On behalf of the Board of Directors and my own, I welcome you all to the Financial Year 2004 Annual General Meeting of Sona Koyo Steering Systems Limited. The notice convening this meeting, the audited accounts of SONA, along with the Directors' Report have been with you for some time and with your permission, I take them as read.

I TRULY APPRECIATE YOU HAVING TAKEN THE TIME TO BE WITH US THIS MORNING.

This is the second year when SONA has produced an Annual Report based o SEBI's guidelines, which includes detailed Management Discussion Analysis and Code of Corporate Governance. I hope, you have found this information useful. I will, therefore, refrain, from repeating may of the item dealt within the report, since the explanations given therein are quite exhaustive.

THE DEMING PRIZE

The Financial Year F-04, has been a major milestone year in Sona's Quality Journey. Our Company was awarded the Deming Prize for Quality in November 2003. On behalf of SONA, I received this 2003 Deming Application Award on November 13, 2003 in Tokyo at a very impressive ceremony where I was handed the Deming Certificate and the Medal by Japan Union of Scientists and Engineers' Chairman Mr. Hiroshi Okuda, who is also the Chairman of Toyota Motors.

I want to take this opportunity to applaud the efforts of my Senior Management under the leadership of Mr. Kiran Deshmukh, Chief Operating Officer and supported by Mr. P.V. Prabhu Parriker and Mr. Y. Akiyama. Special thanks to the Quality System Secretariat of Mr. R.B. Singh and Mr. Dinesh Sharma. And of course a Big Thank You to all my colleagues in each and every Division and Department of the Company.

Sona Koyo Steering is the first Company in North India to receive this recognition and the first Joint Venture of Maruti to have achieved this milestone.

This first major milestone in our Quality Journey has transformed Sona Koyo in its Management Practices and created Robust Processes, which will support the Company's future Vision of "Becoming a Supplier of Choice to Global Customers".

I sincerely thank you all, for the encouragement and support given to the Board and Management of SONA.

The Indian Economy

Let me now turn to the Indian economy and share with you the impact it is likely to have on the Automobile Sector in which we operate.

India is now back on a high growth trajectory. All economic indicators are buoyant and there is a great amount of optimism that this can be sustained. The growth rates achieved in the last year ranks as one of the highest growth rates in the world, second only to China, amongst the large economies. The industrial sector recorded a robust growth of 6.7% and is expected to maintain the momentum in the current year.

If we as a nation could get our act together and increase our real national income by over 7.5% ~ 8% every year for the next 10-15 years, I have no doubts whatsoever that we will be regarded as a global super economic power that is respected by the polity of nations.

India's foreign exchange reserves are at a very healthy $120 billions, which now provides us the opportunity to ease up the controls on capital account which will enable Indian Companies to acquire assets as well as companies overseas - and thus help to create a global footprint for our Corporates.

Globally, there are several welcome indications. Oil prices softening, so are steel prices. I am delighted that our Finance Minister has reduced custom duty on steel from 15% to 10%.

There are however four areas of concern, which the Government needs to still address:

• Fiscal Deficit;
• Interest Rate hardening;
• Inflation; and
• Quality of Infrastructure

India has the privilege of being led by the DREAM TEAM headed by our Prime Minister Shri Man Mohan Singh, Finance Minister Shri P. Chidambaram and Planning Commission's Deputy Chairman Dr. Montek Singh Alhuwalia, leading this nation and I am sure that they recognize the action required to ensure discipline in the area of fiscal deficit, which would have a positive impact on Interest Rate and Inflation, plus to make a major break through in the timely implementation of the infrastructure projects.

Notwithstanding the above referred concerns, I am optimistic and believe in the resilience of our economy and the people who can surmount all odds and come victorious, as has been demo5nstrated amply in the last decade, because the fundamentals of our economy are very good. Thus, I support the views of our Finance Minister that the current year's GDP Growth Rate will be between 6.5% and 7%, which will ensure continued growth in the Automobile Sector.

The automotive industry and your Company's performance

SONA primarily manufactures Steering Systems, and Driveline Products for cars and utility vehicles (UVs). Thanks to the overall economic growth - and catalysed by various competitively priced financing schemes - India has witnessed an impressive growth in demand for automobiles in 2003-04. Sales of car rose by 27% to almost 756,000 units; while sales of UVs increased by 28% to 145,000 units. As I speak, there is every indication that the sales of cars and UVs taken together will substantively exceed the million mark in 2004-05 registering a growth of 20+%. That will make India a global sized automobile market - and allow automotive component manufacturers such as SONA to reap the advantages of scale.

Thank to the growth in demand and an unrelenting focus on quality and productivity, SONA has achieved excellent results that you have already seen in the Annual Report for 2003-04. Let me, however, touch upon a few:

• Sales grew by over 30 per cent to Rs.2,869 million.
• Profit before depreciation, interest and tax (PBDIT) increased by nearly 60 per cent to Rs.284 million.
• Post-tax profit (PAT) grew by almost 100 per cent to Rs.121 million.
• RONW grew from 11.4 per cent in 2002-03 to 19.8 per cent in 2003-04.
• Earnings per share (EPS) increased from Rs.5.6 to Rs.13.8.
  

In a year where automotive component manufacturers were badly affected by sharp increases in steel prices in addition to prices being driven down by the automobile manufacturers, these are creditable numbers. However, much more needs to be accomplished to continuously enhance shareholder value.

The corporate outlook

Your Company has demo5nstrated scalability and, with the Deming Prize, its commitment to quality and productivity. It is, therefore, an appropriate time to set higher targets.

We want to further consolidate our position as a world class manufacturer of auto components, and leverage this to achieve much greater sales, which ought to result in more substantial sales in global market. Your Company, therefore, has set a target for F-07: to achieve net sales of Rs. 500 crore, of which exports should be Rs. 100 crore. Given your Company's partnership with Koyo Seiko and the fact that Sona Koyo has become an integral part of Koyo's global sourcing strategy, the Rs. 100 crore export target for F-07 is achievable.

Our VISION 2010 is "To Make Sona Koyo a 'Supplier Of Choice' to Global Customers". For this, we not only require further improvements in productivity but also need to develop partnerships with customers. Thus, we have to transform ourselves from being a pure manufacturing Company to one that has high class research, design and development capabilities. Conceiving, piloting and managing this transformation is going to be a major area of corporate development in the next few years. I wish to thank the Hon'ble Finance Minister for announcing a 150% weighted deduction for R&D expenditure to the Automotive Sector, which will provide the much needed impetus and accelerate the growth initiatives of our Company.

I am optimistic about your Company's future. The growth momentum should continue. We can maintain double-digit growth. We can continue to increase exports. And we will continue making the investments needed to build global scale - such as the Rs. 54 crore that we will spend in plant and machinery in 2004-05.

The Current Year

In the current year, SONA, has seen record sales in the first quarter of Rs. 74 crores compared Rs. 62 crores, in the first quarter of last year, a growth of 19%. We expect the sales for the full year to be approx. Rs. 350 crores compared to Rs. 287 crores of last year.

We are constantly targeting to improve SONA's operating margins, and recognize that this can only be achieved if our cost reduction achievements are faster than the price reduction our customers expect from us. This is a constant area of focus for our Management and our commitment to enhance shareholders' value, can only be met with improved operating margin,

Acknowledgement

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

My deep gratitude to the members of SONA Parivar, for their dedication in making SONA a strong enterprise, and to our Vendors, Bankers and Financial Institutions for their support.

Finally, my sincere thanks to my colleagues on the Board for their valuable advice and to you, our esteemed shareholders for your confidence in the management of the Company