Chairman's Statement

Chairmans Statement Performance highlights The last fiscal year saw New Orders rise by 80% to Rs 30,142 million with the major contributors and volume drivers being the power, transportation and industry businesses In addition to a 26% increase in Sales Turnover to Rs17,900 million, our company has turned in an impressive operational performance, with Profit Before Tax standing at Rs2,299 million, a healthy rise of 17% as compared to the previous year What is also particularly encouraging is the Unexecuted Order Value position, which is up 136% over the previous years Rs9,023 million This augurs well for future topline growth The operational profit is one of the best in the Siemens AG global network for the past two years This year we improved it further by 13% We have recommended a final dividend of 50%, inclusive of a special dividend of 20%, which along with the interim dividend of 40% takes the total dividend for the year Dear Shareholders, to 90% Last year we had announced a total dividend of 75% which included a special dividend of 10% New beginnings are built on past achievements and future potential It is a great privilege for me to address The record high new orders and sales position, points you all as your Chairman for the very first time this to the success of the Companys focus on order year At the same time, I am constantly reminded of acquisition with a view to improving customer loyalty the glorious tenure of my predecessor, Dr Fredie Mehta, and satisfaction who, for the last sixteen years, successfully steered Siemens Limited through one of the most challenging Our strong performance has also been driven by periods in corporate history Under his able leadership increased resource productivity especially at the and guidance, our Company has never been stronger, factories, which have been running to optimum both financially and operationally capacity In fact, we plan to augment existing capacities in order to effectively handle the projected increase in This success is however, also a challenge As our demand in the future Manufacturing activity has been performance has shown a steady improvement over a major growth driver in the last year, and future the last few years, the bar is raised every time and investment is also being directed largely in expanding expectations will be greater as we move forward At this part of operations Effective asset management this point, I would like to reiterate Dr Mehtas belief in and the aggressive investments-led growth plan, which the concept of alert dynamism, which he spoke about entails growing organically and through strategic last year while we tap opportunities to grow acquisitions, have also been instrumental in achieving profitably, we will also continue to be alert to fast- the high level of performance in all parts of our changing economic scenarios This philosophy has business reaped rewards, and our companys performance stands testimony to this fact We are on a path of high growth, We have also succeeded in making our mark on the supported by extremely encouraging future business global front Over the past two years, Siemens AG prospects identified China and India as two focus markets for 12 Siemens Ltd growth in Asia During the last year, Siemens Limited has to be driven by industrial production and services This seen a large amount of activity specifically catering to seems to be evident with the Index for Industrial global demand Our factories have been recognized as Production accelerating to 79% in the first half of the Centers of Competence by Siemens AG in specified areas current fiscal (April-September 2004) as compared to of operations and a portion of their output was exported 62% in the corresponding period last year against global requirements As India, continues to grow as a preferred global source for sourcing specified On the whole, the confidence in the growth in the products, components and services, we too need to domestic economy is based on the improved trends in ensure that we harness the potential industrial activity and services, bullishness of the domestic capital markets, improved export Siemens Indias software development strengths have performance, doubling of FDI inflows, surge in non- also been recognized and last year, we saw an food credit and the sharp rise in the volume of FII extraordinary level of software development being inflows undertaken in India A substantial portion of this is in the area of high-end development, which confirms our The focus on manufacturing argument that India is a preferred destination not only While the optimistic outlook is encouraging, it is also due the low-cost factor, but also for the high-quality important to identify what areas are fueling growth services and value addition that we provide today Looking at the current figures, if India is to raise annual growth from 6 % to 8%, there can be no denying Siemens India also received the mandate to expand that it is the manufacturing sector that will be the business in its neighborhood Operations in Sri Lanka driver of Indias economic growth which needs to move were launched during the year We are also actively up to double digits supporting Siemens AG in Bangladesh and Afghanistan As I look at the superior results we have achieved, I A recent Economic Times Intelligence Group project would not be far from the truth when I say that though Doing it Right: The Makeover of Indian Manufacturing, our understanding of the domestic economy has been which was completed after field visits to some 40-odd sound, our success has been driven by the efforts of companies spanning the first half of 2004, found that our committed employees and the trust and integrity the transformation in manufacturing in India gathered that our businesses have been built on Productivity momentum by 2000, with the commencement of a per employee has significantly increased in this period large-scale focus on efforts to drive best practices in and the Company has introduced numerous programs manufacturing operations, processes & managerial under the top+ banner These process improvements have practices and increasing productivity helped achieve substantial cost savings and thus propped up the bottomline According to professor Steven Warwick, a consultant with the Warwick Manufacturing Group of UK, Indian An enabling environment manufacturing is truly becoming world class He cites two basic prospects of Indian manufacturing: one, their It is also true that our initiatives were supported by a structured approach to instruction, quality improvement very favorable external environment in the last fiscal and continuous improvement programmes and two, We were able to take advantage of the positive Indian workers on the shop floor being open to new environment, as is reflected in the good performance challenges of the infrastructure and industry segments of our business There is reason for us to be optimistic in the current year also, with GDP growth forecasted to be The CII-Mckinsey study forecasts a second wave of around 6% to 65% for the year This growth is expected manufacturing outsourcing, which could reach $16 13 Chairmans Statement (continued) trillion, and will comprise technology-driven areas like Global trends automotives, engineering and chemicals This is in comparison to the first wave, which was $460 billion and In the changing face of todays manufacturing world, consisted of low-tech items like toys and garments concepts like demand-driven manufacturing are gaining Therefore, India could well increase its manufacturing ground As opposed to conventional manufacturing, exports from the $40 billion in fiscal 2003 to $250-300 which builds products first and then finds the customer, billion by 2015 demand-driven manufacturing focuses on the customer It brings together a set of management strategies, operational methodologies and technology Indian manufacturing is redefining itself after a phase of solutions that continually drive manufacturing in direct intense restructuring over the past two years Indian response to demand It thus tunes the entire supply companies - both large and small - have established some chain, from sourcing to production to sales, responding world-class facilities across several segments in the Indian to the pull of the marketplace manufacturing sector This is very good news especially because manufacturing was seen to be losing out to The fundamental principles of demand-driven services during the boom of late 1990s and the first part manufacturing is to know the customer, adapt to of this decade Today, there is enough evidence that , product demands that could literally change like the now, globally-competitive manufacturing can be done in weather and connect between the customer and India both in terms of quality and scale of operations In supplier expectations with a view to meet customer diverse sectors pharma, chemicals, textiles, metals, satisfaction With changing times and trends, customer refining, cement, auto, ancillaries and engineering orders will not take ages to be met, nor will products India is exporting significant chunks of output wait for customers to be consumed The entire production cycle would be aligned to respond to real- time conditions So is manufacturing in India at a strategic inflection point in its evolution? It appears so if we consider a few facts Infrastructure and the role of Siemens Many large global companies have announced plans to set up greenfield projects in India in recent months After According to the India

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