Sona Koyo Steering Systems

Dear Shareholders,
 
 The year 2008 - 09 has gone down in history as one of the worst years
 that the world economy has seen since the Great Depression of 1929.
 Icons of global business such as Merrill Lynch and Lehman Brothers have
 gone into oblivion, US auto marques such as Chrysler, GM are in
 bankruptcy while Toyota Motors, the bell weather of Japanese
 manufacturing has posted a loss of USD 4.4 Billion and expects to loose
 another USD 5.5 Billion by March 2010. The Indian economy has not been
 totally isolated from these world vagaries and neither has the auto
 sector.
 
 Even though Passenger Vehicles grew by 6.75% from 1,768,283 to
 1,887,619 units, the huge drop in Medium & Heavy and Light Commercial
 Vehicles by 32.45% and 10.45% respectively the over all market posted a
 0.14% dip.
 
 Higher input costs have hit everyone across the board.  Steel prices
 rose by over 74% based on 2007 prices and have now settled at an
 increase of 33% over 2007 prices.  The US$ rose by 23% from Rs. 39.98
 in April 2008, to Rs.  49 in April 2009 and the Japanese Yen has also
 appreciated by 30% from April 2008 to April 2009. The cost of and
 access to funds for both consumers and corporates was another major
 issue. If you recall I had stated these as major issues facing the
 industry in my previous years address. As feared managing these issues
 has been a challenge for everyone associated with the sector - your
 company has been no different.
 
 What we had viewed as a temporary slow down turned into one of the
 most challenging periods in recent economic history. Market sentiment,
 which took a huge dip towards the end of 2008-09 shaved 63.8% off the
 stock exchange from a high of 21,000 points. Layoffs, salary cuts and
 general uncertainty kept automobile customers away.  We saw production
 schedules from our customers fluctuate wildly towards the end of the
 year. Auto companies, though quick to respond to the market, have had
 to revisit strategies and reach out to segments of customers which had
 until now remained untapped. Some key projects of our customers have
 got delayed or shifted - all leading to pressure on our top and bottom
 lines.
 
 Your company has posted a top line growth of 1% moving sales up from
 Rs. 683.6 Crores to Rs. 693.2 Crores.  Unfortunately huge input costs
 have hurt our bottom line terribly and we have for the first time in
 our history posted a loss of Rs. 31.03 Crores. It also pains me to
 announce Zero dividend to our shareholders for this year. It is the
 first time in the history of our company that I am not being able to
 support our shareholders - it is painful and it hurts. The pain has
 been doubly hard since we have had to undertake some very harsh
 measures internally. There has been downsizing of manpower, salary cuts
 and general tightening of the belt all around. We have not been able to
 pay bonuses to our shop floor workers. The pressure has - also been
 passed on to our suppliers. The speed of our localisation plan has been
 stepped up and I am personally supervising its progress.
 
 This will help cut our exposure to foreign exchange risks as well as
 contribute towards saving costs.
 
 We remain true to our basic beliefs i.e. Respect for the Individual,
 Service to the Customer and Excellence in the Pursuit of our Goals
 as well as follow our principles of TQM and TPM to keep competitive. We
 have stepped up our efforts on R&D taking out E-PAM technology to
 market.  Some new businesses have been signed up in the truck and small
 goods carriers business and we hope to announce them shortly.
 
 The 3 subsidiaries of Sona Koyo have been making steady progress. The
 JTEKT Sona Automotive and Sona Fuji Kiko Automotive facilities at Bawal
 are near completion and both should begin commercial production on time
 by November 2009. The Arjan Stampings facility at Farukh Nagar has
 started commercial production in April 2008. The AAM Sona facility at
 Pant Nagar in which Sona Koyo has an investment, has also started trial
 production.
 
 While these tough times may be painful and difficult for us all - they
 also present opportunities for companies to work harder on internal
 systems, processes and policies that make them even more efficient. Let
 us look at Japan, who had to deal with an appreciating dollar, which
 rose from Yen 250 to 130 against the Dollar in a period of around just
 1 year. The entire country looked inwards, rather than blaming the
 external forces, and came out with spectacular results. Their progress
 on internal efficiencies is well documented. We need to do the same.
 
 That having been said, I view the future with cautious optimism. The
 recent return of a stable Government at the centre will undoubtedly
 help improve market sentiment, but the world economy continues to be in
 turmoil. The decision makers of our country have created a system that
 helps protect India from some of these storms and even today predict a
 GDP growth of anywhere between 5.5 and 6.5% - but we dont know for how
 long we will remain unaffected.  Perhaps India and China will lead the
 world out of its current deflation - but whatever the future - it will
 take time for the global economy to turn around.
 
 In the process it would be prudent for Sona Koyo to be cautious. We
 have seen a 9% increase in sales in the first two months of the year
 2009-10 and commodity prices are looking stable. We are working closely
 with customers on forecasting and improving internal efficiencies. We
 will continue to look at internal efficiencies and make commitments
 with caution. We are looking at our project costs and are trying our
 best to prune them.
 
 Let me take this opportunity to thank our partners and customers for
 their continued support, and to all our employees for their dedication
 and hard work. And please allow me to express my heartfelt thanks to
 you, the shareholders, for your continued faith in your Company
 
            
 
                                              Dr. SurinderKapur 
                                                       Chairman