Ladies and Gentlemen:
Welcome to the 53rd Annual General Meeting of your Company.
The Annual Report for 2000-01 gives a comprehensive picture of the Company's performance last year. While I do not intend to review it again, I can say with pride that it was a good year. There were significant improvements in revenues, profitability and resource utilization. The higher profits enabled the Board of Directors to declare a record dividend of 55% which, incidentally, will be paid out within this week.
The health of the Indian economy has become a cause for concern. GDP growth last year was only 5.8%, with each month's economic indicators showing a declining trend. Even the services sector, led by software services which was booming until late last year, has been affected. In the current year, the economic picture continues to deteriorate and growth prospects look uncertain. Economists and financial experts are unable to provide a reliable forecast of either the degree or the duration of the slowdown.
Economic revival will need a number of positive developments - a good monsoon to boost agricultural output, implementation by the Government of overdue economic reforms, and global recovery. Until then, business is not investing, investors are sitting on the fence and consumers are not spending.
After a year of good growth, Blue Star is now feeling the impact of the economic slowdown. The unaudited 1st quarter results announced today show Total Income of Rs 109.33 crores, marginally better than Rs 108.58 crores last year. Net Profit has declined from Rs 3.16 crores to Rs 2.03 crores.
Management has already initiated a number of corrective measures to cope with the slowdown:
Through these measures to boost sales and cut costs, we are hopeful of achieving reasonable financial performance this year in spite of the difficult business scenario.
During the past decade, with the entry of foreign institutional investors and the increasing presence of mutual funds, the profile of equity investors and their expectations from companies have undergone a major shift. Earlier, small investors subscribed to shares at low prices determined by bureaucrats in the office of the Controller of Capital Issues. They bought shares and usually held onto them.
Now FIIs and fund managers buy and sell shares on a short-term basis. They are not usually concerned about a Company's long-term prospects, but in the opportunity to make a quick profit. This is the way markets operate in the USA and UK and that has now become the established basis in India as well.
But investors need to address an important question: Is it valid to blindly transplant a Western model into Indian markets? I would point out some major factors in India which would lead investors in a different direction:
Blue Star's Value Proposition To Investors
Given the realities of the Indian capital markets, what Blue Star strives to achieve is steady growth in earnings which is translated into a growing stream of tax-free dividends for shareholders. Since ours is not a capital intensive business, profitability and cash flow are healthy enough to provide adequate funds to finance future growth while leaving enough surplus cash for a relatively high dividend payout. Future capital needs are comfortably met by retained profits supplemented with moderate borrowings, if required. We do not intend to dilute shareholders' equity and earnings by raising additional equity in the foreseeable future.
In short, Blue Star offers a fine investment opportunity to prudent long-term investors looking for good returns with moderate risk and no dilution. It is not a scrip for short-term speculators.
Before I end, I must convey my sincere thanks to all our employees and business associates for their dedicated contribution to the Company's performance. To my colleagues on the Board, I convey my gratitude for their wise counsel and guidance. We deeply value the continued patronage of our many customers. And finally, let me thank you, our valued shareholders, personally and on behalf of the Board, for your unstinted support over the years.
July 30, 2001