The Hallmark of Steelcast Limited is to produce goods with excellent performance and at reasonable price.
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REGD. OFFICE: Ruvapari Road, Bhavnagar, Gujarat, India 364 005
Phone no.: (+91) (278) 251 9062, Fax nos.: (+91) (278) 242 0589/2519831
E-mail:   Website:

June 15, 2007

Dear Shareholder,

I am pleased to share with you some further developments in your Company since my last letter to you last year. The year 2006-07 closed well with the Company achieving landmark performance, the annual sales and operational income crossing the figure of Rs.100 crores for the first time. The profitability too improved substantially compared to the year 2005-06.

Considering the likely sustained growth of Indian economy at around 9% per year for the next 2-3 years, most of our end user industries and customers, who are largely in the Infrastructure Development Sector, have been indicating a significant increase in their annual requirements of steel castings. Keeping this trend in mind, we are investing a further sum of Rs. 1820 lacs in the current Financial Year 2007-08 towards capacity expansion, additional CNC Machines for our in-house Machine Shop, Energy Conservation and R&D. These investments initiated in November 2006 are likely to be completed by September 2007. Investments made in the year 2006-07 amounting to Rs. 11 crores have been commissioned.

The installed capacity of your Company in the current year is as follows

  April 1, 2007 to September 30, 2007   5,000 Tons (per half year)
  October 1, 2007 to March 31, 2008   6,500 Tons (per half year
  Installed capacity for the year 2007-08   11,500 Tons

The installed capacity for the year 2008-09 will be 13,000 Tons.

Considering the investments made in the last 3 years and investments proposed in the next 3 years, we will be targeting top-line growth of 25 – 30% for the coming 3 years, i.e. 2007-08. 2008-09 and 2009 -10. However, protecting the present operating margins will be a great struggle due to the following reasons:

           1. Raw material cost in the current financial year 2007-08 is up by more than 25% compared to 2006-07. So far, we                were generally able to pass on the increase in the input cost to our customers, but lately we are finding greater                 resistance.
          2. Due to capacity expansion and the consequent need to secure additional business, our ability to press the                 customers for price increase has been decreasing.
          3.  Due to buoyancy in the economy there is definite shortage of skilled manpower, and, to prevent excessive                 attrition, we are forced to incur a steep increase in the personnel cost.

           4. As you know, the Company’s exports are now to the extent of 40% of the total sales, and more than 90% of                 these are in Euros. Over the past 3 to 4 months, due to the Rupee appreciating the exchange rates of US$ with                 Euro have taken a serious beating as follows:

Currency February, 2007 June 2007 % Rupee appreciation
Euro 58 54.50 6%
USD 44 41.00 7%

          5.  In the short term it is extremely difficult to reduce the cost to compensate the appreciation in the rupee value.

         6.  With 40% exports, we are confronted with global competition and not merely local. Increasingly tighter quality                standards both by Indian and International customers, without being fully paid for the higher quality products, are                putting strain on the operating margins.

         7.   The last few months have been seeing an increase in the interest cost. This too will put pressure on the margins.
               In order to protect the operating margins, a Senior Management Team has been put in place to bring about                substantial cost reduction through increasing manufacturing productivity, raising internal quality levels, reducing                internal rejections, reducing raw material procurement cost, reducing interest cost by hedging & treasury                operations etc. Effect of all these measures will be reflected in Quarter 2 of 2007-08.

The Company is fully on track with respect to its Vision 2010 and the financial results of 2006-07 are one year ahead  of our Vision projections.

I am happy to share with you that your Company has received the following recognitions and awards:

          1.  ISO 14001 and OHSAS 18001 Certifications concerning Environment and Occupational Health & Safety from TUV                Nord, Germany.
         2.  SILVER SHIELD in the category of “Star Performers” in 2007 in the product group of Industrial Castings in Large                Enterprises from Engineering Export Promotion Council (EEPC). We had received Certificates of “Export                Excellence” in 2005 and 2006 also.
        3.  “Best Vendor (Category-Castings)” award from M/s. Bharat Earth Movers Ltd., Bangalore, in recognition of                 outstanding performance in supply of materials during 2006-07.

Please find below the comparison of Company’s performance during the year 2006-07 with 2005-06:

Sr. No. Aspect Unit 2006-07 2005-06 % improvement
1 Total Income Rs. Lacs 10103.98 7616.45 33
2 Operating Profit (PBDIT) Rs. Lacs 2037.26 1514.34 35
3 Profit Before Tax (PBT) Rs. Lacs 1719.91 1313.59 31
4 Profit After Tax (PAT) Rs. Lacs 1117.94 874.46 28
5 Return on Net Worth (RONW) % 41 47 -
6 Return on Capital Employed (ROCE). % 24 30 -
7 Earnings per Share (EPS) Rs. 31.43 24.19 30

I have also passed on all the above information to the shareholders who were present in the Company’s AGM held on 15.6.2007.

I would like to place on record my sincere appreciation of the contribution of our employees at various levels and also thank all the stakeholders for supporting us, without which your Company could not have achieved the level of performance reflected above.

Finally, I convey my personal gratitude for the confidence that you have reposed in your Company’s Board of Directors and hope that you will continue to extend your wholehearted support to us in our quest for further accelerated progress of your Company.

I look forward to being in touch with you and sharing my perceptions in future also, periodically.

With regards,
Yours sincerely,

(Chetan Tamboli)

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