Speech by the Chairman,
Mr. Sanjay G. Hinduja
at the
Forty-Seventh Annual General Meeting
on September 25, 2008
My dear fellow Shareholders,
On behalf of the Board of Directors and on my own behalf, I extend a very warm welcome to all of you at the 47th Annual General Meeting of the Company today.
The past twelve months have witnessed extreme turbulence in global markets. The sub-prime crisis in USA coupled with the unprecedented rise in crude oil prices have affected banks and financial institutions and strained global economies in the developed and developing world. The recent collapse of well-established leading financial institutions in the USA and the crisis in the US economy is likely to negatively affect the world economy. The shadow of recession and inflation hangs over the US and some European economies. The next few months and years are likely to be difficult with possible liquidity crunch and rising interest rates that will affect most sectors of business.
The Indian economy which was witnessing a GDP growth rate of around 9% in the last few years, has, of late, been facing challenges in terms of sharp spikes in the crude oil prices, inflation and interest rates. To moderate the inflation, the Reserve Bank of India has taken key policy initiatives. Foreign portfolio investments into the country have come down sharply. However, inflation as in other countries has increased beyond ‘tolerable levels’ as per the RBI. Accordingly, the cost of finance in general has gone up. Further, the Indian currency has been depreciating against the US Dollar. However, the strength of the domestic demand is expected to keep the Indian economy on a relatively stable growth trajectory, even though GDP growth rates may decline to about 7.5% . Sectors such as steel, cement, power, construction, mining and metal sectors are expected to continue to do well in the near future. Development of infrastructure continues to be a major priority for the Union and State Governments and would be the mainstay for future growth and further strengthening of the Indian Economy.
Against this backdrop, in 2007–08, the total revenue of the Company increased by 25% to Rs. 833 crores. However, growth in the profit after tax at Rs. 25.13 crores was only about 9% due to increased cost of raw materials and cost of finance.
The Lubricants Division recorded a growth of about 5% to Rs.420 crores, because of increase in price of base oil, a key raw material and moderation in the growth of automotive sector. The Division continued its focus on co-branded top end Diesel Engine oils with Ashok Leyland and Motor Cycle oils segment. In the motor cycle oil segment, Gulf Pride 4T Plus oil with ‘Pentatec’ feature has achieved a good brand recall with the recent TV campaign on all the major regional channels, which many of you must have watched. Despite the volatility in the crude oil prices, our Company managed to source base oil ( which nearly doubled ) and other key inputs in timely and prudent manner to avoid runaway cost escalations. Timely pricing action also helped to maintain our profit margins.
The Industrial Explosives Division revenue increased by 27% to Rs. 214 crores. The Division continued to make progress by focusing on non-coal, trade, export and metal cladding segments. The mining boom in the country is increasing the demand for explosives and accessories. The Division is well prepared, by augmenting the capacities, to exploit the opportunities. Demand for the Division’s products from private mining and infrastructural activities have been on an upswing. The Division has been receiving good response for its Electronic Detonators and Emulsion Boosters introduced commercially in the last 2 years.
The service income of the Contracts Division at Rs. 141 crores grew by about 120% as compared to the previous year. During the year under review, the Division obtained mining service contracts from Northern Coalfields (a major subsidiary of Coal India) for its Nigahi Mine. The Division has an extremely healthy order pipeline of around Rs. 900 crores to be executed in the next 3 to 5 years. The Division which was operating mainly in the coal and iron ore sectors has recently taken up manganese ore mining contracts in Orissa. The Division has further strengthened its business prospects by taking up construction contracts of the Outer Ring Road project works at Hyderabad and bauxite mine infrastructure project for the Aditya Birla Group.
The Speciality Chemicals Division which has commenced production in June 2006, recorded a turnover of Rs. 58 crores recording a growth rate of 70% over the previous year but was weak on bottom-line due to escalation of raw material costs which could not be recovered in the finished goods prices. This affected all domestic manufacturers of cephalosporins. The Division is working on adding more molecules to balance its product portfolio to improve profitability.
I am pleased to announce that the work on the development of 40 acres at Yellahanka in Bengaluru has been initiated after obtaining Karnataka Government and local approvals. We have also applied for and received the consent of the Karnataka Government for conversion of 30 acres into an IT-SEZ. The Union Government approval is awaited for completing the SEZ status.
Application for a Knowledge City at Hyderabad covering approx. 100 acres is being processed by the Government of Andhra Pradesh, and we expect to fulfill all conditions shortly.
The coming year is likely to be challenging because of the economic scene. However, we are optimistic about the overall growth of our businesses. Our contract mining business is well poised to grow due to demand for Coal and other mining products going up, particularly from the power sector. The Government of India is pushing for increasing electricity generating capacity. Demand for mining service is likely to increase significantly. For our Explosives business, we are hoping to conclude better long-term contracts with Coal India. We are working with the other big producers for more remunerative terms and conditions. Our Lubricants business is expected to maintain its growth.
Ms. Vinoo Hinduja, Mr. V. Ramesh Rao, Mr. P. N. Ghatalia and Mr. M. S. Ramachandran retire by rotation at this meeting and are eligible for reappointment. Individual profiles of these Directors have been circulated to you as part of the Annual Report. Please join me in welcoming them on reappointment.
On behalf of the Board of Directors, I would like to place on record our appreciation to the shareholders, customers, vendor partners, fixed deposit holders and bankers for their continued support and confidence in the Company. I am also grateful to the Central and State Governments for the assistance and cooperation extended to us.
The growth and development taking place in the Company, has been due to its people and their intrapreneurial spirit by undertaking challenges. The enthusiasm and unstinted efforts of the employees have enabled your Company to grow in spite of difficult economic factors and severe competition. I take this opportunity on behalf of the Board to thank each one of the employees. | 
