ANNUAL REPORT 2000-2001
EXIDE INDUSTRIES LIMITED
CHAIRMAN'S SPEECH
Lades & Gentlemen
At the outset let me welcome you to the fifty fourth Annual General Meeting
of our company.
It is stock taking time once again and the year that has passed has been
one of the most turbulent in recent times. The second generation of reforms
is catching up with us and the hard decisions are being taken, albeit
gradually. The pain of structural adjustment of the Indian economy is
finally hitting the corporate sector. In our own case, this has meant a
slowing down of the fast paced growth of the 90c, when we grew by a very
satisfying 37% CAGR. The market realities of today are, however, quite
different and as I stand before you, these manifest themselves in a manner
which requires us to take a holistic approach.
As you have seen for yourselves the first quarter of the current year has
not brought any comfort to our industry,For some time now, we have been
making representations to the Government about the anomaly in the duty
structure whereby fully finished imported batteries are subjected to the
same rate of import duty as we pay on import of lead. This inequity needs
recognition and correction.
The flood of cheap imports, which I had referred to you in my last year's
address, has now become a reality. Dumping of good from China, South Korea
and Japan were sought to be addressed by a petition for invocation of Anti-
Dumping duties. The Government has been very responsive on this matter and
imposed an Initial duty after the notification, as required by law. We are
now in the process of bringing to the Government's attention, dumping
which is taking place through other countries such as Taiwan, Thailand,
Bangladesh and Saudi Arabia, Let me assure you that we have no quarrel with
import of batteries which come into India at a reasonable price and we are
more than confident that your company is well equipped to fight the battle
against them in the marketplace. What we cannot do, however is to fight an
unequal battle where batteries are dumped at prices which some times do not
even cover the cost of production.
One of the Pernicious affects of dumping is the pressure that such dumped
goods exert on the prices existing in the marketplace. As you are
undoubtedly aware, most of these imported batteries have been sold in the
replacement market and that is precisely the segment where our margins ar
the highest. Inevitably therefore, the dumping in this market has squeezed
your company's margins as pries have had to be restructured to meet the
onslaught of imported batteries. This has had a debilitating effect on the
profits for the first quarter. However, with the imposition of Anti-dumping
duty and the pipeline stocks being liquidated, it is expected that matters
would improve.
There is cause for concern as India's industry continues to show a lack-
lustre performance with growth in the past year down to 5% from 6.7%
recorded in the previous year. In the current year, the figures are even
more dismal and it is the opinion of most authorities that the slow down
has primarily been triggered by a severe compression of overall demand in
the economy. A CII study also points out that it is paradoxical that
inspite of better budgetary control, the economy and industry have not
responded. One of the key factors has been the lack of implementation of
policies announced and projects initiated. Nowhere is this more evident
than in the composition of sales of batteries for industrial applications,
that your company manufactures. The infrastructural segment that your
company's industrial batteries seek to address, faces a grim scenario, Two
successive budgets without any increase in the revenue earnings of the
railways, has severely curbed their capacity to purchase new equipment.
Thus, tenders have been floated but have not been finalised. Cash crunch
and a lack of an adequate transparent policy has also plagued the power
sector. The telecom segment is, perhaps, the only exception but severe
competition has ensured that prices continue to fall and margins come under
pressure in this segment.
However, the market for inverter batteries and those required for UPS
Systems, have continued to grow at a fast pace and these have provided
avenues of growth for your company's products and it is primarily in these,
that imported batteries rom China have attempted to wrest market share.
The Government of India has notified the battery (Management & Handling)
Rules 2001 after a continuous dialogue with the domestic industry and
importers. Under these new rules, it shall be the responsibility of the
manufacturer, importer, assembler and reconditioner to ensure that used
batteries are collected back against sale of new batteries by upto 50%
during the first year of implementation, which would progressively increase
to 75% and 90% thereafter. The Ministry of Environment & Forests would
monitor the entire activity. As I have mentioned to you last year, the
intention behind this legislation is laudable indeed, but one which will be
difficult and complex to put into operation and would increase the cost of
domestic industry at at time when they are already facing severe
competition.
Even amidst the current scenario, it is a matter of satisfaction to all of
us that your company's automotive batteries continue to hold on to their
large market share which they had garnered for themselves over the past
five decades. Almost all the new motorcars have chosen to place their trust
with your company. Motorcycle batteries represent a growing area and your
company is now unquestionably the market leader in this segment. The
success of Hero Honda's products have had a multiplier effect on the sale
of your company's motorcycle batteries. During the year, sale of these
batteries grew by over 21% and the first quarter of the current year,
carried on the trend. The other thrust area for your company was the
tractor market which we have tried to address through our Operation Kissan
Scheme. A new distribution pattern has been established for sale of these
batteries, to ensure that they reach the farmers for whom they are intended
and at the same time expand your company's reach in the rural markets.
One of the new markets which hold promise for growth, is the electric
vehicle market which intends to bring in a pollution-free vehicle in the
metropolitian cities of the country. your company has been working with
Mahindra & Mahindra as well as Scooters India with a product to ensure
that, clean three-wheelers ply the main arteries of our cities. We hope to
eventually develop a battery for four-wheeler applications using the same
technology.
We live in an era of tremendous changes and there is a need for us to
recognise that some of these changes would affect all of us in different
ways. The internet is one such medium and we are convinced that if its
potential can be harnessed, not only would it represent and alternative and
more customer-friendly mechanism to service orders, it would also bring in
advantages of integrating our dealers into a close-knit fraternity. Supply-
chain management would contribute significantly to cost reduction and a
dire3ct relationship with our end-customers would also gradually be
established. To achieve these objectives, your company has inaugurated an
automotive portal-autoexide.com, which is the first step towards harnessing
the power of Information Technology.
During the latter half of last year, tumultuous happenings have also taken
place in the capital markets. A major fascination with ICE Stocks (I,
Communication and Entertainment) has been a global phenomena to which
Indian Capital markets have not remained immune. A natural consequence,
investor interest in old economy stock has bed limited. We feel that the
time has come for the investor community to re-examine the potential of
manufacturing companies, particularly, those who have a direct interest in
the growth of the new economy. We would like to emphasise that batteries
for industrial applications, such as, Telecom and UPS Systems, are directly
related to the growth of these two sectors which form part of the new
economy, Additionally, Exide is involved in producing batteries for
electric vehicles, submarines and solar applications all of which are
thrust areas for your
new economy, while the other part continues to service the Automobile
Industry, which is acknowledged to be a force multiplier. it is our belief
that the current stagnation of Indian industry will be corrected over a
period of time and those companies who survive would be able to reap the
benefits of the new order which will come to stay. Your company's continued
investment in Research & Development will give the wherewithal for the
continued growth and prosperity of the company.
In carrying out this task of managing the change, I would wish to thank my
Colleagues on the Board, particularly, our Vice Chairman for their
support,guidance and faith. I would also take this opportunity to thank all
our employees from the humble worker in the factories to those spanning the
entire gamut of corporate services, for carrying on their work unadunted by
the temporary setbacks encountered along the way. I would equally wish to
thank the Bankers, FIs, Equity Research Analysts and you,our shareholders,
for continuing to support Exide in the belief that tomorrow will be a
brighter day.
|