capital gains tax to the extent the gains are invested within six months from the date of transfer in acquiring equity shares forming part of an eligible issue of capital. In addition the shares should be held for at least one year.

6. Subject to the Long term capital gains, other than those mentioned in ( b ) above, in accordance with, and subject to the conditions and to the extent specified in Section 54F of the Act, long-term capital gains tax arising on transfer of the shares of the Company held by an individual or Hindu Undivided Family shall be exempt from capital gains tax in proportion to the net sales consideration utilized, within a period of one year before, or two years after the date of transfer, in the purchase of a new residential house, or for construction of a residential house within three years and the individual or HUF does not own any other residential house.

B. 2. Non Residents:

1. Dividend income received from Company qualifies for exemption under section 10 (34) of the IT Act.

2. As per the provisions of section 10 (38) of the IT Act long term capital gains arising from the sale of the shares of the Company will be exempt from tax if the transaction is entered into in a recognized stock exchange in India and such transaction is chargeable to Securities Transaction Tax.

3. As per the provision of Section 111 A, short term capital gains arising from the sale of Company’s shares in a transaction entered into in a recognized stock exchange in India and such transaction is chargeable to Securities Transaction Tax, will be chargeable to tax @ 15% plus applicable surcharge and education cess.

4. As per the provisions of section 112 of the IT Act, the long term capital gains from the transfer of the shares of the Company, otherwise than as mentioned above, shall be charged to tax:

a. @ 20% plus applicable surcharge and education cess, if the gains are computed after considering the benefit of indexation;

b. @10% plus applicable surcharge and education cess, if the gains are computed without considering the benefit of indexation.

5. Non Resident Indian members of the Company can elect to be governed by special provisions as enunciated in section 115 C to 115 I of the Income tax act, according to which exemption from capital gains tax is available subject to their complying with conditions stated in those sections.

a. Under Section 115E of the Act, any income from investment will be taxable at 20% (plus applicable Surcharge and Education Cess) while income from long-term capital gains on transfer of shares the Company acquired out of convertible foreign exchange shall be taxed at the rate of 10% (plus applicable Surcharge and Education Cess).

b. Under Section 115F of the said Act, and subject to the conditions and to the extent specified therein, long-term capital gain arising to a Non-Resident Indian from transfer of shares of the Company acquired out of convertible foreign exchange shall be exempt from capital gains tax to the extent the net consideration is invested within six months of the date of transfer of the asset in any specified asset or in any saving certificates referred to in clause (4B) of Section 10 of the Act and the new asset is held for a period of at least three years.

c. Under Section 115G of the Act, it is not necessary for a Non-Resident Indian to file a return of income under Sector 139(1) of the Act, if his total income consists only of investment income and/or long term capital gains and the tax has been deducted at source from such income under the provisions of Chapter XVII-B of the Act.

d. Under Section 115H of the Act, where a Non-Resident Indian becomes assessable as resident in India in any subsequent year he may furnish to the Assessing Officer a declaration in writing along with the return of income for the assessment year for which he is so assessable to the effect that the provisions of Chapter XII-A of the Act shall continue to apply to him in relation to the investment income (other than on shares in the Company) derived from any foreign exchange asset as defined therein. On doing so, the provisions of Chapter XII- A of the Act shall continue to apply to him in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion into money of such assets.

e. Under Section 115I of the Act, where a Non-Resident Indian opts not to be governed by the provisions of Chapter XII-A of the Act for any assessment year, his total income for that assessment year (including taxable income arising from investment in the Company) will be computed according to the other provisions of the Act, and he will therefore be eligible to get concessions applicable to a resident individual and will be liable to tax accordingly.

6. In accordance with, and subject to provisions of Section 48 of the Act, capital gains arising out of transfer of capital assets being shares in the Company shall be computed by converting the cost of acquisition, expenditure in connection with such transfer and full value of the consideration received or accruing as a result of the transfer of the capital assets into the same foreign currency as was initially utilized in the purchase of shares and the capital gains computed in such foreign currency shall be reconverted into Indian currency, so that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing/arising from every reinvestment thereafter and sale of shares of the Company. Cost indexation benefits will not be available in such a case.

7. In accordance with, and subject to the conditions and to the extent specified in Section 54EC of the Act, long-term capital gains tax arising on transfer of the shares of the Company shall be exempt from tax to the

26 extent the gains are invested within six months from the date of transfer in the purchase of long-term specified assets and are held for a period of 3 years

8. In accordance with, and subject to the conditions and to the extent specified in section 54ED of the Act, long-term capital gains tax arising on transfer of the shares of the Company shall be exempt from capital gains tax to the extent the gains are invested within six months from the date of transfer in acquiring equity shares forming part of an eligible issue of capital. In addition the shares should be held for at least one year.

B. Foreign Institutional Investors:

1. Income by way of dividend (referred to in Section 115-O of the Act) is exempt from tax Section 10(34) of the Act.

2. Under Section 115AD capital gain arising on transfer of short term capital assets, being shares in a company, are taxed as follows:

a. Short term capital gain on transfer of shares entered in a recognized stock exchange which is subject to Securities Transaction Tax shall be taxed @ 15% (plus applicable Surcharge and Educational Cess): and

b. Long term capital gains on transfer of shares would be taxable @ 10% (plus applicable Surcharge and Education Cess).

3. Under Section 54EC of the Act, Capital gain arising from transfer of long term capital assets (other than those exempt u/s 10 (38) shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain are invested within a period of six months from the date of transfer in specified long-term assets and are held for a period at least three years.

4. Under Section 54ED of the Act, capital gain arising from transfer of long term capital assets, being listed securities or units (other than those exempt u/s. 10 (38), shall be exempt from tax, subject to the conditions and to the extent specified therein, if the capital gain is invested in public issue of equity shares issued by an Indian Public Company within a period of six months from the date of such transfer. If only a part of the capital gain is so reinvested, the exemption shall be proportionately reduced. However, the amount so exempted shall be chargeable to tax subsequently, if the new equity shares are transferred or converted into money within one year from the date of their acquisition. In addition the shares should be held for at least one year.

II. WEALTH TAX

Assets as defined under Section 2(ea) of the Wealth-tax Act, 1957 do not include shares in companies and hence, these are not liable to wealth-tax

III. GIFT TAX:

Gift Tax is not leviable in respect of any gifts made on or after 1 st October, 1998. Therefore, any gift of shares will not attract gift-tax.

SPECIAL TAX BENEFITS

NIL

Notes:

In respect of non residents, taxability of capital gains mentioned above shall be further subject to any benefits available under the Double Taxation Avoidance Agreements, if any, between India and the country in which the non-resident has fiscal domicile.

In view of the individual nature of tax consequences, each investor is advised to consult his/her own tax advisor, with respect to specific tax consequences of his/her participation in the Issue.

The above statement of possible direct tax benefits sets out the provisions of law in a summary manner only and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and disposal of equity shares.

This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequence, each investor is advised to consult their own tax consultant with respect to the specific tax implications arising out due to their participation in the Issue.

We do not express any opinion or provide any assurance as to whether:

• The company or its shareholders will continue to obtain these benefits in future;

• The conditions prescribed for availing the benefits have been/or would be met with.

SECTION IV – ABOUT US

INDUSTRY OVERVIEW

The information in this section is derived from a combination of various official and unofficial publicly available materials and sources of information. It has not been independently verified by the Company, the Lead Mangers, the Legal Advisor and no representation is made as to the accuracy of this information which may be inconsistent with information available with or complied with other sources.

Indian Automotive Industry: Introduction

The Indian Automotive Industry comprising of the automobile and the auto component sectors has recorded considerable growth following the de-licensing and opening up of the sector to FDI in 1993. The unbundling of this industry from restrictive environment has helped it to absorb new technologies, restructure, align itself to the global developments and realize its potential with significant increase in industry’s contribution to overall economic growth in the country. According to ACMA, the investment in the industry has gone up from US$ 2.7 billion in 2002 -03 to US$ 7.2 billion in 2007-08 and is estimated to increase to US$ 20.9 billion by 2015-16. Automotive Industry, globally, as well in India, is one of the key sectors of the economy. Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and acts as one of the drivers of economic growth. The well-developed Indian automotive industry produces a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motor-cycles, mopeds, three wheelers, tractors and other agricultural equipments etc. Production of auto components has been spurred by both domestic and international growth in automobile production and demand from Original Equipment Manufacturers (OEM). The production of all categories of vehicles has recorded a CAGR of 10.59% per annum over the last five years. (Source: ACMA, SIAM and Report of Working Group on Automotive Industry, Eleventh Five Year Plan 2007-2012)

Indian Automobile Industry classification:

Indian Automobile industry can be broadly classified as under:

Indian Automobile Production:

A detailed break-up of the production figures of various kinds of automobiles in India for the period of last five years is given in the following table:

Automobile Production Trends (in Nos.) Products 2003-04 2004-05 2005-06 2006-07 2007-08 Medium & Heavy Commercial Vehicles 1,66,123 2,14,807 2,19,295 2,94,258 2,91,114 Light Commercial Vehicles 1,08,917 1,38,896 1,71,788 2,25,724 2,54,062 Total Commercial Vehicles 2,75,040 3,53,703 3,91,083 5,19,982 5,45,176 Passenger Cars 7,82,562 9,60,487 10,46,133 12,38,021 14,16,480 Utility Vehicles 1,46,325 1,82,018 1,96,506 2,22,495 2,44,648 Multi Purpose vehicles 60,673 67,371 66,661 84,707 1,01,001

29 Automobile Production Trends (in Nos.) Products 2003-04 2004-05 2005-06 2006-07 2007-08 Total Passenger Vehicles 9,89,560 12,09,876 13,09,300 15,45,223 17,62,129 Scooter 9,35,279 9,87,498 10,21,013 9,43,944 10,74,933 Motorcycles 43,55,168 51,93,894 62,07,690 71,12,281 65,03,532 Mopeds 3,32,294 3,48,437 3,79,995 3,79,987 4,30,827 Electric Two Wheelers - - - 30,454 16,757 Total Two Wheelers 5,622,741 65,29,829 76,08,697 84,66,666 80,26,049 Three Wheelers 3,56,223 3,74,445 4,34,423 5,56,126 5,00,592 Grand Total 72,43,564 84,67,853 97,43,503 1,10,87,997 1,08,33,946 (Source: www. siam india.com and Automotive Mission Plan 2006-2016)

Indian Automobile Exports

Automobile exports from India have increased from 4.79 lakh units in 2003-04 to 12.37 lakh units in 2007-08 recording a CAGR of 26.71% over the period. The main contributors to the growth in exports have come from light commercial vehicle, passenger cars, and motor cycles. (Source: www. siam india.com and Automotive Mission Plan 2006-2016)

A detailed break-up of the export figures of various kinds of automobiles from India for last five years is given in the following table:-

Automobile Export Trends (in Nos.) Products 2003-04 2004-05 2005-06 2006-07 2007-08 Medium & Heavy Commercial Vehicles 8,188 13,474 14,078 18,610 22,100 Light Commercial Vehicles 9,244 16,466 26,522 30,927 36,899 Total Commercial Vehicles 17,432 29,940 40,600 49,537 58,999 Passenger Cars 1,25,320 1,60,670 1,69,990 1,92,723 2,09,864 Utility Vehicles 3,049 4,505 4,486 4,399 6,274 Multi Purpose vehicles 922 1,227 1,093 1,330 916 Total Passenger Vehicles 1,29,291 1,66,402 1,75,572 1,98,452 2,17,054 Scooter 53,687 60,699 83,934 35,397 25,482 Motorcycles 1,87,287 2,77,123 3,86,054 5,45,592 7,76,141 Mopeds 24,078 28,585 43,181 38,655 18,224 Total Two Wheelers 2,65,052 3,66,407 5,13,169 6,19,644 8,19,847 Three Wheelers 68,144 66,795 76,881 1,43,896 1,41,235 Grand Total 4,79,919 6,29,544 8,06,222 10,11,529 12,37,135 (Source: www. siam india.com and Automotive Mission Plan 2006-2016)

Indian Auto Component Industry: An overview

Indian auto component industry is quite comprehensive with around 500 firms in the organised sector producing practically all parts and more than 10,000 firms in small unorganised sector, in tierized format. The industry, over the years, has developed the capability of manufacturing all components required to manufacture vehicles, which is evident from the high levels of indigenization achieved in the vehicle industry as well as the components developed for the completely Indian made vehicles like the Tata Indica, Tata Indigo, Mahindra Scorpio, Bajaj Pulsar, TVS Victor and TVS Star. The component industry now has holistic capability to manufacture the entire range of auto- components e.g. Engine parts, Drive & Transmission Parts, Suspension & Braking Parts, Electricals, Body and Chassis Parts, Equipment etc. The component-wise share of production, as indicated by the ACMA, is Engine parts- 31% Drive and Transmission Parts- 19%, Suspension & Braking Parts - 12%, Electricals - 9%, Body and Chassis Parts - 12%, Equipment - 10%.

Over the last few years the Indian Auto Component Industry has created a robust capacity base and all of the world’s major manufacturers have set up their manufacturing units in the country. The quality of the components produced by the component industry in the country is certified by the fact that, out of the 498 ACMA members, 9 are Deming Prize winners, 4 are Japan Institute of Productivity Management (JIPM) award winners and 1 is Japan Quality Medal winner.

Growth Trends: The turnover of auto component sector is expected to reach US$ 18 billion in 2007-2008 from US$ 5.4 billion in 2002-03 recording a CAGR of 20.1% (source: ACMA). Low labour costs, availability of skilled labour and high quality consciousness among Indian vendors have spurred the growth of auto component exports from India. More than 60% of the exports of auto-components are to USA and Europe, which constitute high AQL (Accepted Quality Level) countries. Moreover, over the last 5 years, the structure of the customer base in the global markets has also undergone a major change. In the 1990s more than 65% of the exports were to the international aftermarket. In 2007, more than 75% of the exports are to the global OEMs and Tier 1 companies and only 25% is to the aftermarket. This signifies that the Indian component industry has now reached a high degree of maturity in terms of quality and productivity and has also developed capabilities in the area of design and engineering, which are critical requirements for being a part of the global supply chain.

(Source: ACMA and Automotive Mission Plan 2006-2016)

Indian auto component manufacturing, currently constrained by lack of large capacities, is slowly but steadily working on expanding capacities and automation levels. As the users increasingly become discerning in their buying behaviour, new model introduction by the auto manufacturers has become the trend. Greater variety in vehicle is offering challenges to the manufacturing capabilities and economies of scale of component suppliers. Hence the component industry is constantly looking at maintaining lean and efficient manufacturing systems. Having established themselves in the domestic market, tapping opportunities abroad was a natural step for the auto component manufacturers in their growth path. The Indian auto component industry is targeting a bigger share of the export market and is in the process of ramping up its manufacturing capabilities to meet the capacity and quality requirements. (Source: ACMA and Automotive Mission Plan 2006-2016)

Indian Auto Component Industry classification:

A brief overview of some of the segments of auto component industry is given below:

1. Fuel injection systems and carburettors - Includes components like fuel pumps, carburettors, filters, elements, delivery valve and nozzles.

2. Powertrain components - Includes parts like crankshafts, camshafts, connecting rods, flywheel ring gears and timing chains. These products are largely OEM based.

3. Piston and piston parts – Includes parts like pistons, piston rings and pins.

31 4. Engine valves and parts - Includes parts like engine valves, valve guides, valve tappets and valve collect.

5. Cooling system and parts - Includes parts like radiator, water pumps assembly, radiator caps, fan assembly and water thermostat.

6. Steering assembly and components - Includes steering systems like rack and pinion, and re-circulating ball.

7. Suspension system and components - Includes parts like shock-absorbers and leaf spring.

8. Brakes and components - Includes brakes assembly and brake linings.

9. Lighting equipment - Includes parts like headlights, spot lights, flashlights and bulbs.

Indian Auto Components Industry Production:

According to ACMA, the production of Indian automotive components industry touched an estimated US$ 18 billion in 2007-08 as compared to US$ 15 billion in 2006-07, up by 16.67%. The chart below depicts the automotive components production in India during the last five years:

(in US$ million) Particulars 2003-04 2004-05 2005-06 2006-07 2007-08 Turnover 6,730 8,700 12,000 15,000 18,000 Exports 1,274 1,692 2,469 2,873 3,615 Imports 1,428 1,902 2,482 3,328 4,938 Investment 3,100 3,750 4,400 5,400 7,200 Export (% of Turnover) 19% 19% 21% 19% 20% (Source: ACMA)

Indian Auto Components industry Exports:

Exports of auto components have grown significantly as global Original Equipment Manufacturers (OEMs) and Tier-I automotive component manufacturers have been leveraging on India’s low-cost and highly skilled labour to reduce their production costs. It is estimated that exports will reach US$20 to 22 billion by 2015-16.

Auto component industry exports have recorded a CAGR of 35% from 2002-2003 to 2007-2008. The key export destinations in 2006-07 included Europe (38.7%), Americas (29.7%), Asia (12.4%), Africa (10.8) Middle East (7.1%), Oceania (1.2%) and others (0.1%) (Source: ACMA). However, it is pertinent to mention here that this figure is still very low against the volume of world trade of US$ 185 billion (source: Automotive Mission Plan 2006- 2016) in auto components.

OEM’s are attempting to maintain their margins by reducing costs and in order to reduce their costs, some of the OEM’s have turned to low-cost manufacturing countries like India, China, Thailand and Mexico. These countries provide automotive components at a significantly lower cost.

Auto Component Share Break up

The following table shows the percentage share of various critical components in total component spend by the automobile industry:

Particulars Percentage Share Drive Transmission & Steering 19% Engine Parts 31% Others 7% Electrical Parts 9% Equipments 10% Suspension & Braking Parts 12% Body & Chassis 12% (Source: ACMA)

Key Growth Drivers and success factors

Increase in domestic demand for automobiles

The domestic automobile industry has grown at a CAGR of 10.59 % for the period 2003-2008. The vast domestic market is attracting increasing number of foreign automobile manufacturers such as Ford, General Motors, Honda and Toyota, as they look for alternative markets to counter-act the overcapacity in other global markets. Global manufacturers such as Suzuki and Hyundai have adopted India as their global production base for small cars.

Ability to implement continuous cost control

A critical area for any automotive component manufacturer is cost control, which is essential for maintaining profitability. The importance of this factor is growing steadily, as most OEM’s are now demanding a year-on-year price reduction on components. Automotive component suppliers lack the ability to control costs and are vulnerable to low margins, an erosion of profitability and/or lost sales. Many OEM’s assist their vendors in achieving cost reduction by working with them to identify areas where wasteful expenditure can be curtailed and the resultant savings can be passed on to the OEM.

Ability to meet the high quality standards set by automobile manufacturers

Supplying high quality components at the lowest cost, and on time, has become a critical factor to get orders from OEMs. Most OEMs now insist on self-certification of quality by vendors. Automotive component manufacturers, particularly Tier-I companies, are responsible for the quality of products shipped as these components are directly loaded onto the assembly line by OEMs.

Ability to diversify customer base

It is beneficial for component companies to reduce their dependence on a specific OEM and widen their buyer base across vehicle markets such as passenger cars, commercial vehicles, etc. Vertical diversification is also critical to the growth of component manufacturers as their exposure to the replacement market acts as a buffer during slowdown in the OEM segments.

Flexible production lines and redeployment of labour across lines

Another challenge faced by most automotive component manufacturers is the ability to meet a sudden upsurge in demand. Accordingly, it is beneficial to have the flexibility to redeploy workforce among various product lines so that manufacturer can adapt to the changes in demand for its various products.

33 OUR BUSINESS

Business

Overview

Our products can be classified under 5 broad categories:

34 Competitive Strengths

Resilient Business Model

We foresee that the current upheaval in the macro-economic scenario may result in lower vehicle sales for our customer base, which primarily constitutes major automotive players. Since our performance is also directly related with the fortunes of the automobile industry, any slowdown in their business would have a direct bearing on us. This would have an impact on our OEM side of business. We believe we are relatively insulated from the negative effects in the macro-economic scenario due to the presence of a significant chunk of the aftermarket revenues in both domestic and overseas markets. The aftermarket business would need to be serviced irrespective of the sales of new vehicles. The aftermarket business also helps us in mitigating the business risks related to seasonality and cyclicality. Hence, even with a slowdown impacting the OEM business, the aftermarket business lends higher resilience to our business model in dealing with the adverse economic climate.

Diversified Product Portfolio – increasing diversity of revenue base

We have diversified our revenue base to include multiple product offerings across geographies to provide a hedge against cyclicality of the domestic market. We have a near complete range of drum brake linings for European and North American commercial vehicle applications and a comprehensive range of linings for other world-wide commercial vehicles.

Delivery of Products and Length of relationship with Customers

Delivery has been our Company’s core strength. We have got single source vendor status with most of our OEM customers. Although, automotive manufacturers usually prefer to keep atleast two vendors for the supply of critical components as part of their standard risk management practices, due to our customers’ faith in our delivery capabilities, reliability and best practices, we have continued to remain the single source vendors for most of our OEM customers.

Strong in-house Research & Development capability

Our Research & Development capability has been the hallmark of our success. Our Research and Development initiatives are primarily focused on the areas of product, process and formulation development. Our R&D centre in Chennai has been at the forefront of product innovations in the friction material space. It has been recognized as a key R&D centre by the Department of Scientific and Industrial Research, Government of India for the development of original frictional formulations. We are the pioneers in creating appropriate formulations and products suited for the respective markets in which the product would be deployed. The cornerstone of our philosophy is in creating customized products and not adapting the existing ones. Some of the examples of our success in customizing products according to the needs of our clients include introduction of new generation asbestos free products for one of our large customers.

We spend around 2% of our total income year-on-year on the R&D activities and we believe that continued emphasis on R&D will enable us to develop new products and alter market dynamics. In the last three financial years (2006-2008) our R&D team has introduced 23 new products for the domestic and international markets.

Strong Management Team with successful Track Record

Our senior management team has substantial experience in the manufacturing and friction material space and has been instrumental in the growth of our organization. Our management team has strengthened our business operations in India and overseas through several product innovations, process improvements and introduction of cost reduction initiatives. We believe that our management team is well placed to provide strategic leadership and direction to explore new emerging opportunities as well as improve our current operations. We have witnessed zero attrition of our key management personnel and have several individuals with expertise in critical areas even at the second level of management. We believe our management team provides us with a competitive edge.

35 Our Strategy

Our goal is to continue to strengthen our position in the domestic market, maintain our operational excellence and grow our international business in select countries. Our strategy to achieve these goals consists of the following elements:

Increased presence in new generation products

The market is currently dominated by vehicles fitted with drum brakes but in line with the changing technological scenario we foresee vehicles getting increasingly fitted with the new generation disc brakes. Our range of products is supported by a comprehensive list of disc brake pads for new generation commercial vehicles. We have stepped into marketing the disc brake pads aggressively in both the international as well as domestic spaces and have put in plans to have a first mover advantage in being a vendor of preference for disc brake pads. Further, we intend to secure our presence in new areas like railways and industrial products. We have already introduced brake blocks for the railways and we intend to promote these products more aggressively and consolidate our stronghold in this segment.

Further presence in export markets through white labelling of our products

There exists a nascent and unexploited opportunity for us in the ‘private label’ programme for major players in the international and the domestic space. Scores of manufacturers and Tier I suppliers, especially in the international markets have indicated that they would like to white label our products and market them as their own branded products. We intend to capture this lucrative market in a big way and over the past few months have initiated discussions with major players in North America and Europe. We have been able to successfully finalize a few commercial contracts in this space. Going forward, we believe this segment would provide a major impetus to our export business and also help us in expanding our reach in the international markets through relationships with major auto-component manufacturers.

Expansion into New Geographies

We are looking to expand our operations into other select geographical areas across the globe where our products would be suitable. While we continue to export out of India into many of the markets in North America, we are planning to establish a presence in countries like Romania, Bulgaria etc. in the replacement market. We believe that this geographical diversification will also reduce the impact of cyclicality in the Indian market as the cyclicality of these other international markets may not coincide with the cyclicality of the Indian market.

Penetration into Passenger vehicle products segment

We have traditionally been a strong player in commercial vehicle segment and have also started focussing on the passenger vehicle segment. We are putting in place a well thought-out strategy in order to garner greater product approvals from Passenger Vehicle OEMs. We are making stronger sales efforts with OEMs highlighting our single source vendor status, track record and delivery capability with some of the leading passenger vehicle manufacturers. We would like to see ourselves as a single source vendor with top passenger vehicles manufacturers in the next 5 years and increase, in particular, our disc brake pad presence in the same segment.

Business Operations

Our products can be classified under 5 broad categories:

a. Brake Linings

Brake Linings are friction surfaces that work between two metal surfaces in order to avoid metal to metal contact. The main function of Brake Linings is to stop/control a moving vehicle whenever and wherever required. Brake Lining is the part of the braking system which, converts the vehicle's kinetic energy into heat and the lining material must be capable of surviving high temperatures without excessive wear. Brake Linings are composed of a relatively soft but tough and heat-resistant material with a high coefficient of

36 dynamic friction and ideally an identical coefficient of static friction typically mounted to a solid metal backing using high-temperature adhesives or rivets.

b. Insitu Brake Shoes

A Brake shoe is part of the braking system which, carries the brake lining (in the drum brakes used on automobiles) or the brake block in railway brakes and two-wheeler brakes. The brake shoe carries the brake lining, which is riveted or glued to the shoe. When the brake is applied, the shoe moves and presses the lining against the inside of the drum. The process of automated bonding brake lining with the metal shoe is referred to as the Insitu process. The Insitu process results in better adhesion and zero failure on poor bonding & poor adhesive application.

c. Clutch Facings

Clutch facings are friction discs (properties similar to brake linings) that are used for smooth clutch engagement & disengagement. In the process, they absorb & dissipate the heat generated near the clutch operating area (between flywheel & clutch metal facing).

d. Disc Brake pads

The assembly of lining and braking plate is called a brake pad. Brake pads are the latest concept where the area is small but performance levels are high and prove to be cost effective for the automobile manufactures. The construction of disc brake pads is simple, facilitates easy replacement of pads and requires minimum tools and time making it easy to service.

e. Railway Brake Blocks

Railway brake blocks are fitted on wagons, coaches & freight application carriers on the axles. Composite Brake Blocks (CBB) are friction materials moulded into blocks & are fitted on Railway air brake system acting on the surface area of the wheels to effect braking.

Our products are primarily sold to automotive companies that are engaged in the production of Heavy Commercial Vehicles (HCV), Light Commercial Vehicles (LCV), Passenger Cars, Tractors, Two-wheelers and Railways. The table below shows our product presence across various segments.

Products Passenger Tractors Two Railways HCV LCV Cars Wheelers Brake Linings NA Insitu Brake Shoes # NA Clutch Facings NA Disc Brake pads NA Railway Brake Blocks NA NA NA NA NA

- Product manufactured for the segment - Product not manufactured for the segment # - Product under development for the segment NA - Not Applicable for the segment

Our Business Lines

Our Company operates in the domestic as well as the export markets. Primary lines of our business can be segregated as follows:

i. OEM Business: This includes the sales of our Company’s products to the Original Equipment Manufacturers operating in India. Our Company is primarily a Tier II supplier to Original Equipment Manufactures. Our Company’s products are supplied to Tier I suppliers who are foundation brake

37 manufactures/Clutch Manufacturers. Tier I suppliers assemble our Company’s products and supply them to the OEMs as an integrated product. Our Company’s products being a safety related critical component are validated and approved by the OEM in collaboration with the Tier I suppliers. Development discussions of our products take place directly with the OEMs. Over 80% of our OEM business comes from Tier I suppliers. We derive our OEM business only from the Domestic market.

ii. Aftermarket Business caters to the replacement market for friction material products that need to be replaced due to wear and tear for both the domestic as well as international markets. This also includes sales of our products to institutional clients in bulk namely State Transport Undertakings. Institutional aftermarket sales accounts for more than 20% of aftermarket business.

The following table shows our performance in the OEM as well as the aftermarket in the domestic and export segments: (in Rs. crores) For the 9 months For the year For the year For the year For the year For the year ended December ended March ended March ended March ended March ended March Category 31, 2008 31, 2008 31, 2007 31, 2006 31, 2005 31, 2004

Domestic Sales 1. OEM 54.25 89.29 104.38 58.30 43.95 37.27 2. Aftermarket 27.66 36.36 29.750 31.64 30.02 29.96 Total Domestic Sales 81.91 125.66 134.13 89.91 73.98 67.23

Export Sales 1. OEM ------2. Aftermarket 55.32 61.98 54.89 54.82 58.78 52.51 Total Export Sales 55.32 61.98 54.89 54.82 58.78 52.51

38 Production Process

The principal raw materials required for the production of friction materials are asbestos, fibre, filler, resin, binding material and metal powder. The following flowchart describes the production process that is undergone by our products:

Weighing & Mixing of Raw Pre-forming to bring the Pre-curing for removal of Materials mixture into a desired shape volatility

Cutting and chamfering of Post Curing for product Press Curing for moulding edges stabilizatio n the product shape

Inner and outer surface Drilling Notching/Wear Grooving grinding

Packing Final Inspection Marking

Product Audit

39 Infrastructure & Production Facilities

We have our manufacturing units in four locations viz, one in Padi(Chennai) two units in TSK Puram, Mustakurichi and one in Mahindra World City SEZ, Chengalpet (near Chennai). Of these, two plants are dedicated exclusively to manufacturing asbestos-free brake linings and pads.

The production facility in Padi, Chennai houses our corporate office including various business units and support functions such as Sales, Marketing, Finance, R&D, Human Resources and Quality.

Land Area Constructed Area Plant Location (in square meters) (in square meters) I. Padi, Chennai 100,876 17,486 II. TSK Puram 107, 112 8,287 III. TSK Puram 36,130 6,950 IV. Mahindra World City SEZ 40,480 4,141

The following table presents the production of each plant alongwith its installed capacity:

For the 9 months ended For the year For the year For the year Capacity Details 31.12.08 ended 31.03.08 ended 31.03.07 ended 31.03.06 Installed Capacity (in Metric Tonnes) Padi, Chennai 6,353 6,353 6,774 6,774 TSK Puram 7,121 7,121 7,028 7,028 TSK Puram 4,200 4,200 4,338 2,200 Mahindra World City SEZ 2,228 2,228 1,591 - Actual Production (in Metric Tonnes) Padi, Chennai 2,561 3,569 3,809 3,552 TSK Puram 4,286 5,715 5,199 4,262 TSK Puram 1,731 2,986 2,847 2,646 Mahindra World City SEZ 1,310 1,285 176 -

Power

Our Company has adequate power for expansions in three plants at Padi and TSK Puram. The plant at Padi has a total transformer capacity of 2,750 KVA connected to a total load of 5,948 HP. TSK Puram Plant I has a total transformer capacity of 2,130 KVA connected to a total load of 4,536 HP. TSK Puram Plant II has a total transformer capacity of 1,630 KVA connected to a total load of 3,221 HP. The new Plant IV commissioned in SEZ, Mahindra World City, near Chennai has adequate power to run to its full capacity and has a transformer capacity of 630 KVA connected to a total load of 1,585 HP.

All plants have adequate generator backup to meet full production during power cut. The captive diesel generating sets are operated only during power interruptions from the grid to maintain continuity of operations at the plant.

Water

The process is not water intensive. We have in-house deep bore wells with overhead tank facilities that can feed for manufacturing process adequately. The water required for use in cooling towers, up-keep of factory and office is also available adequately. In addition to this, we have water re-circulation systems and rain water harvesting facilities to conserve water.

40 Effluent Treatment

The Pollution Control Board has issued consent for air and water pollution for all the plants. The same is valid upto March 2009 for Padi Plant & TSK Puram Plant I, upto March 2010 for the plant in Mahindra World City SEZ and valid upto March 2012 for TSK Plant II. Action is being taken for renewal of consents for Padi and TSK Puram plants.

Marketing, Sales & Distribution

Our Company has a strong presence in the Indian OEM space. The OEM business is primarily driven through the existing relationships with vendors with whom our Company has single source vendor relationship. Marketing efforts are made to retain these relationships and market intelligence is also gathered on a systematic and periodic basis to pitch with other OEM manufacturers. Currently, we are the single source vendor with most of our OEM clients as we satisfy their requirements on reliability, quality, credibility and pricing.

The aftermarket business is supported by our sales & distribution network in India comprising of a total of 7 distributors. These 7 distributors have a reach of 143 branches across India and of them, 5 distributors are part of Promoters and Promoter Group. These 143 branches contribute around 75 % of the aftermarket business to our Company and the balance is contributed by institutional clients.

We are also supported by a wide network of our field force located across the country that is responsible for product promotion at the end user level. The strength of our field force is 21 qualified sales personnel.

Details of our distributors and their network is mentioned below:

Distributor Geographical Focus No. of Distribution Branches/Outlets I. India 48 II. South/West India 34 III. South/West/North India 21 IV. South/West/East India 25 V. West India 2 VI. West India 3 VII. West India 10

International Distribution Network

We export our products to more than 70 countries worldwide, supported by a wide variety of part number references for American, European and Japanese commercial vehicles. A business representative in USA works closely with the US/Canadian brake re-builders and distributors. Our Company regularly participates in International Fairs in North America, Europe, Africa, Middle and Far East.

Our Company’s products have been successfully tested to meet international standards like European ECE R-90, American FMVSS 121, South African SABS 1506 and Australian ADR standards.

Competition

Our major competitor in the friction material space in the domestic market for OEMs is Rane Brake Lining Limited. In the replacement market we face competition from companies like Rane Brake Lining Limited, Allied Nippon Limited and Hindustan Composites Limited. We also compete with companies like Fras-le S.A., TMD Group and Federal Moghul Goetze Limited in the international segments. There is some form of competition that also comes from the unorganized players particularly in the replacement market. Unorganized players accounted for 35% of the replacement market in the year 2008 as per ACMA.

41 Research and Development

We place significant emphasis on Research & Development to propel future growth and have continuously been engaging in developing innovative products that can serve the needs of the automotive industry in an efficient manner. Since inception, we have done pioneering work in the field of friction material development. We operate a full-fledged Research & Development facility at our headquarters in Chennai, including brake and clutch dynamometers, gas chromatographs, scanning electron microscopes and vehicle testing facilities for developing and testing friction materials for a wide range of applications. State of the art in house design facilities through Computer-Aided Design and Drafting techniques provide the Company with the necessary infrastructure to carry out design and development work, to meet the growing needs of friction materials for the automotive industry. Our in-house R&D centre has been recognized as a key R&D centre by the Department of Scientific and Industrial Research, Government of India for the development of original frictional formulations.

Our R&D uses QFD (Quality Function Deployment), FMEA (Failure Mode Effect Analysis), DOE (Design of Experiments) & Deep Analysis Techniques in order to research new materials that can add value to the products to enhance customer satisfaction. Our R&D is equipped with Railway Brake Dynamometer and after extensive field testing for 18 months; we developed composite brake block products namely, L-Freight & L-Coach. Both these products were developed in-house and introduced in the market in November 2007 and April 2008 respectively.

Our R&D team comprises of 28 well qualified people. We recruit qualified personnel with a Masters Degree in Chemistry and above only. We are also supported by Dr. O. Prabhakar, Head of Department of Metallurgical Engineering at IIT Madras, as our Consultant on research matters. He has been a consultant to our Company for the past 40 months in the areas of scanning electron microscopy and pressure die casting.

We are the only friction material producer in India to have come up with asbestos free products for Railways without any foreign technical collaboration.

Our R&D expenditure over the last three years has been as follows:

For the 9 months For the year For the year For the year Year ended 31.12.08 ended 31.03.08 ended 31.03.07 ended 31.03.06 R&D expenditure (in Rs. crores) 2.72 3.34 3.17 3.74 R&D expenditure (% of Total Income) 1.98% 1.80% 2.20% 2.00%

Our focus on R&D activities has been further vindicated by the number of successful products introduced by our Company over a period of time. The following table shows the number of new products developed by our R&D team during the last three years:

For the year For the year For the year Year ended 31.03.08 ended 31.03.07 ended 31.03.06 For the OEM Market 3 5 5 For the aftermarket 0 1 2 For the Export Market 0 7 0 Total 3 13 7

Human Resource

We consider our human capital as a critical factor for our success. Accordingly, we place special emphasis on the human resources function in our organization.

We primarily recruit professionals who are engineering graduates and diploma holders from premier Engineering Institutes. We believe in recruiting only experienced manpower and hence rely primarily on lateral hires through internal references from employees. The function wise distribution of all our employees as on December 31, 2008 is as follows:

42 Function No. of Employees Percentage Production & Operations 899 82.40% Sales 51 4.67% Marketing & Distribution 10 0.92% Research & Development 61 5.59% Quality Assurance 20 1.83% Finance & Accounts 14 1.28% General Administration & Others 36 3.30% Total 1,091 100.00%

Training & Development

We are committed to building the competencies of our employees and improving their performance through training and development. Our focus is on identifying gaps in our employees’ competencies and preparing employees for changes in competitive environments, as well as to meet organizational challenges. The objectives of Training & Development at our Company is as follows: • To develop multiple skills of our workmen in order to equip them with the Product & Process knowledge • To provide our personnel with knowledge and training in Safety, Firefighting, First Aid etc. • Involvement of employees across the company in the Management initiatives so as to achieve the goals of the organization • To improve the quality of work life of our employees • To aid the Personality Development of our employees. • Each employee is required to undergo training for a minimum period of 4 days in a year

We sustain our standard of excellence through a prudent investment in training. 6% of the total time annually spent by members is committed to training. Our training methodology is designed specifically as per the job description and function of each employee. Besides training programmes for our regular employees we have also Company Apprenticeship and Graduate Training programmes that have been designed with the objective of extending the opportunity to learn the product and process of Friction material manufacturing to graduates and apprentices.

Quality, Certifications and Awards

We employ stringent quality standards. Quality encompasses every initiative at our Company. It is omnipresent across the spectrum from the vendors to the customers. We engage vendors after a significant screening process. Their products and practices are appraised periodically. We have adopted the Kanban system, which is a Japanese concept related to JIT production and refers to a signalling system that triggers action. Using this methodology we have integrated our workspaces in the shop floors to our plants and to the Sale & Marketing. As a result of this the customer gets a quick despatch and better service. We are the first friction material company in the world to win the Deming Application Prize.

We have received the following awards and certifications in relation to our services and offerings; • ISO 9002 QMS certification in 1992 • ISO 9001 QMS certification in 1995 • QS 9000 QMS certification in 1999 • ISO 14001-EMS certification in 2001 • Deming Application Prize in 2001 • TS 16949 – QMS & ISO 14001-2004 – EMS certification in 2004 • Overall Quality Performance Awarded by Brakes India Ltd in 2006 • ISO 16949 - QMS Recertification in 2007 • Certificate of Performance for Non-Metallics category Awarded by Brakes India Limited in 2008 • ISO 14001-2004 - EMS Recertification in 2008

43 Insurance Coverage

We have insurance coverage including business interruptions which we consider reasonably sufficient to cover all normal risks associated with our operations and which we believe is in accordance with industry standards in India. We have obtained coverage for worldwide product liability and worldwide product recall for all of our products in several countries to which we export our products. Our products are also covered by Export Credit and Guarantee Corporation (ECGC), a Government of India entity that provides export credit insurance support to Indian exporters and is controlled by the Ministry of Commerce.

Financial Indebtedness

Outstanding as on December 31, Name of Purpose of the 2008 S.No. the Lender Loan Key Terms Security (in Rs. crores) • Quarterly repayment @ Rs. Secured by first charge on 0.42 crores per quarter the fixed assets acquired out Meeting of capital • 7% p.a upto 30.09.08 & of the loan and extension of SBI, expenditure SBAR rate which is at charge on fixed assets, 1. Chennai requirements present 12.25% p.a. present and future 2.88 • Quarterly repayment @ Rs. Secured by first charge on 0.75 crores per quarter the fixed assets acquired out Meeting of capital • 8.75% p.a upto 31.10.08 & of the loan and extension of SBI, expenditure SBAR rate which is at charge on fixed assets, 2. Chennai requirements present 12.25% p.a. present and future 8.25 Secured by first charge on • Quarterly repayment @ Rs. the fixed assets acquired out Meeting of capital 0.40 crores per quarter of the loan and extension of SBI, expenditure • SBAR rate which is at charge on fixed assets, 3. Chennai requirements present 12.25% p.a. present and future 2.05 Secured by first charge on present and future current assets and extension by way • SBAR rate which is at of second charge on the SBI, Working Capital present 12.25% p.a for fixed assets, present and 4. Chennai Requirements Open Cash Credit A/c future 15.37

Property Details

A. Owned Properties

Area (inConsideration Year of Acquisition S.No. Location Description of Property acres) (in Rs. crores) Korattur Village, Padi, Factory land with all infrastructure 1975, 1997, 1998, 1. Chennai facilities in Padi 24.92 0.52 1999, 2000, 2001 Kanjamanaikenpatti, Factory land with all infrastructure 2. Virudhunagar facilities in TSK Puram Plant I 26.47 0.04 1982, 1995 Kanjamanaikenpatti, Factory land with all infrastructure 3. Virudhunagar facilities in TSK Puram Plant II 8.93 0.15 1995, 1996 Tiruchuli Village, Open land to be utilized for 4. Virudhunagar expansion purposes 25.28 0.34 1991, 1994 5. Pazhavur Village, Land with 2 wind mill generators 10.98 0.00 1994

44 Area (inConsideration Year of Acquisition S.No. Location Description of Property acres) (in Rs. crores) Tirunelveli district Raja Annamalaipuram, 6. Chennai City Office 0.18 0.02 1986

B. Leased Properties

Lessor / Licensor / Date of the S.No. Location Description Service Provider Agreement Auto Ancillary SEZ, Lease for 99 years situated in Anjur Mahindra Industrial 1. Mahindra World City village, Chengalpattu district Park Limited August 31, 2005

Intellectual Property

Description of Registration Date Expiry Date Issuing Authority S.No. Trademark Goods 1. TVS (Wings) Brake Linings, January 4, 1994 August 13, 2010 Registrar of Clutch Facing etc. Trademarks, Mumbai 2. TVS (Oval) Brake Linings, March 12, 1993 July 30, 2017 Registrar of Brake Linings Clutch Facings Trademarks, Mumbai 3. TVS (Oval) Gutta, Percha, December 3, 1993 March 26,2016 Registrar of Indian Rubber, Trademarks, Mumbai Balata and substitutes and articles made from these substances

45 OUR HISTORY AND MAIN OBJECTS

The business of the Company was started under the name Sundaram-Abex Limited which was promoted in 1974 by T.V. Sundram Iyengar & Sons Limited and its subsidiaries, Southern Roadways Limited and Sundaram Industries Limited in collaboration with Abex Corporation of the USA. Our Company was incorporated on September 5, 1974 as a Public Limited Company and made a public issue of its equity shares in January 1976. We received the Certificate of Commencement of Business dated September 30, 1976. The Corporate Identity Number of our Company is U34300TN1974PLC006703.

During the initial years we focussed on the domestic market and concentrated on supplying to Original Equipment Manufacturers. In 1978, we started exporting brake linings to developed countries. In the year 1984, we decided to go in for substantial expansion to meet the growing domestic and export markets. A modern plant was put up at Kanjamanaickenpatti Village near Madurai in the year 1985. We obtained the technology to manufacture Asbestos free products from Abex Corporation in 1985 to meet the growing needs of markets in USA, Canada and Europe.

Abex Corporation after complying with the terms in the Formation Agreement entered with us disposed of their entire holding in the equity capital of our Company in January 1995. As a consequence, we changed our Company’s name to Sundaram Brake Linings Limited and also amended our Memorandum and Articles of Association. Our Company’s name change is vide the approval of the Ministry of Law, Justice and Company Affairs, Department of Company Affairs, Registrar of Companies, Madras vide their letter dated June 23, 1995 and the Fresh Certificate of Incorporation issued by the Additional Registrar of Companies, Tamil Nadu dated June 23, 1995

We made an offer for 2, 26,231 Secured Partly Convertible Debentures of Rs. 475 on a Rights basis during October 1995.

The Equity Shares of our Company are listed on the NSE and MSE and traded on BSE as a permitted security. Our Company was granted permission to list its shares on the MSE on February 18, 1976. Our Company's shares were listed by NSE on July 17, 1996 and began trading on the NSE with effect from the same date. We were granted permission by BSE for trading in our shares as a permitted security on December 21, 2006 with effect from December 28, 2006.

Our Company today is controlled by three Promoters namely; T.V. Sundram Iyengar & Sons Limited, Southern Roadways Limited, Sundaram Industries Limited and the members of the Promoter Group. Together the Promoters and the Promoter Group hold the majority of the equity shareholding in our Company.

Our Corporate Structure

Our Company does not have any subsidiary company.

History and Major Events

Year Key Events, Milestones and Achievements 1975 Set up manufacturing plant in Padi, Chennai 1978 Export of Brake Linings started 1985 Set up the first manufacturing plant in TSK, Madurai 1986 Introduction of asbestos-free brake linings 1992 Technology Award from DSIR, India Certified for ISO 9002 QMS 1993 Recognition of R&D facility by the DSIR, Government of India 1994 Production line for asbestos-free clutch facings 1995 Set another plant in Madurai – the first totally asbestos-free friction material plant

46 Year Key Events, Milestones and Achievements in India Introduction of Direct Fill Moulding Technology 2001 Production line for asbestos-free lined brake shoes introduced Deming Application Prize 2001 2002 Disc Brake Pad line for new generation passenger cars at TSK Plant 2 (Madurai) 2004 Asbestos free railway Brake blocks introduced 2006 Overall Quality Performance Awarded by Brakes India Limited 2007 ISO 16949 - QMS Recertification 2008 Certificate of Performance for Non-Metallics category Awarded by Brake India Limited

Main Objects of our Company

The main objects of our Company as contained in our Memorandum of Association are:

1. To carry on the business of manufacturers of and merchants and dealers in all friction materials of every kind for automotive, non-automotive, industrial, railway and all other applications. 2. To manufacture, produce, repair, export, import, purchase, sell, and deal in and to generally carry on business in the manufacture, sale, and supply of friction materials for equipment of any kind, vehicular or otherwise. 3. To manufacture, sell or otherwise deal with all such materials or components as are allied or akin to the above mentioned products.

Amendments to our Memorandum of Association

S.No. Date Amendments 1. February 18, 1991Enhancement of Authorized Capital to Rs. 5.0 crores 2. June 12, 1995 Name changed as Sundaram Brake Linings Limited in lieu of Sundaram Abex Limited

47 OUR MANAGEMENT

Board of Directors

The following table sets forth details regarding our Board of Directors as at the date of this Letter of Offer:

Name, Designation, Father's Name, Address, Occupation, Nationality, Age and Term Other Directorships in Indian companies Mr. K. Mahesh, Chairman & Managing Director T. V. Sundram Iyengar & Sons Limited S/o Mr. T.S. Krishna Southern Roadways Limited R/o 81, First Main Road, Sundaram Industries Limited Raja Annamalaipuram Sundaram Clayton Limited Chennai 600 028 Sundaram Textiles Limited Occupation: Business Executive TVS Global Trade Private Limited Nationality: Indian Age: 65 years Term: For 5 years with effect from 2005 DIN: 00051438

Mr. K. Ramesh, Director T. V. Sundram Iyengar & Sons Limited S/o Mr. T.S. Krishna Southern Roadways Limited R/o 18, Jawahar Road Sundaram Industries Limited Chokkikulam Sundram Fasteners Limited Madurai 625 002 Sundaram Textiles Limited Occupation: Businessman TVS Sewing Needles Limited Nationality: Indian Age: 70 years Term: Liable to retire by rotation DIN: 00556922

Mr. T. Kannan, Independent Director Thiagarajar Mills Limited S/o Mr. Karumuthu Thiagaraja Chettiar VTM Limited R/o New No.342 (69) TVS Motor Company Limited Melakkal Road Sundaram Textiles Limited Kochadai , Madurai 625 016 Colour Yarns Limited Occupation: Industrialist Sima Textile Processing Centre Limited Nationality: Indian Age: 56 years Term: Liable to retire by rotation DIN: 00040674

Mr. P.S. Raman, Independent Director Celebrity Fashions Limited S/o Mr. VankataPattabhi Raman R/o1,Lloyds Road, Royapettah,Chennai-600 014 Occupation: Senior Advocate Nationality: Indian Age: 48 years Term: Liable to retire by rotation DIN: 00003606

48 Name, Designation, Father's Name, Address, Occupation, Nationality, Age and Term Other Directorships in Indian companies Mr. Ashok V. Chowgule, Independent Director Chowgule Industries Private Limited S/o Mr. V. D. Chowgule Keltech Energies Limited R/o Baina, Vasco da Gama Chowgule & Co Private Limited Goa Chowgule Engineers & Machines Limited Occupation: Business Executive Dolphin Extrusions Private Limited Nationality: Indian Dolphin Ore Extraction Private Limited Age: 60 years Dolphin Mining Services Private Limited Term: Liable to retire by rotation Ghatge Patil Industries Limited DIN: 00003606 Minas eMinaraies de Goa Private Limited

Brief Biography of our Directors

Mr. K. Mahesh, 65 years, Chairman & Managing Director, is a B.Tech in Metallurgy from IIT, Madras. He was appointed in T.V. Sundram Iyengar & Sons Limited in December, 1965. He has rendered technical and administrative services at various other group companies before taking up the role as a nominated Director of T.V. Sundram Iyengar & Sons Limited of our Company in 1975. He has been at the helm of affairs of our Company and has spearheaded our Company’s export marketing and quality initiatives. He has also been involved in joint venture discussions, finalization, erection and commissioning of three plants for our Company. He has been in the Executive Committee of ACMA (Automotive Component Manufacturers Association of India) for over 19 years. He was President of ACMA (2 years term) and was also a member of National Council of Confederation of Indian Industry (CII).

Mr. K. Ramesh, 70 years, Director, holds a degree in Master of Arts. He has managerial experience of over 50 years. He took his initial management training in T.V. Sundram Iyengar & Sons Limited. He has been on our Board since November, 1982.

Mr. T. Kannan, 56 years, Independent Director is a graduate in Business Administration. He is presently the Chairman of VTM Limited (formerly known as Virudhunagar Textile Mills Limited) and Managing Director of Thiagarajar Mills Limited and holds directorship of several other companies. He is connected with a number of organizations related to industry, education and charity. He was the in the past Chairman of the Confederation of Indian Industry (CII) for the Southern Region. He has wide experience in textile industry and is an Executive Committee Member of the Cotton Textile Export Promotion Council, Mumbai, the Indian Cotton Mills Federation Limited, Mumbai and the Tamil Nadu Chamber of Commerce and Industry. He has been on our Board since July, 1999.

Mr. P.S. Raman , 48 years, Independent Director, is a Commerce Graduate holding a Bachelor Degree in Law from Madras University. He started his practice in law in 1984 at the Madras High Court under the late Mr. V.P. Raman, former Advocate General of Tamil Nadu and Additional Solicitor General of India.He has more than 22 years of practice in the Supreme Court, High Court and other judicial forums in various fields particularly in Constitutional Law, Corporate Law, Contracts, and Intellectual property, Civil Law, Service Law and Indirect Taxation. He is the Legal Advisor to several corporate bodies, banks, associations and prominent individuals. He is Additional Advocate General-I Tamil Nadu, since June 2006. He is a Member of the Executive Committee of the Tamil Nadu Cricket Association as well as the Madras Management Association. He has been on our Board since July, 2004.

Mr. Ashok V. Chowgule, 60 years, Independent Director is a Graduate in Economics and Statistics from Bristol University in England and has studied business in Case Western Reserve University in Cleveland, USA. He joined Chowgule Group of Companies with responsibilities for Finance and Administration and was the Managing Director of Narmada Cement Company Limited. He is in charge of the ship building activities of Chowgule Group that also has an interest in mineral processing, industrial salts, industrial explosives, shipping, industrial oxygen, fisheries etc. He is actively associated with various social and charitable institutions. He has been on our Board since January, 2007.

Borrowing Powers of Directors

Pursuant to a resolution approved by our Shareholders at the General Meeting held on September 29, 1995, the current borrowing powers of the Directors pursuant to section 293(1)(d) of the Companies Act is Rs.50.0 crores.

Compensation of Our Directors

The Chairman and Managing Director of our Company is a Whole Time Director of T.V. Sundram Iyengar & Sons Limited, a promoter company, receiving remuneration from them. Our Company pays him sitting fees for the Board/Committee Meetings attended and also commission upto 5% of the net profits of the Company subject to the overall ceiling fixed by the Companies Act, 1956. All the other Directors are paid sitting fees for the Board Committee meetings attended. Details of the total sitting fees paid during the year ended March 31, 2008 for the Board/Committee Meetings are as follows:

S.No. Meeting of Directors Sitting fees paid (in Rs.) 1. Mr. K. Mahesh 50,000 2. Mr. K. Ramesh 5,000 3. Mr. T. Kannan 70,000 4. Mr. P.S. Raman 35,000 5. Mr. Ashok V.Chowgule 45,000

The sitting fees payable to our Directors for the Board, Audit Committee and Shareholders’/Investors’Greivance Committee meetings are as follows:

S.No. Meeting of Directors Sitting fees payable per meeting (in Rs.) 1. Board Meeting 5,000 2. Audit Committee 5,000 3. Shareholders’/Investors’ Grievance Committee 5,000

Terms of Appointment

S.No. Name of Director Terms of Appointment 1. Mr. K. Mahesh Not liable for retirement by rotation 2. Mr. K. Ramesh Liable for retirement by rotation 3. Mr. T. Kannan Liable for retirement by rotation 4. Mr. P.S. Raman Liable for retirement by rotation 5. Mr. Ashok V.Chowgule Liable for retirement by rotation

Corporate Governance

In terms of the revised provisions of the Clause 49 of the Listing Agreement amended vide SEBI Circular SEBI/CFD/DIL/CG/1/2008/08/04 dated April 8, 2008 the Company is required to have three Independent Directors. The provisions of the Clause 49 of the Listing Agreement entered into with the Stock Exchanges with respect to corporate governance are applicable to us. We have complied with such provisions, including with respect to the appointment of independent Directors on our Board.

Audit Committee

The Audit Committee was constituted by our Directors vide their Board meeting held on September 30, 2001. The purpose of the Audit Committee is to ensure the objectivity, credibility and correctness of our financial reporting and disclosure processes, internal controls, risk management policies and processes, tax policies, compliance and

50 legal requirements and associated matters. The Audit Committee currently consists of Mr. T. Kannan, Mr.P.S.Raman, and Mr. Ashok V.Chowgule.

The primary objective of the Audit Committee is to monitor and provide effective supervision of the financial control and reporting system. The Audit Committee reviews the following:

• Internal audit reports. • Auditor’s Report on the financial statements. • Strength and weakness of the internal controls and recommendations relating thereto. • Compliance with accounting standards • Capital Expenditure • Monitoring of cost control/reduction measures

Shareholders’/ Investors’ Grievance Committee

The Shareholders / Investors’ Grievance Committee was constituted by our Directors vide their Board meeting held on October 26, 2002 . Currently, Mr. P.S Raman, Mr. K. Mahesh and Mr. T. Kannan are the members of the Committee. Our Company Secretary is the Secretary of the Committee. The main focus of the Shareholders Committee’s is on the basic rights of the Shareholders including, transfer of shares, transmission / transposition of shares, issue of duplicate / split share certificates, sub division / consolidation of shares, consolidation of folios, dematerialisation of physical shares / re-materialization of electronic shares, and such other issues relating to shares.

Rights Issue Committee

The Rights Issue Committee was constituted by our Directors vide their Board meeting held on February 6, 2009 . Currently, Mr. K. Mahesh, Mr. T. Kannan and Mr. P.S. Raman are the members of the Committee. The terms of the reference of the committee inter-alia include appointment of merchant bankers, other intermediaries, finalization and approval of the Letter of Offer to be filed with SEBI, determine the other terms and conditions of the Issue etc.

Shareholding of our Directors

As at December 31, 2008 the following table details the shareholding of our Directors in their personal capacity and/or either as sole or first holder:

No. of Equity Percentage of Percentage of Shares shares held (Pre- No. of Equity Shares shares held (Post- Name of Director (Pre-Issue) Issue) (Post-Issue) Issue) Mr. K. Mahesh 179,416 6.61% 260,153 6.61% Mr. K. Ramesh 110,081 4.06% 159,617 4.06% Mr. T. Kannan 1,135 0.04% 1,646 0.04% Mr. P.S. Raman 100 - 145 - Mr. Ashok V.Chowgule - - -- * The number of shares for the column entitled Number of Equity Shares (Post-Rights Issue) has been calculated assuming full subscription to the rights entitlement in this Issue.

Interest of Promoters, Directors and significant Shareholders

Except as stated in section titled "Auditors Report and Financial Information – Related Party Transactions" on page 98 of the Letter of Offer and to the extent of their shareholding in our Company, our Promoters do not have any other interest in our business. The Directors of our Company do not have any interest in our Company other than to the extent of the remuneration or benefits to which they are entitled as per their terms of appointment and reimbursement of expenses incurred by them during the ordinary course of business and to the extent of the Equity Shares held by them in the Company. Except as stated otherwise in this Letter of Offer, we have not entered into any contract, agreement or arrangement during the preceding 2 years from the date of this Letter of Offer in which the

51 Directors are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements or are proposed to be made to them.

Changes to the Board of Directors in the last 3 years

Name of Director Date of Change Reasons for Change Mr. Krishna Mahesh February 5, 2009 Resigned Mr. Ashok V.Chowgule January 22, 2007 Appointed Mr. T. Dulip Singh October 29, 2006 Demise

Management Organisation Structure

The organisation structure of the Key Management Personnel (KMP) is presented below:

K. Mahesh Chairman & Managing Director

V.R. Janardhanam R. Mani Parthasarathy Chief Operating Financial Advisor & Officer Secretary

R. Ramasubramanian G.R. Chandramouli L.S. Jayaraman President EVP, (Market EVP, Projects Development)

Key Management Personnel (KMP)

Details of our KMP are as follows:

Mr. V.R. Janardhanam, Chief Operating Officer is responsible for all the activities including overall financial performance of our Company. He is responsible for the strategies to be adopted to achieve the required growth in the organization and to ensure that all the departments perform to the optimum. He graduated from the Directorate of Marine Engineering Training, Calcutta. He has obtained the Chief Engineer’s Certificate of Competency for Steam and Motor Vessels from the Ministry of Transport. He has a total of 39 years of experience and joined our Company as the Factory Manager in the year 1975.

Mr. R. Ramasubramanian , President takes care of the Production & Operation function at our Company. He is a graduate in Mechanical Engineering from Madras University. He has attended Training programme in Lucas Engineering Systems, Birmingham (UK) and has also visited and studied a world class manufacturing companies. He has a total experience of 42 years and joined our Company in 1976.

Mr. G.R. Chandramouli , Executive Vice President (Market Development) is a graduate in Mechanical Engineering from the Bangalore University. He has over 36 years of sales and business development experience and

52 has travelled extensively all over the world for promotion of our Company’s products. He has been with our Company since 1976.

Mr. L.S. Jayaraman , Executive Vice President (Projects), is a graduate in Electrical Engineering from Birla Institute of Technology and Science, Pilani. He has been with our Company since 1994 and was fully involved in commissioning our first plant at Padi in 1976. He was also fully responsible for setting up the second plant of our Company in TSK Puram. He has a total experience of 38 years.

R. Mani Parthasarathy , Financial Advisor and Secretary, is a commerce graduate, and an Associate Member of the Institute of Company Secretaries of India and an MBA. He joined Sundaram Fasteners in 1970 after serving a commercial organization for around 8 years. He has been with our Company since 1992 and possesses a total experience of 47 years.

Shareholding of our KMP in our Company

The following table details the shareholding of our key managerial personnel in their personal capacity and either as sole or first holder:

S.No. Name of KMP No. of Equity Shares 1. R. Mani Parthasarathy 55 2. R. Ramasubramanian 94 3. V.R. Janardhanam 601 Total 750

Details regarding options granted to Directors and KMP:

Our Company does not have an Employee Stock Option Plan (ESOP) and hence none of the KMPs or Directors mentioned above have been granted options in our Company.

There is no bonus or profit sharing plan for the KMP in our Company.

Details of loans taken by KMP in Our Company

None of the KMPs mentioned above have taken any loan from our Company

Changes in our KMP during the last three years:

There has been no change in the Key Managerial Personnel of our Company during the last one year.

53 OUR PROMOTERS AND PROMOTER GROUP

A. OUR PROMOTERS

The Promoters of our Company are:

i) T.V. Sundram Iyengar & Sons Limited ii) Sundaram Industries Limited iii) Southern Roadways Limited

The details of each Promoter company mentioned above have been described below in the same order.

i) T.V. Sundram Iyengar & Sons Limited

T.V. Sundram Iyengar & Sons Limited was incorporated on October 11, 1929 as a public limited company under the provisions of the Indian Companies Act 1913 . The Registered Office of the company is situated at TVS Building, 7- B, West Veli Street, Madurai – 625 001. T.V. Sundram Iyengar & Sons Limited are the dealers in Automobile Vehicles, Spare parts, Accessories and Petroleum Products. There has been no change in the management control of T.V. Sundram Iyengar & Sons Limited.

S.No. Identification Details 1. Registration No. No. 4 of 1929-1930 Company Identification Number 2. (CIN) U34101TN1929PLC002973 3. PAN Number AABCT 0159 K The Registrar of Companies, Shastri Bhavan, 35, Haddows Road, 4. Address of the ROC Chennai – 600 006

The Company confirms that the Permanent Account Number, Bank Account Numbers, the Company Registration number, the Company Identification Number and the Address of the Registrar of Companies of T.V. Sundram Iyengar & Sons Limited have been submitted to the NSE and the MSE.

Board of Directors

The details of Board of Directors of T.V. Sundram Iyengar & Sons Limited as on date of this Letter of Offer are as follows:

Date of Name Designation Appointment Qualification Residential Address Suresh 79, Poes Garden, Krishna Director December 25, 1970 M.A Chennai – 600 086 Lakshmi Building, Usilampatti Road, Kochadai, Madurai – K. Ramesh Director December 25, 1970 M.A 625 016 29, Prithvi Avenue, Abhirampuram, Street 4, Chennai – S. Ram Director December 25, 1970 B.E., M.S 600 018 81, 1 st Main Road, Raja Annamalaipuram, K. Mahesh Whole Time Director August 30, 1976 B.Tech Chennai – 600 018

54 S.Viji Director August 30, 1976 B.Com, ACA, MBA 33, Poes Garden, Chennai - 600018 Venu Director June 29, 1979 M.S. Westside House, No. Srinivasan 2, Adyar Club Gate Road, Chennai – 600 028 Gopal Director August 31, 1979 B.Com, MBA Westside House, No. Srinivasan 2, Adyar Club Gate Road, Chennai – 600 028 T. K. Balaji Director August 31, 1979 B.E(Hons), MBA 34, Poes Garden, Chennai – 600 086 R.Haresh Joint Managing Director September 30, 1980 M.Com, MBA TVS Building, 7-B, West Veli Street, Madurai -625 001 R.Dinesh Joint Managing Director May 27, 1998 B.Com, ACA 16, Jawahar Road, Chokkikulam, Madurai – 625 002 Srinath R. Director June 16, 2005 B.E., M.S TVS House, No. 20, Rajam Cenotaph Lane 2, Chennai – 600 028 Srivats Ram Director June 16, 2005 MBA 29, Prithvi Avenue, Chennai – 600 018

Shareholding as of December 31, 2008

The details are as follows:

S.No Shareholder Number of shares Percentage 1. Gopal Srinivasan 1,18,944 10.40% 2. R. Haresh 51,536 4.51% 3. Srinath R Rajam 50,848 4.44% 4. R. Naresh 29,164 2.55% 5. S. Viji 26,162 2.29% 6. Srivats Ram 24,441 2.14% 7. Malini Srinivasan 24,014 2.10% 8. Lakshmi Venu 23,502 2.05% 9. Arundathi Krishna 17,095 1.49% 10. Shripriya Mahesh 16,648 1.46% 11. Shrimathi Mahesh 16,648 1.46% 12. Sri Krishna Mahesh 16,648 1.46% 13. Shrikirti Mahesh 16,648 1.46% 14. Mridula Ramesh 16,014 1.40% 15. Vijaya Rangarajan 16,027 1.40% 16. Soumini Ramesh 14,884 1.30% 17. Preethi Krishna 14,699 1.28% 18. Sriram Viji 13,961 1.22% 19. Arathi Krishna 13,883 1.21% 20. Urmila Ramesh 13,062 1.14% 21. Mala Ramesh 12,640 1.10% 22. Raghuvamsa Holding Private Limited 12,126 1.06% 23. Chitra Viji 11,602 1.01% Uthirattadhi ram Holdings Private 24. Limited 6,500 0.57%

55 25. Silver Oak Holdings Limited 6,500 0.57% 26. Mallika Srinivasan 6,500 0.57% 27. Sheela Balaji 6,470 0.57% 28. Anita R Ratnam 6,184 0.54% 29. Prema Ramanujam 6,175 0.54% S. Ram & S. Viji, Executors to the Estate 30. of Padma Santhanam 5,454 0.48% 31. Athreya Harsha Holding Private Limited 4,876 0.43% 32. Saroja Ravindran 3,574 0.31% 33. Rohini Holdings Private Limited 3,250 0.28% 34. Allegro Holdings Private Limited 3,250 0.28% 35. T.K. Balaji 2,304 0.20% 36. R Ramanujam 524 0.05% 37. Sumanth Ramanujam 400 0.03% 38. Sudarshan Venu 22,566 1.97% 39. Arjun Rangarajan 45,196 3.95% 40. R. Dinesh 32,884 2.87% 41. K. Mahesh 21,310 1.86% 42. Shobhana Ramachandhran 20,664 1.81% 43. Venu Srinivasan 66,358 5.80% 44. K. Ramesh 31,300 2.74% 45. R. Haresh 30,866 2.70% 46. Suresh Krishna 53,315 4.66% 47. Indu Ramachandhran 19,000 1.66% 48. Maham Holdings Limited 18,500 1.62% 49. Pritha Ratnam 41,280 3.61% 50. Nivedita Ram 18,325 1.60% 51. Usha Krishna 11,206 0.98% 52. S. Ram 10,357 0.91% 53. Gita Ram 8,947 0.78% 54. Harsha Viji 10,873 0.95% 55. Srikanth Ramanujam 7,946 0.69% 56. Ananth Ramanujam 7,943 0.69% 57. Padmalakshmi Holdings Limited 9,126 0.80% Srikanth Ramanujam/Sri Ananth 58. Ramanujam 7,539 0.66% 59. T.K. Arvind Balaji 7,660 0.67% 60. T.K. Priyamvada Balaji 7,660 0.67% 61. Sheela Balaji 22 0.00% Total 1,144,000 100.00%

Financial Performance

The operating results of T.V. Sundram Iyengar & Sons Limited for the fiscal years 2008, 2007 and 2006 are as follows: (in Rs. crores) Fiscal year ended March Fiscal year ended March Fiscal year ended March Particulars 31, 2008 31, 2007 31, 2006 Total Income 4,560.60 4,284.80 3,195.70 Profit/loss after tax 36.80 138.10 52.30 Reserves and Surplus 250.90 233.30 201.50 Equity share capital 11.44 11.44 11.44 Earnings per share (Rs.) 321.68 1,206.84 457.16 Book Value per share (Rs.) 2,293.12 2,139.27 1,861.73

Share Quotation

T.V. Sundram Iyengar & Sons Limited is an unlisted entity and hence the details of its stock price are not available.

Details of the last public/rights issue made in the last three years

T.V. Sundram Iyengar & Sons Limited has not made any public/ rights issue in the last three years. It has not become a sick company under the meaning of SICA and is not under winding up.

Mechanism for redressal of investor grievances

This is not applicable as T.V. Sundram Iyengar & Sons Limited is an unlisted entity.

Companies with which the Promoters have disassociated in the last three years

T.V. Sundram Iyengar & Sons Limited has not disassociated with any of its subsidiary or associate companies during the last three years.

ii) Sundaram Industries Limited

Sundaram Industries Limited was incorporated on May 5, 1943 as a public limited company under the provisions of the Indian Companies Act, 1913 . The Registered Office of the company is situated at TVS Building, 7-B, West Veli Street, Madurai - 625 001. Sundaram Industries Limited is engaged in the manufacturing of Automobile Rubber products, solid Tyres and re-treading & distribution of tyres. There has been no change in the management control of Sundaram Industries Limited.

S.No Identification Details 1. Registration No. 2656 Company Identification Number 2. (CIN) U65991TN1943PLC002656 3. PAN Number AABCS5320H The Registrar of Companies, Shastri Bhavan, 35, Haddows Road, 4. Address of the ROC Chennai – 600 006

The Company confirms that the Permanent Account Number, Bank Account Numbers, the Company Registration number, the Company Identification Number and the Address of the Registrar of Companies of Sundaram Industries Limited have been submitted to the NSE and the MSE.

Board of Directors

The details of Board of Directors of Sundaram Industries Limited as on date of this Letter of Offer are as follows:

Date of Name Designation Qualification Residential Address Appointment K. Ramesh Director June 14, 1972 M.A Lakshmi Building, Usilampatti Road, Kochadai, Madurai – 625 016 S. Ram Director June 14, 1972 B.E., M.S 29, Prithvi Avenue, Abhirampuram, Street 4, Chennai – 600 018 K. Mahesh Director November 30, 1978 B.Tech 81, 1 st Main Road,

57 Raja Annamalaipuram, Chennai – 600 018 S. Viji Director November 30, 1978 B.Com, ACA, MBA 33, Poes Garden, Chennai – 600 018 R.Haresh Director March 5, 1991 M.Com, MBA TVS Building, 7-B, West Veli Street, Madurai -625 001 Srinath R. Director March 16, 1983 B.E., M.S TVS House, No. 20, Rajaram Cenotaph Lane 2, Chennai – 600 028 R. Naresh Joint Managing Directors March 16, 1983 B.E. TVS Building, 7-B, West Veli Street, Madurai -625 001 Gopal Director September 15, 1984 B.Com, MBA Westside House, No. Srinivasan 2, Adyar Club Gate Road, Chennai- 600 028 Pritha Ratnam Joint Managing Directors September 6, 1995 B.A TVS House, No. 20, Cenotaph Lane 2, Chennai - 600028 Shobhana Director December 14, 1988 M.A. No. 16, Jawahar Ramachandhran Road, Chokkikulam, Madurai – 625 002 Nicholas Director June 30, 1988 M.E. Kadalagam Sundaram Bungalow, Valmiki Nagar, Thiruvanmiyur, Chennai – 600 041

Shareholding as of December 31, 2008

The details are as follows:

S.No Shareholder Number of shares Percentage 1. T.V. Sundram Iyengar & Sons Limited 142,800 56.67% 2. Anitha Ratnam 9,306 3.69% 3. Prema Srinivasan 8,026 3.18% 4. Mailini Srinivasan 7,008 2.78% 5. Suresh Krishna 6,389 2.53% 6. Indu Ramachandhran 5,598 2.22% 7. Sheela Balaji 5,350 2.12% 8. Radha Parthasarathy 4,128 1.64% 9. R. Haresh 3,954 1.57% 10. Nivedita Ram 3,855 1.53% 11. Maham Holdings 3,500 1.39% 12. Sanjay Parthasarthy 2,761 1.10% 13. Ramya Parthasarthy 2,761 1.10% 14. Priya Parthasarthy 2,761 1.10% 15. K. Ramesh 2,780 1.10% 16. Gopal Srinivasan 2,649 1.05% 17. Harsha Viji 2,457 0.97% 18. Sriram Viji 2,458 0.97% 19. Usha Krishna 2,360 0.94%

58 20. Vijaya Rangarajan 2,100 0.83% 21. Uthirattadhi Sriram Holdings 2,000 0.79% 22. Srintah R. Rajarm 1,966 0.78% 23. Pritha Ratnam 1,957 0.77% Srikanth Ramanujam/Ananth 24. Ramanujam 1,882 0.75% 25. Srivats Ram 1,756 0.70% 26. R. Naresh 1,680 0.67% 27. R. Dinesh 1,680 0.67% 28. Venu Srinivasan 1,629 0.64% 29. Srikanth Ramanujam 1,583 0.63% 30. Ananth Ramanujam 1,583 0.63% 31. Shobhana Ramachandhran 1,159 0.46% 32. Mallika Srinivasan 1,000 0.40% 33. K. Mahesh 1,017 0.40% 34. S. Viji 933 0.37% 35. Chitra Viji 2,458 0.37% 36. T.K. Balaji 804 0.32% 37. Athreya Holdings 600 0.24% 38. Mridula Ramesh 560 0.22% 39. Urmila Ramesh 560 0.22% 40. Mala Ramesh 560 0.22% 41. Raghuvamsa Holdings Private Limited 500 0.20% 42. Arun Rangarajan 480 0.19% 43. Anupama Lakshmi Rangarajan 480 0.19% 44. T.K. Arvind Balaji 417 0.17% 45. T.K. Priamvada Balaji 417 0.17% 46. Shrikriti Mahesh 221 0.09% 47. Shripriya Mahesh 221 0.09% 48. Krishna Mahesh 221 0.09% 49. Rupa Srikanth 200 0.08% Total 252,000 100.00%

Financial Performance

The operating results of Sundaram Industries Limited for the fiscal years 2008, 2007 and 2006 are as follows:

(in Rs. crores) Fiscal year ended March Fiscal year ended March Fiscal year ended March Particulars 31, 2008 31, 2007 31, 2006 Total Income 231.46 213.91 187.17 Profit/loss after tax 10.98 228.75 186.18 Reserves and Surplus 42.49 381.61 309.20 Equity share capital 2.52 2.52 2.52 Earnings per share (Rs.) 435.90 907.77 738.84 Book Value per share (Rs.) 1,786.20 1,614.36 1,326.98

Share Quotation

Sundaram Industries Limited is an unlisted entity and hence the details of its stock price are not available.

Details of the last public/rights issue made in the last three years

Sundaram Industries Limited has not made any public/ rights issue in the last three years. It has not become a sick company under the meaning of SICA and is not under winding up.

Mechanism for redressal of investor grievances

This is not applicable as Sundaram Industries Limited is an unlisted entity.

Companies with which the Promoters have disassociated in the last three years

Sundaram Industries Limited has not disassociated with any of its subsidiary or associate companies during the last three years.

iii) Southern Roadways Limited

Southern Roadways Limited was incorporated on September 13, 1946 as a public limited company under the provisions of Indian Companies Act, 1913 . The Registered Office of the company is situated at Lakshmi Building, Kochadai, Madurai – 625 016. Southern Roadways Limited is engaged in the business of transportation of goods by road. There has been no change in the management control of Southern Roadways Limited.

S.No Identification Details 1. Registration No. 2656 Company Identification Number 2. (CIN) U6022ITN1946PLC002582 3. PAN Number AACCS1478B The Registrar of Companies, Shastri Bhavan, 35, Haddows Road, 4. Address of the ROC Chennai – 600 006

The Company confirms that the Permanent Account Number, Bank Account Numbers, the Company Registration number, the Company Identification Number and the Address of the Registrar of Companies of Sundaram Roadways Limited have been submitted to the NSE and the MSE.

Board of Directors

The details of Board of Directors of Southern Roadways Limited as on date of this Letter of Offer are as follows:

Date of Name Designation Appointment Qualification Residential Address K. Ramesh Chairman & September 27, M.A Lakshmi Building, Managing Director 1975 Kochadai, Madurai – 625 016 S. Ram Director April 24, 1975 B.E., M.S 180, Mount Road, Chennai K. Mahesh Director January 29, 1975 B.Tech 81, First Main Road, Raja Annamalaipuram Chennai – 600 028 Venu Srinivasan Director June 30, 1979 M.S. Westside House, No. 2, Adyar Club Gate Road, Chennai – 600 028 A.K. Manikanteswaran Director March 12, 1962 S.S.L.C 84, Aangarai, Trichy G. Somasundaram Director August 29, 1981 B.Com, FCA 354, Anna Nagar, Madurai

60 Mridula Ramesh Director July 3, 2007 PG in Lakshmi Building, Management Kochadai, Madurai – 625 016 Jeya Narayanan Director September 27, B.Com Shreyas, Bathikulam 2008 Street, Calicut – 673 600

Shareholding as of December 31, 2008

The details are as follows:

S.No Shareholder Number of shares Percentage 1. T.V. Sundram Iyengar & Sons Limited 271,012 54.98% 2. K. Ramesh 49,900 10.12% 3. Malini Srinivasan 24,889 5.05% 4. Prema Ramanujam 23,583 4.78% 5. Sheela Balaji 17,017 3.45% 6. K. Ramesh 12,408 2.52% 7. Indu Ramachandhran 11,309 2.29% 8. Anitha R Ratnam 11,309 2.29% 9. Srikanth Ramanujam 10,150 2.06% 10. Suresh Krishna 9,575 1.94% 11. K. Mahesh 9,501 1.93% 12. S. Jayanarayanan 5,216 1.06% 13. K. Ramesh HUF 4,963 1.01% 14. Revathi Holding private Limited 4,743 0.96% 15. Padmalakshmi Holding Private Limited 4,340 0.88% 16. T.K. Arvind Balaji 3,329 0.68% 17. Susheela Padmanabhan 3,182 0.65% 18. Sarala Krishnan 3,182 0.65% 19. Shrikriti Mahesh 1,740 0.35% 20. Preethi Krishna 1,610 0.33% 21. Arthi Krishna 1,614 0.33% 22. Ananth Ramanujam 1,575 0.32% 23. Shripriya Mahesh 1,145 0.23% 24. Arun Rangarajan 840 0.17% 25. Soumini Ramesh 784 0.16% 26. Urmila Ramesh 787 0.16% 27. Mala Ramesh 787 0.16% 28. Mridula Ramesh 788 0.16% 29. Krishna Mahesh 434 0.09% 30. P. Pottu Reddiar 427 0.09% 31. R. Chellathai 242 0.05% 32. Children’s Hospital Private Limited 206 0.04% 33. Dattatreya Fabrics Private Limited 136 0.03% 34. Saroja Ravindran 119 0.02% 35. Menal Farms Limited 35 0.01% 36. Arundhati Krishna 35 0.01% 37. A.K. Manikanteswaran 21 0.00% Total 492,933 100.00%

61 Financial Performance

The operating results of Southern Roadways Limited for the fiscal years 2008, 2007 and 2006 are as follows:

(in Rs. crores) Fiscal year ended Fiscal year ended March Fiscal year ended March Particulars March 31, 2008 31, 2007 31, 2006 Total Income 36.30 46.80 38.44 Profit/loss after tax 7.22 18.17 10.46 Reserves and Surplus 48.60 46.34 36.79 Equity share capital 4.92 4.92 4.92 Earnings per share (Rs.) 146.62 368.79 212.34 Book Value per share (Rs.) 502.79 502.33 500.39

Share Quotation

Southern Roadways Limited is an unlisted entity and hence the details of its stock price are not available.

Details of the last public/rights issue made in the last three years

Southern Roadways has not made any public/ rights issue in the last three years. It has not become a sick company under the meaning of SICA and is not under winding up.

Mechanism for redressal of investor grievances

This is not applicable as Southern Roadways Limited is an unlisted entity.

Companies with which the Promoters have disassociated in the last three years

Southern Roadways Limited has not disassociated with any of its subsidiary or associate companies during the last three years.

B. OUR PROMOTER GROUP

Individuals

1. K. Mahesh 2. Shrimathi Mahesh 3. Shripriya Mahesh 4. Krishna Mahesh 5. Shrikirti Mahesh 6. K. Ramesh 7. Urmila Ramesh 8. Mridula Ramesh 9. Mala Ramesh 10. Suresh Krishna 11. Arathi Krishna

HUF

1. Suresh Krishna – HUF

62 Companies

1. Alagar Farms Private Limited 2. Aplomb Investments Limited 3. Associated Autoparts Limited 4. Brakes India Limited 5. Delphi-TVS Diesel Systems Limited 6. Firestone TVS Private Limited 7. India Motor Parts & Accessories Limited 8. India Telecom Infra Limited 9. Iranian Automotive Systems, Iran 10. Irizar TVS Limited 11. Lucas Indian Service Limited 12. Lucas TVS Limited 13. NSM Finance Limited 14. Rajarajeswari Farms Private Limited 15. Sundaram Clayton Limited 16. Sundaram Textiles Limited 17. Sundram Fasteners Limited 18. Synergy Shakthi Renewable Energy Limited 19. TVS Automotive Europe Limited 20. TVS Autoserve, Gmbh, Germany 21. TVS Srichakra Limited 22. TVS Telecom Components Limited 23. TVS Auto (Bangladesh) Limited 24. TVS Automotive Systems Limited 25. TVS Automotives Private Limited, Sri Lanka 26. TVS Autoparts Private Limited, Sri Lanka 27. TVS CJ Components Limited, United Kingdom 28. TVS Dynamic Global Freight Services Limited 29. TVS Interconnect Systems Limited 30. TVS Lanka Private Limited, Sri Lanka 31. TVS Logistics Services Limited 32. TVS Logistics Siam Limited, Thailand 33. TVS Logistics-Iberia S.L., Spain 34. TVS Net Technologies Limited 35. TVS Novetama Elastomeric Engineered Products Private Limited 36. TVS Sewing Needles Limited 37. Wabco TVS (India) Limited 38. Wheels India Limited

We have availed exemptions as per provisions of clause 6.39 of SEBI Guidelines, after having satisfied the conditions mentioned in the above provision, with respect to disclosure of information required under clauses 6.10.3 of the SEBI Guidelines. Further, we confirm that other than the disclosures made in the Letter of Offer nothing material has changed in respect of disclosures made by us at the time of our previous issue made in October 1995.

Common Pursuits

The aforementioned Promoters of the Company are interested to the extent of their shareholding in the Company. Further, the individual Promoters who are also the Directors of the Company may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a Committee thereof as well as to the extent of other remuneration, reimbursement of expenses payable to them as per the terms of our Articles and

63 relevant provisions of Companies Act. Our Promoter Directors may also be deemed to be interested to the extent of Equity Shares that may be subscribed for and allotted to them, out of the present Issue in terms of this Letter of Offer and also to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares.

Further, our Promoters are also director on the boards of certain Promoter Group companies and they may be deemed to be interested to the extent of the payments made by the Company, if any, to these Promoter Group companies. Except as stated otherwise in this Letter of Offer, we have not entered into any contract, agreements or arrangements during the preceding two years from the date of this Letter of Offer in which the Promoters are directly or indirectly interested and no payments have been made to them in respect of the contracts, agreements or arrangements which are proposed to be made with them including the properties purchased by the Company other than in the normal course of business. For the payments that are made by our Company to certain members of the Promoter Group that are related parties as per AS 18, please refer to the related party transactions in the "Auditors Report and Financial Information – Related Party Transactions" on page 98 of the Letter of Offer. The Promoters are carrying on separate businesses and there is no conflict of interest situation except certain related party transaction mentioned in the "Auditors Report and Financial Information – Related Party Transactions" on page 98.

Further, the Promoters have not been detained as a wilful defaulter by the Reserve Bank of India or any other Government Authority and there are no violations of securities laws committed by the Promoters in the past or no such proceedings are pending against the Promoters.

64 DIVIDEND POLICY

The Board of Directors recommends dividend payment upto 25% of the average net profits of the last three years subject to a maximum of 30% of the net profits of the current year and is approved by our Shareholders, at their discretion. The quantum of dividend depends on a number of factors, including but not limited to the earnings, capital requirements, overall financial conditions and other factors prevailing at the time.

65 REGULATIONS AND POLICIES

We are engaged in the business of manufacturing of automotive, non-automotive and industrial friction materials.

We are required to obtain licenses and approvals, depending upon the prevailing laws and regulations, applicable in the relevant States and/or local governing bodies. For details of such approvals, please refer to the section titled “Government Approvals and Licenses” beginning on page 129 of the Letter of Offer.

Our Business requires sanctions from the concerned authorities, under the relevant Central and State Legislations; and local bye–laws. The following are the important laws and regulations, which govern the Company’s business:

The Factories Act, 1948

The Factories Act, 1948 applies to industries in which 10 or more than 10 workers are employed on any day of the preceding 12 months in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily carried on or to industries where 20 or more workers were employed on any day of the preceding 12 months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on. The said Act seeks to regulate labour employed in factories and inter alia makes provisions for the safety and welfare of the worker, prescribes duties on the person who has ultimate control over the affairs of the factory (“ Occupier ”) etc.

The Factories Act provides that an Occupier of a factory and in case of a company, any of the Directors, must ensure the health, safety, welfare, working hours, leave and other benefits for workers employed in factories. Under this statute, an approval must be granted prior to the setting up of the factory and a license must be granted post the setting up of the same, by the Chief Inspector of Factories. The Factories Act also provides for fines to be paid and imprisonment by the manager of the factory in case of any contravention of the provisions of the Factories Act and the rules framed thereunder.

The Contract Labour (Regulation and Abolition) Act, 1970

The Company is regulated by the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 which requires the Company to be registered as a principal employer and prescribes certain obligations with respect to welfare and health of contract labour.

The Employee’s State Insurance Act, 1948

The Employee State Insurance Act provides for certain benefits to employees in case of sickness, maternity and employment injury and other related matters. In respect of factories to which the Act is applicable, the employers are required to pay contributions to the Employees State Insurance Corporation, in respect of certain employees covered under the said Act at the rate prescribed by the Central Government.

Employee’s Provident Funds and Miscellaneous Provisions Act, 1952

The Employees Provident Fund and Miscellaneous Provisions Act, 1952 provides for the institution of compulsory Provident fund, pension fund and deposit linked insurance funds for the benefit of eligible employees in factories and establishments as may be specified. The said legislation places an obligation on the employer and employee to make certain contributions to the funds mentioned above after obtaining the necessary registrations. There is also a requirement to maintain records and registers in the prescribed form and filing the prescribed forms with the concerned authorities.

Payment of Bonus Act, 1965

The Payment of Bonus Act provides for the payment of bonus to persons employed in certain establishments on the basis of profits and connected matters thereof. An employee in a factory who has worked for at least 30 days in a year is eligible to be paid bonus. The minimum bonus fixed by the said legislation must be paid and the existence of

66 any allocable surplus is immaterial in this regard. If allocable surplus exceeds minimum bonus payable, then the employer must pay bonus proportionate to the salary or wage earned during that period, subject to a maximum of twenty per cent of such salary or wage. Contravention of the provision of the said legislation is punishable by imprisonment up to 6 months or a fine up to one thousand rupees or both.

The Payment of Wages Act, 1936

The Payment of Wages Act, 1936 is a central legislation which applies to the persons employed in the factories and to persons employed in industrial or other establishments specified in sub-clauses (a) to (g) of clause (ii) of section 2 of the Act. This Act does not apply to workers whose wages payable in respect of a wage period average Rs. 1600 a month or more. The Act has been enacted with the intention of ensuring wages are paid on time and without unauthorized deductions.

Payment of Gratuity Act, 1972

The Payment of Gratuity Act provides for payment of gratuity to employees employed in factories, shops and establishments who have put in a continuous service of 5 years, in the event of their superannuation, retirement, resignation, death or disablement. The rule of ‘5 year continuous service’ is however relaxed in case of death or disablement of an employee. Gratuity is calculated at the rate of 15 days wages for every completed year of service with the employer. The said Act also fixes the ceiling on the maximum gratuity payout by an employer for an employee. The Act also requires the employer to obtain and maintain an insurance policy to ensure due performance of their obligation towards payment of gratuity.

Workmen’s Compensation Act, 1923

The Workmen’s Compensation Act, 1923 makes the employer liable to pay compensation to an employee in the event the latter suffers personal injury, as defined in the said statute, caused by an accident during his employment.

Service Tax

Chapter V of the Finance Act 1994 (as amended), and Chapter V-A of the Finance Act 2003 levies service tax for provision of the services listed from time to time. All persons providing taxable services shall register with the Service Tax Commissionerate of the concerned jurisdiction.

Central Excise

The said Act imposes a liability on a manufacturer to pay excise duty on production or manufacture of goods in India. The Central Excise Act, 1944 is the principal legislation in this respect, which provides for the levy and collection of excise duty in respect of ‘excisable goods’ and also provides for detailed procedures for clearance of goods from factory once the goods have been manufactured etc. Additionally, the Central Excise Tariff Act, 1985 prescribes the rates of excise duties for various goods.

Value Added Tax

VAT is a system of multi-point levy on each of the entities in the supply chain with the facility of set-off input tax whereby tax is paid at the stage of purchase of goods by a trader and on purchase of raw materials by a manufacturer. Only the value addition in the hands of each of the entities is subject to tax. VAT is based on the value addition of goods, and the related VAT liability of the dealer is calculated by deducting input tax credit for tax collected on the sales during a particular period.

VAT, is essentially a consumption tax applicable to all commercial activities involving the production and distribution of goods and the provisions of services, and each State that has introduced VAT has its own VAT Act, under which, persons liable to pay VAT must register themselves and obtain a registration number from the Excise Tax Officer of that respective State.

67 Central Sales Tax

The tax on sale of movable assets within India is governed by the provisions of the Central Sales Tax Act, 1956 or the state legislations depending upon the movement of goods pursuant to such sale. Central Sales tax is generally payable on the sale of all goods by a dealer in the course of inter-state trade or commerce or, outside a State or, in the course of import into or, export from India. On the other hand, the taxation of an arrangement of sale which does not contemplate movement of goods outside the state where the sale is taking place is determined as per the local sales tax/VAT legislations in place within the states

The Income Tax Act, 1961

The Income Tax Act provides for taxation of profits of the Company at the rates prescribed from time to time. Further the Act requires a company to withhold income tax on certain specified payments and to apply to the assessing officer for the allotment of a tax deduction account number. Furthermore, the legislation requires every tax payer to apply to the assessing officer for a personal account number.

Environmental Regulations

Manufacturing units or plants must ensure compliance with environmental legislation, such as the Water (Prevention and Control of Pollution) Act 1974, the Air (Prevention and Control of Pollution) Act, 1981, the Environment Protection Act, 1986 and the Hazardous Wastes (Management and Handling) Rules, 1989. The basic purpose of these statutes is to control, abate and prevent pollution. In order to achieve these objectives, Pollution Control Boards (“ PCBs ”), which are vested with diverse powers to deal with water and air pollution, have been set up in each state. The PCBs are responsible for setting the standards for maintenance of clean air and water, directing the installation of pollution control devices in industries and undertaking inspection to ensure that units or plants are functioning in compliance with the standards prescribed. These authorities also have the power of search, seizure and investigation. All Plants of the Company are required to obtain consent orders from the PCBs, which are indicative of the fact that the Plant in question is functioning in compliance with the pollution control norms. These consent orders are required to be kept renewed.

Trade Marks Act, 1999

The Indian law on trademarks is enshrined in the Trade Marks Act, 1999. Under the existing legislation, a trademark is a mark used in relation to goods so as to indicate a connection in the course of trade between the goods and some person having the right as proprietor to use the mark. A ‘mark’ may consist of a word or invented word, signature, device, letter, numeral, brand, heading, label, name written in a particular style and so forth. The trademark once applied for, is advertised in the trademarks journal, oppositions, if any are invited and after satisfactory adjudications of the same, a certificate of registration is issued. The right to use the mark can be exercised either by the registered proprietor or a registered user. The present term of registration of a trademark is ten years, which may be renewed for similar periods on payment of prescribed renewal fee.

Importer Exporter Code

Under the Indian Foreign Trade Policy, 2004, no export or import can be made by a person or company without an Importer Exporter Code number unless such person/company is specifically exempted. An application for an Importer Exporter Code number has to be made to the office of the Joint Director General of Foreign Trade, Ministry of Commerce. An Importer Exporter Code number allotted to an applicant is valid for all its branches/divisions/ units/factories

Foreign Investment

Foreign investment in India is regulated by the FEMA, the regulations framed by the RBI and policy guidelines are issued by the Ministry of Commerce and Industry (through various Press Notes issued from time to time). Foreign investment in companies engaged in manufacture of automotive parts is under the automatic route (i.e. prior approval of the FIPB is not required) unless such approval is required on account of the existence of such circumstances including but not limited to a previous investment in the same field by the Investing company.

Except such circumstances, foreign investment by way of subscription to equity shares of a company engaged in production of automotive parts currently does not require the prior approval of the RBI or the FIPB, except for a post subscription filing with the RBI in Form FC-GPR within 30 days from the issue of shares by our Company.

SECTION V – AUDITORS REPORT AND FINANCIAL INFORMATION

SUMMARY FINANCIAL STATEMENTS OF ASSETS AND LIABILITIES, PROFIT AND LOSS, AS RESTATED, UNDER INDIAN GAAP FOR THE NINE MONTHS ENDED DECEMBER 31 ST , 2008 AND 5 (FIVE) FINANCIAL YEARS ENDED MARCH 31 ST , 2008, 2007, 2006, 2005 AND 2004

The Board of Directors Sundaram Brake Linings Limited Padi, Chennai – 600 050.

Dear Sirs,

We have examined the financial information of Sundaram Brake Linings Limited (‘ SBLL ’ or ‘ Company’ ) annexed to this report, which have been prepared in accordance with the requirements of:

a) paragraph B (1) of Part II of Schedule II to the Companies Act, 1956 (‘the Act’);

b) the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 (‘the Guidelines’) issued by the Securities and Exchange Board of India (‘SEBI’) on January 19, 2000 in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992.

Financial information of “SBLL” as per Audited Financial Statements

We have examined the attached ‘Summary Statement of Assets and Liabilities, as restated of SBLL for the nine month period ended December 31, 2008 and for the years ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure I) and the attached ‘Summary Statement of Profit and Loss, as restated of SBLL (Annexure II) for the nine month period ended December 31, 2008 and for the year ended March 31, 2008, 2007, 2006, 2005 and 2004 together referred to herein as ‘Restated Summary Statements’. These Restated Summary Statements have been extracted from the financial statements of SBLL for the nine month period ended December 31, 2008 and for the year ended March 31, 2008, 2007, 2006, 2005 and 2004 and have been approved/ adopted by the Board of Directors/ Members for those respective years / period.

The financial statements of the Company for the nine month period ended December 31, 2008 and for the year ended March 31, 2008, 2007, 2006, 2005 and 2004 have been audited by us. Based on our examination of these Restated Summary Statements, we state that:

• The ‘Restated Summary Statements’ have to be read in conjunction with the ‘Significant Accounting Policies and Notes to the Summary Statements of Assets and Liabilities, Summary Statement of Profit and Loss and Cash Flow Statement, as restated of SBLL given in Annexure IV and Annexure V to this report. • The restated profits have been arrived at after adjusting for the changes in accounting policies, if any, retrospectively in respective financial years to reflect the same accounting treatment as per changed accounting policy for all the reporting periods. • The restated profits have been arrived at after making such adjustments and regroupings, if any as in our opinion are appropriate in the year to which they relate and are described under note appearing in Annexure V to this report; • There are no extra ordinary items that need to be disclosed separately in the Restated Summary Statements, other than what had already been disclosed. • There are no qualifications in the Auditors’ Report on the financial statements that require adjustments to the Restated Summary Statements.

70 Other Financial Information

We have also examined the following financial information relating to the Company for the nine month period ended December 31, 2008 and for the year ended March 31, 2008, 2007, 2006, 2005 and 2004 approved by the Board of Directors and annexed to this report:

• Statement of Cash Flows, as restated for the nine month period ended December 31, 2008 and for the year ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure III) • Significant Accounting Policies adopted by the Company (Annexure IV) • Notes to the Restated Summary Statements and Cash Flow Statement (Annexure V) • Statement of Accounting and other Ratios as at March 31, 2008, 2007, 2006, 2005, 2004 and for the nine month period ended December 31, 2008 (Annexure VI) • Capitalization Statement as at December 31, 2008( Annexure VII) • Tax Shelter Statement for the nine month period ended December 31, 2008 and for the year ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure VIII) • Details of Secured and Unsecured Loans for the nine month period ended December 31, 2008 and for the year ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure IX) • Details of Terms and conditions of Secured Loans outstanding as on December 31, 2008 (Annexure X) • Related Party Transactions as at and for the nine month period ended December 31, 2008 and for the year ended March 31, 2008, 2007, 2006, 2005 and 2004 (Annexure XI) • Details of Dividend paid for the years ended March 31, 2008, 2007, 2006, 2005, 2004 and for the nine month period ended December 31, 2008(Annexure XII) • Receivable Ageing Analysis for the years ended March 31, 2008, 2007, 2006, 2005, 2004 and for the nine month period ended December 31, 2008(Annexure XIII) • Details of Loans and Advances as at March 31, 2008, 2007, 2006, 2005, 2004 and for the nine month period ended December 31, 2008 (Annexure XIV) • Statement of Contingent Liabilities as at March 31, 2008, 2007, 2006, 2005, 2004 and for the nine month period ended December 31, 2008 (Annexure XV) • Statement of Other Income as at March 31, 2008, 2007, 2006, 2005, 2004 and for the nine month period ended December 31, 2008 (Annexure XVI) • Statement of Investments as at March 31, 2008, 2007, 2006, 2005, 2004 and for the nine month period ended December 31, 2008 (Annexure XVII) • Statement of Current Liabilities and Provisions as at March 31, 2008, 2007, 2006, 2005, 2004 and for the nine month period ended December 31, 2008 (Annexure XVIII)

This report is intended solely for your information and for inclusion in the Letter of Offer in connection with the proposed Rights Issue of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent.

For SUNDARAM & SRINIVASAN Chartered Accountants

M. Padhmanabhan Partner Membership No. 13291 Date : March 17, 2009 Place : Chennai

Annexure I

(in Rs. crores) SUMMARY STATEMENT OF ASSETS AND LIABILITIES AS RESTATED For the 9 For the For the For the For the months year year year year For the year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 FIXED ASSETS Gross Block 124.97 123.50 117.34 100.08 90.77 84.18 Less: Depreciation 53.34 48.88 43.11 38.61 34.69 30.85 Net Block 71.63 74.62 74.23 61.47 56.08 53.33 Capital WIP - - 0.19 0.09 0.05 0.19

Investments 0.53 0.53 0.53 0.53 0.00 0.00

LIABILITIES AND PROVISIONS

Secured loans 28.56 33.43 43.36 30.79 26.48 20.83 Unsecured loans - - 0.49 1.29 2.84 2.80

Current Liabilities 25.61 26.04 20.33 14.34 11.40 14.66

Provisions Provision for Tax - - 0.35 0.65 0.14 - Provision for Dividend (including dividend distribution tax) - 1.90 0.95 1.55 1.55 1.22 Deferred Tax liability 13.19 13.40 13.02 13.40 13.53 12.38

TOTAL (B) 67.36 74.77 78.50 62.02 55.94 51.89

NET WORTH (A-B) 73.88 70.08 64.91 55.05 48.13 41.88 Net worth Represented by Share Capital 2.71 2.71 2.71 2.71 2.71 2.71

Reserves & Surplus 71.17 67.37 62.20 52.47 45.42 39.17

Less : Deferred Revenue Expenditure ------(to the extent not written off or Adjusted)

72 Misc. Expenditure - - - 0.13 - - (to the extent not written off or Adjusted)

Net Worth 73.88 70.08 64.91 55.05 48.13 41.88

73 Annexure II

(in Rs. crores) For the For the For the For the For the For the 9 months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

Total Expenditure (B) 128.03 170.95 168.07 128.76 118.58 106.62

PROFIT BEFORE TAX (A-B) 9.65 18.62 21.66 16.34 15.36 13.35

Provision for taxes Current tax 3.53 5.77 8.07 5.65 4.07 3.80 Deferred tax (0.21) 0.38 (0.38) (0.13) 1.14 0.46 FBT 0.13 0.31 0.20 0.43 - -

PROFIT AFTER TAX 6.20 12.16 13.77 10.39 10.15 9.09 ADJUSTMENTS ------

Total of adjustments after tax impact ------

APPROPRIATION Prior Period Tax 0.25 0.82 0.18 Transfer to General Reserve 5.71 9.38 6.04 6.02 4.89 Transfer to Capital Redemption Reserve 0.00 0.00 0.00 0.00 0.00

74 Dividend Preference - - - - - Equity 1.63 3.52 2.71 2.71 2.44 Tax on dividend 0.28 0.52 0.38 0.37 0.32 TOTAL - 7.61 13.42 9.38 9.92 7.83 Balance carried forward 7.96 4.16 4.70 4.35 3.34 3.10

75 Annexure III

(in Rs. crores) STATEMENT OF CASH FLOW AS RESTATED For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.2008 31.03.2008 31.03.2007 31.03.2006 31.03.2005 31.03.2004

Cash flow from A operating activities:

Net Profit Before Tax 6.02 10.92 21.66 16.34 15.36 13.35 Add: Extraordinary items: Amount paid / refunded / payable to various banks 3.63 7.70 - - - - Compensation paid to employees under Early Retirement Scheme 0.02 0.32 1.34 0.29 0.21 1.18

Net Profit Before Tax and Extraordinary items 9.66 18.94 23.00 16.64 15.57 14.53 Adjustments for : Interest (net) 1.91 2.66 2.34 1.86 1.31 1.82 Dividend income - - - - - (0.00) Unrealized Foreign Exchange Loss/(Gain) (0.06) (0.99) 0.50 0.52 0.09 0.07 Loss on sale of assets & investments (net) 0.11 - 0.04 0.01 - 0.01 Depreciation 4.47 5.77 4.74 4.21 3.85 3.64 Miscellaneous Expenditure to the extent written off - - - - - 0.09 Operating Profit before Extra ordinary items & Working Capital changes 16.09 26.38 30.62 23.24 20.82 20.16

Amount paid / refunded / payable to various banks (3.63) (7.70) - - - - Compensation paid to employees under Early Retirement Scheme (0.02) (0.32) (1.34) (0.29) (0.21) (1.18)

Adjustments for : Trade & other receivables 3.32 3.14 (11.62) (5.27) (6.42) (1.72) Inventories 0.39 (1.72) (1.38) (1.73) (0.93) 0.73 Loans & Advances (4.40) 0.57 0.05 (0.76) (0.36) 0.20 Trade Payables (1.07) 5.63 5.87 2.93 (3.00) (0.70) Cash generation from 10.68 24.84 22.20 18.12 9.90 17.49

76 operations Income Tax (Paid) / Refund (2.23) (4.90) (8.81) (6.19) (4.55) (3.80) Net cash from operating activities - "A" 8.45 19.94 13.39 11.92 5.35 13.69

B Cash flow from investing activities

Purchase of fixed assets (2.18) (6.16) (17.59) (9.76) (6.59) (5.23) Capital Work-in- Progress - 0.18 (0.12) (0.03) 0.15 0.06 Interest Received 0.01 0.15 0.25 0.17 0.13 0.08 Dividend Received - - - - - 0.00 Sale / deletion of fixed assets 0.71 - 0.34 0.45 - 0.01 Sale or deletion / (Addition) of investments - - - (0.52) - 0.26 Net Cash used in investing activities - "B" (1.46) (5.83) (17.12) (9.69) (6.31) (4.82)

Cash flow from C financing activities Proceeds from / (reduction in) short term borrowings (1.91) (4.37) 4.74 (2.10) (0.44) 3.99 Proceeds from long term borrowings 2.05 3.00 16.50 7.50 7.00 - Repayment of long term borrowings (5.01) (8.56) (8.68) (1.08) (0.91) (5.04) Proceeds from finance / leasing activities - - 0.20 - 0.04 2.77 Repayment of finance / leasing activities - (0.49) (1.00) (1.56) - (4.69) Interest paid (1.89) (2.81) (2.58) (2.04) (1.70) (2.00) Dividend paid (1.63) (0.81) (4.07) (2.71) (2.44) (3.39) Tax on Dividend paid (0.28) (0.14) (0.57) (0.38) (0.32) (0.43)

Net cash used in financing activities - "C" (8.67) (14.18) 4.54 (2.37) 1.23 (8.79)

Net increase in Cash and Cash Equivalents - A+B+C (1.68) (0.07) 0.80 (0.14) 0.27 0.08 Cash and Cash Equivalents as at the beginning 2.50 2.57 1.77 1.91 1.64 1.56 Cash and Cash Equivalents as at the end (Note 1) 0.82 2.50 2.57 1.77 1.91 1.64

77 Notes:

1. (in Rs.crores) Cash & Cash Equivalents as per Balance Sheet 1.87 2.99 1.56 1.16 1.74 1.64 Unrealized Foreign Exchange Loss/(Gain) (0.06) (0.99) 0.50 0.51 1.00 0.07 Total 1.81 2.00 2.06 1.67 1.84 1.71 Unrealized Foreign Exchange Loss/(Gain) as on 1st April (0.99) 0.50 0.51 0.10 0.07 (0.07) Cash & Cash Equivalents as per Cash Flow Statement 0.82 2.50 2.57 1.77 1.91 1.64

2. The above statements have been prepared in indirect method except in case of interest, dividend and direct taxes which have been considered on the basis of actual movement of cash, with corresponding adjustments in assets and liabilities .

3. Cash and Cash Equivalent represents Cash and Bank balances only.

4. Additions to Fixed Assets are stated exclusive of Capital Work-in-Progress between the beginning and end of the year and treated as part of investing activities.

5. PCD issue expenses written off has been classified as Miscellaneous Expenditure and treated as part of "Operating Activities".

78 Annexure IV

Significant Accounting Policies adopted by the Company

1. Basis of accounting

The books of accounts are maintained on accrual basis as a going concern.

2. Valuation of Inventories

Inventories are valued at lower of cost or net realizable value and in accordance with the method of valuation prescribed by the Institute of Chartered Accountants of India in Accounting Standard 2 at weighted average rates. Work-in-progress and Finished Goods are valued at raw material cost plus cost of conversion excluding interest.

3. Cash Flow Statement

Cash Flow Statement has been prepared under “Indirect Method”.

4. Depreciation

Depreciation has been charged on Straight Line Method at the rates prescribed under Schedule XIV to the Companies Act 1956.

5. Revenue recognition

The sales include sale of products manufactured and bought out components but are net of trade discounts and exclusive of excise duty and sales tax where applicable. Interest income is recognized on a time proportion basis. Insurance claims are recognized on certainty of realization.

6. Fixed assets

Fixed assets are stated at cost less depreciation. All cost relating to the acquisition and installation of fixed assets are capitalized. Interest on loans availed for acquiring fixed assets is capitalized only upto the date the assets are put to use.

7. Foreign currency transactions

Foreign currency transactions are accounted at the exchange rates prevailing on the date of the transaction. Transactions in foreign exchange, which are covered by forward contracts, are accounted at the contracted rate, the difference between the forward rate and the exchange rate at the date of transaction being recognized in the profit and loss account. Foreign exchange transactions, which are outstanding as at the year-end and not covered by the forward contracts, are translated at the year-end exchange rate. Gains and losses arising on account of such revisions are reflected in the profit and loss account.

8. Derivatives

The Company deals in derivative instruments, viz., forward contracts/options, to hedge its exposures against movements in parity rates of the currencies. The use of these forward contracts/options to some extent reduces the impact arising out of the adverse movement of currencies. The losses / gains, if any, arising under the contracts which are not closed as of the year-end, are recognized in the accounts based on Accounting Standards AS-1, AS-11 and AS-30 as well as the press note issued by the Institute of Chartered Accountants of India.

79 9. Investments

Investments are accounted at cost.

10. Retirement benefits

Company’s contribution to provident fund, superannuation fund and gratuity fund are made to the respective Trusts and charged to the profit and loss account. Provision for leave salary in respect of encashable leave has been provided for according to the service rules of the Company based on actuarial valuation. The necessary disclosures as per Revised AS 15 have been made as part of Notes on Accounts.

11. Borrowing cost

The borrowing cost has been treated in accordance with the Accounting Standard on Borrowing Cost (AS – 16) issued by the Institute of Chartered Accountants of India.

12. Excise Duty

The excise duty in respect of closing inventory of finished goods is included as part of inventory. The amount of CENVAT credits in respect of materials consumed is deducted from the cost of materials consumed.

13. Segment Reporting

The operations of the Company relate only to one segment viz., friction materials which are covered in this report.

14. Related party transactions

The information on related party transactions furnished in this report was compiled based on the guidelines issued by The Institute of Chartered Accountants of India under Accounting Standard on Related Party Transactions (AS –18).

15. Leases

The Company has entered into a lease agreement for acquiring land which is exempt from the coverage of Accounting Standard 19 on Lease.

16. Taxes on Income

Provision for income tax is made on the basis of estimated taxable income for the year. Deferred tax resulting from timing differences between the book and the tax profits is accounted, at the current rate of tax, to the extent that the time differences are expected to crystallize.

80 Annexure V (in Rs. crores) NOTES ON ACCOUNTS For the For the For the For the For the For the 9 months year year year year year ended ended ended ended ended ended 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 a) Subscribed Capital includes Rs.0.23 crores (2,25,000 equity shares of Rs.10/= each) allotted as fully paid-up, pursuant to a contract, without payment being received in cash

Contingent Liabilities not b) provided for :

Estimated value of contracts remaining to be executed on Capital Account (net) 1.81 0.24 2.28 1.11 0.91 2.01 Sales Tax liability contested / being contested in appeal. In case of a favourable decision in the appeal, the liability may not arise 0.15 0.15 0.15 0.15 0.20 0.19 Liability towards Labour law cases 0.04 0.03 0.21 0.21 0.20 0.21 c) Other Contingent Liabilities :

Bank Guarantees for domestic 1.64 0.48 0.69 0.64 0.38 0.33 sales & others Letters of Credit / Comfort - - - - - 0.96 Cheques / DDs purchased (outstation cheques received from customers discounted with the bank and pending realization) - - - 0.04 0.16 0.16 Guarantee to Housing Development & Finance Corporation Limited on behalf of the employees of the Company in respect of housing loans disbursed - - - 0.00 0.01 0.01 d) Secured Loans: (1) Term Loans :

Foreign Currency Non- Resident (Bank) Loans from State Bank of India, Secured by first charge on assets acquired out of the loan and extension of charge on fixed assets present and future - - - 0.46 1.37

81 Loans from State Bank of India, Chennai, Secured by first charge on the fixed assets acquired out of the loan and extension of charge on fixed assets - present and future 13.18 16.14 21.70 13.88 7.00 - 13.18 16.14 21.70 13.88 7.46 1.37

(2) Cash Credit from SBI :

Secured by first charge on present and future current assets and extension by way of second charge on the fixed assets, present and future 15.38 17.29 21.66 16.92 19.02 19.47 e) Included in Sundry Creditors is an amount of Rs. 0.41 crores (PY – Rs. 0.03 crores) due to micro enterprises and small enterprises (based on information available with the Company). a. Principal amount remaining unpaid as on 31 st December / March 0.41 0.03 b. Interest due thereon as on 31 st December / March - - c. Interest paid by the Company in terms of Section 16 of the Micro, Small and Medium Enterprises Development Act, 2006, along with the amount paid to the supplier beyond the appointed day during the year - - d. Interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006 - - e. Interest accrued and remaining unpaid as at 31 st December / March - - f. Further Interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise - - Since this provision has been introduced for accounting

82 period commencing from 1.4.2007, previous years' figures have not been furnished f) Miscellaneous Expenses include commission paid on sales 1.59 1.98 2.44 1.55 0.95 0.90 g) Gratuity : Contribution to Gratuity Fund included in Salaries & wages 0.38 0.37 0.80 0.39 0.32 0.28 h) Excise duty payable on finished goods in stock as at the end of the period has been provided at Rs. 0.12 crores ( PYs- Rs. 0.15 crores, Rs. 0.08 crores, Rs. 0.12 crores, Rs. 0.19 crores & Rs. 0.10 crores for 2007-08, 2006-07, 2005- 06, 2004-05 & 2003-04 respectively) and also included in the value of such stock

I) Provision for taxation represents : i) Income tax 2.29 3.14 8.06 5.64 4.06 3.79 ii) Wealth tax - 0.01 0.01 0.01 0.01 0.01 2.29 3.15 8.07 5.65 4.07 3.80 j) Investments represent long term trade investments as under : 500 shares (Previous Year 500 shares) of Re.1/= each fully paid up of TVS Co- operative Stores Limited (cost Rs.500/=) - unquoted 0.00 0.00 0.00 0.00 0.00 0.00 5,25,000 shares (Previous Year 5,25,000 shares) of Rs.10/- each fully paid up of Arkay Energy (Rameswaram) Limited - unquoted 0.53 0.53 0.53 0.53 0.00 0.00 k) INFORMATION PURSUANT TO PART II OF SCHEDULE VI OF THE COMPANIES ACT, 1956

(1) Licensed capacity : Information is not furnished in view of the abolition of the Industrial Licensing requirements

(2) Installed capacity (Metric Tonne): 19,902 19,902 19,731 16,002 14,892 14,285

(3) Production : Organic automotive, non- automotive and industrial friction materials - in sets ( in crores ) (including non- asbestos products) 1.14 1.73 1.75 1.61 1.49 1.40

(4) Turnover : (i) Organic automotive, non- automotive and industrial friction materials Quantity in sets (in crores) 1.14 1.73 1.75 1.61 1.47 1.40 Value 135.76 186.02 187.52 143.23 131.48 118.43 (ii) Others 1.47 1.63 1.51 1.51 1.29 1.32 137.23 187.65 189.03 144.74 132.77 119.75 Turnover includes Export sales 55.32 61.99 54.90 54.82 58.79 52.51

(5) Stock of Goods produced : Opening Stock - in sets (in crores) 0.02 0.01 0.02 0.02 0.01 0.01 Closing Stock - in sets (in crores) 0.02 0.02 0.01 0.02 0.02 0.01 (6) Imports on CIF basis : (i) Raw Materials 11.26 13.88 15.66 12.67 11.74 10.31 (ii) Components, Spare Parts etc., 0.50 0.10 0.27 0.10 0.16 0.11 (iii) Capital Goods 0.01 0.45 0.28 - 0.04 0.14

(7) Expenditure in Foreign Currency : (i) Royalty, Consultancy & Retainer Fee 0.28 0.28 0.12 0.40 0.40 0.27 (ii) Others 1.29 0.83 2.01 2.09 2.11 3.49

(8) Research & Development Expenditure incurred on revenue account, debited to the various heads of accounts 2.72 3.22 3.28 3.54 3.27 2.65

84 k) INFORMATION PURSUANT TO PART II OF SCHEDULE VI OF THE COMPANIES ACT, 1956 (contd.)

(9). Value of imported and indigenous raw-materials, spares and components consumed during the year and their percentages to total consumption

For the 9 months ended For the year For the year For the year For the year For the year 31.12.08 ended 31.03.08 ended 31.03.07 ended 31.03.06 ended 31.03.05 ended 31.03.04 Value % Value % Value % Value % Value % Value %

(i) Raw Materials (Quantity in MT) Imported Asbestos & other materials 1,427 - 2,171 - 2,178 - 2,457 - 2,528 - 2,528 - Imported Chemicals 141 - 196 - 174 - 139 - 257 - 345 - Indigenous 11,197 - 15,536 - 14,414 - 11,566 - 10,885 - 9,544 - (i) Raw Materials Value (in Rs. crores) Imported Asbestos & other materials 9.59 14.2% 13.58 14.8% 15.51 16.5% 10.96 16.3% 10.03 16.3% 9.52 18.4% Imported Chemicals 3.58 5.3% 7.70 8.4% 8.08 8.6% 4.18 6.2% 3.74 6.1% 4.08 7.9% Indigenous 43.68 64.5% 56.58 61.7% 51.40 54.7% 36.68 54.7% 34.67 56.4% 27.55 53.1% (ii) Other components (indigenous) which do not individually account for more than 10 % of the total consumptio n 10.88 16.0% 13.90 15.1% 18.92 20.2% 15.28 22.8% 13.00 20.2% 10.70 20.6% 67.73 100% 91.76 100% 93.91 100% 67.10 100% 61.44 100% 51.85 100% (iii) Spares : Imported 0.02 15.6% 0.06 3.6% 0.07 5.8% 0.07 6.1% 0.04 3.8% 0.06 7.3% Indigenous 0.09 84.4% 1.62 96.4% 1.18 94.2% 1.00 93.9% 0.86 96.2% 0.73 92.7% 0.11 100% 1.68 100% 1.25 100% 1.07 100% 0.90 100% 0.79 100%

85 (in Rs. crores) NOTES ON ACCOUNTS For the For the For the For the For the For the 9 months year year year year year ended ended ended ended ended ended 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 k) INFORMATION PURSUANT TO PART II OF SCHEDULE VI OF THE COMPANIES ACT, 1956

(10) Earnings in Foreign Exchange : (i) FOB value of goods exported 52.45 59.16 53.44 52.66 55.97 50.43 (ii) Exchange fluctuation on Foreign Currency A/c (Net) 2.08 (0.40) 0.35 0.50 0.58 0.66 54.53 58.76 53.79 53.16 56.55 51.09 (11) Computation of Managerial Remuneration u/s 309 (5) read with sections 198 & 349 of the Companies Act 1956

Profit Before Tax as per P & L A/c 6.02 10.92 21.66 16.34 15.36 13.35

Add: Book Depreciation 4.47 5.77 4.74 4.22 3.85 3.64 Loss on sale of fixed assets as per books (net) 0.11 - 0.04 0.01 - 0.01 Salary paid to Executive Director 0.37 0.39 0.38 0.24 - - Commission to Managing Director & Executive Director 0.44 0.85 1.66 1.13 0.81 0.70 Directors' Sitting Fee 0.00 0.02 0.02 0.02 0.01 0.02 11.41 17.95 28.50 21.96 20.03 17.72 Less: Depreciation u/s 350 4.47 5.77 4.74 4.21 3.85 3.64 Profit on sale of fixed assets as per Sec.349 - - - 0.01 - 0.01 4.47 5.77 4.74 4.22 3.85 3.64 Net Profit for the purpose of Sec.349 6.94 12.18 23.76 17.74 16.18 14.07

Maximum Remuneration (Commission) a. For Managing Director @ 5 % 0.35 0.61 1.19 0.89 0.81 0.70 b. For Executive Director @ 2% 0.14 0.24 0.47 0.24 - - Total remuneration payable (a + b) 0.49 0.85 1.66 1.13 0.81 0.70

Amount provided in the accounts 0.44 0.85 1.66 1.13 0.81 0.70

k) INFORMATION PURSUANT TO PART II OF SCHEDULE VI OF THE COMPANIES ACT, 1956 (contd.)

(12) Deferred Tax Liability:

The Company has estimated the deferred tax charge (credit) using the applicable rate of income tax based on the impact of timing differences between financial statements and estimated taxable income for the current year / period.

The movement of provision for deferred tax is as follows: (in Rs.crores) For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

Liability (Depreciation) Opening 14.19 13.87 13.87 13.88 12.63 12.06 Charge(credit) during the year (0.30) 0.32 0.00 (0.01) 1.25 0.57 Closing 13.89 14.19 13.87 13.87 13.88 12.63

Others Opening (0.79) (0.85) (0.47) (0.36) (0.25) (0.14) Charge(credit) during the year 0.09 0.06 (0.38) (0.11) (0.11) (0.11) Closing (0.70) (0.79) (0.85) (0.47) (0.36) (0.25)

Deferred Tax Liability (net) Opening 13.40 13.02 13.40 13.53 12.38 11.93 Charge(credit) during the year (0.21) 0.38 (0.38) (0.13) 1.14 0.45 Closing 13.19 13.40 13.02 13.40 13.52 12.38

87 (13) Intangible assets:

(a) Technical License Fees of Rs. 0.11 crores has been recognized as an intangible asset in 2003-04 & an amortization policy of 4 years period has been adopted. The same has been fully amortized in four years from 2003- 04 to 2006-07.

(b) License Fees for Windows software application of Rs. 0.10 crores has been recognized as an intangible asset in 2006-07 & an amortization policy of 5 years period has been adopted. For the current year nine month period, a sum of Rs. 0.02 crores (Rs. 0.02 crores each for previous years 2007-08 & 2006-07) has been included as amortization cost.

(14) Disclosure of Related Party Transactions

Please refer to the related party transactions in the "Auditors Report and Financial Information – Related Party Transactions" on page 98 of the Letter of Offer.

(15) Extraordinary items: Amount paid / refunded / payable to various banks:

As at / 9 months ended 31.12.2008 As at / Year ended 31.03.2008 As reported in earlier publications and Annual Certain derivative transactions were purported to have been Accounts, certain derivative transactions were entered into in the name of the Company with some Banks. purported to have been entered into on behalf of the The Company has been advised that such purported Company with some banks. The disputes relating to transactions apart from being ab-initio void, are speculative such transactions with all but one bank have come to in nature amounting to “wagers”. Such purported an end. The net amount paid by the Company on this transactions have no relation whatsoever to the exposure of account (relating to the period of publication) has the Company to foreign currencies arising out of exports been shown as Extra-Ordinary Expenditure (net of and imports nor have in any way minimized the risk of tax). The dispute with Yes Bank still continues and exposure to foreign currencies. Further such activity is not the said Bank has informed the Company that they contemplated under the Objects Clause of the have unilaterally closed the purported transaction as Memorandum of Association of the Company. The of October 3 2008. The net demand so far received Company has filed suits in Madras High Court against the from the said Bank is Rs. 390.12 lakhs including the Banks including Kotak Mahindra Bank and Yes Bank Ltd amount of Rs. 173.71 lakhs, the said Bank has to declare all such transactions as ab-initio void. The suits claimed for unilateral closure of the purported as well as arbitration proceedings initiated by one of the transaction for which no provision has been made in Banks are pending. Upto 31-3-2008, the Company has the accounts as the Company's suit in Madras High received demands for Rs. 6.68 crores from Kotak Mahindra Court is still pending. Yes Bank has filed application Bank Ltd and Rs. 0.75 crores from Yes Bank Ltd under the before Debt Recovery Tribunal, Mumbai (DRT) purported transactions, which have been rejected by the demanding recovery of Rs. 98.39 lakhs and the Company and no provision has been made for the same. Company has provided Bank Guarantee for Rs. 98.39 The amounts received by the Company from the Banks as lakhs to Yes Bank without prejudice to its rights and premium under the said purported transactions in the contentions. current as well as previous year have been refunded to the respective Banks. Such refunds alongwith the amounts, if any, payable to or recovered by the Banks out of the balances in the Company's current / cash credit accounts have been charged as “extraordinary items of expenditure” in the Profit & Loss Account. The Company has been informed that the “Mark to Market” (MTM) value of such outstanding ab-initio void transactions as on 31-3-2008 is approx. Rs. 110.36 crores in the case of Kotak Mahindra Bank Limited and Rs. 9.55 crores in the case of Yes Bank Limited The Company has been advised that it is not required to make any provision for such MTM values in the books of account as the very transactions under which these could arise, are void ab-initio.

(16) Earnings per share

Earnings per share is calculated by dividing the profit attributable to shareholders by the number of equity shares outstanding during the year. Earnings per Share has been calculated as follows:

Particulars For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Rs. Profit After Tax crores 3.80 7.08 13.77 10.39 10.15 9.09 Number of Equity Shares Nos. 2,713,500 2,713,500 2,713,500 2,713,500 2,713,500 2,713,500 Face Value per share Rs. 10.00 10.00 10.00 10.00 10.00 10.00 Earnings per share Rs. 14.02 26.08 50.76 38.30 37.41 33.51

(17) Borrowing Cost During the current period no amount was capitalized according to the accounting policy of the Company (PYs Rs. Nil, Rs. 0.11 crores, Rs. 0.02 crores, Rs. 0.05 crores & Nil for 2007-08, 2006-07, 2005-06, 2004-057 2003-04 respectively).

(18) Disclosures required under Accounting Standard 15 (Revised) “Employee Benefits” notified in the Companies Accounting These disclosures will be reckoned and finalized while finalizing the accounts for the full year 2008-09. The disclosures made for the previous year 2007-08 are as follows:

Defined Contribution Plan: Contribution to Defined Contribution Plans are charged off for the year as under: in Rs. crores Employer's Contribution to Provident Fund / Sr. Staff Provident Fund 0.48 Employer's Contribution to Pension Scheme 0.26 Employer's Contribution to Superannuation Fund 0.19 Total 0.93

The Company has obtained exemption of its Provident Fund under Section 17 of Employee's Provident Fund and Miscellaneous Provisions Act, 1952. Conditions for grant of exemptions stipulate that the employer shall make good deficiency, if any, in the interest rate declared by trust vis-a-vis statutory rate.

Defined Benefit Plan:

The employees' gratuity fund scheme managed by Life Insurance Corporation of India is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

Gratuity Leave Encashment (Funded) (Unfunded) a. Reconciliation of opening and closing balances of Defined Benefit obligation Defined Benefit obligation as at beginning of the year 2.44 0.60

89 Current Service cost 0.14 0.10 Interest cost 0.18 0.05 Actuarial (gain) / loss 0.24 0.01 Benefits paid (0.16) (0.08) Defined Benefit obligation as at end of the year 2.84 0.68 b. Reconciliation of opening and closing balances of fair value of plan assets Fair value of plan assets at beginning of the year 2.63 Expected return of plan assets 0.21 Actuarial gain / (loss) 0.03 Employer's contribution 0.36 Benefits paid (0.16) Fair value of plan assets at the end of the year 3.07 c. Reconciliation of fair value of assets and obligations

Fair value of plan assets as at March 31, 2008 3.07 - Present value of obligation as at March 31, 2008 2.84 0.68 Amount recognized in Balance Sheet 0.23 0.68 d. Expenses recognized during the year

Current Service cost 0.14 0.10 Interest cost 0.18 0.04 Expected return on plan assets (0.21) - Actuarial (gain) / loss 0.21 0.01 Net cost 0.32 0.15 e. Investment details (% invested as at March 31, 2008) LIC Group Gratuity (Cash Accumulation) Policy 100 f. Actuarial assumptions

Mortality Table (LIC) 1994-96 1994-96 Discount rate (per annum) 8.00% 8.00% Expected rate of return on plan assets (per annum) 8.00% - Rate of escalation in salary (per annum) 4.50% 4.00%

The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by an actuary. This being the first year of implementation, figures in respect of previous year have not been furnished.

Annexure VI

(in Rs. crores) STATEMENT OF ACCOUNTING AND OTHER RATIOS

For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

Earnings per Share (Rs) Basic 14.02 26.08 50.76 38.30 37.41 33.51 Diluted 14.02 26.08 50.76 38.30 37.41 33.51 No. of Shares Outstanding in crores 0.27 0.27 0.27 0.27 0.27 0.27 Net Asset Value (in Rs. crores) 73.88 70.08 64.91 55.05 48.14 41.88 Net Asset Value per share (In Rs.) 272.29 258.27 239.21 202.86 177.39 154.35 Return on Net worth (%) 5.10% 10.10% 21.20% 18.90% 21.10% 21.70%

Notes:

1. The ratios have been computed as below:

Earnings per share = Adjusted profit after tax available to Equity Share holders Weighted average no. of equity shares outstanding during the year

Net Worth = Share Capital + Reserves & Surplus - Misc. & Deferred Revenue Expenditure to the extent not written off

Return on Net worth = Adjusted profit after tax Net Worth

Net Asset Value = Net Worth – Preference Capital

Net Asset value per share = Net Asset Value No. of equity shares outstanding as on Year / Period end

91 2. Earnings per share calculations have been done in accordance with Accounting Standard 20 - "Earnings per Share" issued by the Institute of Chartered Accountants of India.

Workings To Annexure VI For the For the For the For the For the For the 9 months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

Net worth (Rs. in crores) 73.88 70.08 64.91 55.05 48.14 41.88

Preference share capital (Rs. in crores) ------

Net asset value (Rs. in crores) 73.88 70.08 64.91 55.05 48.14 41.88 No. of Equity share Outstanding (in crores) 0.27 0.27 0.27 0.27 0.27 0.27 Weighted average no. of Equity share in crores 0.27 0.27 0.27 0.27 0.27 0.27

92 Annexure VII

(in Rs. crores) CAPITALISATION STATEMENT AS AT DECEMBER 31, 2008 Post Issue Particulars Pre Issue (Note 2) 31.12.2008 Long-Term Debts: Cash Credit from bank 15.38 15.38 Term Loans from banks ( Note 1) (A) 13.18 13.18 Total 28.56 28.56

Shareholders' Funds Share Capital 2.71 3.93 Reserves and surplus 71.17 84.85 Less:- Miscellaneous / Deferred Expenditure (To the extent not written off) - -

Total Shareholders' funds (B) 73.88 88.78

Long term debt/equity (A) / (B) 0.39 0.32

Note: 1. Term Loans from banks are from State Bank of India, Chennai, Secured by first charge on the fixed assets acquired out of the loan and extension of the charge on fixed assets, present and future

2. Rights Issue : Equity Share capital – 12,21,075 equity shares @ Rs. 10/- per share and Share premium @ Rs. 112/- per share

93 Annexure VIII

(in Rs. crores) TAX SHELTER STATEMENT 9 months period Particulars ended Years ended March 31 Dec 31, 2008 2008 2007 2006 2005 2004

Net Profit before A Current Taxes A 6.02 10.92 21.66 16.34 15.36 13.35 B Income Tax Rate On Normal Income B 1 33.99% 33.99% 33.99% 33.66% 36.59% 35.88%

C Tax at Normal rate C = A * B 1 2.04 3.71 7.36 5.50 5.62 4.79

Adjustments: Permanent D Differences Donation Disallowed 0.01 0.00 0.14 0.10 0.07 0.08

Total D 0.01 0.00 014 0.10 0.07 0.08

E Timing Differences Expenditure disallowed / (Claimed) u/s 43B of IT Act 0.06 0.08 0.10 0.33 0.30 0.31 Deduction on Export profits - - - - - (1.57) Difference between Tax Depreciation and Book Depreciation 0.86 (1.42) (0.03) (0.07) (4.63) (1.63) Other Adjustments (mainly Deferred Revenue Expenditure on account of expenses

towards compensation paid to employees under Early Retirement Scheme) (0.20) (0.34) 1.83 0.04 0.00 0.04 Total E 0.72 (1.68) 1.90 0.30 (4.33) (2.85)

F Total Adjustments F = D + E 0.73 (1.68) 2.04 0.41 (4.26) (2.77)

G Net Tax impact G = B 1 * F 0.25 (0.57) 0.69 0.14 (1.56) (0.99)

Tax under normal provisions of the H Income Tax Act H = C + G 2.29 3.14 8.05 5.64 4.06 3.80

I Tax Under MAT

J Tax as Per Income Tax

94 Return Filed / Relevant Correspondence on Normal Income 2.29 3.14 8.05 5.64 4.06 3.79

Provision for Current K tax made in books 2.29 3.14 8.05 5.64 4.06 3.79

Note: The above working excludes Wealth Tax, Deferred Tax & Fringe Benefit Tax.

95 Annexure IX

(in Rs. crores) DETAILS OF SECURED LOANS & UNSECURED LOANS For the For the For the For the For the For the 9 year year year year year months ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

SECURED LOANS Term Loans 13.18 16.14 21.70 13.88 7.46 1.37 From Banks

Total 13.18 16.14 21.70 13.88 7.46 1.37

Cash Credit from bank 15.38 17.29 21.66 16.92 19.02 19.46

Total 15.38 17.29 21.66 16.92 19.02 19.46

UNSECURED LOANS Deposits - - 0.49 1.29 2.84 2.80

Total - - 0.49 1.29 2.84 2.80

GRAND TOTAL 28.56 33.43 43.85 32.09 29.32 23.63

Note 1: For Terms & Conditions please refer Annexure X

Note 2: Details of items related to promoter /promoter group/other related party - please refer ANNEXURE XI

96 Annexure X

(in Rs. crores) DETAILS OF TERMS AND CONDITIONS OF SECURED LOANS OUTSTANDING AS ON 31.12.2008 Nature Of Name of

Secured Financial Amount S.No Loan Institution Security Interest ( in Rs. Terms Of

crores) Repayment Secured by first charge 7% p.a upto on the fixed assets 30.09.08 & Quarterly acquired out of the loan SBAR rate repayment Term and extension of charge which is at @ Rs. 0.42 Loans from State Bank of on fixed assets, present present crores per 1. Banks India, Chennai 2.88 and future 12.25% p.a. quarter 8.75% p.a Secured by first charge upto on the fixed assets 31.10.08 & Quarterly acquired out of the loan SBAR rate repayment Term and extension of charge which is at @ Rs.0.75 Loans from State Bank of on fixed assets, present present crores per 2. Banks India, Chennai 8.25 and future 12.25% p.a. quarter Quarterly repayment Secured by first charge @ Rs.0.40 on the fixed assets crores per acquired out of the loan SBAR rate quarter Term and extension of charge which is at starting Loans from State Bank of on fixed assets, present present from Dec. 3. Banks India, Chennai 2.05 and future 12.25% p.a. 2009 Total 13.18 Secured by first charge SBAR rate on present and future which is at current assets and present extension by way of 12.25% p.a second charge on the for Open Cash Credit State Bank of fixed assets, present and Cash Credit 4. from bank India, Chennai 15.38 future A/c

Grand Total 28.56

97 Annexure XI

(in Rs. crores) RELATED PARTY TRANSACTIONS For the For the For the For the For the For the 9 months year year year year year ended ended ended ended ended ended 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Company: T.V. Sundram Iyengar & Sons Limited Associate Purchases 0.51 0.01 0.02 0.02 0.01 0.02 Associate Sales 4.25 5.65 2.80 5.85 3.81 2.89 Creditors Associate outstanding 0.00 0.00 0.00 0.00 0.00 - Debtors Associate outstanding 0.30 0.75 0.48 0.69 0.41 0.28 Rent Associate received 0.01 0.01 0.01 0.01 0.01 0.01 Sundaram Motors: Associate Purchases 0.02 0.04 0.06 0.12 0.04 0.04 Associate Sales 3.58 4.56 3.51 4.56 3.39 3.87 Creditors Associate outstanding 0.00 - - 0.00 - 0.00 Debtors Associate outstanding 0.50 0.50 0.33 0.24 0.25 0.48 Sundaram Honda: Associate Purchases 0.01 - - - - Creditors Associate outstanding 0.00 - - - - Madras Auto Service: Associate Sales 6.59 8.75 6.66 6.78 6.27 5.28 Debtors Associate outstanding 0.53 0.69 0.62 0.62 0.62 0.62 Associate Purchases - 0.02 - - - - Services Associate received - 0.00 - - - - Alagar Farms Private Limited: Enterprises in which relatives of key manageme nt personnel have Purchases 3.11 4.04 3.78 2.93 2.82 2.65

98 significant interest Creditors outstanding 0.79 0.62 0.27 0.04 0.38 0.17 Services rendered 0.00 0.03 0.03 0.02 0.02 0.01 Rent received 0.00 0.00 0.00 0.00 0.00 0.00 Enterprises in which relatives of key manageme nt Alagar personnel Resins have Private significant Limited: interest Purchases 19.51 25.15 22.59 15.19 13.19 6.21 Creditors outstanding 5.21 4.20 0.81 0.35 0.13 0.27 Services rendered - 0.03 0.03 0.02 0.02 0.01

Individual : Ms Relative of Shripriya Key Mahesh Manageme family nt trust Personnel Rent paid 0.01 0.01 0.01 0.01 0.01 0.01 Interest paid - 0.00 0.06 0.07 0.04 Loans received - - 0.11 0.71 1.05 - Relative of Key Mrs. Manageme Shrimathi nt Services Mahesh Personnel received 0.02 0.02 0.02 0.02 0.02 Interest paid - 0.01 0.04 0.06 0.08 0.01 Loans received - - 0.31 0.41 0.81 0.49 Relative of Key Ms Manageme Shripriya nt Mahesh Personnel Interest paid - - - 0.04 0.02 Loans received - - - - 0.51 Relative of Key Mr. Manageme Krishna nt Mahesh Personnel Interest paid - - - 0.01 0.03 Loan - - - 0.19 -

99 received Relative of Key Ms Manageme Shrikirti nt Mahesh Personnel Interest paid - 0.00 0.02 0.05 0.08 0.02 Loans received - - 0.07 0.17 0.79 0.52

Key Management Personnel ( As Detailed Below) Mr. K Mahesh (Chairman & Managing Director) Mr. Krishna Mahesh (Executive Director from 21.07.2005 to 05.02.2009)

(in Rs. crores) PAYMENT TO KEY MANAGEMENT PERSONNEL For the For the For the For the For the For the 9 months year year year year year ended ended ended ended ended ended Name Designation Nature 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

Chairman & K. Managing Services Mahesh Director received 0.32 0.61 1.19 0.89 0.81 0.70 Interest paid 0.00 0.07 0.21 0.17 0.21 Sitting Fees 0.01 0.01 0.00 0.00 0.00 0.00 Rent paid 0.05 0.06 0.05 0.04 0.04 0.04 Creditors outstanding 0.32 0.61 1.19 0.89 0.81 0.70

Krishna Executive Services Mahesh Director received 0.12 0.24 0.48 0.25 - - Interest paid 0.00 0.13 0.04 - - Salary paid 0.38 0.39 0.38 0.24 - - Creditors outstanding 0.12 0.24 0.48 0.25 - -

100 Annexure XII

(in Rs. crores) DETAILS OF DIVIDEND PAID For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

Equity Share:

Dividend (in Rs. crores) - 1.63 3.53 2.71 2.71 2.44

Dividend per share in Rs. - 6.00 13.00 10.00 10.00 9.00

Preference Share:

Dividend (in Rs. crores) ------

Tax on Dividend ( in Rs. crores) - 0.28 0.52 0.38 0.37 0.31

Note: For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Dividend paid to Promoter/ Promoter group Equity (in Rs. crores) - 0.98 2.13 1.64 1.37 1.22 Preference(in Rs. crores) ------

101 Annexure XIII

(in Rs. crores) RECEIVABLES AGEING ANALYSIS For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Receivables Outstanding for a Period Exceeding 6 Months 1.75 1.12 0.10 0.05 0.16 0.14 Other Debts 42.96 46.91 51.07 39.50 34.12 27.72 Total 44.71 48.03 51.17 39.55 34.28 27.86

Note: Details of items related to promoter /promoter group/other related party furnished vide Annexure XI

102 Annexure XIV (in Rs. crores) STATEMENT OF LOANS AND ADVANCES For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Advances recoverable in cash or in kind or for value to be received (unsecured considered good) 7.98 2.67 1.83 2.42 1.89 2.37 Prepaid expenses 0.16 0.53 0.62 0.72 0.69 0.59 Deposits 1.62 1.85 1.61 1.40 1.00 0.88 Balance in Central Excise Account 1.02 1.45 1.59 1.31 1.64 0.90 Advance Tax (net of tax provision) 0.46 0.65 - - - 0.24 Balance in TN VAT Account 0.12 0.00 0.28 - - - Total 11.36 7.15 5.93 5.85 5.22 4.98

Note: Details of items related to promoter /promoter group/other related party furnished vide Annexure XI

103 Annexure XV

(in Rs. crores) STATEMENT OF CONTINGENT LIABILITIES

For the 9 For the For the For the For the For the Months Year Year Year Year Year Ended Ended Ended Ended Ended Ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Estimated value of contracts remaining to be executed on Capital Account 1.81 0.24 2.28 1.11 0.91 2.01 Sales Tax liability contested / being contested in appeal. In case of a favourable decision, the liability may not arise. 0.15 0.15 0.15 0.15 0.19 0.19 Liability towards labour law cases 0.04 0.03 0.21 0.21 0.20 0.21 Bank Guarantees for domestic sales & others 1.64 0.48 0.69 0.64 0.38 0.33 Letters of Credit / Comfort - - - - - 0.96 Cheques / DDs purchased (outstation cheques received from customers discounted with the bank and pending realization) - - - 0.04 0.16 0.16 Guarantee to Housing Development & Finance Corporation Limited on behalf of the employees of the Company in respect of housing loans disbursed - - - 0.00 0.01 0.01 Total 3.64 0.90 3.33 2.15 1.85 3.87

104 Annexure XVI (in Rs. crores) STATEMENT OF OTHER INCOME

For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

Interest on Deposits 0.00 0.02 0.02 0.02 0.01 0.01 Dividend Income - - - - - 0.00 Profit on Sale of Fixed Assets ------Miscellaneous Income 0.02 0.02 0.04 0.02 0.02 0.02

Total 0.02 0.04 0.06 0.04 0.03 0.03

Note: All the above incomes stated herein are recurring in nature. Details of items related to promoter /promoter group/other related party furnished vide Annexure XI

105 Annexure XVII

(in Rs. crores) STATEMENT OF INVESTMENT

For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

Trade (Unquoted ) 500 shares of Re. 1/- each fully paid up of TVS Co-operative Stores Limited (cost Rs. 500/-) 0.00 0.00 0.00 0.00 0.00 0.00

5,25,000 shares of Rs. 10/- each fully paid up of Arkay Energy (Rameswaram) Limited 0.53 0.53 0.53 0.53 - - Less: Diminution in value of shares ------Any other Investment ------

Total 0.53 0.53 0.53 0.53 0.00 0.00

106 Annexure XVIII (in Rs. crores) STATEMENT OF CURRENT LIABILITIES & PROVISIONS

For the For the For the For the For the year year year year year For the 9 months ended ended ended ended ended Particulars ended 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04

Sundry Creditors 24.66 25.07 19.30 13.43 10.54 13.60

(A) 24.66 25.07 19.30 13.43 10.54 13.60

Unpaid Dividend 0.25 0.26 0.41 0.24 0.23 0.50

(B) 0.25 0.26 0.41 0.24 0.23 0.50

Unpaid matured fixed deposits (C) 0.00 0.00 0.00 0.00 0.01 0.01

Warrants issued but not encashed: Fixed deposit interest 0.01 0.01 0.02 0.02 0.03 0.06 Debenture interest 0.01 0.01 0.01 0.01 0.02 0.04 (D) 0.02 0.02 0.03 0.03 0.05 0.10

Provision for leave encashment 0.68 0.68 0.60 0.63 0.58 0.44 Provision For Taxation (Net) - - 0.35 0.66 0.13 - Provision for dividend - 1.63 0.81 1.36 1.36 1.09 Provision for tax on dividend - 0.28 0.14 0.19 0.19 0.14 (E) 0.68 2.59 1.90 2.84 2.26 1.67

Total (A+B+C+D+E) 25.61 27.94 21.64 16.54 13.09 15.88

Note:

Details of items related to promoter /promoter group/other related party furnished vide Annexure XI

107 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations together with our restated financial statements under Indian GAAP including the schedules, annexure and notes thereto and the reports thereon, which appears on page 70 of the Letter of Offer. You should also read the section titled “Risk Factors” on page vi of the Letter of Offer, which discusses a number of factors and contingencies that could impact our financial condition, results of operations and cash flows. Our financial statements have been prepared in accordance with Indian GAAP, the Accounting Standards referred to in Section 211(3C) of the Companies Act and the other applicable provisions of the Companies Act and the applicable SEBI DIP Guidelines as described in the Auditor’s Report of Sundaram & Srinivasan, Chartered Accountants dated March 17, 2009 appearing in the section titled “Auditors Report and Financial Information” on page 70 of the Letter of Offer. The following discussion is also based on internally prepared statistical information and publicly available information. Unless otherwise stated, the financial information used in this section is derived from our audited financial statements under Indian GAAP, as restated.

Overview

Our Company was promoted in 1974 as a joint venture between T. V. Sundram Iyengar & Sons Limited, its subsidiaries Southern Roadways Limited and Sundaram Industries Limited and Abex Corporation of USA to produce Asbestos based friction materials. Our Company went into commercial production in the year 1976 and commenced exports to USA in 1978.

Our products can be classified under 5 broad categories:

108 office including various business units and support functions such as Sales, Marketing, Finance, R&D, Human Resources and Quality.

For the year ended March 31, 2008, we closed with a total income of Rs.189.56 crores and a profit after tax of Rs. 12.16 crores. For the nine month period ended December 31, 2008, we achieved a total income of Rs. 137.68 crores with a profit after tax of Rs. 6.20 crores.

FACTORS AFFECTING RESULTS OF OPERATIONS

Our business is subject to various risks and uncertainties, including those discussed in the section titled “Risk Factors” on page vi of the Letter of Offer. Some of the important factors that have affected and we expect will continue to affect our results of operations, financial condition and cash flows are discussed in this section.

Health of the Automobile Industry

Our financial performance is very closely linked to the performance of the automobile industry, which is our primary market. Various factors impact the performance of the automobile industry – economic and industrial activity, road infrastructure, income levels, availability of vehicle finance & lending rates, oil and fuel prices etc. The automobile industry is also governed by various norms and regulations. Changes in these norms and regulations also have an impact on component manufacturers like us who have to modify their products to be in line with the revised regulations.

Raw Material Prices

Ours is a manufacturing industry and therefore our profitability and cost competitiveness are directly linked to the costs of our raw materials and other inputs as well as our ability to manage procurement at the optimum prices.

Availability of capital for capital expenditure

Competition

We face intense competition and failure to retain our market share at profitable margins can result in erosion of margins and impact the results of our operations. Currently, the industry practice is not to have long term supply orders and therefore we have to provide quotes for procuring each order, as and when a letter of intent or an enquiry is floated to us from our proposed customers. In the aftermarket business, which is a relatively smaller market, we face intense competition from the unorganized sector.

109 RESULTS OF OPERATIONS

Summary of the results of operations: (in Rs. crores)

For the9 For the 9 For the For the For the For the months months year year year year ended ended ended ended ended ended Particulars 31.12.08 31.12.07 31.03.08 31.03.07 31.03.06 31.03.05

INCOME Products Manufactured by the Company 135.76 138.49 186.02 187.52 143.23 131.48 Products traded in by the Company 1.48 1.37 16.33 1.51 1.51 1.29 Income from Product Sales 137.24 139.86 187.65 189.03 144.74 132.77 Other Income 0.21 0.15 0.39 0.60 0.36 0.32 Increase(Decrease) in Inventories 0.23 1.04 1.52 0.10 (0.00) 0.85 Total Income (A) 137.68 141.05 189.56 189.73 145.10 133.94

EXPENDITURE Raw material consumed 67.73 68.78 91.76 93.91 67.10 61.44 Employee Cost 17.88 15.25 20.71 20.66 16.54 14.75 Other Manufacturing expenses 20.05 17.34 23.90 21.12 17.46 15.82 Administrative Expenses 5.25 8.05 12.47 11.27 9.57 10.45 Selling & Distribution Expenses 10.75 9.42 13.52 13.77 11.84 10.83 Interest 1.90 2.39 2.81 2.59 2.04 1.44 Depreciation 4.47 3.97 5.77 4.75 4.21 3.85

Total Expenditure (B) 128.03 125.20 170.94 168.07 128.76 118.58

PROFIT BEFORE TAX (A-B) 9.65 15.85 18.62 21.66 16.34 15.36

Provision for taxes Current tax 3.53 5.04 5.77 8.07 5.65 4.07 Deferred tax (0.21) 0.21 0.38 (0.38) (0.13) 1.14 FBT 0.13 0.24 0.31 0.20 0.43 -

PROFIT AFTER TAX 6.20 10.36 12.16 13.77 10.39 10.15

110 Summary of the results of operations: Common Size Statement

For the9 For the 9 For the For the For the For the months months year year year year ended ended ended ended ended ended Particulars 31.12.08 31.12.07 31.03.08 31.03.07 31.03.06 31.03.05

INCOME Products Manufactured by the Company 98.61% 98.18% 98.13% 98.84% 98.71% 98.16% Products traded in by the Company 1.07% 0.97% 0.86% 0.79% 1.04% 0.97% Income from Product Sales 99.68% 99.15% 98.99% 99.63% 99.75% 99.13% Other Income 0.16% 0.10% 0.21% 0.32% 0.25% 0.24% Increase(Decrease) in Inventories 0.17% 0.74% 0.80% 0.05% 0.00% 0.63% Total Income (A) 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

EXPENDITURE Raw material consumed 49.20% 48.76% 48.41% 49.50% 46.25% 45.87% Employee Cost 12.99% 10.82% 10.93% 10.89% 11.40% 11.01% Other Manufacturing expenses 14.56% 12.29% 12.61% 11.13% 12.03% 11.81% Administrative Expenses 3.82% 5.70% 6.58% 5.94% 6.59% 7.81% Selling & Distribution Expenses 7.81% 6.68% 7.14% 7.26% 8.16% 8.08% Interest 1.38% 1.70% 1.48% 1.36% 1.40% 1.07% Depreciation 3.25% 2.81% 3.04% 2.50% 2.90% 2.87%

Total Expenditure (B) 92.99% 88.77% 90.18% 88.58% 88.74% 88.53%

PROFIT BEFORE TAX (A-B) 7.01% 11.23% 9.82% 11.42% 11.26% 11.47%

Provision for taxes Current tax 2.56% 3.57% 3.04% 4.25% 3.89% 3.04% Deferred tax -0.15% 0.15% 0.20% -0.20% -0.09% 0.85% FBT 0.09% 0.17% 0.16% 0.11% 0.30% 0.00%

PROFIT AFTER TAX 4.50% 7.34% 6.41% 7.26% 7.16% 7.58%

There has been no change in the activities of the issuer company which may have had a material effect on the statement of profit/loss for the five years, including discontinuance of lines of business, loss of agencies or markets and similar factors.

111 Income

Income from products manufactured

Our income represents revenue generated from the sale of brake linings, clutch facings and other friction material products to OEMs and Tier I suppliers. The revenues generated are a factor of the quantity supplied and the rate at which we supply to our customers. The quantity and rates are based on purchase orders received from customers.

Traded Income

Traded Income represents product components like rivets that are procured by us and sold as part of an integrated assembled product.

Income from Product Sales

The Income from product sales is the sum total of the income from products manufactured and the traded income.

Other Income

Other income is mainly on account of interest on bank deposits, sale of scrap, cash discounts and other miscellaneous income.

Costs

Raw Material Consumed

Raw material consumed represent costs of raw materials such as asbestos, glass fibre, binders, metal powder etc., which are used in the manufacture of our products. Consumption costs are a function of the quantity of materials consumed depending on the type/specification of the product manufactured by us and the prevailing costs of materials. Regular increase in the prices of raw materials like (asbestos, fibre, filler, resin, binding material and metal powder) may affect our overall profitability as it is difficult to completely recover such costs, especially from the OEM customers. Further, even if we manage to obtain price escalation it may come after a time lag during which period, we have to fully absorb the increased costs. Increase in input costs can be more easily passed on in the aftermarket segment, albeit this may reduce our cost competitiveness.

Employee Cost

Emoluments to our employees apart from salaries and wages include contribution to provident and other funds, and staff welfare expenses. We also employ casual labour at our plants and a part of their wages is also part of the personnel expenses. We had 1,091 employees as on December 31, 2008. We do not foresee significant growth in our manpower strength in the future. We usually have long term (approximately three years) wage settlement agreement with the workmen, which also include productivity benchmarks. Officers and administrative staff have annual performance linked increments.

Operating and Other Expenses

Operating and Other Expenses primarily consist of Other Manufacturing Expense, Administration Expenses, Selling and Distribution Expenses. The constituents of these major heads have been detailed as follows:

i. Other Manufacturing Expenses Major components of other manufacturing expenses include power, fuel, tools, consumables, spares and plant maintenance related expenditure.

ii. Administrative Expenses Administrative expenses include development expenses, rent, rates & taxes, insurance, maintenance of buildings/furniture & fixtures/computers, work place improvement expenses, postage, telephone, loss on

112 sale of assets & investments. It also contains miscellaneous expenses that include financial charges, printing & stationery.

iii. Selling and Distribution Expenses Selling and Distribution Expenses include packing & forwarding charges, commission on sales, additional sales tax, royalty and travel related expenditure.

Depreciation

Depreciation is provided on straight line method basis. Depreciation is determined based on management’s assessment of assets’ useful lives and is calculated at the rates so determined, which are either equal to or higher than rates provided for such assets under Schedule XIV of the Companies Act.

Financial expenses

Financial expenses represent interest paid on term loans availed for capital expenditure, working capital facility and bank charges.

Performance for the period from April 1, 2008 to December 31, 2008

The results for the nine month period ended December 31, 2008 are not comparable to the previous financial year ended March 31, 2008 (12 months), since the periods differ. Hence, results for the nine month period ended December 31, 2008 have been compared with the results for the nine month period ended December 31, 2007.

Comparison of Performance and Analysis of Developments for the nine month period ended December 31, 2008 vis-à-vis nine month period ended December 31, 2007

Income from Product Sales

The total income from product sales decreased by Rs. 2.63 crores, or 1.88% from Rs. 139.86 crores during the nine month period ended December 31, 2007 to Rs. 137.23 crores during the nine month period ended December 31, 2008. This decrease of was mainly due to the low vehicle sales volume in the OEM segment during the nine month period ended December 31, 2008. This resulted in low volume sales to major automobile manufacturers during this period. Revenues from our OEM segment declined by 17% in the nine month period ended December 31, 2008 as compared to the nine month period ended December 31, 2007. The revenues from Export segment increased by 18% in the nine month period ended December 31, 2008 over the nine month period ended December 31, 2007.

Other Income

Other income increased by Rs. 0.07 crores, or 45.68% from Rs. 0.15 crores during the nine month period ended December 31, 2007 to Rs. 0.21 crores during the nine month period ended December 31, 2008 due to increase in scrap sales and increase in income.

Inventory

Inventory increased by Rs. 0.23 crores during the nine month period ended December 31, 2008 due to increase in stock of finished goods and work in progress.

Raw Material consumed

Raw material consumed decreased marginally by Rs. 1.05 crores or 1.53%, from Rs. 68.78 crores during the nine month period ended December 31, 2007 to Rs.67.73 crores during the nine month period ended December 31, 2008 in line with the decline in offtake by OEM customers. As a percentage of total income generated the raw materials constituted 48.76% and 49.20% in the nine month period ended December 31, 2007 and the nine month period ended December 31, 2008 respectively.

113

Employee Cost

Employee cost increased by Rs. 2.63 crores or 17.24%, from Rs. 15.26 crores during the nine month period ended December 31, 2007 to Rs. 17.89 crores during the nine month period ended December 31, 2008. This was due to revisions in salaries for managers and supervisory staff.

Other Manufacturing Expenses

Other manufacturing expenses increased by Rs. 2.71 crores, or 15.64% from Rs. 17.34 crores during the nine month period ended December 31, 2007 to Rs. 20.05 crores during the nine month period ended December 31, 2008 due to increase in power and fuel cost by 21.00%. The prices of furnace oil increased by 44.00% during the nine month period ended December 31, 2008. Also, there were higher levels of power cuts by the Tamil Nadu Electricity Board during the nine month period ended December 31, 2008 resulting in higher consumption of diesel used for power generation.

Administrative Expenses

Administrative expenses decreased by Rs. 2.79 crores or 34.71%, from Rs. 8.05 crores during the nine month period ended December 31, 2007 to Rs. 5.25 crores during the nine month period ended December 31, 2008 due to gain of Rs. 2.08 crores on account of exchange rate fluctuations. Decrease in development expenditure by Rs. 0.28 crores also contributed to the decrease in Administrative expenses during the nine month period ended December 31, 2008 over the nine month period ended December 31, 2007.

Selling & Distribution Expenses

Selling and Distribution expenses increased by Rs. 1.32 crores or 14.05%, from Rs. 9.42 crores during the nine month period ended December 31, 2007 to Rs. 10.75 crores during the nine month period ended December 31, 2008 due to increase in packing and forwarding costs that occurred due to higher export sales.

Interest

Interest cost decreased by Rs. 0.50 crores or 20.85% from Rs. 2.40 crores during the nine month period ended December 31, 2007 to Rs. 1.90 crores during the nine month period ended December 31, 2008 due to repayment of term loan with SBI. Financial expenses were also lower during the nine month period ended December 31, 2008 as compared to the nine month period ended December 31, 2007 due to better utilization of Export Packing Credit.

Depreciation

Depreciation Cost increased by Rs. 0.50 crores or 12.66% from Rs.3.97 crores during the nine month period ended December 31, 2007 to Rs. 4.47 crores during the nine month period ended December 31, 2008 due to increase in depreciation on account of additions to Fixed Assets made during the second half of fiscal 2008.

Comparison of Performance and Analysis of Developments for the financial year ended March 31, 2008 vis-à- vis financial year ended March 31, 2007

Income from Product Sales

The total income from product sales decreased by Rs. 1.38 crores or 0.73%, from Rs. 189.03 crores in fiscal 2007 to Rs. 187.65 crores in fiscal 2008 due to slowdown in the offtake of insitu brake shoes in the two-wheelers market segment. During fiscal 2008, our insitu brake volume declined by 38.21% over fiscal 2007. The increase in export revenues by 13.10% in fiscal 2008 over fiscal 2007 compensated for the decline in two-wheeler domestic market.

114 Other Income

Other income decreased by Rs. 0.21 crores or 34.33% from Rs. 0.60 crores in fiscal 2007 to Rs. 0.39 crores in fiscal 2008 due to decrease in scrap sales and decrease in fees payable by few customers to our R&D centre for testing related activities.

Inventory

There was an increase in inventory of Rs. 1.52 crores in fiscal 2008 due to increase in strategic stock for finished goods that could not be sold by the end of fiscal 2008.

Raw Material consumed

Raw material consumed decreased by Rs. 2.15 crores or 2.29% from Rs. 93.91 crores in fiscal 2007 to Rs. 91.77 crores in fiscal 2008 primarily due to a minor decrease in requirements of components for products sold to the two- wheeler segment.

Employee Cost

Employee cost increased by a marginal Rs. 0.05 crores or 0.24%, from Rs. 20.66 crores in fiscal 2007 to Rs. 20.71 crores in fiscal 2008 due to full year impact of salary cost for Plant IV in Mahindra World City SEZ in fiscal 2008. During fiscal 2007, Plant IV was operational for only 5 months. Employee cost was 10.89% and 10.93% of total income in fiscal 2007and fiscal 2008 respectively.

Other Manufacturing Costs

Other manufacturing costs increased by Rs. 2.77 crores or 13.13% from Rs. 21.12 crores in fiscal 2007 to Rs.23.90 crores in fiscal 2008 due to increase in cost of furnace oil.

Administrative Expenses

Administrative expenses increased by Rs. 1.21 crores or 10.72% from Rs. 11.27 crores in fiscal 2007 to Rs. 12.47 crores in fiscal 2008 due to an increase in postage & telephone and legal expenses. The increase in legal expenses was due to litigation regarding the derivate contracts mentioned in the section titled “Risk Factors” on page vi of the Letter of Offer.

Selling and Distribution Expense

Selling and Distribution expenses decreased marginally by Rs. 0.25 crores or 1.80% from Rs. 13.77 crores in fiscal 2007 to Rs. 13.53 crores in fiscal 2008 due to decrease of 13% in travel related expenditure.

Interest

Interest cost increased by Rs. 0.22 crores in fiscal 2008 as compared to fiscal 2007 due to availment of additional term loan of Rs. 0.30 crores in fiscal 2008 for financing of assets in Mahindra World City SEZ.

Depreciation

Depreciation cost increased by Rs.1.02 crores or 21.53% from Rs. 4.74 crores in fiscal 2007 to Rs. 5.77 crores in fiscal 2008 due to provision of full year depreciation on additions made to plant and machinery, furniture, buildings, office equipment and furniture of a total of Rs. 17.59 crores in fiscal 2007.

Comparison of Performance and Analysis of Developments for the financial year ended March 31, 2007 vis-à- vis financial year ended March 31, 2006

115 Income from product sales

The total income from product sales increased by Rs. 44.29 crores or 30.60% from Rs. Rs. 144.74 crores in fiscal 2006 to Rs. 189.03 crores in fiscal 2007. This was due to good showing by us particularly in the OEM space which grew by 79% in fiscal 2007 as compared to fiscal 2006. The increase was primarily due to increase in sales volume from 10,460 metric tonnes in fiscal 2006 to 12,031 metric tonnes in fiscal 2007.

Other Income

Other income increased by Rs. 0.23 crores or 63.88 % from Rs. 0.37 crores in fiscal 2006 to Rs. 0.60 crores in fiscal 2007 due to increase in scrap sales, interest on advance tax refund and increase in testing fees earned by our R&D department.

Inventory

Nominal increase in inventory of Rs. 0.10 crores in fiscal 2007 was mainly due to the increase in the inventory for work-in-progress stock.

Raw Material consumed

Raw material consumed increased by Rs. 26.81 crores or 39.95%, from Rs. 67.10 crores in fiscal 2006 to Rs. 93.91 crores in fiscal 2007 due to the increase in the prices of a few raw materials like petroleum based resin and metallic powder. The raw materials consumed as a percentage of total income was 49.50% in fiscal 2007 and 46.25% in fiscal 2006. The raw materials consumed had also increased in line with increase in our volume sales and increased production.

Employee Cost

Employee cost increased by Rs. 4.13 crores or 24.97%, from Rs.16.54 crores in fiscal 2006 to Rs. 20.66 crores in fiscal 2007 primarily due to compensation paid to employees under Early Retirement Scheme. The early retirement also led to accelerated outgo on gratuity payments related to these employees. Also, there was a revision in salaries of all managerial and supervisory staff that contributed to the increase in employee cost.

Other Manufacturing Expenses

Other manufacturing expenses increased by Rs. 3.66 crores or 20.98%, from Rs. 17.46 crores in fiscal 2006 to Rs. 21.12 in fiscal 2007. The increase can directly be attributed to increase in the level of production in fiscal 2007.

Administrative Expenses

Administrative expenses increased by Rs. 1.70 crores or 17.77%, from Rs. 9.57 crores in fiscal 2006 to Rs. 11.27 crores in fiscal 2007 due to increase in special revenue expenses and workplace improvement related expenditure by Rs. 0.86 crores. Increases in managerial remuneration, insurance and other expenditure accounted for the remaining increase in Administrative expenses.

Selling and Distribution Expenses

Selling and Distribution expense increased by Rs. 1.93 crores or 16.31%, from Rs. 11.84 crores in fiscal 2006 to Rs. 13.77 crores in fiscal 2007 mainly because of increase in packing and forwarding costs that increased by Rs.0.35 crores. This was due to the increase in the level of activity and production in fiscal 2007. Also, the commission on sales paid to selling agents increased by 59% i.e. Rs. 0.92 crores in fiscal 2007 over fiscal 2006. The remaining increase of Rs. 0.66 crores in the Selling & Distribution expenses was attributable to the Additional Sale Tax of 2% on higher eligible sales value.

116 Interest

Interest cost increased by Rs. 0.55 crores or 27.02%, from Rs. 2.04 crores in fiscal 2006 to Rs. 2.59 crores in fiscal 2007 due to availment of additional term loan of Rs. 9.00 crores in fiscal 2007 for financing of assets in Mahindra World City SEZ.

Depreciation

Depreciation increased by Rs. 0.53 crores or 12.56%, from Rs. 4.22 crores in fiscal 2006 to Rs. 4.74 crores in fiscal 2007 due to addition of Rs. 17.59 crores of plant and machinery, buildings, office equipment and furniture.

Comparison of Performance and Analysis of Developments for the financial year ended March 31, 2006 vis-à- vis financial year ended March 31, 2005

Income from Product Sales

The total income from product sales increased by Rs.11.96 crores or 9.01 %, from Rs.132.77 crores in fiscal 2005 to Rs. 144.74 crores in fiscal 2006 due to growth in the volumes of insitu brake shoes by 21% in the two-wheeler segment and increase in supply of disc brake pads by 15% in the OEM segment.

Other Income

Other income increased marginally by Rs. 0.05 crores or 14.40%, from Rs.0.32 crores in fiscal 2005 to Rs. 0.37 crores in fiscal 2006 due to an increase in interest income on bank deposits.

Inventory

There was a minor decrease of Rs. 0.40 lac in inventory in fiscal 2006.

Raw Material consumed

Raw material consumed increased by Rs. 5.67 lacs or 9.22%, from Rs. 61.44 crores in fiscal 2005 to Rs. 67.10 crores in fiscal 2006 due to marginal increase in aluminium based input materials. There was also some minor increase in other rubber based raw materials.

Employee Cost

Employee cost increased by Rs. 1.79 crores or 12.12%, from Rs. 14.75 crores in fiscal 2005 to Rs.16.54 crores in fiscal 2006 due to an upward revision in salaries of Managers and Supervisors.

Other Manufacturing Expenses

Other manufacturing costs increased by Rs.1.64 crores or 10.35%, from Rs.15.82 crores in fiscal 2005 to Rs. 17.46 crores in fiscal 2006 due to increase in prices of furnace oil by 29% and diesel by 19% over the previous financial year. The other manufacturing costs were 11.81% and 12.03% of total income in fiscal 2005 and fiscal 2006 respectively.

Administrative Expenses

Administrative expenses decreased by Rs. 0.89 crores or 8.50% from Rs. 10.45 crores in fiscal 2005 to Rs. 9.57 crores in fiscal 2006 mainly due to decrease in advertisement and sales promotion expenditure by Rs. 0.63 crores. Also, there was a decrease of Rs. 0.26 crores in the development expense and other miscellaneous revenue expenditure in fiscal 2006 as compared to fiscal 2005.

117 Selling and Distribution Expenses

Selling and Distribution expense increased by Rs. 1.01 crores or 9.36%, from Rs. 10.83 crores in fiscal 2005 to Rs. 11.84 crores in fiscal 2006 mainly because of increase in commission on sales paid to selling agents by Rs. 0.60 crores and an increase in the packing and forwarding expenses by Rs. 0.29 crores. The remaining increase in the Selling and Distribution costs is attributable to increase in Additional Sales Tax at 1.5%.

Interest

Interest cost increased by Rs. 0.60 crores or 41.50%, from Rs. 1.44 crores in fiscal 2005 to Rs. 2.04 crores in fiscal 2006 due to increase in interest on fresh availment of term loans of Rs. 7.50 crores to fund asset additions.

Depreciation

Depreciation increased by Rs. 0.37 crores or 9.57% from Rs. 3.85 crores in fiscal 2005 to Rs. 4.22 crores in fiscal 2006 due to addition to the fixed assets to the extent of Rs. 9.76 crores.

Significant Accounting Policies adopted by the Company

1. Basis of accounting

The books of accounts are maintained on accrual basis as a going concern.

2. Valuation of Inventories

3. Cash Flow Statement

Cash Flow Statement has been prepared under “Indirect Method”.

4. Depreciation

Depreciation has been charged on Straight Line Method at the rates prescribed under Schedule XIV to the Companies Act 1956.

5. Revenue recognition

6. Fixed assets

7. Foreign currency transactions

118 the difference between the forward rate and the exchange rate at the date of transaction being recognized in the profit and loss account. Foreign exchange transactions, which are outstanding as at the year-end and not covered by the forward contracts, are translated at the year-end exchange rate. Gains and losses arising on account of such revisions are reflected in the profit and loss account.

8. Derivatives

9. Investments

Investments are accounted at cost.

10. Retirement benefits

11. Borrowing cost

The borrowing cost has been treated in accordance with the Accounting Standard on Borrowing Cost (AS – 16) issued by the Institute of Chartered Accountants of India.

12. Excise Duty

13. Segment Reporting

The operations of the Company relate only to one segment viz., friction materials which are covered in this report.

14. Related party transactions

15. Leases

The Company has entered into a lease agreement for acquiring land which is exempt from the coverage of Accounting Standard 19 on Lease.

16. Taxes on Income

119

Material Developments after December 31, 2008

There are no material developments since the date of the last balance sheet except for settlement agreements entered into by the Company with certain banks with respect to certain disputes with them. For a further discussion of consequences of such settlement agreements on our actual results, please refer to the section titled “Risk Factors” on page vi of the Letter of Offer.

There are no material developments except for settlement agreements entered into by the Company with certain banks with respect to certain disputes with them after the date of the last financial statements disclosed in the Letter of Offer which is likely to materially and adversely affect or is likely to affect the trading or profitability of the Company or the value of its assets, or its ability to pay its liabilities within the next twelve months.

Information required as per clause 6.10.5.5(a) of the SEBI Guidelines:

Unusual or infrequent events or transactions

There have been no unusual or infrequent transactions that have taken place during the last three years, other than those mentioned in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 108 of the Letter of Offer and “Our History and Main Objects” on page 46 of the Letter of Offer.

Significant economic changes that materially affected or are likely to affect income from continuing operations

Government policies governing the sector in which we operate or in sectors in which our clients operate as well as the overall growth of the Indian economy have a significant bearing on our operations. Major changes in these factors can significantly impact income from continuing operations. Except as detailed in the preceding paragraph and as described in the section titled “Risk Factors” on page vi and section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 108 of the Letter of Offer, there are no known factors that will have a material adverse impact on our operations, our income from continuing operations and our finances.

Known trends or uncertainties

Apart from the risks as disclosed in the section titled “Risk Factors” on page vi of the Letter of Offer, there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

The extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices

Changes in revenues during the last 3 years are as explained above under the paragraph, “Comparison of Performance and Analysis of Developments for the nine month period ended December 31, 2008 vis-à-vis nine month period ended December 31, 2007”, “Comparison of Performance and Analysis of Developments for the financial year ended March 31, 2008 vis-à-vis financial year ended March 31, 2007, “Comparison of Performance and Analysis of Developments for the financial year ended March 31, 2007 vis-à-vis financial year ended March 31, 2006” and “Comparison of Performance and Analysis of Developments for the financial year ended March 31, 2006 vis-à-vis financial year ended March 31, 2005”.

Future relationship between costs and revenues

Except as discussed in this section, there are no known relationships between our costs and revenues. However, on account of the competition in the industry, if there are any unforeseen changes in input costs, we might not be able to pass on the same to our customers particularly in the OEM segment, which may result in a change in future relationships between costs and revenues.

120

Total turnover of each major industry segment in which we operate

The total turnover from each major industry segment has been mentioned in the table below:

(in Rs. crores) For the 9 months For the year For the year For the year For the year For the year ended December ended March ended March ended March ended March ended March Category 31, 2008 31, 2008 31, 2007 31, 2006 31, 2005 31, 2004

Domestic Sales 3. OEM 54.25 89.29 104.38 58.30 43.95 37.27 4. Aftermarket 27.66 36.36 29.750 31.64 30.02 29.96 Total Domestic Sales 81.91 125.66 134.13 89.91 73.98 67.23

Export Sales 3. OEM ------4. Aftermarket 55.32 61.98 54.89 54.82 58.78 52.51 Total Export Sales 55.32 61.98 54.89 54.82 58.78 52.51

Status of any publicly announced new products or business segment

We have not announced any new products or business segment other than those disclosed under the paragraph titled “Material Developments after December 31, 2008” on page 120 of the Letter of Offer.

The extent to which business is seasonal

Seasonality exists only on the OEM side of the business. A marginal element of seasonality is observed which can be attributed to the seasonality of the automobile industry, which is the key customer segment for us. Typically sales of two wheelers peak during the festive season (October to December) while the sales for tractors increase during the monsoon season. Increased sales of goods & passenger vehicles are observed closer to September & March and also during the festive season.

Any significant dependence on a single or few suppliers or customers

We do not have any significant dependence on any single or few suppliers or customers.

Details of total no. of suppliers are mentioned below:

For the 9 For the For the For the For the For the months year year year year year ended ended ended ended ended ended Particulars 31.12.08 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 Number of total vendors / suppliers of imported raw materials 46 43 34 29 32 31

The following table gives out the details of our Top 3 and Top 10 client concentration in revenues:

For the 9 For the year For the year For the year For the year For the year Particulars months ended ended ended ended ended

121 ended 31.03.08 31.03.07 31.03.06 31.03.05 31.03.04 31.12.08 Top 3 client concentration 22% 29% 29% 28% 30% 35% Top 10 client concentration 52% 60% 68% 60% 59% 60%

Status of any publicly announced new products or business segment

Competitive conditions

Competitive conditions are as described under the section titled “Industry Overview” on page 29 of the Letter of Offer and under the section titled “Risk Factors” on page vi of the Letter of Offer. Our business is subject to severe competition. Some of the factors that are critical for success in our business include:

• Technical capabilities: Keeping abreast with technological changes in the industry and investing in new technology are essential to meeting the ever changing requirements of customers. • Past track record of execution capabilities: We need to maintain strong track record in executing orders in a timely manner while adhering to quality standards, which is one of the key criteria for applying for fresh orders.

122 SECTION VI – LEGAL AND OTHER INFORMATION

OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS

Except as described below, there are no outstanding litigations, suits or criminal or civil prosecutions, proceedings or tax liabilities against our Company, our Directors, our Promoters or Promoter Group companies and there are no defaults, non-payment of statutory dues, over dues to banks/ financial institutions, defaults against banks/ financial institutions/ small scale undertaking(s), defaults in dues payable to holders of any debentures, bonds or fixed deposits, issued by our Company (including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Companies Act, 1956). Our Company, our Directors, our Promoters and the Promoter Group Companies are not on the list of willful defaulters of the RBI.

The following are the outstanding or pending litigations or suits or proceedings against the Company, its Promoters and the Promoter Group.

The disclosures in relation to the Promoters and the Promoter Group Companies are based on the information provided by the respective companies.

Litigation By or Against the Company

I. Central Excise Cases

1. The Company had availed credit of Rs. 0.01 crores and cess of Rs. 2,416.76 during the period from September 2005 to June 2006 in respect of service payments relating to the use of mobile phones by senior executives by the Company which was disallowed by the Assistant Commissioner. The Company's appeal against the said decision was allowed by the Commissioner (Appeals). The Commissioner of Central Excise has filed an Appeal bearing no E/487/2007 before the Customs, Excise and Service Tax Appellate Tribunal and the matter is currently pending.

2. The Company had availed credit of Rs. 0.02 croresand Education cess of Rs. 4,815 in respect of service tax paid by the Company under the head ‘outdoor catering service’ which was disallowed by the Assistant Commissioner who also imposed a penalty of Rs.5,000 on the Company. The Company's appeal against the said decision was allowed by the Commissioner (Appeals). The Commissioner of Central Excise has filed an appeal bearing no. E/87/09 before the Customs, Excise and Service Tax Appellate Tribunal and the same is currently pending.

3. The Company had availed credit of Rs. 0.01 crores in relation to the service tax paid by the Company on the premium on the insurance and medi-claim policies for the employees of the Company which was disallowed by the Assistant Commissioner who also imposed a penalty of Rs. 5,000.The Company has filed an appeal before the Commissioner of Central Excise (Appeals) and the same is currently pending.

4. The Company had availed the credit of Rs. 11,080 in relation to the service tax paid by it for detective services in connection with verification of various commercial deals and the antecedents of those who are to be employed by the Company which was disallowed by the Assistant Commissioner who also imposed a penalty of Rs. 5,000 on the Company. The Company has filed an appeal before the Commissioner of Central Excise (Appeals), which is currently pending.

5. The Company had availed Cenvat credit of Rs.54,757/- in respect of service tax paid on the services of the man power provided for canteen area for the period from July 2006 to June 2007 which was allowed by the Assistant Commissioner of Central Excise, Madurai I division . However, the Commissioner of Central Excise has directed an appeal to be filed against the said decision of Assistant Commissioner pursuant to which an appeal has been filed and the same is currently pending.

123 6. The Company had availed Cenvat credit of Rs.30,450/- in respect of service tax paid on the services of man power provided for canteen area for the period from August 2007 to March 2008 which was allowed by the Assistant Commissioner of Central Excise, Madurai I division . However, the Commissioner of Central Excise has directed an appeal to be filed against the said decision of Assistant Commissioner pursuant to which an appeal has been filed and the same is currently pending.

II. Service Tax cases

1. The Deputy Commissioner of Service Tax levied service tax of Rs. 0.05 crores for the years from February 28, 1999 to March 31, 2003 on the Company under the category ‘Consulting Engineer’s Service’. The Company appealed against the said order before the Customs, Excise, Service Tax Appellate Tribunal which allowed the appeal of the Company. The Commissioner of Service Tax has filed an appeal before the Hon’ble Supreme Court of India and the same is pending.

2. The Assistant Commissioner of Service Tax levied service tax of Rs. 88,190 and Education cess of Rs.3,528 on the basis that the Company is a recipient of ‘Intellectual Property Rights Service’ from Sangsin Brakes, Korea for the provision of technical know-how for the manufacture of disc brake pads and brake linings for passenger cars. The Company has preferred an appeal before the Commissioner of Central Excise (Appeals), Chennai, which is currently pending.

III. Civil Proceedings:

Nil

IV. Sales Tax Cases:

1. The Assessing Officer, CTO, Anna Salai II Assessment Circle vide Assessment order bearing TNGST No.0620064/1999-2000 has inter alia assessed a sum of Rs. 0.05 crores to be payable by the Company in respect of the export sales made by the Company and has also imposed a penalty of Rs. 82,289 on the Company. The Company has challenged the said assessment order before the Tamil Nadu Taxation Special Tribunal and the matter is currently pending.

2. The Assessing Officer, CTO Anna Salai II Assessment Circle vide Assessment order bearing TNGST No. 0620064/2000-2001 has inter alia assessed a sum of Rs. 0.63 to be payable by the Company in respect of export sales made by the Company. The Company has preferred a writ petition before the Hon’ble High Court of Madras seeking to quash the Assessment Order and the same is currently pending.

V. Labour Cases

1. An employee of the Company who was dismissed from the service in 1983 has filed a case before the Presiding Officer, I Additional Labour Court, Chennai for reinstatement with back wages and the same is currently pending.

2. An apprentice of the Company who met with an accident during employment in 1994 raised an industrial dispute before the I Additional Labour Court, Chennai which held that the Company is required to pay stipend and also provide him employment or pay a sum of Rs. 25,000 as ex-gratia payment. Both, the Company and the apprentice filed writ petitions against the said order before the Hon'ble High Court of Madras. Later, the Company and the apprentice entered into a settlement in 2004 by which the Company fully and finally settled the claims of the apprentice and hence the petitions were dismissed as infructuous. The apprentice has subsequently filed a review application before the Hon'ble High Court of Madras and the matter is currently pending.

124 Litigation Involving Directors of the Company

NIL

Litigation Involving the Promoters

I. T.V. Sundram Iyengar & Sons Limited

1. Details of Pending Litigation : NIL

2. Details of the past cases in which penalties were imposed by the concerned authorities:

The Company has remitted compounding fees for alleged offence of non compliance of Sec. 212 of the Companies Act, 1956, for not having translated the accounts of foreign subsidiaries into scheduled VI of the Companies Act; in respect of the financial years ended March 31, 2003 and March 31, 2004 at Rs.5, 000/- for each year.

II. Southern Roadways Limited

1. Details of Pending Litigation:

Four litigations pending before High Court/Supreme Court concerning taxation matters. Aggregate amount of claim involved in all these four litigations is Rs. 1.06 crores.

III. Sundaram Industries Limited

NIL

Litigation involving Promoter Group:

I. TVS Sewing Needles Limited (“TVS SNL”):

1. Six litigations pending before High Court/Supreme Court concerning taxation matters. The amount involved is Rs. 0.47 crores.

2. One suit has been filed against TVS SNL claiming compensation for cancellation of contract. The amount involved is Rs. 0.10 crores.

3. One suit has been filed by TVS SNL for recovery of dues. The amount involved is Rs. 0.52 crores.

II. Sundaram Textiles Limited

1. Twelve litigations pending before various courts concerning taxation matters. The amount involved in these disputes is Rs. 1.10 crores.

III. The Associated Auto Parts Limited (“AAPL”):

1. AAPL has filed a criminal case against one employee for misappropriation of Company funds of Rs. 0.53 crores.

2. AAPL has filed a criminal case against one person under section 138 of the Negotiable Instrument Act for dishonor of cheque for Rs. 0.10 crores.

125 3. AAPL has filed a civil suit against Mohan Motors Private Limited, Turbhey (Navi Mumbai) in Thane. The amount involved is Rs. 0.01 crores.

4. AAPL has filed a civil suit against Lucky Auto Parts in Nagpur. The amount involved is Rs.0.02 crores.

5. AAPL has filed a rent declaratory suit before the Small Causes Court at Mumbai against City Engineering Works & Ors and an obstructionist notice has been filed against AAPL before the same court by certain persons.

IV. TVS Logistics Services Limited

1. Remitted compounding fee for alleged offence of non-compliance of Sec 212 of the Companies Act 1956, for not having attached the translated accounts of foreign subsidiaries into Scheduled VI to the Companies Act, to the balance sheet as of March 31, 2005.

2. Remitted compounding fee for not appointing managerial personnel as of March 31, 2005.

V. TVS Srichakra Limited:(“TVSSL”)

1. Dispute in respect of classification of RTF scrap is pending before the Assistant Commissioner of Central Excise. The amount involved is Rs. 0.02 crores.

2. Dispute has arisen with respect to the classification of Rubberized Tyre Card scrap is pending before the Assistant Commissioner of Central Excise. The amount involved is Rs. 0.08 crores.

3. Dispute in respect of a transaction with an inter-connected company is pending before the Assistant Commissioner of Central Excise. The amount involved is Rs. 0.02 crores.

4. Dispute in respect of a transaction with an inter-connected company is pending before the Joint Commissioner of Central Excise. The amount involved is Rs. 0.17 crores.

5. TVSSL has filed an appeal before the Commissioner of Central Excise (Appeals) against the order disallowing the Cenvat credit availed in respect of removal of capital goods. The amount involved is Rs 0.01 crores.

6. Dispute in respect of a refund claim on anti-dumping duty is pending before the Commissioner (Appeals) (Customs). The amount involved is Rs. 0.24 crores.

7. Dispute in respect of availing service tax credit on wind mill maintenance charges is pending before the Commissioner of Central Excise (Appeals). The amount involved is Rs.0.03 crores.

8. Two disputes in respect of availing service tax credit on outward transportation charges is pending before the Commissioner of Central Excise (Appeals). The total amount involved is Rs. 1.75 crores.

9. Dispute in respect of availing service tax credit on canteen services is pending before the Deputy Commissioner of Central Excise. The amount involved is Rs. 0.01 crores.

10. Two disputes in respect of additional excise duty on Rubberized Tyre Cord Warp sheet is pending before the Customs, Excise, Service Tax Appellate Tribunal. The amount involved is Rs. 2.43 crores.

11. Dispute in relation to availing concessional rate of duty under Government notification is pending before the Customs, Excise, Service Tax Appellate Tribunal. The amount involved is Rs. 0.24 crores.

12. Dispute in relation to availing Cenvat credit on furnace oil is pending before the Hon’ble Madras High Court (Madurai Bench). The amount involved is 37,000.

126 13. Rebate claimed on export of finished goods pending for consideration before the Ministry of Finance, New Delhi. The amount involved is Rs. 0.03 crores.

VI. India Motor Parts & Accessories Limited (“IMPAL”).

1. The Employee State Insurance Corporation (“ESIC”) has demanded a sum of Rs. 0.04 crores towards contribution of employees for the six year period from the year 1977. IMPAL has contested the demand. The Employee State Insurance Court and the High Court of Madras have held in favour of IMPAL. The ESIC has filed special leave petition before the Supreme Court of India.

VII. Sundaram-Clayton Limited

1. Dispute under the Tamil Nadu Town and Country Planning Act, 1971 is pending before the Hon’ble Madras High Court. The amount involved in the dispute is Rs. 0.57 crores.

2. Dispute under the Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003 is pending before the Hon’ble Madras High Court. The amount involved in the dispute is Rs.0.03 crores.

3. Dispute under the Central Excise Act, 1944 is pending before the Customs, Excise, Service Tax Appellate Tribunal, Chennai. The amount involved is Rs. 0.05 crores.

4. Dispute under the Income Tax Act, 1961 is pending before the Commissioner of Income Tax (Appeals), Chennai. The amount involved is Rs. 0.14 crores.

5. Dispute in respect of service tax is pending before the Customs, Excise, Service Tax Appellate Tribunal, Chennai. The amount involved is Rs. 0.04 crores.

6. Dispute in respect of service tax is pending before the Commissioner of Central Excise (Appeals), Chennai. The amount involved is Rs. 0.44 crores.

VIII. The following is the list of Promoter Group companies which have no outstanding litigations or any past cases where penalties have been imposed by the concerned authorities.

1. Alagar Farms Private Limited 2. Aplomb Investments Limited 3. Brakes India Limited 4. Delphi-TVS Diesel Systems Limited 5. Firestone TVS Private Limited 6. India Telecom Infra Limited 7. Iranian Automotive Systems, Iran 8. Irizar TVS Limited 9. Lucas Indian Service Limited 10. Lucas TVS Limited 11. NSM Finance Limited 12. Rajarajeswari Farms Private Limited 13. Sundram Fasteners Limited 14. Synergy Shakthi Renewable Energy Limited 15. TVS Automotive Europe Limited 16. TVS Autoserve, Gmbh, Germany 17. TVS Telecom Components Limited 18. TVS Auto (Bangladesh) Limited 19. TVS Automotive Systems Limited 20. TVS Automotives Private Limited, Sri Lanka 21. TVS Autoparts Private Limited, Sri Lanka

127 22. TVS CJ Components Limited, United Kingdom 23. TVS Dynamic Global Freight Services Limited 24. TVS Interconnect Systems Limited 25. TVS Lanka Private Limited, Sri Lanka 26. TVS Logistics Siam Limited, Thailand 27. TVS Logistics-Iberia S.L., Spain 28. TVS Net Technologies Limited 29. TVS Novetama Elastomeric Engineered Products Private Limited 30. Wabco TVS (India) Limited 31. Wheels India Limited

Material developments after the date of the last Balance Sheet

128

GOVERNMENT APPROVALS AND LICENSES

We have received the necessary consents, licenses, permissions and approvals from the Government of India and various governmental agencies required for our present business and except as mentioned below, no further approvals are required for carrying on our present business.

It must be distinctly understood that, in granting these approvals, the Government of India does not take any responsibility for our financial soundness or for the correctness of any of the statements made or opinions expressed in this behalf.

In view of the approvals listed below, we can undertake this Issue and our current business activities and no further major approvals from any governmental or regulatory authority or any other entity are required to undertake the Issue or continue our business activities. Unless otherwise stated, these approvals are all valid as of the date of this Letter of Offer.

I. Approvals for the Issue

• In-principle approval from the National Stock Exchange of India Limited dated March 30, 2009 • In-principle approval from the Madras Stock Exchange of India Limited dated March 23, 2009

II. Incorporation details

• Certificate of Incorporation dated September 5, 1974 issued by Registrar of Companies, Tamil Nadu to Sundaram Brake Linings Limited.

• Company Identification Number is U34300TN1974PLC006703

• Certificate of Commencement of Business dated September 30, 1976 issued by the Registrar of Companies, Tamil Nadu to the Company.

• Fresh Certificate of Incorporation dated June 23, 1995 issued by Additional Registrar of Companies, Tamil Nadu consequent upon Change of name from “Sundaram Abex Limited” to “Sundaram Brake Linings Limited”

III. General Approvals

The Company requires various approvals for it to carry on its business and the approvals that the Company requires include the following.

• Approvals received

1. Permanent Account Number(PAN): AADCS4888E

2. Allotment of Tax deduction Account Number (TAN No.) dated July 9, 2005, bearing CHES0553A, issued by the Income – Tax Department.

3. Recognition (F. No. TU/IV-RD/1697/2006) dated May 11, 2006 granted by the Department of Scientific & Industrial Research Wing of Ministry of Science & Technology of the Government of India for in-house Research & Development unit of the Company valid till March 31, 2012.

129 4. Certificate dated May 9, 2005 bearing no. B-000738 issued by the Joint Director General of Foreign Trade according the status of Two Star Export House under the provisions of the Foreign Trade Policy 2004-09 which is valid from April 1, 2004 to March 31, 2009.

5. Certificate of Importer and Exporter Code (MS001235) dated September 22, 1976 granted by the Ministry of Commerce

6. Certificate (31794) dated March 1, 1975 issued by Labour Department, Government of Tamil Nadu for registration of the Company as a dealer under the Central Sales Tax (Registration and Turnover) Rules, 1957.

7. Certificate (TIN 33270620064) dated January 9, 2007 issued by Commercial Taxes Department, Government of Tamil Nadu for registration of the Company as a dealer under Tamil Nadu Value Added Tax Act, 2006.

IV. Approvals in relation to our plants

We are required to obtain certain approvals from the concerned central/ State government departments and other authorities for operating our business activities at our plants.

• Approvals Received-general to the Company

1. Approval (1252-II(6) / 91-92) dated 26.03.1992 under the Income Tax Rules, 1962 granted by the Commissioner of Income Tax, Chennai for setting up an employee gratuity fund as constituted under the trust deed dated March 26, 1992 w.e.f. March 1, 1992.

2. Approval (1254(7)/76-77-TN.II) dated March 23, 1977 by Commissioner of Income Tax, Chennai for setting up an employee provident fund

3. Letter (TN/SRO-AMB/Exem/10771/2007) dated June 7, 2007 by the Asst. Provident Fund Commissioner, Employees Provident Fund Organization, Sub-Regional Office, Ambattur, Chennai - 600 037 approving the trust rules of employee provident fund.

4. Letter (1254 (7) / 76-77) dated 2.7.1996 by Commissioner of Income Tax, Chennai approving change in the name of the trust from ‘Sundaram Abex Limited Employees Provident Fund’ to ‘Sundaram Brake Linings Limited Employees Provident Fund’.

5. Letter (TN/SRO/AMB/10771/EDLI/EXEM/2007) dated June 22, 2007 by the Regional Provident Fund Commissioner, Sub-Regional Office, Ambattur, Chennai -600 037 providing exemption under para 28(7) of the Employees Deposit Linked Insurance Scheme, 1976, valid till February 28, 2010

• Approvals specific to Plant I – Padi, Chennai

Approvals received

1. Licence (No. TVR 1253) dated July 11, 1974 granted by the Deputy Chief Inspector of Factories, Chennai for operating the factory, valid till December 31, 2009.

2. Licence (No. 179/2007) dated December 10, 2007 issued by Deputy Chief Inspector of Factories, Chennai for registration of the Company under Section 7(2) of the Contract Labour (Regulation and Abolition) Act, 1970 valid till the license is revoked.

3. Consent (21193 / 17230) dated April 23, 2008 issued by the Tamil Nadu Pollution Control Board for consent to operate under the Air Act and the Water Act and Hazardous Wastes (Management & Handling) Rules, 1989, valid till March 31, 2009

130 4. Certification of Pressure vessels/plants dated November 25, 2008 by Deputy Chief Inspector of Factories, Chennai.

5. Certificate (AADCS4888EST003) dated September 9, 2006 issued by the Service Tax Commissionerate, Chennai for registration of the Company for payment of service tax for Inspection, Certification Transportation of goods by road, Intellectual property services other than copyright, Business Auxiliary Services.

6. Certificate (AABCS9447B XM 001) dated December 7, 2001 issued by the Superintendent of Central Excise Range III A, Chennai for registration of the Company for manufacturing of excisable goods, under the Central Excise Rules, 2002

7. Employer’s Code Number (51-15221-67) allotted by the ESI Corporation to the Padi plant of the Company

• Approvals specific to Plant II –TSK Puram, Kamarajar District (Plant I)

Approvals received

1. Licence (No. VN 1942) dated February 04, 2009 granted by Deputy Chief Inspector of Factories, Virudhunagar for operating the factory, valid till December 31, 2009.

2. Licence (No. 914/07) dated March 23, 2007 issued by Deputy Chief Inspector of Factories, Virudhunagar for registration of the Company under section 7(2) of the Contract Labour (Regulation and Abolition) Act, 1970 valid till the license is revoked.

3. Consent (16560 / 20527) dated November 17, 2008 issued by the Tamil Nadu Pollution Control Board for consent to operate under the Air Act and the Water Act and Hazardous Wastes (Management & Handling) Rules, 1989, valid till March 31, 2009

4. Certification (No. 1818) of pressure vessels/plants dated September 27, 2008 by Deputy Chief Inspector of Factories, Virudhunagar.

5. Certificate (AADCS4888EST002) dated November 21, 2006 issued by the Asst. Commissioner of Central Excise, Madurai – I Division for registration of the Company for payment of service tax for Transport of goods by road, / Management Consultants.

6. Certificate (AADCS4888EXM001) dated January 29, 2003 issued by the Deputy Commissioner of Central Excise, Madurai I Division for registration of the Company for manufacturing of excisable goods, under the Central Excise Rules, 2002.

• Approvals specific to Plant III –TSK Puram, Kamarajar District (Plant II)

Approvals received

1. Licence (No. VN 3096) dated February 04, 2009 granted by the Deputy Chief Inspector of Factories, Virudhunagar for operating the factory, valid till December 31, 2009.

2. Licence (No. 915/07) dated March 23, 2007 issued by Deputy Chief Inspector of Factories, Virudhunagar for registration of the Company under section 7(2) of the Contract Labour (Regulation and Abolition) Act, 1970 valid till the license is revoked.

3. Consent (38 / 38) dated April 4, 2008 issued by the Tamil Nadu Pollution Control Board for consent to operate under the Air Act and the Water Act and Hazardous Wastes (Management & Handling) Rules, 1989, valid till March 31, 2012

131 4. Certification (No. N.S.L 11549) of Pressure vessels/plants dated September 27, 2008 by Deputy Chief Inspector of Factories, Virudhungar.

5. Certificate (AADCS4888EST001) dated May 10, 2007 issued by the Asst. Commissioner of Central Excise, Madurai – I Division for registration of the Company for payment of service tax for Transport of goods by road.

6. Certificate (AADCS4888EXM002) dated January 29, 2003 issued by the Deputy Commissioner of Central Excise, Madurai I Division for registration of the Company for manufacturing of excisable goods, under the Central Excise Rules, 2002

• Approvals specific to Plant IV – Mahindra World City, Kanchipuram District

Approvals received

1. Approval for setting up the unit in the SEZ vide letter bearing F No. 8/6/2006/MahindraSEZ dated March 13, 2006 issued by the Assistant Development Commissioner

2. Licence (No. KM: 7763/07) dated January 19, 2009 granted by the Deputy Chief Inspector of Factories, Kanchipuram for operating the factory, valid till December 31, 2009.

3. Consent (351 / 351) dated November 20, 2008 issued by the Tamil Nadu Pollution Control Board for consent to operate under the Air Act and the Water Act and Hazardous Wastes (Management & Handling) Rules, 1989, valid till March 31, 2010

Approvals applied for

1. Application No. (7763) dated July 31, 2008 for certification of Pressure vessels/plants

V. Intellectual property

The Company has received certificates of registration in relation to the following names and marks, issued by the Trademark Registry, Government of India

Expiry Date S.No. Trademark Description of Goods Issuing Authority Brake Linings, Clutch Registrar of Trademarks, 1. TVS (Wings) Facing etc. August 13, 2010 Mumbai TVS (Oval) Brake Brake Linings, Clutch Registrar of Trademarks, 2. Linings Facings July 30, 2017 Mumbai Gutta, Percha, Indian Rubber, Balata and substitutes and articles made from these Registrar of Trademarks, 3. TVS (Oval) substances March 26,2016 Mumbai

132 SECTION VII - OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority of the Issue

Our Board has, pursuant to a resolution passed at its meeting held on February 6, 2009, decided to make this Issue to the Equity Shareholders of our Company with right to renounce.

Prohibition by SEBI

Our Company, our Directors, our Promoters and Promoter Group have not been prohibited from accessing or operating in the capital markets or restrained from buying, selling or dealing in securities under any order or direction passed by SEBI.

Further, our Promoters and Promoter Group are not declared as wilful defaulters by RBI /Government authorities and there are no violations of securities law committed by them in the past or pending against them.

Eligibility for the Issue

Our Company is an existing listed company registered under the Companies Act, whose Equity Shares are listed on NSE and MSE. It is eligible to offer this Issue in terms of clause 2.4.1(iv) of the SEBI DIP guidelines.

Disclaimer Clause of SEBI

AS REQUIRED, A COPY OF THE LETTER OF OFFER HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE LETTER OF OFFER TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED TO MEAN THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE LETTER OF OFFER. THE LEAD MANAGER SPARK CAPITAL ADVISORS (INDIA) PRIVATE LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES AS FOR THE TIME BEING IN FORCE. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE LETTER OF OFFER, THE LEAD MANAGER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD MANAGER, HAS FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED March 17, 2009 IN ACCORDANCE WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992, WHICH READS AS FOLLOWS:

i. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC.AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE ANNEXURE HERETO IN CONNECTION WITH THE FINALISATION OF THE LETTER OF OFFER PERTAINING TO THE SAID ISSUE,

ii. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, IT’S DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY, WE CONFIRM THAT:

133 A. THE LETTER OF OFFER FORWARDED TO THE BOARD IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE; B. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY THE BOARD, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND C. THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND SUCH DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE COMPANIES ACT 1956, THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 AND OTHER APPLICABLE LEGAL REQUIREMENTS.

iii. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE LETTER OF OFFER ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATIONS ARE VALID.

iv. WE HAVE SATISFIED OUR SELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFILL THEIR UNDERWRITING COMMITMENTS – NOT APPLICABLE .

v. WE CERTIFY THAT THE WRITTEN CONSENT FROM SHAREHOLDERS HAS BEEN OBTAINED FOR INCLUSION OF THEIR SECURITIES AS PART OF PROMOTERS CONTRIBUTION SUBJECT TO LOCK-IN AND THE SECURITIES PROPOSED TO FORM PART OF PROMOTERS CONTRIBUTION SUBJECT LOCK-IN, WILL NOT BE DISPOSED / SOLD / TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING OF THE LETTER OF OFFER WITH BOARD TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE LETTER OF OFFER – NOT APPLICABLE .

vi. WE CERTIFY THAT CLAUSE 4.6 OF THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000, WHICH RELATES TO SECURITIES INELIGIBLE FOR COMPUTATION OF PROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE CLAUSE HAVE BEEN MADE IN THE LETTER OF OFFER – NOT APPLICABLE .

vii. WE UNDERTAKE THAT CLAUSES 4.9.1, 4.9.2, 4.9.3 AND 4.9.4 OF THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 SHALL BE COMPLIED WITH. WE CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION AND SUBSCRIPTION FROM ALL FIRM ALLOTTEES WOULD BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING OF THE ISSUE .WE UNDERTAKE THAT AUDITORS’ CERTIFICATE TO THIS EFFECT SHALL BE DULY SUBMITTED TO THE BOARD. WE FURTHER CONFIRM THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’ CONTRIBUTION SHALL BE KEPT IN AN ESCROW ACCOUNT WITH A SCHEDULED COMMERCIAL BANK AND SHALL BE RELEASED TO THE COMPANY ALONG WITH THE PROCEEDS OF THE PUBLIC ISSUE – NOT APPLICABLE . viii. WE CERTIFY THAT REQUIREMENTS OF PROMOTERS CONTRIBUTION IS NOT APPLICABLE PURSUANT TO CLAUSE 4.10.1(c) OF THE SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000.

ix. WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE ISSUER FOR WHICH THE FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE ‘MAIN OBJECTS’ LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION OR OTHER CHARTER OF THE ISSUER AND THAT THE ACTIVITIES WHICH HAVE BEEN CARRIED

134 OUT UNTIL NOW ARE VALID IN TERMS OF THE OBJECT CLAUSE OF ITS MEMORANDUM OF ASSOCIATION.

x. WE CONFIRM THAT NECESSARY ARRANGEMENTS WILL BE MADE TO ENSURE THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE BANK ACCOUNT AS PER THE PROVISIONS OF SECTION 73(3) OF THE COMPANIES ACT, 1956 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE SAID BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK EXCHANGES MENTIONED IN THE LETTER OF OFFER. WE FURTHER CONFIRM THAT THE AGREEMENT TO BE ENTERED INTO BETWEEN THE BANKERS TO THE ISSUE AND THE ISSUER SPECIFICALLY CONTAINS THIS CONDITION.

xi. WE CERTIFY THAT NO PAYMENT IN THE NATURE OF DISCOUNT, COMMISSION, ALLOWANCE OR OTHERWISE SHALL BE MADE BY THE ISSUER OR THE PROMOTERS, DIRECTLY OR INDIRECTLY, TO ANY PERSON WHO RECEIVES SECURITIES BY WAY OF FIRM ALLOTMENT IN THE ISSUE.

xii. WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE LETTER OF OFFER THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE SHARES IN DEMAT OR PHYSICAL MODE.

xiii. WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE LETTER OF OFFER: a. AN UNDERTAKING FROM THE ISSUER THAT AT ANY GIVEN TIME THERE SHALL BE ONLY ONE DENOMINATION FOR THE SHARES OF THE COMPANY AND; b. AN UNDERTAKING FROM THE ISSUER THAT IT SHALL COMPLY WITH SUCH DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY THE BOARD FROM TIME TO TIME.

The filing of the Letter of Offer does not, however, absolve our Company from any liabilities under section 63 or section 68 of the Act or from the requirement of obtaining such statutory and other clearances as may be required for the purpose of the proposed Issue. SEBI further reserves the right to take-up, at any point of time, with the Lead Manager any irregularities or lapses in the Letter of Offer. In addition to the Lead Manager, the Issuer is also obligated to update the Letter of offer and keep the public informed of any material changes till the date of listing and commencement of trading of the Equity Shares offered under the Letter of Offer.

Caution

Our Company and Lead Manager accept no responsibility for statements made otherwise than in the Letter of Offer or in the advertisements or any other material issued by or at the instance of our Company and that anyone placing reliance on any other source of information, including our website www.tvsbrakelinings.com would be doing so at his / her / their own risk. All information shall be made available by the Lead Manager and the Issuer to the shareholders and no selective or additional information would be made available for a section of the shareholders or investors in any manner whatsoever including at presentations, research or sales reports etc.

Investors that invest in the Issue will be deemed to have represented to our Company and Lead Manager and their respective directors, officers, agents, affiliates and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire Equity Shares of our Company, and are relying on independent advice / evaluation as to their ability and quantum of investment in this Issue.

Disclaimer with respect to jurisdiction

The Letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and regulations hereunder.

135 The distribution of the Letter of Offer and the Issue of Equity Shares on a rights basis to persons in certain jurisdictions outside India may be restricted by the legal requirements prevailing in those jurisdictions. Persons in whose possession the Letter of Offer may come are required to inform themselves about and observe such restrictions. No action has been or will be taken to permit the Issue in any jurisdiction where action would be required for that purpose, except that the Letter of Offer has been filed with SEBI for observations and SEBI has given its observations. Accordingly, the Equity Shares represented thereby may not be offered or sold, directly or indirectly, and the Letter of Offer may not be distributed in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of the Letter of Offer nor any sale hereunder, shall under any circumstances create any implication that there has been no change in our Company’s affairs from the date hereof or that the information contained herein is correct as of any time subsequent to this date.

Designated Stock Exchange

The Designated Stock Exchange for the purpose of the Issue will be NSE.

Disclaimer Clause of the NSE

As required, a copy of the Letter of Offer has been submitted to National Stock Exchange of India Limited (hereinafter referred to as “NSE”). NSE has given vide its letter Ref. No. NSE/LIST/103791-T dated March 30, 2009 permission to the Issuer to use its name in the Letter of Offer as one of the Stock Exchanges on which the Issuer's securities are proposed to be listed. The Exchange has scrutinized the Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to the Issuer. It is to be distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed that the Letter of Offer has been cleared or approved by NSE, nor does it any manner warrant, certify or endorse the correctness or completeness of any of the contents of the Letter of Offer; nor does it warrant that the Issuer's securities will be listed or will continue to be listed on the NSE, nor does it take any responsibility for the financial or other soundness of the Issuer, its Promoters, its management or any scheme or project of the Issuer. Every person who desires to apply for or otherwise acquire any securities of the Issuer may do so pursuant to independent enquiry, investigation and analysis and shall not have any claim against the NSE whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.

Disclaimer Clause of the MSE

The Madras Stock Exchange Limited vide its letter no. MSE/SEC/738/075/09 dated March 23, 2009, has given its no objection to the Company to use the name of the Exchange in this Letter of Offer as one of the stock exchange on which the Company’s securities are proposed to be listed. The Exchange has scrutinized this offer document for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The Madras Stock Exchange Limited does not in any manner –

1. Warrant, certify or endorse the correctness or completeness of any of the contents of this Letter of Offer 2. Warrant that this Company’s securities will be listed or will continue to be listed on the Exchange 3. Take any responsibility for the financial or other soundness of this Company, its promoters, management or any scheme or project of this Company;

It should not be, in any reason be deemed or construed that this Letter of Offer has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of the Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange, whatsoever, by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or any other reason whatsoever.

136 Filing

The Letter of Offer has been filed with Securities Exchange Board of India, D' Monte Building, 3rd Floor, 32 D' Monte Colony, TTK Road, Alwarpet, Chennai – 600 018. The Letter of Offer has also been filed with the NSE and the MSE.

Dematerialised Dealing

Our Company along with the Registrar has entered into tripartite agreements dated February 20, 2001 and February 21, 2001 with NSDL and CDSL, respectively and its Equity Shares bear the ISIN No. INE 073D01013.

Listing

The Equity Shares of our Company are listed on the NSE and MSE. Our Company has made applications to the NSE for permission to deal in and for an official quotation in respect of the Equity Shares offered in terms of the Letter of Offer. Our Company has applied for in-principle approvals from NSE and MSE for the securities proposed to be issued through the Letter of Offer and has received in-principle approvals from the NSE by its letter dated March 30, 2009 and from MSE by its letter dated March 23, 2009 granting in principle approval for listing the securities arising from the Issue. Our Company will apply to the NSE and MSE for listing of the Equity Shares to be issued pursuant to the Issue. If the permission to deal in and for an official quotation of the securities is not granted by any of the Stock Exchanges mentioned above, within 15 days from the Issue Closing Date, our Company shall forthwith repay, without interest, all monies received from applicants in pursuance of the Letter of Offer. If such money is not paid within eight days after our Company becomes liable to repay it, then our Company and every Director of our Company who is an officer in default shall, on and from expiry of 8 days, be jointly and severally liable to repay the money with interest as prescribed under sub-sections (2) and (2A) of section 73 of the Companies Act.

Consent

Consent in writing of the Auditors, Lead Manager, Legal Advisor and the Registrar to the Issue, to act in their respective capacities; and of the bankers to our Company and Directors for their names to appear as such in the Letter of Offer have been obtained and filed with SEBI, along with a copy of the Letter of Offer and such consents have not been withdrawn up to the time of delivery of the Letter of Offer for registration with the Stock Exchanges.

Sundaram & Srinivasan, Chartered Accountants, the Auditors of our Company have given their written consent for the inclusion of their Report in the form and content as appearing in the Letter of Offer and such consents and Reports have not been withdrawn upto the time of delivery of the Letter of Offer for registration to the Stock Exchanges. Sundaram & Srinivasan, Chartered Accountants, the Auditors of our Company have given their written consent for inclusion of statement of tax benefits in the form and content as appearing in the Letter of Offer accruing to our Company and its members. To the best of our knowledge there are no other consents required for making this Issue, however, should the need arise, necessary consents shall be obtained by us.

Impersonation

Attention of the applicants is specifically drawn to the provisions of sub-section (1) of section 68A of the Act, which is reproduced below: “Any person who a) Makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein, or b) Otherwise induces a company to allot, or register any transfer of shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years.”

137 Expert Opinion

Save and except as stated in the section titled “Auditors Report and Financial Information” and section titled “Statement of Tax Benefits” on page 70 and 23 respectively of the Letter of Offer, our Company has not obtained any expert opinions in relation to the Letter of Offer.

Option to Subscribe

Please refer paragraph titled “Option to receive Equity Shares in Dematerialised Form” on page 155 of the Letter of Offer.

Underwriting Commission, Brokerage and Selling Commission

No underwriting commission, brokerage and selling commission will be paid for the Issue.

Details of Public / Rights Issues

Our Company has not made any issue of shares in the last five years.

Promise versus Performance

Since Our Company has not made any issue of shares in the last five years, this is not applicable.

Issue Programme

The subscription list will open upon the commencement of the banking hours and will close upon the close of banking hours on the dates mentioned below or on such extended date (subject to a maximum of 30 days) as may be determined by the Board, subject to necessary approvals:

ISSUE OPENS ON LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS ISSUE CLOSES ON June 3 , 2009 June 8 , 2009 June 17, 2009

Issue expenses

138

Details of Fees Payable

Fees Payable to the Lead Manager

The total fees payable to the Lead Manager will be as per the Engagement Letter dated February 12, 2009 and as stated in the Memorandum of Understanding executed between our Company and Lead Manager dated March 17, 2009 copy of which is available for inspection at our Registered Office.

Fees Payable to the Registrar to the Issue

The Fees Payable to the Registrar to the Issue is set out in relevant documents, copies of which are available for inspection at the Registered Office of our Company at 180, Anna Salai, Chennai 600 006 from 10.00 a.m. to 1.00 p.m., from the date of filing of the Letter of Offer until the date of closure of the Subscription List.

Companies Under the same Management within the meaning of section 370(1) (B) of the Act.

Except as stated in our section titled “Our Promoters and Promoter Group” there are no listed companies under the same management within the meaning of section 370(1)(B) of the Companies Act, 1956.

Material changes after December 31, 2008

For further details of material changes and commitments likely to affect the financial position of our Company since the last date upto which audited information is incorporated in the Letter of Offer please refer to the chapter titled “Management’s Discussion and Analysis on Financial Condition and Results of Operations” on page 108 for details.

Stock Market Data for Equity Shares of our Company

The Equity Shares of our Company are listed on the NSE and MSE. The stock market data for NSE, as extracted from their respective websites, are given below. The high and low closing prices recorded on the NSE for the preceding three years and the number of Equity Shares traded on the days the high and low prices were recorded are stated below: . NSE

The high and low prices and volume of Equity Shares traded on the respective dates during the last three financial years are as follows:

Volume Traded on date of high and low (no. of Volume traded Financial Average Price* Date shares) during the year Year Highest Lowest for the Year Highest Lowest Highest Lowest No of Shares March 17, 2009 282.95 95.50 175.92 May 2, 2008 2009 213 2,411 91,233 March 28, 2008 530.00 229.95 415.57 May 7,2007 2008 13 9,225 234,307 February June 14, 2007 563.15 333.25 447.43 19, 2007 2006 888 284 134,963

Source: NSE website

* The average price has been computed based on the average of the daily high and low prices.

The high and low prices and volume of Equity Shares traded on the respective dates during the last six months are as

139 follows:

Volume Traded on date of high and low (no. of Volume traded Average Date shares) during the month Month Highest Lowest Price * Highest Lowest Highest Lowest No of Shares April 16, April, 2009 126.00 104.50 114.60 2009 April 6, 2009 190 1,329 13,777 March 6, March17, March, 2009 108.00 95.50 100.34 2009 2009 210 2,411 22,104 February February 4, February,2009 111.80 101.10 107.10 27, 2009 2009 60 5 3,864 January 6, January 30, January,2009 134.50 105.00 121.11 2009 2009 218 219 4,729 December December 2, December,2008 121.00 97.70 109.45 31, 2008 2008 20 517 2,886 November 4, November November,2008 133.05 101.35 119.24 2008 28, 2008 97 6 2,147 Source: NSE website

* The average price has been computed based on the average of the daily high and low prices.

The stock market data as per the provision of clause 6.12.22 for MSE is not available as the last trading in the scrip of our Company at MSE took place on December 21, 2001 at a price of Rs 98.50.There are no quotes available from MSE for the aforesaid period. MSE vide its letter dated March 16, 2009 has confirmed the same.

Week end prices of Equity Shares of our Company for the last four weeks on NSE along with the highest and lowest price are as below:

Week ended on Closing Price Highest Price Lowest Price May 8, 2009 124.00 121.95 116.35 May 1, 2009 110.00 121.50 110.00 April 24, 2009 117.00 122.00 117.00 April 17, 2009 120.60 126.00 120.60 Source: NSE website

High/Low prices based on closing quotations on the respective Stock Exchanges.

Closing price on NSE immediately after the date on which the Issue was approved by the Board of Directors of the Company was Rs. 110.00.Closing price on MSE immediately after the date on which the Issue was approved by the Board of Directors of the Company is not applicable There are no quotes available from MSE for the aforesaid period. MSE vide its letter dated March 16, 2009 has confirmed the same.

Issues for consideration other than cash

Our Company issued 225,000 Equity Shares for consideration other than cash to Abex Corporation in January 31, 1976 for the technology support that Abex Corporation was providing our Company.

Outstanding Debentures, Bonds and Preference Shares

Except as mentioned in this DLOF our Company has no outstanding debentures, bonds or preference shares. Please refer paragraph titled “Financial Indebtedness” on page 153.

140 Investor Grievances and Redressal System

Our Company has adequate arrangements for redressal of investor complaints and well arranged correspondence system developed for letters of routine nature. The share transfer and dematerialization for our Company is being handled by the Registrar and Share Transfer Agent. Letters are filed category wise after having attended to redressal norm for response time for all correspondence including shareholders complaints is 15 days.

Investor Grievances arising out of this Issue

Our Company’s investor grievances arising out of the Issue will be handled by Integrated Enterprises (India) Limited , the Registrar to the Issue. The Registrar will have a separate team of personnel handling only our post-Issue correspondence. The agreement between our Company and the Registrar provides for retention of records with the Registrar for a period of at least one year from the last date of dispatch of Letter of Allotment / share certificate / refund order to enable the Registrar to redress the grievances of our investors.

All grievances relating to the Issue may be addressed to the Registrar to the Issue giving full details such as folio number, name and address, contact telephone / cellular phone numbers, email identity of the first applicant, number and type of shares applied for, Application Form serial number, amount paid on application and the name of the bank and the branch where the application was deposited, along with a photocopy of the acknowledgement slip. In case of renunciation, the same details of the Renouncee should be furnished.

The average time taken by the Registrar for attending to routine grievances will be 15 days from the date of receipt. In case of non-routine grievances where verification at other agencies is involved, it would be the endeavour of the Registrar to attend to them as expeditiously as possible. We undertake to resolve the Investor grievances in a time bound manner.

Investors may contact the Company Secretary and Compliance Officer in case of any pre-Issue/ post -Issue related problems such as non-receipt of letters of allotment / share certificates / Demat credit / refund orders etc. His address is as follows:

Mr. R. Mani Parthasarathy, Company Secretary and Compliance Officer Sundaram Brake Linings Limited Padi, Chennai – 600 050 Tel: +91-44-4220 5300; Fax: +91-44-4220 5572; Email: [email protected]

Allotment Letters / Refund Orders

Our Company will issue and dispatch letters of allotment / share certificates / Demat credit and / or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any, within a period of 15 days from the Issue Closing Date. Such refund orders, in the form of MICR warrants / cheques / pay order, marked “ SBLL – Rights Issue 2009 ” would be drawn in the name of a sole / first applicant and will be payable at par at all the centers where the applications were originally accepted, except for those who have opted to receive refunds through the ECS facility or RTGS or Direct Credit. If such money is not repaid within eight days from the day our Company becomes liable to pay it, our Company shall pay that money with interest at the rate of 15% p.a. as stipulated under section 73 of the Act. Letter(s) of Allotment / Refund Order(s) above the value of Rs. 1,500 will be dispatched by registered post to the sole / first applicant’s address. However, Refund Orders for values not exceeding Rs. 1,500/- shall be sent to the applicants under Certificate of Posting at the applicant’s sole risk at his address. Our Company would make adequate funds available to the Registrar to the Issue for this purpose. Adequate funds would be made available to the Registrar to the Issue for dispatch of the letters of allotment / share certificates / Demat credit / refund orders.

In case our Company issues letters of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment thereof or such extended time as may be approved by the Companies Law Board under section 113 of the Companies Act or other applicable provisions, if any. Allottees are requested to preserve such Letters of Allotment, which would be exchanged later for the share certificates.

141 TERMS OF THE ISSUE

The Equity Shares are now being issued pursuant to the Rights Issue and the Equity Shares to be allotted are subject to the terms and conditions contained in the Letter of Offer, the enclosed CAF, the Memorandum and Articles of Association of our Company, the provisions of the Act, FEMA, guidelines issued by SEBI, guidelines, notifications and regulations for issue of capital and for listing of securities issued by Government of India and/or other statutory authorities and bodies from time to time, terms and conditions as stipulated in the allotment advice or letter of allotment or security certificate and rules as may be applicable and introduced from time to time.

Authority for the Issue

This Issue is being made pursuant to the resolution as passed at the meeting of the Board of Directors of our Company under section 81(1)(a) of the Companies Act,1956 as on February 6, 2009.

Basis for the Issue

The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the shares held in the electronic form and on the Register of Members of our Company in respect of shares held in the physical form at the close of business hours on the Record Date, i.e. May 21, 2009 fixed in consultation with the Designated Stock Exchange, NSE.

Rights Entitlement Ratio

As your name appears as beneficial owner in respect of the shares held in the electronic form or appears in the register of members as an equity shareholder of our Company as on the Record Date i.e. May 21, 2009. You are entitled to the number of shares in Block I of Part A of the enclosed in the CAF.

The eligible shareholders shall be entitled to the following: 1. 9 Equity shares for every 20 Equity Shares held as on the Record Date and 2. Rights Entitlement on Equity Shares held in the pool account of the clearing members on the Record Date shall be considered, and such claimants are requested to: • Approach the concerned depository through the clearing member of the Stock Exchange with requisite details; and • Depository in turn should furnish details of the transaction to the Registrar.

Market lot

The securities of our Company are tradable only in dematerialized form. The market lot for the Equity Shares in dematerialized mode is one. In case of holding in physical form, our Company would issue one certificate for the Equity Shares allotted to one folio with a split performance.

Our Company would issue one certificate for the entire allotment. However, our Company would issue split certificates on written requests from the shareholders.

Investors may please note that the Equity Shares of our Company can be traded on the Stock Exchange in dematerialized form only.

Nomination facility

In terms of section 109A of the Act, nomination facility is available in case of Equity Shares. The applicant can nominate any person by filling the relevant details in the CAF in the space provided for this purpose.

142 A sole Equity Shareholder or first Equity Shareholder, along with other joint Equity Shareholders being individual(s) may nominate any person(s) who, in the event of the death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the Equity Shares. A person, being a nominee, becoming entitled to the Equity Shares by reason of the death of the original Equity Shareholder(s), shall be entitled to the same advantages to which he would be entitled if he were the registered holder of the Equity Shares. Where the nominee is a minor, the Equity Shareholder(s) may also make a nomination to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon the sale of the Equity Share by the person nominating. A transferee will be entitled to make a fresh nomination in the manner prescribed. When the Equity Share is held by two or more persons, the nominee shall become entitled to receive the amount only on the demise of all the holders. Fresh nominations can be made only in the prescribed form available on request at the Registered Office of our Company or such other person at such addresses as may be notified by our Company. The applicant can make the nomination by filling in the relevant portion of the CAF.

Only one nomination would be applicable for one folio. Hence, in case the Equity Shareholder(s) has / have already registered the nomination with our Company, no further nomination needs to be made for Equity Shares to be allotted in this Issue under the same folio.

In case the allotment of Equity Shares is in dematerialised form, there is no need to make a separate nomination for the Equity Shares to be allotted in this Issue. Nominations registered with respective DP of the applicant would prevail. If the applicant requires to change the nomination, they are requested to inform their respective DP.

Joint-Holders

Where two or more persons are registered as the holders of any Equity Shares, they shall be deemed to hold the same as joint-holders with benefits of survivorship subject to provisions contained in the Articles of Association of our Company.

Offer to Non-Resident Equity Shareholders/Applicants

As per regulation 6, of Notification No. FEMA 20/200-RB, dated May 3, 2000, RBI has given general permission to Indian companies to issue rights shares to non-resident shareholders including additional shares. Applications received from NRIs and non-residents for allotment of Equity Shares shall be inter alia, subject to the conditions imposed from time to time by the RBI under the Foreign Exchange Management Act, 1999 (FEMA) in the matter of refund of application moneys, allotment of Equity Shares, issue of letter of allotment / notification No. FEMA 20/200-RB dated May 3, 2000. The Board of Directors may at its absolute discretion, agree to such terms and conditions as may be stipulated by RBI while approving the allotment of Equity Shares, payment of dividend etc. to the non-resident shareholders. The rights shares purchased by non-residents shall be subject to the same conditions including restrictions in regard to the repatriability as are applicable to the original shares against which rights shares are issued.

By virtue of Circular No. 14, dated September 16, 2003, issued by RBI, overseas corporate bodies (“OCBs”) have been derecognized as an eligible class of investors and RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)) Regulations, 2003. Accordingly, OCBs shall not be eligible to subscribe to the Equity Shares. The RBI has however clarified in its circular, A.P. (DIR Series) Circular No. 44, dated December 8, 2003, that OCBs which are incorporated and are not under the adverse notice of the RBI are permitted to undertake fresh investments as incorporated non-resident entities. Further, the RBI in its Master Circular dated July 1, 2007, has stated that OCBs are not permitted to subscribe to Equity Shares of Indian companies on rights basis under the automatic route. OCBs shall not be eligible to subscribe to the Equity Shares pursuant to the Letter of Offer unless prior approval of the RBI is obtained in this regard.

Thus, OCBs desiring to participate in the Issue must obtain prior approval from the RBI. For this purpose the Issuer Company will make the requisite applications to RBI. On providing such approval to our Company the OCB shall receive the Letter of Offer and the CAF.

143 Applications received from the Non-Resident Equity Shareholders for the allotment of Equity Shares with, shall, inter alia, be subject to the conditions as may be imposed from time to time by RBI, in the matter of refund of application moneys, allotment of Equity Shares, issue of letters of allotment/ certificates/ payment of dividends etc.

In case of change of status of holders i.e. from Resident to Non-Resident, a new Demat account shall be opened for the purpose. DETAILS OF SEPARATE COLLECTING CENTRES, IF ANY, FOR NON-RESIDENT APPLICATIONS SHALL BE PRINTED ON THE CAF.

The Letter of Offer and CAF shall only be dispatched to non-resident equity shareholders with registered addresses in India.

Mode of Payment of Dividend

Dividend, if any declared by the Board and approved by our shareholders, will be paid in any of the modes permitted by the Companies Act, 1956.

Principal terms and conditions of issue of Equity Shares on rights basis

Face value

Each Equity Share shall have the face value of Rs. 10.

Issue Price

Rs. 122 per Equity share.

Entitlement

9 Equity shares for every 20 Equity Shares held as on the Record Date i.e. May 21, 2009 by our existing Shareholders.

Terms of payment

The entire amount of Rs. 122 (Rs.10 towards Share Capital and the balance towards share premium) - per Equity Share shall be payable on application. A separate cheque / draft must accompany each Application form. Payment should be made in cash (not more than Rs. 20,000) or by cheque / bank demand draft / drawn in favour of “SBLL – Rights Issue 2009” and marked “A/c Payee” on any bank (including a co-operative bank) which is situated at and is a member or a sub-member of the bankers clearing house located at the center where the CAF is accepted. Outstation cheques /money orders / postal orders will not be accepted and CAFs accompanied by such cheque / money orders / postal orders are liable to be rejected.

Where an applicant has applied for additional shares and is allotted lesser number of shares than applied for, the excess application money shall be refunded. The monies would be refunded within 15 days from the closure of the Issue, and if there is a delay beyond 8 days from the stipulated period, our Company will pay interest on the monies in terms of subsections (2) and (2A) of section 73 of the Companies Act, 1956.

Ranking of the Equity Shares

The Equity Shares shall be subject to the Memorandum and Articles of Association of our Company. The dividend payable on Equity Shares allotted in this Issue shall rank for dividend in proportion to the amount paid up. The Equity Shares allotted in this Issue, shall be pari passu with the existing Equity Shares in all respects including dividend. For further details, please refer to the section titled “Main Provisions of our Articles of Association” on page 164 of the Letter of Offer.

144 Rights of Equity Shareholders

Subject to applicable laws, Equity Shareholders shall have the following rights:

1. Right to receive dividend, if declared

2. Right to attend general meetings and exercise voting power, unless prohibited by law;

3. Right to vote on poll, either in person or proxy;

4. Right to receive offer for right shares and be allotted bonus shares if announced;

5. Right to receive surplus on liquidation;

6. Right of free transferability of share; and

7. Such other rights as may be available to a shareholder of a listed public company under the Companies Act and our Memorandum and Articles of Association of our Company and the terms of the listing agreement with the Stock Exchange.

For further details on the main provisions of our Company’s Articles of Association dealing with voting rights, dividend, forfeiture and lien, transfer and transmission and / or consolidation / splitting, please refer to the section titled “Main Provisions of our Articles of Association” on page 164 of the Letter of Offer.

Notices

All notices to the Equity Shareholder(s) required to be given by our Company shall be published in one English national daily with wide circulation, one Hindi national daily with wide circulation and one regional language daily newspaper in Chennai with wide circulation and/or, will be sent by ordinary post / to the registered holders of the Equity Share(s) at the address registered with the registrar from time to time.

Procedure for Application

The enclosed CAF for Equity Shares should be completed in all respects in its entirety before submission to the Bankers to the Issue or their designated branches as they appear in the CAF. The forms of the CAF should not be detached under any circumstances otherwise the application is liable to be rejected.

The CAF would be sent to all shareholders at their registered Indian address. In case the original CAF is not received by the applicant or is misplaced by the applicant, the applicant may request the Registrars to the Issue, Integrated Enterprises (India) Limited , for issue of a duplicate CAF, by furnishing the registered folio number, DP ID Number, Client ID Number and their full name and address.

Shareholders can also obtain a copy of the CAF from the Registrars to the Issue, Integrated Enterprises (India) Limited, from their office situated at II Floor, “Kences Towers”No.1, Ramakrishna Street, North Usman Road, T Nagar, Chennai 600017, by furnishing the registered folio number, DP ID number, Client ID number and their full name and address. Equity Shares offered to you can be renounced either in full or in part in favour of any other person or persons. The renouncees shall be entitled to apply for Equity Shares being offered through the Issue. Such renouncees can only be Indian Nationals / limited companies incorporated under and governed by the Act, statutory corporations / institutions, trusts (unless registered under the Indian Trust Act), minors (through their legal guardians), societies (unless registered under the Societies Registration Act, 1860 or any other applicable laws) provided that such trust /society is authorised under its constitution / bye laws to hold Equity Shares in a company and cannot be a partnership firm, more than three persons including joint-holders, HUF, foreign nationals (unless approved by RBI or other relevant authorities) or to any person situated or having jurisdiction where the offering in terms of the Letter of Offer could be illegal or require compliance with securities laws.

145 The CAF consists of four parts:

Part A: Form for accepting the Equity Shares and for applying for additional Equity Shares Part B: Form for renunciation of Equity Shares Part C: Form for application for renounces of Equity Shares Part D: Form for request for split application form

Options available to the Equity Shareholders

The summary of options available to the Equity Shareholder is presented below. You may exercise any of the following options with regard to the Equity Shares offered, using the enclosed CAF:

Option Option Available Action Required 1. Accept whole or part of your Fill in and sign Part A (All joint holders must sign) entitlement without renouncing the balance. 2. Accept your entitlement in full and Fill in and sign Part A including Block III relating to the apply for additional Equity Shares acceptance of entitlement and Block IV relating to additional Equity Shares (All joint holders must sign) 3. Renounce your entitlement in full to Fill in and sign Part B (all joint holders must sign) one person (Joint renouncees not indicating the number of Equity Shares renounced and exceeding three are considered as one hand over the entire CAF to the renouncee. The renouncees renounce). must fill in and sign Part C of the CAF (All joint renouncees must sign) 4. 1. Accept a part of your entitlement Fill in and sign Part D (all joint holders must sign) and renounce the balance to one or more requesting for Split Application Forms. Send the CAF to renouncee(s) the Registrar to the Issue so as to reach them on or before the last date for receiving requests for Split Forms. OR Splitting will be permitted only once.

2. Renounce your entitlement to all the On receipt of the Split Form take action as indicated Equity Shares offered to you to more than below. one renouncee i. For the Equity Shares you wish to accept, if any, fill in and sign Part A of one split CAF (only for Option 1). ii. For the Equity Shares you wish to renounce, fill in and sign Part B indicating the number of Equity Shares renounced and hand over the split CAFs to the renouncees. iii. Each of the renouncees should fill in and sign Part C for the Equity Shares accepted by them. 5. Introduce a joint holder or change the This will be treated as a renunciation. Fill in and sign sequence of joint holders Part B and the renouncees must fill in and sign Part C.

Option 1: Acceptance of the Issue in full or in part

You may accept the Issue and apply for the Equity Shares offered, either in full or in part by filing part A of the enclosed CAF. For details of submission of CAF and mode of payment please refer to the paragraph titled “Submission of Application and Mode of Payment for Rights Issue of Equity Shares” on page 150 of the Letter of Offer.

146 Option 2: Additional Equity Shares

You are eligible to apply for additional Equity Shares over and above the number of Equity Shares you are entitled to, provided that you have applied for all the Equity Shares offered without renouncing them in whole or in part in favour of any other person(s). The application for additional Equity Shares shall be considered and allotment shall be made at the sole discretion of the Board and in consultation if necessary with the Designated Stock Exchange. This allotment of additional Equity Shares will be made on an equitable basis with reference to number of Equity Shares held by you on the Record Date.

If you desire to apply for additional Equity Shares, please indicate your requirement in the place provided for additional shares in Part A of the CAF. Applications for additional Equity Shares shall be considered and allotment shall be in the manner prescribed under the paragraph titled “Basis of Allotment” on page 153 of the Letter of Offer. The renouncees applying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares.

In case of application for additional Equity Shares by Non-Resident Equity Shareholders, the allotment of additional securities will be subject to the applicable provisions of FEMA.

Where the number of additional Equity Shares applied for exceeds the number available for allotment, the allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange.

In case of change of status of holders i.e. from Resident to Non-Resident, a new demat account shall be opened for the purpose.

Option 3 & 4: Renunciation

This Issue includes a right exercisable by you to renounce the Equity Shares offered to you either in full or in part in favour of any other person or persons subject to the approval of the Board. The Right of Renunciation is attached to the Equity Shares, with 1 (One) Equity Share being allotted for every 1(One) Equity Share held. Such renouncees can only be Indian Nationals (including minor through their natural / legal guardian) / limited companies incorporated under and governed by the Act, statutory corporations / institutions, trusts (registered under the Indian Trust Act), societies (registered under the Societies Registration Act, 1860 or any other applicable laws) provided that such trust / society is authorised under its constitution / bye laws to hold Equity Shares in a company and cannot be a partnership firm, foreign nationals or nominees of any of them (unless approved by RBI or other relevant authorities) or to any person situated or having jurisdiction where the offering in terms of the Letter of Offer could be illegal or require compliance with securities laws of such jurisdiction or any other persons not approved by the Board.

Renunciation in favour of non residents / FIIs

Any renunciation from Resident Indian Shareholder(s) to Non-Resident Indian(s) or from Non-Resident Indian Shareholder(s) to other Non-Resident Indian(s) or from Non-Resident Indian Shareholder(s) to Resident Indian(s) is subject to the renouncer(s) / renouncee(s) obtaining the approval of the FIPB and / or necessary permission of the RBI, if and to the extent required, under the Foreign Exchange Management Act, 1999 (FEMA) and other applicable laws and such permissions should be attached to the CAF. Applications not accompanied by the aforesaid approval(s), wherever the same are liable to be rejected. By virtue of the Circular No. 14 dated September 16, 2003 issued by the RBI, Overseas Corporate Bodies (“OCBs”) have been derecognized as an eligible class of investors and the RBI has subsequently issued the Foreign Exchange Management (Withdrawal of General Permission to Overseas Corporate Bodies (OCBs) Regulations, 2003. Accordingly, the existing Equity shareholders of our Company who wish to renounce the same in favour of renouncees shall not renounce the same (whether for consideration or otherwise) in favour of OCB(s) except with the prior permission of RBI.

Your attention is drawn to the fact that our Company shall not allot and / or register any Equity Shares in favour of:

1. More than three persons including joint holders;

147 2. Partnership firm(s) or their nominee(s); 3. Minors (unless application is made through a guardian) ; 4. Hindu Undivided Family; (unless application is made by karta) and 5. Any Trust or Society (unless the same is registered under the Societies Registration Act, 1860 or any other applicable Trust laws and is authorized under its Constitutions to hold Equity Shares of a Company). 6. Any renounce(s) whom the Board may not approve of.

The right of renunciation is subject to the express condition that the Board / Committee of Directors shall be entitled in its absolute discretion to reject the request for allotment to renouncee(s) without assigning any reason thereof.

Part A of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used, this will render the application invalid. Submission of the enclosed CAF to the Banker to the Issue at its collecting branches specified on the reverse of the CAF with the form of renunciation (Part B of the CAF) duly filled in shall be conclusive evidence for our Company of the person(s) applying for Equity Shares in Part C to receive allotment of such Equity Shares. The renouncees applying for all the Equity Shares renounced in their favour may also apply for additional Equity Shares. Part ‘A’ must not be used by the renouncee(s) as this will render the application invalid. Renouncee(s) will also have no further right to renounce any shares in favour of any other person.

Procedure for Renunciation

To renounce all the Equity Shares offered to a shareholder in favour of one renounce

If you wish to renounce the offer indicated in Part A, in whole, please complete Part B of the CAF. In case of joint holding, all joint holders must sign Part B of the CAF. The person in whose favour renunciation has been made should complete and sign Part C of the CAF. In case of joint renouncees, all joint renouncees must sign this part of the CAF. Renouncee(s) shall not be entitled to further renounce their entitlement in favour of any other person.

To renounce in part/or renounce the whole to more than one person(s)

If you wish to either accept this offer in part and renounce the balance or renounce the entire offer in favour of two or more renouncees, the CAF must be first split into requisite number of forms. For this purpose you shall have to apply to the Registrar to the Issue.

Please indicate your requirement of Split Application Forms in the space provided for this purpose in Part D of the CAF and return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the last date of receiving requests for Split Application Forms.

On receipt of the required number of split forms from the Registrar, the procedure as mentioned in paragraph above shall have to be followed.

In case the signature of the Equity Shareholder(s), who has renounced the Equity Shares, does not agree with the specimen registered with our Company, the application is liable to be rejected.

Renouncee(s)

The person(s) in whose favour the offer is renounced should fill in and sign Part C of the Application Form and submit the entire Application Form to the Bankers to the Issue on or before the Issue Closing Date along with the application money

Option 5: Change and/or introduction of additional holders

If you wish to apply for Equity Shares jointly with any other person(s), not more than three, who is /are not already a joint holder with you, it shall amount to renunciation and the procedure as stated above for renunciation shall have to be followed. Even a change in the sequence of the name of joint holders shall amount to renunciation and the procedure, as stated above shall have to be followed.

148 However, this right of renunciation is subject to the express condition that the Board shall be entitled in its absolute discretion to reject the request for allotment from the renouncee(s) without assigning any reason thereof.

Please note that: 1. Part A of the CAF must not be used by any person(s) other than those in whose favour this Issue has been made. If used, this will render the application invalid. 2. Request for split application form should be made for a minimum of one (1) Equity Share or in multiples of one (1) Equity Share; 3. Request by the applicant for the split application form should reach our Company on or before June 8, 2009. 4. Only the person to whom the Letter of Offer has been addressed to and not the renouncee(s) shall be entitled to renounce and to apply for Split Application Forms. Forms once split cannot be split again. 5. Split form(s) will be sent to the applicant(s) by post at the applicant’s risk

Fractional Entitlement

For Equity Shares being offered on a rights basis under this Issue, if the shareholding of any of the equity shareholders is less than twenty (20) or is not in multiples of twenty (20), then the fractional entitlement of such Equity Shareholders shall be rounded up to the nearest integer. The Equity Shares needed for such rounding off shall be adjusted from the Promoter’s and Promoter Group’s entitlement at the time of allotment.

Availability of duplicate CAF

In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issue a duplicate CAF on the request of the applicant who should furnish the registered folio number / DP and Client ID number and his / her full name and address to the Registrar to the Issue. Please note that those who are making the application in the duplicate form should not utilize the original CAF for any purpose including renunciation, even if it is received / found subsequently. Thus in case the original and duplicate CAFs are lodged for subscription, allotment will be made on the basis of the duplicate CAF and the original CAF will be ignored.

Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of duplicate CAF in transit, if any.

Application on Plain Paper

An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make an application to subscribe to the Issue on plain paper, along with an Account Payee Cheque drawn on a local bank / demand draft payable at Chennai which should be drawn in favour of "SBLL-Rights Issue 2009" in case of resident shareholders and non-resident shareholders applying on non-repatriable basis and in favour of " SBLL- Rights Issue 2009-NR" in case of non-resident shareholders applying on repatriable basis and marked "A/c Payee Only" and send the same by registered post directly to the Registrar to the Issue so as to reach them on or before the closure of the Issue. The envelope should be superscribed "SBLL-Rights Issue 2009" in case of resident shareholders and non-resident shareholders applying on non-repatriable basis, and in favour of "SBLL-Rights Issue 2009 - NR" in case of non-resident shareholders applying on repatriable basis.

The application on plain paper, duly signed by the applicant(s) including joint holders, in the same order as per specimen recorded with our Company, must reach the office of the Registrar to the Issue before the Issue Closing Date and should contain the following particulars:

1. Name of Issuer, Sundaram Brake Linings Limited 2. Name and address of the Equity Shareholder including joint holders 3. Registered Folio Number/ DP ID No. and Client ID No. 4. Number of shares held as on Record Date 5. Certificate numbers and distinctive numbers, if held in physical form. 6. Number of rights Equity Shares entitled

149 7. Number of rights Equity Shares applied for 8. Number of additional Equity Shares applied for, if any 9. Total number of Equity Shares applied for 10. Total amount paid on application at the rate of Rs. 122/- per Equity Share 11. Particulars of cheque / demand draft 12. Savings / Current Account Number and name and address of the bank where the Equity Shareholder will be depositing the refund order. 13. Signature of Equity Shareholders to appear in the same sequence and order as they appear in the records of our Company. 14. In case of Non Resident Shareholders, NRE/ FCNR/ NRO A/c No. Name and Address of the Bank and Branch; 15. If payment is made by a draft purchased from NRE/ FCNR/ NRO A/c No., as the case may be, an Account debit certificate from the bank issuing the draft, confirming that the draft has been issued by debiting NRE/ FCNR/ NRO Account.

Attention of the shareholders is drawn to the fact that those Shareholders making the application otherwise than on the CAF (i.e. on a plain paper as stated above) shall not be entitled to renounce their rights and should not utilise the CAF for any purpose including renunciation even if it is received subsequently. In case the original and duplicate CAFs and application on the plain paper or any two of these applications are lodged or if any shareholder violates any of these requirements, our Company will have the absolute right to reject any one or both of his / her / their application and refund the application money received. However, our Company is not liable to pay any interest whatsoever on money so refunded.

For further details, please refer to the paragraph titled “Submission of Application and Mode of Payment for Rights Issue of Equity Shares” on page 150 of the Letter of Offer.

Please note: In case of applications for a total value of Rs, 50,000 or more, each of the applicants, should mention his/her PAN/GIR NO and Income Tax circle/ Ward/ District. Also submit a photocopy of the PAN card(s) or a communication from the Income Tax authority indicating allotment of PAN (“PAN Communication”) along with the application.. Applicants who do not have PAN are required to provide a declaration in Form 60/ Form 61 prescribed under the I.T. Act along with the application. Applications without this photocopy/ PAN Communication/declaration will be considered incomplete and are liable to be rejected.

SUBMISSION OF APPLICATION & MODE OF PAYMENT FOR RIGHTS ISSUE OF EQUITY SHARES

Resident Equity Shareholders/ Applicants

1. Applicants who are applying through CAF and residing at places where the bank collection centres have been opened by our Company for collecting applications, are requested to submit their applications at the corresponding collection centre together with a cash / local cheque / demand draft (net of bank charges), for the full application amount favouring " SBLL-Rights Issue 2009" and marked ‘A/c Payee only’. 2. Applicants who are applying through CAF and residing at places other than places where the bank collection centres have been opened for collecting applications, are requested to send their applications together with a cheque / demand draft (net of bank and postal charges) for the full application amount favouring " SBLL-Rights Issue 2009" and marked ‘A/c Payee only’ payable at Chennai directly to the Registrar to the Issue by registered post so as to reach them on or before the Issue Closing Date. Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any. 3. Applicants who are applying on plain paper, are requested to send their applications on plain paper together with cash /local cheque/demand draft (net of bank and postal charges), for the full application amount favouring "SBLL-Rights Issue 2009" and marked ‘A/c Payee only’ payable at Chennai directly to the Registrar to the Issue by registered post so as to reach them on or before the Issue Closing Date. Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of applications in transit, if any.

150

Non-Resident Equity Shareholders / Applicants

Application with repatriation benefits

Non-Resident Equity Shareholders / Applicants, applying on a repatriation basis, are required to submit the completed CAF / application on plain paper, as the case may be, alongwith the payment made through any of the following ways:

1. By Indian Rupee drafts purchased from abroad or funds remitted from abroad (submitted along with Foreign Inward Remittance Certificate); or

2. By cheque / bank drafts remitted through normal banking channels or out of funds held in Non--Resident External Account (NRE) or FCNR Account maintained with banks authorized to deal in foreign currency in India, along with documentary evidence in support of remittance; or

3. FIIs registered with SEBI must remit funds from special non-resident rupee deposit account.

4. For Equity Shareholders / Applicants , applying through CAF, the CAF is to be sent at the bank collection centre specified in the CAF along with cheques/drafts in favour of "SBLL-Rights Issue 2009" payable at Chennai and crossed ‘A/c Payee only’ for the amount payable.

5. For Equity Shareholders / Applicants, applying on a plain paper, the applications are to be directly sent to the Registrar to the Issue by registered post along cheques/drafts in favour of "SBLL-Rights Issue 2009" payable at Chennai and crossed ‘A/c Payee only’ for the amount payable so as to reach them on or before the Issue Closing Date.

A separate cheque or bank draft must accompany each application form. Applicants may note that where payment is made by drafts purchased from NRE / FCNR accounts as the case may be, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE / FCNR account should be enclosed with the CAF. In the absence of the above the application shall be considered incomplete and is liable to be rejected.

In the case of NRIs who remit their application money from funds held in FCNR / NRE Accounts, refunds and other disbursements, if any shall be credited to such account details of which should be furnished in the appropriate columns in the CAF. In the case of NRIs who remit their application money through Indian Rupee Drafts from abroad, refunds and other disbursements, if any will be made in any convertible foreign currency at the rate of exchange prevailing at such time subject to the permission of RBI. Our Company will not be liable for any loss on account of exchange rate fluctuation for converting the Rupee amount into any convertible foreign currency or for collection charges charged by the applicant’s Bankers.

Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of application in transit, if any.

Payments through Non Resident Ordinary Account [NR(O)a/c] will not be permitted.

Application without repatriation benefits

For non-residents Equity Shareholders / Applicants applying on a non-repatriation basis, in addition to the modes specified above, payment may also be made by way of cheque drawn on Non-Resident (Ordinary) Account or Rupee Draft purchased out of NRO Account. In such cases, the allotment of Equity Shares will be on non- repatriation basis.

For Equity Shareholders/Applicants, applying through CAF, the CAF is to be sent at the bank collection centre specified in the CAF along with cheques/demand drafts drawn net of bank and postal charges in favour of "SBLL- Rights Issue 2009" payable at Chennai and crossed ‘A/c Payee only’ for the amount payable.

151

For Equity Shareholders / Applicants, applying on a plain paper, the applications are to be directly sent to the Registrar to the Issue by registered post along with cheques / demand drafts net of bank and postal charges drawn in favour of "SBLL-Rights Issue 2009” payable at Chennai so as to reach them on or before the Issue Closing Date.

If the payment is made by a draft purchased from an NRO account, an Account Debit Certificate from the bank issuing the draft, confirming that the draft has been issued by debiting the NRO account, should be enclosed with the CAF. In the absence of the above, the application shall be considered incomplete and is liable to be rejected.

Our Company or the Registrar to the Issue will not be responsible for postal delays or loss of application in transit, if any

Note: 1. In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to Income Tax Act, 1961. 2. In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity Shares cannot be remitted outside India. 3. The CAFs duly completed together with the amount payable on application must be deposited with the collecting bank indicated on the reverse of the CAFs before the close of business hours on or before the Issue Closing Date. 4. Separate cheque or bank draft must accompany each CAF. 5. In case of an application received from non-residents, allotment, refunds and other distribution, if any, will be made in accordance with the guidelines / rules prescribed by RBI as applicable at the time of making such allotment, remittance and subject to necessary approvals.

Last date of Application

The last date for submission of the duly filled in CAF is June 17, 2009. The Issue will be kept open for a minimum of 15 days and the Board or any committee thereof will have the right to extend the said date for such period as it may determine from time to time but not exceeding 30 days from the Issue Opening Date.

If the CAF together with the amount payable is not received by the Banker to the Issue / Registrar to the Issue on or before the close of banking hours on the aforesaid last date or such date as may be extended by the Board, the offer contained in the Letter of Offer shall be deemed to have been declined and the Board shall be at liberty to dispose off the Equity Shares hereby offered, as provided under the paragraph titled “Basis of Allotment” on page 153 of the Letter of Offer.

General

Applications should be made only on the prescribed CAFs provided by our Company and should be complete in all respects. In case an application is rejected in full, the whole of the application money received will be refunded within 15 days from the closure of the Issue without interest and after deducting bank charges. Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money due on Equity Shares, will be refunded without interest and after deduction of bank charges to the applicant within 15 days from the closure of the Issue.

Our Company will not allot any Equity Shares in favour of: 1. more than three persons as joint holders (including the first holder), in the case of renouncees 2. a partnership firm 3. a trust or society (unless such trust or society is registered under the Societies Registration Act, 1860 and it is authorised under its Memorandum & Articles of Association and/or its Rules & Bye Laws to hold shares in a company) 4. a minor (unless application is made through a guardian) 5. HUF (unless the application is made by the Karta) 6. any renouncee(s) whom the Board may not approve of

152

In case the applicants in the above categories are already shareholders of our Company, they will be eligible for their entitlement. In case of applications made under a Power of Attorney (POA) or by Limited Companies or Bodies Corporate or Societies, a certified true copy of the relevant POA or the relevant resolution or authority to make the application as the case may be, along with the copy of the Memorandum & Articles of Association and / or Bye laws must be lodged for scrutiny giving the serial number of the CAF with the Registrars to the issue, simultaneously with the submission of the CAF failing which the application is liable to be rejected. In case the POA is already registered with our Company, the same need not be furnished again. However, the serial number under which the POA has been registered with our Company, must be mentioned below the signature(s) of the concerned applicants(s).

The CAF must be filled in English in BLOCK LETTERS.

In case of joint holders, all joint holders must sign the CAF at the appropriate places in the same order as per specimen signatures recorded in the Register of Members of our Company / Depository.

Signatures in languages other than those prescribed in the 8th Schedule of the Constitution of India and thumb impressions must be attested by a Magistrate or a Notary Public or a Special Executive magistrate under his/her official seal.

In case of renouncee(s), the name of the applicant(s), details of occupation, address and father’s / husband’s name must be filled in Block Letters.

The CAF must be submitted to the Collection Centres as mentioned in the CAF/ Registrar to the Issue, as the case may be, in its entirety. If any of the parts A, B, C, D and the acknowledgement of the CAF is / are detached or separated, such applications will be rejected forthwith.

Any dispute or suit or action or proceeding arising out of or in relation to the Letter of Offer or this Issue or in respect of any matter or thing contained therein and any claim by either party against the other shall be instituted or adjudicated upon or decided solely by the appropriate Court in Chennai.

All communications in connection with your application for the Equity Shares should be addressed to the Registrars to the Issue.

Basis of Allotment

Subject to the provisions contained in the Letter of Offer, the Articles of Association of our Company and the approval of the Designated Stock Exchange, the Board will proceed to allot our Equity Shares in the following order of priority: i) Full allotment to those Equity Shareholders who have applied for their rights entitlement either in full or in part and also to the renouncee(s) who has/ have applied for Equity Shares renounced in their favour, in full or in part. ii) Allotment to the Equity Shareholders who having applied for all the Equity Shares offered to them as part of the Issue and have also applied for additional Equity Shares, the allotment of such additional Equity Shares will be made as far as possible on an equitable basis having due regard to the number of Equity Shares held by them, provided there is an under-subscribed portion after making full allotment in (i) above. The allotment of such Equity Shares will be at the sole discretion of the Board / duly authorised committee of Directors in consultation with the Designated Stock Exchange, as a part of the Issue and not preferential allotment. iii) Allotment to the renouncees who having applied for all the Equity Shares renounced in their favour have also applied for additional Equity Shares, provided there is an under-subscribed portion after making full allotment in (i) and (ii) above. The allotment of such additional Equity Shares will be made on proportionate basis at the sole discretion of the Board / duly authorised committee of Directors but in consultation with the Designated Stock Exchange, as a part of the Issue and not as a preferential allotment.

After taking into account allotment to be made under (i) above, if there is any undersubscribed portion, the same would be available for allocation under (ii) and (iii) above.

153

Listing and Trading of the Equity Shares proposed to be Issued

Our Company’s existing Equity Shares are currently listed and admitted for trading on the NSE and MSE under the ISIN No. INE 073D01013. The fully paid up Equity Shares proposed to be issued on a rights basis shall be listed and admitted for trading on the NSE under the ISIN No. INE 073D01013 for fully paid Equity Shares of our Company. The fully paid up Equity Shares allotted pursuant to this Issue will be listed as soon as practicable but in no case later than 7 working days from the date of allotment.

Allotment and refund orders

All the pay orders / refund orders and Letter(s) of Allotment / Share Certificates will be dispatched within six weeks of the date of closure of issue to the first named / sole applicant at his / her own risk. The Refund Orders will be payable at par in India at all the centres where the applications were originally accepted. The instruments will be marked “Account Payee Only” and in the name of the sole/ first applicant. Bank charges, if any, for encashing such refund orders / pay orders will be payable by the applicants. The Company undertakes that the requisite funds will be made available to the Registrar for complying with the requirement of dispatch of refund orders / allotment letters. The Company shall ensure dispatch of refund orders of value over Rs.1,500/- by Registered Post only and adequate funds will be made available to the Registrar. The Company undertakes to dispatch share certificates/refund orders, complete demat credits and submit the allotment and listing documents to the Stock Exchange within 2 working days of the finalisation of the basis of allotment. Further, the Company undertakes to ensure that all steps for completion of the necessary formalities for listing and commencement of trading at the Stock Exchange where the securities are to be listed are taken within 7 working days of finalisation of basis of allotment.

Printing of Bank Particulars on Refund Orders

As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement, the particulars of the applicant’s bank account are mandatorily required to be given for printing on the refund orders. Bank account particulars will be printed on the refund orders which can then be deposited only in the account specified. Our Company will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery or fraud.

Mode of Refund

Applicants should note that on the basis of name of the Applicants, Depository Participant’s name, Depository Participant-Identification number and Beneficiary Account Number provided by them in the CAF, the Registrar to the Issue will obtain from the Depository the Applicant’s bank account details including nine digits MICR code. Hence, Applicants are advised to immediately update their bank account details as appearing on the records of the depository participant. Please note that failure to do so could result in delays in credit of refunds to Applicants at the Applicants sole risk and neither the Lead Manager nor the Bank shall have any responsibility and undertake any liability for the same.

The payment of refund, if any, would be done through various modes in the following order of preference –

i. Direct Credit - For investors having their Bank Account with the Banker to the Issue, the refund amount would be credited directly to their Bank Account with the Banker to the Issue. ii. RTGS - Investors desirous of taking direct credit of refund through RTGS, will have to provide the IFSC code in the CAF. iii. ECS - Payment of refund would be done through ECS for applicants residing at one of the 15 centres, namely Ahmedabad, Bangalore, Bhuvaneshwar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram, where clearing houses for ECS are managed by RBI. This would be subject to availability of complete Bank Account Details including MICR code from the depository.

154 For all the other applicants except for whom payment of refund is possible through I, II and III, the refund orders would be dispatched “Under Certificate of Posting” for refund orders less than Rs. 1500/- and through Speed Post/ Registered Post for refund orders exceeding Rs. 1500/-.

Shareholder’s Depository Account and Bank details

Shareholder’s applying for shares in Demat mode should note that on the basis of the name of the shareholder(s), Depository Participant’s Name, Depository Participant’s Identification Number and Beneficiary Account Number provided by them in the CAF, the Registrars to the Issue will obtain from the Depository the demographic details including the address, Shareholders bank account details, MICR code and occupation (hereinafter referred to as ‘Demographic Details’). These bank account details would be used for giving refunds to the shareholder(s). Hence, the shareholder(s) are requested to immediately update their bank account details as appearing in the records of the Depository Participant. Please note that failure to do so could result in delays in dispatch / credit of refunds to the shareholder(s) at the shareholder(s) sole risk and neither the Lead Manager’s or the Registrars or the Refund Bankers nor our Company shall have any responsibility and undertake any liability for the same. Hence, applicants should carefully fill their Depository Account details in the CAF.

These demographic details would be used for all correspondences with the shareholder(s) including mailing of Allotment advice and printing of bank particulars on the refund order or for refunds through electronic transfer of funds, as applicable. By signing the CAF the shareholder(s) would be deemed to have authorized the depositories to provide, upon request, to the Registrar to the Issue, the required Demographic Details as available in its records.

In case of Shareholder(s) receiving refunds through electronic transfer of funds, delivery of refund orders / allocation advice gets delayed if the same once sent to the address obtained from the depositories are returned undelivered.

Option to receive Equity Shares in Dematerialised Form

Applicants to the Equity Shares of our Company issued through this Issue shall be allotted the securities in dematerialised (electronic) form at the option of the applicant. Our Company has signed agreements dated February 20, 2001 and February 21, 2001 with NSDL and CDSL respectively, which enables the Investors to hold and trade in securities in a dematerialised form, instead of holding the securities in the form of physical certificates.

In this Issue, the allottees who have opted for Equity Shares in dematerialised form will receive their Equity Shares in the form of an electronic credit to their beneficiary account with a depository participant. The CAF shall contain space for indicating number of shares applied for in demat and physical form or both. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF. Applications, which do not accurately contain this information, will be given the securities in physical form. Separate applications for securities in physical and /or dematerialized form should be made. Separate applications are made, the application for physical securities will be treated as multiple applications and is liable to be rejected. In case of partial allotment, allotment will be done in demat option for the shares sought in demat and balance, if any, will be allotted in physical shares.

The Equity Shares of our Company will be listed on the NSE

Procedure for availing the facility for allotment of Equity Shares in this Issue in the electronic form is as under:

1. Open a beneficiary account with any depository participant (care should be taken that the beneficiary account should carry the name of the holder in the same manner as is exhibited in the records of our Company. In the case of joint holding, the beneficiary account should be opened carrying the names of the holders in the same order as with our Company). In case of Investors having various folios in our Company with different joint holders, the Investors will have to open separate accounts for such holdings. Those Equity Shareholders who have already opened such Beneficiary Account (s) need not adhere to this step.

2. For Equity Shareholders already holding Equity Shares of our Company in dematerialized form as on the Record Date, the beneficial account number shall be printed on the CAF. For those who open accounts later or those who change their accounts and wish to receive their Equity Shares by way of credit to such account, the

155 necessary details of their beneficiary account should be filled in the space provided in the CAF. It may be noted that the allotment of Equity Shares arising out of this Issue may be made in dematerialized form even if the original Equity Shares of our Company are not dematerialized. Nonetheless, it should be ensured that the Depository Account is in the name(s) of the Equity Shareholders and the names are in the same order as in the records of our Company.

Responsibility for correctness of information (including applicant’s age and other details) filled in the CAF vis-à-vis such information with the applicant’s depository participant, would rest with the applicant. Applicants should ensure that the names of the applicants and the order in which they appear in CAF should be the same as registered with the applicant’s depository participant.

If incomplete / incorrect beneficiary account details are given in the CAF or where the investor does not opt to receive the Rights Equity shares in dematerialized form, the applicant will get Equity Shares in physical form.

Applicants must necessarily fill in the details (including the beneficiary account number or client ID number) appearing in the CAF under the heading ‘Request for shares in Electronic Form’.

Applicants should ensure that the names of the Applicants and the order in which they appear in the CAF should be the same as registered with the Applicant’s depository participant.

The Rights Equity Shares pursuant to this Issue allotted to investors opting for dematerialized form, would be directly credited to the beneficiary account as given in the CAF after verification. Allotment advice, refund order (if any) would be sent directly to the applicant by the Registrar to the Issue but the applicant’s depository participant will provide to him the confirmation of the credit of such Equity Shares to the applicant’s depository account.

Renouncees will also have to provide the necessary details about their beneficiary account for allotment of securities in this Issue. In case these details are incomplete or incorrect, the application is liable to be rejected.

Renouncees can also exercise the option to receive Equity Shares in the demat form by indicating in the relevant column in the CAF and providing the necessary details about their beneficiary account. It may be noted that Equity Share arising out of this Issue can be received in demat form even if the existing Equity Shares are held in physical form. Nonetheless, it should be ensured that the depository participant account is in the name of the Applicant(s) in the same order as per specimen signatures appearing in the records of the depository participant / Company. It may be noted that shares in electronic form can be traded only on the Stock Exchange having electronic connectivity with NSDL or CDSL.

Dividend or other benefits with respect to the Equity Shares held in dematerialised form would be paid to those Equity Shareholders whose names appear in the list of beneficial owners given by the depository participant to our Company as on the Record Date.

INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF OUR COMPANY CAN BE TRADED ON THE STOCK EXCHANGE ONLY IN DEMATERIALIZED FORM.

III. General Instruction

Payment by Stockinvest

In terms of RBI Circular DBOD No. FSC BC 42/24.47.00/2003- 04 dated November 5, 2003, the Stockinvest Scheme has been withdrawn with immediate effect. Hence, payment through Stockinvest would not be accepted in this Issue

Underwriting

The present Issue is not underwritten.

156

Issue Period

ISSUE OPENS LAST DATE FOR REQUEST FOR SPLIT APPLICATION ISSUE CLOSES ON FORMS ON June 3 , 2009 June 8 , 2009 June 17, 2009

Minimum Subscription

Arrangement for odd lot Equity Shares

Our Company has not made any arrangements for the disposal of odd lot Equity Shares arising out of this Issue. Our Company will issue a consolidated certificate for the number of shares allotted to the Equity Shareholder. For Equity Shares being offered on a rights basis under this Issue, if the shareholding of any of the equity shareholders is less than twenty (20) or is not in multiples of twenty (20), then the fractional entitlement of such Equity Shareholders shall be rounded up to the nearest integer. The Equity Shares needed for such rounding off shall be adjusted from the Promoter’s and Promoter Group’s entitlement at the time of allotment.

Allotment Schedule

1. Our Company agrees that as far as possible allotment of securities offered to the shareholders shall be made within 15 days from the date of the closure of the Issue.

2. Our Company further agrees that it shall pay interest @ 15% per annum for the delayed period if the allotment has not been made and/or allotment letters / the refund orders have not been despatched to the applicants/ refund instruction beyond 8 days from the date specified above.

157 Disposal of applications and application money

No separate receipt will be issued for application money received. However, the collection centres as listed in the CAF, will acknowledge its receipt by stamping and returning the acknowledgement slip at the bottom of each CAF. In the event of shares not being allotted in full, the excess amount paid on application will be refunded to the applicant or the refund instructions will be given within 2 working days from the date of finalisation of basis of allotment.

The Board reserves its full, unqualified and absolute right to accept or reject any application in whole or in part and in either case without assigning any reason therefore. In case an application is rejected in full the whole of the application money received will be refunded to the applicant. Where an application is rejected in part, the excess application money, if any will be refunded to the applicant.

For further instruction, please read the Composite Application Form (CAF) carefully.

Unsubscribed Equity Shares

The unsubscribed portion, if any of the Equity Shares offered to the shareholders, after considering the application for Rights / Renunciation and additional Equity Shares, as above, shall be disposed by the Board of our Company or Committee of Directors authorised in this behalf by the Board of our Company at their full discretion and absolute authority, in such manner as they think most beneficial to our Company and the decision of the Board of our Company or Committee of Directors in this regard shall be final and binding. In case the Company issues Letter(s) of Allotment, the relative Share Certificate(s) will be kept ready within 3 months from the date of allotment thereof or such extended time as may be approved by the Company Law Board or other applicable provisions, if any. Allottees are requested to preserve such Letters of Allotment, which would be exchanged later for Share Certificate(s).

General instructions for applicants

a) Please read the instructions printed on the enclosed CAF carefully.

b) Application should be made on the printed CAF, provided by our Company except as mentioned under the head “Application on Plain Paper” and should be completed in all respects. The CAF found incomplete with regard to any of the particulars required to be given therein, and / or which are not completed in conformity with the terms of the Letter of Offer are liable to be rejected and the money paid, if any, in respect thereof will be refunded without interest and after deduction of bank commission and other charges, if any. The CAF must be filled in English and the names of all the applicants, details of occupation, address, father’s / husband’s name must be filled in block letters.

c) Payments should be made in cash /cheque /demand draft drawn on any bank which is situated at and is a member of sub-member of the banker’s clearing house located at the centre where application is accepted. Outstation cheques / demand drafts will not be accepted and application(s) accompanied by such cheques /demand drafts will be rejected. The Registrar will not accept cash along with CAF.

d) The CAF together with cheque / demand draft should be sent to the Bankers to the Issue / Collecting Bank or to the Registrar to the Issue and not to our Company or Lead Manager to the Issue. Applicants residing at places other than cities where the branches of the Bankers to the Issue have been authorised by our Company for collecting applications, will have to make payment by Demand Draft payable at Chennai of amount net of bank and postal charges, and send their application forms to the Registrar to the Issue by REGISTERED POST. If any portion of the CAF is / are detached or separated, such application is liable to be rejected.

e) PAN Number: Whenever the application(s) is / are made, the applicant or in the case of an application in joint names, each of the applicants, should mention his / her Permanent Account Number (PAN) allotted under the IT Act. The copy of the PAN card or PAN allotment letter is not required to be submitted with the CAF. Applications without this information and documents will be considered incomplete and are liable

158 to be rejected. It is to be specifically noted that Applicant should not submit the GIR number instead of the PAN as the application is liable to be rejected on this ground. In terms of SEBI Circular bearing no. MRD/DoP/Cir-20/2008 dated June 30, 2008, certain categories of investors (namely the Central Government, State Government, and the officials appointed by the courts e.g. Official liquidator, Court receiver etc. (under the category of Government)) shall be exempted from submitting their PAN, only if such organisations submit sufficient documentary evidence to support the veracity of their claim for such exemption. f) Bank Account Details: It is mandatory for applicants to provide information as to their savings / current account number and the name of the bank with whom such account is held in the CAF to enable the Registrar to the Issue to print the said details in the refund orders, if any, after the names of the payees. Application not containing such details is liable to be rejected. Shareholders may please note that for shares held in DEMAT mode, the bank account details shall be obtained from the depositories. Shareholders may ensure that the bank account details are updated with the depositories. g) Payment by cash: The payment against the application should not be effected in cash if the amount to be paid is Rs. 20,000 or more. In case payment is effected in contravention of this, the application may be deemed invalid and the application money will be refunded and no interest will be paid thereon. Payment against the application if made in cash, subject to conditions as mentioned above, should be made only to the Bankers to the Issue. h) Signatures should be either in English or Hindi or in any other language specified in the Eighth Schedule to the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The Equity Shareholders must sign the CAF as per the specimen signature recorded with our Company or depositories. i) In case of an application under power of attorney or by a body corporate or by a society, a certified true copy of the relevant power of attorney or relevant resolution or authority to the signatory to make the relevant investment under this Issue and to sign the application and a copy of the Memorandum and Articles of Association and / or bye laws of such body corporate or society must be lodged with the Registrar to the Issue giving reference of the serial number of the CAF. In case the above referred documents are already registered with our Company, the same need not be a furnished again. In case these papers are sent to any other entity besides the Registrar to the Issue or are sent after the Issue Closing Date, then the application is liable to be rejected. In no case should these papers be attached to the application submitted to the Bankers to the Issue. j) In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as per the specimen signature(s) recorded with our Company. Further, in case of joint applicants who are renouncees, the number of applicants should not exceed three. In case of joint applicants, reference, if any, will be made in the first applicant’s name and all communication will be addressed to the first applicant. k) Application(s) received from Non-Resident / NRIs, or persons of Indian origin residing abroad for allotment of Equity Shares shall, inter alia , be subject to conditions, as may be imposed from time to time by the RBI under FEMA in the matter of refund of application money, allotment of Equity Shares, subsequent issue and allotment of Equity Shares, interest, export of share certificates, etc. In case a Non- Resident or PIO/NRI Equity Shareholder has specific approval from the RBI, in connection with his shareholding, he should enclose a copy of such approval with the CAF. l) All communication in connection with application for the Equity Shares, including any change in address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of allotment in the Issue quoting the name of the first / sole applicant Equity Shareholder, folio numbers and CAF number. Please note that any intimation for change of address of Equity Shareholders, after the date of allotment, should be sent to Registrar to our Company: Integrated Enterprises (India) Limited, II Floor, “Kences Towers”No.1, Ramakrishna Street, North Usman Road, T.Nagar, Chennai 600 017, in the case of Equity Shares held in physical form and to the respective depository participant, in case of Equity Shares held in dematerialized form.

159

m) Split Application Forms cannot be re-split.

n) Only the person or persons to whom Equity Shares have been offered and not renouncee(s) shall be entitled to obtain split forms.

o) Applicants must write their CAF number at the back of the cheque / demand draft.

p) Only one mode of payment per application should be used. The payment must be either in cash or by cheque / demand draft drawn on any of the banks, including a co-operative bank, which is situated at and is a member or a sub member of the Bankers Clearing House located at the centre indicated on the reverse of the CAF where the application is to be submitted.

q) A separate cheque / draft must accompany each CAF. Outstation cheques / demand drafts or post-dated cheques and postal / money orders will not be accepted and applications accompanied by such cheques / demand drafts / money orders or postal orders will be rejected. The Registrar will not accept payment against application if made in cash. (For payment against application in cash please refer point (f) above)

r) No receipt will be issued for application money received. The Bankers to the Issue / Collecting Bank/ Registrar will acknowledge receipt of the same by stamping and returning the acknowledgment slip at the bottom of the CAF.

Grounds for Technical Rejections

Applicants are advised to note that applications are liable to be rejected on technical grounds, including the following:

1. CAFs, which are not completed or are not accompanied with the application money payable, are liable to be rejected;

2. Amount paid does not tally with the amount payable for;

3. In case of physical shareholders, bank account details (for refund) are not given;

4. Age of first applicant not given;

5. PAN allotted under the IT Act has not been mentioned by the applicant;

6. In case of Application under power of attorney or by limited companies, corporate, trust, etc., relevant documents are not submitted;

7. If the signature of the existing shareholder does not match with the one given on the Application Form and for renouncees if the signature does not match with the records available with their depositories;

8. If the Applicant desires to receive Equity Shares in electronic form, but the CAF does not have the Applicant’s depository account details;

9. CAF are not submitted by the Applicants within the time prescribed as per the CAF and the Letter of Offer;

10. Applications not duly signed by the sole/joint Applicants;

11. Applications by OCBs unless approved by RBI;

12. Applications accompanied by Stockinvest;

160 13. In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the Applicants (including the order of names of joint holders), the Depositary Participant’s identity (DP ID) and the beneficiary’s identity;

Disposal of application and application money

No acknowledgment will be issued for the application moneys received by our Company. However, the Bankers to the Issue / Registrar to the Issue receiving the CAF will acknowledge its receipt by stamping and returning the acknowledgment slip at the bottom of each CAF.

The Board reserves its full, unqualified and absolute right to accept or reject any application, in whole or in part, and in either case without assigning any reason thereto.

In case an application is rejected in full, the whole of the application money received will be refunded. Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money due on Equity Shares allotted, will be refunded to the applicant within six weeks from the close of the Issue in accordance with section 73 of the Companies Act, 1956.

For further instruction, please refer to the paragraph titled “Options available to the Equity Shareholders” on page 146 of the Letter of Offer.

Utilisation of Issue Proceeds

The Board of Directors declares that:

i. The funds received against this Issue will be transferred to a separate bank account other than the bank account referred to sub-section (3) of section 73 of the Companies Act, 1956.

ii. Details of all moneys utilised out of the Issue shall be disclosed under an appropriate separate head in the balance sheet of our Company indicating the purpose for which such moneys has been utilised.

iii. Details of all such unutilised moneys out of the Issue, if any, shall be disclosed under an appropriate separate head in the balance sheet of our Company indicating the form in which such unutilised moneys have been invested.

The funds received against this Issue will be kept in a separate bank account and our Company will not have any access to such funds unless it satisfies the Designated Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of this Issue has been received by our Company.

Interest in Case of Delay in Dispatch of Allotment Letters/ Refund Orders

Our Company will issue and dispatch letters of allotment/ share certificates and/ or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any within a period of six weeks from the date of closure of the Issue. If such money is not repaid within 8 days from the day our Company becomes liable to pay it, our Company shall pay that money with interest at the rate of 15% per annum as stipulated under section 73 of the Act, 1956.

Our Company agrees that as far as possible the allotment of the Equity Shares shall be made within 15 days of the closure of Issue.

Undertakings by our Company

1. The complaints received in respect of the Issue shall be attended to by our Company expeditiously and satisfactorily.

161 2. All steps for completion of the necessary formalities for listing and commencement of trading at the Stock Exchange where the securities are to be listed will be taken within seven working days of finalization of basis of allotment.

3. The funds required for dispatch of refund orders/ allotment letters/ certificates by registered post or any other mode disclosed in the Letter of Offer shall be made available to the Registrar to the Issue.

4. Where refunds are made through electronic transfer of funds, a suitable communication shall be sent to the investors within 15 days of closure of the Issue giving details of the bank where refunds shall be credited along with the amount and expected date of electronic credit of refund.

5. The certificates of the securities/ refund orders to the valid applicants shall be dispatched within the specified time.

6. Except as mentioned in the section titled “Capital Structure” on page 14 of the Letter of Offer, no further issue of securities affecting equity capital of our Company shall be made till the securities issued/offered through the Issue are listed or till the application moneys are refunded on account of non-listing, under-subscription etc.

7. Our Company accepts full responsibility for the accuracy of information given in the Letter of Offer and confirms that to best of its knowledge and belief, there are no other facts the omission of which makes any statement made in the Letter of Offer misleading and further confirms that it has made all reasonable enquiries to ascertain such facts.

8. All information shall be made available by the Lead Manager and the Issuer to the investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road shows, presentations, in research or sales reports etc.

162 Important

1. Please read the Letter of Offer carefully before taking any action. The instructions contained in the accompanying CAF are an integral part of the conditions of the Letter of Offer and must be carefully followed; otherwise the application is liable to be rejected.

2. All enquiries in connection with the Letter of Offer or accompanying CAF and requests for Split Application Forms must be addressed (quoting the Registered Folio Number/ DP and Client ID number, the CAF number and the name of the first Equity Shareholder as mentioned on the CAF and superscribed "SBLL-Rights Issue 2009” on the envelope) to the Registrar to the Issue at the following address:

Integrated Enterprises (India) Limited, II Floor, “Kences Towers”No.1, Ramakrishna Street, North Usman Road, T.Nagar, Chennai 600 017

3. It is to be specifically noted that this Issue of Equity Shares is subject to the section titled “Risk Factors” on page vi of the Letter of Offer. Our Company will not be liable for any postal delays and applications received through mail after the closure of the Issue, are liable to be rejected and returned to the applicants.

4. The Issue will not be kept open for more than 15 days unless extended, in which case it will be kept open for a maximum of 30 days.

163 SECTION VIII – MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION

Pursuant to Schedule II of the Companies Act and the SEBI Guidelines, the main provisions of the Articles of Association relating to voting rights, dividend, lien, forfeiture, restrictions on transfer and transmission of Equity Shares or debentures and/or on their consolidation/splitting are detailed below. Please note that each provision herein below is numbered as per the corresponding article number in the Articles of Association and capitalized/defined terms herein have the same meaning given to them in the Articles of Association

TABLE ‘A’ EXCLUDED

Article 2(i)

Regulations contained in Table ‘A’ in the First Schedule to the Companies Act, 1956, shall apply so far and so far only as they are not inconsistent with any of the provisions contained in these Articles.

CAPITAL

Article 3 a. The Authorized Capital of the Company is Rs. 5,00,00,000/- (Rupees Five crores) divided into 50,00,000 (Fifty Lakhs) Equity Shares of Rs. 10/- each. b. The Company shall have power to issue Preference Shares including Redeemable Preference Shares upon such terms and conditions as the Board may determine. c. The Board may issue and allot shares in the capital of the Company as payment or part payment for any property sold or goods transferred or machinery or appliances supplied, or for services rendered to or to be rendered to the Company in or about the formation or promotion of the Company or the acquisition and/or conduct of its business, and any shares may be so allotted credited as fully paid-up shares, or credited as partly paid-up shares. “PROVIDED that an option or right to call of any shares shall not be given to any person except with the sanction of the Company in General Meeting”.

CERTIFICATE

Article 4

Every Person whose name is entered as a Member in the Register of Members shall be entitled to receive within two months from the date of application for registration of transfer or three months from the date of allotment:

(i) one certificate for all his shares without payment, or (ii) Several certificates each for one or more market lot of shares held by any member.

Article 5 a. Any person (whether the registered holder of the shares or not ) being in possession of any Share Certificate of Share Certificates for the time being may surrender the Share Certificate to the Company and apply to the Company for the issue of tow or more fresh Share Certificates comprising the same shares bearing the same distinctive numbers comprised in the said certificates and in such separate lots as he may desire in lieu of such Share Certificate so surrendered or for the consolidation of the shares comprised in such surrendered certificates into one certificate and the Directors may at their discretion in lieu of and in cancellation of certificates so surrendered issue one or more such Share Certificates, as the case may be, in the name of the person or persons in whose name the original certificate stood and the new certificates so issued shall be delivered to the person who surrendered the original certificates or to his order. No fee shall be charged for issue of such new certificates. b. If a certificate be worn out, defaced or if there is no further space on the back thereof for endorsements or transfer, it shall, if required, be replaced by a new certificate, free or charge, PROVIDED HOWEVER that such

164 new certificate shall not be granted except upon delivery of the worn-out or defaced or used up certificates for the purpose of cancellation and shall be marked as so issued in lieu of the cancelled Share Certificate. c. If a certificates is lost or destroyed. The Company may upon such evidence and proof of such loss or destruction and on such terms and conditions as to indemnity or otherwise, as the Board may require and on payment of a fee of Rupee One or such smaller sum as the Board may determine issued a new certificate.

d. Every share certificate shall be issued under the Common Seal of the Company and in accordance with the provisions of the Companies (Issue of Share Certificates) Rules 1960, or any modifications thereof for the time being in force.

e. Notwithstanding anything contained in this article, when the shares are dealt with in a depository, the Company shall intimate the details of allotment of shares to the depository immediately on allotment of such shares.

f. Notwithstanding anything contained in this article, when the shares are dealt with in a depository, the Company shall intimate the details of allotment of shares to the depository immediately on allotment of such shares.

CALLS ON SHARES

Article 6

a. The Board may, from time to time, make calls upon the members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times. Provided that no call shall exceed one half of the nominal value of the shares or be payable at less than one month from the date fixed for the payment of the past preceding call Each member shall, subject to receiving atleast fourteen days notice specifying the time or times and place of payment, pay to the Company at the time or times and place so specified, the amount on his shares. A call may be revoked or postponed at the discretion of the Board.

b. The Board of Directors, when making a call by resolution, determine the date on which such call shall be deemed to have been made not being earlier than the date of resolution making such call and thereupon the call shall be deemed to have been made on the date so determined and if no such date as aforesaid is fixed, the call shall be deemed to have been made on the date on which the resolution of the Board making the call is passed.

c. No amount paid –up in advance of calls shall in respect thereof confer any right to dividend or to participate in profits.

LIEN

Article 7

a. The Company shall have a first and paramount lien upon all shares other than fully paid up shares registered in the name of any member, either alone or jointly with any other person and upon proceeds of sale thereof for all moneys called or payable at a fixed time in respect of such shares and such lien shall extent to all dividends from time to time declared in respect of such shares , but the Board at any time may declare any share to be exempt, alone or partially from the provisions of this Article. b. No member shall exercise any voting rights in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid or regard o which the Company has, and has exercised any right of lien.

165 FORFEITURE OF SHARES

Article 8

a. If a member fails to pay any call or installment of a call on the day appointed for payment thereof, the Board may, at any time thereafter during such time as any part of the call or installment remains unpaid serve a notice on him, requiring payment of so much of the call or installments as is unpaid, together with any interest which may have accrued. b. The notice aforesaid shall i. name a further day (not earlier than the expiry of fourteen days from the date of service of the notice) on or before which the payment required by the notice is to be made, and ii. state that, in the event of non-payment on or before the day so named, the shares in respect of which the call was made will be liable to be forfeited. c. If the requirements of ant such notice as aforesaid are not complied with, any share in respect of which the notice has been given may, at nay time, thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect.

ALTERATION OF SHARE CAPITAL

Article 9 a. The Company shall have power to alter the conditions of its Memorandum as follows, that is to say, it may:

i. Subject to the provisions of the Section 94 increase its share capital by such amount as it thinks expedient by issuing new shares; ii. Consolidate and divide all or nay of its share capital into shares of larger amount than its existing shares; iii. Sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum, so however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; iv. Cancel shares which, at the date of the passing of the resolution in that behalf have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by amount of the shares so cancelled, provided however the cancellation of shares in pursuance of the exercise of this power shall not be deemed to be a reduction of the share capital within the meaning of the Act. b. The powers conferred by this Article shall be exercised by the Company in General Meeting by means of a Special Resolution and shall not require to be confirmed by the Court.

TRANSFER OF SHARES

Article 12

The instrument of transfer shall be in writing and all the provision of sec. 108 of the Companies Act, and of any statutory modification thereof for the time being shall be duly complied with in respect of all the transfers of shares and of the registration thereof.

Article 13

The transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the Register of Members in respect thereof. Nothing contained in this article shall apply to transfer of shares effected by the transferor and the transferee both of whom are entered as beneficial owners in the records of the depository.

166 REGISTRATION OF TRANSFER AND TRANSMISSION OF SHARES

Article 14

a. The Board may subject to the right of appeal conferred by Section 111 decline to register any transfer of shares on which the Company has a lien. b. The Board may also decline to recognize any instrument of transfer unless

i. the instrument of transfer is accompanied by the certificate of the shares to which it relates, and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer, and ii. the instrument of transfer is in respect of only one class of shares. “PROVIDED that the registration of a transfer shall not be refused on the ground that the transferor is either alone or jointly with any other person or persons indebted to the Company on any account whatsoever except a lien on shares”.

c. The Board of Directors shall not accept application for transfer of less than Twenty Five (25) Equity Shares of the Company, provided, however, that this restriction shall not apply to:

i. transfer of entire Equity Shares made in pursuance of a statutory order or an order of a Competent Court of Law. ii. Transfer of entire Equity Shares by an existing equity share holder of the Company holding less than Twenty Five (25) Equity Shares by a single transfer to a single or joint names. iii. Transfer of more than Twenty Five (25) Equity Shares in favour of the same transferee under one or more transfer deeds, one or more of them relating to transfer of less than Twenty Five (25) Equity Shares. Provided that where a member is holding shares in lots higher than the transferable unit of trading and transfers in lots of transferable unit, the residual shares shall be permitted to stand in the name of such transferor, notwithstanding that the residual holding would be below Twenty Five (25). Provided that the restriction contained in this article shall not apply to shares held in a depository. iv. transfer of Equity Shares held by a member which are less than Twenty Five (25) but which have been allotted to him by the Company as a result of an issue of Bonus and/or Rights shares of any shares resulting from conversion of debentures.

Article 15 a. on the death of a member, the survivor or survivors, where the member was joint holder and legal representatives where he was a sole holder, shall be the only persons recognized by the Company as having any title to his interest in the shares.

b. Nothing in clause (a) shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons.

Article 16

Notwithstanding any other provisions to the contrary in these presents, no fee shall be charged for any of the following, viz.,

a. for registration of transfers of shares and debentures, or for transmission of shares and debentures; b. for sub-division and consolidation of shares and debenture certificates and for sub-division of letters of allotment and split, consolidation, renewal and transfer receipts into denominations corresponding to the market units of trading; c. for sub-division of renounceable letters of right;

167

d. for issue of certificates in replacement of those which are old, decrepit or worn out, or where the cages on the reverse for recording transfers have been fully utilized; e. for registration of any power of attorney, probate, Letters of Administration or similar other documents.

Article 16A

Provisions of articles to apply to shares held in a depository

Except as specifically provided in these articles, the provisions relating to joint holders of shares, calls, lien on shares, forfeiture of shares, transfer and transmission of shares and voting at meetings shall be applicable to shares held in a depository so far as they apply to shares held in physical form subject to the provisions of the Depositories Act, 1996

Article 16B

Dematerialization of securities

Notwithstanding anything contained in the Articles of Association, the Company shall be entitled to dematerialize its shares of any class, debentures and other securities pursuant to the Depositories Act, 1996 and to offer its shares, debentures and other securities for issue in dematerialized form. The Company shall further be entitled to maintain a Register of Members with the details of members holding shares in material and dematerialized form in any media as permitted by law including any form of electronic media.

Article 16 C

Depositories Act to apply to shares held in depositories

Notwithstanding anything contained herein, in case of transfer of shares of any class or other marketable securities where the Company has not issued any certificates and where such shares or securities are being held in an electronic and fungible form, the provisions of the Depositories Act 1996 shall apply.

Article 16 D

Index of beneficial owners deemed to be index of members

A register of index of beneficial owners maintained by a depository under Section 11 of the Depositories Act 1996 shall be deemed to be an index of members or register of debenture holders, as the case may be, for the purpose of the Act.

GENERAL MEETING OF THE COMPANY

Article 17 a. The Company shall in addition to any other meetings, hold a General Meeting once a year, which shall be styled the Annual General Meeting at such intervals, and in accordance with the provisions of Section 166 and 210 of the Act. b. All General Meetings other than the Annual General Meetings of the Company shall be called Extraordinary General Meetings. c.

i. The Board may whenever it thinks fit call an Extraordinary General Meeting.

168 ii. If at any time, there are not within India, directors capable of acting who are sufficient in number to form a quorum, any director may call an Extraordinary General Meeting in the same manner as nearly as possible as that in which such a meeting may be called by the Board. iii. An Extraordinary General Meeting of the Company may also be called by members holding not less than one-tenth of such of the paid-up capital of the Company subject to Section 169 of the Act.

NOTICES

Article 18 a. A General Meeting of the Company may be called by giving not less than twenty one day’s notice in writing or after giving such shorter notice as provided for in Section 171(2) of the Act.

Provided that all the documents or notices to be served or given by members on or to the Company or to any officer thereof shall be served or given by sending it to the Company or officer at the office by post or leaving it at the office.. Provided further that where the securities are held in a depository the records of the beneficial ownership may be served by such depository on the Company by means of the electronic mode or by delivery of floppies or discs. b. Notice of every meeting of the Company shall be given:

i. to every member of the Company; ii. to the persons entitled to a share in consequences of the death or insolvency of a member; iii. to the auditor or auditors for the time being of the Company; in the manner provided for in Section 172 of the Act. c. Accidental omission to give notice to, or the non-receipt of notice by any member or other person to whom it should be given shall not invalidate the proceedings of the meeting.

CONTENTS OF NOTICE

Article 21 a. Every notice of meeting of the Company shall contain the following:

i. It shall specify the place, date and time of the meeting; ii. It shall contain a statement of the business to be transacted therein; b. In every notice calling a meeting of the Company, there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy or proxies to attend and vote instead of himself and that a proxy need not be a member.

QUORUM

Article 22

No business shall be transacted at any General Meeting unless a quorum of members is present at the time when the meeting proceeds to transact the business. Five members present in person shall be the quorum.

169 VOTING RIGHTS

Article 23

a. Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands, every member present in person shall have one vote and on a poll the voting rights of members shall be as laid down in Section 87 of the Act. b. In the case of joint holders, the vote of the senior who tenders vote whether in person or by proxy shall be accepted to the exclusion of the votes of the other joint holders. For this purpose, seniority shall be determined by the order in which the names stand in the Register of Members.

BOARD OF DIRECTORS

Article 24

Subject to the provisions of Section 252,255, 256 and 257 of the Act, the number of Directors shall be not less than three and not more than eight.

Article 26 a. So long as TVS together with its affiliates hold not less than twenty five per cent of the Equity Shares in the Capital of the Company, TVS will be entitled to appoint one Director (hereinafter called “Nominated Director”) and propose another person to be elected as Director in accordance with law. b. The Nominated Director shall not be liable for retirement by rotation. c. The Nominated Director shall hold office at the pleasure of TVS and his nomination may be withdrawn by TVS and TVS may nominate any person in the vacancy caused in the office of the Nominated Director

Article 27

Subject to the provision of Section 313, the Board may appoint an Alternate Director to act for a Director (hereinafter called “the Original Director”) during his absence for a period of not less than three months from the state in which the meetings of the Board are ordinarily held. An Alternate Director appointed under this Article shall not hold office as such for a period longer than that permitted to the Original Director in whose place he has been appointed and shall vacate office if and when the Original Director returns to the said State. If the term of office of the Original Director is determined before he so returns to the said State, any provision in the Act or in these Articles for automatic re-appointment of retiring Directors in default of another appointment shall apply to the Original Director and not to the Alternate Director.

Article 28

No share qualification shall be necessary for any Director.

Article 29 a. The fee payable to a Director (including a Managing or Wholetime Director) for attending a meeting of the Board or Committee thereof shall be the maximum amount prescribed in this respect under the Act or by the Central Government from time to time. b. Every Director shall be entitled to be paid all traveling, hotel and other expenses properly incurred by him in attending and returning from meeting of the Board of Director or any Committee thereof or General Meetings of the Company or in connection with the business of the Company.

170 Article 30

Subject to Article 26 hereof two-thirds of the Directors of the Company shall be persons who are liable for retirement by rotation out of which one-third shall retire at every Annual General Meeting of the Company in accordance with Section 255 and 256 of the Act. The vacancies caused by the retirement of Directors may be filled either by re-appointing the retiring Directors or some other persons thereto.

BORROWING POWERS

Article 36

The Board of Directors may from time to time but with such consent of the Company in General Meeting as may be required under Section 293 of the Act raise or borrow any moneys or sums of money for the purpose of the Company PROVIDED that the moneys to be borrowed by the Company, apart from temporary loans obtained from the Company’s Bankers in the ordinary course of business, shall not without the sanction of the Company in a General Meeting exceed the aggregate of the paid-up capital of the Company and its free reserves, that is to say, reserves not set apart for any specific purpose and in particular, but subject to the provisions of Section 292 of the Act, the Board may from time to time at their discretion raise or borrow or secure the payment of any such sum or sums of money for the purpose of the Company, by the issue of debentures or debenture stock. Perpetual or otherwise debentures convertible into shares of this or any other company or perpetual annuities and in security of any such money so borrowed, raised or received to mortgaged, pledge or charge, the whole or any part of the property, assets, or revenue of the Company present or future, including its uncalled capital by special assignment or otherwise or to transfer or convey the same absolutely or in trust and to give the lender powers of sale and other powers as may be expedient and to purchase, redeem or pay of any such securities.

Provided that every resolution passed by the Company of the power to borrow as stated above shall specify the total amount upto which moneys may be borrowed by the Board of Directors.

Debenture, Debenture Stock Bonds or other securities conferring the right to allotment or conversion into shares or the option or right to call for allotment of shares shall not be issued except with the sanction of the Company in General Meeting, subject to Section 81 of the Companies Act, 1956.

The Directors may by a resolution at a meeting of the Board delegate the above power to borrow money, otherwise than on debentures, to a Committee of Directors or the Managing Director within the limits prescribed.

MANAGING DIRECTOR

Article 37

Subject to the provisions of Section 267,268 and 269 of the Act, the Company may from time to time appoint one or more of their body to the office of Managing Director or Wholetime Director for such period and on such terms as the Company think fit and subject to the terms of any agreement entered into with him may revoke such appointment

Provided a Director so appointed shall not whilst holding such office be subject to appointment by rotation or be taken into account in determining the retirement by rotation of Directors, but his appointment shall be automatically determined if he ceases to be a Director.

Article 38 a. So long as TVS and its affiliates together hold 25% of the paid-up capital of the Company, a director nominated by TVS as per clause 26 (a) shall be the Managing Director of the Company. He shall be paid and shall hold the said office on such terms and remuneration as the Company in General Meeting may determine and the Central Government may approve. b. If a Managing Director ceases to hold office as a Director, he shall ipso facto cease to be Managing Director

171

Article 39

The Board may, from time to time, entrust to and confer upon the Managing Director for the time being, such of the powers exercisable under these presents by the Board as it may think fit, and may confer such powers for such time and to be exercised for such objects and purposes and upon such terms and conditions and with such restrictions as it thinks expedient and it may confer such powers either collaterally with or to the exclusion of, and in substitution for, all or any of the powers of the Directors in that behalf, and may, from time to time, revoke, withdraw, alter to vary all the powers or any of such powers.

DIVIDEND AND RESERVES

Article 43

The Company in General Meeting may declare dividends but no dividends shall exceed the amount recommended by the Board, provided that in declaring dividend, the Company shall comply with the provisions of Section 205 of the Act.

Article 44 The Board may from time to time pay to the members such interim dividends as appear to it to be justified by the profits of the Company.

CAPITALIZATION OF PROFITS

Article 49 a. The Company in General Meeting may, upon the recommendation of the board, resolve:-

i. that it is desirable to capitalize any part of the amount for the time being standing to the credit of any of the Company’s reserve accounts or to the credit of the profit and loss accounts or otherwise available for distribution, and ii. that such sum be accordingly set free for distribution in the manner specified in clause (b) amongst the members who would have been entitled thereto, if distributed by way of divided and in the same proportions. b. The sum aforesaid shall not be paid in cash but shall be applied, subject to the provision contained in clause (c) either in or towards:

i. paying up any amounts for the time being unpaid on any shares held by such members respectively; ii. paying up in full, unissued shares or debentures of the Company to be allotted and distributed, credited as fully paid-up to and amongst such members in the proportions aforesaid, or iii. partly in the way specified in sub-clause (i) and partly in that specified in sub-clause(ii) c. A share premium account and a capital redemption reserve fund may, for the purpose of this regulation, only be applied in the paying up of unissued shares to be issued to members of the Company as fully paid bonus shares. d. The Board shall give effect to the resolution passed by the Company in pursuance of this regulation.

Article 50

Whenever such a resolution as aforesaid shall have been passed, the Board shall i. make all appropriations and applications of the undivided profits resolved to be capitalized thereby, and all allotments and issues of fully paid shares or debentures, if any, and ii. generally do all acts and things required to give effect thereto.

172 Article 51 a. The Board shall have full power:

i. to make such provision by the issue of fractional certificates or by payment in cash or otherwise as it thinks fit, for the case of shares or debentures becoming distributable in fraction; and also ii. to authorize any person to enter, on behalf of all the members entitled thereto, into an agreement with the Company providing for the allotment to them respectively, credited as fully paid up, of any further shares or debentures to which they may be entitled upon such capitalization, or (as the case may require) for the payment up by the Company on their behalf, by he application thereto of their respective proportions of the profits resolved to be capitalized, of the amounts or any part of the amounts remaining unpaid on their existing shares. iii. Any agreement made under such authority shall be effective and binding on all such members.

INDEMNITY

Article 54

Every Officer or Agent for the time being of the Company shall be indemnified out of the assets of the Company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquired or in connection with any application under section 633 in which relief is granted to him by the Court.

173 SECTION IX – OTHER INFORMATION

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

The following contracts (not being contracts entered into in the ordinary course of business carried on by our Company or entered into more than two years before the date of the Letter of Offer) which are or may be deemed material have been entered or to be entered into by our Company. Copies of these contracts and the documents may be inspected at Factory and Office situated at Padi, Chennai 600 050 from 10.00 AM to 4.00 PM on working days from the date of the Letter of Offer until the Issue Closing Date.

Material Contracts to the Issue

1. Engagement Letter dated February 12, 2009 for appointment of Spark Capital Advisors (India) Private Limited as Lead Manager to the Issue. 2. Memorandum of Understanding dated March 17, 2009 executed by our Company and Spark Capital Advisors (India) Private Limited. 3. Memorandum of Understanding dated March 6, 2009 executed by our Company with Registrar to the Issue.

Material Documents

1. Our Memorandum and Articles of Association as amended till date 2. Certificate of incorporation of the Company dated September 5, 1974 3. Fresh Certificate of Incorporation pursuant to change of name dated June 23, 1995 4. Resolution of the Board dated May 14, 2005 appointing Mr. K. Mahesh as Chairman and Managing Director of the Company and fixing his terms of remuneration. 5. Resolutions of the Board dated February 6, 2009, in relation to the Issue and other related matters. 6. Shareholders resolution passed at the Annual General Meeting held on August 27, 2008 appointing , Sundaram & Srinivasan, Chartered Accountants as statutory auditors of the Company 7. The Report of the Auditors, Sundaram & Srinivasan, Chartered Accountants as set out herein dated March 17, 2009 in relation to the restated financials of the Company for the nine month period ended December 31, 2008 and for the years ended March 31, 2008, 2007, 2006, 2005 and 2004. 8. Report of the Auditor, Sundaram & Srinivasan, Chartered Accountants dated March 17, 2009 confirming the Tax Benefits included in the Letter of Offer. 9. Copies of annual reports of our Company for the past five financial years and copy of audited financial statements for the nine month period ended December 31, 2008. 10. Letter dated March 30, 2009 from NSE granting in-principle listing approval. 11. Letter dated March 23, 2009 from MSE granting in-principle listing approval. 12. Consents of Auditor’s, Bankers to our Company, Lead Manager, Registrar to the Issue, Legal Advisor, Directors of our Company, Consultant on research matters and Company Secretary and Compliance Officer to include their names in the Letter of Offer to act in their respective capacities 13. Due diligence certificate dated March 17, 2009 to SEBI from Spark Capital Advisors (India) Private Limited. 14. Tripartite Agreement between NSDL, our Company and Integrated Enterprises (India) Limited dated February 20, 2001 to establish direct connectivity with the depository. 15. Tripartite Agreement between CDSL, our Company and Integrated Enterprises (India) Limited dated February 21, 2001 to establish direct connectivity with the depository. 16. Sanction letter IFB/RM II /02 dated April 15, 2008 from State Bank of India for Rs. 30 crores. 17. Agreement dated July 21, 2005 between Mr. K.Mahesh, Chairman & Managing Director and the Company providing for terms of appointment including remuneration.

174

DECLARATION

We, the Directors of our Company and the Financial Advisor & Secretary, hereby declare that, all the relevant provisions of the Companies Act, 1956, and the guidelines issued by the Government of India or the guidelines issued by the Securities and Exchange Board of India, as the case may be, have been complied with and no statements made in the Letter of Offer contravenes any of the provisions of the Companies Act, 1956 and the rules made thereunder. All the legal requirements connected with the said Issue as also the guidelines, instructions, etc. issued by SEBI, Government and any other competent authority in this behalf have been duly complied with.

We further certify that all the disclosures made in the Letter of Offer are true and correct.

Yours faithfully,

For Sundaram Brake Linings Limited

K. Mahesh Chairman & Managing Director

K. Ramesh Director

T. Kannan Director

P.S. Raman Director

Ashok V. Chowgule Director

R Mani Parthasarathy Financial Advisor and Secretary

Date: May 15 , 2009

175