DIRECTORS' REPORT

DEAR MEMBERS,

We have the pleasure of presenting you the 58th Annual Report of your company along with audited accounts for the Financial Year ended 31st March, 2015.

Financial year 2014-15 was expected to be a year of hope, given the establishment of a stable government at the centre, it was widely expected that with adequate thrust to key reforms would help kick start the economy. The increase in growth was expected to spur consumer expenditure in white goods and automobiles. Auto industry was also expected to be a significant beneficiary from the revival in infrastructure and mining sector. We have seen that while the direction of the Government has been positive, the results particularly in Infrastructure and Mining have, thus far, been short of expectations. The results for the auto industry have also been mixed and the resultant impact of auto component companies has been selective, on the basis of their customer segmentation.

The decline in inflation rates has not been followed commensurately in terms the policy action by the Reserve Bank of India. The reduction in policy rates has been more symbolic than substantive. Even the somewhat meagre policy rates reduction by Reserve Bank of India have not resulted in similar reduction by leading banks. The expectation is however positive that more banks will follow suit and there would be more reduction in policy rates announcements by Reserve Bank of India in the near future.

On the Exchange rate front the decline in exports 5 consecutive months is indeed worrying for the Indian Economy. Substantial devaluation of Euro vs other global currencies has made imports into Eurozone more expensive and that has impacted Indian companies too.

The management continued various cost savings and cost optimization measures like optimization of raw material usage, yield improvements and localization of imported materials. The Net Profit before Tax during the financial year amounted to H1307.80 lacs.

FINANCIAL REVIEW

During the Financial Year 2014-15, passenger vehicle grew by 4% largely on account of robust growth in utility vehicle segment, which increased by 10.8%. Medium and Heavy Commercial business segment increased its sales by 17.4% but LCV segment continue to decline and ended lower by 9.9%. Two wheeler segments witnessed spectacular growth of 27% in Scooters, whereas Motorcycle grew marginally by 4.3%. Overall the auto sector actually grew by about

6% as compared to 10-12% expectation of growth. In Gasket Division, TACL outperformed the segmental growth by growing 33% as against industry growth of 21% in HCVs whereas despite the LCV de-growth of normal 10%, our sales to LCV segment grew by  12%.  Comparative production of vehicles in different segments over three years has been as follows.

Two wheeler industry and Tractor Industry reported production growth of 10% and (12%) respectively. Two wheeler growth was led by Honda Motor & Scooter India Pvt. Ltd., which is catered to by our JV Company. Bajaj Auto Ltd., the major two wheeler customer at your company reported a negative growth of 14.8%.

The volumes for Auto Component Industry being directly linked to production volume of vehicles, Auto Components Industry has reported mixed results depending upon its customer segment .

Your company derives a significant part of its turnover from Exports. Decline in Euro exchange rate particularly in the last quarter of the financial year 2014-15 affected realizations. The company is using a mix of hedging strategies to partially insulate itself on this front. The company clocked a turnover of Rs.31083.89 lacs, a growth of 5.6% over its previous year turnover of Rs.29438.74 lacs, led by its gasket division. The company outperformed auto industry growth in 3 of its key segments namely HCV & MCV and LCVs.

Forging Plant sales in European market faced a challenge due to decline in Eurozone Economy. Besides, a decline in Euro also affected realization particularly towards the end of the financial year. Efforts have been made to re-price the contracts and diversify the export customer base.

NEW INITIATIVES

Your Company has moved closer its major technology up-gradation at Gasket Division. The dedicated line for manufacturing Heat Shields adopting latest technology acquired through Sanwa Packaging Co. Ltd., a well known Japanese company is likely to be commissioned soon.

Heat Shield is a futuristic product with multiple functional advantages and its demand is expected to increase with new generation compact engines.

On the other side at Forging Plant, your company expanded and upgraded its precision machining capabilities and ventured into new product range of its overseas customers in Europe. Yield improvements measures and production optimization measures are expected to provide the stability of and improvements in margins. Increased volume of machining will push up value addition and resultant profit margins on related products.

Activities relating to these initiatives are at different stages and their benefits will start to accrue from current year, 2015-16.

FUTURE OUTLOOK

The improvement in macroeconomic indicators is heartening. The thrust of the central government on development of infrastructure; generation of employment, control over inflation rationalization of tax structure through GST introduction and promotion of industrial growth driven by the 'Make in India' programme is welcome and we as the rest of the industry have great expectations from the same. Economic inclusion measures as Jan Dhan Yojna and social programmes like Swachh Bharat also have the potential to add to economic activity and growth. Overall we expect that the Auto Sector too would be the beneficiary of such measures. Revival of Infrastructure and Mining sectors will also give significant boost to Auto Sector growth.

Your management has continued its strong focus on internal process improvements enhanced productivity and skill-assessment and upgradation of its workforce so as to be a smart, nimble and proactive organization.

DIVIDEND

Your Directors are pleased to recommend 15% dividend for the year 2014-15 subject to the approval of members at the ensuing Annual General Meeting. The total outgo on account of dividend (including Dividend Distribution Tax) for the financial year 2014-15 will be Rs.222.88 lacs.

TRANSFER OF UNPAID DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

The Company shall transfer the unclaimed dividends for the year 2007-08 to Investor Education and Protection Fund on or before 1st November, 2015 as being unpaid for a period of seven years in compliance with the provisions of Section 125 of the Companies  Act, 2013.

The shareholders who have not encashed their dividend warrants for the financial year 2007-08 or any subsequent year are requested to lodge their claims for revalidation of dividend warrants. The Company is specifically intimating those members who have so far not claimed the unpaid dividend for these years.

FIXED DEPOSIT SCHEME

The new Fixed Deposit Scheme of the Company commenced from the month of November, 2014. Deposits accepted from the public amounted to Rs.924.48 lacs as on March 31, 2015.

As on March 31, 2015, 34 fixed deposits aggregating to Rs.11.63 lacs matured for payment, but were neither claimed nor renewed by the depositors.

BOARD MEETINGS

During the financial year ended 31st March 2015 six (6) meetings of the Board of Directors were held. Detailed information on the meetings of the Board and dates of the meetings are included in the report on Corporate Governance, which forms part of this Annual Report.

DIREC IORS

During the year, Ms. Pallavi Sadanand Poojari( DIN 07095137) and Mr. Vidur Talwar (DIN 00114643) were appointed as Additional Directors effective from 12th February 2015. They hold office upto the date of the ensuing Annual General Meeting of the Company.

The Company has received notice in writing from a member proposing the candidature of Ms. Pallavi Sadanand Poojari as an Independent Director to hold office for five consecutive years from 58th Annual General Meeting.

The Company has also received a notice in writing from a member proposing the candidature of Mr. Vidur Talwar as a Director liable to retire by rotation.

No Director resigned from the company during the reporting period.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to Directors Responsibility Statement, your Directors confirm:

a) That in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departure was made for the same;

b) That Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period ended on March 31, 2015;

c) That Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) That Directors have prepared the annual accounts on a going concern basis;

e) That the directors had laid down internal financial control to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

f) That Directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DECLARATION GIVEN BY INDEPENDENT  DIRECTOR UNDER SECTION 149(6)

The independent Directors have confirmed and declared that they fulfill the criteria of independence as per the provisions of Section 149(6) of the Companies Act, 2013 and are not disqualified to act as an Independent Director. The Board is also of the opinion the Independent Directors fulfill the independence requirement in strict sense and are eligible to continue as independent Directors of the company.

DIRECTORS RETIRING BY ROTATION

In accordance with the provisions of Companies Act, 2013 and the Articles of Association of the company Mr. Navin Juneja( DIN 00094520) retires by rotation and being eligible offer himself for re-appointment.

Mr. Navin Juneja, aged 58 years, is a B.Sc. (Mathematics) and Chartered Accountant (FCA). He is working as Finance Head of Talbros Group as its Group CFO. He also advises various companies on financial management and corporate planning. He had more than 30 years of rich experience in Finance, Accounting and Strategic Planning.

The Board recommends his re-appointment.

APPOINTMENT/ RE-APPOINTMENT OF DIRECTORS

Mr. Anuj Talwar

Mr. Anuj Talwar (DIN 00628063) was appointed as Executive Director of the company for a period of three years w.e.f. 14th August 2012 by the shareholders in its Annual General Meeting held on 16th September 2013 and his current term expires on 13th August 2015. Board in its meeting held on 22nd May 2015, subject to approval of shareholders, approved the re-appointment of Mr. Anuj Talwar as Executive Director for a period of three years commencing from 14th August 2015.

KEY MANAGERIAL PERSONNEL

As on 31st March 2015, company has following key managerial personnel in compliance with the provisions of section 203 of the Companies Act, 2013.

1. Mr. Umesh Talwar - Vice Chairman & Managing Director

2. Mr. Rajeev Pal Gupta - Chief Executive Officer

3. Mr. Manvinder Singh Ajmani - Chief Financial Officer

4. Mrs. Seema Narang - Company Secretary

LOANS AND GUARANTEE UNDER SECTION 186

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 form part of the notes to the Financial Statements provided in this Annual Report.

RELATED PARTY TRANSACTIONS

Related party transactions are reviewed and approved by Audit committee and are also placed before the Board for necessary approval. The Company has developed standard operating procedures for the purpose of identification and monitoring of such  transactions.

The board has approved policy for related party transactions which is available on company's website at following link: <http://www>. talbros.com/investors/investor-corporate/related-party-policy/

There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other related parties which may have a potential conflict with the interest of the Company at large.

During the Fiscal year 2015 there are no material transactions between the company and the related parties as defined under clause 49 of the Listing Agreement. Further, all the transactions with the related parties have been conducted at an arm's length basis and are in the ordinary course of business. Accordingly there are no material related party transactions to be reported in Form AOC-2.

MATERIAL CHANGES & COMMITMENTS

During the Financial year 2014-15, your company closed its Gasket manufacturing plant at Chennai on grounds of economic viability. The plant operations were initially stopped w.e.f. 16th August 2014 followed by a complete closure on 18th October 2014. The business and the customers being served from that plant have been seamlessly transferred to the Faridabad and Pune Plants of the Gasket Division. The terminal benefits payable to the erstwhile workforce have been charged to Profit & Loss account as an exceptional item.

INTERNAL FINANCIAL CONTROL

The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

REMUNERATION POLICY & BOARD EVALUATION

The Board on the recommendation of the Nomination & Remuneration Committee for selections and appointments of Directors, senior management and decides their remuneration, after reviewing their qualifications, positive attributes, independence of directors, board diversity. Remuneration Policy of the company is based on the fundamental principles of payment for performance, potential, growth and aligning remuneration with the longer term interests of the Company and its shareholders, promoting a culture of merit recognition and creating a linkage to corporate and individual performance. The criteria for performance evaluation of directors cover the areas relevant to their functioning as member of Board or its Committees thereof. The manner in which the performance evaluation of the board and its committees thereof, the chairman and the directors individually has been carried out has been explained in the Corporate Governance Report.

CORPORATE GOVERNANCE

Adoption of good corporate governance and disclosure practices has been an earnest endeavor on the part of company.

The company's essential character revolves around value based on transparency, integrity, professionalism and accountability. The company continuously strives to improve upon these aspects on an ongoing basis and adopts innovative approaches for leveraging resources, converting opportunities into achievements and developing human resources to take the company forward.

The Board of Directors support the concept of Corporate Governance and having regard to transparency, accountability and rationale behind the decisions have made proper disclosures separately under the heading "Corporate Governance".

A Certificate from the Statutory Auditors regarding compliance of the conditions of Corporate Governance as per the requirement of Clause 49 of the Listing Agreement with the Stock Exchanges is enclosed as part of Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed chapter on "Management Discussion and Analysis" (MDA) pursuant to Clause 49 of the Listing Agreement is annexed to the Annual Report and forms integral part of this Report.

RISK MANAGEMENT POLICY

Risk management forms an integral part of management policy and is an ongoing process integrated with operations.

The Risk Assessment Committee (RAC) constituted by the Board of Directors of the company as after due deliberations with the stakeholders, put in place the formal framework for Risk Assessment. The RAC is in the process of identifying various strategic, operational and financial risks which may impact company performance significantly. The management is of the belief that the present risk mitigation measures in place are adequate to protect the company's operations and existence from any significant risks.

VIGIL MECHANISM

In pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013, a vigil mechanism for directors and employees to report genuine concerns has been established.

Details of establishment of vigil mechanism are disclosed in the corporate governance report and is also available on company's website at www.talbros.com

CORPORATE SOCIAL RESPONSIBILITY

Talbros Automotive Components Ltd. (TACL) has formulated Corporate Social Responsibility (CSR) policy which encompasses its philosophy and guides its sustained efforts for undertaking and supporting socially useful programs for welfare and sustainable

development of the weaker section of the society specially the children and contributed to Savera Association committed for attending to education and nutrition needs of the under privileged children. Your company also contributed to Prime Ministers Relief Fund to support their projects for welfare of the society.

Information pursuant to Section 134(3)(o) read with The Companies (Corporate Social Responsibility Policy) Rules, 2014 is given in Annexure I to this report.

AUDITORS AND AUDITORS' REPORT

Statutory Auditors

M/s. S.N. Dhawan & Co., Chartered Accountants, Statutory Auditors of the Company and CMRS & Associates, Chartered Accountants, Auditors for the Pune Plant, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office, if re-appointed and the necessary resolution for their re-appointment as statutory auditors is placed before the shareholders at the 58th Annual General Meeting.

Cost Auditors

The Board of Directors, on recommendation of the Audit Committee, had re-appointed M/s Vijendra Sharma & Co., Cost accountants (Firm Registration No. 00180) as Cost Auditors of the Company, for the Financial Year 2015-16, for conducting the audit of the cost records maintained by the Company, subject to the ratification of the remuneration to be paid to the Cost Auditor by the shareholders in ensuing Annual general meeting.

A certificate from them has been received to the effect that their appointment as Cost Auditors of the Company, if made, would be in accordance with the limits specified under Section 141 of the Companies Act, 2013 and rules framed there under.

EXPLANATIONS OR COMMENTS BY THE BOARD  ON EVERY QUALIFICATION, RESERVATION OR  ADVERSE REMARK OR DISCLAIMER MADE:

AUDITORS' REPORT

All observations made in the Auditors' Report and notes to the accounts are self-explanatory and do not call for any further comments under Section 134 of the Companies Act, 2013.

SECRETARIAL AUDIT REPORT

The Board had re-appointed Mrs. Kiran Sharma (membership no. 4942 & certificate of practice no. 3116) a practicing Company Secretary for carrying out secretarial audit in terms of the provisions of Section 204 of the Companies Act, 2013 for the financial year  2014-15.

Secretarial audit report for the financial year ended 31st March 2015 as provided by M/s. Kiran Sharma & Associates, Practising Company Secretary is annexed to this Report as Annexure II.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, RESEARCH AND DEVELOPMENT AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to sub-section 3(m) of Section 134 of the Companies Act, 2013 read with Rule 8(3) of The Companies (Account) Rules, 2014 is given in Annexure-IV to this Report.

PARTICULARS OF EMPLOYEES AND RATIO OF DIRECTOR REMUNERATION TO MEDIAN EMPLOYEES' REMUNERATION

As required by the provisions of Section 197 of the Companies Act, 2013 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees are set out in the Annexure-V to this Report and forms part of this report. The ratio of the remuneration of each director to the median employee's remuneration and other details in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure -VI.

The Board of Directors wishes to express their appreciation to all the employees for their outstanding contribution to the operations of the Company during the year. It is the collective spirit of partnership across all sections of employees and their sense of ownership and  commitment that has helped the Company to grow.

EXTRACT UNDER SECTION 92

The extract of the annual return in Form MGT-9 is enclosed as a part of this report in compliance with Section 134(3) of the Companies Act, 2013 as Annexure VII.

FORMAL ANNUAL EVALUATION OF PERFORMANCE OF BOARD, ITS COMMITTEES

Board had in its meeting approved the performance evaluation process in pursuance of Sec. 134(3)(p) & Rule 8(4) of Companies  (Accounts) Rules, 2014 and clause 49 (II)(B)(5) of the listing  agreement.

A document for evaluation of Directors, Chairman, Board and its committees with the title Board Effectiveness Review was duly filled by the Board members. A consolidated report on the views of all the Directors was prepared.

ACKNOWLEDGEMENT

Your Directors gratefully acknowledge the support given by our customers, shareholders, employees, financial institutions and banks and all other stakeholders, and we look forward to their continued support.

For and on behalf of the Board

NARESH TALWAR

Chairman

Place: New Delhi

Date: May 22, 2015