The UPA led alliance was elected to office in May 2004 and made its first formal economic policy statement through the Union Budget on 8th July 2004.

In my reaction to the Finance Minister's Budget Speech, I had stated that it was a well-balanced, growth oriented Budget which has placed emphasis on the major priorities of the National Common Minimum Programme. One of these priorities is the healthy growth and development of the manufacturing sector in which your company is engaged

We welcome the Finance Minister's announcement to set up a National Manufacturing Competitiveness Council for policy dialogue and to energize and sustain the growth of manufacturing industries.

We also welcome the lower capacity addition norm of 10% that would make companies eligible to avail additional depreciation of 15% from next year. This measure will provide a fillip for new investments in manufacturing.

The decision to implement VAT from 1st April 2005 will greatly enhance competitiveness of Indian manufacturing industry by reducing the cascading effect of local taxes and levies.

Inclusion of the automobile sector for purposes of 150% deduction in respect of expenditure incurred on R&D is another important initiative in this Budget. We hope that the same is also applicable to the automotive component industry.

Finally, the decision to upgrade 500 ITI's in order to scale up technological capabilities of our human resources over the next five years reflects a strong commitment to strengthen the quality of technical education in the country.

The Budget has created a strong platform for the Foreign Trade Policy that is to be announced in the next few days. We look forward to the new SEZ legislation and other policy initiatives that will provide a boost to manufacturing, exports and employment.

The UPA Government's first Budget clearly re-affirms its strong commitment to pursue wide-ranging economic reforms that will steer the economy to achieve a sustained 7-8% economic growth. I would like to congratulate the Finance Minister's vision to make this century, "India's Century". .

Auto Components has been designated as a "Thrust Sector" by the Government of India under the EXIM Policy. The Department of Commerce is to promote export of auto components through a specific sectoral strategy. As the country's No. 1 exporter of automobile components for the past three years, I have been actively engaged in making suggestions to the Government for the proposed auto component sectoral package.

The size of the global auto component industry is US$ 1.2 trillion with most of it located in high cost countries. Global purchases of components by international vehicle manufacturers are currently estimated to be US $ 45 billion. However, what is important for us is the increasing role of outsourcing in an integrated global economy. Critically, outsourcing of automobile components that have relatively high engineering and design content from suppliers in low cost countries like India, is gaining fast momentum. It is estimated that in the next 10 years, exports of auto components from low cost countries will reach US $ 225 billion. I believe that it is realistic for the Indian auto component industry to aspire to capture about 10% share of this opportunity. This translates into an export target of US $ 20 billion by 2015 for our industry. Going by current trends in the domestic automotive industry, we expect that the indigenous demand for automotive components will also reach US $ 20 billion in the next 10 years.

To meet the combined demand from domestic and international customers, the industry will have to make incremental investments of US $ 15 billion that will generate additional direct employment of 750,000 and indirect employment of 1.8 million respectively by 2015. There is no doubt that the Indian auto component industry is poised to achieve a Top 2 position in the world and more importantly, is going to be a major driver of growth and employment in the domestic economy.

From your company's perspective, our technological capabilities, operational strengths and global presence place us in a vantage position from which we can leverage the huge outsourcing opportunities that are emerging in the domestic and international markets to our benefit.

I take great pride and pleasure to inform Members that your company's performance in 2003-04 has far exceeded our performance in 2002-03 on virtually every parameter. I would like to re-affirm our Vision, which is for your company to be:

• Among the top three global players in our business


• To aggressively grow the business by accessing global markets


• To set global benchmarks in cost, technology, speed to market and customer service.


• To create sustainable shareholder value through the successful implementation of these growth plans.

In 2003-04, Bharat Forge scaled an important milestone in our journey. Members will be delighted to know that your company is now the second largest forging company in the World with manufacturing operations in India and Germany.

I would like to present to you a snap shot of our performance during the year

• Total Revenue increased by 32 percent - from Rs.645 crores in 2002-03 to Rs.851 crores in 2003-04.
  
• Exports grew by about 23 per cent - from Rs.271 crores in 2002-03 to Rs.330 crores in 2003-04. Exports account for 39 per cent of total sales revenue.
  
• Operating profit (PBDIT) rose by 32.4 per cent - from Rs.196 crores in 2002-03 to Rs.259 crores in 2003-04.
  
• Profit after Tax (PAT) has grown by 54 percent - from Rs.81 crores in 2002-03 to Rs.125 crores in 2003-04.
  
• Return on Net Worth (RONW) increased from 47.3 per cent in 2002-03 to 49.7 per cent in 2003-04.


• Return on Capital Employed (ROCE) increased from 27.2 per cent in 2002-03 to 35.7 per cent in 2003-04. .


• Earnings per share (EPS) rose from Rs.20.71 in 2002-03 to Rs.32.28 in 2003-04.

Our performance in 2003-04 places your company among the best performing companies in Indian manufacturing industry and in the automotive components sector. Our challenge is to sustain and improve on this performance. I am confident that our strategies will result in your company continuing to set new benchmarks for performance and for best industry practices. The outlook for 2004-05 is promising.

Your company's journey to become a global player began in 1997. Three factors determined our need to go global.

1. We appreciated what globalization could do in improving quality, delivery, costs, supply chain, R&D, productivity     and business processes. We therefore, wanted to venture out and learn best practices.

2. While we had sufficient faith in domestic demand, we wanted to grow beyond the Indian market.

3. We recognized that different geographies often follow separate business cycles. We wanted to not only reduce our     over dependence on single market but also take advantage of differential growth opportunities across varying     geographies.

Our international strategy has paid off. Not only is Bharat Forge the largest exporter of automotive components from India but in 2003-04, we were among the first in Indian manufacturing industry to have a manufacturing presence outside India, in a frontline developed country - Germany.

Your company's international strategy had placed considerable emphasis on international acquisitions to complement our export thrust. In pursuance, in January 2004 we acquired the assets, intellectual property and the labour force of the second largest forging company in Germany, CDP. The new entity, CDP-Bharat Forge is a 100% subsidiary of your company. With this acquisition, Bharat Forge has become the World's second largest forging company.

CDP-Bharat Forge and your company have complementary production capacities and excellent market synergies. CDP is a key supplier to European auto majors such as BMW, Volkswagen, DaimlerChrysler and Audi which will help your company to build further bridge heads in Europe and aggressively enter the passenger car business.

In recognition of the fact that the success of the acquisition depended on a comprehensive, well structured, clearly defined and time bound integration programme, we had constituted special integration teams across key disciplines and given them the mandate to complete the process within 100 days. I am glad to inform Members that we have achieved this objective and with it the first step has been taken towards creating a seamless global organization.

CDP is your company's first significant overseas acquisition. As part of our strategy to increase our global footprint through inorganic growth, we will continue to examine other international acquisition opportunities.

Over the past five years, your company has aggressively increased its exports. We have widened our global footprint, secured new customers and have become India's largest exporter of automotive components. Today, your company has a strong market presence in the USA, China and Europe. At Rs 330 crores, exports account for 39% of our total income. Some of the highlights of our exports in 2003-04 were:

i. Growth in exports of axle beams and steering knuckles to USA with more growth expected over the next two     years;

ii. Entry into the passenger car segment in USA and Europe with the first batch of exports to Ford and     DaimlerChrysler.

iii. Consolidation of market presence with OEM's in China and integration into new vehicle development programmes     of customers.

iv. Continuation and expansion of relationships with major European OEM's. These ties will receive a further boost     due to the CDP acquisition.

Qualitatively, your company's international customers include virtually every global automotive OEM and many of the large Tier 1 suppliers to the industry. There are very few component manufacturers in the world who have such a comprehensive customer base. We will continue our efforts to expand our range of customers across geographical markets

Building international scale capacities has always been an important priority for your company. The huge upsurge in domestic demand coupled with buoyant exports has prompted us to undertake a Rs 350 crore expansion programme. The expansion is proposed to be financed by a combination of issue of equity shares / warrants on Rights basis and debt.

In the passenger car category, your company presently has two 6,000 Ton presslines. In addition to this, we plan to expand our capacity further by setting up two new press lines in 5,000 and 5,500 Ton range including one fully automated transfer press line. Out of the two additional lines planned, one is expected to be operational in October 2004 and the other is expected to go on-stream in the last quarter of the current fiscal.

In order to augment the capacity for large forgings, we are investing in a third heavy forging press line, which is expected to be commissioned in the first quarter of 2005-06.

Your company is also expanding its crankshaft machining capacity by 200,000 nos. per annum for which we are setting up three state-of-the-art crankshaft machining lines. This capcity will primarily help us to address the global market for machined heavy duty diesel engine crankshaft. Of the three lines, two are expected to be commissioned in 2004-05 and the third in 2005-06.

Through these expansions your company's forging capacity will increase to over 200,000 Tons and its machining capacity would increase to over 600,000 crankshafts per annum.

Your company is regarded as one of the most technologically advanced forging companies in the World. R & D capability plays a great role in maintaining and enhancing competitive advantage. Our R & D efforts are aimed at reducing costs; making improvements in products and processes; developing new product development capabilities; achieving higher value addition; enhancing quality, speed to market and safety benchmarks; and scaling higher levels of productivity.

Work on completion of our in-house modern product testing and validation facilities is nearing completion and the same will become operational in the next 3 months. This will enable us to become full service supplier to our customers.

In my capacity as President of the Association of Indian Forging Industry, I recently made a presentation to the Hon'ble Minister for Heavy Industries and Public Enterprises, Government of India to set up a government funded Research & Development Centre along with product testing and validation facilities for the Indian forging industry at Pune. Our proposal is being processed and I am reasonably confident that it will be accepted by the Government.

Such an infrastructure would particularly benefit small and medium forging companies and support their efforts to address global market opportunities.

The people of Bharat Forge are its most valuable resource and it has been due to their capability, commitment and sincerity that your company has been able to deliver on its promises. As we step up our efforts to expand scales, develop new markets and benchmark with global standards, we have taken various initiatives to identify and enhance our existing human resource competencies and skills

Notable amongst these initiatives is the one to provide learning opportunities for our people at work. With this focus, Bharat Forge has recently signed an agreement with BITS, Pilani, under which employees of our company can pursue a part-time engineering course, for a B.S. (Mfg.Eng.) degree. All expenses for this three-year course will be borne by the company. This initiative has received a very strong response and the first batch of 40 successful candidates have commenced the course this month.

After the CDP acquisition, we have introduced a part time, on campus, German language course for our management level employees to facilitate and speed up the process of two way exchange, benchmarking and integration. This has greatly facilitated better communication and cross-cultural understanding.

Industrial relations at all our plants have remained cordial throughout the year and not a single day's work was lost.

I would like to re-iterate our strong commitment to good corporate governance. We are continuously striving to improve the quality of our disclosures. Members would have observed that the contents of our Annual Reports over the past few years contain more information about the company and its working.

During the year I have, on several occasions, interacted with groups of business analysts and the media. We have found these interactions useful in communicating effectively with the external environment and in helping them to gain a better understanding about our company's goals, priorities and working. All information about our company is available on our company's official website www.bharatforge.com. I would urge Members to access the website regularly so that you are fully aware about latest developments at Bharat Forge.

A few years ago I had apprised members about Pratham Pune Education Foundation which is an initiative to provide pre-school and primary school education for children in the age group of 4-14 belonging to disadvantaged, weak, poor and under privileged sections in Pune. I am glad to report the satisfactory progress of this initiative which is supported by the corporate sector and the local community.

Last year Pratham was successful in impacting the lives of about 12,000 children and over 300 young women who are instrumental in implementing the programme in Pune city. It is matter of great satisfaction that your company with other companies in the Kalyani Group and GE Foundation, USA are jointly associated and are supporting Pratham in this worthy cause.