16th Annual Generation Meeting of Sona Koyo Steering Systems Limited,
Held at, FICCI Golden Jubilee Auditorium, Federation House, Tansen Marg, New-Delhi 110001 on 8th September, 2000.

On behalf of the Board of Directors and my own, I welcome you to the 2000 Annual General Meeting of Sona Koyo Steering Systems Limited. The notice convening this meeting the audited account of SONA and the Director's report have been with you for sometime and with your permission, I take them as read, I TRULY APPRECIATE YOU HAVING TAKEN THE TIME TO BE WITH US THIS MORNING.

The Indian Economy in the last year has shown that, despite the economic burden of Kargil, Orissa Cyclone and the increase in international oil prices, the economy was able to grow at 6.4% demo5nstrating that the economic momentum is being generated for continued good performance. The diversification in the economic activity for out agricultural dependant economy to a services dominated economy with excellent expert growth rates, should see the GDP growth rates to be around 7 - 75% for the next three to five years. It is hoped that the leadership in Government will contribute by controlling the fiscal deficit and introduction of VAT, so that natural market expansions are generated. This has been the global experience, be it South East Asia, Eastern Europe or Latin America.

The Global experience also shows that Automobile Industry, when provided incentive through a reduced tax regime helps expand markets rapidly, thereby creating large scale employment. In the US, the automotive industry provides 19% of the employment and represents a healthy 9% of its GDP.

The Automotive Industry in India, currently, has capacity of 1.2 million cars and utility vehicles. Last year with sales at 7,60,000 vehicles, there is an urgent need to lower excise duties so that the capacities are utilized fully. The Automotive Industry is liking forward to the announcement of the Automobile policy, which I hope will encourage the industry to invest in R&D through incentives (which are WTO compliant) and by encouraging large volume production of small cars (as they do in Japan) , where Indian has demo5nstrated its ability to be the lowest cost producer in the world.

Whilst last year, the automobile passenger vehicles sales grew by 56% it is expected that this year the growth is likely to be around 10% However, the first five months (April-August) have beet seen any growth in the sales over last year. The sales for this period was 2,42,507 compared to 2,41,982 last year. The stagnancy in vehicle sales is being attributed to restructuring of state Sales Tax and implementation of Bharat II emission norms, both of which has increased the prices of vehicles, Maruti, our main customer last20% sales during the same period with sales dropping from 1,66,716 to 1,31,025 vehicles. It is forecast that, due to general buoyancy in the economy, the sales growth of automobile will pick up from this month onwards. The schedules to the schedules to the Automobile Components Industry by the vehicle producers, is an indication that this is likely to happen.

Sona's sales in the first quarter was marginally higher at Rs. 54.56 crores compared to Rs.49.12 crores. However, profit performance was very poor at Rs. 0.8 crores compared to Rss. 1.8 crores due to a larger than the expected imports along with the adverse foreign exchange rates and poor profitable product mix mainly on account of lower Omni Van sales.

Sales in the months of June and July have been very poor and it was only in the month of August that the sales have been to improve in the first five months (April-August) the sales were Rs.89 crores which is almost the same as last year (Rs.90 crores) As mentioned earlier, sales are expected to pick up from this months and based on customers' plans, expect Sona's sales, for the years to be Rs. 260 crores compared to Rs. 226 crores last years.

It is expected that these types of market fluctuations will become the norm in this industry and thus Sona must prepare itself to face these market conditions with a proactive strategy, rather than be reactive, as Sona has been in the past.

I would lie to now share with you my vision of the transformation that Sona needs to go through and would like to begin by saying that "this new millennium brings new challenges along with greater opportunities" for those who have the leadership abilities of innovativeness and risk taking, so as to "leap frog' in to the global market space. We at sona has developed a Business Strategy to ensure that our leadership position is retained, not only in India, but also for Sona to emerge as a niche global market player.

The First Mea Trend that I see is Globalization. The implication of this , in the new borderless world, we lie in, is that Global Brounds are sought for globally with the result that marketplace of customer and suppliers are becoming global. In the Automotive Industry global Brands of GM, Fort, Toyota, Suzuki, Honda etc. are sought by customers globally and thus these Brands will be available globally. It also follow that component supplier brand like Delphi, Vision, Bosch, Aisin Seiki, Koyo etc will follow the Automotive companies around the world and also became global brands. These supplier Companies have customers globally who will source their requirements globally. Ona has the strong global Koyo brand with it. Koyo is today the Number 1 Steering gear ;maker in the world in the number of steering gears sold ahead of TRW ,Delphi and ZE.

The Second Mega Trend, I see, is Mergers and Acquisition. This trend is ensuring consolidation and creating alliances in order to reach the global markets. American companies are merging with European or Asian companies to support each other in their respective markets with the other's products in the Automotive Industry, excellent examples of mergers & Acquisition are Daimler Ctrysler, Renault Nissan, Ford Mazda, GM-Suzuki, GM- Fiat etc where global relationship have been built. This trend will also follow in the Auto Component Industry, to create the mega suppliers at the Tier-1 level who will in turn, develop the partnership relationship with the automotive makers. Koyo has recently acquire the Renasult and peugeot Steering Business and will soon create alliance with other in US ad Japan to continue to retain it the position as the leader in the Steering Systems Business.

The Third Mega Trend I see is the Network/Bandwidth availability which is the Backhone, on which a Business Revolution of the New Economy is taking place. The World, including India, is getting wired like never before, The earth is being encircled by low level satellite orbiting it to create a wireless network this Electronic Networked World, is creating the opportunities of a global marketplace to sell to buy, to out source none-core business, so that Business @ speed of thought, as forecast by Bill Gates, will be a reality. And it is this third mega trend that truly requires a paradigm ship in businesses and in leadership of businesses to seize the opportunity @ the speed of the thought. For this creates the opportunities to have more customer global customers, more cost effective global suppliers of products and service, where speed and not size, will determine the winners.

In the automotive industry, the opportunity of this Bandwidth availability is being aggressively pursued by the creation of Automotive Exchanges an the lead has been taken in the USA market space. In India too, eight Indian automotive companies are planning for an exchange. To prepare for the B2B era on the Exchange or Market Space or Netmarket, whatever they may be called, is the challenge that all automotive industry, both the Car/Vehicle makers and component makers need to address and prepare for immediately.

I am very proud to say that Sona has taken exciting initiative to prepare itself to operate in this global digital world. Let me now unfold Sona's strategy.

Sona is a New Business Model, in view of the changes that are being brought a by the above mentioned trends. In the New Business Model, Sona will create greater competencies in its core business and outsource the non-core activities.

Whiles, Sona will use Information Technology to e-enable the Company by implementing Oracle e-biz solutions of ERP and e-procurement, it will outsource the management of IT network, an hosting of the solutions to an Application Service Provider F(ASP). Whilst Sona has implemented the Collaborative Product Commerce solution Windchill of Parametric Technology Corporation in-house (incidentally Sona is the first Auto Component Company in India to do so), it will outsource the management, netork89ing and hosting to the ASP. Whilst supplier of Sona will be internet connected to design and develop new products, using Sona's Windchill, the in-bound loistics will be outsourcers to an alliance partner who will ensure just in time suppliers to our plants, which will have a great impact on inventory reduction. Sona is working to aggregate the non-production bought out part with an outsourcing alliance partner to reduce cost of procurement of these items.

This new Business model will ensure that Sona concentrates on its internal Competency to enable Sona to become Customer Centric by providing highest Quality, low cost products on time and that the new products are developed in time, in a collaborative mode with its suppliers, customer, on-line, to save cost by using legacy knowledge and experience.

And Sona, to build its core competencies and to be "Best In Its Class" has, as a strategy introduced TQM, under the guidance of Prof. Tsuda of JUSE, to complete the Business Process Reengineering exercise for all its Process, be they Product Development, Design, Manufacturing, Quality etc. These coupled with the Policy Deployment Tolls will make the Company align itself in the one direction of Customer Satisfaction.

The TPM program under the guidance of Mr. Yamaguchi of JIPM, is preparing Sona to bring its overall equipment efficiency up from 56% to 90% by Dec, 2001. This will mean almost doubling output without additional investments in equipment and manpower.

These Two initiatives of TQM & TPM are creating an environment in which the development of our Human Resource is taking Prime importance, through extensive education and training, as never before.

Finally, for aggressively planning our product portfolio strategy for the next 3 to 5 years, I have appointed the Consulting firm of A.T. Kearney to help the Top Management develop a Strategy and recommend the Re-structuring of the orgaization to execute the strategy. The product portfolio will address both domestic an export markets and will set forth an export commitment by Sona and Koyo, as it is expected that Koyo's global presence will be used y Sona.

Whilst sharing Sona's strategy, I would like to assure all the Shareholders of Sona, that I am committed to lead our Company, in this new millennium, to create shareholders delight. I believe, in every corporate history, there comes a window of opportunity, if captured, can create Quantum changes in the fortunes of the corporation. I believe this 'window' has come now for Sona, due to the Mega trends, that are creating the challenges and offering opportunities and I intend for Sona to seize this moment.

I wish to place on record our sincere thanks to our main customer and partner Maruti Udyog Ltd., and also to Hyundai Motors (India) Ltd. Toyota Kirloskar Motors Ltd., Tata Engineering, Hindustan Motors Ltd., Eicher Motors Ltd., and Koyo Seiko Co. Ltd.

My deep gratitude to the members of Sona Parivar, who are fully dedicated to market SONA as strong enterprise, and to our Vendors, Bankers and Financial Institutions for helping us in this direction.

Last but not the least, my sincere thanks to my colleagues on the Board for their valuable advise and supports, and to our esteemed Shareholders for their confidence in the management of the Company.