In 2010-11, Sona Koyo Steering Systems Ltd. realized another milestone
 in its history by surpassing the Rs 1000 crore mark and achieved a
 Sales Turnover of Rs 1032 crore.  With all its subsidiary Companies now
 commencing full year production, Sona Koyo Group on a consolidated
 basis posted a Sales Turnover of Rs 1203 crore. This refects a 21%
 growth in sales on standalone basis and 41% on consolidated basis.  The
 group also recorded higher net profit of Rs 44.63 crore on consolidated
 basis. Your company is committed to exceed Customer expectations by
 consistently providing high quality products. Management focus towards
 improving capacity utilization and value addition per employee,
 supported by strong market demand has helped the Company to achieve
 significant growth in turnover and profitability.
 
 The global economy continues to recover at a slow pace than the
 forecast, while the emerging markets are beating the forecast growth.
 India is witnessing excellent growth and is expected to be a 5 million
 passenger vehicle market by 2015. India is now home to all the major
 Global Automotive Companies, which provide the Indian Automotive
 Components Companies good opportunities for growth. The auto component
 industry will epand both due to growth in domestic demand as well as
 International demand for its Indian OEMs.
 
 India is most likely to be one of the fastest growing automobile
 markets, and perhaps the third largest, in terms of domestic market
 volumes, by 2020. The growth trajectory in automobiles in India was
 high, in double digits, during the past decade partly because of the
 acceleration in economic growth, and partly, because of favourable
 factors such as increasing finance penetration and rising consumer
 aspirations. The same factors are likely to continue to drive more than
 10 per cent growth in cars, utility vehicles, light commercial
 vehicles, and scooters over the next 10 years. As per SIAM estimates,
 the sector is expected to grow at 15%-16% in FY-12 despite being
 impacted by factors like high inflation, rising raw material costs,
 increase in interest rates and fuel prices. Governments bolstered steps
 for the infrastructure development will continue to support the
 economic growth and employment opportunities in the Indian Economy.
 
 Other developments in the Automobile sector include gradual shift of
 production facilities from high-cost regions in North America and
 European Union to lower-cost regions such as China, India and South
 America. The Asian countries, especially China and India, are expected
 to account for 40% of growth in the auto industry over the next five to
 seven years.  Cost & Efficiency optimization shall be the key words.
 The Automakers have started to reduce the number of technological
 platforms with a greater diversity of models produced from each
 platform in order to remain cost competitive.
 
 There is also a shift for green cars, which will not only mean
 increased use of alternative energy sources but also lightweighting
 of components. A majority of the systems are becoming electronic for
 the same reason. Increasing fuel prices and concerns over global
 warming have focussed attention on the auto industry which has resulted
 in efforts towards either relying less on traditional fossil fuels or
 using renewable sources of energy. It is likely that green cars will
 
 represent up to a third of total global sales in developed auto markets
 and up to 20% in urban areas of emerging auto markets by 2020.
 
 Your company is the leader in the Electronic Power Steering (EPS) in
 India and our partners JTEKT are not only the global leaders in the
 steering business, but also the number 1 Electronic Steering Systems
 provider in the world. Thus the creation of Sona Koyos subsidiary,
 JSAI, is an important strategic decision your Company took. I am very
 pleased to say that our partnership with JTEKT is progressing very well
 on other fronts, too. JTEKT is supporting Sona Koyo, for example, with
 technical experts to improve productivity and quality.
 
 In order to improve quality, reduce costs, and increase value addition,
 your Company is exploring options of backward integration. One such
 project already initiated by the Company is to set up Aluminium Die
 Casting Plant at a new location in Malpura, near Dharuhera. The Company
 has also decided to set up facilities for in-sourcing which essentially
 involves in- house machining of certain key components. Capex outlay of
 Rs. 50 crore has been earmarked for these new projects.
 
 In view of the exponential growth that the Industry is witnessing, a
 big challenge that the Automotive Industry is facing today is the
 development of tier 2 & tier 3 suppliers for quality and productivity.
 Sona Koyo is leading a major Indo-Japanese program called VSME
 (Visionary Small & Medium Enterprises), which is supported by JICA &
 NMCC.  This program is aimed at upgrading the entire supply chain,
 beginning with tier 3 and tier 2 suppliers, and creating a win- win
 relationship between suppliers and customers in this chain.
 
 I am certain that these efforts of optimizing the supply chain will
 benefit your Company not only in short-term, but also for years to
 come.
 
 I take this opportunity to thank our partners; JTEKT, Maruti Suzuki and
 Fuji Kiko, our customers; Maruti Suzuki, Mahindra & Mahindra, Tata
 Motors, Hyundai, Mando India, Fiat India, Toyota Kirloskar, General
 Motors, and Renault-Nissan India, our bankers; State Bank of India,
 Corporation Bank, Standard Chartered Bank, Exim Bank, Yes Bank, Kotak
 Mahindra Bank, Allahabad Bank, Indian Bank and State Bank of Hyderabad,
 and our employees for their continued support and confidence in our
 management.
 
 Finally I thank all the shareholders of our company for your faith in
 the management and the future of Sona Koyo.
 
 Dr. Surinder Kapur
 Chairman