PUNJAB TRACTORS LIMITED

ANNUAL GENERAL MEETING OF SHAREHOLDERS – 7^th JULY, 2008

CHAIRMAN’S SPEECH

Ladies and Gentlemen,

A very good afternoon to all of you.

I am privileged to extend a hearty welcome to Members present at this 37^th Annual General Meeting of your Company.

The quorum being present, I would like to call the meeting to order.  

The Notice convening the Shareholders Meeting and the Annual Report for the year ended 31^st March, 2008 have been with you for sometime.  I believe you would have had the time to go through the details. With your permission, I shall take them as read.

YEAR IN REVIEW

At the AGM last year, I had shared my hope and confidence that PTL’s joining the Mahindra Group would benefit the stakeholders of both M&M and PTL.  I had mentioned that the Company had embarked on a journey of revival for which they had chosen a new slogan “NAYI DISHA NAYI MANZIL”. The objective was to use the year F-2008 to improve the operational health of the Company in order to prepare for future growth. Towards this end, I had mentioned that we would be pursuing both - business health drivers as well as business growth drivers.  I am happy to report some of the key elements of the progress your Company has made on both these priorities.

Immediate and aggressive attention was devoted to improving collection of accounts receivable and reducing the past build-up of channel inventory.  Consciously, tractor billing was restricted to 10974 in the first half, which was 28% lower compared to the previous year. This has resulted in year end receivables being reduced by Rs.222.3 crores, standing at Rs.281.3 crores, which is the lowest level since the year 2000.

To improve our market and customer orientation, a number of customer contact activities have been organized, relevant sales training has been initiated and a more robust MIS put in place.  The dealer network too has been ramped up by 50, taking the total strength to 584 dealers.  Mahindra & Mahindra Financial Services Limited has started extending credit support to Punjab Tractors. Mahindra & Mahindra’s regional stockyards are being used to make product more conveniently and efficiently available closer to the market place. 

The Swaraj brand has been strengthened with fresh advertising which retains the essential positive imagery of the brand, but also, has begun to provide it with an element of modernity. 

The impact of these measures taken in the first half of the year was visible in second half. As a result, tractor billing in H2 reached 17071 tractors against 14879 tractors sold during H2 of last year – a jump of 15% over last year, in a period when domestic industry declined 3%.

The Directors’ Report has elaborately dealt with the performance in the two halves of the year presenting a picture of complete contrast. Risking repetition, let me refer to the same.

For the year as a whole, on a total revenue of Rs.972.0 crores (last year Rs. 963.2 crores), the Company generated a profit before tax of Rs. 97.1 crores as compared to last year’s Rs. 98.5 crores (excluding extraordinary income) despite some 7% drop in tractor sale volume. Additional positive impact came from several other initiatives taken by the Company towards cost reduction, sourcing synergies with M&M Ltd., better cash management and value engineering.  

I would therefore like to sum up my review of last year as follows: The Company has reduced financial risk by significantly reducing outstandings, streamlined the pipeline by drastically reducing stocks with dealers and yet produced operating profit at the same level as the previous year.

Based on this performance, the Board of Directors have recommended a dividend of 50% for the year. I am sure Members would be pleased with this advancement of the AGM by 2 months which will make dividend available much earlier. 

CURRENT TRENDS

Coming to the current trends in the business this year, I am happy to share with you that tractor dispatches during April-June 2008 period at 8954 tractors were up by 3889 tractors, some 77% growth over same period last year -market share of 9.4% (last year 5.9%). This performance is extremely encouraging and a reflection of the healthier distribution pipeline of the Company, but needs to be also seen in the context of last year’s billing having been consciously kept lower.

In looking at the prospects for the current year, there are two key aspects of the environment to which I would like to draw the attention of Members:

Record food production estimated for 2007-08 and all time high wheat procurement, should translate into higher rural income. The latest economic data shows that the agricultural GDP has grown by 4.5% against 3.8% in F07.  The Government has continued its commitment to investment in the Rural Sector including the provision of large scale credit and, most recently, the announcement of a large Debt-Waiver scheme. Overall therefore, the fundamentals for the agriculture sector and tractor industry are sound.  

At the same time, I must sound a note of caution, as sharp inflation and volatility in steel related components and oil will put pressures on margins. The likely selling price increases required on tractors as well as restricted availability of bank credit from time to time because of concerns about NPAs along with high interest rates may also dampen demand in the short term.

We will therefore, need to approach the current year with cautious optimism. 

FUTURE

Coming now to the longer term prospects for our business, it is my firm belief that the fundamentals for the tractor industry’s future are positive.  Agriculture continues to be a very important element of the Indian economy and it’s development is a crucial part of the national agenda.  In the above context, the policy framework as also the priorities of successive governments have contained a strong thrust to bring rural India into the economic mainstream.  I expect this priority for the rural and agriculture sector to continue. 

In the recent Union Budget, the Government of India has proposed an allocation of Rs.2,80,000 crores towards agricultural credit, which is a positive development for the tractor industry. Moreover, there is a stronger focus on irrigation projects and an outlay of Rs. 20,000 crores has been provided for development of areas with scanty rainfall. The strong emphasis on rural economic development and increased support to the agriculture sector by the Government will create enhanced opportunities for growth in farm mechanization.   

A very large debt-waiver scheme has been announced by the Government in the recent Union Finance Bill. In the short term, it has caused some uncertainty amongst Financial Institutions as well as retail borrowers which may have a temporary negative impact on the tractor industry.   Upon implementation, scheduled later this year, however, this waiver is expected to create additional liquidity in the hands of the farmers which would certainly be positive for our industry. 

In view of the various domestic macro economic indicators, it is expected that the Indian tractor industry would maintain a growth trend in the long term. Internationally, PTL plans to expand into newer markets and strengthen its presence in existing markets.

There are, however, many challenges ahead of us, but we are prepared to compete, to win, and to continue being worthy of your continued support.

ACKNOWLEDGEMENTS

I would like to take this opportunity to thank all our shareholders, employees, vendors, distributors and business associates - for their faith and commitment towards the company’s success. I would also like to thank fellow Members of our Board of Directors for their guidance and support. The Company’s Board has been strengthened with the induction of S/Shri S.K.Chanana, V.S.Parthasarathy and Narayan Shankar who bring rich and diverse experience. 

May I now commend for your consideration and adoption the Directors’ Report and Accounts for the year ended 31^st March, 2008.

Thank you,

ANJANIKUMAR CHOUDHARI

CHAIRMAN