Ladies and Gentlemen,

Welcome to the 55th Annual General Meeting of your Company.

Diamond Jubilee

Today, I stand before you filled with pride. This is not just another AGM. It is a special one because, in a couple of months, Blue Star will be celebrating its Diamond Jubilee.

It was 60 years ago that my father, Mohan T. Advani, started the Company as a small 3-man enterprise. He was a man of modest means but lofty ambitions. With little more than a visionary dream, inspiring leadership and undying determination, he struggled to stabilize Blue Star as a viable enterprise and went on to build a solid organization. When he passed away in 1974, Blue Star was firmly established as a reputed public company.

It has been a privilege for me to lead the Company for the last 19 years of momentous change. The Blue Star of today is a successful, growing Corporate citizen with 22,000 shareholders, 1800 employees, market leadership in its core central airconditioning and refrigeration businesses, and an expanding global presence. These are achievements that not many companies in India can claim. In fact, a survey of the more than 5600 companies listed on the Bombay Stock Exchange reveals only 47 public companies that have been in existence for 60 years i.e. less than 1% of the total. Blue Star will now join this select group.

In keeping with this significant milestone, your Board of Directors has recommended a special Diamond Jubilee dividend of 25%, in addition to the 65% dividend paid last year, making a total of 90%. This is our gift to you, our loyal shareholders.

Current Year

After several slow years, the Indian economy is showing definite signs of revival. The monsoon has been very good, so far, and there are favourable forecasts for the rest of the season. With a significant increase in output, the industrial sector too seems to be more confident about the future outlook. And the services sector continues to grow at a healthy pace. These encouraging macro-economic developments point to a good year for the economy.

Blue Star's unaudited 1st quarter results have just been announced today. There has been a notable revenue growth of 24% with Total Income climbing to Rs 142.48 crores. Competitive pressures continue to squeeze margins; Net Profit has increased by 13% to Rs 2.65 crores.

Order inflow in the 1st quarter has shown a brisk increase to Rs 189 crores compared to Rs 146 crores last year. Given the promising outlook for the Indian economy and a substantial order backlog of Rs 313 crores, I am reasonably confident that Blue Star's financial performance in the current year will continue to maintain a healthy growth rate.

From Gold To Diamond - The Last 10 Years

Ten years ago, as part of the Golden Jubilee celebrations, I had given shareholders a historical perspective on the growth and evolution of Blue Star since its inception in 1943. Today, I would like to share with you some of the significant corporate developments of the last decade.

While the Annual Report gives a comprehensive and detailed account of the Company over the years, one can draw some interesting conclusions from the financial figures. Here are a few examples:

• Starting with 1992-93 as the base year with an index of 100, Total Income reached 270 in 2002-03. Though this may not seem very impressive, it is the record of steady and sustained growth that provides a feeling of confidence in the stability of the Company.
• It is on the profit front that one sees a more exciting picture. Profit After Tax climbed to an indexed figure of 752, a compound annual growth rate of more than 22%. This consistently high and growing profitability has been very satisfying.
• Dividend payout increased even more impressively. The indexed figure rose sharply to 987, virtually a ten-fold growth in ten years. Here again, the Company's generous dividend policy has offered an excellent return to our shareholders over the years. And now, the tax-free nature of dividend income has made the shareholders' investments even more attractive.

So much for the financial figures. But numbers do not tell the full story. What they do not reveal are the underlying strengths and capabilities of the people behind the Company's performance.

I have great respect for our employees. They have shown admirable resilience and flexibility by adapting to the new challenges and opportunities in the market, focused on meeting customer expectations, and in the process, delivered excellent results. Given the low operating margins in the highly competitive industry in which we operate, we cannot afford to pay exceptionally high salaries. So it is not money that is the main motivator of our people. Neither are they driven by tough orders coming from top management. What the Company's success is primarily due to is their total dedication to Blue Star. There are many examples of employees rising above and beyond the call of duty to meet an important commitment. They do this voluntarily because they see Blue Star as their Company. They are the reason for our success.

This is perhaps, the most enduring legacy of Mohan Advani: The creation of an organization where people work with pride and passion. We have a culture that respects the individual; gives equal opportunities to all based on their merit; where people are selected on the basis of professional competence, integrity and commitment; and everyone is encouraged to work together in the interests of the Company and its customers.

Acknowledgements

I cannot end without extending my sincere thanks to my colleagues on the Board for their wise guidance and support in successfully steering the Corporate ship through both calm and stormy seas. Blue Star's employees continue to deliver amazing performance and I am very proud of all of them. Our customers have taught us many useful lessons and kept us on our toes when we sometimes falter. And, of course, I am grateful to you, our faithful shareholders, for your continuing confidence in our Company.

ASHOK M. ADVANI

July 23, 2003
Mumbai