From an Operating Loss of approximately Rs. 13 crores, we swung the pendulum to the other end with a profit of Rs. 13 crores +. Business exigencies, however, demanded that provisions for large and new adjustments be made — of Rs. 5.16 crores for additional gratuity payable to Management Staff in view of reduction of the retirement age from 60 years to 58 announced only in March 2003, and a further amount of Rs. 5.33 crores towards a more effective treatment of outstandings, none of which was contemplated at the time of preparation and presentation of the Annual Business Plan to the Board of Directors last year. These adjustments substantially reduced our Operating Profits;

The dramatic turnaround in the results of the erstwhile Storwel Division, from a loss of more than Rs. 3.5 crores to a profit of Rs. 5 + crores, the Business crossing the NBV of Rs. 100 crores for the first time in its history;

Successful diversification of the Storwel Division into Home Furniture;

Launching a national brand — “Godrej Perfect Home”;

Foray by Storwel Group into a new area of business — Laboratory Furniture, and securing significant orders in the last quarter of the financial year;

Continued increase in profitability year after year, for the last 5 years, by the erstwhile Office Furniture Business;

Breakthrough order of 10,000 Chairs from Wipro;

Single largest order of Rs. 5 crores for Furniture from the Andhra Pradesh Secretariat, Hyderabad;

Successful entry into large turnkey operations by the Furniture Division, with a single order of almost Rs. 2.5 crores from the Gujarat State Petroleum Corporation;

The Security Business crossing billed sales of Rs. 100 crores for the first time, and achieving a growth of 11% against the industry rate of 4 to 5%;

Nine new products and design innovations introduced by the Security Business in the last financial year which contributed to 23% of the annual turnover;

The Security Business successfully explored new markets in Nigeria, Vietnam and East Africa and positioned their Sales Representatives in different locations abroad;

Successful tapping of Department of Posts in the non-banking segment by the Security Business, with an order for 700 Safes;

Creation by the Security Business of a new brand concept, “Godrej Secure Home”, offering total security solutions for homes;

New category of business viz. strengthening of old Safes, successfully implemented by the Security Division with a breakthrough order of add-on doors from Bank of India, worth Rs. 2 crores;

The Electronic Security Business achieved 35% growth and looks forward to doubling the same next year;

Development and supply of India’s first indigenous Crane for the Indian Navy at Vizag by the Storage Solutions Group. Order worth more than Rs. 4.6 crores;

New organisational set-up by the Storage Solutions Group in the export market bearing results, as export volumes increased by 300% from 40 lakhs to 135 lakhs with next year’s target of Rs. 10 crores (750%);

The Prima Division stabilised Typewriter production at Shirwal and reduced manpower costs by 70%;

Winning and executing by the Prima Division of an order for printing Electoral Rolls worth Rs. 2.5 crores;

Receiving the single largest order in the history of the Prima Division for Typewriters in Madhya Pradesh worth Rs. 1.21 crores;

Receiving the single largest order for Video Conferencing Equipment worth Rs. 55 lakhs;

Receiving the single largest order for Projectors from Reliance worth Rs. 75 lakhs;

Prima continuing to be the largest Distributor of Fax Machines in India;

The Locks Division successfully entering into the business of Petroleum Locks and successfully defending legal proceedings against it by a world-renowned international competitor seeking to prevent our entry in this field;

Substantial work done in moving the manufacture of new ranges of Locks and components from Mumbai to Goa, thereby reducing costs;

On the Industrial Products side, the Precision Equipment Systems (PES) procuring orders in excess of Rs. 46 crores for the current financial year from Nuclear Power Corporation;

The Tool Room receiving an award from M/s. Honda Motor Cycles and Scooters India Ltd. for “Best Supplier of the Year”;

The Tool Room developed, for the first time in India, new Die-Casting Dies for Car Air Conditioners made by M/s. Subros;

The Material Handling Equipment (MHE) Division exceeding their top line plan by 6% and crossing the Rs. 60 crores turnover for the first time;

Exports of MHE growing by 74%, which constitute more than 33% of the business turnover, with 12 new markets being opened up in the year;

MHE increasing its market share by 5% from 44% to 49% and becoming the  undisputed leader in the Indian market;

The Aerospace Business has successfully set up an assembly line for the world’s  fastest Supersonic Cruise Missile, and for the first time in India, successfully produced a high-profile antenna for the Prime Minister’s Office and Residence, thereby contributing to foreign exchange savings of Rs. 2 crores per antenna. They have a healthy order booking position of Rs. 80 crores, which has more than 80% value addition, and the continuity of the projects which they are involved in is guaranteed for a minimum period of the next 3 to 5 years.

It is unfortunate that in spite of herculean efforts, 7 of our 11 businesses reported a negative bottom line, though many of our loss-making businesses reduced their losses considerably over the last year. But the processes have been put in place, the homework meticulously done. There is excitement in the air, there is a will to win, and the cobwebs are lifting, and one and all are seeing a clearer picture. The new mantra for us is “Sustained Profitable Growth”, and this is the direction for the future.

NEW DIRECTIONS
It is abundantly clear that the negligible overall top line growth of 1.4% is grossly inadequate to leapfrog into the arena of high profitability. Newer products, faster introductions, newer markets, higher contribution and myriad more successes are required to be focused on. The long trumpeted merger of the Storwel and Office Furniture Divisions has eventually taken place with effect from 1st April, 2003, and a new Division christened the Furniture & Interiors Group has been born. The customer, who had traditionally been given a raw deal, has been brought centre stage, and the new Division is so structured as to have a clear demarcation and focus on the “Home” and the “Institutional” customer, and to provide a single point contact for ease of purchase and service. The Manufacturing Plants have been combined under a single Manufacturing Head, and the same is replicated in the Marketing, Sales and Service functions. The mandate given to the new Division by the Management is to double its profits in less than 3 years. With this aim in mind, each Manager is questioned what his/her individual contribution will be towards this superordinate goal.

Our new Branch Office in UAE is doing sterling work, and has given the businesses the focus and confidence they need to explore overseas markets for sustained growth. The operations are currently being strengthened by doubling our sales force, and we are contemplating setting up warehousing facilities, in order to provide faster deliveries and cater to our customers’ stringent requirements.

Apart from the UAE operations, future markets singled out for focus are East Africa, Saudi Arabia, Sri Lanka and Bangladesh. We have already placed a Market Manager in Kenya which is yielding good results, and are posting Sales Representatives in Tanzania and Uganda. In Saudi Arabia, we are setting up new distribution channels, with our Representatives posted at the offices of our Distributors. In Sri Lanka, we have set up a Liaison Office which will be functioning from the end of May 2003. For Bangladesh, we are shortlisting a Manager to be posted in Dhaka to cover this fertile territory.

SHOWROOMS AS AMBASSADORS
We have failed to leverage the vast resources which are available to us at the 25 showrooms we have today throughout the country, some of which are in extremely prime locations. The showrooms, instead of being the Ambassadors of the Company, have often shown us up in poor light. With effect from 1st April, 2003, the Company is entering into a new Retail Business, which initially will concentrate only on the products of the Company, both existing and to be newly introduced, and revamp the entire showroom structure. A Visual Merchandising Consultant has already been appointed, and we intend to renovate a minimum 12 to 13 showrooms a year, at a cost of more than Rs. 3.5 crores. A new Vice President (Retailing) has been appointed to head this business, with a mandate that we would expect the business to target a level of Rs. 80 to 100 crores in 3 years’ time. An international consulting firm in retailing has already submitted its report, and manpower selection is under way. We feel that the thrust into retailing will not only increase our sales, but will give a fillip to our brand image and help improve our bottom line. Apart from the showrooms, we are also contemplating setting up Display Centres in the metro cities, which will display our capabilities, and be a focal point where Architects, Interior Decorators, Facility Managers and Institutional Buyers can view our products and conceptualise their respective requirements.

FIRE-RESISTANT PRODUCTS
The Security Equipment Division has realised that whereas growth in physical security will gradually diminish or at the most remain static in view of the meagre expansion of the banking sector, there is great opportunity for its fire-resistant products in the export market, as well as for its Electronic Security products in India. Plans are at an advanced stage to revamp its manufacturing facilities to cater to these new requirements, and its Export team is eyeing an export target of Rs. 25 crores in 3 years’ time, from the current level of Rs. 5 crores per annum. The Electronic Security Business is also poised for virtually 100% growth and various tie-ups with international manufacturers of repute are on the anvil. The new banking requirement for Banding Machines for Currency Notes, for Cash Counting Machines, will throw up new vistas for increased business velocity.

SOLUTIONS FOR STORAGE
The Storage Solution business had set up a state-of-the-art manufacturing plant at Ambattur, Chennai. Keeping in mind that the requirement of Storage Solutions in India is infinitesimally small compared to the global requirement, and that for our investments to be profitable it is necessary to export more than 50% of its production. From a humble beginning of Rs. 45 lakhs of export, they have last year reached a target of Rs. 1.35 crores and this year have targeted at least Rs. 10 crores of export, by having a clearly defined export strategy and a plan in place. The mandate given to them by the Management is of a minimum export level of Rs. 30 crores annually in the next 2 to 3 years.

NEW VENTURES
Our Prima Business has realised that it would not be possible to increase the number of Manual Typewriters dramatically in view of product obsolescence, and must explore other avenues and new products for growth. They are in dialogue with leading typewriter manufacturers in the world on how to look at different markets jointly for mutual benefit and also of how to become an Original Equipment Manufacturer (OEM) for them. New products with substantial future prospects, like Vending Machines for hot and cold beverages/drinks, have been prototyped and are being field-tested before being commercially introduced. Several unprofitable lines of business have already been closed down and replaced by others where the contribution would be significant.

In the Locks Division, the strategy is to move more and more products to our manufacturing facilities at Goa, where the cost of manufacture is significantly less and to retain in Mumbai only Research and Development activities and the production of high-cost Locks. This strategy over the years is bound to yield results and make us ready for the onslaught of international competition from China and the other South-East Asian countries with the lifting of all import restrictions by 2003.

In our Industrial Products, our Process Equipment Division has done stellar work, and has managed to reduce its losses from 15 crores + last year to virtually break even. It is unfortunate that crores of rupees of finished goods, ready by end March, could not be shipped for want of shipping space. They have a pending order position of almost Rs. 90 crores and have planned their manufacturing facilities in sync with their business plan, thereby forecasting a very profitable year for them. Many prestigious projects have been executed by them and they are now recognised in the International Fraternity as a manufacturer of substance, specially for equipment for the petrochemical and fertiliser industry.

HIGH-TECHNOLOGY MACHINES
Our Aerospace Business last year has been reeling under the strain of technological competence, but have put their house in order by a fresh infusion of complicated and high-technology machines capable of very accurate tolerances. There has been a change of mindset and people are excited to perform. The rave reviews they have received from ISRO and the Defence Sector on the performance of their products has been a major morale-booster. With a healthy order booking position of Rs. 80 crores +, and an assured continuity of the projects which they are working for, there is every opportunity of turning this business around and making it into a profitable venture.

Our Material Handling Equipment Division has realised the importance of aesthetics and design, and to produce new generation Forklift Trucks in order to remain competitive in the international market. With this end in mind, they have currently entered into an arrangement with an international Italian manufacturer, Carer, for the design and manufacture of a 3-wheeler Forklift Truck, with a possible buy-back arrangement. They have also entered into an arrangement with a renowned British Forklift Truck manufacturer, Bendi, for the design and manufacture of articulated trucks with a buy-back arrangement. Both these new products are focused exclusively for catering to the stringent needs of the warehousing industry, and will add to the product range and contribute to the business returning to profitability.

I verily believe that the year 2003-2004 can be a record-breaking year for the Company. The businesses and the persons at the helm of affairs have achieved a sense of maturity, which makes them see the big picture clearly. Everyone knows what is required to be done. Everyone knows what he or she is required to do. Everyone knows where they will land up if they do well, and what will happen to them if they don’t. It is a fine team of young men and women who make up this Godrej army and under their new banner of “Guts, Grit and Glory”, I am confident that there will be no stopping them.

P.D. Lam
President

Excerpts of a message at the Board of Directors Meeting held on 15 and 16 May, 2003.