G S Auto Interna Chairman Speech

Dear Shareholders,



It is my privilege to present the Thirty Eighth Annual Report of your

Company. Fiscal year 2011-2012 was one of the most challenging years in

the automobile industry. When every- one is expecting a turnaround in

the global econ- omy and financial crisis, the unexpected devel-

opments in the Eurozone once again dashes the hope of the recovery in

the world economy. The economic situation could get worsen in Euorpe in

the days to come and US recovery is also not too encouraging. But,

before blaming all on the Europe and to the external markets & environ-

ment, it would make sense to see that there is a lot that can be done

within India.



After continuously growing in high growth tra- jectory in the past many

years, the Indian econ- omy too has run into rough weather. The contin-

uous high inflation in Indian economy compelled the Reserve Bank of

India to choose the path of continuous higher interest rate regime

primarily due to lack of innovation in managing the sup- ply side

inflationary pressures. The Global eco- nomic uncertainty coupled with

our Government''s exclusive focus on tightening monetary policy by

continuously interest rate hike throughout the years along with the

lack of policy consensus for all the critical economic reforms and so

on, have resulted in a decline of the country''s eco- nomic growth

from 8.5% in 2010-2011 to 6.5% in 2011-2012 & 5.3% in the last guarter

of the fiscal year 2011-2012. It is unfortunate that we missed the

opportunity to reap significant gains for our country even as we were

comparatively insulated from the global slowdown. We have failed to

make policy and structural reforms over the past two years to propel

Indian economy towards its growth targets. As policy initiatives



continue to flounder, we have been witnessing an alarming slowdown in

industry as reflected in a weakening IIP growth for the year.



This has adversely impacted capital intensive initiatives by India Inc.

Besides, the surfacing of various high-level improprieties, forced the

active involvement of the Indian judiciary, which diverted the policy

makers'' attention on man- aging tough situations and compulsions of

coa- lition politics, have further resulted in a freeze on growth

oriented policies. The other roadblock that severely challenged

economic progress was the sharp rupee depreciation and increasing fuel

prices. The depreciating rupee as compared to USD is good news for the

exporters but it is not beneficial for the country like India, where we

are the net Importer. The prevailing overall uncer- tainty and lack of

optimism, bulging fiscal deficit, rising cost of funds and increased

cost of living forced India Inc, and the average Indian to post- pone

investment and consumption respectively.



There is sheer pessimism in India Inc, which will have to be reversed;

either the Reserve Bank of India or the Government of India will have

to take some calibrated bold step to put the econ- omy back on the

growth track. The Inflationary pressures can be there but with the

reduction in the rate of interest by the Reserve Bank of India along

with some policy initiatives on key reform areas by the Government of

India, there can be some confidence booster, which in turn will provide

investment opportunity to the India inc, which will further leads to

revival in the domes- tic demand, in other senses, the Indian''s can

feel comfortable to bear the inflationary pres- sures, with more

disposable income in their hand.



I am confident that if the government is able to take the initiatives

in certain key areas and kick- start economic reforms, the economy will

turn around in this fiscal to grow at about 6.5-7%. This would provide

a platform to return to 8-9% growth in the medium term. Implementation

of reforms coupled with removal of bottlenecks that have stifled

economic growth would restore investor confidence and revive the

momentum for sustained high economic growth.



Demographically and economically, India''s auto- motive industry is well

positioned for growth, servicing both domestic and export opportu-

nities. According to Automotives Components Manufacturers Association

(ACMA) estimates in the Automotives Mission plan 2016, the total

turnover of the automotive industry in India would be in the order of

USD 122-159 billion in 2016, accounting for more than 10% of India''s



GDP. As per the Society of Indian Manufacturer Association (SIAM)

estimates, the Indian pas- senger vehicle production is expected to

grow three times to 9.7 million by 2020 from the cur- rent level of 3.3

million. The longer term growth story of the Indian economy is quite

strong but we will have to take some key policy decisions on some

economic reforms area at the earliest.



The key highlights of your Company''s perfor- mance during the year are:



Your company has generated revenue from oper- ations (Net) of Rs.

13078.66 lacs as compared to previous year of Rs. 11961.86 lacs,

register- ing a growth of 9.34% over previous year.



Total revenue increased by 9.50% to Rs. 13125.46 lacs, (other income

increased to Rs. 46.80 lacs, as com-pared to previous year of Rs, 24.93

lacs, an increase of 87.73%, primarily due to exchange rate

fluctuations due to depreciation of rupees vis-a-vis to USD), as

compared to previous year''s total revenue of Rs. 11986.79 lacs.



Earnings before interest, taxes, depreciations and amortizations

(EBIDTA) grew by 15.76% to Rs. 1053.32 lacs as compared to previous

year of Rs. 909.89 lacs. The EBIDTA margin was 8.03% as compared to

7.59% for the previous year.



However, profit after tax (PAT) during the year, almost remains flat at

Rs. 461.23 lacs as com- pared to previous year of Rs. 457.34 lacs,

mainly due to increase in financial cost (increase of 68.10% as

compared to previous year), increase in commodity prices and increase

in taxes (increase by 11.08% as compared to previous year) to some

extent, clearly shows that there was margin pressure during the year.



It was a tough & challenging year particular for the manufacturing

sector in the backdrop of ris- ing interest rate & increase in the

commodity prices. However, we have registered marginal growth during

the current year in terms of our total revenue but due to increase in

the inter- est cost, the profit after tax was almost remain the same.

As I had already discussed with you, some of the issues with regards to

lower profit- ability margins, in my previous year address to you. We

are working on all the different aspects so to overcome all the issues,

with regards to improvement in the overall margins. The contin- uous

rise in the interest cost as well as increase in the commodity prices

will remain the major issues, which will continue to create a margin

pressures in the days to come.



I would like to take this opportunity to thank our Managing Director,

Mr. Surinder Singh Ryait and his team for maintaining the company''s

perfor- mance in such a volatile cum challenging envi- ronment; and all

our employees who have worked very hard to protect our top and bottom

lines.



I am grateful to our Directors who, as always, have been a source of

guidance and incredible support for your company.



We are already working towards creating new capacity in different

regions of the country apart from Jamshedpur, along with the

diversification in other segment of the automotive industry by

increasing its product portfolio. I am hopeful, once we commence the

commercial production at Jamshedpur, it will not only give a big boost

to our top line but will improve the overall profitabil- ity margins of

the Company. We will continue to focus on strengthening our presence in

the after- market segment and will fill the reguired neces- sary gaps

in our product offering, widened our



distribution network and will continue to invest in enhancing brand

visibility resulting in increased market share.



It gives me immense pleasure to welcome Mr. Jasbir Sing Bir (IAS

(Retd.)) on board as an Independent Director. Mr. Bir is a 1989 batch

Indian Administrative Service (IAS) Cadre Officer. He has served the

Punjab Government as an IAS Officer from 1989 to 2010 on difference

positions including Divisional Commissioner of Patiala District,

Secretary to the Government of Punjab, Department of Personnel and

General Administration, Director cum Secretary Cultural Affairs,

Archeology and Museum and Secretary General Administration and

Commissioner MC Amritsar. I also invited Mr. Bir, to be a member of the

Shareholders & Investors Grievance and Audit Committee of your Company.



With the joining of Mr. Bir, on the Board of your Company, your Company

will enrich with their valuable experienced guidance, in the years to

come and will further strengthen the Board of your Company.



The overall market have been very competitive, one has to be extremely

efficient with men, mate- rial, capital deployment, prefect execution

to generate a reasonable long term profit growth. In the days to come,

our main focus will remain to enhance our competitiveness along with

the overall improvement in the profitability margins by all-round cost

reduction, improving guality of the products, cost effective &

improving our in house research & development activities. In the

current fiscal, the challenges posed by an adverse external environment

are expected to continue. India''s economy is expected to grow at

6.5-7%. Inflation will remain high at 7.5%-plus levels.



The political instability continues to withhold the passage of

important growth-oriented poli- cies. The rupee value continues to

hover around Rs. 55 against the US$, making imports dearer, in the near

term. As a result, the performance of India Inc. will largely remain

subdued during the current fiscal. This is already reflected in low IIP

growth and significant underperformance by the automobile industry.



However, in spite of all the above said issues, I am quite hopeful for

the long term Indian growth story and particularly for the Indian

automotive industry along with the auto component indus- try and am

cautiously optimistic in the near term.



Let me conclude by thanking all our sharehold- ers, business partners,

our Investors, Customers, Vendors, Suppliers, all our Stakeholders,

finan- cial partners specially our new financial part- ners "Export

Import Bank of India" & "Axis Bank Limited" & all the well wishers.

I am expressing my sincere appreciations to all my colleagues and all

the employees of the Company across all the ranks, for their continued

dedication, sup- port & commitment to their work; my congratu- lations

to all of them & my heartiest thanks to yours for your continued

support & faith. With your support, we are confident to sail through

all the difficulties & challenging environments in the days to come.



With best Wishes and Warm Regards



Jasbir Singh Ryait



Chairman