Message from the

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Annual Report Image

It gives me great pleasure to reach you through this Annual Report.

During the last year, the economy further improved and the GDP growth was 7.6%. The Government has continued its emphasis on promoting manufacturing in India, and has made several policy decisions that are designed to increase the flow of foreign investments and technology, and remove the difficulties in doing business in India. This process is continuing and will undoubtedly create conditions for manufacturing in India to become more competitive, and thus grow at a faster rate. The entire nation will benefit. There has been fiscal stability, inflation has been under control and the foreign exchange situation has remained satisfactory. One of the disappointments for Industry was the fact that the GST bill was not passed due to problems in the Rajya Sabha. Industry has been repeatedly urging political parties to support all measures that will promote competitive manufacturing, leading to faster growth and more investments, and thereby creating more jobs for our young unemployed. There is also a need for a wider understanding of the fact that the private sector has to play the predominant role in growing manufacturing, and that the Government has to be proactive in improving the business environment for industry to grow faster. Criticism of the Government for taking measures required to make this happen is not only misplaced but will ultimately hurt all of us.

The last year has, overall, been good for your Company, though the industry as a whole has not done too well. We achieved our target of double digit growth, increased our market share and profits after tax went up by 23%. In line with our dividend policy, your Board has recommended an increase of dividend from ` 25 per share to ` 35 per share. This performance has been possible because of the quality and capabilities of all our colleagues in MSIL. They keep making improvements in all aspects of the Company, and overcoming any difficulties or hurdles that arise.

Two new products introduced during the year, namely the Baleno and the Brezza, have exceeded our expectations of demand, and both have a waiting period of 6-7 months. Your Company recognises that this is not a happy situation, and causes considerable customer unhappiness. While apologising to them, I can assure them that both our vendors, and we, are making all efforts to remedy this situation as early as possible.

When Ayukawa San, our Managing Director, had taken over as the Managing Director of the Company over 3 years ago, I had posed a challenge to him - reach 2 million production by 2020. I had also mentioned this ambition in my talk to you two years ago. I am happy to tell you today that the many initiatives taken by your Company suggest that this target should be achievable. Expansion of production capacity is obviously a necessary condition. The Gujarat project is on track and we expect to sell cars made there during the current financial year. Suzuki Japan is fully supporting us, and this has become possible because you all voted overwhelmingly in favour of their implementing the project, and entering into a contract manufacturing agreement with us.

The sales and service network is being expanded in a manner that will provide stability and comfort to both our dealers and to us. A group of specialists have been employed by the Company and they have started acquiring land at sites for future expansion of sales, service and spare parts facilities. I am happy to inform you that our network will remain unmatched in India. The NEXA channel, in particular, has been greatly appreciated by customers and will play an important role in our journey first to 2 million cars, and then beyond.

We continue to strengthen our R&D capabilities, and again Suzuki Japan is extending unstinted cooperation in this task. The Brezza, developed substantially in India, has established our position in the SUV segment, where we were missing till now. We will continue to strengthen our position in this growing market. In the premium segment, the Ciaz has also met with great success and we can say that going forward MSIL will be a key player in this area. Our design engineers, along with SMC engineers, deserve a great deal of credit for these successes.

The Baleno has not only been a huge success in India, but has greatly increased our ability to sell cars in Europe and Japan. Exports have recently started and while it is too early to speak about the degree of acceptance of the car in these markets, I expect exports to play an important role in our growth.

Suzuki San, while addressing an ACMA annual conference two years ago had said that Make in India should be Make in India with Quality. We have been emphasising this message to all our suppliers and associates, because Quality has to be the key in everything we do. In particular, we have launched several initiatives to help all our suppliers attain and maintain total consistency in the quality of their supplies to MSIL.

During the year, the industry has faced one major challenge. Environmentalists, the media, and the judiciary, are very rightly concerned with improving the air quality in the NCR area, and in other parts of India. I can assure them, and all of you, that we are equally concerned about the dangers posed by our polluted air. However, finding the correct solution to any problem requires that the root cause of the problem is correctly diagnosed. This fundamental truth is often forgotten. We know that in the NCR, the major cause of pollution is dust, and PM 2.5 is the most dangerous. In the west dust has never been a pollutant of significance, but NOX is the main concern. However, we seem to be applying the western remedies for pollution to our problem, though the cause is entirely different. The IIT Kanpur has recently done a study of the sources of pollution in the NCR and found that cars are not a significant contributor to PM 2.5 in the NCR. Yet, going by what has been happening, cars and especially diesel cars, are being treated as the main villain for our polluted air. Not only are the measures being enforced unlikely to make any significant difference to the air quality, but the growth of the industry, and creation of jobs are likely to be adversely impacted. Investors are losing confidence, and customers are unsure of what to do.

The positive factor is that the Government recognises the dangers of the situation, and is taking a firm stand in favour of growth, while dealing with the real pollution problem. I do believe that overtime we will do what is really required, and the industry, as well as MSIL, will lead manufacturing growth in India.

In concluding may I again thank all of you for your steadfast support to the management of your Company.

Thank you and Jai Hind.

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R. C. Bhargava