ELECTREX (INDIA) LIMITED Annual Report 1997-98 CHAIRMAN'S STATEMENT AN OVERVIEW The performance of your company is reflective of the sustained investment and development efforts we have put in over the last decade. Inspite of fairly difficult environment, company has enhanced it's scale of operation in manufacturing and pursued an aggressive marketing policy both of which have greatly contributed in production and sales going up as per the projections. Your company has achieved sales turnover of Rs.7530 lacs for the year ended March 31, 1998 as compared to Rs.5323 lacs of the previous year, a growth of 41%. The year under review has been a difficult one but your company has outperformed the industry in growth in production, sales and operating profitability. However due to outgo of large amount of interest on the debts raised by the company for the project expansion and the provision of depreciation, the net profit has been Rs.572.04 lakhs for the year ended March 31, 1998 as against Rs.685.33 lakhs of the previous year. GROWTH EXPECTED Despite the effects of economic recession, the market for portable power tools stand at the threshold of an unprecedented period of success because of following factors. * Power Tools find diverse applications in a variety of industries and their demand is not dependent on any one type of industry. * After almost 50 years of control of imports and licencing regime during which time minimal new product development & applications were done in India, the end user suddenly finds a variety of specialist tools which can enhance the quality of their work and reduce cost and labour. * For your company the fastest growing segment has been in the masonry related tools like MARBLE CUTTER where the company is the undisputed leader and has majority of the market share. * Your company has launched a new IMPACT DRILL which is already accepted very well in the market. During the current year your company will aggressively push up the sales of this new drill and hopes to garner a substantial market share. FROM PRICE TO QUALITY: A SHIFT IN CONSUMER VALUE With the large choice available to customers and the increasing number of internationally known brands as well as cheap unbranded products available now, end users have become very price sensitive. However professional market is beginning to show signs of favouring quality and performance over price. Your company's motto has been - International Quality - International Volume but Indian Prices. Single minded dedication in following this motto has resulted in your company being acknowledged as the No.1 power tool manufacturer in India. EMERGING TRENDS & CHALLENGES FACING POWER TOOL INDUSTRY IN INDIA 1. Globalisation is the most important movement in the market. Indian businesses require to globalise quickly. Globalisation threatens survival of manufacturers who do not respond. Your company intends to pursue the policy of affiliation with international brands but with domestic strategy which will help in cost savings and truncate the learning curve. 2. Product developments and modifications are essential to enhance competitiveness and ensure market survival. By developing innovative new products, focusing on new applications and accelerating the rate at which products are introduced into the market place. Your company plans to generate interest in its products and encourage end-users to upgrade their product at more regular intervals. 3. High rate of market penetration from China and other South East Asian countries requires response. Your company has drawn up a suitable business plan and marketing strategy including design adjustments and differentiation of products to combat the influx of such cheap imports. 4. Discovering new growth area is necessary to offset declining profitability. Your company has been in the forefront to spot new applications and accordingly position the products and will continue to do this practice. 5. Growing importance of distribution channels threatens companies with no coherent strategy. Your company has an exceptionally well developed dealer and distribution network & proposes to strengthen it further by adopting a "Service-Oriented" philosophy into company's strategy. 6. Revenue growth rates for high performance products dedicated to the construction, metal working and woodworking sectors are forecast to be more pronounced than those of other products. By analysing end-uses demands and identifying potential growth areas, your company has been successful in being the first company to launch many new products in the market in the market and gain a head start on other market contenders. THOUGHTS FOR FUTURE We have consciously built up a cadre of talented individuals and I believe we have the intellectual capital to make best use of manufacturing & marketing infrastructures built by the company to surmount the challenges posed in the millennium. As we progress, we will pursue to be multifaceted company in the electro-mechanical tools and appliances line. The future thrust of your company will be to seek knowledge and develop talent in India. Your company must put ever-increasing effort into research and development, production, sales and marketing to achieve competitive goals. Continuous investment in technology is a pre-requisite for sustained competitiveness All these require vast investments which your company hopes to do in a phased manner. For the immediate future your company is working to put an Enterprise Resource Planning (ERP) package which will link the customer, the distribution network, factory and the vendors to achieve twin objective - flexibility in manufacturing and give a product to the customer when he wants it. It will require lot of efforts and time to put in a complete system which will extend from the dealer in the field at one end to the vendor at the other. We have set the year 2000 as a target by which time your company hopes to replace and integrate existing system to the proposed ERP package. I hope this will lead to a dramatic transformation in the way we do business. ANANT V. HEDGE Chairman Bangalore, August 20, 1998