38980105 Bajaj Annual Report 2008

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Corporate Information

Rahul Bajaj

Chairman

Nanoo Pamnani

Vice Chairman

Madhur Bajaj

Rajiv Bajaj

Sanjiv Bajaj

D S Mehta

Dipak Poddar (Managing Director upto 31st March, 2008)

Ranjan Sanghi

Rajendra Lakhotia

Rajeev Jain

Suhas Patwardhan

Chief Executive Officer

Company Secretary

Annual Report 2007-2008 1

Dalal & Shah

Chartered Accountants

Central Bank of India

State Bank of India

C/o. Bajaj Auto Limited

Mumbai - Pune Road,

Akurdi, Pune - 411 035

Bankers

Registered Office

Board of Directors Auditors

21st Annual General Meeting

on Wednesday, 9th July, 2008 at 11.30 a.m.

at the Registered Office of the company


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2 Annual Report 2007-2008

Directors' Report

1.

2. Financial Results :

The Directors present their Twenty-first Annual

Report and the Audited Statement of Accounts for

the year ended 31st March, 2008.

Income from Operations

Other Income

Total

Provision for Doubtful Debts andBad Debts written off, net

Depreciation

Profit before Taxation

Provision for Taxation[Including Deferred Tax Credit and FBT]

Profit for the year after Taxation

Disposable surplus after earlieryears adjustments

Appropriations :

Transfer to Reserve Fund

Transfer to Debenture Redemption

Reserve

Provision for Proposed Dividend

Provision for Dividend Tax

Balance carried to General Reserve /Balance Sheet

2007-08Rs. million

2006-07Rs. million

4,096.7

930.8

5,027.5

1,091.8

48.5

299.8

98.6

201.2

205.8

41.5

90.0

36.6

6.2

31.5

3,527.6

490.3

4,017.9

808.8

30.3

712.5

240.3

472.2

476.4

96.0

207.5

106.0

18.0

48.9

3. Dividend :The Directors recommend for the consideration of

the Members at the Annual General Meeting,

payment of Dividend of Re.1/- per Share (10 per

cent) for the year ended 31st March, 2008 on the

enhanced capital of Rs.366 million, after the

conversion of balance warrants issued to the

Promoters on preferential basis into equity sharesduring the year. The total Dividend outgo including

tax thereon will be Rs.42.82 million.

Dividend paid for the year ended 31st March, 2007

was Rs.3/- per share (30 per cent) and the total

Dividend outgo including tax thereon was Rs.124.1

million.

The Dividend recommended by the Board for the year

2007-08, apart from decline in profits, is also lower

due to the legal requirements relating to creation of

Debenture Redemption Reserve and rules pertaining

to transfer of profits to reserves.

During the year 2007-08, your company deployed atotal amount of Rs.30,363 million, of which

Rs.27,406 million were under various financing

schemes and Rs.2,957 million in AAA rated

securitized retail asset pools which is a new business

initiative by the company. As against this, during the

previous year 2006-07, the total amount deployed

was Rs.26,313 million, thus recording an increase of

15% over the previous year.

The Assets under Finance, Loan and Securitized Retail

Asset Pool receivables as on 31st March, 2008 were

Rs.33,319 million as compared to Rs.27,610 millionas on 31st March, 2007.

The profit before tax for the year was at Rs.299.8

million, as against Rs.712.5 million in the previous

year and the profit after tax for the year was

Rs.201.2 million as compared to Rs.472.2 million in

the previous year. This has been primarily because of

reduced subvention offers from the two wheeler

manufacturer (Rs.59 million in 2007-08 against

Rs.337 million in 2006-07), increased provision for

doubtful debts and bad debts written off, net

(Rs.1,092 million in 2007-08 against Rs.809 millionin 2006-07) due to the company's increased focus on

semi-urban and rural markets in the last 2-3 years.

4. Working Results :


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5. Prospects :

6. New Initiatives :

In the backdrop of strong GDP growth witnessed in

the last few years, the retail finance business is

continuously growing at a rapid pace. This strong

growth is also aided by changes in demographic

profiles, expanding base of potential consumers,

higher disposable incomes and increased product /

brand choices available to the customer. This high

growth level has attracted banks and other multi-

national players into retail finance business, thereby

resulting in increased competition.

However, there are some concerns at the end of the

year with regard to increasing inflationary pressures

and slowdown of economy, which could have an

adverse impact on the demand for two wheelers,

consumer durables and other retail lending

products. It could result in a slow down in retail

finance services and if prolonged, it could adversely

affect the future financial performance of financial

services companies in general.

After a fast paced growth over the last few years, the

retail finance industry in general is currently

witnessing stress in its portfolio quality. This current

trend in provisioning and bad debts is expected to

prevail in the near term.

The company during the year added about 500

permanent employees including some employees at

a senior level in various specialised business /

operational areas, the benefits of which will be

realised in next few quarters.

The company expects to maintain satisfactory

growth during the current year and aims to remain a

leading player in the retail financial services business

in the country through appropriate product strategy,

leveraging on its expertise, enhancing its risk

management capabilities in order to control

delinquencies and launching new business initiatives.

Since the third quarter of the year 2007-08, the

company has launched various new business

initiatives like acquisition of AAA rated securitized

retail asset pools of reputed banks / NBFCs, IPO

financing, insurance distribution to its customers,

cross sell of personal loans to existing customerswith clean repayment history, financing to SMEs /

reputed educational institutions and universities for

personal computers etc. The company is

repositioning itself as a full-service NBFC offering

wide range of products.

The company on 18th January, 2006, had allotted

3,006,540 Warrants to promoters - Bajaj Auto Ltd.,

on preferential basis, each Warrant being convertible

at the option of Bajaj Auto Ltd., within 18 months

from the date of allotment, into one fully paid Equity

Share of Rs.10/- each on payment of an aggregate

price of Rs.410/- per share.

During the year under review, 1,247,940 Equity

Shares were allotted to Bajaj Auto Ltd., on 17th July,

2007, on conversion of the balance Warrants on

receipt of full consideration. With this allotment, the

entire 3,006,540 Warrants allotted to them on

preferential basis, now stand converted into Equity

Shares. Earlier, 1,758,600 Warrants were converted

into equity shares in March, 2007.

After this allotment, the company's Paid-up Equity

Share Capital is now Rs.366 million.

The company under its Rights Issue, had allotted

5,248,365 - 6% Non Convertible Debentures

(NCDs) of the face value of Rs.500/- each

aggregating Rs.2,624.2 million on 9th February,

2007. Of these, the company, as a treasury

operation, repurchased 2,186,380 fully paid NCDs

from the open market, at an average price of

Rs.469.60 per NCD, in terms of the Letter of Offer

dated 1st December, 2006.

Your company received fresh deposits of Rs.1.2

million and with renewals of Rs.6.8 million, the total

deposits mobilised during the year under review,

stood at Rs.8 million. Public Deposits outstanding at

the year-end were Rs.61.1 million and the number of

depositors was 2,539. At the end of the financial

year under review, there were 191 deposits

aggregating Rs.3.00 million which matured but

remained unclaimed as on that date. The company

had written to these depositors and as on date,

deposits aggregating Rs.0.7 million have been

repaid/renewed.

7. Share Capital :

8. Repurchase of Debentures :

9. Fixed Deposits :


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10. Credit Rating :

11. RBI Guidelines :

12. Statutory Disclosures :

CRISIL has re-affirmed the highest rating of

FAAA/Stable for the Fixed Deposit programme of

your company. This rating indicates very strong

degree of safety with regard to timely payment of

interest and principal. Your company is one of the

very few Non-Banking Finance Companies (NBFCs)

which enjoys the highest rating.

The company also enjoys the highest rating of P1+

from CRISIL for Rs.7,000 million Commercial Paper

programme.

The Non-Convertible Debentures allotted on Rights

basis to the shareholders have been assigned

AA+/Stable rating by CRISIL and LAA+ rating by

ICRA.

As regards the Bank Loan Ratings for the bank

facilities stipulated by RBI, as a part of BASEL II

guidelines, CRISIL has assigned AA+/Stable rating

for the company's Cash Credit / Working Capital

Demand Loan amounting to Rs.5,850 million and

Long Term Loan facilities amounting to Rs.2,510

million and P1+ rating for the Short Term Loan

facilities amounting to Rs.4,000 million.

Your company continues to fulfill all the norms and

standards laid down by the Reserve Bank of India

(RBI) pertaining to non-performing assets, capital

adequacy, statutory liquidity ratio etc. As against the

RBI norm of 12 per cent, the capital adequacy ratio

of your company is 40.69 per cent.

In line with the RBI guidelines for Asset-Liability

Management (ALM) system for NBFCs, the companyhas in place an Asset-Liability Committee.

As required under the provisions of Section 217(2A)

of the Companies Act, 1956, read with the

Companies (Particulars of Employees) Rules, 1975, as

amended, particulars of employees are set out in the

Annexure to the Directors' Report. As per the

provisions of Section 219(1)(b)(iv) of the said Act,

these particulars will be made available to any

shareholder on request.

The company, being a Non-Banking Finance

Company, not having any manufacturing or foreign

exchange activity, the Directors have nothing to

report on "Conservation of Energy, Technology

Absorption, Foreign Exchange earnings and outgo".

In compliance of Section 217(2AA) of the Companies

Act, 1956, your Directors state that :

(i) In the preparation of the annual accounts, the

applicable accounting standards have been

followed along with proper explanation relating

to material departures;

(ii) The Directors have selected such accounting

policies and applied them consistently and made

judgments and estimates that are reasonable

and prudent so as to give a true and fair view of

the state of affairs of the company at the end of

the financial year and of the profit of the

company for that period;

(iii) The Directors have taken proper and sufficient

care for the maintenance of adequate

accounting records in accordance with the

provisions of the Companies Act, 1956 for

safeguarding the assets of the company and for

preventing and detecting fraud and other

irregularities;

(iv) The Directors have prepared the annual accounts

on a going concern basis.

Shri Dipak Poddar, in view of his pre-occupation,

resigned as the Managing Director of the company

with effect from 1st April, 2008. Mr. Poddar has

been the Managing Director of the company since

its inception in 1987 and has been a key force in

bringing the company to the present status of one

of the leading retail finance company in India from a

very small beginning. Although Mr. Poddar has

ceased to be the Managing Director, he continues as

a Director on the Board of the company and hence

his valuable advice would always be available. The

Board places on record its sincere appreciation for

13. Directors' ResponsibilityStatement :

14. Directors :


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Pune

21st May, 2008

Rahul Bajaj

Chairman

the valuable contribution made by Shri Dipak Poddar

during his tenure as Managing Director of the

company.

Shri Rahul Bajaj, Shri Sanjiv Bajaj and Shri Madhur

Bajaj, Directors, retire from the Board by rotation this

year and being eligible, offer themselves for re-

appointment.

The information on the particulars of Directors

seeking appointment / re-appointment as required

under Clause 49 of the Listing Agreement with the

Stock Exchanges has been given under the report on

Corporate Governance.

Subject to the approval of the shareholders, the

Board of Directors have appointed Shri Rajeev Jain,

Chief Executive Officer (CEO) of the company as the

Manager under the Companies Act, 1956 for a

period of three years with effect from 1st April,

2008, on the terms of remuneration set out in the

resolution in the Notice for the ensuing AnnualGeneral Meeting. The resolution is recommended for

approval of the shareholders at the Annual General

Meeting.

15. Appointment of Managerunder the Companies Act,1956 :

16. Auditors :

17. Corporate Governance :

You are requested to appoint auditors for the period

from the conclusion of the ensuing Annual General

Meeting till the conclusion of the next Annual

General Meeting and to fix their remuneration.

Your company complies with all the mandatory

requirements pertaining to Corporate Governance, in

terms of Clause 49 of the Listing Agreement with

the Stock Exchanges. A detailed report on Corporate

Governance has been included in this report along

with a certificate from the auditors of the companyregarding compliance of conditions of Corporate

Governance. Further, a separate Management

Discussion and Analysis report is also given in this

report.

On behalf of the Board of Directors


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Management Discussionand Analysis


During the last few years, the Indian economy has shown

an impressive growth trend. India has emerged as one ofthe largest and fastest growing economies in the world

during the last decade. Sustained growth in the industry

(except in the last few months) and service sectors have

contributed significantly to the growth of the Indian

economy.

India's banking and financial services sector has emerged as

the vital support system for sustaining our economic

growth. There has been a paradigm shift in the financial

sector primarily due to the financial sector reforms,

evolving macroeconomic environment and several micro-

level factors. In the recent years, a strong GDP growth

accompanied by increased purchasing power of consumers

has resulted in high growth of the retail finance industry.

This high growth also led to intense competition with the

entry of public sector banks, private banks and multi-

national players in retail financing. While this created

greater choice for the consumers, it also resulted in

irrational behaviour by competitors to garner market share

leading to mis-pricing of risks and pressure on margins.

The industry has seen a considerable amount of customer

over-leverage in certain segments, resulting in higher retail

consumer loan losses.

The outlook for 2008-09 is of cautious optimism due to

rise in inflation, slowing down of domestic industrial

growth and recessionary trends in leading economies of

the world. An economic slow down would have a

cascading impact on purchasing power resulting in lower

demand for consumer goods.

In India, Non-Banking Finance Companies (NBFCs) act as a

critical link in the overall financial system by offering a wide

variety of financial services. NBFCs enjoy numerous

advantages vis--vis banks viz., no requirement of branch

licensing, no priority sector lending targets, no CRR and

SLR requirements etc. However, it also has limitations of

restricted borrowing options. In final analysis, weighing the

pros and cons, increasingly, NBFCs are perceived to be anappropriate regulatory vehicle to build lending businesses.

Bajaj Auto Finance Limited (BAFL) is a leading financier of

two wheelers, consumer durables, personal computers and

personal loans. BAFL with an asset base of Rs.38,458

million, is one of India's leading NBFCs focused on retail

financing. The Company has been classified as an Asset

Finance Company by the Reserve Bank of India.

In the last few years, BAFL has built strong market presence

through its unique business model and deep

understanding of its customers. The company continues toserve it customers through its pan-India network of

branches. The year 2007-08 was a tough year for the

industry in general and BAFL in particular. In 2007-08,

owing to changes in external environment, the two-

wheeler industry reduced its subvention offers to finance

companies. BAFL suffered significantly, in its revenue and

income growth due to this changed external scenario.

Coupled with that, there was also a large increase in

provision for doubtful debts and bad debts written off due

to company's increased focus in semi-urban and rural

markets in the last 2-3 years. Given the market

environment in the retail finance industry, the company

expects the current provisioning and bad debts trend to

prevail in the near term.

The company continues to invest in building capabilities to

grow stronger in the medium term. The company is

strengthening its management structure by staffing

domain specialist talent. The company is also strengthening

its operations and risk strategies by restructuring its credit

operations model, enlisting with credit bureau and creating

a dedicated risk analytics unit. These measures are expected

to help BAFL in building current businesses and launching

new product lines across the consumer finance spectrum.


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Going forward, BAFL has decided to diversify its product

offerings and grow other retail finance product lines. The

company launched new product lines / extensions in the

current year. It launched IPO financing for high networth

customers, acquisition of AAA rated securitization

transactions, personal loan cross sell programme to its

existing customers and financing for personal computers to

SMEs.

BAFL with its nationwide network of branches, strong

capital adequacy ratio, recent infusion of capital, best in

class strengthening of management team and planned

launch of new product lines will continue to strengthen its

position as a leading retail finance player.

The gross deployments of the company for the year 2007-

08 were Rs.30,363 million as against Rs.26,313 million for

the year 2006-07, a growth of 15 per cent over the last

year.

Analysis of Performance for the year

(a) Business performance :

Deployment 2007-2008 2006-2007 % change

Rs. million

Automobiles

Consumer Durables

Personal Computers

Personal Loans

Securitized retail asset

pools

Total Deployment

14,843.7

6,307.1

4,628.1

1,626.7

2,957.4

30,363.0

15,651.5

5,916.0

4,349.5

396.3

-

26,313.3

(5.2%)

6.6%

6.4%

310.4%

100.0%

15.4%

Deployment

Assets under Finance, Loan and Securitized Retail Asset

Pool receivables as on 31 March 2008 was Rs.33,319

million as against Rs.27,610 million as on 31 March 2007.

(Rs. Million)

(b) Financial performance :

Operational results :

Rs. Million

Rs. Million

Particulars 2007-2008 2006-2007

Income Distribution 2007-2008

Total Income

Interest and Finance Charges

Expenses

Depreciation

Provision for Taxation

Profit for the year

5,027

1,704

2,975

48

99

201

4,018

1,181

2,094

31

240

472

Expenses

Depreciation

Interest andFinance Charges

35000

30000

25000

20000

15000

10000

5000

02003

-2004

20

04

-2005

2005

-2006

2006

-2007

2007

-2008

9772

14063

19545

26313

30363

2975

1704

48

Provisionfor Taxation

Profit forthe year

201

99

Profit after Tax

600

500

400

300

200

100

02003

-2004

2004

-2005

2005

-2006

2006

-2007

2007

-2008

385.

72

556.

88

376.

85

472.

21

201.

22

(Rs. Million)


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Income from Operations increased from Rs.3,527.62 million

during 2006-07 to Rs.4,096.65 million during 2007-08, an

increase of 16% per cent over the previous year.

The Board of Directors have recommended a Dividend of

Re.1/- per Share (10 per cent) for the year 2007-08 (last year

: 30 per cent), on the enhanced capital of Rs.366 million

after the allotment of Equity Shares on conversion of balance

Warrants allotted to Promoters into Equity Shares made

during the year. The said Dividend is subject to the approval

of the shareholders.

It is critical to have strong risk management capabilities that

include effective monitoring, reporting, controlling and

mitigation process. BAFL faces risks from factors like

increased competition, economic slowdown, challenge of

retaining manpower, likely decline in asset quality, increase in

operating costs, RBI provisioning policies etc. As an NBFC,

BAFL is also exposed to credit risk, liquidity risk and interest

rate risk.

Management of Risks

BAFL recognises the importance of risk management on

account of increased competition and market volatility in

financial services business. BAFL has in place suitable

mechanisms to effectively mitigate such risks. All these risks

are continuously analysed and reviewed at various levels of

management through an effective management

information system. BAFL has put in place a stronger risk

management team, an effective credit operations structure,

credit analytics and increased credit bureau usage.

The Asset-Liability Committee set up in terms of the

guidelines issued by the RBI, monitors the asset-liability

mismatches, to ensure that there are no

internal audit process.

The Internal Audit Department reviews and ensures that

the audit observations are acted upon. The Audit

Committee of the Board reviews the Internal Audit reports

and the adequacy and effectiveness of internal controls.

On the regulatory front, the Reserve Bank of India (RBI),

which is the regulatory body for NBFCs, has been

continuously strengthening the supervisory framework for

NBFCs in order to ensure sound and healthy functioning

and avoid excessive risk taking. The degree of supervision is

based on the size, type of activity and acceptance or non-acceptance of deposits. Various prudential norms for

capital adequacy, asset classification, income recognition,

provisioning etc., are applicable to NBFCs.

BAFL continues to fulfill all the norms and standards laid

down by RBI pertaining to non-performing assets, capital

adequacy, statutory liquidity ratio etc. The capital adequacy

ratio of the company is 40.69 per cent, which is above the

RBI norm of 12 per cent.

imbalances or

excessive concentrations on either side of the BalanceSheet.

BAFL has adequate internal control systems to ensure

operational efficiency, protection and conservation of

resources, accuracy and promptness in financial reporting

and compliance of laws and regulations. The internal

control system is supported by the

Internal Control Systems and theirAdequacy

Fulfilment of RBI Norms and

Standards

Net Owned Funds

12000

10000

8000

6000

4000

2000

02003

-2004

2004

-2005

2005

-2006

2006

-2007

2007

-2008

2339.

18

2757.

73

4827.

20

9959.

21

10633.8

6

Select Performance Indicators:

Rs. Million

Particulars 2007-08 2006-07

Earning Per Share (Basic) (Rs.)

Earning Per Share (Diluted) (Rs.)

Book value per share (Rs.)

Dividend

5.68

5.68

290.58

10%

19.76

18.79

281.75

30%

Rs. Million


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model. In an increasingly competitive market for human

resources in this industry, the company is putting strong

emphasis on attracting and retaining the right talent. The

company's culture promotes high performance and

professional standards.

Statements in this Management Discussion and Analysis

describing the company's objectives, projections, estimates

and expectations may be a 'forward looking statement'

within the meaning of applicable laws and regulations.

Actual results might differ materially from those either

expressed or implied.

Cautionary Statement :

Human Resources

The relationship with employees continues to be cordial.

The company during the year added about 500 permanent

employees including some employees at a senior level to

head key functional areas, taking the total permanent

employee strength to 1713.

During the year, the company took a number of initiatives

to strengthen human resources such as strengthening the

management structure by bringing domain experts,

realignment of compensation packages in line with the

industry standards with the assistance from external

consultants and streamlining the functional organisation


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Corporate Governance

1. Brief statement on the company's philosophy on code

of governance :

2. Board of Directors :

Composition and category of Directors :

company, proper disclosure of relevant financial and non-financial information and enhancing shareholder value on a

continuing basis.

The Board of consists of 9 Directors, all of whom are non-executive and 4 of them are independent. According to Clause

49, if the Chairman of the Board is a non-executive Director, at least one third of the Board should comprise of

independent directors. This provision is thus met by the Company.

The company strongly believes in fair, efficient and transparent business operations, fairness to all stakeholders in the

Name of Director Executive / Non-executive / No. of other Directorships No. of other BoardIndependent held (in public ltd. companies) Committee positions held


Shri Rahul Bajaj

Shri Nanoo Pamnani

Shri Madhur BajajShri Rajiv Bajaj

Shri Sanjiv Bajaj

Shri D.S. Mehta

Shri Dipak Poddar*

Shri Ranjan Sanghi

Shri Rajendra Lakhotia

Chairman, Non-executive

Vice-Chairman, Non-executive, Independent

Non-executiveNon-executive

Non-executive

Non-executive, Independent

Non-executive



6

3

114

7

6

8

7

3

As Chairman As Member

--

3 2

-- ---- --

-- 4

1 5

-- 4

-- 4

--

* Shri Dipak Poddar was Managing Director of the Company upto 31st March, 2008 and resigned as Managing

Director w.e.f., 1st April, 2008. Mr. Poddar continues as a Director on the Board of the Company.

Notes :

1. Private limited companies, foreign companies and companies under Section 25 of the Companies Act, 1956 are

excluded for the above purposes.

2. Only audit committee and shareholders' grievance committee are considered for the purpose of committee positions

as per listing agreement.


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Attendance of each Director at the Board Meetings and

at the last AGM :

Name of Director No. of BoardMeetings attendedduring 2007-2008

Whetherpresent at thelast AGM ?

Shri Rahul Bajaj

Shri Nanoo Pamnani*

Shri Madhur Bajaj

Shri Rajiv Bajaj

Shri Sanjiv Bajaj

Shri D.S. Mehta

Shri Ranjan Sanghi


Shri Dipak Poddar

Shri Naresh Patni**

3

3

4

3

4

2

3

4

4

1

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

N.A.

* Shri Nanoo Pamnani was appointed as a Director

w.e.f., 16th May, 2007.

** Shri Naresh Patni resigned as a Director w.e.f., 16th

May, 2007.

Four Board Meetings were held during the year 2007-08.The dates on which the meetings were held are as follows:

16th May, 2007, 11th July, 2007, 18th October, 2007, and

29th January, 2008.

The gap between any two meetings is less than four

months, thus complying with the Clause 49 requirement.

The Board has laid down a Code of Conduct for all Board

Members and senior management of the company, which

has been posted on the website of the company. All the

Board members and senior management personnel have

affirmed compliance with the Code for the year ended 31

March 2008. A declaration to this effect signed by the CEO

is given elsewhere in this Annual Report.

Shri Rahul Bajaj, Shri Sanjiv Bajaj and Shri Madhur Bajaj,

Directors are retiring by rotation, and are eligible for re-

appointment. Their brief particulars are as follows :

Number of Board meetings held during 2007-08 and

the dates on which held :

Code of Conduct :

Brief Resume of Directors offering for appointment / re-

appointment :

a) Shri Rahul Bajaj, 69, is recognised as one of the most

successful business leaders of India. He heads theBajaj Group of companies which manufacture and

market a range of products and services in India and

abroad including 2 and 3 wheelers, home appliances,

lamps, wind energy, special alloy and stainless steel,

castings, cranes, forgings, infrastructure development,

material handling equipment, travel, general and life

insurance and investment and financial services. He is

the Chairman of the group's flagship, Bajaj Auto Ltd.

Bajaj Auto Ltd., is India's premier 2 and 3-wheeler

company.

He holds an Honours Degree in Economics from Delhi

University, a degree in Law from Bombay University

and an MBA from Harvard Business School.

He is the Chairman of the Board of many companies.

He was elected to the Upper House of Parliament

(Rajya Sabha) in June 2006.

He has received numerous prestigious awards and

recognitions from reputed authorities and bodies,

notable ones being the award of 'Padma Bhushan' in

2001, Alumni Achievement Award by the Harvard

Business School and Life Time Achievement Awards

from Economic Times and Ernst & Young.

He was the President of Confederation of Indian

Industry (CII - 1979-80/1999-2000). He was also

President of Society of Indian Automobile

Manufacturers (SIAM) and Mahratta Chamber of

Commerce, Industry and Agriculture (MCCIA) and

Chairman of the Development Council for

Automobiles and Allied Industries.

He is a member of the Executive Board of Indian

School of Business. He was appointed Chairman

(1986-89) of the Government owned domestic carrier,

Indian Airlines. He is a director on the Board of

Commonwealth Business Council.

The President of India nominated him as the Chairman

of the Board of Governors of the Indian Institute of

Technology, Bombay during 2003-06.

He is a Member and former Chairman of the

International Business Council of the World Economic

Forum, Geneva and a Member of Harvard Business

School's (India) Research Centre & India Advisory


12/50


Board and the International Advisory Committee of

NYSE Euronext.

He has been associated with the company as its

Chairman since inception.

He holds Directorships in the following public limited

companies apart from Bajaj Auto Finance Ltd. :

Bajaj Auto Ltd.

Bajaj Allianz General Insurance Co. Ltd.

Bajaj Allianz Life Insurance Co. Ltd.

Bajaj Finserv Ltd.

Bajaj Holdings & Investments Ltd.

Mukand Ltd.

He holds 16,000 Shares in the Company.

38, is B.E. (Mech), first class with

distinction from the University of Pune, M. Sc.

(Manufacturing Systems Engg) with distinction from

the University of Warwick, U K and MBA from Harvard

Business School, U S A.

He is the Managing Director of Bajaj Finserv Ltd and

the Executive Director of Bajaj Auto Limited.

He has an extensive on-the-job experience in a variety

of areas in the finance, investment, costing, audit,

legal and IT related functions.

He has been associated with the company as a

Director since 2005.



Bajaj Auto Ltd.

Bajaj Auto Holdings Ltd.Bajaj Allianz General Insurance Co. Ltd.

Bajaj Allianz Life Insurance Co. Ltd.

Bajaj Finserv Ltd.


Maharashtra Scooters Ltd.

He does not hold any Shares in the Company.

55, is an alumni of Doon School,

Dehra Dun. After obtaining his B.Com Degree from

Sydenham College, Bombay, in 1973, he did his MBA

at the International Institute of Management

Development (IMD), Lausanne, Switzerland, in 1979.

n

n

n

n

n

n

b) Shri Sanjiv Bajaj,

n

n

n

n

n

n

n

c) Shri Madhur Bajaj,

He is the immediate past President of SIAM (Society of

Indian Automobile Manufacturers), an apex

association of Indian automobile manufacturers.

He is the current National Council Member of the

Confederation of Indian Industry (CII) and the Past

Chairman of its Western Region.

He is the President of Mahratta Chamber of

Commerce, Industries and Agriculture (MCCIA), the

apex Industries Association of Pune.

He is the Vice Chairman of Bajaj Auto Limited. He is

also the Chairman of Maharashtra Scooters Limited.

He has been associated with the Company as a

Director since 1990.



Bajaj Auto Ltd.

Bajaj Auto Holdings Ltd.

Bajaj Finserv Ltd.


Bajaj Electricals Ltd.

Catalyst Finance Ltd.Conquest Investments & Finance Ltd.

Econium Investments & Finance Ltd.

Lineage Investments Ltd.

Maharashtra Scooters Ltd.

Sidya Investments Ltd.

He holds 16,000 Shares in the Company.

The terms of reference of the Audit Committee apart

from those specified in the Listing Agreement with the

Stock Exchanges broadly pertain to review of business

practices, review of investment policies, review of

compliances and review of systems and controls etc.

After the resignation of Shri Naresh Patni as a Director

with effect from 16th May, 2007, the Audit

Committee was reconstituted and it consists of three

Non-executive independent Directors viz., Shri Nanoo

Pamnani as Chairman of the Committee and Shri D.S.

Mehta and Shri Ranjan Sanghi as members. In

addition to the Audit Committee members, the

Managing Director, CEO, CFO, Head Internal Audit

function and the Statutory Auditors attended the

n

n

n

n

n

n

n

n

n

n

n

3. Audit Committee :


13/50


Name of Director Sitting Fees(Rupees)

Salaries and perquisites(Rupees)

Commission(Rupees)

Total(Rupees)

meetings. The Company Secretary acts as the

Secretary to the Audit Committee.

The Audit Committee met four times during 2007-08,

on 16th May, 2007, 11th July, 2007, 18th October,

2007, and 29th January, 2008. The gap between any

two meetings is less than four months, thus

complying with the Clause 49 requirement.

Shri Nanoo Pamnani and Shri Ranjan Sanghi were

present for three meetings, Shri D.S. Mehta was

present for two meetings. Shri Naresh Patni was

present for one meeting held prior to his resignation

as a Director.

The terms of reference of the Remuneration

Committee in brief pertain to determining the

company's policy on and approve specific

remuneration packages for executive directors after

taking into account financial position of the company,

trend in the industry, appointee's qualification,

experience, past performance, past remuneration,

interest of the company and shareholders etc.

The Remuneration Committee consists of three Non-

executive Independent Directors viz., Shri Nanoo

Pamnani as Chairman of the Committee and Shri

4. Remuneration Committee :

Ranjan Sanghi and Shri Rajendra Lakhotia as

members.

The Remuneration Committee did not meet during

the year, since the remuneration payable to Shri

Dipak Poddar, the then Managing Director was

already approved for his five year term with effect

from 1st April, 2005. Shri Poddar has resigned as

Managing Director w.e.f., 1st April, 2008.

After the resignation of Shri Naresh Patni as a Director

with effect from 16th May, 2007, the Shareholders' /

Investors' Grievance Committee was reconstituted

with Shri Nanoo Pamnani as Chairman of the

Committee and Shri Ranjan Sanghi and Shri D.S.

Mehta as members.

The Secretarial Auditor also attends its meetings.

Name and designation of Compliance Officer : Shri

Suhas Patwardhan, Company Secretary.

19 Shareholder complaints were received during the

year 2007-08 and all of them have been attended to.

Number of pending Share Transfers as on 31st March,

2008 : Nil

5. Shareholders' / Investors'Grievance Committee :

Remuneration of Directors (during 2007-08) :

Shri Rahul Bajaj

Shri Nanoo Pamnani

Shri Madhur Bajaj

Shri Rajiv BajajShri Sanjiv Bajaj

Shri D.S. Mehta

Shri Dipak Poddar

Shri Ranjan Sanghi


Shri Naresh Patni

30,000

60,000

40,000

30,00040,000

40,000

Nil

80,000

40,000

30,000

--

--

--

----

--

2,473,686

--

--

--

2,299,000

--

----

--

1,200,000

--

--

30,000

2,359,000

40,000

30,00040,000

40,000

3,673,686

80,000

40,000

30,000

* Also includes Sitting Fees for attending Committee Meetings.

** The company has not paid any Sitting Fees to Shri Dipak Poddar, Managing Director upto 31st March, 2008, as he was paidsalary/perquisites and commission as specified in Note No.5, Schedule12 forming part of the accounts.

*

*

*

**

*

*


14/50


Location Date & Time

6. General Body Meetings :

(i) Location and time, where last three Annual General Meetings held :

18th Annual General Meeting



Registered Office of the Company atMumbai Pune Road, Akurdi,Pune 411 035

--do

--do

15th July, 2005 3.30 p.m.

14th July, 2006 3.30 p.m.

11th July, 2007 3.30 p.m.

(ii) Special Resolutions passed in the previous three Annual General Meetings : None

(iii) No Special Resolution was passed through Postal Ballot last year.

(iv) No resolutions are proposed to be put through postal ballot at this Annual General Meeting.

7. Subsidiary Companies :

8. Disclosures :

The Company does not have any subsidiary

companies.

nDisclosures on materially significant related party

transactions i.e., transactions of the company of

material nature with its promoters, the directors or

the management, their subsidiaries or relatives etc.,that may have potential conflict with the interests of

the company at large :

None of the transactions with any of the related

parties were in conflict with the interest of the

company. A statement in summary form of

transactions with related parties is placed periodically

before the Audit Committee.

nDetails of non-compliance by the company, penalties,

strictures imposed on the company by Stock

Exchanges or SEBI or any statutory authority, on anymatter related to capital markets, during the last

three years : None

nDisclosure of Accounting Treatment : In the

preparation of financial statements, the company has

followed the treatment as prescribed in the

Accounting Standards.

nRisk Management : The company has a defined Risk

Management framework. The company has laid

down procedures to inform the Board members

about the risk assessment and minimizationprocedures.

nProceeds from public issues, rights issues, preferential

issues etc. : The company has placed before the Audit

Committee a certificate from the statutory auditors

about the utilization of funds raised through the

rights / preferential issues made by the company.

The CEO and the CFO appointed for the purpose of

Clause 49 have given the necessary certificate to the

Board in the prescribed format.

The quarterly, half-yearly and annual financial results

are normally published in Financial Express (all

editions), Indian Express (Pune edition) and Loksatta

(Pune edition).

The half-yearly financial results are sent to the

household of each shareholder.

The financial results, shareholding pattern, code ofconduct etc., are also put on the Company's web-site,

www.bajajfinance.com for the benefit of the public at

large. Official news releases are sent to the stock

exchanges.

As per the Electronic Data Information Filing And

Retrieval (EDIFAR) system introduced by SEBI, various

documents like financial results, shareholding pattern

etc., are filed on SEBI's official web-site,

www.sebi.gov.in.

Management Discussion and Analysis report is givenin a separate section included in this annual report.

9. CEO / CFO Certification :

10.Means of communication :


15/50


11. General Shareholder information :

n21st Annual General Meeting :

nFinancial Calendar (tentative) :

Date : 9th July, 2008Time : 11.30 a.m.

Venue : Regd. Office of the company at

C/o Bajaj Auto Ltd.,Mumbai - Pune Road, Akurdi, Pune - 411 035.

nDates of Book Closure :

nDividend Payment Date :

nListing on Stock Exchanges :

Tuesday, 1st July, 2008 to Wednesday, 9th July, 2008 (both days inclusive)

On or after 14th July, 2008, but within the statutory time limit.

The financial year of the Company is April to March.

Unaudited results for the quarter ending 30th June, 2008and 21st Annual General Meeting

Unaudited results for the quarter / half year ending30th September, 2008

Unaudited results for the quarter / nine months ending31st December, 2008

Audited results for the year ending March, 2009

Annual Listing Fees as prescribed have been paid to the above Stock Exchanges upto 31st March, 2009.

9th July, 2008

Mid / Second half of October, 2008

Mid / Second half of January, 2009

Mid / Second half of May, 2009

Bombay Stock Exchange Ltd.

Phiroze Jeejeebhoy Towers,

Dalal Street,

Mumbai - 400 001.

(Stock Code for Equity Shares: 500034)

National Stock Exchange of India Ltd.

Exchange Plaza,

Bandra-Kurla Complex,

Bandra (E),

Mumbai - 400 051.

(Stock Code for Equity Shares: BAJAUTOFIN - EQ)

Demat ISIN for NSDL and CDSL :

Equity Shares

Fully Paid Non Convertible Debentures

Warrants

nMarket Price Data of Equity Shares during eachmonth in last financial year :

Month BSE NSE

INE296A01016

INE296A07039

INE296A13011

April, 2007

May, 2007

June, 2007

July, 2007

August, 2007

September, 2007

October, 2007

November, 2007

December, 2007

January, 2008

February, 2008

March, 2008

High (Rs.)

449.95

518.90

408.50

394.00

392.00

378.65

362.00

350.00

454.90

532.90

445.00

430.00

Low (Rs.)

386.10

370.00

355.20

355.00

345.00

350.00

322.00

306.00

319.00

285.25

330.00

300.00

High (Rs.)

440.00

560.00

415.00

390.00

395.00

380.00

369.50

350.00

452.00

548.90

448.00

416.00

Low (Rs.)

402.00

371.00

355.05

355.00

336.20

348.00

320.00

302.80

321.00

281.05

340.00

301.00

nPerformance in comparison to BSE Sensex

Bajaj Auto Finance Limited's Stock Perfomance vs BSE Sensex

31-Mar-2007

30-Apr-2007

31-May-2007

30-Jun-2007

31-Jul-2007

31-Aug-2007

30-Sep-2007

31-Oct-2007

30-Nov-2007

31-Dec-2007

31-Jan-2008

29-Feb-2008

31-Mar-2008

180

160

140

120

100

80

60

40

20

0

BSE BAFL

31st March, 2007=100

n

nShare Transfer System :

Registrar and Transfer Agents :

The company has no external Registrar and ShareTransfer agent. All the work related to share registry interms of both physical and electronic segment isdone in-house at a single point at the Registeredoffice of the company.

Share transfers in physical form are registered and

returned well within the stipulated period of 30 days

from the receipt, if the documents are clear in all

respects.


16/50


nDistribution of Shareholding

( as on 31st March, 2008) :

Range of

Holding

No. ofShareholders

% to totalShareholders

No. ofSharesheld

% tototalShares

nShareholding Pattern(as on 31st March, 2008)

CategoryNo. of

Shares held

% to total

Shares

The total number of shares transferred in physical

form during the year 2007-08 was 30,964, compared

to 68,006 in 2006-07.

1 - 100

101 - 500

501 - 1000

1001 - 5000

5001 - 10000

10001 - 50000

50001 - 100000

100001 and above

Total

8849

2854

298

309

55

65

14

25

12469

70.97

22.89

2.39

2.48

0.44

0.52

0.11

0.20

100.00

Promoters & Promoter Group

Resident IndividualsDomestic Companies

Financial

Institutions/Banks/Mutual Funds

Foreign Institutional Investors

Foreign Corporate Bodies

Non Resident Individuals /

Overseas Corporate Bodies

Clearing Members (NSDL+CDSL)

Total...

nDematerialisation of shares and liquidity :

The Equity Shares of your company are traded incompulsory dematerialised form by all the investors.

The company has entered into agreements with both

the depositories viz., National Securities Depository

Ltd (NSDL) and Central Depository Services (India) Ltd

(CDSL), enabling the investors to hold shares of the

company in electronic form through the depository of

their choice.

The Equity Shares of the company are regularly traded

on Bombay Stock Exchange Ltd., and National Stock

Exchange of India Ltd.

670618

636914

238618

718963

414840

1476798

918640

31520685

36596076

1.83

1.74

0.65

1.96

1.13

4.04

2.51

86.14

100.00

nBreak-up of Shares in Physical and Demat segment

(as on 31st March, 2008)

19075276

48107701017253

754036

7669407

3007172

257533

4629

36596076

52.12

13.152.78

2.06

20.96

8.22

0.70

0.01

100.00

No. ofShareholders

% to totalShareholders

No. ofSharesheld

% tototalShares

Segment

Physical

Demat

Total

3854

8615

12469

30.91

69.09

100.00

2075190

34520886

36596076

5.67

94.33

100.00

n

Instruments, conversion date and likely impact onequity :

nAddress for correspondence :

Outstanding GDRs/ADRs/Warrants or any Convertible

The Company on 18th January, 2006, had allotted onpreferential basis, to Bajaj Auto Ltd., 3,006,540

Warrants, each warrant convertible into one fully paid

Equity Share of the face value of Rs.10/- each on

payment of an aggregate price of Rs.410/- per share.

The conversion option was to be exercised within 18

months from the date of allotment. Out of these

Warrants, 1,758,600 Warrants were converted into

Equity Shares on 29th March, 2007 and the balance

1,247,940 were converted on 17th July, 2007. Hence,

there are no outstanding warrants as on 31st March,

2008 out of the said Warrants.

The Company had allotted on 9th February, 2007,5,248,365 detachable Warrants alongwith Non

Convertible Debentures under its Rights Issue in the

year 2006-07. Each Warrant is convertible at the

option of the Warrant holder into one Equity Share of

Rs.10 each during the Warrant Exercise Period

commencing after 12 months from the date of

allotment viz., 9th February, 2008 up to the end of 35

months from the date of allotment viz., 8th January,

2010 on payment of Warrant Exercise Price of

Rs.500/-. The Equity Capital will go up by

Rs.52,483,650/-, if all the Warrantholders exercise the

option for conversion of all the Warrants during the

Warrant Exercise Period.

Secretarial Department

Bajaj Auto Finance Limited,

C/o. Bajaj Auto Ltd.,

Mumbai - Pune Road,

Akurdi, Pune - 411 035.

Phone No. (020) 27472851 (Extn.6912 / 7175)

Fax No. (020) 27484486

E-mail id for Investor Grievances :

[email protected]


17/50


Period of Deposit No. of Amount % to Total

(months) Depositors (Rupees) Deposits

36 2348 5,81,35,000 100

Declaration on Code of Conduct

As required by Clause 49(1)(D) of the Listing Agreement with the Stock Exchanges, it is hereby declared that all the Board members

and senior management personnel have affirmed compliance with the Code of Conduct of the Company for the year ended 31st

March, 2008.

Place : Pune

Date : 6th May, 2008

Rajeev Jain

(CEO)

n

1) Report on relatives of Directors :

Shri Rajiv Bajaj and Shri Sanjiv Bajaj, Directors are

sons of Shri Rahul Bajaj, Chairman.

2) Your company, during the year under review, has

not sanctioned any loan to any of the Directors

and there is no outstanding towards loans to

Directors as on date.

3) None of the employees of the company is

related to any of the Directors of the company.

Additional Information : 4) From the date of the Balance Sheet till the date

of this report, there is no significant event which

will have an impact on the performance of the

company during the year 2008-09.

5) Profile of Fixed Deposits as on 31st March, 2008

was as under :


18/50


To,

The Members of

Bajaj Auto Finance Limited

Pune

Re :- CERTIFICATE BY THE AUDITORS ON CORPORATE GOVERNANCE

We have reviewed the records concerning the Company's compliance of the conditions of Corporate Governance as

stipulated in Clause 49 of the Listing Agreement entered into, by the Company, with the Stock Exchanges of India,

for the financial year ended 31st March, 2008.

The compliance of the conditions of Corporate Governance is the responsibility of the management. Our review was limited

to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of theCorporate Governance. It is neither an audit nor an expression of the opinion on the financial statements of the Company.

We have conducted our review on the basis of the relevant records and documents maintained by the Company and

furnished to us for examination and the information and explanations given to us by the Company.

Based on such review & to the best of our information & according to the explanations given to us, in our opinion, the

Company has complied with the conditions of the Corporate Governance, as stipulated in of Clause 49 of the Listing

Agreements, of the Stock Exchanges of India.

We further state that such compliance is neither an assurance as to the future viability of the Company, nor to the efficiency

or effectiveness with which the management has conducted the affairs of the Company.

For and on behalf of

Dalal & Shah


Shishir Dalal

Partner

Membership No.: 37310st

Mumbai: 21 May, 2008


19/50


Report of theAuditors to the Members

We have audited the attached Balance Sheet of BAJAJ

AUTO FINANCE LIMITED, as at 31st March 2008 and also

the annexed Profit and Loss Account and the Cash Flow

Statement of the company for the year ended on that date.

These financial statements are the responsibility of the

Company's management. Our responsibility is to express an

opinion on these financial statements based on our Audit.

1. 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 free of material

misstatements. An Audit includes examining, on a test

basis, evidence supporting the amounts anddisclosures in 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 provides a

reasonable basis for our opinion.

2. As required by the Companies (Auditor's Report)

Order, 2003 (CARO, 2003), issued by the Central

Government of India in terms of Section 227(4A) of

the Companies Act, 1956, we annex hereto a

Statement on the matters specified in paragraph 4 of

the said Order;

3. Further to our comments in Annexure referred to in

paragraph 2 above, we report that:

(a) We have obtained all the information and

explanations, which to the best of our knowledge and

belief were necessary for the purposes of our audit;

(b) In our opinion, proper Books of Account as required

by Law have been kept by the Company so far as

appears from our examination of the Books of the

Company;

(c) The Balance Sheet, the Profit and Loss Account and

the Cash Flow Statement dealt with by the report

are in agreement with the Books of Account of theCompany;

(d) In our opinion, the Balance Sheet, the Profit andLoss Account and the Cash Flow Statement dealt

with by this report comply with the Accounting

Standards referred to in Section 211 (3C) of the

Companies Act,1956, to the extent applicable;

(e) On the basis of the written representations received

from the Directors as on 31st March, 2008, and

taken on record by the Board of Directors, we report

that none of the Directors is disqualified as on 31st

March, 2008 from being appointed as a director in

terms of clause (g) of sub-section (1) of section 274

of the Companies Act,1956;

(f) In our opinion, and to the best of our information

and according to the explanations given to us, the

said Financial Statements read with note No. 13relating to change in manner of computing

depreciation on additions to assets other than

leasing assets resulting into lower charge of

depreciation by Rs 1.87 crores and profit for the

year being higher by an equivalent amount and

read together with other notes thereon, give the

information required by the Companies Act,1956,

in the manner so required and present a true and

fair view in conformity with the accounting

principles generally accepted in India:

(i) In the case of the Balance Sheet, of the

state of the affairs of the Company as at

31st March,2008;

(ii) In the case of the Profit and Loss Account, ofthe Profit for the year ended on that date, and

(iii) In the case of the Cash Flow Statement, of the

Cash Flows for the year ended on that date.


DALAL & SHAH


SHISHIR DALAL

Partnerst

Mumbai: 21 May, 2008 Membership No. 37310


20/50


Annexure to the Auditor's Report

Statement referred to in Paragraph 2 of the Auditor's

Report of even date to the Members of BAJAJ AUTO

FINANCE LIMITED on the Financial Statements for the

year ended 31st March, 2008.

On the basis of the records produced to us for our

verification / perusal, such checks as we considered

appropriate, and in terms of information and explanations

given to us on our enquiries, we state that:

(i) (a) The Company has maintained proper records

showing full particulars including quantitativedetails and situation of fixed assets;

(b) As explained to us, considering the nature of the

Fixed Assets, the same have been physically

verified by the management, at reasonable

intervals, during the year as per the verification

plan adopted by the Company, which is

reasonable having regard to the size of the

company and nature of its assets, except in case

of Leased Assets, where the confirmations have

been received from the lessees. According to

the information and explanations given to us andthe records produced to us for our verification,

discrepancies noticed on physical verification were

not, in our opinion, material however the same

have been properly dealt with in the Books of

Account;

(c) As per the information and explanation given to

us on our enquiries the disposal of assets during

the year were not substantial so as to have an

impact on the operations of the company, or

affect its going concern;

(ii) (a) As per the information and explanation given to

us and the records produced to us for our

verification, the company has not granted loans,

secured or unsecured, to companies, firms and

other parties covered in the register maintained

under Section 301 of the Companies Act, 1956;

(b) As per the information and explanation given to

us and the records produced to us for our

verification, the Company had taken unsecured

loan of Rs. 67.33 Crores from an Associate

Company, covered in the register maintainedunder section 301 of the Companies Act, 1956

and the balance outstanding at the close of the

year is Rs. 40.50 Crores. The Company has not

taken any loans, secured or unsecured, from

Firms or other parties covered under section 301

of the Companies Act, 1956.

(c) In our opinion the rate of interest and other terms

and conditions on which loan has been taken from

a Company listed in the register maintained under

Section 301 are not prima facie, prejudicial to the

interest of the company;

(d) The Company is regular in repaying the principal

amount as stipulated and has been regular in thepayment of Interest;

(iii) In our opinion and according to the information and

explanation given to us, there are adequate internal

control procedures commensurate with the size of

the Company and the nature of its business with

regard to the purchase of fixed assets and also for

sale of services. During the course of our audit,

nothing had come to our notice that may suggest a

major weakness in internal control systems of the

company;

(iv) (a) On the basis of the audit procedures applied by

us, and according to the information and

explanations given to us on our enquiries on this

behalf and the records produced to us for our

verification, transactions required to be entered

into the register in pursuance of section 301 of

the Companies Act, 1956 have been so entered;

(b) The transactions so entered, aggregating in

excess of Rs. 500,000/- in respect of each party

during the year, have been, in our opinion, as

per the information and explanation given to us,made at prices, which are reasonable, having

regard to the prevailing market prices available

with the Company for such transactions or

prices at which transactions for similar goods or

services have been made with other parties at

the relevant time;

(v) In our opinion and according to the information and

explanations given to us, the Company has complied

with the directives issued by the Reserve Bank of India

and provisions of Section 58A and 58AA of the

Companies Act, 1956, other relevantprovisions of the said Act including the Companies


21/50


(Acceptance of Deposits) Rules, 1975, with regard

to the deposits accepted from the public. No order

has been passed on the Company by the Company

Law Board or National Company Law Tribunal or

Reserve Bank of India or any Court or any other

Tribunal in this regard;

(vi) On the basis of internal audit report broadly reviewed

by us, we are of the opinion that, the Company has

an adequate internal audit system commensurate

with the size and nature of its business;

vii) (a) According to the records of the Company,

the Company has been generally regular indepositing undisputed statutory dues including

Provident Fund, Investor Education and

Protection Fund, Employees State insurance,

Income Tax, Sales Tax, Wealth Tax, Service Tax,

Cess and other Statutory dues with the

appropriate authorities;

(b) On the basis of our examination of the

documents and records of the Company and the

information and explanations given to us upon

our inquiries in this regard, there are no disputed

dues in respect of Sales Tax, Income tax, Wealthtax, Service tax and Cess unpaid as at the last day

of the financial year.

(viii) The Company has not defaulted in repayment of

dues to banks or debenture holders during the

year. The Company has not borrowed any sums

from Financial Institutions;

(ix) The Company has, in our opinion, maintained proper

records and contracts with respect to its investments

where timely entries of transactions are made in the

former. All Investments held by the company at theclose of the year are held in its own name;

(x) As per the information and explanations given to us

on our enquiries, and records of the company

examined by us, the Company has not given any

guarantee for loans taken from financial institutions

and / or banks by others;

(xi) As per the information and explanations given to us,

term loans obtained by the company, in our opinion,

have been applied for the purpose for which they

were obtained;

(xii) According to the information and explanations given

to us and on an overall examination of the Balance

Sheet of the Company, we report that no funds raised

on short-term basis have been used for long term

investments;

(xiii)According to the information and explanations

given to us, the company has made preferential

allotment of shares to a company covered in the

register maintained under section 301 of the

Companies Act, 1956. In our opinion, the price at

which the shares are issued is not prejudicial to the

interest of the company;

(xiv)The company has created securities and registered

charges in respect of debentures issued, in past year

as well as in current year. The details of security are

disclosed in Schedule 3 to the financial statements;

(xv) The management of the company has disclosed the

end use of money raised by way of rights issue of

equity shares & non-convertible debentures as

detailed in Note. No. 12 in schedule No.12 to the

financial statements, during the year, which have

been verified by us;

xvi) As per the information and explanation given to us

on our enquiries in this behalf there were no frauds

on or by the company noticed or reported by the

company during the year;

In view of the nature of activities carried on by the

Company clause no (xiii) of CARO, 2003 is not applicable to

the company. Further in view of the absence of conditions

pre-requisite to the reporting requirement of clauses (ii),

(iii) (b), (c), (d), (viii), (x) and (xii) the said clauses are, at

present, not applicable.


DALAL & SHAH


SHISHIR DALAL

Partnerst

Mumbai: 21 May, 2008 Membership No. 37310


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Balance Sheetas at 31st March, 2008

As at 31stMarch, 2007

Schedule Rupees Rupees Rupees

1. Shareholders' Funds:

(a) Capital 1 365,965,760 353,486,360

(b) Reserves and Surplus 2 10,267,891,447 9,605,721,384

10,633,857,207 9,959,207,744

2. Preferential warrant application money - 51,165,540

3. Loan Funds:

(a) Secured Loans 3 9,416,077,206 9,742,245,385

(b) Unsecured Loans 4 7,218,990,791 6,440,631,301

16,635,067,997 16,182,876,686

Total 27,268,925,204 26,193,249,970

1. Fixed Assets :

(a) Gross Block 468,925,310 334,967,599

(b) Less: Depreciation 331,321,729 284,705,329

(c) Net Block 5 137,603,581 50,262,270

2. Investments 6 3,268,798,752 326,669,642

3. Deferred Tax Asset, net (See Note No.6) 274,042,357 163,140,709

4. Current Assets, Loans and Advances: 7

(a) Assets under Finance 28,346,251,246 27,013,956,426

(b) Lease Debtors - 713

(c) Cash and Bank Balances 2,101,088,986 5,377,500,693

(d) Other Current Assets 143,234,613 167,948,661

(e) Loans and Advances 4,186,628,599 2,321,197,769

34,777,203,444 34,880,604,262

Less: Current Liabilities and Provisions: 8

(a) Liabilities 9,817,589,718 7,823,434,644

(b) Provisions 1,371,133,212 1,403,992,269

11,188,722,930 9,227,426,913

Net Current Assets 23,588,480,514 25,653,177,349

Total 27,268,925,204 26,193,249,970

Notes forming part of the Financial Statements 12

I. SOURCES OF FUNDS:

II. APPLICATION OF FUNDS:

As per our attached report of even date

For and on behalf of DALAL & SHAHChartered Accountants

Shishir DalalPartner

Mumbai: 21st May, 2008

Suhas PatwardhanCompany Secretary

Directors

Rahul BajajChairman

Nanoo PamnaniMadhur BajajD.S. MehtaRanjan SanghiRajendra Lakhotia

Rajiv Bajaj

}Pune: 21st May, 2008

Sanjiv BajajDirector


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Profit and Loss Account for the year ended 31st March, 2008

PreviousYear

Schedule Rupees Rupees Rupees

Assets under Finance:

Financing Charges 2,512,647,549 1,847,273,734Service and Administration charges 1,375,006,788 1,502,312,143

3,887,654,337 3,349,585,877

Leasing Business:

Lease Rentals 6,258,015 38,138,984Lease Equalisation - (87,270)

6,258,015 38,051,714Interest on loans 202,734,338 139,979,574

Other Income 9 930,853,167 490,336,7975,027,499,857 4,017,953,962

Expenses 10 2,975,356,449 2,094,104,797Interest and Finance Charges 11 1,703,799,779 1,180,941,431Depreciation (See Note Nos. 1(B)and 13) 48,528,299 30,374,335

4,727,684,527 3,305,420,563

Profit before Taxation 299,815,330 712,533,399TaxationCurrent tax (including Rs.150,000/-for Wealth tax, Previous year Rs. 100,000 /-) 202,000,000 387,500,000Add: Fringe Benefit Tax 7,500,000 4,500,000Less: Deferred tax credit 110,901,648 151,677,213

98,598,352 240,322,787

Profit for the year after Taxation 201,216,978 472,210,612

Prior Period Adjustments relating to earlier

years:expense/(income) Taxation (4,592,664) (4,206,297)

Profit for the year after Taxation andPrior Period Adjustments 205,809,642 476,416,909

Transferred to Reserve Fund in terms of Section 45IC(1)of the Reserve Bank of India Act, 1934 41,500,000 96,000,000

Transfer to Debenture Redemption Reserve 90,000,000 207,500,000

Transferred to General Reserve - 48,850,254

Proposed Dividend 36,596,076 106,044,408

Provision for Dividend Tax on Dividend 6,219,503 18,022,247

Balance carried to Balance Sheet 31,494,063 -

Notes forming part of the Financial Statements. 12

Earnings per share: (See Note No.15)(Face value Rs.10/-)Net Profit after tax and prior period adjustments 205,809,642 476,416,909

Basic EPS 5.68 19.76

Diluted EPS 5.68 18.79

INCOME FROM:

EXPENDITURE:


For and on behalf of DALAL & SHAHChartered Accountants




Directors

Rahul BajajChairman

Nanoo PamnaniMadhur BajajD.S. MehtaRanjan SanghiRajendra Lakhotia

Rajiv Bajaj


Sanjiv BajajDirector


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Cash flow statementfor the financial year 2007 - 2008

2007-2008 2006-2007

Rupees Rupees Rupees

A) Profit before taxation 299,815,330 712,533,399

B) Adjustments:

Add:

i) Depreciation 48,528,299 30,374,335

ii) Lease equalisation - 87,270

iii) Provision for lease debtors, receivablesand doubtful overdue installments from

Assets under Finance, net 328,894,159 217,253,407

iv) Interest and finance charges 1,703,799,779 1,180,941,431

2,081,222,237 1,428,656,443

2,381,037,567 2,141,189,842

Less:

i) Investment income included in above

Dividend 21,926 37,081

Interest on bonds 575,000 575,000

Interest on government and trust securities 13,246,761 13,337,761

Interest on fixed deposits 218,993,068 59,090,854

Income from units of mutual funds 7,325,977 6,327,823

Interest on investment in securitized assets 68,846,437 -

Profit on sale of investments, net 58,891,956 3,901,789

367,901,125 83,270,308

ii) Surplus on sale of assets 328,809 128,679

iii) Provision for diminution in value of investments

written back, net 12,714,152 12,636,290

Total 380,944,086 96,035,277

CASH FROM OPERATIONS 2,000,093,481 2,045,154,565

Carried over 2,000,093,481 2,045,154,565

I) CASH FROM OPERATIONS:


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Cash flow statementfor the financial year 2007 - 2008 (Contd.)

2007-2008 2006-2007

Brought over 2,000,093,481 2,045,154,565

C) (Increase) / Decrease in Current Assets:

i) Assets under Finance (1,628,013,517) (8,635,724,362)

ii) Lease Debtors 71,001 (713)

iii) Net investment in lease 106,561,575 418,692,186

iv) Other Current Assets and

Loans and Advances (1,871,489,052) (191,533,648)

Total (3,392,869,993) (8,408,566,537)

Increase/ (Decrease) in Current Liabilities:

i) Liabilities 1,904,100,349 2,079,958,493

ii) Gain on debenture repurchase 74,532,598 -

Total 1,978,632,947 2,079,958,493

(1,414,237,046) (6,328,608,044)

Less: Direct taxes paid 269,179,011 431,444,754

Tax adjustments relating to earlier years (4,592,664) (4,206,297)

NET CASH FROM OPERATIONS 321,270,088 (4,710,691,936)

i) (Increase)/ Decrease in Investment, net (2,929,414,958) (45,000,000)

ii) Capital Expenditure (including leased assets) (136,286,463) (48,892,697)

iii) Sale Proceeds of Assets/Adjustments to gross block 745,662 545,853

Total (3,064,955,759) (93,346,844)

iv) Investment Income:

Dividends 21,926 37,081

Interest on Debentures & Bonds 575,000 575,000

Interest on Government Securities 13,246,761 13,337,761

Interest on fixed deposits 218,993,068 59,090,854

Income from units of mutual funds 7,325,977 6,327,823

Interest on investment in securitized assets 68,846,437 -

Profit/(Loss) on Sale of Investment, net 58,891,956 3,901,789

Total 367,901,125 83,270,308

NET CASH FROM INVESTING ACTIVITIES (2,697,054,634) (10,076,536)

Carried over (2,375,784,546) (4,720,768,472)

II) INVESTMENT ACTIVITIES:



26/50


Cash flow statement for the financial year 2007 - 2008 (Contd.)

2007-2008 2006-2007


Brought over (2,375,784,546) (4,720,768,472)

i) Increase/ (Decrease) in secured loans (1,423,691,407) 1,484,112,195

(excluding interest accrued and due)

ii) Repurchase of debentures 1,093,190,000 -

iii) Increase/ (Decrease) in unsecured loans 782,202,641 4,502,381,253

(excluding interest accrued and due)

iv) Interest and finance charges (1,688,608,644) (1,156,602,892)

v) Dividend paid (106,187,364) (83,745,814)

vi) Tax on dividend paid (18,022,247) (11,777,331)

vii) Other adjustments

a) Addition to share capital 12,479,400 143,546,760

b) Addition to share premium 499,176,000 4,636,109,685

c) Preferential warrant application money (51,165,540) (72,102,600)

Total (900,627,161) 9,441,921,256

NET CASH FROM FINANCING ACTIVITIES (900,627,161) 9,441,921,256

NET CHANGE IN CASH AND CASH EQUIVALENTS (3,276,411,707) 4,721,152,784

Cash and cash equivalents as at 01.04.2007

(Opening Balance) 5,377,500,693 656,347,909

Cash and cash equivalents as at 31.03.2008

(Closing Balance) 2,101,088,986 5,377,500,693

III) FINANCING ACTIVITIES:


For and on behalf of DALAL & SHAH





Directors

Rahul Bajaj

Chairman

Nanoo PamnaniMadhur BajajD.S. MehtaRanjan SanghiRajendra LakhotiaRajiv Bajaj


Sanjiv Bajaj

Director


27/50


Schedules 1 to 12 annexed to and forming part of the Financial Statements for the year

ended 31st March, 2008

Rupees Rupees

Share Capital:

Authorised:

50,000,000 Equity shares of Rs. 10 each 500,000,000 500,000,000

Issued:

36,597,076 (35,349,136) Equity shares of Rs. 10 each 365,970,760 353,491,360

Subscribed & Paid up:

36,596,076 (35,348,136) Equity shares of Rs 10 each

fully called up and paid up 365,960,760 353,481,360

1,000 (1,000) Add : Forfeited Equity Shares

(amount paid up) 5,000 5,000

Total 365,965,760 353,486,360

Schedule 1:


Reserves and Surplus

Share Premium Account:(Security Premium Account)

As per last Account 7,044,242,611 2,408,132,926

Add: Received during the year (See Note No.12) 499,176,000 4,671,203,940

Less: Share issue expenses - 35,094,255

7,543,418,611 7,044,242,611Reserve Fund in terms of Section 45IC(1)of the Reserve Bank of India Act, 1934As per last Account 618,000,000 522,000,000

Set aside this year 41,500,000 96,000,000

659,500,000 618,000,000

Debenture Redemption Reserve:(See Note No. 14)As per last account 207,500,000 -

Set aside this year 90,000,000 207,500,000

297,500,000 207,500,000General Reserve:As per last account 1,735,978,773 1,687,128,519

Set aside this year - 48,850,254

1,735,978,773 1,735,978,773

Surplus as per annexed Account 31,494,063 -

Total 10,267,891,447 9,605,721,384

Schedule 2 :

Note: Subscribed and paid up capital includes 3,006,540 equity shares of Rs. 10/- each at a premium of Rs. 400/- per shareallotted to promoters, of which 1,247,940 equity shares of Rs. 10 each at a premium of Rs. 400/- per share are on account ofconversion of warrants during the year.




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Secured Loans

From Banks, against hypothecation of assets under finance,book debts and other receivables :Term loan 2,510,000,000 2,510,000,000Cash Credit (including Working Capital Demand LoanRs. 4,295,000,000/- previous year Rs. 3,145,000,000 /-) 4,340,649,141 3,589,412,8731,000 Secured Redeemable Non Convertible Debentures ofthe face value of Rs. 1,000,000/- each secured byhypothecation of Assets under finance, book debts, otherreceivables and immovable property, since redeemed on10th May, 2008 1,000,000,000 1,000,000,0005,248,365 (5,248,365) Secured Redeemable Non ConvertibleDebentures of the face value of Rs. 500/- each secured by

hypothecation of book debts and mortgage of immovableproperty of the company. Redeemable on 8th February, 2010.(See Note No.12) 2,624,182,500 2,624,182,500Less : 2,186,380 (-) debentures repurchased butnot cancelled - to be reissued (See Note No.12) 1,093,190,000 -

1,530,992,500 2,624,182,500Less :Calls in arrears 6,872,050 18,324,375

1,524,120,450 2,605,858,125Interest accrued and due on bank loans 41,307,615 36,974,387

Total 9,416,077,206 9,742,245,385

Schedule 3 :


Rupees Rupees

Unsecured LoansFixed Deposits 61,124,000 83,315,000Add: Interest accrued and due 2,866,791 3,473,150

63,990,791 86,788,150Loan from a company 405,000,000 -Short term loan from bank 2,650,000,000 3,800,000,000Interest accrued and due on above bank loans - 3,843,151Short term borrowing by issue of" Commercial Papers" 3,250,000,000 2,550,000,000Term loan - others 850,000,000 -

Total 7,218,990,791 6,440,631,301

Rupees

Schedule 4 :


Note:(Maximum balance outstanding during the period Rs. 5,850,000,000 /- Previous year Rs. 4,000,000,000 /-)Negotiable Commercial Papers aggregating Rs. 8,000,000,000/- issued by way of Promissory Note

As at Additions Deductions As at As at Deductions For the As at As at As at31st March, and 31st March, 31st March, and year 31st March, 31st March, 31st March,

2007 adjustments 2008 2007 adjustments (b) 2008 2008 2007

Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees

Assets relating to leasing business:Plant and Machinery 176,440,231 - - 176,440,231 176,440,231 - - 176,440,231 - -

Other assets:Building ( a ) 1,323,207 - - 1,323,207 527,463 - 39,787 567,250 755,957 795,744

Computers 95,579,230 64,711,866 881,049 159,410,047 69,150,690 870,631 23,615,103 91,895,162 67,514,885 26,428,540

Furniture and Fixturesand Equipments 53,755,362 47,102,966 567,703 100,290,625 34,962,534 492,410 21,715,052 56,185,176 44,105,449 18,792,828

Vehicles 7,869,569 8,466,539 880,000 15,456,108 3,624,411 548,858 2,074,521 5,150,074 10,306,034 4,245,158

Intangible assets:Specialised software ( c ) - 16,005,092 - 16,005,092 - - 1,083,836 1,083,836 14,921,256 -

As at 31st March, 2008 Total 334,967,599 136,286,463 2,328,752 468,925,310 284,705,329 1,911,899 48,528,299 331,321,729 137,603,581 50,262,270

As at 31st March, 2007 Total 288,091,838 48,892,697 2,016,936 334,967,599 255,930,756 1,599,762 30,374,335 284,705,329 50,262,270

Particulars Gross Block at cost Depreciation Net Block

Schedule 5 : Fixed Assets

(a) Includes cost of shares in co-operative society Rs. 250/-(b) See Note Nos. 1 B and 13(c) See Note No. 1 B II


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Investments, at cost:(unless otherwise stated)

Long Term:In Government and Trust Securities:

Quoted:* 13% Maharashtra State Development Loan

2007,of the face value of Rs.1,000,000 - 1,000,000

547,085 6.6% Tax Free ARS Bonds of theface value of Rs. 100 each, received onconversion of UTI MIP 1999 includinginterest accrued thereon 54,708,500 54,708,500

12.32% Government of India Stock, 2011of the face value of Rs 10,000,000/- 11,202,533 11,202,533

@ 12.25% Government of India Stock, 2010of the face value of Rs 20,000,000/- 27,480,000 27,480,000

@ 11.83% Government of India Stock, 2014of the face value of Rs 50,000,000/- 63,677,500 63,677,500

157,068,533 158,068,533

157,068,533 158,068,533

In fully paid equity shares:Other than trade:Quoted:

90 Shares of TCFC Finance Limited - -

@ 38,700 Shares of Rs.10 each in Akai Impex Limited 2,322,000 2,322,000

- (75) Shares of Rs.10 each in Bajaj Auto Limited - 34,772

75 (-) Shares of Rs.10 each in Bajaj Holdings andInvestments Limited 19,646 -(Formerly Bajaj Auto Limited)

@ 16,880 Shares of Rs.10 each in Dai IchiKarkaria Limited 1,688,000 1,688,000

50 Shares of Rs.10 each in Fortis FinancialServices Limited 1,435 1,435

25 Shares of Rs.10 each in ICICI Bank Ltd 1,320 1,320

@ 52 Shares of Rs.10 each inMidwest Leasing Limited 450 450

@ 50 Shares of Rs.10 each in Mazda Industriesand Leasing Limited 500 500

@ 50 Shares of Rs.10 each in MCC Finance Limited 1,665 1,665

@ 50 Shares of Rs.10 each inNagarjuna Finance Limited 713 713

Carried over 4,035,729 4,050,855

Carried over 157,068,533 158,068,533

Schedule 6 :


30/50




Investments, at cost:(contd.) Brought over 157,068,533 158,068,533(unless otherwise stated)

In fully paid equity shares:(contd.)Other than trade:(contd.)Quoted:(contd.) Brought over 4,035,729 4,050,855

@ 100 Shares of Rs.10 each in P L Finance andInvestment Limited 1,500 1,500

@ 310 (3100) Shares of Rs.10 each inSouthern Fuels Limited 31,000 31,000(decrease in number of shares due tocapital reduction) 4,068,229 4,083,355

161,136,762 162,151,888

In fully paid equity shares:Other than trade:Unquoted:

75 (-) Shares of Rs.10 each inBajaj Auto Limited (New) 7,685 -

75 (-) Shares of Rs.5 each in Bajaj Finserv Limited 7,441 -

15,126In Bonds:

Quoted:* 11.50% Bonds of Industrial Development

Bank of India 2010 (55th Series) ofthe face value of Rs. 5,000,000/- 4,750,000 4,750,000

165,901,888 166,901,888In Mutual Funds:

Quoted:@ State Bank of India Magnum Equity Fund

of the face value of Rs. 12,655,646/- - 37,702,177

@ State Bank of India Magnum Sector FundUmbrella IT fund of the face value ofRs.18,314,942/- - 52,434,400

Carried over - 90,136,577

Carried over 165,901,888 166,901,888

Schedule 6 :


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Rupees

Documents

38980105 Bajaj Annual Report 2008