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AHMEDNAGAR FORGINGS LIMITEDANNUAL REPORT2005 - 2006

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AHMEDNAGAR FORCINGS LIMITED

DIRECTORS' REPORTTOThe Members,AHMEDNAGAR FORCINGS LIMITEDYour Directors have pleasure in presenting the Twenty Ninth Annu al Repo rt and the Au dited Acco un ts of the Com panyfo r the year ended 30th June 2006.FINANCIAL INFORMATION (Rs. in Lacs)PARTICULARS Year ended

30th June 2006 Year ended30th June 2005Sales/ Income from operationsExpendituresGross ProfitDeprecationProfit Before TaxProvisions for TaxationProfit after TaxProvision fo r Deferred Ta xProfit after Deferred TaxAdd. Accumulated ProfitBalance available fo r appropriationAPPROPRIATIONSTransfer to General ReserveProposed dividend o n equity capitalProvision for tax on dividendSurplus carried to Balance Sh eet

37542.7730758.63

6784.141035.525748.62497.175251.451161.24

4090.21363.32

4453.533500.00

664.4093.18

195.95

20581.8617169.273412.59

417.552995.04251.992743.05

655.662087.391775.933863.323500.00

0.000.00

363.32DIVIDENDConsidering the encouraging performance of the company, your Directors are pleased to recommend a dividend ofRs.2/- per equity share of Rs.10/- each for the year ended 30th June 2006, su bject to the approval of shareholders in theensuing Annual General Meeting.INCREASE IN AUTHORISED CAPITALDuring the year under review, Your Company has increased its Autho rised Share Capital from Rs. 25 Crores to Rs. 35 Crores.Accordingly, the Authorised Capital of the Company is Rs. 35 Crores divided into 3,50,00,000 Equity Share s o f Rs.10/- each.PREFERENTIAL ISSUEDuring the year under review, the Company has issued 92,20,000 equity shares of Rs.10/- each at a premium ofRs.151/- each aggregating to Rs.148,44,20,000/- to the promoters of the Company, Flls, Bodies Corpo rate and individualson preferential basis.PERFORMANCEDuring the y ear under review, the com pany has re corded a turnover of Rs. 37542.77 lacs with a net pro fit after tax of Rs.4090.21 lacs . Cash profit has been recorded at Rs. 5125.74 lacs. The reserve position of the Company has reached ata level of Rs. 22436.43 lacs.

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EXPANSION PLANConsidering the huge demand prospects, your Company is trebling its capacity f rom 46000 tpa. In financial year 2006,the Company has increased its capacity to 86000 tpa. Currently, your company plans to fur ther increase the capacityto 1,30,000 tpa by December 2006. Another 35000 tpa would be added by June 2007 taking the total capacity to165,000tpa. The Company is also increasing its machining capacity f rom the current level of 10,000 tpa to 25,000 tpab y next year.DIRECTORSMr. B. Lugani retires at the ensuing Annual General meeting and being eligible offers himself fo r re-appointment.Mr. Gautam Malhotra who was appointed as additional Director vacates his office at the ensuing Annual General Meeting.T h e Company has received representations from the members of the C ompany along with deposits as required under theprovisions of Section 257 of the Companies Act, 1956 expressing their intention to propose the appointment of Mr GautamMalhotra as Director of the Company.AUDITORSM/s Manoj Mohan & Associates, Chartered Accountants, the Statutory Auditors of the Company retire at the ensuingAnnual General Meeting and being eligible offer themselves for re-appointment. They have confirmed their eligibilityto act as auditors of the Company under Section 224(1B) of the Companies Act, 1956, if appointed at the ensuingAnnual General Meeting.FIXED DEPOSITSDuring the year under review, the Company continued to accept deposits under section 58 - A of the Companies Act,1956.DE-MATERIALISATION OF SHARESThe Company's equi ty shares are avai lable for de - mater ial izat ion on both th e deposi tor ies viz., NSDL & CDSL.Shareholders may be aware that S E B I has made trading in your company's shares mandatory, in de - materializedform. As on 30th June 2006, 2,30,14,537 representing 69.28% of your Company's Equity shares capital has been de -materialised.LISTING AT STOCK EXCHANGET h e shares of company are listed on The Bombay Stock Exchange Limited and The National Stock Exchange of India Limited.T h e company has paid the annual listing fee to the Stock exchanges for the year 2006 - 2007.STATUTORY INFORMATION

Particular o f Employees under section 217 (2A) of the Companies Act, 1956 read with the Companies (Particularsof Employees) Rules, 1975 may be taken as Nil. Statutory details o f Energy Conservation and Technology Absorption, R & D activities an d Foreign ExchangeEarning and Outgo, as required under Section 2 1 7 ( 1 ) (e) of the Companies Act, 1956 and the rules prescribedthere under i.e. the Companies (Disclosure of Particulars in Report of Board of Directors) Rules, 1988 are given

in the Annexure and form part of this Report (Please refer Annexure- I) Certificate received f rom the Auditors of the Company regarding Compliance of condit ions of CorporateGovernance, as required under clause 49 VII of the Listing Agreement, is Annexed to and forms part o f thisreport. (Please refer Annexure - I I ) . As required under clause 49 ( I V ) F of the listing Agreement, Management Discussion and Analysis Report isAnnexed and forms part o f this report (Please refer Annexure - III).

DIRECTORS RESPONSIBILITY STATEMENTPursuant to the requirement under Section 217I2AA) of the Companies Act, 1956, as amended by the Companies(Amendment) Act, 2000 with respect to Directors' Responsibility Statement, it is hereby confi rmed :-

That in the preparation of the annual accounts, the applicable accounting standards have been fol lowed;

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ANNEXURE TO THE DIRECTORS' REPORT 2005-2006ANNEXURE - I

INFORMATION REQUIRED UNDER SECTION 2170(6)) OF THE COMPANIES ACT, 1956.I. Research & Development (R & D)a) Specific area in which ( R&D) :Carried out by the Companyb) Benefits derived as a result

i) Product design & development.ii) Process design & improvement for various products.i) Reduction in process t ime.ii ) Higher productivity.

iii) Consistent quality.T o achieve better yield by wayof cost reduction through higher level of automation.Th e Company is in the processof implementing technical changes & process designs.i) Cost reduct ion to savings in Raw Material dies & Moulds &Power & Fuel.ii) Increased productivity & better quality.NA

c ) Future plan of action inmafg. Process & operat ion.II. Technology Absorption:a) Efforts in brief towardstechnology absorptionb) Benefits derived as a result o fth e above efforts e.g.productc ) In case of imported technology(import during the last 6 yearsreckoned f rom beginning of thefinancial year)

III. Foreign Exchange Earnings & Outgo:Activities relating to exports; initiative taken to increase exports; development of new export ma rkets forproduct and services and export plans.Th e parent Company has strategically acquired units in UK, USA and Germany to increase its share of businessin the international market.( R s . In Lacs)

ParticularsForeign Exchange Used

IV. CONSERVATION OF ENERGY:

1. Electricity Purchased :Purchased Units (in Lacs)Total A m oun t ( R s . in Lacs)Average Rate P er Unit - Rs.

2. Furnance Oil / L.D.O.Quantity - K. LitersTotal Cost ( R s . in Lacs)Average Rate P er Liter / Rs.Total Amt. ( R s )

B ) Consumption per unit of ProductionProduction - TonnesElectricity - Units / TonneFurnance Oil - Ltrs / Tonne

Current Year1211.44

Current Year

197.23832.74

4.225,962.00

1272.6721.35

127,267.01

37,924.00520.07157.21

Previous Year434.84

Previous Year

189.86768 .66

4.056,405.001015.05

15.85101,505.00

20,614.00921.02310.71

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FORCINGS LIMITED

CORPORATE GOVERNANCE REPORTI. COMPANY'S PHILOSOPHY ON CORPORATE GOVERNANCE

Forging Limited has implemented an d continuously strives to improve the Corporate Governance practices,stakeholders' expectations and Company's societal commitments through high standards o fthics, sound business decisions, prudent financial management practices, professionalism in decision making an donducting business and finally with strict compliance with regulatory guidelines on governance.I BOARD OF DIRECTORS

e Business of the Company is managed by the Board o f Directors. The Board formulates the strategy, regularlyreviews th e performance of the Company and ensures that the previously agreed objectives are met on a consistentbasis. The Managing Director along with a team of professionals, manages the day to day operations of the Company.e Non-Executive Directors' ar e eminent professionals, drawn from amongst persons with experience in business,ndustry and finance. The Board o f Directors has the ideal composit ion with more than half the Directors being non-xecutive Directors. Since the Company has an Non Executive Chairman, the Board's composit ion meets the stipulatedof at least one third of the Board comprising independent Directors, who have no professional and/orusiness relationship with th e Company.Composition of Directorships

e constitution of the Board as on June 30 , 2006:-Non Executive ChairmanMr. Arvind Dham, Chairman

Director ExecutiveDirector Non Executive Non Executive and IndependentDirector Directorr. Arvind Dham Mr. A. K. Syal Mr. D. S. Malik Mr. B. Lugani

Mr. S. E. KrishnanMr. Gautam Malhotra

Pecuniary Relationshipis no pecuniary relationship or transaction of the non-executive Directors vis-a-vis the Company.

Attendance Record of Board Meetingsthe year under review, Nine Board meeting were held on 10.08.05,14.10.05, 28.10.05, 09.01.06, 27.01.06, 31.01.2006,12.06.06. The Board members are given appropriate documents and information in advance of eachmeeting.

e attendance record of all the Directors on the Board is as under:-

r. Arvind DhamMalik

KrishnanLugani

Syalr. Gautam Malhotra

No. of BoardMeetings attended67485_

Attendance atlast AGMNOY E SNOYESY E SNO

Attendance atlast EGMNOY E SNONOYESNO

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D. Directors of the company having directorship in other Companies, Membership/Chairmanship in committees(as prescribed under Corporate Governance) across all Companies, in which they are directors.Name of Director

Mr. Arvind DhamMr . A.K. SyalMr. D.S. MalikMr. S . E . KrishnanMr. B. Lugani

Category ofDirectorship

No n Executive - ChairmanExecutive - Managing DirectorNo n ExecutiveIndependent & Non ExecutiveIndependent & Non Executive

No. of otherdirectorshipsHeld in OtherPublic Companies*

81722

No. of Membershipin other companiescommittees **Member Chairman32 13 14 1

Mr. Gautam Malhotra Independent & Non Executive 1Mr. Arvind Dham, No n Executive Chairman of the Company is Chairman an d Managing Director of the Holding Company,Amtek Auto Limited and Mr. D.S. Mailk is Joint Managing Director and Mr. B. Lugani is director o f Amtek Auto Limited.* This excludes directorship held in Private Companies, Foreign Companies an d Companies formed under sect ion 25 ofthe Companies Act, 1956** The Committee of Directors include Audit Committee, Shareholders/Investors Grievance Committee and RemunerationCommittee o f Directors only. This does not include Memberships/Chairmanship in com mittees o f Private Limited com panies.III. BOARD PROCEDUREST h e members of the Board have been provided with the requisite information in the l isting agreement well before theBoard Meeting and the same was dealt with appropriately.A ll the Directors who are in var ious committees are within the permissible limit of the listing agreement and none of theDirectors ar e disqualified fo r appointment as director under an y provision of the Companies Act, 1956.IV. AUDIT COMMITTEET h e Board of the Company has constituted Audit Committee, comprising o f three directors. All the members of thecommittee viz. Mr. B. Lugani (Chairman), Mr . S.E.Krishnen and Mr. D.S.Malik are independent and non executives. Theconstitution of the Audit Committee meets th e requirement o f section 292A of the Companies Act, 1956. The power an drole of the audit com mittee is as per the guidelines set out in the l isting agree me nt and as prescribed under section 292Ao f the Companies Act, 1956.During the year, the committee met 5 times and the attendance o f members at the meetings was as follows:Name of Member Status No. of Meetings attendedMr. B. LuganiMr. S. E. KrishnanMr. D. S. Malik

ChairmanDirectorDirector

555

V . REMUNERATION COMMITTEET h e Board has constituted a Remunerat ion Committee, comprising three no n executive an d independent directors viz.Mr. D . S . Malik (Chairman), Mr. Arvind Dham and Mr. B. Lugani. The committee has been constituted to review andapprove the annual salaries, commission, service agreement an d other employment conditions for the executivedirectors.The remuneration policy is directed towards rewarding per fo rmance, based on review o f achievements on a periodicalbasis. Th e remunerat ion policy is in consonance with the existing industry practice.During the year under review, only one meeting of the Remuneration Committee wa s held, in which all the memberswere present.

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FORCINGS LIMITED

) The details of the remuneration to the Executive Director, provided as per accounts, for the year endedJune 30, 2006 are given below:-Salary*(Rs. in Lacs) Commission Total(Rs. in Lacs) ServiceContract13.38 13.38 5 years

includes basic salary, perquisites and al lowances, contr ibution to provident fund etc.The details of the remuneration to the Non Executive Director, provided as per accounts, for the year endedJune 30, 2005 are given below:-

. Arvind DhamLugani

KrishnanMalik

Malhotra

Sitting Fee (Rs.)NIL1,04,00028,00092,000NIL

Commission

NILNILNILNILNIL

Total (Rs.)NIL1,04,00028,00092,000NIL

SHAREHOLDERS/INVESTORS GRIEVANCE COMMITTEEe Board has const i tuted a Shareholders'/Investors' Grievance Committee, comprising three no n executive an ddirectors viz. S . E . Krishnan (Chairman) , Mr. B. Lugani and Mr Arvind Dham. The committee has beenspecif ically look into redressal of shareholders' and investors grievances such as transfer, dividend, de-

related matters.the year, the committee met five time s. All the members were present in all the meetings held during the period.

number o f letters and complaints received and replied to the satisfaction of shareholders during the year underwas 26. As on 30th June 2006, there are Nil complaints pending with th e Company.e Company has also adopted code o f Internal procedures an d conduc t fo r prevention o f insider trading in the shares

f the Company, pursuant to Securities & Exchange Board o f India (Prohibition o f Insider Trading) Regulations, 1992, asThe Board has designated Company Secretary as the Compliance Officer for this purpose and has authorizedcommittee to monitor the compliances as required under the aforesaid RegulationSHARE TRANSFER COMMITTEE

e Board has delegated the powers to approve transfer of the Shares to Share Transfer Committee. The Committeethree non executive and independent directors viz. S.E.Krishnan (Chairman) , Mr.D. S. Malik and Mr, Arvind33 meeting during the year an d approved transfer of the shares lodged with the com pany. All the comm itteepresent in all the meetings of the committee held during the year.e committee deals with the following matters:

Transfer/transmission of shares; Issue of new share certificates; Review of de - materialisation o f shares. All other matters relating to shares.GENERAL BODY MEETINGSTh e last th ree Annual General Meetings were held as under:-

LocationGat No.614, At Village Kuru liTal. Khed: Pune-410 501Gat No.614, At Village Kurul iTal. Khed: Pune-410 501Ga t No.614, At Village Kurul iTal. Khed: Pune-410 501

Date

31.12.200530.10.200416.12.2003

Time

9.30 A.M.9.30 A.M.9.30 A.M.

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No Special Resolution was passed at the last three Annual General Meeting.During the last year, no resolution was put through postal ballot.DISCLOSURESDuring the year under review, the Company did not have any materially significant related party transactions i.e.transactions of the Company of material nature, with its promoters, the directors or the management, their subsidiariesor relatives etc., that may have potential conflict with the interest o f company at large.Whistle Blower PolicyThe company encourages an open door policy, where employees have access to the Head of the business / Function.In terms o f Amtek Code of Conduct, any instance o f non adherence to the Code / any other observed unethical behavioris to be brought to the attention of the immediate reporting authority, who is required to report the same to the Headof Corporate Human Resources.W e hereby affirm that no personnel has been denied access to the Audit Committee.Also, Stock Exchanges or Securities & Exchange Board of India and any other Statutory authority did not imposed anypenalty on any matter relating to capital markets during the last three years.T h e Company has complied with all mandatory requirements of the revised Clause 49 of the Listing agreement, whichcame into effect f rom 1st January 2006. Further, the Company has also complied with the non-mandatory requirementsrelating to constitution of Remuneration Committee, Shareholder Rights an d establishing the W hist leblower Policy.IX. Means of CommunicationResults fo r quarter ended 30th September, 2005, 31st December 2005, 31st March 2006 and 30th June 2006 have beenpublished in English and Marathi newspapers (viz Indian Express and Loksata).The company also uploads its financial results, shareholding pattern and other Information on the website of thecompany i.e. www.amtek.comT h e Company uploads its financial results, shareholding pattern and other information on the E D I F A R W ebsite maintainedb y the National Informatics Centre (NIC), which can be accessed through the W ebsite of the Securities and ExchangeBoard of India ( S E B I ) : http://www.sebi.gov.inA Management Discussion and Analysis report, which forms part of the Annual, Report is given by means o f a separateannexure and is attached to the Directors' Report.X. GENERAL SHAREHOLDERS INFORMATION1. ANNUAL GENERAL MEETING

DateDayTime and Venue

December 30 , 2006Saturday9.30 A.M,Ga t No.614,A t Village .- Kuruli,TaLKhedDistt.: Pune-410 501

FINANCIAL CALENDER:(Tentative & Subject to change)Financial year . 2006-2007First Quarter ResultsSecond Quarter ResultsThird Quarter ResultsFourth Quarter Results

July 1, 2006 to June 30, 2007End October, 2006End January, 2007End April, 2007End July, 2007

3. DATES OF BOOK CLOSURE W ednesday, December 27 2006 toSaturday, December 30, 2006(Both days inclusive)

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FORCINGS LIMITED

. LISTING ON STOCK EXCHANGES :e Shares of the Company are listed on The Bombay Stock Exchange Limited and The National Stock Exchange of India

fees for the year 2006-2007 has been paid to the Stock Exchanges within the stipulated time.. STOCK CODES :

STOCK EXCHANGE : Security Code 513335Trading Symbol AHMEDFORGEINE 425A01011STOCK EXCHANGENO. for dematerialised shares

. STOCK MARKET DATAhigh and low quotations o f shares traded at National and Bombay Stock Exchanges for the year endedJune 2006.

Month BSE NSEHigh Low High LowJuly, 2005August, 2005September, 2005October, 2005November, 2005December, 2005January, 2006February, 2006March, 2006April, 2006May, 2006June, 2006

490.05531.80556.45162.00181.90164.25214.00220.00216.00244.65228.00190.00

319.90440.05147.45123.00122.20132.00150.00192.00181.35210.00167.95133.50

477.90512.80541.40157.45172.45160.05210.15212.35213.45225.15219.15186.50

332.15452.70150.10126.15128.45132.70152.35196.20183.35212.05172.50141.30

REGISTRARS AN D TRANSFER AGENTS:Beetal Financial & Computer Services Pvt. Ltd.B E E T A L HOUSE, 3rd Floor, 99, Madangir,Behind Local Shopping Centre, New Delhi - 110 062Phone No. : Oil - 29961281-3Fax No. Oil - 29961284SHARE TRANSFER SYSTEM

e shares of the Company are traded in compulsory demat mode for all investors, therefore, the shares sent forin physical form are first registered within a week (if in order and complete in all respect) and a demat optionis sent to the shareholders for exercising the option to receive the shares in demat form within 2 1 days. Then theare confirmed to the respective accounts with depositories of National Securities Depository Limited ( N S D L ) andDepository Services Limited (CDSL).. DISTRIBUTION OF SHAREHOLDING AS ON JUNE 30, 2006

. of Shares heldpaid up)5000

1000020000300004000050000

100000Above

ShareholdersNumber62541409233108

2 82260

126

% of Total75.9017.10

2.831.31

0.340.270.731.53

Total % of Total(in Rs,) Shareholding9575570919477034086602845660102955010046804307760

300833350

2.882.771.030.860.310.301.30

90.56: 8240 100.000 332200000 100.00

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10. The Shareholding Pattern as on June 30 2006Category Category of Shareholder Total NumberCode of Shareholders(A ) Shareholding of Promoter and Promoter Group

Total Numberof Shares16666665

Percentage

50.17(1) Indian(a ) Individual's/Hindu Undivided Family(b ) Central Government/State Government(s)(c ) Bodies Corporate(d ) Financial Institutions / Banks(e ) Any Other (specify)

Sub - Total (A) 0)

001001

001666666500

16666665

0050.1700

50.17(2 ) Foreign|a) Individuals (Non-Resident Individuals/Foreign Individuals)(b ) Bodies Corporate(c ) InstitutionsId) Any Other ) Specify)

Sub - Total (A) (2)Total Shareholding of Promoter and Promoter Group (A) =

00000

(A)(1MA)(2) 1

00000

16666665

00000

50.17(B) Public Shareholding(1) Institutions(a ) Mutual Funds/UTI(b| Financial Institutions / Banks(c ) Central Government / State Government(s)(d ) Venture Capital Funds(e ) Insurance Companies(f) Foreign Institutional Investors(g ) Foreign Venture Capital Investors(h) Any Other (Specify)

Sub Total (B) (1)

47000n00

22

2 12 97823800

0006 8 2 9 7 6 900

8963351

6.410.0100020.5600

26.98(2 ) Non-Institutionsla ) Bodies Corporate 423 2902020 8.74(b ) Individuals -i. Individual Shareholders holding nominalShare Capital upto Rs. 1 lakh.ii. Individual Shareholders holding nominalShare Capital in excess of Rs. 1 lakh(c) Any Other (specify)

7737570

27798111908153

0

8.375.74

0Sub-Total (B)(2)Total Public Shareholding(B) = (B)(l) + (B)(2)TOTAL (A) + (B) ____

(C ) Shares held by Custodians an d against whichDepository Receipts have been issuedGRAND TOTAL (A)+(B)+(Q

821782398240

8240

758998416553335

33220000

33220000

22.8549.8

100.00

100.00

1 1

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FORCINGS LIMITED

. DEMATERIALISATION OF SHARES AND UQUIDITY :e Dematting facility exists with both the NSDL and CDSL for the convenience o f shareholders. As on 30th June 2006,representing 69.28% of Subscribed Capital have been de-materialised.

2. OUTSTANDING GDRS / ADRS / WARRANTS / OR ANYCONVERTIBLE INSTRUMENTS, CONVERSION DATE ANDLIKELY IMPACT ON EQUITY

e Company has not issued GDRS/ADRS/ W ARRANTS or Any convertible instruments. PLANT LOCATION

I - MIDC Area, AhmednagarII - Chakan, Dist. PuneIII - Kuruli, Dist. PuneIV - Parwanoo, Dist. Solan (H.P.)

INVESTORS CORRESPONDENCE MAY BE ADDRESSED TO:-Prabhjot Singh Ahluwalia, Company SecretaryForgings Limited,e Great Eastern Plaza, 604, 6th Floor,A, Airport Road, Near Gunjan Theatre,- 411 006.: 020 4031188

BY ORDER OF THE BOARDFOR AHMEDNAGAR FORGINGS LIMITED

Ne w Delhi: 30th October 2006 (ARVIND DHAM)CHAIRMAN

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AUDITORS' REPORT ON COMPLIANCE OF CONDITIONS OF CORPORATE GOVERNANCET oT h e ShareholdersAhmednagar Forgings LimitedW e have examined the compliance of conditions of corporate governance by Ahmednagar Forgings Limited, fo rthe year ended on 30th June 2006 as stipulated in clause 49 of the Listing Agreement of the said Company withs t o c k exchanges.T h e compliance of conditions of Corporate Governance is the responsibility of the management. Our examinationwas l imited to procedures and implementation thereof, adopted by the Company for ensuring the compliance o fthe conditions of corporate governance. It is neither an audit nor an expression of opinion on the financial statementso f the Company.In our opinion and to best of our information and according to the explanations given to us, we certify that theCompany has complied, in all material respects, with the conditions o f corporate governance as stipulated in theabove mentioned Listing Agreement.W e state that no investor grievances are pending for a period exceeding one month against the Company not theefficiency or effectiveness, with which the management has conducted the affairs of the Company.

For Manoj Mohan & AssociatesChartered AccountantsNew Delhi ( A A . K . Aggarwal)30th October 2006 Partner

DECLARATION BY CEO UNDER CLAUSE 49 OF THE LISTING AGREEMENTA s required under Clause 49 of the Listing Agreement with Stock Exchanges, it is hereby conf irmed that for theyear ended 30th June 2006, the Directors' o f Ahmednagar Forgings Limited have affirmed compliance with the Codeo f Conduct fo r Board Members as applicable to them and members of the senior management have affirmedcompliance with the Employee Code of Conduct as applicable to them.New Delhi A.K. Syal30th October 2006 CEO & Managing Director

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CEO AND CFO CERTIFICATION

W e, A.K. Syal, CEO & Managing Director and IK. Laskar, DG M (Finance & Accounts), responsible for the f inance functioncertify that:a) W e have reviewed th e financial statements and cash f low statement for the year ended 30th June 2006 and to

the best of our knowledge and belief:i) these statem ents do not contain any materially untrue stateme nt or omit any material fact or contain statem entsthat might be misleading;ii) these stateme nts together, present a true an d fair view of the Company's affairs and are in compliance withexisting Accounting Standards, applicable laws and regulations.

b) To the best of our knowledge an d belief, no transactions entered into by the Company, dur ing the year ended 30thJune 2006 are fraudulent, illegal or violative of the Company's code o f conduct.c ) W e accept responsibility fo r establishing an d maintaining internal controls for f inancial reporting and we haveevaluated the effectiveness o f internal contro l system s of the Comapny pertaining to f inancial re porting. Deficienciesin the design o r operat ion of such internal controls, if any, o f which we are aware, have been disclosed to the

Auditors and the Audit Committee an d steps have been taken to rectify these deficiencies.d) i) There has not been any significant change in internal control over f inancial reporting during the year underreference;

ii) There has not been an y significant change in accounting policies during the year requiring disclosure in thenotes to the financial statements; andiii) W e are no t aware of any instance during the year o f significant fraud with involvement therein of themanagement or any employee having a significant role in the Company's internal control system overfinancial report ing.

New Delhi T.K. LASKAR A.K. SYAL30th October 2006 D.G.M. (Finance & Accounts) CEO & Managing Director

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MANAGEMENT DISCUSSION AND ANALYSIS REPORT1 . THE FORGING INDUSTRY - AN OVERVIEWGlobally, the automotive industry size is estimated at $1.2 trillion and auto OEMs purchases auto components worth$450bn from global markets. Out of this market, the est imated au to forgings market size is around $50 bn. Forging haveapplications in various industries like auto, oil & gas, equipment manufacturing etc.T h e Indian Forging Industry size is estimated to be around Rs.120 billion. Th e forging market in India is f ragmented att o w e r level. It is very difficult to estimate the total number of forging manufacturers in India, but in organised sector only,t h e r e are around 330 units operating in the market. Out of 330 units, only 9-10 units are considered to be large unitsand around 100 units are categorized as medium units. Th e other players are considered to be tiny units. Th e totalinstalled capacity o f Indian forging market is estimated to be around 900,000 A A T P A .Globally major auto giants like General Motors (GM) FORD, Hyundai, and Auto ancillaries like Delphi, Arvin Meritor, havebeen facing problems of lower margins mainly because saturated global auto markets an d rising costs mainly labourc o s t s and certain overheads.L o w c o s t producing countries like India, China, Brazil, Thailand have emerged as the solution to this problem. GlobalO E M s have started procuring auto components from the companies based in low cost producing countries. Indian autocomponent companies have proven their delivery capability and engineering skill sets to global OEMs. But still thenumber of Indian auto component companies, which exports their products to global OEMs, is very few. W e believe thatconsidering the labour cost differentiation, engineering skill sets and delivery capabilities of Indian auto componentcompanies, this number is bound to improve at a faster rate over the next 2-3 year.A u t o component export have registered almost a three-fold growth in last 6 years. In FY01, Indian auto componentexports were around $625 mn and it has t ouched the figure o f $1.8bn in FY06. Out o f total auto component exports madef r om India, forging exports are estimated to be around 15% or $270mn.Going forward, we expect the Forging export market to grow at a CAGR of 35-40% for next 4-5 years. The Associationo f Component Manufacturers' Association of India (ACMA) expects auto compo nent market in India to grow at a CAGRo f 1 7 % till 2014 to $40bn from $10bn in 2006. ACMA also expects the Indian auto component exports to grow at a CAGRo f 34% ill 2014 to $25bn from $1.8bn in 2006 an d forging exports to grow at a CAGR of 38% till 2014 to $5bn from$270mn in 2006.2. OPPORTUNITIES & CONSTRAINTSOPPORTUNITIES

Consolidation benefits in domestic market opportunity Huge Outsourcing opportunity Well established customer base fo r parent company Rising demand from domest ic auto market

CONSTRAINTS Less presence in large forg ing components Delay in implementation o f expansion Slowdown in domest ic auto market Inadequate testing and validating facilities fo r smaller forging companies

3. SEGMENT WISE PERFORMANCET h e company deals in only one segment i.e.automot ive components. Therefore, it is not possible to give segment wiseperformance4. FUTURE OUTLOOKYou r company, currently, exports to the US A and Europe markets. Apart from other customers AFL also supplies to itsg r o u p companies like GWK, UK. W e believe that going forward with the increase in business of GW K UK, AFL wou ld alsog e t more orders for supply o f forging components. W e estimate that about 30% of AFL's exports wou ld be supplied toG W K in F Y 0 7 E and FY08E. Th e other major customers of AFL include Fairfield Atlas, USA, Cummins, King AutomotiveS y s t em s Ltd. Coventry, Letchworth, Ze iter Gmbh, Hennef etc.Recently AFL has won initial orders from GE Transportation

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FORCINGS LIMITED

USA and Cummins fo r supplying connecting rods, which wou ld also help fue l AFL's export growth in near future.company expects exports to grow at a CAGR o f 267% fo r FY07E-08E.The Company expects expor t o f Rs.lSOOmnFY07E f rom Rs.200mn in FY06A an d Rs2700mn in FY08E. Further FY08E onwards we expect to ramp up f rom globalOEMs and f rom Amtek group companies.

RISKS & CONCERNSth e year 2005-2006, ra w material and components formed substantial part of the total sales. Fo r the past overo years, steel prices have been extremely volati le and t rend is l ikely to persist. The Company has been partlysuch increase through long term contracts, identification o f alternative sources, th rough cost reduction an dactivities. However, if these input costs continues to increase, and thus remain unabated, it will undoubtedelyoverall margin an d operating results.

e profitability of the Co mpany may further be affected by changes in Government Policies regarding Excise Duty, ImportIncome Tax, Fringe Benefit Tax, VAT and any other Central/State levy etc . Though, the rupee is getting stronger andan y sudden change due to rupee depreciation, may affect adversely the profitability of the Company.y significant downturn in the domestic Commercial Vehicle, Two W hee le r markets and export markets could impact

earning negatively.INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Company has in place an adequate system of internal controls to ensure efficacy o f opertions an d complianceapplicable legislation. Audit Committee is reviewing the internal control systems procedures, periodically. An externalof Chartered Accountants have been appointed fo r conducting the Internal Audit. The key elements o f internalare:

Revenue and Capital Budget monitoring system Management Information System Proper authorization for conduct ing business Periodical presentation by managerial personnelDISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCEthe year, the total sales and other income increased by more than 82% to Rs. 37542.77 lacs, f rom Rs. 20581.86

in the previous year.e Gross profit before taxation has increased f rom Rs. 2995.04 lacs during the previous year to Rs. 5748.62 lacs duringe current year registering an increase of 92%e Profit after tax has also increased from Rs. 2087.39 lacs during the previous year, to Rs. 4090.21 lacs during theyear representing an increase o f 96%.

year ended 30th June 2006, the Company has Reserve & Surplus amounting to Rs. 22436.46 Lacs asto Rs 6781.63 lacs in the previous year.the units of the company operated satisfactorily during the year.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONTCompany firmly believes in human capital an d deeply believes that quality and positive attitude of the people ar e

e keys to face the ever growing competition. Accordingly, change o f mindset, innovation, cost an d process optimization,an d management o f change, culture of trust and transparency have been our major HR initiatives duringe year through our various program on naturopathy.e Industrial relations remained cordial th roughout the year.

STATEMENTreport contains fo rward looking statements. All such statements ar e subject to risks an d uncertainties. Actualcould differ materially f rom those expressed o r implied.

BY ORDER OF THE BOARDFOR AHMEDNAGAR FORINGS LIMITED

: New Delhi (ARVIND DHAM)30th October 2006 CHAIRMAN16

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AUDITORS' REPORTTOThe Members,Ahmednagar Forgings Limited,W e have audited the attached Balance Sheet o f Ahmednagar Forgings Limited, as at 30th June 2006, the Profit & LossAccount an d also cash-flow statement for the year ended on that date annexed thereto. These financial statements ar ethe responsibility o f Company's management. Our responsibility is to express an opinion on these financial statementsbased on our audit.W e conducted o ur audit in accordance with Auditing Standards generally accepted in India. Those Standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free o fmaterial misstatem ent. An Au dit includes examining, on a test basis, evidence supporting the amounts an d disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management as well as evaluating the overall financial statements presentation. W e believe that ou r auditprovides a reasonable basis fo r our opinion. W e report that:

i) W e have obtained all the information an d explanations which to the best of our knowledge and belief werenecessary for the purpose o f ou r audit;ii ) In our opinion, proper books of accounts as required by the law have been kept by the Company so far asappears f r om our examination of the books.i i i ) The Balance Shee t, Profit & Loss Account and Cash Flow Statement, dealt with by this report, are in agreement

with th e Books o f Accounts.iv ) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement, dealt with by this report,comply with the Accounting S tandards referred to in sub-section (3C) o f section 211 of the Companies Act1956.v ) On the basis of written representations received f rom Directors as on 30th June 2006 and taken on recordby th e Board o f Directors, we report that none of the Directors is disqualified as on 30th June 2006 f rom beingappointed as a director in terms o f clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.v i) In our opinion and to the best of our information an d according to the explanations given to us, the saidaccounts read with notes thereon, give the information required by the Companies Act, 1956, in the mannerso required and also give a true and fair view in conformity with the accounting principles generally accepted

in India:a) In the case of the Balance Sheet, of the state of affairs of the company as at 30th June 2006.b) In the case of the Profit & Loss Account, of the Profit for the year ended on that date; andc ) In the case of the Cash Flow Statement, of the cash flow for the year ended on that date

vii) As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government o f India interms of Section (4A) of section 227 of the Companies Act, 1956, we report as under on the matters specifiedin paragraphs 4 & 5 of the said order :

1 . In respect of fixed assets:a. The Company has maintained proper records showing full particulars including quantitative details andsituation o f Fixed Assets on the basis o f available information.b. As explained to us, the fixed assets have been physically verified by the management during the year in aphased manner, which in our opinion is reasonable, having regard to the size of the company an d natureof its assets. No material discrepancies were noticed on such physical verification.c. In our opinion, the company has not disposed o ff substantial part o f fixed assets during the year and thegoing concern status of the company is not affected.

2. In respect of its inventories:

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FORCINGS LIMITED

a. As explained to us, inventories have been physically verified by the management at reasonable intervalsduring th e year.

b. In our opinion and according to the information and explanations given to us, the procedures of physicalverification of inventories fo l lowed by the management is reasonable an d adequate in relation to the size o fthe company and nature of its business.c. The company has maintained proper records of inventories. As explained to us, there were no mater ial

discrepancies noticed o n physical verif ication of inventories, as compared to book records.In respect o f loans, secured or unsecured granted o r taken by the company to / f rom companies, fi rms or otherparties covered in the register maintained under section 301 of the companies Act, 1956:a) The Company has granted loans to group companies aggregating to Rs. 11.40 Lacs. The maximum amountinvolved during the year was Rs. 11.40 lacs.b) In our opinion and according to the information and explainations given to us, the rate of interest, whereverapplicable an d other terms and condit ions are not prima facie prejudical to the interest of the Company.c ) In respect of the loan granted to holding company, the loan is interest f ree and being repayable on demandar e not overdue.

. In our opinion an d according to the information an d explainations given to us, there are adequate internal controlprocedures commensurate with th e size of the Company and the nature of i ts business for the purchase,inventory, fixed assets and for the sale of goods. During the course of our audit, we have not observed any majorweakness in internal controls.In respect o f t ransactions covered under section 301 of the Companies Act, 1956:

a) In our opinion and according to the information and explanations given to us, t ransactions made inpursuance of contracts or arrangements, that needed to be entered in the register maintained under section301 of the Companies Act, 1956 have been so entered.b) In our opinion and according to the information an d explanations given to us, there are no t ransact ions inpursuance of contracts or arrangements entered in the register maintained under section 301 of the Co mpaniesAct, 1956. W e are of the opinion that the terms and condit ions thereof are not prime facie prejudical to theinterest of the company.In our opinion and according to the information an d explanation given to us, the company has complied withthe provision of section 58A, 58AA an d other Provisions of the Companies Act, 1956 and the companies (Acceptanceo f deposits) Rule, 1975 with regard to the deposits accepted f rom th e public. No orde r has been passed by theCompany Law Board or Reserve Bank o f India or National Company Law Tribunal or any Court or any Tribunal.In our opinion, the internal audit system of the company commensurate with its size and nature of its business.The Central Government has prescribed maintenance o f Cost Records under Section 209(l)(d) of the Companies Act,1956 in respect of certain machining activities of the co mpany. W e have broadly reviewed th e accounts an d recordsof the company in this connection and are of the opinion, that prime facie, the prescribed accounts an d recordshave been properly maintained.In respect of statutory dues:a) According to the records of the co mpany, undisputed statutory dues including provident fund, Investor Educationand Protection fund, Employees' State Insurance, Income-Tax, Sales-Tax, Fringe Benefit Tax, V A T , W ealth-Tax,Customs Duty, Excise Duty, Cess, Service Tax and other statutory dues have generally been regularly depositedwith the appropriate authorities. According to the information and explanations given to us, no undisputedamounts, payable in respect of the aforesaid dues, were outstanding as at 30th June 2006, for a period ofmore than six months from the date of their becoming payable.b) The disputed statutory dues aggregating to Rs.2.73 Lacs, that have not been deposited on account of matterspending before appropriate authorit ies are as under:

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S. Name of the Statute Nature of DuesNo Forum where dispute ispending Amount (in Lacs)1 . Customs & CentralExcise Act Interest Asst. Commissioner,Ahmednagar Division,Ahmednagar

2.73

Total 2.7310. Th e company has no accumulated losses and has not incurred any cash losses during the financial year coveredby our audit or in the immediately preceding financial year.1 1 . Based on ou r audit procedures and according to the information an d explanation given to us, we are of the

opinion that th e company has not defaulted in repayment of dues to financial institutions, banks or debentureholders.12. In our opinion and according to the information and explanation given to us, no loans and advances have beengranted by the company on the basis of security by way of pledge of shares, debentures and other securities.13. In our opinion, the company is not a chit fund o r a nidhi/mutual benefit fund /society. Therefore, th e provisiono f clause 4(xiii) of the companies (Auditor's Report) Order 2003, are not applicable to the company.14. In our opinion, the Company is not engaged in trading of securities, debentures and other investments. However,proper records of transactions and contracts in respect of long term investments have been maintained an d timelyentries have been made therein. All securities including shares, debentures and other investments have been heldby the company in its own name. Accordingly the provisions of clause 4 (xiv) of the Companies (Auditor's Report)Order, 2003 are not applicable to the Company.1 5 . The Company has not given guarantees fo r loans taken by others from banks o r financial institutions.1 6 . The company has raised term loans during year to the extent of Rs.4250.00 Lacs from financial institutions/banksand the same has been used for the purpose, fo r which it has been raised.1 7 . According to the information an d explanations given to us and on an overal l examination of the Balance Sheet o f

the Company, we report that no funds raised on short term basis have been used for long term investment an dlong term funds have no t been used to finance short term assets except for the purpose o f meeting the long termworking capital.18. During the year, the company has made preferent ial allotment o f 92,20,000 Equity shares of Rs 10/-each at apremium of Rs 151/-per share including 16,50,000 Equity share of Rs. 107- each to the parties and Companiescovered in the register maintained under Section 301 of the Companies Act, 1956. The allotment and pricing of theshares have been made in accordance with the guidelines laiddown in this regard by S E B I and hence price, ofwhich the shares have been issued is not prejudicia l to the interest to the Company.1 9 . The company has not ra ised any money by way of public issue during the year.20. Based on the audit procedures performed an d information and explanations given to us by the management, wereport that no fraud on or by the company has been noticed or reported during the year.

For Manoj Mohan & AssociatesChartered Accountants

Place : New Delhi.Date : 30th October 2006

(M.K. Aggarwal)PARTNER

Membership No.: 76980

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FORCINGS LIMITED

BALANCE SHEET ASPARTICULARS SCHEDULE

SOURCES OF FUNDS1. SHAREHOLDER'S FUNDS

( a ) Share Capital 1( b ) Reserves & Surplus 2

2. LOAN FUNDS( a ) Secured 3( b ) Unsecured

TOTAL. APPLICATION OFFUNDS

1. FIXED ASSETSGross Block 4Less : Cumulative DepreciationNet Block

2. INVESTMENTS 53. CURRENT ASSETS, LOANS & ADVANCES 6

( a ) Current Assets( i j Inventories( i i ) Sundry Debtors( i i i ) Cash & Banks Balances

(b) Loans & AdvancesTotal Current Assets

Less: Current Liabilities & Provisions 7Current LiabilitiesProvisionsTotal Current Liabilities & Provisions

Net Current Assets4. MISCELLANEOUS EXPENDITURE 8

(T o the extent no t written off or adjusted)TOTAL

to the accounts 12terms of our report of even date attached.r Manoj Mohan & AssociatesAccountants

AGGARW AL)

: New Delhi: 30th October 2006

AT 30TH JUNE 2006As at30th June 2006

3,322.0022,436.46

10,175.001,154.56

37,088.02

38,148.634,919.59

33,229.04142.35

6,368.693,914.28

972.221,816.60

13,071.79

8,181.381,261.78

9,443.163,628.63

88.0037,088.02

( R s . In Lacs)As at30th June 2005

800.006,781.63

4,973.611,256.5313,811.77

14,340.714,019.18

10,321.53161.80

4,830.992,452.061,287.08

948.559,518.68

6,301.7920.45

6,322.243,196.44

132.0013,811.77

For Ahmednagar Forgings LimitedA.K. SYALManaging Director

PRABHJOT SINGHCompany Secretary

ARVIND DHAMDirectorB. LUGANIDirector

T.K. LASKARDGM (Fin. & Acctt.)20

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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30TH JUNE 2006( R s . In L a c s )

PARTICULARS SCHEDULE For the year ended30th June 2006 For the period ended30th June 2005

INCOMES a l e s & Other Income 37,542.77 20,581.86EXPENDITUREMaterial & Manufacturing ExpensesPersonnel ExpensesAdministrative, Selling & Other Exps.Financial Expenses

T O T A L

101 1

27,893.891,491.73837.27535.74

30,758.63

14,696.891,296.82740.52435.04

17,169.27

Profit Before DepreciationDepreciationProfit Before TaxProvision for Taxation

6,784.141,035.525,748.62

3,412.59417.55

2,995.04

C u r r e n t T a xDeffered T a xProfit After TaxA d d : Accumulated Profit

497.171,161.24

4,090.21363.32

251.99655.66

2,087.391,775.93

Balance Available For AppropriationAPPROPRIATIONS:T r f d . to General ReservesProposed Dividend o n Equity CapitalProvision for Tax on DividendSurplus carried to Balance SheetNotes to the accounts

4,453.53

3,500.00664.4093.18195.95

3,863.32

3,500.000.000.00

363.3212

In terms of our report of even date attached.F o r Manoj Mohan & AssociatesChartered Accountants(M K AGGARWAL)PartnerP l a c e : New DelhiDated : 30th October 2006

For Ahmednagar Forgings LimitedA.K. SYAL ARVIND DHAMManaging Director

PRABHJOT SINGHCompany SecretaryDirector

B. LUGANIDirectorT.K. LASKARDGM (Fin. & Acctt.)

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FORCINGS LIMITED

CASH FLOW STATEMENT FOR THE YEAR ENDED 30TH JUNE 2006(Rs. In Lacs)

PARTICULARS For the year ended30th June 2006 For the year ended30th June 2005

FLOW FROM OPERATING ACTIVITIES :Ne t Profit before tax & extraordinary itemsAdjustments to reconcile profit before tax & extraordinaryitems to cash provided by operat ion :Add : DepreciationLoss/(Gain) on sale of Investments, netLossX(Gain) on sale o f f ixed assets, ne tDividend IncomeInterest Received & Other IncomeDeferred & Preliminary Exp. W ritten o ffChanges in current assets, Loans & Advances :(Increase) / Decrease in Inventories(Increase) / Decrease in Sundry Debtors(Increase) / Decrease in Loans & AdvancesIncrease / (Decrease) in Current LiabilitiesCash generat ion by operat ionsInterest Received & Other incomeDividend ReceivedNet cash from operating activitiesCASH FLOW FROM INVESTING ACTIVITIESAddition to Fixed Assets (including Capital W o r k In Progress)Proceeds f rom Sale o f InvestmentProceeds from Sale o f AssetsNet Cash from Investing activitiesCASH FLOW FROM FINANCING ACTIVITIESProceeds f rom issue of share capitalProceeds f rom new borrowingsRepayment of borrowingsNet Cash from financing activitiesNet cash flows during the year (A+B+QCash & Cash equivalents (opening balance)Cash & cash equivalents (closing balance)

5,748 .621,035.52(34.84)(8.11)(0.09)(52.61)44.006,732.49(1,537.70)(1,462.22)(868.05)704.933,569.4552.610.093,622.15

(24,130.29)54.29195.37(23,880.63)

14,844.205,099.420.0019,943.62

(314.86)1,287.08972.22ES TO CASH FLOW STATEMENTFigures in brackets indicate cash outf low an d without brackets indicate cash inflow.Interest paid during the year is considered part o f operating activitiesBank borrowings com prising o f cash credit have been grouped as part o f financing activities.

2,995.04417.550.00(27.67)(0.50)(11.12)44.00

3,417.30(1,061.16)(275.74)(78.55)(850.03)1,151.8211.120.50

1,163.44

(3,966.45)159.44(1.89)(3,808.90)

0.003,965.89(370.83)3,595.06

949.60337.481,287.08

ARVIND DHAMDirectorPRABHJOT SINGHCompany Secretary

A.K. SYALManaging DirectorB. LUGANIDirector

For AHMEDNAGAR FORGING LIMITEDT.K. LASKARDGM !Fin.& Acctt.)

e have examined the above Cash Flow Statement of Ahmednagar Forging Limited for the year ended 30fh June 2006 an d verify that it has beenfrom the audited accounts (and underlying records] of the company reported on by us as per our report.For Manoj Mohan & Associates

Chartered AccountantsNew Delhi30th October 2006 (M.K. AGGARWAL)Partner

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SCHEDULES FORMING PART OF THE BALANCE SHEETSchedule 1SHARE CAPITAL ( R s . In Lacs)

PARTICULARS As a t30thJune 2006 As at30th June 2005

AUTHORISED3,50,00,000 Equity Shares of Rs. 10/- each 3,500.00 1,000.00(Previous year 1,00,00,000 Equity share of Rs. 10/- each) ISSUED, SUBSCRIBED AND PAID UP3,32,20,000 Equity shares of Rs. 10/- 3,322.00 800.00fully paid up (Previous Year 80,00,000 Equity shares of Rs. 10/- each)

TOTAL 3,322.00 800.00Schedule 2RESERVES & SURPLUS

PARTICULARS As a t30th June 2006

( R s . In Lacs)PARTICULARS

Share PremiumOpening BalanceLess Bonus Shares IssuedAdd Issue of SharesCapital SubsidyGeneral ReserveOpening BalanceLess: Bonus Shares IssuedAd d T r f . during the yearProfit & Loss Account

TOTALSchedulesLOAN FUNDS

As at30th June 2006

1,302.56(1,302.56)13,922.20 IT 900 on81.67

5,034.08(297.44)3,500.00

8 r\r\ f /A195.9522,436.46

As at30th June 2005

1,302.5681.67

5,034.08363.326,781.63

( R s . In Lacs)As at

30th June 2005Secured Loans:(i ) Bank Borrowings( i i ) Loans f rom Financial Institutions 3,675.006,500.00 2,723.612 ,250 .00

TOTAL 10,175.00 4,973.61Notes:Term debts from Financial Institutions/Banks are secured by way of first mor tgage o f Company's all immovable propertiesranking pari passu interse and hypo thecation of whole of the C ompany's movable properties including plant & machinery,machinery spares, tools and accessories (save and except book debts) present and future, subject to prior chargescreated/to be created in favour of the Company's bankers on inventories book debts and other specified movables forsecuring the borrowing fo r wo rking capital requirements and loans under EFS/ECS/HP/Lease schemes if any are securedby way of charge on the specified assets f inanced under the scheme.

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Schedule 4FIXED ASSETSGROSS BLOCK

PARTICULARS

Land & Site Development(Including Leasehold)BuildingPlant & MachineryFurniture & FixtureOffice EquipmentData Processing UnitVehic le

As o n01.07.0586.00

1,079.959,118.00

95.0146.06

129 . 867 5 . 9 9

TOTAL 10,630.87Capital W ork - i n -P ro g ress 3,709.84TOTAL GROSS BLOCK 14,340.71CURRENT YEAR

Additions

-

3.348,242.52

3.372.90

2 6 . 3 211.00

8,289.4523,944.6932,234.14

Sales/Transfers

2.11

3 0 . 6 52 7 0 . 6 9

2.160.212.32

14.23

322.378,103.858,426.22

As on30.6.068 3 . 8 9

1,052.6417 , 089 . 83

9 6 . 2 248.75

1 53 . 867 2 . 7 6

18,597.9519 , 550 . 6838,148.63

As o n1.7.05-

340.503,503.79

51.8119.3774.5129.20

4,019.18-

4,019.18

DEPRECIATION

Duringthe year-

35.07964.77

5.992.37

20.476.85

1,035.52-

1,035.52

WrittenBack/adj.-

10.73109.67

1.390.132.22

10.97

135.11-

135.11

As on30.6.06-

3 6 4 . 8 44 , 3 5 8 . 8 9

56.4121.61

9 2 . 7 62 5 . 0 8

4,919.59-

4,919.59

( R s . in Lacs)W RITTEN DOWN

As on30.6.068 3 . 8 9

6 8 7 . 8 012,730.94

39 . 8127.1461.10

4 7 . 6 813,678.3619 , 550 . 6833,229.04

VALUEAs on30.6.0586.00

739.455,614.21

43.202 6 . 6 95 5 . 3 54 6 . 7 9

6,611.693,709.8410,321.53

Total Gross Block(Previous Year) 10,581.14 7,262.85 3,503.28 14,340.71 3,676.74 417.55 75.11 4,019.18 10,321.53

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SchedulestJVESTMENT (Rs. In Lacs)PARTICULARS As at As at

_________________ 30th June 2006 30th June 2005(Quoted-Long Term Trade) at Cost1,00,000 Equity Shares of Rs. 107- each of Grapco Mining & Co. Ltd. 13.00 130(Previous year 1,00,000 Equity Shares of Rs. 10/- each)1,03,100 Equity Shares of Rs. 10/- eacho f Global Infrastructure & Technologies Ltd. 54.86 54.86(Previous year 1,03,100 Equity Shares of Rs. 107- each)700 Equity Shares of Rs. 10/- each of Sanghvi Movers Ltd. AT cost 060 150(Previous year 17,700 Equity Shares of Rs. 10/- each)50,000 Equity Shares of Rs. 10/- eacho f Patheja Forging & Auto Parts Ltd. At cost 50.00 50.00( P r e v i o u s year 50,000 Equity Shares of Rs. 107- each)5,000 Equity Shares of Rs. 107- each of Good Value Marketing Ltd. At cost 200 20( P r e v i o u s year 5,000 Equity Shares of Rs. 107- each)7,014 Equity Shares of Rs. 107- each of Dena Bank At cost 189 18(Previous year Nil Equity Shares of Rs. 10- each))(Unquoted - Long Term Non Trade) at CostNil Equity Shares of Rs. 1007- each of Usav Forgings Ltd. At cost 000 50( P r e v i o u s year 5,000 Equity Shares of Rs. 1007- each)50,000 Equity Shares of Rs. 107- each of Photon Biotech Ltd. 1200 12.00(Previous year 50,000 Equity Shares of Rs. 107- each)10,000 Equity Shares of Rs. 107- each of SICOM Ltd. 800 800( P r e v i o u s year 10,000 Equity Shares of Rs. 107- each)

TOTAL 142.35 161.80

Schedule 6CURRENT ASSETS, LOANS & ADVANCES ( R s In Lacs)

PARTICULARS As at As at_____________________________________30th June 2006________30th June 2005a ) Current Assets

i) Inventory -. (As Certified by the Management)- Raw Material 955.00 1,192.10- Semi Finished Goo ds 3,662.02 1,516.58- Finished Goods 885.87 1,235.70- Consumable Stores 748.14 761.05- Other Stock s 117.66 125.56TOTAL 6,368.69 4,830.99

ii ) Sundry Debtors:(Unsecured considered good)Outstanding for over six month 441.96 539.27Other Debts 3,472.32 1912.79TOTAL 3,914.28 2,452.06

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FORCINGS LIMITED

ill) Cash and Bank BalancesCash in HandBalances with Scheduled banks :In Current AccountsIn Fixed Deposits/Margin MoneyTOTAL

Loans and Advancesa) Advances Recoverable in Cash or in kind or forvalue to be received (considered good)

TOTAL7LIABILITIES & PROVISIONS

PARTICULARS

LIABILITIESCreditorsDividendLiabilities

TOTAL ~A~

Dividend DividendTOTAL ~B~GRAND TOTAL (A+B)

EXPENDITURE

37.23727.03207.96972.22

1,816.601,816.60

As at30th June 2006

3,069.100.94

4,974.29137.05

8,181.38

504.20664.4093.18

1,261.789,443.16

51.15944.43291.50

1,287.08

948.55948.55

( R s . In Lacs)As at

30th June 20051,735.40

0.944,378.26

187.196,301.79

20.450.000.00

20.456,322.24

( R s . In Lacs)PARTICULARS As a t30th June 20O6 As at30th June 2005

o the extent not written off or adjusted). Deferred Revenue Expenses

a) Deferred ExpenditureTOTAL

88.0088.00

132.00132.00

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SCHEDULES FORMING PART OF PROFIT & LOSS ACCOUNTSchedule 9/MATERIAL & MANUFACTURING EXPENSES ( R s . In Lacs)

PARTICULARS For the year ended30th June 2006

TOTAL 27,893.89

For the period ended30th June 2005Material ConsumedAdd : Decrease / (Increase) in StockConsumablesPower & FuelOther Manufacturing ExpensesFreight InwardsRepairs to Plant & Machinery

25,530.99(1,787.71)23,743.28888 .792,127.09887.25119.14

128.34

11,732.95(862.63)10,870.32814.551,804.88998.10124.34

84.7014,696.89

Schedule 10PERSONNEL EXPENSES ( R s . In Lacs)PARTICULARS For the year ended30th June 2006 For the period ended30th June 2005

Salary and WagesContribution to P.F., Gratuity, Leave Encashment, Staff W elfare etc. 1,292.04199.69 1,124.87171.95TOTAL 1,491.73 1,296.82

Schedule 11ADMINISTRATIVE, SELLING AND OTHER EXPENSES ( R s . In Lacs)PARTICULARS

Advertisement & PublicityAuditor's RemunerationBooks & PeriodicalsCharity & DonationDirectors' Remuneration & PerquisitesBusiness Promotion & Development ExpensesInsurance ChargesIS O ExpensesLegal & ProfessionalLoss on Sale of AssetsOffice and Factory Exps.Printing & StationeryRates, Fee & TaxesRentRunning & Maintenance of VehicleSubscription & Membership FeesTelephone, Telex & Postage Exps.Travelling & ConveyanceSELLING & DISTRIBUTION EXPCash DiscountFreight OutwardsPacking & ForwardingEXPENSES W RITTEN OFFDeferred Expenditure

TOTAL

For the year ended30th June 2006

1.083.000.570.0113.386.5017.910.0491.451.2910.1118.56(15.27)29.1617.134.5235.5259.4617.48

379.14102.2344.00

837.27

For the period ended30th June 2005

0.942.500.833.4611.337.8225.251.7276.709.307.9320.08123.6824.1912.712.7528.1053.59

0.05225.6057.9944.00

740.52

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FORCINGS LIMITED

: 12 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (ATTACHEDAND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 30TH JUNE 2006)SIGNIFICANT ACCOUNTING POUCIES:BASIS OF ACCOUNTING

accounts are prepared on the historical cost basis and on the accounting principles of a going concern. Accou ntingno t specifically referred to otherwise ar e consistent and in accordance with generally accepted accounting princi-India (Indian GAAP) and in compliance with the Accounting Standards issued by the Institute o f Chartered Account-o f India (ICAI) as referred in sec. 211 (2c) of the Companies Act, 1956.

REVENUE RECOGNITIONare recognized at the time of despatch of goods and all expenses and income are accounted on accru al basis.FIXED ASSETSassets ar e stated at cost less accumulated depreciation. The cost of fixed assets include s their original cost o f acqui-cenvat and including taxes, freight and other incidental expenses related to acquisition and installation of theassets.DEPRECIATION

ion o n fixed assets is provided on "Straight Line Method" in the manner and at the rates as specified in Scheduleof the Companies Act, 1956. Depreciation on additions / deductions to Fixed Assets is provided on pro-rata basis frome date of actual installation or upto the date o f such sale / disposal, as the case may be.INVENTORIES

w Materials, Stores & Spares, Goods under process and Finished Goods are valued at Cost or Net Realizable Valuelower. W aste and scrap is valued at Net Realizable Value.o f inventories of Raw Materials and Stores and Spares is ascertained on FIFO Basis.o f goods under process an d finished goods comprises o f cost o f materials, product ion overhead an d depreciation onand machinery. Cost of material fo r this purpose is ascertained on First In first O ut basis.

for obsolescence in inventories is made whenever requ ired.INVESTMENT

ar e stated at cost o f acquisition.fo r diminution in value o f long term investment is made, if the diminution is other than temporary.

CURRENCY TRANSACTIONSa) The work ing capital loans ar e revalued at exchange rates prevailing at the year end.Exchange differencearising on such revaluation are duly recognized in the Profit & Loss Account.b) In case o f forward exchange contracts to repay working capital loans, the difference between the forwardrate and the exchange rate at the date o f transaction, is recognized as income or expenses over the lifeof the contract.c ) Debtors an d working capital loans in foreign currency ar e revalued at the year end exchange rates.

Exchange differences arising on such revaluation ar e recognized in Profit & Loss Account.d) Exchange differences arising on revaluation o f foreign currency loans relating to acquisition o f fixed assetsf rom outside India ar e adjusted against relevant fixed assets.EXCISE DUTY

duty is paid according to the prevailing excise rules but is accou nted for in the books on accrual basis. Accordingly,excise duty is made fo r goods lying in the bonded warehouse.EMPLOYEES' RETIREMENT BENEFITSi) Retirement benefits in the form of Provident Fund and Pension Schemes whether in pursuance of law or other-wise, is accounted for on a ccrual basis and charged to Profit & Loss Account of the Year.ii ) Provision fo r present liability fo r future payment o f gratuity is being made to approved Gratuity Fund, which

covers the same under Cash Accumulation Policy o f Life Insurance Corporation of India, fo r employees of allplants an d Head Office.

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iii| Superannuation: Contribution made to Life Insurance Corporation fo r employees covered under Super AnnuationScheme are accounted for at the rate of 12% of such employees' annual salary.J. RESEARCH AND DEVELOPMENTCapital Expenditure is shown separately under respective heads of fixed assets. Revenue expenses including depreciationare included under the respective heads of expenses.K . BORROWING COSTInterest on borrowings are recognized in the Profit and Loss account. Interest incurred on borrowings, specifically raised fo rProjects, is, however, capitalized with the cost of the asset until such time the asset is ready to be put to use for intendedpurpose.L TAXATION

A ) Provision fo r Taxation is made on the basis of the taxable profits computed for the current accounting period (reporting period) in accordance with Income Tax Ac t, 1961.B ) Deferred Ta x resulting from timing difference are expected to crystallize in case o f deferred tax liabilities withreasonable certainty and in case of deferred tax assets with virtual certainty that there would be adequate futuretaxable income, against which such deferre d tax assets, can be realized.

M. DEFERRED REVENUE EXPENSESConsequent to the Accounting Standard on Intangible Assets' (AS26) becoming applicable, expenditure on productdevelopment, which was earlier classified as deferred revenue expenditure, is now acco unted for in accordance with thesaid standard, accordingly,

i) Product development expenditure relating to product up-gradation ha s been charged o ff during the year to theProfit and Loss Account.ii) Deferred Revenue Expenses incurred prior to 01.07.2003 is amortized over a period of 5 years.

N. IMPAIRMENT OF ASSETST he r e is no impairment of fixed assets of the company and as such no impairment loss ha s been recognized during they e a r as required by Accounting Standard "AS-28" on Impairment of Assets.II. NOTES ON ACCOUNTS:1 . Schedule 1 to 12 form an integral part of the Balance Sheet and Profit & Loss Account.2. Contingent Liabilities: (Rs. in Lacs)

Current Year Previous Year30.06.06 30.06.05

a ) Estimated amount of contracts 1,115.13 583.18remaining to be executed onCapital Accou nt and not provided fo rb) Unexpired Letters of Credit 6150 55.00c ) Disputed Tax Liability 273 704

3 . Earning Per share:Net Profit after tax ( Rs. Lacs ) 4,090.21 2087.39Number of equity shares at the begining of the year 80,00,000 80,00,000Issue of Bonus Shares 160,00,000Issue of Fresh Shares 92,20,000No. o f Shares at the end of year 3,32,20,000 80,00,000W eighted Average o f Shares 2,70,56,493 80,00,000Face value of each equity share (Rs.) 10/- 10/-Earning Per Share (Rs.) (Basic/Diluted) 1512 26.09

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FORCINGS LIMITED

In the opinion of the Board of Directors, all Current Assets and Loans and Advances, if realised in the ordinary courseof business, would be realised at least equal to the amounts at which they have been stated in the Balance Sheet.Provision for all kno wn liabilities have been made in the books of accounts.The Com pany is primarily focused on manufacturing Steel Forgings. Therefore, there are no separate segments withinthe Company as defined by Accounting Standard 17 (Segment Reporting), issued by Institute of Chartered Accountantsof India and he nce the same is not reported.Related party Disclosuresparty disclosures as required under Accounting standard on " Related Party Disclosu res", issued by the Institute o fntants of India, are given below: ( R s . In lacs)

Particulars Holding KeyManagement PersonnelSale of goods 367.84

(123.16)Purchase o f Goods 405.92

(773.62)Advances taken -11.40(-121.41)

Remunerat ion of Key Management: 1338(11.33)

Name of the related parties an d description o f relationshipNo. Particulars Name of the Party

Holding Amtek Auto LtdKe y Management P ersonnel Mr Arvind DhamMr. A.K.Syal

Other liabilities under Current Liabilities include amount recovered f rom customers on account o f CST/LST/Surcharge,but not deposited, as the Company had been issued an eligibility certificate fo r Sales Tax deferment under theMaharashtra Sales Tax Act,1959.Maximum amount outstanding at any time during the year du e f rom /due to directors is Rs. Nil. (Previous year Rs.Nil).Conf irmation of Balances in some of the Debtors Account as at 30th June 2006 are yet to be received as at the date o fAuditors ' Report.

. Consequent to the amendment to Schedule VI of The Companies Act,1956 the information in respect of Small ScaleIndustrial Undertakings, to wh om the Company owe a sum exceeding Rs. 1,00,000 an d which is outstanding fo r morethan 30 days, are not ascertainable as at 30th June 2006.The balances with Schedule Banks include:

a ) Fixed Deposits, which stand pledged againstLetters of Credit fo r purchase of raw material

Current Year207.96

( R s . in L a c s )Previous Year

291.50

. Advances recoverable in cash or in kind or for value to be received include:Prepaid Expenses 2155 164

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( R s . in Lacs)Current Year Previous Year

0d )e)f)

52.610.09

56.039.40

34.841600.04

13.38

2.500.50

11.1200.5034.063 6 .98

1422.4411.33

2.50

13. Miscellaneous income include:a) Interestb) Dividend IncomeMisc. IncomeProfit on sale of assetsProfit on sales of InvestmentOther Sales & Income

14. Managerial remunerat ion includes the following payments to Directora) Salary & other perquisitesDetails of remunerat ion to directors ar e given in note 6 o f Note to Account

15. Auditors Remu neration includesa) Audit Feesb) Reimbursement of Expenses

16. Market Value of the Quoted investments as on 30.06.2006.R s . 701.70 per shareRs. 25.95 per share

Grapco Mining & Co . Ltd., Good Value Marketing Ltd., Patheja Forging & Au to Parts Ltd. an d Gloabal Infrastructure &Technologies Ltd. N o t Available17. Unsecure d loans include loans f rom P romo ters, Associates, on account of investments, Public Deposits, Short Termloans etc.18 . The Company made Preferent ial al lo tment o f 92,20,000 Equtiy shares of Rs 10/ each at a premium o f

R s 1517- pe r share to promoter of the Company, Fll's, Bodies Corporates and individuals for the purpose of augmentingresources for capacity expansion of the existing units of the Co mpany. The proceeds o f the issue have been utilisedfo r the purpose, fo r which it was raised.19. A) INFORMATION PURSUANTTO THE PROVISIONS OF PARAGRAPHS 3,4C & 4D OF PART II OF SCHEDULE VI TOTHE COMPANIES ACT, 1956

a) MaterialsConsumed

Sanghvi Movers Ltd.Dena Bank

Sr Hem Unit Current Year Unit Previous Year

i)ii!iii)

Carbon an d alloy steelDie SteelStores

MTs. Rs. Lacs43873 25530.99

158.81729.98

26419.78

MTs. Rs. Lacs25133 11732.95

98.68715.88

12547.51

b) Particulars in respect of goods manufacturedSr Item

i) Steel Forgingsii ) Finished / Semi Finished SteelForgings

Unit

M.T.M.T.

LicencedCapacity74,000(46,000)16,000(12,050)

InstalledCapacity74,000(46,000)16,000(12,050)

Production

* 2 9 4 2 5(18553)

8 4 9 9(568)

*Product ion includes rejection.

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FORCINGS LIMITED

c) Stocks and turnover of Goods Manufactured by the C ompanyOpening Stock

i) Steel Forgingi i) W ork- in-progress

B) Expenditure in Foreign Currency

QtyM.T.s1393(596)1964

(2173)

ValueRs. (Lacs)

1235.70(457.80)1642.14(1557.43)

Closing StockQty

M.T.s1005

(1393)4197

(1964)

ValueRs. (Lacs)

885.87(1235.70)3779.67(1642.14)

Current YearA) Foreign TravelB ) Other Matters

i) Interest13

116.70.60

SalesQty

M.T.s37503

(17784)(-)(-)

ValueRs. (Lacs)35789.76(16621.60)

(-)(-)

Previous Year9.07

137.77

C ) G IF Value of Importsi) Semi-finished Goodsii) Capital Goodsiii) Spares 940.09141.05

251.2719.2517.48C) Exports Income 43611324.00

. Export Sales include sales in transit to its ove rseas cus tomers , acknowledged in subsequent year, indi rectexport/deemed export .Details o f units manufactured, material consumed an d sales include component bought an d sold.Previous year's figures have been regrouped an d rearranged wherever necessary.

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II.I.

II.

BALANCE SHEET ABSTRACT & COMPANY'S GENERAL BUSINESS PROFILE:Registration Details:

Registration No. | 19569 |Balance Sheet Date 130-06-2006]State Code I 11 ICapital Raised during the year (Rs. In Lacs)Public Issue

NilPrivate Placement /Promoters/Financial institutions

922.00

Right IssueI Nil |Premium

| 13922 .20 |III. Position of Mobilisation and Deployment of Funds:Total Liabilities

[37088.021Sources of Funds:Paid-up Capital

[3322.00 |Share Application Money

I Nil |

Total Assets|37088.02|

Reserves & Surplus|22436.46|

Secured LoansApplication of Funds:Net Fixed Assets

|33229.04 |Ne t Current Assets

[ 3 6 2 8 . 6 3 |IV. Performance of Company (Amount in Lacs.)Turnover

110175.00 |Investments| 142.35 |

Misc. ExpenditureI 88.00 I

[ 37542 .771Profit before Tax

Total Expenditure[ 31794 .151

Profit after TaxI 5748!62|

Earning per shareeI 15.12 |

I 4090.21 IDividend Rate %\ 20

Bonus Issue| 1600.00 |

CRPSI Nil |

(Rs. In Lacs.)

Unsecured Loans| 1154.56 |

V. Generic Names of Three Principal Products/Services of Company (as per monetary terms)Code Products Name

Die Steel ForgingsForged Machined Components

T.K. LASKARDG M (Fin. & Acctt.)

Place : New DelhiDated : 30th October 2006

PRABHJOT SINGHCompany Secretary ARVIND DHAMDirectorFor Ahmednagar Forgings Limited

A.K. SYALManaging Director B. LUGANIDirector

For Mono} Mohan & AssociatesChartered Accountants(M K. Aggarwal)Partner

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