Cimmco Ltd.

ANNUAL REPORT 1998-99 CIMMCO BIRLA LIMITED CHAIRMAN'S LETTER TO THE SHAREHOLDERS Dear Shareholder: I am happy to write to you on behalf of the management of Cimmco Birla Limited, and on my own behalf, to express our gratitude for your backing to the Company at all times. While the Directors' Report deals with all aspects of your Company's business, I take this opportunity to share some wider thoughts with you. A significant landmark for your Company, and one that will have a lasting impact, has been reorganiation of a diverse business portfolio through the demerger of Polymers Processing and Cotton Yarn businesses. In the process, the shareholders of Cimmco Birla Limited have of course become shareholders of this new entity thereby unlocking some shareholder value. Cimmco Birla Limited has now become a company focussed on engineering businesses where it can consolidate based on its competence, track record and emerging opportunities in both domestic and external markets. We also propose to see that the activities are confined within its core competencies. The contemporary reality is that diverse businesses in a company lead to dilution in building of competitive advantage and do not permit following of self- reliant growth strategies. The fundamental potential of our businesses is attractive. Thus the results for the year under review should not be viewed in isolation or as a trend; they are a distortion due to factors beyond the Company's control, despite its best efforts. The Company has been successful in winning substantial business from new segments within its scope and expertise. Notwithstanding further efforts in this direction, the management is resolute in taking up the challenge of achieving healthy work practices and productivity norms at Bharatpur. Initiatives for streamlining the organisation to enhance productivity, service levels & accountability are underway. These challenges will not yield fruit without some pain and the Company will need full backing as well as understanding from all its stakeholders, in the long-term interest. The impact of ongoing improvements, strategies and the restructuring may not reflect fully in short term results but will certainly increase shareholders value over time. Our principal aim is to increase shareholder value and thus the Board shall periodically review the strategies for its continuous enhancement. The Board of Directors has discussed the issue of good governance and has adopted measures to introduce greater transparency and accountability, in line with the best practices derived from a number of articulations on corporate governance. It has also updated the Code of Conduct for employees. The ultimate purpose of good governance should be to sustain a self-driven, self-assessed and self-regulated organisation. I look forward to your continued good wishes and support to the Company. Yours Sincerely. Sidharth Birla