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    SIXTEENTH ANNUAL REPORT NOTICE related, and including, without limitation, those manufactured or used in any kind of plant, machinery (stationery or mobile and TO THE MEMBERS whether functioning alone or in conjunction with one or more other Notice is hereby given that the Sixteenth Annual General Meeting of machines), equipment or process. Timken India Limited will be held at Tata Steel Management 2. To import, purchase for resale, export, trade, assemble, distribute, Development Centre, Circuit House Area (East), XLRI Campus, service, overhaul, repair, undertake maintenance and/or act as a Jamshedpur – 831 001 on Wednesday, April 30, 2003 at 12.00 Noon sales agent, for commission and/or any other form of to transact the following business : remuneration, in connection with products manufactured by the 1. To receive and adopt the Profit and Loss Account for the nine- Timken Company and/or any of its subsidiaries or divisions and/ months period ended December 31, 2002 and the Balance Sheet or any other person (individual, firm, trust, partnership or corporate as on that date and the reports of the Directors and the Auditors. entity, including combinations and variations thereof), including, 2. To declare dividend on 9% Cumulative Redeemable Preference without limitation, all kinds of equipment, machinery, anti-friction Shares. bearings and other goods and products, raw materials, 3. To appoint a Director in place of Mr. Gordon W. Robinson who components, tools, accessories, parts, semi-finished and retires by rotation and being eligible, offers himself for complete units of any of the foregoing or any combination thereof reappointment. and dev ices and consumables (including dev ices and consumables used for the reduction of friction), whether or not 4. To appoint Auditors of the Company and to fix their remuneration. related, and including, without limitation, those manufactured or SPECIAL BUSINESS used in any kind of plant, machinery (stationery or mobile and 5. Appointment of Mr. Michael J. Hill as Director whether functioning alone or in conjunction with one or more other To consider and, if thought fit, to pass with or without modification, machines), equipment or process. the following resolution as an ordinary resolution : 3. To act as a sales agent earning commission or any other form of “RESOLVED THAT Mr. Michael J. Hill, in whose respect notice remuneration in relation to the business activities of the Company, has been received from a member under the provisions of Section to render any and all kinds of consultancy, advisory and technical 257 of the Companies Act, 1956, be and is hereby appointed as services including, without limitation, in the areas of information a Director of the Company.” technology, mechanical and electrical engineering, electronics, purchase and procurement, sales and marketing, human 6. Remuneration payable to Dy. Managing Director resources, finance and accounting. To consider and, if thought fit, to pass with or without modification, the following resolution as an ordinary resolution: 4. To carry on any other trade or business that can be conveniently or advantageously combined with the business activities of the “RESOLVED THAT pursuant to Sections 309, 310 and other Company and to do any and all acts or things that may be applicable provisions if any of the Companies Act, 1956 (‘the Act’) necessary or desirable to give effect to or in connection with any and subject to such approvals as may be necessary, the Company of the foregoing.’ ” hereby accords its approval to the modification of the terms relating to remuneration payable to Mr. Shyamal Kumar Sinha as the Dy. Managing Director of the Company with effect from October 1, NOTES : 2002 as per details contained in the abstract of terms and 1. A Member entitled to attend and vote at the meeting is entitled to Memorandum of Interest dated October 22, 2002 circulated to all appoint a Proxy to attend and vote instead of himself and the the members of the Company pursuant to Section 302 of the Proxy need not be a Member. Proxies, in order to be effective, Act.” must reach the Registered Office of the Company not less than 7. To declare and announce the results of Postal Ballot of the Special 48 hours before the time for holding the Meeting. Resolution in respect of change of Object Clause in the 2. An Explanatory Statement pursuant to Section 173(2) of the Memorandum of Association of the Company pursuant to Section Companies Act, 1956 in respect of the Special Business under 17 read with Section 192A of the Companies Act, 1956 and rules items no. 5 to 7 is annexed hereto. Relevant details relating to framed therefor : reappointment/appointment of Directors, pursuant to clause 49 “RESOLVED THAT pursuant to Section 17 of the Companies Act, of the Listing Agreement are also annexed. 1956 (hereinafter called as the Act) read with Section 192A of the 3. The Register of Members and the Share Transfer Books of the Act and other applicable provisions, if any, and subject to such Company will remain closed from April 17, 2003 to April 30, 2003, consents and/or approvals as may be necessary, Clause III(A) of both days inclusive. the Memorandum of Association of the Company be and is hereby substituted with the following new clause III(A) : 4. In terms of the provisions of Section 192A of the Companies Act, 1956 the business mentioned under item no. 7 above requires to ‘III(A) The main objects to be pursued by the Company on its be dealt with through Postal Ballot. A written communication in incorporation are : this regard along with Postal Ballot paper and a self-addressed 1. To research and develop, manufacture, purchase for resale, sell, prepaid envelope have already been dispatched to all the import and export, trade in, assemble, distribute, service, overhaul, members. repair and undertake maintenance of, all kinds of anti-friction bearings and other goods and products, raw materials, By Order of the Board components, tools, accessories, parts, semi-finished and Registered Office : complete units of any of the foregoing or any combination thereof Bara, P. O. Agrico Soumitra Hazra and dev ices and consumables (including dev ices and Jamshedpur - 831 009 Finance Controller & consumables used for the reduction of friction), whether or not March 20, 2003 Company Secretary 1


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    TIMKEN INDIA LIMITED ANNEXURE TO THE NOTICE – EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956 Item No. 5 Mr. Michael J. Hill, Director of the Company, was appointed by the Board of Directors of the Company (‘the Board’) with effect from February 3, 2003 in the casual vacancy caused by death of Mr. Mantosh Sondhi as per the provisions of Section 262 of the Companies Act, 1956. Mr. Hill holds office upto the forthcoming Annual General Meeting when Mr. Sondhi would have retired by rotation in the normal course. The Company has received a notice from a member under the provisions of Section 257 of the Companies Act, 1956 proposing Mr. Hill as a candidate for the office of Director. The proposal for the appointment of Mr. Hill as Director on the Board, is therefore, placed before the members for approval as set out under item no. 5 of the accompanying Notice. The Board recommends the Resolution set out under item no. 5 for approval of members. Memorandum of Interest Except Mr. Michael J. Hill, no other Director is concerned or interested in the resolution. Item No. 6 Mr. Shyamal Kumar Sinha (‘Mr.Sinha’) was appointed as the Dy. Managing Director of the Company with effect from the close of business on June 8, 2001 as per terms and conditions set out in the draft of an Agreement placed before the Annual General Meeting held on July 20, 2001. The Board of Directors, subject to the requisite approval of the Members of the Company and such other approvals as may be necessary, has approved modification of the terms relating to remuneration payable to Mr. Sinha as the Dy. Managing Director of the Company with effect from October 1, 2002 as per the Abstract of Terms and Memorandum of Interest dated October 22, 2002 circulated to all the Members of the Company pursuant to the provisions of Section 302 of the Companies Act, 1956 and as appearing below: Salary including other allowances Rs. 65,000/- per month Performance Incentive As per rules of the Company Perquisites i) Company leased accommodation along with free furnishing. However the Company will recover 10% of Basic Salary of Mr. Sinha or actual rent, whichever is lower. ii) Free electricity, water at house limited to 10% of Basic salary. iii) Free use of telephone facility at his residence which shall not be considered as perquisite/ benefit but personal long distance calls on telephone shall be billed by the Company to Mr. Sinha. iv) Free use of Company car with driver for the purpose of Company business which shall not be considered as perquisite/benefit. But the use of car for private purpose shall be billed by the Company to Mr. Sinha. v) Medical facilities as per rules of the Company. vi) Club Subscription as per rules of the Company. vii) Leave – accrual and encashment – as per rules of the Company. viii) Leave Travel Concession as per rules of the Company. ix) Company’s contribution to Provident Fund/Pension Fund/Employee Deposit Linked Insurance/Group Insurance/Superannuation Fund etc. x) Gratuity as per rules of the Company. Minimum Remuneration The remuneration including the benefits and amenities aforesaid shall nevertheless be paid and allowed as the minimum remuneration for any year in the event of absence or inadequacy of profits for such year. 2


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    SIXTEENTH ANNUAL REPORT Duties and Conditions i) Mr. Sinha will perform the duties and exercise the powers, which from time to time may be assigned to or vested in him by the Board of Directors of the Company. ii) The appointment may be terminated by either party by giving three months’ notice in writing to that effect unless termination at a shorter notice is mutually agreed by both Mr. Sinha and the Board of Directors. iii) Mr. Sinha shall not be entitled to any Sitting Fees for attending any meeting of the Board or any Committee thereof. iv) Mr. Sinha shall be entitled to be reimbursed of all expenses incurred by him for the purpose of business of the Company. The Board of Directors recommends the proposed resolution set out under item no. 6 of the Notice for approval of the Members. Memorandum of Interest No Director of the Company except Mr. Sinha is concerned or interested in the said resolution. Item no. 7 In order to expand the scope of business of the Company so as to take up activities like research and development, consultancy, advisory and technical services and to expand the scope of operation beyond antifriction bearings, its related parts/products, the Object Clause as contained in the Memorandum of Association of the Company is proposed to be altered. In terms of Section 17 of the Companies Act, 1956 (‘the Act’) read with Section 192A of the Act, such alteration requires approval of members by a Special Resolution to be passed through Postal Ballot. The Ballot papers in this regard have been sent to the shareholders with a request to send their assent or dissent in writing to the scrutinizer at the Registered Office of the Company. The Board recommends the resolution for the approval of the members. Directors, who are also shareholders, may be deemed to be concerned or interested in respect of the said resolution. Other Directors do not have any concern or interest in the said resolution. Registered Office : By Order of the Board Bara, P. O. Agrico Jamshedpur - 831 009 Soumitra Hazra March 20, 2003 Finance Controller & Company Secretary DETAILS OF DIRECTORS SEEKING REAPPOINTMENT / APPOINTMENT AT THE FORTHCOMING SIXTEENTH ANNUAL GENERAL MEETING Name of Director Mr. Gordon W. Robinson Mr. Michael J. Hill Date of Birth August 5, 1948 October 9, 1950 Date of Appointment July 26, 1999 February 3, 2003 Expertise in specific l Sales & Marketing l Global Manufacturing functional areas Marketing Communication l l Supply Chain Management l General Management Qualifications l Higher National Diploma in Mechanical l BSCE Engineering l MSCE l Certificate of Apprenticeship in General l Licensed Professional Engineer Mechanical Engineering with Henry Simon Ltd. l Advanced Management Programme – INSEAD List of public companies in which l Yantai Timken Company Ltd. l Timken Romania outside Directorship held as on l Timken NSK (Suzhou) Ltd. l Stark State College of Technology December 31, 2002 Chairman/Member of the Committees of the Board of the — — Companies on which he is a Director as on December 31, 2002 3


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    TIMKEN INDIA LIMITED CHAIRMAN’S STATEMENT Dear Shareholders, Since our last annual report in June 2002, we TIL will continue on its path of improving results via changed the accounting period as announced to the 3 main strategies : you earlier. In order to align with the practices l further increasing our output to increase export followed in The Timken Company, USA, TIL adopted sales; Calendar Year as its new Accounting Year and closed its books of accounts for the nine-months ended l further improving efficiency through the recently December 31, 2002. introduced Six Sigma initiatives ; In my last message to you in June 2002, I requested l broadening the product offerings, particularly in you to keep watching our financial reports. Today, I the industrial and automotiv e aftermarket am happy to announce that we have been able to segments. significantly improve our performance during the These should give us an appreciable growth not only nine months ended December 31, 2002 compared in Net Sales but also in ‘Gross Income’. to the corresponding period last year. Some of the highlights are given below : Cutting of costs will continue to receive the same importance as it has received last year. l Over all Sales – up 57% On the international front, The Timken Company l Domestic Sales – up 28% recently completed the acquisition of The Torrington l Exports Sales – up 229% Company; a powerful move by a very strong l PBT – up 4.6 times Company. This acquisition offers a strong strategic fit and will bring a broader line of engineered The structural changes introduced by us in 2002 products and services to our customers in India. and referred in my message last year, have started giving results. In an increasingly global economy, India’s bearing industry will also face increasing pressure to As a “Focused Factory”, TIL : consolidate ... and Timken India will emerge larger l concentrated on fewer product lines and stronger after this process. l produced to cater to the global demands and Thank you, l used highly advanced Timken technology to retain global competitiveness. Yours sincerely, Together with a positive development on the domestic market, those structural changes were responsible for our improved results in 2002. For 2003, we see a modestly growing domestic Gordon William Robinson market and a relatively flat international market. Chairman Despite significant price increases in raw materials, the bearing industry will find difficulty in recovering Jamshedpur input cost increases through higher price. Therefore, March 17, 2003 4


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    SIXTEENTH ANNUAL REPORT DIRECTORS’ REPORT moved to TIL. This has helped the Company in not only utilizing the capacity but also thinking in terms of expanding it so as to TO THE MEMBERS meet global demand. The Directors have pleasure in presenting the Sixteenth Annual Report on the business and operations of the Company together The increase in sales volume coupled with improved efficiency with the Financial Results for the nine-months ended December and reduced operating and administrative cost have contributed in 31, 2002. overall improvement of profitability. ACCOUNTING YEAR The production at the plant, during the period under review, has increased by around 36% over the corresponding period last year As reported last year, the Company has adopted Calendar Year as without any major investment. This has been made possible by its new Accounting Year. Accordingly, accounts have been closed better capacity utilization of Plant through high performance drives on December 31, 2002 covering a period of nine months. in the organization. FINANCIAL RESULTS DIVIDENDS Nine-months Year ended The Directors recommend payment of dividend on the paid-up period ended (12 months) 26,00,000 9% Cumulative Redeemable Preference Shares of December 31, March 31, Rs. 100/- each aggregating to Rs.26 crores for the year 2001-2002 2002 2002 and also for the nine-months period ended December 31, 2002 (Rs/Lakhs) (Rs/Lakhs) @ Rs.9/- per share aggregating Rs. 4.10 Crores, subject to income- tax at the applicable rates. a) Gross Profit 2706.68 1475.81 Payment of no other dividend is recommended. b) Less : Depreciation 666.40 1319.21 FINANCE c) Earnings before 2040.28 156.60 No fresh long-term loan was arranged during the year under review. Interest & Tax (EBIT) With periodical repayment of existing long term borrowings together d) Less: Interest (Net) 114.35 63.71 with judicious utilization of the Working Capital Finance, the interest charges have come down, enabling the Company, to achieve a e) Profit before Tax (PBT) 1925.93 92.89 reduction by about 35%. f) Less : Taxes 683.40 12.32 DIRECTORS g) Profit after Tax (PAT) 1242.53 80.57 Mr. Mantosh Sondhi who was acting as a Director of the Company h) Add : Profit/(Loss) brought 844.34 1852.77 since inception passed away in Bangalore on October 29, 2002. forward from previous year Dr. J J Irani who was associated with the Company since 1991 – as the Chairman of the Board of Directors (‘the Board’) and then i) Add : Transfer from Investment 0.46 – as a member thereof resigned from the position of a Director of Allowance Reserve the Company effective December 6, 2002. The Board wishes to j) Less : Depletion of reserve – 621.00 place on record its deep appreciation of the valuable support and due to deferred tax accounting guidance received from both Mr. Sondhi and Dr. Irani during their long association as Directors of the Company. k) Profit available for appropriation 2087.33 1312.34 Mr. Gordon W. Robinson, Chairman of the Board retires by rotation l) Less : Proposed Dividend on 410.30 468.00 at the forthcoming Annual General Meeting (AGM) and being Preference Shares eligible offers himself for reappointment. m) Balance carried forward 1677.03 844.34 Mr. Michael J. Hill has been appointed as a Director of the Company by the Board in the casual vacancy created by the death of Mr. Mantosh Sondhi. The performance of the Company during the nine-months period The term of Mr. Michael J. Hill as a Director of the Company will ended December 31, 2002 reflects the outcome of some of the expire at the forthcoming AGM. Notice has been received from a structural changes initiated to re-establish profitability. During the member under the provisions of Section 257 of the Companies period under review, net sales have grown from Rs. 130 Crores in Act, 1956 signifying his intention to propose the name of Mr. Hill 12 months to Rs. 151 Crores in 9 months, i.e. an increase of 55% for appointment as a Director of the Company at the forthcoming on an annualized basis. Volume gains in both Standard and Rail Sixteenth AGM and the same has been included in the Notice to segments and also a growth in Trading have resulted in increased the members convening the AGM. sales. AUDITORS As a result of TIL’s integration with the global network, exports Messrs. S R Batliboi and Co., Chartered Accountants, Auditors of (mainly to U.S.) during the period under review, registered an the Company retire at the conclusion of the Sixteenth Annual increase of 229% over the corresponding period last year. This is General Meeting and offer themselves for reappointment. They recognized by the fact that some of the Part Numbers, hitherto have furnished to the Company a Certificate, regarding their manufactured at other Timken locations worldwide, have now eligibility for the reappointment. 5


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    TIMKEN INDIA LIMITED Pursuant to the directions received from the Central Government, The Company has now achieved full indigenisation of all Mr. Prakash Kumar Varma has been appointed as the Cost Auditor components for Standard Bearings and substantial indigenisation to audit the Cost Accounts of the Company for the nine-months for AP Bearings. It is the intention of the Company to proceed with period ended December 31, 2002 with Central Government’s the process of indigenisation further. approval. Other details are given in the Annexure, which also forms part of CORPORATE GOVERNANCE this report. Pursuant to Clause 49 of the Listing Agreement with the Stock DIRECTORS’ RESPONSIBILITY STATEMENT Exchanges, a Management Discussion and Analysis, Corporate Pursuant to the provision of Section 217(2AA) of the Companies Governance Report and Auditors’ Certificate regarding compliance Act, 1956, the Directors give hereunder the Directors’ Responsibility of conditions of corporate governance are made a part of the Annual Statement relating to the Accounts of the Company: Report. (1) The applicable Accounting Standards have been followed INDUSTRIAL RELATIONS in the preparation of the accompanying Accounts; The Company continued to maintain cordial relations with its Associates. The performance of the Company during the nine- (2) The Directors have selected such Accounting Policies and months period ended December 31, 2002 could be made possible applied them consistently and made judgments and only with the positive response from all the Associates. The estimates that are reasonable and prudent so as to give Directors express their appreciation for the very good co-operation a true and fair view of the state of affairs of the Company received from all sections of the Associates of the Company. at the end of the nine-months ended December 31, 2002 and of the profit of the Company for the said period; SOCIAL RESPONSIBILITY (3) The Directors have taken proper and sufficient care for The Company has been actively participating in the promotion of the maintenance of adequate accounting records in social welfare activities of the community in the industrial town of accordance with the provisions of the Companies Act, Jamshedpur. 1956 for safe guarding the assets of the Company and STOCK EXCHANGE REQUIREMENTS for preventing and detecting fraud and other irregularities; and The Equity Shares of the Company are listed on Mumbai, Calcutta and Magadh Stock Exchanges. The listing fees for the year 2002- (4) The Directors have prepared the accompanying Accounts 2003 have been paid to the Stock Exchanges. on a going concern basis. PARTICULARS OF EMPLOYEES No employee of the company was in receipt of remuneration in excess of the limits referred to in Section 217(2A) of the Companies Act, 1956, and the Rules framed thereunder. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE All the new machineries installed during the year are energy For and on behalf of the Board of Directors efficient. Significant cost saving on cutting fluids has also been achieved by machine modifications and use of longer lasting coolant. Regarding absorption of foreign technology, the process Jamshedpur Gordon William Robinson is ongoing in the areas of machining, heat treatment and finishing. February 3, 2003 Chairman 6


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    SIXTEENTH ANNUAL REPORT ANNEXURE TO THE DIRECTORS’ REPORT – INFORMATION UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 READ WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS RULES), 1988 AND FORMING PART OF DIRECTORS’ REPORT (A) CONSERVATION OF ENERGY a) Energy conservation measures taken New equipments / machines added during the year are energy b) Additional Investments/proposal, if any efficient like earlier installations. (Also please see Directors’ Report) c) Impact of the measures at (a) and (b) above d) Total energy consumption and energy consumption As per details given below under Form A. per unit of production (B) TECHNOLOGY ABSORPTION e) As per details given below under Form B. (C) FOREIGN EXCHANGE EARNINGS AND OUTGO f) Activities relating to exports, initiatives taken to During the period under review, exports mainly to U.S. registered increase exports; development of new export an increase of 229% compared to the corresponding period of the markets for products and services; and export previous year. Some of the Part Numbers hitherto manufactured plans at other Timken locations worldwide have now moved to Company’s Plant in Jamshedpur. The Company expects good export performance to continue in 2003. g) Total foreign exchange used and earned (Rs./Lacs) For the nine months 2001-2002 period ended December 31, 2002 i) Foreign Exchange Earnings 3658.52 2509.69 ii) Foreign Exchange Outgo 2525.13 2506.44 FORM A Form for Disclosure of Particulars with respect to Conservation of Energy (A)Power and FuelConsumption 1. Electricity For the nine-months 2001-2002 period ended December 31, 2002 (a) Purchased Units (KWH) 1,36,69,637 1,68,09,845 Total amount (Rs.) 5,67,28,743 7,95,77,170 Rate per Unit (Rs.) 4.15 4.73 (all inclusive) (b) Own generation (i) Through diesel generator Unit Not used for operations. Only for emergency lighting and water Units per Ltr. of diesel oil requirements Cost/Unit (ii) Through steam turbine/generator Units There is no Steam Turbine/Generator Units per Ltr. of fuel oil/gas Cost/unit 2. Coal (Specify quality and where used) – Not Used Quantity (tonnes) Total Cost Average rate 7


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    TIMKEN INDIA LIMITED 3. Furnace Oil – Not Used Quantity (k.ltrs.) Total amount Average rate 4. Others/internal generation (please give details) – Not Used Quantity Total Cost Rate/Unit (B) Consumption per unit of production Products (with details) Unit Standard (if any) For the nine months 2001-2002 period ended December 31, 2002 Standard Bearings Not set (Standard varies with product mix) Electricity 4.70 6.39 Furnace oil Not Used Not Used Coal (specify quality) Not Used Not Used Others (specify) Nil Nil FORM B Form for Disclosure of particulars with respect to absorption TECHNOLOGY ABSORPTION (A) Research and Development (R&D) 1. Specific areas in which R&D carried out by the Company 2. Benefits derived as a result of the above R&D 3. Future plan of action 4. Expenditure on R&D: The benefits of Research facilities available with The Timken Company are extended to Timken India Limited on a continuing a. Capital basis. b. Recurring c. Total d. Total R&D expenditure as a percentage of total turnover (B) Technology absorption, adaptation and innovation 1. Efforts in brief, made towards technology Under the Collaboration Agreement, technology update is released absorption, adaptation and innovation from The Timken Company, which is transferred to the shop floor 2. Benefits derived as a result of the above efforts, instructions. Any improvement in the technology/process is part of e.g. , product improvement, cost reduction, this continuous update and this is being regularly monitored by product development, import substitution, etc. The Timken Company personnel. 3. In case of imported technology (imported during the last five years reckoned from the beginning of the financial year), following information may be furnished : a) Technology imported Manufacture of Tapered Roller Bearings. b) Year of import 1991-92 onwards. c) Has technology been fully absorbed ? It is being gradually absorbed. d) If not fully absorbed, areas where this Ongoing in the areas of Machining, heat treatment and finishing. has not taken place, reasons therefor and To make further improvements in the manufacturing process, future plans of action product quality and production output. For and on behalf of the Board of Directors Jamshedpur Gordon William Robinson February 3, 2003 Chairman 8


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    SIXTEENTH ANNUAL REPORT MANAGEMENT DISCUSSION AND ANALYSIS Industry Structure and Development provides services in relation to sourcing, repairing and maintenance Bearing Industry in India can be divided into two segments – the organized management of bearings and allied products. Currently, 98% of the sector and the unorganized sector. The unorganized sector is mainly revenue of the Company comes from the Bearings Segment while around represented by the small-scale manufacturing units. 2% of the revenue accounts for activities in the Services Segment. The industry covers both Ball Bearings and Roller Bearings. Roller The Geographical Segments have been identified on the basis of location Bearings can further be divided into Tapered Roller, Cylindrical Roller, of the major customers of the Company and the secondary (geographical) Needle Roller and thrust bearings and other special application bearings. segment would be : While some of the manufacturers cater to specialized applications, the l India l Outside India rest are involved in manufacture of both Ball Bearings and Roller Bearings. For the year under review, around 70% of net sales was generated from Timken India Limited specializes in the manufacture of Tapered Roller domestic source whereas the remaining 30% came from sales outside Bearings (TRBs). India. The growth in bearing industry is directly related to the growth of industries Outlook – Risks and Concern having bearing applications like automotive, electrical applications, pumps, fans and agricultural machinery. These high volume segments are catered The advantage of availability of the Timken technology together with the primarily by domestic manufacturers. Heavy duty industrial applications availability of Timken network worldwide for exports has helped the in rolling stock, rolling mills, heavy earth moving equipments and other Company to survive recessionary phases in the past but has also helped heavy machinery are met from imports. Timken India Limited is essentially the Company to further consolidate its global presence through the Timken catering to heavy automobiles and rail segment – both in domestic and network worldwide. export markets in TRB applications. It meets the requirements of industrial Bearings are also imported by the Company for the purpose of resale in applications – steel, heavy machinery from imports from other Timken the Indian market. These bearings are not manufactured in India because units. of the specialized nature of the product. Incidence of high Customs Duty on these imports makes such imports less remunerative. Besides, a Production of TRBs constitutes about 30% by value of the total bearings section of the bearing industry is facing the problem of free entry of produced in India and at present Timken India enjoys around 21% of the certain types of bearings at an abnormally low rate from countries like market share in the TRB segment. China, Russia and Eastern Europe. Opportunities and Threats Internal Control Systems As mentioned above, the growth of bearing industry is linked to the growth The various internal control systems operating in the Company are of the major bearing applications industry, i.e. the Automobiles/ working satisfactorily. The strength of these systems is continuously Engineering/ Railways. Demand growth in bearings will largely depend being monitored by the Internal Audit team and the findings of these on the growth of demand of the original equipment manufacturers (OEM) audits are reported to the Audit Committee of the Board and also to the in the automobile industry, engineering segment and opportunities in the Board of Directors. The adequacy of the internal control system has international markets. Since Timken India specializes in TRBs only, the also been examined by the Statutory Auditors and the Audit Department demand for growth of TRBs will heavily depend on the growth in the of The Timken Company, USA and the Company has not received any demand of trucks, tractors, railways, etc. both in domestic and international major adverse comments from them on the adequacy of the internal markets. control systems. New Bearings are also used for replacement of old, worn out bearings. Financial Performance vis-à-vis Operational Performance The size of this market is dependent on equipment population, frequency During the period under review, net sales grew from Rs. 130 Crores in 12 of maintenance, etc. months ended March 31, 2002 to Rs. 151 Crores in nine-months ended TRBs as used in the engineering industry are large in size and are mostly December 31, 2002, mainly because of volume increases in both catered through imports. The growth in demand for large industrial Standard and Railway Bearings. The volumes of exports have also bearings will depend on the growth of industrial and infrastructural significantly increased by about 229% during the said period compared activities. Liberalization of industrial policy, entry of multinationals and to corresponding period last year. The exports of the Company mainly increasing demand for industrial products may result in an increase in constitute shipments to USA. Such volume gains coupled with improved demand for large bearings. utilization of existing capacity and reduction in operating costs have The presence of the unorganized sector in the bearing industry poses a resulted in improvement of profits of the Company as reflected in the real threat. They mainly cater to the replacement market which is price accompanying accounts. elastic. They are competitive compared to the manufacturers in the During the period under review, production has increased by about organized sector but offer poor quality. Though they have got a strict 36% compared to the corresponding period last year, mainly due to better regional presence, their activities in the bearing industry cannot be utilization of capacity. An aggregate of 41908 Railway Bearings were ignored. produced during the period compared to 26419 bearings of last year. In Standard, the production during the period was at 1261223 nos. compared Segmentwise Performance to 1695952 nos. bearings last year. Production of components however, Reporting by Segments during the period has increased to 3985587 nos. from 2708590 nos. As per the relative reporting requirements, the Management of the recorded last year. Company feels that the primary segment for the Company would be as HR Front follows: During the year under review, the Company did not witness any adverse l Bearings and Components l Services development on the HR/IR front. The relationship between the Associates The Bearings and Components Segment is a diverse supplier of bearings, of the Company and the Management remained congenial all through components and other allied products catering to the needs of the out the year. The Company employed around 588 Associates (including automobiles, industrial and rail-road enterprises. The Services Segment 175 Officers) as on December 31, 2002. 9


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    TIMKEN INDIA LIMITED TIMKEN INDIA LIMITED BOARD OF DIRECTORS (As on February 3, 2003) MR G W ROBINSON – Chairman MR S K SINHA – Dy. Managing Director CONTENTS DR T MUKHERJEE MR J T ELSASSER Page MR S A SCHERFF Notice 1 MR V K DASARI Chairman’s Statement 4 MR M J HILL Directors’ Report 5 MR J S PATHAK – Alternate to Mr S A Scherff Annexures to Directors’ Report 7 MR P S DASGUPTA – Alternate to Mr J T Elsasser Management Discussion and Analysis 9 Auditors’ Report 10 COMMITTEES OF THE BOARD Balance Sheet 12 (As on February 3, 2003) Profit & Loss Account 13 AUDIT COMMITTEE Schedules 1 to 17 14 MR V K DASARI – Chairman Balance Sheet Abstract 30 DR T MUKHERJEE Cash Flow Statement 31 MR J S PATHAK Corporate Governance Report 32 Auditors’ Certificate 38 INVESTORS’ RELATION & GRIEVANCE COMMITTEE Five years at a Glance 39 Graphs 40 DR T MUKHERJEE – Chairman MR S K SINHA MR J S PATHAK REMUNERATION COMMITTEE DR T MUKHERJEE – Chairman MR P S DASGUPTA Members are requested to please note that MR J S PATHAK with effect from January 1, 2003, Ami Computers (I) Limited has been appointed MANAGEMENT TEAM as the new Registrars & Share Transfer MR S K SINHA – Dy. Managing Director Agents of the Company. Any query relating MR A K SINHA – Director (HR & Purchase) to your shareholding may also be forwarded MR K STHANPATI – Director (Technology & to : Ami Computers (I) Limited, 60A & 60B, Supply Chain Management) Chowringhee Road, Kolkata - 700 020 MR A K DAS – Director (Manufacturing) MR J P SINHA – Director (Sales & Marketing) MR S HAZRA – Finance Controller & Company Secretary Auditors Messrs. S R Batliboi & Co. Registered Office As a measure of economy, copies of the Annual Chartered Accountants Bara, P. O. Agrico Report will not be distributed at the Annual 22, Camac Street Jamshedpur – 831 009 General Meeting. Shareholders are requested Block- C, 3rd Floor, Ph. No. (0657) 2210 293 to bring their copies to the meeting. Kolkata-700 016 Fax No. (0657) 2210 117 10


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    TIMKEN INDIA LIMITED AUDITORS’ REPORT TO THE MEMBERS OF TIMKEN INDIA LIMITED We have audited the attached Balance Sheet of Timken India Limited, as at 31st December 2002 and also the Profit and Loss Account for the 9 months period ended on that date, annexed thereto as well as the cash flow statement for the 9 months period 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. We conducted our audit in accordance with the 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 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Manufacturing and Other Companies (Auditor’s Report) Order, 1988 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to above, we report that : (i) 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; (ii) 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 those books; (iii) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account; (iv) In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; (v) On the basis of written representations received from the directors, as on 31st December, 2002, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st December 2002 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956; (vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give 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 affairs of the Company as at 31st December, 2002; ii. in the case of the Profit and Loss Account, of the profit for the 9 months period ended on that date;and iii. in the case of cash flow statement, of the cash flows for the 9 months period ended on that date. S. R. BATLIBOI & CO. CHARTERED ACCOUNTANTS Place : Kolkata Per RAHUL ROY Dated : 11th February, 2003 a Partner ANNEXURE TO THE AUDITORS’ REPORT TO THE MEMBERS OF TIMKEN INDIA LIMITED (i) the Company has maintained proper records of Fixed Assets showing full particulars including quantitative details and situations thereof. All the assets have been physically verified by the management once during the year which in our opinion is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticed on verification. (ii) the Fixed Assets of the Company have not been revalued during the year. (iii) the Stocks of Finished Goods (including trading goods), Stores, Spare Parts and Raw Materials have been physically verified by the Management during the year. In our opinion, the frequency of verification is reasonable. (iv) the procedures followed by the Management for physical verification of stocks are, in our opinion, reasonable and adequate in relation to the size of the company and the nature of its business. (v) the discrepancies noticed upon such verification between the physical stock and the book balances were not material and have been properly dealt with in the books of account. (vi) on the basis of our examination of stock records, we are of the opinion that the valuation of stocks is fair and proper in accordance with the generally accepted accounting principles, and is on the same basis as in the preceding year. 10


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    SIXTEENTH ANNUAL REPORT ANNEXURE TO THE AUDITORS’ REPORT (Continued) (vii) the company has not taken any loan, secured or unsecured, from companies, firms, or other parties listed in the register maintained under Sections 301 and from companies under the same management as defined under sub-section (1B), of Section 370 of the Companies Act, 1956. (viii) the company has not granted any loan, secured or unsecured, to companies, firms, or other parties listed in the register maintained under Sections 301 and to companies under the same management as defined under sub-section (1B) of Section 370 of the Companies Act, 1956. (ix) in respect of loans and advances in the nature of loans given by the Company, parties have repaid the principal amounts as stipulated. (x) in our opinion and according to the information and explanations 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 purchases of stores, raw materials including components, plant & machinery, equipment and other assets and with regard to the sale of goods. (xi) the Company undertakes transactions of purchase and sale of Goods and Materials, with associate and group companies, in pursuance of contracts/arrangements entered in the register maintained under Section 301of the Companies Act, 1956. As, such transactions relate to propriety items manufactured by the Timken Group and Raw Materials in connection thereto, comparative rates are not available, however, selling price of such goods, in the market, prima facie indicate that the transactions are at reasonable prices. Transactions for sale of services in pursuance of contracts/arrangements entered in the register maintained under section 301 of the Companies Act, 1956 have been made at prices which are reasonable having regard to the prevailing market prices for such services rendered to other parties. (xii) as informed, the Company has a regular procedure for the determination of unserviceable or damaged Stores, Raw Materials and Finished Goods (including trading goods) and adequate provision for loss thereof, has been made in the accounts. (xiii) the Company has not accepted any deposit from public within the meaning of Section 58A of the Companies Act, 1956. (xiv) in our opinion, reasonable records have been maintained by the Company for the sale and disposal of realisable scrap. The Company does not have any by-products. (xv) the Company has an internal audit system which, in our opinion, is commensurate with the size and nature of its business. (xvi) we have broadly reviewed the books of account maintained by the Company pursuant to the order made by the Central government for the maintenance of cost records under Section 209(l)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. (xvii) according to the records of the company, Provident Fund dues have been regularly deposited during the year with the appropriate authorities. As informed to us, the ESI Act is not applicable to the Company. (xviii) according to the information and explanations given to us, there are no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty and Excise Duty outstanding as at 31st December 2002, for a period of more than six months from the date they became payable. (xix) the Company has a policy of authorising expenditure based on reasonable checks and balances. The policy is intended to ensure that expenses are authorised on the basis of contractual obligations or accepted business practices having regard to the Company’s business needs and exigencies. In terms of these observations, we have not come across any expenses charged to Revenue Account, which in our opinion and judgment and to the best of our knowledge and belief, could be regarded as personal expenses. (xx) the company is not a Sick Industrial Company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985. In respect to the service activities of the company: (xxi) the company has a reasonable system of ‘recording receipts, issues and consumption of material and stores and allocating material consumed to the relative jobs, commensurate with its size and nature of its business. (xxii) the company has a reasonable system of allocating manhours utilised to the relative jobs, commensurate with its size and nature of its business. (xxiii) the company is having a reasonable system of authorisation at proper levels, and an adequate system of internal control commensurate with the size of the company and the nature of its business, on issue of stores and labour to jobs. In respect to the trading activities undertaken by the company: (xxiv) in respect of trading activity, damaged goods have been determined and provision has been made for the loss. S. R. BATLIBOI & CO. CHARTERED ACCOUNTANTS Place : Kolkata Per RAHUL ROY Dated : 11th February , 2003 a Partner 11


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    TIMKEN INDIA LIMITED BALANCE SHEET AS AT 31ST DECEMBER, 2002 As at As at 31.12.2002 31.03.2002 Schedule Rupees Rupees Rupees SOURCES OF FUNDS a) SHAREHOLDERS’ FUNDS (i) Share Capital 1 89,72,04,000 89,72,04,000 (ii) Reserves & Surplus 2 16,77,02,947 8,44,80,033 106,49,06,947 98,16,84,033 b) LOAN FUNDS (i) Secured Loans 3 14,14,40,880 15,09,36,163 (ii) Unsecured Loans 4 6,33,74,277 14,64,411 20,48,15,157 15,24,00,574 c) DEFERRED TAX LIABILITIES (NET) [Refer note (n) (ii), Schedule 17] 4,09,94,376 4,68,89,913 131,07,16,480 118,09,74,520 APPLICATION OF FUNDS d) FIXED ASSETS : (i) Gross Block 5 145,37,31,461 142,96,60,581 (ii) Less : Depreciation 96,52,13,285 91,32,90,341 (iii) Net Block 48,85,18,176 51,63,70,240 (iv) Capital Work-in-progress 2,27,99,570 33,20,910 – including advances Rs.15,40,074 (31.03.2002 - Rs.12,87,039) 51,13,17,746 51,96,91,150 e) INVESTMENTS 6 11,78,73,431 11,77,37,687 f) CURRENT ASSETS, LOANS AND ADVANCES (i) Inventories 7 41,54,43,410 36,26,83,303 (ii) Sundry Debtors 8 67,23,94,720 39,45,76,506 (iii) Cash and Bank Balances 9 6,47,71,625 7,23,02,392 (iv) Loans and Advances 10 10,80,12,000 9,48,90,137 126,06,21,755 92,44,52,338 g) LESS : CURRENT LIABILITIES & PROVISIONS (i) Current Liabilities 11 50,43,22,113 33,61,62,829 (ii) Provisions 12 8,22,42,762 5,41,89,184 58,65,64,875 39,03,52,013 h) NET CURRENT ASSETS 67,40,56,880 53,41,00,325 i) MISCELLANEOUS EXPENDITURE TO THE EXTENT NOT WRITTEN OFF 13 74,68,423 94,45,358 131,07,16,480 118,09,74,520 j) ACCOUNTING POLICIES AND NOTES 17 Schedules 1 to 17 form an integral part of these accounts. For and on behalf of the Board As per our report of even date attached G.W. Robinson Chairman For S. R. BATLIBOI & CO. Chartered Accountants Soumitra Hazra Shyamal K Sinha Per Rahul Roy Finance Controller & Company Secretary Dy. Managing Director a Partner Kolkata, 11 Feb, 2003 Jamshedpur, February 3, 2003 12


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    SIXTEENTH ANNUAL REPORT PROFIT AND LOSS ACCOUNT FOR NINE MONTHS ENDED 31ST DECEMBER, 2002 Nine months ended Previous Year ended December 31, 2002 March 31, 2002 Schedule Rupees Rupees INCOME a) Sale of Products (Gross) 167,80,69,637 148,23,11,262 Less : Trade Discounts 3,15,15,619 3,46,90,225 Less : Excise Duty Recovered 13,70,41,848 15,13,57,640 Sale of Products (Net) 150,95,12,170 129,62,63,397 b) Other Income 14 5,44,03,906 8,31,85,745 156,39,16,076 137,94,49,142 EXPENDITURE c) Manufacturing and other expenses 15 129,32,47,649 123,18,67,378 d) Interest (net) 16 1,14,35,378 63,71,467 e) Depreciation 6,66,40,399 13,19,21,309 137,13,23,426 137,01,60,154 PROFIT BEFORE TAX 19,25,92,650 92,88,988 f) Provision for Taxation – Current 7,42,35,136 1,64,42,190 – Deferred ( 58,95,537 ) ( 1,52,09,700 ) 6,83,39,599 12,32,490 PROFIT AFTER TAX 12,42,53,051 80,56,498 g) PROFIT/(LOSS) BROUGHT FORWARD FROM PREVIOUS YEAR 8,44,34,033 18,52,77,148 TRANSFERRED FROM INVESTMENT ALLOWANCE RESERVE 46,000 — DEPLETION OF RESERVES & SURPLUS DUE TO DEFERRED TAX ACCOUNTING — (6,20,99,613) PROFIT AVAILABLE FOR APPROPRIATION 20,87,33,084 13,12,34,033 h) APPROPRIATIONS :- – DIVIDEND ON PREFERENCE SHARES 4,10,30,137 4,68,00,000 PROFIT/LOSS CARRIED TO BALANCE SHEET 16,77,02,947 8,44,34,033 i) ACCOUNTING POLICIES AND NOTES 17 j) EARNINGS PER SHARE – Basic 1.67 (0.24) – Diluted 1.67 (0.24) [Refer note (z) of Schedule 17] Schedules 1 to 17 form an integral part of these accounts. For and on behalf of the Board As per our report of even date attached G.W. Robinson For S. R. BATLIBOI & CO. Chairman Chartered Accountants Soumitra Hazra Shyamal K Sinha Per Rahul Roy Finance Controller & Company Secretary Dy. Managing Director a Partner Kolkata, 11 Feb, 2003 Jamshedpur, February 3, 2003 13


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    TIMKEN INDIA LIMITED SCHEDULES 1 TO 17 FORMING PART OF THE ACCOUNTS AS AT AND FOR THE NINE MONTHS ENDED 31ST DECEMBER, 2002 SCHEDULE 1 : SHARE CAPITAL As at As at 31.12.2002 31.03.2002 Rupees Rupees Rupees Authorised : 7,50,00,000 Equity Shares of Rs. 10/- each 75,00,00,000 75,00,00,000 26,00,000 9% Cumulative Redeemable Preference Shares 26,00,00,000 26,00,00,000 of Rs.100/- each 101,00,00,000 101,00,00,000 Issued : 6,37,50,000 Equity Shares of Rs. 10/- each 63,75,00,000 63,75,00,000 26,00,000 9% Cumulative Redeemable Preference Shares 26,00,00,000 26,00,00,000 of Rs.100/- each 89,75,00,000 89,75,00,000 Subscribed: [Refer note (s), Schedule 17] 6,37,34,850 Equity Shares of Rs. 10/- each fully paid-up 63,73,48,500 63,73,48,500 Less: Calls in Arrears-others 1,44,500 1,44,500 63,72,04,000 63,72,04,000 26,00,000 9% Cumulative Redeemable Preference Shares 26,00,00,000 26,00,00,000 of Rs.100/- each (Redeemable at the expiry of 10 years from 14th March, 1995, the date of allotment, with an option to the Company to redeem the same earlier after giving one month’s notice ) 89,72,04,000 89,72,04,000 SCHEDULE 2 : RESERVES AND SURPLUS a) Profit & Loss Account 16,77,02,947 8,44,34,033 b) Investment Allowance Reserve Balance as per last account 46,000 Less : Transferred to Profit & Loss Account (46,000 ) — 46,000 16,77,02,947 8,44,80,033 SCHEDULE 3 : SECURED LOANS a) i) Term Loan from State Bank of India — 93,75,000 ii) Interest accrued and due on the above — 3,47,661 — 97,22,661 b) Term Loans from Bank of Baroda 5,18,00,175 7,41,89,200 c) Cash Credit Accounts with Scheduled Banks i) State Bank of India 7,95,68,955 5,00,23,031 ii) Bank of Baroda 1,00,71,750 1,70,01,271 8,96,40,705 6,70,24,302 14,14,40,880 15,09,36,163 Notes : (a) Cash Credit accounts with State Bank of India includes Rs. 7,19,43,750 (As on 31.03.2002 - Rs. Nil) being short term Foreign Currency Loan repayable in equivalent rupee value. (b) (i) The term Loan from Bank of Baroda is secured by hypothecation of all fixed assets and movables, both present and future (save and except book debts). (ii) The char ges on fixed assets and movablesstated above ranpari k passu, inter se and are subject to prior charges created in favour of Company’s Bankers under item (c) below. (c) Cash Credit from State Bank of India and Bank of Baroda are secured by joint hypothecation of stocks of raw materials, semi-finished and finished goods, consumable stores and spares and all book debts both present and future. 14


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    SIXTEENTH ANNUAL REPORT SCHEDULE 4 : UNSECURED LOANS [Refer note (t), Schedule 17] As at As at 31.12.2002 31-03-2002 Rupees Rupees Short Term Loan from Scheduled Bank 6,33,74,277 14,64,411 6,33,74,277 14,64,411 SCHEDULE 5 : FIXED ASSETS ASSETS GROSS BLOCK (AT COST) DEPRECIATION NET BLOCK AS AT ADDITIONS DEDUCTIONS AS AT AS AT FOR THE DEDUCTIONS TOTAL AS AT AS AT 31.03.2002 31.12.2002 31.03.2002 YEAR upto 31.12.2002 31.03.2002 31.12.2002 Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Rupees Buildings 13,27,59,864 1,06,100 1,62,714 13,27,03,250 2,99,68,469 26,56,373 8,847 3,26,15,995 10,00,87,255 10,27,91,395 Plant & Machinery 127,28,95,633 # 3,98,64,199 184,45,998 129,43,13,834 87,10,88,869 # 6,27,88,434 1,26,72,054 92,12,05,249 37,31,08,585 40,18,06,764 (including office equipment & tools) Furniture & Fixtures 1,26,24,711 2,39,820 13,18,160 1,15,46,371 81,07,611 3,79,185 12,59,274 72,27,522 43,18,849 45,17,100 Vehicles 1,13,80,373 51,16,404 13,28,771 1,51,68,006 41,25,392 8,16,407 7,77,280 41,64,519 1,10,03,487 72,54,981 Total 142,96,60,581 4,53,26,523* 2,12,55,643 145,37,31,461 91,32,90,341 6,66,40,399 147,17,455 96,52,13,285 48,85,18,176 51,63,70,240 Previous Year 134,70,28,078 4,81,48,960 67,30,469 138,84,46,569 77,17,93,839 12,24,75,063 37,41,181 89,05,27,721 49,79,18,848 57,52,34,239 # Refer note (o) of Schedule 17 * Includes exchange differences of Rs. 2,04,082 (31.03.2002 : Rs.1,10,041) SCHEDULE 6 : INVESTMENTS Face Holdings Purchased Sale/ Holdings as at 31.12.2002 Holdings Value as at /Dividend Conversion as at 01.04.2002 Reinvested 31.03.2002 Rs. Nos. Nos. Nos. Nos. Rs. Rs. Rs. Long Term Investments (At Cost) Trade (Unquoted) Equity Shares fully paid Nicco Jubilee Park Limited 10 30,000 — — 30,000 3,00,000 3,00,000 3,00,000 Current Investments (At Lower of Cost or Market Value) Other Investments (Unquoted) Kotak Mahindra Liquid Scheme - Growth 10 36,70,046 8,66,761 — 45,36,808 5,15,30,979 4,15,30,979 HDFC Liquid Fund - Dividend 10 7,328 93 — 7,421 76,924 73,297 HDFC FIP - Growth 10 10,00,000 — — 10,00,000 1,00,00,000 1,00,00,000 HDFC Liquid Fund - Growth 10 9,05,471 — — 9,05,471 1,02,02,214 1,02,02,214 Prudential ICICI FMP - Growth 10 20,62,421 — — 20,62,421 2,06,78,043 2,06,78,043 Zurich India Liquidity Fund - Growth 10 17,13,614 — — 17,13,614 2,00,70,535 2,00,70,535 Birla Cash Plus - Dividend 10 9,78,374 — 9,78,374 — — 98,67,883 Birla Cash Plus - Growth 10 3,28,814 — — 3,28,814 50,14,736 50,14,736 11,75,73,431 11,74,37,687 11,78,73,431 11,77,37,687 Notes : Aggregate amount of unquoted investments – Rs. 11,78,73,431 15


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    TIMKEN INDIA LIMITED SCHEDULE 7 : INVENTORIES ( At lower of Cost or Net Realisable Value) As at As at 31.12.2002 31.03.2002 Rupees Rupees Rupees a) Stores and Spares (including in transit) 4,57,18,715 4,48,26,834 b) Raw materials and Components 13,39,83,855 8,33,52,773 (including in transit) c) Work-in-progress 6,15,67,369 5,74,86,401 d) Finished stocks (including in transit) 15,48,05,010 15,97,72,408 Add : Excise Duty on finished stock not assessed to duty 1,93,68,461 1,72,44,887 17,41,73,471 17,70,17,295 41,54,43,410 36,26,83,303 SCHEDULE 8 : SUNDRY DEBTORS [Refer note (v), Schedule 17] a) Over six months 3,76,11,071 3,85,82,830 b) Others 65,24,05,119 37,48,87,395 69,00,16,190 41,34,70,225 Less : Provision for Bad and Doubtful debts 1,76,21,470 1,88,93,719 67,23,94,720 39,45,76,506 Debts unsecured and considered good 66,58,75,492 38,91,90,091 Debts secured and considered good 65,19,228 53,86,415 Debts considered doubtful 1,76,21,470 1,88,93,719 69,00,16,190 41,34,70,225 SCHEDULE 9 : CASH AND BANK BALANCES a) Cash and Cheques in Hand 4,17,59,900 4,43,43,978 (including Remittances in Transit) b) With Scheduled Banks i) In Current Accounts 2,30,06,725 2,50,57,160 ii) Towards Share/Debenture application monies refund account — 28,96,254 iii) Towards margin money 5,000 5,000 6,47,71,625 7,23,02,392 16


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    SIXTEENTH ANNUAL REPORT SCHEDULE 10 : LOANS AND ADVANCES [Refer note (w), Schedule 17] As at As at 31.12.2002 31.03.2002 Rupees Rupees a) Prepaid expenses 32,74,483 35,87,984 b) Advance payment of Taxes - net of provision (31.03.2002 Rs. 6,47,70,818) — 1,54,91,076 c) Advances recoverable in cash or kind or for value to be received 4,90,72,584 3,00,85,961 d) Balances with Customs and Excise 4,97,28,645 3,61,96,849 [Refer note (m), Schedule 17] e) Deposits 63,89,483 96,44,069 10,84,65,195 9,50,05,939 Less : Provision for Doubtful Advances 4,53,195 1,15,802 10,80,12,000 9,48,90,137 Loans and Advances, unsecured and considered good 10,80,12,000 9,24,50,387 Loans and Advances, secured and considered good — 24,39,750 Loans and Advances, considered doubtful 4,53,195 1,15,802 10,84,65,195 9,50,05,939 Notes : Amount due by Directors and by Secretary Rs. 1,000 (31.03.2002 : Rs. 1,100). Maximum during the year Rs. 2,45,169 (2001-2002 : Rs. 3,38,775). SCHEDULE 11 : CURRENT LIABILITIES As at As at 31.12.2002 31.03.2002 Rupees Rupees Rupees a) Sundry Creditors : i) Small Scale Industrial undertakings 38,96,458 36,97,666 [Refer note (u), Schedule 17] ii) Others 45,06,21,687 28,83,27,371 45,45,18,145 29,20,25,037 b) Advance payments from Customers 41,28,815 3,68,631 c) Investor Education and Protection Fund shall be credited by the following amounts, namely i) Unpaid application money received for allotment of securities and due for refund — 28,96,254 ii) Unpaid Matured Debentures 75,93,464 77,32,547 iii) Unpaid Interest on Debentures 86,82,813 1,21,94,492 [Refer note (aa), Schedule 17] 1,62,76,277 2,28,23,293 d) Other Liabilities 2,93,98,876 2,09,45,868 50,43,22,113 33,61,62,829 Note : Sundry Creditors - others include Rs. Nil due to Directors (31.03.2002 : Rs. 18,915) 17


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    TIMKEN INDIA LIMITED SCHEDULE 12 : PROVISIONS As at As at 31.12.2002 31.03.2002 Rupees Rupees a) Proposed Preference Dividends 4,10,30,137 4,68,00,000 b) Provision for Leave Encashment 99,44,991 73,89,184 c) Provision for Taxes - net of Advance Rs. 10,77,83,320 3,12,67,634 — [Refer note (ab), Schedule 17] 8,22,42,762 5,41,89,184 SCHEDULE 13 : MISCELLANEOUS EXPENDITURE ( TO THE EXTENT NOT WRITTEN OFF) [Refer note (q), Schedule 17] Technical Know-how Expenses paid 94,45,358 1,20,81,272 Less : Amortised for the year 19,76,935 26,35,914 74,68,423 94,45,358 Nine months ended Previous year ended December 31, 2002 March 31, 2002 Rupees Rupees SCHEDULE 14 : OTHER INCOME i) Agency Commission 1,21,58,014 1,34,56,726 - including TDS Rs. 37,428 (2001-2002 Rs. Nil) ii) Income from Services 1,24,01,955 1,62,21,037 - including TDS Rs. 2,37,221 (2001-2002: Rs. 3,84,929) iii) Foreign Exchange Differences (net) (7,94,692) 18,32,718 iv) Provisions no longer required 43,63,937 48,35,939 v) Export incentives under DEPB Scheme (net) 2,19,96,327 2,81,34,475 vi) Income from Investments - others 3,627 41,47,367 vii) Profit on Sale of Investments 1,48,569 — vii) Miscellaneous Income 41,26,169 1,45,57,483 - including TDS Rs. Nil (2001-2002: Rs. 1,671) 5,44,03,906 8,31,85,745 18


  • Page 20

    SIXTEENTH ANNUAL REPORT SCHEDULE 15 : MANUFACTURING AND Nine months ended Previous year ended OTHER EXPENSES December31,2002 March 31, 2002 Rupees Rupees Rupees 1) Purchase of Products for resale 20,92,78,507 22,29,23,268 [Refer note (c), Schedule 17] 2) Raw Materials and Components consumed 57,67,82,558 45,40,19,369 [Refer note (d), Schedule 17] 3) Payments to and Provision for employees a) Salaries,Wages and Bonus 11,36,61,121 11,29,64,751 b) Company’s contribution to Provident and other Funds 88,23,712 1,17,73,904 c) Staff Welfare expenses 1,44,39,374 1,84,68,399 13,69,24,207 14,32,07,054 4) Operation & Other Expenses a) Stores and spare parts consumed 9,91,08,564 10,09,41,765 [Refer note (e), Schedule 17] b) Purchase of Power 5,67,28,743 7,95,77,170 c) Repairs to Buildings 38,45,665 76,70,993 d) Repairs to Machinery 1,04,19,144 1,49,71,107 e) Royalty 3,60,84,267 3,18,62,313 f) Rent 81,64,066 98,55,483 g) Rates and Taxes 17,92,670 43,67,257 h) Insurance 29,03,254 37,58,732 i) Commission & Discount 94,49,584 1,10,17,710 j) Travelling 1,80,83,407 2,33,13,006 k) Selling Expenses 1,60,35,831 2,20,88,182 l) Conversion Charges 1,77,67,334 75,90,113 m) Other Expenses [Refer note (r), Schedule 17] 6,72,18,644 7,24,06,782 34,76,01,173 38,94,20,613 5) Carriage and Handling 1,83,02,146 1,97,92,855 6) Provision for doubtful debts & advances 29,60,450 71,61,441 7) Excise Duty Paid- (Net of recovery) 5,12,178 44,04,968 8) (Increase) / Decrease in stock of finished goods and semi-finished goods-excluding excise duty on plant stock Opening Stock 21,72,58,809 20,81,96,619 Less : Closing Stock 21,63,72,379 21,72,58,809 8,86,430 (90,62,190 ) 1,29,32,47,649 1,23,18,67,378 SCHEDULE 16 : INTEREST - NET Interest Expense i) Term Loans 62,37,015 1,43,46,753 ii) Others 51,98,408 31,71,904 1,14,35,423 1,75,18,657 Less : Interest Income 45 1,11,47,190 – Tax deducted at source Rs. Nil (2001-2002 : Rs. 19,64,114) 1,14,35,378 63,71,467 19


  • Page 21

    TIMKEN INDIA LIMITED SCHEDULE 17 : NOTES ON THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT a) SIGNIFICANT ACCOUNTING POLICIES (i) Basis of Accounting The Company prepares its accounts on accrual basis under the historical cost convention and in accordance with applicable Accounting Standards in India. (ii) Revenue Recognition Revenue from sale of goods including manufactured products are recognised upon passage of title to the customers, which generally coincides with delivery. Revenue from agency commission and other service charges are recognised upon accrual of such income as per the respective contracts. (iii) Fixed Assets Fixed Assets are stated at cost of acquisition inclusive of duties (net of Cenvat), taxes, incidental expenses, erection/ commissioning expenses and financial charges upto the date the asset is ready for intended use. (iv) Depreciation Depreciation is provided under straight line method at the rates and in the manner provided in Schedule XIV to the Companies Act, 1956 except for certain toolings, not consumable in nature, where depreciation has been considered at a rate higher than that as per Schedule XIV as aforesaid, based on the expected useful life of five years for such tools. Additions/deletions during the year are depreciated pro-rata from the date of such addition/deletion except assets costing below Rs. 5000 which are fully depreciated in the year they are put to use. Extra shift depreciation is calculated on actual shift basis in respect of each operating department. Depreciation on the amount capitalised during the year on account of Foreign Exchange fluctuation is provided prospectively over the residual life of the respective assets. (v) Foreign Currency Transactions Foreign currency transactions are recorded on the basis of average of the exchange rates in force during the relevant month. Foreign currency assets and liabilities (other than those covered by forward contracts) as on the Balance Sheet date are revalued in the accounts on the basis of exchange rates prevailing at the close of the year and exchange difference arising therefrom, is adjusted to the cost of fixed assets or charged to Profit & Loss Account, as the case may be. In the case of transactions covered by forward contracts, the difference between the contract rate and the exchange rate prevailing on the date of transaction, is adjusted to the cost of fixed assets or charged to Profit & Loss Account, as the case may be, proportionately over the contract period. (vi) Inventories Inventories are valued at lower of cost or net realisable value. For the purpose of valuation of inventories, cost is determined on weighted average basis. (vii) Retirement Benefits Gratuity is administered through an approved fund, contributions to which, made in accordance with year end actuarial valuation, are charged to the Profit & Loss Account of the relevant period. The liability on account of unutilised leave due to the employees is charged to the Profit & Loss Account, on the basis of year end actuarial valuation. (viii) Excise Duty Excise Duty is accounted for at the point of manufacture of goods and accordingly, is considered for valuation of finished goods stock lying in the factories as on the Balance Sheet date. 20


  • Page 22

    SIXTEENTH ANNUAL REPORT SCHEDULE 17 : (Contd.) (ix) Deferred Revenue Expenditure Technical Know-how fees are deferred over the period during which the benefits are expected to be derived. (x) Leases Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the Profit & Loss Account. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit & Loss Account on a straight-line basis over the lease term. (xi) Income Taxes Tax expense comprises both current and deferred taxes. Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets (including unrecognised deferred tax assets of earlier years) are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. (xii) Segment Reporting Policies Identification of segments : The Company’s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products or services having different risks and returns. The analysis of geographical segments is based on the areas in which the customers of the Company are located. Inter-segment Transfers : Inter-segment sales and transfers, if any, are accounted for as if the sales or transfers were to third parties at current market prices. Unallocated items : General income and expense items, which are not allocable to any specific business segment, are classified as unallocated revenue and expenditure respectively. (xiii) Contingent Liabilities No provision is made for liabilities which are contingent in nature, unless it is probable that future events will confirm that an asset has been impaired or a liability incurred as at the Balance Sheet date and a reasonable estimate of the resulting loss can be made. However, all known, material contingent liabilities are disclosed by way of separate notes. 21


  • Page 23

    TIMKEN INDIA LIMITED SCHEDULE 17 : (Contd.) b) LICENCED AND INSTALLED CAPACITY AND PRODUCTION (as certified by the Management and accepted by the Auditors) Installed Production capacity i) AP Cartridge Tapered Roller Bearings, unit including components and accessories 1,05,000 Nos. 41,908 Nos. (1,05,000 ) Nos. (26,419 ) Nos. ii) Tapered Roller Bearings, unit including components 40,00,000 Nos. 12,61,223 Nos. (40,00,000 ) Nos. (16,95,952 ) Nos. iii) Components (manufactured for sale) — 39,85,587 Nos. — (27,08,590 ) Nos. 1) Licenced Capacity is not furnished as it is not applicable in terms of Government of India’s Notification No.S.O.477(E) dated 25th July, 1991. 2) Above installed capacity represents existing manufacturing facilities for respective products. 3) Considering the flexibility and interchangeability in production facilities among the lines, the overall capacity of the plant is 35,00,000 equivalent bearings. Note : Figures in brackets are for the previous year c) TURNOVER, CLOSING AND OPENING STOCK OF GOODS TURNOVER CLOSING STOCK OPENING STOCK PURCHASE # Quantity * Rupees** Quantity Rupees Quantity Rupees Quantity Rupees i) Tapered Roller Bearings (including purchased for resale) 14,28,202 Nos. 92,98,93,530 3,55,973 Nos. 12,07,00,330 3,98,804 Nos. 13,87,25,227 86,572 Nos. 5,46,23,028 (17,91,303 ) Nos. (99,84,55,712 ) (3,98,804 ) Nos. (13,87,25,227 ) (4,10,546 ) Nos. (16,59,21,631 ) (59,731 ) Nos. (8,48,65,364 ) ii) Components 40,18,934 Nos. 49,09,32,357 2,79,708 Nos. 3,78,00,701 1,31,832 Nos. 2,60,17,049 1,85,100 Nos. 6,59,24,098 (including purchased (28,75,083 ) Nos. (23,07,02,133 ) (1,31,832 ) Nos. (2,60,17,049) (9,336 ) Nos. (33,00,146 ) (2,17,500 ) Nos. (6,90,21,533 ) for resale) iii) Grease 11,57,541 Kgs. 8,51,69,433 1,46,822 Kgs. 99,20,787 1,27,732 Kgs. 84,86,339 11,76,641 Kgs. 8,44,04,039 (8,79,897 ) Kgs. (6,37,05,145 ) (1,27,732 ) Kgs. (84,86,339 ) (42,979 ) Kgs. (24,20,314 ) (9,64,681 ) Kgs. (6,49,67,141 ) iv) Oil Seals 1,05,032 Nos. 33,66,666 1,95,714 Nos. 40,17,454 86,955 Nos. 19,46,499 2,24,415 Nos. 43,27,342 (56,809 ) Nos. (15,34,821 ) (86,955 ) Nos. (19,46,499 ) (43,930 ) Nos. (10,50,934 ) (3,51,607 ) Nos. (20,32,570 ) v) Dental Handpiece 2,330 Nos. 1,50,184 4,273 Nos. 17,34,199 6,603 Nos. 18,42,181 — — Cartridge (10,564 ) Nos. (18,65,586 ) (6,603 ) Nos. (18,42,181 ) (6,670 ) Nos. (12,57,156 ) (10,302 ) Nos. (20,36,660 ) (including Components) 150,95,12,170 17,41,73,471 17,70,17,295 20,92,78,507 (129,62,63,397 ) (17,70,17,295 ) (17,39,50,181 ) (22,29,23,268 ) * Excludes free samples to customers. # Purchases are for resale. ** Sale of Products is stated net of excise duty and trade discount. Note:Figuresinbracketsareforthepreviousyear. 22


  • Page 24

    SIXTEENTH ANNUAL REPORT SCHEDULE 17 : (Contd.) d) CONSUMPTION OF RAW MATERIALS AND COMPONENTS Nine months period ended December 31, 2002 2001-2002 Details of Raw Materials/Components Quantity Rupees Quantity Rupees Cup 17,36,870 Nos. 20,11,01,425 19,88,234 Nos. 15,18,82,050 Cone 20,04,072 Nos. 12,92,18,189 20,46,633 Nos. 11,42,54,798 Rollers 76,80,826 Nos. 5,42,10,755 32,36,824 Nos. 1,42,12,018 Roller Wire 9,66,202 Kgs. 5,42,64,256 9,98,640 Kgs. 6,26,08,608 Components & Accessories 13,79,87,933 11,10,61,895 57,67,82,558 45,40,19,369 e) CONSUMPTION OF IMPORTED AND INDIGENOUS MATERIALS Value of consumption of imported and indigenously obtained raw materials, components, stores and spare parts and percentage of each to the total consumption : Nine months period ended December 31, 2002 2001-2002 % Rupees % Rupees i) Raw Materials and components Imported 25.14 14,50,21,080 23.15 10,50,91,656 Indigenous 74.86 43,17,61,478 76.85 34,89,27,713 100.00 57,67,82,558 100.00 45,40,19,369 ii) Stores and spare parts Imported 17.17 1,70,17,565 9.60 96,94,202 Indigenous 82.83 8,20,90,999 90.40 9,12,47,563 100.00 9,91,08,564 100.00 10,09,41,765 f) C.I.F. VALUE OF IMPORTS (including in transit) Nine months period ended December 31, 2002 2001-2002 Rupees Rupees i) Raw Materials, components, stores 17,41,75,430 9,00,06,279 and spare parts ii) Finished Products for re-sale 6,01,52,646 9,34,71,861 iii) Capital Goods 1,24,75,783 70,20,431 23


  • Page 25

    TIMKEN INDIA LIMITED SCHEDULE 17 : (Contd.) Nine months period ended December 31, 2002 2001-2002 Rupees Rupees g) EXPENDITURE IN FOREIGN CURRENCY (on cash basis) i) Foreign Travel 29,19,718 44,94,011 ii) Bank Charges 4,46,023 3,43,928 iii) Royalty (net of withholding tax) 1,48,60,207 2,70,43,710 iv) Others 60,07,130 8,88,141 h) DIVIDEND REMITTANCE IN FOREIGN CURRENCY (Preference Shares) 3,97,80,000 1,22,44,932 (26,00,000 9% Cumulative Redeemable Preference Shares held by The Timken Company, USA as at 31st December, 2002. Dividend remitted for the year 1999-2000 & 2000-2001) i) EARNINGS IN FOREIGN EXCHANGE (on realisation basis) i) F.O.B. value of exports 35,40,42,797 23,80,79,484 ii) Agency commission 1,18,09,470 1,28,89,866 j) CONTINGENT LIABILITIES NOT PROVIDED FOR — Guarantees given to banks 6,38,71,299 1,98,43,805 — Income tax demands 14,75,105 14,75,105 — Other claims 8,59,326 7,31,443 — Excise duty and Sales Tax matters 5,72,84,195 5,80,51,410 — Arrears of cumulative preference dividends — 2,34,00,000 k) ESTIMATED AMOUNT OF CONTRACTS REMAINING TO BE EXECUTED 1,72,34,996 1,19,77,077 ON CAPITAL ACCOUNT AND NOT PROVIDED FOR (net of advances paid) l) MANAGERIAL REMUNERATION i) Salary 7,08,965 7,72,910 ii) Contribution to Provident & Other Funds 1,14,273 1,10,444 iii) Estimated Value of Perquisites 71,342 1,11,170 Total 8,94,580 9,94,524 Note : Managerial Remuneration does not include gratuity and leave pay provided on the basis of actuarial valuation in the accounts which is to be included for this purpose at the time of actual payment. m) Deposits include Rs. 260.92 lacs (as on 31.03.2002 : Rs. 244.07 lacs) with Customs Authorities, pending final assessment against which a liability of Rs. 173.49 lacs (as on 31.03.2002 : Rs. 156.64 lacs), considered adequate, is held in the accounts. n) i) Provision for current income tax for the nine months period ended 31st December, 2002, has been computed applying the effective rate on the profit for such nine months period. ‘Effective Rate’ for the purpose has been arrived at taking into consideration actual profit for such nine months period and estimated profit for the quarter ended 31st March, 2003. The ultimate tax liability, however would be determined on the basis of the results for the fiscal year ending 31st March, 2003 corresponding to the Assessment Year 2003-04. 24


  • Page 26

    SIXTEENTH ANNUAL REPORT SCHEDULE 17 : (Contd.) ii) Deferred Tax Accounting – The deferred tax credit for the year has been recognised in the Profit & Loss Account for the year. Details of Deferred Tax Assets/ (Liabilities) are as follows : As on 31.12.2002 As on 31.03.2002 Rupees Rupees — Items under Section 43B of IT Act 57,98,020 41,96,028 — Provision for Bad Debts 83,02,810 83,02,942 — Royalty 56,50,813 33,30,060 — Preliminary Expenses u/s 35D of IT Act 1,48,277 1,44,041 — Capital Loss — 6,99,599 — Technical Know-how Fees (27,44,645 ) (33,71,993 ) — Depreciation (5,81,49,651 ) (6,01,90,590 ) Net Deferred Tax Assets/(Liabilities) (4,09,94,376) (4,68,89,913 ) o) With effect from 1st April, 2002 certain toolings, not consumable in nature, which had hitherto been included under inventories and shown at the Net Realisable Value determined on the basis of technical assessment of their impairment, have been regrouped under fixed assets and being depreciated at a rate higher than that as per Schedule XIV of the Companies Act, 1956 based on the expected useful life of five years for such tools. Accordingly, Rs. 412.14 lacs, Rs. 227.63 lacs being the gross value of such unamortised tools and their related accumulated depreciation respectively as on 1st April, 2002 have been grossed up with the respective opening balance of Plant & Machineries as at that date. There has been no impact in the Profit & Loss Account for the period because of this re-grouping. p) Previous Wage Agreement with Associates’ Union has expired in April 2002 and the management is in the final stage of negotiation for a new wage agreement, pending finalisation of which the liability for differential wages, as per management’s estimate has been provided and included in ‘Salaries, Wages and Bonus’ under item 3 (a) of Schedule 15 without any separate allocation of such provision towards Company’s contribution to Provident and other funds. Adjustment on such liability provided, required if any, consequent on finalisation of such negotiation will be provided in the year of conclusion thereof. q) As per Accounting Policy of deferred revenue expenditure, the Technical Know-how fees payable to the collaborator for providing technical assistance is deferred and amortised over a period of 72 equal monthly installments. Nine months period ended December 31, 2002 2001-2002 Rupees Rupees r) OTHER EXPENSES Item 4 (m) of Schedule 15 includes : i) Auditors’ Remuneration * — For services as Auditors 7,87,500 6,30,000 — For Company Law matters — 13,650 — For Limited Review 3,67,500 2,10,000 — For Tax Audit 2,75,625 2,10,000 — For US GAAP Certification 2,36,250 3,15,000 — For Other Services 3,72,750 1,24,950 — For travelling and out of pocket expenses 54,000 94,100 * Inclusive of service tax, where applicable ii) Directors’ fees 42,000 57,000 iii) Loss on disposal/discarding of assets 10,99,819 20,60,146 iv) Provision for wealth tax 45,000 60,000 s) i) No Equity shares have been allotted during April 2002 to December 2002, out of 15,150 shares of Rs. 10/- each kept in abeyance as at 31st March, 1998. ii) Out of the total shares issued, 5,09,99,988 fully paid-up Equity Shares of Rs. 10/- each and 26,00,000 9% Cumulative Redeemable Preference Shares of Rs. 100/- each are held by The Timken Company, USA as at 31st December, 2002. iii) Calls in arrears in respect of the Shares Rs. 1,44,500 have been computed on the basis of information certified by the Registrars of the Company. t) Unsecured loans include loan repayable within one year amounting to Rs. 6,33,74,277 (As on 31.03.2002 : Rs. 14,64,411). 25


  • Page 27

    TIMKEN INDIA LIMITED SCHEDULE 17 : (Contd.) u) Name of small scale industrial undertakings to whom the Company owes any sum which is outstanding for more than 30 days as at 31st December, 2002 : As on As on 31.12.2002 31.03.2002 Rupees Rupees i) Bhuller Engineering Works 58,815 47,100 ii) Bihar Packaging Industries 86,102 86,102 iii) Crown Packaging 17,289 68,743 iv) Devendra Packaging 26,563 12,234 v) Diamond Enterprises 9,211 10,111 vi) Eastern Machinery Works 57,219 64,544 vii) Industrial Enterprises 32,727 31,084 viii) Kashmir Timber Traders 63,515 45,089 ix) Omni Auto Limited 2,60,896 23,895 x) Pawan Enterprises 1,07,320 2,19,617 xi) Ritu Engg. Works 30,303 85,405 xii) Santi Plastic Enterprises 12,250 12,231 xiii) Shivalik Industries 1,56,956 95,786 xiv) Sudha Enterprises 22,790 24,406 xv) Sumit Techmart 406 — xvi) Viks Gears 53,883 17,434 xvii) JMT Auto Limited 1,620 — xviii) Shyam Enterprises 1,16,743 — xix) Perfect Turners 2,14,987 — v) Sundry Debtors include dues from companies under the same Management : As on As on 31.12.2002 31.03.2002 Rupees Rupees Timken Europa GmbH 6,87,196 11,91,635 British Timken Limited 97,80,119 9,64,044 Australian Timken Proprietary Limited 83,91,258 50,17,152 Timken Do Brasil Com.E.Ind.Ltda. 1,63,30,208 1,90,51,402 Timken Singapore PTE Ltd. 43,41,750 18,74,767 Timken Italia S.R.L. 2,55,318 2,18,185 Yantai Timken Company Limited 1,04,480 19,41,656 Timken South Africa (PTY) Limited 87,20,543 59,29,271 Timken Romania S. A. 7,532 1,46,409 Timken Engg. and Research — 28,425 w) Loans and Advances include dues from companies under the same Management : Maximum Amount As on due during As on 31.12.2002 Apr. ’02-Dec. ’02 31.03.2002 Rupees Rupees Rupees Yantai Timken Company Limited 15,112 5,01,731 4,92,762 Timken Singapore PTE Limited 2,33,130 2,33,130 70,748 Timken Engg. and Research 29,960 1,11,838 1,11,838 Timken France 1,36,001 1,36,001 — Timken Italia S.R.L. — 34,05,449 — Timken Rail Service, Russia 3,02,822 3,02,822 3,02,822 26


  • Page 28

    SIXTEENTH ANNUAL REPORT SCHEDULE 17 : (Contd.) x) Segment Information Business Segment : The business segments have been identified on the basis of the products and services of the Company. The Bearings & Components segment is a diverse supplier of Bearings, components and other allied products. It sells products to the Automobiles, Industrial and Rail-Road enterprises. The Services segment provides service in relation to Procurement and Repairs & Maintenance of the Bearings & Components. Geographical segments : The Geographical segments have been identified on the basis of the location of the major customers of the Company. Primary Segment Nine months Period ended Year ended December 31, 2002 March 31, 2002 Rupees Rupees 1. Segment Revenue (A) Bearings & Components 1,53,51,11,223 1,33,76,54,540 (B) Services 2,59,47,874 3,00,16,355 Total Segment Revenue 1,56,10,59,097 1,36,76,70,895 Less : Inter-segment Revenue — — Unallocated Revenue 28,56,979 1,17,78,247 Net Sales/Income from operations 1,56,39,16,076 137,94,49,142 2. Segment profit/(loss) before tax and interest (A) Bearings & Components 26,62,47,977 8,13,54,993 (B) Services 1,53,59,763 1,32,57,336 Total 28,16,07,740 9,46,12,329 Less : i) Interest (Net) 1,14,35,378 63,71,467 ii) Unallocable expenditure 7,75,79,712 7,89,51,874 Profit Before Tax 19,25,92,650 92,88,988 3. Capital Employed (Segment assets - Segment liabilities) (A) Bearings & Components - Assets 1,65,56,53,142 1,30,78,55,785 (B) Services-Assets 90,91,640 1,29,64,329 Unallocable Assets 23,25,36,572 25,05,06,419 a) Total Assets 1,89,72,81,354 1,57,13,26,533 Bearings & Components-Liabilities 40,91,32,550 27,04,19,958 Services-liabilities 13,99,982 10,99,418 Unallocable Liabilities 17,60,32,342 11,88,32,638 b) Total Liabilities 58,65,64,874 39,03,52,014 Capital Employed (a) - (b) 1,31,07,16,480 1,18,09,74,519 4. Fixed Asset Addition Bearings & Components 6,00,55,806 2,71,72,328 Services 3,34,656 — Unallocable 44,14,719 30,12,469 6,48,05,181 3,01,84,797 5. Depreciation (A) Bearings & Components 6,35,04,353 11,70,64,471 (B) Services 2,56,623 2,94,845 Unallocable 28,79,423 51,15,746 6,66,40,399 12,24,75,062 6. Amortisation of Technical Know-how fees Bearings & Components 19,76,935 26,35,914 27


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    TIMKEN INDIA LIMITED SCHEDULE 17 : (Contd.) Secondary Segment - Geographical Nine months Year ended Period ended March 31, 2002 December 31, 2002 Rupees Rupees Sales Revenue by Geographical Market India 1,08,66,68,634 1,16,65,21,866 Outside India 47,72,47,442 21,29,27,276 Total 1,56,39,16,076 1,37,94,49,142 Carrying Amount of Segment Assets India 1,65,01,08,745 1,47,50,99,050 Outside India 24,71,72,610 9,62,27,483 Total 1,89,72,81,355 157,13,26,533 Purchase of Fixed and Intangible Assets India 6,48,05,181 3,01,84,797 Outside India — — Total 6,48,05,181 3,01,84,797 y) Related Party Disclosure During the year, the Company entered into transactions with related parties. Those transactions along with related balances at 31st December, 2002 and for the year then ended are presented in the following table. (in Rupees) Key Holding Company Fellow Subsidiaries Management Total Personnel Balance Balance Balance Transaction Transaction Transaction Outstanding as on Outstanding as on Outstanding as on Value Value Value 31.12.2002 31.12.2002 31.12.2002 Purchases of goods 10,98,74,752 6,30,39,915 1,42,93,235 78,63,725 12,41,67,987 7,09,03,640 (7,07,94,394) (3,12,47,029) (1,84,75,095) (55,02,039) (8,92,69,489) (3,67,49,068) Saleofgoods 25,38,68,352 13,61,88,361 19,46,25,345 8,29,00,054 44,84,93,697 21,90,88,415 (12,51,25,737) (5,69,02,690) (8,42,40,119) (3,40,68,001) (20,93,65,856) (9,09,70,691) PurchasesofFixed 12,90,807 1,04,16,901 65,00,340 1,17,07,708 65,00,340 Assets (5,79,189) (35,58,180) (4,99,688) (41,37,369) (4,99,688) SaleofFixedAssets 34,05,449 34,05,449 (— ) (— ) ExpenseReceivable 85,51,831 1,08,66,758 4,43,994 4,14,203 89,95,825 1,12,80,961 (72,22,088) (35,75,415) (23,95,020) (6,75,348) (96,17,108) (42,50,763) ExpensePayable 1,32,00,577 3,53,86,051 65,69,081 77,38,997 1,97,69,658 4,31,25,048 (1,64,01,051) (2,51,00,003) (9,50,601) (10,21,237) (1,73,51,652) (2,61,21,240) AgencyCommission 12,72,315 12,72,315 3,26,988 3,26,988 15,99,303 15,99,303 (Expense) (— ) (— ) (— ) (— ) (— ) (— ) AgencyCommission 1,08,94,033 17,38,619 12,63,981 13,63,601 1,21,58,014 31,02,220 (Income) (1,13,23,853) (15,89,832) (15,68,003) (23,21,253) (1,28,91,856) (39,11,085) FreightRecovery 4,46,25,730 1,68,87,770 6,15,13,500 — (1,08,52,894) (35,49,910) (1,44,02,804) (— ) Royalty 3,60,84,267 3,60,67,778 3,60,84,267 3,60,67,778 (3,03,45,060) (1,74,66,893) (3,03,45,060) (1,74,66,893) TechnicalAssistance 6,25,666 6,25,666 6,25,666 6,25,666 Expenses (6,44,292) (6,44,292) (6,44,292) (6,44,292) Remuneration* 8,94,580 8,94,580 (9,94,524) (9,94,524) 28


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    SIXTEENTH ANNUAL REPORT SCHEDULE 17 : (Contd.) 1. Holding Company The Timken Company, USA 2. Fellow subsidiaries Timken Europa-GmbH, Timken UK Limited, Australian Timken Proprietary Limited, Timken South Africa Limited, Yantai Timken Company Limited, Timken Romania, Timken Engg. & Research, Timken Italia-S.R.L, Timken Singapore PTE Limited, Timken Do Brasil COM. E. IND. LTDA, Timken Polska, Handpiece Headquarters, The Timken Company-France. 3. Key Management Personnel Mr. Shyamal K Sinha, Deputy Managing Director 4. During the nine months (Apr’ 02 to Dec’ 02) an amount of Rs. 1,12,288 has been written off against Receivable from Fellow Subsidiary. * For payments being Managerial Remuneration to Key Management Personnel Mr. Shyamal K Sinha - Refer note (l) of Schedule 17. z) Earning Per Share (Basic & Diluted) : Nine months ended Previous year ended December 31, 2002 March 31, 2002 Rupees Rupees Profit After Tax 12,42,53,051 80,56,498 Less : Preference Dividend for the period 1,76,30,137 2,34,00,000 Earning available to Equity Shareholders 10,66,22,914 (1,53,43,502) Weighted Average No. of Equity Share @ Rs. 10 each 6,37,20,400 6,37,20,400 Earning per share 1.67 (0.24) aa) Matured Debentures and interest thereon have been separately funded in the respective bank accounts and remains unpaid in absence of claim. ab) Refunds of Rs. 1,08,61,838 (Previous year Rs. NIL) received from the Income Tax Authorities till date against assessment under section 143(1)(a) of the Income Tax Act, 1961 have been credited to ‘Advance Tax’ account. Advance tax for the current period has been duly adjusted for the carry forward credits arising out of the above assessments made under section 143(1)(a) of the Income Tax Act, 1961. ac) The Current accounting period is for nine months from 1st April, 2002 to 31st December, 2002 and accordingly the current period’s figures are not comparable with those of the previous years. ad) Previous year’s figures have been regrouped/rearranged, wherever necessary. Signature to Schedules 1 to 17 For and on behalf of the Board G.W. Robinson For S. R. Batliboi & Co. Chairman Chartered Accountants Soumitra Hazra Shyamal K Sinha Per Rahul Roy Finance Controller & Company Secretary Dy. Managing Director a Partner Kolkata, 11 Feb, 2003 Jamshedpur, February 3, 2003 29


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    TIMKEN INDIA LIMITED ABSTRACT OF THE BALANCE SHEET AS AT 31-12-2002 AND COMPANY’S GENERAL BUSINESS PROFILE AS PER PART IV OF SCHEDULE VI (AMENDED) TO THE COMPANIES ACT, 1956 I. Registration Details RegistrationNo. 0 7 6 0 1 StateCode 0 3 BalanceSheetDate 3 1 1 2 2 0 0 2 Date Month Year II. CapitalRaisedduringtheYear(Amount in Rs. Thousands) Public Issue Rights Issue N I L N I L Bonus Issue Private Placement N I L N I L III. Position of Mobilisation and Deployment of Fund (Amount in Rs. Thousands) Total Liabilities Total Assets 1 3 1 0 7 1 6 1 3 1 0 7 1 6 Sources of Funds Paid-Up Capital Reserves and Surplus 8 9 7 2 0 4 1 6 7 7 0 3 Secured Loans Unsecured Loans 1 4 1 4 4 1 6 3 3 7 4 Deferred Tax Liabilities (Net) 4 0 9 9 4 Application of Funds Net Fixed Assets Investment 5 1 1 3 1 8 1 1 7 8 7 3 Net Current Assets Misc. Expenditure 6 7 4 0 5 7 7 4 6 8 Accumulated Losses N I L IV. Performance of Company (Amount in Rs. Thousands) Turnover Total Expenditure 1 5 6 3 9 1 6 1 3 7 1 3 2 3 + – Profit/Loss Before Tax + – Profit/Loss After Tax + 1 9 2 5 9 3 + 1 2 4 2 5 3 + – EarningperShareinRs. Dividendrate% + 1 . 6 7 * N I L *Dividendon26,00,0009% CumulativeRedeemablePreferenceSharesofRs.100each@ 9% hasbeenrecommendedfortheperiods1stApril,2001to 31stMarch,2002andalsofrom 1stApril,2002to31stDecember,2002. V. GenericNamesofThreePrincipalProductsoftheCompan(as y per monetary terms) Item Code No. 8 4 8 2 2 0 0 1 & 8 4 8 2 2 0 0 2 (ITC Code) Product Description T A P E R E D R O L L E R B E A R I N G S Item Code No. 8 4 8 2 2 0 0 3 (ITC Code) Product Description A P C A R T R I D G E T A P E R E D R O L L E R B E A R I N G S Item Code No. 8 4 8 2 8 0 0 0 (ITC Code) Product Description O T H E R I N C L U D I N G C O M B I N E D B A L L / R O L L E R B E A R I N G S On behalf of the Board of Directors Jamshedpur Soumitra Hazra Shyamal K Sinha G.W. Robinson February 3, 2003 Finance Controller & Company Secretary Dy. Managing Director Chairman 30


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    SIXTEENTH ANNUAL REPORT CASH FLOW STATEMENT FOR NINE MONTHS ENDED 31ST DECEMBER, 2002 Nine months ended Year ended 31.12.2002 31.03.2002 Rs. ’000 Rs. ’000 A. CASH FLOW FROM OPERATING ACTIVITIES : Net Profit/(Loss) before Tax and Extraordinary items 192,593 9,289 Adjustments for : Depreciation 66,640 122,475 Interest income — (10,194 ) Interest expense 11,435 17,519 Income from Mutual Fund (Net) (152 ) (2,438 ) (Profit)/Loss on sale of assets 1,100 2,060 Miscellaneous expenditure amortised 1,977 2,636 Miscellaneous expenditure paid — — Provision for Wealth Tax 45 60 81,045 132,118 Operating Profit before Working Capital Changes 273,638 141,407 Adjustments for : Trade and Other Receivables (295,569 ) (23,866 ) Inventories (52,760 ) (38,086 ) Trade Payables and Other Liabilities 170,715 71,517 (177,614 ) 9,565 Cash Generated from Operations 96,024 150,972 Direct Tax paid (38,383 ) (28,402 ) (38,383 ) (28,402 ) Net Cash from Operating Activities 57,641 122,570 B. CASH FLOW FROM INVESTING ACTIVITIES : Purchase of Fixed Assets (64,805 ) (30,185 ) Sale of Fixed Assets 5,438 929 Investment (136 ) (117,438 ) Income from Mutual Fund (Net) 152 2,438 Interest received — 10,194 Inter-corporate deposits — 140,000 Net Cash from Investing Activities (59,351 ) 5,938 C. CASH FLOW FROM FINANCING ACTIVITIES : Preference Dividend paid (46,800 ) (25,787 ) Interest paid (11,783 ) (17,186 ) Proceeds from issue of Share Capital — — Proceeds from Term/Short Term Borrowings 133,854 — Repayment of Term Borrowings (31,764 ) (78,070 ) Cash Credit (Net) (49,327 ) 8,472 Net Cash from Financing Activities (5,820 ) (112,571 ) Net increase/(decrease) in Cash and Cash equivalents (7,530 ) 15,937 Cash and Cash equivalents as at 1st April (Opening Balance) 72,302 56,364 Cash and Cash equivalents as at 31st December/March (Closing Balance) 64,772 72,301 Note : (1) Figures in brackets represent outflows. (2) Cash and Cash equivalent as on 31st December, 2002 includes Rs. Nil (2001-02 : Rs. 28,96,254) being amount towards share application money refund account. (3) Cash and Cash equivalents as on 31st December, 2002 includes Rs. 1,62,76,277 (2001-02 Rs. 1,99,26,869) being amount towards unclaimed Debenture Interest, that are not available for use by the enterprise. (4) Previous year’s figures have been regrouped/rearranged, wherever necessary. As per our certificate attached For S. R. Batliboi & Co. Chartered Accountants Per Rahul Roy Soumitra Hazra Shyamal K Sinha G.W. Robinson a Partner Finance Controller & Company Secretary Dy. Managing Director Chairman Kolkata, 11 February, 2003 Jamshedpur, February 3, 2003 AUDITORS’ CERTIFICATE To, The Board of Directors, Timken India Limited Bara, P. O. Agrico Jamshedpur - 831009 We have examined the attached Cash Flow Statement of Timken India Limited for the nine months period ended 31st December, 2002. The Statement has been prepared by the Company in accordance with the requirements of Clause 32 of listing agreements with the Stock Exchanges and is based on and in agreement with the correspond- ing Profit and Loss Account and Balance Sheet of the Company covered by our report of February 2003 to the Members of the Company. S. R. Batliboi & Co. Chartered Accountants Place : Kolkata Per RAHUL ROY Dated : 11 February, 2003 a Partner 31


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    TIMKEN INDIA LIMITED 32


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    SIXTEENTH ANNUAL REPORT FIVE YEARS AT A GLANCE 9 months ended Year ended 31.12.2002 31.03.2002 31.03.2001 31.03.2000 31.03.1999 Production (i) Standard Brgs. (Equiv. Nos.) 1,917,371 1,958,130 1,998,153 2,078,514 1,916,322 (ii) AP Cartridge Brgs. (Sets) 41,908 26,419 53,553 47,324 40,247 Rs./Lakhs Profit & Loss Account (i) Gross Sales 17,325 15,655 17,114 16,288 14,281 (ii) Net Sales (a) Domestic 10,867 11,665 11,836 12,275 10,559 (b) Export 4,772 2,129 3,612 2,181 2,209 Total (a+b) 15,639 13,794 15,448 14,456 12,768 (iii) EBIT 2,040 157 2,381 2,068 1,194 (iv) Profit Before Tax 1,926 93 2,153 1,763 814 (v) Profit After Tax 1,243 81 2,001 1,520 728 (vi) Surplus/(Accumulated Loss) 1,677 844 1,853 110 (1,269 ) Balance Sheet (i) Gross Block 14,765 14,330 13,683 12,372 11,960 (ii) Net Block 5,113 5,197 5,965 5,842 6,526 (iii) Net Current Asset 6,333 4,475 5,208 3,639 3,023 (iv) Capital Employed 11,521 9,582 11,294 9,628 9,549 (v) Beginning Invested Capital (BIC) 9,513 11,273 10,214 10,249 11,370 (vi) Total Debt 2,048 1,524 2,217 2,691 4,609 (vii) Equity 10,574 9,722 10,704 8,935 8,353 (viii) Total Capital 12,623 11,246 12,921 11,626 12,962 Other Comparative Data (i) PAT to Net Sales (%) 8 1 13 11 6 (ii) EBIT / BIC (%) 21 1 23 20 11 (iii) Return on Net Worth (%) 12 1 19 17 9 (iv) E.P.S. (Rs.) 1.67 (0.24) 2.73 1.98 0.74 (v) Capital Expenditure/Depreciation 0.65 0.23 1.03 0.39 1.12 for the year (times) (vi) Total Debt to Equity (%) 19 16 21 30 55 (vii) Total Debt to Total Capital (%) 16 14 17 23 36 (viii) Fixed Asset Turnover (times) 3.06 2.65 2.59 2.47 1.96 (ix) Working Capital Turnover (times) 2.47 3.08 2.97 3.97 4.22 (x) Current Ratio (times) 1.57 1.76 1.99 1.58 1.49 (xi) Interest Cover (times) 17.84 0.89 7.12 4.89 2.42 (xii) Net Sales/Employee (Rs./Lakhs) 27 23 26 26 24 Notes : (i) EBIT/BIC i.e. Beginning Invested Capital, a type of return on asset ratio, is used internally to measure the Company’s performance. In broad terms, invested capital is total assets minus non interest-bearing current liabilities. (ii) Return on Net Worth is profit after tax divided by net worth as at the end of the year. (iii) Equity includes Preference Share Capital net off accumulated losses and miscellaneous expenditure to the extent not written off. (iv) Fixed Asset Turnover is net sales divided by net fixed assets as at the end of the year. (v) Net Current Asset is current assets minus current liabilities including current portion of long term loans repayable within one year. (vi) Working Capital Turnover is net sales divided by net current asset as at the end of the year. (vii) Current ratio is current assets divided by current liabilities including current portion of long term loans repayable within one year. (viii) Interest Cover is profit before interest and taxation divided by interest expenses (gross). (ix) Certain tools have been regrouped with Fixed Assets as on 31st December 2002 and 31st March 2002, gross value being Rs. 457 lacs and Rs. 412 lacs. (Refer Note (O) of Schedule XVII of the Annual Report). (x) Figures have been regrouped/rearranged to make it comparable. 39 33


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    TIMKEN INDIA LIMITED TIMKEN INDIA LIMITED Regd. Office : Bara, P.O. Agrico, Jamshedpur - 831 009 ATTENDANCE SLIP Name ..................................................................................................................................................................... Folio No. ................................................................................................................................................................ No. of Shares held ................................................................................................................................................. I hereby record my presence at the Sixteenth Annual General Meeting of the Company at Tata Steel Management Development Centre, Circuit House Area (East), XLRI Campus, Jamshedpur-831 001 on Wednesday, April 30, 2003 at 12.00 Noon. SIGNATURE OF THE MEMBER/PROXY ............................................................................................................................... Notes : 1 Members/Proxyholders wishing to attend the meeting must bring the Attendance Slip to the Meeting and hand over at the entrance duly signed. 2 Members/Proxyholders desiring to attend the meeting are requested to bring their copy of the Annual Report for reference at the Meeting. TIMKEN INDIA LIMITED Regd. Office : Bara, P.O. Agrico, Jamshedpur - 831 009 PROXY I/We, ............................................................................................................................................................................................. of ................................................................................................... in the District of .................................................................... a Member/Members of the above named Company, hereby appoint ................................................................................................... of .............................................................................................. in the District of ....................................................or failing him ...................................................................................... of ..................................................................................in the District of .................................................................................................................... as my/our Proxy to attend and vote for me/us and on my/our behalf at the Sixteenth Annual General Meeting of the Company, to be held on Wednesday, April 30, 2003 and at any adjournment thereof. Signed this ................................................................................................................. day of .............................................. 2003. Reference Folio : .......................................................................... Affix No. of Shares : ........................................................................... 30 Paise Signature ............................................................................... Revenue Stamp Note : The Proxy must be returned so as to reach the Registered Office of the Company at Bara, P.O. Agrico, Jamshedpur - 831 009 not less than 48 hours before the time for holding the aforesaid Meeting. 34 3RD COVER


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    TIMKEN INDIA LIMITED Corporate Governance Report Board of Directors Composition: Company’s philosophy on code of governance The Company has a Non-Executive Chairman and the number of Timken India Limited, being a subsidiary of The Timken Company, Independent Directors is not less than one-third of the total number USA follows the standards of Business Ethics Policy. In accordance of Directors. The number of Non-Executive Directors is more than with the said policy, the business of the Company is to be 50% of the total number of Directors, with the Dy. Managing Director conducted according to highest standards of integrity and ethics being the only Executive Director on the Board of Directors of the Company. with due regard for all applicable laws. All associates are expected to be familiar and comply with all applicable laws and regulations. None of the Directors on the Board is a member of more than 10 Committees and Chairman of more than 5 Committees across Towards achieving this, the Company had put in place a number all the companies in which he is a Director. The necessary of systems to ensure transparency in decision making, disclosures regarding Committee positions have been made by all empowerment at different levels, accountability and integrity. With the Directors. the introduction of the code of corporate governance through an The names and category of Directors on the Board, their attendance amendment of the Listing Agreement with the Stock Exchanges, at the Board Meetings held during the year and also at the last the Company has fine tuned its corporate practices so as to bring Annual General Meeting, the number of Directorships and them in line with the requirements of the said amendments of the Committee Memberships held by them in other companies are Listing Agreement. given below : Name Category No. of Board Whether No. of No. of Meetings attended attended Director- Committee during the nine AGM held ships in positions months ended on July other held in other December 31, 2002 19, 2002 companies companies Chairman Only Member Mr. Gordon W. Robinson Promoter 3 Yes 2** – – Director, Non-Executive, Not Independent Mr. Shyamal K. Sinha Executive, 3 Yes – – – Not Independent Dr. J. J. Irani* SINCE RESIGNED 1 No 13** 1 8 Mr. Mantosh Sondhi* SINCE DECEASED 2 Yes 8 4 5 Dr. T. Mukherjee Non-Executive, 2 Yes 10** 1 6 Independent Mr. Jon T. Elsasser Promoter Director, – No 3** – – Non-Executive, Not Independent Mr. Scott A Scherff Promoter Director, – No 8** – – Non-Executive, Not Independent Mr. Vinod K. Dasari Non-Executive, 2 Yes 3 – – Independent Mr. Jai S. Pathak Non-Executive, 2 No 3 1 6 Alternate Director to Independent Mr. Scott A. Scherff Mr. P S Dasgupta Non-Executive, – No 21** 1 8 Alternate Director to Independent Mr. Jon T. Elsasser * Dr. J J Irani, a Director of the Company has resigned as a director of the Company effective December 6, 2002. Mr. Mantosh Sondhi, who was the Chairman of the Audit Committee and a Director of the Company passed away in Bangalore on October 29, 2002. ** including directorships in Private Limited/Foreign companies. 32


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    SIXTEENTH ANNUAL REPORT Three Board Meetings were held during the nine-months period Remuneration Committee ended December 31, 2002 and the gap between two meetings did A Remuneration Committee of the Board has been constituted not exceed four months. The dates on which the Board Meetings by the Company. The broad terms of reference of the were held are as follows: Remuneration Committee includes determination on behalf of the 1) May 14, 2002 Board of Directors of the Company and on behalf of the 2) July 19, 2002 shareholders, the Company’s policy on specific remuneration packages for Executive Directors of the Company. The Company 3) October 22, 2002 has one Executive Director under the designation ‘Dy. Managing Information as required under Annexure I to Clause 49 is being Director’. made available to the Board. The Company did not have any In terms of the provisions of Clause 49 of the Listing Agreement pecuniary relationship or transactions with Non-Executive Directors read with the recently amended provisions of Schedule XIII to the during the period under review. Companies Act, 1956, all the three members of the Remuneration Audit Committee Committee are Non-Executive, Independent. The Audit Committee of the Board enjoys all the powers as The composition of the Remuneration Committee is as follows: mentioned in para II(C) of Clause 49 of the Listing Agreement. The scope of the Audit Committee includes all the work stated in Name of the Members Category para II(D) of Clause 49. Dr. T. Mukherjee, Chairman Non-Executive The Company has complied with all the requirements of Clause Independent 49 (II)(A) of the Listing Agreement relating to composition of the Audit Committee. Mr. Mantosh Sondhi, an independent Director Mr. P. S. Dasgupta, Member Non-Executive was the Chairman of the Audit Committee till his death on October Independent 29, 2002. In his absence, Mr. Vinod Kumar Dasari, an independent Mr. Jai S. Pathak, Member Non-Executive Director chaired a meeting of the Audit Committee on October 22, Independent 2002. Mr. Mantosh Sondhi as the Chairman of the Audit Committee was present at the Fifteenth Annual General Meeting of the The resident Non-Executive Directors of the Company are paid Company held on July 19, 2002. remuneration by way of Sitting Fees only. At present, a sum of The composition of the Audit Committee and the details of meetings Rs. 3000/- is paid to each resident Non-Executive Director for attended by the members thereof are as follows: attending a meeting of the Board or a Committee of the Board. Non-resident, Non-Executive Directors are not paid any Sitting Fees. The Dy. Managing Director is also not entitled to receive any Name of the Members Category No. of Sitting Fees for attending meetings of the Board of Directors or Meetings Committees thereof. attended The Company pays remuneration by way of salary, perquisites and Mr. Mantosh Sondhi, Non-Executive 1 allowances (fixed components) and Performance Incentive (variable Chairman* Independent component) to the Dy. Managing Director being the only Executive Dr. T. Mukherjee, Non-Executive 1 Director on the Board of Directors of the Company, after obtaining Member Independent the requisite approvals from the Remuneration Committee, Board of Directors of the Company and the shareholders and complying Mr. Jai S. Pathak, Non-Executive 2 with the requisite formalities as prescribed under the Companies Member Independent Act, 1956. Performance Incentives (variable component) is based on the performance criteria laid down at the beginning of the year Mr. Vinod K. Dasari, Non-Executive 1 which broadly takes into account the profit targets set for the year Member Independent under review. * Mr. Mantosh Sondhi acted as the Chairman of the Audit Details of Remuneration of Directors for nine-months ended Committee till his death on October 29, 2002. on December 31, 2002 Audit Committee Meetings are attended by DM - Finance, Manager Non-Executive Directors – Internal Audit and Dy. Managing Director as invitees. A Name of the Directors Sitting Fees (Rs.) representative of the statutory auditors also attends these meetings normally. Finance Controller & Company Secretary acts as the Mr. Gordon W. Robinson Nil Secretary of the Audit Committee. Dr. J. J. Irani 3,000 Mr. Mantosh Sondhi 9,000 Two Audit Committee Meetings were held during the nine-months Dr. T. Mukherjee 9,000 period ended December 31, 2002. The dates on which the said Mr. Jon T. Elsasser Nil meetings were held are as follows: Mr. Scott A. Scherff Nil 1) May 14, 2002 Mr. Vinod K. Dasari 9,000 2) October 22, 2002 Mr. Jai S. Pathak 12,000 Mr. P. S. Dasgupta Nil Necessary quorum was present at all these meetings. 33


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    TIMKEN INDIA LIMITED Executive Directors Name of the Director Salary & Allowances Perquisites Performance Incentive Stock Options Mr. Shyamal K. Sinha Rs. 7,10,738 Rs. 71,342 Rs. 1,12,500 Nil The terms of appointment of the Dy. Managing Director is governed The status of investors’ queries handled by the Company and also by the provisions of the Companies Act, 1956 and such appointment by the Registrars during the period April 2002 to December 2002 is subject to termination by either party by giving three months are given below: notice unless termination at a shorter notice is mutually agreed by the Dy. Managing Director and the Board of Directors of the Particulars Total Total Total Company. As per terms of his appointment, the Dy. Managing Received Replied Pending Director is not entitled to receive any severance fees. as on 31.12.02 Investors Relation and Grievance Committee Non-receipt of interest 229 229 - The Investors Relation and Grievance Committee is entrusted by /redemption the Board to look into redressal of investor complaints, e.g. transfer Change of Address 329 329 - of shares, non-receipt of Balance Sheet, etc. and also to authorize / POA registration of transfer of shares, issue of duplicate / new certificates, etc. Others 221 221 - Non-receipt of 182 182 - The composition of the Investors Relation and Grievance Certificates Committee is given below: Revalidation 139 139 - Name of the Members Category Duplicate 46 46 - Dr. T. Mukherjee Non-Executive /New Certificates Chairman Independent Transmission 20 20 - Mr. Shyamal K. Sinha, Executive Endorsement 14 14 - Member Not Independent Bills 27 27 - Dematerialisation 20 20 - Mr. Jai S. Pathak, Non-Executive Member Independent TOTAL 1227 1227 - Dr. T. Mukherjee, an Independent, Non-Executive Director is the Stock Exchanges Chairman of the Investors Relation and Grievance Committee. Mumbai Stock Exchange 12 12 - Mr. Soumitra Hazra, Finance Controller & Company Secretary acts Calcutta Stock Exchange 3 3 - as the Compliance Officer. National Stock Exchange 3 3 - No formal meeting of the Investors Relation and Grievance Regulatory Bodies Committee was held in the nine-months period ended December 31, 2002. Approvals of the members of Investors Relation and SEBI 4 4 - Grievance Committee are however, obtained through Circular Registrar of Companies, 2 2 - Resolutions for effecting registration of transfer of shares, issue of duplicate/new certificates and other issues effecting investor Bihar & Jharkhand services, e.g. appointment of new registrars and transfer agents. Dept. of Company Affairs 1 1 - During the above period, an aggregate of 35 resolutions have been approved by the said Committee. As on December 31, 2002, 61 requests for registration of transfer In addition, a status report on Investor Services is also circulated of Equity Shares of the Company remained outstanding in the to the members of the Investors Relation and Grievance books of the Company being requests received subsequent to Committee every month. December 21, 2002. General Body Meetings Details on General Meetings : Location, date and time of General Meetings held during the last three years : Year Location AGM/ Date Day Time No. of Special EGM Resolutions 1999-2000 Tata Steel Management AGM July 21, 2000 Friday 12.00 Noon 1 Development Centre, XLRI Campus, C. H. Area (E), Jamshedpur – 831 001 2000-2001 As above AGM July 20, 2001 Friday 4.00 pm 1 2001-2002 As above AGM July 19, 2002 Friday 12.00 Noon Nil 34


  • Page 39

    SIXTEENTH ANNUAL REPORT None of the resolutions passed at the above General Body Meetings Means of Communication was required to be put through Postal Ballot. The quarterly results are published in the leading English Dailies (Business Standard / Times of India / Economic Times) and Disclosures Hindi newspapers (Uditvani / Chamakta Aina / Prabhat Khabar). There was no materially significant related party transactions, i.e. The financial results are also displayed on the Company’s website transactions of the Company of material nature, with its promoters, at www.timken.com/india. the Directors or the Management, their subsidiaries or relatives, Management Discussion and Analysis is a part of the Annual etc. that may have potential conflict with the interest of the Company Report. at large during the nine-months period ended December 31, 2002. The Chairman of the Board of Directors being a Non-Executive Representation from key management personnel has been Director enjoys all the infrastructural support during his visits to received relating to financial and commercial transactions where the offices of the Company in performance of his duties. The half- he or his relatives may have personal interest. yearly results of the Company are communicated through newspaper insertions and intimation to the Stock Exchanges are Details of non-compliance by the Company, penalties, strictures also displayed on the Company’s website. Regarding postal ballots, imposed on the Company by the Stock Exchange / SEBI or any the Company is governed by the provisions of the Companies Act, statutory authority on any matters related to capital markets during 1956 and rules framed thereunder relating to passing of resolutions the last three years - NIL. by postal ballots. General Shareholders Information 1. AGM Wednesday, April 30, 2003 at 12.00 Noon at Tata Steel Management Development Centre, XLRI Campus, Circuit House Area (East), Jamshedpur – 831 001. As required under clause 49VI(A) of the Listing Agreement, particulars of Directors seeking appointment/ reappointment are given in the Explanatory Statement to the Notice of the Sixteenth Annual General Meeting . 2. Financial Calendar Nine-months period ended December 31, 2002. 3. Date of Book Closure April 17, 2003 to April 30, 2003 (both days inclusive). 4. Dividend Payment Date Payment of dividend on Preference Shares to be made after declaration thereof at the Sixteenth Annual General Meeting. 5. Listing on Stock Exchanges Equity Shares of the Company are listed on the following Stock Exchanges: The Stock Exchange, Mumbai Phiroze Jeejeebhoy Towers Dalal Street Mumbai – 400 001 The Calcutta Stock Exchange Association Limited 7, Lyons Range Kolkata – 700 001 Magadh Stock Exchange Association 9th Floor, Ashiana Plaza Budh Marg Patna – 800 001 The Company has paid annual Listing Fees to all these three Stock Exchanges for the year 2002-2003. 6. Stock Code 522113 (Equity) (Mumbai) 7. Market Price Data Monthly High/Low of Market Prices of the Company’s Equity Shares, traded on the Stock Exchange, Mumbai during the nine-months period ended December 31, 2002: Month High (Rs.) Low (Rs.) April 2002 29.85 27.10 May 2002 39.90 28.15 June 2002 36.95 30.10 July 2002 39.00 33.50 August 2002 37.00 31.60 September 2002 32.35 27.15 October 2002 28.50 26.40 November 2002 30.00 27.30 December 2002 36.00 28.40 35


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    TIMKEN INDIA LIMITED 8. Performance in comparison to Performance of the Company’s Share Prices in comparison of the BSE Sensex is given below: broad-based indices such as BSE Sensex, CRISIL Index etc. 9. Registrar & Transfer Agents Effective January 1, 2003, Ami Computers (I) Ltd. has been appointed as the new Registrars and Share Transfer Agents. The address for correspondence is given below: Ami Computers (I) Ltd. 60A & 60B, Chowringhee Road Kolkata – 700 020 10. Share Transfer System Requests for registration of transfer of Shares held in physical form may be lodged with Ami Computers (I) Ltd. at Kolkata or may also be sent to Finance Controller & Company Secretary at the Registered Office of the Company at Jamshedpur. All valid requests for registration of transfer are normally processed within 10 - 12 days from the date of receipt of the documents, if the same are complete in all respect. A Committee of the Board under the title “Investors Relation and Grievance Committee” has been entrusted with the authority, inter alia, to approve registration of transfer of shares. 11. Distribution of Share holding The distribution of shareholding as on December 31, 2002 is given below : From To Accounts Shares % 0 500 84248 10457204 16.41 501 1000 936 729025 1.14 1001 2000 353 503788 0.79 2001 3000 78 193512 0.30 3001 4000 39 135667 0.21 4001 5000 30 138718 0.22 5001 10000 34 233898 0.37 10001 Above 18 51343038 80.56 Total 85736 63734850 100.00 12. Dematerialisation of The Company has arrangements with National Securities Depository Ltd. (NSDL) and Shares and liquidity Central Depository Services (India) Ltd. (CDSL) for Demat facility. At present around 48% of the Company’s Equity Share Capital is dematerialised. The Shares of the Company are listed on Mumbai, Calcutta and Magadh Stock Exchanges and are regularly traded. 36


  • Page 41

    SIXTEENTH ANNUAL REPORT 13. Outstanding GDRs/ ADRs/ Warrants or any convertible instruments,conversion date Nil and likely impact on equity 14. Plant location The Company’s manufacturing facility is located at Bara, P.O. Agrico, Jamshedpur – 831 009. 15. Address for correspondence Investor related queries may be addressed to the following addresses : The Finance Controller & Ami Computers (I) Ltd. Company Secretary 60A & 60B, Chowringhee Road Timken India Limited Kolkata – 700 020 Bara, P.O. Agrico Tel.No. 033–28009002/28008122 /22812435 Jamshedpur – 831 009 Fax No. 033–22406585/22812609 Tel. No. 0657 – 2210293 E-mail – amicomputers@vsnl.com Fax No. 0657 – 2210117 37


  • Page 42

    TIMKEN INDIA LIMITED AUDITOR’S CERTIFICATE TO THE MEMBERS OF TIMKEN INDIA LIMITED We have examined the compliance of conditions of corporate governance by Timken India Limited, for the nine months ended on 31st December, 2002, as stipulated in Clause 49 of the Listing Agreement of the said Company with stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. We state that no investor grievances are pending for a period exceeding one month against the Company as per the records maintained by the Shareholders/Investors Grievance Committee. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. S. R. BATLIBOI & CO. Chartered Accountants Place : Kolkata Per RAHUL ROY Dated : 11 February, 2003 a Partner 38


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