Business Overview by Region (FY2010-11)

<India>
-The Indian automobile industry continued to grow at a rapid pace in the year ended March 2011. Overall growth rate for commercial vehicle production reached 28 percent, with the light commercial vehicle market increasing 28.6 percent, and the medium- and heavy-duty commercial vehicle market growing by 37.7 percent year-on-year. There has been an increase in sales of heavier duty commercial vehicles, which have more axles and therefore more forged parts. While, traditionally most passenger cars used castings instead of forgings, due to emission norms and more advanced turbocharged engines, more forgings are being used. The Company has a strong marketing positioning in these products, which it leveraged well in the year ended March 2011.

<USA>

-The Company exports mainly to the medium- and heavy-duty commercial vehicle segment with a specific focus on chassis and engine components in Class 8 commercial vehicles. In 2010, Class 8 commercial vehicle production has increased by 27 percent from the level in 2009 to 154,000. The volume, however, is still below the 2006 peak result of 376,000. 

-New emission norms and stress of fuel efficiencies have also contributed to increased demand for forgings. The stimulus based economic growth continues to positively affect demand for automobiles, increasing business opportunities for the Company.

<Europe>
-On account of the phased removal of scrappage incentives, sales of passenger vehicles in Europe decreased 5 percent on a year-over-year basis. On the other hand, commercial vehicle sales rebounded strongly especially in the second half of 2010. Sales of heavy-duty commercial vehicles, the Company's primary market, grew by 8 percent year-on-year. Even then, the heavy-duty vehicle sales in 2010 were less than half the sales recorded in the year immediately before the 2008 financial crisis. The Company increased sales especially in the heavy-duty vehicle segment and grew its automotive exports to Europe significantly.

Joint Ventures

-In June 2010, the Company announced their decision to form a joint venture to manufacture and market a developed hybrid technology solution for automobiles "REVOLO", which will enable both existing and new vehicles to dramatically increase fuel efficiency and engine performance, while significantly decreasing green house gas emissions. The Automotive Research Association of India (ARAI), which tested the new hybrid solution (REVOLO), confirmed fuel efficiency gains of more than 40%. Under city driving conditions the increase in efficiency has been above 60% and reduction in green gas emissions has been more than 30%. As part of joint venture, KPIT Cummins will license the technology to the JV while the Company would bring in its manufacturing, assembly and integration expertise to the JV.

R&D Expenditure

(in million Rs.)

	FY2010-11	FY2009-10	FY2008-09	FY2007-08
R&D Expenditure	75.24	28.55	36.38	68.81
Total turnover	29,935.47	18,887.36	21,063.54	22,849.00
Total R&D expenditure as a % of total turnover	0.25%	0.15%	0.17%	0.30%

R&D Structure

-In 2010, the Company established its new R&D center "Kalyani Center for Technology and Innovation". In the next 2-3 years, there are plans to increase efforts in organizing different types of technical laboratories in this center.

Technology Imported

Year	Technology imported
2004	Technical know-how and assistance from MetalArt Corporaiton, Japan for the manufacture of forged products for Toyota's joint venture in India

Production capacity（FY2010-11）

-The Company established the world's largest forging capacity of over 700,000 tonnes per annum (including the ongoing expansion).

-In the last few years, the focus was on rationalizing operations to break-even at lower levels of capacity utilization. In order to meet growing demand, the Company is setting up a new press line to expand its capacity, planning its operation launch by April 2012.
-The Company is investing in augmenting machining capacity to respond to growing demand for machined products. The first step is to increase its machining capacity from about 880,000 crankshafts to 1.2 million crankshafts per year. 
-This capacity expansion requires investment of around 3 billion rupees in a phased manner over the next two years.