IMF's World Economic Outlook released in April 2002 states that the World economy recorded real GDP growth of 2.5% in 2001. The global economy in recent times has been powered by the US economy. Growth in the US economy in 2001 was only 1.2% as compared with 4.1% growth in 2000. The large drop in GDP growth in the US is perhaps the biggest in any two consecutive years in the last 25 years. IMF has forecast the World economy to grow by 2.8% in 2002 and by 4% in 2003. This translates into relatively better medium term prospects. As regards the US economy, there are some signs of a revival. We hope that this will gain momentum in the next few months.

The World Bank has ranked the Indian economy as the 13th largest in the world. GDP growth in 2001-02 was 5.4%. This makes our economy among the fastest growing particularly among developing countries. In reality however, 2001-02 was one of the most difficult for us and for our economy. Global terrorism apart, the attack on Parliament, the violence in Gujarat and the tension on our international border all took their toll on the economy's performance. Industrial production declined from 5% in 2000-01 to 2.7%. The manufacturing and capital goods sectors were particularly hit with the latter recording a negative growth of 4%. Depressed demand and lack of consumer confidence made market conditions extremely difficult. Bharat Forge's major customer segments were all affected and turned in flat to negative growth.

Shri Jaswant Singh took over as Finance Minister last month. While assuming office, he re-iterated the strong fundamentals of the Indian economy. According to the Finance Minister, there is a need to instill more confidence in domestic and foreign investors. We therefore expect that second generation economic reforms will be re-initiated resulting in the economy returning to reasonable growth of 6 - 6.5% in the current fiscal.

The government's commitment to revive the economy is evident from the Prime Minister's announcement of an 8 point economic package aimed to achieve a compounded economic growth of 8% during the 10th Five Year Plan. We welcome the Prime Minister's initiative and the Finance Minister's acknowledgement of the hardship to middle class taxpayers by restoring some incentives for savings. These measures were expected to contribute in reviving demand and bring back the "feel good" factor. The unsatisfactory monsoon so far however, has dampened sentiment. We hope for a revival in the monsoon to provide a stimulus for agricultural production and economic growth.

While we are optimistic about the revival in domestic and global economies, your company continues to remain vigilant and is prepared to confront the challenges of adverse market conditions. In the past we have demonstrated our resilience. Our strategies have seen us through the most challenging situations. Proof of this is reflected in our performance which, even at the most difficult of times, has been much above industry average. I would like to re-iterate to Members that we are committed to maintaining our leadership position and in building on the breakthroughs that we have made in the international market.

Growth in India's manufacturing sector has the potential to double from last decades average of 6% to 11% per annum; value added from manufacturing can increase to Rs 150,000 crores by 2006; and employment in manufacturing can increase by about 13 million. Some of the steps that the government can take to facilitate this include a complete revamp of labor laws; eliminate market distortions by abolishing preferential policies; accelerate privatization of PSU's; undertake financial and power sector reforms; and simplify procedures to reduce administrative and transaction costs.

During the past year, I have personally made presentations at several industry platforms where I have taken the opportunity to outline the steps that need to be taken to enhance the competitiveness of Indian manufacturing industry. In my opinion, the global trend is clearly towards manufacturing moving to low cost countries like India, China, Malaysia and Thailand. Our experience is that in spite of the tremendous disadvantages that we face, Indian companies are inherently competitive. Proof of this is that several large Fortune 500 companies have started sourcing from India. However, our competitors are closing in on us. Both the Central and State governments therefore need to take proactive steps that will enable manufacturing industry to take advantage of the global trend of outsourcing. While there has been some progress in implementing industry's suggestions, the pace of change has been slow. We would like to see a greater sense of urgency to facilitate faster economic growth. If this is done, India still has the chance to be the next "workshop of the world."

While the potential is there for all to see, it is necessary for individual companies in our industry to take steps that will increase their competitiveness. We need to look inwards and make improvements. For example, we need to implement world class processes; apply technology and innovation to increase productivity and efficiency; make speed to market our USP; focus on developing our human resources; constantly study our competitors; and create a strong brand image for our company and country.

It is a matter of great satisfaction for me that Bharat Forge has implemented many of these measures. I am particularly happy that your company is now highly regarded by both customers and competitors in the international market. In the process, we have built a strong brand image. For example, Members who may have studied our Annual Report would have noted that our market share for the range of axle beams that we export to the US now exceeds 50%. In simple terms, every second heavy truck manufactured in the US runs on a "Made in India" Bharat Forge axle beam.

Power is a critical input for all manufacturing industries. It was therefore a matter of great concern when a major part of the state was plunged into darkness during the last fortnight of May 2002 and again last week. The estimated loss on account of production in industries surveyed in Pune was about Rs 30 crores per day. More dismaying is the fact that several of these companies could not meet their delivery commitments to customers. This would have adversely affected their reputation for reliability. Customers in international markets, particularly in the automobile industry, are most unforgiving for any disruption in supply of components.

If Maharashtra is to attract large investments and be a preferred base for international sourcing, the state government will have to take immediate measures to augment power supply. The state must facilitate investments in generation, transmission and distribution of electricity. Reliable, good quality and reasonably priced power is essential for our industries to compete in global markets. I appeal to the government to give the power sector the priority that it deserves.

• We have been able to expand our overseas customer base, both in terms of user industries and geographical markets as follows:
  
  a. Your company had started supplying components used by the oil and gas exploration sector in the US in 1999-2000. Sales to users in this industry have grown to Rs 19.3 crores in 2001-02 and now account for 18% of our total exports.
  
  b. We have added 10 new customers taking our total overseas customer base to 21 in March 2002. Our list of customers now includes DaimlerChrysler, Renault Vehicle Industries, Caterpillar Perkins etc.
  
• We continue to maintain our strong presence in the US heavy truck industry to which supply of engine and axle components during 2001-02 accounted for 64% of exports. Your company has an over 50% market share for axle components in this segment.
  
• In January 2002, your company concluded an agreement for supply of forgings to Dana Corporation's Spicer Europe Limited operation in Kirkstall, Leeds, UK (Kirkstall Forge Division in England and Wales) (Kirkstall). Bharat Forge has assumed Kirkstall's responsibilities as a supplier to the Cameron Division of Cooper Cameron Corporation for gate valve body forgings and choke body, nut and bonnet forgings. Under supply agreements with Dana, Bharat Forge will supply Dana with certain forgings used by its Kirkstall axle operation and its commercial vehicle axle operations in North America. Supplies under the above contracts will be made from our manufacturing facilities at Mundhwa, Pune.
  
• A leading Chinese Auto OEM has awarded Bharat Forge a large contract for supply of engine components. Your company has started supplying components to this OEM from July onwards, almost 2 months ahead of plan.

As Members will observe, your company has made satisfactory progress in becoming a global supplier. We now have a healthy export order book and are confident of notching up an over 50% growth in exports in 2002-03.

• Strengthen and further re-enforce our core business.
• Pursue prudent and aggressive cost management.
• Be closely tuned in with our customers and build customer loyalties.
• Enhance competitiveness through a technology led approach.
• Bolster relationships with all our stakeholders.
• Constantly search for new avenues for growth to strengthen our company.

Innovative business practices that we have adopted enabled your company to successfully weather the storm last year. We will pursue with these initiatives and continuously upgrade our efforts.

The market situation in our domestic customer segments appears to be gradually improving; though it may still be awhile before demand is fully restored to peak levels. On the export front, I have already shared various developments with you. I am optimistic about our export performance during the current fiscal and beyond. Exports will, in fact, become the key driver of your company's future performance.

• 27% growth in total sales - from Rs.112.56 crores to Rs.143.36 crores
• 120% growth in exports - from Rs.20.20 crores to Rs.44.45 crores
• 354% growth in profit before tax - from Rs.4.03 crores to Rs.18.29 crores
• 207% growth in net profit - from Rs.4.03 crores to Rs.12.37 crores
• 216% growth in EPS - from Rs.0.99 to Rs.3.13

I am optimistic that we will be able to sustain, and perhaps even step up this momentum, during the remainder of this fiscal and beyond.

We are now a largely de-layered organization with incentive driven wage structures. In April 2002, we signed a three-year wage settlement with our workers union, which will be effective from 1st July 2001. The agreement is aimed at motivating employees so that they can contribute effectively to the working of the company. The settlement focuses on improving productivity and equipment utilization, and in reducing down times.

Your company's total staff strength reduced from 2865 in March 2001 to 2521 employees by March 2002. We will continue our manpower restructuring in the current year. At the same time, emphasis on skill and performance enhancement training that has been an important focus area for us over the past few years will continue to receive considerable attention.

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.

I take this opportunity to express my sincere thanks to the government of India, the government of Maharashtra, and the financial institutions and banks for their encouragement and support to our company. I would like to thank our collaborators for their help and assistance.

I sincerely appreciate the contributions of all our employees and request them to carry on the good work.

Thank you!