RED HERRING PROSPECTUS

Maruti Udyog Limited

Please read Section 60B of the Companies Act, 1956 May 27, 2003 100% Book Building Offer

(The Company was originally incorporated as a private limited company (Government company) on February 24, 1981 under the Companies Act, 1956 and subsequently became a deemed public company under Section 43 A (1) of the Act on January 24, 1983. Further the Company has become a public company with effect from May 30, 2002)

Registered Office: 11th Floor, Jeevan Prakash Building, 25, Kasturba Gandhi Marg, New Delhi 110 001 Tel no.: +91-11-2331 6831; Fax no.: +91-11-2371 3575/2331 8754; E-Mail: investors@maruti.co.in; Website: www.marutiudyog.com Factory: Palam-Gurgaon Road, Gurgaon 122 015, Haryana Tel no.: +91-124-234 6721; Fax no.: +91-124-501 5701

Offer for sale of 72,243,300 equity shares of Rs. 5 each at a price of Rs. [q] for cash aggregating Rs. [q] million (hereinafter referred to as the Offer). The Offer would constitute 25% of the fully diluted Post-Offer paid-up capital of the Company.
The size of the Offer may be enhanced to the extent of upto 10% of the Offer i.e. by upto 7,224,300 equity shares of Rs.5 each in case the Selling Shareholder decides to retain any over-subscription. In such a case, the size of the Offer may increase upto 79,467,600 equity shares of Rs. 5 each. Floor Price - Rs. 115 per equity share of Rs. 5 each
The Offer is being made through the 100% book building process wherein a maximum of 60% of the Offer shall be offered on a discretionary basis to Qualified Institutional Buyers. Further, not less than 15% of the Offer shall be available for allocation on a proportionate basis to Non-institutional bidders and not less than 25% of the Offer shall be available for allocation on a proportionate basis to Retail Bidders, subject to valid bids being received at or above the Offer Price.

Risk in Relation to First Offer

This being the first Offer of equity shares of Maruti Udyog Limited (our Company), there has been no formal market for the equity shares of the Company. The Offer Price (as determined by the Selling Shareholder in consultation with our Company, the Book Running Lead Manager and Co-Book Running Lead Managers, on the basis of assessment of market demand for the equity shares by way of book building) should not be taken to be indicative of the market price of the equity shares after the equity shares are listed. No assurance can be given regarding an active and/ or sustained trading in the equity shares of the Company nor regarding the price at which the equity shares will be traded after listing.

General Risks
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Offer 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 this offering. For taking an investment decision, investors must rely on their own examination of the Company and the Offer including the risks involved. The equity shares offered in the Offer 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 Red Herring Prospectus. Specific attention of the investors is invited to the summarized and detailed statements in Risk Factors beginning on page no. i.

Companys Absolute Responsibility

Maruti Udyog Limited, having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus contains all information with regard to Maruti Udyog Limited and the Offer, which is material in the context of the Offer, that the information contained in this Red Herring Prospectus is true and correct in all material aspects 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 Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect.

Listing
The equity shares offered through this Red Herring Prospectus are proposed to be listed on the National Stock Exchange of India Limited and The Stock Exchange, Mumbai. We have received in-principle approval from these stock exchanges for the listing of our equity shares pursuant to letters dated May 14, 2003.

BOOK RUNNING LEAD MANAGER

REGISTRAR TO THE OFFER

Kotak Mahindra Capital Company Ltd 3rd Floor, Bakhtawar 229, Nariman Point, Mumbai 400 021 Tel no.: 91-22-5634 1100;Fax no.: 91-22-2284 0492 E-mail: maruti.ipo@kotak.com

MCS Ltd Sri Venkatesh Bhavan 212-A, Shahpurjat, New Delhi 110 049 Tel no.: 91-11-2649 4830;Fax no.: 91-11-2649 4152 E-mail: mulipo@mcsind.com

CO-BOOK RUNNING LEAD MANAGERS

ICICI Securities Ltd 41/ 44, Minoo Desai Marg, Colaba Mumbai 400 005 Tel no.: 91-22-2288 2460 Fax no.: 91-22-2283 7045 E-mail: mul_ipo@isecltd.com

JM Morgan Stanley Pvt Ltd 141, Maker Chambers III Nariman Point, Mumbai 400 021 Tel no.: 91-22-5630 3030 Fax no.: 91-22-5630 1694 E-mail: marutiipo@jmmorganstanley.com

HSBC Securities and Capital Markets (India) Pvt Ltd 52/ 60, Mahatma Gandhi Road, Fort Mumbai 400 001 Tel no.: 91-22-2267 4921 Fax no.: 91-22-2263 1984 E-mail: mul_ipo@hsbc.co.in

OFFER PROGRAM
BID/ OFFER OPENS ON BID/ OFFER CLOSES ON : : THURSDAY, JUNE 12, 2003 THURSDAY, JUNE 19, 2003

TABLE OF CONTENTS
PAGE NO. Definitions and Abbreviations .................................................................................................................. Forward-looking Statements .................................................................................................................... Certain Conventions; Use of Market Data .............................................................................................. Risk Factors ................................................................................................................................................ The Offer ..................................................................................................................................................... Summary .................................................................................................................................................... Summary Unconsolidated Financial Data .............................................................................................. General Information .................................................................................................................................. Government Approvals ............................................................................................................................. Capital Structure ....................................................................................................................................... Objects of the Offer ................................................................................................................................... Industry Overview ..................................................................................................................................... Our Business .............................................................................................................................................. Our History ................................................................................................................................................. Selected Unconsolidated Financial Data ................................................................................................ Managements Discussion and Analysis of Financial Condition and Results of Operations .............. Our Management ....................................................................................................................................... Our Promoters ........................................................................................................................................... Group Companies ...................................................................................................................................... Related Party Transactions Details for the Year April 2002-March 2003 and April 2001-March 2002 ....................................................................................................................... Regulations and Policies ........................................................................................................................... Outstanding Litigation and Material Developments .............................................................................. Dividend Policy .......................................................................................................................................... Statement on Basis of Issue Price ............................................................................................................ Other Regulatory Disclosures ................................................................................................................... Unconsolidated Financial Statements ..................................................................................................... Summary of Significant Differences between Indian GAAP and US GAAP .......................................... Consolidated Financial Statements as per AS 21 ................................................................................... Consolidated Financial Statements as per AS 21, AS 23 and AS 27 ..................................................... Terms of the Offer ...................................................................................................................................... Statutory and Other Information ............................................................................................................. Main Provisions of Articles of Association of Maruti Udyog Ltd ........................................................... Material Contracts and Documents for Inspections ............................................................................... Declaration ................................................................................................................................................. A G H i 1 2 4 6 18 22 28 29 36 55 57 60 78 85 92 115 125 127 143 144 147 148 184 189 201 220 237 244 261 263

DEFINITIONS AND ABBREVIATIONS

DEFINITIONS
Term Maruti or our Company or the Company or Maruti Udyog Ltd or MUL we, us and our Offer Related Terms Acquisition Act Articles/ Articles of Association Auditors Banker(s) to the Offer Bid Maruti Limited (Acquisition and Transfer of Undertakings) Act, 1980 Articles of Association of our Company The statutory auditors of our Company: Price Waterhouse, Chartered Accountants CitiBank N.A., HDFC Bank Ltd, ICICI Bank Ltd, Kotak Mahindra Bank Ltd, State Bank of India and The HongKong and Shanghai Banking Corporation Ltd An offer made during the Bidding Period by a prospective investor to acquire the equity shares of the Company at a price at or above the Floor Price, including all revisions and modifications thereto The amount equal to highest value of the optional Bids indicated in the Bid cum Application Form and payable by the Bidder on submission of the Bid in the Offer The date after which the members of the Syndicate will not accept any Bids for the Offer, which shall be notified in a widely circulated English national newspaper and Hindi national newspaper with wide circulation The form in terms of which the Bidder shall make an offer to purchase equity shares of our Company and which will be considered as the application for transfer of the equity shares in terms of this Red Herring Prospectus The date on which the members of the Syndicate shall start accepting Bids for the Offer, which shall be the date notified in an English national newspaper and a Hindi national newspaper with wide circulation Any prospective investor who makes a Bid pursuant to the terms of this Red Herring Prospectus The period between the Bid/ Offer Opening Date and the Bid/ Offer Closing Date inclusive of both days and during which prospective Bidders can submit their Bids The Board of Directors of Maruti Udyog Limited or a committee thereof Book Building route as provided in Chapter XI of the SEBI Guidelines, in terms of which this Offer is made Book Running Lead Manager to the Offer, in this case being Kotak Mahindra Capital Company Ltd Means the note or advice or intimation of allocation of equity shares sent to the Bidders who have been allocated equity shares in the Book Building Process ICICI Securities Ltd, JM Morgan Stanley Pvt Ltd and HSBC Securities and Capital Markets (India) Pvt Ltd The Companies Act, 1956, as amended from time to time Consumer Protection Act, 1986 Cut-off Price refers to any price at or above the Floor Price. A Bid submitted at Cut-off Price is a valid Bid at all price levels at or above the Floor Price. Description Maruti Udyog Limited, a public limited company incorporated under the Companies Act, 1956 Unless the context otherwise requires, refers to Maruti Udyog Limited

Bid Amount Bid/ Offer Closing Date

Bid cum Application Form

Bid/ Offer Opening Date

Bidder Bidding Period/ Offer Period Board of Directors/ Board Book Building Process/ Method BRLM CAN/ Confirmation of Allocation Note Co-BRLMs Companies Act/ The Act COPRA Cut-off Price

Term Depositories Act Depository Depository Participant Designated Date

Description The Depositories Act, 1996, as amended from time to time A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time A depository participant as defined under the Depositories Act The date on which funds are transferred from the Escrow Account to the Public Offer Account after the Prospectus is filed with the RoC, following which the Selling Shareholder shall transfer equity shares to successful Bidders Director(s) of Maruti Udyog Ltd unless otherwise specified Account opened with Escrow Collection Bank(s) and in whose favour the Bidder will issue cheques or drafts in respect of the Bid Amount when submitting a Bid, or the amount payable by the Bidder after allocation within the Pay-in Period Agreement entered into among the Syndicate Members, our Company, the Selling Shareholder, the Registrar, the Escrow Collection Bank(s), BRLM and Co-BRLMs for collection of the Bid Amounts and refunds of the amounts collected to the Bidders The banks at which the Escrow Account for the Offer will be opened Foreign Exchange Management Act, 1999, as amended from time to time, and the regulations framed thereunder Foreign institutional investor (as defined under SEBI (Foreign Institutional Investors) Regulations, 1995) registered with SEBI under applicable laws in India The twelve months ended March 31 of a particular year The Bidder whose name appears first in the Bid cum Application Form or Revision Form The price advertised by our Company prior to the Bid/ Offer Opening Date, below which the Offer Price will not be finalized and below which no Bids will be accepted Generally accepted accounting principles in India The Income-Tax Act, 1961, as amended from time to time, except as stated otherwise The Joint Venture Agreement between our Company and Suzuki dated October 2, 1982 as superseded by the Revised Joint Venture Agreement among our Company, the Selling Shareholder and Suzuki on May 15, 2002. Unless otherwise indicated, collectively, the license agreements between our Company and Suzuki dated October 2, 1982, December 14, 1992, March 26, 1997, December 15, 1998, August 3, 1999 and January 9, 2001 The amount paid by the Bidder at the time of submission of his/her Bid, being 0% to 100% of the Bid Amount The Maruti Udyog Limited Employees Mutual Benefit Fund The Memorandum of Association of our Company Monopolies and Restrictive Trade Practices Act, 1969 Monopolies and Restrictive Trade Practices Commission All Bidders that are not Qualified Institutional Buyers or Retail Bidders The portion of the Offer being minimum of 10,836,500 equity shares of Rs.5 each available for allocation to Non-institutional Bidders All Bidders who are not persons resident in India Non-resident Indian, is a person resident outside India, as defined in FEMA and who is a citizen of India or a Person of Indian Origin, as defined under FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 B

Director(s) Escrow Account

Escrow Agreement

Escrow Collection Bank(s) FEMA FII/ Foreign Institutional Investor Financial year/ fiscal/ FY First Bidder Floor Price Indian GAAP I.T. Act Joint Venture Agreement/ JVA/ RJVA Licence Agreements

Margin Amount MUL-EMBF Memorandum/ Memorandum of Association MRTP MRTPC Non-institutional Bidders Non-institutional Portion Non Residents NRI/ Non Resident Indian

Term OCB/ Overseas Corporate Body

Description A company, partnership, society or other corporate body owned directly or indirectly to the extent of at least 60% by NRIs, including overseas trusts in which not less than 60% of beneficial interest is irrevocably held by NRIs directly or indirectly as defined under FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 The offer for sale by the Selling Shareholder of our Company of 72,243,300 equity shares of Rs.5 each at the Offer Price in terms of this Red Herring Prospectus The size of the Offer may be increased to the extent of upto 10% of the Offer i.e. upto 7,224,300 equity shares of Rs.5 each, in case the Selling Shareholder decides to retain any over-subscription. In such a case, the size of the Offer may increase upto 79,467,600 equity shares of Rs.5 each.

Offer/ Offer for Sale

Offer Price

The final price at which equity shares will be transferred in terms of this Red Herring Prospectus, as determined by GoI, in consultation with our Company, the BRLM and the Co-BRLMs, on the Pricing Date Bid Closing Date or the last date specified in the CAN sent to Bidders, as applicable This term means (i) with respect to Bidders whose Margin Amount is 100% of the Bid Amount the period commencing on the Bid Opening Date and extending until the Bid Closing Date, and (ii) with respect to Bidders whose Margin Amount is less than 100% of the Bid Amount the period commencing on the Bid Opening Date and extending until the closure of the Pay-in Date The date on which GoI, in consultation with our Company, the BRLM and the Co-BRLMs, finalizes the Offer Price The Selling Shareholder and Suzuki The Prospectus to be filed with the RoC containing, inter alia, the Offer Price that is determined at the end of the Book Building process, the size of the Offer and certain other information In accordance with Section 73 of the Companies Act, an account opened with the Bankers to the Offer to receive monies from the Escrow Account for the Offer on the Designated Date Public financial institutions as specified in Section 4A of the Companies Act, FIIs, scheduled commercial banks, mutual funds registered with SEBI, multilateral and bilateral development financial institutions, venture capital funds registered with SEBI, foreign venture capital investors registered with SEBI and state industrial development corporations Means this Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, which does not have complete particulars on the price at which the equity shares are offered and the size of the Offer. It carries the same obligations as are applicable in case of a Prospectus and will be filed with RoC at least three days before the Bid/ Offer Opening Date. It will become a Prospectus after it is filed with the RoC following the pricing of the equity shares 11th Floor, Jeevan Prakash Building, 25, Kasturba Gandhi Marg, New Delhi 110 001 Registrar to the Offer, in this case being MCS Ltd having its registered office as indicated on the cover page of this Red Herring Prospectus Individual Bidders (including HUFs and NRIs) who have not Bid for more than 1,000 equity shares in any of the bidding options in the Offer The portion of the Offer being minimum of 18,060,900 equity shares of Rs.5 each available for allocation to Retail Bidder(s)

Pay-in Date Pay-in-Period

Pricing Date Promoters Prospectus

Public Offer Account

Qualified Institutional Buyers or QIBs

Red Herring Prospectus

Registered Office of our Company Registrar to the Offer Retail Bidder(s) Retail Portion

Term Revision Form SCRR SEBI SEBI Act SEBI Guidelines

Description The form used by the Bidders to modify the quantity of equity shares or the Bid Price in any of their Bid cum Application Forms or any previous Revision Form(s) Securities Contracts (Regulation) Rules, 1957, as amended from time to time The Securities and Exchange Board of India constituted under the SEBI Act Securities and Exchange Board of India Act, 1992, as amended from time to time SEBI (Guidelines for Disclosure and Investor Protection) 2000 issued by SEBI effective from January 27, 2000, as amended, including instructions and clarifications issued by SEBI from time to time The President of India, acting through and represented by the Joint Secretary, Department of Heavy Industry, Ministry of Heavy Industries and Public Enterprises, GoI BSE and NSE The BRLM, the Co-BRLMs and the Syndicate Members The agreement to be entered into among the Selling Shareholder, the Company and the members of the Syndicate, in relation to the collection of bids in this Offer Kotak Securities Ltd and ICICI Brokerage Services Ltd The slip or document issued by the members of the Syndicate to the Bidder as proof of registration of the Bid The BRLM, the Co-BRLMs and Syndicate Members The Agreement among the Syndicate, our Company and GoI to be entered into on the Pricing Date Generally accepted accounting principles in the United States

Selling Shareholder Stock Exchanges Syndicate Syndicate Agreement Syndicate Members TRS/ Transaction Registration Slip Underwriters Underwriting Agreement US GAAP

ABBREVIATIONS
Abbreviation AS BSE CAGR CDSL EGM EPS FCNR Account FEMA FIPB GIR Number GoI HSBC HUF I-Sec JMMS JPY KMCC LCO MACT NAV NRE Account NSDL NSE P/E Ratio PAN RBI RJVA RoC RONW Suzuki Full Form Accounting Standards as issued by the Institute of Chartered Accountants of India The Stock Exchange, Mumbai Compounded Annual Growth Rate Central Depository Services (India) Ltd Extraordinary General Meeting Earnings Per Equity Share Foreign Currency Non Resident Account Foreign Exchange Management Act, 1973 Foreign Investment Promotion Board General Index Registry Number Government of India HSBC Securities and Capital Markets (India) Pvt Ltd Hindu Undivided Family ICICI Securities Ltd JM Morgan Stanley Pvt Ltd Japanese Yen Kotak Mahindra Capital Company Ltd Labour Conciliation Officer Motor Accident Claims Tribunal Net Asset Value Non Resident External Account National Securities Depository Ltd National Stock Exchange of India Ltd Price/ Earnings Ratio Permanent Account Number Reserve Bank of India Revised Joint Venture Agreement Registrar of Companies, National Capital Territory of Delhi and Haryana located at New Delhi Return on Net Worth Suzuki Motor Corporation

In this Red Herring Prospectus, references to allotment of equity shares in this Offer, unless the context otherwise requires, also include a reference to transfer of equity shares. In this Red Herring Prospectus, any discrepancies in any table between total and the sum of the amounts listed are due to rounding.

GLOSSARY OF TECHNICAL AND INDUSTRY TERMS

Term CBU CFTs CKD CNG CRM CRIS INFAC Description Completely Built-Up units Cross-Functional Teams Completely Knocked-Down condition Compressed Natural Gas Customer Relationship Management The brand name of CRISIL Research & Information Services Ltd, a wholly owned subsidiary of Credit Rating Information Service of India Ltd (CRISIL) that produces and sells information and analysis on the Indian economy, industries and companies Customer Satisfaction Index Direct Final Check OK Earnings per Share Free-on-Board value Gross Domestic Product London Interbank Offered Rate Liquefied Petroleum Gas Maruti Authorised Service Stations Maruti Genuine Accessories Maruti Genuine Parts Mumbai Interbank Offered Rate Maruti Production System Maruti Service Masters Multi-utility vehicle Net Asset Value Cumulative number of vehicles sold by a company, since its inception, less the number of vehicles that have been scrapped Passenger cars per 1000 persons Profit after tax Planning, Doing, Checking, Acting, an approach used as underlying theme of our manufacturing process Quantitative Restrictions Society of Indian Automobile Manufacturers Semi-Knocked-Down condition Cars belonging to segment A or segment B Segment A and segment B taken together Total Quality Management Value Analysis Value Added Tax Value Engineering Voluntary Retirement Scheme

CSI DFC OK EPS FOB GDP LIBOR LPG MASSs MGA MGP MIBOR MPS MSMs MUV NAV Parc/ car parc Parc Density PAT PDCA QRs SIAM SKD small car small car segment TQM VA VAT VE VRS

FORWARD-LOOKING STATEMENTS
This Red Herring Prospectus contains certain forward-looking statements. These forward-looking statements generally can be identified by words or phrases such as we believe, expect, estimate, anticipate, intend, plan or other words or phrases of similar import. Similarly, statements that describe our objectives, plans or goals are also 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 expectations include, among others:
q q q q q q q q

General economic and business conditions in India; Our ability to successfully implement our strategy, our growth and expansion plans and technological changes; Changes in the value of the Indian rupee and other currency changes; Changes in the Indian and international interest rates; Changes in laws and regulations that apply to the Indian automobile industry; Increasing competition in, and the conditions of, the Indian automobile industry; Changes in political conditions in India; and Changes in the foreign exchange control regulations in India.

For further discussion of factors that could cause our actual results to differ materially from our expectations, see Risk Factors, Our Business and Managements Discussion and Analysis of Financial Condition and Results of Operations in this Red Herring Prospectus. 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. In accordance with SEBI requirements, our Company, the Selling Shareholder, the BRLM and the Co-BRLMs will ensure that investors in India are informed of material developments until such time as the grant of listing and trading permission by the Stock Exchanges.

CERTAIN CONVENTIONS; USE OF MARKET DATA

Except where the context otherwise requires, all references to India contained in this Red Herring Prospectus mean the Republic of India, all references to the U.S. or U.S.A., or to the United States are to the United States of America, all references to China are to the Peoples Republic of China and all references to Taiwan are to the Republic of China. Unless the context indicates or otherwise requires, references to we, us, our, the Company or Maruti mean Maruti Udyog Limited, not including its subsidiaries. All references to Suzuki mean the Suzuki Motor Corporation. All references to the Selling Shareholder, the GoI, the Government or the Central Government mean the Government of India. Market data used throughout this Red Herring Prospectus were obtained from internal company reports and industry publications. 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 market data used in this Red Herring Prospectus are reliable, they have not been independently verified. Similarly, internal company reports, while believed by us to be reliable, have not been verified by any independent sources. According to the Japan Automobile Manufacturers Association, or JAMA, mini cars in Japan are generally defined as vehicles with a length of less than 3.4 meters, height of less than 2.0 meters, width of less than 1.4 meters and exhaustion volumes of less than 0.66 liters under Japanese standards. The term mini car used in this Red Herring Prospectus shall have the same meaning ascribed to it as in the abovementioned definition by JAMA. There are two principal systems of classification in the Indian passenger car industry:

Price-based Classification
Classification based on price is widely accepted in the Indian passenger car industry. Maruti has, since its inception, classified its different models on the basis of ex-showroom prices of the base model in Delhi. As of December 31, 2002, the different price segments used by Maruti were as follows:
q q q q q

Segment A cars priced lower than Rs. 300,000 Segment B cars priced between Rs. 300,000 and Rs. 500,000 Segment C cars priced between Rs. 500,000 and Rs. 1,000,000 Segment D cars priced between Rs. 1,000,000 and Rs. 2,500,000 Segment E cars priced above Rs. 2,500,000

Length-based Classification
In April 2002, SIAM introduced a new segmentation of cars on the basis of the length of the cars, in order to establish a uniform industry standard. The new segmentation of passenger vehicles is as follows: 1. Passenger cars
q q q q q q

Segment A1 (Mini) cars having a length up to 3,400mm Segment A2 (Compact) cars having a length of 3,401-4,000mm Segment A3 (Mid-size) cars having a length of 4,001-4,500mm Segment A4 (Executive) cars having a length of 4,501-4,700mm Segment A5 (Premium) cars having a length of 4,701-5,000mm Segment A6 (Luxury) cars having a length of more than 5,000mm Weight upto 3.5 tonnes o o Seating capacity not exceeding 7 (including driver) Seating capacity between 7 and 9 (including driver) Seating capacity not exceeding 13 (including driver)

2.

Utility vehicles
q

Weight upto 5 tonnes o Multi-purpose vehicles (Weight upto 3.5 tonnes)

Classification used in this Red Herring Prospectus

Unless otherwise indicated, in this Red Herring Prospectus, models of different manufacturers are classified in different segments in accordance with the price-based classification. Other than for models introduced after December 31, 2002, we have generally classified models in different segments on the basis of available information on the ex-showroom price of the base model in Delhi as of December 31, 2002. We also consider industry perceptions of segmentation while classifying models, and therefore there may be some variants of models manufactured by others or us, which if strictly classified on the basis of price would be classified in a different segment. For example, one of Marutis products, the Versa, is significantly larger than cars in the B segment and for the purposes of this Red Herring Prospectus, has been classified in the C segment despite the fact that it is priced below Rs.500,000.

Market data
Sales volumes in this Red Herring Prospectus refer to sales to dealers. Unless otherwise indicated, in this Red Herring Prospectus, we have used either CRIS INFAC Annual Review of 2001 or 2002 or the CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003, as the source for financial and statistical data relating to the automobile industry. The CRIS INFAC Annual Review of 2002 and the CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003 use the lengthbased classification in presenting data for sales volumes of models. We have used the sales volumes of models provided by the CRIS INFAC Annual Review of 2002 or the CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003 to compute market share using our price-based classification.

The classification of models of cars in the Indian passenger car market in accordance with the length-based classification and our price-based classification is presented below: Manufacturer Name of the model Cielo Matiz C Class E 250 S Class Fiat Palio Fiat Siena Fiat Uno Palio Adventure Escort Ikon Mondeo Opel Astra Opel Corsa Opel Swing Corsa Sail Ambassador Contessa Lancer Accord City Accent Santro Sonata Maruti 1000 Maruti 800 Alto Baleno Esteem WagonR Zen Versa Omni 118NE Peugeot 309 Segment as per length-based classification A3: Mid-size A2: Compact A4: Executive A5: Premium A6: Luxury A2: Compact A3: Mid-size A2: Compact A3: Mid-size A3: Mid-size A3: Mid-size A5: Premium A3: Mid-size A3: Mid-size A3: Mid-size A2: Compact A3: Mid-size A4: Executive A3: Mid-size A5: Premium A3: Mid-size A3: Mid-size A2: Compact A5: Premium A3: Mid-size A1: Mini A2: Compact A3: Mid-size A3: Mid-size A2: Compact A2: Compact Utility vehicles Utility vehicles A3: Mid-size A3: Mid-size Segment as per price-based classification C B E E E B C B C C C D C C C B B C C D C C B D C A B C C B B C A B C A D B C

1. 2.

Daewoo Motors India Ltd Daimler Chrysler India Pvt Ltd

3.

Fiat India Automobiles Pvt Ltd

4.

Ford India Ltd

5.

General Motors India Ltd

6.

Hindustan Motors

7. 8.

Honda SIEL Cars India Ltd Hyundai Motor Company Ltd

9.

Maruti Udyog Ltd

10. 11. 12. 13.

PAL-Peugeot Ltd Premier Automobiles Ltd Skoda Auto India Pvt Ltd Tata Engineering & Locomotive Company Ltd

Premier Padmini A2: Compact Octavia Indica Indigo J A5: Premium A2: Compact A3: Mid-size

RISK FACTORS
An investment in equity shares involves a high degree of risk. You should carefully consider all of the information in this Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our equity shares. If any of the following risks actually occur, our business, financial condition and results of operations could suffer, the trading price of our equity shares could decline, and you may lose all or part of your investment. Unless stated otherwise, the financial data in this section are derived from our unconsolidated financial statements prepared in accordance with Indian GAAP the Companies Act and the SEBI guidlines, and included elsewhere in this Red Herring Prospectus. Unless otherwise indicated, all financial and statistical data relating to the automobile industry in the following discussion are derived from either the CRIS INFAC Annual Review of 2001 or 2002 or the CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003. These data have been reclassified in certain respects for purposes of presentation. For more information, see Certain Conventions; Use of Market Data on page H of this Red Herring Prospectus.

Internal Risk Factors

We operate in a highly competitive environment and competitive pressure on our business is likely to continue. Since the delicensing of the passenger car industry by the GoI in 1993, a number of international and domestic automobile manufacturers have begun manufacturing passenger cars in India and have entered the Indian passenger car market. As a result, the Indian passenger car market has become highly competitive. In a growing market, our overall market share in terms of number of passenger cars sold in the Indian market declined from 83.1% in fiscal 1998 to 57.6%, 58.6% and 54.6% in fiscal 2001, 2002 and 2003, respectively. While continuing to offer products in most segments of the Indian passenger car market, we are primarily focused on the A and B segments (priced below Rs.500,000) which are particularly pricesensitive and together constituted more than 84% of sales volumes in the Indian passenger car market in fiscal 2003. Our market share for passenger cars in the B segment (priced between Rs. 300,000 and Rs. 500,000), declined from 67.3% in fiscal 1998 to 36.9%, 40.3% and 38.6% in fiscal 2001, 2002 and 2003, respectively. Our sales volumes in the combined A and B segments comprised 95.1% of our domestic sales volumes in fiscal 2003. We are currently the only manufacturer that sells passenger cars in the A segment. In segment B, we compete primarily with three other manufacturers. In the future, we may also face competition from other domestic and international manufacturers that enter the A and B segments, including international manufacturers that have been successful in foreign markets for cars of a similar size but are yet to enter these segments in India. Some of the international manufacturers that have entered the Indian market in recent years have significantly greater financial resources than us, which may enhance their ability to compete with us. The C segment (priced between Rs. 500,000 and Rs. 1,000,000), which comprised 4% of our domestic sales volumes in fiscal 2003, is significantly more fragmented than the A and B segments and there are several competing manufacturers in this segment. We exported passenger cars comprising 3.1%, 2.6% and 7.4%, of our total sales in fiscal 2001, 2002 and 2003, respectively, to many countries including countries in Western Europe. We expect to continue to face competition in the export markets, which may reduce demand for our products in those markets. Since most of our cars run on petrol, we also compete with manufacturers of cars with diesel engines. We may also face competition from public transportation systems in India, as they improve.
i

We compete primarily based on price, product performance, brand image, new model launches, distribution network and the availability of value-added after-sales services and after-sales support. If we are unable to compete effectively based on these factors, competition may reduce our market share in individual segments of the passenger car market as well as our overall market share in the future. We expect competitive pressure on our business to continue. After a net loss in fiscal 2001, we achieved profitable operations in fiscal 2002 and 2003. We may face a decline in our profits or a reduction in sales volumes in the future due to intense competition. We are substantially dependent on the Maruti 800, which comprised 43.4% of our domestic sales volumes in fiscal 2003. At present, we are the only manufacturer in India to produce passenger cars in the A segment (priced below Rs.300,000), which contributed approximately 58.6% of our domestic sales volumes in fiscal 2003. A substantial portion of our sales volumes is derived from the sales of the Maruti 800 model, which is an A segment car. In fiscal 2003, Maruti 800 accounted for 43.4% of our domestic sales volumes. We anticipate that the Maruti 800 will continue to dominate the small car segment and account for a substantial portion of our sales. Consequently, our future success will, to a large extent, depend on continued demand for and market acceptance of the Maruti 800, our ability to enhance and develop the Maruti 800 to meet the evolving needs of the customers, and our ability, following the end of the product life-cycle of the Maruti 800, to find another model that will generate similar sales volumes in a similar price range. A change in consumer preferences, technological change or other factors could reduce demand for the Maruti 800, which could lead to a material adverse effect on our business and results of operations. In addition, a competitor could start manufacturing cars for sale in the A segment to compete with the Maruti 800. We could face competition from imports of new or pre-owned cars of various categories, and from cars manufactured or assembled in India using imported components. In April 2001, all quantitative restrictions on the import of automobiles into India were removed. The GoI has, since March 2002, allowed automatic approvals for foreign equity ownership of upto 100% in entities manufacturing automobiles and components in India. There remain relatively high tariffs on imports of automobiles and components and other restrictions such as quantity restrictions. We expect that tariffs on the import of components, CKDs or CBUs will be reduced in the near future in order to comply with Indias obligations under the World Trade Organisation agreement. If tariffs on the import of new or pre-owned cars or components are reduced, or other restrictions on such imports are removed, we could face increased competition from automobile manufacturers that import new or pre-owned passenger cars to India or manufacture passenger cars in India using imported components. Our ability to reduce our cost of production and thereby increase our operational efficiency is an essential part of our business strategy and we cannot assure you that our cost reduction measures will continue to achieve the operational efficiencies they have done in the past. Reducing our cost of production is essential to our business strategy in a highly competitive market environment. We have significantly reduced costs through a combination of measures such as increasing the use of locally manufactured components for our products, reducing the cost of manufacturing and increasing productivity. In the past, these measures have allowed us greater flexibility in reducing the prices of our products in an increasingly competitive market environment. Our measures to increase our operational efficiency may not yield similar results in the future, which may adversely affect our sales volumes or profit margins.

ii

Suzuki has the ability to exercise significant control over us and its interests may conflict with your interests as a shareholder. Suzuki owns 54.2% of our outstanding equity shares and is our controlling shareholder. As a result, Suzuki has the ability to exercise significant control over most matters requiring approval by shareholders, including the election and removal of directors and other significant corporate transactions. In addition, Suzuki could, by exercising its powers of control, delay or defer a change in control of our Company or a change in our Companys capital structure, delay or defer a merger, consolidation, takeover or other business combinations involving our Company, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company. Following Suzukis acquisition of a controlling interest in us, the success of our business also depends on our continued ability to integrate Suzuki personnel into our management structure. Suzuki is a major manufacturer and exporter of passenger cars and motorcycles. Approximately 20% of Suzukis outstanding equity shares are owned by General Motors of Canada Ltd, which is part of the General Motors group. The General Motors group also has an Indian venture competing with us in segment C of the automobile industry and has recently introduced a model in segment B. We have entered into several nonexclusive agreements with Suzuki and its affiliates for the supply of technical know-how, assistance and information related to our products and after-sales service, and for the supply of raw materials, components, and other inputs. These agreements place restrictions on our ability to export and to manufacture and sell products that compete with the products covered by the agreements. Suzukis global interests and our interests as a company may not always be aligned in the future. Suzuki has the ability to change our business strategy. In addition, if there is a change of control of Suzuki, Suzukis relationship with us and our business strategy may change in the future. For details of the terms governing our relationship with Suzuki and restrictions imposed on us by our agreements with Suzuki and details of the nature of our transactions with its affiliates, please see Related Party Transactions on page 115 of this Red Herring Prospectus and Our Promoter on page 85 of this Red Herring Prospectus. We are substantially dependent on Suzuki. Suzuki, which became our controlling shareholder in 2002, has several license agreements with us under which it has, since our inception:
q

provided us with technical know-how, assistance and information for the manufacture, sale and aftersales service of our products and parts; supplied components for our passenger cars; deputed technical personnel helped us develop manufacturing processes and integrate certain Japanese management practices such as kaizen, which is Japanese for continuous improvement, in our plants; trained our personnel; and helped us develop and manage the supply chain for our products.

q q q

q q

Suzuki has agreed to no longer charge royalty for the Maruti 800, Omni, Gypsy, Esteem and Zen models, which arrangement is subject to revision in the event of the introduction of new technology or upgradation in specifications due to changes in market conditions or requirements of new laws or norms. The royalty expenses on these models paid to Suzuki in fiscal 2002 were Rs.779.5 million. In addition, Suzuki will provide a 10% discount on knocked-down components imported by us, except those imported for the Alto

iii

model built for exports, for the period between April 2003 to March 2005. Thereafter, the discounts will be determined subject to market conditions in India. Suzuki is entitled to terminate any of its existing licence agreements with us by giving notice six months before the end of the original term and each renewal period. In addition, we have commercial relationships with some of Suzukis affiliates relating to the supply of materials, services, spares and accessories, vendor assistance, including guarantees and co-lease arrangements, and the purchase of dies and moulds and capital equipment. If Suzuki terminates any license agreement or any of its affiliates terminate their agreements with us, we may be unable to obtain necessary inputs, information or services for our business from alternative sources or at a reasonable cost. Since we are substantially dependent on Suzuki and Suzukis technical personnel, if a material adverse change occurs in Suzukis business, or if Suzuki ceases to provide technical know-how and assistance, components, training and other aid, our business may be adversely affected. We are dependent on a limited number of vendors for the supply of critical components, consumables and raw materials used in the manufacture of our products. We depend on external suppliers, whom we refer to as vendors, for the supply of raw materials, components and spare parts for our products. As of March 31, 2003, we had an aggregate of 299 vendors of components in India. We had strategic equity interests through joint venture agreements in 13 of these vendors. We collaborate closely with many of our vendors in order to secure a reliable supply of components that meet our requirements and to generate economies of scale. As a result of this approach, for several inputs in our manufacturing process such as glass, seats and axles, we rely on a sole vendor or only a limited number of vendors. The failure by a vendor to adhere to our technical specifications, quality requirements and production and delivery schedules could disrupt our manufacturing process. If a vendor fails to meet quality standards, it could be exposed to warranty and other product liability costs, and expose us to the risk of product liability claims. In addition, a vendor on whom we are dependent may raise its prices or a dispute may arise between us and the vendor. If we are dependent on a sole vendor or a limited number of vendors for a critical input, we may find it difficult to replace a vendor on a timely basis and at reasonable cost, and our business and results of operations may be adversely affected. For example, labour unrest in February 2003 at one of our vendors facilities disrupted the supply of engine cylinder blocks to us, which had an adverse impact on our production volumes in March 2003. Further, the unauthorised market for our spares and accessories will become stronger should vendors decide to supply such spares and accessories directly to the market. Our agreements with most of our vendors require that they use the designs, drawings and specifications provided by us only, to manufacture and supply components to us and therefore restrict our vendors from selling such components to others without our consent. However, vendors who use their own designs, drawings and specifications to manufacture components are not generally restricted by these agreements from selling such components to others. Our agreements with most of our joint venture companies permit them to sell their products to others, with our consent, after they fulfill our requirements. We also sell the products manufactured by our vendors through our dealer and stockists networks under the Maruti brand name. Disputes between our major shareholders may have an adverse impact on our business. After this offering, Suzuki and the GoI will hold 54.2% and approximately 20.8%, respectively, of our outstanding equity shares. Subject to certain restrictions in the RJVA between Suzuki and the GoI, Suzuki has the right to nominate a majority of the directors on our Board and the right to nominate our Chairman and our Managing Director. However, after this Offer, the GoI will retain certain rights under the RJVA, including the right to nominate one of our directors so long as it owns in excess of 10% of our outstanding equity shares. In addition, until the earlier of December 31, 2003 or the termination of the RJVA, we are not permitted to sell, transfer, lease or dispose our fixed assets in excess of 10% in any fiscal year, other than in
iv

the ordinary course of business, increase our paid-up capital, commence winding up proceedings or enter into any arrangements with creditors, without the affirmative vote of the director nominated by the GoI. The RJVA will terminate if the GoI ceases to own more than 10% of our outstanding equity shares. In the past, our shareholders had disputes relating to the management of our Company that resulted in delays in the investment decisions, upgradation and launch of new models of cars, and this adversely affected our business and results of operations. If a dispute arises between Suzuki and the GoI with respect to their respective rights under the RJVA or otherwise in connection with us, or a dispute arises among any other major shareholders in the future in connection with us, our business could be adversely affected. Selling Shareholder and Suzuki are significant shareholders in our Company and are able to control the election of our board and may have interests which conflict with those of our other shareholders. The Selling Shareholder and Suzuki, alongwith their officers and directors, will beneficially own, in the aggregate, approximately 75% of our outstanding equity shares after the completion of this Offer. Under the RJVA, the Selling Shareholder has agreed to vote with Suzuki on all matters requiring affirmative vote of 75% of the shareholders, except for certain matters specified in the RJVA. As a result, acting together, this group has the ability to exercise significant control over most matters requiring our shareholders approval, including the election and removal of directors and significant corporate transactions. Additionally, our Articles provide that so long as Suzuki holds 50% of our equity share capital, it shall have the right to appoint our Chairman, Managing Director and a majority of our directors. Under our Articles, the Chairman has a casting vote. Suzuki could, by exercising its powers of control, delay or defer a change in control of our Company or a change in our Companys capital structure, delay or defer a merger, consolidation, takeover or other business combinations involving our Company, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company. We are subject to risks of assuming product warranty, recall and product liability costs due to defects in our products or related after-sales services, which could generate adverse publicity and adversely affect our business, results of operations and financial condition. Defects, if any, in our products could require us to publicly undertake service actions or recall campaigns. Such actions could require us to expend considerable resources in correcting these problems and could adversely affect demand for our products. Defects in our products that arise from defective components or spare parts supplied by our vendors may be covered under warranties provided by our vendors. We are not covered by insurance for product warranty claims for cars sold in India. Our product warranty insurance only covers claims that are asserted during the third and fourth year in the life of a car and are covered by extended warranties purchased by customers. An unusual number or amount of warranty claims against a vendor could affect us adversely because we depend on a limited number of vendors for the supply of raw materials and components. Repeated warranty claims may result in a rise in our insurance premium. In addition, such claims could have an impact on our consolidated results of operations and financial condition as some of our vendors are our affiliates and for some of our vendors we are guarantors on outstanding loans or lease payment obligations. Further, any defect in our products or after-sales services provided by authorized dealers or third parties could also result in customer claims for damages. In defending such a claim, we could incur substantial costs and receive adverse publicity. Management resources could be diverted away from our business towards defending such claim. As a result, our business, results of operations and financial condition could suffer. We cannot assure you that the limitations of liability set forth in our contracts with vendors will be enforceable in all instances or will otherwise protect us from liability for damages.

Further, we are not fully insured against all potential hazards incidental to our business. For example, our insurance does not cover replacement cost of plant and machinery, product liability costs for cars sold in India and losses related to recall of cars for design defects or replacement of components or spare parts. Potential delays in the launch of new models in the market and lower-than-anticipated market acceptance of new or existing models can cause us to lose market share and adversely affect our results of operations. In a highly competitive environment where the passenger car industry has excess capacity, competitors can gain a significant advantage by bringing a new model to market in a particular segment before we do. For example, a delay in the launch of one of our models has, in the past allowed a competitors model to precede it in the market and develop a competitive advantage. In addition, the launch of a new model usually requires substantial capital investment and costs of production of new models are higher since, at least initially, new models have high import content. The capital investments in plant and machinery associated with the launch of a new model may result in higher levels of depreciation. Our loss in fiscal 2001 was partially attributable to these factors. Similar investments by us in the future may have an adverse impact on our profitability. Therefore, if market acceptance of any of our new models is lower than anticipated, we may be unable to gain the intended economic benefits of our investments and higher cost of production, and our results of operations may be adversely affected. Our net cash flow provided by operating activities was a negative Rs. 2,448 million in fiscal 2001, primarily due to our increased working capital requirements and our loss before tax in fiscal 2001. Our cash flow from operating activities before working capital changes in fiscal 2001 was Rs. 440 million. We issued an aggregate amount of Rs.3,000 million secured non-convertible redeemable debentures to help fund our capital expenditure requirements. As of March 31, 2003, we had cash and bank balances and current investments amounting to Rs. 10,057 million. If we do not have sufficient cash, bank balances and current investments to fund our working capital or capital expenditure required for the launch of new models and other purposes in the future, we may need to incur indebtedness. In addition, our major capital projects may either not be completed at all or may not be completed in the timeframe or at the cost levels originally anticipated. We suffered a loss before tax in fiscal 2001 and our future profitability will depend on our ability to adapt to changing conditions in the passenger car industry. We suffered a loss before tax of Rs.2,692 million in fiscal 2001. During the period from November 1994 to December 1999, when we did not launch a new model, competitors launched and gained market share for their own models in the rapidly-growing B segment. Immediately following the settlement of the dispute between our shareholders in June 1998, we initiated our capital-intensive strategy of new model introduction as well as capacity expansion to address the growing market in a highly competitive environment. As a long-term strategy, we rapidly expanded our product portfolio, launching four new models, in addition to certain variants, in the short span of 22 months from December 1999. We expanded our installed capacity to 350,000 with our third plant becoming operational in March 1999. The expansion of capacity and launch of these models and variants required substantial capital investment over a relatively short period, resulting in relatively higher depreciation. In addition, the cost of components for the new models was relatively high due to low levels of localisation early in the life of the models. Further, we incurred substantial additional cost in developing engines for many of our models in order to comply with the Bharat Stage I emission norms, which first became applicable from June 1999 and Bharat Stage II emission norms, which first became applicable in April 2000. In the shorter term, these factors adversely affected our profitability and contributed to our loss before tax in fiscal 2001.

vi

We generated a profit before tax in fiscal 2002 and 2003, primarily due to factors such as the increasing use of locally manufactured components in our new models, improvement in manufacturing and vendor productivity, our cost reduction measures, and implementation of the new performance-based incentive scheme for our employees in January 2001. Our profitability in the future will depend on our ability to anticipate or respond to developments in the passenger car market and industry, such as changes in competitive conditions, government regulation, technology and consumer preferences. We cannot assure you that our business will not be adversely affected by such developments or that our experience of a loss before tax in fiscal 2001 will not be repeated. Our employees are represented by a trade union and any labour unrest at our manufacturing facility or our vendors facilities could adversely affect our operations and profitability. On March 31, 2003, we had 4,590 employees, of which 2,999 are represented by a trade union. Our manufacturing operations were affected by a strike from October 12, 2000 to January 8, 2001 arising from a dispute between the management and the union regarding the specifics of a new incentive scheme proposed by the management. The strike was resolved with the signing of a good conduct agreement between the workers and the management. While our production volumes were not significantly affected during the strike, future labour unrest at our facility or at the facilities of our vendors could adversely affect our manufacturing operations and our operating results. At March 31, 2003, 2,999 of our employees were represented by the Maruti Udyog Kamgar Union, or the MUKU. We are involved in negotiations with the MUKU for the renewal of a wage settlement agreement, which expired in March 2000. The terms of this renewal may adversely affect our results of operations and financial condition. In the previous wage settlement agreement, entered into in February 1998, we had agreed to provide retrospective wages from April 1996 until the date of the agreement for certain categories of employees, and other benefits such as transport subsidies and increases in the amounts of permissible advances. We had also agreed to set up a pension scheme with more favourable terms for employees than the statutorily required employee provident fund. Breakdowns in our information technology based communication systems may disrupt our operations. We rely on an information technology based communications infrastructure which links our offices, vendors, dealers and Suzuki, and is essential to the management of our supply chain, inventory, manufacturing and new businesses. It also forms an integral part of our internal communications and management information systems. In the case of a breakdown, the ordering and follow-up system with vendors and dealers will be affected, which could lead to production stoppages, significant increases in levels of inventory and lead times. It may also disrupt our internal decision-making process by causing loss of data and making it difficult for members of our management team to communicate with each other in a timely manner. We have launched several new businesses and we cannot assure you that we will remain successful in these businesses or that they will yield the intended economic benefit. To complement our core business of manufacture and sale of passenger cars, we have recently entered into alliances with third parties for the sale of pre-owned Maruti passenger cars, providing financing for purchases of our products, providing automobile insurance for our products, and providing leasing and fleet management services in relation to our products, in each case using the Maruti brand name. These businesses form an integral part of our business strategy to offer a one-stop shop for the needs of the Indian consumer in order to foster brand loyalty and benefit from our extensive dealership network for distribution of the services. We have launched these businesses during and after fiscal 2002, and they are in their early stages. Some of the business models we are using are relatively new to the Indian passenger car industry and we cannot assure you that these business models will gain widespread acceptance.
vii

Governmental regulation may also have an adverse impact on the economic viability of these business models. We have limited experience in these businesses and are substantially dependent on our alliance partners in the case of each of our new businesses. We cannot assure you that we will succeed in developing the management skills required to be successful in these businesses. In addition, since our brand is associated with these businesses, their failure may weaken our brand. Although we have limited our liability towards our alliance partners and their customers, we anticipate that customers will require us to fulfil expectations related to the services provided by our alliance partners since our brand is associated with these businesses. On January 14, 2002, we incorporated three wholly owned subsidiaries and made capital investments of Rs. 0.5 million in each of these companies: True Value Solutions Limited, or TVSL, to facilitate the business of selling pre-owned Maruti passenger cars through our dealership network, and Maruti Insurance Distribution Services Limited, or MIDSL, and Maruti Insurance Brokers Limited, or MIBL, as insurance intermediaries to facilitate the distribution of automobile insurance in alliance with certain insurance companies. In fiscal 2003, TVSL, MIDSL and MIBL generated profit after tax of approximately Rs. 1,244,000, Rs. 1,278,000 and Rs. 7,781,000, respectively. We conduct our automobile finance business in alliance with finance companies, and our leasing and fleet management business in alliance with providers of automobile financing and insurance, dealers and car rental agencies. These activities may not yield the intended economic benefits. We have several group companies, some of which have yielded low returns on investment. Some of these group companies are also loss making, which may adversely affect our result of operations. We have equity stakes in 19 group companies. Some of these have yielded low returns on investment or incurred losses in the last three years, as set out in the table below: Profit/(Loss) in Rs. million for financial year ended March 31: Joint Venture Mark Auto Industries Limited Maruti Countrywide Auto Financial Services Limited MUL Shareholding 33.89% 26.00% 2003 6.04 (97.53) 2002 3.02 (44.67) 2001 (25.11) (4.73)

Suzuki Metal India Limited, our joint venture to establish an aluminium foundry, is yet to begin commercial operations and has therefore not yet started earning revenues. These investments may continue to adversely affect our consolidated results of operations and financial condition. For more information on the recent financial performance of our group companies, see Our Group Companies on page 92 of this Red Herring Prospectus. Our strategic investments in, and capital commitments for the benefit of, vendors may adversely affect our consolidated results of operations and financial condition. Close collaboration with vendors is an important part of our business strategy. We have made strategic equity investments in 13 vendors that supply critical raw materials and components for the manufacture of our products, some of which have yielded low or negative returns on investment or have been generating losses in the course of the last three fiscal years. In the case of some of our vendors, we have made capital commitments as their guarantors for their obligations under leases or loan agreements. The future performance of these vendors may therefore adversely affect our results of operations and financial condition. For more information on the recent financial performance of vendors in whom we have strategic investments, see Our Group Companies Our Joint Ventures on page 95 of this Red Herring Prospectus.

viii

Our contingent liabilities as per Indian Accounting Standards are as follows: As of March 31, 2003, our contingent liabilities not provided for were as follows:
q

Claims against us not acknowledged as debts in the aggregate amount of Rs.14,135 million due to sales tax, excise, customs, income tax and disputed claims against us. Guarantees given by us to HDFC in the aggregate amount of Rs.300 million against a term loan of Rs.300 million given by HDFC Limited to Maruti Employees Co-operative House Building Society Limited, Bhondsi. Against it, the contingent liability at March 31, 2003 was Rs.147 million. Guarantees given to finance companies in the aggregate amount of Rs. 456 million for term loans and lease finance provided to various vendors for the purchase of dies and moulds of certain models. Leasing commitments in the aggregate amount of Rs. 2,411 million as co-lessee under certain agreements between various vendors, as lessees, and finance companies or banks, as lessors, for the leasing of dies and moulds for certain models.

To the extent that any of these contingent liabilities become actual liabilities, they will adversely affect our results of operations and financial condition in the future. We are dependent on our dealership network for the sales and distribution of our products. We believe that our extensive network of 178 authorised dealers as of March 31, 2003 is one of our most important competitive advantages in the passenger car industry. We maintain close contact with our dealers and monitor their performance, but we do not have control over them. Since the dealers have direct contact with the retail customers at the time they purchase the product and during after-sales services and support, their conduct has a significant impact on the consumers perception of our products and our brand. We are therefore subject to the risk that dealers may fail to adhere to the quality standards we set for them in respect of providing sales and after-sales service and support, and thereby negatively affect market perception of our products. In addition, in the recent past, intense competition among our dealers or with dealers of competitors products and other factors beyond our control have negatively affected the financial condition of some of our dealers. If this happens on a large scale, a significant portion of our dealers businesses would be affected and therefore they may be unable to provide after-sales service and support to customers. Further, our dealers could engage in other businesses that could hinder them from providing quality services. Finally, we bear the risk of dealer default to customers and consequent customer recourse to Maruti. Although we are not contractually liable to the customer in these instances, we have to expend considerable resources defending such claims and ensuring that defaulting dealerships are terminated. In addition, sales and distribution of our vehicles may be affected if we are unable to deliver them to dealers in a timely manner due to disruptions in railway or road transportation networks due to weather related events, labour strikes or otherwise. For example, in April 2003, a nation-wide strike by truck drivers in India adversely affected our production. All these factors could erode one of our major competitive advantages and could adversely affect our business and results of operations. We are dependent on our key management personnel and our ability to attract and retain talented professionals. We rely on the expertise and services of key members of our senior management such as our Managing Director and our Marketing Director. If we lose any of these key personnel, we may find it difficult to find replacements with similar knowledge and experience, especially in relation to our business and our Company, and integrate them into our organization. As a result, our business, results of operations and financial condition could be adversely affected. In addition, we compete with other companies in and outside our industry, to recruit and retain highly skilled professionals trained in automobile engineering, product

ix

development and marketing. If we are unable to attract highly skilled professionals, fail to integrate them into our organization, or fail to retain them after we have invested resources in their training, our ability to compete and our results of operations may be adversely affected. In addition, we do not have any noncompetition agreements with any of our senior management or other members of our management team.
We are yet to receive certain statutory approvals required in the ordinary course of business.

We are yet to receive the following renewals and approval:

q

The Haryana State Pollution Control Board (HSPCB) consent relating to the discharge of effluents by us, was valid till March 31, 2003. We filed an application for the extension of this consent for FY2004 and FY2005 on December 20, 2002. The HSPCB consent setting permissible emission levels was valid till March 31, 2003. We filed an application for the extension of this consent for FY2004 and FY2005 on December 20, 2002.

Failure to obtain these renewals, which have been regularly obtained in the past, would adversely affect our business. In addition, we have not received building completion certificates and approvals under the Punjab Schedule and Controlled Areas (Restriction of Unregulated Developments) Act, 1963 or approvals from the Director, Town and Country Planning, Government of Haryana, for any of our buildings, covering an area of 3,60,313 square meters, in our manufacturing facility. We have applied for the approval of the building plans and submitted the required plans, drawings and other relevant documents. We are defendants in a number of legal proceedings that if determined against us, could have a material adverse impact on our results of operations and financial condition. We are defendants in a number of legal proceedings incidental to our business and operations. We were also subject to claims against us arising from excise, sales tax, customs, income tax, consumer disputes and other disputed demands. The contingent liability not provided for in our books of accounts in respect of these claims was Rs.14,135 million at March 31, 2003. We are currently disputing claims made against us by the excise department, including one claim of Rs. 2,003.58 million pending before the Commissioner of Excise arising from the MODVAT credit on capital goods. Also, there are a number of civil and criminal cases filed against us and our directors. Should any new developments arise, such as a change in Indian law or a ruling against us by appellate courts or tribunals, we may need to establish reserves in our financial statements, which could increase our expenses and our current liabilities. Furthermore, if a claim is determined against us and we are required to pay all or a portion of the disputed amount, it could have a material adverse affect on our results of operations. All of the above legal proceedings are pending at different levels of adjudication before various courts, tribunals, enquiry officers, and appellate tribunals. Our Group Companies are defendants in a number of legal proceedings incidental to their business and operations. They are also subject to claims arising from excise, sales tax, customs, income tax, consumer disputes and other disputed demands. For more information regarding litigation involving our directors, our group companies or us, see Outstanding Litigation and Material Developments on page 127 of this Red Herring Prospectus.

Any future equity offerings by us or our existing shareholders, or the issue of options under an employee stock option plan, may lead to dilution of your shareholding in us or affect the market price of our equity shares. As a purchaser of equity shares in this Offer, you may experience dilution to your shareholding to the extent that we make future equity offerings or issue stock options under any employee stock option plan. In addition, under the RJVA, the GoI has an option to offer its remaining stake of 3,002,414 equity shares of Rs.100 each, that is 60,048,280 equity shares of Rs.5 each, representing 20.8% of the equity share capital of Maruti, either by way of additional offers to the public or by exercising an option to put the equity shares to Suzuki. This option is subject to a lock-in period of one year pursuant to the SEBI Guidelines, the details of which are set forth in Note 2 under Notes to Capital Structure in the section entitled Capital Structure. For additional details on the rights of the GoI under the RJVA, see Our Promoter on page 85 of this Red Herring Prospectus.

External Risk Factors

Our performance is linked to the performance of the Indian economy and the passenger car industry in India. Demand for passenger cars can be adversely affected by factors such as an increase in fuel prices, macroeconomic performance, and competition from alternative modes of transport. In fiscal 2001 and fiscal 2002, demand for passenger cars in India has been depressed, the industry has experienced excess capacity, and competition has intensified as a result. We are dependent on the Indian passenger car market as exports contributed only 3.1%, 2.6% and 7.4%, of our total sales in fiscal 2001, 2002, and 2003, respectively. We have therefore been subject to increasing competitive pricing pressure. Excess capacity in the industry is likely to further intensify competitive pricing pressure in the event of continued economic downturn, which may have a material adverse impact on our results of operations. Should consumer demand soften or interest rates increase, our profitability may be affected. In addition, these conditions may have an adverse impact on the performance of the financial markets in India and may cause the market price of our equity shares on the Indian stock exchanges to decline in the future. After this Offer, the price of our equity shares may be highly volatile, or an active trading market for our equity shares may not develop. The prices of our equity shares on the Indian stock exchanges may fluctuate after this Offer as a result of several factors, including:
q q q

q q q

volatility in the Indian and global securities market; our results of operations and performance, in terms of market share; performance of our competitors, the Indian passenger car industry and the perception in the market about investments in the automobile sector; media reports about the GoIs process of selling its stake in us and other companies in which the GoI has an equity participation; changes in the estimates of our performance or recommendations by financial analysts; significant developments in Indias economic liberalization and deregulation policies; and significant developments in Indias fiscal and environmental regulations.

There has been no public market for our equity shares and the prices of our equity shares may fluctuate after this Offer. There can be no assurance that an active trading market for our equity shares will develop or be sustained after this Offer or that the Offer Price or the price at which our equity shares are initially

xi

traded will correspond to the prices at which our equity shares will trade in the market subsequent to this offering. Increases in the cost of raw materials and automobile components may have a material adverse impact on our results of operations. In fiscal 2003, consumption of raw materials and components formed 71.8% of our total expenditure net of excise duty. We enter into contracts with suppliers of these inputs in order to fix our input costs over a defined period. We also have joint venture agreements with 13 vendors that supply these inputs. If costs of raw materials and components rise, our results of operations will be adversely affected. If the supply of power or the fuel needed to generate power is interrupted, it could disrupt our production process or subject us to additional costs. The state of Haryana, where we are located, has a power shortage and is unable to meet our needs for power for our operations. We have a captive power plant for the production of 60MW of power. Any interruption in the supply of power from our captive power plant would disrupt our manufacturing operations. Due to a decision of the Supreme Court of India applicable to the industrial use of natural gas, we are no longer able to use natural gas as fuel for generating power in our captive power plant. Instead, we have been using naphtha as fuel since July 2002. Naphtha is a more expensive fuel than natural gas. In addition, in case of a shortage in our supply of naphtha or other fuels we rely on, in the future, we may have to resort to generating power from other more expensive sources of fuel to ensure that our production is not affected. We continue to look for less expensive sources of fuel. Compliance with increasingly stringent safety or emissions standards relating to our products or our manufacturing facility, or other environmental regulation, may adversely affect our business and results of operations. In the last few years, the GoI has introduced several regulations regarding emission levels, fuel efficiency, noise and safety of cars, as well as levels of pollutants generated by the plants that produce cars. These regulations are likely to become more stringent and the cost of complying with these regulations may be significant. We are committed to improving and maintaining our environmental and safety standards with respect to our products and our manufacturing facility, and have received the ISO 14001 certification for environmental management. In fiscal 2001, we incurred substantial additional costs to upgrade our vehicles to comply with Bharat Stage II emission norms. To comply with the requirements of environmental regulation, we may have to incur substantial capital expenditure and research and development costs to upgrade our products and our manufacturing facility, which may increase our cost of production and thereby adversely affect our results of operations. If we are unable to comply with these standards within the timeframe provided to us, our production and sales may be adversely affected. For details on the environmental regulation to which we are currently subject, see Regulations and Policies on page 125 of this Red Herring Prospectus. Taxes and other levies imposed by the GoI on the acquisition and ownership of passenger cars, or GoI regulation relating to us may have a material adverse effect on demand for our products. Taxes and other levies imposed by the central or state governments in India that affect our industry include:
q q q

customs duties on imports of raw materials and components; excise duty on the manufacture of cars; central and state sales tax;

xii

q q q

value added tax; road and registration tax; and income disclosure requirements applicable to customers who want to purchase cars.

These taxes and levies affect the cost of production and prices of our products and therefore the demand for our products. In addition, restrictions or levies imposed by the government on the use of vehicles, such as a congestion charge or other traffic control measures, could affect the demand for our cars in the future. An increase in any of these taxes or levies, or the imposition of new taxes or levies in the future, may have a material adverse impact on our business, results of operations and financial condition. For details on the taxes and levies relating to our industry, see Regulations and Policies on page 125 of this Red Herring Prospectus. Our failure to anticipate, or adapt our business to, consumer preferences in the automobile industry may adversely affect our business and our leadership position in the small car segment. Evolving industry standards, changing consumer preferences, technological changes and new product introductions characterize the automobile industry. Our success depends on our ability to keep pace with these changes and introduce products with contemporary features. We may not be successful in addressing these developments on a timely basis or if we address these developments, our new products may not be successful in the marketplace. In addition, products developed by others may make our products less competitive. Although we produce some cars that run on diesel, liquefied petroleum gas and compressed natural gas, most of the cars we produce run on petrol. If the price of diesel falls significantly below that of petrol, demand for cars running on diesel is likely to rise at the expense of demand for our products. In addition, with petroleum being a limited natural resource, several companies are in the process of developing cars running on alternative sources of fuel. Cars using energy sources other than petrol or diesel, such as electricity, may become more popular in the future. We may not be able to introduce successful and popular cars that use such alternative sources of energy. While we expect to continue to manufacture products in most segments of the Indian passenger car market, our business strategy is to focus primarily on producing a wide range of models in the A and B segments, which together comprised over 84% of the sales volumes in the Indian passenger car market in fiscal 2003. As consumer income levels rise in India, our lack of concentration on, and competitiveness in, the segments for cars priced above Rs. 500,000 (the C, D and E segments) has promoted, and may continue to promote, attrition of our customers upgrading from the A and B segments towards our competitors. We are subject to risks arising from exchange rate fluctuations. We import a substantial amount of our imported components, especially for newer models, from Suzuki. Since the cost of these components is denominated in Yen, any adverse fluctuations with respect to the exchange rate of Yen for Indian Rupees is likely to affect our input costs. We continue to bear this risk despite the increasing use of locally manufactured components in each of our models over time. In addition, we are subject to exchange rate fluctuations in relation to the export of our products. We enter into foreign exchange forward and derivative contracts to hedge these risks, but these contracts may not protect us fully from losses due to fluctuations in foreign exchange rates.

xiii

Our manufacturing operations and substantially all of our assets and those of most of our vendor affiliates are located in or in close proximity to one high volume facility in Gurgaon, Haryana, which exposes us to the risk of significant disruptions in production should a catastrophe occur at or in the vicinity of such facility. Our operations are dependent on our ability to protect our infrastructure including plant and machinery against damage from fire, earthquakes, floods, power losses and similar events. The occurrence of a natural disaster or other unanticipated problems at our facility or the facilities of our vendors could cause interruptions in our operations. This risk is particularly relevant because our manufacturing operations are located in one facility, many of our vendors are located within 100 kilometres of that facility and some of our vendors are located in the facility. Conversely, some of our vendors are not located in close proximity to our facility and are therefore heavily reliant on transportation networks that connect their facilities to ours. If they are unable to deliver raw materials or components to us in a timely manner due to disruptions in railway or road transportation networks due to weather-related events, labour strikes or otherwise, we may be forced to stop production. For example, the nation-wide strike by truck drivers in India in April 2003 adversely affected our production volumes. Any damage or failure that causes interruptions in our operations could have a material adverse effect on our business, financial condition and results of operations. Terrorist attacks and other acts of violence or war involving India, the United States, and other countries could adversely affect the financial markets, result in loss of customer 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 and New Delhi on December 13, 2001 and Bali on October 12, 2002, and other acts of violence or war, including those involving India, the United States 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, any of these events could adversely affect fuel prices, cause consumer spending to decrease, cause increased volatility in the financial markets and have an adverse impact on the economies of India and other countries, including economic recession.
NOTES TO RISK FACTORS

1. The average cost of acquisition of equity shares of Rs. 5 each held by the Selling Shareholder is Rs. 4.981 . 2. The average cost of acquisition of equity shares of Rs.5 each held by Suzuki is Rs. 32.08. 3. The Company had made a rights issue of 1,219,512 equity shares of Rs.100 each amounting to about Rs. 4,000 million on May 30, 2002 at a price per share of Rs. 3,280. In addition, Suzuki paid a control premium of Rs. 10 billion to GoI. 4. The book value per equity share of Rs. 5 each as on March 31, 2003 is Rs. 105.64. 5. The net worth of our Company as on March 31, 2003 is Rs. 30,093 million. 6. The present offer is an Offer of sale of 72,243,300 equity shares of Rs. 5 each at a price of Rs. q for cash aggregating Rs. q million. 7. The size of the Offer will be enhanced to the extent of upto 10% of the Offer i.e. upto 7,224,300 equity shares of Rs.5 each in case the Selling Shareholder decides to retain any over-subscription. In such a case, the size of the Offer may increase upto 79,467,600 equity shares of Rs.5 each.
The cost of acquisition of equity shares held by the Selling Shareholder is calculated without considering the cost of equity shares purchased from MUL-EMBF. These equity shares will be purchased at the Offer Price.
1

xiv

8. For related party transactions, refer to the section entitled Related Party Transactions on page 115 of this Red Herring Prospectus. 9. Investors may note that in case of over-subscription in the Offer, allotment to Non-institutional Bidders and Retail Bidders shall be on proportionate basis. For more information, see Basis of Allotment on page 237 of this Red Herring Prospectus. 10. Investors are free to contact the BRLM or the Co-BRLMs for any clarification or information on the Offer who will be obliged to provide the same. 11. The investors may contact the BRLM or the Co-BRLMs for any clarifications or information pertaining to the Offer. 12. Investors are advised to refer to the paragraph entitled Basis for Issue Price on page 144 of this Red Herring Prospectus. 13. Under the RJVA, the GoI has an option to offer its remaining stake of 3,002,414 equity shares of Rs.100 each that is 60,048,280 equity shares of Rs.5 each, representing 20.8% of the equity share capital of Maruti, either by way of additional offers to the public or by exercising an option to put the equity shares to Suzuki. The GoIs ability to exercise this option by way of additional offers to the public is restricted by a lock-in period of one year pursuant to the SEBI guidelines. For additional details on the rights of the GoI under the RJVA, see section titled Our Promoter of this Red Herring Prospectus.

xv

THE OFFER
Equity shares offered: Offer for Sale by Selling Shareholder Of which: Qualified Institutional Buyers portion 43,345,900 equity shares of Rs.5 each (Allocation on a discretionary basis) 10,836,500 equity shares of Rs.5 each (Allocation on a proportionate basis) 18,060,900 equity shares of Rs.5 each (Allocation on a proportionate basis) 288,910,060 equity shares of Rs.5 each 288,910,060 equity shares of Rs.5 each Our Company will not receive any proceeds from the Offer. This being an Offer for Sale, the objects of the Offer are to list the equity shares of our Company and carry out the divestment of 72,243,300 equity shares of Rs.5 each by the Selling Shareholder. 72,243,300* equity shares of Rs.5 each

Non-institutional Portion

Retail portion

Equity shares outstanding prior to the Offer Equity shares outstanding after the Offer** Objects of the Offer and use of proceeds

SEBI, vide its letter RM/21334/2003 dated October 29, 2002, has granted its approval for retention of over-subscription of 10% of the Offer i.e. of upto 7,224,300 equity shares of Rs. 5 each. This is in addition to the limit of 10% allowed for the purposes of rounding off only under clause 6.4.2 (f) of SEBI Guidelines. In the event of retention of over-subscription by the Selling Shareholder, allotment to Bidders shall be as per the basis of allocation as set out in this RHP under Offer Structure.

** As this is an offer for sale, there will be no change in the number of equity shares outstanding subsequent to the Offer.

SUMMARY
We should read the following summary together with the risk factors and the more detailed information about us, and our financial data included elsewhere in this Red Herring Prospectus. Unless otherwise indicated, all financial and statistical data relating to the automobile industry in the following discussion are derived from either the CRIS INFAC Annual Review of 2001 or 2002 or the CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003. These data have been reclassified in certain respects for purposes of presentation. For more information, see Certain Conventions; Use of Market Data on page H of this Red Herring Prospectus.

Our Business
We are the largest passenger car manufacturer in India. We sold 330,013 cars in India in fiscal 2003 with an overall market share of 54.6% in fiscal 2003. Our product range includes ten basic models with more than 50 variants. We are the leading manufacturer of cars in the A and B segments, which together constituted over 84% of sales in the Indian passenger car market in fiscal 2003. In fiscal 2003, we had a combined market share in the A and B segments of 62%. We also export certain models to various countries, which contributed 3.1%, 2.6% and 7.4%, respectively, of our total sales in fiscal 2001, 2002 and 2003. We are a subsidiary of Suzuki Motor Corporation, the largest manufacturer of mini passenger vehicles in Japan since fiscal 1974, in terms of sales volumes, with a market share of 31.6% in 2002, according to the Japan Mini Vehicles Association. Suzuki was also the eleventh largest vehicle manufacturer in the world and the fourth largest manufacturer in Japan in terms of worldwide sales volumes in 2000, according to Automotive Intelligence.

Our Competitive Strengths

We believe we are well-positioned to maintain and enhance our leadership position in the small car segment in India, while continuing to offer products in most segments of the Indian market, on account of our competitive strengths, which include the following:
q q q q q q q q q

Expertise in small car technology Extensive product portfolio Quality products Extensive sales and service network Brand strength Integrated manufacturing facility Strong vendor base and higher rates of localisation Skilled labour and experienced management Capital resources

Our Principal Objectives

As the leading manufacturer in the small car segment of the Indian market, we have the following principal objectives:
q q

To strengthen our leadership position in the small car segment of the Indian market; To continue to expand the size of the Indian market for small cars by strengthening and expanding our dealer network and making automobile financing available at competitive rates; and To continue to benchmark ourselves against improving global manufacturing, marketing and other practices and standards, strive to increase customer satisfaction through quality products and new initiatives, and promote the financial strength of our sale network.

Our Business Strategy

We intend to continue to focus on the small car segment, while offering products in most segments of the Indian passenger car market. We aim to achieve our principal objectives by pursuing the following business strategies: Maintain and enhance our product range. We intend to utilize Suzukis expertise in small car technology to produce new variants of our existing models and to upgrade our products with contemporary technology and features. Increase reach and penetration. We plan to continue to utilize our extensive sales and service network to increase the reach, in terms of geographical spread, and penetration, in terms of sales volumes, of our products across India. Increase availability of automobile finance. We continue to seek opportunities to expand the size of the Indian passenger car market, especially in the small car segment, through facilitating easy availability of automobile finance. To that end, we have recently entered into an agreement with the State Bank of India. Secure repeat purchases by offering a 360-degree customer experience. On the basis of our belief that securing repeat purchases from an existing customer requires less expenditure than acquiring a new customer, we aim to provide customers with a one-stop shop for automobiles and automobile-related products and services. Continue to benchmark our manufacturing capabilities. We plan to continue to benchmark our manufacturing capabilities with the most efficient car manufacturing facilities of Suzuki and its subsidiaries. Continue to reduce costs to offer more competitive products. Cost-competitiveness has been, and continues to be, central to our strategy as the leading manufacturer in the small car segment to expand the size of the market by offering competitively priced, high quality products. The components of this strategy are:
q q q q q q

Higher levels of localisation Vendor participation in cost-reduction Cost-reduction on warranties Reduction in initial investment cost Reduction in number of vehicle platforms Achieve further cost-reduction through higher productivity

Lowering the cost of ownership. Through our business strategies, we seek to reduce the consumers cost of ownership of our cars, which comprises the cost of purchase, fuel consumption and maintenance, including spare parts and repairs, during the life of the vehicle, insurance, and resale value.

SUMMARY UNCONSOLIDATED FINANCIAL DATA

The following summary unconsolidated financial data have been prepared in accordance with applicable Indian GAAP the , Companies Act and the SEBI Guidelines and restated as described in the Auditors Report of Price Waterhouse dated May 6, 2003 in the section entitled Unconsolidated Financial Statements. You should read these financial data in conjunction with our audited unconsolidated financial statements for each of fiscal 1999, 2000, 2001, 2002 and 2003 including the notes thereto and the reports thereon, which appear elsewhere in this Red Herring Prospectus, and Managements Discussion and analysis of financial condition and results of operations. Indian GAAP differs in certain significant respects from US GAAP For more information on these differences, see Summary of Significant Differences Between Indian GAAP and US . GAAP included elsewhere in this Red Herring Prospectus. Our audited consolidated financial statements consolidating (1) the results of operations and financial condition of our subsidiaries for fiscal 2002 and 2003, and (2) the results of operations and financial condition of our subsidiaries, our joint ventures and our associates for fiscal 2003, are included elsewhere in this Red Herring Prospectus under Consolidated Financial Statements as per AS 21 and Consolidated Financial Statements as per AS 21, AS 23 and AS 27, respectively.

SUMMARY OF FINANCIAL DATA

Summary of Profit and Loss Account, as Restated
(Rs. in Million) Fiscal 2003 Total sales Other Income/ Revenue Total Income/ Revenue Total Expenditure Profit/(Loss) before tax Net Profit/(Loss) after tax as per audited statement of accounts (A) Total Adjustments (B) Adjusted Profit/ (Loss) (A+B) 90,636 3,624 94,260 91,419 2,821 1,464 (215) 1,249 Fiscal 2002 90,809 3,180 93,989 92,803 1,183 1,045 (140) 905 Fiscal 2001 89,287 3,214 92,501 95,164 (2,692) (2,694) 1,128 (1,566) Fiscal 2000 93,151 3,574 96,725 92,875 3,851 3,301 (868) 2,433 Fiscal 1999 77,814 3,992 81,806 73,963 7,841 5,230 215 5,445

Summary of Assets and Liabilities, as Restated

(Rs. in Million) March 31, 2003 March 31, 2002 A. Total Fixed Assets B. Investments: C. Current Assets, Loans & Advance: Inventories Sundry Debtors Cash & Bank balances Other Current Assets Loans & Advances Total D. Total Liabilities and provisions E. Net Worth (A+B+C-D) F. Share Capital 4,870 6,711 9,894 598 5,755 27,828 21,417 30,093 1,445 29,535 887 30,093 6,811 8,393 719 479 4,604 21,006 21,968 25,031 1,323 24,900 1,192 25,031 8,655 6,755 876 716 5,508 22,510 24,492 25,128 1,323 24,392 587 25,128 9,902 4,663 317 1,039 4,225 20,146 21,459 26,760 1,323 25,960 523 26,760 5,784 2,766 8,169 1,079 5,364 23,162 17,139 24,991 1,323 23,931 263 24,991 22,650 1,032 25,025 968 March 31, 2001 March 31, 2000 March 31, 1999 26,155 955 24,099 3,974 14,123 4,845

G. Total reserves and surplus H. Miscellaneous Expenditure to the extent not written off I. Net Worth (F+G-H)

GENERAL INFORMATION
Authority for the Offer
Under the terms of the RJVA, the Selling Shareholder has the option to sell approximately 72,243,380 equity shares of Rs.5 each (approximately 3,612,169 equity shares of Rs.100 each) or more, by way of an initial public offer. For details on the RJVA, please see the section titled Our Promoters on page 85 of this Red Herring Prospectus. As per the letter no. 2[16]/2000PE-VI, dated February 7, 2003, from the Ministry of Heavy Industries and Public Enterprises, Department of Heavy Industry, GoI, the Cabinet Committee of Disinvestment has approved the disinvestment in Maruti by GoI by way of an Offer for sale of its shareholding in the domestic market. Pursuant to the decision taken by the Cabinet Committee, the Ministry of Heavy Industry and Public Enterprises, acting for and on behalf of the President of India, has been authorized to offer 72,243,380 equity shares of Rs.5 each (3,612,169 equity shares of Rs.100 each as per the said letter) and such additional number of equity shares as may be permitted to be offered for allotment towards over-subscription. SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for retention of over-subscription of upto 10% of the Offer i.e. by upto 7,224,300 equity shares of Rs. 5 each. This is in addition to the limit of 10% allowed for the purposes of rounding off under clause 6.4.2(f) of the SEBI Guidelines. In the event of retention of over-subscription by the Selling Shareholder, allotment to Bidders shall be as per the basis of allocation as set out in this RHP under Offer Structure. Our Company has also consented to the Offer through our Board Resolution dated March 25, 2003 and the subsequent committee resolution dated April 19, 2003.

Prohibition by SEBI
Our Company, our Directors, our Promoters, the directors and persons in control of our Promoters, our subsidiaries, our associates, our group companies, other companies or entities promoted by Suzuki and companies or entities with which our Companys directors are associated as directors 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.

Eligibility for the Offer

Our Company is eligible for the Offer as per Clause 2.2.1 of the SEBI Guidelines as explained under:
q

A track record of distributable profits as per Section 205 of Companies Act, for at least three out of the immediately preceding five years; A pre-issue net worth of not less than Rs. 10 million in three out of the preceding five years, with the minimum net worth met during the immediately preceding two years; and The proposed Offer size is not expected to exceed five times the pre-Offer net worth.

The net profit, dividend and net worth from the Auditors Report included under the head Unconsolidated Financial Statements, for fiscal 2003, 2002, 2001, 2000 and 1999 is reproduced below: (Rs. in Million) FY2003 Net Profit/(Loss) after tax as per audited statement of accounts Adjusted profit/ (loss) Dividend Net Worth 1,464 1,249 427 30,093 FY2002 1,045 905 397 25,031 FY2001 (2,694) (1,566) 25,128 FY2000 3,301 2,433 331 26,760 FY1999 5,230 5,445 397 24,991

For the complete explanation of the adjustments and regroupings in order to arrive at the Adjusted profit/ (loss) from the figures mentioned under Net Profit/(Loss) after tax as per audited statement of accounts, please refer to the Note to Accounts no. 1 in the section titled Unconsolidated Financial Statements.

Disclaimer Clause
AS REQUIRED, A COPY OF THE RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE RED HERRING PROSPECTUS 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 THE PROJECT FOR WHICH THE OFFER IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD MANAGER, KOTAK MAHINDRA CAPITAL COMPANY LTD AND THE CO-BOOK RUNNING LEAD MANAGERS, ICICI SECURITIES LTD AND JM MORGAN STANLEY PVT LTD AND HSBC SECURITIES AND CAPITAL MARKETS (INDIA) PVT LTD HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURES AND INVESTOR PROTECTION 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 OFFER. 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 RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGER AND CO-BOOK RUNNING LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE BOOK RUNNING LEAD MANAGER, KOTAK MAHINDRA CAPIAL COMPANY LTD AND THE CO-BOOK RUNNING LEAD MANAGERS, ICICI SECURITIES LTD, AND JM MORGAN STANLEY PVT LTD AND HSBC SECURITIES AND CAPITAL MARKETS (INDIA) PVT LTD HAVE FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED APRIL 25, 2003 IN ACCORDANCE WITH THE SEBI GUIDELINES WHICH READS AS FOLLOWS: WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS, ETC. AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE RED HERRING PROSPECTUS PERTAINING TO THE SAID OFFER. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE OFFER, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY, WE CONFIRM THAT:
q

THE RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE OFFER; ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID OFFER AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND THE DISCLOSURES MADE IN THE RED HERRING PROSPECTUS ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED OFFER.

WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE RED HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE SUCH REGISTRATIONS ARE VALID. WHEN UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE NET WORTH OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS. WE CERTIFY THAT 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 TO LOCK-IN, WILL NOT BE DISPOSED / SOLD / TRANSFERRED BY THE PROMOTERS DURING THE PERIOD STARTING FROM THE DATE OF FILING THE DRAFT RED HERRING PROSPECTUS WITH THE BOARD TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED IN THE DRAFT RED HERRING PROSPECTUS ALL LEGAL REQUIREMENTS PERTAINING TO THE OFFER WILL BE COMPLIED WITH AT THE TIME OF FILING OF THE RED HERRING PROSPECTUS WITH THE ROC IN TERMS OF SECTION 60B OF THE ACT. ALL LEGAL REQUIREMENTS PERTAINING TO THE OFFER WILL BE COMPLIED WITH AT THE TIME OF REGISTRATION OF THE PROSPECTUS WITH THE ROC IN TERMS OF SECTION 56, SECTION 60 AND SECTION 60B OF THE COMPANIES ACT.

THE FILING OF THE RED HERRING PROSPECTUS DOES NOT, HOWEVER, ABSOLVE THE COMPANY AND SELLING SHAREHOLDER FROM ANY LIABILITIES UNDER SECTION 63 AND 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 OFFER. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP AT ANY POINT OF TIME, WITH THE BOOK RUNNING LEAD MANAGER AND THE CO-BOOK RUNNING LEAD MANAGERS, ANY IRREGULARITIES OR LAPSES IN THE RED HERRING PROSPECTUS.

Caution
The Selling Shareholder, our Company, the BRLM and the Co-BRLMs accept no responsibility for statements made otherwise than in the Red Herring Prospectus or in the advertisements or any other material issued by or at our instance and anyone placing reliance on any other source of information would be doing so at his or her own risk. The BRLM and Co-BRLMs accept no responsibility, save to the limited extent as provided in the Underwriting Agreement to be entered into among the Selling Shareholder, the Underwriters and us and the Memorandum of Understanding among the Selling Shareholder, the Underwriters and us dated April 25, 2003. All information shall be made available by the Selling Shareholder, our Company, the BRLM and the Co-BRLMs to the public and 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 show presentations, in research or sales reports or at bidding centres or elsewhere.

Disclaimer in Respect of Jurisdiction

This Offer is being made in India to persons resident in India including Indian nationals resident in India who are majors, HUFs, companies, corporate bodies and societies registered under the applicable laws in India and authorized to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions, commercial banks, regional rural banks, cooperative banks (subject to RBI permission), Trusts registered under the Societies Registration Act, 1860, as amended from time to time, or any other Trust law and who are authorized under their constitution to hold and invest in shares and to nonresidents including NRIs and FIIs. This Red Herring Prospectus does not, however, constitute an offer to sell or an invitation to subscribe to shares offered hereby in any other jurisdiction to any person to whom it is unlawful to make an offer or invitation in such jurisdiction. Any person into whose possession this Red Herring Prospectus comes is required to inform himself or herself about, and to observe, any such restrictions. Any dispute arising out of this Offer will be subject to the jurisdiction of appropriate court(s) in New Delhi only. No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose, except that this Red Herring Prospectus has been submitted to SEBI. Accordingly, the equity shares represented thereby may not be offered or sold, directly or indirectly, and this Red Herring Prospectus may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this Red Herring Prospectus nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of Maruti since the date hereof or that the information contained herein is correct as of any time subsequent to this date.

Disclaimer Clause of the NSE

As required, a copy of this Red Herring Prospectus has been submitted to NSE. NSE has given vide its letter dated May 14, 2003, permission to the Company to use the NSEs name in this Red Herring Prospectus as one of the stock exchanges on which this Companys securities are proposed to be listed subject to the Company fulfilling the various criteria for listing including the one related to paid up capital and market capitalisation (i.e. the paid up capital shall not be less than Rs.100 million and market capitalisation shall not be less that Rs. 250 million at the time of listing). The NSE has scrutinized this Red Herring Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. It is to be distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed that the Red Herring Prospectus has been cleared or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Red Herring Prospectus; nor does it warrant that this Companys 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 this Company, its promoters, its management or any scheme or project of this Company. 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 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. 8

Disclaimer Clause of the BSE

As required, a copy of this Red Herring Prospectus has been submitted to BSE. The BSE has given vide its letter dated May 14, 2003, permission to this Company to use the BSEs name in this Red Herring Prospectus as one of the stock exchanges on which this Companys securities are proposed to be listed. The BSE has scrutinised this Red Herring Prospectus for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The BSE does not in any manner: i. ii. warrant, certify or endorse the correctness or completeness of any of the contents of this Red Herring Prospectus; or warrant that this Companys securities will be listed or will continue to be listed on the BSE; or

iii. take any responsibility for the financial or other soundness of this Company, its promoters, its management or any scheme or project of this Company; and it should not for any reason be deemed or construed that this Red Herring Prospectus has been cleared or approved by the BSE. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the BSE 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 for any other reason whatsoever.

Filing
A copy of the Red Herring Prospectus, along with the documents required to be filed under Section 60B of the Companies Act, has been delivered for registration to the RoC and a copy of the Prospectus to be filed under Section 60 of the Companies Act would be delivered for registration with the RoC. A copy of the Red Herring Prospectus has been filed with SEBI at Ground Floor, Mittal Court, A Wing, Nariman Point, Mumbai 400 021.

Listing
Applications have been made to the NSE and the BSE for permission to deal in and for an official quotation of our equity shares. If the permissions to deal in and for an official quotation of our equity shares are not granted by any of the Stock Exchanges mentioned above, the Selling Shareholder will forthwith repay, without interest, all moneys received from the applicants in pursuance of this Red Herring Prospectus. If such money is not repaid within eight days after the Selling Shareholder becomes liable to repay it i.e. from the date of refusal or within 70 days from the date of Offer Closing Date, whichever is earlier, then the Selling Shareholder shall, on and from expiry of eight days, be liable to repay the money, with interest at the rate of 15% per annum on application money, as prescribed under Section 73 of the Companies Act. Our Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges mentioned above are taken within seven working days of finalisation and adoption of the basis of allotment for the Offer.

Minimum Subscription
This being an offer for sale, the requirement of minimum subscription is not a pre-condition for completion of the Offer and obtaining listing permissions.

Impersonation
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68 A of the Companies Act, which is reproduced below: Any person who: a) b) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein, or 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.

Withdrawal of the Offer

The Selling Shareholder, in consultation with our Company, the BRLM and the Co-BRLMs, reserves the right not to proceed with the Offer anytime after the Bid/ Offer Closing Date but before allotment, without assigning any reason therefor.

Letters of Allotment or Refund Orders

The Selling Shareholder and our Company shall give credit to the beneficiary account with depository participants within two working days of finalisation of the basis of transfer of equity shares. The Selling Shareholder and we shall ensure dispatch refund orders, if any, of value up to Rs.1,500, by Under Certificate of Posting, and will dispatch refund orders above Rs.1,500, if any, by registered post or speed post at the sole or first bidders sole risk, within 15 days of the Offer Closing Date. In accordance with the Companies Act, the requirements of the Stock Exchanges and SEBI Guidelines, the Selling Shareholder and we further undertake that:
q

Allocation and transfer of equity shares will be made only in dematerialized form within 15 days from the Bid/ Offer Closing Date; Dispatch of refund orders/ cancelled stockinvests will be done within 15 days from the Bid/ Offer Closing Date; and The Selling Shareholder shall pay interest at the rate of 15% per annum for any delay beyond the 15 day time period as mentioned above, if transfer is not made, refund orders/ cancelled Stockinvests are not dispatched and/ or demat credits are not made to investors within the 15 day time prescribed above.

q q

The Selling Shareholder will provide adequate funds required for dispatch of refund orders or allotment advice to the Registrar to the Offer. Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank appointed by us and the Selling Shareholder, as a refund banker and payable at par at places where bids are received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at other centers will be payable by the Bidders.

Offer Program
BID/ OFFER OPENS ON : THURSDAY, JUNE 12, 2003

BID/ OFFER CLOSES ON : THURSDAY, JUNE 19, 2003 Bids and any revision in bids shall be accepted only between 10 a.m. and 3 p.m. (India Time) during the Bidding Period as mentioned above at the bidding centres mentioned on the Bid cum Application Form except that on the Bid Closing Date, the Bids shall be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time) and uploaded till such time as may be permitted by the BSE and the NSE on the Bid/ Offer Closing Date.

10

Book Running Lead Manager

Kotak Mahindra Capital Company Ltd 3rd Floor, Bakhtawar 229, Nariman Point Mumbai - 400 021 Tel no.: +91-22-5634 1100 Fax no.: +91-22-2284 0492 E-mail: maruti.ipo@kotak.com

Co-Book Running Lead Manager

ICICI Securities Ltd 41/ 44, Minoo Desai Marg, Colaba Mumbai - 400 005 Tel no.: +91-22-2288 2460 Fax no.: +91-22-2283 7045 E-mail: mul_ipo@isecltd.com JM Morgan Stanley Pvt Ltd 141, Maker Chambers III Nariman Point Mumbai 400 021 Tel no.: +91-22-5630 3030 Fax no.: +91-22-5630 1694 E-mail: marutiipo@jmmorganstanley.com HSBC Securities and Capital Markets (India) Pvt Ltd 52/ 60, Mahatma Gandhi Road Fort Mumbai - 400 001 Tel no.: +91-22-2267 4921 Fax no.: +91-22-2263 1984 E-mail: mul_ipo@hsbc.co.in

Syndicate Members
Kotak Securities Ltd 1st Floor, Bakhtawar 229, Nariman Point Mumbai - 400 021 Tel no.: +91-22-5634 1100 Fax no.: +91-22-2284 0492 ICICI Brokerage Services Ltd 41/ 44, Minoo Desai Marg, Colaba Mumbai - 400 005 Tel no.: +91-22-2288 2460 Fax no.: +91-22-2283 7045

11

Statement of Inter-Se Allocation of Responsibilities

The responsibilities and co-ordination for various activities in this Offer have been distributed between the BRLM and the Co-BRLMs as under: S.No. 1. Activities Capital structuring with the relative components and formalities such as type of instruments etc. Responsibility KMCC I-Sec JMMS HSBC KMCC I-Sec JMMS HSBC Co-ordinator KMCC

2.

Due diligence of our Companys operations/management/business plans/legal etc. Drafting and Design of Red Herring Prospectus and of statutory advertisement including memorandum containing salient features of the Prospectus. The BRLM shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, RoC and SEBI. Drafting and approval of all publicity material other than statutory advertisement as mentioned in (2) above including corporate advertisement, brochure, etc. Appointment of other intermediaries viz. Registrar, Printers, Advertising Agency and Bankers to the Offer.

KMCC

3.

KMCC I-Sec JMMS HSBC KMCC I-Sec JMMS HSBC KMCC I-Sec JMMS HSBC

I-Sec

4.

KMCC

5.

Marketing of the Offer, which will cover inter alia Formulating marketing strategies, preparation of publicity budget q Finalise media and PR strategy q Finalise centers for holding conferences for brokers etc. q Finalise collection centers q Follow-up on distribution of publicity and issue material including form, prospectus and deciding on the quantum of the Offer material.
q

I-Sec

6.

Finalize the list and division of investors for one to one meetings, deciding pricing and institutional allocation in consultation with the Selling Shareholders/ Company, finalization of Prospectus and RoC filing. The post-bidding activities including management of escrow accounts, coordinate non-institutional allocation, intimation of allocation and dispatch of refunds to bidders etc. The post-issue activities for the issue will involve essential follow-up steps, which include the finalisation of listing of instruments and dispatch of certificates and demat delivery of shares, with the various agencies connected with the work such as the Registrar to the Offer and Bankers to the Offer and the bank, handling refund business. The merchant banker shall be responsible for ensuring that these agencies fulfill their functions and enable it to discharge this responsibility through suitable agreements with our Company.

KMCC I-Sec JMMS HSBC KMCC I-Sec JMMS HSBC KMCC I-Sec JMMS HSBC

KMCC

7.

I-Sec

8.

I-Sec

12

Registered Office
11th floor, Jeevan Prakash Building 25, Kasturba Gandhi Marg New Delhi 110 001 Tel no.: +91-11-2331 6831 Fax no.: +91-11-2371 3575, 2331 8754

Factory
Palam-Gurgaon Road Gurgaon 122 015 Haryana Tel no.: +91-124-234 6721 Fax no.: +91-124-501 5701

General Manager (Legal), Company Secretary and Compliance Officer

Mr. S. Ravi Aiyar Maruti Udyog Ltd 11th floor, Jeevan Prakash Building 25, Kasturba Gandhi Marg New Delhi 110 001 Tel no.: + 91-11-23712854, 2331 6831 Fax no.: +91-11-2371 3575, 2331 8754 E-mail: raviaiyar@maruti.co.in Investors can contact the Compliance Officer in case of any pre-Offer or post-Offer related problems such as non-receipt of letters of allotment, share certificates, refund orders or cancelled stockinvests, etc.

Registrar to the Offer

MCS Ltd Sri Venkatesh Bhavan 212-A, Shahpurjat New Delhi 110 049 Tel no.: +91-11-2649 4830 Fax no.: +91-11-2649 4152

Domestic Legal Counsel for the Offer

Crawford Bayley & Co. State Bank Buildings, 4th floor N. G. N. Vaidya Marg Fort Mumbai - 400 023 Tel no.: +91-22-2266 3713 Fax no.: +91-22-2266 0355

International Legal Counsel for the Offer

(Advising the GoI and the Underwriters on matters pertaining to the laws of the State of New York and the federal law of the United States of America) Davis Polk & Wardwell The Hong Kong Club Building 3A Chater Road Hong Kong Tel. No.: +852-2533 3300 Fax no.: +852-2533 3333

Legal Counsel to the Underwriters

Amarchand & Mangaldas & Suresh A. Shroff & Co. Peninsula Chambers Peninsula Corporate Park Ganpatrao Kadam Marg Lower Parel, Mumbai 400 013 Tel no.: +91-22-2496 4455 Fax no.: +91-22-2496 3666

Legal Counsel to the Company

Associated Law Advisers 615, Antriksh Bhavan 22, Kasturba Gandhi Marg New Delhi 110 001 Tel no.: +91-11-2375 5511, 2335 1921 Fax no.: +91-11-2335 2226, 2335 2331

13

Auditors to the Company

Price Waterhouse Chartered Accountants PW Centre, Saidulajab Mehrauli Badarpur Road Opposite D-Block, Saket New Delhi 110 030 Tel no.: +91-11-2652 3760, 2686 4390 Fax no.: +91-11-2686 4391, 2696 7249

Financial Advisors to the Company for this Offer

Asit Mehta & Co. Chartered Accountants 410, New Delhi House 27, Barakhamba Road New Delhi - 110 001 Tel no.: +91-11-2331 3510 Fax no.: +91-11-2331 3413

Banker to the Offer and Escrow Collection Bankers

Citibank N. A. Bombay Mutual Building Mezzanine Floor 293 Dr. D. N. Road Fort Mumbai 400 021 HDFC Bank Ltd Sandoz Bank Dr. Annie Besant Road Worli Mumbai 400 018 ICICI Bank Ltd Capital Markets Division 30, Mumbai Samachar Marg Mumbai - 400 001 Kotak Mahindra Bank Ltd Ground Floor Mittal Court, C Wing Nariman Point Mumbai 400 021

The HongKong and Shanghai Banking Corporation Ltd Global Payments and Cash Management 52/ 60, Mahatma Gandhi Marg Fort Mumbai 400 001 State Bank of India (New Issue Division) Mumbai Main Branch Mumbai Samachar Marg Mumbai - 400 023

Bankers to the Company

State Bank of Travancore SBT House 18/4, Arya Samaj Road New Delhi 110 005 Tel no.: +91-11-2576 1044 Fax no.: +91-11-2581 2044 ICICI Bank Ltd. 9A, Connaught Place New Delhi 110 001 Tel no.: +91-11-2372 0510 Fax no.: +91-11-2372 0509 The HongKong and Shanghai Banking Corporation Ltd Corporate Banking Division First Floor, ECE House 28, Kasturba Gandhi Marg New Delhi 110 001 Tel no.: +91-11-2371 6000 Fax no.: +91-11-2372 5329 Punjab National Bank ECE House 28A, Kasturba Gandhi Marg New Delhi - 110 001 Tel no.: +91-11-2332 3357 Fax no.: +91-11-2332 4788 BNP Paribas New Delhi Branch Hansalaya, 2nd floor 15, Barakhamba Road New Delhi 110 001 Tel no.: +91-11-2332 3164 Fax no.: +91-11-2332 4188

Citibank N.A. Jeevan Vihar Building 3, Sansad Marg New Delhi 110 001 Tel no.: +91-11-2373 6873 Fax no.: +91-11-2373 6960

14

UFJ Bank Ltd Upper Ground Floor Mercantile House 15, Kasturba Gandhi Marg New Delhi - 110 001 Tel no.: +91-11-2331 8421 Fax no.: +91-11-2331 5162 Standard Chartered Bank H-2, Connaught Circus New Delhi 110 001 Tel no.: +91-11-2340 6404 Fax no.: +91-11-2372 2175 UTI Bank Ltd. Statesman House 148, Barakhamba Road New Delhi 110 001 Tel no.: +91-11-2331 1043 Fax no.: +91-11-2331 1054 Corporation Bank IFB Branch, 10th floor HT House New Delhi 110 001 Tel no.: +91-11-2371 0918 Fax no.: +91-11-2371 0936 ABN Amro Bank NV DLF Center Sansad Marg New Delhi 110 001 Tel no.: +91-11-2373 0696 Fax no.: +91-11-2375 5401 Bank of Tokyo Mitsubishi New Delhi Branch 3, Parliament Street New Delhi 110 001 Tel no.: +91-11-2374 3922 Fax no.: +91-11-2374 6329

American Express Bank 1-A, Hamilton House Connaught Place New Delhi 110 001 Tel no.: +91-11-2330 8053 Fax no.: +91-11- 2331 1437 State Bank of India Corporate Accounts Group 10th floor, Vijaya Building 17, Barakhamba Road New Delhi 110 001 Tel no.: +91-11-2335 2602 Fax no.: +91-11-2335 3101 Union Bank of India Industrial Finance Branch G-39, Connaught Circus New Delhi 110 001 Tel no.: +91-11-2373 8861 Fax no.: +91-11-2332 5940 Credit Llyonais Bank Mercantile House, 6th floor 15, Kasturba Gandhi Marg New Delhi 110 001 Tel no.: +91-11-2375 5213 Fax no.: +91-11-2375 5231 HDFC Bank Ltd. Hindustan Times House, 6th floor 18-20, Kasturba Gandhi Marg New Delhi 110 001 Tel no.: +91-11-2332 9055 Fax no.: +91-11-2335 9601

Credit Rating
As this is an Offer for equity shares there is no credit rating for this Offer. The credit ratings for the various borrowing programs by our Company in the last three years have been listed below: Borrowing Program Rs. 2,000 million non-convertible debenture Rs. 1,000 million commercial paper Rs. 2,000 million non-convertible debenture Rs. 1,000 million commercial paper Rs. 2,000 million non-convertible debenture Rs. 1,000 million commercial paper Rating Agency ICRA ICRA ICRA ICRA ICRA ICRA Rating LAAA (reaffirmation) A1+(reaffirmation) LAAA (reaffirmation) A1+ LAAA A1+ Date of letter from the rating agency April 28, 2003 April 28, 2003 March 5, 2002 March 5, 2002 July 7, 2000 July 7, 2000

15

Trustees
As the Offer is of equity shares, the appointment of trustees is not required.

Book Building Process

Book building refers to the collection of Bids from investors, based on the Floor Price, with the Offer Price being fixed after the Bid Closing Date. The principal parties involved in the Book Building Process are: 1. 2. 3. 4. The Company, Suzuki and GoI; The Book Running Lead Manager; The Co-Book Running Lead Managers; and The Syndicate Members who are intermediaries registered with SEBI and eligible to act as underwriters. The BRLM and the Co-BRLMs appoint the Syndicate Members.

SEBI, through its guidelines, has permitted an offer of securities to the public through the 100% Book Building Process, wherein not more than 60% of the Offer shall be allocated on a discretionary basis to QIBs. Further, not less than 15% of the Offer shall be available for allocation on a proportionate basis to Non-institutional Bidders and not less than 25% of the Offer shall be available for allocation on a proportionate basis to Retail Bidders, subject to valid Bids being received at or above the Offer Price. We will comply with these guidelines for this Offer. In this regard, we have appointed the Book Running Lead Manager and the Co-Book Running Lead Managers to procure subscription to the Offer. The process of book building, under SEBI guidelines, is relatively new and the investors are advised to make their own judgement about investment through this process prior to making a Bid in the Offer. Steps to be taken by the Bidders for bidding:
q q q

Check whether he/ she is eligible for bidding; Bidder necessarily needs to have a demat account; and Ensure that the Bid cum Application Form is duly completed as per instructions given in this Red Herring Prospectus and in the Bid cum Application Form.

Underwriting Agreement
After the determination of the Offer Price and prior to filing of the Prospectus with the RoC, the Selling Shareholder and our Company will enter into an Underwriting Agreement with the Underwriters for the equity shares proposed to be offered through the Offer. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLM and the Co-BRLMs shall be responsible for bringing in the amount devolved in the event that the Syndicate Members do not fulfill their underwriting obligations. Commitments as per the terms of the Underwriting Agreement would be invoked by the Selling Shareholder. The Underwriters have indicated their intention to underwrite the following number of equity shares: Name and Address of the Underwriters Indicated Number of equity shares to be Underwritten 24,081,000 Amount Underwritten (Rs. in Million) [ q]

Kotak Mahindra Capital Company Ltd 3rd Floor, Bakhtawar 229, Nariman Point Mumbai - 400 021 ICICI Securities Ltd 41/44, Minoo Desai Marg Colaba Mumbai 400 005 JM Morgan Stanley Pvt Ltd 141, Maker Chambers III Nariman Point, Mumbai 400 021 HSBC Securities and Capital Markets (India) Pvt Ltd 52/60, Mahatma Gandhi Road, Fort Mumbai 400 001 16

24,081,000

[q ]

12,040,550

[q]

12,040,550

[ q]

Name and Address of the Underwriters

Kotak Securities Ltd 1st Floor, Bakhtawar 229, Nariman Point Mumbai - 400021 ICICI Brokerage Services Ltd 41/44, Minoo Desai Marg, Colaba Mumbai - 400 005

Indicated Number of equity shares to be Underwritten 100

Amount Underwritten (Rs. in Million) [q]

100

[ q]

The above-mentioned is indicative underwriting and this would be finalized after the pricing and actual allocation. The above Underwriting Agreement is dated [q]. In the opinion of the Selling Shareholder and our Board of Directors (based on a certificate given by the Underwriters), the resources of all the above-mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. All the above-mentioned Underwriters are registered with SEBI under Section 12(1) of the SEBI Act. The Selling Shareholder and our Board of Directors have accepted the Underwriting Agreement mentioned above at its meeting held on [q], 2003 and the Selling Shareholder and our Company have issued letters of acceptance to the Underwriters. Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstanding the above table, the BRLM, Co-BRLMs and the Syndicate Members shall be responsible for ensuring payment with respect to equity shares allocated to investors procured by them. In the event of any default in payment, the respective Underwriter, in addition to other obligations defined in the Underwriting Agreement, will also be required to procure/subscribe to the extent of the defaulted amount. Allocation to QIBs is discretionary as per the terms of the Red Herring Prospectus and may not be proportionate in any way and the patterns of allocation to the QIBs could be different for the various Underwriters.

17

GOVERNMENT APPROVALS
In view of the approvals listed below, we can undertake this Offer and our current business activities and no further major approvals from any Government authority or the RBI are required to continue those activities. We have received the following major Government approvals pertaining to the Offer: We have received a letter no. 2[16]/2000PE-VI, dated February 7, 2003, from the Ministry of Heavy Industries and Public Enterprises, Department of Heavy Industries, GoI, the Cabinet Committee of Disinvestment has approved the disinvestment in Maruti by GoI by way of Offer for sale of its shareholding in the domestic market. Pursuant to the decision taken by the Cabinet Committee, the Ministry of Heavy Industry and Public Enterprises, acting for and on behalf of the President of India, has been authorized to offer 72,243,380 equity shares of Rs.5 each (3,612,169 equity shares of Rs.100 each as per the said letter) and such additional number of equity shares as may be permitted to be offered for allotment against over-subscription. SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for retention of over-subscription of 10% of the Offer i.e. by upto 7,224,300 equity shares of Rs.5 each. This is in addition to the limit of 10% allowed for the purposes of rounding off only, under clause 6.4.2(f) of SEBI Guidelines. In the event of retention of over-subscription by the Selling Shareholder, allotment to Bidders shall be as per the basis of allocation as set out in this RHP under Offer Structure. We have received approval from GoI, Ministry of Finance and Company Affairs (Department of Economic Affairs) pursuant to its letter no. FC.II: 74(1982)-Comp dated April 16, 2003 for the transfer of equity shares in this Offer to eligible non-resident investors, NRIs and FIIs. In terms of the approval of GoI, OCBs have not been permitted to participate in the Offer. Our Company has received approval from the RBI stating that the RBI has no objection for non-resident investors to acquire equity shares in the Offer for Sale and for Suzuki to submit a bid in the Offer and the Selling Shareholder to transfer to Suzuki shares to the extent of shortfall in the Offer, pursuant to its letter no. CO.FID 709/10.1.0/02.200(603)/2002-03 dated May 23, 2003. The final permission of the RBI for acquisition of shares is to be received on completion of certain filing requirements. We have received the following major Government approvals pertaining to our business: 1. All the land and property of our factory had been acquired by the Central Government under the Maruti Ltd (Acquisition and Transfer of Undertakings) Act, 1980. Under the Acquisition Act, the Central Government has directed vide notification date April 24, 1981, that the undertakings of Maruti Ltd, having its registered office at Palam, Gurgaon Road, Gurgaon, Haryana, and the right, title and interest shall vest in the company known as Maruti Udyog Ltd on and from April 24, 1981. Central Excise Registration Certificate issued under Rule 9 of the Central Excise Rules, 2002 stating that our Company is registered to manufacture excisable goods vide Form RC dated December 23, 2002. Central Excise Registration Certificate No. 46/92/R-I/GGN dated October 5, 1992 in respect of the production and manufacture motor vehicles, parts of motor vehicles, waste and scrap, motor vehicles for transport of goods and dies by our Company. Sales Tax Registration Certificate No. GRG-IV-12368 in respect of trading and manufacturing of passenger and light commercial vehicles and generation of power and electricity, by our Company, dated October 4, 1982. This certificate was valid from February 16, 1982 to March 31, 1987. The said certificate was subsequently renewed from April 1, 1987 to March 31, 1992, from April 1, 1992 to March 31, 1997, from April 1, 1997 to March 31, 2002 and again from April 1, 2002 to March 31, 2007. Sales Tax Registration Certificate No. GRG/HGST18132 in respect of trading and manufacturing of passenger and light commercial vehicles and generation of power and electricity, by our Company dated November 11, 1994. This certificate was valid from January 25, 1993 to March 31, 1997. The said certificate was subsequently renewed from April 1, 1997 to March 31, 2002 and again from April 1, 2002 to March 31, 2007. Certificate of Importer Exporter Code (IEC), issued by the Joint Directorate General of Foreign Trade, Ministry of Commerce from File No. 05/04/130/00059/AM89, dated July 12, 2000 stating that our Company has been issued the certificate as on February 24, 1988 IEC No. 0588000591. No Objection Certificate No. J.13011/30/96 IA, dated March 21, 2002 from the Ministry of Environment and Forests (MoEF), granting permission to our Company to use HSD as an alternate fuel for its three captive power plants of 20 MW each. No Objection Certificate No. J 13011/30/96 IA.II(T) dated July 26, 2001 from MoEF allowing our Company the use of naphtha along with HSD as an alternate fuel for the captive power plants. No Objection Certificate No. J 13011/12/91 IA, dated March 31, 1992 from the MoEF granting clearance to our Company for setting up the captive power plant phase 1 (20 MW).

2. 3. 4.

5.

6.

7.

8. 9.

18

10. No Objection Certificate No. J 13011/30/96 IA II (T) IA, dated March 20, 1997 from the MoEF granting clearance to our Company for setting up the third captive power plant (20 MW). 11. Application dated July 11, 2001 from the Company to Haryana Electricity Regulatory Commission, seeking approval for the three captive power plants set up within the Company premises. 12. Environmental Clearance No. J-11011/14/91-IA.II, dated November 30, 1992 from the MoEF to our Company for the expansion project undertaken by our Company which involves setting up of additional plants on the premises. 13. Consent Letter No. HSPCB 2002/859 dated May 8, 2002 from the Haryana State Pollution Control Board (HSPCB) directing our Company to comply with the directions issued by the MoEF vide NOC dated March 21, 2002 and stating that the HSPCB prefers the use of compressed natural gas by our Company. 14. Consent Letter No. HSPCB 2002/4419 dated November 26, 2002 from HSPCB directing our Company to comply with the directions issued by the MoEF vide NOC No. J.130111/30/96-IA dated March 21, 2002 and stating that the HSPCB prefers the use of liquefied natural gas by our Company. 15. HSPCB provisional NOC No. HSPCB/NOC/5749, dated August 21, 1998 regarding pollution of water and air by the expansion project of 100,000 vehicles per year by our Company. 16. HSPCB grant of consent No. 2002/1163 dated May 27, 2002 relating to the discharge of effluents under S. 25/26 of the Water (Prevention and Control of Pollution) Act, 1974, by our Company. Daily quantity of domestic effluent released shall not exceed 120.0 KL a day and industrial effluent shall not exceed 1779 KL a day. This consent is valid till March 31, 2003. Application for extension of the consent for FY2004 and FY2005 has been filed with HSPCB vide letter dated December 20, 2002. 17. HSPCB Authorisation No. HSPCB/HWM/Authorisation/3212 dated August 8, 2002 allowing our Company to operate a facility for collection, reception, treatment, storage, transportation and disposal of hazardous wastes. The authorisation is valid for one year from date of issue. 18. HSPCB Air Consent/2002/1165 dated May 27, 2002 for emission of Air under Section 21/22 of the Air (Prevention and Control of Pollution) Act, 1981, to our Company and consent to remain valid from April 1, 2002 to March 31, 2003. Application for extension of the consent for FY2004 and FY2005 has been filed with HSPCB vide letter dated December 20, 2002. 19. Central Ground Water Authority Approval No. 2-1/CGWA/MUL/99-742 dated March 14, 2000 allowing withdrawal of ground water by our Company for its use. 20. Licence No. P-12(11) 733/HN 1000 granted to our Company by the Chief Controller of Explosives to import and store 990 KL petroleum on premises, dated July 1, 1992 and valid upto December 1, 2001. This has been subsequently renewed upto December 31, 2004. 21. Licence No. P- 12(11) 440 granted by the Chief Controller of Explosives to import and store 220 KL petroleum on premises, dated December 19, 1985 and valid upto December 31, 1986 to our Company. This has been subsequently renewed upto December 31, 2004. 22. Licence No. PV(NC) S-11 HN 201/PVS granted by the Chief Controller of Explosives to store 60 MT KGS compressed gas on premises, dated March 12, 1984 and valid upto March 10, 1988 to our Company. This has been subsequently renewed upto March 31, 2004. 23. Licence No. PV(NC) S-185/ALDS/HN granted by the Chief Controller of Explosives to store 7000 KG of liquefied petroleum gas on premises, to our Company, dated October 4, 2002 and valid upto March 31, 2005. 24. Certificate No. SC/SY 106-108, to our Company, dated March 4, 2002 of annual test of safety valves by authority appointed by and operating under the Chief Controller of Explosives. 25. Certificates of Approval from the Haryana Boiler Inspection Department to our Company for the use of seven boilers. a. b. c. d. e. No. 386, dated August 14, 2002, validity from June 21, 2002 to June 20, 2003. No. 387, dated August 14, 2002, validity from June 21, 2002 to June 20, 2003. No. 430, dated August 28, 2002, validity from June 7, 2002 to June 6, 2003. No. 477, dated October 28, 2002, validity from September 12, 2002 to September 11, 2003. No. 000041, dated December 12, 2002, validity upto six months from date of certificate.

19

f. g.

No. 523. dated December 18, 2002, validity from September 12, 2002 to September 11, 2003. No. 602, dated August 20, 2002, validity from July 22, 2002 to July 21, 2003.

26. Factory License dated June 7, 2001 issued by the Chief Inspector of Factories on Registration No. GGM/M-165/6967 to our Company to employ over 1,000 persons on any day and to remain valid until December 31,2005. 27. Letter to Chief Inspector of Factories, dated December 19, 2002 declaring Mr. Shinichi Takeuchi as the occupier of the factory premises of our Company. 28. Approval No. CIT-II/A Approval Super Fund/ 2001-02/1251 from the Commissioner of Income Tax with respect to our Companys superannuation fund. The said approval has been in effect from April 1, 2001. 29. Approval No. 3/GF/D/94-95/533 from the Commissioner of Income Tax with respect to our Companys Gratuity Fund. The said approval has been in effect from April 1, 1993. 30. Approval No.229(2)/82-83/J from the Commissioner of Income Tax with respect to our Companys Staff Provident Fund. The said approval has been in effect from June 1, 1983. 31. Department of Industrial Policy and Promotion, Ministry of Commerce and Industry letter to Suzuki dated May 31, 2002 approving the disinvestment proposal of our Company including an exemption to Suzuki from obtaining a separate approval from FIPB to increase Suzukis shareholding in our Company, pursuant to acquisition of equity shares renounced by GoI to Suzuki in the rights issue by our Company as per the RJVA. The letter advised Suzuki to indicate the percentage of equity shares acquired and amount of consideration including control premium paid, on completion of the transaction. 32. RBI permissions on investment by foreign collaborator into our Company: a) b) March 17, 1983: Permission to our Company (No. DEL CI/2111/24(Spl. 465)-83) to issue equity shares worth Rs 17.3 million to Suzuki, under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. February 25, 1984: Permission to our Company (No. EC DEL CI/BM/24(Spl. 465)83-84)to issue equity shares worth Rs 39.2 million to Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. February 20, 1985: Permission to our Company (No. EC DEL CI/1383 (Spl. 465)84-85)to issue equity shares worth Rs 32.1 million to Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. June 13, 1985: Permission to our Company (No. EC DEL CI/BH-152/24(Spl. 465)-85) to issue equity shares worth USD 422,400 Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. February 13, 1986: Permission to our Company (No. EC DEL CI/BH-403/24(Spl. 465)-85)to issue 503,000 equity shares (face value Rs 100 each) to Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. May 14, 1986 : Permission to our Company (No. EC DEL CI/3070/24(Spl. 465)-86)to issue equity shares worth 47,000 share (face value Rs 100 each) to Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. August 25, 1986: Permission to our Company (No. EC DEL CI/63/24(Spl. 465)86)to issue 243,000 equity shares worth Rs 24.3 million to Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. January 24, 1987: Permission to our Company (No. EC DEL CI/323/24(Spl. 465)86-87)to issue 243,000 equity shares worth Rs 24.3 million to Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. October 7, 1987: Permission to our Company (No. EC DEL CI/121/24(Spl. 465)86-87)to issue 244,000 equity shares worth Rs. 24.4 million to Suzuki under S. 19(1)(d) of FERA. May 21, 1988: Permission to our Company (No. EC DEL CI/565 /24(Spl. 465)88)to issue 106,200 equity shares worth Rs 10.62 million to Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. Suzuki holding should not increase beyond 40% of the total paid up capital of the company. January 13, 1989: Permission to our Company (No. EC DEL CI/BH/24(Spl. 465)89) to issue 2,085,664 equity shares worth Rs 208.6 million to Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. Suzuki holding should not increase beyond 40% of the total paid up capital of the company.

c)

d) e)

f)

g)

h)

i) j)

k)

20

l)

June 5, 1992: Permission to our Company (No. EC COF ID(I) 3334/252 (ND)/91-92) to issue 2,204,860 equity shares (face value Rs 100 each) at a premium of Rs 169 per equity share worth Rs. 372.6 million to Suzuki under S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of FERA. Maximum shareholding of Suzuki not to exceed 50%.

m) May 8, 2002: No Objection letter to our Company no. D.O.No.EC.CO.FIF(I).6423/10.1.07.02.200 (47)-30 to the rights issue by our Company to increase Suzukis shareholding in our Company. The No Objection has been granted subject to approval of GoI relating to increase in percentage of non-resident holding (which was obtained on May 31, 2002) We have not received the following approvals: 1. The Company has not received building completion certificates and approvals under the Punjab Schedule and Controlled Areas (Restriction of Unregulated Developments) Act, 1963 for any of its buildings in its manufacturing facilities. The Company has applied for the same and submitted the required plans, drawings and other relevant documents as applicable. Approval from Director, Town and Country Planning, Government of Haryana for constructing buildings covering an area of 360,313 square meters at our manufacturing facility.

2.

We have made applications for renewal of the following approvals: 1. HSPCB grant of consent No. 2002/1163 dated May 27, 2002 relating to the discharge of effluents under S. 25/26 of the Water (Prevention and Control of Pollution) Act, 1974, by our Company. Daily quantity of domestic effluent released shall not exceed 120.0 KL a day and industrial effluent shall not exceed 1779 KL a day. This consent is valid till March 31, 2003. Application for extension of the consent for FY2004 and FY2005 has been filed with HSPCB vide letter dated December 20, 2002. HSPCB Air Consent/2002/1165 dated May 27, 2002 for emission of Air under Section 21/22 of the Air (Prevention and Control of Pollution) Act, 1981, to our Company and consent to remain valid from April 1, 2002 to March 31, 2003. Application for extension of the consent for FY2004 and FY2005 has been filed with HSPCB vide letter dated December 20, 2002.

2.

21

CAPITAL STRUCTURE
Share Capital as on RoC filing date (Rs. in Million) Aggregate Aggregate value nominal value at Offer Price A. Authorised Capital1 310,000,000 equity shares of Rs. 5 each2 B. Issued, Subscribed And Paid-Up Capital 288,910,060 equity shares of Rs. 5 each C. Present net offer to the public in terms of this RHP3 Offer for Sale 72,243,3004 equity shares of Rs. 5 each D. Equity Capital after the Offer 288,910,060 equity shares of Rs. 5 each E. Share Premium Account Before the Offer After the Offer
1

1,550.00

1,444.55

361.22

[q ]

1,444.55

4,240.59 4,240.59

The authorized share capital of our Company was increased from Rs. 1,350 million divided into 13.5 million equity shares of Rs. 100 each to Rs. 1,550 million divided into 15.5 million equity shares of Rs. 100 each through special resolution passed at its extra-ordinary general meeting held on May 15, 2002. Subsequently, a stock-split was approved at an extraordinary general meeting of our shareholders held on March 25, 2003, resulting in each equity share of Rs. 100 being sub-divided into 20 equity shares of Rs. 5 each and consequently the equity shares were sub-divided with effect from March 25, 2003. The net Offer to the public is by an offer for sale by the GoI of 72,243,300 equity shares of Rs.5 each. SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for retention of over-subscription of 10% of the Offer i.e. by upto 7,224,300 equity shares of Rs.5 each. This is in addition to the limit of 10% allowed for the purposes of rounding off only, under clause 6.4.2 (f) of SEBI Guidelines. Hence the size of the Offer may be enhanced to the extent of upto 10% of the Offer i.e. by upto 7,224,300 equity shares of Rs.5 each, in case the Selling Shareholder decides to retain any over-subscription. In such a case, the size of the Offer may increase upto 79,467,600 equity shares of Rs.5 each. In the event of retention of over-subscription by the Selling Shareholder, allotment to Bidders shall be as per the basis of allocation as set out in this RHP under Offer Structure.

3 4

22

Notes to the Capital Structure

1. Share Capital History of our Company: Date of Allotment Number of Face Value Issue Price Equity (Rs.) (Rs.) Shares Consideration Reasons for Allotment Cumulative Share Premium (Rs. in Million) Nil

February 24, 1981

100

100

December 24, 1981 September 23, 1982

50,000 442,000

100 100

100 100

January 24, 1983 October 25, 1983 March 1, 1984 March 29, 1985 June 3, 1985 July 31, 1985 July 31, 1985 February 18, 1986 February 18, 1986 May 19, 1986 May 19, 1986 September 30, 1986 September 30, 1986 December 22, 1986 March 3, 1987 March 3, 1987 June 26, 1987 December 21, 1987 December 21, 1987 March 1, 1988 May 20, 1988 January 10, 1989 June 20, 1992 May 30, 2002 Total Total

173,000 1,776,000 392,000 320,870 346,127 51,987 55,451 503,000 1,563,000 47,000 500,000 243,000 200,000 300,000 243,000 200,000 180,000 244,000 700,000 302,000 106,200 2,085,664 2,204,860 1,216,341 14,445,503 288,910,060

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

100 100 100 100 100 269 100 3,280 100 5 Rs.100 paid-up equity shares sub-divided into 20 equity shares each 23

Subscription to equity shares on signing of Memorandum Cash Allotment to the President of India Other than cash Allotment to the President of India for vesting assets under the Acquisition Act Cash Allotment to Suzuki Cash Allotment to the President of India Cash Allotment to Suzuki Cash Allotment to Suzuki Cash Allotment to the President of India Cash Allotment to Suzuki Cash Allotment to the President of India Cash Allotment to Suzuki Cash Allotment to the President of India Cash Allotment to Suzuki Cash Allotment to the President of India Cash Allotment to Suzuki Cash Allotment to the President of India Cash Allotment to the President of India Cash Allotment to Suzuki Cash Allotment to the President of India Cash Allotment to the President of India Cash Allotment to Suzuki Cash Allotment to the President of India Cash Allotment to the President of India Cash Allotment to Suzuki Cash Allotment to Suzuki Cash Allotment to Suzuki Cash Rights issue

Cash

Nil Nil

Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 373 4,241 4,241 4,241

2.

Promoters Contribution and Lock-in Suzuki has locked in 57,782,012 equity shares of Rs.5 each towards the promoters contribution for a period of 3 years from the date of transfer of equity shares in this Offer. The details of the equity shares locked in by Suzuki have been tabulated below: Date of Allotment Number of equity shares (of face value of Rs. 100 each) 1,672,764 1,216,337 2,889,101 Equivalent number Issue Price for Percentage of Lock-in period (of face value consideration as pre-Offer and of Rs. 5 each) cash for equity post-offer paid-up of equity shares shares of face value capital (%) Rs.100 each (Rs.) 33,455,272 24,326,740 57,782,012 269 3,280 11.58 8.42 20.00 3 years 3 years

June 20, 1992 May 30, 2002 Total

Subsequent to this Offer, GoI, under the RJVA has the right to exercise its put option and sell its portion of our equity shares to Suzuki. Such put option will commence four months after the date of listing of our equity shares and expire twenty-four months after the date of listing of our equity shares. Other than the above and the equity shares being offered for sale in this Offer, the entire pre-Offer share capital of our Company shall be locked in for the period of one year from the date of transfer in this Offer. The Promoters may pledge their equity shares with banks or financial institutions as additional security for loans whenever availed by them from banks or financial institutions. 3. Shareholding pattern of our Company before and after the Offer: Pre-split Shareholders Pre-Offer Number of equity shares Promoter Suzuki President of India* Promoter group Public Total 7,830,918 6,614,579 6 0 14,445,503 54.2 45.8 0.0 0.0 100.0 7,830,918 3,002,414 6 3,612,165 14,445,503 54.2 20.8 0.0 25.0 100.0 Percentage Post-Offer Number of equity shares Percentage

* Acting through the Ministry of Heavy Industries and Public Enterprises, GoI

Post-split Shareholders Pre-Offer Number of equity shares Promoter Suzuki President of India* Promoter group Public Total 156,618,360 132,291,580 120 0 288,910,060 54.2 45.8 0.0 0.0 100.0 156,618,360 60,048,280 120 72,243,300 288,910,060 54.2 20.8 0.0 25.0 100.0 Percentage Post-Offer Number of equity shares Percentage

* Acting through the Ministry of Heavy Industries and Public Enterprises, GoI

Besides the Promoters, none of the promoter group companies have any shareholding in us.

24

4.

The list of top 10 shareholders of our Company and the number of equity shares held by them is as under Top ten shareholders on the date of filing the Red Herring Prospectus with RoC are as follows: Serial Name of Shareholders Number 1 2 3 4 5 6 7 8 Suzuki President of India* Mr. Sunil Kumar Chaturvedi (Nominee of President of India) Mr. M. R. Bali (Nominee of President of India) Mr. Shinzo Nakanishi (Chairman)(nominee of Suzuki) Mr. Kinji Saito (Director) (nominee of Suzuki) Mr. Shinichi Takeuchi (Director) (nominee of Suzuki) Mr. Motohiro Atsumi (Director) (nominee of Suzuki) Number of equity shares of Rs. 5 each 156,618,360 132,291,580 20 20 20 20 20 20 288,910,060
* Acting through the Ministry of Heavy Industries and Public Enterprises, GoI

Top ten shareholders ten days prior to the date of filing Red Herring Prospectus with RoC are as follows: Serial Name of Shareholders Number 1 2 3 4 5 6 7 8 9 Suzuki President of India* MUL-EMBF Mr. Sunil Kumar Chaturvedi (Nominee of President of India) Mr. M. R. Bali (Nominee of President of India) Mr. Shinzo Nakanishi (Chairman) (nominee of Suzuki) Mr. Kinji Saito (Director) (nominee of Suzuki) Mr. Shinichi Takeuchi (Director) (nominee of Suzuki) Mr. Motohiro Atsumi (Director) (nominee of Suzuki) Number of equity shares of Rs. 5 each 156,618,360 131,603,580 688,000 20 20 20 20 20 20 288,910,060
* Acting through the Ministry of Heavy Industries and Public Enterprises, GoI

Top ten shareholders two years prior to the date of filing the Red Herring Prospectus with RoC are as follows: Serial Name of Shareholders Number 1 2 3 4 5 Suzuki President of India* MUL-EMBF Mr. Pradeep Kumar (Nominee of President of India) Mr. B. S. Negi (Nominee of President of India) Number of equity shares of Rs. 100 each 6,614,581 6,580,179 34,400 1 1 13,229,162
* Acting through the Ministry of Heavy Industries and Public Enterprises, GoI

5. 6.

There are no outstanding warrants, options or rights to convert debentures, loans or other instruments into our equity shares, as on date. None of our Promoters, members of the promoter group or directors of Suzuki have purchased or sold any equity shares during a period of six months preceding the date on which the Red Herring Prospectus is filed with RoC except as stated below: a. As per the terms of the trust deed for the MUL-EMBF the equity shares held by the MUL-EMBF could only be transferred , to GoI. GoI and the Trustees of the MUL-EMBF have vide letter dated April 16, 2003 agreed to the terms of the 25

acquisition and transfer of the 688,000 equity shares of Rs. 5 each held by the MUL-EMBF to GoI. The transfer of the shares in favour of GoI was completed on April 17, 2003. GoI has agreed to pay the MUL-EMBF consideration in two tranches. The first tranche is payable no later than May 31, 2003, at a price per share of Rs. 115. The second tranche is to be paid within a reasonable period of the completion of the listing of the equity shares of MUL. The second tranche payment is the difference between the Offer Price and Rs. 115. For details regarding the MUL-EMBF, see section titled MUL-EMBF on page 52 of this Red Herring Prospectus. b. As per the circular resolution dated February 12, 2003, under Section 289 of The Act, four equity shares of Rs.100 each were transferred from Suzuki in favour of following individual nominees to be held in trust for Suzuki: S. no. Name of Director 1 2 3 4 7. Mr. Shinzo Nakanishi (Chairman) Mr. Kinji Saito Mr. Shinichi Takeuchi Mr. Motohiro Atsumi Number of equity shares of Rs. 100 each 1 1 1 1 Number of equity shares of Rs. 5 each 20 20 20 20

The Selling Shareholder, our Company, our Directors, BRLM or Co-BRLMs have not entered into any buy-back and/or standby arrangements for purchase of equity shares of our Company from any person except as stated in the RJVA and disclosed in the section Terms of the Offer. There are no outstanding employee stock option plans or employee share purchase schemes outstanding. We have received approval from GoI, Ministry of Finance and Company Affairs (Department of Economic Affairs) pursuant to its letter no. FC.II: 74(1982)-Comp dated April 16, 2003 for the transfer of equity shares in this Offer to eligible nonresident investors, NRIs and FIIs. In terms of the approval of GoI, OCBs have not been permitted to participate in the Offer. Our Company has received approval from the RBI stating that the RBI has no objection for non-resident investors to acquire equity shares in the Offer for Sale and for Suzuki to submit a bid in the Offer and the Selling Shareholder to transfer to Suzuki shares to the extent of shortfall in the Offer, pursuant to its letter no. CO.FID 709/10.1.0/02.200(603)/ 2002-03 dated May 23, 2003. The final permission of the RBI for acquisition of shares is to be received on completion of certain filing requirements.

8. 9.

10. In this Offer, in case of over-subscription in all categories, not more than 60% of the Offer shall be available for allocation on a discretionary basis to Qualified Institutional Buyers, a minimum of 15% of the Offer shall be available for allocation on a proportionate basis to Non-institutional Bidders and a minimum of 25% of the Offer shall be available for allocation on a proportionate basis to Retail Bidders, subject to valid bids being received at or above the Offer Price. Undersubscription, if any, in any category would be met with spill-over from other categories at the sole discretion of the Selling Shareholder, the BRLM and the Co-BRLMs. 11. A Bidder cannot make a Bid for more than the number of equity shares offered through the Offer, subject to the maximum limit of investment prescribed under relevant laws applicable to each category of investor. 12. The size of the Offer may be increased to the extent of upto 10% of the Offer i.e. upto 7,224,300 equity shares of Rs.5 each, in case the Selling Shareholder decides to retain any over-subscription. In such a case, the size of the Offer may increase upto 79,467,600 equity shares of Rs.5 each. In the event of retention of over-subscription by the Selling Shareholder, allotment to Bidders shall be as per the basis of allocation as set out in this RHP under Offer Structure. 13. An over-subscription to the extent of 10% of the Offer can be retained for the purposes of rounding off to the nearest multiple of 50 equity shares while finalizing the basis of allotment. 14. There would be no further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or in any other manner during the period commencing from submission of the Red Herring Prospectus with SEBI until the equity shares offered have been listed. 15. We presently do not intend or propose to alter our capital structure for a period of six months from the date of opening of the Offer, by way of split or consolidation of the denomination of equity shares or further issue of equity shares (including issue of securities convertible into exchangeable, directly or indirectly for equity shares) whether preferential or otherwise, except that we may issue options to our employees pursuant to an employee stock option plan or, if we enter into acquisitions or joint ventures, we may consider raising additional capital to fund such activity or use equity shares as currency for acquisition or participation in such joint ventures.

26

16. We have not issued any equity shares out of revaluation reserves or for consideration other than cash, except for equity shares issued to the President of India under the Acquisition Act. For details please refer to note no.1 given above and the section entitled Our History. 17. At any given point of time, there shall be only one denomination for the equity shares of our Company and we shall comply with such disclosure and accounting norms specified by SEBI from time to time. 18. We have 8 shareholders as on date. 19. We have entered into agreements with GoI and Suzuki. These agreements are agreements for licenses, agreements relating to the management of our Company and the rights and obligations of GoI, Suzuki and our Company and the put options between the GoI and Suzuki. For details of the various agreements referred to above, please refer to the section entitled Our Promoters.

27

OBJECTS OF THE OFFER

This being an Offer for Sale, the objects of the Offer are to list the equity shares of our Company and carry out the divestment of 72,243,300 equity shares of Rs.5 each by the Selling Shareholder. Our Company will not receive any proceeds from the Offer.

28

INDUSTRY OVERVIEW
Unless otherwise indicated, all financial and statistical data relating to the automobile industry in the following discussion are derived from either the CRIS INFAC Annual Review 2001 or 2002 or the CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003. These data have been reclassified in certain respects for purposes of presentation. For more information, see Summary Our Business on page 2 of this Red Herring Prospectus.

The Global Passenger Car Industry

In 2000, approximately 40 million cars were sold globally. The passenger car markets of North America, Western Europe and Asia accounted for nearly 85% of global new car registrations in 2000. Between 1998 and 2000, new car registrations in these markets grew at a CAGR of only 6.9%, whereas during the same period, new car registrations in India grew by over 17%, the highest in any of the major passenger car markets. (figures are in 000s) North America Western Europe Asia - ex Japan China India Japan Total (North America, Western Europe & Asia)
Source: CRIS INFAC Annual Review 2001

1998 8,183 14,369 3,062 507 518 4,092 29,706

1999 10,017 15,322 3,711 570 690 4,154 33,204

2000 10,453 15,112 4,111 609 709 4,260 33,936

CAGR(%) 13.0% 2.6% 15.9% 9.6% 17.0% 2.0% 6.9%

Market opportunities are primarily in the developing economies

The developed economies of the US, Western Europe and Japan have the highest levels of car penetration and constitute over 70% of total new car registrations. Between 2000 and 2002, the sales of cars were adversely affected due to economic downturn in the US, which, as a single country, is the largest market in the world. The US market is expected to grow only marginally. Between 1999 and 2002, the passenger car market in Western Europe was stagnating. In 2002, sales volumes in Western Europe declined by approximately 2%. As a result of the recession in Japan, the second largest car market in the world, the demand for cars in Japan has been adversely affected. However, Japanese automobile companies with global manufacturing capabilities have not been significantly affected due to strong demand for their products in overseas markets.

Emerging Markets
Income level is one of the key factors affecting new car purchases. The relationship between gross national income per capita measured in terms of Purchasing Power Parity, or PPP which is an indicator of the per capita income, and the number of new , car registrations per 1000 persons in various economies, has been shown below:
40000

USA PPP Gross National Income per capita (US$)

30000

Canada

Japan Netherlands Germany UK Italy

France
20000

Other W.Europe Argentina

South Korea

Spain

10000

Mexico China India Brazil

Poland

0 0 5 10 15 20 25 30 35 40 45

New vehicle Registrations in 2000 per 1000 persons

Source: Population and Gross National Income measured in terms of Purchasing Power Parity has been sourced from World Bank Data; the data on new vehicle registrations have been sourced from the CRIS INFAC Annual Review 2001

29

As shown in the chart, in 2000, developed economies, such as US, Japan and countries in Western Europe, with higher income levels, had higher levels of new car registrations, while emerging economies, such as India and China, with lower income levels, had lower levels of new car registrations. With rising income levels in emerging markets it is likely that the number of new car registrations will also increase. After China joined the WTO, import duties fell substantially, leading to increased imports. In addition, reduction in prices by domestic manufacturers in China, is expected to boost the demand for cars significantly. Between 2001 and 2010, car sales are expected to grow at a CAGR of between 14 and 15%. The Chinese government has permitted foreign companies to enter the Chinese market through alliances with local partners. However, the Chinese passenger car industry continues to have certain impediments such as high local duties and prohibition on car manufacturers to offer car-financing. For information about the Indian passenger car market, see Indian Passenger Car Industry on page 30 of this Red Herring Prospectus.

Trends in global passenger Car Industry

The automobile industry is capital intensive. Despite over 20 mergers and strategic investments and alliances in recent years, the global automobile industry faces over-capacity. This has led car manufacturers globally to increase the utilization of capacities and share a basic vehicle platform across several models in order to achieve economies of scale. The sharing of the basic vehicle platform spreads the development costs over a large volume base of various models. This increases the utilization of the platform, allowing car manufacturers to price new models at competitive prices. Typically, between 65% and 75% of the value of a vehicle comprises of components that are outsourced. Hence, manufacturers make significant efforts to reduce the cost of procurement from component suppliers through strategies such as joint procurement of components with other car manufacturers, e-procurement and worldwide procurement. Car manufacturers have also sought to reduce costs by sharing manufacturing facilities with other car manufacturers, making improvements in technology and increasing their product portfolio and by focusing on initiatives such as built-to-order and mass customization. Manufacturers seek to enhance their customer base and their customer satisfaction by providing related services and products such as automobile finance, preowned cars, fleet management and insurance.

Implications of global trends for the Indian passenger car market

As a result of rising household income and decline in interest rates, along with current low passenger car ownership density, many global manufacturers have entered the Indian market. According to the Central Statistical Organisation, India had a GDP growth rate of 6.1%, 4.4% and 5.6% in fiscal 2000, 2001 and 2002, respectively. India is generally believed to have a high GDP growth potential aided by low cost of production and availability of skilled manpower. The high rate of growth in the sales of passenger cars in India is driven primarily by growth in the sales of passenger cars priced below Rs. 500,000, which constituted over 84% of total sales volumes in fiscal 2003.

The Indian passenger car industry The Indian Economy

According to World Bank data for 2002, India is the second largest country in the world in terms of population with one of the largest economies in the world in terms of purchasing power parity measured in US Dollars. The GoI has played a significant role in the development of the Indian economy. In 1991, a series of comprehensive macroeconomic and structural transformations were initiated by the GoI to promote greater market orientation and economic stability and growth. The key policy reforms that have been implemented include:
q q q

deregulation of industry; impetus for foreign direct investment for equity participation in Indian industry; and progressive reduction in the GoIs role in production, by implementing a series of disinvestments in public sector units or PSUs

Since fiscal 2000, the GoI has carried out several strategic disinvestments in key PSUs. The notable disinvestments that have been successfully carried out include sale of GoI stakes in Videsh Sanchar Nigam Ltd and CMC Ltd to the Tata Group, Indian Petrochemicals Corporation Ltd to the Reliance Group, IBP to Indian Oil Corporation Ltd and Bharat Aluminium Company Ltd and Hindustan Zinc Ltd to the Sterlite Group. In May 2002, Maruti completed a rights issue of its equity shares at Rs. 3280 per Rs. 100 share, whereby GoI renounced its equity shares to Suzuki. The price at which the equity shares were offered in the rights issue was determined by taking the average of the valuations provided by three independent firms, KPMG, S. B. Billimoria and Ernst & Young. In addition, Suzuki paid GoI a control premium of Rs. 10,000 million. As a part of its 30

ongoing disinvestment process, GoI has initiated disinvestments in several key sectors such as petroleum and shipping.

Evolution of the Indian passenger car industry Background

The passenger car industry in India grew at a nominal CAGR of approximately 3.6% during the 1960s and the 1970s. Sales of passenger cars were limited by supply. There were only two manufacturers in the market, Hindustan Motors and Premier Automobiles, and they had limited production capacities. The import of passenger cars was restricted to the State Trading Corporation (STC) and foreign diplomats. There were quantitative restrictions on imports. The rate of customs duty levied on cars was 225%.

Marutis entry into the Indian passenger car market

In 1982, the GoI entered into a collaboration with Suzuki and established Maruti, which commenced operations in fiscal 1984. Maruti launched a small car, the Maruti 800, which had an engine capacity of 796 cc, high fuel efficiency, contemporary design and was priced competitively. Maruti introduced the Omni in 1984, the Maruti 1000 in 1990, the Zen in 1993 and the Esteem in 1994. Each of these models provided customers with choices that were not available in the market. The entry of Maruti expanded the overall demand for passenger cars in India, leading to the industry growing at a CAGR of approximately 25% between fiscal 1984 and fiscal 1990. During 1986 to 1997, Maruti was a principal car manufacturer in India. During this period, Maruti encouraged the development of the automobile component industry and emphasized localisation of components and other input materials, through collaborative efforts with vendors for the development of automobile components. In the 1980s, rates of import duties varied from 150% to 200% based on the engine capacity of a car. In order to facilitate development of the car industry, GoI has substantially lowered the rates of import duties levied on cars and components.

Significant events in the 1990s

In 1992, Suzukis shareholding in Maruti increased to 50%. A year later in June 1993, GoI delicensed the passenger car industry in India. Overseas entities were permitted to set up automobile manufacturing facilities in India through joint ventures with Indian entities. The overseas entities were permitted to own up to 51% of the equity of such joint ventures until 1995 and more than 51% after 1995. As a result, overseas manufacturers such as General Motors, Ford, Daimler-Chrysler, Peugeot, Fiat and Daewoo Motors entered the passenger car and utility vehicles market in India. Most of the new car manufacturers introduced cars in the mid or large car segments. Premier Automobiles Limited and Maruti were the only manufacturers in the entry-level small car segment during this period. Between fiscal 1993 and fiscal 1997, demand for passenger cars increased at a CAGR of 24%. Demand increased largely due to the availability of new models, high demand from the corporate sector, and increased availability of affordable consumer financing. Between 1997 and 1999, a number of new models were launched in the compact and mid-sized car segments. In fiscal 2000, the Indian passenger car market grew sharply by 59.7% over the previous year primarily due to the entry of new car manufacturers such as Hyundai and Telco and introduction of new models such as the Matiz, the Indica and the Accent and advance purchases in anticipation of increase in sales tax rates. In the same year PAL discontinued its entry level small car model with the result that Maruti became the sole manufacturer of small cars priced below Rs. 300,000. In fiscal 2001, there was a correction in demand with a negative growth rate of 6.8%. In fiscal 2002 and 2003, the passenger car market in India grew by 0.9% and 3.7% respectively.

Key global players in India

The principal global car manufacturers who actively compete in the Indian market are listed below:
q q q q q q q

Fiat India Automobiles Pvt Ltd Ford India Ltd General Motors India Ltd Honda Siel Cars India Ltd Hyundai Motors India Ltd Toyota Kirloskar Motor Ltd Daimler Chrysler India Pvt Ltd

31

Segment Volumes and Market share

The sales volumes of different passenger car companies in various segments in the Indian passenger car market for the last four years is as follows: 1999-00 Segment A: Maruti PAL MUL market share in Segment A Segment A share in overall market Segment B: Maruti Fiat Hyundai Telco Others MUL market share in Segment B Segment B share in overall market Segment C: Maruti Fiat Ford GM HM Honda Hyundai Others MUL market share in Segment C Segment C share in overall market Segments D&E: Total 271,570 271,488 82 100% 44% 280,621 87,905 16,178 69,449 54,499 52,590 31.3% 45.7% 61,281 18,442 4,567 7,988 2,817 8,545 9,698 6,215 3,009 30.1% 10.0% 521 613,993 2000-01 210,797 210,797 100% 37% 282,031 104,041 7,205 64,877 43,797 62,111 36.9% 49.3% 78,884 14,897 2,149 18,024 8,255 7,783 10,009 16,083 1,684 18.9% 13.8% 711 572,423 2001-02 206,350 206,350 100% 36% 293,131 118,021 20,379 67,909 64,037 22,785 40.3% 50.8% 72,610 14,255 898 14,650 8,518 6,589 9,600 17,700 400 19.6% 12.6% 5,411 577,502 2002-03 193,302 193,302 100% 32% 312,642 120,603 23,317 82,892 72,713 13,117 38.6% 52.2% 81,257 12,982 2,615 14,954 8,100 5,105 12,000 19,152 6,349 16.0% 13.6% 11,738 598,939

Source: Sales volumes data in the CRIS INFAC Annual Review 2002 and the CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003, reclassified in accordance with price-based segmentation Fiat - Fiat India Automobiles Pvt. Ltd.; Ford - Ford India Ltd.; GM - General Motors India Ltd.; HM - Hindustan Motors; Hyundai - Hyundai Motors India Ltd.; Honda - Honda SIEL Cars India Ltd.; Maruti - Maruti Udyog Ltd.; PAL Premier Automobile Ltd.; Telco - Tata Engineering and Locomotive Company. As may be seen from the above, the A and the B segment have consistently constituted over 84% of the total passenger cars sold in the Indian passenger car market. In fiscal 2003, we had a 100% market share in the A segment and a 38.6% market share in the B segment resulting in 62% overall market share in these two segments.

32

Overall Market share

The overall market share of the various manufacturers in the Indian car market is shown below: 1997-98 Maruti Hyundai Telco Others 83.1% 0.0% 0.0% 16.9% 1998-99 78.8% 4.6% 0.0% 16.6% 1999-00 61.5% 12.3% 8.9% 17.3% 2000-01 57.6% 14.1% 7.7% 20.6% 2001-02 58.6% 15.2% 11.1% 15.1% 2002-03 54.6% 17.3% 13.2% 14.9%

(Based on CRIS INFAC Annual Review 2002 and CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003) Hyundai - Hyundai Motors India Ltd; Telco - Tata Engineering and Locomotive Company Ltd

Manufacturing capacities and utilisation

The total installed capacity, which is measured at the time of installation of a plant as the number of vehicles a plant is expected to produce annually, is around 1,237,000 units in India. Maruti, which is the largest manufacturer in India, has generally operated at more than 100% capacity utilization. The capacity utilization is the ratio of the vehicles actually produced in a year and the installed capacity. In fiscal 2002, Maruti operated at a capacity utilization of 102%, as compared to the industry average of 57.8%. The historical production volumes and capacity utilisation levels of various car manufacturers in India in fiscal 2002 is shown below: (units) 1999-00 2000-01 2001-02 Installed Capacity (2001-02) 350,000 160,000* 120,000 110,000 100,000 64,000* 50,000 30,000 25,000 10,000 n.a. n.a. Capacity Utilisation (%) (2001-02) 102.0% 57.6%* 78.1% n.a. 10.3% 36.2%* n.a. 34.4% 32.5% 14.2% n.a. n.a.

Maruti TELCO Hyundai Daewoo Ford Hindustan Motors Fiat Honda GM Daimler Chrysler PAL-Peugeot PAL Total

3,98,669 56,802 75,709 n.a. n.a 26,673 16,039 n.a. 3,108 436 32 54 5,77,522

3,42,248 45,688 81,740 n.a. n.a 25,774 n.a 2,652 8,324 880 5,07,306

3,51,949 64,712 93,670 n.a. 10,287 19,398 n.a 10,310 8,135 1,415 5,59,876

Source: CRIS INFAC Annual Review 2002 n.a: Not Available * includes cars and utility vehicles 1) Sales Figures for Daewoo Motors India Ltd. (estimated) and Fiat India Ltd. have been taken as a proxy for production, as the production numbers for these companies are not available. 2) Production figures include the exports of vehicles.

33

Sector Outlook
Between fiscal 2002 and fiscal 2007, the entire Indian passenger car market is expected to grow by approximately 9.5%, largely as a result of increasing demand for segment B cars. Segment A This is the entry-level and the most price-sensitive segment constituting 32.3% of the total Indian passenger car market in fiscal 2003. Maruti is the sole manufacturer in this segment since fiscal 2000. In fiscal 2003, this segment accounted for sales volumes of 193,302 cars. Due to the low per-capita income levels in India, the price of ownership of cars significantly affects the demand for cars. Between fiscal 2002 and fiscal 2007, this segment is expected to post a CAGR of 2.7%. Segment B In fiscal 2003, this segment constituted 52.2% of the total Indian passenger car market and is expected to grow to 57.6% of the Indian passenger car market by fiscal 2007 at a CAGR of about 12.3%. In fiscal 2003, there were eight models in this segment. Due to the present low per capita income in India, the price and cost of ownership of cars are significant factors that affect demand for cars in this segment. Segment C, D, and E In fiscal 2003, segment C, D and E constituted about 15.6% of the total Indian passenger car market. There are 11 manufacturers with 24 models in these segments. These segments typically have low sales volumes, therefore, high growth rates of 11%, 19% and 35%, respectively, are expected between fiscal 2002 and fiscal 2007. New model launches, growth in per capita income levels, high aspirations and status associated with larger cars, are the key factors affecting demand for cars in these segments.

Factors Affecting Demand for Indian Passenger Cars

Demand for cars depends on a number of factors. The key factors affecting demand for passenger cars in India are per-capita income, introduction of new models, prices of cars, availability and cost of consumer financing, incidence of duties and taxes, fuel costs and the quality of road infrastructure. Due to low per-capita income in India, the price and cost of ownership of cars is a significant factor in demand for cars. According to the Statistical Outline of India 2002-03 by Tata Services Ltd, the per-capita gross national product which is an indicator of per-capita income levels has increased to Rs.20,320 in fiscal 2001 from Rs.14,325 in fiscal 1997, a CAGR of 9.13%. According to the National Readership Survey 2002, the proportion of individuals with annual per-capita income exceeding Rs. 48,000 has increased from 14.2% in 1990 to 20.4% in 2002. The fiscal policies of the government affect the prices of cars sold in India. The excise duty rate of 24%, the central sales tax rate of 3%, the local sales tax rates and other municipal, road taxes and registration taxes constitute approximately 45% of the ex-showroom price of a car. In March 2001, excise duty rates for passenger cars in India were reduced from 40% to 32%. In the finance bill presented in February 2003, GoI reduced such rates further to 24% and also reduced rates of customs duty levied on imported components from 30% to 25%. Recently, there has been progress in major highway and road construction projects, such as the Golden Quadrilateral Project, a highway connecting the four metropolitan areas of Kolkata, New Delhi, Mumbai and Chennai. Availability of better road infrastructure will also affect demand for cars.

The Pre-Owned Car Market

The size of the pre-owned car market in India in fiscal 2002 has been estimated to be 1.1 to 1.3 times the size of the new car market. The A and B segments account for between 70% and 80% of the total sales volumes in the pre-owned passenger car market in India. The proportion of pre-owned cars from segment B is increasing and is expected to form the largest portion of the pre-owned passenger car market during the next two years. Mid-size and large cars are less popular in the pre-owned passenger car market primarily due to faster depreciation in value, lower fuel economy and higher maintenance costs.

34

The market share of the various segments in the pre-owned passenger car market in India for fiscal 2002 is shown below: Segment A B C D, E Utility Vehicles Volumes (numbers)
Source: CRIS INFAC Annual Review 2002

Percentage Share 35-40 35-40 8-10 5 5 756,000-860,000

It is estimated that between 15% and 20% of the pre-owned passenger car market is organized. Small brokers and pre-owned car dealers dominate majority of the market. Key concerns for a customer in the pre-owned passenger car market have been the lack of transparency in the purchase process, inaccurate valuation of the car, risk of poor quality and incomplete or fraudulent documentation. Recently, manufacturers are addressing these concerns by participating in the pre-owned passenger car market. We believe the key factors affecting demand for pre-owned passenger car market in India are as follows:
q

the entry of organized participants into the pre-owned passenger car market resulting in (1) a more transparent process in valuation and assessment of quality, (2) a more convenient means of selling or exchanging pre-owned cars and (3) the availability of adequate warranties; the introduction of a large number of models in the new car market and a reduction in the holding period resulting in wider availability of recently introduced models in the pre-owned passenger car market; and an increase in per capita income levels in urban and rural areas and wider availability of consumer finance for the purchase of pre-owned cars.

35

OUR BUSINESS
Unless otherwise indicated, all financial and statistical data relating to the automobile industry in the following discussion are derived from either the CRIS INFAC Annual Review of 2001 or 2002 or the CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003. These data have been reclassified in certain respects for purposes of presentation. The references to prices of our products in this section are to the ex-showroom price in Delhi. For more information, see Certain Conventions; Use of Market Data on page H of this Red Herring Prospectus.

Overview
We are a subsidiary of Suzuki Motor Corporation, the largest manufacturer of mini passenger vehicles in Japan since fiscal 1974, in terms of sales volumes, with a market share of 31.6% in 2002, according to the Japan Mini Vehicles Association. Suzuki was also the eleventh-largest vehicle manufacturer in the world and the fourth-largest manufacturer in Japan in terms of worldwide sales volumes in 2000, according to Automotive Intelligence. In 2002, Suzuki had a 22% share of the market in Asia for vehicles exported from Japan, according to the Japan Automobile Manufacturers Association. Maruti was ranked twentieth by Automotive Intelligence in terms of worldwide sales volumes amongst vehicle manufacturers. We have been the largest passenger car manufacturer in India since 1986. In the Indian passenger car market in fiscal 2003, we had the highest sales volumes of 330,013 cars and a market share of 54.6%. The remaining market share was divided among approximately nine other manufacturers. Our market share was more than three times the share of the manufacturer ranked second in terms of sales volumes for fiscal 2002, and exceeded the combined market share of other manufacturers by more than 40%. We have a diverse product range that includes ten basic models with over 50 variants, of which nine models are manufactured by us and one is imported from Suzuki, with prices ranging from approximately Rs.200,000 to approximately Rs.1.8 million. Our wide product range is supported by an extensive sales and service network in India. We manufacture cars for most segments of the Indian passenger car market, and are the leading manufacturer of cars priced below Rs.500,000 comprising segments A and B, to which we refer as the small car segment. The small car segment constituted more than 84% of the Indian passenger car market in fiscal 2003. In fiscal 2003, we had sales volumes of 313,905 cars in the small car segment, which resulted in a market share in that segment of 62%. We intend to continue to focus on the small car segment, which we expect will continue to be the largest segment in the Indian passenger car market in the foreseeable future.

Our competitive strengths

We believe we are well positioned to maintain and enhance our leadership position in the small car segment in India, while continuing to offer products in most segments of the Indian market, on account of our competitive strengths, which include the following:
q

Expertise in small car technology. As a subsidiary of Suzuki, we have access to globally respected technology in the small car segment. We have the advantage of Suzukis expertise in all aspects of small car technology and design, with respect to our products, our manufacturing processes and business practices, the development of our supply chain and the training of our personnel. Extensive product portfolio. Our diverse product range includes cars in segments A, B and C, and utility vehicles. We manufactured five out of the ten models that were sold in the combined A and B segments in India in fiscal 2003. We are the only manufacturer of cars in segment A (priced below Rs.300,000) where we have two models, the Maruti 800 and the Omni. The Maruti 800 has been the largest selling car in India for several years, and continued to have the highest sales volumes of any model in fiscal 2003, with a market share of 23.9%. The Omni, a versatile vehicle that can seat more passengers than the Maruti 800 or be used as an ambulance or cargo vehicle, had a market share of 8.3% in fiscal 2003. We are also the only manufacturer to sell three distinct models, the Zen, the Alto and the WagonR, in segment B (priced between Rs.300,000 and Rs.500,000). We believe that our dominance in segment A and extensive product range in segment B enables us to offer the customer a wider choice in the small car segment than any of our competitors. In addition, the absence of other manufacturers in segment A gives our dealers greater flexibility in promoting models in segment B. Quality products. In November 2001, we were one of the first automobile manufacturers in the world to receive the ISO 9001:2000 certification. We began to export products in 1988, primarily in order to benchmark our products against international quality standards. We have exported products to approximately 70 countries, including countries in Western Europe. Our products for export are manufactured using the same assembly line as our products for the domestic market.

36

Extensive sales and service network. We believe that we have the largest network of dealers and service centers amongst car manufacturers in India. As of March 31, 2003, we had 178 authorized dealers with 243 sales outlets in 161 cities. We estimate our car parc to be in excess of 3.5 million vehicles. To service this car parc, at March 31, 2003, we had 342 dealer workshops and 1,545 Maruti Authorized Service Stations, or MASSs, which covered 898 cities in India backed by Express Service Centers on 30 highways across the country. In addition to the distribution of our cars, our dealership network is a critical resource in our efforts to provide customers with a one-stop shop for automobiles and automobile-related products and services such as automobile finance, automobile insurance, Maruti-certified pre-owned cars available for purchase, and leasing and fleet management, in order to promote customer loyalty. Brand strength. We have been present in the Indian market for almost twenty years and have built our brand on the basis of the values of trust and reliability. Most of our principal competitors have been present in the Indian passenger car market for a significantly shorter period. Certain manufacturers have ceased to manufacture certain products shortly after introducing them, or have left the market altogether. In contrast, we continue to support the maintenance of our products. This has contributed to the strength of our brand. In 2000, 2001 and 2002, J.D.Power Asia Pacific, Inc. ranked us No. 1 in the India Customer Satisfaction Index, which assesses customer satisfaction with product quality and dealer service. We believe that this was the first time that a volume leader in the automobile industry anywhere in the world was ranked first on the JD Power Customer Satisfaction Index. NFO Automotives 2002 Total Customer Satisfaction Survey ranked Maruti products as No. 1 in the Economy, Premium Compact and Entry Mid-size segments respectively, for 2002. Integrated manufacturing facility. Our manufacturing facility comprises three integrated plants with flexible assembly lines located at Gurgaon in the northern state of Haryana. Our facility has advanced engineering capability and each plant is upgraded on an ongoing basis to improve productivity and quality. As a result, our first plant set up in fiscal 1984 is technologically at par with our newer plants and is also used in the production of our new models. We believe that we are one of the most efficient among the vehicle-manufacturing facilities of Suzukis subsidiaries outside Japan in terms of productivity measured as the ratio of number of vehicles produced to number of employees. We have an installed capacity of 350,000 vehicles per year, which is the highest among passenger car manufacturers in India and among the passenger car manufacturing facilities of Suzukis subsidiaries outside Japan. We have consistently produced in excess of our installed capacity in the five fiscal years ended March 31, 2003. We believe that we would be able to expand our production to 500,000 cars per year with minimal additional capital expenditure. This would enable us to benefit from significant economies of scale. Strong vendor base and higher rates of localisation. We work closely with our vendor base for the supply of raw materials, components and spare parts of our products. In order to improve quality and generate economies of scale, we have reduced the number of our vendors of components in India from 370 as of March 31, 2000 to 299 as of March 31, 2003, and intend to continue to reduce the number of our vendors. 113 of our vendors at March 31, 2003 were in technical collaboration with foreign entities. As of the same date, we had strategic equity interests through joint venture agreements in 13 of our vendors, who together supply a substantial portion of our purchases of components. A number of our vendors are our dedicated suppliers in that we account for a majority of their turnover. Vendors located within a radius of 100 kilometres from our facility supply the majority of our components. The production systems of our vendors are generally aligned to our need for a reliable and timely supply of components that meet our quality requirements. This has enabled us to increase the proportion of locally-sourced, lower-cost components in our models, a concept we refer to as localisation. We have been able, in collaboration with our vendors, to increase the rate at which we are able to localise production of our new models over time. This has helped us reduce the cost of our components. Skilled labour and experienced management. Our highly-skilled labour force has become increasingly productive in terms of vehicles produced per employee and receives training on an ongoing basis, including training by Suzuki. As of March 31, 2003, 1,900 of our employees had been trained at Suzukis facilities in Japan. We have been present in the Indian passenger car market for a significantly longer period than most of our principal competitors. As a result, we have been able to build a highly-experienced management team that is familiar with conditions in the Indian passenger car market. For instance, our Managing Director has almost ten years of experience with us, and most of the heads of our divisions have more than 15 years of experience with us. Capital resources. At March 31, 2003, we had cash and bank balances and current investments amounting to Rs.10,057 million. As of the same date, we had relatively low levels of outstanding indebtedness, in the amount of Rs.4,560 million. As a result, we have relatively low interest expense and flexibility to raise funds, if necessary, for our working capital and capital expenditure in the future.

37

Our Principal Objectives

As the leading manufacturer in the small car segment of the Indian market, we have the following principal objectives:
q q

To strengthen our leadership position in the small car segment of the Indian market; To continue to expand the size of the Indian market for small cars by strengthening and expanding our dealer network and making automobile financing available at competitive rates; and To continue to benchmark ourselves against improving global manufacturing, marketing and other practices and standards, strive to increase customer satisfaction through quality products and new initiatives, and promote the financial strength of our dealer network.

Our Business Strategy

We intend to continue to focus on the small car segment, while offering products in most segments of the Indian passenger car market. We aim to achieve our principal objectives by pursuing the following business strategies: Maintain and enhance our product range. We intend to utilize Suzukis expertise in small car technology to produce new variants of our existing models and to upgrade our products with contemporary technology and features. We plan to increase the number of variants we offer of existing models at different prices in the A and B segments. We continue to explore opportunities to launch new models in different segments across the Indian passenger car market. Increase reach and penetration. We plan to continue to utilize our extensive sales and service network to increase the reach, in terms of geographical spread, and penetration, in terms of sales volumes, of our products across India. We continue to assist our existing dealers in enhancing their performance and profitability by suggesting improvements, such as increasing the number of sales executives employed at dealerships. Currently, our wide network of MASSs primarily provides aftersales service. We plan to use our MASSs that are located in some of the more remote areas of India as sales outlets to increase our reach and penetration in those areas. We also aim to expand our sales and service network by increasing the total number of our authorized dealers and MASSs and achieving wider coverage in terms of geographical area. We seek to strengthen our sales network in areas where we identify potential for improvement in our sales volumes. Increase availability of automobile finance. We continue to seek opportunities to expand the size of the Indian passenger car market, especially in the small car segment. Since January 2002, we have made available, through our dealers, finance products of eight select finance companies under the brand Maruti Finance. We aggregate the finance products provided by these companies to offer uniform financing conditions to the customer at Maruti dealerships. This increases the transparency of the financing transactions, which we believe contributes to customer satisfaction and confidence in our brand. We have recently entered into an agreement with the State Bank of India, or SBI, pursuant to which SBI will offer financing on competitive terms for the purchase of our products using its network of more than 9,000 branches across India. We expect that this will promote demand for our products among SBIs vast customer base and expand the size of the passenger car market in India. Secure repeat purchases by offering a 360 degree customer experience. On the basis of our belief that securing repeat purchases from an existing customer requires less expenditure than acquiring a new customer, we aim to provide customers with a one-stop shop for automobiles and automobile-related products and services. We intend to use our extensive sales and service network to make available to our customers a wide range of Maruti-branded services at different stages of ownership, a concept we refer to as the 360 degree customer experience. We believe that this will help secure repeat purchases of our products by existing customers and increase the revenue of our sales network. To this end, we have launched several new business initiatives to make available, through third party service providers and dealers, under the Maruti brand name, the following products and services:
q q q q q q

automobile insurance; automobile finance; Maruti-certified pre-owned cars available for purchase; leasing and fleet management; accessories; and extended warranties.

Continue to benchmark our manufacturing capabilities. We aim to further improve our operating efficiencies by striving to align ourselves with Suzukis premier manufacturing facility, its Kosai plant in Japan, by fiscal 2005. We have recently acquired the capability to conduct minor and major facelifts to our models, and upgrade our products in terms of technology or

38

features. As part of Suzukis plans to make Maruti its research and development center for cars in Asia (outside Japan), we expect to have full model change capability by fiscal 2008. By utilizing advanced manufacturing techniques and processes, we plan to continue to offer technologically advanced, high quality products at competitive prices. Continue to reduce costs to offer more competitive products. Cost competitiveness has been, and continues to be, central to our strategy as the leading manufacturer in the small car segment to expand the size of the market by offering competitively priced, high quality products. The components of this strategy are:

Higher levels of localisation

Typically, the adoption of a new technology or the launch of a new model by us requires the import of components. We increase the level of localisation over time by working closely with our vendors in India to upgrade their capabilities, which enables us to reduce costs and increase our flexibility in pricing our products. It is our strategy to introduce new models with a minimum of 75% localisation level and increase the same to at least 90% within three years of introduction of the model. We intend to continue to increase the rate of localisation of our new models.

Vendor participation in cost reduction

We have begun working with some of our major vendors to implement the Maruti Production System that focuses on the elimination of wasteful activities in their manufacturing processes. We continue to work with our vendors in areas such as improving their productivity, reducing the number of their components that are rejected, reducing materials handling, improving their yield from materials, and reducing their inventories. This helps reduce their costs of production, which also reduces the costs of our components. We set targets with vendors for cost reduction, and for the initial period of the cost reduction, we share the benefits of the reduction with the vendor to provide an additional incentive for the vendor to reduce costs. In addition, we plan to begin to integrate our vendors into the worldwide purchase system, or WWP whereby a vendor may , become the sole supplier for a Suzuki product in several countries including India. This would generate economies of scale for the vendor that also result in reduction of our costs.

Cost reduction on warranties

The warranty costs of our vendors are computed as the cost of components incurred by our vendors to service warranty claims arising from defects in components supplied by them. We have been able to reduce the warranty costs of our vendors per vehicle by approximately 21% between fiscal 2002 and fiscal 2003. We periodically set targets for warranty reduction for our vendors and monitor the achieved reductions through reviews by management. In addition, we have reduced our inhouse warranty costs per vehicle by approximately 77% between fiscal 2002 and fiscal 2003.

Reduction in initial investment cost

We aim to reduce our initial investment cost for new models through in-house development and localised sourcing of dies, welding jigs and other equipment, introduction of flexible welding lines that can be used for multiple models, and in-house development of machine shop equipment. We also plan to source dies for new models and upgraded versions of existing models from sources outside India other than Japan, such as Taiwan, which are typically less expensive sources than Japan.

Reduction in number of vehicle platforms

We currently use six basic vehicle platforms for production. We intend to reduce the number of our basic vehicle platforms and increasingly share basic vehicle platforms among multiple models in order to spread development costs and achieve economies of scale.

Achieve further cost reduction through higher productivity

We benchmark our production systems with those of Suzuki. We aim to improve our productivity and the efficiency of our operations through increased in-house automation, optimum utilization of production lines, outsourcing and reduction in materials handling. Lowering the cost of ownership. Through our business strategies, we seek to reduce the consumers cost of ownership of our cars, which comprises the cost of purchase, fuel consumption, maintenance, including spare parts and repairs, insurance, and resale value. In order to achieve this, we will use our ability to:
q q

manufacture high quality, fuel-efficient, cars; price our cars, spare parts and accessories, and extended warranties, competitively;

39

q q

make automobile finance more easily available to the consumer on competitive terms; make maintenance services, including spare parts, accessories and repairs, widely available through our extensive sales and service network; offer automobile insurance and other automobile-related services through our sales and service network; and create a market for Maruti-certified pre-owned cars through our Maruti True Value business.

q q

Manufacturing
The core focus areas of our manufacturing division are:
q q

benchmarking ourselves against global standards to efficiently manufacture quality products; and building a strong and motivated work force by emphasizing safety, education and continuous improvement of our manufacturing capabilities and those of our vendors.

Our Manufacturing Facility and Process Facility

Our manufacturing facility comprises three integrated plants with flexible assembly lines located at Gurgaon in the northern state of Haryana. The first plant was set up in fiscal 1984 with an initial installed capacity to produce 20,000 vehicles per annum, which was augmented to 130,000 by fiscal 1991. Installed capacity was further increased with the second plant becoming operational in fiscal 1995 to 200,000 vehicles per year. In fiscal 1996, with capacity increases in each plant, installed capacity increased to 250,000. With the third plant becoming operational in March 1999, installed capacity increased to 350,000 vehicles per year, which is the highest among passenger car manufacturers in India and among the passenger car manufacturing facilities of Suzukis subsidiaries outside Japan. Our facility has advanced engineering capability and is upgraded on an ongoing basis to improve productivity and quality. We have 17 manufacturing shops and are capable of producing more than 50 variants of the nine basic models manufactured, with different specifications, within the same day. This is possible due to our information technology-enabled vehicle build sequence system and vehicle tracking system. Under the vehicle build sequence system, at the production planning stage, requirements are communicated via our intranet (internally) and our extranet (to vendors) in advance as to the time and place for delivery of components and other production inputs in order to fulfill production targets. Our vehicle tracking system monitors and records the implementation of the planning during production.

Capacity Utilization
As the table below shows, we have, in each of the five fiscal years ended March 31, 2003, produced in excess of our installed capacity. Fiscal 1999* Installed Capacity (No. of Vehicles) Actual Production (No. of Vehicles) Capacity Utilization (%)
Source: Maruti Annual Reports
* Since the additional capacity of 100,000 vehicles was installed in March 1999, the installed capacity for computing capacity utilization in fiscal 1999 is taken at 258,333 vehicles, which is the weighted average for the earlier capacity for 11 months and the new capacity taken for one month.

Fiscal 2000 350,000 407,589 116.5%

Fiscal 2001 350,000 350,376 100.1%

Fiscal 2002 350,000 358,108 102.3%

Fiscal 2003 350,000 359,960 102.8%

350,000 333,198 129.0%

We believe that, with minimal capital expenditure, we would be able to produce 500,000 vehicles per year.

Utilities
We do not rely on outside sources of power as we have a 60-megawatt gas turbine captive power plant, which has multi-fuel capability. We also have our own reverse osmosis water treatment plant and effluent and sewage treatment plant. In 1999, we received the ISO14001 certification in respect of our environment management systems.

40

Our Manufacturing Paradigm

We adopt a target control and PDCA approach as the underlying theme of all our processes. PDCA constitutes:
q q q q

Planning by setting a target and time-line, dividing into action plan with value to each factor/element; Doing the standardized operation as decided; Checking through gap analysis to check whether the operation is really giving the desired results; and Acting to freeze if effective or correct.

Productivity
Improving productivity is an ongoing effort in Maruti, through the Maruti production system, or MPS, which is derived from the Suzuki production system, and focuses on elimination of wasteful activities taking place during manufacturing processes. In addition to MPS activities, in-house automation, increasing utilization of production lines, outsourcing of low value-addition jobs and reduction in materials handling have contributed to improvements in the productivity of our employees and the efficiency of our operations. As shown in the table below, our employee productivity, measured as the ratio of production volume in a fiscal year to the number of our permanent employees at the end of the fiscal year, increased by approximately 81% from fiscal 1995 to fiscal 2003. In September and October 2001, 1,050 permanent employees participated in our voluntary retirement scheme, which reduced the size of our workforce significantly without having a material impact on production volumes. Fiscal Year 1995 2001 2002 2003 Number of Permanent Employees 4,840 5,770 4,627 4,590 Production Volume 206,330 350,376 358,108 359,960 Production Volume Per Employee 43 61 77 78

Conservation of energy
We follow the three principles of Reduce, Reuse and Recycle for conserving energy. Between fiscal 1997 and fiscal 2003, we have reduced the consumption of electricity measured as the ratio of kilowatt hours of power consumed to the number of vehicles produced, by approximately 29%. This was achieved by using energy-saving lights and natural light, and also the efficient usage of other electrical appliances, thus reducing wastage. In the same period, we reduced the consumption of water, measured as the ratio of the volume of water consumed to the number of vehicles manufactured, by approximately 66%. This is achieved through the recycling of waste water in our water treatment plant and effluent and sewage treatment plant.

Quality
We produce high quality products, some of which we also export to various countries including the Netherlands, Italy, Germany, the United Kingdom and Switzerland. We were certified to ISO systems in the year 1995. ISO set in place a renewed and revised quality management system standard in the year 2000. The new ISO 9001:2000 standards are based on the eight quality management principles of customer focus, leadership, involvement of people, process approach, system approach to management, continual improvement, factual approach to decision making and mutually beneficial supplier relationships. The standard encourages the use of the PDCA approach extensively and requires continuous improvement. We were certified with ISO 9001:2000 in 2001 and aim to achieve the TS-16949 certification. In addition, we have made the following improvements in terms of producing defect-free products:
q

DFC OK: Our Direct Final Check OK, or DFC OK percentage, which signifies the percentage of vehicles that pass through the inspection stages as defect-free, improved from approximately 77% in March 2002 to approximately 87% in March 2003. Reduction in rejection: Our in-process rejection cost per vehicle, computed as the ratio of (1) the cost of components rejected due to defects arising during our production process, to (2) the number of vehicles sold, declined by approximately 55% from fiscal 2002 to fiscal 2003. In house warranty: Our in-house warranty costs per vehicle, computed as the ratio of (1) the aggregate cost of components incurred by us to service warranty claims arising from operational defects in our manufacturing lines, to (2) the numbers of vehicles sold in the fiscal year, declined by approximately 77% between fiscal 2002 and fiscal 2003.

41

Suzuki Quality Management System

Based on a method adopted by Suzuki at its manufacturing facilities, the quality of a vehicle dispatched from our facility is measured through a quality index audit on a daily basis. The quality index is a relative measure of quality based on evaluation of vehicles selected at random on a daily basis. In addition, we have recently adopted Suzukis global customer audit index, in order to provide a more customer-oriented focus to our entire organization, and channel resources towards customer complaints for rapid response.

Quality improvement initiatives

We have recently introduced for quality control:
q

q q

q q

Tracking surveys and direct customer contact in order to better understand customer satisfaction levels and customers problems; Full-time task forces for improvement in initial quality study problems and departmental cross-functional teams to work on defined problems with challenging targets; Quality gates at various stages in order to raise alarms for correction and immediate action on defects; Fool-proofings, or Pokayoke in Japanese, which comprises checks conducted in order to prevent defects arising from human error during the manufacturing process; A real-time feedback system, cross-linked with overall targets; and The Pica Pica system, which aligns the sequence of components and vehicles in order to prevent incorrect fitting of components.

Kaizen
We have adopted the Japanese management concept of Kaizen, or continuous improvement. Our Kaizen activities have resulted in the improvement of our in-house capabilities. For example, we manufactured 25 multi-axis robots and 16 multispot welders. Group discussions among employees in different departments are conducted on a monthly basis in order to discuss and resolve problems relating to their areas of operation, an activity we refer to as quality circle activity. Based on our belief that individuals contribute to improvement in growth, we have a suggestion scheme in which we promote participation of all employees at all levels. The average number of suggestions made per employee has improved by approximately 24% in fiscal 2003, when we received more than 72,000 suggestions, as compared to fiscal 2002. Some of the other improvements as a result of the Kaizen process have been increased automation through our automated material transport system. We have also won numerous awards including the Excellence in Suggestion Scheme award instituted by the Indian National Saving Scheme Association regularly for each of the last four years and 15 trophies in quality circle competitions organized by the Confederation of Indian Industries.

Manufacturing Process
The manufacturing process at our facility is depicted below:
W e ld S h o p 1 P a int S h o p 1
A s s e m b ly S h o p 1

F in a l V e h ic le I n s p e c ti o n 1

S te e l C o ils

B la n k i ng L in e

P re s s Shop

W e ld S h o p 2

P a int S h o p -2

A s s e m b ly S h o p 2

F in a l V e h ic le I n s p e c ti o n 2

S a le s & D e s p a tc h

W e ld s h o p 3

P a int S h o p 3

A s s e m b ly S h o p 3

F in a l V e h ic le I n s p e c ti o n 3

B um pe r p ain t s h o p

E n g in e

S u p p ly

to A s s y s h o p s 1 , 2 & 3

E n g in e A ssy -1

E n g in e A ssy .-2

E n g in e A ssy .-3

M ac h in e Shop 1

M ac h in e Shop 2

M ac h in e Shop 3

42

The production of a car at our facility occurs in the following stages:

Press Shop: Our press shop has five transfer presses and two blanking lines. In the press shop, steel coils are cut to the required size and panels are prepared by pressing them between various die sets such as doors, roofs and bonnet. An antirust coat is applied at this stage. We also have in-house capability and the necessary technical knowledge for the design and manufacture of medium-size press dies. Weld Shop: We have three welding shops with 122 six-axis robots and 25 in-house manufactured two-to-four axis robots. In this shop, various press-metal components manufactured in the previous stage are spot-welded together to form the body shell. Various parts such as the floor panel, side panel, doors and bonnet are sub-assembled in this shop. Subsequently, the assembled parts undergo final welding. The welded body is sent to the paint shop through a conveyor. Paint Shop: We have three paint shops, within one of which the final outer body is fully painted by robots. In the paint shop, the body undergoes various pre-treatment and electro deposition painting processes to provide a high corrosion resistance to the body. The car body is given an intermediate or primer coat before applying the stoving topcoat paint. The intermediate and the final coat are applied by using automatic electrostatic spray-painting machines (micro bells) and robots, followed by a baking process. Assembly Shop: We have highly flexible assembly lines, which can simultaneously handle a large number of variants as well as adapt to sequence changes. The painted bodies proceed for final assembly in three stages. The first stage is the trim line wherein various components such as roof head lining, windshield glass and interior trim components are fitted. Thereafter, the car is transferred to an overhead conveyor, the chassis line, wherein components such as the engine, gearbox and front and rear axles are assembled on the underbody. The vehicle is then lowered to the final line on its own wheels and here components and parts such as seats, the steering wheel and the battery are fitted. The completely-assembled vehicle finally rolls out of the assembly lines to the final inspection stages. Machine and engine shops: We assemble and test engines in our engine shops and carry out precision machining of engine components in our machine shops.

Licence agreements with Suzuki

Suzuki has several license agreements with us under which it has, since our inception:
q

provided us with technical know-how, assistance and information for the manufacture, sale and after-sales service of our products and parts; supplied components for our passenger cars; deputed technical personnel to our facility; helped us develop manufacturing processes and integrate certain Japanese management practices such as kaizen, which is Japanese for continuous improvement, in our plants; trained our personnel; and helped us develop and manage the supply chain for our products.

q q q

q q

We have agreed with Suzuki that amongst other things:

q

we will not manufacture in, or export products covered by agreements with Suzuki to, any territory except those permitted by Suzuki; we will not enter into agreements with any other manufacturer to sell any product or part that competes with any product or part covered by our license agreements with Suzuki; and we will not otherwise sell, distribute or promote the sale of any product that competes with products covered by our license agreements with Suzuki.

Suzuki will not be liable to us for damages arising from our use of the licensed information and disclaims responsibility for all representations and warranties made by us with respect to the licensed products. We pay Suzuki a fixed amount as lump-sum royalty in connection with the launch of each model. In addition, we pay Suzuki a running royalty, which is calculated every six months as a fixed percentage of the free-on-board, or FOB value of the components not imported from Suzuki, for any given model.

43

Our Supply Chain

Our purchases of production inputs primarily comprise raw materials and purchased components. In fiscal 2003, 26% of our raw materials and components consumed were imported and the remaining 74% were purchased from sources within India.

Raw Material Suppliers

The raw materials used in our manufacturing process primarily comprise steel coils and paints. We require our suppliers to comply with stringent quality specifications. We purchase steel coils from manufacturers in Japan, Korea and, to some extent, India. In recent years, we have sought increasingly to localise our purchases of steel coils with a view to reducing costs. We purchase our paint requirements from Indian suppliers. We earlier followed the tender system for the purchase of steel. Under this system, we floated limited tenders giving our specifications and had to accept the lowest price offered by a supplier who could meet our specifications. Last year, we moved to the quotation system where we have the flexibility to renegotiate prices once an offer is submitted. We issue standard purchase orders covering a period of six months for purchase of steel from foreign suppliers. We generally enter into contracts for the purchase of steel from Indian suppliers and issue purchase orders in line with our requirements. We generally enter into one-year contracts for the supply of paints and issue purchase orders as and when we require supplies.

Components Local Vendors

Since our inception, we have helped establish an organized automobile component industry in India through our vendor development program. We have developed our vendor base in India to address our specific needs and we believe that the efficiency of our vendors production processes, and the quality and competitiveness of their products, have generally improved in the course of their association with us. A large number of our vendors depend on our purchases for a substantial majority of their turnover. We play a collaborative role with our vendors by assisting them in periodically improving their processes and through training and interaction, regular audits and follow-ups in order to reduce line rejections and warranty cost. We seek to align our vendors interests with our own and bring their manufacturing and service standards in line with our requirements. The role of our vendors has gradually evolved from tactical to strategic where the vendors work in close coordination with us to meet our long-term goals in terms of:
q q q q

component development; quality; delivery; and cost control.

In order to improve quality and generate economies of scale, we have reduced the number of our vendors of components in India from 370 as of March 31, 2000 to 299 as of March 31, 2003, and intend to continue to reduce the number of our vendors. As of March 31, 2003, 13 of our vendors were our joint venture companies. The details of the commercial arrangements and other details of the joint ventures have been presented in the section entitled Our Group Companies. As of the same date, 113 of our vendors had collaborations with foreign entities, which help them to gain access to advanced facilities and systems, technical data and expertise. For fiscal 2002, our top ten local vendors accounted for approximately 34% of our aggregate purchases of components from vendors in India.

Agreements with vendors

Our vendors supply components in accordance with purchase orders and supply schedules periodically provided to them and time of delivery is the essence of the agreement. Our agreements with our vendors require that they sell components that are made in accordance with designs, drawings and specifications provided by Maruti, exclusively to Maruti. These agreements require that the vendor adopt Marutis established quality control procedures and permit periodic inspections of components and audits of its premises by Maruti. Repair and replacement costs of defective components supplied are borne by the vendor. Our agreements with our vendors typically permit termination by the aggrieved party upon breach of the agreement. In addition, these agreements provide for automatic termination upon the occurrence of (1) a change in the ownership of the vendor, (2) merger or amalgamation of the vendor with a third party, (3) transfer of a material portion of the assets of a vendor to a third party so that components cannot be supplied to Maruti without the assistance of the third party, and (4) insolvency of the vendor. 44

Delivery by Vendors
Most of our vendors have developed flexible manufacturing systems, which enable them to align their production to our changing requirements. We have a delivery instruction system that provides details of our component requirements for every 15 days, across the different variants of the various models, to our vendors. We are linked to our vendors through our Internetbased information network, which maintains online information regarding order status and delivery instructions. This capability has helped in reducing both inventory levels and lead times required for the supply of various components and sub-assemblies, and has enabled our vendors to more efficiently plan and dispatch their products. Vendors located within a radius of 100 kilometers from our facility supply the majority of our components. This has enabled our vendors to eliminate packaging and supply components directly to the assembly line.

Reduction of Vendor Costs

We have begun working with some of our major vendors to implement the MPS, which focuses on the elimination of wasteful activities in their manufacturing processes. We continue to work with our vendors in areas such as improving their productivity, reducing the number of their components that are rejected, reducing materials handling, improving their yield from materials, and reducing their inventories. This helps reduce their costs of production, and also reduces the costs of our components. We set targets with vendors for cost reduction, and for the initial period of the cost reduction, we share the benefits of the reduction with the vendor to provide an additional incentive for the vendor to reduce costs. In addition, we plan to begin to integrate our vendors into the worldwide purchase system, or WWP whereby a vendor may become the sole supplier for a , Suzuki product in several countries including India. This would generate economies of scale for the vendor that also results in reduction of our costs. Through value analysis, or VA, we aim to minimize the cost of manufacturing a component without changing its functional utility. Through value engineering, or VE, we aim to minimize costs at the stage of designing the component, before commencing production. We have adopted cost-efficient designs for certain components from Suzuki to enhance our competitiveness in terms of price and quality, with respect to the components. We have the support of 250 engineers trained in VA and VE to help us conceive and implement our VA/VE activities. The warranty costs of our vendors are computed as the cost of components incurred by our vendors to service warranty claims arising from defects in components supplied by them. We have been able to reduce the warranty costs of our vendors per vehicle, which is computed as the ratio of (1) the aggregate annual warranty costs of our vendors to replace defective products, to (2) the numbers of vehicles sold in the fiscal year, by approximately 21% between fiscal 2002 and fiscal 2003.

Vendor Quality Control

Quality management systems such as ISO 9000/ QS 9000 form the basis for producing a quality product. To assist small and medium vendors in achieving ISO 9000 certification, in 1995 we adopted a cluster approach wherein we grouped vendors together, trained them in quality management and assisted them in obtaining ISO 9000 certification. This cluster approach was extended to helping vendors attain QS 9000 certification. As of March 31, 2003 approximately 114 vendors had obtained ISO 9001/2 certification, 122 vendors had obtained QS 9000 certification and 11 vendors had obtained TS 16949 certification. We conduct periodic vendor quality system audits in order to ensure that quality standards are sustained.

Imported components
We purchase our imported components mainly from Suzuki. During fiscal 2002 and 2003, we purchased components valued at Rs. 7,804 million and Rs. 7,902 million, respectively, from Suzuki.

Discounts and Royalty Waivers from Suzuki

On March 5, 2003, Suzuki agreed to the following:
q

For fiscal 2004 and fiscal 2005, Suzuki will provide a 10% discount on knocked down components imported by us, except for components imported for the Alto built for export. Thereafter, the discounts will be determined subject to market conditions in India. With respect to the Alto built for exports, discounts are already applicable from February 2003 until January 2004. The value of our purchases of components from Suzuki in fiscal 2002 and 2003 was Rs. 7,804 million and Rs. 7,902 million, respectively. Suzuki will no longer charge royalty for the Maruti 800, Omni, Gypsy, Esteem and Zen models. This arrangement is subject to revision in the event of the introduction of new technology or upgradation in specifications due to changes in market conditions or requirements of new laws or norms. The total royalty expenses on these models paid to Suzuki in fiscal 2002 were Rs. 779.5 million. 45

Localisation
We strive to increase the proportion of locally-sourced components and raw materials in our products, a concept we refer to as localisation. As a measure of the level of localisation, we compute the local value as the difference between the total notional value of the imported set of component for a model and the actual value of imports for that model in a period. Localisation is then computed in terms of the local value expressed as a percentage of the total notional value of the imported set of components for a model. We increase the levels of localisation in our existing models and our new models over time by working closely with our vendors in India to develop their capacity to manufacture and supply components that match our quality and technical requirements at costs lower than the cost of imported components. It is our strategy to introduce new models with a minimum of 75% localisation level and increase the same to at least 90% within three years of introduction of the model. We aim to reduce our initial investment cost for new models through in-house development and localised sourcing of dies, welding jigs and other equipment, introduction of flexible welding lines that can be used for the production of multiple models, and in-house development of machine shop equipment. We also plan to source dies for new models and upgraded versions of existing models from sources outside India other than Japan, such as Taiwan, which are typically less expensive sources than Japan. In addition, we have recently entered into a joint venture with Suzuki to establish an aluminium foundry. The foundry will manufacture components such as cylinder heads, cylinder blocks for aluminium engines and transmission cases. We believe that this venture will help us to increase our localisation levels and reduce costs.

Marketing
Marutis marketing objective is to continually offer the customer new products and services that:
q q

reduce the customers cost of ownership of our cars; and anticipate and address the customers needs and preferences in all aspects and stages of car ownership, to provide what we refer to as the 360-degree customer experience.

Our Products
We sell ten models with more than 50 variants in segments A, B, C, and utility vehicle segment of the Indian passenger car market. Of these, we manufacture nine models and import the Grand Vitara as a completely built unit from Suzuki in Japan. Our models and variants are designed to address the changing demands of the market and are periodically upgraded in technology, styling and features. To take advantage of the brand recognition associated with our products, we retain the brand name of the product through various stages of product upgrades over time. For example, the version of the Maruti 800 brand currently sold in the market is a significantly upgraded version, in terms of technology, design and styling, of the Maruti 800 launched in 1983. A segmentwise analysis of our brands is presented below: Segment Brand Ex-showroom price in Delhi of base model as of March 31, 2003 Engine Launch date capacity (cc) Sales volumes of the brand as a percentage of total industry sales volumes in the segment in fiscal 2003 74.2% 25.8% 20.1% 10.2% 8.2% 12.8% 0.8% 2.3% 2.8% N.A.

A A B B B C C

Maruti 800 Omni Zen Wagon R Alto Esteem Baleno

Rs. 184,121 (M800, Bharat Stage I) 796 Rs. 221, 040 (Omni E) Rs. 330,236 (LX Bharat Stage II) Rs. 323,065 (WagonR LX) Rs. 287, 213 (Alto LX) Rs. 465,865 (LX Bharat Stage II) Rs. 654,917 (Baleno Sedan) 796 993 1061 796/1061

December 1983 November 1984 May 1993 December 1999 September 2000

1298 (petrol) November 1994 1527 (diesel) 1590 December 1999 October 2001 December 1985 April 2003

C Versa Utility Vehicle Gypsy King

Rs. 399,876 (DX) 1298 Rs. 452,538 (Gypsy King Soft Top) 1298 2700

Utility Vehicle Grand Vitara Rs. 15,96,000 (XL7/Standard) 46

Exports
In fiscal 2001, 2002 and 2003, exports comprised 3.1%, 2.6% and 7.4%, respectively, of our total sales. We export our products, primarily the Alto and Maruti 800 models, to more than 70 countries, including countries in Western Europe such as the Netherlands, Italy, Germany, the United Kingdom and Switzerland, and to Bangladesh, Nepal, Sri Lanka, Chile and Egypt.

Sales network
Our dealers. As of March 31, 2003, we offered our products to the customer through a network of 178 authorized dealers with 243 sales outlets across 161 cities. We believe that this is the largest network of dealers amongst car manufacturers in India. As of March 31, 2003, our dealers employed more than 3,500 sales executives. We are linked to our sales network through our secure extranet-based information network. The sales of our spares, accessories and automobile-related services such as insurance and finance serve as additional sources of revenue for our dealers. We believe that the availability of these related products and services at sales outlets also helps to attract customers to the outlets and promotes sales of our cars. Agreements with our dealers. We generally appoint a limited number of dealers for a certain geographical territory. Our dealers provide services to customers such as pre-delivery inspection of vehicles, sales of cars, after sales service, supply of spare parts and other services that promote sales of cars within the territory for which they are appointed. We have the right to sell our products and services through other dealers or intermediaries in any territory, whether or not one of our dealers is already established in that territory. Our dealers are required to maintain their outlets in accordance with our specifications and employ well-trained sales staff. Our agreements with our dealers usually have terms of five years. These agreements are generally renewable for successive terms of three years, by mutual agreement. The agreements typically permit termination by either the dealer or us with six months prior notice. Enhancing dealer performance. Our central office in Delhi, our regional offices and our area offices monitor and assist our dealer network. As of March 31, 2003, we had nine regional offices, five area offices and 187 sales and marketing personnel. We follow the performance of our dealers and frequently suggest improvements. In order to assist our dealers in enhancing their performance and capabilities, we have introduced the concept of the Balanced Scorecard. Using this tool, we seek to measure the performance of a dealership in several areas of operations, including sales, service, spares and accessories, financial management and management systems. We reward dealers who perform well on the Balanced Scorecard with a cash payment at the end of the fiscal year. We believe that the Balanced Scorecard serves as an effective incentive for dealers to enhance their performance. Dealer training. We have established standard operating procedures, showroom ambience and service quality standards for dealerships. We provide periodic training through our training centres located at our manufacturing facility and at Chennai, Kolkata, Guwahati and Pune. We trained more than 2,600 and 3,400 dealer sales personnel in fiscal 2002 and fiscal 2003, respectively. Our subsidiary, True Value Solutions Ltd., provides value-added services, such as manpower recruitment and training, to our dealers. For fiscal 2002, our top dealer and our top 10 dealers accounted for 3.4% and 18.4%, respectively, in terms of value of products sold to such dealer, of our domestic sales of vehicles.

After-sales Service Network

As of March 31, 2003, there were 342 Maruti dealer workshops and 1,545 Maruti Authorised Service Stations, or MASSs, covering 898 cities in India. In addition, 24-hour mobile service is offered in 38 cities under the brand Maruti On-road Service. We intend to extend this service to an additional 25 cities over the next three years. As a benchmark for dealers with respect to service quality and infrastructure facilities, we have launched service stations under the brand Maruti Service Masters, or MSMs, in three locations in India. As of March 31, 2003, we had service stations on 30 highways in India under the brand Express Service Stations. To promote sales of our spare parts and the availability of high quality, reliable spare parts for our products, we sell spares under the brand name Maruti Genuine Parts, or MGP These are distributed through our dealer network and through . authorised sellers of our spare parts, to whom we refer as stockists. Many of our MASSs are at remote locations where we do not have dealers. In order to increase the penetration, in terms of sales volumes, of our products in these remote areas, we are exploring opportunities to integrate some of the MASSs into the sales process in order to increase sales of our cars and related products and services such as spares and accessories, insurance and financing. We have trained more than 6,700 and 9,600 service technicians in fiscal 2002 and fiscal 2003, respectively. 47

Genuine Accessories
We have also entered the business of marketing car accessories under the brand name Maruti Genuine Accessories, or MGA, through our dealership network. We seek to provide customers with the opportunity to customize their vehicles with accessories such as music systems, security systems, car-care products and utility products.

Warranty and Extended Warranty Program

We offer a two-year warranty on all our vehicles at the time of sale. Our dealers are required to address any claim made by a customer, in accordance with practices and procedures prescribed by us, under the provisions of the warranty in force at that time. The dealers subsequently claim the warranty cost from us. We analyse warranty claims from dealers and either claim the cost from vendors, in the case of defective components, or bear the cost ourselves, in the case of manufacturing defects. We offer an extended paid-warranty program marketed under the brand, Forever Yours for the third and fourth year after purchase. We have entered into arrangements with insurance companies to cover the costs of warranties offered under this program. The extended warranty program is intended to maintain the dealers contact with the customer and increase the revenue generated from sale of spares, accessories and automobile-related services. An effort is made during the period of the extended warranty to encourage the customer to exchange his existing Maruti car for a new Maruti car, or upgrade to a new Maruti car.

New business initiatives

As the largest manufacturer and leader in the small car segment, we continually seek new ways to utilize our vast car parc, range of products and extensive sales and service network to expand the size of the passenger car market in India. We have recently launched new initiatives to develop the market for automobile insurance, automobile finance, leasing and fleet management, and pre-owned cars. We aim to provide customers with a one-stop shop for automobiles and automobilerelated products and services, and build on our wide customer base and extensive sales and service network to make available to our customers a wide range of Maruti-branded services at different stages of ownership, which we refer to as the 360 degree customer experience. In fiscal 2003, our new business initiatives other than those conducted by our subsidiaries, Maruti Insurance Brokers Ltd and Maruti Insurance Distribution Services Ltd, generated net revenue of Rs. 60 million. In fiscal 2003, Maruti Insurance Brokers Ltd and Maruti Insurance Distribution Services Ltd generated net revenue of Rs. 172.7 million and Rs.43.4 million, respectively.

Automobile finance
One of the key factors in the buying decision of a customer in the passenger car market in India is the availability of finance. Automobile finance has in the past been made available through direct selling agents of independent finance companies. Since January 2002, we have made available, through our dealers, finance products of eight select finance companies, including those of two of our group companies, Maruti Countrywide Auto Financial Services Ltd., a joint venture among Maruti, Housing Development Finance Company Ltd. and GE Capital Services India Ltd., and Citicorp Maruti Finance Ltd, a joint venture between Maruti and Citicorp Overseas Investment Corporation Ltd, under the brand Maruti Finance. We aggregate the finance products provided by these companies to offer uniform financing conditions to the customer at Maruti dealerships. This increases the transparency of the financing transactions, which we believe contributes to customer satisfaction and confidence in our brand. We earn a sourcing fee from the finance company while the credit evaluation of the customer and the loan disbursement to the customer is done by the finance companies.

Alliance with the State Bank of India (SBI)

In February 2003, we entered into an agreement with SBI, the largest bank in India with over 9,000 branches and a vast customer base across India. The arrangement is to be branded SBI-MUL Finance. Under our agreement with SBI, we have nominated SBI as our preferred financier for customers who purchase our cars. SBI has agreed to provide automobile finance to Marutis customers. In addition, SBI has agreed to work in close coordination with our dealers and us in order to develop finance packages, conduct promotional activities and generate car loan business. The credit evaluation of the customer and the loan disbursement to the customer is at the discretion of SBI. We believe the competitive rates offered for the finance products under this alliance and access to SBIs extensive branch network will make our passenger cars affordable to a greater number of customers and expand the size of the market.

Insurance intermediary
Automobile insurance is mandatory in India. It is purchased upon the purchase of a vehicle and is subject to annual renewal. Two of our subsidiaries, Maruti Insurance Brokers Ltd and Maruti Insurance Distribution Services Ltd, have entered into 48

alliances with insurance companies. Since May 2002, these companies have been acting as intermediaries offering products of these alliance partners under the brand name Maruti Insurance. As dealers claim payments on insurance claims directly from the alliance partners, the customer is provided with the benefit of a cashless transaction in respect of the repairs or spares that are covered by the insurance policy. Additionally, due to the availability of this benefit, the customer is encouraged to use our dealers and purchase MGP thus adding to our revenue from sale of spare parts and to revenues of dealers. We earn , sourcing revenues from insurance companies for each customer using Maruti Insurance.

Leasing and Fleet Management

Our leasing and fleet management services offered to corporate clients are marketed under the Maruti N2N brand. While the functions of brand management, business development, maintenance, risk-underwriting and fleet management operations are managed by us, we use the services of four key alliance partners in order to run this business: the financier, the dealer, the insurer and the car rental agency. The financier conducts initial credit assessment of the clients, provides funding, takes residual value risk, is responsible for collections and engages in lease product development. Under standard agreements entered into by us, the primary responsibility for maintenance and value-added services, valet services and car replacement lies with us. We delegate this responsibility to our alliance partners. The dealer maintains the cars and provides other valueadded services such as valets and emergency assistance. The insurer provides vehicle risk underwriting. The car rental agency provides replacement cars if and when necessary. We earn fleet management rental fees from the client and a business development fee from the financier.

Pre-owned cars business

Pre-owned cars, being less expensive, address demand among two-wheeler vehicle owners aspiring to own a car and among existing car owners to upgrade their cars. The pre-owned car market in India was estimated to be between 1.1 and 1.3 times the size of the market for new cars and utility vehicles in fiscal 2002. Until recently, the business of selling pre-owned cars was handled predominantly by the unorganized sector. This led to a lack of reliability and transparency in transactions involving pre-owned cars. With our wide range of products, we are well positioned to offer customers the opportunity to upgrade their cars. Our pre-owned cars business, launched in October 2001 is conducted under the brand name Maruti True Value. We believe that our pre-owned car business is a significant marketing tool to retain customers and reduce their cost of ownership, and acquire new customers. This can be achieved by creating an organized market for the resale of the pre-owned cars, where the value of the pre-owned car is assessed in a more transparent manner and the car is certified by Maruti. While the central intermediary to the transaction is a dealer, we play an advisory role in conducting technical evaluation, estimating the refurbishment cost and providing certification and warranty to the buyer of the pre-owned car. The warranty given to the buyer of the pre-owned car is covered by an arrangement with insurance companies. Prior to certification, every car passes through a 120-point check, which includes verification of the sellers credentials. The refurbishment of pre-owned cars which are under Maruti True Value improves the utilization rates of dealer workshops and other Maruti True Value outlets and also increase the sales of spares. We receive from dealers a proportion of their revenue, net of cost of refurbishment of the pre-owned car. As on March 31, 2003, Maruti True Value operated from 50 dealer-owned outlets spread over 34 cities. An additional 30 dealer-owned outlets are at various stages of launch.

Awards and Recognition

We have received several awards and recognition in various surveys and studies conducted on the automobile industry, including the following: Business World Survey of Most Respected Companies in India, 2003. We were ranked 12th amongst the Most Respected Companies in India by Business World, one of Indias premier business magazines. We were the only car manufacturer to be ranked among the top 15 companies. J.D.Power India Customer Satisfaction Index Study. This annual study, which began in 1997, assesses customer satisfaction with product quality and dealer service. The factors used for measurement are problems experienced, quality of service advisor, service performance, service timing and facility appearance. In 2000, 2001 and 2002, J.D.Power Asia Pacific, Inc. ranked us No. 1 in the India Customer Satisfaction Index. NFO Automotive Total Customer Satisfaction Survey, 2002. The 2002 India Total Customer Satisfaction Study is the first syndicated study introduced by NFO Automotive in India, an organization that specializes in automotive research. The study is based on responses from new car purchasers during the first three years of ownership. The analysis focused on the performance of over 30 new car models in the Indian passenger car market at the vehicle segment level to provide comparison 49

amongst similar groups of vehicles in the key areas of sales satisfaction, product quality, vehicle performance and design, after-sales service, brand image and cost-of-ownership. Based on these indicators, the Maruti 800 was ranked No. 1 in the Economy segment, the Maruti Zen (petrol version) was ranked No. 1 in the Premium Compact segment and the Maruti Esteem was ranked No. 1 in the Entry Mid-size segment. Awards for Export Excellence, 2002. We received the regional trophy for the Top Exporter in the category of large scale manufacturing units from the Engineering Export Council of India in 2002. CII-EXIM Business Excellence Award, 1998. We received the CII-EXIM Business Excellence Award for 1998 for excellence in manufacturing operations, sound management of supply chain, high degree of employee involvement in continuous improvement activities, and strong visible involvement of senior management in promoting total quality management across the organization.

Competition
We are primarily focused on the A and B segments, which are particularly price-sensitive. In fiscal 2003, the A segment constituted 32.3% of the overall Indian passenger car market. In this segment, we offer the Maruti 800 and the Omni. Since fiscal 2000, we have been the sole manufacturer in the entry-level A segment. In fiscal 2003, the B segment constituted 52.2% of the Indian car market. In this segment, we compete with Hyundai (Santro), Telco (Indica), Fiat (Palio and Uno), General Motors (Corsa Sail) and Hindustan Motors (Ambassador). There are approximately nine models offered in this segment, of which we offer three, the Zen, the Alto and the WagonR. The segments for cars priced above Rs.500,000, which together constituted approximately 16% of the Indian passenger car market in fiscal 2003, are significantly more fragmented than the small car segment, with several players competing for what has been a relatively small share of the passenger car market in terms of sales volumes. In addition to Maruti, with the Esteem, Versa and Baleno models, the C segment includes Hyundai (Accent), Ford (Ikon), Honda (City), General Motors (Astra and Corsa), Hindustan Motors (Contessa/Lancer), Telco (Indigo) and Fiat (Siena). In April 2003, we launched the Grand Vitara, a utility vehicle imported from Suzuki in Japan. The Grand Vitara competes primarily with a variety of imported and domestically manufactured utility vehicles such as the Mitsubishi (Pajero), the Chevrolet (Forrester) and Daimler-Chrysler (Mercedes M-Class). Since most of our cars run on petrol, we also compete with manufacturers of cars with diesel engines. We exported passenger cars comprising 3.1%, 2.6% and 7.4%, respectively, of our total sales to various regions of the world, including Western Europe, in the fiscal 2001, 2002 and 2003, respectively. The global passenger car industry has been shaped by mergers and alliances that have led to a consolidation of resources and market share. Globally, the passenger car industry has been affected by the economic slowdown and depressed demand. The automobile industry in our export markets is witnessing weak pricing, intensified competition and excess capacities. We continue to face competition in our export markets. Competition in the Indian passenger car industry is based primarily on price, product performance, brand image, new model launches, distribution network and the availability of value-added after sales services and after sales support. Our ability to compete effectively will depend in part on our ability to respond to these competitive factors.

Regulations and Policies Fiscal Regulation

Changes in excise duties, sales tax and customs duties, and other fiscal levies, affect the costs of manufacturers including ourselves, are reflected in the price of the car to the customer and therefore can stimulate or adversely affect demand for cars in the country. The GoI levies customs duties at the basic rate of 60% on import of CBUs and 25% on the import of CKDs. The high rates of customs duties imposed by the GoI on components imported by us directly affects the prices of cars sold by us in India. Customs duties on components, CKDs and SKDs are expected to fall as India aligns its tariff structure to its obligations as a member of the World Trade Organization. The effective customs duty paid is higher. We receive a duty drawback on exports, which enables us to recover import duties levied on imports used to manufacture products for export. The rate of excise duty levied by the GoI on the manufacture of passenger cars has been falling since fiscal 2001. In March 2001, the rate of excise duty on passenger cars was reduced from 40% to 32%. The union budget of March 2003 further reduced the rate of excise duty to 24% and levied a national calamity contingency duty at the rate of 1%. Reduction in the rate of excise duty reduces the price of the car to the customer and thereby tends to stimulate demand for passenger cars. 50

We are also subject to central and uniform state sales tax levies. We have been granted a sales tax benefit under the Haryana Sales Tax law on account of the expansion of our plant for a period of 14 years with effect from August 2001.

Environmental and Safety Regulation

In the last few years, the GoI has introduced several stringent regulations regarding emissions levels, fuel efficiency, noise, safety of cars and levels of pollutants generated by the plants that produce cars. In April 2000, the GoI imposed the Bharat Stage II emission norms (equivalent to Euro II). These norms currently apply to sales of passenger cars in Mumbai, New Delhi, Kolkata and Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra and are expected to be applicable to the whole of India by April 1, 2005. Bharat Stage III emission norms (equivalent to Euro III) are expected to be applicable to the cities of New Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra by April 1, 2005. Euro III equivalent norms are expected to be applicable nationwide by April 2010. The GoI has also introduced noise control norms for passenger cars, which came into effect from January 1, 2003. The GoI has also indicated that more safety and environmental norms will be made applicable to passenger cars in the future, to align them with international requirements. We have, from time to time, taken suitable steps to ensure that all our cars meet the requirements of GoI regulations and policies relating to the automobile industry. We have also commenced production of vehicles running on alternate fuels such as CNG and LPG for our Omni model. We supply Euro III compliant cars to overseas markets and plan to introduce Bharat Stage III compliant cars in India, well in time to meet the forthcoming emission norms. The GoI, however, may impose stricter regulations or increase its enforcement activities, which could require us to spend additional amounts on environmental compliance. For more information on regulations and policies applicable to us, see Regulations and Policies on page 125 of this Red Herring Prospectus.

Employees
As of March 31, 2003, we had 4,590 employees, including 614 engineers, 84 MBA graduates and 24 chartered accountants. In a survey conducted jointly by Business Today and Hewitt Associates in 2002, we were ranked twentieth among the best employers in India.

Training
We seek to align the objectives of our employee training programs with our business objectives. We provide ongoing training to our employees at our Company as well as at Suzukis facilities in Japan. Training provided by Suzuki in Japan includes:
q

training of managerial, executive and supervisory employees provided in collaboration with the Japanese government to enhance managerial skills and technical skills; training of employees across divisions of Maruti to transfer Japanese best practices for their functions; training in connection with the development of new products; and deputation of our engineers to Suzuki for a period of two years to gain experience in design and development activities.

q q q

As of March 31, 2003, more than 1,900 of our employees had been trained at the facilities of Suzuki in Japan.

Management Reviews
Our management committee, which comprises full-time directors and divisional heads, carries out comprehensive reviews of our different divisions every month. They review the progress made towards the goals for each division, analyse the deficiencies and take corrective action. They receive inputs for these reviews from internal audits that are carried out by our quality systems division. Our management committee also conducts weekly performance reviews that focus on product performance, customer feedback, product conformity and status of corrective and preventive actions undertaken.

Trade unions
The Maruti Udyog Employees Union, or MUEU, undertook a strike from October 12, 2000 to January 8, 2001, arising from a dispute between management and MUEU regarding the terms of a new performance-based incentive scheme proposed by management. During the period of the strike, many workers signed a good conduct undertaking and resumed their duties. MUEU signed the good conduct undertaking on January 8, 2001 and accepted the incentive scheme. Our production volumes 51

were not significantly affected during the strike in fiscal 2001. MUEU was derecognised in February 2002 by the Registrar of Trade Unions of Haryana, following a complaint about mismanagement of funds. Subsequently, we derecognised the MUEU on February 22, 2002. Our employees are currently represented by another trade union, the MUKU. At March 31, 2003, 2,999 of our employees were represented by the MUKU. We are involved in negotiations with the MUKU for the renewal of a wage settlement agreement, which expired in March 2000. In the previous wage settlement agreement, entered into in February 1998, we had agreed to provide retrospective wages from April 1996 until the date of the agreement for certain categories of employees, and other benefits such as transport subsidies and increases in the amounts of permissible advances. We had also agreed to set up a pension scheme with more favourable terms for employees than the statutorily required employee provident fund. We believe that our relations with our employees are good. However, future labour unrest at our facility or at the facilities of our vendors could adversely affect our manufacturing operations and our operating results. For further information, see Outstanding Litigation and Material Developments on page 180 of this Red Herring Prospectus.

The Voluntary Retirement Scheme

We offered a Voluntary Retirement Scheme, or the VRS, which was open to our regular employees from September 24, 2001 to October 23, 2001. The eligibility parameters of the VRS varied with the category of employee. 1,050 of our employees participated in the VRS. Some claims related to the VRS were filed with the LCO, Gurgaon. For further information, see Outstanding Litigations and Material developments on page 180 of this Red Herring Prospectus.

MUL-EMBF
The MUL-EMBF has been registered as a trust in 1990, to hold shares in beneficial interest for employees of our Company. The trust is independently overseen by a group of trustees comprising ten trustees. The trust issues beneficiary certificates to employees who hold such beneficial interest in the shares of our Company throughout the tenure of their employment. This beneficial interest is non-transferable and has several restrictive provisions on entry and exit. In April 2003, the trust transferred its entire shareholding in our Company to the Selling Shareholder. For further details, see Capital Structure.

Information Technology Current network

We are connected with our business associates, vendors and dealers through an extranet network. This extranet network links our facility and our offices to our dealers, vendors and Suzuki. For example, our network has online information regarding order status and delivery instructions to vendors. This has helped in reducing both inventory levels and lead times required for the supply of various components and sub-assemblies. Our extranet network permits business partners to access critical business information and assists in demand and factory planning, delivery instruction system and e-procurement. We also have an intranet-based system in order to increase internal efficiencies. In addition, we are connected to our overseas distributors through Suzukis extranet facility, which enables speedy invoicing, order collection and other product related information exchange.

Customer Relationship Management

We have designed a comprehensive database of customers, the Customer Relationship Management, which provides centralized access to dealers and MASSs and enables more efficient and integrated management of sales and service network.

Research and Development

In fiscal 2003, our total capital expenditure on research and development was Rs.63 million. We have allocated Rs.320 million for capital expenditure on research and development in fiscal 2004. Some areas in which we carry out research and development are localisation and development of components, cost reduction measures such as VA/VE, development of alternate fuel (CNG and LPG) vehicles, performance-benchmarking to certain parameters such as noise, ride handling and braking and development of power-steerings for certain models. We regularly upgrade our models and also launch variants of our models by adding features developed through research and development. We have recently acquired the capability to conduct minor and major facelifts to our models, and upgrade our products in terms of technology or features. As part of Suzukis plans to make Maruti its research and development center for cars in Asia (outside Japan), we expect to have full model change capability by fiscal 2008.

52

Registered Trademarks
We have several registered trademarks in India and certain foreign jurisdictions.

Infrastructure Factory land

The GoI acquired the entire assets of Maruti Limited through the Acquisition Act. According to the Acquisition Act, with effect from October 13, 1980, the GoI became the owner of all the assets of Maruti Limited. The GoI transferred all the assets of Maruti Limited, including the land on which our manufacturing facilities are built, to us. For further information, see Our History on page 55 of this Red Herring Prospectus.

Property
We have a corporate office and several regional offices in New Delhi (corporate and regional-North 1), Mumbai (regionalWest 1), Lucknow (regional-Central), Guwahati (regional-North East), Bangalore (regional-South 1), Chandigarh (regional-North 2), Kolkata (regional-East), Chennai (regional-South 1), and Ahmedabad (regional West 2). We have entered into either lease agreements or agreements for purchase for these properties. These agreements for purchase and lease agreements contain standard terms and conditions. We have constructed buildings covering an area of 3,60,313 square meters at our manufacturing facility. We have not taken any approval from the Director, Town and Country Planning, Government of Haryana for constructing these buildings. The District Town Planner, Enforcement, Gurgaon, or DTP has vide Memo No. 3560 dated September 1, 1998 issued a show cause , notice under sub section (2) of Section 12 of the Punjab Schedule and Controlled Areas (Restriction of Unregulated Developments) Act, 1963. The DTP had sought the sanctioned building plans to be submitted to it by September 15, 1998. We filed certain drawings and plans vide letter dated September 14, 1998. These were not in accordance with the specifications required by the DTP Another show cause notice dated September 24, 1998 was issued by the DTP seeking filing of the plans . as per specifications. We sought an extension of time from the DTP vide letter dated October 31, 1998 for filing the plans. The DTP rejected the application and vide letter dated December 28, 1998, sought submission of the plans and other relevant documents within 15 days of the date of the letter. We submitted these plans as per the specification on December 29, 1999 to the office of the Estate Officer, Haryana Urban Development Authority. We estimate that a compounding fee at Rs 10 per square feet may be levied. We have not yet received any communication from the DTP or any other authority on the issue. The details of the properties are as set forth below: S. No. 1 Location Gurgaon Address Palam-Gurgaon Road, Gurgaon 122015, Haryana Area Lease/Freehold Manufacturing Facility Total area Freehold 12,02,256 square metres (297 acres) Built Up Area 360,313 square metres Regional Offices 1 Mumbai 602, Madhava, Bandra Kurla Complex, Bandra (E) JNPT, Nhava Sheva B1 Pickup Bhawan, Vibhutikhand 204, 2nd Floor, Embassy Classic, 11 Vittal Malaya Road, Bangalore Room No. 403 Orion Towers 39-40, S.C.O., 8-C Basement floor +Ground floor + 7th Floor, Capital Tower, 180, Nungambakkam L&T Chambers, 16 Camac Street 4285 sq. ft. Freehold

2 3 4 5 6

Lucknow Bangalore Guwahati Chandigarh Chennai

4650 sq. ft. 4148.5 sq. ft. 4341.8 sq. ft. 1150 sq. ft. 11120 sq. ft. 8249 sq. ft.

Freehold Freehold Freehold (Lease hold 99 years lease) Freehold

Kolkata

5585 sq. ft.

Freehold

53

S. No. 1

Location Chennai

Address 101 & 102, Mount Road, Guindy

Area 1300 Sq.ft. on 1st floor 418 Sq.ft. for shed Parking space for 6 vehicles 230 Sq.ft on 1st floor 100 Sq.ft. for shed 2045 Sq.ft on 2nd floor 702 Sq.ft. open space 1740 Sq.ft. Parking space for 6 vehicles

Lease/Freehold Lease

Training Centers

2 3 4

Guwahati Pune Kolkata

Bimal Auto, Adabari F-11-69, Pimpri, Chinchwad, Indl. Area Pimpri 138, B, Beliagatcha Road C/o Jallan Distributor

Lease Lease

Lease

54

OUR HISTORY
Prior to our incorporation, GoI had, under the Acquisition Act, acquired the entire undertaking of Maruti Limited. We were incorporated on February 24, 1981 with the main object of acquiring and taking over from GoI the undertakings of Maruti Limited. All the land and property of Maruti Ltds factory had been acquired by the Central Government under the Maruti Ltd (Acquisition and Transfer of Undertakings) Act, 1980 The Acquisition Act. Under The Acquisition Act, the Central Government has directed vide notification date April 24, 1981, that the undertakings of Maruti Ltd and the right, title and interest shall vest in the company known as Maruti Udyog Ltd. on and from April 23, 1981. Our main objects as set forth in our Memorandum of Association are:
q

To acquire and take over from GoI the right, title, and interest in relation to the undertakings of Maruti Ltd. as provided for in the appropriate enactment of GoI together with the liabilities of GoI so far as they are related to the Undertakings of the said Company. To carry on the business of manufacturers of, and dealers in, automobiles, motorcars, lorries, buses, vans, motorcycles, cycle-cars, motor, scooters, carriages, amphibious vehicles, and vehicles suitable for propulsion on land, sea, or in the air or in any combination thereof and vehicles of all descriptions (all hereinafter comprised in the term motor and other things), whether propelled or assisted by means of petrol, diesel, spirit, steam, gas, electrical, animal, or other power, and of internal combustion and other engines, chassis-bodies and other components, parts and accessories and all machinery, implements, utensils, appliances, apparatus, lubricants, cements, solutions enamels and all things capable of being used for, in, or in connection with manufacture, maintenance, and working of motors and other things or in the construction of any track or surface adapted for the use thereof. To carry on the business of garage keepers and suppliers of and dealers in petrol, electricity and other motive power for motors and other things. To carry on in the business of iron founders, mechanical engineers, and manufacturers of machinery, tool makers, brass founders, metal workers, boiler makers, mill rights, machinists, iron and steel converters, smiths, wood workers, builders, electroplaters, chromium platers, lacquerers, enamellers, painters, metallurgists, electrical engineers, and printers and to carry on any branch of manufacturing and engineering business.

Our activities are carried out and in the past have been carried out in accordance with the objects as specified in our Memorandum of Association.

Changes in Memorandum of Association

Since our incorporation, the following changes have been made to our Memorandum of Association: Date of amendment February 4, 1987 Resolution passed in EGM Amendment in the Objects incidental or ancillary to the attainment of the Main Objects The following clause was added: To promote and undertake the formation of any institution or company or companies for the purpose of acquiring all or any of the property rights and liabilities of this company or for any other purpose which may seem, directly or indirectly, calculated to benefit this company or form any subsidiary company or companies. The following clause was added: The authorised capital of the Company is Rs. 155,00,00,000 (RUPEES ONE HUNDRED FIFTY FIVE CRORES ONLY) divided into 155,00,000 (ONE HUNDRED FIFTY FIVE LAKHS ONLY) equity shares of Rs.100 (ONE HUNDRED ONLY) each. Sub division of face value of equity shares from Rs. 100 per equity share to Rs. 5 per equity share.

May 15, 2002 Special Resolution passed in EGM

March 25, 2003 Special Resolution

The details of the capital raised are given in the section Capital Structure on page 22 of this Red Herring Prospectus.

55

Key events
Year 1981 1982 1983 1984 1984 1985 1986 1987 1988 1990 1991 1992 1993 1994 1994 1995 1995 1996 1996 1997 1998 1998 1999 1999 1999 1999 1999 2000 2000 2000 2001 2001 2001 2001-02 2002 2002 2002 2002 2003 2003 Key Events, Milestones, and Achievements Incorporated as Maruti Udyog Limited JVA and License Agreement executed between Suzuki and GoI, Suzuki acquired 26% stake in Maruti Started production under JVA; Maruti launches 796 cc hatchback Maruti 800 Installed capacity reached 40,000 units Launched Omni Launched Gypsy Produced 100,000 vehicles since commencement of production Exported first lot of 500 cars to Hungary Reached an installed capacity of 100,000 units Launched 3 box car Maruti 1000 Reached cumulative indigenisation of 65% for all vehicles produced Suzuki increased its stake in Maruti to 50% Launched Zen Launched Esteem Produced the 1 millionth vehicle since the commencement of production Plant 2 became operational, installed capacity increased to 200,000 units Received ISO 9002 certification Awarded star-trading house status by Ministry of Commerce Launched 24-hour emergency on-road vehicle service started in 21 cities across India Produced the 2 millionth vehicle since the commencement of production CII-EXIM Business Excellence Award Launched website as part of CRM initiatives Plant 3 and new press, paint and assembly shops became operational and installed capacity to 350,000 units Launched Maruti Service Masters (MSM) as model workshop Launched Baleno and WagonR Awarded Export Excellence Award for our export performance; awarded Samman Patras for excise contribution Received ISO 14001 certification for environmental management Rated No. 1 in JD Power Asia Pacifics 2000 India Customer Satisfaction Index study Launched Alto and Altura Produced the 3 millionth vehicle since the commencement of production Rated No. 1 in JD Power Asia Pacifics 2001 India Customer Satisfaction Index study Awarded ISO 9001:2000 certification for quality standards and procedures Launched Versa Launched new businesses for the resale of used cars (Maruti True Value), for car financing (Maruti Finance) and for corporate lease & fleet management (N2N) Revised JVA between GoI and Suzuki GoI to divest stake in Maruti in two phases: i) rights issue and ii) public offering Maruti rights issue, GoI renounced its right to subscribe in favour of Suzuki; Suzuki stake increased to 54.21%, GoI stake reduced to 45.55% Launched insurance intermediary (Maruti Insurance) Rated No. 1 in JD Power Asia Pacifics 2002 India Customer Satisfaction Index study; lead in multiple categories in NFO Automotives 2002 India Total Customer Satisfaction survey Launched Grand Vitara Produced the 4 millionth vehicle since the commencement of production

56

SELECTED UNCONSOLIDATED FINANCIAL DATA

The following selected unconsolidated financial data have been prepared in accordance with Indian GAAP ,the Companies Act and the SEBI Guidelines and restated as described in the Auditors Report of Price Waterhouse dated March 25, 2003 in the section entitled Unconsolidated Financial Data. You should read these financial data in conjunction with our audited unconsolidated financial statements for each of fiscal 1999, 2000, 2001, 2002 and 2003 including the notes thereto and the reports thereon, which appear elsewhere in this Red Herring Prospectus, and Managements Discussion and analysis of financial condition and results of operations. Indian GAAP differs in certain significant respects from US GAAP For more . information on these differences, see Summary of Significant Differences Between Indian GAAP and US GAAP included elsewhere in this Red Herring Prospectus. Our audited consolidated financial statements consolidating (1) the results of operations and financial condition of our subsidiaries for fiscal 2002 and 2003, and (2) the results of operations and financial condition of our subsidiaries, our joint ventures and our associates for fiscal 2003, are included elsewhere in this Red Herring Prospectus under Consolidated Financial Statements as per AS 21 and Consolidated Financial Statements as per AS 21, AS 23 and AS 27, respectively.

57

Summary of Profit and Loss Account, as Restated

(Rs. in Million) Financial Year ended March 31, 2003 Income/ Revenue Sales: Of Products manufactured by the Company Of Products traded in by the Company Other Income/ Revenue Total Expenditure Consumption of Raw Materials & Components Cost of Spares/ Dies & moulds sold Consumption of Stores Excise Duty Employees Remuneration & Benefits Manufacturing/ Administrative and other expenses Selling & Distribution expenses Financial expenses Provision for Contingencies Depreciation Deferred Revenue Expenditure charged off Less: Vehicles for own use (Accretion)/ Decretion to Work-in-progress and Finished Goods Total Net profit before extraordinary items & prior period adjustments. Add: Net prior period adjustments Profit/(Loss) before tax Less: Taxation Current Less: Taxation Deferred Net Profit/(Loss) after tax as per audited statement of accounts (A) Adjustment on account of changes in accounting policies [Refer IV(ii)(1)] Impact of material adjustments and prior period items [Refer IV(ii)(1)] Total Adjustments (B) Adjusted Profit/ (Loss) (A+B) 52,677 3,227 415 18,101 2,136 3,284 6,078 558 371 3,221 386 55 90,399 1,020 91,419 2,841 (20) 2,821 351 1,006 1,464 (215) (215) 1,249 53,768 4,568 458 20,132 2,289 3,420 4,821 764 318 3,429 324 69 94,222 (1,419) 92,803 1,186 (3) 1,183 138 1,045 (362) 222 (140) 905 54,734 4,084 622 22,118 2,003 3,222 3,989 746 141 3,223 197 118 94,961 203 95,164 (2,663) (29) (2,692) 2 (2,694) 1,029 99 1,128 (1,566) 86,361 4,275 90,636 3,624 94,260 85,153 5,656 90,809 3,180 93,989 84,399 4,888 89,287 3,214 92,501 Financial Year ended March 31, 2002 Financial Year ended March 31, 2001

58

Summary Of Assets and Liabilities, As Restated

(Rs. in Million) March 31, 2003 March 31, 2002 March 31, 2001 A. Fixed assets: Gross Block Less: Accumulated Depreciation Net Block Add: Capital Work in Progress Total B. C. Investments: Current Assets, Loans & Advance: Inventories Sundry Debtors Cash & Bank balances Other Current Assets Loans & Advances Total D. Liabilities & Provisions: Current Liabilities & Provisions Deferred Tax (Asset)/Liability Secured Loans Unsecured Loans Total E. F . G. Net Worth (A+B+C-D) Net Worth Represented By Share Capital Reserves and Surplus Capital Reserve Share Premium Investment Allowance Reserve Debenture Redemption Reserve General Reserve Profit & Loss Account Total H. I. Miscellaneous Expenditure to the extent not written off Net Worth (F+G-H) 15 4,241 352 1,568 23,359 29,535 887 30,093 15 373 176 1,422 22,914 24,900 1,192 25,031 15 373 1,679 22,325 24,392 587 25,128 1,445 1,323 1,323 14,786 2,071 3,000 1,560 21,417 30,093 14,343 1,065 3,951 2,609 21,968 25,031 12,668 703 5,615 5,506 24,492 25,128 4,870 6,711 9,894 598 5,755 27,828 6,811 8,393 719 479 4,604 21,006 8,655 6,755 876 716 5,508 22,510 45,138 22,581 22,557 93 22,650 1,032 43,847 19,546 24,301 724 25,025 968 38,667 16,196 22,471 3,684 26,155 955

59

MANAGEMENTS 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 audited unconsolidated financial statements for each of the fiscal years ended March 31, 1999, 2000, 2001, 2002 and 2003, including the notes thereto and the reports thereon, which appear elsewhere in this Red Herring Prospectus. These financial statements are prepared in accordance with Indian GAAP the Companies Act and the SEBI Guidelines and restated as described in the , Auditors Report of Price Waterhouse dated May 6, 2003 in the section entitled Unconsolidated Financial Data. Indian GAAP differs in certain significant respects from US GAAP For more information on these differences, see Summary of Significant . Differences Between Indian GAAP and US GAAP on page 184 of this Red Herring Prospectus. The following discussion is based on our audited unconsolidated financial statements for fiscal 2001, 2002 and 2003, which have been prepared in accordance with Indian GAAP the Companies Act and the SEBI Guidelines and on information available , from other sources. Our fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the twelve-month period ended March 31 of that year. Unless otherwise indicated, all financial and statistical data relating to the automobile industry in the following discussion are derived from either the CRIS INFAC Annual Review of 2001 or 2002 or the CRIS INFAC Cars and Utility Vehicles Review and Outlook, dated May 2003. These data have been reclassified in certain respects for purposes of presentation. For more information, see Certain Conventions; Use of Market Data on page H of this Red Herring Prospectus.

Overview
We are the largest passenger car manufacturer in India. We sold 330,013 cars in India in fiscal 2003 with an overall market share of 54.6% in fiscal 2003. Our product range includes ten basic models with more than 50 variants. We are the leading manufacturer of cars in the A and B segments, which together constituted over 84% of sales in the Indian passenger car market in fiscal 2003. In fiscal 2003, we had a combined market share in the A and B segments of 62%. We also export certain models to various countries, which contributed 3.1%, 2.6% and 7.4%, respectively, of our total sales in fiscal 2001, 2002 and 2003.

Background
In fiscal 1984, we commenced operations and entered the Indian passenger car market with our Maruti 800 model, a fuelefficient car with modern styling and features relative to the other passenger car models being sold in the Indian passenger car market at the time. In the following decade, we periodically introduced new models to address different market segments and had five passenger car models and one utility vehicle by November 1994. Competition during this period was largely restricted to long-standing passenger car manufacturers in India such as Premier Automobiles and Hindustan Motors. In a market that was primarily driven by supply, our sales volumes grew at a CAGR of approximately 20% from fiscal 1985 to fiscal 1993. This was significantly higher than the 7% CAGR of the Indian passenger vehicle industry in the same period, according to Association of Indian Automobile Manufacturers. From fiscal 1986, we have been the largest manufacturer in the Indian passenger car industry. By fiscal 1991, our installed capacity was 130,000 vehicles per year. The competitive environment changed in 1993 when the GoI delicensed the passenger car industry and permitted foreign entities to set up automobile manufacturing facilities in India through joint ventures with Indian entities. This led to the entry of several global and domestic automobile manufacturers into the industry. Driven partly by the success of our Zen model launched in fiscal 1994, we continued to maintain our leadership position in the domestic market, and had a market share of approximately 74% in fiscal 1995. Between fiscal 1993 and fiscal 1997, demand for passenger cars increased at a CAGR of approximately 24%. The increase was primarily due to the availability of new models, high demand from the corporate sector and increased availability of affordable consumer financing. Given our leadership position in the market, we were well positioned to benefit from the expansion of the passenger car market by introducing new models and pro-actively increasing our manufacturing capacity to meet the growing demand. Our installed capacity increased with our second plant becoming operational in fiscal 1995 to 200,000 vehicles per year, and further increased to 250,000 in fiscal 1996 with capacity increases in each plant. However, during the period from 1995 to 1998, primarily due to a dispute between our shareholders, we were not able to introduce new models, expand our installed capacity, or prepare for the advent of new emission norms. During the period from November 1994 to December 1999, when we did not launch a new model, competitors launched and gained market share for their own models in the rapidly growing B segment. Immediately following the settlement of the dispute between our shareholders in June 1998, we initiated our capital-intensive strategy of new model introduction as well 60

as capacity expansion to address the growing market in a highly competitive environment. As a long-term strategy, we rapidly expanded our product portfolio, launching the WagonR and Baleno in December 1999, the Alto in September 2000 and the Versa in October 2001. Thus, in the short span of 22 months from December 1999, we launched four new models, in addition to certain variants. We expanded our installed capacity to 350,000 with our third plant becoming operational in March 1999. The expansion of capacity and launch of these models and variants required substantial capital investment over a relatively short period, resulting in relatively higher depreciation. In addition, the cost of components for the new models was relatively high due to low levels of localization early in the life of the models. Further, we incurred substantial additional cost in developing engines for many of our models in order to comply with the Bharat Stage I emission norms which first became applicable from June 1999 and Bharat Stage II emission norms which first became applicable in April 2000. In the shorter term, these factors adversely affected our profitability and contributed to our loss before tax in fiscal 2001. Towards the end of fiscal 2001 and thereafter, the positive effects of our long-term business strategy were visible through our improving financial performance. We believe that the major factors that contributed towards our return to profitability in fiscal 2002 were an increase in the localization levels in our new models, improvement in manufacturing and vendor productivity, our cost reduction measures, and implementation of the new performance-based incentive scheme for our employees in January 2001. We believe that our market share of 83.1% in fiscal 1998 declined to 57.6%, 58.6% and 54.6% in fiscal 2001, 2002 and 2003, respectively, primarily due to the gain of market share by three models launched by competitors in the rapidly growing B segment prior to our launch of new models in December 1999 and thereafter. However, with the introduction of our new models in the B segment, the Alto and Wagon R, our market share increased to 58.6% in fiscal 2002. Since fiscal 2001, while our overall market share has continued to fluctuate, our market share in segment B has grown from 31.3% in fiscal 2000 to 36.9%, 40.3% and 38.6% in fiscal 2001, 2002 and 2003, respectively.

Evaluation of Factors Affecting Our Operations

Several factors have affected our results of operations in the past and may continue to do so in the future, including:

Competition
As the number of international and domestic automobile manufacturers in the Indian passenger car market has increased in recent years with several new entrants, competition has been intense in the Indian passenger car market. While our product range includes products in each of segments A, B and C, we focus primarily on the A and B segments of the passenger car market in India, which together constituted more than 84% of sales volumes in the Indian passenger car market in fiscal 2003. The sales of the Maruti 800 and Omni, our A segment models, contribute a substantial portion of our revenue. In fiscal 2001, 2002 and 2003, sales of the Maruti 800 comprised 45.3%, 42.5% and 43.4%, respectively, of our domestic sales volumes. We are currently the only manufacturer that sells passenger cars in the A segment. In segment B, we compete primarily with Hyundai, Telco and Fiat. Sales of the Zen, Alto and WagonR, our models in the B segment, comprised 36.5% of our domestic sales volumes in fiscal 2003. Our market share in segment B was 36.9%, 40.3% and 38.6% in fiscal 2001, 2002 and 2003, respectively. Our sales volumes in the combined A and B segments comprised 95.1% of our domestic sales volumes in fiscal 2003. The segments for cars priced above Rs.500,000, which together constituted approximately 16% of the Indian passenger car market in fiscal 2003, are significantly more fragmented than the small car segment, with several players competing for what has been a relatively small share of the passenger car market in terms of sales volumes. Sales of the Esteem, Versa and Baleno, our models in the C segment, comprised 4% of our domestic sales volumes in fiscal 2003. Other players in segment C include Hyundai, Ford, Honda, General Motors, Hindustan Motors, Telco and Fiat. Our market share in segment C was 18.9%, 19.6% and 16% in fiscal 2001, 2002 and 2003, respectively. In the future, we may also face competition from other domestic and international manufacturers that enter into the A and B segments, including international manufacturers that have been successful in foreign markets for cars of a similar size but are yet to enter these segments in India. However, substantial investments are required in order to set up manufacturing facilities with the scale required to compete effectively in the Indian passenger car market, especially in the small car segment. We believe that this has contributed to the concentration of relatively few players in the small car segment in comparison with greater fragmentation in the C and D segments. Our manufacturing facility has an installed capacity of 350,000 vehicles per year. We have, in each of the five fiscal years ended March 31, 2003, produced in excess of our installed capacity. We believe that, with minimal capital expenditure, we would be able to produce more than 500,000 vehicles per year. While we had a capacity utilization of approximately 102% in fiscal 2002, the average capacity utilization among the major players in the Indian passenger car industry was approximately 58%. We had a capacity utilisation of approximately 103% in fiscal 2003.

61

We believe that our ability to expand our production volumes without significant additional capital expenditure and our relatively high levels of capacity utilization generate significant economies of scale and are a significant competitive strength in the A and B segments. In addition, our access to Suzuki technology, the range of models and variants in our product portfolio, our brand image and our extensive sales and service network are competitive strengths in the A and B segments. While our market share may fluctuate from year to year, we expect to maintain our leadership position in the small car segment in India. In order to compete effectively, we have incurred, and expect to continue to periodically incur, expenditure either in the development of new models or their variants, or in the upgradation of existing models and their variants. In addition, the cost of producing new models is initially high compared to existing models and generally declines over the life of the model. We expect that these factors will continue to affect our results of operations in the foreseeable future. Although we produce some cars that run on diesel, liquefied petroleum gas and compressed natural gas, most of the cars we produce run on petrol. Some of our competitors sell cars that run on diesel, which is currently less expensive than petrol in India, although the price differential between petrol and diesel in India has declined over time. The success of diesel-run cars in the Indian market will depend on a number of factors, including the suitability of diesel engines for cars in the small car segment, the costs incurred by manufacturers in developing the capability to produce cars that run on diesel, the differential between diesel prices in relation to the price of petrol in India, and the ability of diesel engine technology in India to comply with emission norms. We will continue to evaluate our strategy in respect of diesel-run cars. In addition, we face competition in our export markets. We do not expect that our export sales will grow significantly as a percentage of our total sales in the near future.

New Model Introductions

In the highly competitive environment of the Indian passenger car industry, it is important to periodically introduce new models that address customer demand in terms of their price, features and performance. Following the settlement in June 1998 of the dispute between our shareholders, we launched the WagonR (segment B) and Baleno (segment C) in December 1999, the Alto (segment B) in September 2000 and the Versa (segment C) in October 2001. Thus, in the short span of 22 months from December 1999, we launched four new models, in addition to certain variants. We expanded our installed capacity to 350,000 with our third plant becoming operational in March 1999. The expansion of our capacity and the launch of these models required substantial capital investment over a relatively short period, resulting in relatively high depreciation. In addition, the cost of components was relatively high due to low levels of localisation early in the life of the models. Further, the delay in the launch of our segment B models allowed competitors to launch and gain market share for their own models prior to the launch of our models. These factors adversely affected our profitability and contributed to our loss before tax in fiscal 2001. The launch of a new model tends to affect our results of operations in the following ways:
q

Depreciation. Preparation for the launch of a new model usually requires substantial capital investment, which results in depreciation charges over the life of the model. Capitalization of plant and machinery acquired in connection with new model launches and capacity expansion led to relatively high depreciation of Rs. 3,223 million, Rs. 3,429 million and Rs.3,221 million in fiscal 2001, 2002 and 2003, respectively. Depreciation as a percentage of net sales was 4.8%, 4.8% and 4.5% in fiscal 2001, 2002 and 2003, respectively. We did not launch a new model or expand our capacity in fiscal 2003. We expect depreciation as a percentage of net sales to decline in fiscal 2004. Cost of Components. Our new models typically use a higher proportion of imported components, and therefore have lower levels of localisation, than our existing models. We generally increase the level of localisation over time by working with vendors to increase the proportion of locally sourced components. Generally, the cost of locally sourced components is less than the cost of imported components. The high cost of components in the initial period of production of the WagonR, Alto and Baleno was one of the factors in the increase in consumption as a percentage of net sales from 74.6% in fiscal 1999 to 80.4% in fiscal 2000 and 88.4% in fiscal 2001. Subsequently, consumption as a percentage of net sales declined to 81% and 78.7% for fiscal 2002 and fiscal 2003, respectively. Primarily through collaborative efforts with vendors in India, we expect to increase the initial levels of localisation in our new models. Economies of Scale. Our new models typically take time to generate the sales volumes necessary to achieve significant economies of scale. As a result, early in the life of the model, the increases in sales may not be sufficient to offset the effect of relatively high levels of depreciation and cost of components on our results of operations.

62

Market acceptance. The ability of our new models to achieve anticipated sales volumes in order for us to recover our initial investment and achieve economies of scale will depend on their market acceptance and other market conditions. Changing Product Mix. Our product mix changed in fiscal 2002 primarily due to a 12% increase in the domestic sales of the Zen, WagonR and Alto. The average selling price, inclusive of excise duty and freight, for our vehicles sold in the domestic market during fiscal 2001, 2002 and 2003 was Rs. 241,188, Rs. 240,852 and Rs. 238,337, respectively.

Cost Reduction Measures

Steel and automobile components comprised 94% of our consumption of raw materials and components in fiscal 2003. We enter into contracts with suppliers of these inputs in order to fix our input costs over a defined period. Fluctuations in input costs for steel and automobile components affect our cost of raw materials and components and therefore our results of operations. An essential component of our strategy to remain profitable in a competitive environment is to reduce our costs and increase our operational efficiency. We have been able to reduce our costs significantly since fiscal 2001 by:
q q

reducing the costs of our components primarily through increasing our levels of localisation; increasing productivity in our manufacturing facility and at vendors facilities, and enhanced focus on quality in relation to our products and those of our vendors to reduce warranty costs; measures to reduce costs of producing a component without changing its functional utility, which we refer to as value analysis and value engineering; and better inventory management.

The resulting cost reduction was a primary factor in our ability to generate a profit before tax of Rs.1,183 million in fiscal 2002 and Rs.2,821 million in fiscal 2003 after incurring a loss before tax of Rs.2,692 million in fiscal 2001. In addition, we have recently entered into a joint venture with Suzuki to establish an aluminium foundry. The foundry will manufacture components such as cylinder heads, cylinder blocks for aluminum engines and transmission cases. We believe that this venture will help us to increase our localisation levels and reduce costs. We intend to continue these cost reduction measures in the foreseeable future. We expect that our ability to reduce costs in the next two fiscal years will be enhanced by the following commitments by Suzuki:
q

For fiscal 2004 and fiscal 2005, Suzuki will provide a 10% discount on knocked down components imported by us, except for components imported for the Alto built for export. Thereafter, the discounts will be determined subject to market conditions in India. With respect to the Alto which is built for exports, discounts are already applicable from February 2003 until January 2004. The value of our purchases of components from Suzuki in fiscal 2002 and fiscal 2003 was Rs. 7,804 million and Rs. 7,902 million, respectively. Suzuki will no longer charge royalty for the Maruti 800, Omni, Gypsy, Esteem and Zen models. This arrangement is subject to revision in the event of the introduction of new technology or upgradation in specifications due to changes in market conditions or requirements of new laws or norms. The total royalty expenses on these models paid to Suzuki in fiscal 2002 were Rs. 779.5 million.

We generated Rs.357 million in revenue from sale of power from our captive power plant in fiscal 2002. We discontinued the sale of power in April 2002 after natural gas became unavailable as a fuel for generating power due to a decision of the Supreme Court of India applicable to the industrial usage of natural gas. We are currently using naphtha as fuel. Naphtha is more expensive than natural gas. Despite the significant reduction in the power we produced in fiscal 2003 (having discontinued the sale of power) as compared to fiscal 2002, the increase in the cost of fuel primarily resulted in an increase in our power and fuel expenses to Rs.781 million in fiscal 2003 from Rs.494 million in fiscal 2002. We continue to look for less expensive sources of fuel.

Environmental and Fiscal Regulation

Environmental regulation. To comply with current and future environmental regulation, we may have to incur substantial capital expenditure and research and development costs to upgrade our products and our manufacturing facility, which may increase our cost of production. For example, in fiscal 2001 we incurred substantial additional costs to upgrade our vehicles to comply with Bharat Stage II emission norms. The more stringent Bharat Stage III emission norms may become applicable in the future, and will entail additional costs for automobile manufacturers in the industry, including us, and may also result in an increase in the price to the customer of our products. 63

Fiscal regulation. Changes in excise duties, sales tax and customs duties, and other fiscal levies affect the costs of manufacturers including ourselves, are reflected in the price to the customer, and therefore can stimulate or adversely affect demand for cars in the country. For example, in May 2000, in response to the introduction of the uniform sales tax in that month, we reduced the prices of several models in order to keep the price to the customer unchanged, which resulted in a decline in the rupee value of our total sales and profitability for fiscal 2001. The rate of excise duty on passenger cars has declined in recent years, beginning with a reduction from 40% to 32% in March 2001. There was a further reduction in the rate of excise duty on passenger cars from 32% to 25% (including a National Calamity Contingency duty of 1%) with effect from March 1, 2003. Excise duty is recovered at actual cost and included in the selling price of our cars. Reduction in the rate of excise duty therefore reduces the price to the customer and thereby tends to stimulate demand for passenger cars, especially in the pricesensitive A and B segments. We also benefit from a duty drawback on exports, which enables us to recover import duties levied on imports used to manufacture products for export. We expect that changes in taxes or levies, the imposition of new taxes or levies in the future, or the loss of tax or other benefits we currently enjoy, will continue to be factors affecting our business, results of operations and financial condition.

Foreign Exchange Rate Fluctuations

We import a substantial proportion of our components, especially for newer models, from Suzuki in Japan. Since the cost of these components is denominated in Yen, fluctuations with respect to the exchange rate of Yen for Indian Rupees can increase or reduce our input costs. In addition, we are subject to exchange rate fluctuations in relation to the export of our products. We enter into foreign exchange forward and derivative contracts to hedge these risks, but these contracts may not protect us fully from losses due to fluctuations in foreign exchange rates.

Macroeconomic Environment
Income levels of consumers are key determinants of demand in the passenger car market. In addition, interest rates tend to have an impact on our sales as availability and cost of car finance is one of the key drivers of demand in India. Demand for passenger cars can also be affected by factors such as a change in fuel prices, the performance of the Indian economy and competition from alternative modes of transport. Such changes are likely to continue to have an impact on the business of passenger car manufacturers in India, including us.

Consolidated Reporting
Our audited consolidated financial statements consolidating (1) the results of operations and financial condition of our subsidiaries for the fiscal 2002 and 2003, and (2) the results of operations and financial condition of our subsidiaries, our joint ventures and our associates for fiscal 2003, are included elsewhere in this Red Herring Prospectus under Consolidated Financial Statements as per AS 21 and Consolidated Financial Statements as per AS 21, AS 23 and AS 27, respectively. Following this offering, we expect to report on a periodic basis our consolidated results of operations for fiscal 2003 onwards, consolidating the results of our subsidiaries, our joint ventures and our associates, in addition to our unconsolidated results of operations.

64

Revenue
Our revenue has two components: total sales and other revenue. Our total sales comprise sales of products manufactured by us and sales of products manufactured for our vehicles by vendors and sold by us. The following table sets forth the contribution of the different components of total sales and of other revenue towards total revenue during each of fiscal 2001, 2002 and 2003: (Rs. in Million) Fiscal 2003 Sales: Of Products manufactured by the Company Vehicles Domestic Exports Spares, dies and moulds Sub-total (I) Of Products traded by the Company Spares and Accessories Dies and Moulds Sub-total (II) Total Sales (I + II) Other Revenue Revenue 4,056 219 4,275 90,636 3,624 94,260 4,227 1,429 5,656 90,809 3,180 93,989 3,635 1,253 4,888 89,287 3,214 92,501 78,654 6,708 999 86,361 81,881 2,379 893 85,153 80,830 2,766 803 84,399 Fiscal 2002 Fiscal 2001

Sales of Products Manufactured by Us

The sales of products manufactured by us comprise:
q q q

domestic sales of vehicles; exports of vehicles; and sales of spares, dies and moulds.

We recognize domestic sales upon dispatch of goods from the factory. We recognize sales from exports upon dispatch of goods from the port of embarkation. Sales of products manufactured by us includes excise duty and freight, which are also included in our expenditure. Domestic sales of vehicles. Domestic sales of vehicles contributed 90.5%, 90.2% and 86.8% to total sales in fiscal 2001, 2002, and 2003, respectively. We sold 335,133, 339,964 and 330,013 vehicles in the domestic market during fiscal 2001, 2002 and 2003, respectively. We revise our selling prices periodically depending on market conditions, modifications in product features and changes in government regulation. Our major revisions in selling prices during the three fiscal years ended March 31, 2003 occurred in May 2000 when we reduced selling prices for several models in response to an increase in sales tax resulting from the introduction of the uniform sales tax in that month, and in July 2002, when we reduced selling prices for the Maruti 800 model. Exports of vehicles. We export our Alto and Maruti 800 models to various countries including the Netherlands, Italy, Germany, the United Kingdom, Switzerland, Bangladesh, Nepal, Sri Lanka, Chile and Egypt. Our cars are exported mainly under the Suzuki brand. Export sales of vehicles contributed 3.1%, 2.6% and 7.4%, respectively, to our total sales in fiscal 2001 , 2002 and 2003. We exported 15,300, 12,233 and 32,240 vehicles, respectively, during fiscal 2001, 2002 and 2003. Sales of manufactured spares, dies and moulds. We manufacture spares, dies and moulds for our vehicles. The spares that are manufactured are primarily body and engine parts. Our sales of manufactured spares constituted 18.5% of our total sales of spares and accessories in fiscal 2003. Sales of manufactured spares, dies and moulds constituted 0.9%, 1% and 1.1%, respectively, of our total sales in fiscal 2001, 2002 and 2003. 65

Sales of Products Traded by Us

We import or purchase locally spares and accessories and sell them to dealers and wholesale traders in spare parts, whom we refer to as stockists. Sales of traded spares and accessories contributed 4.1%, 4.7% and 4.5%, respectively, of total sales in fiscal 2001, 2002 and 2003. We purchase dies and moulds used in the manufacture of various components for the launch of new models or modifications of existing models and sell the same to vendors at actual cost for use in the manufacture of components for us. Sales from traded dies and moulds contributed 1.4%, 1.6% and 0. 2%, respectively, of total sales in fiscal 2001, 2002 and 2003.

Other Revenue
Other revenue consists primarily of the sale of scrap, interest on investments, receivables and advances, net gains from sale of investments, sale of power, sales tax incentives granted under the Haryana Sales Tax law for a period of 14 years beginning August 2001, and revenue from our new business initiatives. Sale of power was discontinued in April 2002 after natural gas became unavailable as a fuel for generating power in our captive power plant. Revenue from new business initiatives comprises revenue from services provided by us in connection with automobile finance, leasing and fleet management and sale of pre-owned cars. We generated Rs.60 million of net revenue in fiscal 2003 from the new business initiatives. Other revenue contributed approximately 3.5%, 3.4% and 3.8% of the total revenue in fiscal 2001, 2002 and 2003, respectively.

Expenditure Consumption
Consumption includes:
q

consumption of raw materials and components, which includes consumption of imported and indigenous components, steel and other consumables such as paints; cost of spares/dies and moulds sold; consumption of stores; (accretion)/decretion to work-in-progress and finished goods, which includes the value of goods that are works-in-progress and finished goods that were not sold; vehicles for own use; and excise duty on accretion/ (decretion) to finished goods.

q q q

q q

Excise duty on accretion/(decretion) to finished goods is included in consumption in order to present (accretion)/decretion to finished goods net of excise duty. The consumption of raw materials and components constituted 92.6% of consumption in fiscal 2003. We record imported components at landed cost. Raw materials and components sourced from within India contributed approximately 67%, 72% and 74%, respectively, of our total consumption of raw materials and components in fiscal 2001, 2002 and 2003.

Excise Duty
Excise duty expense includes excise duty on manufactured vehicles, manufactured spares, manufactured dies and moulds and scrap generated. Excise duty is recovered at actual cost and included in our selling prices.

Manufacturing/ Administrative and Other Expenses

Our manufacturing/administrative and other expenses consist primarily of running royalty paid under our licence agreements with Suzuki and power and fuel expenses for the production of power by our captive power plant. We pay a lump-sum and running royalty to Suzuki in accordance with the terms of licence agreements for the transfer of various technologies. We pay a fixed amount as lump-sum royalty in connection with the launch of each model. Running royalty is calculated every six months as a fixed percentage of the free-on-board, or FOB value of the components not imported from Suzuki, for any given model. The running royalty expense was Rs. 1,052 million, Rs.1,160 million and Rs.1,129 million in fiscal 2001, 2002 and 2003, respectively. Power and fuel expenses constituted 16%, 14.5% and 23.8%, respectively, of our manufacturing/administrative and other expenses in fiscal 2001, 2002 and 2003.

66

Selling and Distribution Expenses

Selling and distribution expenses consist primarily of advertisement, publicity and sales promotion expenses and commissions and incentives to dealers. Freight expenses, which are also a major constituent of selling and distribution expenses, are, in the case of domestic sales, recovered at actual cost and included in total sales.

Adjusted Profit/(Loss) After Tax

The adjusted profit/(loss) after tax consists of the net profit/(loss) after tax as per the audited statement of accounts, adjusted on account of (1) changes in accounting policies and (2) the impact of material adjustments and prior period items.

Our Critical Accounting Policies

Preparation of financial statements in accordance with generally accepted accounting principles in India, the applicable accounting standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956, require our management to make judgements, estimates and assumptions regarding uncertainties that affect the reported amounts of our assets and liabilities, disclosures of contingent liabilities and the reported amounts of revenues and expenses. These judgements, assumptions and estimates are reflected in our accounting policies, which are more fully described in the auditors report appearing elsewhere in this Red Herring Prospectus. Certain of our accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant assumptions and estimates of our management. We refer to these accounting policies as our critical accounting policies. Our management uses its historical experience and analyses the terms of existing contracts, historical cost convention, industry trends, information provided by our dealers and information available from other outside sources, as appropriate, when forming its assumptions and estimates. However, this task is inexact because our management is making assumptions and providing estimates on matters that are inherently uncertain. While we believe that all aspects of our financial statements should be studied and understood in assessing our current and expected financial condition and results, we believe that the following critical accounting policies warrant additional attention:

Fixed Assets
We carry fixed assets (except freehold land) at cost of acquisition or construction or at manufacturing cost (in case of own manufactured assets) in the year of capitalization less accumulated depreciation. In respect of the various project related activities, which are carried on concurrently with production, expenses on administration and supervision incurred, the bifurcation of which between production and construction activities is not ascertainable, are charged to revenue.

Depreciation
Fixed assets except for leasehold land are depreciated on straight-line method on a pro-rata basis from the month in which the asset is put to use. For assets capitalized before April 2, 1987, depreciation has been provided at the rates computed in terms of Section 205 (2) (b) of the Companies Act, 1956, in terms of Circular No. 1/86 dated 21.05.86 of the GoI. For assets capitalized on or after April 2, 1987, depreciation has been provided at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for certain fixed assets where based on our managements estimate of the useful life of the assets, higher depreciation has been provided at the following rates: Plant and Machinery: Single Shift Double Shift Triple Shift Dies and Jigs 7.31% 11.88% 15.83% 19.00%

We amortize leasehold land over the period of lease. We depreciate at the rate of 100%, plant and machinery, the written down value of which at the beginning of the year is Rs.5,000 or less and other assets the written down value of which at the beginning of the year is Rs.1,000 or less. We provide the depreciation on revised unamortised depreciable amount prospectively, over the residual useful life of the asset, in case of assets where the historical cost has undergone a change due to increase or decrease in long-term liability on account of such events as foreign exchange fluctuation and change in duties.

67

Estimates of useful life are subject to changes in economic environment and different assumptions and conditions. Factors such as changes in planned uses of buildings, machinery or equipment could result in shortened useful lives or impairment.

Inventories
We value inventories at lower of cost, determined on weighted average basis, and net realizable value. We estimate the net realizable value based upon the prevailing market prices subsequent to the end of the fiscal year. We write off tools over a period of three years except for tools valuing Rs.5,000 or less individually which are charged off to revenue in the year of purchase. We charge off machinery spares, other than those supplied along with main plant and machinery, which are capitalized and depreciated accordingly, to revenue on consumption except those valuing Rs.5,000 or less individually, which are charged off to revenue in the year of purchase and those whose value are not individually ascertainable are written off over a period of three years.

Investments
We value our current investments at lower of cost and fair value. We value our long-term investments at cost except in case of permanent diminution in their value, wherein necessary provision is made.

Deferred Revenue Expenditure

We write off deferred revenue expenditure over the period of its benefit. Estimates of period of its benefits are subject to changes in economic environment and different assumptions and conditions.

Deferred Tax
The tax expense for the year or period, as applicable, comprising current tax and deferred tax, is included in determining the net profit/(loss) for such year or period. However, in fiscal 2003, the year during which liability provision must be created, the accumulated deferred tax liability at the beginning of the year has been recognized with a corresponding charge to the general reserve in accordance with Accounting Standard 22 issued by the Institute of Chartered Accountants of India. We recognize deferred tax assets for all deductible timing differences and carry forward to the extent it is probable that future taxable profit will be available against which such deferred tax assets can be realized. We review our deferred tax assets at each balance sheet date and write-down/write-up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized. We may reduce from time to time the amount of our deferred tax assets considered realizable if our estimates of future taxable income are reduced or there is a change in the governing taxation laws. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted at the balance sheet date.

Contingent Liabilities
Contingent liabilities are accounted as per Accounting Standard 4 on Contingencies and Event Occurring After Balance Sheet Date issued by the Institute of Chartered Accountants of India. Contingent loss arising from tax disputes and other claims are provided for when it is probable that:
q q

a liability has been incurred as at the balance sheet date; and an amount can be reasonably estimated.

This requires significant management judgements which may be based on opinions of legal experts, wherever necessary. Disclosure by way of Notes to the accounts is made when either of the above conditions is not met and possibility of loss is not remote.

68

Our Results of Operations

The table below sets forth various line items from our audited unconsolidated financial statements for fiscal 2001, 2002 and 2003, as a percentage of net sales, which is defined as total sales excluding excise duty. (Rs. in Million) Fiscal 2003 Sales Less: Excise Duty on Sales Net Sales Consumption to Net Sales : Raw Materials and Components Consumption of Spares/Dies and Moulds Sold Consumption of Stores (Accretion)/decretion to Work-in-Progress and Finished Goods Vehicle for own use Excise duty on accretion / (decretion) of finished goods Consumption Employee Remuneration and Benefits to Net Sales : Employee Remuneration and benefits Manufacturing/Administrative and Other Expenses to Net Sales: Manufacturing/Administrative and other Expenses Selling and Distribution Expenses to Net Sales: Selling and Distribution Expenses Depreciation to Net Sales Depreciation Profit/(loss) before tax to net sales Profit/(loss) before tax Profit/(loss) after Tax to Net Sales Profit/(loss) after tax 90,636 18,342 72,294 78.7% 52,677 3,227 415 1,020 (55) (400) 56,884 3% 2,136 4.5% 3,284 8.4% 6,078 4.5% 3,221 3.9% 2,821 2.03% 1,464 Fiscal 2002 90,809 19,621 71,188 81.0% 53,768 4,568 458 (1,419) (69) 375 57,681 3.2% 2,289 4.8% 3,420 6.8% 4,821 4.8% 3,429 1.7% 1,183 1.5% 1,045 Fiscal 2001 89,287 22,070 67,217 88.4% 54,734 4,084 622 203 (118) (88) 59,437 3% 2,003 4.8% 3,222 5.9% 3,989 4.8% 3,223 -4% (2,692) -4% (2,694)

Fiscal 2003 Compared to Fiscal 2002 Revenue

Our revenue increased by 0.3% to Rs.94,260 million in fiscal 2003 from Rs.93,989 million in fiscal 2002, primarily due to an increase in other revenue by 14% to Rs.3,624 million in fiscal 2003 from Rs. 3,180 million in fiscal 2002. An increase in sales from exports of vehicles to Rs.6,708 million in fiscal 2003 from Rs.2,379 million in fiscal 2002 was largely offset by a decrease in domestic sales of vehicles by 3.9% to Rs.78,654 million in fiscal 2003 from Rs.81,881 million in fiscal 2002.

Sales of Products Manufactured by Us

The sales of products manufactured by us increased by 1.4% to Rs.86,361 million in fiscal 2003 from Rs.85,153 million in fiscal 2002. Domestic sales of vehicles decreased by 3.9% to Rs.78,654 million in fiscal 2003 from Rs.81,881 million in fiscal 2002. This decline was due primarily to:
q q

a 2.9% decline in domestic sales volumes to 330,013 vehicles in fiscal 2003 from 339,964 vehicles in fiscal 2002; a decline in the average selling prices of our domestic vehicles primarily due to our reduction of selling prices for the Maruti 800 in July 2002; and a reduction in the rate of excise duty on passenger cars from 32% to 25% (including a National Calamity Contingency duty of 1%) with effect from March 1, 2003, to the extent that this reduced the excise duty component in our domestic sales of vehicles.

69

Sales from exports of vehicles increased to Rs.6,708 million in fiscal 2003 from Rs.2,379 million in fiscal 2002, primarily due to an increase in export sales volumes to 32,240 vehicles in fiscal 2003 from 12,233 vehicles in fiscal 2002. This increase was principally a result of sales of the Alto (1.1 litre) model, which we began to export in January 2002. Export vehicle sales as a percentage of total sales increased to 7.4% in fiscal 2003 from 2.6% in fiscal 2002. Sales of manufactured spares, dies and moulds increased by 11.9% to Rs.999 million in fiscal 2003 from Rs.893 million in fiscal 2002.

Sales of Products Traded by Us

Sales of traded spares and accessories decreased by 4.1% to Rs. 4,056 million in fiscal 2003 from Rs. 4,227 million in fiscal 2002. Sales of traded dies and moulds decreased by 84.7% to Rs.219 million in fiscal 2003 from Rs.1,429 million in fiscal 2002. In fiscal 2002, sales of traded dies and moulds were higher primarily on account of sale to vendors of dies related to the manufacture of the Versa model. The sales of traded dies and moulds decreased in fiscal 2003 primarily because no new model was launched in fiscal 2003.

Other Revenue
Other revenue increased by 14% to Rs.3,624 million in fiscal 2003 from Rs.3,180 million in fiscal 2002, primarily due to:
q

a gain of Rs. 350 million on sale of our investments in certain mutual funds and interest of Rs. 262 million on fixed deposits during the fiscal 2003. No such revenue was generated in fiscal 2002. In fiscal 2003, we had surplus cash available mainly due to proceeds we received in the amount of Rs. 3,990 million from our rights issue to Suzuki in May 2002 and net cash flow of Rs. 7,705 million from operating activities for fiscal 2003. The surplus cash was invested in fixed deposits and mutual funds during fiscal 2003. As of March 31, 2003, we did not have any investments in mutual funds. an increase in duty drawback on exports to Rs. 320 million in fiscal 2003 from Rs.142 million in fiscal 2002, primarily as a result of a 182% increase in export vehicle sales.

We have been granted a sales tax benefit under the Haryana Sales Tax Law on account of the expansion of our plant with effect from August 2001. In fiscal 2003, we recognized a sales tax benefit of Rs.229 million as compared to Rs.161 million in fiscal 2002. We generated Rs.357 million in revenue from sale of power in fiscal 2002. There was no sale of power in fiscal 2003 as sale of power was discontinued in April 2002 after natural gas became unavailable as a fuel for generating power in our captive power plant.

Profit/(Loss) Before Tax

Profit before tax increased to Rs.2,821 million in fiscal 2003 from Rs.1,183 million in fiscal 2002. Profit before tax as a percentage of net sales increased to 3.9% in fiscal 2003 from 1.7% in fiscal 2002, primarily due to:
q q q

a decline in the cost of components supplied by local vendors; higher levels of localisation of components of the Alto and existing models; and, to a lesser extent, decreases of 6.1%, 4% and 6.7% in depreciation, manufacturing/administrative and other expenses, and employee remuneration and benefits, respectively, and an increase in other revenue from interest on fixed deposits and a gain from the sale of investments in certain mutual funds.

This increase was partially offset by an increase in selling and distribution expenses as a percentage of net sales to 8.4% in fiscal 2003 from 6.8% in fiscal 2002.

Consumption
Consumption in fiscal 2003 decreased by 1.4% to Rs.56,884 million in fiscal 2003 from Rs.57,681 million in fiscal 2002. Consumption as a percentage of net sales decreased to 78.7% in fiscal 2003 from 81.0% in fiscal 2002. The decrease in consumption was primarily due to:
q q

a decline in the cost of components supplied by local vendors; and higher levels of localisation of components of the Alto and existing models.

70

Excise Duty
Excise duty expense decreased by 10.1% to Rs.18,101 million in fiscal 2003 from Rs.20,132 million in fiscal 2002. The decrease was primarily due to the 3.9% decline in domestic sales of vehicles in fiscal 2003 as compared to fiscal 2002 and a reduction in the rate of excise duty on passenger cars from 32% to 25% (including a National Calamity Contingency duty of 1%) with effect from March 1, 2003.

Employees Remuneration and Benefits

Employee remuneration and benefits decreased by 6.7% to Rs.2,136 million in fiscal 2003 from Rs.2,289 million in fiscal 2002. Employee remuneration and benefits as a percentage of net sales decreased to 3% in fiscal 2003 from 3.2% in fiscal 2002. The decrease in employee remuneration and benefits was primarily because of the reduction in the number of our employees as a result of the voluntary retirement scheme, which was open to our regular employees from September 24, 2001 to October 23, 2001.

Manufacturing/Administrative and Other Expenses

Manufacturing/ administrative and other expenses decreased by 4% to Rs.3,284 million from Rs. 3,420 million in fiscal 2002. Manufacturing/administrative and other expenses as a percentage of net sales decreased to 4.5% in fiscal 2003 from 4.8% in fiscal 2002. The decrease in manufacturing/administrative and other expenses was primarily due to a decrease in our provision for bad debt, relating principally to amounts owed to us by dealers, to Rs.3 million in fiscal 2003 from Rs.300 million in fiscal 2002. The amount of our provision for bad debt in respect of amounts owed by dealers has fluctuated in the past and we expect that it will continue to do so in the future. This was offset by an increase in our power and fuel expenses to Rs. 781 million in fiscal 2003 from Rs. 494 million in fiscal 2002. This increase occurred despite a significant reduction in the power we produced in fiscal 2003 (having discontinued the sale of power) and was primarily due to the increase in fuel costs since we were no longer able to use natural gas as fuel for generating power in our captive power plant and instead used naphtha, which is more expensive than natural gas.

Selling and Distribution Expenses

Selling and distribution expenses increased by 26.1% to Rs.6,078 million in fiscal 2003 from Rs. 4,821 million in fiscal 2002. Selling and distribution expenses as a percentage of net sales increased to 8.4% in fiscal 2003 from 6.8% in fiscal 2002. The increase in our selling and distribution expenses was primarily due to:
q

an increase of 28.5% in transportation and distribution expenses due to a 163.5% increase in export sales volumes in fiscal 2003 as compared to fiscal 2002; a 15.5% increase in commissions and incentives paid out to dealers in fiscal 2003 as compared to fiscal 2002, primarily as a result of additional discounts to dealers following our reduction of selling prices for the Maruti 800 in July 2002 and other commissions and incentives paid to dealers to promote the sales of our products; and a 43.2% increase in advertisement, publicity and sales promotion expenses in fiscal 2003 as compared to fiscal 2002 in order to promote the sales of our products.

Financial Expenses
Financial expenses decreased by 27% to Rs.558 million in fiscal 2003 from Rs.764 million in fiscal 2002, primarily due to repayment of our short-term borrowings in fiscal 2003 and the effects of a favourable exchange rate for the U.S. dollar relative to the Indian rupee on our payment obligations under our US$30 million foreign currency loan from the Bank of TokyoMitsubishi.

Provision for Contingencies

Provision for contingencies increased by 16.7% to Rs.371 million in fiscal 2003 from Rs. 318 million in fiscal 2002. In fiscal 2003, our contingency provision related primarily to certain excise duty disputes and obligations arising out of a term loan from HDFC Limited to the Maruti Employees Co-operative House Building Society Limited, in respect of which we have provided a guarantee to HDFC Limited. In fiscal 2002, we made a contingency provision of Rs.298 million on account of unamortised cost of assets of certain models of vehicles.

Depreciation
Depreciation decreased by 6.1% to Rs.3,221 million in fiscal 2003 from Rs.3,429 million in fiscal 2002. Depreciation as a percentage of net sales decreased to 4.5% in fiscal 2003 from 4.8% in fiscal 2002. The decrease in depreciation was primarily due to the completion of the useful life of certain assets in fiscal 2003. 71

Deferred Revenue Expenditure Charged Off

Deferred revenue expenditure charged off increased by 19.1% to Rs.386 million in fiscal 2003 from Rs. 324 million in fiscal 2002. In fiscal 2002, we had offered the voluntary retirement scheme to our employees and made a payment of Rs.736 million, which is being amortised over the estimated future pay-back period of 36 months from the conclusion of the schemes.

Profit/(Loss) After Tax

Profit after tax increased by 40% to Rs.1,464 million in fiscal 2003 from Rs.1,045 million in fiscal 2002, as a result of the foregoing factors and a deferred tax provision of Rs. 1,006 million based on the application of Accounting Standard 22 on deferred taxes, which became mandatory with effect from April 1, 2002, resulting in a significant increase in the amount of the deferred tax provision.

Adjusted Profit/(Loss) After Tax

Adjusted profit after tax increased by 38% to Rs. 1,249 million in fiscal 2003 from Rs.905 million in fiscal 2002.

Fiscal 2002 Compared to Fiscal 2001 Revenue

Our revenue increased by 1.6% to Rs.93,989 million in fiscal 2002 from Rs.92,501 million in fiscal 2001. This increase was primarily due to a 1.7% increase in our total sales.

Sales of Products Manufactured by Us

The sales of products manufactured by us increased by 0.9% to Rs.85,153 million in fiscal 2002 from Rs.84,399 million in fiscal 2001. Domestic sales of vehicles increased by 1.3% to Rs. 81,881 million in fiscal 2002 from Rs. 80,830 million in fiscal 2001. This increase was due primarily to:
q q

a 1% increase in the domestic sales volumes to 339,964 vehicles in fiscal 2002 from 335,133 vehicles in fiscal 2001; and a change in our product mix, with a 12% increase in the domestic sales of our three models in the B segment: the Alto, the WagonR and the Zen. The sales of these models constituted 34.3% of domestic sales in fiscal 2002 as compared to 31% in fiscal 2001.

Sales from exports of vehicles decreased by 14% to Rs.2,379 million in fiscal 2002 from Rs.2,766 million in fiscal 2001, primarily due to a 8.2% decline in export sales of our Alto and Zen models. Sales of manufactured spares, dies and moulds increased by 11% to Rs.893 million in fiscal 2002 from Rs.803 million in fiscal 2001.

Sales of Products Traded by Us

Sales of traded spares and accessories increased by 16.3% to Rs.4,227 million in fiscal 2002 from Rs.3,635 million in fiscal 2001. Sales of traded dies and moulds increased by 14% to Rs.1,429 million in fiscal 2002 from Rs.1,253 million in fiscal 2001.

Other Revenue
Other revenue increased by 1.1% to Rs.3,180 million in fiscal 2002 from Rs.3,214 million in fiscal 2001. Duty drawback on exports decreased by 12.8% to Rs.142 million in fiscal 2002 from Rs.163 million in fiscal 2001, primarily due to a decline in sales of exported vehicles of 20.1%. In fiscal 2001, to supplement our sources of liquidity to meet our working capital and capital expenditure requirements, we sold certain investments in certain mutual funds and bonds resulting in a gain of Rs.190 million. There was no revenue of this kind in fiscal 2002. We have been granted a sales tax benefit under the Haryana Sales Tax Law on account of the expansion of our plant with effect from August 2001. In fiscal 2002, we recognized a sales tax benefit of Rs.161 million. Sale of power increased by 5.9% to Rs.357 million in fiscal 2002 from Rs.337 million in fiscal 2001.

72

Profit/(Loss) Before Tax

Profit before tax increased to Rs.1,183 million in fiscal 2002 from a loss before tax of Rs.2,692 million in fiscal 2001. Profit before tax as a percentage of net sales increased to 1.7% in fiscal 2002 from -4.0% in fiscal 2001, primarily due to:
q q

a decline in the cost of components supplied by local vendors; the appreciation of the Indian rupee in relation to Yen in fiscal 2002 as compared to fiscal 2001, reducing the cost of our imports from Suzuki; higher levels of localisation of components of new models such as the Alto and WagonR; and an increase in the prices in the domestic market of certain models.

q q

This increase was partially offset by a 20.9% increase in selling and distribution expenses.

Consumption
Consumption in fiscal 2002 decreased by 3.0% to Rs.57,681 million in fiscal 2002 from Rs.59,437 million in fiscal 2001. Consumption as a percentage of net sales decreased to 81% in fiscal 2002 from 88.4% in fiscal 2001. The decrease in consumption was primarily due to:
q q

a decline in the cost of components supplied by local vendors, the appreciation of the Indian rupee in relation to Yen in fiscal 2002 as compared to fiscal 2001, reducing the cost of our imports from Suzuki, and higher levels of localization of components of new models such as the Alto and WagonR.

Excise Duty
Excise duty expense decreased by 9.0% to Rs.20,132 million in fiscal 2002 from Rs.22,118 million in fiscal 2001. The decrease was primarily due to a reduction of excise duty rates from 40% to 32% from March 2001.

Employees Remuneration and Benefits

Employee remuneration and benefits increased by 14.3% to Rs.2,289 million in fiscal 2002 from Rs.2,003 million in fiscal 2001. Employee remuneration and benefits as a percentage of net sales increased to 3.2% in fiscal 2002 from 3% in fiscal 2001. The increase in employee remuneration and benefits was primarily due to a lower base in fiscal 2001 because of lower-thannormal production man-hours during the strike by our employees union from October 12, 2000 to January 8, 2001.

Manufacturing/Administrative and other Expenses

Manufacturing/ administrative and other expenses increased by 6.1% to Rs. 3,420 million in fiscal 2002 from Rs.3,222 million in fiscal 2001. Manufacturing/administrative and other expenses as a percentage of net sales was 4.8% in each of fiscal 2002 and fiscal 2001. The increase in manufacturing/administrative and other expenses was primarily due to a 10.3% increase in running royalty expense which increased to Rs.1,160 million in fiscal 2002 from Rs.1,052 million in fiscal 2001, which was in turn primarily due to higher levels of localisation in the Alto and WagonR models and increase in domestic sales volumes, including the sales volumes of the Alto, the Zen and the WagonR. This was partially offset by a decrease in power and fuel expenses of 3.9% to Rs. 494 million in fiscal 2002 from Rs.514 million in fiscal 2001.

Selling and Distribution Expenses

Selling and distribution expenses increased by 20.9% to Rs. 4,821 million in fiscal 2002 from Rs.3,989 million in fiscal 2001. Selling and distribution expenses as a percentage of net sales increased to 6.8% in fiscal 2002 from 5.9% in fiscal 2001. The increase in our selling and distribution expenses was primarily due to an increase of 47.9% in commissions and incentives paid out to dealers in fiscal 2002 as compared to fiscal 2001 and an increase of 11.3% in advertisement, publicity and sales promotion expenses in fiscal 2002 as compared to fiscal 2001. We increased the commissions and incentives paid to dealers in fiscal 2002 primarily because the profitability of our operations in fiscal 2002 enabled us to do so. In addition, the increase was intended to compensate dealers for the reduction in the ex-showroom prices of vehicles in dealers inventory following the reduction in the rate of excise duty to 32% in March 2001. Advertisement, publicity and sales promotion expenses increased in order to promote the sales of our products and recover market share following our loss before tax in fiscal 2001.

Financial Expenses
Financial expenses increased by 2.4% to Rs.764 million in fiscal 2002 from Rs.746 million in fiscal 2001.

73

Provision for Contingencies

Provision for contingencies increased to Rs. 318 million in fiscal 2002 from Rs.141 million in fiscal 2001. In fiscal 2002, we made a contingency provision of Rs.298 million, on account of unamortized cost of assets of certain models of vehicles. In fiscal 2001, we had provided for Rs.137 million for compensation payable on non-fulfillment of purchase obligations.

Depreciation
Depreciation increased by 6.4% to Rs.3,429 million in fiscal 2002 from Rs.3,223 million in fiscal 2001. Depreciation as a percentage of net sales was 4.8% in fiscal 2002 and fiscal 2001. The increase in depreciation was primarily due to the capitalization of plant and machinery in fiscal 2002 of approximately Rs.5,057 million in connection with:
q q

the launch of the Versa model in November 2001; and routine annual capital expenditure on plant and machinery.

Deferred Revenue Expenditure Charged Off

Deferred revenue expenditure charged off increased by 64.5% to Rs. 324 million in fiscal 2002 from Rs.197 million in fiscal 2001. In fiscal 2002, we had offered the voluntary retirement scheme to our employees and made a payment of Rs.736 million, which is being amortised over the estimated future pay-back period of 36 months from the conclusion of the schemes.

Profit/(Loss) After Tax

Profit after tax was Rs.1,045 million in fiscal 2002 as compared to a loss after tax in fiscal 2001 of Rs.2,694 million, as a result of the foregoing factors.

Adjusted Profit/(Loss) After Tax

Adjusted profit after tax was Rs.905 million in fiscal 2002 as compared to an adjusted loss after tax in fiscal 2001 of Rs.1,566 million.

Quarterly Variations in Our Results of Operations

After this Offer, we will be required to report our results of operations on a quarterly basis to the Stock Exchanges. Our results of operations tend to vary from quarter to quarter based on a number of factors including macroeconomic factors, market conditions and fiscal regulation, and we expect that they will continue to do so. However, we do not believe that this variation is due to seasonal patterns or that our business is seasonal in nature.

Liquidity and Capital Resources Liquidity

Our primary liquidity needs have been historically to finance our working capital needs and our capital expenditures. To fund these costs, we have relied on cash flows from operations and short-term and long-term borrowings.

Cash Flows
The table below summarizes our cash flows for fiscal 2001, 2002 and 2003. (Rs. in Million) Cash Flow Net Cash Flow from (used in) operating activities Net Cash Used in investing activities Net Cash flow from (used in) financing activities Net Increase/(Decrease) in Cash and Cash Equivalents Figures in brackets represent cash outflow Our cash flows from operations are influenced primarily by capital expenditure, working capital requirements and cash from operations and incurrence and repayment of debt. Our net cash flow from operating activities for fiscal 2003 was Rs. 7,705 million, primarily due to our reduced working capital requirements, as compared to fiscal 2002, and profit before tax in fiscal 2003. Our net cash flow from operating activities was Rs. 6,539 million in fiscal 2002, primarily due to our reduced working capital requirements, as compared to fiscal 2001, and profit before tax in fiscal 2002. 74 Fiscal 2003 7,705 370 1,100 9,175 Fiscal 2002 6,539 (1,281) (5,415) (157) Fiscal 2001 (2,448) (1,935) 4,942 559

Net cash from investing activities was Rs.370 million in fiscal 2003 and net cash used in investing activities was Rs. 1,281 million in fiscal 2002. Our net cash from investing activities for fiscal 2003 related mainly to a gain of Rs. 350 million on sale of our investments in certain mutual funds. Our net cash used in investing activities for fiscal 2002 related primarily to the purchase of fixed assets for the launch of the Versa model in November 2001. Our net cash from financing activities was Rs.1,100 million in fiscal 2003, primarily due to proceeds we received from our rights issue to Suzuki in the amount of Rs. 3,990 million in May 2002, partially offset by repayment of short-term borrowings. Our net cash used in financing activities was Rs.5,415 million in fiscal 2002, primarily due to repayment of short-term borrowings.

Indebtedness
Key terms of our outstanding indebtedness as of March 31, 2003 were as follows: 11.20% secured non-convertible redeemable debentures. We had an aggregate principal amount of Rs. 2,000 million of our 11.20% secured non-convertible redeemable debentures (Series I) outstanding at March 31, 2003. These debentures are redeemable at par on July 24, 2007 with a put or call option on July 24, 2005. These debentures bear interest at a rate of 11.2% per annum and are secured by mortgages on specific buildings and plant and machinery. 12.00% secured non-convertible redeemable debentures. We had an aggregate principal amount of Rs. 1,000 million of our 12.00% secured redeemable non-convertible debentures (Series II) outstanding at March 31, 2003. Of this aggregate principal amount, 30% is payable on December 4, 2005, 30% on December 4, 2006 and the remaining 40% on December 4, 2007. These debentures bear interest at the rate of 12% per annum and are secured by mortgages on specific buildings and plant and machinery. Foreign currency loan. We had an aggregate principal amount of US$30 million outstanding under foreign currency loan from Bank of Tokyo Mitsubishi at March 31, 2003. The first tranche of US$10 million of the outstanding principal amount is repayable on February 16, 2004, and the second tranche of US$20 million is repayable on February 27, 2004. The interest rate applicable to the foreign currency loan is 0.60% per annum over six months floating London Interbank Offered Rate, or LIBOR, the LIBOR rate being reset every six months. The loan is against a negative lien on specific fixed assets of our company. Upon written request from the lender, this loan may be secured by a specific and exclusive charge over certain unencumbered assets of ours with a net book value of at least 1.25 times the amounts outstanding under the loan. Working capital facility. We had an aggregate principal amount of Rs. 133 million outstanding under a working capital facility from UFJ Bank as at March 31, 2003. The interest rate applicable to the loan is 0.62% per annum over the Mumbai Interbank Offered Rate, or MIBOR, compounded on a daily basis.

Off-balance Sheet Arrangements

Vendors of certain components need specific dies and moulds to manufacture those components for us. These dies and moulds are customized for specific models. Substantial investment is required for the purchase of these dies and moulds. To make these dies and moulds available to vendors, we have entered, as co-lessee, into various agreements between various vendors, as lessees, and finance companies or banks, as lessors, for the leasing of dies and moulds for certain models. The aggregate amounts of our obligations under such agreements were Rs.1,639 million at March 31, 2000, Rs. 3,545 million at March 31, 2001, Rs. 3,384 million at March 31, 2002, and Rs. 2,411 million at March 31, 2003. We have also provided guarantees to finance companies for term loans and for lease finance given to various vendors, for purchase of dies and moulds for certain models. At March 31, 2003, we were guarantors to certain finance companies for term loans in the aggregate principal amount of Rs. 55 million and for lease financing of Rs. 401 million, to facilitate the purchase by various vendors of dies and moulds of certain models. We have also provided a guarantee to HDFC Limited for a term loan of Rs.300 million to Maruti Employees Co-operative House Building Society Limited. At March 31, 2003, the amount outstanding repayable by Maruti Employees Co-operative House Building Society Limited under the loan was Rs.184 million. Against this loan the contingent liability not provided for was in the amount of Rs. 147 million as of March 31, 2003.

Historical and Planned Capital Expenditures

In fiscal 2001, we had purchased fixed assets amounting to Rs.6,036 million, primarily for the launch of new models and capacity expansion. Our net proceeds from borrowings in fiscal 2001 were in the amount of Rs.5,617 million. In fiscal 2002, we had purchased fixed assets amounting to Rs.2,229 million, primarily for the launch of the Versa model in November 2001. Our net repayment of borrowings in fiscal 2002 was in the amount of Rs.4,626 million.

75

In fiscal 2003, we purchased fixed assets amounting to Rs.1,017 million in the ordinary course of business, such as the purchase of new dies. Our net repayment of borrowings in fiscal 2003 was in the amount of Rs.1,963 million. We have received the necessary authorizations and expect to spend an aggregate amount of approximately Rs. 3,580 million in fiscal 2004 on the following projects:
q q q q

automation and research and development; minor modifications to existing models and workshops; normal annual capital maintenance; and construction of a new corporate office and marketing plaza.

We may adjust the amount of our capital expenditure upward or downward based on our cash flow from operations and market conditions.

Principal sources of liquidity

At March 31, 2003, cash and bank balances and current investments amounted to Rs.10,057 million. We believe that our anticipated cash flows from operations, together with our existing cash and issuance of short-term and long-term debt, will be sufficient to meet our working capital and capital expenditure requirements for fiscal 2004. Our anticipated cash flows from operations however depend on a number of factors beyond our control, such as demand for passenger cars, prevailing economic conditions in the market, the competition in the automobile industry and the cost of our inputs. We may therefore need to incur additional indebtedness.

Transactions with Related Parties

We have entered into several transactions for transfer of technology, purchase of components and training of personnel with Suzuki. We believe that the prices paid for the purchase of components from Suzuki are not comparable with prevalent market prices, as the components are of a specialised nature. We enter into contracts for exports of vehicles to some of Suzukis subsidiaries in other countries. We have also entered into certain transactions with many of our joint ventures and subsidiaries. In the ordinary course of business, certain loans and advances are given to many of our vendors on commercially reasonable terms having regard to market conditions. Some of our joint ventures and associates avail of the same policy. For more information, see Related Party Transactions on page 115 of this Red Herring Prospectus. In addition, our board of directors has approved long-term and short-term loans to be granted from time to time of a maximum aggregate amount of Rs.950 million to Suzuki Metals India Limited, or SMIL, our joint venture with Suzuki, set up to establish an aluminium foundry. As of March 31, 2003, an aggregate amount of Rs.368 million in loans was outstanding. The interest rate charged by Maruti to SMIL was benchmarked against interest rates offered by financial institutions. As of March 31, 2003, we had no loans outstanding to directors and an aggregate amount of Rs.953,051 outstanding in loans to key management personnel. All employees, including directors and key management personnel, are entitled to various categories of loans in accordance with our policy.

Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is a function of our manufacturing and selling activities. We are exposed to market risk from changes in both foreign exchange rates and interest rates.

Exchange Rate Risk

We face exchange rate risk to the extent that our receivables and payables are denominated in currencies other than Indian rupees. We import raw materials and components and make royalty payments for technology licenced from Suzuki. All these costs are denominated in foreign currencies, with substantially all imports of components denominated in Yen, imports of raw materials denominated in US dollars and royalty payments denominated in Yen. Our aggregate cost of imported raw materials and components was Rs. 17,924 million, Rs. 15,003 million and Rs.13,720 million in fiscal 2001, 2002 and 2003, respectively. Our aggregate cost for running royalty expense was in the amount of Rs. 1,052 million, Rs. 1,160 million and Rs.1,129 million in fiscal 2001, 2002 and 2003, respectively. Exports of vehicles contributed 3.1%, 2.6% and 7.4%, respectively, of our total sales in fiscal 2001, 2002 and 2003. These sales were denominated primarily in US dollars. In addition, we have US$30 million outstanding under a foreign currency loan repayable in February 2004.

76

Appreciation or depreciation of the Indian rupee relative to the currency of our payables and receivables can increase our payment obligations or reduce our export sales. We enter into foreign exchange forward and derivative contracts to hedge these risks, but these contracts may not protect us fully from losses due to fluctuations in foreign exchange rates.

Interest Rate Risk

Our interest rate risk results from changes in interest rates, which may affect our financial expenses. We bear interest rate risk with respect to the following indebtedness: The rate of interest applicable to the US$30 million outstanding at March 31, 2003 under our long-term foreign currency loan is 0.60% per annum over six months floating LIBOR, the LIBOR rate being reset every six months. This loan is repayable in full in February 2004. The rate of interest applicable to the Rs. 133 million outstanding at March 31, 2003 under our working capital facility from UFJ Bank was 0.62% per annum over MIBOR, compounded on a daily basis. On November 13, 2001, we entered into a rupee-interest rate swap with a nominal value of Rs. 1,000 million to be amortised in line with the repayment schedule for our 12.00% secured redeemable non-convertible debentures (Series II) with Citibank N.A. Under the swap agreement, effective November 15, 2001, we swapped our fixed interest rate liability of 12% per annum on our debentures Series II of Rs. 1,000 million until maturity on December 4, 2007, into a floating rate of interest at a spread of 3.18% over the Average five year GoI Securities rate, computed as the simple average of the daily five year annualized yield for GoI securities for ten business days preceding and including the interest payment date. The first setting of average five year GoI securities rate was done in advance at the time of entering into the swap at 7.46% per annum to be valid till December 3, 2002. The subsequent resets will be done annually in arrears. We are entitled under the swap agreement to receive a fixed rate of interest on the aggregate principal amount of Rs. 1,000 million at the fixed rate of 12% per annum. A rise in interest rates may increase our interest payment obligations under the instruments described above. We do not bear interest rate risk in relation to our other indebtedness, all of which requires interest payments at fixed rates of interest.

Effect of Inflation
During fiscal 2001, 2002 and 2003, the All India Consumer Price Index increased by 3.8%, 4.3% and 4%, respectively. Since we set the price for our products sold in India based on various factors, including inflation, inflation has not had a significant effect on the result of our operations to date. We do not expect that inflation rates in India will have a significant impact on our results of operations for the foreseeable future.

Unusual and Infrequent Events or Transactions

There have been no events, to our knowledge, other than as described in this Red Herring Prospectus, which may be called unusual or infrequent.

Significant Accounting and Regulatory Changes

Accounting Standard 22 on deferred taxes became mandatory with effect from April 1, 2002, resulting in significant increase in amount of income tax provision. New products or Business Segments We are in the business of manufacturing cars. As part of our continuing operations, we have introduced and will continuing to introduce various new models or variants of existing models depending on varying market conditions and customer preferences. We have recently entered into certain new businesses. For more information on these businesses, see Our Business - New Business Initiatives on page 48 of this Red Herring Prospectus.

77

OUR MANAGEMENT
Board of Directors
Our Managing Director, Jagdish Khattar, is also our chief executive officer. He conducts the day-to-day operations of our Company under the overall supervision, direction and control of our Board. Under our Articles of Association we cannot have fewer than three or more than twelve directors. We currently have nine directors. The following table sets forth certain details regarding the members of our Board as on the date: Name, Designation, Fathers Name, Address, Occupation and Term Shinzo Nakanishi Chairman (S/o Shintaro Nakanishi) 59-3, Saiwai 2 Chome Hamamatsu Shizuoka-pref. Japan Business Executive Part-time Non-Retiring Jagdish Khattar Managing Director (S/o Shyam Khattar) N-128 A, Panchsheel Park, New Delhi 110017 India Business Executive Whole-time Non-Retiring Tenure Expires: May 29, 2005 Junzo Sugimori Joint Managing Director (S/o Yuri Sugimori) Room No. 321 Hotel Ashok, Chanakyapuri New Delhi 110021 India Business Executive Whole-time Retiring Tenure Expires: April 18, 2006 Kinji Saito Director (Marketing and Sales) (S/o Shigeo Saito) B-61, Paschimi Marg Vasant Vihar New Delhi 110057 India Business Executive Whole-time Retiring Tenure Expires: May 29, 2005 44
q q

Age (years) 55

Other Directorships
q

Suzuki Motor Corporation

60

q q q q

Climate Systems India Limited J.J. Impex (Delhi) Pvt. Limited Maruti Countrywide Auto Financial Services Limited Citicorp Maruti Finance Limited

61

Suzuki Motor Corporation

Maruti Countrywide Auto Financial Services Limited Citicorp Maruti Finance Limited

78

Name, Designation, Fathers Name, Address, Occupation and Term Shinichi Takeuchi Joint Managing Director (S/o Kunihei Takeuchi) Room No. 421 Ashok Hotel, Chanakyapuri, New Delhi - 110021 India Business Executive Whole-time Retiring Tenure Expires: September 26, 2004 Motohiro Atsumi Director (Finance) (S/o Yuji Atsumi) Room No. 1407 Ashok Hotel, Chanakyapuri, New Delhi 110021 India Business Executive Whole-time Retiring Tenure Expires: May 29, 2005 Osamu Suzuki Director (S/o Eihachi Matsuda) 3-19-18, Shijimizuka-cho, Hamamatsu Japan Industrialist Part-time Non-Retiring Hirofumi Nagao Director (S/o Late Tatsuo Nagao) Hilltop, Matsushiro 103 Matsushiro cho 201-7 Hamamatsy city Shizuoka pref. Japan Business Executive Suzuki Nominee; Part-time Retiring S. V. Bhave Director (S/o V. D. Bhave) C II/ 62, Shah Jahan Road, New Delhi 110 011 India Government Official GoI Nominee; Part-time Retiring

Age (years) 55

Other Directorships
q q q q q

Krishna Maruti Limited Machino Plastics Limited Suzuki Metal India Limited Bharat Seats Limited Subros Limited

40

Suzuki Metal India Limited

73

Suzuki Motor Corporation

50

Nil

54

q q q

Bharat Bhari Udyog Nigam Limited Engineering Projects (I) Limited Scooters India Limited

79

Details of Directors
Shinzo Nakanishi, Chairman of our Company, age 55 years, was appointed as a non-retiring part-time Director of our Company with effect from May 2002. Mr. Nakanishi joined Suzuki in 1971. Mr. Nakanishi is presently Director (Board Member) and Executive General Manager, Overseas Automobile Marketing in Suzuki. Jagdish Khattar, Managing Director, age 60, completed his Bachelor in Arts (with Honours) degree from St. Stephens College, University of Delhi and his LL.B from the Delhi University. Mr. Khattar has been an officer of the Indian Administrative Service, or IAS, and has more than 37 years of experience. Prior to joining us, he served in the following positions: as an officer of the Uttar Pradesh State Government from 1965 to 1979; as director of the Tea Board of India, London from 1979 to 1983; as chairman of the Tea Board, Ministry of Commerce, from 1983 to 1984; as chairman and managing director of the Uttar Pradesh State Cement Corporation from 1984 to 1986; as secretary and then chairman of the Uttar Pradesh Road Transport Corporation, Transport Department from 1986 to 1988); and as joint secretary in the Ministry of Steel, GoI from 1988 to 1993. Mr. Khattar is currently the Vice President of the Society of Indian Automobile Manufacturers. Mr. Khattar joined us on July 1, 1993 as Director (Marketing). He was appointed Second Managing Director on July 1, 1999 and was nominated by GoI and appointed as Managing Director and Chief Executive Officer on August 18, 1999. Prior to being appointed as the Second Managing Director, Mr. Khattar has held the positions of Executive Director(Marketing) and Director (Marketing). Pursuant to the Revised Joint Venture Agreement, Mr. Khattar resigned and was immediately re-appointed as Managing Director nominated by Suzuki on May 30, 2002. Junzo Sugimori, Joint Managing Director, aged 61, is a Graduate from the Department of Economics, Osaka University, Japan. Mr. Sugimori has 38 years of experience in sales, marketing and administration. He started his career with Suzuki in 1965. After serving in various positions in Suzuki and its associate companies in Indonesia, Canada and the USA, he assumed charge as General Manager of the Overseas Automobile Marketing Division in charge of the North American market in 1991 and in charge of Asia and Oceania market in 1995 before being appointed as a Board member of Suzuki in 1997. He was dispatched to our Company as Director (Marketing & Sales) in 1999 for a period of three years until 2002. Before assuming charge as Joint Managing Director of our Company with effect from April 19, 2003 responsible for finance, human resources, information technology, corporate services and vigilance, he was Director of Indian Affairs, Overseas Automobile Marketing Division at Suzuki. Kinji Saito, Director (Marketing and Sales), age 44, is a Graduate from the Hiroshima University. Mr. Saito has more than 21 years of experience in the automobile industry, through various roles in marketing research, product and sales planning, and marketing at Suzuki. Mr. Saito has been involved with the marketing aspect of Suzukis Indian market operations since 1995, before becoming Head of Suzukis Representative Office in India in 1999. Mr. Saito joined Maruti on May 30, 2002. He is responsible for marketing and sales functions of our Company. Shinichi Takeuchi, Joint Managing Director, age 55, is a Graduate from the Department of Technology, Shizuoka University, Japan. Mr. Takeuchi has more than 32 years of experience in production engineering in the automobile industry. Mr. Takeuchi joined Suzuki in 1970. In 1989, he was appointed Deputy Manager of the Production Engineering Division of Suzuki. He was made Deputy General Manager in the Production and Engineering Division in 1995, before being transferred to the Kosai Plant in 1997 as General Manager. He was appointed as Plant Manager of the Kosai Plant in 2001. Mr. Takeuchi joined us on September 27, 2001 as Director (Production) and with effect from April 19, 2003, he has been appointed Joint Managing Director in charge of Production, Production Engineering, Supply Chain and Engineering. He is responsible for the production activities of our Company. Mr. Takeuchi is also the occupier of our factory under the Factories Act, 1948. Motohiro Atsumi, Director (Finance), age 40, is a Graduate from the Department of Administration Engineering at the Keio University, Japan. Mr. Atsumi has over 17 years of experience in the automobile industry, in purchasing and finance. He joined Suzuki in 1986 and was assigned to the Purchasing Department. In 1992, he was transferred to the Accounting Department and appointed Assistant Manager in 1996 and Deputy Staff Manager in 2002. Mr. Atsumi joined us on September 16, 2002. As head of our Finance division and as a specialist in costing, he is responsible for our finance-related activities. Osamu Suzuki, age 73 years, is the Chairman and Chief Executive Officer of Suzuki Motor Corporation, Japan. Mr. Suzuki was appointed as a Director of our Company with effect from May 24, 1983. Hirofumi Nagao, age 50 years, was appointed as a retiring part-time Director of our Company with effect from May 30, 2002. Mr. Nagao joined Suzuki in 1978. Mr. Nagao is currently the General Manager (China/West Asia Automobile Marketing Division), Overseas Automobile Marketing Division II in Suzuki. 80

S. V. Bhave, age 54 years, is a Joint Secretary, Ministry of Heavy Industries & Public Enterprises, GoI. Mr. Bhave is an IAS Officer. Mr. Bhave was appointed as a retiring part-time Director of our Company with effect from March 25, 2003.

Compensation of Our Directors

For details of compensation of our whole-time Directors, please refer to the section entitled Statutory and Other Information. Our part-time Directors do not receive any remuneration from us.

Shareholding of Our Directors

Our Articles do not require our Directors to hold any equity shares in our Company. The following table details the shareholding of our Directors: Name of Directors Number of equity shares of Rs.5 each (Prior to Issue) 20 20 20 20 Number of equity shares of Rs.5 each (Post Issue) 20 20 20 20

Mr. Shinzo Nakanishi (Chairman) Mr. Kinji Saito Mr. Shinichi Takeuchi Mr. Motohiro Atsumi

Term of Office
In accordance with the Act, all our Directors except Mr. Nakanishi, Mr. Khattar, and Mr. Suzuki, are required to retire by rotation. For the details of the terms of office of the above directors, please refer the section Statutory and Other Information.

Changes in Our Board of Directors during the Last Three Years

Changes to our Board of Directors during the last three years are as follows: Name Yoshio Saito Junzo Sugimori Pradeep Kumar K. Kumar Tsuneo Kobayashi A.R. Halasyam A.V. Singh K.K. Jaswal Yuichi Nakamura Shinichi Takeuichi Hirofumi Nagao Jagdish Khattar Jagdish Khattar Kinji Saito Isao Ozawa Motohiro Atsumi Shinzo Nakanishi S.V. Bhave Junzo Sugimori V.K. Malhotra Date of Appointment June 9, 1998 June 9, 1998 June 9, 1998 June 22, 1998 September 8, 1998 September 8, 1998 September 27, 1999 January 25, 2000 September 21, 2001 September 27, 2001 May 30, 2002 August 18, 1999 May 30, 2002 May 30, 2002 May 30, 2002 September 16, 2002 May 28, 2002 March 25, 2003 April 19, 2003 July 19, 2002 May 21, 2003 81 August 31, 2002 May 30, 2002 Date of Cessation May 27, 2002 May 27, 2002 September 11, 2002 June 8, 2001 September 15, 2001 September 7, 2001 October 25, 1999 July 2, 2002 April 18, 2003 Reason Resignation Completed tenure Resignation Superannuation Resignation Superannuation Resignation Resignation Resignation Appointed in place of Dr. K. Kumar Appointed pursuant to RJVA Resignation pursuant to RJVA Appointed pursuant to RJVA Appointed in place of Mr. Sugimori Resignation Appointed in place of Mr. Ozawa Appointed pursuant to RJVA Appointed in place of Mr. P Kumar . Appointed in place of Mr. Yuichi Nakamura Resigned

Corporate Governance
The guidelines in respect of corporate governance will be applicable to us immediately upon the listing of our equity shares on the Stock Exchanges. We undertake to adopt the Corporate Governance Code as per clause 49 of the listing agreement of the Stock Exchanges prior to entering into the listing agreement. We intend to comply with SEBI guidelines in respect to corporate governance, especially with respect to the appointment of independent directors to our Board and constituting our board committees: the Shareholding/Investor Grievance Committee; and the Compensation Committee. The Company has an Audit Committee whose members are as follows: 1. 2. 3. Shinzo Nakanishi Vinod Kumar Malhotra (since resigned) Shinichi Takeuchi

Key Managerial Personnel

Amitava Nandy, Executive Director (Production), age 55, has a Bachelors degree in Mechanical Engineering and a Masters degree in industrial engineering from the Indian Institute of Technology, Kanpur. Mr. Nandy has more than 31 years of experience with various companies. Prior to joining us, he served in the following positions: as systems analyst in the Management Services Division of Air India from 1971 to 1974; as consultant with the Management Services Division of A F Ferguson & Co. from 1974 to 1975; and as Manager at Bharat Heavy Electricals Ltd from 1976 to 1982. Mr. Nandy joined us on April 29, 1982 in the production engineering division. Mr. Nandy has held many positions in our Company, such as Regional Manager (Sales), head of Spares, head of Human Resources, and is now responsible for, and head of, Production. As reported in the directors report of our Company for fiscal 2003, under Section 217 (2A) of the Companies Act, 1956, in fiscal 2003, the remuneration of Mr. Nandy was Rs. 3,024,583. S.K. Bhatia, Executive Director, age 57, has a Bachelors degree in Mechanical Engineering from the Indian Institute of Technology, Delhi and a Masters degree in Business Administration from Faculty of Management Studies, Delhi University. Mr. Bhatia has more than 35 years of experience. Prior to joining us, he served at the Ministry of Industry, GoI from 1967 to 1993, where he left as director. Mr. Bhatia joined us on March 24, 1993 as General Manager and was responsible for vendor upgradation. He has since headed Supply Chain and Parts Inspection and is currently on deputation to one of our joint venture companies, Mark Exhaust Systems Ltd, as Joint Managing Director. Masayuki Osada, Executive Director (Engineering), age 53, is a graduate from the Nigata University, Japan. Mr. Osada has over 33 years of experience in the automobile industry. He joined Suzuki in 1972 and was assigned to Body Design Group, Engineering in 1972, and was subsequently promoted to Divisional Manager, Body Design Group, Suzuki. Mr. Osada joined us on April 27, 2003 as Executive Director, (Engineering). Hiromitsu Totsuka, Plant Manager, age 56, is a Graduate from the Shimada-gakuen High School, Japan. Mr. Totsuka has over 36 years of experience in the automobile industry, in the welding function. He joined Suzuki in 1967 and was assigned to the welding shop, Iwata plant. In 1991, he was promoted to a manager. Mr. Totsuka joined us on May 28, 2000 as Suzuki Advisor and was promoted as Plant Manager from April 1, 2003. As reported in the directors report of our Company for fiscal 2003, under Section 217 (2A) of the Companies Act, 1956, in fiscal 2003, the remuneration of Mr. Totsuka was Rs. 3,991,977. C.K. Dave, Chief General Manager (Spares), age 52, has a Masters degree in Mechanical Engineering from the Indian Institute of Science, Bangalore. Mr. Dave has 28 years of experience. Prior to joining us, Mr. Dave served as senior engineer at Bharat Heavy Electricals Ltd from 1975 to 1984. Mr. Dave joined us on November 27, 1984. He was appointed head of Supply Chain in 1996 and is currently the head of Spares since May 2001. S. Maitra, Chief General Manager (Engineering), age 47, has a Bachelors degree in Technology from the Indian Institute of Technology, Delhi and has passed the Intermediate exam of the Institute of Cost & Works Accountants of India. Mr. Maitra has 27 years of engineering experience. Prior to joining us, he served in the following positions: as graduate engineer trainee at GKW Limited from 1976 to 1977, as foreman in charge at Bata India Ltd from 1977 to 1979, as engineer with Tata Engineering & Locomotive Company Ltd from 1979 to 1982, and as senior engineer at Eicher Goodearth Ltd from 1982 to 1983. 82

Mr. Maitra joined us on July 4, 1983, when he was first appointed head of Quality and Inspection, and later, Production. He currently heads Research and Development and has been head of Engineering since May 2001. As reported in the directors report of our Company for fiscal 2003, under Section 217 (2A) of the Companies Act, 1956, in fiscal 2003, the remuneration of Mr. Maitra was Rs. 2,655,042. M.M. Singh, Chief General Manager (Production Plant 1), age 47, has a Bachelors degree in Engineering from the Birla Institute of Technology (BIT), MESRA, Ranchi. Mr. Singh has 25 years of experience in engineering. Prior to joining us, he served as junior engineer at Tata Engineering & Locomotive Company Ltd from 1978 to 1981 and as assistant engineer at Tata Iron & Steel Company Ltd from 1982 to 1983. Mr. Singh joined us on August 4, 1983. He has since headed Maintenance, Paint Shop operations and Production at Plant 2, and currently heads Production at Plant 1. I.V. Rao, Chief General Manager (Production Engineering), age 50, has a Masters degree in Mechanical design from the Indian Institute of Technology, Kanpur. Mr. Rao has 26 years of experience in engineering. Prior to joining us he served as assistant development engineer at Jyoti Ltd from 1977 to 1979 and as senior engineer at KG Khosla Compressors Ltd from 1979 to 1983. Mr. Rao joined us on May 13, 1983. He headed Engineering for 7 years and was appointed head Production Engineering in May 2001. A.K. Talukdar, Chief General Manager (Human Resources), age 47, has a bachelors degree in science with honours from Kolkata University and a post graduate diploma in management from the Indian Institute of Management, Kolkata. Mr. Talukdar has 25 years of experience in human resources. Prior to joining us he served in the following positions: as senior personnel assistant in the human resources department of Indian Aluminium Company Ltd from 1978 to 1981; at BOC India Ltd from 1982 to 1990 where his last assignment was Regional Personnel Manager-West; as personnel manager at Britannia Industries Ltd from 1990 to 1994; at Pepsi Foods Ltd from 1994 to 1997 where his last assignment was General Manager-Employee Relations; and as director of human resources at Whirlpool of India Ltd from 1997 to 1999. Mr. Talukdar joined us on August 13, 1999 and is head of Human Resources. R. Dayal, Chief General Manager (Supply Chain), age 50, has a Bachelors degree in Mechanical Engineering (with Honours) from the Birla Institute of Technology & Science (BITS), Pilani. Mr. Dayal has 29 years of professional experience. Prior to joining us he served as foreman at Hindustan Motors Ltd from 1974 to 1979 and as senior engineer at Bharat Heavy Electricals Ltd from 1980 to 1985. Mr. Dayal joined us on August 1, 1985. He has headed a number of divisions within our Company, including Parts Inspection, Quality Assurance, and After-Sales Service. Currently, Mr. Dayal heads Supply Chain. As reported in the directors report of our Company for fiscal 2003, under Section 217 (2A) of the Companies Act, 1956, in fiscal 2003, the remuneration of Mr. Dayal was Rs. 2,620,148. K. Kumar, Advisor (Engineering), age 64, is a Graduate in Mechanical Engineering from the University of Delhi, has a Ph.D from the Indian Institute of Technology and has a Masters in Science from Council of National Academic Awards. Dr. Kumar has more than 38 years of professional experience. Prior to joining us he has served in the following positions: as assistant divisional mechanical engineer at Northern Railways from 1964 to 1970; as deputy director at Research Design & Standards Organisation, Lucknow from 1970 to 1977; as joint director at Research Design & Standards Organisation, Lucknow from 1977 to 1984; and as additional director at the Ministry of Railways from 1984 to 1985. Dr. Kumar joined us on July 25, 1985. He has headed Engineering and After-Sales Service. He superannuated as Director (Engineering) in June 2001 and has since been retained as Advisor (Engineering) on a contractual basis. As per the Office order no. 305/ 2002 dated June 8, 2002, he will continue to discharge his responsibilities in his present position till further orders. As reported in the directors report of our Company for fiscal 2003, under Section 217 (2A) of the Companies Act, 1956, in fiscal 2003, the remuneration of Dr. Kumar was Rs. 4,761,933. A.K. Mishra, Chief General Manager (Vigilance), age 57, has a Masters degree in Science (Defence) and Post graduate diplomas in Management (HR) and Training and Development. Prior to joining us, he served in the Indian Army for 33 years and took premature retirement as a Brigadier on 31 May 1999. Brigadier Mishra joined us on June 15, 1999 and has since been our head of Vigilance on a contractual basis. His contract expires on December 31, 2003.

All key managerial personnel except Dr. K Kumar and Brig. A K Mishra are permanent employees of our Company.
83

Bonus or Profit Sharing Plan for our Key Managerial Personnel

The Incentive Scheme of our Company, which is effective from April 1,1999 till April 1, 2003 is based on productivity, performance and profitability of our Company. Our Company has defined certain parameters for the payment of incentive to the regular employees. The parameters on which the Company gives incentive to the Employees are as follows: 1. 2. 3. 4. 5. 6. Payment for achieving base level performance; Payment for achieving higher than base level performance; Payment for improvement in quality; and Payment for improvement in productive time. Payment linked to performance of individual employee. Payment linked to performance of the Company.

Changes in our Key Managerial Personnel during the Last Three Years
Following are the changes in our key managerial personnel in the last three years: Manager Name Function Human Resources DVM Vigilance DVM Production Plant Manager Production Engineering DVM Marketing Chief General Manager Marketing and Sales Executive Director Executive Director DVM = Divisional Manager Mr. Masayuki Osada April 27, 2003 Appointed Mr. Rohtash Mal November 18, 2000 Resigned Mr. S.M. Kapoor July 2001 Superannuated Mr. Hiromitsu Totsuka April 1, 2003 Promoted as plant manager Brig. Bahri July 21, 1999 End of Tenure Mr. A.K. Talukdar August 13, 1999 Date of Appointment Date of Cessation Reason

84

OUR PROMOTERS
Our promoters are Suzuki and GoI. With 54.2% of our share capital, Suzuki has management control of our operations. GoI holds 45.8% of our share capital, which is expected to reduce to 20.8% after this Offer. The shareholders who will purchase shares pursuant to this Offer may not be in a position to influence any decisions taken by the promoters. In addition, after the completion of this Offer, GoI has the right to sell the remainder of its shareholding. For further details, see Revised Joint Venture Agreement in this section.

Suzuki Motor Corporation

Suzuki Motor Corporation is the largest manufacturer of mini cars in Japan since fiscal 1974, in terms of sales volumes, with a market share of 31.6% in 2002, according to Japan Mini Vehicles Association. Suzuki was also the eleventh largest vehicle manufacturer in the world and the fourth largest manufacturer in Japan in terms of worldwide sales volumes in 2000, according to Automotive Intelligence. In 2002, Suzuki had a 22% share of the market in Asia for vehicles exported from Japan, according to the Japan Automobile Manufacturers Association. Suzuki also manufactures small cars for other manufacturers like General Motors, Nissan and Mazda. In fiscal 2002, Suzuki produced a total of 1,642,468 cars and 1,624,911 motorcycles. In fiscal 2002, Suzuki generated 78.6% of its revenue from car sales and 18.7% of its revenue from motorcycle sales. The break up of Suzukis car sales across different regions is shown below: (In Billions of Yen) Fiscal 2000 Japan Asia Europe North America Other areas
Source: Suzuki Annual Reports

Fiscal 2001 805 143 292 271 89

Fiscal 2002 787 137 331 315 98

790 137 321 192 81

Suzuki is headquartered in Hamamatsu in Shizuoka, Japan. As on July 1, 2002, Suzuki employed about 15,000 employees worldwide and had 6 plants in Japan. In addition, Suzuki products are manufactured in 40 companies in 22 countries around the world including 2 companies in North America, 6 companies in South America, 2 companies in Europe and 22 companies in Asia. Suzuki also has two research and development centres located in Yokohama and Miyakoda, Japan, a training center located in Inasa-gun, Japan and 3 test courses in Ryuyo, Shimokawa and Sagara, in Japan.

History
Michio Suzuki promoted Suzuki under the name Suzuki Loom Works in 1909, in the town of Hamamatsu, Japan. The firm was in the business of manufacturing weaving looms. The firm was incorporated as Suzuki Loom Manufacturing Co. in March 1920. With the objective of diversification, Michio Suzuki decided to enter into the small car business, and built several innovative small car prototypes in the late 1930s. The name of the company was then changed to Suzuki Motor Co., Ltd in June 1954. In 1954 Suzuki was manufacturing 6,000 motorcycles per annum. The company launched its first lightweight car, the Suzulight, in 1955. Over the next few decades, Suzuki gained a reputation as one of the leading manufacturers of small cars. By 1977, Suzuki started selling its outboard motors in the US, maintaining a rich tradition of innovation in all its product offerings. In October 1990, the name of the company was changed to Suzuki Motor Corporation. Some of the other products manufactured by Suzuki include outboard motors, generators, welders, general-purpose engines, boats, motorized wheelchairs, electro-scooters, ultrasonic related products (cleaner, cutter, etc.) and pre-fabricated houses.

Suzuki and Us
Suzuki has always played, and continues to play, an important role in the management of our Company. Some of our key management personnel and technical personnel are deputed to Suzuki. Currently, three of our directors are also directors of Suzuki. In 1982, Suzuki acquired a 26% stake in our Company. Since then, Suzuki has increased its stake in our Company and currently holds about 54.2%. Suzuki provided us access to some of its products, licensed its technology, shared with us its best practices in manufacturing processes and helped us develop and manage our supply chain. Suzuki has also provided support in training our personnel and integrating Japanese management practices such as Kaizen in our plant. Due to our collaborative efforts, we believe that we have become more efficient than many of Suzukis plants worldwide. 85

Board of Directors
The Board of Directors, under the guidance of Chairman and CEO Osamu Suzuki, currently manages Suzuki. The Board of Directors of Suzuki as on July 1, 2002 is as follows: Name Osamu Suzuki Masao Toda Akira Tsutsui Sokichi Nakano Chuichi Mizuguchi Katsuhiro Yokota Hiroshi Tsuda Shunichi Wakuda John F. Smith Jr. Toshitaka Suzuki Tsuneo Kobayashi Takahira Kiriyama Osamu Matsuoka Kiyoshi Aoshima Akio Kosugi Junzo Sugimori Yasuhiro Yamada Takashi Nakayama Kazuyoshi Suzuki Sigeaki Hamada Sadayuki Inobe Masanori Atsumi Kenji Yamamoto Shinzo Nakanishi Yoshihiko Kakei Akihiro Sakamoto Katsumi Takata Hirotaka Ono
Source: Suzuki annual report FY2002

Designation Chairman & CEO President & COO Executive Vice President and Assistant to the President Executive Vice President and Assistant to the President Senior Managing Director Senior Managing Director Senior Managing Director Senior Managing Director Director Managing Director Managing Director Managing Director Managing Director Managing Director Managing Director Director Director Director Director Director Director Director Director Director Director Director Director Director

86

Shareholding
The shareholding pattern of Suzuki as on March 31, 2002 is as follows: Name of Shareholder General Motors of Canada Limited The Chase Manhattan Bank N.A., London UFJ Bank Limited The Mitsubishi Trust and Banking Corporation The Asahi Bank, Limited The Nichido Fire and Marine Insurance Co. Limited Japan Trustee Services Bank, Limited The Shizuoka Bank, Limited UFJ Trust Bank Limited The Chuo Mitsui Trust and Banking Co., Limited Other individuals Total
Source: Suzuki Annual Report

Number of shares owned 108,660,000 35,373,000 23,756,000 17,819,000 13,836,000 13,349,000 12,895,000 12,500,000 11,494,000 11,242,000 280,158,074 541,082,074

Percentage Shareholding (%) 20.1 6.5 4.4 3.3 2.6 2.5 2.4 2.3 2.1 2.1 51.8 100.0

Strategic Alliance with General Motors Corporation

Suzuki entered into a business arrangement with General Motors Corporation in 1981. On January 18, 2001, General Motors Corporation increased their shareholding in Suzuki to 20.1%, and became the largest shareholder in Suzuki. Suzuki and General Motors Corporation collaborate in various activities such as joint purchase of components, cost-reductions, product development, development of advanced technologies, sharing of distribution networks and research and development. Suzuki also manufactures a product that is marketed under the General Motors brand name.

Financial Performance
The financial performance of Suzuki on a consolidated basis for the last three years is presented below: (Figures in Million of Yen except per share amounts) FY02 Equity Capital Reserves Misc expenditure Shareholders Equity Sales (Net) Profit after Tax (PAT) Earnings per share (EPS) (Fully diluted) Yen Net Asset Value (NAV) per share yen
Source: Suzuki Annual Reports

FY01 119,629 474,141

FY00 90,546 407,210

119,736 500,268

620,004 1,668,251 22,392 41.16 1,145.86

593,770 1,600,253 20,248 40.24 1,098.09

497,756 1,521,192 26,886 55.32 1,017.57

License Agreements with Suzuki

1. License agreements dated October 2, 1982 as amended on April 24, 1989, December 14, 1992 and March 26, 1997 supplemented by licence agreement dated July 13, 1998:

87

We entered into a license agreement to obtain the license and the right to use the technical know-how required for the manufacture, sale and after sale service of the five series of motor vehicles in India. Suzuki had agreed to provide technical collaboration and license necessary for the engineering, design and development, manufacture, assembly, testing, quality control, sale and after-sales service of the products and parts. We have agreed to maintain production standards and quality comparable to the standards of Suzuki. Suzuki has also agreed to export parts manufactured by us. Suzuki has the right to discontinue the manufacture of any product and replace a line of product with any other line of product manufactured by us. We retain the right to continue the manufacture of such discontinued lines of products and Suzuki has agreed to grant all assistance in this regard. Any improvements in any of the products manufactured discovered by us, are to be given to Suzuki along with all related information. We are allowed to sublicense the rights under this Agreement to entities that will manufacture parts in India for us, with Suzukis consent. Suzuki has granted us a non-exclusive right to export the products covered by these agreements to all countries other than those where Suzuki manufactures the products and parts or where a Suzuki licensee already exists. We are required to give Suzuki prior notice 180 days before exporting to any country and to follow Suzuki quality requirements. The obligations relating to confidentiality of the information that Suzuki makes available and its intellectual property, under the agreement, will continue even after the termination of the agreement. We have agreed to indemnify Suzuki from any product liability claims in connection with the products or parts covered by the agreement, and will procure insurance policies for the benefit of Suzuki at our cost. We have approved the extension of the validity of License Agreements dated October 2, 1982, April 24, 1989 and December 14, 1992, with Suzuki for a further period of three years from the last date of expiry in each case. The License Agreement dated March 26, 1997 is due to expire only in December 2003. Suzuki will not extend the royalty provisions of the license agreement for Maruti 800, Omni, Gypsy, Esteem and Zen and thus not charge royalty for these models. In case of introduction of new technology or upgradation in specifications due to change in market conditions or requirement of new laws/norms, fresh proposal for extension of the royalty provisions in the license agreements shall be made. Suzuki agreed to supply us technical know-how, assistance and information for the manufacture of two new series of cars. The term of the license is for a period of 10 years from the date all approvals are obtained. The agreement shall be automatically extended for successive periods of five years unless either party terminates with written notice to other party at least six months before the end of the current period. Under this agreement, we pay Suzuki a lumpsum of Japanese Yen 400,000,000 and a running royalty based on a percentage of prices of products and components. We have agreed to indemnify Suzuki from any product liability claims in connection with the products or parts covered by the agreement, and will procure insurance policies for the benefit of Suzuki at our cost. Suzuki has granted us a non-exclusive right to export the products covered by these agreements to all countries other than those where Suzuki manufactures the products and parts or where a Suzuki licensee already exists. We are required to give Suzuki prior notice 180 days before exporting to any country and to follow Suzuki quality requirements. In February 2000, Suzuki permitted us to export the products licensed under this agreement to Bangladesh, Sri Lanka, Bhutan, Nepal and Mauritius. Suzuki agreed to supply us technical know-how, assistance and information for the manufacture of two new series of cars. The term of the license is for a period of 10 years from the date all approvals are obtained. The agreement shall be automatically extended for successive periods of five years unless either party terminates with written notice to other party at least six months before the end of the current period. Under this agreement, we pay Suzuki a lumpsum of Japanese Yen 300,000,000 and a running royalty based on a percentage of prices of products and components. We have agreed to indemnify Suzuki from any product liability claims in connection with the products or parts covered by the agreement, and will procure insurance policies for the benefit of Suzuki at our cost. We have no right to export the products licensed under this agreement. In February 2000, Suzuki permitted us to export products licensed under this agreement to Bangladesh, Sri Lanka, Bhutan, Nepal and Mauritius. 88

2.

License agreement dated December 15, 1998.

q q

3.

License agreement dated August 3, 1999.

q

4.

License agreement dated January 9, 2001.

q q

Suzuki agreed to supply us technical know-how, assistance and information for the manufacture of a new series of cars. The term of the license is for a period of 10 years from the date all approvals are obtained. The agreement shall be automatically extended for successive periods of five years unless either party terminates with written notice to other party at least six months before the end of that current period. Under this agreement, we pay Suzuki a lumpsum of Japanese Yen 200,000,000 and a running royalty based on a percentage of prices of products and components. We have agreed to indemnify Suzuki from any product liability claims in connection with the products or parts covered by the agreement, and will procure insurance policies for the benefit of Suzuki at our cost. We have no right to export the products licensed under this agreement without the prior approval of Suzuki. In July, 2002, Suzuki permitted us to export products licensed under this agreement to fifteen countries.

Under all the license agreements we have agreed not to enter into any other license or export or distribution or agency agreement with respect to India with any manufacturer or seller of motor vehicles during the term of the above licenses wherein we would directly or indirectly manufacture, assemble, sell, distribute or promote the sale of any product which is in competition with any of the products or parts covered by the license agreements. We have a non-exclusive right to export our products. Under all the licence agreements we have agreed not to export our products to countries where Suzuki has its own manufacturing facilities or another licensee for the products, without the concurrence of Suzuki. Additionally, we cannot directly or indirectly, in India, sell, distribute or promote the sale of any such competing product. We are however permitted to sell any motor vehicles directly or through a third party to GoI or any of its agencies or any company, a majority of whose equity is owned by GoI. In all the above license agreements, we have recognised Suzukis ownership of the licensed information and licensed trademarks under the licenses and have undertaken not to apply for patents on such intellectual property of Suzuki without its consent. We are required to notify Suzuki immediately if we discover an infringement of any licensed information. Suzuki has certified to us that no third party has raised any patent claim against them, which claim might have a material adverse effect on the manufacture, use, sale, repair or service of the products or parts by or for us. Suzuki has agreed to make reasonable efforts to provide us with a technical solution that will not violate the relevant patent if any claim is raised during the term of the agreement, and cannot be settled with the relevant third party. Suzuki will cooperate with us in the defence of law suits alleging infringement by us of a third partys patents in respect of the products or parts manufactured in strict conformity with Suzukis licensed information. Suzuki has provided no other warranty with respect to products, parts, or licensed information or trademarks. Suzuki will not be liable to us for damages arising from the use of the licensed information. Suzuki also disclaims responsibility for representations and warranties made by us with respect to the products or parts manufactured, assembled or sold by us. We have agreed to indemnify Suzuki for claims arising from our representations or warranties. If any third party brings an action for patent or trademark infringement against either Suzuki or us, both parties shall consult each other regarding the resolution of the matter. We shall cooperate with Suzuki to make a proper defence against any action brought against Suzuki alleging infringement of any patent or trademark owned by others by any act of ours. We have agreed not to use the licensed information in connection with or in the manufacture, assembly and/or the sale of any product other than those products or parts covered by the agreement.

89

Discounts from Suzuki

Suzuki regularly grants our Company discounts in respect of components imported from them. The details of the discounts provided by Suzuki are set forth below: S.No 1 2 3 4 5 Model Baleno/ Altura Wagon R All Models Alto Versa Discount rate 10% 5% 3% 5% 10% 5% 6 Alto Export 5% + JPY 30,000 5% + JPY 50,000 JPY 50,000 JPY 50,000 (EU specifications) JPY 30,000 (GCC specifications) Period of discounts From November 1999 January 2000 June 2000 July 2000 September 2001 June 2003 February 2002 December 2002 March 2003 April 2003 To February 2003 February 2003 May 2001 February 2003 May 2003 May 2004 November 2002 February 2003 March 2003 March 2004

Suzuki will provide a 10% discount on knocked down components imported by us, except for components imported for the Alto built for export specifications, for the period April 2003 to March 2005. Thereafter the discounts would be determined subject to market conditions in India. With respect to the Alto model which is built for exports, discounts are already applicable from February 2003 upto January 2004. The value of our purchases of components from Suzuki in the fiscal 2002 and 2003 is Rs. 7,804 million and Rs. 7,902 million respectively. Suzuki will not extend the royalty provisions of the license agreement for Maruti 800, Omni, Gypsy, Esteem and Zen and thus not charge royalty for these models. In case of introduction of new technology or upgradation in specifications due to change in market conditions or requirement of new laws/norms, fresh proposal for extension of the license agreement shall be made. The total expense due to royalty on these models paid by us to Suzuki in the fiscal 2002 was Rs. 779.5 million

Revised Joint Venture Agreement

Suzuki entered into a license agreement (the License Agreement) with us on October 2, 1982. In order for us to implement the License Agreement, we invited Suzuki to become a shareholder in our Company and entered into a Joint Venture Agreement with GoI and Suzuki on October 2, 1982. Pursuant to the Joint Venture Agreement, Suzuki subscribed to 26% of the paid up and issued equity share capital of our Company, which was later increased to 40% in 1988. Suzuki, GoI and we entered into an agreement concerning major policy decisions dated October 2, 1982. This agreement listed the decisions for which the concurrence of Suzuki was required. Suzuki, GoI and we also entered into a Subscription and Amendment Agreement dated June 2, 1992 (Amendment Agreement) whereby Suzuki increased its shareholding in our company to 50%. As part of its ongoing disinvestment program GoI decided to transfer management control to Suzuki by renouncing its share in the rights issue of our Company to Suzuki and entered into the RJVA on May 15, 2002. Suzuki paid Rs 10,000 million as control premium to the GoI and in addition to its own, it also subscribed to GoIs share of the our rights issue. Suzuki agreed to subscribe and pay for 1,216,341 equity shares at the subscription price of Rs. 3,280 per equity share (Rs. 100 being the face value and Rupees Three Thousand One Hundred and Eighty (Rs. 3,180) being the premium). Suzuki became our majority shareholder and now owns 54.2% of our equity shares. The RJVA substituted and replaced, in its entirety, the Joint Venture Agreement as amended subsequently by the Subscription and Amendment Agreement and the Major Policy Decisions Agreement between GoI and the Suzuki. The RJVA and Suzukis subsequent letter dated February 19, 2003 provide that GoI shall divest all of its shareholding or at least 25% of our paid up share capital in a public offer through price discovery by way of a book building process by July 31, 2003 in one tranche. GoI has the option to extend the time for completing the offer upto December 31, 2003.

90

The RJVA also provides that the minimum floor price for a bid for our equity shares of face value Rs. 100 shall be Rs. 2,300. Suzuki has agreed that if the Offer Price for this Offer were fixed at the Floor Price, Suzuki would bid for any shortfall in the demand for the Offer. Please see Terms of the Offer on page 220 of this Red Herring Prospectus. After the completion of this Offer, GoI has the right: (i) to sell the remainder of its shareholding in our Company on any Indian stock exchange within twenty four (24) months commencing from the date of the listing; or

(ii) by exercising its put option under the RJVA to cause Suzuki to purchase its unsold equity shares. GoI may exercise this put option at any time after four months from the date of listing of our equity shares upto the expiry of twenty four months after the date of listing of our equity shares. The RJVA additionally provides that no equity share held by GoI can be transferred by or on behalf of GoI without the written consent of Suzuki. The RJVA provides that GoI is entitled to divest its equity shares in the Indian market subject to the restriction that no person shall hold more than 5% of the total paid up equity shares except for Indian public financial institutions, multilateral and bilateral development financial institutions, scheduled commercial banks, mutual funds, foreign institutional investors and foreign venture capital investors, and venture capital funds registered with SEBI may hold 10% of the equity shares. By entering into the RJVA, subject to certain restrictions in the RJVA, Suzuki has among other rights, the right to nominate a majority of the directors on our Board. The chairman of our Board has a casting vote in a board meeting. The RJVA also provides that our managing director will be our chief executive officer and is vested with substantial operational management powers, subject to the overall superintendence, direction and control of our Board and exercise of such powers by the Board. As per the RJVA, prior to December 31, 2003 and so long as GoI holds 25% of our equity shares, GoI has the right to nominate for appointment two directors on our Board. After GoIs right to appoint two directors ceases, so long as GoI holds upto 10% of our equity shares, or until the end of the period of 12 months after the expiry of the last put option under the RJVA (whichever is earlier), GoI has the right to appoint one (1) director on our Board. In addition as per the RJVA, the affirmative rights of GoI will decline with time and these rights will cease after December 31, 2003. The RJVA will terminate automatically and all rights of GoI would cease once the GoI shareholding reduces to less than 10%.

91

GROUP COMPANIES
Our group companies comprise 3 wholly owned subsidiaries, 16 companies in which we have joint venture participation and 1 company in which Suzuki (and not Maruti) has joint venture participation. The list of our group companies and the relationships with them is enclosed below: Sl. Name of Company No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Maruti Insurance Brokers Limited Maruti Insurance Distribution Services Limited True Value Solutions Limited Asahi India Glass Limited Bharat Seats Limited Caparo Maruti Limited Citicorp Maruti Finance Limited Climate Systems India Limited Denso India Limited J.J Impex (Delhi) Private Limited Jay Bharat Maruti Limited Krishna Maruti Limited Machino Plastics Limited Mark Auto Industries Limited Mark Exhaust Systems Limited Maruti Countrywide Auto Financial Services Limited Nippon Thermostat (India) Limited Sona Koyo Steering Systems Limited Suzuki Metal India Limited Subros Ltd Relationship Subsidiary Subsidiary Subsidiary Associate Associate Associate Associate Associate Associate Joint Venture Associate Associate Associate Associate Joint Venture Associate Associate Associate Associate Suzuki group company Percentage of ownership interest held by us 100.00 100.00 100.00 12.00 14.81 20.00 26.00 39.00 10.27 49.13 29.28 13.14 15.35 33.89 44.37 26.00 10.00 7.85 49.00 Nil

Our Subsidiaries
We have the following wholly owned subsidiaries:
q q q

Maruti Insurance Brokers Ltd; Maruti Insurance Distribution Services Ltd; and True Value Solutions Ltd

The details of our subsidiaries are as under:

Maruti Insurance Brokers Limited (MIBL)

MIBL was incorporated on January 14, 2002 as a wholly owned subsidiary of Maruti with an authorized capital of Rs. 5 million. It obtained the certificate to commence business on May 1, 2002 from the RoC. The company has been established to act as an insurance intermediary to provide services as brokers, agents, insurance consultants, surveyors, loss assessors and third party administrators. In order to distribute insurance products to Maruti customers and leverage Marutis nationwide dealership network, MIBL has obtained a corporate agency license of National Insurance Company Limited from the Insurance Regulatory Development Authority.

92

The company distributes insurance products of National Insurance under the Maruti Insurance brand. Maruti Insurance was launched nationwide on May 10, 2002 and provides online issuance of policies and cashless transactions for post accident repairs through Maruti dealerships.

Board of Directors
The directors on the Board of the company as on April 30, 2003 were: 1. 2. 3. Ram Suresh Akella; Rajan Walia; and Rajiv Khanna.

Financial Performance
The financial performance of MIBL is as follows: (Rs. in 000s) Financial year ended March 31, 2003 Equity Capital Reserves (Excluding Revaluation Reserve) Income Profit / (loss) after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) (Rs.) 500 7,682 172,692 7,781 155.62 163.74 Period ended March 31, 2002 500 (123) (4) 7.54

Please refer to the section entitled Unconsolidated Financial Statements for the detailed financial accounts

Maruti Insurance Distribution Services Limited (MIDSL)

MIDSL was incorporated on January 14, 2002 as a wholly owned subsidiary of Maruti with an authorized capital of Rs. 5 million. It obtained the certificate to commence business on May 1, 2002 from the RoC, NCT of Delhi and Haryana. The company has been established to act as an insurance intermediary to provide services as brokers, agents, insurance consultants, surveyors, loss assessors and third-party administrators. In order to distribute insurance products to Maruti customers and leverage Marutis nationwide dealership network, MIDSL has obtained a corporate agency license of Bajaj Allianz General Insurance Company Limited from the Insurance Regulatory Development Authority. The company distributes insurance products of Bajaj Allianz under the Maruti Insurance brand. Maruti Insurance was launched nationwide on May 10, 2002 and provides online issuance of policies and cashless transactions for post accident repairs through Maruti dealerships.

Board of Directors
The directors on the Board of the company as on April 30, 2003 were: 1. 2. 3. Surendra Srivastava; D S Kedia; and Vandana Singla.

93

Financial Performance
The financial performance of MIDSL is as follows: (Rs. in 000s) Financial year ended March 31, 2003 Equity Capital Reserves (Excluding Revaluation Reserve) Income Profit / (loss) after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) (Rs.) 500 1179 43,428 1,278 25.56 33.56 Period ended March 31, 2002 500 (123) (4) 7.54

Please refer to the section entitled Unconsolidated Financial Statements for the detailed financial accounts

True Value Solutions Limited (TVSL)

TVSL was incorporated on January 14, 2002 as a wholly owned subsidiary of Maruti with an authorized capital of Rs. 5 million. It obtained the certificate to commence business on May 1, 2002 from the RoC, NCT of Delhi and Haryana. TVSL provides value-added services to owners and users of motor vehicles on matters relating to manpower services with regard to recruitment, training and development. The company also intends to provide services to Maruti, MIDSL and MIBL to promote their business in the areas of pre-owned cars, lease and fleet management, finance and insurance. These services shall include compliance with predefined business processes at the dealership, continuous training of dealer staff in order to ensure quality of operation to ultimately achieve the business objectives of TVSL.

Board of Directors
The directors on the Board of the company as on April 30, 2003 were: 1. 2. 3. Arun Kumar Dey; Satish Chandra; and S Srivathsan.

Financial Performance
(Rs. in 000s) Financial year ended March 31, 2003 Equity Capital Reserves (Excluding Revaluation Reserve) Income Profit / (loss) after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) (Rs.) 500 1,089 9,059 1,244 24.88 31.78 Period ended March 31, 2002 500 (169) (60) 6.42

Please refer to the section entitled Unconsolidated Financial Statements for the detailed financial accounts

94

Our Joint Ventures and Associates

We have signed joint venture agreements for our participation in 16 companies. The details of these companies are presented below: All share quotations are closing share prices from the Stock Exchange, Mumbai.

Asahi India Glass Limited (AIG)

AIG, a joint venture between Maruti, Asahi Glass Company Ltd. (Japan), The Indo-Asahi Glass Company Ltd., B. M. Labroo & Associates was originally incorporated on December 10, 1984 with the name Indian Auto Safety Glass Private Limited. The company changed its name to Asahi India Safety Glass Ltd and was issued a fresh certificate of incorporation by the RoC on February 7, 1986. The company changed its name to Asahi India Glass Ltd and was issued a fresh certificate of incorporation by RoC on September 26, 2002. AIG owns 79.62% of the share capital of Floatglass India Ltd. (FGI), a listed company. The Boards of Directors of AIG and FGI, in its meetings held on January 30, 2003, approved the merger of FGI with AIG subject to the requisite approvals. The proposal envisages amalgamation of FGI with the AIG, following which shares held in FGI by AIG is proposed to be cancelled. The salient features of the proposal as approved by the Boards are as below:
q

Merger to become effective from April 1, 2002 and thus, after requisite approvals, the merger will allow corporate tax benefits retrospectively from that date. AIG shares valued at two times FGI shares. Hence a swap ratio of 1 equity share of AIG for every 2 equity shares of FGI has been recommended. The Boards have approved part equity and part preference shares (in lieu of cash) swap.

The shareholders and the creditors of the company have also approved the merger. The merger process, which has now commenced, is likely to be completed by November 2003. AIG has been incorporated for the purpose of setting up a tempered glass unit to primarily provide for our needs and in general for the automobile industry. Under the joint venture agreement dated September 14, 1985 with regard to AIG, we have a right to appoint two out of twelve directors to the board of directors of AIG on the basis that for every 10% of the equity shareholding, there should be one director on the board. As long as we are party to the agreement, our concurrence is required for all major policy decisions covering certain limited areas such as capital expenditure in excess of Rs. 1 million, sale and disposal of assets. We have agreed to give the first preference to purchase tempered glass from AIG. AIG is required to manufacture tempered glass to meet our specifications and requirements. AIG is required to satisfy our requirements for original equipment and spares. After satisfying our requirements, if AIG has excess capacity, AIG may manufacture and sell tempered glass in the open market as per AIGs policy of sale.

Shareholding Pattern as on April 30, 2003

(Face value of the equity shares was changed from Rs. 10 to Re. 1 with effect from October 18, 2002) Name of shareholder Asahi Glass Co. Ltd., Japan (Foreign promoters) Maruti B M Labroo & Associates Public Total Number of shares (face value Re. 1) 17,760,000 8,880,000 17,760,000 29,600,000 74,000,000 % shareholding 24 12 24 40 100

Board of Directors
The directors of the company are: 1. 2. 3. 4. B.M. Labroo; Sanjay Labroo; K. Miyazawa; P Safaya; .L. 95

5. 6. 7. 8. 9.

Arvind Singh; Yuji Hara; Surinder Kapur; Amitava Nandy; Gautam Thapar; and

10. K. Yonamoto .

Financial Performance
(Rs. in Million) FY02 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports of AIG

FY01 37.00 286.20 2,238.60 79.60 21.51 87.35

FY00 37.00 213.40 2,200.36 93.32 25.22 67.68

74.00 309.91 2,331.65 118.62 16.03 51.88

In April 1987, AIG made a public issue of 740,000 equity shares of Rs. 10 each for cash at par aggregating Rs. 7.4 million.

Share Quotation
Highest and lowest price in the last six months Month November 2002 December 2002 January 2003 February 2003 March 2003 April 2003 High (Rs.) 35.60 34.90 39.00 40.00 39.50 42.50 Low (Rs.) 33.00 33.00 34.00 38.30 35.00 36.70

As on May 22, 2003, the closing price of the shares of AIG quoted on the BSE was Rs.48.50.

Bharat Seats Ltd. (BSL)

BSL, a joint venture between Maruti, Suzuki, and Rohit Relan & Associates was incorporated on March 6, 1986. The certificate of commencement of business dated March 18, 1986 has been issued by RoC. BSL is engaged in the business of manufacturing seats to be supplied to us, to be used by us for the manufacture of vehicles. The company is listed on Delhi, Mumbai, and Ahmedabad Stock Exchanges. The joint venture agreement dated May 10, 1988 provides, amongst other things, that we have a right to nominate one out of six directors on the board of BSL, as long as we remain a shareholder of BSL. The chairman shall be nominated upon consultation and agreement amongst us, Suzuki and Rohit Relan & Associates. As long as we hold more than 10% of the total number of issued shares, all major corporate and policy decisions with regard to BSL shall be made only after consultation with us and with our concurrence. BSL shall supply such parts of the four wheeler vehicles as required by Maruti. BSL may engage in only such other business as agreed upon by Maruti, Suzuki and Rohit Relan & Associates.

96

Shareholding Pattern as on May 8, 2003

Name of shareholder Maruti Suzuki Rohit Relan & Associates Non Promoters Total Number of shares (face value Rs. 10) 465,000 465,000 930,000 1,280,000 3,140,000 % shareholding 14.81 14.81 29.62 40.76 100

Board of Directors as on May 8, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. 7. N D Relan; Rohit Relan; S. Takeuchi; C K Dave; Ajay Relan; G. N. Mehra; and P K. Lahiri. .

Financial Performance
(Rs. in Million) FY03 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports/ accounts of BSL

FY02 31.40 130.00 831.57 15.36 4.89 51.40

FY01 31.40 120.96 904.33 11.27 3.59 48.52

31.40 137.49 988.89 14.57 4.64 53.79

In August 1988, the company made a public issue of 2,999,300 equity shares of Rs. 10 each for cash at par which included allotments of 929,300, 465,000 and 465,000 equity shares of Rs.10 each to Indian resident directors, their friends and relations, Maruti and Suzuki respectively. The balance 1,140,000 equity shares of Rs.10 each were offered to the public for cash at par.

Share Quotation
Highest and lowest price in the last six months Month November 2002 December 2002 January 2003 February 2003 March 2003 April 2003 High (Rs.) 20.00 18.10 19.40 18.15 18.05 19.60 Low (Rs.) 16.50 16.50 16.50 16.00 17.00 18.75

As on May 22, 2003, the closing price of the shares of BSL quoted on the BSE was Rs.24.45.

97

Denso India Limited (DIL)

DIL was incorporated on November 22, 1984 with the name SRF NipponDenso Limited. The name of this company was changed to Nippon Denso India Limited and a fresh certificate of incorporation was granted by RoC on October 19, 1994. The company changed its name to Denso India Limited and a fresh certificate of incorporation was granted by RoC on October 1, 1996. The company has been set up for the purpose of manufacturing, assembling and selling in India and exports to the other countries, parts and components for automobiles, trucks, buses, motorcycles and other vehicles. The equity shares of the company are listed on the Delhi, Mumbai, Chennai and National stock exchanges. Maruti entered into a joint venture agreement dated April 1, 1993 with NipponDenso Company Ltd and Sumitomo Corporation. Pursuant to the terms of the agreement, we have a right to nominate one out of ten directors on the board of DIL on the basis of the respective shareholding ratio of the joint venture parties. Certain matters to be transacted at the board meeting and/or general meeting are subject to prior consultation and written agreement between the joint venture parties.

Shareholding Pattern as on April 30, 2003

Name of shareholder Denso Corporation, Japan Sumitomo Corporation, Japan Asmo Co Ltd, Japan Maruti UTI Public Total Number of shares (face value Rs. 10) 13,362,091 2,862,794 1,393,982 2,862,758 1,819,545 5,578,474 27,879,644 % shareholding 47.93 10.27 5.00 10.27 6.53 20.00 100.00

Board of Directors as on April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. 7. 8. 9. H Hirahata; J S Baijal; Dr. K Kumar; R K Bhatnagar; A C Chakrabortti; H Niwa; K Matsumoto; K Ando (alternate to K Matsumoto); K Matsuyama;

10. T Yoshimoto (alternate to K Matsuyama); and 11. Yasushi Nei (alternate to M Ohta).

98

Financial Performance
(Rs. in Million) FY02 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports of DIL In January 1986, the company made a public issue of 6,131,490 equity shares of Rs. 10 each for cash at par aggregating Rs. 61 million.

FY01 278.79 688.72 2,380.35 68.20 2.45 34.70

FY00 278.79 651.16 1,954.15 14.33 0.51 33.36

278.79 698.67 2,496.66 91.83 3.29 35.06

Share Quotation
Highest and lowest price in the last six months Month November 2002 December 2002 January 2003 February 2003 March 2003 April 2003 High (Rs.) 23.40 25.80 26.70 26.00 24.80 23.95 Low (Rs.) 18.70 21.30 22.10 23.50 20.50 20.65

As on May 22, 2003, the closing price of the equity shares of DIL quoted on the BSE was Rs.26.85.

Jay Bharat Maruti Ltd. (JBML)

JBML was incorporated on March 19, 1987. The certificate of commencement of business was issued by the RoC on April 1, 1987. JBML is engaged in the manufacture and assembly of automotive sheet metal components. Maruti entered into a joint venture agreement dated March 17, 1988 with S. K. Arya. Pursuant to the terms of the agreement, we have a right to nominate three out of twelve directors. We have agreed to give the first preference to purchase items manufactured by JBML, and would keep JBML as the primary source of supply for the products. JBML is required to satisfy our requirements for original equipment and spares. After satisfying our requirements, if JBML has excess capacity, JBML with the prior consent of the joint venture partners may manufacture and sell similar parts in the market or to other automobile manufacturers in India or abroad. In case we introduce any new models, the requirement of components will be given to JBML. The price of such components would be agreed between JBML and ourselves. JBML is required to manufacture the products as per our quality requirements, for which we will provide technical know-how to JBML. After seven years from the date of the agreement, JBML can continue to produce and manufacture under the same name, style and trademark. We have indemnified JBML against claims arising out of JBML manufacturing products as per our drawings, specifications and quality requirements. We have agreed to provide standby water and power on a chargeable basis to JBML from our own facilities.

Shareholding Pattern as on April 30, 2003

Name of shareholder Promoters Non Promoters (Institutional investors, Banks, FIIs and FIs Others (Private corporate bodies, Indian public, NRIs/OBCs Total Number of shares (face value Rs. 10) 31,70,201 1,21,075 21,21,224 5,412,500 % shareholding 58.47 2.24 39.19 100.00

99

Board of Directors as on April 30, 2003

The directors on the board are: 1. 2. 3. 4. 5. 6. 7. F.C. Singhal; S.K. Arya; S. Maitra; U.C. Aggarwal; D.P Agarwal; . S.D.S. Mongia; and S.P Arya. .

Financial Performance
(Rs. in Million) FY03 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports/ accounts of JBML

FY02 54.13 181.67 2797.82 19.36 3.58 43.56

FY01 54.13 263.08 2457.59 21.89 4.04 58.60

54.13 198.17 3117.27 33.60 6.21 46.61

In September 1988, the company made a public issue of 1,950,000 equity shares of Rs. 10 each for cash at par aggregating to Rs. 19.5 million.

Share Quotation
Highest and lowest price in the last six months Month November 2002 December 2002 January 2003 February 2003 March 2003 April 2003 High (Rs.) 26.25 27.25 28.85 27.50 27.85 31.80 Low (Rs.) 24.00 24.40 25.50 25.50 24.05 25.00

As on May 22, 2003 the closing price of the shares of JBML quoted on the BSE was Rs.35.

Machino Plastics Limited (MPL)

MPL a joint venture between Maruti, Suzuki, Machino Techno (Sales) Pvt. Ltd. and M D Jindal was incorporated on April 2, 1986. The certificate of commencement of business dated April 2, 1986 has been issued by the RoC. The company has been set up to undertake the business of manufacture of injection plastic parts in India to be supplied to us for the manufacture of four-wheel vehicles. The company can engage in only such other business as will be agreed on among Maruti, Suzuki, and Machino Techno (Sales) Pvt. Ltd. Maruti entered into a joint venture agreement dated May 14, 1987 with Suzuki, Machino Techno (Sales) Pvt. Ltd. Pursuant to the terms of the agreement, we have a right to nominate one out of six directors on the board of MPL, as long as we remain a shareholder of MPL. So long as we hold more than 10% of the total number of the issued shares, all major corporate and policy decisions shall be made after consulting us and with our concurrence. We shall give first preference to MPL to purchase our requirement for injection plastic parts for four wheeler vehicles. MPL may engage in only such other business as is agreed upon among Maruti, Suzuki, Machino Techno (Sales) Pvt. Ltd. 100

Shareholding Pattern as on March 31, 2003

Name of shareholder Maruti Other Indian Promoters Foreign Promoters Public Total Number of shares (face value Rs. 10) 941,700 2,549,110 941,700 1,703,046 6,136,800 % shareholding 15.35 41.53 15.35 27.77 100.00

Board of Directors as of April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. 7. M.D. Jindal; Sanjiv Jindal; Shinichi Takeuchi; G.C. Dwivedi; H.C. Bhasin; R.L. Gaggar; and Harbhajan Singh.

Financial Performance
(Rs. in Million) FY02 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports of MPL

FY01 30.68 226.19 567.65 22.33 7.28 83.72

FY00 30.68 210.63 493.58 106.52 34.72 78.64

30.68 212.73 593.64 23.16 7.55 79.33

In January 1989, MPL made a public issue of 2,079,993 equity shares of Rs. 10 each for cash at par which included allotments of 644,993, 322,500 and 322,500 equity shares of Rs.10 each to Indian resident directors, their friends, relatives and private promoters, Maruti and Suzuki respectively. The balance 790,000 equity shares of Rs.10 each were offered to the public for cash at par.

Share Quotation
Highest and lowest price in the last six months Month November 2002 December 2002 January 2003 February 2003 March 2003 April 2003
As on May 22, 2003, the price of the shares of MPL quoted on the BSE was Rs.18.45.

High (Rs.) 18.20 19.20 18.80 16.10 13.80 14.70

Low (Rs.) 14.40 16.00 15.70 13.30 12.50 12.50

101

Sona Koyo Steering Systems Ltd (SKSS)

SKSS a joint venture between Maruti and Dr. Surinder Kapur and associates was incorporated as Sona Steering Systems Ltd on June 14, 1984. The certificate of commencement of business dated September 20, 1985 has been issued by the RoC. It changed its name to Sona Koyo Steering Systems Ltd and a fresh certificate of incorporation was issued by the RoC on September 18, 1998. SKSS manufactures steering gear systems. SKSS is listed on Mumbai, Delhi, Kolkata, Bangalore, Ludhiana and Ahmedabad Stock Exchanges. The joint venture agreement dated 4th February, 1986 provides among other things for its management. Pursuant to the terms of the we have a right to appoint one director to the board of directors of SKSS, so long as the total number of directors, excluding the directors nominated by the financial institutions / banks, is not more than ten. In the event this number exceeds ten, additional representation on the board of directors shall be determined in consultation with Dr. Surinder Kapur. We have agreed to give the first preference to purchase steering gear systems from SKSS. SKSS will endeavour to meet our total requirement for steering gear systems, both original equipment and spares.

Shareholding Pattern as of March 31, 2003

Name of shareholder Dr. Surinder Kapur & Associates Maruti Public Total Number of shares (face value Rs. 10) 3,573,955.00 690,000 4,529,445 8,793,400 % shareholding 40.64 7.85 51.51 100.00

Board of Directors as of April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. 7. 8. 9. Dr. Surinder Kapur; A.K. Jain; Kiyoshi Takeda; Jugmohan Kapur; B.L. Passi; Lalit Suri; Chander Uday Singh; Ravi Bhoothalingam; and P K. Chadha. .

Financial Performance
(Rs. in Million) FY03 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports / accounts of SKSS

FY02 87.93 391.07 2,047.67 47.72 5.43 54.47

FY01 87.93 529.08 2,135.36 17.79 2.02 70.17

87.93 393.54 2,187.53 60.60 6.89 54.75

In August 1991, the company made a public issue of 2,300,000 14% partly convertible debentures of Rs. 40 each for cash at par aggregating to Rs. 92 million. 102

Share Quotation
Highest and lowest price in the last six months Month November 2002 December 2002 January 2003 February 2003 March 2003 April 2003
As on May 22, 2003, the closing price of the shares of SKSS on the BSE was Rs.104.

High (Rs.) 55.25 55.25 60.00 67.75 69.30 83.65

Low (Rs.) 44.00 40.00 52.15 52.00 58.00 57.00

Caparo Maruti Ltd. (CML)

CML, a joint venture between Maruti, Caparo Group Ltd., M. D. Jindal and associates, was incorporated on April 6, 1994. The certificate of commencement of business dated July 5, 1994 has been issued by the RoC. CML manufactures sheet metal sub-assemblies and components. Maruti entered into a joint venture agreement dated January 7, 1994 with Caparo Group Ltd. and M.D. Jindal. Pursuant to the terms of the agreement, we have a right to appoint two out of twelve directors to the board of directors of CML. CML is required to satisfy our requirements for original equipment and spares. After satisfying our requirements, if CML has excess capacity, CML with the prior consent of the joint venture partners may manufacture and sell similar parts in the market or to other automobile manufacturers in India or abroad. We have agreed to supply standby water and power from our facilities on a chargeable basis to CML. We have also indemnified CML against any claim that may arise out of CMLs manufacture of products as per drawings, specifications and quality standards specified by us.

Shareholding Pattern as of April 30, 2003

Name of shareholder Caparo India Ltd (UK) Maruti Udyog Ltd Machino Plastic Ltd Machino Finance Pvt. Ltd Others Total Number of shares (face value Rs. 10) 74,999,600 25,000,000 12,500,000 12,499,300 1,100 125,000,000 % shareholding 59.99 20.00 10.00 9.99 0.00 100.00

Board of Directors as of April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. M.D. Jindal; Angad Paul; Ambar Paul; Collin G. Steele; Amitava Nandy; and Anil Kr. Asthana.

103

Financial Performance
(Rs. in Million) FY03 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports/ accounts of CML

FY02 125.00 64.50 565.18 31.62 2.53 15.16

FY01 125.00 46.59 410.24 85.71 6.86 13.73

125.00 18.63 719.40 10.29 0.82 11.49

The company has not made any public or rights issue of its equity shares.

Citicorp Maruti Finance Ltd. (CMFL)

CMFL, a joint venture between Maruti and Citicorp Overseas Investment Corporation Ltd, was incorporated on October 7, 1997. The certificate of commencement of business has been issued on November 27, 1997 by the RoC. CMFL is in the business of providing a full range of consumer finance packages to purchasers of our vehicles. Maruti and Citicorp Overseas Investment Corporation Ltd have entered into joint venture agreement dated September 18, 1997. Pursuant to the terms of this agreement, we have a right to appoint directors on the basis of proportional representation. All decisions of the board of directors shall be taken on the basis of approval by majority vote. There are no financial commitments for either of the joint venture partners other than contributions made to the capital of CMFL. We have agreed to license to CMFL, our trade names and applicable trademarks. The joint venture agreement provides that we will be paid a one-time fee of 0.35 % of the loan value of each loan given for the purchase of cars manufactured by us.

Shareholding Pattern as on April 30, 2003

Name of shareholder Maruti Citicorp Finance (India) Ltd. Total Number of shares (face value Rs. 10) 26,000,000 74,000,000 100,000,000 % shareholding 26.00 74.00 100.00

Board of Directors as on April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. 7. 8. Sarvesh Sarup; Sanjoy Sen; Nanoo Pamnani; Jagdish Khattar; Kinji Saito; N Rajashekaran; P S Jayakumar; and S Venkatachalam.

104

Financial Performance
(Rs. in Million) FY03 Equity Capital Reserves (Excluding Revaluation Reserve) Income Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports/ accounts of CMFL

FY02 1,000.00 -23.65 1,091.64 86.40 0.86 9.76

FY01 1,000.00 -42.28 967.14 84.10 0.84 9.58

1,000.00 -69.26 1,100.67 32.26 0.32 9.31

The company has not made any public or rights issue of its equity shares.

Climate Systems India Ltd. (CSIL)

CSIL, a joint venture between Maruti and the Ford Motor Company (Ford), was incorporated as Climate Control (India) Pvt. Ltd. on December 6, 1991. The company changed its name to Climate Systems India Ltd and was given a fresh certificate of incorporation consequent to change of name dated March 24, 1994. CSIL is in the business of manufacture and sale of mechanically assembled aluminum radiators, primarily for the Indian markets and for exports. Maruti and Ford have entered into a joint venture agreement dated December 17, 1991. Pursuant to the terms of the agreement, we have a right to appoint one permanent director out of the three directors on the board. In the event the board of directors comprises five directors, we shall be entitled to appoint one permanent director and one non-permanent director. The joint venture agreement also provides for CSIL to expand into a full service engine cooling and climate control supplier primarily for the Indian market. We have to purchase from CSIL 100% of its production of mechanically assembled aluminum radiators to be installed in certain vehicles. We have entered into a purchase agreement with CSIL for this purpose. During the term of the agreement, Ford and we will not, directly or through a subsidiary, affiliate or related company manufacture, assemble or sell mechanically assembled aluminum radiators, automotive heaters, and other climate control products in India.

Shareholding Pattern as of March 31, 2003

Name of shareholder Visteon International Holding Inc., USA Maruti Sumitomo Corporation Total Number of shares (face value Rs. 100) 744,800 518,700 66,500 1,330,000 % shareholding 56.00 39.00 5.00 100.00

Board of Directors as of March 31, 2003

The directors on the board were: 1. 2. 3. N.S. Mohan; Jagdish Khattar; and Clifford B. Dawson.

105

Financial Performance
(Rs. in Million) FY03 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports/accounts of CSIL

FY02 133.00 81.58 368.60 13.02 9.79 161.34

FY01 133.00 81.51 438.56 7.01 5.27 161.29

133.00 54.72 357.12 17.36 13.05 14.11

The company has not made any public or rights issue of its equity shares.

J J Impex (Delhi) Private Limited (JJIDPL)

JJIDPL a joint venture between Maruti, Sumitomo Corporation, Maruti Countrywide Auto Financial Services Ltd was incorporated on June 13, 1976. The company is in the business repair and service of our automobiles, sale of spare parts and accessories of motor vehicles and sale and purchase of automobiles and dealers in articles and commodities connected to the business of JJIDPL. Maruti entered into a joint venture agreement dated April 1, 1999 with Sumitomo Corporation and Maruti Countrywide Auto Financial Services Ltd. Pursuant to the terms of the agreement, we have a right to nominate three directors out of seven directors to the board of directors. We have a right to appoint the chairman as well as Managing Director or chief executive officer of JJIDPL. The chairman shall have a casting vote in a board meeting. In order to constitute a valid quorum for a meeting of the board of directors, at least one of our nominee directors should be present. Subject to the due constitution of the quorum, any action of the Board may be taken by an affirmative vote of at least one of our directors. We cannot set up any other joint venture for workshops in Delhi without prior consent from Sumitomo. This restriction applies for five years after activation of the first workshop with Sumitomo and MCFL. We have agreed that for setting up additional workshops after five years, we will consider Sumitomo on merit basis. Outside Delhi, we shall be free to own and set up additional workshops through joint ventures.

Shareholding Pattern as on April 30, 2003

Name of shareholder Maruti Sumitomo Corporation Maruti Countrywide Auto Financial Services Ltd. Sumitomo Corporation India Pvt. Ltd. Total Number of shares (Face value Rs. 10) 4,323,750 3,443,750 152,500 880,000 8,800,000 % shareholding 49.00 39.00 1.73 10.00 100.00

Board of Directors as on April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. 7. Jagdish Khattar; Dr. K. Kumar; Pankaj Narula; Sanjay Gupta; K. Matsuyama; Shoichiro Oka; and Toshio Yoshimoto.

106

Financial Performance
(Rs. in Million) FY03 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) Net Asset Value (NAV) per share
Source: Annual reports/accounts of JJIDPL

FY02 30.50 4.47 127.78 5.05 1.65 11.47

FY01 30.50 -0.89 80.22 1.76 0.58 9.71

88.00 8.76 166.04 6.07 1.77 28.23

The company has not made any public or rights issue of its equity shares.

Krishna Maruti Limited (KML)

KML, a joint venture between Kapur & Associates, Suzuki and Maruti, was originally incorporated on June 25, 1991 in the name of Sona Car Seats Ltd.. The certificate for the commencement of business dated September 17, 1991 has been issued by the RoC. The name of the company was changed to Krishna Maruti Ltd. a fresh certificate of incorporation dated November 15, 1994 was issued by RoC. The company is in the business of manufacturing seats for four-wheel vehicles. Maruti entered into a joint venture agreement dated June 24, 1993 with Suzuki and Kapur & Associates. Pursuant to the joint venture agreement we have the right to nominate one director out of six directors to the board of directors. All major corporate and policy decisions shall be made after consulting us and with our concurrence, so long as we hold more than 10% of the total number of the issued shares. KML may engage in only such other business as will be agreed upon among Suzuki, Kapur & Associates and us from time to time. Suzuki and we have agreed not to undertake any business in competition with KMLs business in India either directly or indirectly. Suzuki and our existing investments are not affected by this restriction.

Shareholding Pattern as on April 30, 2003

Name of shareholder Suzuki Maruti Mr. Ashok Kapur & Associates Fidelity Investments Limited Total Number of shares (Face value Rs. 10) 1,240,000 670,000 1,910,000 1,280,000 5,100,000 % shareholding 24.31 13.14 37.45 25.10 100.00

Board of Directors as on April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. Ashok Kapur; K. Kumar; S. Takeuchi; Sanjay Labroo; Arminder S. Sawhney; and Sunandan Kapur.

107

Financial Performance
(Rs. in Million) FY02 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports/ accounts of KML

FY01 51.00 220.04 1,558.87 17.16 3.36 53.15

FY00 51.00 215.83 1,154.06 67.11 13.16 52.32

51.00 283.82 1,690.52 76.89 15.08 65.65

The company has not made any public or rights issue of its equity shares.

Mark Auto Industries Ltd (MAIL)

MAIL, a joint venture between Maruti, K M Talwar and Rattan Kapur & Associates, was incorporated on March 18, 1986. The certificate of commencement of business dated April 4, 1986 has been issued by the RoC. The company is in the business of manufacturing of automotive assemblies and components. Maruti, K M Talwar and Rattan Kapur & Associates entered into a joint venture agreement dated December 19, 1986. Pursuant to the terms of the agreement, we have a right to nominate two directors out of twelve directors to the board of directors. MAIL will be the primary source of Maruti for products manufactured by MAIL. After meeting Marutis requirements, MAIL shall be free to manufacture the products for the industry in general.

Shareholding Pattern as of May 9, 2003

Name of shareholder Maruti Bodies Corporate Non-Resident Indians Resident Individuals Total Number of shares (Face value Rs. 10) 1,840,000 2,124,150 326,000 1,139,850 5,430,000 % shareholding 33.89 39.12 6.00 20.99 100.00

Board of Directors as of May 9, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. R.P Goyal; . Kallol Roy; S. Natarajan; Amitava Nandy; R. Dayal; and Rattan Kapur .

108

Financial Performance
(Rs. in Million) FY03 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports/ accounts of MAIL

FY02 54.30 140.44 1,270.53 3.02 0.56 35.86

FY01 54.30 137.73 1,220.66 -25.11 25.36

54.3 120.73 1,263.22 6.04 1.11 32.23

The company has not made any public or rights issue of its equity shares.

Maruti Countrywide Auto Financial Services Ltd (MCAFSL)

MCAFSL, a joint venture between Maruti, Housing Development Finance Company Ltd and GE Capital Services India Ltd, was incorporated on June 26, 1995. The company is in the business of leasing and financing of Maruti vehicles, office equipment and machinery. Maruti, Housing Development Finance Company Ltd and GE Capital Services India Ltd. entered into a joint venture agreement dated May 24, 1995. Pursuant to the terms of the agreement, we (along with our dealers) have a right to nominate two out of six directors on the board, as long as our shareholding remains at 10% or more. A valid quorum shall require the presence of at least one of our directors. All decisions of the board of directors shall be taken on the basis of approval by majority vote.

Shareholding Pattern as on April 30, 2003

Name of shareholder Maruti Housing Development Finance Corporation Ltd. GE Capital Services India Ltd. Total Number of shares 10,400,000 14,800,000 10,400,000 40,000,000 % shareholding 26 37 37 100

Board of Directors as on April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. Pramod Bhasin; Jagdish Khattar; Vishal Pandit; Ridha Wirakusumah; and Kinji Saito.

Financial Performance
(Rs. in Million) FY02 Equity Capital Reserves (Excluding Revaluation Reserve) Total Income Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports/ accounts of MCAFSL

FY01 400.00 39.32 625.38 -4.73 10.98

FY00 400.00 100.26 699.57 24.52 0.61 12.51

400.00 37.97 581.60 -44.67 10.95

109

The company has not made any public or rights issue of its equity shares.

Nippon Thermostat (India) Limited (NTIL)

NTIL, a joint venture between Maruti, Nippon Thermostat Corporation and Mr. V. Chidambaram, was incorporated on May 16, 1994. The Additional Registrar of Companies, Tamil Nadu, issued the certificate of commencement of business dated May 23, 1994. The company is in the business of manufacturing of automotive components. Maruti, Nippon Thermostat Corporation and Mr. V. Chidambaram entered joint venture agreement dated April 26, 1995. Pursuant to the terms of the agreement, we have a right to nominate one director out of nine directors on the board of directors. NTIL is required to satisfy our requirements for original equipment and spares. After satisfying our requirements, if NTIL has excess capacity, NTIL with the prior consent of the joint venture partners may manufacture and sell similar parts in the market or to other automobile manufacturers in India or abroad.

Shareholding Pattern as on April 30, 2003

Name of shareholder Nippon Thermostat Corporation Maruti Mrs. Seetha Chidambaram Mr. C. Venkatachalam Others Total Number of shares (Face Value Rs. 10) 375,000 125,000 441,623 232,625 75,752 1,250,000 % shareholding 30.00 10.00 35.33 18.61 6.06 100.00

Board of Directors as on April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. 7. 8. Seetha Chidambaram; Y Onishi; T Hatanaka; I V Rao; J Sridhar; C Venkatachalam; T K Kameshwaran; and Mrs Seetha Chidambaram (appointed as an Executive Chairperson at the Board Meeting held on 03.02.2003).

Financial Performance
(Rs. in Million) FY02 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (excluding excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports of NTIL

FY01 12.50 10.66 75.24 1.45 1.16 18.53

FY00 12.50 10.03 44.53 3.25 2.60 18.02

12.50 14.18 90.15 4.81 3.85 21.34

The company has not made any public or rights issue of its equity shares. 110

Mark Exhaust Systems Ltd (MESL)

MESL, a joint venture between Maruti and Kapur & Associates, was incorporated on November 3, 1993. The certificate of commencement of business dated January 18, 1994 has been issued by the RoC. MESL commenced business on February 12, 1996. The company is in the business of manufacturing of exhaust systems and door sashes. Maruti and Kapur & Associates entered a joint venture agreement dated February 10, 2002. Pursuant to the terms of the agreement, we have a right to nominate three directors out of six directors to the board of directors. As long as we hold at least 26% of the shareholding in MESL, we have the right to appoint the joint managing director. The appointment of the managing director by Kapur & Associates can only be made after consulting us and obtaining our concurrence and approval. So long as we hold, directly or indirectly, at least 26% of the shareholding, all major corporate and policy decisions shall be made by the board of directors only. MESL is required to satisfy our requirements for exhaust systems and door sashes. After satisfying our requirements, if MESL has excess capacity, MESL may supply the excess exhaust systems and door sashes to any other party. However, MESL, with our prior consent, may manufacture and sell similar parts in the market or to other automobile manufacturers in India or abroad. If we grant our consent, MESL has agreed to pay a royalty to us on the sale of such products to customers, other than us. This royalty is 3% (for 4 - wheelers) and 2% (for 2 - wheelers) of ex-factory value of product minus cost of raw material. Kapur & Associates has agreed that it will not directly or indirectly compete with the business of MESL in India except where the investment has been made by Kapur & Associates in companies in India manufacturing exhaust systems or door sashes prior to the date of the agreement.

Shareholding Pattern as of April 30, 2003

Name of shareholder Maruti Sankei Giken Kogyo Co. Ltd. Japan Nissho Iwai Corporation, Japan Chanson Shipping & Packaging Co. Pvt. Ltd. Spinx Auto (India) Pvt. Ltd. Rattan Kapur (HUF) Others Total Number of shares (Face Value Rs. 10) 4,437,465 750,000 375,000 1,075,000 1,875,000 387,465 1,100,070 10,000,000 100.00 5.17 % shareholding 44.37 10.00 5.00

Board of Directors as of April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. 7. R.P Goyal; . Rattan Kapur; S.K. Bhatia; S. Natarajan; K.T.S. Tulsi; Kallol Roy; and Sandeep Chandok.

111

Financial Performance
(Rs. in Million) FY03 Equity Capital Share Application Money Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports/ accounts of MESL

FY02 75.00 25.00 41.97 1,155.10 16.01 2.13 15.60

FY01 75.00 6.25 34.82 1,118.41 15.62 2.08 14.64

100.00 33.34 954.66 4.95 0.50 13.33

The company has not made any public or rights issue of its equity shares.

Suzuki Metal India Ltd (SMIL)

SMIL a joint venture between Maruti and Suzuki was incorporated on November 14, 2002. The certificate of commencement of business dated November 21, 2002 was issued by the RoC. The company has not begun its operations and will be engaged in the business of manufacturing aluminum die casting and low pressure casting engine parts such as cylinder blocks, transmission cases, cylinder heads, etc. for four wheelers and twowheelers. Maruti and Suzuki entered into a joint venture agreement dated November 1, 2002. Pursuant to the terms of the agreement, as long as the shareholding ratio between us and Suzuki remains 49% and 51% respectively, we have a right to nominate two directors and Suzuki has a right to nominate three directors. We have agreed that SMIL will be granted license and rights under a license agreement, to be entered into between Suzuki and SMIL for technical information, which may be construed as conflicting with the rights and licenses already granted under the existing license agreements between Suzuki and us. (See details under section titled License Agreements under Our Promoters). We have agreed that we will not insist on its exclusivity nor claim from Suzuki or SMIL any compensation, fee, royalty or other consideration in connection with the execution of the license agreement and any transactions as contemplated thereby.

Shareholding Pattern as on April 30, 2003

Name of shareholder Suzuki and 5 Nominees Maruti Total Number of shares (Face Value Rs. 10) 12,750,000 12,250,000 25,000,000 % shareholding 51.00 49.00 100.00

Board of Directors as on April 30, 2003

The directors on the board were: 1. 2. 3. 4. Motohiro Atsumi; Tadashi Kitano; S. Takeuchi; and Vipin Dang.

112

Financial Performance
(Rs. in Million) FY03 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) (Rs.) Net Asset Value (NAV) per share (Rs.)
Source: Annual accounts of SMIL

250.00 -2.06 9.92

The company has not made any public or rights issue of its equity shares.

Ventures Promoted by Suzuki

Suzuki has promoted another venture in India, Subros Ltd., the details of which are listed below:

Subros Ltd.
Subros, a joint venture between Denso Corporation, Japan and Suzuki, was incorporated on February 14, 1985 with the name Subros Pvt. Ltd. Subsequently, the name was changed to Subros Ltd and the RoC issued a fresh certificate of incorporation on October 17, 1985. The company is engaged in the business of manufacturing, processing, assembling, repairing or otherwise dealing in many kinds of products, such as air conditioners, water coolers, refrigerators, cooling towers and their allied machines, equipment units, parts and accessories in India and abroad.

Shareholding Pattern as on April 30, 2003

Name of shareholder Promoters and associates Suzuki Denso Corporation, Japan Foreign Financial Institutions Govt./ Banks/ Govt. sponsored Institutions Public (Others) Total Number of shares (Face Value Rs. 10) 2,400,000 780,000 780,000 28,101 143,975 1,866,784 5,998,860 % shareholding 40.00 13.00 13.00 0.47 2.41 31.12 100.00

Board of Directors as on April 30, 2003

The directors on the board were: 1. 2. 3. 4. 5. 6. 7. 8. 9. Ramesh Suri; Lalit Suri; Shradha Suri; Y Nakamura; Hiroshi Uchiyama; P Sabanayagam; G N Mehra; Yasushi Nei; and Shailendra Swarup.

113

Financial Performance
(Rs. in Million) FY02 Equity Capital Reserves (Excluding Revaluation Reserve) Sales (Gross including excise) Profit after Tax (PAT) Earnings per share (EPS) Net Asset Value (NAV) per share (Rs.)
Source: Annual reports of Subros Limited

FY01 59.99 697.65 5,053.51 28.47 4.75 126.29

FY00 59.99 700.59 4,845.18 139.04 23.18 126.78

59.99 548.06 4,784.11 50.81 8.47 101.36

In April 1995, the company made a rights issue of 2,250,000 equity shares of Rs. 10 each for cash at a premium of Rs. 23 per equity share aggregating Rs. 74.25 million to existing shareholders in the ratio of 3 equity shares for 5 equity shares held.

Share Quotation
Highest and lowest price in the last six months Month November 2002 December 2002 January 2003 February 2003 March 2003 April 2003
As on May 22, 2003, the closing price of the shares of Subros on the BSE was Rs. 47.25.

High (Rs.) 31.95 32.40 37.70 35.30 32.50 30.90

Low (Rs.) 28.45 29.65 29.60 31.20 24.75 25.30

Companies with which Suzuki has Disassociated in the Last Three Years TVS Suzuki Ltd
After several years of a joint venture with Sundaram Clayton Limited (SCL) in TVS-Suzuki Limited, now known as TVS Motor Company Limited (TVS), Suzuki and SCL mutually agreed for a gradual and amicable parting of ways in order to pursue their respective business interests. The terms of the amicable disassociation are given below:
q

Suzuki sold its entire shareholding of 6 million shares to Anusha Investments Limited, a subsidiary of SCL, for a consideration of Rs. 90 million. The license agreement between Suzuki and TVS was continued for a period of thirty months from September 27, 2001 to enable TVS to produce the licensed products during the said period under the Suzuki brand name. However, TVS had the option for an early termination of the license agreement. Pursuant to the exercise of this option, the license agreement came to an end on April 30, 2002.

The TVS Group is entitled to continue manufacturing two-wheeler vehicles under its own brand name. While TVS and SCL gave no-objection certificates to Suzuki to establish commercial production and sale of Suzukis two-wheeler and other products in India through such presence as Suzuki may determine, Suzuki contractually agreed to commence commercial production supply and sale of powered two wheelers in India after a period of thirty months from September 27, 2001, i.e. after April 26, 2004.

New Ventures of Suzuki in India

Suzuki has received permission from the FIPB for investment of upto 100% in the paid-up equity capital of a venture in India for the manufacture of two-wheelers.

Companies for which an Application is made to Registrar of Companies for Striking Off Name
No application has been made to the RoC for striking off the name of any promoter group company from its records.

114

RELATED PARTY TRANSACTIONS DETAILS FOR THE YEAR APRIL 2002-MARCH 2003 AND APRIL 2001 MARCH 2002
The Company has entered into the following related party transactions. Such parties and transactions have been identified in accordance with Accounting Standard 18 issued by the Institute of Chartered Accountants of India.
(Rs. in Million) Related Party J.J. Impex (Delhi) Limited Joint Venture April 02March 03 April 01March 02 Mark Exhaust Systems Limited JointVenture April 02March 03 April 01March 02 Maruti Insurance Brokers Limited Subsidiary April 02March 03 April 01March 02 Maruti Insurance Distribution Services Limited Subsidiary April 02March 03 April 01March 02 True Value Solutions Limited Subsidiary April 02March 03 April 01March 02

Relationship Period Outstanding at year end Recoverable by MUL Loans and advances recoverable Amount recoverable Interest recoverable Payable by MUL Amounts payable Proposed Dividend Payable Guarantees given to third parties by the Company Transactions during the year Purchases of Capital items by MUL Sale of goods by MUL Other Income/ Revenue Rendering of services by MUL Finance Income earned by MUL Recovery of Power and Fuel Cost by MUL Dividend received by MUL Royalty received by MUL Commission received by MUL Other Incomes earned by MUL Expenditure Purchases of goods by MUL Royalty paid by MUL Interest paid by MUL Receipt of services by MUL MUL- Maruti Udyog Limited

15 8 -

19 6 -

6 30 1

7 42 5

22 0

0 -

7 0

0 -

0 -

0 -

30 231

79 302

1 -

115

48

41

34

33

2 4 1

1 -

12 -

14 8

0 -

0 -

608 0 -

709 0 -

(Rs. in Million) Related Party Relationship Period Outstanding at year end Recoverable by MUL Loans and advances recoverable Amount recoverable Interest recoverable Payable by MUL Amounts payable Proposed Dividend Payable Guarantees given to third parties by the Company Transaction during the year 51 45 59 39 29 21 65 20 29 62 0 0 0 0 1 0 4 1 33 6 12 299 30 0 0 0 0 Asahi India Glass Limited Associate April 02March 03 April 01March 02 Bharat Seats Limited Associate April 02March 03 April 01March 02 Caparo Maruti Limited Associate April 02March 03 April 01March 02 Climate Systems (India) Limited Associate April 02March 03 April 01March 02 Denso (India) Limited Associate April 02March 03 April 01March 02

116

Purchases of Capital items by MUL Sale of goods by MUL Other Income/ Revenue Rendering of services by MUL Finance Income earned by MUL Recovery of Power and Fuel Cost by MUL Dividend received by MUL Royalty received by MUL Commission received by MUL Other Incomes earned by MUL Expenditure Purchases of goods by MUL Royalty paid by MUL Interest paid by MUL Receipt of services by MUL MUL Maruti Udyog Limited

279

5 5 -

6 2 -

6 6 1 -

5 4 1 -

1 39 9 130

38 8 4 104

3 5 -

2 2 -

8 3 -

8 3 -

816 0 -

787 0 -

780 0 -

516 0 -

588 0 -

293 0 -

342 0 -

270 -

1,133 -

1,135 0 -

(Rs. in Million) Related Party Relationship Period Outstanding at year end Recoverable by MUL Loans and advances recoverable Amount recoverable Interest recoverable Payable by MUL Amounts payable Proposed Dividend Payable Guarantees given to third parties by the Company Transaction during the year 155 673 232 943 109 180 96 254 62 314 46 437 28 165 72 227 2 10 4 29 6 58 237 11 13 0 8 2 0 3 59 0 9 61 1 6 3 0 30 17 1 0 0 0 0 Jay Bharat Maruti Limited Associate April 02March 03 April 01March 02 Krishna Maruti Limited Associate April 02March 03 April 01March 02 Machino Plastics Limited Associate April 02March 03 April 01March 02 Mark Auto Industries Limited Associate April 02March 03 April 01March 02 Nippon Thermostat (India) Limited Associate April 02March 03 April 01March 02

117

Purchases of Capital items by MUL Sale of goods by MUL Other Income/ Revenue Rendering of services by MUL Finance Income earned by MUL Recovery of Power and Fuel Cost by MUL Dividend received by MUL Royalty received by MUL Commission received by MUL Other Incomes earned by MUL Expenditure Purchases of goods by MUL Royalty paid by MUL Interest paid by MUL Receipt of services by MUL MUL Maruti Udyog Limited

21

139

33

4 48 32 4 232

9 45 26 4 252

11 -

14 3 0

4 22 1 -

11 17 1 -

8 21 2

12 14 0

1 -

1 0 -

2,495 0 -

2,082 0 -

1,503 0 -

950 0 -

495 0 -

516 0 -

517 0 -

520 -

85 0 -

99 -

(Rs. in Million) Related Party Sona Koyo Steering Systems Limited Associate April 02March 03 April 01March 02 Citicorp Maruti Finance Limited Associate April 02March 03 April 01March 02 Maruti Countrywide Auto Financial Services Limited Associate April 02March 03 April 01March 02 Suzuki Motor Corporation Holding Company April 02March 03 April 01March 02

Relationship Period Outstanding at year end Recoverable by MUL Loans and advances recoverable Amount recoverable Interest recoverable Payable by MUL Amounts payable Proposed Dividend Payable Guarantees given to third parties by the Company Transaction during the year

1 -

0 1 -

9 -

5 -

6 -

3 -

5 -

4 -

97 -

75 -

7 -

30 -

8 -

23 -

404 229 -

645 199 -

118

Purchases of Capital items by MUL Sale of goods by MUL Other Income/ Revenue Rendering of services by MUL Finance Income earned by MUL Recovery of Power and Fuel Cost by MUL Dividend received by MUL Royalty received by MUL Commission received by MUL Other Incomes earned by MUL Expenditure Purchases of goods by MUL Royalty paid by MUL Interest paid by MUL Receipt of services by MUL MUL Maruti Udyog Limited

121 -

508 -

5 1 -

10 2 -

7 20 30 -

15 16 2 -

14 32 -

10 1 -

1,138 0 -

1,256 0 -

19

47

19

29

8,139 1,129 123

8,034 1,186 108

(Rs. in Million) Related Party Relationship Period Outstanding at year end Recoverable by MUL Loans and advances recoverable Amount recoverable Interest recoverable Payable by MUL Amounts payable Proposed Dividend Payable Guarantees given to third parties by the Company Transaction during the year 0 1 1 400 199 2 1 454 Suzuki Metal India Limited* Fellow Subsidiary April 02March 03 April 01March 02 Suzuki Motor GMBH Deutschland Fellow Subsidiary April 02March 03 Suzuki Do Brazil Automobile Limited Fellow Subsidiary April 02March 03 Suzuki Europe S A Fellow Subsidiary April 02March 03 Suzuki France S A Fellow Subsidiary April 02March 03 Suzuki Italia S P A Fellow Subsidiary April 02March 03

119

Purchases of Capital items by MUL Sale of goods by MUL Other Income/ Revenue Rendering of services by MUL Finance Income earned by MUL Recovery of Power and Fuel Cost by MUL Dividend received by MUL Royalty received by MUL Commission received by MUL Other Incomes earned by MUL Expenditure Purchases of goods by MUL Royalty paid by MUL Interest paid by MUL Receipt of services by MUL

214

19

1 -

5,362

18

*Suzuki Metal India Limited is also an associate of Maruti Udyog Limited.

MUL Maruti Udyog Limited

(Rs. in Million) Related Party Suzuki Australia Pty. Ltd. Fellow Subsidiary April 02March 03 Suzuki Austria Automobil Handels GmBH Fellow Subsidiary April 02March 03 Suzuki GB PLC Magyar Suzuki Corp. Fellow Subsidiary April 02March 03 SuzukiMotor Poland Ltd. Fellow Subsidiary April 02March 03

Relationship Period

Fellow Subsidiary April 02 -March 03

Outstanding at year end Recoverable by MUL Loans and advances recoverable Amount recoverable Interest recoverable Payable by MUL Amounts payable Proposed Dividend Payable Guarantees given to third parties by the Company Transaction during the year 0 0 0 0 0 0 2 -

120

Purchases of Capital items by MUL Sale of goods by MUL Other Income/ Revenue Rendering of services by MUL Finance Income earned by MUL Recovery of Power and Fuel Cost by MUL Dividend received by MUL Royalty received by MUL Commission received by MUL Other Incomes earned by MUL Expenditure Purchases of goods by MUL Royalty paid by MUL Interest paid by MUL Receipt of services by MUL

22

MUL Maruti Udyog Limited

(Rs. in Million) Related Party Relationship Period Outstanding at year end Recoverable by MUL Loans and advances recoverable Amount recoverable Interest recoverable Payable by MUL Amounts payable Proposed Dividend Payable Guarantees given to third parties by the Company Transaction during the year Purchases of Capital items by MUL Sale of goods by MUL 0 122 5,750 508 529 1,138 229 1,563 1,495 199 2,163 1 495 825 13 143 681 48 Suzuki International Europe Gmbh Fellow Subsidiary April 02-March 03 Suzuki Phillipines Inc. Fellow Subsidiary April 02-March 03 Faffin Gesellschaft for factoring & leasing Fellow Subsidiary April 02-March 03 April 02-March 03 April 01- March 02 Total

121

Other Income/ Revenue Rendering of services by MUL Finance Income earned by MUL Recovery of Power and Fuel Cost by MUL Dividend received by MUL Royalty received by MUL Commission received by MUL Other Incomes earned by MUL Expenditure Purchases of goods by MUL Royalty paid by MUL Interest paid by MUL Receipt of services by MUL Note: 1. Maruti Udyog Limited became subsidiary of Suzuki Motor Corpration in May 2002. Hence, subsidiaries of Suzuki Motor Corporation became fellow subsidiaries of Maruti as per AS-18. Therefore, details of transactions with other subsidiaries of Suzuki have been provided only for fiscal 2003. 2. Accounting Standard 18 which refers to related party disclosures became mandatory from April 1, 2001. Therefore details of related party transactions have been prepared from fiscal 2002 onwards. 18,639 1,129 0 169 17,167 1,186 0 184 5 152 90 27 34 66 371 9 166 69 37 27 3 364

Remuneration paid to Key Management Personnel during the year from April 1, 2002 to March 31, 2003 an April 1,2001 to March 31, 2002 is as follows:
Name Jagdish Khattar Yuichi Nakamura T. Kobayashi J Sugimori Kinji Saito A.R. Halasyam Isao Ozawa Motohiro Atsumi Shinichi Takeuchi Dr.Krishan Kumar Shinzo Nakanishi Yoshio Saito Osamu Suzuki Hirofumi Nagao Pradeep Kumar K.K.Jaswal V.K.Malhotra S.V. Bhave Total
122

Designation Managing Director Joint Managing Director (from 21st September 2001) Joint Managing Director (up to 15th September 2001) Director (Marketing & Sales) (up to 27th May, 2002) Director (Marketing & Sales) (from 30th May, 2002) Director (Finance) (up to 7th September, 2001) Director (Finance) (from 30th May 2002 to 31st August, 2002) Director (Finance) (from 16th September, 2002) Director (Production) (from 27th September, 2001) Director (Engineering) (up to 8th June 2001) Chairman (from 30th May 2002) Chairman (up to 27th May 2002) Director Director (from 30th May 2002) Director (up to 11th September 2002) Director (up to 02nd July 2002) Director (from 19th July 2002) Director (from 25th March 2003)

April 02- March 03 8 7 1 6 1 4 7 34

April 01 March 02 3 2 2 4 2 2 1 16

RELATED PARTY TRANSACTIONS DETAILS FOR THE PERIOD APRIL 01 MARCH 02 AND APRIL 02- MARCH 03
(Rs. in Million) Relationship Period Joint Venture April 02March 03 April 01March 02 Subsidiary April 02March 03 April 01March 02 Associate April 02March 03 April 01March 02 Holding Company April 02March 03 April 01March 02 Fellow Subsidiary April 02March 03 Total April 02March 03 April 01March 02

Outstanding at year end Recoverable by MUL Loans and advances recoverable 21 26 29 44 117 401 495 143 Amount recoverable 38 48 124 629 5 4 658 825 681 Interest recoverable 1 5 0 12 43 13 48 Payable by MUL Amounts payable 30 79 1 701 771 404 645 2 1,138 1,495 Proposed Dividend Payable 229 199 229 199 Guarantees given to third parties by the Company 231 302 1,332 1,861 1,563 2,163 Transaction during the year Purchases of Capital items by MUL 121 508 1 122 508 Sale of goods by MUL 82 74 25 455 5,643 5,750 529 Other Income/ Revenue Rendering of services by MUL 5 9 5 9 Finance Income earned by MUL 14 14 0 138 152 152 166 Recovery of Power and Fuel Cost by MUL 90 69 90 69 Dividend received by MUL 27 37 27 37 Royalty received by MUL 1 34 26 34 27 Commission received by MUL 4 62 3 66 3 Other Incomes earned by MUL 1 8 364 356 6 371 364 Expenditure Purchases of goods by MUL 608 709 9,892 8,424 8,139 8,034 18,639 17,167 Royalty paid by MUL 1,129 1,186 1,129 1,186 Interest paid by MUL 0 0 0 0 0 0 Receipt of services by MUL 8 38 76 123 108 169 184 Note: 1. Maruti Udyog Limited became subsidiary of Suzuki Motor Corporation in May 2002. Hence, subsidiaries of Suzuki Motor Corporation became fellow subsidiaries of Maruti as per AS-18. Therefore, details of transactions with other subsidiaries of Suzuki have been provided for the year April 2002 March 2003 only. 2. Accounting Standard 18 which refers to related party disclosures became mandatory from April 1, 2001. Therefore details of related party transactions have been prepared from fiscal 2002 onwards.

123

MUL-Maruti Udyog Limited

Remuneration paid to Key Management Personnel during the year from April 1, 2002 to March 31, 2003 and April 1,2001 to March 31, 2002 is as follows:
Period April 2001 March 2002 April 2002 March 2003 (Rs. in Million) Amount 16 34

HOLDING COMPANY: Suzuki Motor Corporation

FELLOW SUBSIDARIES Suzuki Metal India Limited * Faffin Gesellschaft for factoring & leasing. Magyar Suzuki Corp.

SUBSIDIARIES
Maruti Insurance Brokers Limited Maruti Insurance Distribution Services Limited True Value Solutions Limited

Suzuki Motor Poland Ltd.

Suzuki GB PLC. Suzuki Australia Pty. Ltd. Suzuki Austria Automobil Handels GmBH. Suzuki Motor GMBH Deutschland Suzuki Europe S A Suzuki France S A Suzuki Italia S P A Suzuki Do Brazil Automobile Limiteda Suzuki International Europe Gmbh Suzuki Philippines Inc.

ASSOCIATES Asahi India Glass Limited Bharat Seats Limited Caparo Maruti Limited Climate Systems India Limited Citicorp Maruti Finance Limited Denso India Limited Jay Bharat Maruti Limited Krishna Maruti Limited. Machino Plastics Limited. Mark Auto Industries Limited. Maruti Countrywide Auto Financial Services Limited. Nippon Thermostat (India) Limited Sona Koyo Steering Systems Limited

JOINT VENTURE J.J. Impex (Delhi) Private Limited Mark Exhaust Systems Limited KEY MANAGEMENT PERSONNEL Shinzo Nakanishi (from 30th May 2002) Yoshio Saito (upto 27th May 2002) Jagdish Khattar Yuichi Nakamura (from 21st September 2001) T.Kobayashi (upto 15th September 2001) Kinji Saito (from 30th May, 2002) J. Sugimori (upto 27th May, 2002) Motohiro Atsumi (from 16th September, 2002) Isao Ozawa (from 30th May 2002 to 31st August, 2002) A.R. Halasyam (upto 7th September, 2001) Shinichi Takeuchi (from 27th September, 2001) Dr. Krishan Kumar (upto 08th June 2001) Osamu Suzuki Hirofumi Nagao (from 30th May 2002) Pradeep Kumar (upto 11th September 2002) K.K.Jaswal (upto 02nd July 2002) V.K.Malhotra (from 19th July 2002) S. V. Bhave (from 25th March 2003)

* Suzuki Metal India Limited is an associate of Maruti Udyog Limited and a subsidiary of Suzuki Motor Corporation. For above disclosure, it has been considered as fellow subsidiary of Maruti Udyog Limited.

124

REGULATIONS AND POLICIES

GoI has over the years formulated various regulations and policies for the development of the automobile industry in India.

Foreign Investment Regulations

A new industrial policy was formulated in 1991, in order to implement the economic reforms initiated by GoI. The objective of the policy was to improve the technical capabilities and production capacities of manufacturers in India with minimum foreign exchange outflow. GoI has since allowed foreign investment in various sectors in a phased manner, gradually allowing higher levels of foreign participation in Indian companies. Since March 2002, GoI has permitted equity ownership by overseas manufacturers of up to 100% in entities manufacturing automobiles and components in India.

Fiscal Regulations
In India, various taxes and levies account for around 50% of the acquisition cost of the passenger car. Levies and taxes include excise duty (24%), uniform state sales tax (12%), and road and registration tax (1-4%). From fiscal 2003, Value Added Tax, or VAT, is to be levied across India in a phased manner. VAT is a broad based tax covering the value added in a product at each stage of production and distribution. The automobile industry involves multi-tiered supply chains, with components and sub-assemblies moving from different states to the final assembly plant. It is expected that the introduction of VAT will rationalize the indirect tax structure and ensure that a simple rate on the value addition will be collected.

Trade Regulations
According to the automotive policy formulated by GoI in 1995, global manufacturers were required to sign a memorandum of understanding with the Directorate General of Foreign Trade, in order to obtain licenses to import CKD/SKD kits assembled at plants in India. They were also required to comply with the conditions imposed by GoI with respect to their investment in Indian companies, which included requirements pertaining to levels of indigenisation, minimum capital investment and minimum export obligations. The World Trade Organisation (WTO), of which India is a member, does not allow quantitative restrictions or QRs (such as import licenses and import quotas) on foreign trade. Since April 1, 2001, all QRs on automobiles have been removed and imports of all categories of new and used cars have been allowed. However, the customs duty on imports of new and used cars remains high, with the basic customs duty at the rate of 60% on new CBUs and 25% on CKD and SKD units. In addition, GoI has imposed several conditions on the import of new and used vehicles such as restrictions on the age and the residual life of the used car being imported, restriction on the port through which the imports are allowed, requirements of certification from notified agencies regarding various matters, requirements pertaining to the availability of spares and servicing facilities and a requirement that the used cars can only be exported from the country in which they have been manufactured. It is expected that GoI, in order to fulfill its obligations under the WTO, will gradually have to lower tariffs on the import of components, CKDs and SKDs, which in turn is likely to reduce the input costs of car manufacturers in India.

New Automobile Policy

In March 2002, GoI announced the new automobile policy or NAP The highlights of the policy and their effects on the . manufacturers have been summarized below:
q q q q

requirements of minimum levels of indigenisation were removed; requirements of minimum export commitments were removed; up to 100% equity ownership in Indian companies by overseas manufacturers was permitted; fiscal incentives were provided for cars less than 3.8 meters in length in order to establish India as the centre in Asia for the export of small cars; and tax incentives, automatic approvals for investment by overseas entities in Indian entities and concessional duty on import of equipment were provided to entities setting up of automotive design firms in India.

Environmental Regulations
The Environment Protection Act, Water (Prevention and Control of Pollution) Act and the Air (Prevention and Control of Pollution) Act require companies to obtain consents for emissions and discharge of effluents into the environment. In addition, GoI notified norms relating to emission by vehicles, age of vehicles and specifications about quality and sales of fuels. These environmental regulations are increasingly driving technology innovation in the passenger car market. 125

Environmental Policy
Under the NAP GoI has announced the environmental policy for automobiles. The policys key provisions include: ,
q q q

approval of Mashelkar committee report dated September 2002, or the Mashelkar Committee Report, described below; encouragement for cars using alternative fuel technologies like CNG and electric batteries; adoption of international standards for levy of road tax such as charging higher tax for older cars, in order to discourage the use of old vehicles. At present, road taxes are levied at the time of purchase and are based on the size of the vehicle.

GoI has been developing a regulatory framework to reduce pollution from cars, through a phased introduction of emission norms. The framework as introduced by GoI, based on the recommendations of the Mashelkar Committee Report, is as follows:
q

sale of only Bharat Stage II compliant cars in the cities of Mumbai, New Delhi, Kolkatta and Chennai, as applicable from 2000; Bharat Stage II norms are applicable from April 1, 2003 to the cities of Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra and from April 1, 2005 to the whole of India; Euro Stage III equivalent emission norms are expected to be made applicable to the cities of New Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra by April 2005 and Euro IV equivalent norms by April 2010; and

Bharat Stage II and Euro III equivalent emission norms specifying quality of petrol and diesel that can be sold in various cities that become applicable at the same time as the norms applicable to the sales of cars.

Mashelkar Committee Recommendations

The key recommendations of the Mashelkar Committee Report are the following:
q

GoI should only decide the vehicular emission standards and the corresponding fuel specifications without specifying the vehicle technology and the type of fuel to be used; a roadmap for the implementation of vehicular emission norms and automobile fuel quality; vehicles running on alternative fuels, like di-methyl ether, bio-diesel, hydrogen, LNG, CNG, electric and fuel cells, need to be encouraged, giving the choice of fuel and vehicle technology to the customers; and putting in place other cost effective measures, such as a comprehensive inspection and certification systems for in-use vehicles with private sector participation, fitting emission reduction devices in in-use vehicles, traffic management and construction of bypasses.

q q

In order to meet the new emission norms, substantial investments are required to produce appropriate quality of fuel and vehicles. The Mashelkar Committee Report has estimated that the investment required for upgrading refineries to produce Bharat Stage II automobile fuels (petrol and diesel) is estimated to be around Rs. 170 billion. An additional amount of around Rs. 180 billion would be required to produce Euro-III equivalent petrol and diesel. Also, the test facilities currently available in the country are inadequate to meet the new regulations. According to SIAM estimates, the cost of setting up additional facilities to test vehicles as per the new regulations would be around Rs. 10.4 billion (excluding the cost of setting up inspection and certification centers). Hence, the Mashelkar Committee Report has recommended that preferential treatment be given to the oil and automobile industry in matters relating to:
q q q q q

customs duty on imported capital goods, equipment and machinery needed for the upgradation of technology/facilities; excise duty on indigenously manufactured capital goods, equipment and machinery needed for upgradation; 100% depreciation on plant and machinery set up for upgradation; soft loans for technology modernization/upgradation projects; adequate incentives, such as tariff differentials and other measures to enable the domestic industry to compete with imports; and financial incentives to the manufacturers and users of electric vehicles in order to make these vehicles competitive.

Safety Norms
GoI has notified the requirement for use of safety belts in all cars. In addition, new noise control norms for passenger cars were notified by GoI and became effective from January 1, 2003. GoI has also indicated that in the future additional safety norms will be made applicable to passenger cars to align them with international standards. 126

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS

There are no contingent liabilities not provided for, outstanding litigation, disputes, non payment of statutory dues, overdues to banks/ financial institutions, defaults against banks/ financial institutions, defaults in dues towards instrument holders like debenture holders, fixed deposits, and arrears on cumulative preference shares issued by the Company, defaults in creation of full security as per terms of issue/ other liabilities, proceedings initiated for economic/ civil/ any other offences (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) against our Company except the following:

Against our Company Criminal Cases

There are 19 cases filed by customers against the Company and its dealers u/s 420 of the Indian Penal Code, 1860 alleging that the Company and its dealers have failed to perform their obligations either under the contract of sale of vehicles or the obligations under the warranty. Of these cases seventeen (17) cases relate to sales wherein the complainant has filed the criminal complaint relating to sales. Two relate to non-performance of warranty obligations after the sale of the vehicle. In eighteen (18) of these cases the Managing Director has been made a party to the case or the case has been filed against the company through the Managing Director.

Civil Cases
A. Money Recovery 1.
q

We have a total of 45 money recovery suits pending against us in various courts in India. The total amount claimed from us is Rs. 173,190,686. A few material cases are disclosed below: Classic Motors Ltd was a dealer appointed by us and had collected booking amounts for vehicles from various parties. Ashok Leyland Limited has initiated legal proceedings against Classic Motors and our Company alleging a total amount of Rs. 42,700,000. Tata Finance Limited has also initiated legal proceedings against Classic Motors and our Company. Tata Finance Limited has alleged that they had booked 40 Maruti vehicles through Classic Motors Limited. Tata Finance Limited has claimed a refund of Rs 3,100,000 from our Company and Classic Motors Ltd. Escorts Finance Ltd has also initiated proceedings against Classic Motors Ltd. We have been named as a party in the suit but Escorts Finance Ltd has not sought any relief against us. All the above suits are pending before the High Court at New Delhi. ICICI Bank Ltd has filed a case against our Company and Ganga Automobiles, an erstwhile dealer of our Company. ICICI Bank had paid Ganga Automobiles for the booking of 60 cars. The total amount being claimed by ICICI Bank is Rs. 17,845,000. The case is pending before the City civil Court at Ahmedabad. DCL Finance Limited (DCL) had filed three (3) suits against Mahalaxmi Motors, RKS Motors and our Company in the Court of the III Additional Chief Judge, City Civil Court of Hyderabad. The City Civil Court of Hyderabad has decreed the suits in favour of DCL. As on the date of the decree, the consolidated amount of all 3 decrees, inclusive of interest and costs, is Rs. 9,240,473. Our Company has filed 3 appeals in the High Court of Andhra Pradesh against the decrees of the City Civil Court. The appeals are pending before the High Court of Andhra Pradesh. The High Court of Andhra Pradesh has passed a stay order in all three cases and directed us to deposit half of the decretal amount plus cost and interest. We have deposited half of the decretal amount and the interest plus the costs. There has been no objection raised by DCL vis-vis the amount deposited. Pennar Paterson Securities Limited has filed a suit against our Company and Mahalaxmi Motors, an erstwhile dealer of our Company. The suit is filed before the Court of the III Additional Chief Judge, City Civil Court at Hyderabad. Pennar Paterson has alleged that demand drafts had been made in favour of our Company for the booking of 20 cars. The claim is for a refund of a sum of Rs. 9,240,473. Gujarat Lease Financing has initiated legal proceedings against Competent Automobiles (a dealer appointed by our Company) and our Company in the High Court of Delhi. Gujarat Lease Financing has alleged that it intended to lease certain vehicles manufactured by our Company from Competent Automobiles. Gujarat Lease Financing has claimed that booking amounts were advanced to Competent Automobiles but no specifications as to vehicles were stated at that time. It is alleged that 1431 cars were booked but not delivered. Gujarat Lease Financing has claimed a refund of Rs. 16,655,643.28. ICICI Bank Ltd has initiated legal proceedings against Rama Automobiles (an erstwhile dealer of our Company) and our Company before the Debt Recovery Tribunal, Ahmedabad. ICICI Bank is seeking relief against Rama Automobiles for the breach of an agreement entered into between Rama Automobiles and ICICI Bank. The Company is not a party to this agreement. The total refund claimed is Rs. 75,603,000.

127

A substantial portion of the amounts involved in the above cases is regarding the non-delivery of cars by dealers appointed by MUL, after accepting payments from customers. As per the terms of the dealership agreement entered into between MUL and the dealers our dealers are appointed on a principal-to-principal basis. The terms of the sale to the customers do not create a privity of contract between MUL and the customer. The sale by MUL to the dealer and the sale from the dealer to the customer are on a principal to principal basis. MULs responsibility is to provide the dealer with the vehicles booked by the dealer.
q

A claim for recovery of Rs. 20 million has been filed by Mr. Pradeep Arora against us and Allied Motors (Pvt.) Ltd., an erstwhile dealer Hyundai Motor India Limited has initiated proceedings against Varun Motors (our dealer) and our Company. Hyundai Motors has alleged that Varun Motors tampered with a car (manufactured by Hyundai) and used that car for a test drive offer to potential buyers. It is alleged that customers were asked to compare the Hyundai car with a Maruti vehicle. It is alleged that the Hyundai car used was tampered and had been made defective thus resulting in below par performance. The Hyundai Motor India Ltd has claimed compensation of Rs. 10,000,000. The matter is at the trial stage in the City Civil Court in Hyderabad.

B. Other Civil cases

In addition to the above there are 23 other cases relating to various aspects, such as dealership disputes, claim for damages and directions, which are pending before various courts.

Labour Cases
1. Cases relating to strike Our Company faced major labour unrest in September 2000 with regard to the proposed changes to the incentive scheme of the Company. Upon the changes to the incentive scheme in October 2000, the workmen of the Company undertook a tool down strike which later evolved into a strike. Our management advised the workmen to sign a good conduct undertaking reiterating their adherence to the standing orders of the Company and to join duties before the occurrence of such strike. A large number of workmen chose not to sign the good conduct undertaking. The union and the management reached a settlement dated January 8, 2001. The incentive scheme was accepted by the Union on the same terms as initially proposed by the Company. The union challenged the introduction of the requirement to sign the good conduct undertaking and sought a permanent injunction against the signing of the good conduct undertaking in the court of Civil Judge Senior Division, Gurgaon. The Civil Court has refused to grant the injunction in favor of the union. The union filed an appeal against the order of the Civil Court before the District Judge, which was dismissed. The union then filed a writ petition before the High Court, Punjab and Haryana at Chandigarh, seeking an interim stay of the requirement of the signing of the good conduct undertaking. This application for stay has also been dismissed. The writ petition is pending before the High Court. Summary dismissal for instigation or agitation during strike. Some of the agitating workers, including some union leaders had been dismissed from service on the grounds of instigating a strike. A total of 24 workmen who had been summarily dismissed have filed cases against the Company in the court of the LCO seeking reinstatement of services with arrears of wages and continuity of service. The challenges are on the grounds that the mandatory provision in the standing order had not been followed and the principles of natural justice have been violated. The cases are in different stages of proceedings before the Labour Court, Gurgaon. Non-confirmation of trainees Some trainees who were working with us at the time of the strike were subsequently not confirmed on the grounds that their performance in the training had been unsatisfactory and that, in certain cases, they were lacking in integrity. A total of 52 trainees have filed applications with the LCO, Gurgaon and have sought confirmation as employees of our Company on the grounds that they are employees and the certified standing orders of the Company are applicable to them and the dismissals are illegal. The trainees have alleged that we are victimizing them for not signing the Undertaking and joining the recognized union in the strike. The trainees have served notice on our Company under Section 2A of the Industrial Disputes Act, 1947. A few of these cases are pending before the LCO and a few have been referred to the Labour Court, Gurgaon

128

Unauthorised absence from work The Company issues charge sheets to workmen for unauthorized absence from their place of work. Pursuant to the respective charge sheets given to individual workers, enquiry committees were set up. In certain cases where the enquiry reports found the charges against the workers accurate and the explanations of the workers unsatisfactory, the enquiry committee recommended dismissal of the workers. 17 workers have filed applications before the LCO, Gurgaon alleging that they have been dismissed from service for taking part in the agitation and that the dismissal was against the provisions of the standing orders of the Company and the Industrial Disputes Act, 1947. The Company has filed replies to all these applications and the matters are pending with the LCO, Gurgaon. Derecognition of Maruti Udyog Employees Union (MUEU) The Company has passed an order derecognising the Maruti Udyog Employees Union (MUEU) on February 22, 2002. This was done following the de-registration of MUEU by the Registrar of Trade Unions of Haryana. The Registrar of Trade Unions of Haryana derecognised MUEU following a complaint by some members that there was mismanagement of funds. The MUEU has filed a case challenging this decision in a civil suit in Gurgaon. The Company has in the interim recognized another union, the Maruti Udyog Kamgar Union (MUKU). MUKU was registered during the days of the employee unrest in 2001. 2. Litigation arising out of the Voluntary Retirement Scheme dated September 24, 2001 (VRS scheme), and alleged premature retirement Approximately 200 employees have filed applications before the LCO, Gurgaon alleging that they had been pressurized to resign before the VRS scheme was announced and that the VRS scheme is actually a retrenchment scheme and is in violation of the Section 9A of the Industrial Disputes Act, 1947. The relief being sought by these employees is reinstatement of jobs, arrears of wages and continuity of service. Some employees have claimed that they had been retired prematurely under the VRS Scheme illegally without consent on their part. The New Delhi High Court rejected this claim of the petitioners and refused to pass an order directing their reinstatement. An appeal against the order of the single Judge has been filed. Our Company has filed its written statement in the said Appeal. Some employees opted for voluntary retirement under the VRS scheme but were denied the benefit of payment of 24 months salary, on the grounds that at the time of opting for VRS scheme a disciplinary proceeding was pending against them. Conciliation proceedings were held but failed. The dispute was not referred to the Labour Court-cum-Industrial Tribunal. The employees have filed a petition praying for directions to the Labour Department to refer the dispute to the Labour Court-cum-Industrial Tribunal and to award costs to the workmen. 3. Cases relating to the erstwhile Maruti Ltd. Workmen and employees of Maruti Ltd. were retrenched with one months salary in lieu of notice, in terms of the settlement between the official liquidator and workmen and employees of Maruti Ltd. Some of the employees of Maruti Ltd initiated legal proceedings in the High Court of Punjab and Haryana at Chandigarh seeking reemployment in the Company. The employees claimed that as they were employees of Maruti Ltd and the Company should give them preference for employment. A Division Bench of the High Court upheld their claim and directed the Company to provide the workers employment. The Company filed a special leave petition before the Supreme Court of India which passed an order that status quo be maintained. The matter is pending for hearing before the Supreme Court. Employees and workmen of Maruti Ltd filed further cases on the same grounds as above. 4. Cases concerning the Employees Union The Company has filed a suit against the employees union seeking an injunction to stop the union from creating disturbances by way of strikes and disrupting activities within the factory premises. The lower court refused to pass such an injunction. Revision petitions were filed before the High Court to set aside the Order of the lower court. The High Court has issued an order stating that the union is restricted from holding any demonstration within a radius of 500 metres of the factory boundary wall. The matter has been referred back to the lower court. A similar injunction has been granted restraining workmen from holding demonstrations within 100 meters of the Corporate Office Building in New Delhi.

129

5.

Cases on House Building Allowance Deduction 13 cases are pending before the Consumer Disputes Redressal Forum, Gurgaon, under the Consumer Protection Act. All these cases relate to deductions for the house building allowance. There are cases relating to the deductions from the employees salaries that took place relating to the house building loans provided by the company and small claims relating to the same. The Employees of Maruti formed a society, which is registered as Maruti Employees Co-operative Housing Society or the Society. The Society arranged an aggregate loan from HDFC for its members for construction of flats on the plots owned by the said Society for its members. Payments are made on monthly installments from the salary of the employees and the disputes concern these deductions and also deductions from the VRS amount. These deductions relate to possible increases in the compensation amount relating to land acquisition by Society.

6.

Termination for Misconduct of workmen R.S. Panwar a worker against whom enquiry proceedings have been initiated has filed a civil suit in the Civil Court, Gurgaon asking for an injunction against the proceedings on the grounds that the enquiry committee had rejected the workmans nominee as co-worker in the enquiry proceedings. The Civil Court had passed an injunction restraining our Company from having any enquiry without the nomination of a co-worker. The Company then proceeded to dismiss the worker from service without any enquiry vide a letter dated September 27, 2001. As a result of the dismissal, the workman has also filed a suit before the Civil Court Gurgaon initiating contempt proceeding against the Company on the grounds that by proceeding with the inquiry without allowing him representation, it had violated the interim injunction of the Court. The Company has filed its reply in the contempt proceedings.

7.

Contract labour cases 80 contract labourers employed in our canteen have filed a suit for regularization of employment as workmen of the Company in the High Court of Punjab and Haryana at Chandigarh. The court has passed an order that the labourers are not to be dismissed during the pendency of the suit. The contractor, Bharat Trading, has in the interim terminated the employment of 3 contract labourers. The High Court had held the contractor and the Company in contempt and granted the contractor one month to reinstate the dismissed contract labourers. The contractor has reinstated the contract laborers. The contempt petition has been disposed off. The main suit for regularisation has been referred to the Labour Court for adjudication.

8.

Other Cases In addition to the cases details above there are 43 cases relating to labour disputes between the Company and workers in which the company has either received notices and no proceedings have been initiated or that are pending at various stages at different courts.

Monopolies and Restrictive Trade Practices

We have thirteen (13) cases pending before the MRTPC, the material claims against the Company are as follows: 1. There are three applications under Section 12B of the MRTP before the MRTPC filed by various parties against the Company and M/s Ganga Automobiles. The cases relate to the non-delivery of automobiles by Ganga Automobiles. The total amount claimed is Rs.7,838,108 plus interest on the claimed amount. There are 5 enquiry proceedings/cases pending in relation to alleged restrictive trade practices followed by our Company. The enquiries relate to various issues, such as:
q q q q q

2.

Payment of incentives to our dealers Dealership agreements which we enter into with each of our dealers contain restrictive covenants Conditions imposed at the time of booking of our cars with the dealer Practices followed for over the counter delivery of cars Interest paid to customers on booking amounts

These enquiries seek cease and desist orders against the Company. 3. 4. In addition to the cases detailed above there are 4 cases filed by our customers against the Company for compensation that are pending at various stages before the MRTP Commission. There is one unfair trade practice enquiry filed against the Company. The relief sought is to restrain the Company from delivering certain models under a particular scheme.

130

Consumer Disputes
1. Various consumer cases against our dealers and us (where we have been made a party) are pending before National Consumer Disputes Redressal Commission, State Commission or the District Forums. Such pending consumer claims are classified on the basis of the forum in which they are pending and listed below. Forum 1. 2. 3 4 National Consumer Dispute Redressal Commission State Consumer Dispute Redressal Commissions District Consumer Disputes Redressal Forum High Court Number of Cases 23 82 685 1 Total Amounts Claimed (in Rupees) 61,801,591 37,021,099 128,160,213 678,004

There are two claims for an aggregate amount of Rs. 64,900,907 relating to our erstwhile dealer M/s Ganga Automobiles. A customer, Smt Shukla Ghosh has filed a claim for Rs. 2,000,000 alleging at there is a manufacturing defect in the steering system of one of our car models. The matter is pending before the State Consumer Disputes Redressal Commission, Kolkata. 2. Cases relating to Catalytic converter installation There are 28 claims filed before the District Consumer Disputes Redressal Forum, Chandigarh pursuant to a newspaper article alleging that the car prices by the Company were hiked on account of installation of catalytic converters but the Company did not provide the catalytic converter. All customers in the above complaints had sought the refund of Rs. 7,000 on the ground that Maruti had enhanced the price by Rs. 7,000 on account of fitting of catalytic converter and their cars are without catalytic converters. In some of the claims, the District Consumer Disputes Redressal Forum, Chandigarh had held that Maruti have charged the price of a component, which they have not supplied and the enhanced price on account of catalytic converter is clearly refundable to the complainant. The State Consumer Disputes Redressal Commission, Chandigarh dismissed the appeal, inter alia, with the observation that if the machine delivered does not contain any particular part / gadget, the customer will get the part/gadget or return of the value thereof. The National Consumer Disputes Redressal Commission confirmed the earlier orders and dismissed the revision petitions. Our company has filed a special leave petition in the Supreme Court of India, which has stayed the operations of the order(s) passed in the revision petitions. All the above matters were adjourned sine die. 3. Cases relating to refund of excise duty for taxis There are 37 cases pending before various Consumer Disputes Redressal Forum relating to the refund of excise duty to customers who have bought vehicles for use as taxis. There are some cases in which the respective District Consumer Forums have passed adverse orders against the Company in this regard. The Company has preferred appeals against such cases.

Motor Accident Claims

The Company has eight motor accident claims pending against it before the MACT, with the amount claimed (not including interest) totaling to Rs. 72,19,184/ -

Arbitration
We have initiated arbitration proceedings against a few of our dealers as follows: Name of Dealer Mahalaxmi Motors Classic Motors Limited Our Claim Counter claim

Rs. 153,025,610 with further interest at 18% with Rs. 737,037,776 with interest at 30% p.a. effect from 1.11.2002 Rs. 367,471,000

In the case of Mahalaxmi Motors, the Honourable sole arbitrator has passed an order dated 25th March 2003 stating that he is prima facie satisfied that our Company has made out a prima facie case for an interim order and directed Mahalaxmi Motors to furnish a bank guarantee for a sum amounting to Rs 76.3 million. 131

Excise claims
No. Date of Show Period Cause Notice/ order June 12, 2001 July 23, 1996 March 2000 Nature Pending Status/Last Decision Demand Before Amount (Rs. Million) 2,003.58 Commissioner Pending before Commissioner. Finance bill 2003 has proposed amendment in excise rates with retrospective effect from 1996. we believe that passing of this bill by parliament, the excise department is likely to drop this demand 28.3 Commissioner Pending before Commissioner 249.72 CEGAT Pending before CEGAT

Modvat Credit on capital goods

August 08, 2002 January 31, 2003

July 2001 March 2002 July 2001 March 2001 and April 2001 to June 2001

Excise duty on tool kits & Jack Assembly Excise duty on free after-sales service

December 2000 - Excise duty on January 02, March 2002 2002 and Freight and Service August 6, 2002 charges December 12, 2002 August 1996 March 2001 Electro deposition coating parts transferred to spare parts department.

639.50 Commissioner Pending before Commissioner 16.80 Appeal by the Company against the Order No. 7/ 2002 of the Commissioner dated 28.02.02. CEGAT vide Final Order No. 631/ 2002-A dated 12.12.02 set aside the penalty and held that discharge duty liability after including cost of electro depositing coating and the Company is eligible to take Modvat Credit of duty paid on coating materials. The Company has made a provision for payment of Rs. 16.8 million

January 16, 2002

March 26, 2001 April 3, 2001

Cenvat Credit on supplementary invoices Modvat Credit on waste and scrap & duty on value of tool kit

190.54 Commissioner Pending before Commissioner 108.38 Commissioner The Commissioner has deferred the decision.

October 25, 1996

September 1988 - June 1995

132

April 4, 2003

August 2000 February 2002

February 4, 2000

June 1993 June 1998

Cenvat Credit availed in case of export oriented unit Modvat on parts of seats

10.19 CEGAT

Pending before CEGAT

499.57 CEGAT

Appeal by the Company against the order of the Commissioner. The CEGAT allowed our appeal vide Final Order No.A/77-78-2000NB(D). The Excise Department has filed a reference application before Delhi High Court and Delhi High Court has referred two questions to CEGAT. Appeal by the Company against Order of the Commissioner. The CEGAT vide Final Order No. A/377380/97NB dated 17.03.97 allowed the appeal of the Company. The Excise Department has filed a reference application before Delhi High Court

10

March 17, 1997

April 1991 June 1993

Modvat on parts of seats

301.07 High Court (HC)

11

April 16, 2002

March 1999 March 2000

Input inventory discrepancy

6.48 Commissioner The total of the show cause notice was for Rs.86.5 million, out of this the Company has deposited Rs. 80 million, vide TR-6 challan. The Company has made a provision for this payment in the books of accounts 72.09 Commissioner Pending before Commissioner

12

October 4, 2002

August 2001 July 2002

Excise duty on sales tax concession as capital subsidy Penalty imposed by Commissioner of Excise, New Delhi in the case of FOC parts of certain models removed to vendors Excise duty on extended warranty for 3rd and 4th year. TOTAL

13

December 18, 2002

17.75 CEGAT

Pending before CEGAT

14

March 27, 2003 April 2002 to December 2002

11.21 Commissioner Pending before Commissioner. The Company has made a provision for payment of Rs. 7.54 million in our books of accounts 4155.13

Apart from the above stated cases there are other cases pending against the Company at various forums of appropriate jurisdiction. The total contingent liability on account of disputed excise demands/show cause notices is Rs.4,328 million. Against this, the Company has deposited a sum of Rs.37 million (previous year Rs.202 million) under protest. 133

Income Tax Liabilities of the Company.

The contingent liability of the Company relating to income tax is Rs. 8,098 million, as on March 31, 2003 (Rs.6,592 million as on March 31, 2002). Against this, the Company has paid an amount of Rs. 2,214 million as on March 31, 2003 (Rs.815 million till March 31, 2002) under protest. The Company filed a return of income for assessment year 2000-01 declaring a total income of Rs.1203 million and tax (including interest) of Rs.463 million. The income tax department assessed the income at Rs.3801 million and tax at Rs.1769 million. Against this, the Company filed an appeal before Commissioner (Appeals) as well as a rectification application before the assessing officer for rectifying the arithmetical errors. A contingent liability of Rs.1262 million exists with respect to assessment year 2000-01. The Appeal is pending before commissioner of Income Tax (Appeal). The Company filed a return of income for assessment year 1999-00 declaring a total income of Rs.6674 million and tax (including interest) of Rs.2,358 million. The income tax department assessed the income at Rs.18935 million and tax at Rs.9139 million. Against this, the Company filed an appeal before Commissioner (Appeals) as well as a rectification application before the assessing officer for rectifying the arithmetical errors. Subsequently, the income tax department passed a rectification order and reduced the total income to Rs.16063 million and tax to Rs.7877 million. CIT (A) passed his order in March 03 and MUL has filed the appeal before ITAT which is pending. A contingent liability of Rs.5382 million exists with respect to assessment year 1999-00. Against this, the Company has paid under protest / department has adjusted Rs. 1400 million. The Company filed a return of total income for assessment year 1998-99 of Rs. 9785 millions and tax of Rs.3438 million. The income tax department assessed the income at Rs.11653 million and tax at Rs.4538 million. The company then filed an appeal before Commissioner (Appeals), against whose decision an appeal was filed before the appellate tribunal. A contingent liability of Rs.1090 million exists with respect to assessment year 1998-99. Against this, the Company has paid under protest / department have adjusted Rs. 473 million. Presently, the appeal is pending before the Income Tax Appellate Tribunal. The Company filed a return of total income for assessment year 1997-98 for Rs. 6684 million and tax of Rs. 2904 million. The income tax department assessed the income at Rs.8205 million and tax at Rs. 3952 million. Against this, the Company filed an appeal before Commissioner (Appeals), who by an order reduced the total income to Rs. 6865 million and tax to Rs. 2995 million. The income was increased to Rs.6917 million and tax to Rs.3023 million through a rectification order. The company has created a provision for tax of Rs.2949 million in its P&L Account. Thus, a contingent liability of Rs.74 million exists with respect to assessment year 1997-98. Against this, the Company has paid under protest / department have adjusted Rs.87 million. Presently, the appeal is pending before the Income Tax Appellate Tribunal. The Company filed a return of income for assessment year 1996-97 for Rs. 4906 million and tax of Rs. 2274 million. The income tax department assessed the income at Rs. 6191 million and tax at Rs.3198 million. The company preferred an appeal before Commissioner (Appeals), who by an order reduced the total income to Rs.5176 million and tax to Rs. 2406 million. The company has created a provision for tax of Rs. 2281 millions in its P&L Account. Thus, a contingent liability of Rs. 40 million exists with respect to assessment year 1996-97. Against this, the Company has paid under protest / department have adjusted Rs. 103 million. Presently, the appeal is pending before the Income Tax Appellate Tribunal. The Company has filed return of income for assessment year 1995-1996 for Rs. 1111 million and tax of Rs.512 million. The income tax department assessed the total income at Rs. 2311 million and tax at Rs. 1439 million. An appeal was preferred before Commissioner (Appeals) who by an order reduced the total income to Rs.1469 million and tax of Rs. 796 million. The company has created a provision for tax of Rs. 512 million in its P&L Account. Thus, a contingent liability of Rs. 213 million exists with respect to assessment year 1995-96. Against this, the Company has paid under protest / department have adjusted Rs. 151 million. Presently, the appeal is pending before the Income Tax Appellate Tribunal. The Company has filed a return of income for assessment year 1994-1995 for Rs.320 million and tax of Rs. 166 million. The income tax department assessed the income as Rs 1213 million and tax of Rs. 740 million. An appeal was preferred before Commissioner (Appeals) who by an order reduced the total income to Rs.418 million and tax to Rs. 217 million. The company has created a provision for tax of Rs. 180 million in its P&L Account. Thus, a contingent liability of Rs. 37 million exists with respect to assessment year 1994-95. Against this, the Company has not paid any amount under protest. Presently, the appeal is pending before the Income Tax Appellate Tribunal.

Land Acquisition Cases

The GoI had acquired land under the Land Acquisition Act, 1894 for the purpose of factory land for Maruti Limited. Some of the land oustees have filed suit for mandatory injunction in the Civil Court, Gurgaon seeking employment on the basis of an agreement allegedly entered into amongst Maruti, Gram Panchayat and Local Administration, Gurgaon. However, no such agreement was placed on record of the Court in support of their claim by any of the claimants. Some of the claimants have placed a copy of minutes allegedly recorded on the conclusion of alleged meeting as stated above. Six (6) such suits are pending as of date against the Company out of which the City Court, Gurgaon has decreed two such suits while taking the cognizance of the minutes of meeting and directed the Company to provide employment to the claimants. 134

Out of the two matters hereinabove, the Companys appeal in one matter is pending in the District Court whereas in the other matter, the claimant did not join within one month as directed by the High Court, Chandigarh and the matter stands closed. In another three suits, the City Civil Court, Gurgaon dismissed the suits and no relief was granted to the claimants. The said claimants have filed First Appeal before the District Judge, Gurgaon, which is pending. One such land acquisition matter is pending in the High Court, Chandigarh after the dismissal of First Appeal by the District Judge in the favour of the Company.

Claims made by Maruti

The Company has provided us with a list of various claims, which the Company has initiated against third parties. A list of such pending cases is given below: Sl No. 1. 2. 3. 4. 5. 6. Party Ravi Sharma Classic Motors Limited Union Motor Services Limited Arpita Automobiles Private Limited Swastic Rubber Products Limited Mahalaxmi Motors Limited Claim (Rs.) 400,000 42,700,000 74,638,413 7,611,040 154,863 15,000,000

Sales Tax Cases

1. Imposition of sales tax by National Capital Territory of New Delhi. The Company besides selling passenger vehicles to dealers also sold vehicles to certain customers outside the state of Haryana directly from its factory at Gurgaon. The inter-state sales tax payable was collected and deposited with the sales tax authorities at Gurgaon. As per sale system for direct billing from factory, customers placed the orders and collected passenger vehicles through dealers situated outside Haryana. The Delhi Sales Tax Department considered such direct billing of vehicles delivered to customers through Maruti Sales & Service, Delhi, or MSSD, a division of Maruti Udyog, as local sales in Delhi (and not an inter-state sales in Gurgaon as treated by the Company). Thus, a demand of Rs. 46,676,834.00 was raised in February 1993 for deposit of local sales tax (for the assessment years 1988-89 to 1991-92). The assessment orders were received in February 1993 and the appeal was filed in the same month. The Company has obtained a stay from the Delhi High Court (in March 1994) against the additional demand on conditional deposit of Rs. 400,000 for each assessment year. The case is pending for hearing on merits before the Additional Commissioner, Sales Tax Department, Delhi. 2. Sales tax liability for the Assessment Year 1988-1989. The Assessing Authority, or AA, Gurgaon, has imposed an additional duty of Rs. 2,426,524.00 on the Company for the assessment year 1988-1989. The AA has treated the Omni vehicle as a van and taxed the same at a rate higher than applicable to motor cars. The Sales Tax Tribunal has remanded the matter to the AA. 3. Sales tax liability for the Assessment year 1985-1986. In the course of business the company had transferred vehicles to its branches out side the states and the Company had deposited the purchase tax on these transactions. The Excise and Taxation Officer, Gurgaon vide letter dated August 10, 1989 has imposed interest and penalty amounting to Rs. 1,211,327.00 on the Company for not depositing purchase tax within due dates. The Sales Tax Tribunal has remanded the matter to the AA. 4. Contingent sales tax liability with respect to stockyard: Contingent sales tax liability with respect to Bhopal Stockyard. The AA has imposed sales tax and penalty for assessment year 1987-88 amounting to Rs. 1,742,764.00. The Company has paid Rs. 174,500.00. Contingent sales tax liability with respect to Gwalior Stockyard. The AA has imposed sales tax and penalty assessment year 1987-88 amounting to Rs. 127,503.00. The Company has paid Rs. 12,750. Contingent sales tax liability with respect to Kotwan Stockyard. The AA has imposed sales tax and penalty amounting to Rs. 340,000.00.

135

5.

Excess adjustment of first point tax rebate of sales tax on sale of after-sales spare parts during the year 2001-02 and period April 1, 2002 to December 31, 2002. The AA, Gurgaon has issued two show causes notice dated February 27, 2003 to the Company asking for payment of the short payment on account of excess adjustment of first point tax rebate of sales tax on sale of after-sales spare parts during the year 2001-02 and period April 1, 2002 to December 31, 2002. The Company had claimed adjustment of first point tax amounting to Rs. 76,043,114.38 for the year 2001-02 and Rs. 59,260,407.66 for the period April 1, 2002 to December 31, 2002 under Section 15-A of the Haryana General Sales Tax Act, 1973 on account of tax paid on purchase of goods within the State. The AA has stated that the adjustment of tax is admissible only in respect of goods purchased for use in manufacturing. The AA claims that the Company in the process of manufacturing is using only original equipment and that the spare parts are purchased by the spare parts division for trading in spare parts and thus such purchases within the state are inadmissible for claiming adjustment under Section 15 A of the Haryana General Sales Tax Act, 1973. The Company is claming this rebate on the basis of a notification issued by the Government of Haryana bearing No. S.O. 32/C.A. 74/1956/S.8/2001 dated 19th March 2001. The contingent liability amount is Rs. 135,303,521.

Dispute Relating to Domain Name

The Company has been the complainant in certain proceedings before the World Intellectual Property Organization, or WIPO, where it alleged, amongst other things, that the respondent, the registrant of the domain name maruti.com at the time of the complaint, lacked rights or legitimate interests in that domain name. The administrative panel of the WIPO Arbitration and Media Center on May 5, 2003 found that the respondent lacked rights or legitimate interests in the domain name and had acted in bad faith. The panel directed that the domain name maruti.com be transferred to the Company. The decision will be implemented following the expiration of a 10 business day waiting period following the decision, unless within such period the respondent submits official documentation demonstrating that legal proceedings against the Company have been initiated in a jurisdiction to which the Company has submitted. The Company is not aware of any further proceedings having been initiated in this regard.

Against our Joint Ventures and Associates Asahi India Glass Ltd. (AIG) Contingent liabilities not provided for as on March 20, 2003
q q q q

Guarantee / Letter of Credit / Bill of exchange discounted Rs. 123.06 million Disputed demand relating to pending excise cases - Rs. 123.62 million Others Rs. 10.27 million Estimated value of contracts remaining to be executed on capital account Rs. 11.41 million

Outstanding litigation as on March 20, 2003

Civil cases
q

A winding up petition has been filed by AIG against Pal Peugeot Ltd. in the Bombay High Court involving the outstanding amount of Rs. 0.44 million due and payable by Pal Peugeot Ltd. to AIG. This winding up petition has been accepted and clubbed for hearing with other similar petitions filed against Pal Peugeot Ltd. A suit has been filed by Thawar Steel Traders in the Addl Civil Judge, Rewari, Haryana for recovery of about Rs. 0.13 million , which AIG is disputing. An application has been filed in the Debt Recovery Tribunal, New Delhi, by Standard Chartered Bank against Paras Ram and Pista Agarwal in respect of the shares of AIG pledged with the said Bank. AIG has been made a party to this application for handing over of dividend warrant and bonus shares pertaining to pledged shares.

Labour cases
q

1 case filed by Mr. Inderjit Yadav in Punjab & Haryana High Court, Chandigarh, challenging his termination and praying for reinstatement with back wages. 2 cases filed by Mr. Karambir and Mr. Balwan Singh in Labour Tribunal, Gurgaon challenging the termination of their respective services. 136

Income Tax
q

1 appeal pending before the Income Tax Appellate Tribunal involving Rs. 2.9 million.

Central Excise and Customs

q

1 show cause notice pending before the Deputy Commissioner of Central Excise, Division II, Gurgaon, involving an amount of Rs. 47.3 million 2 show cause notices pending before the Additional Commissioner of Central Excise, Gurgaon, involving the aggregate amount of Rs. 0.691million. 4 show cause notices pending before the Commissioner of Central Excise, Delhi III involving an aggregate amount of Rs. 49.83 million. 1 show cause notice pending before the Superintendent of Customs (Drawback), Air Cargo Unit, New Customs House, New Delhi, involving an amount of Rs. 1.2 million. 1 Writ Petition pending in the Delhi High Court involving an amount of about Rs. 347.00 million.

Bharat Seats Ltd (BSL) Contingent liabilities not provided for as on March 31, 2003
The aggregate of the demand based on the difference between the excise records maintained by BSL and the balance sheet stock figures for the Financial Years ended March 31, 1997, March 31, 1998 and March 31, 1999 is about Rs. 10.16 million.

Outstanding litigation as on March 31, 2003

Central Excise and Customs
q

Demand of about Rs. 3,195.00 million (including penalty of about Rs. 65 million), which had once been decided in the favour of the Company by CEGAT of the Department of Central Excise and Customs had sought the intervention of the Honble Delhi High Court which had issued adjusted the directions to CEGAT to clarify certain points of law arising out of that order. Matter is still pending for final decision. The Company has received a refund of customs duty of about Rs. 6.25 million from the Assistant Commissioner (Refund), Customs House, Khandla, which had been adjusted against Loans and Advances shown in previous years. However, subsequently a notice was received to refund the same on the ground that it was erroneously being granted. The Company has filed a suitable reply to the customs authorities and the matter for final decision.

Denso India Ltd (DIL) Outstanding litigation as on March 20, 2003

Income Tax
q q

1 appeal pending before the Income Tax Appellate Tribunal involving Rs. 0.1015 million. 1 appeal pending before Commissioner of Income Tax (Appeals) involving Rs. 0.493 million.

Sales Tax
q

1 demand remanded by the Appellate Deputy Commissioner to the Assistant Commissioner for re-assessment on taxability on sale of assets, involving Rs. 0.411 million.

Central Excise and Customs

q

1 appeal pending before the Commissioner of Central Excise (Appeals) involving an amount of Rs. 1.608 million.

Labour cases
q

1 case pending for reinstatement of employee.

Jay Bharat Maruti Ltd. (JBML) Contingent liabilities not provided for as on March 31, 2003
q

Guarantees issued by the banks for letter of credit about Rs. 93.55 million Excise cases pending at various stages of appeal with the authorities excluding interest payable Rs.0.53 million 137

External development charges claimed by the Town & Country Planning, Government of Haryana, relating to a company property. The company has filed a special leave petition with the Supreme Court against the demand, which has been accepted subject to the deposit of 25% of the claim amount. The said amount is yet to be deposited by the company Rs. 10.63 million Disputed demand of sales tax Rs.18.08 million Estimated value of contracts remaining to be executed on capital account about Rs.57.28 million Future obligations towards lease rentals pertaining to tripartite lease agreements entered between itself, Maruti and other financial institutions/ banks Rs.442.28 million

q q q

Outstanding litigation as on April 30, 2003

Civil cases
q

1 special leave petition pending before the Honble Supreme Court of India challenging the external development charges for Plant II for Change of Land Use involving the amount of Rs. 10.63 million. 10 % of the charges deposited as per Supreme Court direction, but not accepted by the department.

Sales Tax
q

1 writ petition pending before the High Court of Punjab & Haryana against a demand made by the Sales Tax Department, Haryana involving the amount of Rs. 18.08 million.

Central Excise and Customs

q

7 cases pending before the Commissioner of Central Excise, Delhi III, Gurgaon involving an aggregate amount of Rs. 140.04 million with interest and penalty. 2 appeals pending before Commissioner, Central Excise (Appeals), Gurgaon involving an aggregate amount of Rs. 2.8 million with interest and penalty. These appeals are likely to have adverse impact on the financial performance of JBML.

Machino Plastics Ltd Contingent liabilities not provided for as on March 31, 2003
q q q

Disputed demand under sales tax/ service tax about Rs.0.55 million Disputed demand relating to third party claims about Rs. 3.26 million Disputed demand under Employees State Insurance Act, 1948 involving an amount of Rs.0.11 million for which appeal is pending before the relevant authorities. Arrear of preference dividend Rs.7.8 million Guarantees outstanding about Rs.22.92 million Estimated value of contracts remaining to be executed on capital account about Rs.240.12 million Outstanding commitments under Letters of Credit Rs. 15.35 million

q q q q

Outstanding litigation
q

1 appeal pending before the relevant authority under Employees State Insurance Act, 1948 involving an amount of Rs.0.11 million.

Sona Koyo Steering Systems Ltd Contingent liabilities not provided for as on March 31, 2003
Claims against the company not acknowledged as debt On account of a) b) Customs duty - about Rs. 0.5 million Others - about Rs.3.53 million

In respect of matters in appeal a) b) Income Tax - about Rs.42.74 million Service Tax about Rs.2.20 million 138

Customer bills discounted - about Rs.126.61 million Corporate Guarantee in respect of a) Employee Loan - about Rs.0.88 million

Caparo Maruti Ltd Contingent liabilities not provided for as on March 31, 2003
Estimated value of contracts remaining to be executed on capital account about Rs.5.32 million Demand order of ESIC - Rs. 81,250

Citicorp Maruti Finance Ltd (CMFL) Outstanding litigation

Criminal cases
q

There are totally 442 criminal cases filed by CMFL under section 138 of the Negotiable Instruments Act, 1981 in respect of bouncing of cheques against various parties, which are pending at different stages. There is one Superdari case filed by CMFL against Hindustan Industrial Security. There are 29 criminal cases filed by CMFL under section 406 of the Indian Penal Code against various parties, which are pending at different stages.

q q

Civil cases
q

There are 14 money recovery suits filed by CMFL against various parties in the Trial Court at Tis Hazari, New Delhi involving an amount aggregating approximately to Rs. 1.9 million There are 27 cases (7 cases relating to repossession, 6 relating to injunction, 1 relating to employee and 6 counter claims) filed against CMFL in various courts for different reliefs, which are pending.

Climate Systems India Ltd. (CSIL) Contingent liabilities not provided for as on March 31, 2003
q q q q

Disputed demand relating to sales tax/ service tax about Rs. 19.08 million Estimated value of contracts remaining to be executed on capital account about Rs. 2.8 million Bank guarantees to the Sales Tax Department Rs. 10,000 Other contingent liabilities Rs.14,000

Outstanding litigation
Income Tax
q

4 appeals pending before the Commissioner of Income Tax (Appeals) involving the aggregate amount of about Rs. 5.60 million 1 appeal pending before the Income Tax Appellate Tribunal involving about Rs. 2.02 million 1 appeal pending before the Sales Tax Authority involving the amount of about Rs. 0.30 million.

q q

In the event of the above cases not being decided in favour of CSIL, the combined income tax liability of CSIL shall be Rs. 2.8 million and sales tax liability shall be Rs. 0.3 million. These cases then are likely to have adverse effect on the financial performance of CSIL

J J Impex (Delhi) Pvt Ltd Outstanding litigation

Civil case
q

1 case pending in the District Consumer Disputes Redressal Forum, New Delhi filed by Mr. Vineet Kumar involving an amount of Rs. 0.2 million.

139

Krishna Maruti Ltd. (KML) Contingent liabilities not provided for as on March 31, 2003
q q q q

Excise Duty about Rs.39.10 million Customs Duty - about Rs. 7.43 million Guarantees outstanding about Rs.8.54 million Estimated Value of contracts remaining to be executed on capital account Rs. 0.84 million

Outstanding litigation as on April 30, 2003

Central Excise and Customs
q

4 show cause notices pending before the Commissioner of Central Excise, Delhi III involving an aggregate amount of Rs. 37.50 million with interest and penalty. 1 show cause notice pending before the Deputy Commissioner of Central Excise, Division II, Gurgaon involving the amount of Rs. 0. 10 million with interest and penalty. 2 appeals pending before Commissioner, Central Excise (Appeals) involving an aggregate amount of Rs. 1.60 million. 3 show cause notices pending before the Deputy Commissioner, Customs House, Kandla involving an aggregate amount of Rs. 7.43 million.

q q

Mark Auto Industries Ltd (MAIL) Contingent liabilities not provided for as on March 31, 2003
q q q q q q q

Bank Guarantee outstanding - about Rs. 17.02 million Estimated value of contracts remaining to be executed on capital account about Rs.2.53 million. Oustanding commitments under Letter of Credit about Rs.10.97 million Disputed demands related to Income Tax about Rs. 4.75 million Disputed demands related to Excise cases - about Rs. 7.9 million Disputed demand relating to third party claims about Rs. 7.19 million Other contingent liabilities about Rs.99.83 million

Outstanding litigation as on March 20, 2003

Income Tax
q q

5 appeals pending before the Income Tax Appellate Tribunal involving the aggregate amount of Rs. 4.74 million. 1 appeal pending before the Wealth Tax Appellate Tribunal involving the amount of Rs. 0.004 million.

Central Excise and Customs

q

1 show cause notice pending before the Deputy Commissioner of Central Excise, Gurgaon involving an amount of Rs. 0.22 million. 1 show cause notice pending before the Commissioner of Central Excise, New Delhi involving an amount of Rs. 7.9 million. If this notice is decided against MAIL, the same is likely to have an adverse effect on the financial performance of MAIL. 2 appeals pending before the Commissioner of Central Excise (Appeals), Collectorate No. III, New Delhi, involving the aggregate amount of Rs. 39.70 million. 1 appeal pending before the CEGAT, which if decided in favour of MAIL, would involve refund of the duty paid by MAIL to the Customs department. A special leave petition has been filed in the Honble Supreme Court of India against the extra development charges levied by the Director, Town & Country Planning, Haryana amounting to Rs. 7.2 million on the Companys property situated at Village Begampur Khatola, Gurgaon, Haryana.

Civil Cases
q

140

Criminal Cases
q

A complaint was filed against Mr. K. M. Talwar, former Managing Director of the company under the provisions of section 630 (b) of the Companies Act, 1956 in the Court of Chief Judicial Magistrate, Gurgaon, for recovery of the companys assets worth Rs. 4.1 million which are retained by him even after resigning from the company.

Legal Notices (Possible litigation in future)

q

A legal notice dated 04.09.2002 was sent to Unitech limited for recovery of Rs. 9.5 million out of a total amount of Rs. 10.9 million paid to Unitech Limited for 2430 square feet area of office space, in Signature Tower, Gurgaon, after deducting earnest money of Rs. 1.45 million.

The only adverse effect on MAIL would be in respect of the case before the Commissioner, Central Excise, New Delhi in respect of the amount of Rs. 6.3 million relating to 40% Cenvat credit on FOC items invoices.

Maruti Countrywide Auto Financial Services Limited (MCAFSL) Contingent liabilities not provided for as on March 31, 2003
q q

Claims not acknowledged as debts Rs.11.5 million Disputed tax liabilities Rs.5.8 million

Outstanding litigation
Criminal cases
q

1 case (Vikas Motor Vs MCAFSL) pending before the Metropolitan Magistrate, room No. 182, Tis Hazari Court, Delhi, under section 138 of the Negotiable Instruments Act for an amount of Rs. 0.5 million. 1 complaint under sections 406 and 409 of IPC, pending before the Consumer Redressal Forum, Bandra amounting to Rs. 0.48 million. 1 case under section 506 (2) of IPC pending in the Metropolitan Court, Meghani Nagar. 1 case under sections 294(B), 506(1) and 34 IPC pending before the First Class Magistrate, Court-II, Kochi

q q

Consumer Cases
q

6 cases pending before various consumer forums, involving an aggregate amount of Rs. 0.54 million.

Civil cases
q

3 civil cases pending in various courts, involving an aggregate amount of Rs. 10 million.

Mark Exhaust Systems Ltd (MESL) Contingent liabilities not provided for as on March 31, 2003
q q q q

Bank Guarantees issued by Banks - about Rs. 26.34 million Unexpired Letter of credit - about Rs. 14.57 million Customs Duty on damaged goods in Kandla cyclone - about Rs. 3.42 million Value of bond executed in favour of Commissioner of Customs in respect of license issued under EPCG License - about Rs. 4.45 million and also furnished a bank guarantee of about Rs.2.23 million to meet export obligations Value of bond executed in favour of Commissioner of Customs in respect of Advance License for intermediate Exports about Rs. 7.86 million and also furnished a bank guarantee of about Rs.5.53 million to meet export obligations. Estimated value of contracts remaining to be executed on capital account about Rs.11.6 million

Outstanding litigation as on April 30, 2003

Civil Cases A Special Civil Application has been filed by MESL in the Honble High Court of Gujarat at Ahmedabad for expediting recovery of the claim amount for loss of some material belonging to MESL in the Kandla cyclone, which claim the Insurance Company has accepted but not released because the Customs Authority has not accepted the remission application.

141

Against Ventures Promoted by Suzuki in India Subros Ltd Contingent liabilities not provided for as on April 1, 2003
q q q q q

Bank Guarantees issued by Banks - about Rs. 30.33 million Outstanding Letter of credit - about Rs. 380.6 million Disputed demand under Income Tax Act - about Rs. 0.30 million Disputed demand under Central Excise Act - about Rs. 252.87 million Other claim including labour matters - about Rs.2.88 million

Outstanding litigation
Labour Cases 9 labour cases filed in the Labour Court, Ghaziabad involving the approximate aggregate amount of Rs. 0.93 million.

Against Suzuki
There are no contingent liabilities not provided for, outstanding litigation, disputes, non payment of statutory dues, overdues to banks/ financial institutions, defaults against banks/ financial institutions, defaults in dues towards instrument holders like debenture holders, fixed deposits, and arrears on cumulative preference shares issued by the company, defaults in creation of full security as per terms of issue/ other liabilities, proceedings initiated for economic/ civil/ any other offences against Suzuki in India.

Against Our Directors

There is one case filed by a customer against Mr. Kinji Saito, Director (Marketing & Sales) and the Company u/s 420 of the Indian Penal Code, 1860 alleging that the Company and its dealers have failed to perform their obligations under the contract of sale of vehicles. The case has been filed in Sabalgarh, Morena district. In one case in which civil proceedings were commenced against our Company by a dealer for repudiation of an agreement between the dealer and our Company, a stay on further proceedings was granted by the 2nd Civil Judge (Senior Division), Alipore in favour of the dealer. Our Company initiated criminal proceedings in New Delhi against the dealer for non-payment of dues. Pursuant to this, an application for contempt of court has been filed before the 2nd Civil Judge (Senior Division), Alipore, against the Company, Mr. Shinzi Nakanishi, Chairman, Mr. Jagdish Khattar, Managing Director, Mr. Yuichi Nakamura, Mr. Shinichi Takeuchi, Joint Managing Director, Mr. Kinji Saito, Director (Marketing and Sales), Mr. Motohiro Atsumi, Director (Finance), Mr. Hirofumi Nagao, Director, Mr. Osamu Suzuki, Director, and Mr. V. K. Malhotra, Director, The case is pending in the court of the 2nd Civil Judge (Senior Division), Alipore. There is one case filed by a customer against Mr. Jagdish Khattar, Managing Director and the Company u/s 420 of the Indian Penal Code, 1860 alleging that the Company and its dealers have failed to perform their obligations under the contract of sale of vehicles. The case has been filed in the court of Ashok Kumar, Judicial Magistrate, 1st Class, Ranchi.

142

DIVIDEND POLICY
The declaration and payment of dividends will be recommended by our Board of Directors and our shareholders, in their discretion, and will depend on a number of factors, including but not limited to our earnings, capital requirements and overall financial condition. The dividends paid by our Company during the last five fiscal years have been presented below. FY2003 Face value of equity shares (in Rs. per share) Dividend (in Rs. million) Dividend rate Dividend tax 5 427 30% 55 FY2002 100 397 30% FY2001 100 2 FY2000 100 331 25% 73 FY1999 100 397 30% 44

A stock split was approved at an extraordinary general meeting of our shareholders held on March 25, 2003, resulting in each equity share of Rs. 100 being sub-divided into 20 equity shares of Rs. 5 each and consequently the equity shares were subdivided with effect from March 25, 2003. However, the amounts paid as dividend in the past are not indicative of our dividend policy in the future.

143

STATEMENT ON BASIS OF ISSUE PRICE

1. Adjusted Earning Per Share (EPS) - As per unconsolidated Indian Accounting Standards. Pre-Split Rupees 1 2 3 Year ended March 31,2001 Year ended March 31,2002 Year ended March 31,2003 Weighted Average (118.37) 68.41 87.69 46.92 Weight 1 2 3 Post-Split Rupees (5.92) 3.42 4.38 2.34 Weight 1 2 3

Note 1: In the Extraordinary General Meeting of the Company held on 25th March 2003, the shareholders approved a twenty-for-one share split with an effective date of 25th March 2003. Subsequent to this split, the authorised equity share capital of Rs. 1,550,000,000 has been divided into 310,000,000 equity shares of Rs. 5 each and the issued, subscribed and paid up capital of Rs. 1,444,550,300 has been divided into 288,910,060 equity shares of Rs. 5 each. Accordingly, the ratios have been computed on the basis of number of equity shares, both pre-split and post-split Note 2: A. The Earning Per Share has been computed on the basis of adjusted profits & losses for the respective year drawn after considering the Impact of accounting policy changes and prior period adjustments/ regroupings pertaining to earlier years. The denominator considered for the purpose of calculating Earning Per Share is the weighted average number of equity shares outstanding during the year. Based on year ended 31st March 2003 EPS of Rs. 46.92 (pre split) and Rs. 2.34 (post-split) [*] Industry P/E (i) Highest (ii) Lowest (iii) Industry Composite

B. 2.

Price/Earning (P/E) ratio in relation to Issue Price of Rs. [*] a. b.

Source: Capital Market Volume May 12 25, 2003 Category: Automobiles. Passenger Cars 3. Average Return on Net Worth % 1 2 3 Year ended March 31,2001 Year ended March 31,2002 Year ended March 31,2003 Weighted Average Note: A. The Average Return on Net Worth has been computed on the basis of adjusted profits & losses for the respective year drawn after considering the Impact of accounting policy changes and prior period adjustments/ regroupings pertaining to earlier years. 4. Minimum Return on Increased Net Worth required to maintain pre-issue EPS. There is no change in net worth due to offer for sale. (6.23) 3.62 4.15 2.24 Weight 1 2 3

144

5.

Net Asset Value per Share, as on March 31,2003 Pre-Split Post Split Rupees 2,113 Rupees 105.64

Net Asset Value Per Share represents Shareholders equity less miscellaneous expenses as Divided by Weighted Average Number of Shares. 6. Net Asset Value per Share after issue. There is no change in net worth due to offer for sale. Issue Price Per Share: Rs. [*] * Issue Price Per Share will be determined on conclusion of book building process.

145

DETAILS OF BORROWINGS IN OUR COMPANY

As on March 31,2003 S. No. Nature of borrowings/ debt 11.20% secured non-convertible redeemable debentures (Series I) Sanctioned Amount Amount outstanding Rs.2,000 mn Date of issue Date of maturity July 24, 2007 with put and call option on July 24, 2005 Interest rate Security

1.

July 24, 2000

11.20%

Secured by mortgage on specific buildings and plant and machinery Negative lien on specific fixed assets

2.

External Commercial Borrowing from Bank of Tokyo Mitsubishi

USD 50 million USD10mn

February 16, 2001

February 16, 6 month USD 2004 Libor + 60 basis points Prepayment option at end of 24 months

USD20mn

February 27, 2001

February 27, 2004 Prepayment option at end of 24 months December 4, 2005 30% December 4, 2006 30% December 4, 2007 40%

3.

12.00% secured redeemable nonconvertible debentures (Series II)1

Rs.1,000 mn

December 4, 2000

12.00%

Secured by mortgage on specific buildings and plant and machinery

4. Overdraft from Banks (as on March 31, 2003)2 a. UFJ Bank Rs.300mn Rs.133mn Tenor linked Prime Lending Rate Unsecured

1 On November 13, 2001, we entered into a rupee-interest rate swap with a nominal value of Rs. 1,000 million to be amortised in line with the repayment schedule for our 12.00% secured redeemable non-convertible debentures (Series II) with Citibank N.A. Under the swap agreement, effective November 15, 2001, we swapped our fixed interest rate liability of 12% per annum on our debentures Series II of Rs. 1,000 million until maturity on December 4, 2007, into a floating rate of interest at a spread of 3.18% over the Average five year GoI Securities rate, computed as the simple average of the daily five year annualized yield for GoI securities for ten business days preceding and including the interest payment date. The first setting of five year GoI securities rate was done in advance at the time of entering into the swap at 7.46% per annum to be valid till December 3, 2002. The subsequent resets will be done annually in arrears. We are entitled under the swap agreement to receive a fixed rate of interest on the aggregate principal amount of Rs. 1,000 million at the fixed rate of 12% per annum. 2

As on date, in addition to the above, we also have approved sanctioned limits for secured working capital facilities from State Bank of India (Rs.750mn), Corporation Bank (Rs.1000mn), Punjab National Bank (Rs.500mn), UTI Bank (Rs. 450 million), State Bank of Travancore (Rs. 200 million), BNP Paribas (Rs. 200mn) and HDFC Bank (Rs. 500mn)

146

OTHER REGULATORY DISCLOSURES

Stock Market Data for our Equity Shares
This being an initial public offering of our Company, the equity shares of our Company are not listed on any stock exchange.

Particulars Regarding Public Issues during the Last Five Years

We have not made any public issue during the last five years.

Companies Under the Same Management

There are no companies under the same management within the meaning of erstwhile Section 370 (1B) of the Companies Act 1956, other than the subsidiaries and group Companies, details of which are provided in the section entitled Group Companies on page 92 of this Red Herring Prospectus.

Mechanism for Redressal of Investor Grievances

The agreement between the Registrar to the Offer, MCS Ltd. and us, will provide for retention of records with the Registrar to the Offer for a period of at least one year from the last date of dispatch of letters of allotment, demat credit, refund orders to enable the investors to approach the Registrar to the Offer for redressal of their grievances. All grievances relating to the Offer may be addressed to the Registrar to the Offer, giving full details such as name, address of the applicant, number of shares applied for, amount paid on application and the bank branch or collection center where the application was submitted.

Disposal of Investor Grievances

We estimate that the average time required by us or the Registrar to the Offer for the redressal of routine investor grievances shall be seven working days from the date of receipt of the complaint. In case of non-routine complaints and complaints where external agencies are involved, we will seek to redress these complaints as expeditiously as possible. We have appointed Mr. S Ravi Aiyar as the Compliance Officer and he may be contacted in case of any pre-Issue or post-Issuerelated problems. He can be contacted at: Maruti Udyog Limited; 11th floor, Jeevan Prakash Building, 25 Kasturba Gandhi Marg, New Delhi 110 001; Tel: +91-11-2331 6831; Fax no.: +91-11-2371 3575, 23318754; e-mail: raviaiyar@maruti.co.in

147

UNCONSOLIDATED FINANCIAL STATEMENTS

For five years ending March 31, 2003 Auditors Report To The Board of Directors Maruti Udyog Limited Dear Sirs, A. We have examined the books and accounts of Maruti Udyog Ltd. (MUL) for the five financial years ended March 31, 2003 being the last date to which the accounts of the company have been made up and audited by us for presentation to the members. We have accepted the relevant accounts and statements in respect of Maruti Insurance Brokers Limited, Maruti Insurance Distribution Services Limited and True Value Solutions Limited, the three subsidiaries of the Company for the three months period ended March 31, 2002 audited and reported by the auditors of the subsidiaries. We have also accepted the accounts of these companies for the year ended March 31, 2003 prepared and approved by Board of Directors of the respective companies and audited by the respective auditors. In accordance with the requirements of: (a) Paragraph B (1) of Part II of Schedule II to the Companies Act, 1956 (b) The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 issued by SEBI on January 19, 2000 in pursuance of Section 11 of SEBI Act, 1992, the SEBI Guidelines. (c) Instructions dated April 21, 2003 received from the company, requesting us to carry out work relating to the offer document being issued by the company in connection with the offer of sale by the government of India of certain equity shares in the company (referred to as the issue), We report that the profits of the company for the above years are as set out below. These profits (expressed in Millions of rupees) have been arrived at after charging all expenses of management, including depreciation and after making such adjustments (and regroupings) as in our opinion are appropriate and are subject to the notes given below. In accordance with para 6.18.3(ii) of the SEBI Guidelines, also attached are restated summary financial statements of subsidiaries Maruti Insurance Brokers Limited, Maruti Insurance Distribution Services Limited and True Value Solutions Limited of the Company for the year ended March 31, 2003 and period ended March 31, 2002. We have accepted the relevant restated summary financial statements in respect of the above subsidiaries for the above year/ period, which were audited by other auditors as mentioned therein. In respect of the relevant summary financial statements for the year ended March 31, 2003 and the period ended March 31, 2002, the respective auditors have reported that the said restated financial statements have been prepared in accordance with Part II of Schedule II of the Act and the SEBI Guidelines. The financial statements of the Companys subsidiaries have not been consolidated into the attached summary statements of the Company and are enclosed as Annexures E, F and G to this report. In all the subsidiaries the beneficial ownership entirely vests with the Company, the assets and liabilities and profit or loss as applicable, of such subsidiaries in the aforementioned financial statements entirely concern the members of the Company.

148

I.

SUMMARY OF PROFIT AND LOSS ACCOUNT, AS RESTATED

(Rs. in Million) Financial Year ended March 31, 2003 Income/ Revenue Sales: Of Products manufactured by the Company Of Products traded in by the Company 86,361 4,275 90,636 Other Income/ Revenue Total Expenditure Consumption of Raw Materials & Components Cost of Spares/ Dies & moulds sold Consumption of Stores Excise Duty Employees Remuneration & Benefits Manufacturing/ Administrative and other expenses Selling & Distribution expenses Financial expenses Provision for Contingencies Depreciation Deferred Revenue Expenditure charged off Less: Vehicles for own use 52,677 3,227 415 18,101 2,136 3,284 6,078 558 371 3,221 386 55 90,399 (Accretion)/ Decretion to Work-in-progress and Finished Goods Total Net profit before extraordinary items & prior period adjustments. Add: Net prior period adjustments Profit/(Loss) before tax Less: Taxation Current Less: Taxation Deferred Net Profit/(Loss) after tax as per audited statement of accounts (A) 1,020 91,419 2,841 (20) 2,821 351 1,006 1,464 53,768 4,568 458 20,132 2,289 3,420 4,821 764 318 3,429 324 69 94,222 (1,419) 92,803 1,186 (3) 1,183 138 1,045 54,734 4,084 622 22,118 2,003 3,222 3,989 746 141 3,223 197 118 94,961 203 95,164 (2,663) (29) (2,692) 2 (2,694) 52,225 3,936 651 23,256 1,873 3,272 4,252 668 549 2,631 163 88 93,388 (513) 92,875 3,850 1 3,851 550 3,301 41,034 2,126 581 19,186 1,726 2,586 3,811 560 303 1,912 78 66 73,837 126 73,963 7,843 (2) 7,841 2,611 5,230 3,624 94,260 85,153 5,656 90,809 3,180 93,989 84,399 4,888 89,287 3,214 92,501 88,414 4,737 93,151 3,574 96,725 75,051 2,763 77,814 3,992 81,806 Financial Year ended March 31, 2002 Financial Year ended March 31, 2001 Financial Year ended March 31, 2000 Financial Year ended March 31, 1999

149

(Rs. in Million) Financial Year ended March 31, 2003 Adjustment on account of changes in accounting policies [Refer IV(ii)(1)] Impact of material adjustments and prior period items [Refer IV(ii)(1)] Total Adjustments (B) Adjusted Profit/ (Loss) (A+B) Transfer from Investment allowance reserve Carry forward Profit/(Loss) from previous year Accounting policy changes and prior period adjustments pertaining to previous years * Profit available for appropriation Less Debenture Redemption Reserve General Reserve Proposed Dividend Corporate Dividend Tax Deferred Tax adjusted in General Reserve ** Balance Carried Forward to Balance Sheet 176 146 427 55 23,359 176 105 397 (362) 22,914 2 1,029 22,325 332 331 73 (754) 24,922 530 397 44 14 22,458 (215) (215) 1,249 22,914 24,163 Financial Year ended March 31, 2002 (362) 222 (140) 905 22,325 23,230 Financial Year ended March 31, 2001 1,029 99 1,128 (1,566) 24,922 23,356 Financial Year ended March 31, 2000 (753) (115) (868) 2,433 13 22,458 24,904 Financial Year ended March 31, 1999 (31) 246 215 5,445 22 18,169 (193) 23,443

The accompanying significant accounting policies and notes are an integral part of this statement. * Denotes the Impact of accounting policy changes (excluding deferred tax adjustments) and prior period adjustments pertaining to earlier years.

** As per Accounting Standard (AS 22) Accounting for Taxes on Income issued by the Institute of Chartered Accountants of India, the company has adjusted net deferred tax liability till 31st March 2002 as a charge to General Reserve.

150

II. SUMMARY OF ASSETS AND LIABILITIES, AS RESTATED

The assets and liabilities of the Company as at the end of each financial year i.e. March 31, 2003, 2002, 2001, 2000 and 1999 audited by us and presented to the members and examined and found correct by us and after making such adjustments/ regroupings and subject to the notes appearing hereinafter are as set out below: (Rs. in Million) March 31, 2003 A. Fixed assets: Gross Block Less: Accumulated Depreciation Net Block Add: Capital Work in Progress Total B. Investments: C. Current Assets, Loans & Advance: Inventories Sundry Debtors Cash & Bank balances Other Current Assets Loans & Advances Total D. Liabilities & Provisions: Current Liabilities & Provisions Deferred Tax (Asset)/Liability Secured Loans Unsecured Loans Total E. Net Worth (A+B+C-D) Net Worth Represented By F. Share Capital G. Reserves and Surplus Capital Reserve Share Premium Investment Allowance Reserve Debenture Redemption Reserve General Reserve Balance as per Profit & Loss Account Total H. Miscellaneous Expenditure to the extent not written off I. Net Worth (F+G-H) 15 4,241 352 1,568 23,359 29,535 887 30,093 15 373 176 1,422 22,914 24,900 1,192 25,031 15 373 1,679 22,325 24,392 587 25,128 15 373 650 24,922 25,960 523 26,760 15 373 13 1,072 22,458 23,931 263 24,991 1,445 1,323 1,323 1,323 1,323 14,786 2,071 3,000 1,560 21,417 30,093 14,343 1,065 3,951 2,609 21,968 25,031 12,668 703 5,615 5,506 24,492 25,128 14,266 1,732 864 4,597 21,459 26,760 15,194 978 218 749 17,139 24,991 4,870 6,711 9,894 598 5,755 27,828 6,811 8,393 719 479 4,604 21,006 8,655 6,755 876 716 5,508 22,510 9,902 4,663 317 1,039 4,225 20,146 5,784 2,766 8,169 1,079 5,364 23,162 45,138 22,581 22,557 93 22,650 1,032 43,847 19,546 24,301 724 25,025 968 38,667 16,196 22,471 3,684 26,155 955 34,999 13,242 21,757 2,342 24,099 3,974 23,636 10,618 13,018 1,105 14,123 4,845 March 31, 2002 March 31, 2001 March 31, 2000 March 31, 1999

The accompanying significant accounting policies and notes are an integral part of this statement. 151

III. DIVIDENDS
We further report that the dividends (subject to deduction of tax at source, where applicable) declared by Maruti Udyog Limited in respect of five financial years ended March 31, 2003 are as under: (Rs. in Millions) Financial Year ended March 31, 2003 Equity Share Capital Rate of Dividend Amount of Dividend Corporate Dividend Tax 1445 30% 427 55 Financial Year ended March 31, 2002 1323 30% 397 Financial Year ended March 31, 2001 1323 2 Financial Year ended March 31, 2000 1323 25% 331 73 Financial Year ended March 31, 1999 1323 30% 397 44

152

IV. SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS (i) SIGNIFICANT ACCOUNTING POLICIES
1) BASIS FOR PREPARATION OF ACCOUNTS These Accounts have been prepared in accordance with historical cost convention, the applicable accounting standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956. 2) REVENUE RECOGNITION Domestic and Export Sales are recognized on dispatch of goods from the factory/stock yard and Port respectively. 3) FIXED ASSETS Fixed Assets (except freehold land) are carried at cost of acquisition or construction or at manufacturing cost (in case of own manufactured assets) in the year of capitalization less accumulated depreciation. In respect of the various project related activities, which are carried on concurrently with production, expenses on administration and supervision incurred, the bifurcation of which between production and construction activities is not ascertainable, are charged to revenue. 4) BORROWING COSTS Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalized till the month in which the asset is put to use as part of the cost of that asset. 5) DEPRECIATION a) Fixed Assets except for lease hold land are depreciated on straight line method on a pro-rata basis from the month in which the asset is put to use, at the following rates: i) Assets capitalized before 02.04.1987 Depreciation has been provided at the rates computed in terms of Section 205 (2) (b) of the Companies Act, 1956, in terms of Circular No. 1/86 dated 21.05.86 of the Government of India. ii) Assets capitalized on or after 02.04.1987 Depreciation has been provided at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for certain fixed assets where based on managements estimate of the useful life of the assets, higher depreciation has been provided at the following rates: Plant and Machinery: Single Shift Double Shift Triple Shift Dies and Jigs b) c) d) 7.31% 11.88% 15.83% 19.00%

Leasehold land is amortized over the period of lease. Plant and machinery the written down value of which at the beginning of the year is Rs. 5,000 or less and other assets the written down value of which at the beginning of the year is Rs. 1,000 or less are depreciated at the rate of 100%. In case the historical cost of an asset undergoes a change due to increase or decrease in long-term liability on account of foreign exchange fluctuation, change in duties etc., the depreciation on revised unamortised depreciable amount is provided prospectively over the residual useful life of the asset.

153

6)

INVENTORIES a) b) c) Inventories are valued at lower of cost, determined on weighted average basis, and net realizable value. Tools are written off over a period of three years except for tools valuing Rs. 5,000 or less individually which are charged off to revenue in the year of purchase. Machinery spares (other than those supplied along with main plant and machinery, which are capitalized and depreciated accordingly) are charged off to revenue on consumption except those valuing Rs. 5,000 or less individually, which are charged off to revenue in the year of purchase and those whose value are not individually ascertainable are written off over a period of three years.

7)

INVESTMENTS Current investments are valued at lower of cost and fair value. Long-term investments are valued at cost except in case of permanent diminution in their value, wherein necessary provision is made.

8)

RESEARCH AND DEVELOPMENT Revenue expenditure on research and development is charged off against the profit of the year in which it is incurred except expenditure incurred on development and testing of components, which are deferred over a period of three years. Capital expenditure on research and development is shown as an addition to fixed assets and depreciated accordingly.

9)

FOREIGN CURRENCY TRANSLATIONS a) Foreign Currency transactions other than those covered by forward contracts are recorded at the exchange rate prevailing at the date of transaction. Exchange differences arising on settlement of transactions, except those relating to fixed assets, are recognized as Income or expense in the year in which they arise. The cost of the respective fixed assets are adjusted for exchange differences arising on repayment of liabilities incurred for the purpose of acquiring such fixed assets. At the balance sheet date all assets, other than fixed assets, and liabilities denominated in foreign currency but not covered by forward contract are reported at the exchange rate prevailing at the balance sheet date. The cost of the respective fixed assets are adjusted for increase or decrease in liabilities incurred for the purpose of acquiring such fixed assets due to application of exchange rate prevailing at the balance sheet date. Foreign currency transactions covered by forward contracts are recorded at the exchange rate prevailing at the date of inception of forward contracts. At the balance sheet date all assets and liabilities covered by forward contracts are stated at the forward contract rates. The difference between the forward rate and the exchange rate at the inception of a forward contract is recognized as income or expense over the life of the contract except in respect of liabilities incurred for acquiring fixed assets in which case such difference is adjusted in the cost of the respective fixed assets. Profit or Loss arising on cancellation or renewal of a forward contract is recognized as income or expense in the year in which such cancellation or renewal has been made except in case of a forward contract relating to liabilities incurred for acquiring fixed assets, where profit or loss is adjusted in the cost of the respective fixed assets.

b)

c) d) e)

f)

10) RETIREMENT BENEFIT COSTS Gratuity and leave encashment benefits on retirement are accounted for on the basis of actuarial valuation made at the end of the year. 11) DEFERRED REVENUE EXPENDITURE Deferred Revenue Expenditure is written off over the period of its benefit.

154

12) CUSTOMS DUTY Customs Duty paid on import of components specifically for export vehicles is debited to Customs Duty Deposit Account and duty drawback recoverable on export of vehicles is credited to this account. Other categories of duties available as drawback are debited to purchases and credited to income on export of vehicles. 13) GOVERNMENT GRANTS Government Grants are recognized in the profit and loss account in accordance with the related scheme and in the year in which these are accrued. 14) DEFERRED TAX Tax expense for the year comprising current tax and deferred tax, is included in determining the net profit/(loss) for the year. However, in the year of transition, the accumulated deferred tax liability at the beginning of the year has been recognized with a corresponding charge to the General Reserve in accordance with Accounting Standard 22 issued by the Institute of Chartered Accountants of India. Deferred tax assets are recognized for all deductible timing differences and carried forward to the extent it is probable that future taxable profit will be available against which such deferred tax assets can be realized. Deferred tax assets are reviewed at each balance sheet date and written down/ written up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted at the balance sheet date.

155

(ii) NOTES TO ACCOUNTS 1) Adjustments/ Regroupings

Impact of change in accounting policies and prior period items (Rs. in Million) Particulars Financial Year ended March 31, 2003 (A) 1,464 Financial Year ended March 31, 2002 1,045 Financial Year ended March 31, 2001 (2,694) Financial Financial Year ended Year ended March 31, March 31, 2000 1999 3,301 5,230

Profit/ (Loss) after tax as per audited statements of accounts Adjustment on account of : (I) Changes in Accounting Policies a) Work in Progress valuation at lower of cost or net realisable value and impact of overhead valuation. (note1) b) Deferred Tax Adjustments (note 2) Total of Adjustments Tax Impact of adjustments (Note 4) Total of Adjustments Net of tax impact (II) Prior Period Items a) Salary & Wage Arrears / Liability Adjustment b) Retrospective amendments to prices of raw materials and components (note 3) c) Prior Period expenses d) Prior Period incomes e) Sales tax cases adjustment f) Lumpsum Royalty adjustment g) Provision for tax for earlier years Total of Adjustments (Note 4) Tax Impact of adjustments Total of Adjustments Net of tax impact Adjusted Profit / (Loss)

(B) -

(362) (362) (362)

1,029 1,029 1,029

1 (754) (753) (753)

(70) 14 (56) 25 (31)

(104)

13

79

12

(409) 34 (14) (25) 126 (392) 177 (C) (A+B+C) (215) 1,249

311 (18) 1 25 332 (110) 222 905

43 33 (8) 5 152 (53) 99 (1,566)

(155) (36) (1) (180) 65 (115) 2,433

80 16 (12) 187 280 (34) 246 5,445

156

(Rs. in Million) Particulars Financial Year ended March 31, 2003 Financial Year ended March 31, 2002 Financial Year ended March 31, 2001 Financial Financial Year ended Year ended March 31, March 31, 2000 1999

(III) Regroupings a) Consumption of Raw Materials and Companents b) Other Income/ Revenue c) Selling & Distribution expenses Notes: 1) For the year ended March 31, 1999 the Company valued Work in Progress at cost inclusive of allocable overheads and from the year 2000, the Company changed its policy and valued Work in progress at lower of cost, determined on weighted average basis, and net realisable value. The Company has accounted for Deferred Tax assets/ liability for earlier years in order to comply with provisions of Mandatory Accounting Standard- 22 Taxes on Income issued by the Institute of Chartered Accountants of India. The Company makes a provision at each year-end for retrospective amendments to the price increase of raw materials and components. These financial statements have been adjusted based upon the actual price increase of raw material and components passed on to vendors with retrospective effect in subsequent years. The tax rate applicable for the year ended March 31, 2003, has been used to calculate the notional tax impact of the adjustments. (114) (114) (32) (32)

2) 3)

4)

2) Non Adjustments / Regroupings

a) The Company has provided for contingencies as per details indicated in Note 9 below. Some of these provisions have been written back in subsequent years, when it was certain that they were not required. No adjustment has been made in the financial statements of the relevant years, on account of non-availability of related information. During the year ended March 31, 1999 machinery spares purchased along with the fixed assets were charged off to revenue, whereas in the subsequent accounting years due to the amendment in the relevant Accounting Standard, these machinery spares were capitalised. The details of machinery spares purchased along with the fixed assets during the year ended March 31, 1999 are not available and accordingly these have not been capitalised in year ended March 31, 1999. The company for the year ended March 31, 1999 followed the policy of valuing vehicle spares at weighted average cost whereas in the subsequent accounting years due to the amendment in the relevant Accounting Standard, it changed its policy and valued the above Inventories at lower of cost, determined on weighted average basis, and net realisable value. The information relating to cost for the year 1999 is not available.

b)

c)

157

3) Contingent Liabilities as at:

(Rs. in Million) Particulars As At March 31, 2003 As At March 31, 2002 As At March 31, 2001 As At March 31, 2000 As At March 31, 1999

1)

Contingent Liabilities on account of A) Claims against the Company not acknowledged as debts: - Sales-tax demands (Deposited under protest) - Excise demands (Deposited under protest) (Company has related counter claims on third parties.) - Customs demands (Deposited under protest) - Income-tax demands (Deposited under protest) - Other Disputed claims against the company lodged by various parties, pending litigation. B) Guarantees: (i) Guarantee given by the Company to HDFC Limited against a term loan of Rs.300 million given by HDFC Limited to Maruti Employees Co-operative House Building Society Limited, Bhondsi. (Against it, the contingent liability at the year-end is) (ii) Guarantee given to Finance Companies - For term loan - Lease finance given to various vendors of the company for purchase of dies and moulds of certain models. C) Co-lessee in agreements entered into between various vendors of the company, as lessee, and Finance Companies and Banks as lessors for leasing of dies and moulds of certain models. D) Others Compensation, in the event of the company not fulfilling its minimum purchase obligation For components, as per terms of an a greement entered into. Outstanding commitments under Letters of Credit established by the Company: Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for

189 (3) 4,328 (37) 90 8,098 (2,214)

53 (3) 8,508 (202) 10 6,592 (815)

64 (8) 5,933 (202) 9 1,611 (652)

66 (7) 963 (19) (3) 10 1,450 (255)

68 (7) 1,594 (237) (217) 10 1,238 (151)

1,430

621

616

480

449

300 (147)

300 (207)

300 (227)

300 (244)

300 (256)

55

74

401

523

2,411

3,384

3,545

1,639

76

199

445

2) 3)

239

677

1,476

3,255

2,963

280

845

1,268

2,018

2,931

158

4)

a) b)

Purchases are booked after the inspection of the goods is complete in the factory. Consumption for raw material, components, vehicle spares and consumables has been derived from the opening stock, purchases and closing stock physically verified by the management. (Rs. in Million)

5)

Excise Duty expense as per Profit & Loss account has following components: Financial Year ended March 31, 2003 18,342 109 (400) 50 18,101 Financial Year ended March 31, 2002 19,621 107 375 29 20,132 Financial Year ended March 31, 2001 22,070 103 (88) 33 22,118 Financial Year ended March 31, 2000 23,033 79 134 10 23,256 Financial Year ended March 31, 1999 19,182 48 (44) 0 19,186

Particulars

Excise duty on vehicle, spares and dies & moulds sales Excise duty on scrap sales Excise duty on accretion/(decretion) of finished vehicles Miscellaneous (Damaged Vehicles etc.) Total

6) 7)

Sales include freight amounting to Rs. 1,867 million, Rs. 1,543 million, Rs. 1,500 million, Rs. 1,591 million and Rs. 1,324 million in the years ended 31st March 2003, 2002, 2001, 2000 and 1999, respectively. In the year 1999, the Company created a provision of Rs.850 million (included in Consumption of Raw Materials and Components), on account of estimated reversal of tax benefit, (inclusive of earlier years) on quantity differences (under reconciliation) on inputs. In subsequent years, the company had made provisions of Rs.153 million, Rs. 205 million, Rs.374 million (inclusive of Rs.164 million for earlier years) and Rs.200 million for the years ended 31st March 2003, 2002, 2001 and 2000 respectively on account of estimated reversal of tax benefit on quantity differences (under reconciliation) on inputs. Consumption of Raw Material and Components is net of Rs 287 million and Rs. 114 million in the year ended 31st March 2003 and 2002, respectively on account of reversal of provision of tax benefit on quantity differences (under reconciliation) on inputs created in earlier years. Manufacturing, Administrative and Other expenses for the year ended 31st March 2003 and 2002 include a provision of Rs.41 million inclusive of Rs.30 million for earlier years and Rs.60 million inclusive of Rs.51 million for earlier years for interest on estimated reversal of tax benefit, on quantity differences (under reconciliation) on inputs.

8)

159

9)

The Company has made provision for contingencies on account of: (Rs. in Million)

Particulars

Financial Year ended March 31, 2003 27 7 190 64 83 371

Financial Year ended March 31, 2002 298 10 10 318

Financial Year ended March 31, 2001 137 4 141

Financial Year ended March 31, 2000 292 190 63 4 549

Financial Year ended March 31, 1999 229 70 4 303

Non fulfillment of its future years export obligation against import of capital goods Unamortized cost of assets of certain models of vehicles Compensation for non fulfillment of purchase obligation Tax benefit on quantity differences (under reconciliation) on inputs Cases of Excise Duty disputes Obligation arising out of guarantee given for certain loans Other Claims Total

10) During the year ended 31st March, 2001, the Company, based on the technical and management estimate revised depreciation rates, prospectively, from higher rates to the depreciation rates prescribed under Schedule XIV of the Companies Act, 1956 on the new plant and machinery and dies and jigs for new models. Accordingly, the depreciation change and loss for the year was lower by Rs.667 million and the net fixed assets were higher by the same amount. 11) The Company had entered into a Constant Maturity Interest Rate swap in the year 2001-02 with a bank for its Rs.1,000 million Long term Debentures, under which the Bank will bear the fixed interest rate liability at the rate of 12% p.a. till maturity and the Company will bear the floating interest burden at a fixed spread over the 5 year Government Security yields. 12) The Company is entitled to sales tax benefit in accordance with the provisions of Rule 28C of Haryana General Sales Tax Rules, 1975 for the period from 01st August, 2001 to 31st July, 2015. The ceiling amount of concession to be availed during entitlement period is Rs.5,644 million. Till 31st March 2003, we have availed sales tax benefit amounting to Rs. 390 million. The Haryana State Sales-tax law has been replaced by State VAT law with effect from April 1st 2003. The VAT law of Haryana State contemplates the continuation of the sales tax benefit enjoyed by the company in an altered form. 13) The Company had offered Voluntary Retirement Schemes to its employees in the year 2001-02 and made a payment of Rs.736 million. This amount is included under miscellaneous expenses (to the extent not written off or adjusted) and is being amortized over the estimated future pay back period of 36 months from the conclusion of the scheme. 14) a) Land valuing Rs.4 million is not yet registered in the name of the Company. Part of this land has been made available to Group Companies. b) c) Building amounting to Rs.32 million is not yet registered in the name of the Company. Plant and Machinery includes pro-rata cost amounting to Rs.374 million of a Gas Turbine jointly owned by the Company with its Group Companies and certain Other Companies.

160

15) SECURED LOANS (Rs. in Million) Particulars As At March 31, 2003 As At March 31, 2002 As At March 31, 2001 As At March 31, 2000 As At March 31, 1999

LONG TERM LOANS 11.2% Non-Convertible Debentures Series I (Secured by mortgage on specific Buildings and Plant & Machinery) (Series- I Debentures are redeemable at par on 24th July 2007 with put / call option on 24th July2005) 12% Non-Convertible Debentures Series II (Secured by mortgage on specific Buildings and Plant & Machinery) (Series- II Debentures are redeemable at par 30% on 4th December 2005, 30% on 4th December 2006 and balance 40% on 4th December 2007.) Total SHORT TERM LOANS Cash Credit / Working Capital Demand Loans/Rupee Loans from Banks Packing Credit from banks Post shipment credit from Banks Foreign Currency loans from banks (The above are secured by pari passu first charge on the stock, book debts and other current assets.) Overdraft from banks (Secured against fixed deposits) Total Grand Total 3,000 951 3,951 2,615 5,615 864 864 218 218 951 2,615 427 1 436 197 14 7 3,000 3,000 3,000 1,000 1,000 1,000 2,000 2,000 2,000 -

161

16) UNSECURED LOANS (Rs. in Million) Particulars As At March 31, 2003 As At March 31, 2002 As At March 31, 2001 As At March 31, 2000 As At March 31, 1999

SHORT TERM LOANS Foreign Currency Loans from Banks (Note 1) (against negative lien on specific fixed assets of the Company) Packing Credits from Banks Post Shipment Credits from Banks Overdraft / Short Term Rupee Loans from Banks Foreign Currency Loans - From Banks - From Others Total Notes: 1. The Interest rate applicable to foreign currency loan taken from bank is at a spread of 0.60% per annum over 6 months Floating LIBOR (The LIBOR rate being reset every 6 months). The above-mentioned loan is repayable in full as follows, the first tranche of USD 10 million on February 16, 2004 and the second tranche of USD 20 million on February 27, 2004. Foreign currency loan was a long term loan as at March 31,2002 and March 31,2001. Interest on short term loans is payable in the range of 7.75%, 6%-9%, 5.41%-13.18%, 6.46%- 10% and 9%- 12.24% for the years ended 31st March, 2003, 2002, 2001, 2000 and 1999 respectively. All short-term loans outstanding at each balance sheet date are repayable within one year from the balance sheet date. 1,560 2,609 2798 5,506 3010 872 4,597 749 1,427 1,464 1,399 -

133

930 15 200

715 44 550

708 7 -

600 5 144

2. 3.

162

B. Other financial information

We have examined the following financial information relating to Maruti Udyog Limited proposed to be included in the Offer Document, as approved by you and annexed to this report. Summary of accounting ratios based on the adjusted profits relating to earnings per share, net asset value and return on net worth is enclosed as Annexure A. (ii) Capitalisation statement as at 31st March 2003 of the Company is enclosed as Annexure B. (iii) Statement of taxation is enclosed as Annexure C. (iv) Details of items of other income are enclosed as Annexure D. In our opinion the financial information of the Company as stated to this report as mentioned in paragraph (A) & (B) above read with respective significant accounting policies, after making groupings and adjustments and subject to non adjustment of certain matters as stated in notes to accounts, have been prepared in accordance with Part II of Schedule II of the Act and the SEBI Guidelines. This report is intended solely for your information and for inclusion in the Offer Document in connection with the Offer for Sale of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent. Yours faithfully, Sd/S. Berera Partner For and on behalf of Price Waterhouse Chartered Accountants Place : New Delhi Date : 6/5/03 (i)

163

OTHER FINANCIAL INFORMATION

SUMMARY OF ACCOUNTING RATIOS: Annexure - A Pre-Split
Key ratios Financial Year ended March 31, 2003 87.69 2,113 4.15 Financial Year ended March 31, 2002 68.41 1,892 3.62 Financial Year ended March 31, 2001 (118.37) 1,899 (6.23) Financial Year ended March 31, 2000 183.91 2,023 9.09 Financial Year ended March 31, 1999 411.59 1,889 21.79

Earning Per Share (Rs.) Net Asset Value per Share (Rs.) Return on Net worth (%) Weighted Average Numbers of Equity Share Outstanding during the year

14,242,780

13,229,162

13,229,162

13,229,162

13,229,162

Post-Split (Note 1)
Key ratios Financial Year ended March 31, 2003 4.38 105.64 4.15 Financial Year ended March 31, 2002 3.42 94.61 3.62 Financial Year ended March 31, 2001 (5.92) 94.97 (6.23) Financial Year ended March 31, 2000 9.20 101.14 9.09 Financial Year ended March 31, 1999 20.58 94.45 21.79

Earning Per Share (Rs.) Net Asset Value per Share (Rs.) Return on Net worth (%) Weighted Average Numbers of Equity Share Outstanding during the year

284,855,590

264,583,240

264,583,240

264,583,240 264,583,240

Formula:
Earnings Per Share (Rs.) = Net Profit after tax and before extraordinary items Weighted Average Numbers of Equity Shares Outstanding During the year Net Asset Value Per Share (Rs.) = Net worth excluding revaluation reserve Weighted Average Numbers of Equity Shares Outstanding During the year Return on Net Worth (%) = Net profit before extraordinary items but after adjusted tax Net worth excluding revaluation reserve Notes: 1. The shareholders in the Extra-Ordinary General Meeting held on March 25, 2003 have approved the sub-division of equity shares of face value of Rs. 100 each into twenty equity shares of face value of Rs. 5 each. Subsequent to this sub-division, the authorised equity share capital of Rs. 1,550,000,000 has been divided into 310,000,000 equity shares of Rs. 5 each and the issued, subscribed and paid up capital of Rs. 1,444,550,300 has been divided into 288,910,060 equity shares of Rs. 5 each. Accordingly, the ratios have been computed on the basis of number of equity shares post-split. 2. 3. Above ratios are computed on the basis of stand-alone (unconsolidated) restated financials of Maruti Udyog Limited. Ratios have been computed on the basis of the adjusted profits/ losses for the respective years. 164

CAPITALISATION STATEMENT Annexure - B

(Rs. in Million) Particulars Short Term Debt Long Term Debt (A) Total Debt Share Holders Fund Share Capital Reserves after adjustments of miscellaneous expenditure, to the extent not written off. # Total Shareholders Fund (B) Long Term Debt/ Total Shareholders Fund (A/B) # The above has been calculated after considering the adjustments. 1,445 28,648 30,093 0.10 Pre-issue as at March 31, 2003 1,560 3,000 4,560

(Rs. in Million) Particulars Short Term Debt Long Term Debt (A) Total Debt Share Holders Fund Share Capital Reserves after adjustments of miscellaneous expenditure, to the extent not written off. # Total Shareholders Fund (B) Long Term Debt/ Total Shareholders Fund (A/B) * # 1,445 28,648 30,093 0.10 Post-issue as at March 31,2003* 1,560 3,000 4,560

The Government of India is selling part of its stake in the Company and accordingly no money is received by the Company from this offer. Therefore, there is no change in capitalisation statement, pre and post issue. The above has been calculated after considering the adjustments.

165

STATEMENT OF TAX SHELTERS Annexure C

(Rs in Million) PARTICULARS Financial Year ended March 31, 2003* 2,821 1,037 Financial Year ended March 31, 2002 1,183 422 Financial Year ended March 31, 2001 (2,692) (1,065) Financial Year ended March 31, 2000 3,851 1,483 Financial Year ended March 31, 1999 7,841 2,744

Profit/(Loss) before tax but after Extraordinary items as per books (A) Tax on actual rate on profits Adjustments Permanent Differences (B) Interest on tax free securities Dividend exempt u/s 10(33) Penalties Donations Deduction U/S 80G Deduction U/S 80IA Deduction U/S 80HHC Indexation difference on Long term Capital Gain/Loss Gratuity unpaid during the year Total Permanent Differences (B) Timing Differences (C) Difference between tax depreciation and book depreciation Capital Expenditure debited to profit and loss account in books Deduction U/s 35 Borrowing cost capitalised in the books claimed as revenue expense in Income Tax Deferred Revenue Expenditure net of claimed in Income Tax Statutory duties claimed on paid basis net of reversal of duties claimed in Income Tax in earlier years Difference between interest accrued and investment as per Income Tax Difference between interest accrued and interest received Voluntary Retirement Scheme

(23) 99 76

(26) (39) (5) (70)

(49) (37) 4 (186)

(176) (451) 6 (6) (74) (113) (106)

(192) (75) (441) (445) (72)

(268)

(920)

(1,225)

(860) 78 (56)

(1,603) 35 (169)

(1,773) 122 (194)

(1,140) 310 (98)

(302) 33 (172)

59

(136) 20

(143) (64)

(8) (260)

(57)

(233) 98

1,224 (36)

(287) (212) 11 -

(796) 22 25 -

(36) (59) 66 -

166

(Rs in Million) PARTICULARS Financial Year ended March 31, 2003* (10) (76) Financial Year ended March 31, 2002 (10) 13 (120) Financial Year ended March 31, 2001 (85) Financial Year ended March 31, 2000 (170) Financial Year ended March 31, 1999 50 (17) 851

Provision in diminution in value of investment accounted for in the books Disallowance U/s 40A(7) Disallowance U/s 35AB Disallowance U/s 43B Provisions for doubtful current assets and Contingent liabilities debited to P&L Account net of w/back Prior Period Expenses (net of claimed in Income Tax Act) Total Timing Differences (C) Net Adjustments (B+C) Tax Saving thereon Profit/(Loss) as per Income Tax Returns (D)= (A+B+C) Brought Forward Losses adjusted (E) Taxable Income/(Loss) (D+E) Taxable Income as per MAT Tax as per Income tax as returned Interest u/s 234 Total Tax as per return Carried Forward Business Loss Carried Forward Depreciation Loss Carried Forward Capital Loss Total Carried Forward Loss as per return *

188 34 (778) (702) (258) 2,119 (2,119) 2,823 222 222 (39) (2,890) (227) (3,156)

(349) 1 (1,130) (1,200) (428) (17) (17) 1,325 101 101 (39) (5,009) (227) (5,275)

309 32 (2,284) (2,552) (1,009) (5,244) (5,244) (39) (4,998) (221) (5,258)

409 (35) (1,741) (2,661) (1,025) 1,190 1,190 463 463 (12) (12)

(315) 16 58 (1,167) (409) 6,674 6,674 2,336 2 2,338 -

These are provisional numbers and final amount will be ascertained at the time of filing of return

167

DETAILS OF OTHER INCOMES Annexure - D

(Rs in Million) PARTICULARS Financial Year ended March 31, 2003 Financial Year ended March 31, 2002 Financial Year ended March 31, 2001 Financial Year ended March 31, 2000 Financial Year ended March 31, 1999 Nature of Income

Interest on: (a) Inter Corporate Deposits (Gross) (includes TDS) (b) Fixed Deposits with Banks (Gross) (includes TDS) (c ) Securities (Gross) (includes TDS) (d) Others (receivable, advances and others) (Gross)(includes TDS) Duty Drawback on Exports Sale of Scrap Sale of Power Workshop Receipts Sales Tax Benefits Miscellaneous Receipts Profit on sale of Investments (Net) Dividend (a) Trade Investments Long Term (b) Others Long Term (c ) Others Current Provisions no longer required written back Recovery of Service Charges Less: Repair cost of Damaged Vehicles Total 27 3 247 128 (67) 3,624 37 2 322 130 (45) 3,180 31 6 559 134 (48) 3,214 24 90 337 476 141 (44) 3,574 17 58 520 118 (45) 3,992 Recurring Recurring Recurring Recurring Recurring

98

387

Recurring

262 23

25

51

396 242

469 482

Recurring Recurring

722 320 830 23 229 527 350

815 142 819 357 25 161 390 -

607 163 804 337 24 356 190

278 255 635 202 23 350 71

284 217 415 272 20 293 485

Recurring Recurring Recurring Recurring Recurring Recurring Recurring Recurring

Annexures E, F and G are on pages 175, 178 and 181 of this Red Herring Prospectus, respectively

168

SUNDRY DEBTORS AS ON MARCH 31, 2003

(Rs. in Million) A Debts outstanding for a period exceeding six months: Unsecured Considered Good Considered Doubtful 767 194 961 Less: Provision for Doubtful Debts B Other Debts: Unsecured Total Considered Good 5,944 6,711 194 767

Out of the total debtors outstanding as at March 31, 2003, Rs.458 Million is recoverable from the Promoter Group Companies. Out of the total debtors outstanding as at March 31, 2003, Rs.346 Million is recoverable from the Group Companies. No amount is recoverable from the Promoters. Note: 1. 2. Promoters - Suzuki Motor Corporation. Promoter Group Companies represents the Subsidiaries and Associates of Suzuki Motor Corporation (excluding Suzuki Metal India Limited, Machino Plastics Limited, Bharat Seats Limited and Krishna Maruti Limited which have been taken as Group Companies of Maruti Udyog Limited) and Subros Limited, where Suzuki Motor Corporation share holding is 13%. Group Companies represents the Subsidiaries, Associates and Joint Ventures of Maruti Udyog Limited.

3.

This page is not a part of the Auditors Report dated May 6, 2003, and forms a part of the Auditors certificate issued on May 9, 2003

169

VALUE OF QUOTED INVESTMENTS

The Book Value and Market Value of quoted investments of the Company as on March 31, 2003 is as below: (Rs. in Million) Name of the Company A EQUITY SHARES LONG TERM 1 TRADE INVESTMENT Asahi India Glass Limited Bharat Seats Limited Denso India Limited Jay Bharat Maruti Limited Machino Plastics Limited Sona Koyo Steering Systems Limited 2 NON-TRADE INVESTMENT LIC Housing Finance Limited Total 573,600 34 145 38 508 8,880,000 465,000 2,862,758 1,585,000 941,700 690,000 2 5 73 16 5 10 311 8 59 40 12 40 Number of Shares Book Value Market Value

This page is not a part of the Auditors Report dated May 6, 2003, and forms a part of the Auditors certificate issued on May 9, 2003

LOANS AND ADVANCES AS AT MARCH 31, 2003

(Rs. in Million) A Loans Secured - Considered Good - Considered Doubtful Less: Provision for Doubtful Loans Unsecured - Considered Good - Considered Doubtful Less: Provision for Doubtful Loans B Advances recoverable in cash or in kind or for value to be received: Unsecured - Considered Good - Considered Doubtful Less: Provision for Doubtful Advances C Deposits - Considered Good unless otherwise stated Balance with Customs, Port Trust and other Government Authorities Inter Corporate Deposits Considered Doubtful Less :Provision for Doubtful Deposits Other Deposits Total 170 313 313 0 9 5,755 4,096 989 75 1,064 75 989 170 34 204 34 491 1 492 1 491 170

A.

1. Out of the total Loans and Advances outstanding as at March 31, 2003, Rs. 64 Million is recoverable from the Promoter Group Companies. 2. 3. Out of the total Loans and Advances outstanding as at March 31, 2003, Rs. 496 Million is recoverable from the Group Companies. No amount is recoverable from the Promoters.

Note: 1. 2. Promoters - Suzuki Motor Corporation. Promoter Group Companies represents the Subsidiaries and Associate of Suzuki Motor Corporation (excluding Suzuki Metal India Limited, Machino Plastics Limited, Bharat Seats Limited and Krishna Maruti Limited which have been taken as Group Companies of Maruti Udyog Limited) and Subros Limited, where Suzuki Motor Corporation share holding is 13%. Group Companies represents the Subsidiaries, Associates and Joint Ventures of Maruti Udyog Limited.

3. B. C.

Loans and Advances recoverable as at March 31, 2003 from persons/ companies in which Directors of Maruti Udyog Limited are interested, as listed in the register maintained under section 301 of the Companies Act, 1956 is Rs 512 million. Apart from the above, no other Loans and Advances have been made by MUL to persons/companies related to SMC/any of the directors of MUL.

This page is not a part of the Auditors Report dated May 6, 2003, and forms a part of the Auditors certificate issued on May 9, 2003

171

CASH FLOW STATEMENT PREPARED FROM THE RESTATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2003, MARCH 31, 2002 AND MARCH 31, 2001
Following is the Cash Flow Statement prepared under the indirect method as set out in Indian Accounting Standard 3 on Cash Flow Statements issued by Institute of Chartered Accountants of India. (Rs in Million) For the year ended 31.03.03 A. Cash flow from operating activities: Net Profit/(loss) before tax Adjustments for: Depreciation Interest Expense Interest Income Dividend Income Net loss on sale / discarding of Fixed Assets Profit on sale of Investments Deferred revenue expenditure written off Deferred Revenue Expenditure Incurred Debts / Advances written off Provision for Doubtful Debts and Advances Provision no longer required written back Unrealised foreign exchange (gain) / Loss Provision for Contingencies Operating profit before working capital changes Adjustments for changes in working capital: (Increase)/Decrease in Sundry Debtors (Increase)/Decrease in Other Current Assets, Loan & Advances (Increase)/Decrease in Inventories Increase/(Decrease) in current liabilities and provisions Cash generated from operating activities Taxes (Paid) /Received (Net of TDS) Net cash from / (used in) operating activities B. Cash flow from Investing activities: Purchase of fixed assets Sale of fixed assets Sale of Investments Purchase of investments Interest Received (Revenue) Dividend Received Net cash from / (used) in investing activities 172 (1,017) 86 23,191 (22,905) 985 30 370 (2,229) 94 (13) 828 39 (1,281) (6,036) 168 3,319 (110) 687 37 (1,935) 1,673 (1,246) 1,941 315 7,828 (123) 7,705 1,056 (1,841) 1,750 1,395 6,662 (123) 6,539 (1,246) (2,092) 1,247 (518) (2,543) 95 (2,448) 3,221 518 (1,007) (30) 54 (350) 386 (81) 4 3 (222) (25) 371 5,145 3,429 654 (840) (39) 8 324 (929) 300 (436) (2) 318 4,302 3,223 704 (658) (37) 7 (190) 197 (261) 71 (591) 141 66 2,303 1,515 (2,540) For the year For the year ended 31.03.02 ended 31.03.01

(Rs in Million) For the year ended 31.03.03 C. Cash flow from financing activities: Proceeds from fresh issue of Share Capital (including Share Premium ) Proceeds from long term borrowings (excludes Exchange Fluctuation) Proceeds from short term borrowings Repayment of short term borrowings Interest Paid Dividend Paid Net cash from/ (used) in financing activities D. Net Increase/(Decrease) in Cash & Cash Equivalents (A+B+C) E. Opening Balance of Cash and cash equivalents F. Closing Balance of Cash and cash equivalents Cash and cash equivalents comprise Cash, Cheques & Drafts (in hand) and Remittances in transit Balance with Scheduled Banks in Current Accounts Balance with Scheduled Banks in Deposit Accounts Notes: 1. 2. Previous years figures have been regrouped wherever necessary to conform to the current periods classification. Figures in brackets represent cash outgo. 174 220 9,500 438 281 365 511 3,990 133 (2,096) (530) (397) 1,100 9,175 719 9,894 415 (5,041) (789) (5,415) (157) 876 719 4,356 1,261 (675) 4,942 559 317 876 For the year For the year ended 31.03.02 ended 31.03.01

This cashflow statement is not a part of the Auditors Report dated May 6, 2003, and forms a part of the Auditors certificate issued on May 9, 2003

173

SEGMENT RESULTS PREPARED FROM THE RESTATED FINANCIAL STATEMENTS

The following table presents the Segment profit, assets and liabilities information relating to the Business segment for the year ended March 31, 2003 and March 31, 2002. There are no reportable Secondary segments of the company.

Information about business segment Primary

(Rs. in Million) 2002-03 SEGMENT REVENUE Sales Other income Total Revenue Segment results Dividend, Interest Income and Profit on sale of Investment Interest Expense Income Taxes Net Profit Other Information Segment Assets Unallocated Assets Total Assets Segment Liability Unallocated Liability Total Liability Capital Expenditure Depreciation Deferred Revenue Expenditure Note: a) b) c) d) e) The company is in the business of manufacture, purchase and sale of Motor Vehicles and spare parts. Others include businesses of pre-owned cars, fleet management and financing. Dividend is on non-trade investment and interest income is on securities and fixed deposits. Unallocated assets represent non trade investment and balance with banks in deposit accounts. Unallocated liabilities represent interest bearing liabilities and Income tax Liabilities. Capital Expenditure represents additions to Fixed Assets. 984 3,221 386 2 0 12,194 55 41,701 112 41,813 9,697 51,510 12,249 9,168 21,417 986 3,221 386 2,397 3,429 324 4 0 11,862 6 46,707 8 46,715 284 46,999 11,868 10,100 21,968 2,401 3,429 324 Motor Vehicles 90,636 2,901 93,537 2,187 Others 0 60 60 (4) Total 90,636 2,961 93,597 2,183 638 518 1,054 1,249 Motor Vehicles 90,809 3,139 93,948 2,176 2001-02 Others 0 14 14 (34) Total 90,809 3,153 93,962 2,142 27 654 610 905

THIS PAGE IS NOT A PART OF THE AUDITORS REPORT DATED MAY 6, 2003, AND FORMS A PART OF THE AUDITORS CERTIFICATE ISSUED ON MAY 15, 2003

174

MARUTI INSURANCE BROKERS LIMITED Annexure E I. Summary Of Profits And Loss Account, As Restated
The profit/(losses) of Maruti Insurance Brokers Limited for the year ended March 31, 2003 and March 31, 2002 after making such adjustments and regroupings and subject to notes appearing hereinafter are as set out below: (Rs. in 000s) For the year ended 31st March 2003 A. Income Commission Other Income Total A B. Expenditure Personnel Remuneration to Dealers Administrative & Other Expenses Preliminary Expenses Written Off Depreciation Total B C. Adjusted Profit before Taxation (A-B) D. Provision for Taxation E. Profit after Tax (C-D) 790 157,095 2,428 24 24 160,361 12,331 4,550 7,781 4 4 (4) (4) 172,642 50 172,692 Period ended 14th January 2002 to 31st March 2002

175

MARUTI INSURANCE BROKERS LIMITED Annexure E II. Summary of assets and liabilities, as restated:
The assets and liabilities of the company as on March 31, 2003 and March 31, 2002 after making such adjustments and regroupings and subject to notes appearing hereinafter are as set out below: (Rs. in 000s) As at 31st March, 2003 Fixed Assets Gross Block Less: Accumulated Depreciation Net Block (A) 343 24 319 As at 31st March 2002

Current Assets, Loans & Advances Sundry Debtors Cash & Bank Balances Loans & Advances Total (B) 31,168 22,888 30,535 84,591 500 500

Liabilities &Provisions Unsecured Loans Current Liabilities Provisions Total (C) 22,000 50,178 4,550 76,728 7,863 8,182 123 123 377 377

Net Current Assets (D)= (B-C) Net Worth Represented By Share Capital Issued, Subscribed and paid up. 50,000 Equity Shares of Rs. 10 each Reserves & Surplus Surplus in Profit & Loss Account Less: Preliminary Expenses Less: Loss for the year Net Worth (A)+(D)

500 7,777 95 8,182

500 119 4 377

176

MARUTI INSURANCE BROKERS LIMITED Annexure E III. Significant accounting policies and notes
Significant Accounting Policies 1) Accounting Convention: The financial statements are prepared under historical cost convention, on a going concern basis and in accordance with applicable accounting standards issued by the Institute of Chartered Accountants of India. 2) Revenue Recognition: Agency commission is recognized based on the total net premium collected/handed over to the Principal. 3) Fixed Assets: Fixed Assets are shown at cost less accumulated depreciation. 4) Depreciation: Depreciation is provided on straight-line method at the rates specified in Schedule XIV of the Companies Act, 1956. Depreciation on additions is charged for the whole month irrespective of the date of addition. 5) Staff Benefits: The Company makes regular contributions to duly constituted funds set up for Provident Fund and Family Pension Fund. 6) Preliminary Expenses: Preliminary Expenses are written off over a period of five years from the year in which the company commenced business. Notes :1. 2. 3. 4. 5. Other Income includes participation fees received from Insurance Companies. Personnel expenses include Directors Remuneration Rs. 6,02,572. Taxation has been computed on the basis of the rates applicable for the year. Authorized Share Capital of the company is Rs. 50 Lakhs divided into 5 Lakh Equity Shares of Rs. 10 each. Balance confirmation from parties, having credit balance, have not been obtained.

IV. DIVIDENDS:
We further report that, the company has not declared any dividend since incorporation.

177

MARUTI INSURANCE DISTRIBUTION SERVICES LIMITED Annexure F I. Summary of profits and loss account, as restated
The profit/(losses) of Maruti Insurance Distribution Services Limited for the year ended March 31, 2003 and March 31, 2002 after making such adjustments and regroupings and subject to notes appearing hereinafter are as set out below: (Rs. in 000s) For the year ended 31st March 2003 A. Income Commission Total A B. Expenditure Remuneration to Dealers Administrative & Other Expenses Preliminary Expenses Written Off Total B C. Adjusted Profit before Taxation (A-B) D. Provision for Taxation E. Profit after Tax (C-D) 40,675 691 24 41,390 2,038 760 1,278 4 4 (4) (4) 43,428 43,428 Period ended 14th January 2002 to 31st March 2002

178

MARUTI INSURANCE DISTRIBUTION SERVICES LIMITED Annexure F II. Summary of assets and liabilities, as restated:
The assets and liabilities of the company as on March 31, 2003 and March 31, 2002 after making such adjustments and regroupings and subject to notes appearing hereinafter are as set out below: (Rs. in 000s) As at 31st March, 2003 Current Assets, Loans & Advances Sundry Debtors Cash & Bank Balances Loans & Advances Total (A) 5,904 6,772 3,987 16,663 500 500 As at 31st March 2002

Liabilities & Provisions Unsecured Loans Current Liabilities Provisions Total (B) 7,000 7,224 760 14,984 1,679 1,679 123 377 377 123

Net Current Assets (C)=(A-B) Net Worth=(C) Represented By Share Capital Issued, Subscribed and paid up. 50,000 Equity Shares of Rs. 10 each Reserves & Surplus Surplus in Profit & Loss Account Less : Preliminary Expenses Less : Loss for the year Net Worth

500 1,274 95 1,679

500 119 4 377

179

MARUTI INSURANCE DISTRIBUTION SERVICES LIMITED Annexure F III. Significant Accounting Policies And Notes
Significant Accounting Policies 1) Accounting Convention: The financial statements are prepared under historical cost convention, on a going concern basis and in accordance with applicable accounting standards issued by the Institute of Chartered Accountants of India. 2) Revenue Recognition: Agency Commission is recognized based on the total net premium collected/handed over to the principal. 3) Preliminary Expenses: Preliminary Expenses are written off over a period of five years from the year in which the Company commenced business. Notes :1. 2. Balance confirmation from parties, having credit balance, have not been obtained. Authorized Share Capital of the company is Rs. 50 Lakhs divided into 5 Lakh Equity Shares of Rs. 10 each.

IV. DIVIDENDS:
We further report that, the company has not declared any dividend since incorporation.

180

TRUE VALUE SOLUTIONS LIMITED Annexure G I. Summary of profits and loss account, as restated
The profit/(losses) of True Value Solutions Limited for the year ended March 31, 2003 and March 31, 2002 after making such adjustments and regroupings and subject to notes appearing hereinafter are as set out below: (Rs. in 000s) For the year ended 31st March 2003 A. Income Consultancy Fees Total A 9,059 9,059 Period ended 14th January 2002 to 31st March 2002

B. Expenditure Personnel Administrative & Other Expenses Preliminary Expenses Written Off Total B 5,883 1,133 24 7,040 2,019 775 1,244 56 4 60 (60) (60)

C. Adjusted Profit before Taxation(A-B) D. Provision for Taxation E. Profit after Tax (C-D)

181

TRUE VALUE SOLUTIONS LIMITED Annexure G II. Summary of assets and liabilities, as restated:
The assets and liabilities of the company as on March 31, 2003 and March 31, 2002 after making such adjustments and regroupings and subject to notes appearing hereinafter are as set out below: (Rs. in 000s) As at 31st March, 2003 Current Assets, Loans & Advances Sundry Debtors Cash & Bank Balances Loans & Advances Total (A) 1,889 467 752 3,108 500 500 As at 31st March 2002

Liabilities & Provisions Current Liabilities Provisions Total (B) 744 775 1,519 1,589 1,589 179 179 321 321

Net Current Assets (C)=(A-B) Net Worth=(C) Represented ByShare Capital Issued, Subscribed and paid up. 50,000 Equity Shares of Rs. 10 each Reserves & Surplus Surplus in Profit & Loss Account Less : Preliminary Expenses Less : Loss for the year Net Worth

500 1,184 95 1,589

500 119 60 321

182

TRUE VALUE SOLUTIONS LIMITED Annexure G III. Significant accounting policies & notes
Significant Accounting Policies 1) Accounting Convention: The financial statements are prepared under historical cost convention, on a going concern basis and in accordance with applicable accounting standards issued by the Institute of Chartered Accountants of India. 2) Revenue Recognition: Consultancy Fees is accounted for on accrual basis based on the agreed rates with the service user. 3) Staff Benefits: The Company makes regular contributions to duly constituted funds set up for Provident Fund and Family Pension Fund. Gratuity and leave encashment have been provided for accrual basis. 4) Preliminary Expenses: Preliminary Expenses are written off over a period of five years from the year in which the business has commenced. Notes :1. 2. Taxation has been computed on the basis of the rates applicable for the year. Authorized Share Capital of the company is Rs. 50 Lakhs divided into 5 Lakh Equity Shares of Rs. 10 each.

IV. DIVIDENDS:
We further report that, the company has not declared any dividend since incorporation.

All notes to the accounts, significant policies as well as auditors qualifications as mentioned in the Auditors report have been included.

183

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN INDIAN GAAP AND US GAAP

The consolidated and non-consolidated financial statements included in this Draft Red Herring Prospectus have been prepared in accordance with applicable Indian GAAP and the applicable provisions of the Companies Act and the SEBI Guidelines. Indian GAAP differs in certain respects from US GAAP . The following table summarises certain differences between Indian GAAP and US GAAP and that could be significant to the presentation of our results of operations and financial position as of March 31, 2003. We have not prepared financial statements in accordance with US GAAP and, accordingly, cannot offer any assurances that the differences described below would give rise to the most material differences between our financial statements prepared under US GAAP and those prepared under Indian GAAP In addition, we cannot estimate the net effect that applying US GAAP would have on our results of operations . or financial position, or any component thereof, in any of the presentations of financial information that have been included in this Red Herring Prospectus. The effect of such differences may be, individually or in the aggregate, material for the consolidated or non-consolidated net results and shareholders equity prepared on the basis of US GAAP as compared to those prepared on the basis of Indian GAAP The following summary may not include all the differences that exist between US GAAP and . Indian GAAP US GAAP is generally more prescriptive and comprehensive than Indian GAAP regarding recognition and . measurement of transactions, account classification and disclosure requirements. No attempt has been made to identify all disclosure, presentation or classification differences that would affect the manner in which transactions and events are presented in the financial statements and the notes thereto. Various US GAAP and Indian GAAP pronouncements have been issued for which the mandatory application date is later than March 31, 2003. These, together with standards that are in the process of being developed in both jurisdictions, could have a significant impact on future comparisons between US GAAP and Indian GAAP . Particulars 1 Contents of financial statements Indian GAAP Companies are required to present balance sheets and profit and loss accounts for two years along with the relevant accounting policies and notes. US GAAP All companies are required to present balance sheets, statements of operations, statements of cash flows and statements of changes in stockholders equity for two years along with the relevant accounting policies and notes to accounts. Potential registrants are required to present statements of operations, statements of cash flows and statements of changes in stockholders equity for three years. They need not present the balance sheet for the third year.

Additionally, all listed companies (including companies in the process of getting listed), companies with turnover exceeding Rs.50 crores and insurance companies are required to present cash flow statements. (applicable for financial years beginning on April 1, 2001 for other than listed companies). Companies in the process of listing are required to present five years of adjusted financial information. 2 Changes in accounting policies - Accounting treatment The effect of a change in accounting policy must be recorded in the income statement of the period in which the change is made except as specified in certain standards where the change resulting from adoption of the standard has to be adjusted against opening retained earnings.

The effect of a change in accounting policy is generally included (net of taxes) in the current year income statement after extraordinary items. Pro-forma comparatives should be disclosed. There is a requirement to make retrospective adjustments for certain items.

184

Particulars 3 Correction of fundamental errors

Indian GAAP The effect of correction of errors must be included in the current year income statement with appropriate disclosure. Applicable to all listed companies from April 1, 2001. Investment in associates should be accounted for in accordance with the equity method of accounting. Investment in joint ventures accounted for as per proportionate consolidation method. Generally, Goodwill on Consolidation is amortised over a period of 3-5 years.

US GAAP Comparative figures for all previous years affected by the change must be restated. Applicable to all companies. As under Indian GAAP .

Principles of Consolidation

Investment in joint ventures generally accounted for under the equity method of accounting. Goodwill acquired in business combinations after June 30, 2001 shall not be amortized, and goodwill arising from acquisitions prior to this date is no longer amortized subsequent to December 31, 2001, but is subject to an annual impairment test. Capitalize purchased intangible assets, if specific criteria are met. Goodwill and certain other intangibles are not presumed to be wasting assets. Intangibles that have an indefinite useful life are required to be tested, at least annually, for impairment.

Intangible assets

Capitalize intangible assets if specific criteria are met and amortize over useful life, generally not exceeding 10 years. The recoverable amount of an intangible asset that is not available for use or is being amortized over a period exceeding 10 years should be reviewed at least at each financial year-end even if there is no indication that the asset is impaired. Amortization should be based on the consumption pattern of the asset or on a straight line basis if a pattern is not determinable.

Intangible assets that have finite useful life are required to be amortized over their estimated useful lives.

Internally generated intangible assets

Expenditure incurred on research must be expensed off as incurred. Development costs can be capitalized and amortized only if stringent criteria are met.

Research and development costs must be expensed as incurred. Certain software and websitedevelopment related costs must be capitalised. Revaluations are not permitted.

Property, plant and equipment

Fixed assets are recorded at the historical costs or revalued amounts. On revaluation, an entire class of assets is revalued, or a selection of assets for revaluation is made on a systematic basis. There is no restriction on the frequency of valuation. However, revaluation should not exceed the recoverable amount of assets.

185

Particulars 8 Depreciation

Indian GAAP The Companies Act prescribes the minimum statutory rates for minimum depreciation provision. Where applicable, higher depreciation based on useful life of the asset should be provided. Asset lives are not prescribed by the Companies Act, but can be derived from the depreciation rates.

US GAAP Assets are depreciated over their estimated useful economic lives.

Impairment of assets

Applicable for accounting period beginning from April 1, 2004 onwards. If impairment is indicated, the assets must be written down to higher of net selling price and the value in use based on discounted cash flows.

The impairment review is based on undiscounted cash flows at the lowest level of independent cashflows. If the undiscounted cash flows are less than the carrying amount the impairment loss must be measured using discounted cash flows. Compulsory when relates to the construction of certain qualifying assets. The valuation depends on the classification of the investmentsif held to maturity then they are carried at amortized cost, otherwise at fair value. Unrealized gains/losses must be recognized to other comprehensive income or (if trading securities) to income statement. Deferred taxes are measured using the full provision method, driven by balance sheet temporary differences. Deferred tax assets are recognized if recovery is probable. Deferred tax assets and liabilities are measured using enacted tax rates.

10

Capitalization of borrowing costs

Applicable for accounting periods beginning from April 1, 2000 onwards. Permitted for qualifying assets. Long-term investments are carried at cost (with provision for other than temporary diminution in value). Current investments are carried at lower of cost or fair value determined on individual basis or by category of investment but not on overall (or global) basis. Deferred tax assets and liabilities should be recognized for all timing differences subject to consideration of prudence in respect of deferred tax assets.

11 Valuation of Investments

12

Deferred income taxes

Unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it is certain that such previously unrecognized deferred tax assets will be realized. Deferred tax assets and liabilities are measured using tax rates that have been enacted or substantively enacted by the balance sheet date. 13 Derivatives and other financial instruments Measurement of derivative instruments and hedging activities The Guidance Note on Accounting for Equity Index Options and Equity Stock Options and the Guidance Note on Accounting for Equity Index Futures are the pronouncements which address the accounting for derivatives.

A number of specific differences in application.

Derivatives and hedge instruments must be measured at fair value. The changes in fair value must be recognized in the income statement, except for effective cash flow hedges where the changes in face value must be deferred in equity

186

Particulars

Indian GAAP However, the accounting treatment recommended in these guidance notes are applicable to all equity index options irrespective of the motive, i.e., speculation, arbitrage or hedging.

US GAAP until effect of the underlying transaction is recognized in the income statement. (No basis adjustment on cash flow hedges of futures)

See note 11 to our financial statements in Gains/losses on hedge instruments used the Section titled Unconsolidated Financial to hedge forecast transactions are Statements for details of the interest rate included in the cost of the asset/liability. swap owned by our Company. 14 Extraordinary and exceptional items Extraordinary items are limited to a few events outside the control of the company. Extraordinary items should be disclosed in the statement of profit and loss as a part of net profit or loss for the period. The nature and the amount of each extraordinary item should be separately disclosed in the statement of profit and loss in a manner that its impact on current profit or loss can be perceived. Exceptional items are usually shown on the face of the income statement or in the notes. 15 Proposed Dividend Proposed dividends are recognized in the financial statements for the period to which they relate. Any proposed dividends declared after the balance sheet date are adjusted in the financial statements for the relevant year even if they are subject to shareholders approval. There is no specific guidance for the accounting for off-balance sheet items under Indian GAAP Schedule VI of the . Companies Act mandates the disclosure of amounts committed to be paid for the acquisition of fixed assets not provided for in the books of accounts. Accounting standards require specific disclosures for commitments and contingent liabilities. Extraordinary items are limited to a few events outside the control of the company. US GAAP does not use the term extraordinary items, but requires a separate disclosure of items that are of such size and nature that require separate disclosure to explain the performance of the entity.

Exceptional items are usually shown on the face of the income statement or in the notes. A dividend is recorded when it has been declared and notice given to the shareholders. Stock dividends should preferably be recorded as of the time of declaration unless there is a clear indication that they will be rescinded. The US Securities and Exchange Commission requires the disclosure of material facts and circumstances that provide investors with a clear understanding of a registrants material off-balance sheet arrangements and their material effects in the financial statements. Further standards have been issued recently providing additional guidelines for the accounting and disclosures for guarantees, including indirect guarantees of indebtedness of others and for consolidation of variable interest entities. Additionally, existing accounting standards require disclosures of commitments made by an enterprise. Contingent gains / losses must be recognized or disclosed in the accounts provided certain conditions are met.

16

Off-Balance Sheet Items

187

Particulars 17 Employee Compensation Stock

Indian GAAP There is no specific guidance on accounting for employee stock compensation under Indian GAAP .

US GAAP Requires recognition of the cost of shares/ options awarded to employees, whether conditional upon performance criteria or not, over the period to which the employees service relates. Entities have a choice of accounting methods for determining the costs of benefits arising from employees stock compensation plans. They may either follow an intrinsic value method or a fair value method. Under the intrinsic value method, the compensation cost is the difference between the market price of the stock at the measurement date and the price to be contributed by the employee (exercise price). The measurement date could be the date of grant or the date of exercise depending upon terms of the plan. This method is widely used in practice. The fair value method is based on the fair value of the option at the grant date. This is estimated using an option-pricing model. If an entity chooses to follow the intrinsic value method, it must make pro-forma disclosures of net income and earnings per share as if the fair value method had been applied. All options given to non-employees have to follow the fair value method. An ESOP trusts assets and liabilities are included in the balance sheet of the sponsoring entity where the arrangements are such that the sponsoring entity has de facto control and bears the benefits and risks of the shares held by the ESOP trust.

SEBI has issued the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999, which are effective for listed companies for all stockoption schemes established after June 19, 1999. In accordance with these guidelines, the excess of the market price of underlying equity shares as of the date of grant of the options over the exercise price of the options, including up-front payments, if any, is to be recognized and amortized on a straight-line basis over the vesting period

The general practice is to consolidate trusts set up for administration of employee stock option plans.

188

Consolidated financial statements as per AS 21

REPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS OF MARUTI UDYOG LTD
1. We have audited the attached summary restated consolidated Balance Sheet of Maruti Udyog Limited (the Company) and its subsidiaries as per Note III A 1 (the Group), as at 31st March 2003 and 31st March 2002 and the summary restated consolidated Profit and Loss account for the years ended on that date, annexed thereto, which we have signed under reference to this report. These consolidated Financial Statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated Financial Statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Financial Statement presentation. We believe that our audit provide a reasonable basis for our opinion. We did not audit the Financial Statements of the subsidiaries, whose Financial Statements reflect total assets of Rs 99 million and Rs 2 million as at 31st March 2003 and 31st March 2002 and total revenue of Rs.225 million for the year ended 31st March 2003. These Financial Statements have been audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of the subsidiaries, is based solely on the report of the other auditors. We report that the summary restated consolidated Financial Statements have been prepared by the company in accordance with the requirements of Accounting Standard 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited Financial Statements of the Company and its subsidiaries included in the summary restated consolidated Financial Statements. Accounting for investments of the Company in its associates and joint ventures in the summary restated consolidated Financial Statements is in accordance with AS13 Accounting for Investments and not as per AS-23 & AS 27 regarding Accounting of Investment in Associates in Consolidated Financial Statements and Financial Interest of reporting in Joint Ventures, respectively, which became mandatory for accounting periods starting 1st April, 2002. Had the accounting of investments in associates and joint ventures been done as per AS-23 and AS-27, the carrying value of investments and the profit for the year would be higher by Rs.329 million and Rs.24 million, respectively, with consequential impact on the net assets for the year. On the basis of the information and explanations given to us and on consideration of the separate audit reports on individual audited Financial Statements of the Company and its aforesaid subsidiaries, in our opinion, subject to para 5 above, the summary restated consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the summary restated consolidated Balance Sheet, of the consolidated state of affairs of Maruti Udyog Limited and its subsidiaries as at 31st March 2003 and 31st March 2002; and (b) in the case of the summary restated consolidated Profit and Loss account, of the consolidated results of operations of Maruti Udyog Limited and its subsidiaries for the years ended on that date. 7. This report is solely for your information and for inclusion in the offer document being issued by the Company in connection with the offer for sale by the Government of India of certain equity shares in the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent. Sd/S. Berera Partner For and on behalf of Price Waterhouse Chartered Accountants

2.

3.

4.

5.

6.

Place : New Delhi Date : 6/5/03

189

I.

SUMMARY RESTATED CONSOLIDATED PROFIT AND LOSS ACCOUNT

(Rs. in Million) Financial Year ended March 31, 2003 Income Sales: Of Products manufactured by the Company Of Products traded in by the Company 86,361 4,275 90,636 Other Income Total Expenditure Consumption of Raw Materials & Components Cost of Spares/ Dies & Moulds Sold Consumption of Stores Excise Duty Employees Remuneration & benefits Manufacturing/ Administrative and other expenses Selling & Distribution expenses Financial expenses Provision for Contingencies Depreciation Deferred Revenue Expenditure charged off Less: Vehicles for own use 52,677 3,227 415 18,101 2,143 3,279 6,276 558 371 3,221 386 55 90,599 (Accretion)/ Decretion to work-in-progress and finished goods Total Net profit before prior period adjustments. Add: Net prior period adjustments Profit before tax Less:Taxation Current Less:Taxation Deferred Net Profit after tax as per audited statement of accounts (A) Adjustment on account of changes in accounting policies [Refer III(B)(ii)(1)] Impact of material adjustments and prior period items [Refer III(B)(ii)(1)] Total Adjustments (B) Adjusted Profit (A+B) 190 1,020 91,619 2,857 (20) 2,837 357 1,006 1,474 (215) (215) 1,259 53,768 4,568 458 20,132 2,289 3,420 4,821 764 318 3,429 324 69 94,222 (1,419) 92,803 1,186 (3) 1,183 138 1,045 (362) 222 (140) 905 3,840 94,476 85,153 5,656 90,809 3,180 93,989 Financial Year ended March 31, 2002

(Rs. in Million) Financial Year ended March 31, 2003 Carry forward Profit from previous year Add: Accounting policy changes and prior period adjustments pertaining to earlier years * Profit available for appropriation Less: Debenture Redemption Reserve General Reserve Proposed Dividend Corporate Dividend Tax Deferred Tax adjusted in General Reserve** Profit transferred to Balance Sheet 176 146 427 55 23,369 176 105 397 (362) 22,914 22,914 24,173 Financial Year ended March 31, 2002 22,332 (7) 23,230

The accompanying significant accounting policies and notes are an integral part of this statement. * Denotes the Impact of accounting policy changes (excluding deferred tax) and prior period adjustments pertaining to earlier years.

** As per Accounting Standard (AS 22) Accounting for Taxes on Income issued by the Institute of Chartered Accountants of India, the company has adjusted net deferred tax liability till 31st March 2002 as a charge to General Reserve. This is the Profit and Loss Account referred to in our report of even date.

S.BERERA Partner For and on behalf of PRICE WATERHOUSE Chartered Accountants New Delhi Dated: 6/5/03

JAGDISH KHATTAR Managing Director

MOTOHIRO ATSUMI Director (Finance)

S.RAVI AIYAR Company Secretary & Chief Legal Officer

191

II. SUMMARY RESTATED CONSOLIDATED BALANCE SHEET

(Rs. in Million) As at March 31, 2003 A. Fixed assets: Gross Block Less: Accumulated Depreciation Net Block Add: Capital Work in Progress Total B. Investments: C. Current Assets, Loans & Advances: Inventories Sundry Debtors Cash & Bank Balances Other Current Assets Loans & Advances Total D. Liabilities & Provisions: Current Liabilities & Provisions Deferred Tax (Asset)/ Liability Secured Loans Unsecured Loans Total E. Net Worth (A+B+C-D) Net Worth Represented By F. Share Capital G. Reserves and Surplus Capital Reserve Share Premium Investment allowance Reserve Debenture Redemption reserve General Reserve Profit & Loss Account Total H. Miscellaneous Expenditure to the extent not written off I. Net Worth (F+G-H) 15 4,241 352 1,568 23,369 29,545 887 30,103 15 373 176 1,422 22,914 24,900 1,192 25,031 1,445 1,323 14,842 2,071 3,000 1,560 21,473 30,103 14,343 1,065 3,951 2,609 21,968 25,031 4,870 6,748 9,924 598 5,755 27,895 6,811 8,393 720 479 4,604 21,007 45,138 22,581 22,557 93 22,650 1,031 43,847 19,546 24,301 724 25,025 967 As at March 31, 2002

192

The accompanying significant accounting policies and notes are an integral part of this statement. This is the Balance Sheet referred to in our report of even date.

S.BERERA Partner For and on behalf of PRICE WATERHOUSE Chartered Accountants New Delhi Dated: 6/5/03

JAGDISH KHATTAR Managing Director

MOTOHIRO ATSUMI Director (Finance)

S.RAVI AIYAR Company Secretary & Chief Legal Officer

193

III. NOTES TO SUMMARY RESTATED CONSOLIDATED FINANCIAL STATEMENTS. A. BACKGROUND:

1. 2. Maruti Udyog Limited (MUL) has three wholly owned subsidiaries - Maruti Insurance Brokers Limited (MIBL), Maruti Insurance Distribution Services Limited (MIDSL) and True Value Solutions Limited (TVSL). MIBL, MIDSL and TVSL were incorporated in India on January 14, 2002 as a wholly owned subsidiary of MUL with an authorized capital of Rs. 5 million each. MIBL, MIDSL and TVSL have obtained the certificate to commence business on May 1, 2002.

B. SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS:

(i) 1. SIGNIFICANT ACCOUNTING POLICIES: BASIS FOR PREPARATION OF SUMMARY RESTATED CONSOLIDATED FINANCIAL STATEMENTS: The consolidated financial statements include accounts of Maruti Udyog Limited (The Company) and its subsidiary undertakings (The Group). Subsidiary undertakings are those companies in which Maruti Udyog Limited, directly or indirectly, has an interest of more than one half of voting power or otherwise has power to exercise control over the operations. Subsidiaries are consolidated from the date on which effective control is transferred to the Group till the date such control exists. All inter company transactions, balances and unrealized surpluses and deficits on transactions between group companies are eliminated. Consistency in adoption of accounting policies among all group companies is ensured to the extent practicable. Investments in Subsidiaries have been accounted for in accordance with Accounting Standard 21 on Consolidated Financial Statements. Investments in the Associates and Joint Ventures have been accounted in these consolidated statements as per Accounting Standard 13 on Accounting for Investments and not as per Accounting Standard 23 on Accounting for Investments in Associates in Consolidated Financial Statements and Accounting Standard 27 on Financial Reporting of Interests in Joint Ventures. The policy for accounting of other investments is described under Para 7 below. The consolidated financial statements have been prepared in accordance with historical cost convention, the applicable accounting standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956. The consolidated financial statements are proposed to be included in the offer for sale document proposed to be filed by the Company with the Securities and Exchange Board of India. 2. REVENUE RECOGNITION: Domestic and Export Sales are recognised on dispatch of goods from the factory/stock yard and Port respectively. Agency Commission is recognized based on the total net premium collected/handed over to the Principal 3. FIXED ASSETS: Fixed Assets (except freehold land) are carried at cost of acquisition or construction or at manufacturing cost (in case of own manufactured assets) in the year of capitalisation less accumulated depreciation. In respect of the various project related activities, which are carried on concurrently with production, expenses on administration and supervision incurred, the bifurcation of which between production and construction activities is not ascertainable, are charged to revenue. 4. BORROWING COSTS Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised till the month in which the asset is put to use as part of the cost of that asset.

194

5.

DEPRECIATION a) Fixed Assets except for lease hold land are depreciated on straight line method on a pro-rata basis from the month in which the asset is put to use, at the following rates: i) Assets capitalised before 02.04.1987 Depreciation has been provided at the rates computed in terms of Section 205 (2) (b) of the Companies Act, 1956, in terms of Circular No. 1/86 dated 21.05.86 of the Government of India. ii) Assets capitalised on or after 02.04.1987 Depreciation has been provided at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for certain fixed assets where based on managements estimate of the useful life of the assets, higher depreciation has been provided at the following rates: Plant and Machinery: Single Shift Double Shift Triple Shift Dies and Jigs b) c) d) Leasehold land is amortised over the period of lease. Plant and machinery the written down value of which at the beginning of the year is Rs. 5,000 or less and other assets the written down value of which at the beginning of the year is Rs. 1,000 or less are depreciated at the rate of 100%. In case the historical cost of an asset undergoes a change due to increase or decrease in long term liability on account of foreign exchange fluctuation, change in duties etc., the depreciation on revised unamortised depreciable amount is provided prospectively over the residual useful life of the asset. 7.31% 11.88% 15.83% 19.00%

6.

INVENTORIES a) b) c) Inventories are valued at lower of cost, determined on weighted average basis, and net realisable value. Tools are written off over a period of three years except for tools valuing Rs. 5,000 or less individually which are charged off to revenue in the year of purchase. Machinery spares (other than those supplied alongwith main plant and machinery, which are capitalized and depreciated accordingly) are charged off to revenue on consumption except those valuing Rs. 5,000 or less individually, which are charged off to revenue in the year of purchase and those whose value are not individually ascertainable are written off over a period of three years.

7.

INVESTMENTS Current investments are valued at lower of cost and fair value. Long-term investments are valued at cost except in case of permanent diminution in their value, wherein necessary provision is made.

8.

RESEARCH AND DEVELOPMENT Revenue expenditure on research and development is charged off against the profit of the year in which it is incurred except expenditure incurred on development and testing of components which are deferred over a period of three years. Capital expenditure on research and development is shown as an addition to fixed assets and depreciated accordingly.

195

9.

FOREIGN CURRENCY TRANSLATIONS a) Foreign Currency transactions other than those covered by forward contracts are recorded at the exchange rate prevailing at the date of transaction. Exchange differences arising on settlement of transactions, except those relating to fixed assets, are recognised as Income or expense in the year in which they arise. The cost of the respective fixed assets are adjusted for exchange differences arising on repayment of liabilities incurred for the purpose of acquiring such fixed assets. At the balance sheet date all assets, other than fixed assets, and liabilities denominated in foreign currency but not covered by forward contract are reported at the exchange rate prevailing at the balance sheet date. The cost of the respective fixed assets are adjusted for increase or decrease in liabilities incurred for the purpose of acquiring such fixed assets due to application of exchange rate prevailing at the balance sheet date. Foreign currency transactions covered by forward contracts are recorded at the exchange rate prevailing at the date of inception of forward contracts. At the balance sheet date all assets and liabilities covered by forward contracts are stated at the forward contract rates. The difference between the forward rate and the exchange rate at the inception of a forward contract is recognised as income or expense over the life of the contract except in respect of liabilities incurred for acquiring fixed assets in which case such difference is adjusted in the cost of the respective fixed assets. Profit or Loss arising on cancellation or renewal of a forward contract is recognised as income or expense in the year in which such cancellation or renewal has been made except in case of a forward contract relating to liabilities incurred for acquiring fixed assets, where profit or loss is adjusted in the cost of the respective fixed assets.

b)

c) d) e)

f)

10. RETIREMENT BENEFIT COSTS Gratuity and leave encashment benefits on retirement are accounted for on the basis of actuarial valuation made at the end of the year. 11. DEFERRED REVENUE EXPENDITURE Deferred revenue expenditure is written off over the period of its benefit . Preliminary expenses are written off over a period of five years. 12. CUSTOMS DUTY Customs duty paid on import of components specifically for export vehicles is debited to Customs Duty Deposit Account and duty drawback recoverable on export of vehicles is credited to this account. Other categories of duties available as drawback are debited to purchases and credited to income on export of vehicles. 13. GOVERNMENT GRANTS Government Grants are recognized in the profit and loss account in accordance with the related scheme and in the year in which these are accrued. 14. DEFERRED TAX Tax expense for the year, comprising current tax and deferred tax, is included in determining the net profit/(loss) for the year. However, in the year of transition, the accumulated deferred tax liability at the beginning of the year has been recognized with a corresponding charge to the General Reserve in accordance with Accounting Standard 22 issued by the Institute of Chartered Accountants of India. Deferred tax assets are recognized for all deductible timing differences and carried forward to the extent it is probable that future taxable profit will be available against which such deferred tax assets can be realized. Deferred tax assets are reviewed at each balance sheet date and written down/ written up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted at the balance sheet date. 196

(ii) NOTES TO ACCOUNTS: 1. Adjustments: Impact of change in accounting policies and prior period items: (Rs. in million) Particulars Profit after tax as per audited statements of accounts Adjustment on account of: (I) a) Changes in Accounting Policies Deferred Tax Adjustments (note 1) (B) (362) (362) (362) Financial Year ended March 31, 2003 (A) 1,474 Financial Year ended March 31, 2002 1,045

Total of Adjustments Tax impact of adjustments Total of adjustments Net of tax Impact (II) Prior Period Items a) b) c) d) e) f) Salary & Wage Arrears/ Liability Adjustment Retrospective amendments to prices of raw materials and components (note 2) Prior Period expenses Prior Period incomes Royalty Adjustment Provision for tax for earlier years

(104) (409) 34 (14) (25) 126 (392) 177 (C) (A+B+C) (215) 1,259

13 311 (18) 1 25 332 (110) 222 905

Total of Adjustments Tax impact of adjustments Total of adjustments Net of tax Impact Adjusted Profit after tax (III) Regroupings a) b) Consumption of Raw Materials & Components Other Income 1.

(114) (114)

Notes: The Company has accounted for Deferred Tax assets/ liability for earlier years in order to comply with provisions of Mandatory Accounting Standard- 22 Taxes on Income issued by the Institute of Chartered Accountants of India. The Company makes a provision at each year-end for retrospective amendments to the price increase of raw materials and components. These financial statements have been adjusted based upon the actual price increase of raw material and components passed on to vendors with retrospective effect in subsequent years.

2.

197

2.

Non Adjustments The Company has provided for contingencies as per details indicated in Note 9 below. Some of these provisions have been written back in subsequent years, when it was certain that they were not required. No adjustment has been made in the financial statements of the relevant years, on account of non-availability of related information.

3.

Contingent Liabilities as at: (Rs. in Million) Particulars 1) A) Contingent Liabilities on account of : Claims against the Company not acknowledged as debts: Sales-tax demands (Deposited under protest) Excise demands (Deposited under protest) Customs demands (Deposited under protest) Income-tax demands (Deposited under protest) B) Other Disputed claims against the company lodged by various parties, pending litigation. 189 (3) 4,328 (37) 90 8,098 (2,214) 1,430 53 (3) 8,508 (202) 10 6,592 (815) 621 March 31, 2003 March 31, 2002

Guarantees: (i) Guarantee given by the Company to HDFC Limited against a term loan of Rs.300 million given by HDFC Limited to Maruti Employees Co-operative House Building Society Limited, Bhondsi. (Against it, the contingent liability due at the year-end is) 300 (147) 300 (207)

(ii) Guarantee given to Finance Companies - For term loan - Lease finance given to various vendors of the company for purchase of dies and moulds of certain models. C) Co-lessee in agreements entered into between various vendors of the company, as lessee, and Finance Companies and Banks as lessors for leasing of dies and moulds of certain models. Outstanding commitments under Letters of Credit established by the Company: Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for 55 401 74 523

2,411 239

3,384 677

2) 3)

280

845

4.

Consumption for Raw Material, components, vehicle spares and consumables have been derived from the opening stock, purchases and closing stock physically verified by the management at the year end.

198

5.

Excise Duty expense as per Profit & Loss account has following components: (Rs. in Million) Particulars Excise duty on vehicle, spares and dies & moulds sales Excise duty on scrap sales Excise duty on accretion/(decretion) of finished vehicles Miscellaneous (Damaged Vehicles, etc.) Total Financial Year ended March 31 2003 18,342 109 (400) 50 18,101 Financial Year ended March 31, 2002 19,621 107 375 29 20,132

6. 7.

Sales include freight amounting to Rs. 1,867 million and Rs. 1,543 million for the year ended 31 st March 2003 and 2002 respectively. Consumption of Raw Materials and Components include a provision of Rs.153 million and Rs.205 million for the year ended 31st March 2003 and 2002, respectively on account of estimated reversal of tax benefit, on quantity differences (under reconciliation) on inputs and is net of Rs.287 million and Rs. 114 million in the year ended 31st March 2003 and 2002 respectively on account of reversal of tax benefit provision on quantity differences (under reconciliation) on inputs created in earlier years. Manufacturing, Administrative and Other expenses for year ended 31st March 2003 and 2002 include a provision of Rs.41 million inclusive of Rs.30 million for earlier years and Rs.60 million inclusive of Rs.51 million for earlier years for interest on estimated reversal of tax benefit, on quantity differences (under reconciliation) on inputs. The Company has made provision for contingencies on account of: (Rs. in Million) Particulars Unamortized cost of assets of certain models of vehicles Compensation for non fulfillment of purchase obligation Cases of Excise Duty disputes Obligation arising out of guarantee given for certain loans Other Claims Total Financial Year ended March 31 2003 27 7 190 64 83 371 Financial Year ended March 31, 2002 298 10 10 318

8.

9.

10. The Company had entered into a Constant Maturity Interest Rate swap in the year 2001-02 with a bank for its Rs.1,000 million long term Debentures, under which the Bank will bear the fixed interest rate liability at the rate of 12% p.a. till maturity and the Company will bear the floating interest burden at a fixed spread over the 5 year Government Security yields. 11. The Company is entitled to sales tax benefit in accordance with the provisions of Rule 28C of Haryana General sales Tax Rules, 1975 for the period from 01st August, 2001 to 31st July, 2015. The ceiling amount of concession to be availed during entitlement period is Rs.5,644 million.Till 31st March 2003, Company has availed sales tax benefit amounting to Rs. 390 million. The Haryana State Sales-tax law has been replaced by State VAT law with effect from April 1st 2003. The VAT law of Haryana State contemplates the continuation of the sales tax benefit enjoyed by the company in an altered form.

199

12. The Company had offered Voluntary Retirement Schemes to its employees in the year 2001-02 and made a payment of Rs.736 million. This amount is included under miscellaneous expenses (to the extent not written off or adjusted) and is being amortized over the estimated future pay back period of 36 months from the conclusion of the scheme. 13. a) b) c) Land valuing Rs.4 million is not yet registered in the name of the Company. Part of this land has been made available to Group Companies. Building amounting to Rs.32 million is not yet registered in the name of Company. Plant and Machinery includes pro-rata cost amounting to Rs.374 million of a Gas Turbine jointly owned by the Company with its Group Companies and certain Other Companies.

14. No provision has been made for deferred tax asset/ liability for subsidiary companies, as it does not have any material impact on the results of operations for the year ended 31st March, 2003 and for the year ended 31st March, 2002 and on net assets as at 31st March, 2003 and as at 31st March, 2002. 15. Investments in the Associates and Joint Ventures have been accounted in these consolidated statements as per Accounting Standard 13 on Accounting for Investments and not as per Accounting Standard 23 on Accounting for Investments in Associates in Consolidated Financial Statements and Accounting Standard 27 on Financial Reporting of Interests in Joint Ventures which has become mandatory for accounting periods starting with effect from 01st April 2002. 16. The shareholders of the Company at its Extraordinary General Meeting held on 25th March, 2003 approved a twenty-forone share split, effective from 25th March 2003. Consequently, the issued equity shares have increased to 288,910,060 shares of Rs 5 each. All notes to the accounts, significant policies as well as auditors qualifications as mentioned in the Auditors report have been included.

200

Consolidated financial statements as per AS 21, AS 23 and AS 27

Report of the auditors to the Board of Directors of Maruti Udyog Limited.
1. We have audited the attached summary restated consolidated Balance Sheet of Maruti Udyog Limited (the Company) and its subsidiaries, joint ventures and associates as per Note III A 1 (the Group), as at 31st March 2003 and the summary restated consolidated Profit and Loss account for the year ended on that date, annexed thereto, which we have signed under reference to this report. These consolidated Financial Statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Financial Statement presentation. We believe that our audit provide a reasonable basis for our opinion. a) We did not audit the Financial Statements of the subsidiaries as at 31st March. 2003. These Financial Statements have been audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of these subsidiaries, is based solely on the reports of the other auditors. We did not audit the Financial Statements of joint ventures and associate companies as at 31st March, 2003. These Financial Statements have been audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of these joint ventures and associates, is based solely on the report of the other auditors. Attention is invited to Note III B (ii) 2 regarding certain associates whose Financial Statements are unaudited, but the impact of which is not likely to be material. The financial statements of joint venture and associate companies used for the preparation of the summary restated consolidated Financial Statements are not restated. Accordingly, we are unable to ascertain the impact that such restatement would have on the summary restated consolidated Financial Statements. The Financial Statements of subsidiaries and joint ventures reflect total assets of Rs. 99 million and Rs. 388 million respectively, as at 31st March, 2003 and total revenues of Rs. 225 million and Rs. 510 million respectively, for the year ended on that date. The Financial Statements of associates reflect Net Profit after tax of Rs. 15 million for the year ended 31st March 2003.

2.

3.

b)

c)

d)

4.

We report that the summary restated consolidated financial statements have been prepared by the company in accordance with the requirements of Accounting Standard (AS) 21 Consolidated Financial Statements, AS 23 Accounting for Investments in Associates in Consolidated Financial Statements and AS 27 Financial Reporting of Interest in Joint Venture issued by the Institute of Chartered Accountants of India, on the basis of the separate audited Financial Statements of the Company and its subsidiaries, joint ventures and associates included in the summary restated consolidated Financial Statements. On the basis of the information and explanations given to us and on consideration of the separate audit reports on individual audited Financial Statements of the Company and its aforesaid subsidiaries, joint venture and associate companies, in our opinion, the summary restated consolidated Financial Statements, subject to Para 3 c) above, give a true and fair view in conformity with the accounting principles generally accepted in India: a. b. in the case of the summary restated consolidated Balance Sheet, of the consolidated state of affairs of Maruti Udyog Limited and its Group as at 31st March 2003; and in the case of the summary restated consolidated Profit and Loss account, of the consolidated result of operations of Maruti Udyog Limited and its Group for the year ended on that date.

5.

201

6.

This report is solely for your information and for inclusion in the offer document being issued by the Company in connection with the offer for sale by the Government of India of certain equity shares in the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent. Sd/S. Berera Partner For and on behalf of Price Waterhouse Chartered Accountants

Place : New Delhi Date : 6/5/03

202

I.

SUMMARY RESTATED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2003
(Rs. in Million) AMOUNT Income Sales: Of Products manufactured by the Company (includes Joint Venture share of Rs. 424 million) Of Products traded in by the Company (includes Joint Venture share of Rs. 68 million) 86,785 4,343 91,128 Other Income (includes Joint Venture share of Rs. 19 million) Total Expenditure Consumption of Raw Materials & Components (includes Joint Venture share of Rs. 271 million) Cost of Spares/ Dies & Moulds Sold (includes Joint Venture share of Rs. 31 million) Consumption of Stores (includes Joint Venture share of Rs. 5 million) Excise Duty (includes Joint Venture share of Rs. 65 million) Employees Remuneration & benefits (includes Joint Venture share of Rs. 23 million) Manufacturing/ Administrative and other expenses (includes Joint Venture share of Rs. 46 million) Selling & Distribution expenses (includes Joint Venture share of Rs. 5 million) Financial expenses (includes Joint Venture share of Rs. 23 million) Provision for Contingencies Depreciation (includes Joint Venture share of Rs. 29 million) Deferred Revenue Expenditure charged off Less: Vehicles for own use 52,948 3,258 420 18,166 2,166 3,326 6,279 581 371 3,250 386 55 91,096 (Accretion)/ Decretion to work-in-progress and finished goods (includes Joint Venture share of Rs. (1) million) Total Net profit before prior period adjustments. Add: Net prior period adjustments Add: Share in Profit of Associates Profit before tax Less: Taxation Current (includes Joint Venture share of Rs 2 million) Less: Taxation Deferred (includes Joint Venture share of Rs 3 million) Net Profit after tax as per audited statement of accounts (A) Impact of material adjustments and prior period items [Refer III(B)(ii)(1)] Total Adjustments (B) Adjusted Profit (A+B) 1,019 92,115 2,845 (20) 41 2,866 359 1,009 1,498 (215) (215) 1,283 3,832 94,960

203

(Rs. in Million) AMOUNT Carry forward Profit from previous year Add: Accounting policy changes and prior period adjustments pertaining to earlier years * Profit available for appropriation Debenture Redemption Reserve General Reserve Proposed Dividend Corporate Dividend Tax Profit transferred to balance sheet The accompanying significant accounting policies and notes are an integral part of this statement. * denotes the Impact of accounting policy changes (excluding deferred tax adjustments) and prior period adjustments pertaining to earlier years. 23,078 215 24,576 176 146 427 55 23,772

This is the Profit & Loss Account referred to in our report of even date.

S. BERERA Partner For and on behalf of PRICE WATERHOUSE Chartered Accountants New Delhi Dated: 6/5/03

JAGDISH KHATTAR Managing Director

MOTOHIRO ATSUMI Director (Finance)

S.RAVI AIYAR Company Secretary & Chief Legal Officer

204

II. SUMMARY RESTATED CONSOLIDATED BALANCE SHEET AS ON 31st MARCH 2003

(Rs. in Million) AMOUNT A. Fixed assets: Gross Block (includes Joint Venture share of Rs. 354 million) Less: Accumulated Depreciation (includes Joint Venture share of Rs. 76 million) Net Block Add: Capital Work in Progress (includes Joint Venture share of Rs. 19 million) Total B. Investments: C. Current Assets, Loans & Advances: Inventories (includes Joint Venture share of Rs. 45 million) Sundry Debtors (includes Joint Venture share of Rs. 22 million) Cash & Bank Balances (includes Joint Venture share of Rs. 11 million) Other Current Assets (includes Joint Venture share of Rs 2 million) Loans & Advances (includes Joint Venture share of Rs. 10 million) Total D. Liabilities & Provisions: Current Liabilities & Provisions (includes Joint Venture share of Rs. 80 million) Deferred Tax (Asset)/ Liability (includes Joint Venture share of Rs. 14 million) Secured Loans (includes Joint Venture share of Rs. 131 million) Unsecured Loans (includes Joint Venture share of Rs. 54 million) Total E. Net Worth (A+B+C-D) Net Worth Represented By F. Share Capital G. Reserves and Surplus Capital Reserve Share Premium Debenture Redemption reserve General Reserve Profit & Loss Account Total H. Miscellaneous Expenditure to the extent not written off I. Net Worth (F+G-H) 44 4,246 352 1,568 23,772 29,982 887 30,540 1,445 14,921 2,086 3,131 1,614 21,752 30,540 4,913 6,770 9,935 600 5,766 27,984 45,493 22,657 22,836 112 22,948 1,360

205

The accompanying significant accounting policies and notes are an integral part of this statement. This is the Balance Sheet referred to in our report of even date.

S.BERERA Partner For and on behalf of PRICE WATERHOUSE Chartered Accountants New Delhi Dated: 6/5/03

JAGDISH KHATTAR Managing Director

MOTOHIRO ATSUMI Director (Finance)

S.RAVI AIYAR Company Secretary & Chief Legal Officer

206

III. NOTES TO SUMMARY RESTATED CONSOLIDATED FINANCIAL STATEMENTS.

A. 1. BACKGROUND: Maruti Udyog Limited (The Company) has three wholly owned subsidiaries, two joint venture companies and fourteen associate companies (The Group) as follows: Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2. B. (i) Name of Company Maruti Insurance Brokers Limited Maruti Insurance Distribution Services Limited True Value Solutions Limited J.J Impex (Delhi) Private Limited Mark Exhaust Systems Limited Suzuki Metal India Limited Climate Systems India Limited Mark Auto Industries Limited Jay Bharat Maruti Limited Maruti Countrywide Auto Financial Services Limited Citicorp Maruti Finance Limited Caparo Maruti Limited Machino Plastics Limited Bharat Seats Limited Krishna Maruti Limited Asahi India Glass Limited Denso India Limited Nippon Thermostat (India) Limited Sona Koyo Steering Systems Limited Relationship Subsidiary Subsidiary Subsidiary Joint Venture Joint Venture Associate Associate Associate Associate Associate Associate Associate Associate Associate Associate Associate Associate Associate Associate Percentage of ownership interest 100.00 100.00 100.00 49.13 44.37 49.00 39.00 33.89 29.28 26.00 26.00 20.00 15.35 14.81 13.14 12.00 10.27 10.00 7.85

Maruti Insurance Brokers Limited, Maruti Insurance Distribution Services Limited, True Value Solutions Limited, Mark Exhaust Systems Limited and J.J Impex (Delhi) Private Limited were incorporated in India. SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS: SIGNIFICANT ACCOUNTING POLICIES: 1. BASIS FOR PREPARATION OF SUMMARY RESTATED CONSOLIDATED FINANCIAL STATEMENTS: The consolidated financial statements include accounts of Maruti Udyog Limited and its subsidiaries, joint ventures and associate undertakings. Subsidiary undertakings are those companies in which Maruti Udyog Limited, directly or indirectly, has an interest of more than one half of voting power or otherwise has power to exercise control over the operations. Investments in Subsidiaries have been accounted for in accordance with Accounting Standard 21 on Consolidated Financial Statements. Subsidiaries are consolidated from the date on which effective control is transferred to the Group till the date such control exists. All inter company transactions, balances and unrealized surpluses and deficits on transactions between the company and its subsidiaries are eliminated. Investments in joint venture undertakings over which the company exercises joint control are accounted for using proportionate consolidation as per Accounting Standard 27 on Financial Reporting of Interests in Joint Ventures. Investment in associates (entity over which the company exercises significant influence, which is neither a subsidiary nor a joint venture) are accounted for using the equity method as per Accounting Standard 23 on Accounting for Investments in Associates in Consolidated Financial Statements. All unrealized surpluses and deficits on transactions between the group companies are eliminated. 207

The policy for accounting of other investments is described under Para 7 below. Accounting policies between group companies are consistent to the extent practicable. Appropriate disclosure is made of significant deviations from the company accounting policies, which have not been adjusted. The consolidated financial statements have been prepared in accordance with historical cost convention, the applicable accounting standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956. The consolidated financial statements are proposed to be included in the offer for sale document proposed to be filed by the Company with the Securities and Exchange Board of India (SEBI). 2. REVENUE RECOGNITION: Domestic and Export Sales are recognised on dispatch of goods from the factory/stock yard and Port respectively. Finance charges on hire purchase business/ lease rental income are recognized on the basis of implicit rate of return on the value of asset hired out/leased. Agency Commission is recognized based on the total net premium collected/handed over to the Principal. 3. FIXED ASSETS: Fixed Assets (except freehold land) are carried at cost of acquisition or construction or at manufacturing cost (in case of own manufactured assets) in the year of capitalisation less accumulated depreciation. In respect of the various project related activities, which are carried on concurrently with production, expenses on administration and supervision incurred, the bifurcation of which between production and construction activities is not ascertainable, are charged to revenue. 4. BORROWING COSTS Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised till the month in which the asset is put to use as part of the cost of that asset. 5. DEPRECIATION (Refer Section III (B) (ii) (16)(b)) a) Fixed Assets except for lease hold land are depreciated on straight line method on a pro-rata basis from the month in which the asset is put to use, at the following rates:

i) Assets capitalised before 02.04.1987 Depreciation has been provided at the rates computed in terms of Section 205 (2) (b) of the Companies Act, 1956, in terms of Circular No. 1/86 dated 21.05.86 of the Government of India. ii) Assets capitalised on or after 02.04.1987 Depreciation has been provided at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for certain fixed assets where based on managements estimate of the useful life of the assets, higher depreciation has been provided at the following rates: Plant and Machinery: Single Shift Double Shift Triple Shift Dies and Jigs 7.31% 11.88% 15.83% 19.00%

208

iii) Depreciation has been provided on Straight Line Method at rate higher than Schedule XIV for some associate companies as follows: Assets Office Buildings Factory Buildings Electrical Fittings Plant & Machinery Furniture & Fittings Vehicles Electronic Processing Equipments b) c) Depreciation rates 2% 5% 33.33% 7.14% - 20.00% 15.00% - 20.00% 20% 20.00% - 33.33%

Leasehold land is amortised over the period of lease. Plant and machinery the written down value of which at the beginning of the year is Rs. 5,000 or less and other assets the written down value of which at the beginning of the year is Rs. 1,000 or less are depreciated at the rate of 100%. In case the historical cost of an asset undergoes a change due to increase or decrease in long term liability on account of foreign exchange fluctuation, change in duties etc., the depreciation on revised unamortised depreciable amount is provided prospectively over the residual useful life of the asset. In case of certain associates, the depreciation is provided on a written down value method.

d)

e) 6.

GOODWILL Goodwill arising on acquisition is amortized to expense on a straight line basis over the period of estimated benefit but not exceeding three years.

7.

INVENTORIES a) b) c) Inventories are valued at lower of cost, determined on weighted average basis, and net realisable value. Tools are written off over a period of three years except for tools valuing Rs. 5,000 or less individually which are charged off to revenue in the year of purchase. Machinery spares (other than those supplied alongwith main plant and machinery, which are capitalized and depreciated accordingly) are charged off to revenue on consumption except those valuing Rs. 5,000 or less individually, which are charged off to revenue in the year of purchase and those whose value are not individually ascertainable are written off over a period of three years. In case of certain associate and joint venture companies, raw material and work in progress have been valued at cost, determined on FIFO basis.

d) 8.

INVESTMENTS Current investments are valued at lower of cost and fair value. Long-term investments are valued at cost except in case of permanent diminution in their value, wherein necessary provision is made.

9.

RESEARCH AND DEVELOPMENT Revenue expenditure on research and development is charged off against the profit of the year in which it is incurred except expenditure incurred on development and testing of components which are deferred over a period of three years. Capital expenditure on research and development is shown as an addition to fixed assets and depreciated accordingly.

10. FOREIGN CURRENCY TRANSLATIONS a) Foreign Currency transactions other than those covered by forward contracts are recorded at the exchange rate prevailing at the date of transaction. Exchange differences arising on settlement of transactions, except those relating to fixed assets, are recognised as Income or expense in the year in which they arise. The cost of the respective fixed assets are adjusted for exchange differences arising on repayment of liabilities incurred for the purpose of acquiring such fixed assets.

209

b)

At the balance sheet date all assets, other than fixed assets, and liabilities denominated in foreign currency but not covered by forward contract are reported at the exchange rate prevailing at the balance sheet date. The cost of the respective fixed assets are adjusted for increase or decrease in liabilities incurred for the purpose of acquiring such fixed assets due to application of exchange rate prevailing at the balance sheet date. Foreign currency transactions covered by forward contracts are recorded at the exchange rate prevailing at the date of inception of forward contracts. At the balance sheet date all assets and liabilities covered by forward contracts are stated at the forward contract rates. The difference between the forward rate and the exchange rate at the inception of a forward contract is recognised as income or expense over the life of the contract except in respect of liabilities incurred for acquiring fixed assets in which case such difference is adjusted in the cost of the respective fixed assets. Profit or Loss arising on cancellation or renewal of a forward contract is recognised as income or expense in the year in which such cancellation or renewal has been made except in case of a forward contract relating to liabilities incurred for acquiring fixed assets, where profit or loss is adjusted in the cost of the respective fixed assets.

c) d) e)

f)

11. RETIREMENT BENEFIT COSTS (Refer Section III (B) (ii) (16)(c)) Gratuity and leave encashment benefits on retirement are accounted for on the basis of actuarial valuation made at the end of the year. In case of certain associate companies, provision for leave encashment has been made on accrual basis. In case of certain joint venture and associate companies, contributions towards gratuity are charged to Profit & Loss Account on the basis of premium paid to the Life Insurance Corporation of India. 12. DEFERRED REVENUE EXPENDITURE (Refer Section III (B) (ii) (16) (d)) Deferred Revenue Expenditure is written off over the period of its benefit. Preliminary Expenses are written off over the period of its benefit. Deferred Revenue Expenditure and Preliminary Expenses of joint venture and associate companies have been charged to the Profit & Loss Account in the year of incurrence. 13. CUSTOMS DUTY Customs duty paid on import of components specifically for export vehicles is debited to customs duty deposit account and duty draw back recoverable on export of vehicles is credited to this account. Other categories of duties available as drawback are debited to purchases and credited to income on export of vehicles. 14. GOVERNMENT GRANTS Government Grants are recognized in the profit and loss account in accordance with the related scheme and in the period in which these are accrued. 15. DEFERRED TAX (Refer Section III (B) (ii) (16) (a)) Tax expense for the period, comprising current tax and deferred tax, is included in determining the net profit/(loss) for the year. However, in the year of transition, the accumulated deferred tax liability at the beginning of the year has been recognized with a corresponding charge to the General Reserve in accordance with Accounting Standard 22 issued by the Institute of Chartered Accountants of India. Deferred tax assets are recognized for all deductible timing differences and carried forward to the extent it is probable that future taxable profit will be available against which such deferred tax assets can be realized. Deferred tax assets are reviewed at each balance sheet date and written down/ written up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted at the balance sheet date. Taxes have been accounted for as per the current tax method for the subsidiaries Deferred tax has not been accounted for in case of subsidiaries. 210

(ii) NOTES TO ACCOUNTS 1. Adjustments Impact of material adjustments and prior period items (Rs. in Million) Particulars For the Financial Year ended on March 31 2003 (A) 1,498

Profit after tax as per consolidated Profit & Loss account Adjustment on account of: (I) Prior Period Items a) Salary & Wage Arrears/ Liability Adjustment b) Retrospective amendments to prices of raw materials and components (Refer Note) c) Prior Period expenses d) Prior Period incomes e) Royalty Adjustment f) Provision for tax for earlier years Total of Adjustments Tax impact of adjustments Total of adjustments Net of tax Impact Adjusted Profit after tax Note:

(104)

(409) 34 (14) (25) 126 (392) 177 (B) (A+B) (215) 1,283

The company makes a provision at each year-end for retrospective amendments to the price increase of raw materials and components. The consolidated financial statements have been adjusted based upon the actual price increase of raw material and components passed on to vendors with retrospective effect in subsequent periods. 2. The consolidated financial statements have been prepared based on audited financial statements of subsidiaries, associates and joint ventures for the financial year ended on 31st March 2003 except in case of Krishna Maruti Limited, Asahi India Glass Limited & Denso India Limited, the impact of which is not likely to be material. The Profit after tax of Asahi India Glass Limited & Denso India Limited have been annualised based on unaudited financial statements of nine month ended 31st December 2002. Reserves of the joint venture pertaining to period prior to 1st April 2002 have been adjusted in the opening reserves of the company as on that date. Non Adjustments The company has provided for contingencies in period prior to 2002-03. Some of these provisions have been written back in current year, when it was certain that they were not required. No adjustment has been made in the consolidated financial statements of the current year, on account of non-availability of related information.

3. 4.

211

5.

Contingent Liabilities as at March 31, 2003 (Rs. in Million) Particulars 1) Contingent Liabilities on account of A) Claims against the Group not acknowledged as debts: B) Sales-tax demands (Deposited under protest) Excise demands (Deposited under protest) Income-tax demands (Deposited under protest) Customs Other disputed claims lodged by various parties, pending litigation 202 (5) 4,396 (37) 8,106 (2,216) 91 1,455 0 (0) 0 (0) 0 (0) 7 0 202 (5) 4,396 (37) 8,106 (2,216) 98 1,455 Maruti Udyog Limited Joint Venture Subsidiaries and Associate Group

Guarantees: (i) Guarantee given by the company to HDFC Limited against a term loan of Rs.300 million given by HDFC Limited to Maruti Employees Co-operative House Building Society Limited, Bhondsi. (Against it, the contingent liability due at the year-end is) (ii) Guarantee given to Finance Companies For term loan Lease finance given to various vendors of the company for purchase of dies and moulds of certain models. 55 0 55

300 (147)

0 0

300 (147)

401 15

0 12

401 27

(iii) Others C) Co-lessee in agreements entered into between various vendors of the company, as lessee, and Finance Companies and Banks as lessors for leasing of dies and moulds of certain models. 2) 3) Outstanding commitments under Letters of Credit established by the Group: a) Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for Others

2,411 274

0 7

2,411 281

394 34

5 0

399 34

b) Note:

In respect of Asahi India Glass Limited and Denso India Limited, the Companys share of contingent liabilities amounting to Rs. 20 million and Rs. 13 million, respectively, as at 31st March 2003, are based on confirmations received by the Company.

212

6. 7.

Consumption for Raw Material, components, vehicle spares and consumables has been derived from the opening stock, purchases and closing stock physically verified by the management at year-end. Excise Duty expense as per Profit & Loss account has following components: (Rs in Million) Particulars Excise duty on vehicle, spares, auto components and dies & moulds sales Excise duty on scrap sales Excise duty on accretion/(decretion) of finished vehicles Miscellaneous (Damaged Vehicles, etc.) Total Financial Year ended March 31, 2003 18,407 109 (400) 50 18,166
st

8. 9.

Sales include freight amounting to Rs,1,867 million for the year ended 31 March 2003 Consumption of Raw Materials and Components includes a provision of Rs. 153 million on account of estimated reversal of tax benefit on quantity differences (under reconciliation) on inputs and is net of Rs. 287 million on account of reversal of tax benefit provision on quantity differences (under reconciliation) on inputs created in earlier years.

10. Manufacturing, Administrative and Other expenses for year ended 31st March 2003 include a provision of Rs. 41 million inclusive of Rs.30 million for earlier years on account of interest on estimated reversal of tax benefit, on quantity differences (under reconciliation) on inputs. 11. Provision for contingencies have been made on account of: (Rs. in Millions) Particulars Unamortized cost of assets of certain models of vehicles Compensation for non-fulfillment of purchase obligations Cases of Excise Duty disputes Obligation arising out of guarantee given for certain loans Other Claims Total For financial year end March 31 2003 27 7 190 64 83 371

12. The Company had entered into a Constant Maturity Interest Rate swap in the year 2001-02 with a bank for its Rs.1, 000 million Long term Debentures under which the Bank will bear the fixed interest rate liability at the rate of 12% p.a. till maturity and the company will bear the floating interest burden at a fixed spread over the 5 year Government Security yields. 13. The Company is entitled to sales tax benefit in accordance with the provisions of Rule 28C of Haryana General Sales Tax Rules, 1975 for the period from 01st August 2001 to 31st July 2015. The ceiling amount of concession to be availed during entitlement period is Rs.5,644 million. Till 31st March 2003, the Company has availed sales tax benefit amounting to Rs. 390 million. The Haryana State Sales-tax law has been replaced by State VAT law with effect from April 1st 2003. The VAT law of Haryana State contemplates the continuation of the sales tax benefit enjoyed by the Company in an altered form. 14. The Company had offered Voluntary Retirement Schemes to its employees in the year 2001-02 and made a payment of Rs.736 million. This amount is included under miscellaneous expenses (to the extent not written off or adjusted) and is being amortized over the estimated future pay back period of 36 months from the conclusion of the scheme. 15. a) b) c) Land valuing Rs.4 million is not yet registered in the name of the Company. Part of this land has been made available to the group companies. Building amounting to Rs.32 million is not yet registered in the name of the Company. Plant and Machinery includes pro-rata cost amounting to Rs.374 million of a Gas Turbine jointly owned by the Company with its group companies and certain other companies. 213

16. Differences between accounting policies of the Company and other group companies: a) No provision has been made for deferred tax asset/ liability for subsidiary companies, as it does not have any material impact on the results of operations for the financial year ended 31st March 2003 and on net assets as at 31st March 2003. In case of certain associate companies, depreciation has been provided on written down value method at rates prescribed under Schedule XIV to the Companies Act, 1956, the impact of which is not likely to be material. In case of certain associate companies, provision for leave encashment has been made on accrual basis. In case of certain associate and joint venture companies, contributions towards gratuity is charged to Profit & Loss Account on the basis of premium paid to the Life Insurance Corporation of India d) Deferred Revenue Expenditure and Preliminary Expenses of joint venture and associate companies have been charged to the Profit & Loss Account in the year of incurrence.

b) c)

17. The shareholders of the Company at its Extraordinary General Meeting held on 25th March 2003 approved a twenty-forone share split, effective from 25th March 2003. Consequently, the issued equity shares have increased to 288,910,060 shares of Rs 5 each. All notes to the accounts, significant policies as well as auditors qualifications as mentioned in the Auditors report have been included.

214

Statement Of Tax Benefits

We hereby certify that the enclosed annexure states the tax benefits available to Maruti Udyog Limited (the Company) and its shareholders under the provisions of the Income Tax Act, 1961 and other direct and indirect tax laws presently in force. The contents of this annexure is 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. A shareholder is advised to consider in his own case the implications of an investment in the shares. S.Berera Partner For and on behalf of Price Waterhouse Chartered Accountants

New Delhi May 15, 2003

A. To the Company - Under the Income Tax Act, 1961

q

Interest income accruing to the company on long-term finance [i.e. repayable after minimum 5years] extended to enterprises engaged in the infrastructure business (including telecommunication services) and approved by the Central Government will be exempt from tax, subject to conditions prescribed by section 10(23G) of the Income Tax Act, 1961. Long-term capital gains accruing to the company from sale of Debentures of enterprises engaged in the infrastructure business (including telecommunication services) will be exempt from tax, subject to conditions prescribed by section 10(23G) of the Income Tax Act, 1961. In accordance with and subject to the conditions specified in Section 80HHC of the Income Tax Act, 1961, the company would be entitled to deduction of:
q q

30% for Financial year 2003-04; and Nil for the Financial Year 2004-05 and onwards

of the profits derived from the export of goods, if any, for the relevant financial year.
q

In accordance with and subject to the conditions specified in Section 80 IA of the Income Tax Act, 1961, the company is entitled to deduction of the entire profits derived from its undertaking generating power (Gas Turbines) for a period of 10 consecutive years, falling within the first 15 years, beginning with the initial assessment year it started generating power. In accordance with and subject to the conditions specified in Section 80-IB of the Income Tax Act, 1961, the company would be entitled to deduction of 30% of profits derived from Industrial Undertaking (Plant II) at Gurgaon for a period of 10 consecutive years beginning with the initial assessment year it had started production of vehicles. In accordance with and subject to the provisions of Section 35, the company would be entitled to deduction in respect of expenditure laid out or expended on Scientific Research related to the business. By virtue of section 10 (34) of the IT Act, dividend income referred to in section 115-O of the IT Act, are exempt from tax in the hands of the Company. By virtue of insertion of new section 10(35) of the IT Act, the following income shall be exempt in the hands of the company:a) b) c) income received in respect of the units of a Mutual Fund specified under clause (23D); or income received in respect of units from the Administrator of the specified undertaking; or income received in respect of units from the specified company:

Provided that this exemption does not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be. For the purposes a) b)
q

Administrator means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002; specified company means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002;

By virtue of insertion of new section 10(36) of the IT Act, any long term capital gain arising to the company from the transfer of a long term capital asset being an eligible equity share in a company purchased on or after the 1st day of March 2003 and 215

before 1s day of March 2004 and held for a period of 12 months or more would be not be liable to tax in the hands of the Company. For this purpose eligible equity share meansa) an equity share in a company being a constituent of BSE 500 Index of the Stock Exchange, Mumbai as on 1.3.2003 listed in a recognized stock exchange in India and the transaction of purchase and sale of such equity share are entered into on a recognised stock exchange in India; or an equity share in a company allotted through a public issue on or after 1.3.2003 and listed in a recognized stock exchange in India before 1.3.2004 and the transaction of sale of such share is entered into on a recognised stock exchange in India.

b)

Under section 54EC of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains (not covered under section 10(36) of the Act) arising on the transfer of shares of the Company will be exempt from capital gains tax if the capital gain are invested within a period of 6 months after the date of such transfer for a period of 3 years in bonds issued by
q

National Bank for Agriculture and Rural Development established under section 3 National Bank for Agriculture and Rural Development Act, 1981; National Highway Authority of India constituted under section 3 of National Highway Authority of India Act, 1988; Rural Electrification Corporation Limited, the company formed and registered under the Companies Act, 1956; National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987; and Small Industries Development Bank of India established under section 3(1) of the Small Industries Development Bank of India Act, 1989;

q q q q

Under section 54ED of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains (not covered under section 10(36) of the Act) on the transfer of shares of the Company, as and when it is listed, will be exempt from capital gains tax if the capital gain are invested in shares of an Indian Company forming part of a eligible public issue, within a period of 6 months after the date of such transfer. Under section 112 of the Income Tax Act, 1961 and other relevant provisions of the Act, long term capital gains (not covered under section 10(36) of the Act) arising on transfer of shares in the Company, as and when it is listed, i.e. if shares are held for a period exceeding 12 months shall be taxed at a rate of 20% (plus applicable surcharge) [after indexation as provided in the second proviso to section 48; indexation not available if investments made in foreign currency as per the first proviso of Section 48 stated above] or at 10% (plus applicable surcharge) [without indexation], at the option of the company.

B. To the Members of the Company - Under the Income Tax Act, 1961
B. 1 Resident Members
q

In terms of section 10(23D) of the Income Tax Act, 1961 all Mutual Funds set up by Public Sector Banks or Public Financial Institutions or Mutual Funds registered under the Securities and Exchange Board of India or authorized by the Reserve Bank of India, subject to the conditions specified therein are eligible for exemption from income tax on all their income, including income from investment in the shares of the company. By virtue of section 10 (34) of the IT Act, dividend income referred to in section 115-O of the IT Act, are exempt from tax in the hands of the shareholders. By virtue of insertion of new section 10(36) of the IT Act, any long term capital gain arising to the shareholder from the transfer of a long term capital asset being an eligible equity share in a company purchased on or after the 1st day of March 2003 and before 1s day of March 2004 and held for a period of 12 months or more would not be liable to tax in the hands of the shareholder. For this purpose eligible equity share meansa) an equity share in a company being a constituent of BSE 500 Index of the Stock Exchange, Mumbai as on 1.3.2003 listed in a recognized stock exchange in India and the transaction of purchase and sale of such equity share are entered into on a recognised stock exchange in India; or an equity share in a company allotted through a public issue on or after 1.3.2003 and listed in a recognized stock exchange in India before 1.3.2004 and the transaction of sale of such share is entered into on a recognised stock exchange in India. 216

b)

Under section 54EC of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains (in cases not covered under section 10(36) of the Act) arising on the transfer of shares of the Company will be exempt from capital gains tax if the capital gain are invested within a period of 6 months after the date of such transfer for a period of 3 years in bonds issued by
q

National Bank for Agriculture and Rural Development established under section 3 National Bank for Agriculture and Rural Development Act, 1981; National Highway Authority of India constituted under section 3 of National Highway Authority of India Act, 1988; Rural Electrification Corporation Limited, the company formed and registered under the Companies Act, 1956; National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987; and Small Industries Development Bank of India established under section 3(1) of the Small Industries Development Bank of India Act, 1989;

q q q q

Under section 54ED of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains (in cases not covered under section 10(36) of the Act) on the transfer of shares of the Company, as and when it is listed, will be exempt from capital gains tax if the capital gain are invested in shares of an Indian Company forming part of a eligible public issue, within a period of 6 months after the date of such transfer. Under section 54F of the Income Tax Act, 1961 long term capital gains (in cases not covered under section 10(36) of the Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will be exempt from capital gain tax subject to other conditions, if the sale proceeds from such shares are used for purchase of residential house property within a period of one year before and two year after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer. Under section 112 of the Income Tax Act, 1961 and other relevant provisions of the Act, long term capital gains arising (in cases not covered under section 10(36) of the Act), i.e., if shares are held for a period exceeding 12 months, on transfer of shares in the Company, as and when it is listed, shall be taxed at a rate of 20% (plus applicable surcharge) after indexation as provided in the second proviso to section 48 or at 10% (plus applicable surcharge) without indexation, at the option of the shareholder. By virtue of section 10 (34) of the IT Act, dividend income referred to in section 115-O of the IT Act, are exempt from tax in the hands of the shareholders. By virtue of insertion of new section 10(36) of the IT Act, any long term capital gain arising to the shareholder from the transfer of a long term capital asset being an eligible equity share in a company purchased on or after the 1st day of March 2003 and before 1s day of March 2004 and held for a period of 12 months or more would be not be liable to tax in the hands of the shareholder. For this purpose eligible equity share meansa) an equity share in a company being a constituent of BSE 500 Index of the Stock Exchange, Mumbai as on 1.3.2003 listed in a recognized stock exchange in India and the transaction of purchase and sale of such equity share are entered into on a recognised stock exchange in India; or an equity share in a company allotted through a public issue on or after 1.3.2003 and listed in a recognized stock exchange in India before 1.3.2004 and the transaction of sale of such share is entered into on a recognised stock exchange in India.

B.2 Non-Resident Indians/ Non Residents Members [Other than FIIs and Foreign venture capital investors]
q

b)

A non-resident Indian (i.e. an individual being a citizen of India or person of Indian origin) has an option to be governed by the provisions of Chapter XII-A of the Income Tax Act, 1961 viz. Special Provisions Relating To Certain Incomes of Non-Residents.
q

Under section 115E of the Income Tax Act, 1961, where shares in the company are subscribed for in convertible Foreign Exchange by a Non Resident Indian, capital gains arising to the non-resident on transfer of shares held for a period exceeding 12 months shall (in cases not covered under section 10(36) of the Act) be concessionally taxed at the flat rate of 10%. (Without indexation benefit and protection against foreign exchange fluctuation plus applicable Surcharge). Under provisions of section 115F of the Income Tax Act, 1961 long term capital gains (not covered under section 10(36) of the Act) arising to a non-resident Indian from the transfer of shares of the company subscribed to in convertible Foreign Exchange shall be exempt from Income tax, if the net consideration is reinvested in specified assets within six months of the date of transfer. If only part of the net consideration is so reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the specified assets are transferred or converted within three years from the date of their acquisition. 217

Under provisions of section 115G of the Income Tax Act, 1961 it shall not be necessary for a Non-Resident Indian to furnish his return of income if his only source of income is investment income or long term capital gains or both arising out of assets acquired, purchased or subscribed in convertible foreign exchange and tax deductible at source has been deducted therefrom. Under section 115-I of the Income Tax Act, 1961, a Non-Resident Indian may elect not to be governed by the provisions of Chapter XII-A for any Assessment Year by furnishing his Return of Income under section 139 of the Income Tax Act declaring therein that the provisions of the chapter shall not apply to him for that assessment year and if he does so the provisions of this chapter shall not apply to him instead the other provisions of the Act shall apply.

Under the first proviso to section 48 of the Income Tax Act, 1961, in case of a non-resident, in computing the capital gains arising from transfer of shares of the company acquired in convertible foreign exchange (as per exchange control regulations) protection is provided from fluctuations in the value of rupee in terms of foreign currency in which the original investment was made. Cost indexation benefits will not be available in such a case. Under section 54EC of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains (not covered under section 10(36) of the Act) arising on the transfer of shares of the Company will be exempt from capital gains tax if the capital gain are invested within a period of 6 months after the date of such transfer for a period of 3 years in bonds issued by
q

National Bank for Agriculture and Rural Development established under section 3 National Bank for Agriculture and Rural Development Act, 1981; National Highway Authority of India constituted under section 3 of National Highway Authority of India Act, 1988; Rural Electrification Corporation Limited, the company formed and registered under the Companies Act, 1956; National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987; and Small Industries Development Bank of India established under section 3(1) of the Small Industries Development Bank of India Act, 1989;

q q q q

Under section 54ED of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains (not covered under section 10(36) of the Act) on the transfer of shares of the Company, as and when it is listed, will be exempt from capital gains tax if the capital gain are invested in shares of an Indian Company forming part of a eligible public issue, within a period of 6 months after the date of such transfer. Under section 54F of the Income Tax Act, 1961 long term capital gains (not covered under section 10(36) of the Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company will be exempt from capital gain tax subject to other conditions, if the sale proceeds from such shares are used for purchase of residential house property within a period of one year before and two year after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer. Under section 112 of the Income Tax Act, 1961 and other relevant provisions of the Act, long term capital gains (not covered under section 10(36) of the Act) arising on transfer of shares in the Company, as and when it is listed, i.e. if shares are held for a period exceeding 12 months shall be taxed at a rate of 20% (plus applicable surcharge) [after indexation as provided in the second proviso to section 48; indexation not available if investments made in foreign currency as per the first proviso of Section 48 stated above] or at 10% (plus applicable surcharge) [without indexation], at the option of the shareholder. By virtue of section 10 (34) of the IT Act, dividend income referred to in section 115-O of the IT Act, are exempt from tax in the hands of the shareholders of the Company. By virtue of insertion of new section 10(36) of the IT Act, any long term capital gain arising to the shareholder from the transfer of a long term capital asset being an eligible equity share in a company purchased on or after the 1st day of March 2003 and before 1s day of March 2004 and held for a period of 12 months or more would be not be liable to tax in the hands of the shareholder. For this purpose eligible equity share meansa) an equity share in a company being a constituent of BSE 500 Index of the Stock Exchange, Mumbai as on 1.3.2003 listed in a recognized stock exchange in India and the transaction of purchase and sale of such equity share are entered into on a recognised stock exchange in India; or an equity share in a company allotted through a public issue on or after 1.3.2003 and listed in a recognized stock 218

B.3 Foreign Institutional Investors [FIIs]

q

b)

exchange in India before 1.3.2004 and the transaction of sale of such share is entered into on a recognised stock exchange in India.
q

The income by way of short term capital gains or long term capital gains (not covered under section 10(36) of the Act) realized by FIIs on sale of shares in the company would be taxed at the following rates as per section 115AD of the Income Tax Act, 1961.
q q

Short term capital gains 30% (Plus applicable surcharge ) Long term capital gains 10% (without cost indexation Plus applicable surcharge) (Shares held in a company would be considered as a long term capital asset provided they are held for a period exceeding 12 months.)

Under section 54EC of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains (not covered under section 10(36) of the Act) arising on the transfer of shares of the Company will be exempt from capital gains tax if the capital gain are invested within a period of 6 months after the date of such transfer for a period of 3 years in bonds issued by: q

National Bank for Agriculture and Rural Development established under section 3 National Bank for Agriculture and Rural Development Act, 1981; National Highway Authority of India constituted under section 3 of National Highway Authority of India Act, 1988; Rural Electrification Corporation Limited, the company formed and registered under the Companies Act, 1956; National Housing Bank established under section 3(1) of the National Housing Bank Act, 1987; and Small Industries Development Bank of India established under section 3(1) of the Small Industries Development Bank of India Act, 1989; Under section 54ED of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains (not covered under section 10(36) of the Act) on the transfer of shares of the Company, as and when it is listed, will be exempt from capital gains tax if the capital gain are invested in shares of an Indian Company forming part of a eligible public issue, within a period of 6 months after the date of such transfer.

q q q q

B.4 Venture Capital Companies/ Funds In terms of section 10(23FB) of the Income Tax Act, 1961 all Venture capital companies/ funds registered with Securities and Exchange Board of India, subject to the conditions specified, are eligible for exemption from income tax on all their income, including income from sale of shares of the company. C. Benefits to Members of the Company under the Wealth Tax Act, 1957 Shares of the company held by the shareholder will not be treated as an asset within the meaning of section 2(ea) of Wealth Tax Act, 1957, hence Wealth Tax Act will not be applicable. D. Benefits to Members of the Company under the Gift Tax Act, 1957 Gift of shares of the company made on or after October 1, 1998 would not be liable to Gift tax. Notes
q

All the above benefits are as per the current tax law as amended by the Finance Act, 2003 and will be available only to the sole/first named holder in case the shares are held by joint holders. In respect of non-residents, the tax rates and the consequent taxation 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 scheme.

E.

Benefits to the Company under the Sales Tax The Haryana State sales tax law has been replaced by State VAT law with effect from April 1st 2003. The VAT law of Haryana State contemplates the continuation of the sales tax benefit, hitherto enjoyed, in an altered form. Hitherto, the Company was entitled to sales tax benefit in accordance with the provision of Rule 28C of erstwhile Haryana General Sales Tax Rules, 1975 for the period from 1st August 2001 to 31st July 2015. The ceiling amount of concession to be availed during the entitlement period was Rs 5,644 million. 219

TERMS OF THE OFFER

The equity shares being offered are subject to the provisions of the Companies Act, our Memorandum and Articles, conditions of the FIPB and RBI approvals, the terms of this Red Herring Prospectus, Bid cum Application Form, the Revision Form, the CAN and other terms and conditions as may be incorporated in the Share Certificates/ Letters of Allotment and other documents/ certificates that may be executed in respect of the Offer. The equity shares shall also be subject to laws as applicable, guidelines, notifications and regulations relating to the issue of capital and listing of securities issued from time to time by SEBI, GoI, Stock Exchanges, RBI, RoC and/ or other authorities, as in force on the date of the Offer and to the extent applicable. The equity shares being offered are also subject to the conditions in the RJVA.

Authority for the Offer

In terms of the RJVA, the Selling Shareholder has the option to sell approximately 72,243,380 equity shares of Rs.5 each (approximately 3,612,169 equity shares of Rs.100 each as per the RJVA) or more by way of an initial public offer. For details on the RJVA, please see the section titled Our Promoters. As per the letter no. 2[16]/2000PE-VI, dated February 7, 2003, from the Ministry of Heavy Industries and Public Enterprises, Department of Heavy Industry, GoI, the Cabinet Committee of Disinvestment has approved the disinvestment in Maruti by GoI by way of Offer for sale of its shareholding in the domestic market. Pursuant to the decision taken by the Cabinet Committee, the Ministry of Heavy Industry and Public Enterprises, acting for and on behalf of the President of India, has been authorized to offer upto 72,243,380 equity shares of Rs.5 each (3,612,169 equity shares of Rs.100 each as per the said letter) and such additional number of equity shares as may be permitted to be offered for allotment against over-subscription. SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for retention of over-subscription over and above the limit of 10% allowed for the purposes of rounding off only, under clause 6.4.2(f) of SEBI Guidelines. In the event of retention of over-subscription by the Selling Shareholder, allotment to Bidders shall be as per the basis of allocation as set out in this RHP under Offer Structure. Our Company has also consented to the Offer through Board Resolution dated March 25, 2003 and the subsequent committee resolution dated April 19, 2003.

Ranking of Equity Shares

The equity shares being offered shall be subject to the provisions of our Memorandum and Articles and shall rank pari-passu with the existing equity shares of our Company, including rights in respect of dividends.

Face Value and Offer Price

The equity shares with a face value of Rs. 5 each are being offered in the Offer at a total price of Rs. [ q ] per share. At any given point of time there shall be only one denomination for the equity shares.

Rights of the Equity Shareholder

Subject to applicable laws, the equity shareholders shall have the following rights:
q q q q q q q

Right to receive dividend, if declared; Right to attend general meetings and exercise voting powers, unless prohibited by law; Right to vote on a poll either in person or by proxy; Right to receive offers for rights shares and be allotted bonus shares, if announced; Right to receive surplus on liquidation; The right of free transferability; and Such other rights, as may be available to a shareholder of a listed public company under the Companies Act and the Memorandum and Articles.

For a detailed description of the main provisions of our Articles dealing with voting rights, dividend, forfeiture and lien, restrictions on transfer and transmission and/or consolidation/ splitting, refer to the section on Main Provisions of Articles of Association of the Company on page 309 in this Red Herring Prospectus.

220

Market Lot
In terms of Section 68B of the Companies Act, the equity shares in this Offer shall be transferred only in dematerialized form. In terms of existing SEBI Guidelines, the trading of our equity shares shall only be in dematerialized form. Since trading of our equity shares is in dematerialized form, the tradable lot is one equity share. Transfer of the equity shares upon allocation will be done only in electronic form in lots of 50 equity shares.

Jurisdiction
Exclusive jurisdiction for the purpose of this Offer is with competent courts/ authorities in New Delhi, India.

Nomination Facility to Investor

In accordance with Section 109A of the Companies Act, the sole or first bidder, along with other joint bidder, may nominate any one person in whom, in the event of the death of sole bidder or in case of joint bidders, death of all the bidders, as the case may be, the equity shares allotted, if any, shall vest. A person, being a nominee, entitled to the equity shares by reason of the death of the original holder(s), shall in accordance with Section 109A of the Companies Act, be entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of the equity share(s). Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person to become entitled to equity share(s) in the event of his or her death during the minority. A nomination shall stand rescinded upon a sale of equity share(s) by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form available on request at the Registered Office of our Company or to the Registrar and Transfer Agents of our Company. In accordance with Section 109B of the Companies Act, any person who becomes a nominee by virtue of the provisions of Section 109A of the Companies Act, shall upon the production of such evidence as may be required by the Board, elect either: a) b) to register himself or herself as the holder of the equity shares; or to make such transfer of the equity shares, as the deceased holder could have made.

Further, the Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to transfer the equity shares, and if the notice is not complied with within a period of ninety days, the Board may thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the equity shares, until the requirements of the notice have been complied with. Since the transfer of equity shares in the Offer will be made only in dematerialized form, there is no need to make a separate nomination with us. Nominations registered with respective depository participant of the applicant would prevail. If the investors require to change the nomination, they are requested to inform their respective depository participant.

Application by Non Residents/ NRIs/ FIIs

Our Company has received approval from GoI, Ministry of Finance and Company Affairs (Department of Economic Affairs) pursuant to its letter no. FC.II: 74(1982)-Comp dated April 16, 2003 for the transfer of equity shares in this Offer to eligible nonresident investors, NRIs and FIIs. In terms of the approval of GoI, OCBs have not been permitted to participate in the Offer. Our Company has received approval from the RBI stating that the RBI has no objection for non-resident investors to acquire equity shares in the Offer for Sale and for Suzuki to submit a bid in the Offer and the Selling Shareholder to transfer to Suzuki shares to the extent of shortfall in the Offer, pursuant to its letter no. CO.FID 709/10.1.0/02.200(603)/2002-03 dated May 23, 2003. The final permission of the RBI for acquisition of shares is to be received on completion of certain filing requirements. Subject to obtaining such approvals, it will not be necessary for the investors to seek separate permission from the FIPB/RBI for this specific purpose. However it is to be distinctly understood that there is no reservation for Non Residents, NRIs and FIIs and all Non Residents, NRI and FII applicants will be treated on the same basis with other categories for the purpose of allocation. The Transfer of equity shares to Non Residents shall be subject to the conditions as may be prescribed by GoI or RBI while granting such approvals.

221

Offer Structure
The present Offer, for cash at a premium of Rs. [q] per equity share of Rs. 5 aggregating total consideration of Rs. [q] million is being made through a 100% book building process. QIBs Number of equity shares Up to 43,345,900 equity shares or Offer size less allocation to Non-institutional Bidders and Retail Bidders Non-institutional Bidders Minimum of 10,836,500 equity shares or Offer size less allocation to QIBs and Retail Portion Retail Minimum of 18,060,900 equity shares or Offer Size less allocation to QIBs and Noninstitutional Portion

Percentage of Offer Size Up to 60% or Offer size less Minimum 15% or Offer size less Minimum 25% or Offer Size less allocation to Non Institutional allocation to QIBs and Retail allocation to QIBs and Nonavailable for allocation Portion and Retail Portion Portion institutional Portion Basis of Allocation or Discretionary Allotment if respective category is oversubscribed Minimum Bid Proportionate Proportionate

1100 equity shares and 1100 equity shares and 100 equity shares and thereafter thereafter in multiples of 100 thereafter in multiples of 100 in multiples of 100 equity shares equity shares equity shares Not exceeding the size of the Not exceeding the size of the 1,000 equity shares Offer Offer Compulsory Dematerialised form One 50 Public financial institutions, as specified in section 4A of the Companies Act, scheduled commercial banks, mutual funds, foreign institutional investors registered with SEBI, multi-lateral and bilateral development financial institutions, venture capital funds registered with SEBI, foreign venture capital investors registered with SEBI and state industrial development corporations Margin Amount applicable to QIB Bidders at the time of submission of Bid cum Application Form to the members of the Syndicate in Compulsory in Dematerialised Compulsory in Dematerialised form form One 50 One 50

Maximum Bid

Allotment Mode

Trading Lot Lot size for allocation Who can Apply

Resident Indian individuals, Individuals (including NRIs and HUF (in the name of Karta), HUFs) applying for up to 1,000 companies, corporate bodies, equity shares NRIs, societies and trusts

Terms of Payment

Margin Amount applicable to Non-institutional Bidders at the time of submission of Bid cum Application Form to the members of the Syndicate

Margin Amount applicable to Retail Bidders at the time of submission of Bid cum Application Form to the members of the Syndicate

222

Subject to valid bids being received at or above the Offer Price. Undersubscription, if any, in any of the categories, would be allowed to be met with spill over from any of the other categories, at the discretion of the Selling Shareholder, BRLM and the CoBRLMs.

Suzukis Stand-By Support

As per clause 6.1 (b) of the RJVA dated May 15, 2002, Suzuki agrees that in the event the book building exercise is undertaken and the offer process initiated, Suzuki shall bridge any shortfall between the Shares offered for sale and the bids received. For this purpose it is agreed that where the floor price, in the public offer, is Rs. 2300 and there is a shortfall in the demand through the bids received, Suzuki shall, and Suzuki undertakes to, as of no later than the date and time of the closure of the issue, submit a bid to the extent of the said shortfall at the said price of Rs. 2300 per Share, in accordance with all relevant approvals, GoI and Suzuki will implement the above clause through the following steps: (a) In terms of Article 6.1(b) of the RJVA, Suzuki to deliver a bid to GoI for the entire Offer size as of no later than the date and time of the closure of the Bidding Period (Suzuki Bid), subject to provision of clause (d) below; (b) In terms of the RJVA, Suzuki Bid to be irrevocable; (c) Suzuki Bid shall be delivered to GoI containing all details required from non-resident investors in the bid form, to enable transfer of equity shares; (d) After the pricing for the Offer and the approval of the basis of allocation by the Stock Exchanges, the difference between the total number of shares offered to the public i.e. 72,243,300 equity shares having face value of Rs. 5 each, and the actual allocation in the Offer shall represent the Stand-by Support to be provided by Suzuki; (e) After the Government accepts the Suzuki Bid, Suzuki shall deposit the consideration, as determined through clause (d) above, in the designated bank account by way of inward remittance of foreign exchange. The remittance shall be as per applicable laws to receive equity shares on a repatriable basis. After realisation of the consideration in the designated bank account, equity shares shall be transferred to Suzuki. Further, as per SEBI letter dated April 16, 2003 addressed to the Secretary, Ministry of Disinvestment, GoI: (a) the shares acquired by Suzuki in the offer, in accordance with the stand by support, would not attract the lock-in provisions of SEBI Guidelines. (b) In case the public holding in the company falls below 25%, on account of Suzuki meeting the shortfall in the issue, the company would be required to provide an undertaking to the stock exchange(s), at the time of finalizing the basis of allotment, stating that the company would increase the percentage of public holding to the required minimum threshold level within the specified time.

Retention of oversubscription
SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for retention of over-subscription of 10% of the Offer i.e of upto 7,224,300 equity shares of Rs.5 each, over and above the limit of 10% allowed for the purposes of rounding off only, under clause 6.4.2 (f) of SEBI Guidelines. Hence the size of the Offer may be enhanced to the extent of upto 10% of the Offer i.e. by upto 7,224,300 equity shares of Rs.5 each, in case the selling shareholder decides to retain any oversubscription. In such a case, the size of the Offer may increase upto 79,467,600 equity shares of Rs.5 each. In the event of retention of over-subscription by the Selling Shareholder, allotment to Bidders shall be as per the basis of allocation as set out in this RHP under Offer Structure.

Offer Procedure
Book Building Procedure The Offer is being made through the 100% book building scheme wherein up to 60% of the Offer shall be available for allocation on a discretionary basis to Qualified Institutional Buyers. Further, not less than 15% of the Offer shall be available for allocation on a proportionate basis to Non-institutional Bidders and the not less than 25% of the Offer shall be available for allocation on a proportionate basis to Retail Bidders, subject to valid bids being received at or above the Offer Price. Bidders are required to submit their Bids through the members of the Syndicate. The Selling Shareholder and our Company in consultation with the BRLM and Co-BRLMs reserves the right to reject any Bid procured by any or all members of the Syndicate without assigning any reason therefore in case of QIBs. In case of Non-institutional Bidders and Retail Bidders, the Selling Shareholder and our Company would have a right to reject the Bids only on technical grounds. Investors should note that equity shares would be transferred to all successful allottees only in dematerialised form. 223

Bid cum Application Form Bidders shall only use the specified Bid cum Application Form bearing the stamp of a member of the Syndicate for the purpose of making a Bid in terms of this Red Herring Prospectus. The Bidder shall have the option to make a maximum of three Bids in the Bid cum Application Form and such options shall not be considered as multiple bids. Upon the allocation of equity shares, dispatch of the CAN and filing of the Prospectus with the RoC, the Bid cum Application Form shall be considered as the Application Form. Upon completing and submitting the Bid cum Application Form to a member of the Syndicate, the Bidder is deemed to have authorised our Company to make the necessary changes in this Red Herring Prospectus and the Bid cum Application Form as would be required for filing the Prospectus with the RoC and as would be required by the RoC after such filing, without prior or subsequent notice of such changes to the Bidder. The prescribed colour of the Bid cum Application Form for various categories, is as follows: Category Indian Public or NRIs applying on a non-repatriation basis Non-residents including NRIs or FIIs applying on a repatriation basis Who can Bid
q q

Colour of Bid cum Application Form White Blue

Indian nationals resident in India who are majors, in single or joint names (not more than three); Hindu undivided families or HUFs, in the individual name of the Karta. The Bidder should specify that the Bid is being made in the name of the HUF in the Bid cum Application Form as follows: Name of Sole or First bidder: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the Karta. Bids by HUFs would be considered at par with those from individuals; Companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in equity shares; Indian mutual funds registered with SEBI; Indian financial institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI permission, as applicable); Venture capital funds registered with SEBI; Foreign venture capital investors registered with SEBI; State Industrial Development Corporations; Trusts registered under the Societies Registration Act, 1860, as amended, or under any other law relating to Trusts and who are authorised under their constitution to hold and invest in equity shares; Non-residents including NRIs and FIIs on a repatriation basis or a non-repatriation basis subject to applicable laws; and Scientific and/ or industrial research organisations authorised to invest in equity shares.

q q

q q q q

q q

Note: The BRLM, Co-BRLMs, Syndicate Members and any associate of the BRLM, Co-BRLMs, and Syndicate Members (except asset management companies on behalf of mutual funds, Indian financial institutions and public sector banks) cannot participate in that portion of the Offer where allocation is discretionary. Further, the BRLM or Co-BRLMs shall not be entitled to subscribe to this Offer in any manner except towards fulfilling their underwriting obligation. Additionally, in accordance with the RJVA, no single bidder will be allocated equity shares that would result in their holding exceeding 5% of the total equity share capital of our Company. Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or maximum number of equity shares that can be held by them under the relevant regulations or statutory guidelines. As per the current regulations, the following restrictions are applicable for investments by mutual funds: No mutual fund scheme shall invest more than 10% of its net asset value in the equity shares or equity related instruments of any company provided that the limit of 10% shall not be applicable for investments in index funds or sector or industry specific funds. No mutual fund under all its schemes should own more than 10% of any companys paid-up capital carrying voting rights. The offer of equity shares to a single FII should not exceed 10% of the post-offer paid-up capital of the company (i.e 10% of 224

288,910,060 equity shares of Rs. 5 each). In respect of an FII investing in our equity shares on behalf of its sub-accounts, the investment on behalf of each sub-account shall not exceed 10% of our total issued capital or 5% of our total issued capital in case such sub-account is a foreign corporate or an individual. As of now, the aggregate FII holding in the Company cannot exceed 24% of our total issued capital. The above information is given for the benefit of the Bidders. Our Company, the BRLM and the Co-BRLMs are not liable for any amendments or modification or changes in applicable laws or regulations, which may happen after the date of this Red Herring Prospectus. Bidders are advised to make their independent investigations and ensure that their number of equity shares bid for do not exceed the applicable limits under laws or regulations. Maximum and Minimum Bid Size (a) For Retail Bidders: The Bid must be for a minimum of 100 equity shares and in multiples of 100 equity shares thereafter up to a maximum of 1,000 equity shares. In case the Bid is for more than 1,000 equity shares, the same would be considered for allocation under the Non-institutional Bidders category. (b) For other (Non-institutional Bidders and QIBs) Bidders: The Bid must be for a minimum of 1100 equity shares and in multiples of 100 equity shares thereafter. A Bid cannot be submitted for more than the size of the Offer. However, the maximum Bid by a QIB investor should not exceed the investment limits prescribed for them by the regulatory or statutory authorities governing them.

Bidding Process
1. 2. 3. 4. Our Company has filed the Red Herring Prospectus with the RoC. The members of the Syndicate will circulate copies of the Red Herring Prospectus along with the Bid cum Application Form to potential investors. Any investor who would like to obtain the Red Herring Prospectus along with the Bid cum Application Form can obtain the same from our corporate office or from any of the BRLM or Co-BRLMs or Syndicate Members. Our Company, the BRLM and the Co-BRLMs shall declare the Bid/Offer Opening Date, Bid/Offer Closing Date and Floor Price and publish the same in two widely circulated newspapers (one each in English and Hindi). This advertisement shall contain the salient features of the Red Herring Prospectus as specified under Form 2A of the Companies Act, the method and process of bidding and the names and addresses of the BRLM, Co-BRLMs and Syndicate Members. The BRLM, CoBRLMs and Syndicate Members shall start accepting Bids from the Bidders from the Bid/Offer Opening Date. Investors who are interested in subscribing for our Companys equity shares should approach any of the BRLM or CoBRLMs or Syndicate Members or their authorised agent(s) to register their Bid. The Bids should be submitted on the prescribed Bid cum Application Form only. Bid cum Application Forms should bear the stamp of the BRLM or Co-BRLMs or Syndicate Members. Bid cum Application Forms which do not bear the stamp of the BRLM or Co-BRLMs or Syndicate Members will be rejected.

5. 6.

Bidding 1. Each Bid cum Application Form will give the Bidder the choice to bid for up to three optional prices (for details refer to the paragraph entitled Bids at Different Price Levels below) and specify the demand (i.e. the number of equity shares bid for). The price and demand options submitted by the Bidder in the Bid cum Application Form will be treated as optional demands from the Bidder and will not be cumulated. After determination of the Offer Price, the maximum number of equity shares bid for by a Bidder at or above the Offer Price will be considered for allocation and the rest of the Bid(s), irrespective of the bid price, will become automatically invalid. The Bidder cannot bid on another Bid cum Application Form after Bids on one Bid cum Application Form have been submitted to any member of the Syndicate. Submission of a second Bid cum Application Form to either the same or to another member of the Syndicate will be treated as multiple bidding and is liable to be rejected either before entering the Bid into the electronic bidding system, or at any point of time prior to the transfer of equity shares in this Offer. The BRLM, Co-BRLMs and Syndicate Members will enter each option into the electronic bidding system as a separate Bid and the Bid Amount paid by the Bidder and generate a Transaction Registration Slip (TRS), for each price and demand option and give the same to the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum Application Form. Along with the Bid cum Application Form, all Bidders will make payment in the manner described under the paragraph Terms of Payment on page 226 of the Red Herring Prospectus. 225

2.

3.

4.

Bids at Different Price Levels The Floor Price has been fixed at Rs. 115 per Equity Share of Rs. 5 each for reference purposes of the Bidders. The Floor Price is only indicative. The Selling Shareholder in consultation with our Company, the BRLM and Co-BRLMs can finalise the Offer Price at or above the Floor Price in accordance with this clause without the prior approval of, or intimation, to the Bidders. The Bidder can bid at any price at or above the Floor Price. The Bidder has to bid for the desired number of equity shares at a specific price. Bidding at Cut-off Price is prohibited for QIB or Non-institutional Bidders and such Bids from QIBs or Non-institutional Bidders shall be rejected. Retail Bidders may bid at Cut off Price. Retail Bidders who bid at the Cut-off Price agree that they shall subscribe to the equity shares at the Offer Price as determined by the Selling Shareholder in consultation with the Company and the BRLM and Co-BRLMS. Retail Bidders bidding at the Cutoff Price shall deposit the Bid Amount based on the Floor Price in the Escrow Account. In the event that the Bid Amount collected is lesser than the subscription amount payable by the Retail Bidders (i.e. the total number of equity shares allocated in the Offer multiplied by the Offer Price), Retail Bidders shall be required to deposit the difference in the Escrow Account by the Pay-in-Date. In the event that the Bid Amount is greater than the subscription amount payable by the Retail Bidders (i.e. the total number of equity shares allocated in the Offer multiplied by the Offer Price), Retail Bidders shall receive the refund of the excess amounts from the Escrow Account. The Bidder can bid at any price in multiples of Re. 1 only, at or above the Floor Price.

Escrow Mechanism
The Selling Shareholder, our Company and the members of the Syndicate shall open Escrow Accounts with one or more Escrow Collection Banks in whose favour the Bidders shall make out the cheque or demand draft in respect of the Bid and/or revision. Cheques or demand drafts received from Bidders in a certain category would be deposited in the Escrow Account for the Offer. The Escrow Collection Banks will act in terms of this Red Herring Prospectus and the Escrow Agreement. The monies in the Escrow Account for the Offer shall be maintained by the Escrow Collection Bank(s) for and on behalf of the Bidders. The Escrow Collection Bank(s) shall not exercise any lien whatsoever over the monies deposited therein and shall hold the monies therein in trust for the Bidders. On the Designated Date, the Escrow Collection Banks shall transfer the monies from the Escrow Account to the Public Offer Account with the Bankers to the Offer. Payments of refund to the Bidders shall also be made from the Escrow Collection Banks, as per the terms of the Escrow Agreement and this Red Herring Prospectus. The Bidders should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement between the Selling Shareholder, our Company, the members of the Syndicate, the Escrow Collection Bank(s) and the Registrar to the Offer to facilitate collections from the Bidders.

Terms of Payment and Payment into the Escrow Collection Account

Each Bidder shall, with the submission of the Bid cum Application Form draw a cheque, demand draft or Stockinvest for the maximum amount of the Bid in favour of the Escrow Account of the Escrow Collection Bank (for details refer to the paragraph Payment Instructions) and submit the same to the member of the Syndicate with whom the Bid is being deposited. Bid cum Application Forms accompanied by cash shall not be accepted. The maximum bid price has to be paid at the time of submission of the Bid cum Application Form based on the highest bidding option of the Bidder. The members of the Syndicate shall deposit the cheque, demand draft or Stockinvest with the Escrow Collection Bank. The Escrow Collection Bank will hold all monies collected for the benefit of the Bidders till such time as the Designated Date. On the Designated Date, the Escrow Collection Bank shall transfer the funds in respect of those Bidders whose Bids have been accepted from the Escrow Account for the Offer, as per the terms of the Escrow Agreement, into the Public Offer Account with the Bankers to the Offer. The balance amounts after the transfer to the Public Offer Account, lying credited with the Escrow Collection Banks shall be held for the benefit of the Bidders who are entitled to refunds. On the Designated Date and no later than 15 days from the Bid/Offer Closing Date, the Escrow Collection Bank shall also refund all amounts payable to unsuccessful Bidders and also the excess amount paid on bidding, if any, after adjustment for allocation, to the Bidders. Each category of Bidders i.e. QIBs, Non-institutional Bidders and Retail Bidders would be required to pay their applicable Margin Amount at the time of the submission of the Bid cum Application Form. The details of the Margin Amount payable will be available with the members of the Syndicate and will be as per the Syndicate Agreement. Where the Margin Amount applicable to the Bidder is less than 100% of the Bid Amount, any difference between the amount payable by the Bidder for equity shares allocated at the Offer Price and the Margin Amount paid at the time of Bidding, shall be payable by the Bidder no later than Pay-in Date, which shall be a minimum period of two days from date of communication of the allocation list to the 226

members of the Syndicate by the BRLM and Co-BRLMs. If the payment is not made favouring the Escrow Account within the time stipulated above, the Bid of the Bidder is liable to be cancelled. However, if the members of the Syndicate do not waive such payment, the full amount of payment has to be made at the time of submission of the Bid Form. Where the Bidder has been allocated lesser number of equity shares than they had bid for, the excess amount paid on bidding, if any, after adjustment for allocation, will be refunded to such Bidder within 15 days from the Bid/Offer Closing Date.

Electronic Registration of Bids

1. 2. The members of the Syndicate will register the Bids using the on-line facilities of NSE and BSE. There will be at least one on-line connectivity with each city where a Stock Exchange Centre is located in India, where the Bids are accepted. NSE and BSE will offer a screen-based facility for registering Bids for the Offer. This facility will be available on the terminals of the members of the Syndicate and their authorised agents during the Bidding Period. Members of the Syndicate can also set up facilities for off-line electronic registration of Bids subject to the condition that they will subsequently download the off-line data file into the on-line facilities for book building on an half-hourly basis. On the Bid Closing Date, we will upload the bids till such time as permitted by the Stock Exchanges. The aggregate demand and price for bids registered on each of the electronic facilities of NSE and BSE will be downloaded on a half-hourly basis, consolidated and displayed online at all bidding centers. A graphical representation of consolidated demand and price would be made available at the bidding centres during the bidding period. At the time of registering each Bid, the members of the Syndicate shall enter the following details of the investor in the on-line system:
q q q q q q q

3.

4.

Name of the investor Investor Category Individual, Corporate, NRI, FII, or Mutual Funds etc. Numbers of equity shares bid for Bid price Bid cum Application Form number Whether payment is made upon submission of Bid cum Application Form Depository Participant Identification no. and Client Identification no. of the demat account of the Bidder.

5.

A system generated TRS will be given to the Bidder as a proof of the registration of each of the bidding options. It is the Bidders responsibility to obtain the TRS from the members of the Syndicate. The registration of the Bid by the member of the Syndicate does not guarantee that the equity shares shall be allocated either by the Selling Shareholder or the members of the Syndicate or us. Such TRS will be non-negotiable and by itself will not create any obligation of any kind.

6.

It is to be distinctly understood that the permission given by NSE to use their network and software of the online IPO system should not in any way be deemed or construed that the compliance with various statutory and other requirements by the Selling Shareholder, our Company, BRLM or Co-BRLMs are cleared or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the compliance with the statutory and other requirements nor does it take any responsibility for the financial or other soundness of our Company, our promoters, our management or any scheme or our project. It is also to be distinctly understood that the approval given by NSE should not in any way be deemed or construed that the Red Herring Prospectus has been cleared or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this Red Herring Prospectus; nor does it warrant that the equity shares will be listed or will continue to be listed on the NSE.

7.

Build Up of the Book and Revision of Bids

1. 2. Bids registered by various Bidders through the members of the Syndicate shall be electronically transmitted to the NSE or BSE mainframe on an on-line basis. Data would be uploaded on a half-hourly basis. The book gets built up at various price levels. This information will be available with the BRLM and Co-BRLMs on an regular basis.

227

3.

During the Bidding Period, any Bidder who has registered an interest in the equity shares at a particular price level is free to revise the Bid to a higher price level (upward revision) as well as to lower price level subject to the Floor Price (downward revision) using the printed Revision Form which is a part of the Bid cum Application Form. Revisions can be made in both the desired number of equity shares and the bid price by using the Revision Form. The Bidder must complete the details of all the options in the Bid cum Application Form or earlier Revision Form and revisions for all the options as per the Bid cum Application Form or earlier Revision Form. For example, if a Bidder has bid for three options in the Bid cum Application Form or the earlier Revision Form and is changing only one of the options in the Revision Form, the Bidder must still fill the details of the other two options, that are not being revised, in the Revision Form unchanged. Incomplete or inaccurate Revision Forms will not be accepted by the members of the Syndicate. The Bidder can make this revision any number of times during the Bidding Period. However, for any revision(s) in the earlier Bid, the Bidders will have to use the services of the same member of the Syndicate through whom the original Bid was placed. Bidders are advised to retain copies of the blank Revision Form. Any revision of the Bid shall be accompanied by payment in the form of cheque or demand draft or Stockinvest for the incremental amount, if any, to be paid on account of the upward revision of the Bid. The excess amount, if any, resulting from downward revision of the Bid would be returned to the Bidder at the time of refund in accordance with the terms of this Red Herring Prospectus. In case of QIBs, the members of the Syndicate may at their sole discretion waive the payment requirement at the time of one or more revisions by the Bidders. When a Bidder revises a Bid, the Bidder shall surrender the earlier TRS and get a revised TRS from the members of the Syndicate. It is the responsibility of the Bidder to request for and obtain the revised TRS, which will act as proof of having revised the Bid. In case of discrepancy of data between the electronic book and the physical book, the decision of the BRLM and CoBRLMs based on the physical records of the Bid cum Application Form shall be final and binding on all concerned.

4.

5.

6.

7.

8.

Price Discovery and Allocation

1. 2. After the Bid/Offer Closing Date, the BRLM and Co-BRLMs shall analyse the demand generated at various price levels and discuss pricing strategy with the Selling Shareholder and our Company. The Selling Shareholder will in consultation with our Company, the BRLM and Co-BRLMs, finalise the Offer Price. The Selling Shareholder and our Company will in consultation with the BRLM and Co-BRLMs finalize the number of equity shares to be transferred and the allocation to successful QIB Bidders. The allocation will be decided based on the quality of the Bidder determined broadly by the size, price and date of the Bid. The allocation for QIBs of 60% of the Offer Size would be discretionary. The allocation to Non-institutional Bidders and Retail Bidders of not less than 15% and not less than 25% of the Offer Size respectively would be on proportionate basis, in consultation with the The Stock Exchange, Mumbai, subject to valid Bids being received at or above the Offer Price. Undersubscription, if any, in any category, would be allowed to be met with spill over from any of the other categories, at the sole discretion of the Selling Shareholder, BRLM and Co-BRLM(s). Allocation to Non Residents, NRIs or FIIs applying on repatriation basis will be subject to the terms and conditions stipulated by the FIPB and RBI while granting permission for Offer of equity shares to them. The BRLM and Co-BRLMs, in consultation with the Selling Shareholder and our Company, shall notify the Syndicate Members of the Offer Price and allocations to their respective Bidders where the full Bid Amount has not been collected from the Bidders. The Selling Shareholder, in consultation with our Company, reserve the right to cancel the Offer any time after the Bid/ Offer Opening Date but before allotment.

3.

4. 5. 6.

7.

Signing of Underwriting Agreement and RoC Filing

1. 2. The Selling Shareholder, our Company, the BRLM, the Co-BRLMs and the Syndicate Members shall enter into an Underwriting Agreement on reaching agreement upon the Offer Price and allocation(s) to the Bidders. After the Underwriting Agreement is signed between the Selling Shareholder, our Company, the BRLM, the Co-BRLMs and the Syndicate Members, we will file the Red Herring Prospectus with RoC, which then would be termed Prospectus. The Prospectus would have details of the Offer Price, size of the Offer, underwriting arrangements and would be complete in all material respects.

228

Advertisement regarding Offer Price and Prospectus

A statutory advertisement will be issued by us after the filing of the Prospectus with the RoC. This advertisement, in addition to the information that has to be set out in the statutory advertisement, shall indicate the Offer Price along with a table showing the number of equity shares and the amount payable by an investor. Any material updates between the Red Herring Prospectus and the Prospectus will be included in such statutory advertisement.

Issuance of Confirmation of Allocation Note

1. 2. The BRLM or Co-BRLMs or Registrar to the Offer shall send to the members of the Syndicate a list of their Bidders who have been allocated equity shares in the Offer. The BRLM, Co-BRLMs or Syndicate Members would then send the CAN to their Bidders who have been allocated equity shares in the Offer. The despatch of a CAN shall be deemed a valid, binding and irrevocable contract for the Bidder to pay the entire Offer Price for all the equity shares allocated to such Bidder. Those Bidders who have not paid into the Escrow Account for the Offer at the time of bidding shall pay in full the amount payable into the Escrow Account for the Offer by the Pay-in Date specified in the CAN. Bidders who have been allocated equity shares and who have already paid into the Escrow Account for the Offer at the time of bidding shall directly receive the CAN from the Registrar to the Offer subject, however, to realisation of their cheque or demand draft paid into the Escrow Account for the Offer. The despatch of a CAN shall be a deemed a valid, binding and irrevocable contract for the Bidder to pay the entire Offer Price for all the equity shares transferred to such Bidder.

3.

Designated Date and Transfer in the Offer

After the funds are transferred from the Escrow Account for the Offer to the Public Offer Account on the Designated Date, the Selling Shareholder and our Company would ensure the transfer of equity shares to the allottees within two days of the allotment. All allottees will receive credit for the equity shares directly in their depository account. Equity shares will be transferred only in the dematerialised form to the allottees. Allottees will have the option to re-materialise the equity shares so transferred, if they so desire, as per the provisions of the Companies Act and the Depositories Act. The Selling Shareholder and we will ensure the transfer of equity shares within 15 days of closure of the bidding and also ensure that credit is given to the allottees depository accounts within two working days from the date of allotment.

General Instructions
Dos:
q q

Check if you are eligible to apply; Read all the instructions carefully and complete the Resident Bid cum Application Form (white in colour) or Non-Resident Bid cum Application Form (blue in colour), as the case may be; Ensure that the details about Depository Participant and Beneficiary Account are correct as there will be no transfer of equity shares in physical form; Ensure that the Bids are submitted at the bidding centres only on forms bearing the stamp of a member of the Syndicate; Ensure that you have collected a TRS for all your Bid options; and Submit revised Bids to the same member of the Syndicate through whom the Original Bid was placed and obtain a revised TRS.

q q q

Donts:
q q q q q q

Do not Bid for lower than the minimum Bid size or less than the Floor Price; Do not Bid on another Bid cum Application Form after you have submitted the Bid to the members of the Syndicate; Do not pay the Bid amount in cash; Do not send Bid cum Application Forms by post; instead hand them over to a member of the Syndicate only; Do not Bid at cut off price (for non-institutional and institutional bidders); Do not fill up the Bid cum Application Form for an amount that exceeds the investment limit or maximum number of equity 229

shares that can be held by him under the applicable laws or regulations or maximum amount permissible under the applicable regulations.

Instructions for Completing the Bid cum Application Form

Bidders can obtain Bid cum Application Forms and / or Revision Forms from the BRLM or Co-BRLMs or Syndicate Members.

Bids and Revision of Bids

Bids and revision of Bids must be: 1. 2. Made only in the prescribed Bid cum Application Form or Revision Form, as applicable (white colour for Resident Indians and NRI applying on non-repatriation basis and blue colour for NRI or FII applying on repatriation basis). Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the instructions contained herein, in the Bid cum Application Form or in the Revision Form. Incomplete Bid cum Application Forms or Revision Forms are liable to be rejected. For the Retail Bidders, the Bids must be for a minimum of 100 equity shares and in multiples of 100 thereafter subject to a maximum of 1000 equity shares. For Non-institutional and QIB Bidders, Bids must be for a minimum of 1100 equity shares and in multiples of 100 equity shares thereafter. Bids cannot be made for more than the size of the Offer. Bidders are advised to ensure that a single Bid from them should not exceed the investment limits or maximum number of shares that can be held by them under the applicable laws or regulations. In single name or in joint names (not more than three). Thumb impressions and signatures other than in the languages specified in the Eightth Schedule in the Constitution of India must be attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official seal.

3. 4.

5. 6.

Bidders Bank Details

The name of the sole or first Bidders bank, branch, type of account and account numbers must be mandatorily completed in the Bid cum Application Form. This is required for the Bidders own safety so that these details can be printed on the refund orders. Bid cum Application Forms without these details are liable to be rejected.

Bidders Depository Account Details

Equity shares shall be transferred only in dematerialised form. All Bidders should mention their depository participants name, Depository Participant-Identification number and beneficiary account number in the Bid cum Application Form. Please ensure that in case of joint names, the names stated in the Bid cum Application Form should be in the same order as the names stated in the Bidders depository account.

Bids under Power of Attorney

In case of Bids made pursuant to a Power of Attorney or by limited companies, corporate bodies, registered societies, a certified copy of the Power of Attorney or the relevant resolution or authority, as the case may be, along with a certified copy of the memorandum and articles of association and/or bye laws must be lodged alongwith the Bid cum Application Form. Failing this, we reserve the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefore. In case of Bids made pursuant to a Power of Attorney by FIIs, a certified copy of the Power of Attorney or the relevant resolution or authority, as the case may be, along with a certified copy of their SEBI registration certificate must be lodged alongwith the Bid cum Application Form. Failing this, our Company reserves the right to accept or reject any Bid in whole or in part, in either case, without assigning any reason therefore. We, in our absolute discretion, reserve the right to relax the above condition of simultaneous lodging of the Power of Attorney along with the Bid cum Application form, subject to such terms and conditions as we may deem fit.

230

Bids by NRIs
NRI Bidders to comply with the following: 1. 2. Individual NRI Bidders can obtain the Bid cum Application Forms from our corporate office at Maruti 11th Floor, Jeevan Prakash Building, 25, Kasturba Gandhi Marg, New Delhi, India, or BRLM or Co-BRLMs or the Registrar to the Offer. NRI Bidders may please note that only such Bids as are accompanied by payment in free foreign exchange shall be considered for allotment. NRIs who intend to make payment through Non-Resident Ordinary (NRO) accounts shall use the Bid Cum Application form meant for Resident Indians.

Bids by Non Residents, NRIs or FIIs on a repatriation basis

Bids and revision to Bids must be made: 1. 2. 3. On the Bid cum Application Form or the Revision Form, as applicable, (blue in colour), and completed in full in BLOCK LETTERS in ENGLISH in accordance with the instructions contained therein. In a single name or joint names (not more than three). By NRIs - For a minimum of 100 equity shares and in multiples of 100 thereafter subject to a maximum of 1000 equity shares for the Bid to be considered in the Retail Portion. Bids for 1100 or more equity shares would be considered under Non Institutional Category for the purposes of allocation; By FIIs/ Eligible Non-Residents for a minimum of 1100 equity shares and in multiples of 100 thereafter subject to a maximum of 10% of the equity share capital of our Company; for further details see Offer Procedure - Maximum and Minimum Bid Size. No Bids will be accepted from OCBs, as investment by OCBs has not been permitted in this Offer in terms of the approval of the GoI, Ministry of Finance and Company Affairs (Department of Economic Affairs) pursuant to its letter No.FC.II:74(1982) Comp dated April 16, 2003.

4.

Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only and net of bank charges and / or commission. In case of Bidders who remit money through Indian Rupee drafts purchased abroad, such payments in Indian Rupees will be converted into US Dollars or any other freely convertible currency as may be permitted by the RBI at the rate of exchange prevailing at the time of remittance and will be dispatched by registered post or if the Bidders so desire, will be credited to their NRE accounts, details of which should be furnished in the space provided for this purpose in the Bid cum Application Form. We will not be responsible for loss, if any, incurred by the Bidder on account of conversion of foreign currency.

Payment Instructions
The Selling Shareholder, our Company, the BRLM, the Co-BRLMs and the Syndicate Members shall open an Escrow Account for the Offer with the Escrow Collection Banks for the collection of the Bid Amounts payable upon submission of the Bid cum Application Form and for amounts payable pursuant to allocation in the Offer. Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid and/or on allocation as per the following terms:

Payment into Escrow Account for the Offer:

1. The Bidders who have paid the Bid Amount/ Margin on application shall draw a payment instrument for the Bid Amount/ Margin in favour of the Escrow Account for the Offer and submit the same to the members of the Syndicate alongwith the Bid cum Application Form. In case the Margin Amount is less than 100% of the Bid Amount, on receipt of the CAN, an amount equal to any difference between the amount payable by the Bidder for equity shares allocated at the Offer Price and the Margin Amount paid at the time of Bidding, shall be paid by the Bidders into the Escrow Account for the Offer within the period specified in the CAN which shall be a minimum period of two days from the date of communication of the allocation list to the members of the Syndicate by the BRLM or Co-BRLMs. The payment instruments for payment into the Escrow Account for the Offer should be drawn in favour of: 1. 2. In case of Resident Bidders: Escrow Account - Maruti Public Offer In case of Non Resident Bidders: Escrow Account - Maruti Public Offer - NR

2.

3.

231

4.

In case of Bids by Non Residents/NRIs applying on repatriation basis, the payments must be made through Indian Rupee drafts purchased abroad or cheques or bank drafts or Stockinvests, for the amount payable on application remitted through normal banking channels or out of funds held in Non-Resident External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts, maintained with banks authorised to deal in foreign exchange in India, along with documentary evidence in support of the remittance. Payment will not be accepted out of Non-Resident Ordinary (NRO) Account of Non-Resident subscribers applying on a repatriation basis. Payment by drafts should be accompanied by bank certificate confirming that the draft has been issued by debiting to NRE or FCNR Account. In case of Bids by FIIs, the payment should be made out of funds held in Special Rupee Account along with documentary evidence in support of the remittance. Payment by drafts should be accompanied by Bank Certificate confirming that the draft has been issued by debiting to Special Rupee Account. Where a Bidder has been allocated a lesser number of equity shares than the Bidder has Bid for, the excess amount, if any, paid on bidding, after adjustment towards the amount payable on the equity shares allocated, will be refunded to the Bidder from the Escrow Account for the Offer. On the Designated Date, the Escrow Collection Banks shall transfer the funds from the Escrow Account for the Offer as per the terms of the Escrow Agreement into the Public Offer Account with the Bankers to the Offer. On the Designated Date and no later than 15 days from the Bid/Offer Closing Date, the Escrow Collection Bank shall also refund all amounts payable to unsuccessful Bidders and also the excess amount paid on bidding, if any, after adjustment for allocation, to the Bidders.

5.

6.

7. 8.

Payment by Stockinvest
In terms of the Reserve Bank of India Circular No. DBOD No. FSC. BC.100/24.47.001/94 dated September 2, 1994, a Bidder, being an individual or mutual fund, has the option to use the Stockinvest instrument in lieu of cheques or bank drafts for payment of bid money, subject to applicable laws or regulations. Stockbrokers, corporate bodies, banks and financial institutions are not allowed to apply through Stockinvests. In respect of individual Bidders, banks have imposed a ceiling of Rs. 50,000 per individual per Stockinvest. Stockinvest instruments are payable at par at all the branches of the issuing bank and as such, outstation Stockinvest instruments can be attached to the Bid cum Application Form or Revision Form. The bidder may approach the banks concerned for obtaining Stockinvest and detailed instructions for the same. Service charges, if any, for issuing the Stockinvest must be borne by the Bidder. The Bidder has to fill in the following particulars:
q q q q

Title of the Account as mentioned in the Bid cum Application Form; Number of equity shares bid for; The maximum amount payable as per the options in the Bid cum Application Form or Revision Form; and Name and address of the Bidder.

The Bidder should thereafter sign the instrument. It should also bear the stamp of the bank issuing the instrument and should be crossed A/c Payee Only and made payable only to Maruti Udyog Limited. The Bidder should not complete the portion to be completed by the Registrar (right-hand portion of the instrument). The Bidder should use the Stockinvest and the name of the Bidder or one of the Bidders should be indicated as the first Bidder in the Bid cum Application Form or Revision Form. Thus, if the signature of the Bidder on the Stockinvest and the signature of the first Bidder in the Bid cum Application Form or Revision Form do not tally, the Bid would be treated as having been accompanied by a third party Stockinvest and is liable to be rejected. The Stockinvest instrument should be used by the Bidder within 10 days from the date of issue of the instrument, failing which such bids are liable to be rejected. For the purpose of calculating the 10 days, the last date for use of the Stockinvest for submitting the Bid cum Application Form or Revision Form to the members of the Syndicate is indicated on the face of the Stockinvest with a notation to be used before _______.

232

The Registrar to the Offer will complete the right-hand side of the Stockinvest indicating the equity shares transferred to the Bidder, calculated as follows:
q

In case of full allotment, the number of equity shares on the right-hand side will be the same as that on the left-hand side of the instrument; In case of partial allotment, the number filled up by Registrar to the Offer on the right-hand side of the instrument will be less than the number filled up by the Bidder on the left- hand side; and In case the allotment is Nil, the number filled up by the Registrar to the Offer on the right-hand side of the instrument will be Nil.

No refund order will be issued to the Bidders using Stockinvest for payment of the money due while submitting the Bid cum Application Form or Revision Form. In case of non-allotment of equity shares, the cancelled Stockinvest instruments will be returned to the Bidder, within 15 days of the Offer Closing Date by registered post or speed post. The Bidder will have to approach the issuing bank branch for lifting the lien. Registrar to the Offer has been authorised by our Company, to sign on behalf of our Company, to realise the proceeds of the Stockinvest from the issuing bank or to affix non-allotment advice on the instrument, or to cancel the Stockinvest(s) of the non-allottees. Such cancelled Stockinvest(s) shall be sent back by the Registrar directly to the investors. Stockinvest will be realised through the Banker(s) to the Offer. All other conditions mentioned for making a Bid through cheque or bank draft will also apply to Bids made using Stockinvest. Note: (1) The above information is given for the benefit of investors and the Selling Shareholder and we are not liable for any modification of the terms of Stockinvest or procedure thereof by the issuing bank. For further instructions, please read the Bid cum Application Form carefully. (2) Bidders are required to mention the number of application form on the reverse of the payment instruments to avoid misuse of instruments submitted along with the Bid cum Application Form.

Submission of Bid cum Application Form

All Bid cum Application Forms or Revision Forms duly completed and accompanied by account payee cheques or drafts or Stockinvest shall be submitted to the members of the Syndicate at the time of submission of the Bid cum Application Form unless waived by a member of the Syndicate at its sole discretion. The collection center of the BRLM, Co-BRLMs or Syndicate Members will acknowledge the receipt of the Bid cum Application Forms or Revision Forms by stamping and returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve as the duplicate of the Bid cum Application Form for the records of the Bidder. No separate receipts shall be issued for the money paid on the submission of Bid cum Application Form or Revision Form.

Other Instructions Joint Bids in the case of Individuals

Bids may be made in single or joint names (not more than three). In the case of joint Bids, all payments will be made in favour of the Bidder whose name appears first in the Bid cum Application Form or Revision Form (First Bidder ). All communications will be addressed to the First Bidder and will be despatched to his or her address.

Multiple Bids
A Bidder should submit only one Bid (and not more than one) for the total number of equity shares required. Two or more Bids will be deemed to be multiple Bids if the sole or First Bidder is one and the same. In case of a mutual fund, a separate Bid can be made in respect of each scheme of the mutual fund registered with SEBI and such Bids in respect of more than one scheme of the mutual fund will not be treated as multiple bids provided that the Bids clearly indicate the scheme concerned for which the Bid has been made. We reserve the right to reject, in our absolute discretion, all or any multiple Bids in all or any categories.

PAN or GIR Number

Where the maximum Bid for equity shares by a Bidder is for the total value of Rs. 50,000 or more, i.e. the actual numbers of equity shares Bid for multiplied by the Bid Amount is Rs. 50,000 or more, the Bidder or, in the case of a Bid in joint names, each of the Bidders should mention his or her Permanent Account Number (PAN) allotted under the I.T. Act or where the same has not been allotted, the General Index Register (GIR) Number and the Income-Tax Circle, Ward or District. In case neither the 233

PAN nor the GIR number has been allotted, the Bidders must mention Not allotted in the appropriate place. Bid cum Application Forms without this information will be considered incomplete and are liable to be rejected.

Our Right to Reject Bids

The Selling Shareholder, we and the members of the Syndicate reserve the right to reject any Bid without assigning any reason therefore in case of QIBs. In case of Non-institutional Bidders and Retail Bidders, the Selling Shareholder and we would have the right to reject bids based on technical grounds. Consequent refunds shall be made by cheque or pay order or draft and will be sent to the bidders address at the Bidders risk.

Grounds for Technical Rejections

Bidders are advised to note that Bids are liable to be rejected on technical grounds, including the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. Amount paid does not tally with the highest value of equity shares bid for; Bank account details (for refund) are not given; Age of First Bidder not given; Bid by minor; PAN or GIR Number not given if Bid is for Rs. 50,000 or more; Bids for lower number of equity shares than specified for that category of investors; Bids at a price less than the Floor Price; Bids at cut-off price by a QIB or a Non-institutional Bidder; Bids for number of equity shares which are not multiples of 100;

10. Category not ticked; 11. Multiple bids as defined elsewhere; 12. In case of Bid under power of attorney or by limited companies, corporate, trust etc., relevant documents are not submitted; 13. Bids accompanied by Stockinvest purchased 10 days prior to Bid/Offer Opening Date; 14. Bids accompanied by Stockinvest of value exceeding Rs. 50,000 by individuals; 15. Bids accompanied by third party Stockinvest; 16. Right hand side of the Stockinvest has been completed; 17. Bids by Bidders other than individuals and mutual funds accompanied by Stockinvest; 18. Bid cum Application Form does not have the stamp of the BRLM or Co-BRLMs or Syndicate Members; 19. Bid cum Application Form does not have Bidders depository account details; 20. Bid cum Application Forms are not submitted by the Bidders within the time prescribed as per the Bid cum Application Form, Bid/Offer Opening Date advertisement and this Red Herring Prospectus and as per the instructions in this Red Herring Prospectus and the Bid cum Application Form; or 21. Bids for amounts greater than the maximum permissible amounts prescribed by the regulations see the details regarding the same at page 224 of this Red Herring Prospectus. 22. Bids from OCBs

Equity Shares in Dematerialised Form with NSDL or CDSL

In terms of Section 68B of the Companies Act, the equity shares in this Offer shall be transferred only in dematerialized form, (i.e. not in the form of physical certificates but be fungible and be represented by the statement issued through electronic mode). In this context, two tripartite agreement have been signed between the Registrar, the Depositories and us:
q q

An agreement dated July 22, 2000 between NSDL, us and MCS Ltd; and An agreement dated May 15, 2003 between CDSL, us and MCS Ltd

234

Bids from any investor without the following details of his or her depository account are liable to be rejected.
1. 2. 3. 4. A Bidder applying for equity shares must have at least one beneficiary account with either of the Depository Participants of NSDL or CDSL prior to making the Bid. The Bidder must necessarily fill in the details (including the beneficiary account number and Depository Participants Identification number) appearing in the Bid cum Application Form or Revision Form. Equity shares transferred to a Bidder will be credited in electronic form directly to the beneficiary account (with the Depository Participant) of the Bidder Names in the Bid cum Application Form or Revision Form should be identical to those appearing in the account details in the Depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the depository account of the Bidder(s) . If incomplete or incorrect details are given under the heading Bidders Depository Account Details in the Bid cum Application Form or Revision Form, it is liable to be rejected. The Bidder is responsible for the correctness of his or her demographic details given in the Bid cum Application Form vis-vis those with his or her Depository Participant. It may be noted that equity shares in electronic form can be traded only on the stock exchanges having electronic connectivity with NSDL or CDSL. All the stock exchanges where our equity shares are proposed to be listed are connected to NSDL and CDSL. The trading of our equity shares would be in dematerialised form only for all investors.

5. 6. 7.

8.

Communications
All future communications in connection with Bids made in the Offer should be addressed to the Registrar to the Offer quoting the full name of the sole or First Bidder, Bid cum Application Form number, number of equity shares bid for, date of Bid Form, name and address of the member of the Syndicate where the Bid was submitted and cheque, draft or Stockinvest number and issuing bank thereof.

Undertaking by the Selling Shareholders and Our Company

The Selling Shareholder and we undertake as follows:
q

q q

that the complaints received in respect of this Offer shall be attended to by the Selling Shareholder and us expeditiously and satisfactorily; that we shall take all steps for the completion of the necessary formalities for listing and commencement of trading at all the stock exchanges where the equity shares are to be listed within seven working days of finalisation of the basis of allotment; that the funds required for despatch of refund orders or allotment advice by registered post or speed post shall be made available to the Registrar to the Offer by the Selling Shareholder; that the refund orders or allotment advice to the NRIs or FIIs shall be dispatched within specified time; and that no further Offer of equity shares shall be made till the equity shares offered through this Red Herring Prospectus are listed or until the Bid moneys are refunded on account of non-listing, under-subscription, etc.

Utilisation of Offer Proceeds

The Selling Shareholder certifies that all monies received out of the Offer shall be transferred to a separate Bank account other than the bank account referred to in sub-section (3) of Section 73 of the Companies Act. The Selling Shareholder shall not have recourse to the Offer proceeds until approval for trading of equity shares from all the stock exchanges where listing is sought is received.

Procedure and Time Schedule for Transfer of Equity Shares

The Selling Shareholder and we reserve at our absolute and uncontrolled discretion and without assigning any reason thereof, the right to accept or reject any Bid in whole or in part. In case a Bid is rejected in full, the whole of the Bid Amount will be refunded to the Bidder within 15 days of the Bid/Offer Closing Date. In case a Bid is rejected in part, the excess Bid Amount will be refunded to the Bidder within 15 days of the Bid/Offer Closing Date. The Selling Shareholder and we will ensure the transfer of the equity shares within 15 days from the Bid/Offer Closing Date. The Selling Shareholder shall pay interest at the rate of 15% per annum (for any delay beyond the periods as mentioned above), if transfer is not made, refund orders, cancelled Stockinvests are not dispatched and/ or demat credits are not made to investors within two working days from the date of allotment. 235

Disposal of Applications and Application Money

The Selling Shareholder and we shall ensure dispatch of allotment advice, refund orders or cancelled Stockinvests and giving of benefit to the Beneficiary Account with Depository Participants and submission of the transfer and listing documents to the Stock Exchanges within two working days of finalisation of the basis of allotment of equity shares. The Selling Shareholder and we shall ensure the dispatch of refund orders, if any, of value up to Rs. 1,500, Under Certificate of Posting, and dispatch of refund orders above Rs. 1,500, if any, by Registered Post or Speed Post at the sole or First Bidders sole risk. We shall use best efforts to ensure that all steps for completion of the necessary formalities for listing and commencement of trading at all the Stock Exchanges where the equity shares are proposed to be listed, are taken within seven working days of finalisation of the basis of allotment. In accordance with the Companies Act, the requirements of the stock exchanges and SEBI Guidelines, the Selling Shareholder and we, further undertake that:
q q

Transfer of equity shares shall be made only in dematerialised form within 15 days of the Bid/Offer Closing Date; The Selling Shareholder and we would ensure despatch of refund orders and cancelled Stockinvests within 15 days of the Bid/Offer Closing Date; and The Selling Shareholder shall pay interest at 15% per annum (for any delay beyond the 15 day time period as mentioned above), if transfer is not made, refund orders and cancelled Stockinvests are not dispatched and/or demat credits are not made to investors within the 15 day time prescribed above.

The Selling Shareholder will provide adequate funds required for dispatch of refund orders or allotment advice to the Registrar to the Offer. Refunds will be made by cheques, pay orders or demand drafts drawn on a bank appointed by us as a refund banker and payable at par at places where Bids are received. Bank charges, if any, for cashing such cheques, pay orders or demand drafts at other centres will be payable by the Bidders.

Interest on Refund of excess Bid Amount

The Selling Shareholder shall pay interest at the rate of 15% per annum on the excess Bid Amount received by us if refund orders are not dispatched within 15 days from the Bid/Offer Closing Date as per the Guidelines issued by the GoI, Ministry of Finance pursuant to their letter no. F-8/6/SE/79 dated July 21, 1983, as amended by their letter no. F/14/SE/85 dated September 27, 1985, addressed to the stock exchanges, and as further modified by SEBIs Clarification XXI dated October 27, 1997, with respect to the SEBI Guidelines.

Disposal of Applications made by Stockinvest

The procedure for disposal of applications made by cash, cheque, pay order or demand draft described above will apply mutatismutandis to applications accompanied by Stockinvests, except for the following: In case of non-allotment, the Registrar to the Offer will return the Stockinvest directly to the Bidder with the stamp CANCELLED and/or NOT ALLOCATED across the face of the instrument within 15 days from the Bid/Offer Closing Date. On allotment or partial allotment, the Registrar to the Offer shall fill in the amount (which will be less than or equal to the amount filled in by the investor) before presenting the Stockinvest to the respective issuing banker for payment to the extent of allotment. The bank issuing the Stockinvest will lift the lien on the balance amount, if any, of the deposit.

Restrictions on Foreign Ownership of Indian Securities

Foreign investment in Indian securities is regulated through the industrial policy of GoI, or the Industrial Policy and FEMA. While the industrial policy prescribes the limits and the conditions subject to which foreign investment can be made in different sectors of the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under the Industrial Policy, unless specifically restricted, foreign investment is freely permitted in all sectors of Indian economy up to any extent and without any prior approvals, but the foreign investor is required to follow certain prescribed procedures for making such investment. As per current foreign investment policies, foreign investment is allowed up to 100% in companies in the automobile sector. The government bodies responsible for granting foreign investment approvals are the Foreign Investment Promotion Board of the GoI (FIPB) and the RBI. Under present regulations, the maximum permissible FII investment in our Company is restricted to 24% of our total issued capital. This can be raised to 100% by adoption of a special resolution by our shareholders; however, as of the date hereof, no such resolution has been recommended to our shareholders for adoption.

236

STATUTORY AND OTHER INFORMATION

Consents
Consents in writing of: (a) the Directors, the Company Secretary, the Auditors, Legal Advisors, Bankers to the Company and Bankers to the Offer; and (b) Book Running Lead Manager to the Offer, Co-Book Running Lead Managers to the Offer, Escrow Collection Bankers, Registrar to the Offer and Legal Advisors to the Underwriters, Syndicate Members etc. to act in their respective capacities, have been obtained and filed along with a copy of the Red Herring Prospectus with the Registrar of Companies, NCT of Delhi and Haryana located at New Delhi, as required under Section 60 and 60B of the Companies Act and such consents have not been withdrawn up to the time of delivery of the offer document for registration. Price Waterhouse, Chartered Accountants and our statutory auditors have given their written consent to the inclusion of their report in the form and context in which it appears in the Red Herring Prospectus and such consent and report has not been withdrawn up to the time of delivery of the Red Herring Prospectus for registration to the RoC. Price Waterhouse, Chartered Accountants have given their written consent to the tax benefits accruing to our Company and its members in the form and context in which it appears in the Red Herring Prospectus and has not withdrawn the same up to the time of delivery of the Red Herring Prospectus for registration to the RoC.

Minimum Subscription
This being an offer for sale, the requirement of minimum subscription is not a pre-condition for completion of the Offer and obtaining listing permissions.

Expert Opinion
Save as stated elsewhere in the Red Herring Prospectus, we have not obtained any expert opinions.

Changes in Auditors during the Last Three Years

There have been no changes of the auditors in the last three years

Basis of Allotment or Allocation

1. For Retail Bidders
q

Bids received from the Retail Bidders at or above the Offer Price shall be grouped together to determine the total demand under this category. The allocation to all the successful Retail Bidders will be made at the Offer Price. The Offer size less allocation to Non Institutional Bidders and QIBs shall be available for allocation to Retail Bidders who have bid in the Offer at a price, which is equal to or greater than the Offer Price. If the aggregate demand in this category is less than or equal to 18,060,900 equity shares at or above the Offer Price, full allocation shall be made to the Retail Bidders to the extent of their demand. If the aggregate demand in this category is greater than 18,060,900 equity shares at or above the Offer Price, the allocation shall be made on a proportionate basis up to a minimum of 50 equity shares. For the method of proportionate basis of allotment, refer below. Bids received from Non-institutional Bidders at or above the Offer Price shall be grouped together to determine the total demand under this category. The allocation to all successful Non-institutional Bidders will be made at the Offer Price. The Offer size less allocation to QIBs and Retail Portion shall be available for allocation to Non-institutional Bidders who have bid in the Offer at a price, which is equal to or greater than the Offer Price. If the aggregate demand in this category is less than or equal to 10,836,500 equity shares at or above the Offer Price, full allocation shall be made to Non-institutional Bidders to the extent of their demand. In case the aggregate demand in this category is greater than 10,836,500 equity shares at or above the Offer Price, allocation shall be made on a proportionate basis up to a minimum of 50 equity shares. For the method of proportionate basis of allotment, refer below.

2.

For Non-institutional Bidders

q

237

3.

For QIBs
q

Bids received from the QIBs at or above the Offer Price shall be grouped together to determine the total demand under this category. The allocation to all the QIBs will be made at the Offer Price. The Offer size less allocation to Non-Institutional Portion and Retail Portion shall be available for allocation to QIBs who have bid in the Offer at a price, which is equal to or greater than the Offer Price. The allocation would be broadly decided based on the quality of the Bidder determined by the size, price and date of the Bid.

The Selling Shareholder and our Company, in consultation with the BRLMs and Co-BRLMs would have the discretion for any allocation to QIBs.

Method of Proportionate Basis of Allotment

In the event the Offer is over-subscribed, the basis of allotment to Retail and Non-institutional Bidders shall be finalised by us in consultation with The Stock Exchange, Mumbai.The Executive Director or Managing Director of the The Stock Exchange, Mumbai along with the BRLM/Co-BRLMs and the Registrar to the Offer shall be responsible for ensuring that the basis of allotment is finalised in a fair and proper manner. In the event of retention of over-subscription by the Selling Shareholder, allotment to Bidders shall be as per the basis of allocation as set out in this RHP under Offer Structure. The transfer shall be made in marketable lot, on a proportionate basis as explained below: a) b) Bidders will be categorised according to the number of equity shares applied for The total number of equity shares to be transferred to each category as a whole shall be arrived at on a proportionate basis, which is the total number of equity shares, applied for in that category (number of bidders in the category multiplied by the number of shares applied for) multiplied by the inverse of the over-subscription ratio. Number of equity shares to be transferred to the successful Bidders will be arrived at on a proportionate basis, which is total number of equity shares, applied for by each Bidder in that category multiplied by the inverse of the over-subscription ratio. In all Bids where the proportionate allotment is less than 50 equity shares per Bidder, the transfer shall be made as follows:
q q

c)

d)

Each successful Bidder shall be transferred a minimum of 50 equity shares; and The successful Bidders out of the total Bidders for a category shall be determined by draw of lots in a manner such that the total number of equity shares transferred in that category is equal to the number of equity shares calculated in accordance with (b) above.

e)

If the proportionate allotment to an Bidder works out to a number that is more than 50 but is not a multiple of 50 (which is the lot size for allocation), the number in excess of the multiple of 50 would be rounded off to the higher multiple of 50 if that number is 25 or higher. If that number is lower than 25, it would be rounded off to the lower multiple of 50. All Bidders in such categories would be transferred equity shares arrived at after such rounding off. If the equity shares allocated on a proportionate basis to any category are more than the equity shares transferred to the Bidders in that category, the remaining equity shares available for transfer shall be first adjusted against any other category, where the allotted shares are not sufficient for proportionate allotment to the successful bidders in that category. The balance equity shares, if any, remaining after such adjustment will be added to the category comprising Bidders applying for minimum number of equity shares.

f)

Expenses of the Offer

The expenses of the Offer payable by the Selling Shareholder inclusive of brokerage, fees payable to the BRLM, Co-BRLMs, Syndicate Members, other advisors to the Offer, fees of Legal Advisors to the Offer and Auditors, stamp duty, printing, publication, advertising and distribution expenses, bank charges, fees payable to the Registrar to the Offer and other miscellaneous expenses will be met out of the proceeds of the Offer. The listing fees will be paid for by us.

Fees Payable to the BRLM

The total fees payable to the Book Running Lead Manager will be as per the Letter of Appointment dated May 17, 2002 issued by GoI, a copy of which is available for inspection at our corporate office.

238

Fees Payable to the Co-BRLMs

The total fees payable to the Co-BRLMs will be as per the Letters of Appointment dated November 8, 2002 and December 26, 2002 issued by GoI, a copy of which is available for inspection at our corporate office.

Fees Payable to the Registrar to the Offer

The fees payable to the Registrar to the Offer will be as per the the Letter of Appointment dated March 17, 2003, a copy of which is available for inspection at our Corporate Office. Adequate funds will be provided to the Registrar to the Offer to enable them to send refund orders or allotment advice by registered post.

Commission and Brokerage on Previous Issues

Except as stated elsewhere in the Red Herring Prospectus, no sum has been paid or is payable as commission or brokerage for subscribing to or procuring or agreeing to procure subscription for any of our equity shares since our inception.

Previous Rights and Public Issues

We have made a rights issue of 1,219,512 equity shares of Rs. 100 each at a price of Rs. 3,280 per equity share, under which 1,216,341 equity shares were allotted on May 30, 2002 to the shareholders who subscribed to the rights issue, while the remaining 3,171 equity shares were not issued on account of non-subscription. Other than such rights issue, we have not made any rights or public issue since its inception.

Outstanding Debentures or Bond Issues

As of March 31, 2003, we have Rs. 3,000 million of non-convertible debentures, which have been issued in 2000.

Outstanding Preference Shares

As of March 31, 2003, we did not have any outstanding preference shares.

Capitalisation of Reserves or Profits

We have not capitalised our reserves or profits at any time.

Issues otherwise than for Cash

Except as stated above and in the section entitled Capital Structure on page 53 in the Red Herring Prospectus, we have not issued any equity shares for consideration otherwise than for cash.

Option to Subscribe
Equity shares being offered through this Red Herring Prospectus can be applied for in the dematerialized form only.

Purchase of Property
There is no property which we have purchased or acquired or proposes to purchase or acquire which is to be paid for wholly or partly out of the proceeds of the present Offer or the purchase or acquisition of which has not been completed on the date of this Red Herring Prospectus, other than property in respect of which:
q

The contracts for the purchase or acquisition were entered into in the ordinary course of the business, and the contracts were not entered into in contemplation of the Offer nor is the Offer contemplated in consequence of the contracts; or the amount of the purchase money is not material. Or the relevant disclosures in the Red Herring Prospectus

q q

Except as elsewhere stated in this Red Herring Prospectus, we have not purchased any property in which any of its promoters and/or Directors, have any direct or indirect interest in any payment made thereof.

Remuneration of Managing Director/ Whole-Time Director Mr. Jagdish Khattar, Managing Director
Mr. Khattar joined us on July 1, 1993 as Director (Marketing). He was the nominee of the GoI.

239

Pursuant to the RJVA dated May 15, 2002, entered into between the GoI and Suzuki, wherein Suzuki is entitled to appoint the Managing Director of Maruti, Suzuki nominated Mr. Khattar as its nominee as the Managing Director of Maruti. In accordance with the resolution adopted at the extra-ordinary general meeting held on May 30, 2002 Mr. Jagdish Khattar has been appointed as a non-retiring director and Managing Director w.e.f May 30, 2002 for a period of three years, on the following terms, remuneration and conditions as under: 1. Remuneration : Basic Salary: Rs.300,000 per month Special Salary: Rs. 150,000 per month 2. 3. 4. Performance linked bonus: Equivalent to a guaranteed minimum of four months basic salary and a maximum of ten months salary, to be paid annually, with the authority of the Board. Perquisites and allowances: Rs. 2,000,000 per annum Minimum salary: In the event of loss or inadequacy of profits, subject to the applicable laws, he shall be entitled to remuneration by way of basic and special salary, performance linked bonus not exceeding four months basic salary, perquisites and allowances as specified above.

In accordance with the resolution adopted in the extra-ordinary general meeting on July 19, 2002, Mr. Khattars remuneration has been varied as under: 1. 2. Basic salary : In the scale of Rs. 300,000 to Rs. 450,000 with authority to the Board to revise his salary from time to time. The annual increments will be merit based and take into account Marutis performance. Perquisites and allowances: The aggregate perquisites and allowances will be Rs. 2,000,000 per annum with authority to the Board to increase it from time to time upto a maximum of Rs. 3,000,000 per annum.

Agreement dated September 16, 2002, has been entered into between Maruti and Mr. Khattar to record the above terms of his appointment. The term of his contract is three years.

Mr. Kinji Saito, Director (Marketing and Sales)

Mr. Saito has been appointed as the Director (Marketing and Sales) for a period of three years w.e.f May 30, 2002. In accordance with the resolution adopted at the extra-ordinary general meeting held on May 30, 2002 the following are the terms, remuneration and conditions of his appointment: 1. Remuneration : Basic Salary : Rs. 225,000 per month Special Salary : Rs. 100,000 per month 2. 3. Performance linked bonus: Equivalent to a guaranteed minimum of four months basic salary and a maximum of ten months salary , to be paid annually, with the authority of the Board. Perquisites and allowances: Rs. 2,200,000 per annum Minimum salary: in the event of loss or inadequacy of profits, subject to the applicable laws, he shall be entitled to remuneration by way of basic and special salary, performance linked bonus not exceeding four months basic salary, perquisites and allowances as specified above. In accordance with the resolution adopted in the extra-ordinary general meeting on July 19, 2002, Mr. Saitos remuneration has been varied as under: 1. 2. Basic salary: In the scale of Rs. 225,000 to Rs. 337,500 with authority to the Board to revise his salary from time to time. The annual increments will be merit based and take into account the Marutis performance. Perquisites and allowances: The aggregate perquisites and allowances will be Rs. 2,200,000 per annum with authority to the Board to increase it from time to time upto a maximum of Rs. 3,200,000 per annum.

The term of his contract is three years.

240

Mr. Shinichi Takeuchi, Joint Managing Director

Mr. Takeuchi has been appointed as the Joint Managing Director w.e.f May 6, 2003 and is to retire by rotation. In accordance with the resolution adopted at the annual general meeting held on September 28, 2001, the following are the terms, remuneration and conditions of Mr. Takeuchis appointment: 1. 2. 3. 4. Remuneration : Basic Salary : Rs. 62,500 per month Commission : Equivalent to nine months salary , payable out of the net profits as arrived at in accordance with Sections 198 r/w 349 and 350 of the Companies Act, 1956. Perquisites and allowances: As specified in the Despatch of Designees Agreement Compensatory Allowance :Rs. 60,000 per month. In the event of loss or inadequacy of profits in any financial year during the term of appointment, Mr. Takeuchi shall be paid remuneration as per Schedule XIII of the Companies Act, 1956.

In accordance with the resolution adopted at the extra-ordinary general meeting held on May 30, 2002, Mr. Takeuchis remuneration was revised as under: 1. Remuneration : Basic Salary : Rs. 225,000 per month Special Salary : Rs. 100,000 per month 2. 3. 4. Performance linked bonus: Equivalent to a guaranteed minimum of four months basic salary and a maximum of ten months salary, to be paid annually, with the authority of the Board. Perquisites and allowances: Rs. 2,200,000 per annum Minimum salary: In the event of loss or inadequacy of profits, subject to the applicable laws, he shall be entitled to remuneration by way of basic and special salary, performance linked bonus not exceeding four months basic salary, perquisites and allowances as specified above.

In accordance with the resolution adopted in the extra-ordinary general meeting on July 19, 2002, Mr. Takeuchis remuneration has been varied as under: 1. 2. Basic salary: In the scale of Rs. 225,000 to Rs. 337,500 with authority to the Board to revise his salary from time to time. The annual increments will be merit based and take into account the Marutis performance. Perquisites and allowances: The aggregate perquisites and allowances will be Rs. 2,200,000 per annum with authority to the Board to increase it from time to time upto a maximum of Rs. 3,200,000 per annum.

In accordance with the resolution adopted at the annual general meeting held on May 6, 2003 the following are the terms, remuneration and conditions of Mr. Sugimoris appointment: 1. Remuneration: Basic Salary: in the scale of Rs. 250,000 to Rs. 375,000 per month with the authority to the Board to revise this salary from time to time. Special Salary: Rs. 100,000 per month 2. 3. Performance Linked Bonus: Equivalent to a guaranteed minimum of four months basic salary and a maximum of ten months basic salary, to be paid annually, with authority of the Board. Perquisites and allowances: In the scale of Rs. 2,400,000 per annum to Rs. 3,400,000 per annum with the authority of the Board.

The term of his contract is three years.

Mr. Junzo Sugimori, Joint Managing Director

Mr. Junzo Sugimori has been appointed as the Joint Managing Director from May 6, 2003 to May 5, 2006. In accordance with the resolution adopted at the annual general meeting held on May 6, 2003 the following are the terms, remuneration and conditions of Mr. Sugimoris appointment:

241

1.

Remuneration: Basic Salary: in the scale of Rs. 250,000 to Rs. 375,000 per month with the authority to the Board to revise this salary from time to time. Special Salary: Rs. 100,000 per month

2. 3.

Performance Linked Bonus: Equivalent to a guaranteed minimum of four months basic salary and a maximum of ten months basic salary, to be paid annually, with authority of the Board. Perquisites and allowances: In the scale of Rs. 2,400,000 per annum to Rs. 3,400,000 per annum with the authority of the Board.

The term of his contract is three years.

Mr. Motohiro Atsumi, Director (Finance)

Mr. Atsumi has been appointed as the director (finance) from 16th September 2002 to May 29, 2005. In accordance with the resolution adopted at the annual general meeting held on September 20, 2002 the following are the terms, remuneration and conditions of Mr. Atsumi appointment: 1. Remuneration : Basic Salary : in the scale of Rs. 225,000 per month to Rs. 337,500 with authority of the Board to revise from time to time. Special Salary : Rs. 100,000 per month 2. 3. 4. Performance linked bonus: Equivalent to a guaranteed minimum of four months basic salary and a maximum of ten months salary , to be paid annually, with the authority of the Board. Perquisites and allowances: In the scale of Rs. 2,200,000 per annum to Rs. 3,200,000 per annum with authority of the Board. Minimum salary: in the event of loss or inadequacy of profits, subject to the applicable laws, he shall be entitled to remuneration by way of basic and special salary, performance linked bonus not exceeding four months basic salary, perquisites and allowances as specified above.

The term of his contract is three years.

Interest of Promoters and Directors

Except as stated in Related Party Transactions on page 115 of the Red Herring Prospectus, the Promoters, the promoter group companies and other related parties do not have any interest in our business except to the extent of investments made by them in our Company and earning returns thereon. We do not pay any remuneration to our part-time Directors and also do not pay them any sitting fees. The Directors are paid for the work done by them for our Company and are interested to the extent of such payment for the services rendered by them for us. The Managing Director and the whole-time directors are interested to the extent of remuneration paid to them for services rendered as our officers or employees. The Directors may also be regarded as interested in the shares, if any, held by or that may be subscribed by and allotted/ transferred to the companies, firms and trust, in which they are interested as Directors, Members, partners and/ or trustees. All Directors may be deemed to be interested in the contracts, agreements/ arrangements entered into or to be entered into by us with any company in which they hold Directorships or any partnerships in which they are a partner. Except as stated otherwise in this Red Herring Prospectus, we have not entered into any contract, agreements or arrangement during the preceding two years from the date of the Red Herring Prospectus in which the 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.

Borrowing Powers of Directors

Article 50 of the Articles of Association provides that the Board of Directors may by means of the resolution passed at a meeting of the Board from time to time, borrow and/or secure the payment of any sums of money for the purposes of our Company.

242

The Board of Directors of Maruti is authorized to borrow by way of cash-credit, overdraft, working capital loan from scheduled banks or financial institutions upto a limit of Rs. 10,000 million. The committee of Directors comprising the Managing Director, Director (Finance) and Director (Marketing and Sales) is authorized to approve the terms and conditions in respect of any borrowings. Article 52 provides that subject to Section 117 of the Act, any debentures, debentures stock, bonds or other securities may be issued at a discount, premium or otherwise and with any special privileges, as to redemption, surrender, drawings, allotment of shares, appointment of directors and otherwise. Debentures, debenture stocks, bonds and other securities may be made assignable free from any equities between our Company and the person to whom the same may be issued.

Revaluation of Assets
We have not revalued any of its assets since its inception.

Classes of Shares
Our authorised capital is Rs. 1,550 million, which is divided into 310 million equity shares of Rs. 5 each.

Payment or Benefit to Promoters or Officers of our Company

Except as stated otherwise in this Red Herring Prospectus, no amount or benefit has been paid or given within the two preceding years or is intended to be paid or given to any of our promoters or officers except the normal remuneration for services rendered as directors, officers or employees.

243

MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF MARUTI UDYOG LIMITED

Pursuant to Schedule II of the Companies Act and the SEBI Guidelines, the main provisions of the Articles of Association of Maruti solutions relating to voting rights, dividend, lien, forfeiture, restrictions on transfer and transmission of equity shares/ debentures and/or on their consolidation /splitting are detailed below:

Main Provisions of the Articles of Association of Maruti Udyog Limited

5. Power of Company to purchase its own Shares: Subject to the provisions of Section 77A and 77B of the Act, the Company may purchase its own Shares (hereinafter referred to as buy back) out of :(i) Its free reserves; or (ii) the Share premium account; or (iii) the proceeds of any Shares Provided that no buy back of any kind of Shares shall be made out of the proceeds of an earlier issue of the same kind of Shares. 6. Power to issue sweat equity Shares: The Company may issue equity Shares to employees or directors at a discount subject to the conditions specified in Section 79A of the Act.

10. Commission and brokerage: The Company may pay commissions and brokerage subject to and in accordance with the provisions of the Act.

FORFEITURE AND LIEN

19. If call or installment not paid notice may be given: If any member fails to pay any call or installment on or before the day appointed for the payment of the same, the Board may at any time thereafter during such time as any part of the call or installment remains unpaid serve a notice on such member requiring him to pay the same, together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. 20. Form of notice: The notice shall name a day (not being less than fourteen days from the date of service of the notice) and a place or places on and at which such call or installment and such interest and expenses as aforesaid are to be paid. The notice shall also state that in the event of non-payment on or before the time so named, and at the place appointed, the Share in respect of which such call was made or installment is payable will be liable to be forfeited. 21. If notice not complied with Share may be forfeited: If the requirement of any such notice as aforesaid be not complied with, any Share in respect of which such notice has been given may, at any time thereafter, before payment of all calls or installments, interest and expenses due in respect thereof, be forfeited by a resolution of the Board to that effect. When any Share is forfeited an entry of the forfeiture with the date thereof shall be made in the register of members. 22. Forfeited Share to become property of the Company: Any Share so forfeited shall be deemed to be the property of the Company, and the Board may sell, re-allot or otherwise dispose of the same in such manner as they think fit. 23. Power to annul forfeiture: The Board may, at any time, before any Share so forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 24. (i) Effect of forfeiture: A Person whose Shares have been forfeited shall cease to be a member in respect of the forfeited Shares, but shall, notwithstanding the forfeiture, remain liable to pay to the Company all money which, at the date of forfeiture, were presently payable by him to the Company in respect of the Shares, together with interest thereon from the date of forfeiture until payment at such rate as may be determined by the Board from time to time and the Board may enforce payment thereof or any part thereof, without any deduction or allowance for the value of the Shares at the time of forfeiture, but shall not be under any obligation to do so.

(ii) The liability of such Person shall cease if and when the Company shall have received payment in full of all such moneys in respect of the Shares. 25. Declaration of forfeiture: (i) A duly verified declaration in writing that the declarant is a Director, the Manager or the Secretary of the Company and that a Share in the Company has been duly forfeited on a date stated in the declaration, shall be conclusive evidence of the facts therein stated as against all person claiming to be entitled to the Share.

(ii) The Company may receive the consideration, if any, given for the Share on any sale or disposal thereof and may execute a transfer of the Share in favour of the Person to whom the Share is sold or disposed of. 244

(iii) The transferee shall thereupon be registered as the holder of the Share. (iv) The transferee shall not be bound to see to the application of the purchase money, if any, nor shall his titled to the Share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the Share. 26. Forfeiture provisions to apply to non-payment in terms of issue: The provision of these Articles as to forfeiture hereof shall apply in the case of non-payment of any sum which, by the terms of issue of a Share, become payable at a fixed time, whether on account of the nominal value of a Share or by way of premium, as if the same had been payable by virtue of a call duly made and notified. 27. Companys lien on Share/ debenture: The Company shall have a first and paramount lien on every Share/ debenture (not being a fully paid Share/ debenture) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that Share/ debenture, and the Company shall also have lien on all Shares/ debentures (other than fully paid Shares/debentures) standing registered in the name of a single person, for all money presently payable by him or his estate to the Company, but the Board may at any time, declare any Share/ debenture to be wholly or in part exempt from the provisions of this Article. The Companys lien if any, on a Share/ debenture extend to all dividends/ bonuses payable thereon. Unless otherwise agreed, the registration of a transfer of Shares/ debentures shall operate as a waiver of the Companys lien, if any, on such Shares or debentures. 28. Enforcement of lien by Sale: The Company may sell, in such manner as the Board think fit, any Share on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of amount in respect of which the lien exists as is presently payable has been given to the registered holder for the time being of the Share, or the person entitled by reason of his death or insolvency to the Share. 29. Application of proceeds of sale: The proceeds of the sale shall be applied on payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue shall (subject to a like lien for sums not presently payable as existed upon the Shares prior to the sale) be paid to the person entitled to the Shares on the date of the sale. The purchaser shall be registered as the holder of the Shares and he shall not be bound to see to the application of the purchase money, nor shall his title to the Shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. 30. Board may issue new certificates: Where any Share under the powers in that behalf herein contained is sold by the Board and the certificate in respect thereof has not been delivered up to the Company by the former holder of such Share, the Board may issue a new certificate for such Share distinguishing it in such manner as they may think fit from the certificate not so delivered up.

TRANSFER OF SHARES
30A.Transfer of Shares by GoI : No Share held by or on behalf of GoI may be transferred by or on behalf of GoI to or in favour of any party unless the written consent of Suzuki has been obtained prior to the consummation of such transfer of Shares. Provided that GoI shall be entitled to divest its Shares in the Indian market, subject to the restriction that no Person shall hold, in the aggregate, more than 5 percent of the total paid up Shares except that Indian public financial institutions, multilateral and bilateral development financial institutions, scheduled commercial banks, mutual funds, foreign institutional investors, foreign venture capital investors and venture capital funds registered with Securities and Exchange Board of India may individually hold upto 10 percent Shares. Provided further that GoI shall be entitled to divest its Shares in accordance with Article 5 and Article 6 of the Revised Joint Venture Agreement. 30B.Transfer of Shares by Suzuki: So long as GoI has the right to exercise its put options under the Revised Joint Venture Agreement or until the termination of the Revised Joint Venture Agreement, whichever is earlier, Suzuki shall not transfer any Shares of the Company held by Suzuki as will reduce the Suzukis aggregate shareholding in the Company (together with its subsidiary/ies or Suzuki Associate) to less than 51 percent of the paid up Shares, without the prior written consent of GoI. Notwithstanding the foregoing it is agreed and Suzuki undertakes that so long as GoI has the right to exercise its put options under the Revised Joint Venture Agreement or until termination of the Revised Joint Venture Agreement, whichever is earlier, Suzuki shall hold, as registered and beneficial owner, not less than 26 percent of the paid up Shares of the Company.

245

30C.Permissible Suzuki Transfers: Notwithstanding any provision contained in Article 30B: Suzuki shall be entitled to transfer any Shares held by Suzuki to any subsidiary of Suzuki or a Suzuki Associate, subject in each case to the condition that until the date on which GoI ceases to hold at least 10 percent of the paid-up Shares, the Suzuki subsidiary or Suzuki Associate acquiring the Shares shall have delivered to GoI a deed of adherence (in the form provided in the Revised Joint Venture Agreement) undertaking to adhere to the Revised Joint Venture Agreement and not to transfer any of the Shares being acquired by it to any party (other than Suzuki or any subsidiary of Suzuki or a Suzuki Associate) and further undertaking that prior to ceasing to be a Suzuki subsidiary or Suzuki Associate, to transfer back the Shares to Suzuki or Suzuki subsidiary or Suzuki Associate. Suzuki shall be entitled to transfer all (but not less than all) of the Shares of the Company held by it or its subsidiary or subsidiaries or Suzuki Associate to any successor by amalgamation, merger or consolidation, or to, any person, firm, or corporation to which, at the same time substantially all of the property, business and assets, of Suzuki are sold (Corporate Successor) subject to applicable Indian laws and regulations, in which event Suzuki shall procure the Corporate Successor to become bound hereby and to succeed to all of the rights and obligations of Suzuki under the Revised Joint Venture Agreement. 30D.Tag Along Rights: If within a period commencing from the Closing Date (as defined in the Revised Joint Venture Agreement) until December 31, 2003 or listing of the Shares, whichever is earlier, Suzuki or its subsidiaries or a Suzuki Associate (collectively referred to as Suzuki Seller) desires to sell any of its Shares in excess of 51 percent of the total paid up Shares of the Company to a third party, Suzuki shall provide written notice (Sale Notice) to GoI indicating the name of the proposed buyer, the number of Shares and the price per Share at which the Suzuki Seller proposes to sell its Shares to the prospective buyer. Within thirty (30) days of receipt of the Sale Notice, GoI shall be entitled to send a tag along notice to Suzuki (Tag along Notice) offering to sell to Suzuki Sellers prospective buyer, at the same price and on the same terms as offered to Suzuki Seller by the said buyer, a percentage of the total number of Shares then owned by GoI in the Company as on the date of the Sale Notice which is equal to the percentage of the total number of Shares owned by Suzuki i.e. the Suzuki Sellers collectively (as on the date of the Sale Notice) which are proposed to be sold by Suzuki Seller to the prospective buyer (Tag Along Shares). If GoI opts to send a Tag Along Notice, Suzuki shall ensure that the proposed buyer also acquires all of the Tag Along Shares offered by GoI for the same consideration and on the same terms and conditions offered to Suzuki Seller. If the proposed buyer for any reason does not acquire the Shares held by Suzuki Seller within a period of thirty (30) days of the Sale Notice, GoIs Tag Along Notice (if sent) and all rights thereunder shall automatically lapse and shall be inoperative. If however the offer is renewed by the same or another prospective buyer, the Tag Along Rights of GoI shall again apply. Provided however that GoIs Tag Along Rights under this Article shall not extend beyond the period specified in the first paragraph of this Article 30D and shall not apply to (i) transfer of Shares permitted under Article 30C; and (ii) any Shares which are subject to a lock-in after the date of listing of the Companys Shares. 30E.GoIs Put Options: GoI shall have the following put options: In case GoI does not undertake a price discovery through book building and/ or public offer and hence does not divest any Shares in the Indian market prior to July 31, 2003 or within the extended period expiring on December 31, 2003, GoI shall be entitled to issue a written notice (Put Option Notice) to Suzuki requiring Suzuki to purchase from GoI all GoIs Shares and Suzuki shall be obliged to buy all the Shares from GoI within sixty (60) days from the date of receipt of the Put Option Notice (subject to receipt of all relevant regulatory approvals) and in any event not later than 30 days from the date on which all relevant regulatory approvals are received, at a price per Share which is higher of: (i) the book value of the Shares as on March 31, 2001 (i.e. Rs. 2000 per Share, being rounded off) or (ii) the book value of the Shares as on the last audited balance sheet of the Company (as determined by the auditors of the Company) preceding the date of the Put Option Notice referred to in this Article 30E (a). The Put Option under Article 30E (a) shall commence from March 31, 2003 and shall expire on August 31, 2004; Suzuki agrees that in the event the book building exercise is undertaken and the offer process initiated, Suzuki shall bridge any shortfall between the Shares offered for sale and the bids received. * For this purpose it is agreed that where the floor price, in the public offer, is Rs. 2300 and there is a shortfall in the demand through the bids received, Suzuki shall, and Suzuki undertakes to, as of no later than the date and time of closure of the issue, submit a bid to the extent of the said shortfall at the said price of Rs. 2300 per Share, in accordance with all relevant approvals. In respect of the Residual Shares (as defined in the Revised Joint Venture Agreement), GoI shall have the right to exercise its put option under Article 30E(a); In case GoI divests Shares in the Indian market which is equal to or more than the Minimum Divestment Shares at a price 246

equal to or higher * than Rs. 2300 per Share, GoI shall be entitled to issue a written notice (Put Option Notice) to Suzuki requiring Suzuki to purchase from GoI the Residual Shares (as defined in the Revised Joint Venture Agreement) and Suzuki shall be obliged to buy the said Residual Shares from GoI within sixty (60) days from the date of receipt of the Put Option Notice (subject to receipt of all applicable regulatory approvals) and in any event no later than 30 days from the date on which all applicable regulatory approvals are received, at a price per Share which is equal to the average of the daily closing prices of the Shares of the Company as quoted on the National Stock Exchange of India in the ninety (90) day period preceding the date of the Put Option Notice referred to in this Article 30E (c). The Put Option under Article 30E (c) shall commence from four (4) months after the date of listing of the Companys Shares and shall expire twenty four (24) month after the date of listing. Provided that in case of (c) above, the average price referred to therein shall be discounted as provided in Proviso (i) and (ii) to Article 6.1(c) of the Revised Joint Venture Agreement: After the expiry of the aforesaid put options, if for any reason GoI continues to hold Shares, GoI shall be free to dispose of the Shares in accordance with Article 3 of the Revised Joint Venture Agreement.

TRANSFER AND TRANSMISSION OF SHARES

31. Directors may refuse to transfer Shares: Subject to the provisions of Section 111 of the Act and Section 22A of the Securities Contracts (Regulation) Act, 1956, the Directors may, at their own absolute and uncontrolled discretion and by giving reasons, decline to register or acknowledge any transfer of Shares which is not in accordance with these Articles, whether fully paid or not and the right of refusal, shall not be affected by the circumstances that the proposed transferee is already a member of the Company but in such cases, the Directors shall within two months from the date on which the instrument of transfer was lodged with the Company, send to the transferee and transferor notice of the refusal to register such transfer provided that registration of transfer shall not be refused on the ground of the transferor being either alone or jointly within any other Person or Persons indebted to the Company on any account whatsoever except when the Company has a lien on the Shares. Transfer of Shares / debentures in whatever lot shall not be refused. 32. Company not bound to recognize any interest in Shares other than that of the registered holders: Subject to the provision of the Act and save as herein otherwise provided, the Company shall be entitled to treat the person whose name appears on the register of members as the holder of any Share as the absolute owner thereof and accordingly shall not (except as ordered by a Court of competent jurisdiction or as by law required) be bound to recognize any benami trust or equity or equitable, contingent or other claim to or interest in such Share on the part of any person whether or not it shall have express or implied notice thereof. 33. Execution of transfer: The instrument of transfer of any Share in the Company shall be executed both by the transferor and the transferee and the transferor shall be deemed to remain holder of the Share until the name of the transferee is entered in the register of members in respect thereof. 34. Instrument of transfer: Subject to the provisions of Section 108, the Shares of the Company shall be transferred in Form No. 7B of the Companies (Central Governments) General Rules and Forms 1956 or any amendment thereof. 35. No fee on transfer or transmission: No fee shall be charged for registration of transfer, transmission, Probate, Succession Certificate and Letters of administration, Certificate of Death or Marriage, Power of Attorney or similar other document. 36. Application by transferor: Application for the registration of the transfer of a Share may be made either by the transferor or the transferee, provided that, where such application is made by the transferor no registration shall, in the case of a partly paid Share, be effected unless the Company gives notice of the application to the transferee in the manner prescribed by Section 110 of the Act, and subject to the provisions of these Articles the Company shall, unless objection is made by the transferee within two weeks from the date of receipt of the notice, enter in the register the name of the transferee in the same manner and subject to the same conditions as if the application for registration of the transfer was made by the transferee.

DEMATERIALISATION OF SECURITIES
37. Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialise its Shares and other securities pursuant to the Depositories Act, 1996 and to offer its Shares and other securities for issue in dematerialised form. The Company shall further be entitled to maintain a Register of Members with the details of members holding Shares both in material and dematerialised form in any media as permitted by law including any form of electronic media. The provisions relating to joint holders of Shares, calls, lien on Shares, transfer and transmission of Shares 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. 247

38. Transfer to be left at office and evidence of title to be given: Every instrument of transfer shall be left at the office for registration, accompanied by the certificate of the Shares to be transferred, and such evidence as the Company may require to prove the title of the transferor or his right to transfer the Shares. all instruments of transfer shall be retained by the Company, but any instrument of transfer which the Company may decline to register shall be returned to the person depositing the same. 39. Right of refusal to register a Person entitled by transmission: Subject to the provisions of Section 111 of the Act, the Company shall have the same right to refuse to register a Person entitled by transmission to any Shares or his nominee, as if he were the transferee named in an ordinary transfer presented for registration. 40. Transmission of registered Shares: The executor or administrator of a deceased member (not being one of several joint holders) shall be the only Person recognized by the Company as having any title to the Share registered in the name of such member, and, in case of the death of any one or more of the joint holders of any registered Share, the survivor shall be the only Person recognized by the Company as having any title to or interest in such Share, but nothing herein contained shall be taken to release the estate of a deceased joint holder from any liability on the Share held by him jointly with any other person. Before recognizing any executor or administrator the Directors may require him to obtain a grant of Probate or Letters of Administration or other legal representation, as the case may be from a competent Court in India and having effect in Delhi. Provided nevertheless that in any case where the Board in their absolute discretion think fit it shall be lawful for the Board to dispense with the production of Probate or Letters of Administration or such other legal representation upon such terms as to indemnity or otherwise as the Board, in their absolute discretion, may consider adequate. 41. As to transfer of Shares of insane, minor, deceased or bankrupt members. (Transmission Article): Any committee or guardian of a lunatic or minor member or any person becoming entitled to or to transfer a Share in consequence of the death or bankruptcy or insolvency of any member upon producing such evidence that he sustain the character in respect of which he proposes to act under this Article or of his title as the Board think sufficient, may, with the consent of the Board (which the Board shall not be bound to give) be registered as member in respect of such Share, or may, subject to the regulations as to transfer hereinbefore contained, transfer such Share. This Article is hereinafter refereed to as the Transmission Article. 42. Election under the Transmission Article: (i) If the person so becoming entitled under the Transmission Article shall elect to be registered as holder of the Share himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects.

(ii) If the person aforesaid shall elect to transfer the Share, he shall testify his election by executing an instrument of transfer of the Share. (iii) All the limitations, restriction and provisions of these Articles relating to the right to transfer and the registration of instruments of transfer of a Share shall be applicable to any such notice or transfer as aforesaid as if the death, lunacy, bankruptcy or insolvency of the member had not occurred and the notice of transfer were a transfer signed by that member. 43. Rights of Persons entitled to Shares under the Transmission Article: A Person so becoming entitled under the Transmission Article to a Share by reason of the death, lunacy, bankruptcy or insolvency of the holder shall, subject to the provisions of Article 82 and Section 206 of the Act, be entitled to the same dividends and other advantages as he would be entitled to if he were the registered holder of the Share. Provided that the Board may at any time give notice requiring any such person to elect either to be registered himself or to transfer the Share, and if the notice is not complied with within ninety days, the Board may thereafter withhold payment of all dividends, bonus or other moneys payable in respect of the Share, until the requirements of the notice have been complied with.

INCREASE, REDUCTION AND ALTERATION OF CAPITAL

44. Power to increase capital: The Board may with the sanction of the Company in general meeting increase the Share capital by such sum, to be divided into Shares of such amount, as the resolution shall prescribe. 45. On what condition new Shares may be issued: New Shares shall be issued upon such terms and conditions and with such rights and privileges annexed thereto as the general meeting resolving upon the creation thereof shall direct and if no direction be given as the Board shall determine.

248

46. How far new Shares to rank with existing Shares: Except so far as otherwise provided by the conditions of issue or by these presents, any capital raised by the creation of new Shares shall be considered part of then existing capital of the Company and shall be subject to the provisions herein contained with reference to the payment of dividends, calls and installments, transfer and transmission, forfeiture, lien, surrender and otherwise. 47. Reduction of capital etc.: Subject to the provisions of Section 100 to 105 of the Act, the Company may, from time to time by special resolution reduce its capital by paying off capital or canceling capital which has been lost or is un-represented by available assets or is superfluous or by reducing the liability on the Shares or otherwise as may seem expedient, and capital may be paid off upon the footing that it may be called up again or otherwise and the Directors may subject to the provisions of the Act, accept surrender of Shares. 48. Sub-division, consolidation and cancellation of Shares.The Company may, by ordinary resolution:consolidate and divide all or any of its Share capital into Shares of larger amount than its existing Shares;
q

sub-divide its existing Shares or any of them into Shares of smaller amount than is fixed by the memorandum, subject, nevertheless, to the provisions of clause (d) of sub-section (1) of section 94 of the Act; cancel any 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 the amount of the Shares so cancelled.

MODIFICATION OF RIGHTS
49. Power to modify rights: If at any time, the capital of the Company, by reason of the issue of preference Shares or otherwise, is divided into different classes of Shares, all or any of the rights and privileges attached to each class may subject to the provisions of Sections 106 and 107 of the Act be modified, abrogated or dealt with by agreement between the Company and any person purporting to contract on behalf of that class, provided such agreement is (a) ratified in writing by the holders of at least three-fourths of the nominal value of the issued Shares of that class or (b) confirmed by special resolution passed at a separate general meeting of the holders of Shares of that class and all the provision hereinafter contained as to general meeting shall, mutatis mutandis apply to every such meeting, except that the quorum thereof shall be members holding or representing by proxy one-fifty of the nominal amount of the issued Shares of that class.

BORROWING POWERS
50. Power to borrow: Subject to the provisions of the Act, the Board may by means of the resolution passed at a meeting of the Board from time to time, borrow and/or secure the payment of any sums of money for the purposes of the Company. 51. Conditions on which money may be borrowed: The Board may raise or secure the repayment of such sum or sums in such manner and upon such terms and conditions in all respects as they think fit and, in particular, by the issue of bonds, perpetual or redeemable, debentures or debenture stock, or any mortgage or other security on the undertaking of the whole or any part of the property of the Company (both present and future), including its uncalled capital for the time being. 52. Issue at discount etc. or with special privileges: Subject to Section 117 of the Act, any debentures, debenture stock, bonds or other securities may be issued at a discount, premium or otherwise and with any special privileges, as to redemption, surrender, drawings, allotment of Shares, appointment of Directors and otherwise. Debentures, debenture stock, bonds and other securities may be made assignable free from any equities between the Company and the Person to whom the same may be issued. 53. Instrument of Transfer: Save as provided in Section 108 of the Act, no transfer of debentures or debenture stock shall be registered unless a proper instrument of transfer duly stamped and executed by the transferor and transferee has been delivered to the Company together with the certificate or certificates of the debentures or debenture stock as the case may be. 54. Dematerialisation of Debentures: Notwithstanding anything contained in Article 53 of the Articles of Association, the Company may issue debentures in dematerialised form and debenture holders shall also have the option to hold debentures in dematerialised form and re-materialise them as and when he wishes to do so in accordance with the provision of Depositories Act, 1996 and other applicable laws as amended from time to time. 55. Term of Issue of Debenture: Any debentures, debenture-stock or other securities may be issued at a discount, premium or otherwise and may be issued on condition that they shall be convertible into Shares of any denomination and with any privileges and conditions as to redemption, surrender, drawing, allotment of Shares, attending (but not voting) at the General Meeting, appointment of Directors and otherwise Debentures with the right to conversion into or allotment of Shares shall be issued only with the consent of the Company in the General Meeting by a Special Resolution. 249

56. Notice of refusal to register transfer: If the Board refuses to register the transfer of any Debentures or debenture stock the Company shall, within two months from the date on which the instrument of transfer was lodged with the Company, send to the transferee and to the transferor notice of the refusal. 57. Persons not to have priority over any prior charge: Whenever any uncalled capital of the Company is charged all Persons taking any subsequent charge thereon shall take the same subject to such prior charge and shall not be entitled by notice to the shareholders or otherwise, to obtain priority over such prior charge. 58. Indemnity may be given: If the Directors or any of them or any other person shall become personally liable for the payment of any sum primarily due from the company, the Directors may execute or cause to be executed any mortgage, charge or security over or affecting the whole or any part of the assets of the Company by way of indemnity to secure the Directors or Persons so becoming liable as aforesaid from any loss in respect of such liability.

GENERAL MEETINGS
59. When General Meeting to be held: In addition to any other meeting, general meetings of the Company shall be held within such intervals as are specified in Section 166(1) of the Act and subject to the provisions of Section 166(2) of the Act, at such times and places as may be determined by the Board. Such general meetings shall be called Annual General Meetings and shall be specified as such in the notice convening the meeting. Any other meeting of the Company shall be called an Extra-ordinary General Meeting. 60. When other General Meeting to be held: (i) The Board shall on requisition of the members holding not less than one-tenth of the paid-up capital of the Company, call an extra-ordinary general meeting.

(ii) The Board may, whenever it thinks fit, call an extraordinary general meeting. 61. Circulation of members resolution: The Company shall comply with the provisions of Section 188 of the Act as to giving notice of resolution and circulating statements on the requisition of members. 62. Notice of meeting: Save as provided in sub-section (2) of Section 171 of the Act, not less than twenty-one days notice shall be given of every general meeting of the Company. Every notice of a meeting shall specify the place and the day and hour of the meeting and shall contain a statement of the business to be transacted thereat. Where any such business consists of special business as hereinafter defined there shall be annexed to the notice a statement complying with Section 173(2) and (3) of the Act. Notice of every meeting of the Company shall be given to every member of the Company, to the Auditors of the Company and to any Person entitled to a Share in consequence of the death or insolvency of a member in any manner hereinafter authorised for the giving of notice to such Persons. Provided that where the notice of a general meeting is given by advertising the same in a newspaper circulating in the neighborhood of the office under sub-section (3) of Section 53 of the Act, the statement of material facts referred to in Section 173 (2) of the Act need not be annexed to the notice as required by that Section but it shall be specified in the advertisement that the statement has been forwarded to the members of the Company. The accidental omission to give any such notice to or its non-receipt by any member or other Persons to whom it should be given shall not invalidate the proceedings of the meeting. 63. Short notice by consent: With the consent of all members entitled to receive notice of a meeting or to attend and vote at any such meeting, a meeting may be convened by shorter notice than twenty one days.

PROCEEDINGS AT GENERAL MEETINGS

64. Business of meetings: The business of an annual general meeting shall be to receive and consider the Profit and Loss Account, the Balance Sheet and the Reports of the Directors and of the Auditors, to declare dividends and to transact any other business which under these Articles ought to be transacted at an annual general meeting. All other business transacted at an annual general meeting and all business transacted at an extraordinary general meeting shall be deemed special. 65. Quorum: Five members present in Person shall be a quorum for a general meeting of the Company 66. Right of President to appoint any person as his representative: (i) The President, so long as he is a shareholder of the Company, may, from time to time appoint one or more person(s) (who need not be a member or members of the Company) to represent him at all or any meeting(s) of the Company. 250

(ii) Any one of the Persons appointed under sub-clause (i) of this Article shall be deemed to be a member of the Company and shall be entitled to vote and be present in person and exercise the same rights and powers (including the right to vote by proxy) as the President could exercise as a member of the Company. (iii) The President may, from time to time, cancel any appointment made under sub-clause (i) of this Article and make fresh appointments. (iv) The production at the meeting of an order of the President evidenced as provided in the Constitution of India, shall be accepted by the Company as sufficient evidence of any such appointment or cancellation of aforesaid. 67. Resolution to be passed by Company in general meeting: Any act or resolution which, under the provisions of these Articles or of the Act, is permitted or required to be done or passed by the Company in general meeting shall be sufficiently so done or passed if effected by an ordinary resolution as defined in Section 189(1) of the Act unless otherwise required in accordance with these Articles, [including Article 66A] or either the Act or these Articles specifically require such act to be done or resolution passed by a special resolution as defined in Section 189(2) of the Act. 68. Chairman of general meeting: The Chairman of the Board for the time being shall be entitled to take the Chair at every general meeting. If there be no such Chairman, or if at any meeting he shall not be present within fifteen minutes after the time appointed for holding such meeting or is unwilling to act, the members present shall choose another Director as chairman, and if no director be present, or if all the Directors present decline to take the chair, then the members present shall on a show of hands or on a poll if properly demanded, elect one of their number to be the Chairman. 69. When if quorum not present meeting to be dissolved and when to be adjourned:If within half-an-hour from the time appointed for the meeting a quorum be not present, the meeting, if convened on the requisition of shareholders, shall be dissolved, but in any other case it shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and at such time and place as the Board may by notice to members appoint. If at such adjourned meeting a quorum be not present, those members who are present shall be a quorum and may transact the business for which the meeting was called. 70. How question to be decided at meeting: Every question submitted to a meeting shall be decided in the first instance by a show of hands, and in the case of an equality of votes, both on show of hands and on a poll, the Chairman of the meeting shall have a casting vote in addition to the vote or votes to which he may be entitled as a member. 71. Passing of resolutions by postal ballot: Subject to the provisions of Section 192A of the Act, the Company may pass a resolution by means of a postal ballot, instead of transacting the business in general meeting. 72. What to be evidence of the Passing of a Resolution where poll not demanded. At any general meeting a resolution put to vote of the meeting shall be decided on a show of hands, unless a poll is, (before or on the declaration of the result of the show of hands) demanded in accordance with provision of the Act and unless a poll is so demanded, a declaration by Chairman that a resolution has on a show of hands been carried unanimously or by a particular majority or lost, and an entry to that effect in the book of proceedings of the Company, shall be conclusive evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against that resolution. 73. In what cases poll taken without adjournment: Subject to the provisions of Section 180 of the Act, any poll duly demanded on the election of a Chairman of a meeting or on any question of adjournment shall be taken at the meeting and without adjournment. 74. Consideration of poll when demanded: If a poll is duly demanded, it shall be taken in such manner and at such time and place as the Chairman of the meeting directs, and either at once, or after an interval or adjournment or otherwise, and the result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken. The demand of a poll may be withdrawn at any time by the person or Persons who made the demand. 75. Business may proceed not withstanding demand of poll: The demand of a poll shall not prevent the continuance of a meeting for transaction of any business other than the question on which a poll has been demanded. 76. Chairmans decision conclusive: The Chairman of any meeting shall be the sole judge of the validity of every vote tendered at such meeting. The Chairman present at the taking of a poll shall be the sole judge of the validity of every vote tendered by such poll. On a poll a member entitled to more than one vote, or his proxy or other person entitled to vote for him, as the case may be, need no, if he votes, use all his votes or cast in the same way all the votes he uses. 77. Power to adjourn general meeting:The Chairman of a general meeting may with the consent of the meeting adjourn the same from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. 251

VOTES OF MEMBERS
78. Votes of members. Upon a show of hands every member present in person or by proxy or by duly authorised representative shall have one vote, and upon a poll, every member present in person or by proxy or by duly authorised representative, shall have one vote for every Share held by him. 79. Procedure where a Company is a member of the Company: Any member which is a body corporate may attend a general meeting by a representative duly authorised by a resolution of the board of such body corporate in accordance with the provisions of Section 187 of the Act and vote on a show of hands and by proxy. The production at the meeting of a copy of such resolution duly authenticated by such body corporate shall at the meeting be accepted by the Company as sufficient evidence of the validity of his appointment. 80. Votes in respect of deceased, insane and insolvent members: Any person entitled under the Transmission Article to transfer any Shares may vote at any general meeting in respect thereof in the same manner as if he were the registered holder of such Shares provided that at least seventy two hours before the time of holding the meeting or adjourned meeting, as the case may be, at which he proposes to vote he shall satisfy the Board of his right to transfer such Shares unless the Board shall have previously admitted his right to such Shares or his right to vote at such meeting in respect thereof. 81. Votes in respect of Shares of members of unsound mind: A member of unsound mind, or in respect of whom an order has been made by any Court having jurisdiction in lunacy, may vote whether on a show of hands or on poll by his committee or other legal guardian and any such committee or guardian may on a poll, vote by proxy. 82. Joint holders: Where there are joint registered holders of any Share any one of such Person may vote at any meeting either personally or by proxy in respect of such Shares as if he were solely entitled thereto; and if more than one such joint holders be present at any meeting either personally or by proxy, that one of the said Persons so present whose name stands first on the Register in respect of such Shares shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased member in whose name any Share is registered shall for the purposes of this Article be deemed joint holders thereof. 83. Proxies permitted: On a poll votes may be given either personally or by proxy, or in the case of body corporate by a representative duly authorised as aforesaid. 84. Instrument appointing proxy to be in writing: A member entitled to attend and vote at a meeting may appoint another person (whether a member or not) as his proxy to attend a meeting and vote on a show of hands or on a poll. No member shall appoint more than one proxy to attend on the same occasion. A proxy shall not be entitled to speak at a meeting. The instrument appointing a proxy shall be in writing and be signed by the appointer or his attorney duly authorised in writing or if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it. 85. Instrument appointing a proxy to be deposited at the office: The instrument appointing a proxy and the power of attorney or other authority ( if any) under which it is signed, or a notarially certified copy of that power of authority, shall be deposited at The Office of the Company not less than forty-eight hours before the time for holding the meeting of adjourned meeting at which the person named in the instrument purports to vote in respect thereof and in default the instrument of proxy shall not be treated as valid. 86. When vote by proxy valid through authority revoked: A vote given in accordance with the terms of an instrument appointing a proxy shall be valid notwithstanding the previous death or insanity of the principal, or revocation of the instrument, or transfer of the Share in respect of which the vote is give, provided no intimation in writing of the death, insanity, revocation or transfer of the Share shall have been received by the Company at the office before the vote is given. Provided nevertheless that the Chairman of any meeting shall be entitled to require such evidence as he may in his discretion think fit of the due execution of an instrument of proxy and that the same has not been revoked. 87. Form of instrument appointing proxy: Every instrument appointing a proxy may be as nearly as circumstance will admit in the following form or in any other form as the Board shall approve:

252

MARUTI UDYOG LIMITED

I/We ..... being a member of Maruti Udyog Limited hereby appoint of (or failing him .. of .. or failing him .. of ..) as my/our proxy to attend and vote for me/us, and on my/our behalf at the Annual or Extraordinary (as the case may be) General Meeting of the Company to be held on the . day of .. Signed by the said .... 88. Restriction on voting: No member shall be entitled to be present, or to vote on any question either personally or by proxy or as proxy for another member, at any general meeting or upon, a poll, or be reckoned in quorum whilst any call or other sum shall be due and payable to the Company in respect of any of the Shares of such member. 89. Admission or rejection of votes: Any objection as to the admission or rejection of a vote, either on a show of hands, or on a poll, may in due time, shall be referred to the Chairman who shall forthwith determine the same, and such determination made in good faith shall be final and conclusive. 90. Time for objection to vote: No objection shall be made to the validity of any vote except at the meeting or poll at which such vote shall be tendered and every vote whether given personally or by proxy or as proxy of another member, not disallowed at such meeting or poll, shall be deemed valid for all purposes of such meeting or poll whatsoever.

BOARD OF DIRECTORS
91. Number of Directors: (1) The Maximum number of Directors on the Board of the Company shall be not more than twelve. The Directors are not required to hold any qualification Shares.

Appointment of Directors:
(2) So long as Suzuki (together with its subsidiary/ies or Suzuki Associate) holds more than 50 percent of the paid-up Shares, Suzuki shall be entitled to nominate for appointment a majority of the Directors on the Board of the Company. So long as GoIs shareholding in the Company is more than 25 percent of the paid-up Shares, GoI shall, until December 31, 2003, have the right to nominate for appointment two (2) part-time, retiring Directors on the Board of the Company. After GoIs right to nominate two Directors on the Board ceases as provided above, but GoI continues to hold at least 10 percent of the total paid up Shares or until the end of the period of 12 months after the expiry of the last of the put options referred to in the Revised Joint Venture Agreement (whichever is earlier), GoI shall continue to have the right to nominate one (1) Director on the Board who shall be a part-time, retiring Director. The independent Directors shall be appointed by the Board of the Company. Suzuki and GoI, as the case may be, shall be entitled to remove the Directors nominated by each of them and appoint any other person(s) in his/their place. (3) Suzuki shall have the right to nominate, from amongst its nominee Directors, for appointment, the Chairman and also the Managing Director of the Company. The Chairman shall chair the general meetings of the Company and also the meetings of the Board of Directors of the Company. (4) The Managing Director, who shall be a non-retiring Director, shall be the chief executive officer of the Company, who shall be vested with substantial powers of operational management which shall be exercised under the overall superintendence, direction and control of the Board of Directors and subject to the powers exercisable by the Board of Directors. (5) Not less than two-thirds of the total number of Directors shall be elected by the Company in general meeting and shall be liable to retire by rotation in accordance with the Act. A retiring director may be re-elected. Any casual vacancy occurring in the office of a director may be filled by the Board of Directors. A person who is not a retiring director shall be eligible for appointment in accordance with Section 257 of the Act. (6) All Directors shall be paid such salary, fees and allowances as the Company may from time to time determine. 92. Additional Director: The Board shall have power at any time, and from time to time, to appoint a person as an additional director, provided the number of the directors and additional directors together shall not at any time exceed the maximum strength fixed for the Board by the articles.

253

93. Alternate Director: The Board may appoint an Alternate Director to act for a non-resident Director or for a Director (hereinafter called the Original Director) during his absence for a period of three months from the State in which the meetings of the Board are ordinarily held. An Alternate Director appointed under this Article shall be a person recommended for such appointment by the Original Director. An Alternate Director appointed shall not hold office for a period longer than the permissible to the Original Director in whose place he has been appointed and shall vacate office if and when the Original Director returns to the State. If the terms of office of the Original Director ends before he so returns to that State, any provisions in the Act or retiring Directors in default of another appointment shall apply to the Original Director and not to the Alternate Director. 94. Appointment of Director as a Director of the Company in which the Company is interested: A Director of the Company may become a Director of any Company promoted by this Company or in which it may be interested as a Member, Shareholder or otherwise. 95. Disqualification of Director: (1) The office of a Director shall ipso facto become vacant if:he is found to be of unsound mind by a Court of Competent jurisdiction; or
q q q

he applies to be adjudicated an insolvent; or he is adjudged an insolvent; or he is convicted by a Court of any offence involving moral turpitude and is sentenced in respect thereof to imprisonment for not less than six months; or he fails to pay any call in respect of Shares of Company held by him, whether alone or jointly with others, within six months from the last date fixed for the payment of the call unless the Central Government has by notification in the Official gazette, removed the disqualification incurred by such failure; or he absents himself from three consecutive meetings of the board or from all meetings of the Board for the continuous period of three months, which ever is longer, without obtaining leave of absence from the Board; or he (whether by himself or by any person for his benefit or on his account), or any firm in which he is a partner, or any private company of which he is a Director, accepts a loan, or any guarantee or security for a loan, from the Company in contravention of Section 295 of the Act; or he becomes disqualified by an order of the Court under Section 203 of the Act; or he acts in contravention of Section 299 of the Act; or he is removed from office in pursuance of Section 284 of the Act; or having been appointed a Director by virtue of his holding any office or other employment in the Company, he ceases to hold such office or other employment in the Company; or by notice in writing to the Company he resigns his office; or any office or place of profit under the Company or under any subsidiary of the Company is held in contravention of Section 314 of the Act and by operation of that section he is deemed to vacate office.

q q q q

q q

(2) Notwithstanding any matter or thing in sub-clause (e), (f) and (k) of Clause (1), the disqualification referred to in those sub-clauses shall not take effect:
q q

for thirty days from the date of adjudication, sentence or order; or where any appeal or petition is preferred within the thirty days aforesaid against the adjudication, sentence or conviction resulting in the sentence or order until the expiry of seven days from the date on which such appeal or petition is disposed of; or where within the seven days aforesaid any further appeal or petition is preferred in respect of the adjudication, sentence, conviction or order, and the appeal or petition, if allowed, would result in the removal of the disqualification, until such further appeal or petition is disposed of.

PROCEEDINGS OF THE BOARD

96. Meetings of Board: The Board shall meet at least once in every three months for the dispatch of business and may adjourn and otherwise regulate its meeting and proceedings. Notice in writing of every meeting of the Board shall be given to every Director for the time being in India, and at his usual address in India to every other Director. 97. Director may summon meeting: A Director may, at any time, and the Secretary shall, upon the request of the Director made at any time, convene a meeting of the Board. 254

98. Chairman: If the Chairman is not present within five minutes after the time appointed for holding the meeting of the Board, the Directors present shall choose some one of their number to be the chairman of such meeting. 99. Quorum: The quorum for a meeting of the Board shall be two or 1/3rd of their strength whichever is higher, subject to the provisions of Section 287 of the Act. The presence of a GoI nominated director is not necessary to constitute a quorum for a meeting of the Board except that until December 31, 2003 or so long as GoI holds more than 25 percent Shares of the Company (whichever occurs first), The presence of one director nominated by GoI shall be necessary to constitute a quorum for a meeting of the Board in which a resolution is proposed to be passed in respect of any matter specified in Article 108. Provided however that if within half an hour from the time appointed for holding the Board meeting, a quorum as aforesaid is not present, the meeting shall stand adjourned to same day in next week at the same time and place. If at the adjourned meeting also, a quorum is not present within half an hour from the time appointed for holding the meeting, the directors present at that meeting shall constitute a quorum and the Board shall be entitled to take a decision on any of the aforesaid matters notwithstanding the absence of a nominee director of GoI. 100.Power of Quorum: A meeting of the board at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretion by or under these Articles or the Act for the time being vested in or exercisable by the Board generally. 101.How question to be decided: Unless otherwise required by the Act or under Article 108, all decisions at the meeting of the Board of Directors of the Company shall be made by a majority of the Directors present and voting. In case of an equality of votes, the Chairman shall have a casting vote. 102.Powers to appoint Committee and to delegate: The Board may subject to the provision of the Act, from time to time and at any time, delegate any of its powers to a Committee consisting of such Director or Directors as they think fit, and may, from time to time, revoke such delegation. Any Committee so formed shall in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed upon it by the Board. 103.Proceedings of Committee.The meeting and proceedings of any such Committee shall be governed by the provisions herein contained for regulating the meeting and proceedings of the Board so far as the same are applicable thereto, and are not superseded by any regulations made by the Board under the last preceding Article. 104.When acts of a Director valid notwithstanding defective appointments, etc., Acts done by a person as a Director shall be valid notwithstanding, that it may afterwards be discovered that this appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provisions contained in the Act or in these Articles. Provided that nothing in this Article shall be deemed to give validity to acts done by a director after his appointment has been shown to the company to be invalid or to have terminated. 105.Resolution by circulation:Save in those cases where a resolution is required by Section 292, 297 and 372A(2) of the Act to be passed at a meeting of the Board, a resolution shall be as valid and effectual as if it had been passed at a meeting of the Board or a Committee of the Board as the case may be, duly called and constituted, if a draft thereof in writing is circulated, together with the necessary papers, if any, to all the Directors, or to all the members of the Committee or the Board, as the case may be, then in India (not being less in number than the quorum fixed for a meeting of the Board or Committee, as the case may be) and to all other Directors or members of the Committee at their usual addresses in India, and has been approved by such of them as are then in India or by a majority of such of them as are entitled to vote on the resolution.

MINUTES
106.Minutes to be made: (1) The Board shall in accordance with the provisions of Section 193 of the Act, cause minutes to be kept by making entries thereof in books provided for the purpose. The said books shall be maintained and the entries therein made, dated and signed in the manner provided by Section 193 of the Act. (2) The said minutes shall contain particulars:q

of the names of the Directors present at each meeting of the Board and of any Committee of the Board and in the case of each resolution passed at the meeting, the names of the Directors, if any dissenting from or not concurring in the resolution;

255

of all appointments of Directors and other officers of the Company;

q q

of all orders made by the Board and Committee of the Board; and of all proceedings of general meetings of the Company and of meetings of the Broad and Committee of the Board.

The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat. Provided that no matter need be included in any such minutes which the Chairman of the meeting, in his absolute discretion, is of opinion:q q q

is or could reasonably be regarded as defamatory of any person: is irrelevant or immaterial to the proceedings; or is detrimental to the interest of the Company.

(3) Any such minutes of any meeting of the Board or of any Committee of the Board or of the Company in general meeting, kept in accordance with the Provision of Section 193 of the Act, shall be evidence of the matters stated therein. The minute books of general meetings of the Company shall be kept at the office and shall be open to inspection by members during business hours between 10.00 a.m. and 12 noon on working days.

POWER OF THE BOARD

107. General powers of the board: (1) The Business of the Company shall be managed by the Board of Directors who may pay all the expenditure incurred in setting up and registering the Company. (2) Subject to the provision of the Act, the Board of Directors of the Company shall be entitled to exercise all such powers, and to do all such acts and things, as the Company is authorised to exercise and do; Provided that the Board shall not exercise any powers or do any act or thing which is directed or required by any law for the time being in force or by the Memorandum or Articles of Association of the Company or otherwise, to be exercised or done by the Company in general meeting. Provide further that in exercising any such power or doing any such act or thing the Board shall be subject to the provisions contained in that behalf in the Act, or in the Memorandum or Articles of the Company, or in any regulation not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting. (3) No regulation made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made. 108.GoIs affirmative right: (I)So long as GoI holds more than 25% of the paid up Shares of the Company or until July 31, 2003 (whichever occurs first), no action shall be taken by the Board or the shareholders in general meeting on the matters listed below without the same having been first approved by the Board of the Company with the affirmative vote of a Director nominated by GoI (subject however to the provisions of Article 99 above): Sale, transfer, lease or other disposition of fixed assets of the Company which in a financial year is in excess of five (5) percent of the gross fixed assets of the Company (as provided in the Revised Joint Venture Agreement) and which is not in the ordinary course of business; Variation of rights attached to Shares; Reduction of Share capital of the Company; Buy-back of Shares of the Company; Employee retrenchments except in the ordinary course of business or pursuant to disciplinary action; Increase in the paid-up Share capital except as provided in the Revised Joint Venture Agreement; and Taking of steps to wind up or terminate the corporate existence of the Company or entering into any arrangement with the creditors of the Company. After July 31, 2003 or the date on which GoI ceases to hold 25% Shares of the Company (whichever occurs first) and so long as GoI holds more than 10% Shares of the Company, no action shall be taken by the Board or the shareholders in general meeting on the matters listed below without the same having been first approved by the Board of the Company with the affirmative vote of a Director nominated by GoI (subject however to the provisions of Article 99 above): 256

sale, transfer, lease or other disposition of fixed assets of the Company which in a financial year is in excess of ten (10) percent of the fixed assets of the Company (as provided in the Revised Joint Venture Agreement) and which is not in the ordinary course of business; increase in paid-up Share capital except as provided in the Revised Joint Venture Agreement; and Taking of steps to wind up or terminate the corporate existence of the Company or entering into any arrangement with the creditors of the Company. Provided however that GoIs rights under this Article 108 (II) shall automatically lapse and shall not apply after December 31, 2003. 109 Specific powers of the Board: Without prejudice to the general powers conferred by the last preceding Article, and the other powers conferred by these Articles, and subject to the provisions of the Act, the Board of Directors shall have the following powers, that is to say, powers; To acquire property: (1) to purchase, take on lease or otherwise acquire for the Company, property, rights or privileges which the Company is authorised to acquire at such price and generally on such terms and conditions as they think fit. Revenue Budgets: (2) to approve revenue and capital budgets of the Company including proposals in regard to the expansion, diversification, modernization, replacement of plant, machinery and equipments, balancing requirements of equipments, investments in joint ventures or associated companies as well as variations in the approval estimates. To pay for property in debentures etc.: (3) to pay for any property, rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in Shares, bonds, debentures, or other securities of the Company, and any such Shares may be issued either as fully paid up or with such amount credited as paid up thereon as may be agreed upon; and any such bonds, debentures or other securities may be either specifically charged upon all or any part of the property of the Company and its uncalled capital or not so charged; To secure contracts by Mortgage: (4) to secure the fulfillment of any contracts or engagements entered into by the Company by mortgage or charge of all or any of the property of the Company and its uncalled capital for the time being or in such other manner as they may think fit. To appoint officers, etc.: (5) to appoint and at their discretion, remove or suspend such managers, secretaries, officers, clerks, workmen, employees, agents and servants, specialists and consultants for permanent or temporary or special services as they may from time to time, think fit, and to determine their powers and duties and fix their specific scales of pay and allowances of specific jobs. To appoint trustees: (6) to appoint any person or Persons (whether incorporated or not), to accept and hold in trust for the Company any property belonging to the Company or in which it is interested or for any other purposes, and to executed and do all such deeds and things as may be requisite in relation to any such trust and provide for the remuneration of such trustee of trustees; To bring and defend action, etc.: (7) to institute, conduct, defend, compound or abandon any legal proceeding by or against the Company or its officers or otherwise concerning the affairs of the Company and also to compound and allow time for payment or satisfaction of any claims or demands by or against the Company; To refer to arbitration: (8) to refer any claims or demands by or against the Company to arbitration and observe and perform the awards; To give receipt: (9) to make and give receipts, release and other discharges for money payable to the company and for the claims and demands of the Company;

257

To authorize acceptance, etc.: (10) to determine who shall be entitled to sign on the Companys behalf, bills, notes, receipts, acceptances, endorsements, cheques, releases, contracts and documents; To appoint attorneys: (11) to provide from time to time for the management of the affairs of the Company at different places in such manner as they think fit, and in particular to appoint any person to be the attorneys or agents of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit; To invest moneys: (12) to invest in the Reserve Bank of India or in such securities as may be approved and deal with any of the moneys of the Company upon such investments authorised by the Memorandum of Association of the Company (not being Shares in this Company) and in such manner as they think fit, and from time to time to vary or release such investments; To give security by way of indemnity: (13) to execute in the name and on behalf of the Company in favour of any Director or other person who may incur or be about to incur any personal liability of the benefit of the Company, such mortgages of the Companys property (present and future) as they think fit and any such mortgage may contain a power of sale and such other powers, covenants and provisions as shall be agreed upon; To give percentage: (14) Subject to the approval to give to any person employed by the Company a commission on the profits of any particular business transaction, or a Share in the general profits of the Company, and such commission or Shares of profits shall be treated as part of the working expenses of the Company; To make bye laws: (15) from time to time to make, vary and repeal bye laws and/or rules for the regulation of the business of the Company, and for determination of service conditions of its employees; To give award or allow any bonus: (16) to give, award or allow any bonus, pension superannuation, gratuity or compensation to any employee of the Company, or his widow, children, or dependants, that may appear to the Directors just or proper, whether such employee, his widow, children or dependants has or have not a legal claim upon the Company; To create provident fund: (17) before declaring any dividend, to set aside such portion of the profits of the Company as they may think fit, to form a fund to provide for such pensions, gratuities of compensation or to create any provident fund or benefit fund in such manner as the Directors may deem fit; To make Contracts etc.: (18) to enter into all such negotiations and contracts and rescind and vary all such contracts, and execute and do all such acts, deeds, and things in the name and on behalf of the Company as they may consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company; and To delegate powers: (19) subject to the restrictions laid down in Section 292 of the Act, to delegate any of the powers, authorities and discretion for the time being vested in them, subject however, to the ultimate control and authority being retained by them.

DIVIDENDS
112. Dividends: The profits of the Company available for payment of dividend subject to any special rights relating thereto created or authorised to be created by these presents and subject to the provisions of these presents as to the reserve fund, shall be divisible amongst the members in proportion to the amount of capital held by them respectively provided always that (subject as aforesaid) any capital paid upon a Share during the period in respect of which a dividend is declared shall only entitle the holder of such Share to an apportioned amount of such dividend as from the date of payment. 113. Capital paid up in advance: Where capital is paid up on any Shares in advance of calls upon the footing that the same shall carry interest such capital shall not, whilst carrying interest, confer a right to participate in profit or dividends. 258

114. Declaration of dividends: The Company in general meeting may declare a dividend to be paid to the members according to their rights and interest in the profits and may fix the time for payment but no dividend shall exceed the amount recommended by the Board. 115. Dividends out of profits only and not to carry Interests: No dividend shall be declared or paid by the Company for any financial year except out of the profits of the Company for that year arrived at after providing for the depreciation in accordance with the provisions of the sub-section (2) of Section 205 of the Act or out of profits of the Company for any previous financial year or years arrived at after providing for the depreciation in accordance with those provisions remaining undistributed or out of both or out of moneys provided by the Central Government for the payment of dividend in pursuance of a guarantee given by the Central Government. No dividend shall carry any interest as against the Company. 116. When to be deemed net profits: The declaration in the annual accounts duly certified by the auditors under section 227 of the Act as to the amount of the net profits of the Company shall be conclusive. 117. Interim dividend: The Directors may, from time to time, pay to the members such interim dividend as in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 118. Debts may be deducted: The Directors may retain any dividends on which the Company has lien and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 119. Dividend and call together: Subject to the provisions of Section 205 (A) of the Act, any general meeting declaring a dividend may adjust a call made on the members of such amount as the meeting fixes and the call be made payable at the time as the dividend. The making of a call under this clause, shall be deemed ordinary business of an ordinary general meeting which declares a dividend. 120. Distribution of Reserves, etc.: The Company in general meeting may resolve that any moneys, investments, or other assets forming part of the undivided profits of the Company standing to the credit of the reserves, or in the hands of the Company and available for distribution or representing premia received on the issue of Shares and standing to the credit of the Share premium account, be capitalized and distributed amongst the share holders in accordance with their rights and that all or any part of such capitalized fund be applied on behalf of the shareholders in paying up in full any unissued Shares so fully paid be distributed accordingly amongst the shareholders in the proportion in which they are entitled to receive dividends, and shall be accepted by them in full satisfaction of their interest in the said capitalized sum. For the purpose of giving effect to any resolution under this Article the Board may settle any difficulty which may arise in regard to the distribution as they think expedient and in particular may issue fractional certificates and may determine that cash payment shall be made to any members upon the footing of the value so fixed or that fractions of less than one rupees may be disregarded in order to adjust the rights of all parties, and may vest any such cases of specific assets in trustees upon such trust for the Persons entitled to the dividend or capitalized fund as may seem expedient to the Board. Where requisite, a proper contract shall be filed in accordance with Section 75 of the Act, and the Board may appoint any person to sign contract on behalf of the person entitled to the dividend or capitalized fund, and such appointment shall be effective, provided that subject to the provisions contained in Section 205(3) of the Act no dividend shall be payable except in cash. 121.Dividends are to be paid in cash: Subject to the provisions of Section 205 of the Act, no dividend shall be payable except in cash. 122. Effect of transfer: A transfer of Shares shall not pass the right to any dividend declared thereon before the registration of the transfer. 123. Dividend to joint holders: Any one of the several Persons, who are registered as the joint holders of any Shares, may give effectual receipts for all dividends and payments on account of dividends in respect of such Shares. 124. Payment by post: Unless otherwise directed, any dividend may be paid by cheque or warrant sent through the post to the registered address of the member or Person entitled or in case of joint holders, to the registered address of that one whose name stands first on the register, and every such cheque or warrant so sent shall be made payable to the order of the person to whom it is sent. 125. Notice of dividends: Notice of the declaration of any dividend, whether interim or otherwise, shall be given to the holders of registered Shares in the manner hereinafter provided. 126. Unpaid or Unclaimed dividend: Where the Company has declared a dividend but which has not been paid or claimed within 30 days from the date of the declaration, to any shareholder entitled to the payment of the dividend, the company shall within 7 days from the date of the expiry of the said period of 30 days, transfer the total amount of dividend which remains unpaid or unclaimed within the said period of 30 days, to a special account to be opened by the company in that behalf in any scheduled bank, to be called Unpaid Dividend Account of Maruti Udyog Limited. 259

Any money transferred to the unpaid dividend account of the company as above which remains unpaid or unclaimed for a period of seven (7) years from the date of such transfer shall be transferred by the Company to the Fund established under sub-section (1) of section 205C of the Act. No unclaimed or unpaid dividend shall be forfeited by the Board.

260

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 this Red Herring Prospectus) which are or may be deemed material have been entered or to be entered into by our Company. These Contracts, copies of which have been attached to the copy of this Red Herring Prospectus, delivered to the Registrar of Companies, National Capital Territory of Delhi and Haryana located at New Delhi for registration and also the documents for inspection referred to hereunder, may be inspected at the Corporate Office of our Company situated at 11th Floor, Jeevan Prakash Building, 25, Kasturba Gandhi Marg, New Delhi 110 001 from 10.00 a.m. to 4.00 p.m. from the date of this Red Herring Prospectus until the date of Issue Closing Date.

Material Contracts
1. 2. 3. 4. 5. Letter of appointment to Kotak Mahindra Capital Company Ltd from GoI dated May 17, 2002 appointing them as BRLM Letter of appointment to ICICI Securities Ltd from GoI dated November 8, 2002 appointing them as Co-BRLM Letter of appointment to JM Morgan Stanley Pvt Ltd and HSBC Securities and Capital Markets (India) Pvt Ltd from GoI dated December 26, 2002 appointing them as Co-BRLM Memorandum of Understanding amongst GoI, the Company, BRLM and Co-BRLMs Letter from GoI appointing MCS Ltd

Material Documents
1. 2. 3. 4. 5. 6. 7. 8. 9. Revised Joint Venture Agreement dated May 15, 2002. Letter from Suzuki dated February 19, 2003 extending RJVA. Our Memorandum and Articles of Association as amended from time to time. Our certificate of incorporation dated February 24, 1981. Resolution of the Board of Directors of the Company, passed at its Meeting held on May 6, 2003, adopting the accounts for FY2003 Letters dated February 7, 2003, from Ministry of Heavy Industries and Public Enterprises, Department of Heavy Industry, authorizing the Offer. The Report of the Auditors, M/s Price Waterhouse, Chartered Accountants as set out herein dated May 6, 2003 Copies of the Annual Reports for the years ended March 31, 1999, 2000, 2001, 2002 and 2003 of the Company on which Report of the Auditors of the Company, M/s Price Waterhouse, and Chartered Accountants is based. A copy of the tax benefit report dated May 15, 2003 from our Auditors, M/s Price Waterhouse, Chartered Accountants.

10. Consents of: (a)Auditors, Bankers to the Company and (b) Book Running Lead Manager, Co-Book Running Lead Managers, Syndicate Members, Domestic legal counsel for the Offer, International legal counsel to the Offer, Legal Counsel to the Underwriters, Legal counsel to the Company, Financial advisers to the Company for this Offer, directors, the Company Secretary, Registrar and Bankers to the Offer as referred to, in their respective capacities. 11. General Powers of Attorney executed by Directors of the Company in favour of person(s) for signing and making necessary changes in the Red Herring Prospectus. 12. Resolution of the Committee of Board of Directors on IPO held on April 19, 2003 authorising the Offer and the Registrar to the Offer to sign the Stockinvests on our behalf for realising the proceeds of the Stockinvests. 13. Due Diligence Certificate dated April 25, 2003 to SEBI from, Kotak Mahindra Capital Company Ltd, ICICI Securities Ltd, JM Morgan Stanley Pvt Ltd and HSBC Securities and Capital Markets (India) Pvt Ltd. 14. Letter numbered 2[16]/2000PE-VI, dated February 7, 2003, from the Ministry of Heavy Industries and Public Enterprise, Department of Heavy Industry, GoI, the Cabinet Committee of Disinvestment has approved the disinvestment in Maruti by GoI by way of Offer for sale of its shareholding in the domestic market. 15. SEBI letter RM/21334/2003 dated October 29, 2002 granting approval for retention of over-subscription over and above the limit of 10% allowed for the purposes of rounding off under clause 6.4.2(f) of SEBI Guidelines. 16. SEBI observation letters dated May 14, 2003 and May 21, 2003.

261

17. In-principle listing approvals both dated May 14, 2003 from NSE and BSE. 18. Approval CO.FID /709/10.1.0/02.200(603)/2002-03 dated May 23, 2003 from the RBI. 19. Tripartite Agreement between the NSDL, us and MCS Ltd dated July 22, 2000. 20. Tripartite Agreement between the CDSL, us and MCS Ltd dated May 15, 2003. 21. Annual Reports/accounts of the group companies 22. Approval from GoI, Ministry of Finance and Company Affairs (Department of Economic Affairs) pursuant to its letter no. FC.II: 74(1982)-Comp dated April 16, 2003 for the transfer of equity shares in this Offer to eligible non-resident investors, NRIs and FIIs. In terms of the approval of GoI, OCBs have not been permitted to participate in the Offer. 23. Letter dated May 27, 2003 filed by the bookrunners with SEBI regarding lot size for allocation and SEBIs reply to the same.

262

DECLARATION
All the relevant provisions of the Companies Act, 1956, and the guidelines issued by the GoI or the guidelines issued by the Securities and Exchange Board of India, as the case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992 or rules made thereunder or guidelines issued, as the case may be.

SIGNED BY THE DIRECTORS

Mr. Shinzo Nakanishi* Mr. Jagdish Khattar* Mr. Junzo Sugimori* Mr. Shinichi Takeuchi* Mr. S. V. Bhave* Mr.Kinji Saito* Mr. Motohiro Atsumi* Mr. Osamu Suzuki* Mr. Hirofumi Nagao*

(*Through their constituted attorney Mr.S Ravi Aiyar)

SIGNED BY THE SELLING SHAREHOLDER

Mr. S. V. Bhave Joint Secretary Department of Heavy Industry Ministry of Heavy Industries & Public Enterpises (As authorised vide letter no. 2[16]/2000-PE-VI dated February 7, 2003) Date: May 27, 2003 Place: New Delhi

263