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V.S.T. TILLERS TRACTORS LTD.

40

th

Annual Report

2007 - 2008

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LORD GANESHA

Idol of Lord Ganesha at

VST Tillers Tractors Limited

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NOTICE

"NOTICE IS HEREBY GIVEN that the 40th Annual

General Meeting of VST TILLERS TRACTORS LTD

will be held at Woodlands Hotel Pvt. Ltd. No.5,

Rajaram Mohan Roy Road, Bangalore-560 025 on

August 29, 2008 at 3.00 P.M. to transact the following

business.

Ordinary Business:

1. To receive, consider, approve, and adopt the

audited Balance Sheet as at March 31, 2008,

Profit and Loss account and Cash Flow Statement

for the year ended on that date together with the

Directors' and Auditors' Report thereon.

2. To declare dividend.

3. To appoint a Director in place of Mr. A. Hishikawa,who retires by rotation and being eligible offers

himself for re-appointment

4. To appoint a Direc to r in place of Mr. V.

Ramachandran, who retires by rotation and being

eligible offers himself for re-appointment.

5. To appoint Auditors and fix their remuneration.

SPECIAL BUSINESS:

Item No.6

To consider and if thought fit, to pass with or withoutmodification(s) the following resolution as ORDINARY

RESOLUTION.

"RESOLVED THAT Mr. B C S Iyengar who was

appointed as an Additional Director in the Board of

Directors meeting held on August 28, 2007, pursuant

to provisions of Section 260 of the Companies Act,

1956 and who holds office upto the date of this AGM,

be and is hereby appointed as Director of the

Company"

To consider and if thought fit, to pass with or withoutmodification(s) the following resolution as SPECIAL

RESOLUTION.

"RESOLVED THAT pursuant to the provisions of

Article 29 of the Articles of Association of the Company

and Sections 198, 269, 309 and 314 read wi th Schedule

XIII and other applicable provisions, if any, of the

Companies Act, 1956 (including any sta tutory

modification or re-enactment thereof for the time

being in force) and subject to such consents, approvals

and permissions as may be required

VST TILLERS TRACTORS LTD

Mr. B C S Iyengar be and is hereby appointed as

Executive Director of the Company not liable to

retire by rotation for a period of five years w.e.f.

August 28, 2007 on the remuneration and terms

& conditions set out below effective from

August 1, 2008:

"FURTHER RESOLVED that subject to the overall

limits of managerial remuneration fixed by the

Companies Act, 1956, the Managing Director of the

Company be and is hereby authorized on behalf of

the Shareholders to revise the remuneration of

Mr. B.C.S. Iyengar suitably as he deems fit whenever

the remuneration is revised to the Management Staff

of the Company."

"RESOLVED FURTHER THAT in the case of absence

or inadequacy of profits in any financial year, theabove remuneration be paid to the Executive Director

as the minimum remuneration."

Salary

a. Basic Salary - Rs.50,000/- per month in the scale

50,000 - 2,500.

b. House Rent Allowance - Rs.30,000/- per month.

c. Special Allowance - Rs.9,000/- per month.

PERQUISITES

In addition to salary, the following perquisites are

allowed and classified into four categories, "A", "B",

"C" and "D" as follows :-

CATEGORY - A

a) Furnishing Allowance - Reimbursement upto

Rs.25,000/- (Rupees twenty five thousand only)

per annum towards furnishing/ repair/

maintenance of own house.

b) Leave Travel Allowance - for self and family once

in a year not exceeding two months basic salary.

c) Club Fees - Re-imbursement of monthly club

fees for a maximum of two clubs.

d) Medical Insurance Premium for family - subjectto a limit of Rs.2,500/- per annum.

Note: For the purpose of this Part, "family"

means the spouse, dependent children and

dependent parents of the Executive Director.

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NOTICE-

CATEGORY-B

a) Contribution to Provident Fund will not be

included in the computation of the ceiling on

perquisites to the extent it is not taxable under

the Income-tax Act.

b) Gratuity payable shall not exceed one half month's

salary for each completed year of service subject

to a ceiling specified in the Gratuity Act.

c) Earned/Privilege Leave shall be allowed to the

Executive Director on full pay and allowances

according to the rules of the Company but not

more than 34 (thi rty four) days leave for every 12

(twelve) months service. However, leave

accumulated but not availed of will be allowed to

be en-cashed.

CATEGORY-C

Provision of Car for use on Company's business and

telephone at residence will not be considered as

perquisites.

CATEGORY - D

COMMISSION

One percent on the net profit of the Company subject

to a maximum of the annual basic salary drawn.

Item No.7

To consider and if thought fit, to pass with or without

modification(s) the following resolution as ORDINARY

RESOLUTION.

"RESOLVED THAT Mr. V V Pravindra who was

appointed as an Additional Director in the Board of

Directors meeting held on July 28, 2008, pursuant to

provisions of Section 260 of the Companies Act, 1956

and who holds office upto the date of this AGM, be

and is hereby appointed as Director of the Company"

To consider and if thought fit, to pass with or withoutmodification(s) the following resolution as SPECIAL

RESOLUTION.

"RESOLVED THAT pursuant to the provisions of

Article 29 of the Articles of Association of the Company

and Sections 198, 269, 309 and 314 read with Schedule

XIII and other applicable provisions, if any, of the

Companies Ac t, 1956 (including any sta tutory

modification or re-enactment thereof for the time

being in force) and subject to such consents, approvals


and permissions as may be needed Mr. V V Pravindra

be and is hereby appointed as the Deputy Managing

Director of the Company not liable to retire by

rotation for a period of five years w.e.f. July 28, 2008on the remuneration and terms & conditions set out

below effective from August 1, 2008 :

"FURTHER RESOLVED that subject to the overall

limits of managerial remuneration fixed by the

Companies Act, 1956, the Managing Director of the

Company be and is hereby authorized on behalf of the

Shareholders to revise the remuneration of

Mr. V V Pravindra suitably as he deems fit whenever

the remuneration is revised to the Management Staff

of the Company"

"RESOLVED FURTHER THAT in the case of absenceor inadequacy of profits in any financial year, the

above remuneration be paid to the Deputy Managing

Director as the minimum remuneration"

Salary

a. Basic Salary - Rs.45,000/- per month in the scale

45,000 - 2,500.

b. House Rent Allowance - Rs.30,000/- per month.

c. Special Allowance - Rs.9,000/- per month.

PERQUISITES


allowed and classified to four categories, "A", "B",

"C" and "D" as follows:-

CATEGORY - A

a) Furnishing Allowance - Reimbursement upto

Rs.25,000/- (Rupees twenty five thousand only)

per annum towards furnishing/ repair/

maintenance of own house.

b) Leave Travel Allowance - fo r self and family oncein a year not exceeding two months basic salary.


fees at actuals for a maximum of two clubs.

d) Medical Insurance Premium for family - subject

to a limit of Rs.2,500/- per annum.

Note: For the purpose of this Part, "family" means

the spouse, and dependent children of the Deputy

Managing Director.
http://rs.45.000/-http://rs.45.000/-

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NOTICE

CATEGORY - B

a) Contribution to Provident Fund wil l not be



the Income-tax Act.b) Gratuity payable shall not exceed one half month's




Deputy Managing Director on full pay and

allowances according to the rules of the Company

but not more than 34 (thirty four) days leave for

every 12 (twelve) months service. However, leave


be en-cashed.

CATEGORY-C

Provision of Car for use on Company's business,

telephone and other communication facilities at

residence will not be considered as perquisites.

CATEGORY - D

COMMISSION


to a maximum of the annual basic salary drawn.

NOTES:

1. A MEMBER ENTITLED TO ATTEND AN D

VOTE IS ENTITLED TO APPOINT A PROXY

TO ATTEND AND VOTE INSTEAD OF

HIMSELF AND PROXY NEED NOT BE A

MEMBER OF THE COMPANY.

2. The proxies to be effective, should be deposited

at the Registered Office of the Company not

later than 48 hours before the commencement

of the meeting.

3. The relative Explanatory Statement pursuant to

Section 173 (2) of the Companies Act, 1956 in

respect of Special Business under item no. 6 & 7

is annexed hereto.

4. The Register of Members and Share Transfer

Books of the Company will be closed from


August 22, 2008 to August 31, 2008 (both days

inclusive) in connection with Annual General

Meeting.

5. Dividend if declared shall be payable to all those

members whose names appear in the register ofmembers or to the beneficial owners as per the

records of the depositories, at the closing of

business hours on August 21, 2008.

6. Members desirous of obtaining any information

on the annual accounts are requested to write to

the Company at an early date to facilitate

compilation and dissemination of the same at the

AGM.

By the Order of the Board

for VST TILLERS TRACTORS LTD.

Place: Bangalore

Date: June 28, 2008

Sd/-

Subash B K

Company Secretary

EXPLANATORY STATEMENT AS PER SECTION

173(2) OF COMPANIES ACT, 1956

Item No. 6

Mr. B C S Iyengar was appointed as an AdditionalDirector of the Company by the Board of Directorsw.e.f. August 28, 2007. Pursuant to Section 260 of theCompanies Act, 1956, Mr. B C S Iyengar holds officeonly up to the Annual General Meeting. As requiredunder Section 257 of the said Act, a notice has beenreceived from a member along with deposit ofRs. 500/- signifying his intention to proposeMr. B C S Iyengar as a candidate for the office ofDirector.

The Board of Directors had also appointedMr. B C S Iyengar as an Executive Director of theCompany for a period of 5 years effective fromAugust 28, 2007 subject to the approval of theshareholders of the Company.

As per the provisions of Section 198, 269, 309 and314 read with Schedule XIII to the Companies Act,1956, the appointment of and remuneration toExecutive Director requires the approval of theshareholders in General Meeting by way of a specialresolution.

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NOTICE

The Board of Directors recommends the resolutions

for approval as set out under item no.6.

None of the Directors except Mr. B C S Iyengar, is

concerned or interested in the said resolution.

The Explanatory Statement together with theaccompanying notice may also be regarded as anabstract of the terms of appointment ofMr. B C S Iyengar, Executive Director of the Company

and Memorandum of interest of Directors u/s. 302 ofthe Companies Act, 1956.

(1) Background Details - Mr. B C S Iyengar, aged58 years, is a Chartered Accountant and has beenassociated with the Company in various capacitiesfor over 29 years.

(2) Past remuneration -

Remuneration in the capacity as Vice President

was Rs. 12,24,564/- CTC

(3) Job profile and his suitability - Subject to thesuperintendence, direction and control of the

Board, the day to day administration of theCompany would be vested with the ExecutiveDirector. Owing to his association for over 29years in various capacities and also beingin-charge of finance and marketing

Mr. B. C. S. Iyengar is suitable for the post of

Executive Director.(4) Remuneration proposed - as set out in the

resolution for the item no. 6. The remuneration

to Executive Director has the approval of theBoard of Directors.

(5) Comparative remuneration profile wi th respectto industry, size of the company, profile of theposition and person - Taking into considerationthe size of the Company, the profile of

Mr. B. C. S. Iyengar, the responsibilities shoulderedby him, the aforesaid remuneration package is

commensurate with the remuneration packagepaid to managerial position in other Companies.

(6) Besides, the remune rat ion pro posed,

Mr. B. C. S. Iyengar does not have any other

pecuniary relationship with the Company.

Iterm No. 7

The Company has received a notice in writing from a

member under section 257 of Companies Act, 1956


along with a deposit of Rs.500/-proposing the

candidature of Mr. V V Pravindra for the office of

Director.

As per the provisions of Section 198, 269, 309 and

314 read with Schedule XIII to the Companies Act,1956, the appointment of and remuneration to Deputy

Managing Director requires the approval of the

shareholders in General Meeting by way of a special

resolution.

The Board of Directors recommends the resolutions

for approval as set out under item no.7

None of the Directors except Mr. V V Pravindra, is

concerned or interested in the said resolution.

The Explanatory Statement together with theaccompanying notice may also be regarded as an

abstract of the terms of appointment of

Mr. V V Pravindra, Deputy Managing Director of the

Company and Memorandum of interest of Directors

u/s. 302 of the Companies Act , 1956.

(I) Background Details - Mr. V V Pravindra, aged

43 years, is a Commerce graduate. After an initial

training with a Chartered Accountant firm he

undertook to independently manage VST Auto

Anciilaries Pvt. Ltd., (a VST group Company)supplying parts to the Company. During the year

1996 he was appointed as Executive coordinator

and subsequently elevated to the post of

Vice-President, Business Development in the

year 2004.

(2) Past remuneration -

Remuneration in the capacity as Vice President

was Rs.12,08,292/- CTC.

(3) Job profile and his suitability - Subject to the

superintendence, direction and control of the

Board, Mr. V V Pravindra shall broad base

administrative operations, corporate policies and

responsibilities of the Company including its overall

development. In consideration to his contributions

for the past 12 years in various capacities and also

as head of Business Development and considering

his varied experience in the aforementioned

capacities, he stands apt for the post of Deputy

Managing Director.

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NOTICE

(4) Remuneration proposed - as set out in the

resolution for the Item No.7. The remuneration

to Deputy Managing Director has the approval of

the Board of Directors.

(5) Comparative remuneration profile wi th respectto industry, size of the company, profile of the

position and person - Taking into consideration

the size of the Comp any , the profi le of

Mr. V V Pravindra, the responsibilities shouldered

by him, the aforesaid remuneration package is

commensurate with the remuneration package

paid to managerial position in other Companies.

(6) Besides, the remu nera tion prop osed,

Mr. V V Pravindra also belongs to the promoter

group.

VS T TILLERS TR AC TO RS LTD

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Board of Directors : Mr. V.K. Surendra - Chairman

Mr. A. Hishikawa

Mr. K. Tanaka - Alternate to A. Hishikawa

Mr. R. Subramanian

Mr. M.K. Bannerjee

Mr. V. Ramachandran

Mr. V.P. Mahendra - Managing Director

Mr. B.C.S. Iyengar - Executive Director

Company Secretaryand Compliance Officer Mr. Subash B.K.

Auditors M/s. Brahmayya & Company10/2, Khivraj Mansion,Kasturba Road, Bangalore - 560 001

Cost Auditors M/s. Rao, Murthy & AssociatesNo.23/33, Surveyor's StreetBasavanagudi, Bangalore - 560 004

Bankers M/s. Canara BankM/s. State Bank of IndiaM/s. Canbank Factors Limited

Legal Advisers M/s. AZB & Partners67-4, 4th Cross, Lavelle RoadBangalore - 560 001

Regd. Office Plot No.I, Dyavasandra Industrial Layout,P.B.No.4801, Whitefield Road,Mahadevapura Post, Bangalore - 560 048

INFORMATION

REQUEST TO MEMBERS

1. Please bring your copy of the Annual Report to the meeting as no extra copies will be distributed owing tolimited number of copies printed.

2. Members are requested to send their queries, if any, relating to the annual accounts and reports at least oneweek prior to the date of meeting to facilitate computation of information.

3. Members/their proxies/representatives are advised to bring their Attendance Slip duly filled in for attending themeeting. An Attendance Slip and Proxy form are attached at the end of this Annual Report

Annual Report 2007 - 20081
http://rb.no.480/http://rb.no.480/

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Information as required under clause 49 (IV)(G) of the Listing Agreement

Brief resume of Directors seeking Appointment / Re-appointment

Particulars

Date of Birth & Age

Appointment on

Qualifications

Expertise in specific

functional Areas

Mr. A. Hishikawa

10/09/1951 & 57 Years

27/06/2003

Masters Degree, Tokyo Instituteof Technology

Senior General Manager of General

Machinery & Special Vehicle

Headquarters. He takes a role of

business management of Engine and

Turbocharger in Japan and worldwide.

Mr. V. Ramachandran

26/01/1948 & 60 Years

29/01/2004

Bachelor of Engineering

34 years of experience in AutoComponent Industry, evolvinglong-term strategies and plans,investment decisions and formulatingmanagement policies. He was ViceChairman and Managing Director ofKar Mobiles Ltd., Bangalore. He is

Chairman, Southern Region of AutoComponent Manufacture'sAssociation.


for VST TILLERS TRACTORS LTD.

Subash B K

Company Secretary

Place: Bangalore

Date: June 28, 2008

Annual Report 2007 - 2008 2

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ABS TR ACT OF V ARI AT I O N I N TH E TE RMS OF CO NT RA CT WI TH THE MAN AG I N G

DIRE CTO R PU RS UA NT TO SECT IO N 302 OF TH E CO MPA NI ES ACT, 1956.

Mr. V R Mahendra was re-appointed as Managing

Director at the 36th Annual General Meeting of the

Company held on September 3, 2004 for a further

period of 5 years w.e.f. February 20, 2004. The Share

Holders had authorised the Board of Directors to

revise the remuneration of the Managing Director on

behalf of the Company on a time scale or whenever

the circumstances rendered it desirable. Accordingly,

the Board of Directors in its meeting held on July 28,

2008 has revised the remuneration payable to Managing

Director with effect from August 1, 2008 by passing

the following resolutions:

"RESOLVED THAT subject to provisions of Sections

198, 269, 309 and 311 read with Schedule XIII and

other applicable provisions, if any, of the Companies

Act, 1956 (including any statutory modification or

re-enactment thereof for the time being in force) the

pay scale Mr. V. P.Mahendra, Managing Director be

and is hereby revised as per the Terms & Conditions

set out below:

SALARY

Rs. 1,00,000/- per month in the scale of Rs. 1,00,000 -

5000.

PERQUIS ITES


allowed and classified into four categories, "A", "B",

"C" and "D" as follows:-

CATEGORY - A

a) Medical Reimbursement - Expenses incurred for

self and family subject to a ceiling of one month's

salary per year or three months' salary over a

period of three years.

b) Leave Travel Allowance - for self and family once

in a year not exceeding two months basic salary.


fees for a maximum of two clubs.

d) Medical Insurance Pre miu m for Spouse &

Chi ldren: Actuals subject to a limit of Rs.5,000/

- per annum.

e) Furnishing & Othe r Allowance - Reimbursement

upto Rs.50,000/- (Rupees fifty thousand only) per

annum or Rs.2,00,000/- (Rupees two lakhs only)

3

Place: Bangalore

Date: June 28, 2008

Subash B K

Company Secretary



for VS T TILLERS TR AC TO RS L TD .

over a period of four years towards furnishing/

repair/ maintenance of own house.

e) Fuel Allowance for ca r: To & Fro from Residenceto Office on actual basis.

Note : For the purpose of this Part, "family" means

the spouse, dependent children, and dependent parents

of the Managing Director.

CATEGORY - B

a) Contribution to Provident Fund will not be



the Income-tax Act.

b) Gratuity payable shall not exceed one half month's




Managing Director on full pay and allowances

according to the rules of the Company but not

more than 37 (thirty seven) days leave for every

12 (twelve) months service. However, leave


be en-cashed.

CATEGORY - C

Provision of Car for use on Company's business and

telephone at residence will not be considered as

perquisites.

CATEGORY - D

C O M M I S S I O N


to a maximum of one and half times annual salary

drawn."RESOLVED FURTHER THAT in the case of absence

or inadequacy of profits in any financial year, the

above remuneration be paid to the Deputy Managing

Director as the minimum remuneration."

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Contents ....

Directors' Report

Report on Corporate Governance

Auditors' Report

Balance Sheet

Profit and Loss Account

Schedules

Notes forming part of Accounts

Balance Sheet Abstract

Cash Flow Statement

6

14

20

24

25

26

33

43

44


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FINANCIAL INDICATORS


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DIRECTORS' REPORT

Dear Shareholders,

Your Directors place on record by paying tribute and homage to a great soul who was closely associated with

your Company since its inception - our beloved Founder Shri V T Velu. He gave inspiration and guidance to

your Company through its formative years and led the organization during difficult and joyous times. His passing

away leaves a vacuum that will always be felt in your Company and the business fratenity in general.

Your Directors are pleased to present the 40th Annual Report and the Audited Statement of Accounts for the

year ended March 31, 2008.

FINANCIAL PERFORMANCE (Rupees in lacs)

Period

TURNOVER

OTHER INCOME

TOTAL INCOME

PROFIT BEFORE DEPRECIATION & INTEREST

INTERESTDEPRECIATION

PROFIT BEFORE TAX

INCOME TAX

PROFIT AFTER TAX

BALANCE B/F

SURPLUS AVAILABLE FOR APPROPRIATION TO:

DIVIDEND

TAX ON DIVIDEND

TRANSFER TO GENERAL RESERVE

BALANCE CARRIED FORWARD

Year 2007-08

18,858

278

19,136

2,569

53290

2,226

786

1,440

777

2,217

288

49

1,000

880

Year 2006-07

16,228

211

16,439

2,283

45273

1,965

710

1,255

541

1,796

230

39

750

777

COMPANY'S PERFORMANCE

During the year under review your company continued

to make progress over the previous year by selling

over 12000 Tillers, a new milestone and consolidating

its market position in the power tiller industry.

The turnover for the year increased by 16% from

Rs 162 crores in 2006-07 to Rs. 188.58 crores in

2007-08 while the operating profit rose to Rs. 22.90crores compared to Rs 20.74 crores in the previous

year mainly due to higher capacity utilization for

power tillers and tractors. However higher operating

expenses incurred to support growth had an impact

on operating profit margins. Despite increase in price

of steel products and other inputs, your company has

achieved satisfactory results. The Precision

Components Division has also improved its exports

and contributed to the overall increase in profitability

of your Company. Consequently, earnings per share

increased from Rs. 21.79 to Rs. 25.01 and your

company continues to remain debt free while short

term borrowings were limited to only need based

working capital requirements.

The sale of Power Tillers during the year increased to

12174 units as against the previous year's sales of10510 units an increase of 16%. Sale of Chinese make

power tillers under the brand name "Dragon" has

been encouraging and our strategy to expand market

share across, the country is well positioned. The

Company's Tractor sales have grown to 1714 units as

against 1537 units in the previous year. Your Company

sold 76 Rice Transplanters in the rice growing belts in

India, which is slowly shifting in favor of these machines

to overcome manpower shortage and reduce costs.


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DIRECTORS' REPORT

The Precision Component Division's performance has

been encouraging despite the continuous increase in

cost of various grades of steel which has resulted in

reduced margins on exports. The growth in profitability

of this division is dependent on overseas customers

accepting an upward revision in price, in line with rawmaterial increase. DEPB benefits from exports were

availed on higher rates during the year, which has

contributed to higher profits from this division. During

the year, TS 16949 re-certification for quality standards

has been obtained this being essential to develop new

customers in the automotive field.

D I V I D E N D :

Your Directors have pleasure in recommending a

dividend of Rs. 5/- per equity share of Rs. 10/- each for

approval at the Annual General Meeting. The dividend

if declared will result in an outflow of Rs.337 lacsincluding the distribution tax.

DIRECTORS:

In accordance with the provisions of the Companies

Act, 1956 and Articles of Association, Mr. A. Hishikawa

and Mr. V Ramachandran, Directors of the Company

retire by rotation and being eligible, offer themselves

for re-appointment.

Consequent to withdrawal of Nomination by

MITSUBISHI AGRICULTURAL MACHINERY CO.

LTD. Mr. M. Tanaka, has ceased to be on the Board

of the Company w.e.f. July 28, 2008. Your Directors

place on record their sincere appreciation for the

contribution of Mr. M. Tanaka during his tenure as

Director of the Company.

At the Board Meeting held on August 28, 2007, Mr. B

C S Iyengar, has been co-opted on the Board of the

Company and designated as Executive Director for a

period of 5 years.

At the Board Meeting held on July 28, 2008, Mr. V VPravindra, has been co-opted on the Board of the

Company and designated as Deputy Managing Director

for a period of 5 years.

Both the appointments and remuneration payable to

them are subject to the approval of the shareholders

at the forthcoming Annual General Meeting on the

terms and conditions as set out in the Notice of the

Meeting. The attention of the Members is invited to

A U D I T O R S :

M/s. Brahmayya & Company, Chartered Accountants,

retire as Auditors of the Company at the conclusion

of 40th Annual General Meeting and are eligible for

re-appointment.

7 Annual Report 2007 - 2008

Item no. 6 & 7 of the Notice and the Explanatory

Statement attached thereto.

CORP ORATE GOV E RNANCE :

The Company strives to ensure highest standards in

Corporate Governance and levels of transparency andhas been compliant with all the provisions of Clause-

49 of the Listing Agreement. A certificate from the

Auditors to this effect forms part of Corporate

Governance Report.

DIRECTOR'S RESPONSIBILITY STATEMENT:

Pursuant to sec 217(2AA) of the Companies Act 1956,

amended as per Companies (Amendment) Act 2000,

the Directors confirm that:

In preparation of the Annual Accounts of your

Company the Accounting Standards laid down by the

Institute of Chartered Accountants of India from time

to time have been followed.

Appropriate Accounting policies have been selected

and applied consistently, and reasonable and prudent

judgment and estimates have been made so as to

ensure that the accounts give a true and fair view of

affairs of your Company as at March 31, 2008 and the

profits of your Company for the year ended March

31, 2008.

Proper and sufficient care has been taken for the

maintenance of appropriate accounting records in

accordance with the provisions of the act for

safeguarding the assets of your Company and for

preventing and detecting frauds and other irregularities.

The annual accounts have been prepared on a going

concern basis.

The observations of Auditors in their report toMembers have been adequately dealt with in the

relevant notes to accounts. Hence no additional

explanation is considered necessary.

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DIRECTORS' REPORT

RISKS AND CONCERNS

With the amendment to CMVR rules by the Ministry

of Surface Transport, the power tillers has been

subjected to extensive compliances in respect of road

safety though the basic design does not support thesefeatures. Representations by manufacturers have been

forwarded to the Government to exempt power tillers

wholly used for agricultural operations with features

that are impractical.

With respect to tractors the key factor that affects

demand is institutional credit, which has declined due

to high defaults. In addition, interest rates have been

increasing which could have an impact on demand.

Monsoons plays a significant role in agriculture and

water is the primary factor that determines farm

production and consequently has a bearing on demand

for your company's products.

The continuous increase in oil price is a cause for

concern as it forms a major operating cost for

agricultural machinery. During the year international

crude touched an unprecedented levels, which could

lead to lower demand for your company's products.

There are continuing concerns on input cost increases

particularly steel and rubber. In a competitive market,

your company may not be able to pass on the cost

increases fully. Hence, margins may come under

pressure.

The appreciation of Rupee against the Euro and Pound

Sterling for most part of the financial year 2007-08 in

addition to the constant increase in raw material

prices impacted the margins of Precision Components

Division. Presently due to a better exchange rate, this

division is expected to maintain its performance.

CURRE NT Y E AR OUTLOOK

Your Company envisages the growth outlook for 2008-

09 to be positive. The Government's continued thrust

on agriculture will help the economy in general and

the farm community in particular and your Company

expects improved sales through out the year. The

Central subsidy has been increased on power tillers


and the Government has given thrust in the 11th Five

Year Plan through schemes like Rashtriya Krishi Vikas

Yojana, Integrated Tribal Development, National Food

Security Scheme and Macro Management Scheme.

However subsidy dues from the Government continue

to be of concern on out standings and efforts to

realize the same are being taken. To augment existing

capacity, investments are being made to create requisite

infrastructure for both power tillers and tractors to

cater the growth in the market. During the first half of

the year, overall turnover is expected to show an

improvement. Ot her measurers such as changing the

existing production layout and better utilization of

machines are being planned. The Supply Chain function

is being strengthened in line with increase in capacities.The full benefit of these measurers will accrue in the

coming years.

Protecting our market share and margins in the face of

continued increase in price of raw materials and steel

products will be the key challenge for business in

2008-09 as competition from Chinese made tillers is

rapidly making in roads.

As a conscious strategy of expanding the range of

business, your company as in the earlier years believed

in focusing on marketing Rice Transplanters. The efforts

are translating into better opportunities in various rice

growing belts to market this labour saving machine,

which requires considerably less time than manual

transplanting.

The Precision Component Division (PCD) derives

over 4 0 % of its revenue through sale of machined

connecting rods and crankshafts to overseas customers.

This division's performance continues to be challenging

due to lack of consistency in orders. This segment

faces competition from China which is a low cost

producer of forgings on account of huge investments

in increasing capacities in this sector. In PCD, forgings

constitute a major portion of raw material used for

machining. Initiatives taken to improve efficiency and

optimum use of machinery are expected to contribute

to better revenue streams.

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DIRECTORS' REPORT

Internal Control Systems

Your Company maintains adequate internal control

system, which provides reasonable assurance that

transactions in significant areas are monitored to

prevent any misuse. To strengthen this area your

Company is looking at improved responsiveness from

a fully integrated ERP. The present system is being

revamped to improve its capability and speed of

information to add more value. The Internal auditors

carry out audits on a regular basis and submit their

report once in a quarter to the Audit Committee. The

Audit Committee reviews the report and

recommendations of the Internal Auditors and advises

the Management to strengthen and streamline the

system wherever required.

Industrial Relation

Industrial relations have been cordial across all the

plants during the year. Your Company is continuously

taking initiatives for building organizational capabilities

and enhancing people productivity. Various training

and development programs were offered to the

managerial cadre to upgrade their skills and develop

the human resource base. Your company is

continuously developing apprentices and trainees across

various departments to cultivate new talent. Steps are

being implemented to strengthen specific areas thatare considered key to the Company achieving its

business goals.

Forward-Looking Statements

Statements in this release that are "forward-looking

statements" are based on current expectations and

assumptions that are subject to risks and uncertainties.

Actual results could differ materially from those either

expressed or implied due to factors such as Raw

material prices, Government policies, Competition,

tax regime, market acceptance of new products and

services, continued acceptance of existing products

and services, changes in licensing programs, product

price discounts, delays in product development and

related product release schedules, sales channel

disruption.

All information in this release is as of June 28, 2008.

The company undertakes no duty to update any

forward-looking statement to conform to actual results

or changes in the company's expectations.


ACKNOWLEDGEMENTS:

The Directors wish to convey their gratitude for the

faith reposed in your Company by Mitsubishi Heavy

Industries Limited, Mitsubishi Agricultural Machinery

Company Limited, the financial institutions, employees

and the customers at large.

For and on behalf of the Board

Sd/-

V. K. Surendra

Chairman

Place: Bangalore

Date : June 28, 2008

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DIRECTORS' REPORT

ANNEXURE

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 the Directors' Report forthe year ended 31st March 2008.

1. Conservation of energy:

As the industry is not a power intensive unit, no

capital investment was made and hence no benefit

could accrue.

2. A. Research and Development (R&D) :

a. Technology up gradation of VST 130DI and

VW H 120 Engines to meet latest Trem III

emission norms has been Completed andapproved by Automotive Research

Association of India.

b. VST Shakti 130DI and Mitsubishi Shakti

Power Tillers have been upgraded to meet

latest Central Motor Vehical Rules (CMVR)

norms and approved by Central Farm

Machinery Training & Testing Institute

(CFMTTI), Budni.

c. SI 100 A2N engine which is the prime mover

for Dragon Power Tiller upgraded to meet

latest TREM III emission norms and

approval from ARAI obtained.

d. Dragon Power Tiller upgraded to meet latest

CMVR norms and approved by CFMTTI,

Budni.

e. Small Power Weeder taken up for testing

and approval with testing agency to make it

available under subsidy schemes.

B. Technology Absorption:

a. Technology absorption through up gradation

of 3D software at Product Development to

the latest version.

C. Benefits deri ved :

a. Software up gradation has enhanced the

product design skills.


D. Expen ditu re on R &D :

a. The Company's expenditure on R&D

(including capital expenditure) during the

year was Rs. 41,98,182/-

E. Fu tur e plan of action :

a. Cost effective and latest technology engine

under development for Power tiller

application.

b. Higher horsepower engine for Tractor -

initial feasibility study completed and further

adaptation activity under progress.

3. Foreign Exchange Earnings and Out go :

a) Complete information about exports, which

have contributed towards foreign exchange

earnings, is given in Para 6(f) of the Schedule 19

to the Audited Accounts annexed to this Report.

Similarly, details of foreign exchange outgo on

account of imports, expenditure on travelling,

dividend etc. are shown in Para No.5(e), 5(f)

and 5(h) respectively in Schedule 19, i.e., in

Notes forming part of Accounts.

b) Total foreign exchange used and earned :

Foreign exchange earnings: Rs. 17,82,75,880/-

Foreign exchange outgo: Rs.6,47,96,638/-

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DIRECTORS' REPORT

CHIEF EXECUTIVE OFFICER (CEO) ANDCHIEF FINANCIAL OFFICER (CFO) CERTIFICATION

To,The Board of DirectorsVST TILLERS TRACTORS LTD

We, the undersigned, in our respective capacities as Chief Executive Officer and Chief

Financial Officer of VST Tillers Tractors Limited ("the Company"), to the best of our

knowledge and belief certify that:

(a) We have reviewed the financial statements and the cash flow statement for the year

ended on March 31, 2008 and based on our knowledge and belief, we state that:

(i) These statements do not contain any materially untrue statement or omit any

material fact or contain any statement that might be misleading;

(ii) These statements together present a true and fair view of the Company's affairsand are in compliance with existing accounting standards, applicable laws, and

regulations.

(b) We further state that to the best of our knowledge and belief, there are no transactionsentered into by the Company during the year, which are fraudulent, illegal, or violativeof the Company's code of conduct.

We hereby declare that all the members of the Board of Directors and Management

Committee have confirmed compliance with the Code of Conduct as adopted by the

Company.

(c) We are responsible for establishing and maintaining internal controls and for evaluating

the effectiveness of the same over the financial reporting of the Company and havedisclosed to the Auditors and the Audit Committee, deficiencies in the design or

operation of internal controls, if any, of which we are aware and the steps we have

taken or propose to take to rectify these deficiencies.

(d) We have indicated, based on our most recent evaluation, wherever applicable, to the

Auditors and Audit Committee:

(i) Significant changes, if any, in the internal control over financial reporting during the

year;

(ii) Significant changes, if any, in the accounting policies made during the year and thatthe same has been disclosed in the notes to the financial statements; and

(iii) Instances of significant fraud of which we have become aware and the involvementtherein, if any, of the management or an employee having significant role in theCompany's internal control system over financial reporting.

V. P. Mahendra

Managing Director

Bangalore, June 28, 2008

R. Thiyagarajan

Chief Financial Officer


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Auditors' Certificate on Compliance with the conditions of

Corporate Governance under Clause 49 of the listing

Agreement(s)

To the Members,

VST Tillers Tractors Limited

We have examined the Compliance conditions of Corporate Governance of V.S.T Tillers Tractors

Limited for the year ended on 31st March, 2008, as stipulated in clause 49 of the listing

Agreement of the said Company with stock exchange in India.

The compliance of conditions of Corporate Governance is the responsibility of the management.

Our responsibility has been limited to procedures and implementation thereof, adopted by the

Company for ensuring the compliance of the conditions of 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 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.

For Brahmayya & Co.,

Chartered Accountants

Sd/-

G. Srinivas

(Partner)

Membership No. 086761

Place : Bangalore

Date : 28th June, 2008


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REPORT ON CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

Your Company believes that, corporate governance is

the relationship between corporate managers,

directors, and the providers of equity, people, and

institutions who save and invest their capital to earn a

return.

It ensures that the board of directors is accountable

for the pursuit of corporate objectives and that the

corporation itself conforms to the law and regulations.

BOARD OF DIRECTORS:

(a) Composition of the Board:

The Board comprises of eight Directors and is headed by a Non-Executive Chairman, three whole-time

Directors and five Non-Executive Directors. The composition and category, the attendance at Board

Meetings and last AGM, number of Directorships and Chairmanship / Membership of Committees in other

Companies is as follows: -

The keys to creating wealth and maintaining a free

society lie primarily in the same direction. Both require

that broad based systems of accountability be built

into the governance structures of corporations

themselves

More vigilant shareowners are also more likely to be"socially responsible," in the true meaning have thatterm, increasing triple bottom line returns (addingeconomic, environmental and social value). Activelyinvolved owners are likely to help find solutions tomany corporate challenges.

Name of the Director

Messers.

V. K. Surendra

V. T. Velu *

A. Hishikawa

K. Tanaka

(AlternateA. Hishikawa)

M. Tanaka

R. Subramanian

M. K. Bannerjee

V. Ramachandran

V. P. Mahendra

A. T. Nahender *

B C S Iyengar **

Category of

Directorship

Non-Executive

Non-Executive

Non-Executive

Non-Executive

Non-Executive

Non-Executive /

Independent

Non-Executive/

Independent

Non-Executive/

Independent

Managing Director

Director (Operations)

Executive Director

No. of Board

Meetings

attended

6

-

1

3

-

6

6

6

7

4

1

Attendance

at the last

AGM

YES

NO

NO

NO

NO

YES

YES

YES

YES

-

-

No. of other

companies in

which Director

2

2

1

1

1

1

-

3

5

-

-

No. of other

Board committee

in which member

-

-

-

-

-

-

-

2

1

-

-

* Vacation of office due to demise

** Co-opted in the Board Meeting held on 28-08-2007

Details of Board Meetings:

During the year under review the Board met seven times on April 28, 2007, June 21, 2007, July 27, 2007, July

28, 2007, August 28, 2007, October 26, 2007 and January 29, 2008.


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(b) Board Procedures:

The Chairman of the Board, in consultation with

the other members of the Board, shall determine

the timing and length of the meetings of the

Board. The Board expects that five regularmeetings at appropriate intervals are in general

desirable for the performance of the Board's

responsibilities. In addition to regularly scheduled

meetings, unscheduled Board meetings may be

called upon appropriate notice at any time to

address specific needs of the Company.

The Chairman shall establish the agenda for each

Board meeting. Each Director shall be entitled

to suggest the inclusion of items on the agenda,

request the presence of or a report by anymember of the Company's senior management,

or at any Board meeting raise subjects that are

not on the agenda for that meeting.

The agend as for Board meetings shall provide

opportunities for the operating heads of all the

depa rtme nts of the Comp any to make

The certificate by CEO of the Company on compliance with the code of conduct is given below:

presentations to the Board during the course of

the year. At one meeting each year the Board

shall be presented the long-term strategic plan

for the Company and the principal issues that

the Company expects to face in the future.

Sufficient time shall be allocated for thispresentation to allow for questions by and full

discussion with the members of the Board.

Information provided to the Board includes

amongst others quarterly results of the Company,

Minutes of Audit and other Committees,

information on recruitment and remuneration of

senior officers just below the Board, review of

annual operating plans and compliance report.

c) Cod e of Cond uct:

The Company has a formulated and implemented

Code of Conduct for Board Members and Senior

Management of the Company in compliance with

Clause 49 (I) (D) of the Listing Agreement and

the same is displayed on Company's web-site

www.vsttillers.com

T o ,The Board of Directors,


It is hereby confirmed that the Directors and Senior Management have duly complied

with the code of conduct laid down by the Company during the financial year ending

March 31, 2008.

V P Mahendra

Managing Director

Place: Bangalore

Date: June 28, 2008

Committee Meetings

Each Committee Chair, after consultation with the

Chairman of the Board, shall establish agend as and

set meetings at the frequency and length appropriate

and necessary to carry out the Committee's

responsibilities.

Any Director who is not a member of a particular

Committee may attend any Committee meeting with

the concurrence of the Committee Chair or a majority

of the members of the Committee.

Audi t Commit tee

A key element in the corporate governance process

of any organization is its audit committee. The battle

for financial statement integrity and reliability depends

on balancing the pressures of multiple stakeholders,

including management, regulators, investors, and the

public interest.

Composition

The membership of the Committee consists of at least

th re e direct ors, all of wh om shall mee t the

COMM ITTE ES OF THE BOARD :

http://www.vsttillers.com/http://www.vsttillers.com/

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independence requirements established by the

Securities and Exchange Board of India and applicable

laws, regulations and listing requirements. Each

member shall in the judgment of the Board have the

ability to read and understand fundamental financial

statements. At least one member of the Committeeshall in the judgment of the Board be an "audit

committee financial expert".

At present the Audit Committee comprises of all the

three independent Directors of the Company.

Terms of Reference:

The Audit Committee of the Board of Directorsassists the Board of Directors in fulfilling itsresponsibility for oversight of the quality and integrityof the accounting, auditing, and reporting practices of

Details of Audit Committee Meetings:

During the year under review the Audit Committee met six times on April 28, 2007, June 21, 2007, July 28,

2007, August 28, 2007, October 26, 2007 and January 29, 2008.

SI.No.

1

2

3

Name of the Member

Mr. R. Subramanian

Mr. V. Ramachandran

Mr. M. K. Bannerjee

Designation

Chairman

Member

Member

Attended

5

5

5

SHAREHOLDERS / INVESTOR GRIEVENCES

COMMITTEEThe current composition of the Committee is

Mr. V. Ramachandran (Chairman) and

Mr. V. P. Mahendra. The Committee meets to approve

transfer / transmission of shares and issue of duplicate

share certificates. The Committee also looks into

investor complaints like non-receipt of Annual Report,

Dividend revalidation etc.,

The Committee approved transfer / transmission and

issue of duplicate share certificates on 14 occasions

during the year under review.

Mr. Subash B K, Company Secretary and Compliance

Officer can be contacted:

Subash B K,

No.1, Dyavasandra Indl. Layout,

P.B. No.4801, Whitefield Road,

Mahadevapura Post,

Bangalore - 560 048

Ph. No.28510805 / 6 / 7

Fax No.28510221

E-mail: [email protected]


the Company, and such other duties as directed bythe Board. The Committee's purpose is to overseethe accounting and financial reporting processes of theCompany, the audits of the Company's financialstatements, the qualifications of the Statutory Auditorsengaged as the Company's independent auditor toprepare or issue an audit report on the financialstatements of the Company, and the performance ofthe Company's internal and independent auditors.The Committee's role includes a particular focus onthe qualitative aspects of financial reporting toshareholders, the Company's processes to managebusiness and financial risk, and compliance withsignificant applicable legal, ethical, and regulatoryrequirements. The Committee is directly responsiblefor the appointment, compensation, retention, andoversight of the Company's independent auditor.

REMUNERATION COMMITTEE:

INSIDER TRADING REGULATIONS:

The Company has prescribed code of conduct and

disclosure practice to prevent insider trading.

DIRECTORS REMUNERATION

The non-executive Directors are not paid any

remuneration other than the sitting fees which is

within the limits prescribed by Rule 10B of Companies

(Central Government's) General Rules and Forms.

The details of remuneration paid to executive Directors

are provided under Clause L of Schedule 20 of the

Notes forming part of accounts.

MEANS OF COMMUNICATION:

The outcome of the Board Meeting, quarterly and

annual financial results are sent to Stock Exchanges

immediately after the Board approves these.

The intimation of date of Board Meeting and quarterly

and annual financial results are also published in leading

newspapers.

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DISTRIBUTION SCHEDULE OF SHAREHOLDINGS AS ON 31ST MARCH 2008

Category

Upto 5,000

5,001 10,000

10,001 20,000

20,001 30,000

30,001 40,000

40,001 50,000

50,001 1,00,000

1,00,001 and above

Total

No. of

Shareholders

4209

343

174

55

27

35

32

61

4936

% to total No. of

shareholders

85.27

6.95

3.53

1.11

0.55

0.71

0.65

1.24

100.00

Shares

Amount (Rs.)

5656240

2738810

2642790

1406650

955200

1652900

2245260

40299000

5,759,6850

% to total

shares amount

9.82

4.76

4.59

2.44

1.66

2.87

3.90

69.97

100.00

DETAILS OF REQUEST/COMPLAINTS RECEIVED DURING THE YEAR 07 - 08.

Nature of Request

Change of Address

Bank Mandate

Revalidation of Warrants

Duplicate share certificates

Transfer/Transmission

De-materialisation

Re-materialisation

OB

-

-

-

-

-

-

-

Received

28

3

42

7

40

140

1

Attended

28

3

42

7

40

140

1

Pending

-

-

-

-

-

-

SHAREHOLDING PATTERN AS ON 31ST MARCH 2008

Category

Promoters/Associates

Foreign Promoters

Bodies Corporate

Banks

Financial Institutions

Foreign Financial Institutions

Non-Resident Indians

Public/Others

TOTAL

No. of Shareholders

59

2

184

3

6

5

33

4644

4936

No. of shares held

2959929

217965

361496

1125

168350

676

12444

2037700

57,59,685

% to total

No . of shares

51.39

3.78

6.28

0.02

2.92

0.01

0.22

35.38

100.00


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GENERAL SHARE HOLDER INFORMATION

nvestor Services

29th August 2008 at 3.00 P.M.

Wood Lands Hotel Pvt., Ltd.

No.5, Rajaram Mohan Roy Road

Bangalore - 560 025

Financial year

August 22, 2008 to August 31,

2008 (Both Days inclusive)

AGM date,

ime and venue

1st Apri l - 31st March

Book Closure

Dividend: Dividend if declared would be payable on

any day between September 01, 2008 to

September 15, 2008

The Company has appointed M/s. Alpha Systems Pvt.

Ltd., Registrar & Share Transfer Agents for handling all

matters relating to share transfers including transfer/

ransmission of shares, de-materialization of share

Bombay Stock Exchange Ltd

Bangalore Stock Exchange Ltd

ISIN : INE 764D01017

531266

ALPHA SYSTEMS PVT. LTD.,

# 30, Ramana Residency,

Ground Floor, 4th Cross,

Sampige Road, Malleswaram,

Bangalore - 560 003

Phone Nos. 080-23460815 - 818, Fax: 080-

23460819

e-mail : [email protected]

Stock code:

certificates, sub division / conversion of share certificate

etc.

Share Holders desiring to communicate on any matter

relating to the shares of the Company may either visit

in person or write to the Company's Share TransferAgent quoting their Folio No./ DP ID & Client ID

number at the following address.

Market Price Data Information

MONTH

Apr-07

May-07Jun-07

Jul-07

Aug-07

Sep-07

HIGH

143.90

149.80165.00

217.30

195.00

184.00

LOW

112.50

122.10133.30

153.50

159.00

161.00

MONTH

Oct-07

Nov-07Dec-07

Jan-08

Feb-08

Mar-08

HIGH

201.00

233.00230.00

258.80

176.95

162.00

LOW

160.10

165.00188.10

137.00

135.00

105.50


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Particulars of last 3 Annual General Meetings

Date/Time

28.08.20073.00 p.m.

29.08.20063.00 p.m.

29.07.20053.00 p.m.

Location

Wood Lands Hotel Pvt., Ltd.No.5, Rajaram Mohan Roy Road

Bangalore - 560 025


Bangalore - 560 025


Bangalore - 560 025

Summary of Special Business

Nil

Nil

Re-appointment of Mr. A. T. Nahenderas Director (Operations) fora further period of 5 years.

No special resolution had been passed through Postal Ballot during the year 2007-08.

Dividend Payment Date Any day between 30th August 2008 to15th September 2008.

P L A N T L O C A T IO N S :

Plot No. I

Dyavasandra Indl. Layout

Whitefield Road

Mahadevapura PO.

BANGALORE 560 048 , Karnataka

Plot No. A-7

SIDCO Industrial Estate

HOSUR 635 126

Tamil Nadu

Precision Component Division,

Plot No.42/43, Survey No.20,

Metagalli Indl. Area,

Mysore - 570 016 Karnataka

DISCLOSURES

During the year under review, besides the

transactions mentioned under schedule 20, page

no .. .. of Annual Report, there were no otherrelated party transactions by the Company with

its promoters, directors and management that

had a potential conflict with the interest of the

Company at large.

There are no instances of non-compliance on

any matter relating to the capital market during

the last three years.

The Company has not adopted the non-

mandatory requirements as stated in Annexure I

D of clause 49 of the Listing Agreement.

However, the Company had moved towards a

regime of unqualified financial statements since

many years.

The Company follows Accounting Standards

issued by the Institute of Chartered Accountants

of India in the preparation of financial statements,

the Company has not adopted a treatment

different from that prescribed in the Accounting

Standard.

For VS T TILLERS TRA CT OR S LTD

V K Surendra

Chairman

Place: Bangalore

Date: June 28, 2008


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AUDITORS' REPORT

TO THE MEMBERS OF

V.S.T TILLERS TRACTORS LIMITED

We have audited the attached Balance sheet ofM/s. V.S.T TILLERS TRACTORS LIMITED as at31st March 2008, Profit and Loss Account and also the

cash flow statement for the year ended on that dateannexed thereto. These financial statements are theresponsibility of the Company's management. Ourresponsibility is to express an opinion on these financialstatements based on our audit.

1. We have conducted our audit in accordancewith auditing standards generally accepted inIndia. These Standards require that we plan andperform the audit to obtain reasonable assuranceabout whether the financial statements are free

of material misstatement. An audit includes

examining, on test basis, evidence supportingthe amounts and disclosures in the financialstatements. An audit also includes assessing theaccounting principles used and significantestimates made by the management, as well asevaluating the overall financial statementpresentation. We believe that our audit providesa reasonable basis for our opinion.

2. As required by the Companies (Auditor's Report)Order, 2003 issued by the Central Government

of India in terms of sub section (4A) of Section

227 of the Companies Act, 1956 and based onsuch checks as we considered appropriate andaccording to the information and explanationsgiven to us, we enclose in the Annexure astatement on the matters specified in paragraphs4 and 5 of the said order.

3. Further to our comments in the Annexure

referred to above, we report that:

a. We have obtained all the information and

explanations which to the best of our

knowledge and belief were necessary for

the purpose of our audit;

b. In our opinion proper books of account asrequired by law have been kept by theCompany so far as appears from ourexamination of the books;

c. The Balance Sheet, Profit and Loss Accountand Cash Flow Statement dealt with by

Place : Bangalore




Sd/-

G. Srinivas

(Partner)



this report are in agreement with the books

of account;

d. In our opinion, the Balance Sheet, Profit

and Loss Account and Cash Flow Statement

dealt with by this report comply with the

accounting standards referred to in sub

section (3C) of section 211 of the

Companies Act, 1956;

e. On the basis of written representations

received from the Directors, as on 31st

March, 2008 and taken on record by the

Board of Directors, we report that none of

the Directors is disqualified as on 31st

March, 2008 from being appointed as aDirector in terms of clause(g) of sub

section(I) of section 274 of the Companies

Act, 1956 and

f. In our opinion and to the best of our

information and according to the

explanations given to us, the accounts read

with the notes thereon 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 March, 2008;

(ii) In the case of the Profit and Loss

Account, of the Profit for the year

ended on that date; and

(iii) In the case of Cash Flow Statement,

of the Cash Flow for the year ended

on the date.

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AUDITORS' REPORT

ANNE X URE TO AUDI TORS ' RE P ORT

Referred to in paragraph 3 of our report of even

date

i) (a) Th e Company has maintained proper

records showing full Particulars including

quantitative details and situation of fixed

assets.

(b) All the assets have been physically verified

by the management during the year as per

programme of verification 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 such verification.

(c) In our opinion, the Company has not

disposed off a substantial part of fixed assets

during the year and going concern status of

the Company is not affected.

ii) (a) Th e inventory has been physically verified

by the management. In our opinion, the

frequency of verification is reasonable.

(b) The procedures of physical verification of

inventories followed by the management

are reasonable and adequate in relation to

the size of the Company and the nature of

its business.

(c) On the basis of our examination of the

records of inventory, we are of the opinion

that the Company is maintaining proper

records of inventory. The discrepancies

noticed on verification between the physical

stocks and the book records were not

material and have been properly dealt

within the books of accounts.

iii) (a) The Company has not granted any loans

secured or unsecured, to Companies, firms

or other parties listed in the Register

maintained under section 301 of the

Companies Act, 1956, hence paragraphs

(iii)(b),(c) and (d) of the Order, are not

applicable.

(b) The Company has not taken any loans

secured or unsecured, from companies,


firms or other parties listed in the Register

maintained under section 301 of the

Companies Act, 1956, hence paragraphs

(iii)(f) and (g) of the Or der, are not

applicable.

iv) 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 inventory,

fixed assets and with regard to the sale of goods.

Further, on the basis of our examination, and

according to the information and explanations

given to us, we have neither come across nor

have we been informed of any instance of majorweakness in the aforesaid internal control

systems.

v) (a) Based on the audit procedures applied by

us and according to the information and

explanations provided by the management,

we are of the opinion that the transactions

that need to be entered into the register

maintained under Section 301 of the

companies Act 1956, have been so entered.

(b) In our opin ion and according to the

information and explanations given to us,

the transactions made in pursuance of

contracts or arrangements entered in the

Register maintained under section 301 of

the Companies Act, 1956 exceeding the

value of rupees five lakh in respect of each

party during the year have been made at

prices which are reasonable having regard

to prevailing market prices at the relevant

time.

vi) According to the information and explanations

given to us, the Company has not accepted any

deposits from the public; as such the provisions

of sections 58A and 58AA of the Companies

Act, 1956 and the Companies (Acceptance of

Deposits) Rules, 1975, do not apply.

vii) In our opinion, the Company has an internal

audit system commensurate with the size and

nature of its business.

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AUDITORS' REPORT

viii) We have broadly reviewed the books of accounts

maintained by the Company in respect of

products where, pursuant to the rules made by

the Central Government of India, themaintenance of Cost records has been prescribed

under clause (d) of sub section (I), of section209 of the Companies Act, 1956, and are of the

opinion that prima facie, the prescribed accounts

and records have been made and maintained.

However we have not made a detailed

examination of records with a view to determine

whether they are accurate or complete.

ix) (a) Accord ing to the inform ati on and

explanations given to us and according to

the records as produced and examined by

us, In our opinion, the Company is regularin depositing with appropriate authorities

Name of

the Statue

Central Excise

Act, 1944

Finance Act,

1944

Central Excise

Act, 1944

Nature of

the dues

Rebate on

Export of

Goods

Penalty

Excise Duty/

Penalty

Amount in

(Rs.)

3,57,291/-

2,00,000/-

15,44,83,344/-

Period to

which the

amount relates

2005-06

2004-05 &

2005-06

Various years

from 2004-05

to 2006-07

Forum where

pending

Dept. of Revenue

Delhi & Mangalore,

Revision Authority

Central Excise and

Service TaxAppellate Tribunal

Central Excise and

Service Tax

Appellate Tribunal

the undisputed statutory dues including

Provident Fund, Investor Education and

Protection Fund, Employees' State

Insurance, Income Tax, Sales Tax, Wealth

Tax, Service Tax, Custom Duty, Excise Duty,

Cess and other statutory dues to the extentapplicable to it. There are no arrears of

outstanding statutory dues as at 31st March,

2008 for a period of more than six months

from the date they became payable.

(b) According to the records of the Company

and information and explanations given to

us, there are no dues in respect of Sales

Tax, Income Tax, Customs Duty, Wealth

Tax, Service Tax Excise Duty/Cess which

have not been deposited on account ofdispute except the following;

x) The Company does not have accumulated losses

as at 31st March, 2008 and has not incurred any

cash losses during the financial year covered by

our Audit or in the immediately preceding

financial year.

xi) According to the information and explanations

given to us, the Company has not defaulted in

repayment of dues to banks. The Company has

no dues to Financial Institutions and banks at the

balance sheet date and the Company has not

issued any Debentures.

xii) According to the information and explanations

given to us, the Company has not granted loans

and advances on the basis of security by way of

pledge of shares, debentures and other securities.

xiii) The provisions of any special statute applicable

to Chit Fund / Nidhi / Mutual Benefit Fund /

Societies are not applicable to the Company.

xiv) In our opinion and according to explanations

given to us, the Company is not a dealer or a

trader in Securities.

xv) According to the information and explanations

given to us, the Company has not given any

guarantee for loans taken by others from bank

or financial institutions.

xvi) According to the information and explanations

given to us, the term loans have been applied for

the purpose for which they were obtained.


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AUDITORS' REPORT

xvii) Based on the information and explanations given

to us and an overall examination of the Balance

Sheet of the Company, in our opinion, there are

no funds raised on short term basis which have

been used for long term investment and vice-

versa.

xviii) Th e Company has not made any preferential

allotment of shares to parties and Companies

covered in the Register maintained under section

301 of the Companies Act, 1956 during the year

and therefore paragraph 4 Clause (xviii) of the

order is not applicable to the Company.

xix) The Company has not issued debentures during

the year and therefore paragraph 4 (xix) of the

Order is not applicable.

xx) The Company has not raised any money by

public issues during the year and therefore

paragraph 4 (xx) of the Order is not applicable.

xxi) During the course of our examination of the

books and records of the Company, carried out

in accordance with the generally accepted

auditing practices in India and according to the

information and explanation given to us, we

have neither come across any instance of the

fraud on or by the Company, noticed or reported

during the year, nor have we been informed of

such case by the management.



Sd/ -

G. Srinivas

(Partner)


Place : Bangalore



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BALANCE SHEET

As at

PARTICULARS

SOURCES OF FUNDS

Shareholders' Funds

Share Capital

Reserves and Surplus

Loan Funds

Secured Loans

Unsecured Loans

Deferred Tax Liability

Deferred Tax Asset

Deferred Tax (Net)

TOTAL

APPLICATION OF FUNDS

Fixed Assets

Gross Block

Accumulated Depreciation

Net Block

Capital Work-in-Progress

nvestments

Current Assets, Loans and Advances

nventoriesReceivables

Cash and Bank Balances

Loans and Advances

Sub-Total (A)

Current Liabilities and Provisions

Current Liabilities

Provisions

Sub-Total (B)

Net Current Assets (A-B)

Miscellaneous Expenditure to the extent

ot written off

TOTAL

Sch

No.

1

2

3

4

5

6

78

9

10

11

12

13

31st March, 2008

Details

Rs.

5,75,96,850

62,50,54,850

2,39,04,286

5,52,92,606

3,86,52,418

47,74,597

56,26,38,721

28,37,62,441

27,88,76,280

1,78,89,997

33,57,17,55930,32,08,487

16,96,74,585

4,96,13,588

85,82,14,220

36,40,69,573

4,70,86,462

41,11,56,035

Total

Rs.

68,26,51,700

7,91,96,892

3,38,77,821

79,57,26,413

29,67,66,277

4,48,54,400

44,70,58,185

70,47,551

79,57,26,413

31st March, 2007

Details

Rs.

5,75,96,850

51,47,87,100

2,79,11,951

5,01,59,630

4,04,81,174

27,95,396

52,68,40,002

26,01,11,920

26,67,28,082

1,06,07,933

26,53,88,55924,19,60,581

15,50,17,152

4,97,02,843

71,20,69,135

27,63,38,226

4,40,83,626

32,04,21,852

Total

Rs.

57,23,83,950

7,80,71,581

3,76,85,778

68,81,41,309

27,73,36,015

83,54,400

39,16,47,283

1,08,03,611

68,81,41,309

.K.SurendraChairman

Place : Bangalore

Dated : 28th June, 2008

V.P.MahendraManaging Director

Subash B.K.

Company Secretary

As per our report of even date

For BRAHMAYYA & CO.


G.Srinivas

Partner

Membership No.08676l

24Annual Report 2007 - 2008

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PROFIT AND LOSS ACCOUNT

for the year ended

PARTICULARS

INCOMESales

Other Income

TOTAL

EXPENDITURE

Materials consumed

Personnel & Other Expenses

Finance Charges

Depreciation

TOTALPROFIT FOR THE YEAR

ADD/(LESS) : Prior Year's Adjustment

PROFIT BEFORE TAX

PROVISION FOR INCOME TAX

Current tax

Income Tax - Prior period

Deferred Tax

Fringe Benefit Tax

PROFIT AFTER TAX

ADD: Balance brought forward

AM OUNT AVAILABLE FOR APPROPRIATION

APPROPRIATIONS :

Dividend

Tax on Distributed Dividends

Transfer to General Reserve

BALANCE IN PROFIT and LOSS ACCCOUNT

EPS - Basic

EPS - Diluted

Sch

No.

14

15

16

17

18

5

31st March, 2008

Details

Rs.

188,58,08,040

2,78,36,530

123,78,42,995

41,89,82,721

53,38,233

2,89,93,059

7,83,00,000

3,596

(38,07,957)

40,78,800

Total

Rs.

1,91,36,44,570

169,11,57,00822,24,87,562

1,12,097

22,25,99,659

7,85,74,43914,40,25,220

7,77,02,758

22,17,27,978

2,87,98,425

48,94,292

10,00,00,000

8,80,35,261

22,17,27,97825.01

25.01

31st March, 2007

Details

Rs.

162,27,94,734

2,10,72,326

104,46,62,577

37,07,67,188

44,89,734

2,73,03,344

6,73,00,000

9,26,688

(12,57,476)

40,39,200

Total

Rs.

1,64,38,67,060

144,72,22,84319,66,44,217

(1,04,851)

19,65,39,366

7,10,08,41212,55,30,954

5,41,25,978

17,96,56,932

2,30,38,740

39,15,434

7,50,00,000

7,77,02,758

17,96,56,93221.79

21.79

V.K.SurendraChairman

V.P.Mahendra

Managing DirectorAs per our report of even date

For BRAHMAYYA & CO.


G.Srinivas

Partner

Membership No.086761


Place : Bangalore

Dated : 28th June, 2008

25

Subash B.K.

Company Secretary

7/28/2019 VST_AR_2008

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SCHEDULES

forming part of Balance Sheet as at

01. SHARE CAPITAL

Authorised10,00,000 Redeemable (Previous year: 10,00,000)

Preference Shares of Rs. 10/- each

60,00,000 Equity Shares of Rs. 10/- each

(Previous year: 60,00,000)

Issued, Subscribed & Paid-up :

57,59,685 Equity Shares (Previous year :

57,59,685) of Rs. 10 each fully paid.

TOTAL

31st March, 2008

Details

Rs.

Total

Rs.

1,00,00,000

6,00,00,000

7,00,00,000

5,75,96,850

5,75,96,850

31st March, 2007

Details

Rs.

Total

Rs.

1,00,00,000

6,00,00,000

7,00,00,000

5,75,96,850

5,75,96,850

02. RESERVES AND SURPLUS

Capital Reserve :

Profit on reissue of forfeited shares

Share Premium Account

Per Last Balance Sheet

Revaluation Reserve :

Per Last Balance Sheet

LESS: Depreciation for the Year

General Reserve:Per last Balance Sheet

ADD: Transfer from Profit and Loss Account

Surplus in Profit and Loss Account

TOTAL

8,250

5,51,95,050

68,81,042

64,752

37,50,00,000

10,00,00,000

5,52,03,300

68,16,290

47,50,00,000

8,80,35,261

62,50,54,850

8,250

5,51,95,050

69,45,617

64,575

30,00,00,000

7,50,00,000

5,52,03,300

68,81,042

37,50,00,000

7,77,02,758

51,47,87,100

03. SECURED LOANS1) Working Capital Loans

A) From Commercial BanksB) From Others

TOTAL

2,39,04,286-

2,39,04,286

2,39,04,286

2,79,11,951-

2,79,11,951

2,79,11,951

04. UNSECURED LOANSDeposits from Dealers

Sales tax deferment

TOTAL

5,46,77,350

6,15,256

5,52,92,606

4,83,13,850

18,45,780

5,01,59,630


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forming part of the Balance Sheet

05. FIXED ASSETS

LAND

BUILDINGS

PLANT & MACHINERY

COMPUTER SYSTEMS

OFFICE EQUIPMENTS

VEHICLES

FURNITURE & FIXTURES

CAPITAL WORK IN

PROGRESS INCLUDING

ADVANCES

PREVIOUS YEAR

CAPITAL WORK IN PROGRESS

INCLUDING ADVANCES

GROSS BLOCK

As at 01-04-2007

Rs.

2,92,54,256

7,66,72,009

37,30,45,508

2,35,43,364

41,80,851

1,21,22,862

80,21,152

52,68,40,002

1,06,07,933

49,97,64,807

1,22,17,860

Additions

Rs.

63,24,406

3,50,68,388

8,64,617

39,300

14,36,783

7,762

4,37,41,256

3,11,23,842

Deletions

Rs.

44,24,819

6,15,995

3,825

28,97,898

79,42,537

40,48,647

As at

31-03-2008

Rs.

2,92,54,256

8,29,96,415

40,36,89,077

2,37,91,986

42,16,326

1,06,61,747

80,28,914

56,26,38,721

17,889,997

52,68,40,002

10,607,933

DEPRECIAITION

Upto

31-03-2007

Rs.

2,19,15,858

21,40,92,921

1,48,10,833

16,27,448

28,43,795

48,21,065

26,01,11,920

23,62,91,059

For the year

Rs.

16,19,599

2,39,08,954

18,27,676

1,98,641

11,27,978

3,74,963

2,90,57,811

2,73,67,919

Adjustments

Rs.

38,01,080

5,38,132

3,827

10,64,251

5,4,07,290

35,47,058

Upto

31-03-2008

Rs.

2,35,35,457

23,42,00,795

1,61,00,377

18,22,262

29,07,522

51,96,028

28,37,62,441

26,01,11,920

NET BLOCK

As at

31-03-2008

Rs.

2,92,54,256

5,94,60,958

16,94,88,282

76,91,609

23,94,064

77,54,225

28,32,886

27,88,76,280

26,67,28,082

As at

31-03-2007

Rs.

2,92,54,256

5,47,56,151

15,89,52,587

87,32,531

25,53,403

92,79,067

32,00,087

26,67,28,083

26,34,73,748

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SCHEDULES


06. INVESTMENTS AT COSTLONG TERM INVESTMENTS:

Non Trade - Quoted

33,544(33,544) Bonds of Rs. 100 each of Tax Free

Bonds issued by Unit Trust of India

Trade - Unquoted

41,50,000 Equity Shares of Rs. 10 each of

Mitsubishi -VST Diesel Engines Private

Limited,a joint venture company

1,00,000 (1,00,000) Equity Shares of

Rs. 10 each of Ranba Castings Ltd.

Less Provision for diminution in Investments

CURRENT INVESTMENTS:

Non Trade - Unquoted

i) LIC Mutual Fund

LICMF Floating Rate Fund - Dividend

250,000 (Nil) Units of Rs. 10 each

ii) PNB-Principal Mutual FundPrincipal Floating Rate Fund SMP

250,000 (Nil) Units of Rs. 10 each

TOTAL

31st March, 2008

Details

Rs.

33,54,400

4,15,00,000

Total

Rs.

33,54,400

4,15,00,000

4,48,54,400

-

44,854,400

-

4,48,54,400

31st March, 2007

Details

Rs.

33,54,400

10,00,000

25,00,000

25,00,000

Total

Rs.

33,54,400

10,00,000

43,54,400

10,00,000

3,354,400

50,00,000

83,54,400

07. INVENTORIESi. Raw material and Components

Add : Goods-in-Transit

ii. Work-in-Progress

iii. Finished Goods

iv. Stock of Spares and Attachments

v. Stock of Trading goods

vi. Consumable Stores

vii. Loose Tools

viii . Machinery Spares and Others

TOTAL

17,88,25,465

12,38,31818,00,63,783

1,19,27,198

6,53,10,825

5,40,05,890

47,43,921

4,21,390

1,53,18,841

39,25,711

33,57,17,559

17,15,10,122

-17,15,10,122

96,05,799

1,91,29,921

4,42,45,877

32,08,394

13,16,749

1,26,86,425

36,85,272

26,53,88,559


Market Value of Quoted Investments

as on 31-03-2008 Rs.35,47,613/-

(Previous year Rs.35,00,316/-)

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SCHEDULES


08. RECEIVABLES

Unsecured Considered Good :-

Debts outstanding for a period

exceeding six months

Other Debts

TOTAL

31st March, 2008

Details

Rs.

1,14,98,119

29,17,10,368

Total

Rs.

30,32,08,487

30,32,08,487

31st March, 2007

Details

Rs.

1,58,43,071

22,61,17,510

Total

Rs.

24,19,60,581

24,19,60,581

09. CASH AND BANK BALANCES

Cash on hand

Cheques on hand and in transit

Balances with Scheduled BanksOn Current Accounts

On Margin and Other Accounts

Balances on Deposit Account with others

TOTAL

5,35,78,364

3,06,68,300

1,00,000

2,21,012

8,51,06,910

8,43,46,664

16,96,74,585

6,23,55,468

5,44,09,900

1,00,000

1,12,081

3,80,39,703

11,68,65,368

15,50,17,152

10. LOANS AND ADVANCES

(Unsecured Considered Good)

Advances recoverable in Cash or

in Kind or for value to be received :-Advances against Supplies

Sundry Advances and Deposits

Income Accrued but not due

Deposits with Government Departments

Advance Income tax and TDS Less Provisions

TOTAL

46,01,725

1,09,04,218

3,31,270

1,58,37,213

3,37,76,375

-

4,96,13,588

1,32,33,552

1,34,84,495

7,97,369

2,75,15,416

2,16,87,948

499,479

4,97,02,843

11. CURRENT LIABILITIES

Documents

VST_AR_2008