MODI RUBBER LIMITED
On behalf of the Board of Directors and on my own behalf, I extend to you
all a very warm and cordial welcome to the 25th Annual General Meeting of
your Company. The Notice convening the Meeting, the Directors' Report and
the Audited Accounts for the year ended June 30, 1996, have been with you
for some time and, with your permission, I take them as read.
You will be pleased to note that the performance of your Company has been
satisfactory. The turnover of the Company increased to Rs. 1019.80 Crores
in the current year from Rs. 869.98 Crores in the previous year. Thus the
Company has for the first time crossed Rs. 1000 Crores mark, during the
year. The Operating Profit before Interest and Depreciation increased to
Rs. 69.49 Crores during the current year against Rs.46.01 Crores in the
previous year. However, on account of higher interest cost, the Profit
before Tax was placed at Rs. 15.73 Crores in the current year against Rs.
1.88 Crores in the previous year. These operation results have been
achieved by taking various cost control and cost reduction measures besides
the financial discipline at all levels of operations.
The performance of Indian Economy in the first phase of Economic Reforms
introduced in 1991 have led to a significant growth in the industrial
production. The Economic Growth of 6.6% achieved in the current year was
higher from the level of 6.3% in 1994-95. The record performance of
Industrial Growth 13.1% added to the higher overall economic growth last
year. I compliment the Government for achieving success at macro economic
level. I am also happy that the present Government led by Prime Minister
Shri Deve Gowda has assured that the liberalization of Indian Economy will
not be reversed and steps will be taken to further liberalize the same.
Although the present Foreign Exchange position of the country is at a
satisfactory level at around US$ 22 billion but the recent slowdown in
growth of export sector and lower production of oil is causing concern. The
overall growth in export has slowed-down which grew merely by 9.8% in the
first half of the current financial year compared with 12.3% in the
corresponding period last year. The prevailing high rate of interest and
the sluggish capital market are two major concerns of the Indian Industry.
The industry as a whole is keen for massive infusion of funds in the
economy for sustaining the growth in the industrial production of the
Country. Progressive cut in corporate taxes would go a long way in
stimulating investments and better tax compliance.
The infrastructure sector in the country continues to be weak especially
the Power Sector and Construction of roads. It is heartening that the
Government is allowing private sector as well as foreign investment in the
road construction activity. This will act as a major catalyst for the rapid
economic development of the country.
Automobile Industry which is a major contributor to industrialization of
India has witnessed a sustained growth for about a decade. However,
currently the Automobile Industry is witnessing a pinch of demand slow-
Although the production of cars have gone up yet due to lack of proper
network of roads, the benefits of this alternative mode of transportation
is mostly limited to major cities. While cities are getting over crowded by
cars, the common man in the country side and also in the cities and town is
dependent largely on public transport. The bad conditions of existing roads
and lack of wider roads and additional road network has not kept pace with
the rising demand of road transport.
Of late the Automobile Industry is faced with piling inventories. With the
result, some car manufacturers have been forced to rethink. The position of
two-wheeler manufacturers is also more or less the same. Some
manufacturers have been forced to cut their production, ranging between 15%
to 20%. Since the off-take continued to drop in two- wheelers segments,
stocks have started piling up. While Finance Companies and Banks have
helped in propping up demand, the novel schemes like own-your-car and
various leasing and hire purchase schemes have brought about a significant
change in the Automobile Industry. Continuous reviewing of such schemes in
also necessary so as to be conducive to the preaviling market conditions
for maintaining the automobile industry as a vibrant sector of Indian
The performance of Tyre Industry is linked with the developments in the
automobile sector. With the growth in the automobile sector, the tyre
industry has also witnessed a remarkable growth in the post liberalization
The growing importance of the Tyre Industry could be gauged from the fact
that a number of leading international tyre manufacturers have been seeking
entry into India either on their own or through joint ventures. The entry
of leading auto manufacturers of the world has therefore, added a new
dimension to the Tyre Industry.
With the opening of transport sector to the private sector, particularly in
construction and maintenance of road network, it is hoped that the Tyre
Industry would be able to sustain its production and performance.
The future of the Tyre Industry in my view is bright. I hope that
Government would not hike the petroleum prices as it will offset the
buoyant economic growth fostered by increased trade and further
Your Company has also embarked upon an ambitious expansion and
modernization plan for manufacture of Passenger & Light Commercial Vehicle
Radial tyres in collaboration with M/s. Continental Aktiengesellschaft of
M/s. Continental have also agreed to give the latest technology of Radial
Passenger and LCV tyres and patterns which are currently being used by them
I am glad to inform you that R & D Department of your Company has
successfully been developing new sizes and patterns for different vehicles
in India. Your Company has launched new truck tyres like 515, 436 & IC 60
for meeting the varied demand of truck and bus customers in various market
I am happy to inform that inspite of competition from the leading
international tyre manufacturers, your Company has achieved an export
turnover of Rs.106 Crores. The network of our export market encompasses
both developed and developing countries of Asia, Middle East, Europe and
Latin America besides USA. In my view export performance of your Company at
a time when India's overall exports have declined, is satisfactory.
The Industry has represented to the Government to reduce the Value Addition
Norm for value based advance licenses to 35% from the present 50%. The
industry has based its representation on dilution of the original value
based advanced licensing scheme by placing almost all raw materials in the
restricted/sensitive list of import. The Company has undertaken vigrous
export promotion measures and is confident that export will receive the
much required boost if the Value Addition Norm is reduced to 35% from 50%
under Value Based Advance Licensing Scheme. If this suggestion of the
industry is accepted by the Government then it is hoped that the overall
export of tyres will double within next two years from the current level of
Rs. 600 Crores.
During the course of last one year the Industry has to accept multiple
price increase effected by domestic manufacturers of nylon tyre cord
fabric, rubber chemicals, carbon black and several miscellaneous chemicals.
Natural Rubber prices rose sharply upwards in traditional lean season
period as the Government did not accept the Industry's request for duty
free import of Natural Rubber.
Since the Government has accepted the recommendations of the Chilliah
Committee report, it is committed to apply 3 - tier import duty policy to
the Industry where the tariffs on raw materials and intermediates are lower
than that of finished goods. It is, however a matter of regret that this
policy is yet to be applied to the Automotive Industry the import duty for
Automotive tyres is currently 52%, whereas the import duty on some of the
major raw materials which go in the manufacture of tyres continues to be
very high and needs to be reduced considerably. For example, the import
duty on Synthetic Rubber and Nylon Tyre Cord Fabric is 52% and Carbon Black
and Rubber Chemicals is 42%. It is suggested that the import duties on none
of the raw materials required for the tyre industry should be more than
The Company has been imposed with additional financial burden due to
reversal of MODVAT credits on indigenous raw materials used for export
production prior to April, 1995. The Industry has requested the Government
to amend this provision of custom's notification No.203/92 for export under
value based advanced licenses prior to April, 1995. The Government's stand
is still awaited.
TOTAL QUALITY MANAGEMENT
A competitive environment has been created in the country as a result of
economic reforms. In order that your Company is able to complete
effectively, we have taken several measures. The first emphasis has been on
the maintenance of the quality. A well drawn Quality Management Strategy
has been prepared to produce tyres to match international standard.
Constant reviews are made of processes by inducting latest know how and
technologies in tyre manufacturing to remain as a leading manufacturer in
the country and also to expand export market.
I am pleased to inform that your collaborators Continental
Aktiengesellschaft, Germany had conducted the Quality Audit of your plant
in January, 1996 and rated the overall quality performance of your plant at
94.98% which is a record achievement if compared with the other plants of
AMALGAMATION OF MODISTONE LTD.
Subject to your Company's obtaining requisite approvals and pending
completion of necessary formalities tor legal merger of Modistone Ltd.
(MSL) with the Company as a first step towards the proposal approved by the
Board of Directors of your Company in principle, it has been decided to
implement organisational/operational restructuring for which effective
steps have already been taken. This will help both the Companies to
minimise their expenses and increasing their productivity, range of
products as well as profitability in the long run. A suitable proposal for
seeking approval of the Shareholders and other concerned authorities will
be initiated at the appropriate time.
Cordial and harmonious relations have been maintained in your Company. I
must say that the successful operation of the Company is due to dedication
and team work of your Company's human resources. It is, but for the
unstinted co-operation, discipline and untiring efforts put in by the
workers, staff, and officers at all levels that your Company has been able
to achieve an impressive growth.
I take this opportunity to offer my sincere thanks to various Departments
of the Central and State Governments for their unstinted support. Financial
Institutions, Banks, Dealers, Customers and Shareholders deserve praise for
their continued co-operation. I also place on record my sincere gratitude
to our Technical Collaborators, M/s. Continental Aktiengesellschatt,
Germany tor the valuable technical assistance being extended by them to
your Company. I wish to place on record once again my deep appreciation for
the services rendered by the officers, staff and workers of the Company at
all levels for their dedication and loyalty.
Wishing you all A Happy and Prosperous New Year.
Vice Chairman & Managing Director