TIDE WATER OIL COMPANY (INDIA) LIMITED
ANNUAL REPORT 2002-2003
Platinum Jubilee Year 75 years of successful business
Speech delivered by Shri Arindom Mukherjee, Chairman of Tide Water Oil
Co.(I) Ltd., at the Annual General Meeting of the shareholders held on 30th
July 2003 at Kolkata
It gives me great pleasure to welcome you all to the Annual General Meeting
of the shareholders of Tide Water Oil Co. (I) Ltd. The Company is
completing 75 years of operation and I am pleased to say that the
performance brings good tidings for us all. The annual report containing
the Directors' report and audited accounts for the year 2002-03 is already
with you, and with your permission, I take them as read.
During the year under review the GDP growth was scaled down to 4.4%. This
was largely due to a decline of 3.1% estimated in agriculture, whilst
industrial growth is estimated at 6.1%. The service sector seems to have
recorded an impressive 7.1% growth mainly coming from the financial,
telecommunication, road transport and their related sectors. In the
petroleum sector, crude throughput was up by 5% at 112.5 million tonnes,
but prices of fuels increased significantly during the year. The drought
early in the year impacted business in the farm sector where your Company's
stakes are high. Seasonal rainfall was only 81% of the average with drought
conditions prevailing in more than half the country. The rise in base oil
prices in the latter half due to the fear of war in Iraq put severe
pressure on the margins.
In spite of these adverse operating conditions, your Company increased
sales marginally to Rs.189 crores and posted a commendable profit before
tax of Rs.11.9 crores against Rs.10.96 crores of the previous year.
Although the 100% tax relief under section 80113 for its Silvassa plant
stands reduced to 30% from the year under review, the Company was able to
record a post tax profit of Rs.9.99 crores. The earnings per share continue
to be at an enviable level of Rs.115 per share. The Directors have pleasure
in recommending a dividend of 100% (including the interim dividend of 75%
already paid) on the Ordinary shares of the Company.
Your Company's mission of enhancing customer satisfaction while
simultaneously increasing shareholder value has made it possible to report
this commendable performance. Reserves are at an all time high of Rs.79
crores; the book value of the share is inching up to Rs.900 and is well
reflected in the market price of the share.
Keeping pace with the developments in engine and machine design, the
products in the Diesel and Petrol engine oil segments, namely PRIMA & Take-
off 4T, were upgraded to meet higher specifications. The upgraded and new
products, PRIMA for diesel engines and Take-off 4T for four-stroke
motorcycles have been well received in the market as is evident from their
increasing sales and realisation.
The sales of products manufactured in collaboration with Nippon Oil
Corporation, Japan, (with which Mitsubishi Oil has merged) have shown a
phenomenal growth of 34%, especially that of engine oil for motorcycles
riding on the boom in this sector. The collaboration agreement is due for
renewal in October 2003 and with this, the Company shall continue to reap
the benefits of the latest technology and exploit the opportunities arising
in the market from the growth in new generation vehicles.
Value added distribution strategies included bringing about financial
discipline in the primary and secondary trade through an attractive
channel-financing scheme negotiated and implemented through the Company's
bankers. Trade debtors were brought down from a high of Rs.37.12 crores in
March 2002 to Rs.24.63 crores in March 2003. Consequently, interest burden
was reduced further from Rs.72.47 lacs to Rs.43.27 lacs .
The Union budget speech indicated that Value Added Tax would replace the
Sales Tax regime. Much confusion prevailed thereafter due to apprehension
of small traders, political compulsions in various states and
implementation procedures and machinery not being in place. Year-end sales
suffered as the trade consciously cut inventories to reduce their risks on
stocks. However, the whole process of implementation of VAT now seems to be
delayed due to lack of consensus among states and the Union Government's
wish to introduce it across the country simultaneously. Your Company, in
readiness for implementation of VAT and in line with Industry leaders, had
equalised landed prices of its products to the trade in February 2003.
Pending implementation of VAT and the wide variation of sales tax rates in
different states, the Company faces imbalances in the unit price
realisation of its products.
The focussed marketing strategy to communicate the enhanced product
quality, the increasing reach of the distribution network and brand
building was supported by a 30% increase in advertising spend effectively
executed through media, ground visibility and field campaigns. Demand for
the Company's products is healthy and trade margins are looking up.
The dedication and preparedness of the Company's leadership and employees
has remained at a high level resulting in their being able to exploit
opportunities meaningfully and respond smartly to the dynamic business
Last year I had indicated that Andrew Yule Group along with the financial
institutions were preparing to disinvest their shareholding to a strategic
investor supervised by an Inter Ministerial Group formed by the
Government. The process was begun in May 2002 and the response to the
invitation for expression of interest was encouraging. Due diligence was
carried out including inspection of manufacturing facilities. The share
purchase agreement was drafted and finalised after discussion with the
bidders. The requisite approvals in this connection are awaited.
I am pleased to inform you that the performance of your Company in the
first quarter of this year continues to be commendable. Sales have
increased by around 8% and profits are looking healthy. The monsoon is
favourable and may have a positive effect on the demand in the months to
come. However, the unabated increase in base oil prices is likely to put
pressure on the margins if the market does not absorb this increase.
In conclusion, l wish to express my appreciation to all customers,
suppliers, employees, the Company's bankers and other stakeholders as well
as all shareholders for their unstinted support in shaping the Company's
Note: This does not purport to be a record of the proceedings of the Annual
General Meeting of the Company
Shri Arindom Mukherjee
Date: BUSINESS LINE AUGUST 1, 2003