The Annual Report containing the Directors' Report and the audited accounts for the year ended 31st March 2004 has been with you for some time and, I am sure, you have had the opportunity to peruse them.

Your company has its footprint on three continents - North America, Europe and Asia. With the global economy anticipated to continue to perform well in 2004-05, we are well positioned to take advantage of these encouraging trends.

As regards the Indian economy, the country recorded GDP growth of 8.2% in 2003-04. This makes India the second fastest growing economy in the world. This is undoubtedly a strong platform for the new Government to launch the next phase of reforms through which we can consolidate past gains and also place our economy on a path of consistent high growth.

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".

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.

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

• Growth in exports of axle beams and steering knuckles to USA with more growth expected over the next two years;
• Entry into the passenger car segment in USA and Europe with the first batch of exports to Ford and DaimlerChrysler.
• Consolidation of market presence with OEM's in China and integration into new vehicle development programmes of customers.
• 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.

• CAPEX

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.

• Research & Development

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.

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.

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

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 which has resulted in your company's excellent performance in 2003-04. I request them to carry on the good work and help us realise the common objectives and goals that we have set. Their efforts will greatly contribute not only in making Bharat Forge a global company but also towards realizing a National Vision to make "Made in India" a global brand in manufacturing industry.

Thank you!