SWARAJ ENGINES LIMITED

ANNUAL GENERAL MEETING OF SHAREHOLDERS

3^rd August, 2010

CHAIRMAN’S SPEECH

Ladies and Gentlemen,

A very good afternoon to all of you.

It gives me great pleasure to welcome you all on behalf of my colleagues on the Board at this 24th Annual General Meeting of your Company.

The requisite quorum being present, I accordingly call this meeting to order.

The Notice convening the Shareholders Meeting and the Annual Report for the year ended 31st March, 2010 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.

Before I proceed further, I would like to brief you of the changes in composition of the Board of Directors of your Company since the last time we met. Shri Anjanikumar Choudhari and Shri G.S.Rihal ceased to be the Directors of the Company consequent to their resignations. We take this opportunity to place on record our deep sense of appreciation for their valuable contributions. In their place, Dr. Pawan Goenka and Shri Mahesh Kaushal have joined the Board

Dr. Pawan Goenka is presently serving as President of Automotive & Farm Equipment Sectors of Mahindra & Mahindra Ltd. and brings with him tremendous business knowledge and rich experience in automobile industry. I am sure his varied experience would immensely benefit the Company.

Shri Mahesh Kaushal is the Chief Financial Officer of Mahindra & Mahindra Ltd. – Swaraj Division and has sound knowledge of financial and commercial matters. His association would greatly benefit the Company.

Please join me in welcoming Dr. Goenka and Shri Kaushal to the Board.
 

 YEAR IN REVIEW

As performance of your Company has a close link with that of Swaraj Division of Mahindra & Mahindra Limited (M&M), may I start with a reference to the developments in tractor industry and Swaraj during the year.

The domestic tractor industry, after 3 years of plateauing, registered a significant growth of 32% during the financial year 2009-10 and in the process tractor sales crossed the mark of 4,00,000 tractors for the first time. In fact, the industry consolidated its growth on quarter-on-quarter and the fourth quarter ended March 2010 has witnessed a jump of over 50% over corresponding quarter of last financial year. However, export market at around 37,600 tractors remained almost flat in view of slow recovery of international markets from the global recession.

Against the above industry scenario, “Swaraj” outperformed the industry with a volume growth of around 36% over previous year which resulted into higher demand of engines for fitment in tractors. Accordingly, in line with increased demand of engines from Swaraj Division, your Company has recorded its highest ever yearly sale of 39,143 engines compared to last year’s despatches of 28,539 engines – a growth of 37%. Similarly, increased demand from Swaraj Mazda Limited (SML) for hi-tech engine components, namely – Crank case, Cylinder head, Case transmission, and Con-rod – led to higher billings of Rs.18.9 crores compared to last year’s billing of Rs. 14.2 crores – a growth of 34%.

On the strength of increased demand from both the key customers, Company’s net operating revenue for the year grew to Rs.282.4 crores from Rs. 208.2 crores - an increase of 36%. Members would be pleased to learn that this impressive volume growth coupled with favourable product-mix, better plant efficiencies and cost containment, led to improvement in operating margin to 17.6% compared to 15.3% of last year.

Pre-tax profit for the year moved to Rs. 54.7 crores from last year’s profit of Rs. 32.2 crores – a jump of 70%. Post-tax profit at Rs.37.4 crores registered a growth of 76% over last year’s profit of Rs. 21.3 crores and translates into an earning of Rs.30.08 per share. Transfer of profits of Rs. 25.8 crores to the reserves in the current year resulted increase in Shareholders’ Funds by 26% which now stand at Rs. 122.7 crores.

Based on this performance, the Board of Directors have recommended a stepped up dividend of 80% for the year.

CURRENT PERFORMANCE

Friends, it is my duty to draw your attention to April-June, 2010 first quarter results taken on record by the Board of Directors this morning. With sustained demand of engines from M&M-Swaraj Division, your company registered a growth of 22% in engines despatches during first quarter ended on 30th June 2010. Consequently, Net Revenue for the quarter reached Rs. 84.9 crores against last year’s first quarter revenue of Rs. 67.6 crores – a growth of 26%. Operating profit for the quarter moved to Rs. 14.8 crores as compared to Rs. 12.3 crores for the corresponding quarter of last year – an increase of 21%.

FUTURE

Since principal customers of your company are Swaraj Division of M&M and Swaraj Mazda, it would be appropriate to take note of the future prospects of both tractor and commercial vehicle industry.

Tractor demand is closely linked to agricultural output, growth in farm mechanization, farmers remuneration and Government thrust on rural sector. With continuing firmness in the prices of agricultural products, improving farm mechanization levels due to scarcity of labour in rural areas, increasing non-agricultural use of tractors, large budgetary allocations by the Government and easy availability of finance, we believe that the medium to long term demand drivers for the industry remain robust and will give further push to increase in tractor penetration.

 Government’s focus on improving urban and rural infrastructure including roads, ports, etc., coupled with promoting tourism is expected to drive demand for commercial vehicles as well.

The combined effect of these factors is expected to spur further demand in the farm mechanisation and transportation sectors and augurs well for company’s future revenue growth. Your Company, besides expansion of existing business activities to support increased demand from its key customers, is also examining new growth opportunities by enlarging product as well as customer base.

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 – Mahindra & Mahindra Limited 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. Our vendors and the motivated 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 31st March, 2010.

(G.P.GUPTA)

CHAIRMAN