Dear Shareholders,

I have recently stepped into the very large shoes of our far-sighted Chairman,
Dr. Brijmohan Lall Munjal, who skilfully and successfully steered this Company since 1984. Hero MotoCorp has since grown substantially in stature, size and scale, and it remains a world leader for 14 years. I feel both privileged and humbled that our eminent Board has considered me worthy of carrying the baton forward.

My father, now Chairman Emeritus, believes that as promoters, we are custodians who simply act on behalf of all the other co-owners. As I embark on the voyage ahead, I bear the same philosophy in my mind, and I will do all that I can to fulfil this enormous responsibility.

The Indian two-wheeler industry swung wildly during FY 2014-15: there was cheerful growth of 16% during the first half of the year, but just one per cent growth during the second. Meagre and unseasonal rains, moderation in the growth of farm support prices, and a decline in rural wages caused distress; all this adversely affected sales.

However, as I write this message, agricultural prospects are comparatively better, and the country is poised for viable recovery. In this fiscal itself, I anticipate a rebound in the capital goods production, which is usually the harbinger of revival in the manufacturing sector. Once the business cycle turns more positive – as it should, by the second half of this fiscal – I expect an uptick in demand across multiple consumer verticals. In turn, this should create a second order impact across many tertiary sectors.

I remain optimistic and see signs of strong government policy action. In the last one year, the government has invested in infrastructure and smarter governance; it has also drafted modern laws and cascaded financial inclusion through millions of new banking accounts. To my mind, these bold initiatives are potential game-changers for economic recovery and investor confidence.

As India transforms, Hero is keeping pace with new technology and trends. In the recent past, our teams have paid significant attention to enhancing fuel-efficiency, and this initiative alone has helped us gain share and further strengthen our leadership in the motorcycle market. We have also announced the introduction of two 'next-gen' scooters, and brought an upgraded version of our iconic Splendor to the market. We feel that this will cater to today's youth and young-at-heart customers.

Hero remains bullish about the two-wheeler business, not just in India but also overseas. We are pumping in over ` 3,000 crores
(US$ 470 million) in different areas to catapult your Company into its next stage of growth.

Our quest to build a world-class, state-of-the-art R&D ecosystem is set to gain even stronger traction with the new 'Hero Centre for Global Innovation and R&D' getting ready to become operational by the end of the current fiscal.

Over a very short period, we have built up a strong R&D team with many talented professionals and a number of global experts. We have aligned our design and development processes in a way that winnable products roll out smoothly. We have also identified and firmed up a robust portfolio of products across all two-wheeler segments for the next several years, to serve the domestic and international markets.

As a business enterprise, Hero aims to become more efficient in a number of key areas. The Company has launched a range of margin improvement projects that aim to optimise fixed costs. Some of these projects have already started showing results, and have so far added ` 750+ crores (US$ 117 million) to our bottom-line, and we anticipate significantly higher savings in the next five years.

Hero's parts business is now in excess of ` 2,000 crores (US$ 313 million), and is slated to touch a turnover of US$ 1 billion. By applying industry-defining technologies, we are overhauling the management of this business. Positive customer relationships and profitability outcomes from this realignment should start accruing within the current financial year.

Hero is transforming the way the organisation conducts itself, manages people and discovers new talent. There is a much stronger focus on meritocracy as a function of career growth and transparency within the organisation. This new culture has already recognised and helped three bright young minds come up with the hugely successful iSmart technology embedded in one of our products. During the year in review, the 'Splendor iSmart' clocked 102.5 kms per litre of petrol under government-certified testing, making it the world's most fuel-efficient bike.

To sustain and strengthen this culture of innovation, Hero institutionalised Idea Contests two years ago. Employees from across the country take part in these contests to bring forth out-of-the box ideas covering new products, design and savings via technology advances or production techniques. Besides fostering an espirit-decorps, these contests help the organisation unearth latent talent and incubate new ideas that give the Company an edge over its competition.

If investments in people constitute one arm of our innovation vision, technology deployment makes up the second. Last year, we rolled out a mobile-based platform for our sales force. This platform is proving to be especially useful in the rural market. We have also introduced e-bidding to de-risk our supply chain and to secure a competitive advantage in pricing for parts and products. In the same vein, we have also introduced a system of e-material flows at one of our facilities to save on storage costs for materials and components.

As a business philosophy, we continuously develop plans to optimise and enhance production capacities. Our fourth production facility, christened 'the Garden Factory', went live in October 2014 at Neemrana in Rajasthan. It is the country's first 'LEED Platinum' facility certified by the Indian Green Building Foundation, and represents our vision of what India's manufacturing-led future
should be.

Designed and built around the theme of 'Manufacturing Happiness', this facility has best-in-class sustainable practices, people policies, architecture and process technologies. Rooftop solar panels provide clean power of up to 30% of all energy requirements. A 'green' oxygen wall pumps in fresh and clean air for factory workers. A unique air-conditioning system provides a dust free environment. The roof is equipped with greenhouses that serve as a food farm for our workers.

Over the years, we have periodically deployed balancing equipment to optimise capacities of our factories in Dharuhera, Gurgaon and Haridwar.

Three other Hero production plants are coming up; they are strategically located to enhance our penetration within India and other regions of the world. The plant at Halol in Gujarat will not only help support the western market more efficiently, it will help Hero reach global destinations faster, since it is within close proximity of ports. The plant at Villa Rica in the state of Cauca in Colombia will help support the Company's aggressive initiatives to market its products across South America. Similarly, the production facility in Bangladesh will help us in servicing the needs of that region.

As we set our sights on transforming into a global company, our teams have quickly learnt to adapt; where necessary, they have refined entry strategies for different markets. Volumes from our global business crossed the 200,000 mark during the year in review, and we are well on track with our objective of being present in 50 global markets by 2020.

A strong presence in new markets requires time and needs a serious brandbuilding effort and strategy. It is likely, therefore, for our marketing spends to trend a bit higher for the next couple of years. However, we will ensure that it stays well within prudent limits.

When the new Hero came into being four years ago, it resembled an unfinished gene sequence. There were heaps of moving parts. In a very short period, many of the pieces are in place. Richard Dawkins, the great evolutionary biologist, once said: "the solution always turns out more beautiful than the puzzle". I am sure that when you read my message next year, these words will ring true!

Once again, thank you for your continued support.

With regards,

Pawan Munjal
Chairman, Managing Director and CEO