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23

Dear Member,

Your directors have pleasure in presenting the Annual Report alongwith the audited statement of accounts of your Company for thefinancial year ended March 31, 2006.

FINANCIAL PERFORMANCE

D I R E C T O R S ’ R E P O R T

Year Ended31.03.2006 31.03.2005

(Rs./Crore)

Sales & other Income 3,003.30 2,676.62

Profit before Depreciation, Tax & Exceptional items 173.36 141.70Less: Depreciation 72.79 56.79

Provision for Tax – Current 21.79 3.65– Deferred 1.86 13.63– Fringe Benefit Tax 4.55 –

Profit after Tax before Exceptional items 72.37 67.63Add: Exceptional items 5.80 –

Net Profit 78.17 67.63Add: Transfer from Debenture Redemption Reserve 6.11 10.91

Surplus brought forward from previous year 111.32 104.18

Profit available for Appropriations 195.60 182.72

AppropriationsGeneral Reserve 50.00 50.00Debenture Redemption Reserve - 1.73Proposed Dividend 17.25 17.25Dividend Tax 2.42 2.42

Balance carried forward 125.93 111.32

195.60 182.72

OPERATIONS

Sales from operations during the financial year ended March 31, 2006 amounted to an all time high of Rs. 3,002.12 crore as againstRs. 2,656.81 crore during the previous year, recording a growth of approx.13%.

Operating profit, before interest and depreciation, amounted to Rs. 223.92 crore as against Rs. 184.64 crore during the previousyear, registering an increase of approx. 21.27%. Net profit, after providing for interest, depreciation, tax and exceptional itemsamounted to Rs. 78.17 crore, as against Rs. 67.63 crore during the previous year.

The strong performance of Apollo is a combination of high growth in sales alongwith enhanced operations management, better workingcapital management, aggressive marketing and overall cost reduction measures adopted by the Company.

During the year, your Company realigned its relationship with Michelin and exited from the Joint Venture Company “Michelin ApolloTyres (P) Ltd.”, as radialisation in commercial vehicle tyres segment in Indian markets had not reached anticipated levels. The Companyrecovered almost its entire investment in the JV through sale of its 49% stake back to Michelin. This re-alignment would enable theCompany to utilise the available resources better towards other growth opportunities in short to medium term.

24

PRODUCTION

During the year 2005-06, your Company has achieved 12.2% growth in production tonnage by recording production of 2.52 lac MTas against 2.24 lac MT in the previous year. As a result of successful implementation of expansion programme, the total capacityacross the plants has increased to 704 MT/day from 628 MT/day.

DIVIDEND

Your directors recommend for your approval a dividend of Rs. 4.50 per equity share for the financial year 2005-06. There will beno tax deduction at source on dividend payments, but your Company will have to pay tax on dividend @ 14.025%, inclusive ofsurcharge.

The dividend, if approved, shall be payable to the shareholders registered in the books of the Company and the beneficial ownersas per details furnished by the depositories, determined with reference to the book closure from 23-8-2006 to 25-8-2006 (both daysinclusive).

RAW MATERIALS

In the year under review, the raw material prices continued their upward march with record highs being recorded for our major rawmaterials viz. Natural rubber, Nylon tyre cord fabric, Carbon Black, Synthetic Rubber and Rubber Chemicals. The unabated increasein prices continued throughout the year with assured supplies being an important factor for the coming year.

The year under review saw Natural Rubber prices scaling new peaks in the international markets with weather playing a major rolein disrupting supplies. There were drought conditions in early part of the year in Thailand, China lost rubber plantations in the Hainanprovince due to typhoon in September, 2005 followed by floods in Thailand and Malaysia in December, 2005.

With international natural rubber prices ruling high and India being a part of the global market, exports of rubber from India adverselyaffected the demand and supply position. The inverted customs duty structure on natural rubber continues wherein the customs dutyon imported natural rubber is 20% as against 12.5% customs duty on import of tyres.

Petro based raw materials namely Nylon Tyre Cord Fabric, Carbon Black, Synthetic Rubber and Rubber Chemicals went up dueto crude prices breaching the barrier of USD 70/barrel and settling at higher levels over the previous year. The adverse demandand supply position for Synthetic Rubber and Rubber Chemicals led to phenomenal increase in prices for these raw materials. Theantidumping duty on import of Nylon Tyre Cord Fabric and Rubber Chemicals further contributed to the increased costs.

The Company continued its thrust on strategic partnership with vendors and expanding the sourcing network across the world to getcompetitive prices.

DOMESTIC MARKETING

The top line growth was registered on a foundation of taking the corporate journey of “Passion In Motion” into every aspect of ouractivities and operations to build greater customer satisfaction. This is based on the principle that one delighted customer will be acustomer for life and will also bring in ten more into the Apollo Tyres customer base.

The robust distribution network was further strengthened over the year by servicing our dealers through our 118 district offices and 12distribution centres; our end consumers through our 4,250 dealers thus ensuring availability of the product through industry-leadingspread and depth across the country.

While we continue to lead in the replacement market, our relationships with key automakers have become more collaborative andvibrant allowing us to conduct more profitable business with them and generate more replacement sales.

On the product front, we launched the premium “Gold” range in the truck & bus segment that gave a clear product benefit proposition ofgreater mileage. The Acelere range of high performance passenger car tyres was expanded to cater to the latest cars being introducedin the country while the entire Hawkz range was also rolled out to cater to the growing popularity of sport utility vehicles (SUVs).

In our constant quest to innovate for greater customer delight, your Company launched the ‘Apollo Acelere Tubeless Service Point’whereunder till March 31, 2006, 162 tyre dealers across the country have been appointed to service tubeless passenger car tyres. TheAcelere Wheelz range of high performance alloy wheels for passenger cars was expanded to offer the tyre dealer with an additionalbusiness stream while the car owner got a world-class product right here. These initiatives are in our quest to make your Companyevolve into more than just a tyre maker and marketer by offering products and services that embellish the core tyre business through aone-stop-shop solution. This quest of your Company becoming a “tyres plus” marketer will continue through the years.

On the service front, our 3-day claim settlement regimen gained unprecedented appreciation from the end consumer. Apollo Mobile, aphone based facility to let our dealers have updates about critical aspects of their business is another industry first. Our expandingspecialist network of ‘Apollo Pragati Kendras’ and ‘Apollo Tyre Worlds’ has been strengthened with the partnerships forged with ReliancePetroleum, ONGC ‘Oval’ and Tata Motors to market the range of Apollo Tyres through their networks, further improving our reach andavailability.

27

Annexure-‘A’ANNEXURE TO DIRECTORS’ REPORT

The Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

Information under Section 217 (1) (e) of the Companies Act,1956 read with Companies (Disclosure of Particulars in the report of Boardof Directors) Rules, 1988 and forming part of the Directors' Report for the year ended March 31, 2006.

A) CONSERVATION OF ENERGY

(a) Measures taken for conservation of energy

To overcome the impact of rising energy costs, the company has undertaken many energy efficient measures like commissioningAC drives for boiler feed water pumps, energy efficient blowers, energy efficient motors for mixing mills, vapour compressionchiller, conversion of most of furnace oil fired boilers into gas fired, commissioning of highly efficient rubber mixer, screwcompressors for plant air, process applications and installation of HT/LT capacitors for power factor improvements.

During the year, Limda Plant was awarded one of the “Excellent Energy Efficient Unit” by Confederation of Indian Industry(CII).

(b) Additional investment and proposal for reduction of energy usage:

The proposed energy conservation measures include Clean Development Mechanism (CDM) Project, Wind Turbine Generator(WTG), high efficient burners for boilers, optimise compressed air system, energy efficient pumps and motors for variousapplications and water harvesting project.

(c) Impact of the measures at (a) and ( b) above for reduction of energy consumption and consequent impact on the costof production of goods:

- Power consumption/MT was reduced by 30.96 KWH, a reduction of 3.93 % over previous year.- Fuel consumption / MT was reduced by 13.35 ltr., a reduction of 7.04 % over previous year.

(d) Total energy consumption and energy consumption per unit of production

FORM A

PARTICULARS Unit Measure Total

2005-06 2004-05

A POWER/FUEL CONSUMPTION

1) Electricitya. Purchased Units (in lac) 1248.73 1127.77

Total Amount (Rs./lac) 4988.08 4631.75Rate per Unit (Rs.) 3.99 4.11

b. Own Generationi) Total Captive Generation

- Units (in lac) 266.24 459.09- Units / Ltr. Of Diesel / Furnace oil 3.94 4.10- Cost / Unit (Rs.) 4.83 3.88

ii) through steam turbine/generator- Units (in lac) 319.12 97.65- Units / Ltr. Of Diesel / Furnace oil 6.33 5.26- Cost / Unit (Rs.) 1.50 1.59

2) Coal - -

3) Furnace oil / LSHSQuantity (K.ltrs) 42673.18 40507.23Total Amount (Rs./lac) 5285.20 4799.34Average rate (Rs.) 12.39 11.85

4) Other / internal generation 0.00 0.00

B CONSUMPTION PER UNIT OF PRODUCTION

Electricity (KWH/MT) 757.48 788.44Furnace Oil / LSHS (ltrs/MT) 176.24 189.59Coal & Others

24

PRODUCTION

During the year 2005-06, your Company has achieved 12.2% growth in production tonnage by recording production of 2.52 lac MTas against 2.24 lac MT in the previous year. As a result of successful implementation of expansion programme, the total capacityacross the plants has increased to 704 MT/day from 628 MT/day.

DIVIDEND

Your directors recommend for your approval a dividend of Rs. 4.50 per equity share for the financial year 2005-06. There will beno tax deduction at source on dividend payments, but your Company will have to pay tax on dividend @ 14.025%, inclusive ofsurcharge.

The dividend, if approved, shall be payable to the shareholders registered in the books of the Company and the beneficial ownersas per details furnished by the depositories, determined with reference to the book closure from 23-8-2006 to 25-8-2006 (both daysinclusive).

RAW MATERIALS

In the year under review, the raw material prices continued their upward march with record highs being recorded for our major rawmaterials viz. Natural rubber, Nylon tyre cord fabric, Carbon Black, Synthetic Rubber and Rubber Chemicals. The unabated increasein prices continued throughout the year with assured supplies being an important factor for the coming year.

The year under review saw Natural Rubber prices scaling new peaks in the international markets with weather playing a major rolein disrupting supplies. There were drought conditions in early part of the year in Thailand, China lost rubber plantations in the Hainanprovince due to typhoon in September, 2005 followed by floods in Thailand and Malaysia in December, 2005.

With international natural rubber prices ruling high and India being a part of the global market, exports of rubber from India adverselyaffected the demand and supply position. The inverted customs duty structure on natural rubber continues wherein the customs dutyon imported natural rubber is 20% as against 12.5% customs duty on import of tyres.

Petro based raw materials namely Nylon Tyre Cord Fabric, Carbon Black, Synthetic Rubber and Rubber Chemicals went up dueto crude prices breaching the barrier of USD 70/barrel and settling at higher levels over the previous year. The adverse demandand supply position for Synthetic Rubber and Rubber Chemicals led to phenomenal increase in prices for these raw materials. Theantidumping duty on import of Nylon Tyre Cord Fabric and Rubber Chemicals further contributed to the increased costs.

The Company continued its thrust on strategic partnership with vendors and expanding the sourcing network across the world to getcompetitive prices.

DOMESTIC MARKETING

The top line growth was registered on a foundation of taking the corporate journey of “Passion In Motion” into every aspect of ouractivities and operations to build greater customer satisfaction. This is based on the principle that one delighted customer will be acustomer for life and will also bring in ten more into the Apollo Tyres customer base.

The robust distribution network was further strengthened over the year by servicing our dealers through our 118 district offices and 12distribution centres; our end consumers through our 4,250 dealers thus ensuring availability of the product through industry-leadingspread and depth across the country.

While we continue to lead in the replacement market, our relationships with key automakers have become more collaborative andvibrant allowing us to conduct more profitable business with them and generate more replacement sales.

On the product front, we launched the premium “Gold” range in the truck & bus segment that gave a clear product benefit proposition ofgreater mileage. The Acelere range of high performance passenger car tyres was expanded to cater to the latest cars being introducedin the country while the entire Hawkz range was also rolled out to cater to the growing popularity of sport utility vehicles (SUVs).

In our constant quest to innovate for greater customer delight, your Company launched the ‘Apollo Acelere Tubeless Service Point’whereunder till March 31, 2006, 162 tyre dealers across the country have been appointed to service tubeless passenger car tyres. TheAcelere Wheelz range of high performance alloy wheels for passenger cars was expanded to offer the tyre dealer with an additionalbusiness stream while the car owner got a world-class product right here. These initiatives are in our quest to make your Companyevolve into more than just a tyre maker and marketer by offering products and services that embellish the core tyre business through aone-stop-shop solution. This quest of your Company becoming a “tyres plus” marketer will continue through the years.

On the service front, our 3-day claim settlement regimen gained unprecedented appreciation from the end consumer. Apollo Mobile, aphone based facility to let our dealers have updates about critical aspects of their business is another industry first. Our expandingspecialist network of ‘Apollo Pragati Kendras’ and ‘Apollo Tyre Worlds’ has been strengthened with the partnerships forged with ReliancePetroleum, ONGC ‘Oval’ and Tata Motors to market the range of Apollo Tyres through their networks, further improving our reach andavailability.

27

Annexure-‘A’ANNEXURE TO DIRECTORS’ REPORT

The Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

Information under Section 217 (1) (e) of the Companies Act,1956 read with Companies (Disclosure of Particulars in the report of Boardof Directors) Rules, 1988 and forming part of the Directors' Report for the year ended March 31, 2006.

A) CONSERVATION OF ENERGY

(a) Measures taken for conservation of energy

To overcome the impact of rising energy costs, the company has undertaken many energy efficient measures like commissioningAC drives for boiler feed water pumps, energy efficient blowers, energy efficient motors for mixing mills, vapour compressionchiller, conversion of most of furnace oil fired boilers into gas fired, commissioning of highly efficient rubber mixer, screwcompressors for plant air, process applications and installation of HT/LT capacitors for power factor improvements.

During the year, Limda Plant was awarded one of the “Excellent Energy Efficient Unit” by Confederation of Indian Industry(CII).

(b) Additional investment and proposal for reduction of energy usage:

The proposed energy conservation measures include Clean Development Mechanism (CDM) Project, Wind Turbine Generator(WTG), high efficient burners for boilers, optimise compressed air system, energy efficient pumps and motors for variousapplications and water harvesting project.

(c) Impact of the measures at (a) and ( b) above for reduction of energy consumption and consequent impact on the costof production of goods:

- Power consumption/MT was reduced by 30.96 KWH, a reduction of 3.93 % over previous year.- Fuel consumption / MT was reduced by 13.35 ltr., a reduction of 7.04 % over previous year.

(d) Total energy consumption and energy consumption per unit of production

FORM A

PARTICULARS Unit Measure Total

2005-06 2004-05

A POWER/FUEL CONSUMPTION

1) Electricitya. Purchased Units (in lac) 1248.73 1127.77

Total Amount (Rs./lac) 4988.08 4631.75Rate per Unit (Rs.) 3.99 4.11

b. Own Generationi) Total Captive Generation

- Units (in lac) 266.24 459.09- Units / Ltr. Of Diesel / Furnace oil 3.94 4.10- Cost / Unit (Rs.) 4.83 3.88

ii) through steam turbine/generator- Units (in lac) 319.12 97.65- Units / Ltr. Of Diesel / Furnace oil 6.33 5.26- Cost / Unit (Rs.) 1.50 1.59

2) Coal - -

3) Furnace oil / LSHSQuantity (K.ltrs) 42673.18 40507.23Total Amount (Rs./lac) 5285.20 4799.34Average rate (Rs.) 12.39 11.85

4) Other / internal generation 0.00 0.00

B CONSUMPTION PER UNIT OF PRODUCTION

Electricity (KWH/MT) 757.48 788.44Furnace Oil / LSHS (ltrs/MT) 176.24 189.59Coal & Others

28

B) TECHNOLOGY ABSORPTION

Efforts made in technology absorption as per form B

1. Research & Development

(1) Specific areas in which R&D is carried out by the company:

As a part of continuous improvements, the organisation has taken several initiatives to support the Company’s vision tobe self sufficient in Technology.

A modern laboratory and number of tyre testing equipments were added for material characterization, reverse engineering,failure analysis and advanced tyre research.

Advanced tyre design cell developed sophisticated FEM simulation techniques to design tyres with built in durability andperformance characteristics. A software with numerous options for optimization of tyre patterns noise to design tyres withminimal noise level is developed.

A few novel raw materials with very high performance characteristics to enhance tyre performance and durability isdeveloped. A second stage Tyre building machine for LCV tyres and fabric let off for steel cord calender is developed.

(2) Benefits derived as a result of R&D:

The major benefits derived as a result of R&D work is the development of asymmetric and directional patterns for ultrahigh performance passenger cars, addition of rough terrain, highway and luxury type of tyres in SUV segments.

Optimised the usage of material in Bias tyres. Designed tyres with very high mileage and development cycle time isreduced by usage of house developed software and simulation techniques.

The development of dual bead tyres for LCV segment for increased load carrying capacity by developing such a machinewith a major equipment manufacturer.

(3) Future Plan of Action :

The objective is to develop products to compete with world class manufacturer and make presence in the highly demandingquality markets and to develop products of different season, application and energy saving tyres.

(4) Expenditure on R&D: (Rs./crore)

(a) Capital Nil

(b) Deferred revenue expenditure Nil

(c) Revenue 8.33

(d) Total 8.33

(e) Total R&D expenditure as a % of turnover 0.28

2. Technology Absorption, Adaptation and Innovation

(1) Efforts Towards Technology Absorption, Adaptation and Innovation:

The Company has taken several steps towards technology absorption, adaptation and innovation. The Company usesthe expertise of people with proven tyre technology background and training people abroad to improve the knowledgeand skill of the people working in R&D. The Company works closely with reputed academic institutions and suppliers forthe development of novel material and compositions and understand the influence of material and design parameters ontyre performance.

(2) Benefits derived as a result of the above efforts:

The Company is able to create several specialists in the field of tyre technology capable of designing tyres and equipmentsin house.

Major innovations are the development of softwares for the tyre performance optimisations, compound mixing technologyand tyre cure estimations.

(3) Technology imported:

a) No technology was imported during the year.

b) Year of import – Not Applicable.

c) Has the technology been fully absorbed: So far no technology has been imported.

d) At present all technology advancements in Baroda Plant have been predominantly due to internal R&D efforts.

29

C) FOREIGN EXCHANGE EARNINGS AND OUTGO

The Company’s exports are mainly routed though Apollo International Ltd.

Rs/crore

i) Foreign Exchange Earnings:

- On account of direct export sales from Apollo Tyres Ltd.(FOB value) 0.88

- Others -

ii) Foreign Exchange outgo 21.05

(other than CIF value of imports)

30

Annexure-‘B’

CORPORATE GOVERNANCE REPORT

(Pursuant to clause 49 of the Listing Agreement)

Your Company has complied in all material respects, with the requirements of the Corporate Governance Code as per clause 49 of thelisting agreement with the stock exchanges.

A report on the implementation of the Corporate Governance Code of the listing agreement by your Company is furnished below:–

1. Company's philosophy on Corporate Governance

At Apollo Tyres Ltd., corporate governance is all about the processes which involve direction and control of affairs of theCompany in a fashion that ensures optimum returns for the stakeholders. Corporate governance is a broad framework, whichdefines the way a corporate body functions and interacts with its environment. It is a combination of voluntary practices andcompliance with laws and regulations leading to effective control and management of the organisation.

Your Company is sincerely following the philosophy of good corporate governance by creating and holding strong businessfundamentals and delivering high performance through relentless focus on the following:–

(a) Transparency by classifying and explaining the Company’s policies and actions to those towards whom it hasresponsibilities, i.e. maximum possible disclosures without hampering the Company’s and shareholders’ interests.

(b) Accountability whereby even though the management has the executive freedom to drive the enterprise towards growth,it chooses to use this freedom within the framework of effective accountability and full responsibility.

(c) Professionalisation ensures that the management teams at all levels are qualified for their positions, have a clearunderstanding of their roles and are capable of exercising their own judgement, keeping in view the Company’s interest,without being subject to undue influence from outsiders.

(d) Trusteeship brings into focus the fiduciary role of the management to align and direct the actions of the organisationtowards creating wealth and shareholder value.

(e) Corporate Social Responsibility ensures the promotion of ethical values and setting up exemplary standards of ethicalbehaviour in our conduct towards our business partners, colleagues, shareholders and general public, i.e. abiding by thelaws, showing mutual respect and acting with honesty and responsibility. Corporate social responsibility ensures that theCompany contributes to society’s overall welfare by undertaking not-for-profit activities which could benefit all or any ofits stakeholders in society.

(f) Safeguarding Integrity ensures independent verification and truthful presentation of the Company’s financial position. Forthis purpose, the Company has also constituted Audit Committee which pays particular attention to the financialmanagement process.

(g) Continuous focus on training & development of employees and workers to achieve the overall corporate objectives.

Your Company is open, accessible and consistent with communication and shares long term perspective and firmly believes thatgood Corporate Governance practices underscore its drive towards competitive strength and sustained performance. Thus, basicCorporate Governance norms have been institutionalized as an enabling and facilitating business process at the Board,Management and operational levels.

2. Board of Directors

a) Composition of Board:

The Company has a broad-based board and meets the ‘Composition’ criteria. As on March 31, 2006 the Company’s board ofdirectors consist of 13 Executive and Non-Executive Directors, including leading professionals in their respective fields. Thefollowing is the percentage of executive and non-executive directors of the Company:

Category of Directors No. of Directors % of Total No. of Directors

Executive 4 31

Non Executive:- Independent Directors 8 61- Others 1 8

Total 13 100%

31

Attendanceat last AGM

Executive/Non- Executive/Independent

No. of positions heldin other companies

No. of BoardMeetingsAttended

Board# Committee##

Name / Designationof Director

# This includes directorships held in public limited companies and subsidiaries of public limited companies and excludes directorships held in privatelimited companies and overseas companies.

## For the purpose of committees of the board of directors only Audit and Shareholders’ Grievance committees in other public Ltd. companies andsubsidiaries of public Ltd. companies are considered.

* The Govt. of Kerala nominated Mr. T. Balakrishnan as its nominee director on the board in place of Mr. John Mathai w.e.f 22nd July, 2005.** Compagnie Financiere Michelin has withdrawn the nomination of Mr. Herve Frederic Richert and Mr. Jean Marc Francois w.e.f. September 30,

2005. However, Mr. Jean Marc Francois continued on the board of the Company as a non – nominee director till 8th March, 2006, when heresigned as a director.

@ Mr. Nimesh N. Kampani is the Chairman of M/s. JM Morgan Stanley Pvt. Ltd., providing corporate financial advisory services to the Company.The Company has paid fee of Rs. 26.74 lac for the year 2005-2006 for financial advice rendered by JM Morgan Stanley Pvt. Ltd. in which heis a director. The board has determined that such payments in the context of overall expenditure by the Company, is not significant and doesnot affect his independence.

Mr. Onkar S. Kanwar Promoter – Executive 5 1 5 YesChairman & Managing Director

Mr. K. Jacob Thomas Non-Executive 3 1 5 YesIndependent

Mr. K. Jose Cyriac Non-Executive 3 - 2 NoNominee Director Independent– Govt. of Kerala(Equity Investor)

Mr. M.R.B. Punja Non-Executive 8 5 4 YesIndependent

Mr. Neeraj Kanwar Executive 3 - 5 YesJt. Managing Director

Mr. Nimesh N. Kampani@ Non-Executive 8 5 2 NoIndependent

Mr. Raaja Kanwar Non-Executive 2 - 3 Yes

Mr. Robert Steinmetz Non-Executive - - 4 YesIndependent

Mr. Sunam SarkarChief (Strategy & Business Operations) Executive - - 5 Yes& Whole Time Director

Mr. Shardul S. Shroff @@ Non-Executive 4 3 2 NoIndependent

Dr. S. Narayan Non-Executive - - 4 NoIndependent

Mr. T. Balakrishnan* Non-Executive 12 - 3 N.A.Nominee Director Independent– Govt. of Kerala(Equity Investor)

Mr. U.S.OberoiChief ( Projects & Corporate Affairs) Executive 4 1 5 Yes& Whole Time Director

Ceased to be Director

Mr. Herve Frederic Richert** Non-Executive - - 3 YesIndependent

Mr. Jean Marc Francois** Non-Executive - - 4 YesIndependent

Mr. John Mathai* Non-Executive 6 1 - N.A.Nominee Director Independent– Govt. of Kerala(Equity Investor)

b) The constitution of the board and attendance record of directors is given below:

32

(c) Profile of the Chairman and Managing Director and Jt. Managing Director

Mr. Onkar S. Kanwar is the Chairman & Managing Director of Apollo Tyres Ltd. Mr. Kanwar has graduated in scienceand administration from University of California. Innovation, quality and exclusivity are Mr. Kanwar’s guiding principles,which have helped the Company achieve a great turnaround. He is the past President of Federation of Indian Chamberof Commerce and Industry (FICCI). Mr. Kanwar has also held the office of Chairman of Automotive Tyres ManufacturingAssociation (ATMA), the apex body of the Indian tyre industry, and is a past President of the Indian Arm of the InternationalChamber of Commerce.

Mr. Neeraj Kanwar is the Jt. Managing Director of Apollo Tyres Ltd. and is responsible for all operations of the Company.He graduated from Lehigh University, Bethlehem PA, USA as a Bachelor of Science in Industrial Engineering withspecialisation in Management Systems.

(d) During the year, five board meetings were held on the following dates: -

7th June, 200522nd July, 200530th September, 200531st October, 200530th January, 2006

The gap between any two meetings never exceeded four months as per clause 49 of the listing agreement. The requiredinformation was suitably placed before the board to the extent possible at the board meetings.

In addition to the members of the audit committee, these meetings are attended by the Heads of accounts & finance and otherrespective functional heads, internal auditors, cost auditors and statutory auditors of the Company, wherever necessary, andthose executives of the Company who are considered necessary for providing inputs to the committee. Members havediscussions with the statutory auditors during the meetings of the committee and the quarterly/half-yearly and annual auditedfinancials of the Company are reviewed by the audit committee before consideration and approval by the board of directors.The committee also reviews the internal control systems, IT systems and conduct of the internal audit.

b) Meetings:

During the financial year, the audit committee met four times on the following dates: -

6th June, 200521st July, 200531st October, 200530th January, 2006

3. Audit Committee

a) Constitution and Composition of Committee:

The board of directors constituted an audit committee in the year 1992. The present audit committee comprises offollowing three non-executive and independent directors who have financial/accounting acumen to specifically look into theinternal controls and audit procedures:

Name of Director Designation Category of Director No. of meetings attended

Mr. M.R.B. Punja Chairman Non-Executive 3Independent

Mr. K. Jacob Thomas Member Non-Executive 4Independent

Dr. S. Narayan Member Non-Executive 3Independent

@@ Mr.Shardul S. Shroff is a partner of M/s Amarchand & Mangaldas & Suresh A. Shroff & Co., carrying out the practice of solicitors and advocateson record.The Company has paid fee of Rs. 12.84 lac for the year 2005-2006 for professional advice rendered by the firm in which he isinterested. The board has determined that such payments in the context of overall expenditure by the Company, is not significant and does notaffect his independence.

None of the directors of your Company is a member of more than 10 committees or is the chairman of more than fivecommittees across all the companies in which they are directors.

33

c) Mr. P.N. Wahal, Company Secretary, acts as secretary of the committee.

d) Role of Internal Auditors

The organisation considers the Internal Audit Department as a powerful tool with clear focus on risk control andgovernance. Internal Auditing assesses and promotes strong ethics and values within the organisation and serves as aneducational resource regarding changes and trends in the business and regulatory environment.

At Apollo, the Internal Audit Team aims at audit of the organisation which is reflected by quality review of all majorfunctional areas- Production, Marketing, Sales, Technical, Commercial and Finance. Besides legal and compliance issues,Internal Audit function supports in evaluation of Internal Control Systems and locating all other important issues, whichcontribute to organisational objectives of customer delight, employee satisfaction, operating profit margin increase andrevenue growth.

Internal Auditing also provides objective assurance to the board on all the major findings during their audit.

e) Terms of reference:

The audit committee has been entrusted with the following responsibilities: -

- Overview of the Company’s financial reporting process and disclosure of its financial information to ensure that thefinancial statements are correct, sufficient and credible

- Recommend the appointment/removal of external auditors, nature and scope of audit, fixation of audit fee andpayment for any other services to external auditors.

- Review with the management, the quarterly/half yearly and annual financial statements before submission to theboard focusing primarily on:-

• Matters required to be included in the Directors Responsibility Statements forming part of Directors’ Report.

• Any changes in accounting policies and practices.

• Major accounting entries based on exercise of judgement by management.

• Qualifications in draft audit report.

• Significant adjustments arising out of audit.

• The going concern assumption.

• Compliance with accounting standards.

• Compliance with stock exchange and legal requirements concerning financial statements.

• Management discussion and analysis of financial condition and results of operations.

• Management letters/letters of internal control weaknesses issued by the statutory auditors.

- The appointment, removal and terms of remuneration of the Chief Internal Auditor shall be subject to review by theAudit Committee.

- Any related party transactions i.e. transactions of the Company of material nature, with promoters or the management,their subsidiaries or relatives etc. that may have potential conflict with the interests of the Company at large.

- Discussion and review of the internal audit reports and the reports of the external auditors with the management.

- Review of the adequacy and effectiveness of internal audit function, the internal control system of the Company,compliance with the Company’s policies and applicable laws and regulations.

- Discussions with external auditors about the scope of audit including the observations of the auditors.

- Discussion with internal auditors about significant findings and follow up thereon.

- Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspectedfraud or irregularity or a failure of internal control system of a material nature and reporting the matter to the Board.

- Reviewing the Company’s financial and risk management policies.

- Looking into the reasons for substantial defaults, if any, in payments to the depositors, debentureholders, shareholders(in case of non payment of declared dividends and creditors).

- Reviewing on going relationship of business partners.

The audit committee may also review such matters as are considered appropriate by it or referred to it by the board.

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4. Remuneration Committee

a) Constitution and Composition of the Committee:

The board of directors had constituted a Remuneration Committee in the year 2003. The present composition of theRemuneration Committee is as follows:

Name of Director Designation Category

Dr. S. Narayan Chairman Non-Executive, Independent

Mr. M.R.B. Punja Member Non-Executive, Independent

Mr. K. Jacob Thomas Member Non-Executive, Independent

b) Meetings of the Committee:During the financial year, no meeting of the Remuneration Committee was held.

c) Mr. P.N. Wahal, Company Secretary, acts as the secretary of the committee.

d) Terms of Reference

The Remuneration committee has been entrusted with the following responsibilities:

- To review and grant annual increments to Managing Director.

- To vary and/or modify the terms and conditions of appointment/re-appointment including remuneration and perquisites,commission etc. payable to Managing Director within the overall ceiling of remuneration as approved by the members.

- To suitably suggest changes based on changes in Schedule XIII of the Companies Act, 1956 and/or any amendmentsand/or modifications that may be made by the Central Govt. from time to time.

- To do all such acts, deeds, things and execute all such documents, instruments and writings as may be considerednecessary, expedient or desirable on this subject.

The board of directors at the Board Meetings notes the minutes of the Remuneration Committee meetings.

e) Payment of remuneration/sitting fee to the directors

Remuneration/sitting fee paid/payable to directors during the financial year 2005-2006 is given below:

i) Executives (Rs./Lac)

Name of Director Salary Contribution to Commission/ Perquisites TotalPF/Superannuation Performance Remuneration

Bonus

Mr. Onkar S.Kanwar 180.00 48.60 117.00 162.68 508.28

Mr. Neeraj Kanwar 27.00 7.29 27.00 35.80 97.09

Mr. U.S.Oberoi 21.00 5.67 20.16 26.67 73.50

Mr. Sunam Sarkar 10.20 2.75 15.59 9.89 38.43

The remuneration policy of the Company is to remain competitive in the industry to attract and retain talent and appropriatelyreward them on their contribution. The criteria for payment of remuneration to the executive directors takes into account thebusiness plans and market conditions.

f) Non-Executives: The remuneration of non-executive directors is decided by the board of directors as per the terms approvedby the shareholders within the limits approved by the Central Govt.

The criteria for payment of commission to non-executive directors takes into account their contribution and current corporatepractices. During the year, the following fee/commission was paid to the non-executive directors:-

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* Compagnie Financiere Michelin has withdrawn the nomination of Mr. Jean Marc Francois and Mr. Herve Frederic Richert w.e.f. September30, 2005. However, Mr. Jean Marc Francois continued on the board of the Company as a non – nominee director till 8th March, 2006, when heresigned as a director.** The Govt. of Kerala nominated Mr. T. Balakrishnan as its nominee director on the board in place of Mr. John Mathai w.e.f 22nd July, 2005.# Commission payable to Govt. of Kerala.

5. Shareholders’ / Investors’ Transfer / Grievance Committee

(a) Constitution and Composition of the Committee

The Company has constituted a Shareholders’ / Investors’ Transfer / Grievance Committee comprising of the following members:-

Name of Director Designation No. of meetings attended

Mr. K. Jacob Thomas Chairman 2

Mr. Neeraj Kanwar Member 5

Mr. Shardul S. Shroff Member 3

Dr. S. Narayan (ceased to be member) Member 1

Mr. Sunam Sarkar Member 4Mr. U.S. Oberoi Member 5

Mr. P.N. Wahal, Company Secretary, acts as secretary of the committee.(b) Terms of reference

This committee has been formed with a view to undertake the following: -

– Approval of transfer/transmission of shares/debentures issued by the Company, issue of duplicate certificates andcertificates after split/consolidation/ replacement.

– Looking into the redressal of shareholders’ and investors’ complaints like transfer of shares/debentures, demat ofshares, non-receipt of balance sheet, dividend and interest etc.

(c) Meetings

During the year, seven meetings were held for the Shareholders’ /Investors’ Transfer/ Grievance Committee.

(d) Compliance Officer

Mr. P.N. Wahal, Company secretary, has been designated as the compliance officer.

(e) No. of shareholders’ complaints received

During the year 2005-2006, the Company received 28 complaints. As on date, no complaints are pending settlement otherthan those, which are under litigation, disputes or court orders. All other complaints were attended and resolved to thesatisfaction of the shareholders.

Name of Director Sitting fee Commission No. of Shares Stock Option, ifprovided for held as on any

the year 2005-2006 31.03.06

*Mr. Jean Marc Francois 0.80 3.60 N.A. N.A.

*Mr. Herve Frederic Richert 0.60 1.92 N.A. N.A.

**Mr. John Mathai 0.00 N.A. N.A.

Mr. K. Jose Cyriac 0.40 # 7.67 Nil N.A.

**Mr. T. Balakrishnan 0.60 Nil N.A.

Mr. K. Jacob Thomas 2.05 3.83 44205 N.A.

Mr. M.R.B. Punja 1.25 3.83 Nil N.A.

Mr. Nimesh N. Kampani 0.40 3.83 Nil N.A.

Mr. Raaja Kanwar 0.60 3.83 16388 N.A.

Mr. Robert Steinmetz 0.80 3.83 Nil N.A.

Mr. Shardul S. Shroff 1.00 3.83 Nil N.A.

Dr. S. Narayan 1.45 3.83 Nil N.A.

(Rs./Lac)

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6. General Body Meetings and Dividend declared

a) The last three AGMs were held as under:

Year Venue Date Time

2004-2005 Kerala Fine Arts Theatre, 22.07.2005 10.00 A.M.Fine Arts Avenue,Foreshore Road, Ernakulam,Kochi (Kerala)

2003-2004 - do - 19.07.2004 10.00 A.M.

2002-2003 - do - 28.07.2003 10.00 A.M.

b) Special Resolutions passed in the previous three AGMs : -

Year Special Resolution passed

2004-2005 No Special resolution was passed

2003-2004 - Amendment in Articles of Association

- Dislisting of securities from Ahmedabad, Calcutta, Delhi &

Ludhiana Stock Exchanges

2002-2003 - Amendment in Articles of Association

c) Resolutions passed last year through postal ballot

During the year, the following resolutions were passed through postal ballot :-

- Amendment in Articles of Association of the Company

- Sale, Lease or otherwise disposal of Tubes Division

Details of voting pattern of the resolutions passed through Postal Ballot are as under :-

Amendment in Articles of Association of the Company as a Special Resolution.

Number of Postal Ballots received 2,145

Total number of valid votes cast 2,26,96,477

Votes cast in favour of the Special Resolution 2,26,88,658

Votes cast against the Special Resolution 7,819

Requisite majority of votes for carrying the resolution as a Special Resolution 23,457

Majority of votes received in favour of the Special Resolution 2,26,80,839

Number of invalid Postal Ballots 57

Number of invalid votes 6,970

Result:- The Resolution for amendment in Articles of Association of the Company is passed as a Special Resolution as the votescast in favour of the resolution are more than three times the number of votes cast against the resolution.

Sale, lease or otherwise disposal of tubes division as an Ordinary Resolution

Number of Postal Ballots received 2,145

Total number of valid votes cast 2,26,96,320

Votes cast in favour of the Resolution 2,26,86,164

Votes cast against the Resolution 10,156

Requisite majority of votes for carrying the resolution as an Ordinary Resolution 10,157

Majority of votes received in favour of the Resolution 2,26,76,008

Number of invalid Postal Ballots 57

Number of invalid votes 6,205

Result:- The Resolution for sale, lease or otherwise disposal of tubes division is passed as an Ordinary Resolution as the votes castin favour of the resolution are more than the number of votes cast against the resolution.

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d) Person who conducted the postal ballot exercise

Mr. P.P. Zibi Jose, Practising Company Secretary was appointed as Scrutinizer for conducting the postal ballot process in afair and transparent manner.

e) Whether any resolution is proposed to be conducted through postal ballot :-

The Company has proposed to pass the following resolutions through postal ballot vide its Notice dated 11th April, 2006:-

1. Increase in Authorised Capital. (Ordinary Resolution)

2. Amendment in the Memorandum of Association. (Ordinary Resolution)

3. Amendment in the Articles of Association.(Special Resolution)

4. Issue of Securities under Section 81 and 81(1A) of the Companies Act, 1956.(Special Resolution)

f) Procedure for postal ballot :

The Company conduct Postal Ballot procedure pursuant to Section 192A of the Companies Act, 1956, read with TheCompanies (Passing of the Resolutions by Postal Ballot) Rules, 2001.

g) Dividend declared in last three annual general meetings.

Financial Year Ended Dividend

31.03.2005 45%

31.03.2004 45%

31.03.2003 45%

7. Disclosures

a) Related Party Transactions

Related Parties and transactions with them as required under Accounting Standard (AS- 18) are furnished underparagraph number 17 of the Notes to the Accounts attached with the financial statements for the year ended March 31,2006.

No transaction of material nature has been entered into by the Company with its promoters, the directors or themanagement, their subsidiary or relatives etc. that may have a potential conflict with the interests of the Company. TheRegister of contracts containing transactions, in which directors are interested, is placed before the board regularly.

b) Risk Management Procedure

In terms of sub-clause IV.C of the Clause 49 of the Listing Agreement, a comprehensive study is being undertaken byDeloitte Haskins & Sells to frame a risk management policy/internal control frame work. The Board shall periodically reviewthe risk and plan to mitigate the same.

c) Compliance by the Company

There has been no instance of non-compliance by the Company on any matter related to capital markets during the lastthree years.

8. Means of communication

– The quarterly/half yearly and annual financial results of the Company are normally published in “Business Standard” and“The Times of India” (national dailies) and “Malyalam Manorma”/“Matrubhumi” (Malayalam). In addition to the above,quarterly and annual results are displayed at our Website at www.apollotyres.com for the information of all theshareholders.

– All material information about the Company is promptly sent to the stock exchanges and the Company regularly updatesthe media and investor community about its financial as well as other organizational developments.

– Pursuant to Clause 51 of the Listing Agreement, financial information like annual and quarterly financial statements,shareholding pattern, etc. are available on SEBI website www.sebiedifar.nic.in

9. Management Discussion & Analysis Report

Management Discussion & Analysis Report is annexed hereto and forms part of the annual report (Annexure-B-1).

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10. General Shareholder Information

a) Registered office : 6th Floor,Cherupushpam BuildingShanmugham Road,Kochi - 682 031.Kerala.

b) Annual General Meeting:

- Date : 25th August, 2006- Day : Friday- Time : 10.00 a.m.- Venue : Kerala Fine Arts Theatre,

Fine Arts Avenue,Foreshore Road,Ernakulam, Kochi (Kerala).

c) Financial calendar for Financial Year 2006-2007:

Financial Reporting for the quarter ending June 30, 2006 : Month of July, 2006

Financial Reporting for the half year ending September 30, 2006 : Month of October, 2006

Financial Reporting for the quarter ending December 31, 2006 : Month of January, 2007

Financial Reporting for the quarter ending March 31, 2007 : April – June, 2007

d) Date of Book-Closure : From 23rd August to25th August(both days inclusive)

e) Dividend payment date : On or after 25th August, 2006but within the statutory time limit

f) Listing at stock exchanges:

1. Cochin Stock Exchange Ltd., 2. *The Calcutta Stock Exchange Assn. Ltd.MES, Dr. P. K. Abdul Gafoor Memorial 7, Lyons Range,Cultural Complex, 36/1565, 4th Floor, Kolkata – 700 001.Judges Avenue, Kaloor, Ph.:033-22104470-77Kochi – 682017. Fax: 033-22104500Ph.0484-2400044,2401898Fax:0484-2400330E-mail: csel@vsnl.com

3. The Stock Exchange, Mumbai 4. National Stock Exchange of India Ltd.Phiroze Jeejeebhoy Towers, Exchange Plaza, Bandra Kurla Complex,1st Floor, Dalal Street, Bandra (E), Mumbai – 400 051.Mumbai – 400 001. Ph.: 022-26598100-14Ph.: 022-22721233/34 Fax: 022-26598237-38Fax: 022-22721919/3027 E-mail: cmlist@nse.co.in

* Application has been filed for delisting.The annual listing fee for the year 2006-2007 has been paid to all the aforesaid stock exchanges.

g) Stock Code:Stock Exchange, Mumbai : 500877

National Stock Exchange : APOLLOTYRE

39

ATL share price on NSE & Nifty Index

April, 05 297.90 258.05 9.50 2084.90 1896.30May, 05 289.00 265.00 4.34 2099.35 1898.15June, 05 288.00 229.00 8.66 2226.15 2061.35July, 05 259.10 225.30 9.98 2332.55 2171.25August, 05 302.45 235.00 22.15 2426.65 2294.25September, 05 310.00 271.00 19.50 2633.90 2382.90October, 05 305.00 242.00 17.64 2669.20 2307.45November, 05 284.00 235.55 5.84 2727.05 2366.80December, 05 314.95 270.10 15.51 2857.00 2641.95January, 06 329.85 279.70 9.17 3005.10 2783.85February, 06 316.95 284.00 12.04 3090.30 2928.10March, 06 310.00 284.00 8.45 3433.85 3064.00

Month NSE Nifty Index

High(Rs.)

Low(Rs.)

Volume(in lac)

High Low

h) Stock Market Price Data for the year 2005-2006

ATL share price on BSE & Sensex

April, 05 299.00 262.50 2.99 6,649.42 6,118.42

May, 05 295.00 266.10 2.31 6,772.74 6,140.97

June, 05 286.90 235.00 3.98 7,228.21 6,647.36

July, 05 253.20 220.00 5.61 7,708.59 7,123.11

August, 05 303.90 237.25 9.51 7,921.39 7,537.50

September, 05 307.00 271.00 7.41 8,722.17 7,818.90

October, 05 305.00 243.90 7.62 8,821.84 7,656.15

November, 05 295.00 257.00 2.63 9,033.99 7,891.23

December, 05 314.40 270.00 6.05 9,442.98 8,769.56

January, 06 326.00 278.05 5.88 9,945.19 9,158.44

February, 06 324.00 285.10 1.98 10,422.65 9,713.51

March, 06 312.00 287.00 3.30 11,356.95 10,344.26

Month BSE Sensex

High(Rs.)

Low(Rs.)

Volume(in lac) High Low

i) Shares Traded during 1st April, 2005 to 31st March, 2006

BSE NSE

No. of shares traded (in lacs) 59.27 142.78Highest Share Price (in Rs. ) 326.00 329.85Lowest Share Price (in Rs. ) 220.00 225.30Closing Share Price (as on March 31, 2006) 288.85 290.95Market Capitalization (as on March 31, 2006) (Rs. in Crore) 1107.39 1115.44

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j) Distribution of ShareholdingThe following is the distribution of shareholding of equity shares of the Company as on 31st March, 2006:–

Category No. of Shareholders % of Shareholders No. of Shares Held % of Shareholding

1-250 44039 95.57 2735980 7.14

251-500 1165 2.53 440839 1.15

500-1000 475 1.03 365995 0.95

1001-2000 213 0.46 315611 0.82

2001-3000 65 0.14 167788 0.44

3001-4000 20 0.04 73989 0.19

4001-5000 13 0.03 61018 0.16

5001-10000 22 0.05 163474 0.43

10001 & above 66 0.14 34013283 88.72

Total 46078 100.00 38337977 100.00

There are no outstanding warrants or convertible instruments, which may have impact on equity.

"Group" for inter-se transfer of shares

As required under Clause 3(e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)Regulations, 1997, the following entities constitute "Group" (within the meaning as defined in the Monopolies and RestrictiveTrade Practices Act, 1969) for the purpose of Regulation 10 to 12 of the aforesaid SEBI Regulations:- Apollo Finance Limited,Sunrays Prop. & Inv. Co. Private Limited, Ganga Kaveri Credit & Holding Co. Private Limited, Sacred Heart Inv. Co. PrivateLimited, Kenstar Invest & Finance Co. Private Limited, Neeraj Consultants Limited, Constructive Finance Private Limited,Motlay Finance Private Limited, Indus Valley Inv. & Finance Pvt. Limited, Sargam Consultants Private Limited, Global CapitalLimited, Apollo International Limited, PTL Enterprises Ltd., OSK Holdings/Trust (being formed) and OSK Family.

The above entities, alongwith the family members hold 150.54 lac shares constituting 39.72% of share capital of the Companyas on 31st March, 2006.

k) Share Transfer SystemTo expedite the share transfer in physical segment, “Shareholders’/Investors’ Transfer/ Grievances Committee” hasauthorised whole-time director and Company Secretary to approve transfer of securities upto 1000 received from individualsand transfers pertaining to shares of notified parties lodged by the Office of Custodian on weekly basis. In case of approvalof transfer of securities over 1000, the “Shareholders’/Investors’ Transfer /Grievances Committee” meets at periodicalintervals. In any case, all share transfers are completed within the prescribed time limit from the date of receipt, if documentmeets the stipulated requirement of statutory provisions in all respects. In reference to SEBI directives, the Company isproviding the facility for transfer and dematerialization of securities simultaneously. The total no. of shares transferred duringthe year were 107601. All the transfers were completed within stipulated time.

l) Dematerialisation of Shares and LiquidityThe equity shares of the Company are being traded under compulsorily demat form as per SEBI notification. The Company’sshares are tradeable compulsorily in electronic form and are available for trading in the depository systems of both NationalSecurities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL). The International SecuritiesIdentification Number (ISIN) of the Company, as allotted by NSDL and CDSL, is INE438A01014. As on 31st March, 2006,93.80 % of the share capital stands dematerialized, excluding 14.9% shares allotted to Michelin in physical form, on theirrequest.

m) Share Transfer/Demat Registry WorkAll share transfers/demat are being processed in house. The Company has completed all the formalities for dematconnectivity with NSDL/CDSL for carrying out demat completely in house. NSDL / CDSL have installed all the equipmentincluding software as per their requirements.

n) Share Transfer DepartmentAll Communications regarding change of address for shares held in physical form, dividend etc. should be sent at theCompany’s corporate office at:-

Apollo Tyres Ltd.Apollo House, 7, Institutional Area,Sector-32, Gurgaon – 122 001(Haryana)Tel Nos : (0124) 238 3002-10Fax : (0124) 2383351, 2383021E-Mail : pn.wahal@apollotyres.com

41

o) Outstanding GDRs/ADRs/Warrants

The Company has not issued any GDRs/ADRs/Warrants and there is no instrument pending for conversion into equity.

p) ECS Mandate

All shareholders are requested to update their bank account details with their respective depositories urgently. This wouldenable the Company to service its investors better.

q) Plant Location

1. Perambra, P.O. Chalakudy,Trichur – 680 689 (Kerala)

2. Limda, Taluka Waghodia,Dist.Vadodara – 391 760 (Gujarat)

3. Ranjangaon, Nagar Road,Tal.Shirur, Dist. Pune – 419 209(Maharashtra)

r) Address for correspondence

For share transfer/demat : Secretarial Department,of shares, payment of dividend Apollo Tyres Ltd.,and any other query relating Apollo House, 7, Institutional Area,to shares Sector-32, Gurgaon.

Tel No 0124-238 3002 (17 Lines)

The non-mandatory requirements, wherever necessary have been complied with.

11. ADDITIONAL INFORMATION

a) Investors Relation Section

The Investors Relation Section is located at the corporate office of the company.

Contact person : Mr. P. N. Wahal, Compliance Officer

Time : 10.00 A.M. to 6.00 P.M. on all working days of theCompany. (Saturdays & Sundays closed)

Phone No. : (0124) 2383002 – 10 (Extn. 602)

Fax No. : (0124) 2383351/2383021

E-mail : pn.wahal@apollotyres.com

b) Bankers

State Bank of India The Federal Bank Ltd.Bank of India Canara BankState Bank of Mysore IDBI Bank Ltd.State Bank of Patiala Standard Chartered BankICICI Bank Ltd. Citi BankUnion Bank of India

c) AuditorsFraser & Ross, Chartered Accountants

d) Cost AuditorsN. P. Gopalakrishnan & Co., Cost Accountants

e) Code of Conduct of Insider TradingApollo Tyres Ltd. has a Code of Conduct for ‘Prevention of Insider Trading’ in the shares of the Company. The Code ofConduct prohibits the purchase/ sale of shares of the Company by employees in possession of unpublished price sensitiveinformation pertaining to the Company. Mr. P.N. Wahal, Company Secretary, has been appointed the Compliance Officer.

This Code of Conduct is applicable to all the Directors, Departmental Chiefs and Heads and such other employees of theCompany who are expected to have access to unpublished price sensitive information.

f) Code of Conduct for Directors and Senior Management

Apollo Tyres has a code of business conduct called “The Code of Conduct for Directors and Senior Management”. The Codeenvisages that Board of Directors and Senior Management must act within the bounds of the authority conferred upon them

42

COMPLIANCE:The certificate dated 5th May, 2006 obtained from statutory auditors, M/s. Fraser & Ross, forms part of this annual report and the same isgiven herein:

AUDITORS’ CERTIFICATE

AS PER CLAUSE 49 OF THE LISTING AGREEMENT

To the Members ofApollo Tyres Ltd.

We have examined the compliance of conditions of corporate governance by Apollo Tyres Limited for the year ended on 31st March,2006, as stipulated in Clause 49 of the Listing Agreement of the said Company with the stock exchanges.

The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to theprocedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the CorporateGovernance. 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 hascomplied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

We state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness withwhich the management has conducted the affairs of the Company.

For FRASER & ROSSChartered Accountants

Sd/-(M.K. Ananthanarayan)

PartnerPlace : Gurgaon Membership Number 19521Dated : 5th May, 2006.

and with a duty to make and keep themselves informed about the development in the industry in which the Company isinvolved and the legal requirements to be fulfilled.

The Code is applicable to all the Directors and senior management of the Company. The Company Secretary is thecompliance officer.

g) Secretarial AuditAs stipulated by SEBI, a qualified Company Secretary in practice conducts the Secretarial Audit of the Company for thepurpose of reconciliation of total admitted capital with the Depositories, i.e. NSDL and CDSL, and the total issued and listedcapital of the Company.

The Company Secretary in practice conducts such Secretarial Audit in every quarter and issues a Secretarial AuditCertificate to this effect to the Company.

Declaration Affirming Compliance of provisions of the Code of Conduct

To the best of my knowledge and belief and on the basis of declarations given to me, I hereby affirm that all the Boardmembers and the senior management personnel have fully complied with the provisions of the Code of Conduct for Directorsand Senior Management Personnel during the financial year ending March 31, 2006.

For Apollo Tyres Ltd.

(Onkar S. Kanwar)Chairman & Managing Director

Date: 5th May, 2006

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1. Industry Structure and Developments

Indian tyre industry is two tier. The Tier-I players (top six tyre companies) account for over 85% of industry turnover containing a well-diversified product-mix and presence in all three major segments i.e. replacement market, original equipment manufacturers (OEM’s)and exports. Tier-II companies are small in size, mainly concentrating on production of small tyres (for two/three-wheelers etc.),tubes and flaps and the replacement market.

The demand and growth for the industry depends on primary factors like the overall GDP growth, agricultural & industrial production,growth in vehicle demand and secondary factors like the infrastructure development, prevailing interest rates and financing optionsetc.

The truck and bus market is the largest segment of the industry accounting for approx. 70% of industry turnover in terms of valueand tonnage - a segment in which Apollo Tyres has maintained the leadership position amongst the industry players for quite a fewyears.

In the year 2005-06, the truck and bus tyres segment volumes witnessed a healthy growth of approx. 8%. Passenger car segmenttyres volumes grew by approx. 13% in the year under review.

Steep rise in raw material prices with limited pricing flexibility impacted the profit margins of all the players. This was the thirdconsecutive year of raw material cost- push both for natural rubber and crude oil linked raw material basket .Consistent rise in majorraw materials costs (natural rubber, nylon tyre cord, carbon black, synthetic rubber) have resulted in pressure on the margins of thetyre companies despite good topline growth. In fact some of the major tyre companies are operating at break even situation.

Tyre exports are increasing consistently and the industry saw a growth of approx. 9 % in this area in the year under review.

The radialisation in the important commercial vehicle segment is still at a mere 2%. This has not really picked up pace. Goingforward, we expect it to gather some momentum but still levels of radialisation in this segment are predicted to be around 10% in fiveyears time.

The year ahead still looks tough with no respite in the raw material prices. The cost- push continues unabated and with the industryplayers reluctant to take large price increases, the challenge on profit margins will stay. The story on the demand front though looksgood in medium term with the economy continuing to do well.

2. Opportunities and Threats

SWOT Analysis of Apollo Tyres Ltd.

Strengths

• Continued Market Leadership in the dominant industry segment i.e. Truck / Bus tyres.

• Global presence with acquisition of Dunlop Tyres International (Pty) Ltd in South Africa.

• Robust Operation Center for managing IT operations across 140 Locations supported by – ERP / Dealer Portal / InformationSystems Security Control etc.

• Presence in technology products in car radial segment.

• Dynamic & Progressive Leadership.

• Responsive to changes in market conditions and product profiles.

• Product innovation and technical superiority.

• Strong Brand recall in a price sensitive market.

• Economies of transportation cost on account of closeness to natural rubber growing belt.

Weaknesses

• No presence in two/three wheeler segment.

• Declining profit margins due to raw material cost push.

Opportunities

• Continuous thrust in road infrastructure and construction of expressways & national highways. Creation of roadinfrastructure has given, and will increasingly give a tremendous fillip to road transportation in the coming years. Tyreindustry will play an important role in this changing product mix of transport.

• Leadership position in the commercial vehicle segment will enable the Company to leverage new and related businessopportunities.

Annexure-‘B-1’MANAGEMENT DISCUSSION AND

ANALYSIS REPORT

44

• Access to global sources for raw materials at competitive prices due to economies of scale.

• Steady growth in vehicle production in the immediate future leading to growing demand.Threats

• An increase in the flow of tyres from competitive sources like China.• Cheaper imports on account of import from countries which are signatories to Regional Trading Agreements (RTA’s).• With crude prices scaling upwards, pressure on raw material prices can be expected.• Continuous increase in the prices of natural rubber, which accounts for nearly one third of total raw material cost.

3. Segment Wise Performance

The Company consolidated its leadership position in the categories of truck-bus and light-truck by registering growths that werein excess of the industry’s growth. We continue to be the dominant player in these categories. While maintaining our positionin the farm segment, we continued to lead the growth of the passenger car segment with an 18% increase over the previousyear in our journey to establish ourselves as leaders in the segment.

The Company maintains its premium price position in every segment of operation.

4. Outlook

The Company continues its rapid strides in developing and producing the country’s finest and most relevant tyres in eachsegment leading to class-leading customer delight and loyalty.

The Gold Series in truck-bus bias tyres, the expanded Acelere range for passenger cars and the dual-bead tyres for light trucksstand testimony to the Company’s commitment to always offer the consumer with the most appropriate technology for Indianoperating conditions. Our pioneering position in the field of radials for farm tyres was further enhanced by a broadening of ourrange during the course of the year.

The Company has also initiated work on the introduction of a range of world-class truck and bus radial tyres that will see introductionin the Indian market in 2006-07.

5. Risks and Concerns

The growth of tyre industry is dependent on the growth in automobile industry which is cyclical in nature. Most of the rawmaterials are petroleum based and their prices are linked to the movement in crude oil prices.

6. Information Technology/ Internal Control Systems and their adequacies

The Company has proper and adequate systems for internal controls including Information Systems Security Controls to ensureand safeguard information assets from unauthorised use. These controls help in ensuring information confidentiality, availability andintegrity. The Company has adopted an information security framework and has deployed policies and procedures to ensure thatdata is protected and is always in right hands. The Company has been certified for BS7799, which is a globally acclaimed standardfor information security practices, developed by British Standards Institution.

The Company has further strengthened its ERP deployment and is deploying decision support systems and management dashboardsacross various functions. Your Company has come closer to its customers by using innovative solutions like SMS which automaticallytakes relevant information and send SMS to dealers.

A very robust and feature rich “Intranet Portal” has been deployed enabling efficiencies, electronic workflows and replacement ofpaper in the system. Alongwith this employee self service has also been deployed.

The Company has taken major initiatives to ensure knowledge management and better decision making tools across the organisation.

7. Discussion on Financial Performance with Respect to Operational Performance

The financial statements have been prepared in accordance with the requirements of the Companies Act, 1956 and applicableaccounting standards issued by the Institute of Chartered Accountants of India. The management of Apollo Tyres Ltd. acceptsthe integrity and objectivity of these financial statements as well as the various estimates and judgements used therein. Theestimates and judgements relating to the financial statements have been made on a prudent and reasonable basis, in order thatthe financial statements reflect in a true and fair manner, the form of transactions and reasonably present the Company’s stateof affairs and profit for the year.

45

SL. NO. P A R T I C U L A R S Year Ended31.03.2005

Year Ended31.03.2006

1 Net Sales/Income from operations 3002.12 2656.81

2 Other Income 1.18 19.81

3 Total Expenditure 2779.38 2491.98

a) (Increase) / Decrease in Work in Processand Finished Goods (76.80) 14.41

b) Consumption of Raw Materials 1844.16 1425.37

c) Staff Cost 163.50 143.40

d) Excise Duty 376.60 431.32

e) Other Expenses 471.92 477.48

4 Operating Profit 223.92 184.64

5 Interest 50.56 42.94

6 Depreciation 72.79 56.79

7 Profit before Tax & exceptional items 100.57 84.91

8 Provision for Tax - Current 21.79 3.65

- Deferred 1.86 13.63

- Fringe Benefit Tax 4.55 0.00

9 Profit after tax before exceptional items 72.37 67.63

10 Exceptional items 5.80 -

11 Net Profit 78.17 67.63

Rs./Crore

8. Material Developments in Human Resource / Industrial Relations

During the year 2005-06, the Company focused on aligning employee aspirations to that of business objectives through its HRpolicies, process and other development initiatives to achieve its business goals.

The Company realised that robust HR process and systems were the key drivers to translate its people vision to a reality. TheCompany institutionalised dynamic process for job evaluation, job grading, compensation benchmarking, well-definedbehavioural competencies and new performance management system as a step towards a global organisation. To reinforceperformance driven organisation culture in Apollo in a system-based mode, the Company launched its new PerformanceManagement System “PACE” on line.

Since leadership development and capability enhancement of employees, were considered most critical for a Company’ssuccess in the existing cut-throat competitive scenario, the Company rolled out a series of Development Initiatives in 2005-06in collaboration with prestigious Management Institutes like IIM Ahmedabad, MDI Gurgaon etc. Programmes like ApolloLaureates Development Programme (ALDP) for middle level Managers, Enhanced Leadership Development Programme (ELDP)for senior Management staff, Supervisory Development programmes, train the trainer programme, Manufacturing Excellence andsales effectiveness were a major step towards capability building initiatives.

In line with the Company’s commitment to create a dynamic and effective sales force, series of development initiatives like ‘StateManagers Programme at IIM Ahmedabad’, and ‘Enhancing Marketing competencies for District Managers’ at MDI Gurgaon wereorganised to cater to the needs of the field staff. All these innovative initiatives helped the Company adhere to higher growthtrajectory and accelerate performance across all fronts.

In line with its commitment of creating a learning organisation, the Company launched several new initiatives like Manage Mentormodule, HR bulletin etc in its Intranet called “Apollo connect” to ensure and facilitate continuous learning. As a step towardsbuilding a culture of teamwork and trust, the Company ensured maximum involvement and engagement of employees in the in-house magazine “Verve” and “Apollo connect”.

Due to its strong commitment on blue-collar worker integration to Company’s objectives, the Company lays focus on workerdevelopment, community developments, quality circles, family oriented training programs, skill & attitudinal programs helped theCompany to build a congenial working culture where productivity and cost cutting norms are talked out side the purview of LongTerm Settlement.

46

The number of employees directly employed by the Company stood at 7,294 on March 31, 2006.

NOTE:

This report contains forward-looking statements that describe our objectives, plans or goals. All statements that addressexpectations or projections about the future, including, but not limited to statements about the Company’s strategy for growth,product development, market position, expenditure and financial results, are forward looking statements. These are subject tocertain risks and uncertainties, including but not limited to, government action, local, political or economic development,technological risks, risks inherent in the Company’s growth strategy, dependence on certain customers, technical personnel andother factors that could cause actual results to differ materially from those contemplated by the relevant forward lookingstatements. Investors should bear this in mind as they consider forward-looking statements.

47

TO THE MEMBERS OF APOLLO TYRES LTD.

1. We have audited the attached Balance Sheet of Apollo Tyres Ltd. as at 31st March, 2006, the Profit and Loss Account and alsothe Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility ofthe Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

3. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Government of India in terms of sub-section(4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in Paragraph 3 above, we report that :

i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary forthe purposes of our audit;

ii) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from ourexamination of those books;

iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with thebooks of account;

iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply withthe accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v) On the basis of written representations received from the directors and taken on record by the Board of Directors, we reportthat none of the directors is disqualified as on 31st March, 2006 from being appointed as a director in terms of clause (g)of sub-section (1) of section 274 of the Companies Act, 1956;

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give theinformation required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformitywith 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 31st March, 2006;

(b) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

For FRASER & ROSSCHARTERED ACCOUNTANTS

M.K. ANANTHANARAYANANPlace : Gurgaon PARTNERDate : 5th May, 2006 MEMBERSHIP NO. : 19521

AUDITORS’ REPORT

48

(i) a. The Company has maintained proper records showing particulars, including quantitative details and situation of fixedassets.

b. Physical verification of fixed assets is carried out in a phased manner as determined by management, whereby assets heldat the Company’s factories have been verified during the year. The programme of verification is reasonable consideringthe nature of assets and size of the Company and no material discrepancies were noticed on such verification.

c. The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of theCompany and such disposal has, in our opinion, not affected the going concern status of the Company.

(ii) a. The inventory has been physically verified during the year by the management. In our opinion, the frequency of verificationis reasonable.

b. The procedures of physical verification of inventories followed by the management are reasonable and adequate in relationto the size of the Company and the nature of its business.

c. The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physicalstocks and the book records were not material.

(iii) a. The Company has not granted any loans, secured or unsecured to Companies, firms or other parties covered in the registermaintained under Section 301 of the Companies Act, 1956.

b. The Company has not taken any loans, secured or unsecured from Companies, firms or other parties as listed in theregister maintained under Section 301 of the Companies Act, 1956.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control systemscommensurate with the size of the Company and the nature of its business for the purchases of inventory, fixed assets and forthe sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct majorweakness in such internal control systems.

(v) a. According to the information and explanations given to us, we are of the opinion that the particulars of contracts orarrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to bemaintained under that section; and

b. In our opinion and according to the information and explanations given to us, the transactions made in pursuance ofcontracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 have beenmade at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public during the year.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and the nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company relating to the manufacture of tyres and tubes,pursuant to the order made by the Central Government for the maintenance of cost records under Section 209(1) (d) of theCompanies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made andmaintained. We have, however, not made a detailed examination of the records with a view to determining whether they areaccurate or complete.

(ix) a. The Company is regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund,Investor Education and Protection Fund, Employee’s State Insurance, Income-tax, Sales-tax, Wealth Tax, Service tax,Customs Duty, Excise Duty, Cess and other material statutory dues applicable to it.

b. According to the information and explanations given to us, no undisputed amounts in respect of Income-tax, Sales-tax,Wealth Tax, Service tax, Customs Duty, Excise Duty and Cess were in arrears as at 31st March, 2006 for a period morethan six months from the date they became payable.

c. According to the information and explanations given to us, there are no dues of Income tax, Sales tax, Wealth Tax, Service

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

49

tax, Customs Duty, Excise Duty and Cess which have not been deposited on account of any dispute except thefollowing:

(x) In our opinion, the Company does not have accumulated losses and has not incurred cash losses during the financial yearcovered by our audit or in the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, Company has not defaulted in repayment of duesto financial institutions, banks and debenture holders.

(xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and othersecurities.

(xiii) In our opinion, the Company is not a chit fund or nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) ofthe Companies (Auditor’s Report) Order, 2003 are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly,the provisions of clause 4(xiv) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company.

(xv) In our opinion and according to the information and explanations given to us, the Company has not during the year given anyguarantee for loan taken by others from banks or financial institutions.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed bythe Company was applied for the purpose for which these loans were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company,we report that no funds raised on short-term basis have been used for long term investment.

(xviii) According to the information and explanations given to us, the Company has not made preferential allotment of shares to partiesand companies covered in the register maintained under section 301 of the Companies Act, 1956 during the year.

(xix) The Company has created security in respect of debentures issued in earlier years and has not issued any debentures duringthe year.

(xx) The Company has not raised money by way of public issues during the year.

(xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by theCompany was noticed or reported during the course of our audit.

For FRASER & ROSSCHARTERED ACCOUNTANTS

M.K. ANANTHANARAYANANPlace : Gurgaon PARTNERDate : 5th May, 2006 MEMBERSHIP NO. : 19521

NAME OF THE NATURE OF DUES AMOUNT INVOLVED PERIOD TO WHICH PENDING BEFORESTATUTE (Rs. in Crores) IT RELATES

Custom Act, 1962 Custom Duty 0.13 Assessment Years Assistant Commissioner1989-90 & 1994-95 of Customs/Supreme

Court

Customs Act, 1962 Anti Dumping Duty 8.19* Year 2004-05 & Commissioner (Appeals)2005-06

Sales Tax Act Sales Tax 11.42** Assessment Years Various Appellateapplicable to various 1990-91 to 2002-03 Authorities/ RevenueStates Board/ High Court

Central Excise Excise Duty and 11.58 1995-96 to 2005-06 Various AppellateAct, 1944 Additional Excise Duty Authorities/High Court

Total 31.32

* Net of Deposit of Rs. 2 crores** Net of Deposit of Rs. 1.79 crores

50

As at 31st March, 2006

Schedule As at As at31st March, 2006 31st March, 2005

Rs./Crs. Rs./Crs.SOURCES OF FUNDS :

Shareholders’ Funds :Share Capital 1 38.34 38.34Reserves and Surplus 2 595.68 538.40

634.02 576.74

Loans : 3Secured 381.00 348.75Unsecured 369.00 195.06

750.00 543.81

Deferred Tax Liability (Net) (Note - B9) 105.21 103.35

T O T A L 1489.23 1223.90

APPLICATION OF FUNDS :

Fixed Assets 4Gross Block 1310.61 1148.43Less : Depreciation 469.94 398.30

Net Block 840.67 750.13Capital Work in Progress 77.93 84.33

918.60 834.46

Investments 5 0.53 54.48Current Assets, Loans and Advances : 6

Inventories 419.41 330.12Sundry Debtors 175.14 156.52Cash and Bank Balances 231.36 110.43Other Current Assets 0.21 0.02Loans and Advances 184.39 146.46

1010.51 743.55Less: Current Liabilities and Provisions : 7

Current Liabilities 415.72 380.14Provisions 24.95 28.83

440.67 408.97

Net Current Assets 569.84 334.58

Deferred Revenue Expenditure (Note - B 10) 0.26 0.38

T O T A L 1489.23 1223.90

SIGNIFICANT ACCOUNTING POLICIES 13AND NOTES ON ACCOUNTS

BALANCE SHEET

As per our Report attached ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASFor FRASER & ROSS Chairman & Jt. Managing Director M.R.B. PUNJAChartered Accountants Managing Director ROBERT STEINMETZ

RAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectorsM.K. ANANTHANARAYANAN

Partner HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

51

For the year ended 31st March, 2006

PROFIT & LOSS ACCOUNT

INCOMEGross Sales 3002.12 2656.81Less: Excise Duty 376.60 2625.52 431.32 2225.49

Other Income 8 1.18 19.81

2626.70 2245.30

EXPENDITUREManufacturing and Other Expenses 9 2479.58 2046.25(Increase)/Decrease in Work in Process and Finished Goods 10 (76.80) 14.41Interest 11 50.56 42.94

2453.34 2103.60Profit Before Depreciation, Tax & Exceptional Items 173.36 141.70

Depreciation 72.94 56.94Transfer from Revaluation Reserve (0.15) 72.79 (0.15) 56.79

Profit Before Tax & Exceptional Items 100.57 84.91Provision for Tax - Current 21.79 3.65 - Deferred 1.86 13.63 - Fringe Benefit Tax 4.55 28.20 – 17.28

Profit After Tax Before Exceptional Items 72.37 67.63Add: Exceptional Items: 12 5.80 -

Net Profit 78.17 67.63Add: Profit brought forward from previous year 111.32 104.18

Transfer from Debenture Redemption Reserve 6.11 10.91195.60 182.72

Deduct: Appropriations : General Reserve 50.00 50.00 Debenture Redemption Reserve – 1.73 Proposed Dividend 17.25 17.25 Dividend Tax 2.42 2.42

69.67 71.40

Surplus Carried to Schedule 2 125.93 111.32Basic & Diluted Earnings Per Share(Face Value of Rs. 10/- each) (Rs.)

Before Exceptional Items 18.88 17.64After Exceptional Items 20.39 17.64

SIGNIFICANT ACCOUNTING POLICIES 13

AND NOTES ON ACCOUNTS

Schedule Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

As per our Report attached ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASFor FRASER & ROSS Chairman & Jt. Managing Director M.R.B. PUNJAChartered Accountants Managing Director ROBERT STEINMETZ

RAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectorsM.K. ANANTHANARAYANAN

Partner HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

52

SCHEDULES

ANNEXED TO THE ACCOUNTS

SCHEDULE 1 - SHARE CAPITAL

AUTHORISED

4,80,00,000 Equity Shares of Rs. 10/- each 48.00 48.00

2,00,000 Preference Shares of Rs. 100/- each 2.00 2.0050.00 50.00

ISSUED, SUBSCRIBED AND PAID UP

3,83,37,977 Equity Shares of Rs. 10/- each 38.33 38.33Add: Forfeited Shares 0.01 0.01

38.34 38.34

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

53

CAPITAL RESERVES

Fixed Assets Revaluation ReserveAs per last Balance Sheet 3.46 2.89Less: Transfer to Profit & Loss Account 0.15 0.15Add: Excess Transfer to Depreciation Reserve made in

earlier years adjusted - 0.723.31 3.46

Share Forfeiture (Rs. 1375/-) - -

Capital RedemptionAs per last Balance Sheet 4.44 4.44

Debenture RedemptionAs per last Balance Sheet 9.95 19.13Add: Transfer from Profit & Loss Account - 1.73Less: Transfer to Profit & Loss Account 6.11 10.91

3.84 9.95Securities PremiumAs per last Balance Sheet 217.43 218.10Less: Premium on Redemption of Debentures 0.23 0.67

217.20 217.43OTHER RESERVES

Investment Fluctuation ReserveAs per last Balance Sheet 0.84 0.84Less: Transfer to Schedule 12 0.84 -

- 0.84

Capital SubsidyAs per last Balance Sheet 0.30 0.30

GeneralAs per last Balance Sheet 190.66 183.71Less: Transfer to Profit & Loss Account - 32.85Less: Impairment in value of Assets adjusted - 10.20

190.66 140.66Add: Transfer from Profit & Loss Account 50.00 50.00

240.66 190.66

Surplus as shown in the Profit & Loss Account 125.93 111.32595.68 538.40

SCHEDULE 2 - RESERVES & SURPLUS

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

54

SCHEDULE 3 - LOANS

SECUREDDebentures

30,10,000 - 14.5% Partly Convertible Debentures of Rs. 222/- each 66.82 66.82Less: Converted into Equity Shares to date 27.69 27.69

39.13 39.13Less : Redeemed to date 39.13 33.15

- 5.98

10,00,000 - 11.25% Non Convertible Debentures of Rs. 100/- each 10.00 10.00Less: Redeemed to date 3.33 -

6.67 10.00

6.67 15.98Term Loans

From International Finance Corporation - Foreign Currency 67.87 84.82

- Rupee Loan 53.58 121.45 64.30 149.12

From Banks :

ICICI - Foreign Currency 47.35 46.27

State Bank of India 100.00 -

From Institutions :

G E Capital Services India 22.50 28.48

Other Loans :

Banks - Cash Credit 71.77 97.64

Sales Tax Loan 11.26 11.26

374.33 332.77

381.00 348.75

UNSECUREDCommercial Paper 70.00 150.00Short Term Loans

- From Banks 224.00 45.06- From Others 75.00 –

369.00 195.06

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

55

NOTES: SECURED LOANS

1. 10,00,000 -11.25% Non Convertible Debentures of Rs. 100 each issued at par and allotted on 26th June, 2002 are redeemable inthree equal annual instalments at the end of 3rd, 4th and 5th year from the date of allotment of debentures. The first instalment of Rs.3.33 Crores was paid during the current year. The above debentures and interest payable thereon are secured by a pari passu firstcharge on the Company’s land and premises at Chalakudy, Kerala State and at village Limda, Gujarat State together with theFactory Buildings, Plant & Machinery and Equipments, both present and future.

2. Loan from International Finance Corporation is secured by :

• A pari passu first charge along with other lenders on the Company’s land at Chalakudy, Kerala State and at village Limda,Gujarat State together with the Factory Buildings, Plant & Machinery and Equipments, both present and future.

• A first and fixed charge on the Company’s land and premises situated at Gurgaon, Haryana State together with all existing andfuture buildings, erections and structures.

• A pari passu first charge on all the moveable assets except current assets of the Company.

• A second charge on all the current assets of the Company.

3. External Commercial Borrowing from ICICI Bank Limited, Singapore is secured by:

• A pari passu first charge along with other lenders on the Company’s land at Chalakudy, Kerala State and at village Limda,Gujarat State together with the Factory Buildings, Plant & Machinery and Equipments both present and future.

• A pari passu first charge on all the moveble assets except current assets at Chalakudy, Kerala State and at village Limda,Gujarat State.

4. Loan from State Bank of India is secured by :

• A pari passu first charge along with other lenders on the Company’s land at Chalakudy, Kerala State and at village Limda,Gujarat State together with the Factory Buildings, Plant & Machinery and Equipments, both present and future.

• A second charge on all the current assets of the Company.

5. Loan from GE Capital Services India is secured by :

• A pari passu first charge along with other lenders on the Company’s land at Chalakudy, Kerala State and at village Limda,Gujarat State together with the Factory Buildings, Plant & Machinery and Equipments, both present and future.

• A pari passu first charge on all the moveable assets except current assets at Chalakudy, Kerala State and at village Limda,Gujarat State.

6. Cash Credits and Guarantees from Banks are secured by Hypothecation of Raw materials, Work-in-Process, Stocks, Stores andBook Debts ranking in priority to the charge created in respect of the IFC Loan and also by second charge on the Company’s landat Chalakudy, Kerala State, at village Limda, Gujarat State and on part of the Land at Ranjangaon in the State of Maharashtratogether with the Factory Buildings, Plant & Machinery and Equipments, both present and future.

7. The Company had availed interest free Sales Tax Loan from Gujarat State Government amounting to Rs. 11.26 Crores as on 31stMarch, 2006. These loans are secured by a pari passu charge on the entire fixed assets of the Company, both present and futuresituated at village Limda in Gujarat State. The said loan is repayable in six equal annual installments on the expiry of 14 years fromthe commencement of commercial production i.e. 31st May, 2006.

8. Loans, other than debentures, include Rs. 84.60 Crores (Rs.33.39 Crores) repayable within one year.

56

SCHEDULE 4 - FIXED ASSETS

Land 7.42 - 0.03 7.39 - - 7.39 7.42

(c) (c)

Leasehold Land 2.05 - 0.02 2.03 - - 2.03 2.05

(a)

Buildings 150.75 13.56 0.16 164.15 4.51 34.91 129.24 120.34

(c) (c)

Plant & Machinery 859.92 135.15 0.16 994.91 53.23 366.73 628.18 546.30

(c) (c)

Electrical Installation 32.43 2.45 - 34.88 1.64 16.25 18.63 17.82Furniture, Fixtures 44.94 6.63 0.15 51.42 3.89 23.59 27.83 25.14& OfficeEquipments

Vehicles 29.64 5.83 3.07 32.40 3.95 13.53 18.87 19.00

(b) (b)

Intangible Assets 9.13 2.17 - 11.30 2.08 4.27 7.03 6.95

Assets under HirePurchase acquiredafter 01.04.2001 :

-Vehicles 12.15 - 0.02 12.13 3.64 10.66 1.47 5.11

1,148.43 165.79 3.61 1,310.61 72.94 469.94 840.67 750.13

Previous Year 975.87 179.70 7.14 1,148.43 56.94 398.30 750.13 648.08

GROSS BLOCK DEPRECIATION NET BLOCK

Descriptionof Assets

As at31st March,

2005Rs./Crs.

Additions

Rs./Crs.

Deductions

Rs./Crs.

To date

Rs./Crs.

As at31st March,

2006Rs./Crs.

For the year

Rs./Crs.

As at31st March,

2006Rs./Crs.

As at31st March,

2005Rs./Crs.

(a) Represents proportionate lease premium Rs. 0.02 Crores (Rs.0.04 Crores) written off.

(b) Includes Rs. 1.31 Crores (Rs.1.31 Crores) value of assets purchased under Hire Purchase Scheme acquired before 01.04.2001.

(c) Includes amount added on revaluation in 1985-86 and 1986-87 - Rs. 22.78 Crores.

57

SCHEDULE 5 - INVESTMENTS

LONG TERM :

TRADE (FULLY PAID)

QUOTEDEquity Shares of Rs. 10/- each in Companies :9,99,515 Shares in Raunaq Finance Ltd. 1.00 1.001,67,150 Shares in Apollo Tubes Ltd. 0.02 0.0216,394 Shares In Bharat Gears Ltd. 0.04 0.0451,80,000 Equity Shares in Gujarat Perstorp Electronics Ltd. of 0.52 0.52Re. 1/- each97,41,015 Shares in PTL Enterprises Ltd., Subsidiary Company. - 9.74(97,41,015 Shares sold during the year - Cost Rs. 9.74 Crores)

1.58 11.32

UNQUOTED50,000 (Nil) Shares in Apollo Radial Tyres Ltd. - wholly owned subsidiary 0.05 -50,000 (Nil) Shares in Apollo Automotive Tyres Ltd. - wholly owned subsidiary 0.05 -1 (Nil) Share in Apollo (Mauritius) Holdings Pvt Ltd. - wholly owned subsidiary - -73,50,000 Equity Shares of Michelin Apollo Tyres Pvt Ltd of Rs 10/- each - 44.05(73,50,000 Shares sold during the year - Cost Rs. 44.05 Crores)5,000 Shares in Apollo Tyres Employees’ Multipurpose 0.05 0.05Co-operative Society Limited of Rs. 100/- each

NON TRADE (FULLY PAID)CURRENT:1,71,529 Units of Unit Scheme 2002 (Income) of Unit Trust of India # 0.10 0.10

1.83 55.52Less : Provision for Diminution / Reduction in the Value of Investments 1.30 1.04

0.53 54.48Cost / Book value of Quoted Investments (Net of Provision for Diminution /Reduction in the Value of Investments ) 0.28 10.28Market Price of Quoted Investments 1.07 19.97# Repurchase Price of Units 0.23 0.16

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

58

CURRENT ASSETS

Inventories : @

Raw Materials 192.12 196.38

Stores and Spares 27.22 22.41

Work-in-Process 29.41 23.35

Finished Goods 170.66 87.98

419.41 330.12

Sundry Debtors - Unsecured

Over Six Months

Considered Good 3.05 5.43

Considered Doubtful 3.61 3.61

Others - Considered Good 172.09 151.09

178.75 160.13

Less: Provision for Doubtful Debts 3.61 3.61

175.14 156.52

Cash and Bank Balances

Cash and Cheques on hand 43.46 34.48

Remittances in Transit 25.25 28.92

With Scheduled Banks :

Current Accounts 25.55 29.18

Dividend Accounts 1.65 1.91

Deposit Accounts* 135.45 15.94

231.36 110.43

Other Current Assets

Income Accrued on Investments 0.21 0.02

0.21 0.02

* Includes Rs. 13.90 Crores (Rs. 13.25 Crores) pledged with a bank against which working capital loan has been availed by Apollo

Finance Ltd.

@ Includes stock in transit

SCHEDULE 6 - CURRENT ASSETS, LOANS AND ADVANCES

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

LOANS AND ADVANCES - UNSECURED

Advances recoverable in cash or in kind

or for value to be received

Considered Good* 151.82 110.97

Considered Doubtful - 1.42

151.82 112.39

Less: Provision for Doubtful Advances - 1.42

151.82 110.97

Advance Tax 218.14 194.64

Less: Provision for Taxation 185.58 32.56 159.24 35.40

Balance with Customs, Port Trust etc. 0.01 0.09

184.39 146.46

1,010.51 743.55

* Includes due from Subsidiary Company. 3.18 3.12

59

CURRENT LIABILITIES

Sundry Creditors:Due to Small Scale and Ancillary Industrial Undertakings 0.64 0.64Others* 339.41 325.90

Acceptances 66.49 44.72Interest accrued but not due 6.92 5.84**Investor Education and Protection Fund shall be credited by the following amounts namely:-

Unpaid Debenture Redemption Amount 0.34 0.70Unpaid Interest on Debentures 0.13 0.24Unpaid Matured Deposits and Interest Thereon 0.13 0.18Unpaid Dividend 1.66 1.92

415.72 380.14

PROVISIONSDividend Tax 2.42 2.42Proposed Dividend on Equity Shares 17.25 17.25Gratuity, Leave Encashment & Superannuation 5.28 9.16

24.95 28.83440.67 408.97

SCHEDULE 7 - CURRENT LIABILITIES AND PROVISIONS

* Includes Liability towards Hire Purchase / Financial Lease Rs. 0.50 Crores (Rs. 4.62 Crores)- repayable within one year Rs. 0.50Crores (Rs. 4.12 Crores)

**1. There are no amounts due and outstanding as at Balance Sheet Date to be credited to the Investor Education & Protection Fund.

2. Other unpaid amounts represent warrants / cheques issued to the Debentureholders / Depositors / Shareholders, as the case maybe, which remain unpresented to the Bankers as on 31st March, 2006.

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

Income from Investments*- Trade Investments - -- Others :

From Mutual Funds - 0.07- 0.07

Profit on Sale of Assets (Net) - 11.76Profit / (Loss) on Sale of Investments - (16.22)

Add: Transfer From Provision for Diminution invalue of Investments - 23.39 7.17

Miscellaneous Receipts * 1.18 0.81

1.18 19.81

* Tax Deducted at Source. - 0.02

SCHEDULE 8 - OTHER INCOME

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

60

MATERIALSRaw Materials Consumed* 1,850.34 1,431.09Less: Scrap Recoveries 6.18 5.72

1,844.16 1,425.37EMPLOYEES

Salaries, Wages and Bonus** 129.99 113.60Contribution to Provident and Other Funds 9.64 8.95Welfare Expenses 23.87 20.85

MANUFACTURING, ADMINISTRATIVE AND SELLINGPurchase of Finished Goods 78.77 87.19Stores and Spares Consumed 24.75 21.77Power and Fuel 121.82 114.57Conversion Charges 2.39 4.10Repairs and Maintenance- Machinery 4.95 3.99- Buildings 0.97 0.72- Others 8.77 7.58Rent*** 7.67 5.90Insurance 7.50 5.66Rates and Taxes 9.79 7.71Directors’ Sitting Fees 0.10 0.03Loss on Sale of Assets (Net) 0.53 -Travelling, Conveyance and Vehicle Expenses 26.21 24.56Postage, Telex, Telephone and Stationery 6.59 6.45Freight & Forwarding 62.15 48.73Commission to Selling Agents 3.46 2.88Sales Promotion Expenses 43.89 66.66Advertisement & Publicity 10.08 18.13Research and Development 8.33 6.84Bank Charges 3.88 3.83Provision for Doubtful Debts / Advances - 5.03Bad Debts/Advances Written off 1.42 2.73Less: Transferred from Provision 1.42 - - 2.73Lease/Service charges to PTL Enterprises Ltd. 10.00 7.50Provision for Diminution in the Value of Investments 0.26 0.26Legal & Professional Expenses 4.44 3.76Miscellaneous Expenses**** 24.62 20.90

2,479.58 2,046.25

SCHEDULE 9 - MANUFACTURING & OTHER EXPENSES

* Net of Foreign Exchange Fluctuation Gain of Rs. 0.81 Crores (Rs. 2.45 Crores).

** Includes VRS payments amortised during the year of Rs. 0.25 Crores (Rs. 1.66 Crores).*** Net of Rent Receipts of Rs. 1.43 Crores (TDS Rs. 0.32 Crores) (Rs. 1.12 Crores,

TDS - Rs. 0.23 Crores).**** Net of Foreign Exchange Fluctuation Gain of Rs. 0.18 Crores (Rs.0.24 Crores).

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

61

OPENING STOCKWork in Process 23.35 18.28Finished Goods 87.98 117.77

111.33 136.05

Less:

CLOSING STOCKWork in Process 29.41 23.35Finished Goods 170.66 87.98

200.07 111.33

(88.74) 24.72

Excise Duty on Increase / (Decrease) of Finished Goods 11.94 (10.31)

(76.80) 14.41

SCHEDULE 10 - (INCREASE) / DECREASE IN WORK IN PROCESS AND FINISHED GOODS

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

SCHEDULE 11 - INTEREST

Fixed Loans * 18.02 12.71

Debentures 1.24 3.49

Others # * 31.30 26.74

50.56 42.94

# Net of Interest Earned Rs. 3.29 crores (Rs. 1.49 crores). Tax Deducted at source Rs. 0.46 crores (Rs. 0.19 crores).* Including Foreign Exchange Fluctuation Loss of Rs. 1.16 Crores (Rs. 4.92 Crores).

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

62

Additional Excise Duty pertaining to earlier years - Refundable - 47.66Tax Provision on above no longer required written back - (14.81)Transfer from General Reserve - (32.85)

- -

Foreign Exchange Fluctuation loss attributable to investment in a (5.09) -foreign subsidiary company (Note - B 3)

Profit on Sale of Investments in Shares of Subsidiary Company 14.30 -PTL Enterprises Ltd

Loss on Sale of Investment in Shares of Joint Venture Company (3.41) -Michelin Apollo Tyres (P) Ltd (Net of transfer from InvestmentFluctuation Reserve - Rs. 0.84 Crores)

5.80 -

SCHEDULE 12 - EXCEPTIONAL ITEMS

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

63

SCHEDULE 13 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

A. SIGNIFICANT ACCOUNTING POLICIES :

1. BASIS OF ACCOUNTING

The accounts are prepared on Historical Cost Convention with the exception of certain Plant and Machinery (which were

revalued) based on Accrual method of Accounting and applicable Accounting Standards.

2. FIXED ASSETS

(a) Fixed Assets are stated at cost as adjusted by revaluation of certain Land, Buildings and Plant and Machineries based on

the then replacement cost as determined by approved independent valuer in 1986 and 1987 less depreciation. All costs

relating to the acquisition and installation of fixed assets are capitalised and include finance cost on borrowed funds

attributable to acquisition of fixed assets for the period upto the date of commencement of production, rollover charges on

forward exchange contracts, and adjustments arising from exchange rate variations and receipts on cancellation of foreign

exchange contracts relating to specific borrowing attributable to fixed assets acquired from outside India.

(b) Fixed Assets taken on lease before 1st April, 2001, other than land, are not treated as Assets of the Company and the lease

rentals are charged off to revenue over the period of lease.

(c) Fixed Assets taken on Hire Purchase are capitalised and depreciation has been provided on such assets, while the hire

charges have been charged to revenue.

(d) The expenditure incurred by the Company on acquisition and implementation of Software System / Development cost of new

product is recognised as an Intangible asset.

3. BORROWING COSTS

Borrowing Costs are capitalised as part of qualifying asset when it is possible that they will result in future economic benefits. Other

borrowing costs are expensed.

4. INVESTMENTS

Long Term investments are stated at cost and provision for diminution is made if the decline in value is other than temporary in

nature. Current investments are stated at lower of cost and fair value determined on the basis of each category of investments.

5. INVENTORIES

Inventories are valued at the lower of cost and net realisable value. The cost comprises of Cost of Purchase, Cost of Conversion and

other costs including appropriate production overheads in the case of finished goods and work in process, incurred in bringing such

inventories to their present location.

In case of Raw materials and Stores and Spares, the cost (Net of Cenvat Credits where applicable) is determined on a moving

weighted average basis.

6. FOREIGN CURRENCY TRANSACTIONS

Foreign Currency Transactions are recorded at rates of exchange prevailing on the date of transaction. The transaction outstanding

at the year-end are translated at the rate of exchange prevailing at the year-end and profit or loss other than that relating to fixed

assets acquired from outside India is recognised in Profit & Loss Account. The premium or discount arising at the inception of the

foreign exchange contract, other than that relating to fixed assets acquired from outside India are amortised as expense or income

over the life of the contract. Exchange difference on such contracts are recognised in the Profit & Loss Account except in respect of

those relating to fixed assets acquired from outside India.

7. SALES

Gross Sales are inclusive of excise duty and are net of trade discounts/sales returns.

64

8. EXPORT INCENTIVE

Export Incentive in the form of Advance Licences / credit earned under Duty Entitlement Pass Book Scheme are treated as

income in the year of export at the estimated realisable value / actual credit earned on exports made during the year and are

credited to the Raw Material Consumption Account.

9. DEPRECIATION

Depreciation on fixed assets is provided on the straight line basis at the rates specified in Schedule XIV of the Companies Act,

1956, classifying certain Plant and Machinery as Continuous Process Plant on technical evaluation except that on certain

vehicles depreciation is provided at 30%. Additional depreciation consequent on the enhancement in the value of fixed assets

on the revaluation is adjusted in the fixed assets revaluation reserve account. Leasehold land is amortised over the period of

lease. In respect of assets impaired, the revised carrying value is depreciated over its remaining useful life. Intangible Assets

are amortised over the estimated useful life of the asset.

10. RESEARCH AND DEVELOPMENT EXPENSES

Revenue expenditure on Research & Development is charged to Profit & Loss Account and Capital expenditure on Research

& Development is included in fixed assets under the appropriate heads.

11. RETIREMENT BENEFITS

• Liability for gratuity to employees determined on the basis of actuarial valuation as on Balance Sheet date is funded with

the Life Insurance Corporation of India, and the contribution thereof paid / payable is absorbed in the Accounts.

• Liability for leave encashment benefit determined on the basis of actuarial valuation as on the balance sheet date is provided

for in the Accounts.

• Fixed contributions to Provident Fund, Employees Pension Fund, Superannuation Fund and Cost of other benefits are recognised

in the Accounts on actual cost to the Company.

12. VOLUNTARY RETIREMENT PAYMENTS

Payments under Voluntary Retirement Scheme are being charged to Profit & Loss Account over a period of three years.

13. TAXES ON INCOME

Current year’s tax is determined on the income for the year chargeable to tax in accordance with the Income Tax Act, 1961.

Deferred Tax is recognised, subject to the consideration of prudence, on timing differences.

65

B. NOTES ON ACCOUNTS :

1. CONTINGENT LIABILITIES

2005-06 2004-05Rs./Crs. Rs./Crs.

- Sales Tax 13.21 15.08- Income Tax-Disputed Demands under Appeal 21.10 22.48- Claims not acknowledged as debts

– Employee Related - 0.43– Property Disputes 0.21 0.21– Others 0.06 0.07

- Corporate Guarantees/Provision of Security 13.90 13.25- Guarantees given by bankers on behalf of the Company 19.86 19.44- Custom Duty 0.69 0.13- Land Acquisition Cases - 0.07- Excise Duty* 0.70 3.13

* Excludes demands of Rs. 10.88 Crores (Rs. 10.55 Crores) raised on one of the Company’s units relating to the issues whichhave been decided by the Appellate Authority in Company’s favour in appeals pertaining to another unit of the Company.

2. Capital Expenditure Commitments not provided for 56.76 58.29

3. During the year Company had entered into an agreement to acquire 100% share holding in Dunlop Tyres International (Pty) Ltd.in South Africa alongwith some of its subsidiaries / associates for a consideration of Rand 398 Million (approximately Rs. 290Crores), including deferred consideration of Rand 60 Million (approximately Rs. 43 Crores) payable after one year. The Companyhas since concluded the acquisition process.

4. During the year Company has divested its share holding in PTL Enterprises Ltd, a subsidiary company and in Michelin ApolloTyres (Pvt) Ltd, a joint venture with Michelin Group.

5. Borrowing Costs capitalised during the year 0.47 1.24

6. The names of Small Scale and ancillary Industrial undertakings (as identified by the management) to whom the Company owesa sum which is outstanding for more than 30 days as on 31st March, 2006 are given below :

Name of Undertaking Name of Undertaking Name of Undertaking

Bharati Enterprise Fluid Logic Systems Pvt Ltd. Omex Enterprises

Desai Engineering Industries Foremost Industries Perfect Charts Company

Excell Engineering Industries Hayagreeva Engineers Shri Mahakali Machinery Pvt Ltd

Equipment Enterprises Heliflex Hydroaulics & Engg. Speedy Services

Udaipur Mineral Development Manson Industries Accurate Components & Tools

Rashmi Engineering Works Chadayamury Engg. Works Sirji Machine Crafts

Ferro Tube & Forge Industries Lakhotia Enterprise Star Knives & Saws

P A R T I C U L A R S

7. The Company has taken, on operating lease, the plant of PTL Enterprises Ltd. for a period of one year, which is renewable. Thelease rent of Rs. 10.00 Crores (Rs. 7.50 Crores) paid as per the lease agreement has been charged to Profit and Loss account.

8. Research and Development Expenses comprise of the following :

2005-06 2004-05Rs./Crs. Rs./Crs.

Salary, Wages & Other Benefits 3.20 3.71Travelling & Conveyance 0.91 0.84Others 4.22 2.29

T O T A L 8.33 6.84

P A R T I C U L A R S

66

P A R T I C U L A R S

11. (A) Computation of Profit for Managerial Remuneration

2005-06 2004-05Rs./Crs. Rs./Crs.

Net Profit as per Profit & Loss Account 78.17 67.63Add: Provision for Tax 28.20 17.28

Remuneration to Managing / Wholetime Directors 7.17 5.71Commission to Non-Whole Time Directors 0.40 0.30Sitting Fees to Directors 0.10 0.03Provision for Doubtful debts/advances - 5.03Provision for diminution in value of investment 0.26 0.26Profit on sale of assets U/S 349(1)(d) of Companies Act, 1956 - 0.31Loss on sale of Investments 4.25 -

Less: Profit on sale of investments 14.30 7.17Transfer from Investment Fluctuation Reserve 0.84 -Reversal from Provision for Doubtful Debts/Advances 1.42 -Profit / (Loss) on sale of assets as per books (0.53) 11.76

Net Profit 102.52 77.62

1% Commission to Non-Wholetime Directors restricted to(Included under Miscellaneous Expenses) 0.40 0.30

9. The components of Deferred Tax Liability (Net) are as follows :

2005-06 2004-05Rs./Crs. Rs./Crs.

Deferred Tax Liability on timing differences arising on :

Depreciation 113.70 105.58

Premium on Redemption of Debentures - 0.03

Sub Total (A) 113.70 105.61

Deferred Tax Assets on timing differences arising on :

Payment under Voluntary Retirement Scheme 0.14 0.79

Others 8.35 1.47

Sub Total (B) 8.49 2.26

Net Deferred Tax Liability (A-B) 105.21 103.35

P A R T I C U L A R S

Payment Under VRS

10. Deferred Revenue Expenditure :

2005-06 2004-05Rs./Crs. Rs./Crs.

Opening Balance 0.38 1.65Add: Payment During the year 0.13 0.39

T O T A L 0.51 2.04

Less: Amortised during the year 0.25 1.66

Closing Balance 0.26 0.38

67

ii) Remuneration to Whole-time Directors :

2005-06 2004-05Rs./Crs. Rs./Crs.

Salary 0.31 0.29Commission/Performance Bonus 0.36 0.33Contribution to Provident / Superannuation Funds 0.08 0.08Money Value of Perquisites 0.36 0.38

T O T A L 1.11 1.08

T O T A L (i + ii) 7.17 5.71

INSTALLED CAPACITY*PER ANNUM

P A R T I C U L A R S

P A R T I C U L A R S

PARTICULARS

12. Statutory Auditors' Remuneration included under Miscellaneous Expenses:

2005-06 2004-05Rs./Crs. Rs./Crs.

For Audit 0.15 0.13For Certification & Other Service 0.02 0.04Reimbursement of expenses 0.06 0.02

T O T A L 0.23 0.19

13. (A) Capacities and Production

UNIT PRODUCTION @

2005-2006 2004-2005 2005-2006 2004-2005

Automobile Tyres No. 79,34,272 68,88,640 70,29,973 59,71,492Automobile Tubes No. 65,22,560 51,43,200 61,77,585 54,10,606Automobile Flaps No. - - 31,88,527 28,48,843Alloy Wheels No. - - 3,528 -Camel Back/Retreading MT 3,000 3,000 - -Materials

*As certified by the Management (includes capacity under Lease agreement)@ Includes Production under Lease Arrangement and purchases/conversion of Finished Goods by Conversion Agents :-

Tyres 9,14,083 Nos. (7,60,938)Tubes 7,55,288 Nos. (13,73,830)Flaps 31,88,527 Nos. (28,48,843)Alloy Wheels 3,528 Nos. (Nil)

i) Remuneration to Managing Director & Joint Managing Director :

2005-06* 2004-05Rs./Crs. Rs./Crs.

Salary 2.07 2.07Commission 1.44 0.49Contribution to Provident / Superannuation Funds 0.56 0.56Money Value of Perquisites 1.99 1.51

T O T A L 6.06 4.63

* Includes salary paid to Joint Managing Director/Whole-time Director.

P A R T I C U L A R S

(B) Remuneration to Managing / Wholetime Directors included under Employee Expenses:

68

(C) Raw Materials Consumed

2005-2006 2004-2005

Fabric 22,045.61 451.21 21,691 349.67

Rubber 1,22,351.53 926.99 1,15,273 726.44

Chemicals 18,561.15 155.25 16,858 104.72

Carbon Black 59,384.96 204.42 55,522 159.14

Others 112.47 91.12

1,850.34 1,431.09

Tonnes Rs./Crs Tonnes Rs./Crs

(D) Break-up of Consumption

2005-2006 2004-2005

Raw Materials - Imported 33.53 620.38 25.32 362.42

- Indigenous 66.47 1,229.96 74.68 1,068.67

100.00 1,850.34 100.00 1,431.09

Stores & Spares - Imported 5.94 1.47 5.56 1.21

- Indigenous 94.06 23.28 94.44 20.56

100.00 24.75 100.00 21.77

% Rs./Crs % Rs./Crs

(E) C.I.F. Value of Imports :

Raw Materials 453.08 424.08

Stores & Spares 2.47 1.95

Finished Goods 0.56 -

Capital Goods 42.23 38.72

P A R T I C U L A R S2005-2006Rs./Crs.

2004-2005Rs./Crs.

PARTICULARS

PARTICULARS

Automobile Tyres No. 2,77,736 3,19,690 68,42,897 60,13,446 4,64,812 2,77,736Rs./Crs 68.43 96.02 2,710.27 2,403.74 146.00 68.43

Automobile Tubes No. 6,92,832 6,63,515 61,67,656 53,81,289 7,02,761 6,92,832Rs./Crs 17.02 18.15 237.30 206.61 20.59 17.02

Automobile Flaps No. 1,97,694 2,67,654 31,16,023 29,18,803 2,70,198 1,97,694Rs./Crs 2.53 3.60 54.17 46.46 3.80 2.53

Alloy Wheels No. - - 1,824 - 1,704 -Rs./Crs - - 0.38 - 0.27 -

TOTAL Rs./Crs 87.98 117.77 3,002.12 2,656.81 170.66 87.98

Opening Stock Turnover* Closing Stock2005-2006 2004-2005 2005-2006 2004-2005 2005-2006 2004-2005Unit

(B) Turnover and stock

PARTICULARS

* Includes quantity relating to claims & own consumption.

69

16. Earnings Per Share (EPS) – The numerator and denominator used to calculate Basic and Diluted Earnings Per Share :

A) Before Exceptional Items:

2005-2006 2004-2005P A R T I C U L A R S

17. The Company’s operations comprise of only one segment – Tyres, Tubes & Flaps and therefore, there are no otherbusiness / geographical segments to be reported as required under Accounting Standard (AS-17) “Segment Reporting” issuedby The Institute of Chartered Accountants of India.

Profit attributable to the equity shareholders usedas numerator (Rs. Crores) - (A) 72.37 67.63

The weighted average number of equity shares outstandingduring the year used as denominator - (B) 3,83,37,977 3,83,37,977

Basic / Diluted earnings per share (Rs.) - (A) / (B) 18.88 17.64(Face value of Rs. 10 each)

(F) Expenditure in Foreign Currency (Remitted) : (Excluding value of imports)

Interest 9.03 4.23

Dividend* 2.67 2.67

Royalty - 3.54

Others 9.35 15.73

P A R T I C U L A R S2005-2006Rs./Crs.

2004-2005Rs./Crs.

* Number of non-resident Shareholders – 42 (45), Number of Shares held by non-resident Shareholders – 59,28,350(59,28,350)

14. Earnings in Foreign Exchange :

FOB value of Exports 0.88 2.20

P A R T I C U L A R S2005-2006Rs./Crs.

2004-2005Rs./Crs.

15. A) The following Forward Exchange Contracts entererd into by the Company are outstanding as on 31st March, 2006:

Currency Amount Buy/Sell Cross Currency

US Dollar US$ 8,000,000/- Buy Rupees

B) Premium on Forward Exchange Contracts deferred to be recognised in subsequent accounting periods – Rs. 0.76 Crores (Rs. 0.90 Crores).

2005-2006 2004-2005P A R T I C U L A R S

Profit attributable to the equity shareholders usedas numerator (Rs. Crores) - (A) 78.17 67.63

The weighted average number of equity shares outstandingduring the year used as denominator - (B) 3,83,37,977 3,83,37,977

Basic / Diluted earnings per share (Rs.) - (A) / (B) 20.39 17.64(Face value of Rs. 10 each)

B) After Exceptional Items:

70

PARTICULARS 2005-2006 2004-2005

Subsidiaries PTL Enterprises Ltd. (ceased to be asubsidiary during the year) PTL Enterprises Ltd.Apollo Automotive Tyres Ltd.Apollo Radial Tyres Ltd.Apollo (Mauritius) Holding Pvt. Ltd.Apollo (South Africa) Holding Pty. Ltd.(through Apollo (Mauritius) Holdings Pvt. Ltd.)

Associates Apollo International Ltd. Apollo International Ltd.Encorp E Services Ltd. Encorp E Services Ltd.Gujarat Perstorp Electronics Ltd. Gujarat Perstorp Electronics Ltd.(Under Liquidation)Landmark Farms & Housing (P) Ltd. Landmark Farms & Housing (P) Ltd.Sunlife Tradelinks (P) Ltd. Sunlife Tradelinks (P) Ltd.Travel Tracks (P) Ltd. Travel Tracks (P) Ltd.

Joint Venture Company Michelin Apollo Tyres Pvt. Ltd. Michelin Apollo Tyres Pvt. Ltd.(ceased to be a JV during the year)

Key Management Personnel Mr. O. S. Kanwar Mr. O. S. KanwarMr. Neeraj Kanwar Mr. Neeraj KanwarMr. U. S. Oberoi Mr. U. S. OberoiMr. Sunam Sarkar Mr. Sunam Sarkar

Relative of Key Mr. Raaja Kanwar Mr. Raaja KanwarManagerialPersonnel

18. Disclosure of Related Party Transaction in accordance with Accounting Standard (AS-18) “Related Party Disclosures” issued byThe Institute of Chartered Accountants of India.

a) Name of the Related Parties :

71

2005-2006

ParticularsAssociates

KeyManagement

Personnel

Relatives of KeyManagement

PersonnelTotal

Rs./Crs. Rs./Crs. Rs./Crs. Rs./Crs.

Volume of Transactions:

Sales 268.58 268.58

Investments made 0.10 0.10

Loans given 3.18 3.18

Reimbursement of Expenses 31.24 (0.03) (1.50) 29.71

Lease / Service Charges 10.00 10.00

Managerial Remuneration 7.17 7.17

Rent Paid 2.24 2.24

Purchases 0.01 0.01

Travelling Expenses 4.69 4.69

Rent Received (0.08) (0.25) (0.33)

Conference Expenses 5.20 5.20

Provision for Diminution in value 0.26 0.26of Investment

Interest Received (0.05) (0.05)

Interest paid 0.07 0.07

Security Deposit Paid 1.80 1.80

Consultancy fees paid 1.10 1.10

Dividend Paid 0.79 2.57 3.36

Claims Accepted 0.46 0.46

Total 44.54 283.92 1.92 7.17 - 337.55

Amount Outstanding Dr./(Cr.) 3.18 37.60 40.78

Subsidiaries

Rs./Crs.

b) Transactions with Related Parties during the financial year 2005-06 :

JointVenture

Rs./Crs.

72

2004-2005

ParticularsAssociates

KeyManagement

Personnel

Relatives of KeyManagement

PersonnelTotal

Rs./Crs. Rs./Crs. Rs./Crs. Rs./Crs.

Volume of Transactions :

Sales 210.20 210.20

DEPB Licenses Purchased 0.19 0.19

Reimbursement of Expenses 30.27 (0.06) (1.40) 28.81

Lease / Service Charges 7.50 7.50

Managerial Remuneration 5.71 5.71

Sale of land in Pune 16.76 16.76

Travelling Expenses 4.29 4.29

Rent Received (0.28) 0.26 (0.02)

Conference Expenses 3.18 3.18

Payment towards Current Liability 7.26 7.26

Provision for Diminution in value 0.26 0.26of Investment

Interest Received 0.06 0.06

Security Deposit Paid 3.47 3.47

Dividend Paid 0.79 0.79

Claims Accepted (0.49) 0.67 0.18

Total 37.34 229.97 15.62 5.71 288.64

Amount Outstanding Dr./(Cr.) 3.12 29.14 0.35 32.61

Subsidiaries

Rs./Crs.

JointVenture

Rs./Crs.

Total minimum lease payments 0.51 5.01

Less: future liability on interest account 0.01 0.39

Present value of lease payments 0.50 4.62

P A R T I C U L A R S2005-2006Rs./Crs.

2004-2005Rs./Crs.

19. Disclosures relating to assets taken on Hire purchase / Financial Lease after 1-4-2001 :a) The Company has acquired vehicles under Hire Purchase with respective underlying assets as security.b) Reconciliation between total minimum lease payments and their present value:

c) Year-wise future minimum lease rental payments :

Not later than one year 0.51 0.50 4.50 4.12

Later than one year and not later thanfive years Nil Nil 0.51 0.50Later than five years Nil Nil Nil Nil

P A R T I C U L A R S TotalMinimum

HP Payment

PresentValue of

HP Payment

TotalMinimum

HP Payment

P A R T I C U L A R S PresentValue of

HP Payment

2005-2006 2004-2005Rs./Crs. Rs./Crs.

73

20. Information on Joint Ventures as per Accounting Standard 27

2005-06 2004-05a) Name of the Joint Venture Michelin Apollo Michelin Apollo

Tyres Pvt. Ltd.* Tyres Pvt. Ltd.

Country of Incorporation India IndiaShare in ownership and voting power 49% 49%

b) Contingent Liabilities in respect of Joint Venture:i) Directly incurred by the Company Nil Nilii) Share of the Company in Contingent Liabilities which have been

incurred jointly with other venture companies Nil Niliii) Share of the Company in Contingent Liabilities incurred by jointly

controlled entity Nil 0.01iv) Share of other joint venture companies in Contingent Liabilities

incurred by jointly controlled entity Nil Nil

c) Capital Commitments in respect of Joint Ventures:i) Direct Capital Commitments by the Company Nil Nilii) Share of the Company in Capital Commitments which have been

incurred jointly with other joint venture companies Nil Niliii) Share of the Company in Capital Commitments of the jointly

controlled entity Nil 9.96

d) Disclosure of Financial Data as per Accounting Standard -27 - 'Financial Reporting of Interests in Joint Venture' is donebased on the unaudited financial statements of the jointly controlled entity.

e) Proportionate share of the Company in the Assets, Liabilities, Incomes and expenses of the Joint Venture :

21. Previous Year's figures have been regrouped wherever necessary to conform to the classifications for the current year.Previous Year's figures are given in brackets.

P A R T I C U L A R S 2005-06 2004-05Rs./Crs. Rs./Crs.

Proportionate Share of Current Assets - 23.43Proportionate Share of Fixed Assets ( Including CWIP ) - 18.66Proportionate Share of Current Liabilities - 1.71Proportionate Share of Deferred Tax Liability - 0.04Proportionate Share of Income 4.58 10.88Proportionate Share of Expenses (including Provision for Tax) 5.12 14.63

* Ceased to be a JV during the year.

As per our Report attached ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASFor FRASER & ROSS Chairman & Jt. Managing Director M.R.B. PUNJAChartered Accountants Managing Director ROBERT STEINMETZ

RAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectorsM.K. ANANTHANARAYANAN

Partner HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

74

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE(AS PER SCHEDULE VI, PART (IV) OF THE COMPANIES ACT, 1956)

I REGISTRATION DETAILSRegistration No. 2 4 4 9State Code 9Balance Sheet Date 3 1 0 3 2 0 0 6

II CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousands)Public IssueRights IssuePrivate PlacementBonus

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousands)Total Liabilities 1 4 8 9 2 3 4 2*Total Assets 1 4 8 9 2 3 4 2Paid-up Capital 3 8 3 4 4 7Reserves & Surplus 5 9 5 6 6 1 8Secured Loans 3 8 1 0 0 2 3Unsecured Loans 3 6 9 0 0 0 0*Including Deferred Tax Liability (Net) 1 0 5 2 2 5 4

APPLICATION OF FUNDSNet Fixed Assets 9 1 8 5 9 1 8Investments 5 3 0 6Net Current Assets 5 6 9 8 5 5 9Misc. Expenditure 2 5 5 9Accumulated Losses N I L

IV PERFORMANCE OF THE COMPANY (Amount in Rs. Thousands)Turnover including Other Incomes 3 0 0 3 3 0 0 8Total Expenditure 2 8 9 6 9 3 0 9Profit Before Tax 1 0 6 3 6 9 9Profit After Tax 7 8 1 6 6 6Earnings Per Share (Rs.) 2 0 . 3 9Dividend Rate (%) 4 5

V GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF THE COMPANY

ITEM CODE NO. (ITC CODE) TYRES FLAPS TUBES

Passenger/Jeep 4 0 1 1 1 0 0 0 4 0 1 3 1 0 0 1

Bus/Lorries 4 0 1 1 2 0 0 0 4 0 1 2 9 0 0 4 4 0 1 3 1 0 0 2

Off the Road 4 0 1 1 9 9 0 1 4 0 1 3 9 0 0 3

Tractor 4 0 1 1 9 9 0 2 4 0 1 3 9 0 0 4

Signatures to Schedules 1 to 13 which form integral part of Accounts.

N I LN I LN I L

ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASChairman & Jt. Managing Director M.R.B. PUNJA

Managing Director ROBERT STEINMETZRAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectors

HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

N I L

75

A CASH FLOW FROM OPERATING ACTIVITIES(i) PROFIT AFTER TAX & EXCEPTIONAL ITEMS 78.17 67.63

ADD: - PROVISION FOR TAX 28.20 2.47NET PROFIT BEFORE TAX BUT AFTER EXCEPTIONAL ITEMS 106.37 70.10ADD: - DEPRECIATION 72.79 56.79

- LEASE RENT ON LEASEHOLD LAND 0.02 0.04- TRANSFER FROM GENERAL RESERVE - (32.85)- TRANSFER FROM INVESTMENT FLUCTUATION RESERVE (0.84) -- (PROFIT) / LOSS ON SALE OF ASSETS 0.53 (11.76)- (PROFIT) / LOSS ON SALE OF INVESTMENTS (NET) (10.05) (7.17)- INCOME FROM INVESTMENTS - (0.07)- PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS 0.26 0.26- REVERSAL OF PROVISION FOR DOUBTFUL DEBTS/ADVANCES (1.42) 5.03- DEFERRED REVENUE EXPENDITURE AMORTISED NET OF PAYMENT 0.12 1.27- INTEREST 50.56 111.97 42.94 54.48

(ii) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 218.34 124.58ADJUSTMENT FOR- TRADE & OTHER RECEIVABLE (57.97) (17.98)- INVENTORIES (89.29) (67.46)- TRADE PAYABLES 31.35 (115.91) 70.01 (15.43)

(iii) CASH GENERATED FROM OPERATIONS 102.43 109.15- DIRECT TAXES PAID (23.50) (23.50) (0.57) (0.57)

(iv) NET CASH FLOW FROM OPERATING ACTIVITIES 78.93 108.58B. CASH FLOW FROM INVESTING ACTIVITIES

- PURCHASE OF FIXED ASSETS (159.39) (198.19)- SALE OF FIXED ASSETS 1.76 17.78- PURCHASE OF INVESTMENTS (0.10) -- SALE OF INVESTMENTS 63.84 16.64- INTEREST RECEIVED 3.10 1.49- DIVIDEND RECEIVED - 0.10

NET CASH USED IN INVESTING ACTIVITIES (90.79) (162.18)C. CASH FLOW FROM FINANCING ACTIVITY

- LONG TERM BORROWING RECEIVED 100.00 54.40- REPAYMENTS OF LONG TERM BORROWING (42.24) (36.46)- PAYMENTS OF PREMIUM ON REDEMPTION OF DEBENTURES (0.23) (0.67)- BANK OVERDRAFT/SHORT TERM FUNDS 148.07 104.46- DIVIDENDS PAID (19.93) (19.94)- INTEREST PAID (52.88) (44.11)

NET CASH FLOW FROM (USED IN) FINANCING ACTIVITIES 132.79 57.68NET INCREASE IN CASH & CASH EQUIVALENTS 120.93 4.08

CASH & CASH EQUIVALENT AS ON 01.04.2005 (01.04.2004) 110.43 106.35CASH & CASH EQUIVALENT AS ON 31.03.2006 (31.03.2005) 231.36 110.43

CASH - FLOW STATEMENT

Rs./Crs.

2005-06 2004-05

As per our Report attached ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASFor FRASER & ROSS Chairman & Jt. Managing Director M.R.B. PUNJAChartered Accountants Managing Director ROBERT STEINMETZ

RAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectorsM.K. ANANTHANARAYANAN

Partner HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

76

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIESACT, 1956 RELATING TO SUBSIDIARY COMPANIES

1 NAME OF APOLLO APOLLO APOLLO APOLLOTHE RADIAL AUTOMOTIVE (MAURITIUS) (SOUTH AFRICA)SUBSIDIARY TYRES LTD TYRES LTD HOLDINGS PVT LTD HOLDINGS (PTY) LTD

2 NUMBER OF SHARES 50,000 EQUITY 50,000 EQUITY 1 EQUITY SHARE SUBSIDIARYHELD IN THE SHARES OF Rs.10/- SHARES OF Rs.10/- OF US$ 1/- THROUGH APOLLOSUBSIDIARY COMPANY EACH FULLY PAID EACH FULLY PAID FULLY PAID (MAURITIUS)

HOLDINGS PVT LTD

3 PERCENTAGE OF 100.00% 100.00% 100.00%HOLDING IN THESUBSIDIARY COMPANY

4 FINANCIAL YEARENDED 31st March, 2006 31st March, 2006 31st March, 2006 31st March, 2006

5 PROFITS/(LOSSES) OFTHE SUBSIDIARYCOMPANY FOR ITSFINANCIAL YEAR SO FARAS IT CONCERNS THEMEMBERS OF APOLLOTYRES LTD. WHICH HAVENOT BEEN DEALT WITH INTHE ACCOUNTS OF APOLLOTYRES LTD. FOR THE YEARENDED 31ST MARCH, 2006

FOR THE YEAR - - Rs. 0.03 CRORES -(Rs. 40,977/-) (Rs. 40,977/-)

FOR THE PREVIOUSFINANCIAL YEARS - - - -

TOTAL ACCUMULATEDUPTO THE YEAR - - - -

6 THE NET AGGREGATE OFPROFITS / (LOSSES) OF THESUBSIDIARY CO. WHICH HAVEBEEN DEALT WITHIN THEACCOUNTS OF APOLLOTYRES LTD. FOR THEYEAR ENDED 31STMARCH, 2006

FOR THE YEAR - - - -

FOR THE PREVIOUSFINANCIAL YEARS - - - -

TOTAL ACCUMULATEDUPTO THE YEAR - - - -

ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASChairman & Jt. Managing Director M.R.B. PUNJA

Managing Director ROBERT STEINMETZRAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectors

HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

77

AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF APOLLO TYRES LTD.ON THE CONSOLIDATED FINANCIAL STATEMENTS OF APOLLO TYRES LTD.AND ITS SUBSIDIARIES AND ASSOCIATE

1. We have audited the attached Consolidated Balance Sheet of Apollo Tyres Ltd. and its subsidiaries – Apollo (Mauritius) HoldingsPvt Ltd., Apollo (South Africa) Holdings Pty Ltd., Apollo Automotive Tyres Ltd., Apollo Radial Tyres Ltd. and its Associate – GujaratPerstorp Electronics Ltd as at 31st March 2006 and the Consolidated Profit and Loss Account for the year then ended and theConsolidated Cash Flow statement for the year ended on that date annexed thereto. The results of PTL Enterprises Ltd., anerstwhile subsidiary and Michelin Apollo Tyres Private Ltd., an erstwhile Joint Venture have been consolidated up to the dateof disinvestment of shareholdings by the company in these companies. These financial statements are the responsibility of ApolloTyres Ltd.’s management and have been prepared by the management on the basis of separate financial statements and otherfinancial information regarding components. Our responsibility is to express an opinion on these financial statements based onour audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We did not audit the financial statements of the above mentioned Subsidiaries and associate whose financial statements reflect totalassets of Rs. 3.25 Crores as at 31st March, 2006 and total revenues of Rs. 15.42 Crores and cash flows amounting to Rs. 4.61Crores for the year then ended. The financial statements of Apollo Automotive Tyres Ltd., Apollo Radial Tyres Ltd., consolidatedfinancial statements of PTL Enterprises Ltd. have been audited by other auditors whose reports have been furnished to us, and ouropinion, in so far as it relates to the amounts included in respect of the subsidiaries, is based solely on the report of the other auditor.The consolidated financial statements of Apollo (Mauritius) Holdings Pvt Ltd., erstwhile joint Venture Michelin Apollo Tyres PrivateLtd. and Associate Gujarat Perstorp Electronics Ltd and other financial information have not been audited and in so far as it relatesto the amounts included in respect of the above Subsidiaries and Associate, is based solely on the financial statements preparedand submitted by the management.

4. We report that the consolidated financial statements have been prepared by Apollo Tyres Ltd.’s management in accordance with therequirements of Accounting Standard (AS-21), Consolidated Financial Statements, Accounting Standard (AS-23), Accounting forInvestments in Associates, Accounting Standard (AS-27), Financial Reporting of Interest in Joint Ventures, issued by the Institute ofChartered Accountants of India.

5. Based on our audit and on consideration of reports of other auditors on separate financial statements and on the other financialinformation of the components, and to the best of our information and according to the explanations given to us, we are of theopinion that the attached consolidated financial statements give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

(a) In the case of the Consolidated Balance Sheet, of the state of affairs of Apollo Tyres Ltd and its Subsidiaries and Associateas at 31st March, 2006;

(b) In the case of the Consolidated Profit and Loss Account, of the profit for the year ended on that date; and(c) In the case of the Consolidated Cash Flow statement, of the cash flow for the year ended on that date.

FOR FRASER & ROSSCHARTERED ACCOUNTANTS

M.K. ANANTHANARAYANANPlace : Gurgaon PARTNERDate : 5th May, 2006. MEMBERSHIP NO. : 19521

78

As at 31st March, 2006

Schedule

SOURCES OF FUNDS:Shareholders’ Funds:

Share Capital 1 38.34 38.34Reserves and Surplus 2 595.65 562.76

633.99 601.10

Minority Interest - 3.28

Loans: 3Secured 381.00 348.75Unsecured 369.00 195.12

750.00 543.87

Deferred Tax Liability (Net) (Note - B 7) 105.21 103.75

T O T A L 1489.20 1252.00

APPLICATION OF FUNDS:

Fixed Assets 4Gross Block 1310.61 1166.22Less: Depreciation 469.94 413.61

Net Block 840.67 752.61Capital Work in Progress 77.93 84.33Add: Share in Joint Venture - 12.24

918.60 849.18

Goodwill on Consolidation 34.29

Investments 5 0.43 2.73

Current Assets, Loans and Advances: 6

Inventories 419.41 341.53Sundry Debtors 175.14 156.52Cash and Bank Balances 231.47 131.98Other Current Assets 0.21 0.07Loans and Advances 184.37 152.66

1010.60 782.76Less: Current Liabilities and Provisions : 7

Current Liabilities 415.74 383.81Provisions 24.95 33.53

440.69 417.34

Net Current Assets 569.91 365.42

Deferred Revenue Expenditure (Note B 8) 0.26 0.38

T O T A L 1489.20 1252.00SIGNIFICANT ACCOUNTING POLICIES 13AND NOTES ON ACCOUNTS

CONSOLIDATED BALANCE SHEET

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

As per our Report attached ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASFor FRASER & ROSS Chairman & Jt. Managing Director M.R.B. PUNJAChartered Accountants Managing Director ROBERT STEINMETZ

RAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectorsM.K. ANANTHANARAYANAN

Partner HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

79

For the year ended 31st March, 2006

CONSOLIDATED PROFIT & LOSS ACCOUNT

Schedule Year Ended31st March, 2005

Rs. /Crs.

Year Ended31st March, 2006

Rs./Crs.INCOME

Gross Sales 3002.12 2656.81Less: Excise Duty 376.60 2625.52 431.32 2225.49

Add: Share in Joint Venture 4.58 10.86

Other Income 8 1.95 15.002632.05 2251.35

EXPENDITUREManufacturing and Other Expenses 9 2473.80 2065.72(Increase) / Decrease in Work in Process andFinished Goods 10 (74.89) 3.79Interest 11 50.51 42.06

2449.42 2111.57

Profit Before Depreciation, Tax & Exceptional Items 182.63 139.78Depreciation 73.14 56.76Transfer from Revaluation Reserve (0.15) 72.99 (0.15) 56.61

Profit Before Tax & Exceptional Items 109.64 83.17Provision for Tax - Current 25.24 6.34 - Deferred 1.83 13.72 - Fringe Benefit Tax 4.60 -Add. Share in Joint Venture - 31.67 0.03 20.09

Profit After Tax Before Exceptional Items 77.97 63.08Add: Exceptional Items 12 12.53 -Profit After Tax and Exceptional Items 90.50 63.08 Less: Minority Interest 1.56 1.30Net Profit (Including Share in Joint Venture Rs. -0.54 Crores (Rs. –3.75 Crores)) 88.94 61.78Add: Profit brought forward from previous year 135.50 134.21

Transfer from Debenture Redemption Reserve 6.11 10.91230.55 206.90

Deduct : Appropriations :General Reserve 50.00 50.00Debenture Redemption Reserve - 1.73Proposed Dividend 17.25 17.25Dividend Tax 2.42 2.42

69.67 71.40Surplus Carried to Schedule 2 160.88 135.50

Basic & Diluted Earnings Per Share (Face Value of Rs. 10/- each) (Rs.)Before Exceptional Items 19.93 16.11

After Exceptional Items 23.20 16.11

SIGNIFICANT ACCOUNTING POLICIES 13AND NOTES ON ACCOUNTS

As per our Report attached ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASFor FRASER & ROSS Chairman & Jt. Managing Director M.R.B. PUNJAChartered Accountants Managing Director ROBERT STEINMETZ

RAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectorsM.K. ANANTHANARAYANAN

Partner HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

80

ANNEXED TO THE ACCOUNTS

SCHEDULE 1 - SHARE CAPITAL

AUTHORISED

4,80,00,000 Equity Shares of Rs. 10/- each 48.00 48.00

2,00,000 Preference Shares of Rs. 100/- each 2.00 2.0050.00 50.00

ISSUED, SUBSCRIBED AND PAID UP

3,83,37,977 (3,83,37,977) Equity Shares of Rs. 10/- each. 38.33 38.33

Add: Forfeited Shares 0.01 0.01

38.34 38.34

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

SCHEDULES

81

CAPITAL RESERVES

Fixed Assets Revaluation ReserveAs per last Balance Sheet 3.46 2.89Less: Transfer to Profit & Loss Account 0.15 0.15Add: Excess Transfer to Depreciation Reserve made in

earlier years adjusted - 0.723.31 3.46

Share Forfeiture (Rs. 1375/-) - -

Capital RedemptionAs per last Balance Sheet 4.44 4.44

Debenture RedemptionAs per last Balance Sheet 9.95 19.13Add: Transfer from Profit & Loss Account - 1.73Less: Transfer to Profit & Loss Account 6.11 10.91

3.84 9.95Securities PremiumAs per last Balance Sheet 217.46 218.10Less: Adjustment arising on desubsidisation of 0.03 - Joint Venture (Refer Note No. A-2 of Schedule 13)Less: Premium on Redemption of Debentures 0.23 0.67Add: Share in Joint Venture - 0.03

217.20 217.46OTHER RESERVES

Investment Fluctuation ReserveAs per last Balance Sheet 0.84 0.84Less: Transfer to Profit & Loss Account 0.84 -

- 0.84Capital SubsidyAs per last Balance Sheet 0.30 0.30

GeneralAs per last Balance Sheet 191.33 184.38Less: Transfer to Profit & Loss Account - 32.85Less: Impairment in value of Assets adjusted - 10.20Less: Adjustment arising on desubsidisation of Subsidiary (Refer Note No. A-2 of Schedule 13) 0.67 -

190.66 141.33Add: Transfer from Profit & Loss Account 50.00 50.00

240.66 191.33Less: Reduction in Carrying Amount of Investment in Gujarat Perstorp Electronics Ltd (Under Liquidation) 0.52 0.52

240.14 190.81

Surplus as shown in the Profit & Loss Account 160.88 135.50Less: Adjustment arising on desubsidisation of Subsidiary/Joint Venture (Refer Note No. A-2

of Schedule 13) 34.46 -

Surplus carried to Balance Sheet 126.42 135.50

595.65 562.76

SCHEDULE 2 - RESERVES & SURPLUS

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

82

SCHEDULE 3 - LOANS

SECUREDDebentures

30,10,000 - 14.5% Partly Convertible Debentures of Rs. 222/- each 66.82 66.82Less: Converted into Equity Shares to date 27.69 27.69

39.13 39.13Less : Redeemed to date 39.13 33.15

- 5.98

10,00,000 - 11.25% Non Convertible Debentures of Rs. 100/- each 10.00 10.00Less: Redeemed to date 3.33 -

6.67 10.00

6.67 15.98Term Loans

From International Finance Corporation - Foreign Currency 67.87 84.82

- Rupee Loan 53.58 121.45 64.30 149.12

From Banks :

ICICI - Foreign Currency 47.35 46.27

State Bank of India 100.00 -

From Institutions :

G E Capital Services India 22.50 28.48

Other Loans :

Banks - Cash Credit 71.77 97.64

Sales Tax Loan 11.26 11.26

374.33 332.77

381.00 348.75

UNSECUREDCommercial Paper 70.00 150.00Dealers' Security Deposits - 0.06Short Term Loans - From Banks 224.00 45.06

- From Others 75.00 -

369.00 195.12

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

83

NOTES: SECURED LOANS

1. 10,00,000 -11.25% Non Convertible Debentures of Rs.100 each issued at par and allotted on 26th June, 2002 are redeemable inthree equal annual instalments at the end of 3rd, 4th and 5th year from the date of allotment of debentures. The above debentures andinterest payable thereon are secured by a pari passu first charge on the Parent Company’s land and premises at Chalakudy, KeralaState and at village Limda, Gujarat State together with the Factory Buildings, Plant & Machinery and Equipments, both present andfuture.

2. Loan from International Finance Corporation is secured by :

• A pari passu first charge along with other lenders on the Parent Company’s land at Chalakudy, Kerala State and at villageLimda, Gujarat State together with the Factory Buildings, Plant & Machinery and Equipments, both present and future.

• A first and fixed charge on the Parent Company’s land and premises situated at Gurgaon, Haryana State together with allexisting and future buildings, erections and structures.

• A pari passu first charge on all the moveable assets except current assets of the Parent Company.

• A second charge on all the current assets of the Parent Company.

3. External Commercial Borrowing from ICICI Bank Limited, Singapore is secured by :

• A pari passu first charge along with other lenders on the Parent Company’s land at Chalakudy, Kerala State and at villageLimda, Gujarat State together with the Factory Buildings, Plant & Machinery and Equipments both present and future.

• A pari passu first charge on all the moveable assets except current assets at Chalakudy, Kerala State and at village Limda,Gujarat State.

4. Loan from State Bank of India is secured by :

• A pari passu first charge along with other lenders on the Parent Company’s land at Chalakudy, Kerala State and at villageLimda, Gujarat State together with the Factory Buildings, Plant & Machinery and Equipments, both present and future.

• A second charge on all the current assets of the Parent Company.

5. Loan from GE Capital Services India is secured by :

• A pari passu first charge along with other lenders on the Parent Company’s land at Chalakudy, Kerala State and at villageLimda, Gujarat State together with the Factory Buildings, Plant & Machinery and Equipments, both present and future.

• A pari passu first charge on all the moveable assets except current assets at Chalakudy, Kerala State and at village Limda,Gujarat State.

6. Cash Credits and Guarantees from Banks are secured by Hypothecation of Raw materials, Work-in-Process, Stocks, Stores andBook Debts ranking in priority to the charge created in respect of the IFC Loan and also by second charge on the Parent Company’sland at Chalakudy, Kerala State, at Village Limda, Gujarat State and on part of the Land at Ranjangaon in the State of Maharashtratogether with the Factory Buildings, Plant & Machinery and Equipments, both present and future.

7. The Parent Company has availed interest free Sales Tax Loan from Gujarat State Government amounting to Rs.11.26 Crores as on31st March, 2006. These loans are secured by a pari passu charge on the entire fixed assets of the Parent Company, both presentand future situated at Village Limda in Gujarat State. The said loan is repayable in six equal annual instalments on the expiry of 14years from the commencement of commercial production i.e. 31st May, 2006.

8. Loans, other than debentures, include Rs. 84.60 Crores (Rs. 33.39 Crores) repayable within one year.

84

SCHEDULE 4 - FIXED ASSETS

(a) Represents proportionate lease premium Rs. 0.02 Crores (Rs. 0.04 Crores) written off.

(b) Includes Rs. 1.31 Crores (Rs.1.31 Crores) value of assets purchased under Hire Purchase Scheme acquired before 01.04.2001.

(c) Includes amount added on revaluation in 1985-86 and 1986-87 - Rs. 22.78 Crores.

(d) Includes Amount removed towards cessation of Subsidiary Gross Block Rs. 17.33 Crores and towards cessation of Joint Venture Gross

Block Rs. 0.46 Crores.

Land 7.57 - 0.18 7.39 - - 7.39 7.57(c) (c)

Leasehold Land 2.05 - 0.02 2.03 - - 2.03 2.05(a)

Buildings 153.58 13.56 2.99 164.15 4.58 34.91 129.24 121.63(c) (c)

Plant & Machinery 873.29 135.15 13.53 994.91 53.33 366.73 628.18 546.88(c) (c)

Electrical Installation 32.79 2.45 0.36 34.88 1.64 16.25 18.63 17.82

Furniture, Fixtures 45.54 6.63 0.75 51.42 3.91 23.59 27.83 25.18& OfficeEquipmentsVehicles 29.66 5.83 3.09 32.40 3.95 13.53 18.87 19.00

(b) (b)

Intangible Assets 9.13 2.17 - 11.30 2.08 4.27 7.03 6.95Assets under HirePurchase acquiredafter 01.04.2001 :-Vehicles 12.15 - 0.02 12.13 3.64 10.66 1.47 5.11

1,165.76 165.79 20.94 1,310.61 73.13 469.94 840.67 752.19

Add: Share in Joint Venture 0.46 0.00 0.46 0.00 0.01 - - 0.42

1,166.22 165.79 21.40 1,310.61 73.14 469.94 840.67 752.61(d)

Previous Year 999.96 180.23 13.97 1,166.22 56.76 413.61 752.61 656.67

GROSS BLOCK DEPRECIATION NET BLOCK

Descriptionof Assets

As at31st March,

2005Rs./Crs.

Additions

Rs./Crs.

Deductions

Rs./Crs.

To date

Rs./Crs.

As at31st March,

2006Rs./Crs.

For the year

Rs./Crs.

As at31st March,

2006Rs./Crs.

As at31st March,

2005Rs./Crs.

85

SCHEDULE 5 - INVESTMENTS

LONG TERM :

TRADE (FULLY PAID)

QUOTEDEquity Shares of Rs.10/- each in Companies :9,99,515 Shares in Raunaq Finance Ltd. 1.00 1.001,67,150 Shares in Apollo Tubes Ltd. 0.02 0.0216,394 Shares In Bharat Gears Ltd. 0.04 0.0451,80,000 Equity Shares in Gujarat Perstorp Electronics Ltd. of Re. 1/- each - * - *

1.06 1.06

UNQUOTED5,000 Shares in Apollo Tyres Employees MultipurposeCo-operative Society Limited of Rs.100/- each 0.05 0.052,30,000 8% Optionally Convertible Debentures of Apollo International Ltd.of Rs. 100/- each - 2.30

NON TRADE (FULLY PAID)

CURRENT:1,71,529 Units of Unit Scheme 2002 (Income) of Unit Trust of India # 0.10 0.10

1.21 3.51

Less : Provision for Diminution / Reduction in the Value of Investments 0.78 0.780.43 2.73

Cost / Book value of Quoted Investments ( Net of Provision for Diminution /Reduction in the Value of Investments ) 0.28 0.28Market Price of Quoted Investments 1.07 1.02# Repurchase Price of Units 0.23 0.16

* Net of Company's share in negative profits of Gujarat Perstorp Electronics Ltd (under liquidation).

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

86

CURRENT ASSETS

Inventories : @Raw Materials 192.12 196.38Stores and Spares 27.22 22.59Work-in-Process 29.41 23.35Finished Goods 170.66 87.98

419.41 330.30Add: Share in Joint Venture* - 11.23

419.41 341.53Sundry Debtors

Over Six Months - UnsecuredConsidered Good 3.05 5.43Considered Doubtful 3.61 5.01

Others - Unsecured & Good 172.09 151.09178.75 161.53

Less: Provision for Doubtful Debts 3.61 5.01175.14 156.52

Cash and Bank BalancesCash and Cheques on hand 43.46 34.49Remittances in Transit 25.25 28.92Add: Share in Joint Venture - 0.03

With Scheduled Banks :Current Accounts 25.66 29.36Dividend Accounts 1.65 1.91Deposit Accounts** 135.45 25.61Add: Share in Joint Venture - 11.66

231.47 131.98Other Current Assets

Income Accrued on Investments 0.21 0.02Add: Share in Joint Venture - 0.05

0.21 0.07* Includes stock in transit Nil (Rs. 0.61 Crores).** Includes Rs.13.90 Crores (Rs.13.25 Crores) pledged with a bank against which working capital loan

has been availed by Apollo Finance Ltd.@ Includes stock in transit.

SCHEDULE 6 - CURRENT ASSETS, LOANS AND ADVANCES

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

LOANS AND ADVANCES - UNSECURED

Advances recoverable in cash or in kind

or for value to be received

Considered Good* 151.80 111.08

Considered Doubtful - 1.65

151.80 112.73

Less: Provision for Doubtful Advances - 1.65

151.80 111.08

Add: Share in Joint Venture - 0.21

151.80 111.29

Advance Tax 218.14 204.27

Less: Provision for Taxation 185.58 163.48

Add: Share in Joint Venture (Net of Provision) - 32.56 0.25 41.04

Balance with Customs, Port Trust etc. 0.01 0.33

184.37 152.66

1,010.60 782.76

* Includes Rs. 3.14 Crores Pre acquisition Expenditure against Investment in Dunlop Tyres International Pty. Ltd., South Africa.

87

CURRENT LIABILITIES

Sundry Creditors:Due to Small Scale and Ancillary Undertakings 0.64 0.64Others* 339.43 327.86

Acceptances 66.49 44.72Interest accrued but not due 6.92 5.84**Investor Education and Protection Fund shall be credited by the following amounts namely:-

Unpaid Debenture Redemption Amount 0.34 0.70Unpaid Interest on Debentures 0.13 0.24Unpaid Matured Deposits and Interest Thereon 0.13 0.18Unpaid Dividend 1.66 1.92

Add: Share in Joint Venture 1.71

415.74 383.81

PROVISIONS**Dividend Tax 2.42 2.42Proposed Dividend on Equity Shares 17.25 17.25Gratuity, Leave Encashment & Superannuation 5.28 13.86

24.95 33.53440.69 417.34

SCHEDULE 7 - CURRENT LIABILITIES AND PROVISIONS

* Includes Liability towards Hire Purchase / Financial Lease Rs. 0.50 Crores (Rs. 4.62 Crores)- repayable within one year Rs. 0.50Crores (Rs. 4.12 Crores).

**1. There are no amounts due and outstanding as at Balance Sheet Date to be credited to the Investor Education & Protection Fund.

2. Other unpaid amounts represent warrants / cheques issued to the Debentureholders / Depositors / Shareholders, as the case maybe, which remain unpresented to the Bankers as on 31st March, 2006.

As at31st March, 2005

Rs./Crs.

As at31st March, 2006

Rs./Crs.

Income from Investments*- Trade Investments - -- Others :

Income from Mutual Funds - 0.07- 0.07

Profit on Sale of Assets (Net) - 6.24Profit / (Loss) on Sale of Investments - - (16.22)Add: Transfer From Provision for Diminution in

value of Investments - - 23.39 7.17Interest Received* 0.75 0.67

Miscellaneous Receipts* 1.20 0.83

1.95 14.98

Add: Share in Joint Venture - 0.02

1.95 15.00

* Tax Deducted at Source 0.17 0.14

SCHEDULE 8 - OTHER INCOME

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

88

MATERIALSRaw Materials Consumed* 1,850.34 1,431.09Less: Scrap Recoveries 6.18 5.72

1,844.16 1,425.37EMPLOYEES

Salaries, Wages and Bonus** 130.07 113.77Contribution to Provident and Other Funds 9.64 8.95Welfare Expenses 23.87 20.85Add: Share in Joint Venture 0.96 1.36

MANUFACTURING, ADMINISTRATIVE AND SELLINGPurchase of Finished Goods 78.77 87.19Add: Share in Joint Venture 0.63 79.40 19.66 106.85Stores and Spares Consumed 24.75 21.77Power and Fuel 121.82 114.57Conversion Charges 2.39 4.10Repairs and Maintenance- Machinery 4.95 3.99- Buildings 0.97 0.72- Others 8.77 7.59Rent*** 7.74 5.94Insurance 7.65 5.83Rates and Taxes 9.89 7.74Directors’ Sitting Fees 0.11 0.03Loss on Sale of Assets (Net) 0.66 -Travelling, Conveyance and Vehicle Expenses 26.22 24.56Postage, Telex, Telephone and Stationery 6.62 6.46Freight & Forwarding 62.15 48.73Commission to Selling Agents 3.46 2.88Sales Promotion Expenses 43.89 66.66Advertisement & Publicity 10.42 18.14Research and Development 8.33 6.84Bank Charges 3.88 3.83Provision for Doubtful Debts / Advances - 5.03Bad Debts/Advances Written off 1.42 Less: Transferred from Provision 1.42 - 2.73Legal & Professional Expenses 4.72 3.93Miscellaneous Expenses**** 24.65 21.40

Add: Share of Other Expenses in Joint Venture***** 1.66 5.10

2,473.80 2,065.72

SCHEDULE 9 - MANUFACTURING & OTHER EXPENSES

* Net of Foreign Exchange Fluctuation Gain of Rs. 0.81 Crores (Rs. 2.45 Crores).** Includes VRS payments amortised during the year of Rs. 0.25 Crores (Rs. 1.66 Crores).

*** Net of Rent Receipts of Rs. 1.43 Crores (TDS on Rent Received Rs. 0.32 Crores) (Rs. 1.12 Crores, TDS - Rs. 0.23 Crores).**** Net of Foreign Exchange Fluctuation Gain of Rs. 0.18 Crores (Rs. 0.24 Crores).

***** Net of Foreign Exchange Fluctuation Gain Nil (Rs. 0.27 Crores).

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

89

OPENING STOCKWork in Process 23.35 18.28Finished Goods 87.98 117.77

Add: Share in Joint Venture 10.62 -

121.95 136.05

Less:

CLOSING STOCKWork in Process 29.41 23.35Finished Goods 170.66 87.98

Add: Share in Joint Venture 8.71* 10.62

208.78 121.95

(Increase)/Decrease in Finished Goods (86.83) 14.10

Excise Duty on Increase / (Decrease) of Finished Goods 11.94 (10.31)

(74.89) 3.79

* Represents closing stock as on the effective date of disinvestment.

SCHEDULE 10 - (INCREASE) / DECREASE IN WORK IN PROCESS AND FINISHED GOODS

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

SCHEDULE 11 - INTEREST

Fixed Loans * 18.02 12.71

Debentures 1.24 3.49

Others # * 31.30 26.80

50.56 43.00

Add: Share in Joint Venture** (0.05) (0.94)

50.51 42.06

# Net of Interest Earned Rs. 3.29 Crores (Rs. 1.49 Crores). Tax Deducted at source Rs. 0.46 Crores (Rs. 0.19 Crores).* Including Foreign Exchange Fluctuation Loss of Rs. 1.16 Crores (Rs. 4.92 Crores).** Share in Joint Venture includes Interest Earned of Rs. 0.05 Crores (Rs. 0.98 Crores). Tax Deducted at source Nil (Rs. 0.25 Crores).

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

90

Additional Excise Duty pertaining to earlier years - Refundable - 47.66Tax Provision on above no longer required written back - (14.81)Transfer from General Reserve - (32.85)

- -

Foreign Exchange Fluctuation loss attributable to investment in a (5.09) -foreign subsidiary company (Note - B 3)

Profit on Sale of Investments in Shares of Subsidiary Company 10.75 -PTL Enterprises Ltd

Profit on Sale of Investment in Shares of Joint Venture Company 6.87 -Michelin Apollo Tyres (P) Ltd (Net of transfer from InvestmentFluctuation Reserve - Rs. 0.84 Crores)

12.53 -

SCHEDULE 12 - EXCEPTIONAL ITEMS

Year Ended31st March, 2005

Rs./Crs.

Year Ended31st March, 2006

Rs./Crs.

91

SCHEDULE 13 - SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

A. SIGNIFICANT ACCOUNTING POLICIES :

The significant accounting policies adopted in preparation of these accounts are as follows:

1. BASIS OF PREPARATION

The consolidated financial statements have been prepared under historical cost convention (except revaluation of certain fixedassets) and applicable mandatory Accounting Standards.

3. FIXED ASSETS

(a) Fixed Assets are stated at cost as adjusted by revaluation of certain Land, Buildings and Plant and Machineries based onthe then replacement cost as determined by approved independent valuer in 1986 and 1987 less depreciation. All costsrelating to the acquisition and installation of fixed assets are capitalised and include finance cost on borrowed fundsattributable to acquisition of fixed assets for the period upto the date of commencement of production, rollover charges onforward exchange contracts, and adjustments arising from exchange rate variations and receipts on cancellation of foreignexchange contracts relating to specific borrowing attributable to fixed assets.

(b) Fixed Assets taken on lease before 1st April, 2001, other than land, are not treated as Assets of the Company and the leaserentals are charged off to revenue over the period of lease.

(c) Fixed Assets taken on Hire Purchase are capitalised and depreciation has been provided on such assets, while the hirecharges have been charged to revenue.

2. BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of Apollo Tyres Ltd. and the following Companies:

Name of the Company Relationship Country of Proportion of Proportion ofIncorporation Ownership Ownership

31.03.2006 31.03.2005

PTL Enterprises Ltd. (ceased to be a subsidiaryduring the year) Subsidiary India 73.59%Gujarat Perstorp Electronics Ltd.(Under Liquidation) Associate India 37.45% 37.45%Michelin Apollo Tyres Pvt. Ltd. (ceased to bea joint venture during the year) Joint Venture India 49.00%Apollo (Mauritius) Holdings Pvt. Ltd. Subsidiary Mauritius 100%Apollo Automotive Tyres Ltd. Subsidiary India 100%Apollo Radial Tyres Ltd. Subsidiary India 100%Holdings through subsidiaryApollo (South Africa) HoldingsPty Ltd. (held 100% by Apollo(Mauritius) Holdings Pvt Ltd.) Sub-subsidiary South Africa 100%

The consolidated financial statements have been prepared in accordance with the principles and procedures for the preparation andpresentation of the consolidated financial statements as laid down in Accounting Standard (AS) 21 “ Consolidated Financial Statements”.

Investment in Associates is accounted for in the consolidated financial statements under the “Equity Method” as laid down in AccountingStandard (AS) 23. The carrying amount of investment in the Associate Company has been brought down to Nil since the Company’sshare in the post acquisition loss in the Associate exceeds the carrying amount of investment. The corresponding adjustment in thisregard has been made in the General Reserve.

Interest in a Joint Venture is accounted for in the consolidated financial statements under “Proportionate Consolidation” as laid downin Accounting standard (AS) 27.

During the year Company has divested its share holding in PTL Enterprises Ltd, a subsidiary company and in Michelin Apollo Tyres(Pvt) Ltd, a joint venture with Michelin Group. The Results of these companies up to the effective date of disinvestment have beenconsidered in the Consolidated Accounts of the Company .

In respect of the foreign operations, the unaudited financial statements for the year ended March 31st, 2006 were converted intoIndian currency as per AS- 11 “The effect of changes in Foreign Exchange Rates”.

92

(d) The expenditure incurred by the Company on acquisition and implementation of Software System / Development cost of newproduct is recognised as an Intangible asset.

4. BORROWING COSTSBorrowing Costs are capitalised as part of qualifying asset when it is possible that they will result in future economic benefits. Otherborrowing costs are expensed.

5. INVESTMENTSLong Term investments are stated at cost and provision for diminution is made if the decline in value is other than temporary innature. Current investments are stated at lower of cost and fair value determined on the basis of each category of investments.

6. INVENTORIESInventories are valued at the lower of cost and net realisable value. The cost comprises of cost of purchase, cost of conversion andother costs including appropriate production overheads incurred in bringing such inventories to their present location.In case of Raw materials and Stores and Spares the cost (Net of Cenvat Credits where applicable) is determined on a movingweighted average basis.

7. FOREIGN CURRENCY TRANSACTIONSForeign Currency Transactions are recorded at rates of exchange prevailing on the date of transaction. The transaction outstandingat the year-end are translated at the rate of exchange prevailing at the year-end and profit or loss other than that relating to fixedassets acquired from outside India is recognised in Profit & Loss Account. The premium or discount arising at the inception of theforeign exchange contract, other than that relating to fixed assets acquired from outside India are amortised as expense or incomeover the life of the contract. Exchange difference on such contracts are recognised in the Profit & Loss Account except in respect ofthose relating to fixed assets acquired from outside India.

8. SALESGross Sales are inclusive of excise duty and are net of trade discounts/sales returns.

9. EXPORT INCENTIVEExport Incentive in the form of Advance Licences / credit earned under Duty Entitlement Pass Book Scheme are treated asincome in the year of export at the estimated realisable value / actual credit earned on exports made during the year and arecredited to the Raw Material Consumption Account.

10. DEPRECIATIONDepreciation on fixed assets is provided on the straight line basis at the rates specified in Schedule XIV of the Companies Act,1956, classifying certain Plant and Machinery as Continuous Process Plant on technical evaluation except that on certainvehicles depreciation is provided at 30%. Additional depreciation consequent on the enhancement in the value of fixed assetson the revaluation is adjusted in the fixed assets revaluation reserve account. Leasehold land is amortised over the period oflease. In respect of assets impaired, the revised carrying value is depreciated over its remaining useful life. Intangible Assetsare amortised over the estimated useful life of the asset.

11. RESEARCH AND DEVELOPMENT EXPENSESRevenue expenditure on Research and Development is charged to Profit and Loss Account and Capital expenditure on Researchand Development is included in fixed assets under the appropriate heads.

12. RETIREMENT BENEFITS

• Liability of gratuity to employees determined on the basis of actuarial valuation. In case of parent company, Gratuity Liability ason Balance Sheet date is funded with the Life Insurance Corporation of India and the contribution thereof is absorbed orprovided for in the Accounts.

• Liability for leave encashment benefit determined on the basis of actuarial valuation as on the balance sheet date is provided forin the accounts.

• Fixed contributions to Provident Fund, Employees Pension Fund, Superannuation Fund and Cost of other benefits are recognisedin the Accounts on actual cost to the Company.

13. VOLUNTARY RETIREMENT PAYMENTSPayments under Voluntary Retirement Scheme are being charged to Profit and Loss Account over a period of three years.

14. TAXES ON INCOMECurrent year’s tax is determined in accordance with the Income Tax Act, 1961. Deferred Tax is recognised, subject to theconsideration of prudence, on timing differences.

93

B. NOTES ON ACCOUNTS:

1. CONTINGENT LIABILITIES

P A R T I C U L A R S 2005-06 2004-05Rs./Crs. Rs./Crs.

Sales Tax 13.21 16.46Income Tax-Disputed Demands under Appeal 21.10 22.48Claims not acknowledged as debts – Employee Related - 0.43

– Property Disputes 0.21 0.21– Others 0.06 0.07

Corporate Guarantees/Provision of Security 13.90 13.25Guarantees given by bankers on behalf of the Company* 19.86 19.45Custom Duty 0.69 0.13Land Acquisition Cases - 0.07Excise Duty** 0.70 3.13

*Share in Joint Venture Nil (Rs. 0.01 Crores)**Excludes demands of Rs. 10.88 Crores (Rs. 10.55 Crores) raised on one of the units of the Company relating to the issueswhich have been decided by the appellate authority in Company’s favour in appeals pertaining to another unit of the Company.

2. Capital Expenditure Commitments not provided for 56.76 68.25(including share in joint venture Nil (Rs. 9.96 Crores))

3. During the year Company had entered into an agreement to acquire 100% share holding in Dunlop Tyres International (Pty) Ltd.

in South Africa alongwith some of its subsidiaries / associates for a consideration of Rand 398 Million (approximately Rs. 290

Crores), including deferred consideration of Rand 60 Million (approximately Rs. 43 Crores) payable after one year. The company

has since concluded the acquisition process.

4. Borrowing Costs capitalised during the year 0.47 1.24

5. The Company has taken on operating lease the plant of PTL Enterprises Ltd. for a period of one year, which is renewable. The lease

rent of Rs. 10.00 Crores (Rs. 7.50 Crores) paid as per the lease agreement has been charged to Profit and Loss account.

6. Research and Development Expenses comprise of the following:

2005-06 2004-05Rs./Crs. Rs./Crs.

Salary, Wages & Other Benefits 3.20 3.71Travelling & Conveyance 0.91 0.84Others 4.22 2.29

T O T A L 8.33 6.84

P A R T I C U L A R S

7. The components of Deferred Tax Liability (Net) are as follows :

2005-06 2004-05Rs./Crs. Rs./Crs.

Deferred Tax Liability on timing differences arising on :

Depreciation 113.70 105.94

Premium on Redemption of Debentures - 0.03

Sub Total (A) 113.70 105.97

Deferred Tax Assets on timing differences arising on :

Payment under Voluntary Retirement Scheme 0.14 0.79

Others 8.35 1.47

Sub Total (B) 8.49 2.26

Share in Joint Venture Deferred Tax Liability-

Depreciation (C) - 0.04

Net Deferred Tax Liability (A-B+C) 105.21 103.75

P A R T I C U L A R S

94

Payment Under VRS

8. Deferred Revenue Expenditure :

2005-06 2004-05Rs./Crs. Rs./Crs.

Opening Balance 0.38 1.65Add: Payment During the year 0.13 0.39

T O T A L 0.51 2.04

Less: Amortised during the year 0.25 1.66

Closing Balance 0.26 0.38

9. Earning Per Share (EPS) – The numerator and denominator used to calculate Basic and Diluted Earning Per Share :

A) Before Exceptional Items:

P A R T I C U L A R S 2005-06 2004-05

Profit attributable to the equity shareholders used as numerator(Rs. Crs) - (A) 76.41 61.78

The weighted average number of equity shares outstandingduring the year used as denominator - (B) 3,83,37,977 3,83,37,977

Basic / Diluted earning per share (Rs.) - (A) / (B) 19.93 16.11(Face Value of Rs. 10 each)

B) After Exceptional Items:

P A R T I C U L A R S 2005-06 2004-05

Profit attributable to the equity shareholders used as numerator(Rs. Crs) - (A) 88.94 61.78

The weighted average number of equity shares outstandingduring the year used as denominator - (B) 3,83,37,977 3,83,37,977

Basic / Diluted earning per share (Rs.) - (A) / (B) 23.20 16.11(Face Value of Rs. 10 each)

10. The Company’s operations comprise of only one segment – Tyres, Tubes and Flaps and therefore, there are no other business /

geographical segments to be reported as required under Accounting Standard (AS-17) “Segment Reporting” issued by The Institute

of Chartered Accountants of India.

11. Disclosures relating to assets taken on Hire purchase / Financial Lease after 1-4-2001:

a) The Company has acquired vehicles under Hire Purchase with respective underlying assets as security.

b) Reconciliation between total minimum lease payments and their present value:

2005-06 2004-05Rs./Crs. Rs./Crs.

Total minimum lease payments 0.51 5.01Less: Future liability on interest account 0.01 0.39Present value of lease payments 0.50 4.62

P A R T I C U L A R S

P A R T I C U L A R S TotalMinimum

HP Payment*

PresentValue of

HP Payment

TotalMinimum

HP Payment

PresentValue of

HP Payment

Not later than one year 0.51 0.50 4.50 4.12

Later than one year and not later than five years Nil Nil 5.01 0.50

Later than five years Nil Nil Nil Nil

*Excluding Share in Joint Venture Nil (Rs. 0.26 Crores)

2005-06 2004-05Rs./Crs. Rs./Crs.

c) Year wise future minimum lease rental payments :

95

12. A) The following Forward Exchange Contracts entered into by the Company are outstanding as on 31st March, 2006:

Currency Amount Buy/Sell Cross Currency

US Dollar US$ 8,000,000/- Buy Rupees

B) Premium on Forward Exchange Contracts deferred to be recognised in subsequent accounting periods – Rs. 0.76 Crores

(Rs. 0.90 Crores).

13. Disclosure of Related Party Transaction in accordance with Accounting Standard (AS-18) “Related Party Disclosures” issued by

The Institute of Chartered Accountants of India.

a) Name of the Related Parties :

PARTICULARS 2005-06 2004-05

Associates Apollo International Ltd. Apollo International Ltd.

Encorp E Services Ltd. Encorp E Services Ltd.

Landmark Farms & Housing (P) Ltd. Landmark Farms & Housing (P) Ltd.

Sunlife Tradelinks (P) Ltd. Sunlife Tradelinks (P) Ltd.

Travel Tracks (P) Ltd. Travel Tracks (P) Ltd.

Key Management Personnel Mr. O. S. Kanwar Mr. O. S. Kanwar

Mr. Neeraj Kanwar Mr. Neeraj Kanwar

Mr. U. S. Oberoi Mr. U. S. Oberoi

Mr. Sunam Sarkar Mr. Sunam Sarkar

Relative of Key Managerial Mr. Raaja Kanwar Mr. Raaja Kanwar

Personnel

2005-06

ParticularsAssociates

KeyManagement

Personnel

Relatives of KeyManagement

PersonnelTotal

Rs./Crs. Rs./Crs. Rs./Crs. Rs./Crs.

Volume of Transactions:

Sales 268.58 268.58Reimbursement of Expenses (0.03) (0.03)Managerial Remuneration 7.17 7.17Rent Paid 2.24 2.24Purchases 0.01 0.01Travelling Expenses 4.69 4.69Rent Received (0.08) (0.08)Conference Expenses 5.20 5.20Provision for Diminution in value of Investment 0.26 0.26Security Deposit Paid 1.80 1.80Dividend Paid 0.79 0.79Claims Accepted 0.46 0.46

Total 283.92 7.17 - 291.09

Amount Outstanding Dr./(Cr) 37.60 37.60

b) Transactions with Related Parties:

96

2004-05

ParticularsAssociates

KeyManagement

Personnel

Relatives of KeyManagement

PersonnelTotal

Rs./Crs. Rs./Crs. Rs./Crs. Rs./Crs.

Volume of Transactions:

Sales 210.20 210.20

DEPB Licences Purchased 0.19 0.19

Reimbursement of Expenses (0.06) (0.06)

Managerial Remuneration 5.71 5.71

Travelling Expenses 4.29 4.29

Rent Received (0.28) (0.28)

Conference Expenses 3.18 3.18

Payment towards Current Liability 7.26 7.26

Security Deposit paid 3.47 3.47

Dividend Paid 0.79 0.79

Claims Accepted 0.67 0.67

Total 229.71 5.71 235.42

Amount Outstanding Dr./(Cr) 29.14 29.14

14. Previous Year's figures have been regrouped wherever necessary to conform to the classifications for the current year.Previous Year's figures are given in brackets.

Signatures to Schedules 1 to 13 which form integral part of Accounts.

As per our Report attached ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASFor FRASER & ROSS Chairman & Jt. Managing Director M.R.B. PUNJAChartered Accountants Managing Director ROBERT STEINMETZ

RAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectorsM.K. ANANTHANARAYANAN

Partner HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

97

CONSOLIDATED CASH - FLOW STATEMENT

Rs./Crs.

2005-06 2004-05

A CASH FLOW FROM OPERATING ACTIVITIES

(i) PROFIT AFTER TAX 88.94 61.78

ADD: - PROVISION FOR TAX 31.67 5.28

- MINORITY INTEREST 1.56 1.30

NET PROFIT BEFORE TAX & EXCEPTIONAL ITEMS 122.17 68.36

ADD: - DEPRECIATION 72.99 56.61

- LEASE RENT ON LEASEHOLD LAND 0.02 0.04

- TRANSFER FROM GENERAL RESERVE/SHARE PREMIUM (0.70) (32.85)

- (PROFIT) / LOSS ON SALE OF ASSETS 0.66 (6.24)

- (PROFIT) / LOSS ON SALE OF INVESTMENTS (16.78) (7.17)

- INTEREST RECEIVED (0.75) (0.69)

- INCOME FROM INVESTMENTS - (0.07)

- REVERSAL OF PROVISION FOR DOUBTFUL ADVANCES (1.42) 5.03

- DEFERRED REVENUE EXPENDITURE AMORTISED NET OF PAYMENT 0.12 1.27

- INTEREST 50.51 42.06

- REINSTATEMENT OF PROVISION WRITTEN BACK IN EARLIER YEAR - 0.01

- TRANSFER FROM INVESTMENT FLUCTUATION RESERVE (0.84)

103.81 58.00

(ii) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 225.98 126.36

ADJUSTMENT FOR

- TRADE & OTHER RECEIVABLE (55.76) (21.53)

- INVENTORIES (77.88) (78.69)

- TRADE PAYABLES 23.00 73.56

(110.64) (26.66)

115.34 99.70

(iii) CASH GENERATED FROM OPERATIONS

- DIRECT TAXES PAID (13.62) (13.62) (6.05) (6.05)

- ADJUSTMENT ARISING ON DISINVESTMENT OF SUBSIDIARY (14.07)

& JOINT VENTURE (NOTE)

(iv) NET CASH FLOW FROM OPERATING ACTIVITIES 87.65 93.65

B CASH FLOW FROM INVESTING ACTIVITIES

- PURCHASE OF FIXED ASSETS (147.15) (210.90)

- SALE OF FIXED ASSETS 3.91 19.08

- PURCHASE OF INVESTMENTS - (2.30)

- SALE OF INVESTMENTS IN SUBSIDIARY & JOINT VENTURE 63.84 21.13

- ADJUSTMENT ARISING ON DISINVESTMENT OF SUBSIDIARY (21.06) -

& JOINT VENTURE (NOTE)

- DIVIDEND RECEIVED - 0.07

- INTEREST RECEIVED 3.95 3.16

NET CASH USED IN INVESTING ACTIVITY (96.51) (169.76)

C CASH FLOW FROM FINANCING ACTIVITY

- LONG TERM BORROWING RECEIVED 100.00 54.40

- REPAYMENTS OF LONG TERM BORROWING (42.24) (36.46)

98

NOTE : The transactions relating to disinvested Subsidiary and Joint Venture (Note A 2) are reflected in the Profit & Loss Account for the year, till the effective date of divestmentbut the Balance Sheet as at 31.03.06 does not reflect the Assets & Liabilities in respect of such entities. To reflect cash flow under each activity correctly the impact of suchexclusion on Cash Flow has been shown as Adjustment arising on Disinvestment of Subsidiary and Joint Venture.

As per our Report attached ONKAR S. KANWAR NEERAJ KANWAR K. JACOB THOMASFor FRASER & ROSS Chairman & Jt. Managing Director M.R.B. PUNJAChartered Accountants Managing Director ROBERT STEINMETZ

RAAJA KANWARDR. S. NARAYANU.S. OBEROIDirectorsM.K. ANANTHANARAYANAN

Partner HARISH BAHADUR P.N. WAHALGurgaon Head-Accounts & Head-Secretarial &5th May, 2006 Taxation Company Secretary

- PAYMENTS OF PREMIUM ON REDEMPTION OF DEBENTURES (0.23) (0.67)

- BANK OVERDRAFT/SHORT TERM FUNDS 148.01 104.46

- DIVIDENDS PAID (19.93) (19.94)

- INTEREST PAID (52.88) (44.21)

- ADJUSTMENT ARISING ON DISINVESTMENT OF SUBSIDIARY

& JOINT VENTURE (NOTE) 0.06 -

NET CASH USED IN FINANCING ACTIVITIES 132.79 57.58

- ADJUSTMENT ARISING ON DISINVESTMENT OF SUBSIDIARY

& JOINT VENTURE IN CASH AND CASH EQUIVALENTS (NOTE) (24.44)

NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS 99.49 (18.53)

CASH & CASH EQUIVALENT AS ON 01.04.2005 (01.04.2004) 131.98 150.51

CASH & CASH EQUIVALENT AS ON 31.03.2006 (31.03.2005) 231.47 131.98

99

Information pertaining to Subsidiary Companies u/s 212 (8) of the Companies Act, 1956

Contents Apollo Apollo Radial Apollo (South Africa)Automotive Tyres Ltd. HoldingsTyres Ltd. (Pty) Ltd.

Share Capital 5.00 5.00 0.00Reserves 0.00 0.00 0.00Total Assets 5.00 5.00 314.13 *Total Liabilities 5.00 5.00 314.13Details of Investments 0.00 0.00 0.00Turnover (including other income) 0.00 0.00 0.00Profit / (Loss) before Taxation (0.41) (0.41) 0.00Provision for Taxation 0.00 0.00 0.00Profit after Taxation (0.41) (0.41) 0.00Proposed Dividend 0.00 0.00 0.00

*Includes Pre-acquisition Expenditure against Investment in Dunlop Tyres International Pty. Ltd., South Africa

(Rs. Lacs)