On behalf of the Board of Directors and my own, I welcome you all to the 2001 Annual General Meeting of Sona Koyo Steering Systems Limited. The notice concerning this meeting , the audited accounts of SONA, along with the Directors' 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, after achieving a growth rate of 6.4% in 1999 - 2000 was projected to grow at a high rate and stabilize at + 7% growth rate this year Instead, the GDP growth rate this year, Instead, the GDP growth rate showed to 6% in 2000 - 2001 and continues to be sluggish.

In his Budget Speech of 28th of February, 2001 the Hon'ble Financial Minister did present some bold steps of reducing excise duties on Cars from 40% to 32 % to spur growth in Car Sales; reduced Dividend Tax from 20% to help boost the equities markets; lowered deposit rates by 1 % to reduce interest rates and promised that his Government would bring to Parliament flexible labour legislation. The euphoria his budget speech created, was, however short - lived. Scam after scam destroyed the ' Good Feel' factor that the budget was to create. This coupled with an economic slow down in US, Europe and Japan affected high growth of software services and inflow of FDI which is impacting the Indian Economy's Growth prospects. The recent political failure of the Agra Summit to produce even a joint statement and UTI scadal are worening these prospects. It is now expected that with a reasonably good monsoon, the GDP Growth rate may be around 5 % for the current year.

Economist are now forecasting the future growth rate more realistically , by projecting GDP Growth rates to be around 5 % to 6.6 % in the next five years with the service sector leading this growth by contributing to 50 % of the economy. This , in fact is a positive indicator for the automobile industry, as the main demand drivers for Personal Transportation are the expansion of the Services Sector and availability of cheaper finance.

With this background, SONA is forecasting the sale of cars and MUV's to increase from 717,000 to 900,000 units over years as against earlier forecast of 1.2 million units Thus Sona as a Tier 1 supplier of Steering Systems and Axle Assemblies is planning OEM sales to grow only by 5 % annually instead of the earlier 10% ~ 12%

Sales of passenger cars, including MUVs surged 45% in 1999-2000 to over 760,000 units, declined by 6% to 717,000 units last year. In fact the economy ca segment, which is of particular importance to SONA declined by 21%. The economy and medium car segments together declined by 11% from 558,000 to 497000 units and this accounted for 90 % of our market base last year.

In the last year, SONA budgeted its sales to increase from Rs. 225 crores to Rs. 260 crores but the actual sale declined to Rs. 214 crores. This resulted in the profit after ta declining shaply from Rs. 907 lacs to Rs. 178 lacs

In the first four months of the current year (April - July 2001 ), SONA's sales were Rs. 69 crores against Rs. 72 crores last year while profit after tax was Rs. 140 lacs against Rs. 4 lacs.

Despite the decline in profits last year, SONA's management has recommended to maintain the dividend at 25 % because the current decline in sale are as per SONA's efforts to diversify its market portfolio to other OEM's and entering into the Indian after market will commence in Q3 and Q4. If new product launches are, as per schedule sales this year will be of Rs. 225 crores, which is equivalent to the sales achieved two years ago.

To improve SONA's bottom line, besides the programs of TQM and TPM, being led by Mr. K. M. Deshmukh, which are improving operational efficiencies, SONA has launched a major supply chain procurement cost and innovatory reduction program under Mr. P. V. Prabhu Parriker leadership. This project is being executed with the help of the consulting firm A. T. Kearney.

A. T. Kearney in their recommendations to SONA for unlocking Shareholders' value, besides recommending of markets and cost reduction in the supply chain, have also recommended that the investment of Rs. 13.25 crores made in promoting Group Companies be divested, since the performance of these Companies are not dividend any dividends.

In fact, for the Cold Forge Company, SONA has provided additional loan or RS. 6.56 crores along with Corporate Guarantees to Lenders. These Investments, along with the repayment of Loans / Corporate Guarantees, stated above, are being taken over by Sona Investment Limited, a Company in which I have majority shareholding. This disinvestment will ring to SONA Rs. 16.25 crores in cash and repayment of loans or Rs. 6.56 crors, which will reduce SONA's interest cost by over Rs. 2 crores annually.

With the eintiatives SONA should bounce back to 1999- 2000 levels. The diversification of markets especially to OEM's other than Maruti, entering into after market and exports to KOYO, along with major cost reductions in procurement and localization of parts are actions to which my whole time Directors, Mr. P. V. Prabhu Parriker, Mr. K. M. Deshmukh and Mr. Yoshitaka Akiyama and I are committed too.

With India joining WTO, the removal of QR and reduced import duties, the automobile and component industry will under major restricting. The car manufacturers strategy will be introduce newer models rapidly which they will do with CKD imported components. This new scenario will pose major difficulties to Indian Component Industries.

Faced with the reality, the booming automotive market of 1990's with endless growth has one, that the customers will put continuos pressure on margins, it is imperative that SONA diversify its markets and make the domestic OEM market a smaller part of its total sales. The after market in India and globally, along with sales to KOYO must become the growth drivers of SONA.

I am happy to inform you that Mr. Kiyoshi Takeda, SONA's Director has recently been appointed CEO of the $ 1 billion Steering Business of Koyo Seiko Co., Ltd., as its Senior Managing Director Managing Director On behalf all of us, I extend congratulations to Mr. Takeda, I am working very closely with him to get his hel to diversify SONA's mission.

Finally, SONA is also preparing to implement the SEBI's Corporate Governance Code and your Board has appointed CII to help in the implementation of the same. This will ensure that SONA becomes a Performance Oriented Organization whose main onjectie is to enhance shareholders' value.

I wish to place on record our sincere thanks to our main customer and partner Maruti Udyog Ltd. and Koyo Seiko Co. Ltd. Also thanks to Hyundai Motors (India ) Ltd. Toyoto Kirloskar Motors Ltd. , Tata Engineering, Hindustan Motors Ltd., Eicher Motors Ltd., and Mahindras for their business support.

My deep gratitude to the members for Sona parivar, for their dedication in making SONA a strong enterprise, and to our Venders, Bankers and Financial Institutions for their support.

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