SWARAJ ENGINES LIMITED

ANNUAL GENERAL MEETING OF SHAREHOLDERS

7^th JULY, 2008

CHAIRMAN’S SPEECH

Ladies and Gentlemen,

A very good morning to all of you.

It gives me great pleasure to greet all of you at this 22^nd Annual General Meeting of your Company.

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 them. With your permission, I shall take them as read.

YEAR IN REVIEW

Since performance of your Company has a close link with that of Punjab Tractors (PTL), may I start with a reference to the developments in tractor industry and PTL during the year.

After registering strong growth during FY 2004 to FY 2007, domestic demand conditions in tractor industry remained subdued during FY 2008 with aggregate billings reaching 302000 tractors against 318000 tractors for previous financial year - down 5%. States of U.P., M.P., Gujarat, Rajasthan, Tamilnadu, Karnataka and Orissa had shown drop. On PTL front, the year presented a mixed picture. While in the first half tractor billing was restricted due to Company’s concerted efforts to deal with the issues of high channel inventory and dealers outstanding, the second half witnessed improvement in billing.

Reflecting these conditions, engine supplies to Punjab Tractors in the first half was 6219 engines, while in the second half it increased to 10189 engines, taking cumulative billing for the year to 16408 engines (last year 17702).  With higher demand for hi-tech engine components - Crank Case, Cylinder Head, Case Transmission and Con-Rod, value of supplies to Swaraj Mazda rose to Rs.20.03 crores during 2007-08 as compared to Rs. 17.04 crores in the previous year – a growth of 18%.  

Overall, Company’s net revenue for the year reached Rs.125.54 crores as against last year’s Rs.129.32 crores. Pre-tax profit for the entire year was Rs.22.04 crores as compared to Rs.22.63 crores for the previous year, despite subdued operations in the first half. Profit After Tax at Rs.14.36 crores translates into earning of Rs.11.56 per share.

Based on this performance, the Board of Directors have recommended a dividend of 50% for the year.

CURRENT PERFORMANCE

Friends, it is my pleasant duty to inform you that with increased demand for Swaraj tractors, engine supplies to PTL during first quarter (April-June) of current fiscal reached 6946 engines against 2290 engines supplied during the corresponding period of last year – a growth of over 200%.

FUTURE

While Company’s principal business has been tailored to supply engines to Punjab Tractors, supply of engine components to Swaraj Mazda has also emerged as a significant product line.  

Although tractor industry witnessed downtrend during last fiscal, we believe the long-term prospects continue to be good. Several initiatives for addressing the major needs of the farm sector and raise rural incomes have been taken by the Government - enhanced credit, accelerated irrigation, marketing of agri-produce, enhancement of minimum support prices, upgradation of farm technology etc..  Allocation of Rs. 2,80,000 crores towards agricultural credit, Rs. 20,000 crores for development of areas with scanty rainfall, Rs. 50,000 crores for debt-waiver for small and marginal farmers and Rs. 10,000 crores for one-time settlement of 25% of loan for remaining farmers provided in the recent Union Budget proves government’s commitment towards farming and the farming community. Furthermore, massive investments have been planned for urban and rural infrastructure including roads, ports, power etc.  Visible signs have also emerged of sustainable growth trends in manufacturing, merchandise trade and tourism.   

The combined effect of the above economic factors is expected to drive future demand in both these key sectors of farm mechanisation and transportation. It is in this background and in recognition of SEL’s status of principal supplier of engines to Punjab Tractors and the main source of hi-tech engine components to Swaraj Mazda that I have ventured to project a bright future for SEL. 

ACKNOWLEDGEMENTS

I take this opportunity to express my thanks to all the Shareholders for their continued trust in the Board and management of the Company. I would like to place on record our gratitude to our principal Shareholders - Punjab Tractors Ltd. and Kirloskar Oil Engines Ltd. - for their valuable guidance and for nurturing the growth of the Company. I would also like to thank fellow Members of our Board of Directors for their wise guidance and participation. The Company’s Board has been strengthened with the induction of S/Shri V.S.Parthasarathy, R.R.Deshpande and Kumar Kanetkar who bring rich and diverse experience. Our vendors and the young SEL team need to be commended for their contributions.

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

(G.P.GUPTA)

CHAIRMAN