1994 SHAKTI FINANCE LIMITED CHAIRMANS' STATEMENT Ladies and Gentlemen, It gives me great pleasure to welcome you all to the 38th Annual General Meeting of the members of the Company. The Directors' Report and the audited accounts of the Company for the financial year ended 31st March, 1994 have been with you for some time and with your permission, I shall take them as read. FAVOURABLE DEVELOPMENTS IN INDIAN ECONOMY The achievements of Sri P.V. Narasimha Rao's Govemment after it had assumed office in June 1991 has been outstanding in many respects. Due to the impact of the liberalisation measures adopted by the Central Govemment consistently, the economy is entering a new phase of growth. In 1993-94 the balance of payments position was completely under control with a reduction in the trade deficit to a meagre amount of $1.03 billion from $3.31 billion in 1992-93. Exports were higher by 20.3 per cent while imports have increased by only 3.3 per cent in spite of the liberalisation of import controls and adequate availability of foreign exchange with full convertibility of the nupee on current account. It is expected that the uptrend in foreign exchange reserves will remain evident and the $20 billion mark may be touched before long. With agricultural output recording a net rise in the aggregate and an improvement in industrial production in the later half of 1993-94, the Gross Domestic Product is estimated to have grown around 4 per cent. The efforts of the Government in curtailing inflation rate may prove successful in the coming months as the monsoon is behaving satisfactorily for the seventh season in succession. In fact there has been a heavy and even abnormal rainfall in some regions. It is hoped that agricultural production will again be at high levels. The uptrend in industrial production will be more pronounced in 1994-95 and the Gross Domestic Product may rise to over S per cent with industrial production also increasing by over 6 percent. THE AUTOMOBILE INDUSTRY The Indian automobile industry, which was affected by demand recession, began to experience a strong revival in-1993 94. The demand for Commercial Vehicles increased from the middle of 1993-94 and the major manufacturers were able to respond effectively to meet the renewed market demand by increasing their production in the second half of the year. With the liberalisation of the economy leading to increase in industrial activity coupled with increase in production of agricultural commodities and the growing prosperity of large consumer segment, the demand for commercial vehicles and passenger cars is expected to increase. Almost all the passenger car manufacturers in the country are planning to introduce new models However the road network is the only factor setting the limits for the growth of commercial vehicle industry. A study by Asian Development Bank has recommended constnuction of about 10000 k.m. of express ways before the year 2015 at an estimated cost of Rs.30900 crores. For development of existing high ways, an additional investment of Rs.27000 crores is estimated making a total of Rs.57900 crores. Therefore the Govemment should consider enhancing the investments in roads which will promote wider economic development. EXCELLENT PERFORMANCE IN 1993-94 The performance of your company in 1993-94 was excellent as greater emphasis was laid on the transaction of hire purchase business with the conclusion of lease contracts only to the extent necessary. As explamea earller, tnere was also a revivals activity in the automoDne moustry m an lts segments m tne later nau of the accounting period and as adequate resources were available to the Company with the equity base getting enlarged on account of Issue of equlty shares on a rignt basis, the dlsbursements m mre purcnase Dusme$ coula De steppea up snarply to Rs.68 crores from Rs.34 crores in 1992-93, recording a growthof 100%. The stock on hire has thus risen by 48% to Rs.121.62 crores from Rs.81.66 crores in 1992-93 With an increase in advances in all directions, the gross income has improved to Rs.37.23 crores from Rs.30.14 crores and the net profit after depreciation to Rs.4.00 crores from Rs.3.01 crores previously, there being no liability for taxation The dividend has been maintained at 25 percent, taxable even on the enlarged On capital after rights issue. A larger outlay of Rs 1 40 crores (Rs 0 77 crores) is therefore required. The new shares are eligible for a proportionate dividend. The balance has been appropriated for strengthening reserves. BRIGHT PROSPECTUS It is proposed to keep up the growth rate during the current year, closer to that of the last hnancial year by disbursing around Rs. 125 crores. I am pleased to inform you that against the said objective, around Rs.30 crores have already been deployed in the first four months registering a growth rate of 103 per cent as compared to corresponding period last year These higher disbursements will lead to larger unmatured finance charges and thus the future prospects of the company is bright. The scope for increasing advances is substantial as there has been an increase in output of commercial vehicles and passenger cars. The branch expansion programme envisaged in neighbouring states like Andhra Pradesh and Kamataka will also enable the Company to increase the deployment. The emphasis will be mainly on hire purchase finance for commercial vehicles and passenger cars. The outlook for 1994-95 and the coming years will therefore be promising especially as it is also being explored how activities can be diversified in new directions. PRUDENTIAL NORMS FOR NON-BANKING FINANCE COMPANIES Based on the recommendations of the Dr A C Shah Committee Reserve Bank of India has announced the guidelines for prudential norms for income recognition, accounting standards, provisioning for bad debts, etc. Your Board of Directors have already taken steps to comply with these guidelines. The method of providing depreciation on leased assets have already been changed to conform to the norms of The Institute of Chartered Accountants of India. This segment of the financial services sector has indeed a bright future. The pace of development in the coming years will thus be much faster than in recent years I am sure your Company will also participate fully in the new phase of growth of the industry as always and reach new heights in the coming years. ACKNOWLEDGEMENT On behalf of the Board of Directors, I wish to convey my sincere thanks to the shareholders, customers, hankers, depositors and employees of the Company. I pray the Goddess "SAKTHI" to shower her blessings and continue to guide us in all our endeavours. NOTE This does nor purport to be the proeeedings of the Annual General Meeting of the Company. DR N CMHAIHMAALNINGAM CHAIRMAN COIMBATORE - 641018. 1st September, 199444