COMPANY PROFILE Incorporated in 1973, FALCON TYRES located in Mysore, Karnataka State, India, is a part of Mr. P.K.

Ruia Group, Falcon Manufactures and markets a wide range of NylonB i a s P l y T y r e s ( w h i c h i n c l u d e s ) L o w a s p e c t ratio of varying Load Index, Uni-Directional tyres, Tube less 2 tyres (Scooter) and butyl tubes for two and t h r e e wheelers, passenger cars, jeep, light commercial vehicles and farm vehicles, under DUNLOP brand for the domestic market and FALCON brand for overseas market.Falcon is the preferred choice of all leading vehicle manufacturers.In India like Bajaj Auto Yamaha Motors Escorts Hero Honda Motors Majestic Auto LML Kinetic Engineering Kinetic Motor Company Royal Enfield MotorsFalcon tyres Limited global operation include exporting tyres to Bangladesh, SriLanka, Peru, Nepal, European countries, etc.Falcon tyres meets ISO, BIS, JIS and T & RA AIS 044 and ETRTO standards wherever applicable. Falcons R & D center is engaged in upgrading the product performance,quality and introduction of new products. Falcons aim is to give satisfaction to itscustomers by offering High quality and Cost effective Tyres and Tubes. Padmashree institute of management and sciences Page 12

Quality Accreditations Dot Marking for all 2 & 3 wheeler sizes for export to USA. ECE Marking for Export to European countries. DGS & D Certification for all 2 & 3 Wheeler sizes for supply to Governmentorganizations. Falcon has got ISO 9001:2000 & TS 16949 : 2002The company has also received Certificate for ISO 14001 : 2004 and OHSAS18001 : 1999 from M/s. TUV SUDDEUTSCHLAND INDIA PVT. LTD., during thefinancial year.The Company supplies to al the major OEMs directly from the factory. TheReplacement Market is cater ed to through the C & F Agents established all over thec o u n t r y . T h e E x p o r t m a r k e t i s d i r e c t l y h a n d l e d f r o m t h e f a c t o r y a t M y s o r e . T h e Companys brand DUNLOP has enabled the company to withstand the severe cutthroat competition from other tyre companies to a great extent. A) Companys Philosophy on Corporate Governance: The company believes in the philosophy of continuous i m p r o v e m e n t i n a l l facets of its operation. Budgets, investment proposal significant developments are placed before the Board. Committees such as Audit. Share Transfer, Remuneration andInvestors Grievances Committee meet regularly to consider aspects relevant to eachcommittee. The Companys existing practice and policies are in conformity with ther e q u i r e m e n t s s t i p u l a t e d b y S e c u r i t i e s a n d E x c h a n g e B o a r d s o f I n d i a ( S E B I ) . T h e Company has committed itself to continue providing the best service to its investors a n d a l s o t o instill pride of the long term association with the Company a m o n g i t s members.S E B I r e v i s e d t h e C l a u s e 4 9 o f t h e L i s t i n g a g r e e m e n t t h a t d e a l s w i t h t h e C o r p o r a t e Governance and made the same applicable from 1 st January, 2006. The company has a l r e a d y s t a r t e d i m p l e m e n t i n g t h e r e v i s e d p r o v i s i o n s o f C l a u s e 4 9 . T h e B o a r d s h a s adopted a code of Conduct and made it applicable to all the members of the Board and Padmashree institute of management and sciences Page 13

to all General Managers. The Company has also posted the Code of Conduct on itswebsite. B) Board of Directors In terms of the Companys Corporate Governance Policy, all statutory and other s i g n i f i c a n t a n d m a t e r i a l i n f o r m a t i o n a r e p l a c e d b e f o r e t h e B o a r d o f e n a b l e i t t o discharge its responsibilities of strategic supervision of the Company and as trustees of stake holders.The Board has adopted a Code of Conduct for Directors and all the GeneralManagers and above, and a declaration has been obtained from the Managing Director about its Compliance.T h e B o a r d m e e t s atleast once in a quarter to review the C o m p a n y s performance and financial results and more often, if considered necessary, to transactother business.The Board of Directors of FTL consists of 1 . M r . P . K . R u i a 2 . M r . A . Sadasivam3.Mr. Prakash .M. Nene4.Mr. S. Badrinathan5.Mr. Tarun Gandhi6.Mr. Ambuj Kumar J a i n The Managing Director of FTL is Mr. A. Sadasivam Padmashree institute of management and sciences Page 14

C. Audit Committee The Audit Committee is headed by Mr. P.M. Nene who is the Chairman of thecommittee. There are two members Mr. S. Badrinathan and Mr. Ravindra Pal Bhatia.Mr. S. Badrinarayanan is the Secretary of the Committee.The functions of the committee are given below:a)Review the Companys financial reporting process. b ) R e v i e w o f h a l f y e a r l y a n d annual financial statements, before submission to t h e Board.c)Review with External Auditors, on areas of concern.d)Recommending appointment of External Auditor and fixation of audit fees.e ) T o e n s u e c o m p l i a n c e o f i n t e r n a l c o n t r o l s y s t e m a n d a c t i o n t a k e n o n i n t e r n a l a u d i t report.f)To review the Companys Financial and Risk Management Policies.g ) To appraise the Board on the impact of accounting policies, accounting standards and legislation.h) Review of reasons for default in payment to shareholder / creditors etc.i) Review the adequacy of internal audit function. j) To hold periodical discussions with statutory auditors on the scope and content of audit. C. Remuneration Committee The Remuneration Committee determines and fixes remuneration to executiveDirector and Managing Director. The remuneration to the Managing Director and theExecutive direc tors had been determined considering the prevalent remuneration for managerial personnel of Companies of similar size and stature. Padmashree institute of management and sciences Page 15

D. Investors / Shareholders Grievances Committee The committee is headed by Mr. A. Sadasivam. The committee h a s o t h e r members namely Mr. S. Badrinathan and Mr. P.M. Nene.The committee looks into redressing the grievances of the investors namelyshareholders. The committee deals with grievances pertaining to transfer of shares, non receipts of Balance Sheet, non receipt of dividend, dematerialization of shares,complaint letters received from Stock Exchanges, SEBI etc.During the year, one complaint was received from a shareholder and the samehas been resolved to the satisfaction of the complaint and no transfer was pending as on31 st March, 2006. Competitors Information:MRF: A leading company in the tyre industry, MRF Ltd. Boasts of an enviable track record. The company has continued in the same vein and has been posting excellentr e s u l t s , n o t w i t h s t a n d i n g t h e w i n d s o f r e c e s s i o n b l o w i n g a c r o s s t h e e c o n o m y . Performance of the company has been commendable in light of the fact that the user industry is facing a slowdown. The company has benefited from better productivity andoperational efficiency. The company caters to a host of impressive clients. It has signedon to be the sole supplier for auto giants like General Motors, Fiat and Fort in India. T h e c o m p a n y i s a l s o r e n o w n e d f o r i t s e x p o r t s , w h i c h h a v e a l s o b e e n w i t n e s s i n g positive growth. The company has recently entered the radial tyre segment and has metwith positive response. The performance of the company could further improve withthe revival of the auto industry. Thus, MRF Ltd. can be expected to retain its position inthis segment. However, investors can move out of the scrip, considering the outlook for the industry as a whole. Padmashree institute of management and sciences Page 16

Falcon Tyres Limited CEAT: Being the second largest selling brand in India with a market s h a r e o f 1 4 . 6 percent, CEAT caters primarily to the replacement market. Due to the strong growth int h e O E M s e c t o r , t h e s h a r e o f t h e r e p l a c e m e n t m a r k e t i n t h e t o t a l r e v e n u e o f t h e company has fallen. However, the production growth in the automobile sector over the past few years should provide a boost to the replacement market in the coming yearsand CEAT could be a major beneficiary thereof. With the advent of multinationals likeGood Year, Michelin, Bridgestone and Continental, a major shakeout in the industry isi m m i n e n t a n d t h e s a m e c o u l d r e s u l t i n C E A T , w h i c h i s a l r e a d y o p e r a t i n g o n t h i n margins, being hived off as a joint venture with Good Year, in collaboration with whichCEAT has already promoted South Asia Tyres for manufacturing radial tyres in India.With a modest track record on the financial front, the forthcoming results may not beencouraging. Apollo Tyres Ltd. (ATL) A slow-down in the trye market and rubber procurement at high prices has putthe brakes on Apollo Tyres Limited (ATL). The company has traditionally been them a r k e t l e a d e r i n t h e t r u c k a n d b u s t y r e s s e g m e n t s . A T L caters to the replacementsegment of the domestic market. F o l l o w i n g i t s t a k e o v e r o f P r e m i e r T y r e s , A T L s market share has risen. Besides the core truck and bus tyre business, fairly considerable p a r t o f its turnover comes from automotive tubes and f l a p s , f o r w h i c h i t h a s commissioned a plant in Pune. D e s p i t e a r e v e r s a l i n t h e f o r t u n e o f t h e a u t o m o b i l e industry, the chief user base of the companys products, the demand for truck tyres, particularly in the replacement market, was not encouraging. Even as tyre producersg r a p p l e w i t h o v e r - c a p a c i t y a n d h i g h l e v e l s of inventory, the government stirred ahornets nest by proposing free imports of used and second -hand tyres. ATL h a s conversion agreements for small tyres with TCIL, Stallino Tyres and Rado. Its exportsare routed through Apollo International to the US, Germany, Brazil, Sudan, Egypt, Etc.A well entrenched position in the replacement market, favours ATL and the declining price trend of key inputs like natural rubber and carbon black may provide relief to itswafer thin margins. At the current price level the scrip has emerged as an attractive buy; thus accumulate its shares in small lots.

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Achievements / Awards: Central Excise has termed FTL as GOOD PAYERS. Sales Tax Department and the Electricity Boards have given GOLD CARD toFTL. The PF Department has termed FTL as BEST ENTERPRISE. In addition to this Mr. J.A.K. Tareen, the Senior General Manager HR of Falcon tyrs limited, has been conferred with RASBIC AWARD 2005 for L e a d e r s h i p a n d L i f e T i m e A c h i e v e m e n t i n t h e f i e l d o f H u m a n R e s o u r c e Management. The Falcon family takes pride in the achievement of the Mr. J.A.K. Tareen. Future Growth and Prospectus: To develop wide range of tyres and tubes in two, three and four wheeler andindustrial segments for export market. To develop tubeless tyres in two wheeler segment. To further introduce advanced technology tyres of directional pattern designand conventional pattern in Motorcycle segment. To further develop hi-tech Low Profile tyres in scootrate segments.T h e Company expects that there will be growth in demand for two / threew h e e l e r t y r e s a n d t u b e s . H o w e v e r t h e c o m p e t i t i o n w i l l a l s o b e s e v e r e w i t h consequential impact on the market share of the various tyre manufacturers as well astheir margins. Rubber and Nylon prices are expected to remain firm in the

near termand hence the tyre companies have to increase prices if they have to show improvedresults. The long term outlook continues to be positive for the industry as well as thecompany. The company believes that its efforts at new product development, marketdevelopme nt and improving its operations will help it to meet the challenges of the future. Padmashree institute of management and sciences Page 18

The Company has embarked on a 600 million rupees e x p a n s i o n p l a n . T h e t y r e manufacturing capacity is being raised from 5,50,000 to 7,50,000 per month and the tube manufacturing capacity is raised from 3,50,000 to 7,50,000 per month.FTL is case of emergencies goes for Rush Purchase of Stores & Spares. The minimumand maximum capability of FTL per day is. M I N I M U M M A X I M U M T Y R E S 2 0 , 0 0 0 p e r d a y 3 0 , 0 0 0 p e r d a y T U B E S 1 4 , 0 0 0 p e r d a y 2 1 , 0 0 0 p e r d a y Work-In-Progress: Always FTL maintains one day stock in floor. T h e r e a r e t w o s h i f t s i n production. Total one and half day of stock is always present.Finished Goods: The finished goods are dispatched to factory (exports), OE Depots (3),and Replacement Depots (32).Transit Period = Minimum Level Maintained * Demand MILESTONES OF FALCON TYRE LIMITED: Padmashree institute of management and sciences Page 19

Falcon Tyres Limited 1 9 7 3 : F T L w a s p r o m o t e d b y a g r o u p o f p r o f e s s i o n a l s . 1 9 7 5 : F T L s t a r t e d i t s c o m m e r c i a l p r o d u c t i o n . 1 9 8 3 : C o m p a n y s t a r t s m a k i n g l o s s e s . 1 9 8 7 : T h e c o m p a n y w a s t a k e n o v e r b y M r . C h h a b r i a a p a r t o f Jumbo group or industries.1 9 9 1 - 1 9 9 2 : T h e e n t i r e a c c u m u l a t e d l o s s e s o f t h e c o m p a n y w e r e w i p e d off the company carried out on of the most remarkableturnover in the Indian corporate history.1 9 9 2 - 1 9 9 5 : F T L e x p a n d e d i t s c a p a c i t y f r o m 2 . 2 l a k h s t o 3 l a k h s . 1 9 9 5 - 1 9 9 6 : I t e m e r g e d a s t h e h i g h e s t p r o f i t a b l e c o m p a n y i n t h e I n d i a n tyre industry with a net profit ratio of over 5%1 9 9 6 1 9 9 7 : I t m a d e r e c o r d b y s e l l i n g a m i l l i o n t y r e s t o B a j a j A u t o L t d . 1 9 9 7 2 0 0 1 : F T L e x p a n d e d i t s i n s t a l l e d c a p a c i t y f r o m 3 . 0 l a k h s to 3.5 lakhs.2 0 0 1 2002:It acquired modern and sophisticated t e c h n o l o g y f r o m K o r e a , Taiwan and UK for producing quality tyres and tubes.Installed capacity expanded from 3.0. lakhs to 4.5 lakhs per month for tyres and tubes production.The turnover of the industry reached Rs. 182.00 crores.2 0 0 2 - 2 0 0 3 : T h e t u r n o v e r o f t h e i n d u s t r y i n c r e a s e d t o 1 8 2 . 0 0 c r o r e s d u e to rise in price of raw materials.2 0 0 4 - 2 0 0 5 : T h e t u r n o v e r o f t h e c o m p a n y i n c r e a s e d t o 2 2 3 . 9 5 c r o r e s . Padmashree institute of management and sciences Page 20

Falcon Tyres Limited The tyre industry is one of the oldest industries in India. The Dunlop introduced thefirst tyre manufacturing plant in 1936 at Sangeria (West Bengal), which lead to one of m o s t i m p o r t a n t i n d u s t r y i n I n d i a , w h i c h n o t o n l y p r o v i d e d g a i n f u l e m p l o y m e n t t o Indians, but become one of the major export earner.T h e f u t u r e o f t h e t y r e i n d u s t r y d e p e n d s o n t h e a g r i c u l t u r a l a n d i n d u s t r i a l performance of the economy, the transportation needs and the production of vehicles.Hence, this is a very sensitive industry, which has to adop t itself to a highly volatileenvironment.O n e o f t h e m a i n r e a s o n s f o r t h e d e v e l o p m e n t o f t h e t y r e i n d u s t r y i s r u b b e r industry. It has been established in 1921 with a small unit, but now it has increased to600 units, 30 large scales, 300 medium scales, and 5600 small-scale industry. They produce around 35000 rubber products. India is the third largest consumer of syntheticrubber together in the world.Most of the rubber produced in India is consumed for making of tyres. Thisleads to growth of the tyre industry. The rubber produced in the country is consumed asthe following. Automotive tyre sector 50% Bicycle tyre and tubes 15% Foot Wear 12% Belts 06% Camelback and latex Products 07% Remaining Rubber 10%Indias with availability of basic raw materials is in abundance, availability of c h e a p l a b o u r , t e c h n i c a l l y s k i l l e d manpower and a vast domestic market, is ideally p o s e d t o supplement and complement overseas manufactures t h r o u g h j o i n t collaboration to contribute substantial to the world trade of rubber products. This is major reason for origin of tyre industry in India. Padmashree institute of management and sciences Page 21

Falcon Tyres Limited POWER & FUEL CONSUMPTION 2 0 0 5 - 2 0 0 6 2 0 0 4 - 2 0 0 5 1. Electricitya. PurchasedT o t a l U n i t s 1 0 5 6 0 0 0 9 9 7 6 0 3 8 3 T o t a l A m o u n t ( R s . I n L a k h s ) 5 0 6 . 6 2 4 7 0 . 3 1 R a t e p e r u n i t ( R s . ) 4 . 8 0 4 . 8 2 b. Own GenerationU n i t s G e n e r a t e d 1 8 7 8 7 3 9 8 3 4 5 U n i t s p e r L t r . O f D i e s e l 3 . 0 9 3 . 0 8 C o s t p e r u n i t ( R s . ) 9 . 2 2 8 . 7 3 2. Furnace OilT o t a l Q u a n t i

t y ( K L ) 3 7 8 2 3 6 4 3 T o t a l C o s t ( R s . I n L a k h s ) 6 4 3 . 3 6 4 5 3 . 3 9 R a t e P e r L i t r e ( R s . ) 1 7 . 0 1 1 2 . 4 5 1.Consumption per kg. of Prod of Tyre & tube E l e c t r i c i t y ( U n i t s / K g . ) 0 . 5 6 0 . 5 7 F u r n a c e O i l ( L t r s . / K g . ) 0 . 2 0 0 . 2 0 Thus from the above illustration the company has successfully implemented itsShared Value Conservation of Energy.The Falcon Tyres had a shared value of maximizing shareholders wealth and increasingits turnover.Therefore Falcon Tyres registered a net profit of 36.3 million rupees compared with9.2 million in 2004-05. Total Company turnover stood at 2.55 billion rupees against 2 . 1 9 b i l l i o n t h e same last year. The company announced a 25% dividend for i t s shareholders, which was 2.50 Rs. Per share, highest in its history. SHARED VALUE: As per the model, SHARED VALUES implies The values that go beyond, but might well include, simple goal statements in determining corporate destiny. To fitthe concept, these values must be shared by most people in the organization.Along with this, each department is having its own objectives to be achieved. Some of the objectives that were implemented during the current year were Padmashree institute of management and sciences

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Falcon Tyres Limited STYLE: Style refers to the employees shared and common way of thinking anbehavingunwritten norms of behaviour and thought. In simple words it is the behaviour which anorganization projects to shareholders. Major Customers of Falcon Tyres 1 . B a j a A u t o L t d . A k r u d i , P u n e 2.Bajaj Auto Ltd. Waluj, Aurangabad3.Bajaj Tempo Ltd. Akrudi, Pune4.He ro Honda Motors Ltd. Gurgoan5 . M a j e s t i c A u t o L t d . G h a z i a b a d 6.Royal Enfield Motors, Chennai 7 . L M L L i m i t e d , K a n p u r 8.Yamaha Motors India Pvt. Ltd. Faridabad9.Kinetic E n g i n e e r i n g L t d . P u n e 10.Piaggio Greaves Ltd. Baramati11.VST Tillers & Tractors Ltd. Bangalore COMPANY SECRETARY Mr. S. BadrinarayananR E G I S T E R E D O F F I C E G o l d T o w e r s , 50, Residency Road,Bangalore 560025FACTORY Metagalli, K.R.S. RoadMysore - 570 016B A N K E R S 1.Syndicate Bank 2.Punjab National Bank Padmashree institute of management and sciences Page 23

Falcon Tyres Limited 3.State Bank of IndiaA U D I T O R S M / s . L o d h a & C o . , 14, Government Place (East)Calcutta 700 001 Ownership Pattern: Shareholding pattern as on 31 st March, 2006 No. of EquityShares HeldPercentage of Shareholding A. Promoters Holding1. PromotersIndian PromotersForeign Promoters33161439188505.8468.98 Padmashree institute of management and sciences Page

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