M M FORGINGS LIMITED
ANNUAL REPORT 2009-2010
Friends, Good Afternoon. The Board of Directors and I welcome you to this
the 64th Annual General Meeting of your Company. The Directors' Report and
the Audited Annual Accounts for the year ended 31 March 2010 have been with
you for sometime now. With your permission, I shall take them as read.
YOUR COMPANY'S PERFORMANCE - AN OVERVIEW :
In my speech at the AGM last year, I had said and I quote, 'Once the Indian
Economy and the global Economy recovers - in the segments relevant to M M
Forgings - your Company will bounce back in terms of performance and return
to the growth trajectory it has achieved in the past. The recovery is
expected to begin in the first quarter of 2010-2011'.
The first quarter results published on 27th July this year vindicates this
statement. Sales increased by 71%. Exports accounted for 69% of total
sales. Net Income was almost five times more than in the corresponding
quarter of the previous year and half of what was earned in the full year
2009-10. You will be interested to know that sales of Rs.21 Crores in June
2010 is the highest for any month in the Company's history.
Despite the relative under performance in 2009-10, the Dividend has been
maintained at 15%. This is due to the confidence derived from the first
quarter results, and the optimistic outlook for the future. The proposed
Dividend is in line with the Company's objective of consistently rewarding
all stakeholders - in particular, you our shareholders - in good times and
C. M M FORGINGS LIMITED - IN PURSUIT OF MANAGERIAL EXCELLENCE:
Managerial Excellence is the bedrock for reliable performance and stable
growth of in any company.
Peter Drucker - one of the foremost 'Management Thinkers' the world has
produced -has said that for any Company to succeed:
'Its Management practices should be both EFFECTIVE AND EFFICIENT
Effectiveness is choosing the right thing to do Efficiency is then doing
the chosen things right'.
Judged from both these dimensions M M Forgings is indeed a well managed
Company. It has effective strategies that are efficiently executed. Let me
cite six examples to support this viewpoint.
It is now recognized by the business community the world over that 'People
not products deliver results'. It is also recognized that effective Human
Resources Management can make 'Ordinary people deliver extraordinary
results'. The fundamental prerequisite is for the organization to recruit
good people - people who have both character and competence.
Your Company is strongly focused on recruiting talented people at every
level. Money spent on their training and development is viewed as an
investment not as an expenditure. They are remunerated well and retention
of the best receives the highest priority. The Company fully understands
that human assets are the only assets that do not necessarily depreciate
Customer Relations Management is the cornerstone for stable long term
growth in Sales and Profits. Customer satisfaction that ensures Customer
Retention is therefore an important aspect of your Company's strategy.
To retain customers, your Company is constantly striving to achieve global
standards in terms of product quality, ontime delivery and after sales
service. I am happy to report that your Company has not lost a single
customer in both Domestic and Export Markets. On the contrary, the existing
customer base acts as a strong 'Brand Ambassador' to attract new customers
at premium prices.
To achieve the lowest 'break even level' in the industry is a target that
your company steadfastly aims for. The Company is therefore obsessed with
continuous improvements in productivity and a perpetual effort to lower
From a business perspective 2009-10 was one of the most turbulent years in
recent history. Demand for most products declined sharply causing a steep
fall in sales, higher inventories and lower capacity utilization.
Currencies were volatile. Input costs rose to unprecedented levels. Bank
credit was more expensive and hard to come by.
In this adverse environment, your Company increased its profit after tax
over the previous year and has maintained its dividend. This demonstrates
that reducing 'break even levels' is a prudent strategy at all times -
particularly so in turbulent times.
In 1994, when the Company went Public, it had only one large customer in
the Domestic Market and no Exports. The Board decided then that aggressive
forays into Export Markets and widening the domestic customer base was the
appropriate strategy for the Company to pursue.
M M Forgings today is the largest Exporter of Steel Forgings from Southern
India. In recognition, it has won 16 successive Export Awards. It has
several large customers in the Domestic Market and is no longer dependent
on any one of them. The strategy to build Exports and diversify the
domestic customer base has been executed to perfection.
The systematic augmentation of manufacturing capacity -with a strong bias
towards value addition - has been a vital part of the Company's growth
strategy. Nearly 200 Crores of rupees have been invested, in the last
decade, to increase capacity from 10,000 Tons to 38,000 Tons. The overall
expansion in capacity has been in incremental steps causing no strain on
financial or human resources. This strategy has helped the Company to
rapidly respond to any surge in demand. The 71% increase in Sales in the
first Quarter of this year is a case in point.
SIXTH AND FINALLY:
Historical experience has established that no company in India can plan
stable growth based on power supply from State Electricity Boards.
Investment in self generation is a fundamental prerequisite. Your Company
has invested Rs.35 Crores in windfarms. These windfarms generate
electricity at significantly lower prices than grid supplies. Your Company
today can self generate its total requirement of power. It is this strategy
executed extraordinarily well that has helped an energy intensive Company
such as yours to sustain growth in an energy starved environment.
D. FUTURE OUTLOOK:
The Founder of your Company the Late S E Krishnan was a Visionary
Entrepreneur and an outstanding Management Leader. It is he who promoted
Effectiveness and Efficiency in Management Practices, and Ethics and
Transparency in Corporate Governance at M M Forgings. This has helped the
Company's growth trajectory in the past. I am proud that his two sons -
Vidyashankar and Venkatramanan - are raising the bar in terms of developing
competencies on both these dimensions. The Management today is highly
effective and precisely efficient. The future outlook is bright because M M
Forgings is managerially well poised, to respond favourably to a
Let me conclude by thanking all our employees for their dedication and
cooperation; our customers for their continued loyalty and patronage, our
Bankers for their empathy and support, our vendors for their promptness and
service and our Board for their guidance and encouragement.
Above all, I thank you our shareholders for the TRUST and CONFIDENCE you
have reposed in us. The Board assures you that we will do everything
possible to justify the confidence and trust you have reposed in us - by
delivering consistent results year after year and reinforcing the image of
M M Forgings as a World Class Company.
To achieve this, we need your continued support and God's blessings.
ANNUAL GENERAL MEETING 3:30 pm - 27th August 2010