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63rd Annual General Meeting 14th July 2010
Ladies & Gentlemen
I extend a very warm welcome to all of you. It gives me great pleasure to once again meet and interact with you at this venue.
I recollect that, at the AGM last year, I had mentioned that we were looking at the future with cautious optimism since, though the slow down was still very much evident there were certain positive signs of recovery in the economic and industry front. Today, one can say with conviction that our economy is back on track and, in fact, is recovering very fast to reach the pre–downturn levels. We have weathered the storm with prudence and pragmatism. This impressive turnaround definitely show–cases the inherent strength and resilience of the Indian economy in general and of our banking and fiscal system in particular
It is expected that the growth story will continue in the near future. Economists are predicting a GDP growth of 9% for the current year. IMF has predicted a growth of 9.5%. With the Industrial Production Index scaling upto 16%, it seems imminently possible that a strong growth is expected in agriculture and in the services sector. India is expected to be one of the fastest growing economies in the world during the next decade. One feels proud when the President of United States of America declares that Whenever the Indian Prime Minister speaks, the whole world listens to him.
In spite of this euphoric growth there are certain major areas of concern. The fiscal deficit which is presently nearly 7% of the GDP will have to be restricted to at about 4%. Inflation, especially for food items, is not only hurting the common man but, if not controlled within time, would lead to reduction in real income and purchasing power which will have an adverse effect on industrial production. Though food inflation has started to decelerate and is expected to go down substantially by the end of the third quarter due to good monsoon, it is felt that proactive and stringent steps would be required to contain the twin challenges of rising fiscal deficit and high inflation whilst, continuing to provide the necessary impetus for growth.
The financial results of your Company for 200910 are already with you and you would have noted that consequent to robust sales we recorded an increase of 86% in profit before tax. I believe that this growth in a year of economic uncertainties, is commendable. I must extend my compliments to the management team.
During the early part of the year, the automobile industry was badly affected by the downturn and sale of four–wheelers showed a huge decline. Your Company therefore concentrated and succeeded in making aggressive forays in the replacement market, specially in the two–wheeler segment, which to some extent compensated for the decline in sales in the four wheeler segment. However, subsequently, the automobile industry made a remarkable recovery, mainly due to certain fiscal initiatives taken by the Government. Your Company was a beneficiary of such initiatives . Consequently, the automobile business of your Company grew by a healthy 13% during 2009 10.
In the Industrial Battery Segment, though the telecom sector had a de–growth of 35%, your Company could maintain a healthy growth in railways, power, traction and other infrastructure segments. The Fast Moving Industrial Battery Segment and the UPS Segment also recorded handsome growth rates. The overall growth in industrial batteries was 10% both in terms of volume and value.
Most of the battery manufacturers in the country depend on imported lead which is the major raw material for the product. The prices of lead are extremely volatile leading to uncertainties in costs and supplies. Two years ago, your Board took a strategic decision to invest in two smelting units by way of backward integration to assure itself of uninterrupted supply of Lead. These two companies, Chloride Metals Ltd., and Leadage Alloys India Ltd., have since upgraded their facilities and are regularly supplying quality recycled lead to Exide. The Companys significant rise in profits for the year was partly attributable to the reduction in the impact of volatility of lead prices in the international market.
Last evening the Board of Directors approved the un–audited financial results for the 1st quarter of this year and I am happy to inform you that we have achieved 30% growth in Gross sales as compared to the same period in the previous year. The Profit Before Tax is Rs 249 crores which is an increase of 30% over the previous year. Sales of automotive batteries registered a growth of 26% compared to the sales for the corresponding period in the previous year. Similarly, sales of industrial batteries also grew by 25% during the last quarter over the corresponding period in the previous year.
Due to an unanticipated growth in the automobile industry since the latter part of last year, your Company, in spite of producing to nearly full capacity, could not fully cater to the market demand and unfortunately had to lose its market share in certain segments. Looking at the buoyant market your Company has accelerated the capex plans for increasing capacities in its existing plants. A new plant also is being set up in Ahmednagar, Maharashtra where work is in full swing and production is expected to commence from August 2010.
The automobile industry is expected to grow over 12% annually in the next 5 years. India, as stated in the Directors Report, is emerging as a small car hub and every major global player is investing in manufacturing facilities not only for catering to the growing domestic market but also for exports. This in effect would mean that the Indian Battery Industry will grow by more than double in the next 5 years. This would also usher in a regime of quality consciousness and stringent quality controls which would ultimately make the batteries manufactured in India at par with international standards.
I am happy to state that the vehicle manufacturers, which include several multinational corporations with stringent quality parameters, have chosen to partner with Exide for almost all the new vehicles launched or proposed to be launched in the near term. This is a true testimony of the reliance and faith reposed in our products and dealings by our customers.
Growth in the automobile industry means not only increased demand from the automobile manufacturers but as a collorary leads to high demand in the replacement segment. Your Company, in order to penetrate in the market further, and to provide better after sales service reorganized its marketing and distribution set up through the Hubs and Spokes model. Presently we are already operating from over 200 locations. During the current year we propose to increase our reach further and be present in more than 250 locations across the length and breadth of the country. Several other marketing initiatives are being taken to increase the customer base, including those in the rural and semi–rural markets. India will have to usher in a new Green Revolution and your Company is gearing itself to meet the requirements of the agricultural sector in this respect.
As far as the Industrial Battery Segment is concerned, the prospects look bright. The massive spending by the Government in the infrastructure sector, the second telecom boom and the investments planned in power plants, would lead to an increase in demand for your Companys products. Though imports, mainly from China, remain a source of concern, your Company is confident that due to its better quality and prompt after sales service, it would continue to be the preferred suppliers, for all major players in the infrastructure sector.
Exports which showed a decline last year due to the depressed market conditions resulting out of the economic downturn has also started showing signs of improvement with the gradual recovery in the economies of the West. Exports of automotive batteries during the last quarter increased by 70% and that of industrial batteries by 68% compared to the previous year.
One of the major strengths of your Company is its uncompromising thrust towards quality and quest for innovation. The R&D Division of the Company requires special mention due to its continuous efforts not only to strive for better quality but also for its innovation in both finished products as well as raw materials & components. This results in introducing technologically superior products at competitive costs. I also thank your Companys foreign collaborators from whom it receives continuous support and inputs for upgrading technology and processes. As regards new generation storage power facilities, Exide has already launched its e–bike batteries and is evaluating technologies for production of lithium–ion batteries for automobiles. Plans for introduction of new products, including batteries for hybrid vehicles, are also under active consideration
Exide is conscious of its responsibilities not only as a manufacturer of quality products, transparent dealings, Customer Centric service, good governance and a preferred employer, but also as a good corporate citizen. Exide continues to sponsor and espouse causes for upliftment of the less fortunate and in generally improving the quality of life and the environment. We firmly believe in nurturing environment and creating sustainable values.
Considering the overall economic scenario and the various initiatives being taken by your Company, I am confident that Exide would endeavour to increase its shareholders wealth and play a significant role in contributing to the socio–economic growth of the country. I am thankful to my colleagues on the Board, our employees, and to all of you who are part of the extended Exide family for your support during these exciting times. We will continue to draw upon your support and goodwill, as further challenges emerge, in the business environment around us, and together we are determined to become a more efficient and quality–oriented organization.
Chairman Exide Industries