AMFORGE INDUSTRIES LIMITED
ANNUAL REPORT 2003-2004
THE CHAIRMAN'S INTIMATE TALK
Dear Amforge Member,
The Performance of the Financial Year 2003-04 and the promising future
hereafter have encouraged me to re-establish my intimate talk with you.
Hope this sharing of information will help you peruse your further reasoned
We have had an encouraging start to the efficacious measures initiated by
the Management for the long term revival and sustained growth of the
Company. The revenues have gone up by 50%, yielding net profits purely from
operations, to the tune of Rs.109.3 million. The silver lining to this
performance is that this has been achieved despite discontinuance of the
activities at Khopoli and the Wheels Division at Faridabad. The earning per
share nearing its face value and is likely to exceed it in the coming year.
To attain the above financials, the Company initiated a business
restructuring plan basically to focus on our core strengths which have been
developed over the last five decades with strong OE customer exposure that
Amforge has in the forging industry.
As the demand grew in India, Amforge, based on its strong bondage with its
OE customers and with better utilization of its installed capacity, entered
the higher target market in respect of value added products like
Crankshafts, Stub-axles, and Connecting rods, etc. This resulted in
securing a larger share of business from our major customers, thereby
increasing our business share in the domestic market. At the Plant level,
better productivity has been achieved with technology up-gradation,
introduction of CAD-CAM systems, automisation of production equipment and
lower rejection levels.
CNC machining, after designing on CAD-CAM, was introduced for die making,
thus, giving a thrust to saving on material inputs and better yields
resulting in substantial saving at OE customers' level by involving minimum
machining of the product at their end. Thus, giving an edge on product
performance and pricing to our OE buyers.
The export market has also been tapped and exports have started from the
Chinchwad unit. As you are aware, exports have a long gestation period.
Major supplies on volume basis are moving up on a month to month basis.
Export efforts have also been on at Chakan and initial samples for certain
components have already been accepted. We are now working on crystallizing
the same through pricing and pilot batch route. We are very confident of
achieving it. Both our Pune based units are QS9000 certified and work on TS
16949 is in progress with a time bound schedule.
Apart from improving the performance of our major Pune units, the
management also took action to increase the overall financial performance
of the Company by shutting its other uneconomical operations. As you are
aware, the Company has already closed its Khopoli and Faridabad operations.
Action has also been initiated at Bhandup, where the high cost of
production on account of heavy wage bill and Government taxes applicable
within the metropolitan city of Mumbai, coupled with obsolete technology
and equipment make operations totally unviable. Apart from following the
legal path, the Management has also initiated discussions with the
concerned parties to arrive at a peaceful and amicable settlement to
resolve the matter, as expeditiously as possible.
Training programs for technical and product engineering are regularly being
conducted for our workers and supervisors with both in-house and outside
expertise. This will bring about a substantial cultural change to ensure
that our products are accepted in the global market.
As you are aware, the current economic scenario in India and rest of the
world with special reference to Automobile and its ancillary sectors has
resulted in an unprecedented upsurge in the automobile as can be gauged
from data below:
Passengers Cars : +37%
Commercial Vehicles : +35%
2-Wheelers : +12%
3-Wheelers : +22%
Total production of all above exceeded 7.90 million nos. in 2003-04. Of
this, exports was over 0.50 million registering a growth of +56%.
The growth drivers were:
1. Good monsoon in 2003;
2. Reduction in excise duty to 24% from 32%;
3. Drop in lean interest rate;
4. Higher disposable incomes.
With the liberalization of foreign investment in India coupled with free
inflow of foreign technology and investments for car manufacture, the
automobile industry cashed upon such opportunities and produced vehicles of
International Standard to increase its export and its own development. This
atmosphere led to many of the international manufacturers establishing
their production base in India or made foreign technical and financial
collaboration and investments with Indian partners.
The forging industry has all along helped the buoyant automobile industry
by acting as contract manufacturers for critical auto components.
India is fast gaining acceptance as first choice for 'auto outsourcing'
resulting in contracts to the tune of over 1 billion USD in 2003-04 since:
1. we are a high-skilled and low-cost source;
2. understanding of customers' requirements is clearly understood and fully
Not surprisingly, therefore, we are preferred to even China and Mexico-
other low-cost sources.
Since our export of auto components is only 0.3% of global demand,
sustained growth at 35-40% per annum is certain and easy.
The domestic and international demand for autos and its components will
increase substantially in the coming years. Amforge has prepared itself to
ride this high tide with a well formulated action plan involving:
- capex programmes for increase in production capacity / removal of
bottlenecks, quality control and improvement measures to control
- Training for all its staff;
- and other measures such as strategic partnership, alliances with
prospective customers / forging units abroad.
With the above, I request my shareholders to bear with me for a further
short period so that we can reap the fruits of the above actions initiated
by the Management.
I thank my shareholders, business associates and employees for remaining
with the Company during the trying time and extending their bit to the
performance of Amforge.
Chairman & Managing Director
Dated : 31st August, 2004.