1995 KANORIA INDUSTRIES LIMITED SPEECH OF THE CHAIRMAN Fellow Shareholders, Ladies and Gentlemen, I extend to you all a cordial welcome to this Annual General Meeting. The last year has been a year of significant changes. We have seen a change of government in 8 states. What is significant, is that each of the new governments have pursued the economic agenda with renewed vigour. This has far reaching implications for India. It shows that our country has reached economic maturity. The direction and growth of the Indian economy will no longer be subject to the whims and fancies of political parties. Political philosophies will not govern the economic agenda of the nation. That is not to say that politics will have no effect on the economic scene whatsoever. Individual companies and projects will get affected from time to time; political largesse with a view to elections, and other similar activities and attitudes will keep on surfacing. What is important is that they will cover only a portion of the Indian economic canvas with the rest of the canvas being covered with pragmatic and practical economics. Thus I believe that irrespective of the political party in government at the centre and in the states we shall continue to see the economy being guided by economic factors. We shall see huge private investment in infrastructure be it power, telecommunication or roads. I expect the economy to start growing at around 7% per annum in real terms. The political milieu however will remain confused and will therefore continue to remain a drag on the economy. But for this drag one could expect an almost double digit growth rate. After having passed through a difficult period for several years profitability has been restored to your company. This time on a long term basis. Followed by the reduction in power and coal consumption the debt burden on the company has started to come down. In order to ensure long term profitability a comprehensive expansion, modernisation and energy conservation scheme has been worked out and is in the last stages of processing with the financial institutions. This plan will be implemented immediately and the expanded capacity will come on stream early 1997. This will result in the power consumption coming down to 100 units per tonne of cement as compared to 116 units now and coal consumption to 760 k cals per kg from 940 k cal per kg. The capacity and production will go up from 3.30 ltpa to 8 lac tons per annum, an increase of 4.70 ltpa. The implications are that with 70% more energy we shall produce 140% more cement. On the fiscal side with the completion of the scheme at a cost of Rs. 95 crores, that is at only about Rs. 2000 per annual tonne of expanded capacity, your company's turnover is expected to treble and post handsome profits. In addition your Company will be elegible for sales tax exemption/deferment for a period of 7/9 years limited to 80% of the capital cost incurred. By early 1997 we are looking at a low energy consumption, near state of the art, eight lac tonnes per annum, low capital cost plant with substantial sales tax benefits in full swing. The project cost of Rs. 95 crores is proposed to be financed by fresh equity through a rights issue, internal accruals and fresh debt. The specifics are under discussion with IDBI and other financial institutions and will be finalised soon. This phase will be followed by a 2nd phase resulting in substantial increase in slag grinding taking benefit of the significant projected increase in steel production in Karnataka, Goa and Kerala. This will result in taking our production well beyond the 1 million ton per annum level. In parallel the Company proposes to put up a captive thermal plant which will meet the entire power needs of your company and will leave some surplus for sale to the state grid and other industrial consumers. Finally, the Company has made a net profit of Rs. 3.5 crores reflecting an EPS of Rs. 8.19 in the year 1994-95 and your Directors have recommended dividend at the rate of 15%. I expect the profitability and EPS to grow substantially on the existing equity capital as well the post rights expanded equity capital base. We have returned to profitability and the dividend list with great perseverance and effort and we will now ensure that we not only remain there but continue to improve our performance with each passing year. I take this opportunity to thank my fellow shareholders for their continued support and assure them a bright future with Kanoria Industries. Shri Ajay Kanoria Chairman Place : Bombay Date : 9th August, 1995