Tube Investments of India

As the world witnesses one of the most challenging periods in nearly
 eight decades, India was relatively insulated on account of its
 regulated financial system and large consumption-driven economy.
 However, global turbulence did interrupt Indias. growth; GDP growth
 declined from 9% in 2007- 08 to 6.7% in 2008-09, Even at this lower
 growth rate, India retained its position as the worlds second fastest
 growing economy.
 
 The global - and Indian - economy was marked by contrasting halves in
 2008-09. The first half was marked by input cost volatility: rising
 steel and crude oil prices, greater inflation and a depreciating rupee.
 So even as demand increased, cost-push inflation and currency
 fluctuations impacted our margins.
 
 The second half of the year was in complete contrast. Global financial
 institutions collapsed and liquidity became scarce. As it turned out,
 the automotive sector was among the worst affected, as most sectoral
 players encountered sluggish demand, declining realisations and
 increasing inventory. Besides, currency write- offs, following a
 depreciating Indian currency vis-a-vis the US dollar, dampened
 profitability.
 
 The global environment impacted Tl, especially the engineering
 business, with a drop in export volume, lower demand from the
 automotive segment and increased finance cost. These tough business
 conditions warranted bold steps to
 
 stay on course towards profitable growth.
 
 Bicycle business
 
 Tl redefined the bicycle business in India with a clear long-term focus
 on retail by establishing a network of exclusive retail outlets. Tl
 entered into a distribution tie-up with two well-known international
 brands for super premium bicycles and launched relevant products
 through the Track & Trail outlets. This initiative will enable us to
 cater to a wide customer cross-section - children to racing enthusiasts
 - on one hand and enhance realisations on the other. In 2008-09, we
 launched electric scooters catering to a growing market for
 environment-friendly and cost-effective transportation.
 
 Engineering business
 
 Tl strengthened its leadership in the precision welded tube segment
 through an extension into value- added components and by leveraging its
 expertise in metallurgy. We are evolving ways to replace certain
 conventional components with tubes for key clients, thus enhancing our
 market share. Most importantly, Tl is in the process of making its
 business model flexible to stay profitable under different business
 conditions.
 
 Metal forming business
 
 Growth in revenue, from supply of sections for wagons and coaches, act
 as a de-risking measure from the dependence on the automotive sector.
 In the automotive chain segment, the creation of facilities at
 Uttarakhand in close proximity to automotive hubs will enhance returns.
 In industrial chains, This determined to establish itself as a quality
 supplier to address multiple user segments in the global market.
 
 Investments in financial services
 
 The Companys subsidiary, Cholamandalam MS General Insurance Company
 Limited, recorded a 31% growth in 2008-09 amidst difficult business
 environment. This subsidiary is taking steps to consolidate its
 position in the industry.
 
 The difficult conditions prevailing in financial services market
 necessitated further capital infusion in the Companys joint venture
 viz., Cholamandalam DBS Finance Ltd (CDFL). A sum of Rs. 150 crore each
 was invested, both by us and our joint venture partner, DBS Bank
 Limited, Singapore. This timely infusion of capital is expected to
 stand CDFL in good stead over the years.
 
 Recovery
 
 As the current year starts, there are signs of recovery with a growth
 (1.4%) in the Index of Industrial Production (IIP), 13% growth in two-
 wheeler segment and 4% growth in passenger cars in April, 2009. We
 anticipate that a full recovery may not be likely for some more time to
 come. It would be our endeavour to quickly adapt to the changed
 environment and become capable of delivering in varying economic
 conditions.
 
 Human resources
 
 In our quest to stay on course, we recognise the need to develop our
 people across all levels at Tl to work together as a team in pursuit of
 a common vision and goal. We do this through various structured
 training programmes and experiential learning. Mr. L Ramkumar, our
 Managing Director, led the entire team in this journey. I wish to
 acknowledge his and the Tl teams efforts in a year that was most
 difficult.
 
 Directors
 
 Mr. Tapan Mitra will be retiring at this Annual General Meeting and has
 expressed his desire not to seek re- election. Mr. Mitra has been
 associated with Tl since October, 2000 and has contributed immensely to
 the Companys growth, both as a senior member of the Board and as
 Chairman of the Audit Committee.  His wisdom and experience have been a
 source of inspiration to us. I take this opportunity to express our
 most grateful thanks and wish him the very best.
 
 Our Board of Directors have always been a great source of encouragement
 and support to the Companys management team and to me personally. I
 deeply value their wisdom and wise counsel and thank them for their
 involvement and participation.
 
 I also take this opportunity to express my gratitude to all
 shareholders for their continued confidence in the Company.
 
                                                         Sincerely yours,
                                                         M M Murugappan