WELCOME

I welcome all the Shareholders at the 22nd Annual General Meeting of your Company.

I would like to share with you the important milestones achieved by the Company during the financial year gone by, your Company’s growth plans and its future strategies. Before setting out the task, I would briefly touch upon some important issues the steel industry is facing today, globally and at home.

WORLD STEEL IN 2006

In 2006, world crude steel production at 1.244 billion tonnes registered a robust growth of 9% year-on-year, while apparent consumption of finished steel products at 1.113 billion tonnes also matched up with an 8.5% year-on-year growth.

Though China continued its dominance in steel production growth, world steel demand scenario saw a major shift back to the Western markets.

On the supply side, of the 102 million tonnes additional crude steel produced during the year, China alone added 67 million tonnes.

On the demand side, EU, other European (including Romania, Turkey, Bulgaria) and CIS countries saw some significant steel consumption growth of 11%, 14% and 13% respectively. Also NAFTA, Central and South America and Middle East Countries saw consumption growth of 10% to 11% in 2006. Comparatively, Chinese consumption growth was 9% and Indian consumption growth was about 11% in 2006.

High growth in Chinese steel production coupled with continuing Chinese consumption growth, saw China exporting about 60 million tonnes of finished steel, mainly to high growth markets in Europe, North America and South East Asia. The glut in Chinese exports to global markets kept global steel prices on a check for most of 2006 even with high global steel demand and supply.

INDIAN STEEL IN 2006

Estimated steel production in India for the year ended March 2007 stood at 49.4 million tonnes while consumption at 43.7 million tonnes saw year-on-year growth of about 11%. However, increased surge in imports at 4.1 million tonnes for the fiscal further reduced the export-import gap of Indian steel to just about 6.5 lakh tonnes. Indian steel exports for the fiscal was 4.75 million tonnes.

With access to captive raw material forming a critical link in the entire value chain of the steel business, Indian steel industry is today at cross-roads with the government on the verge of finalizing The New National Mineral Policy.

The outlook for Indian steel industry is truly positive with the industry already on the way to meet National Steel Policy’s projections of achieving 60 million tonnes of steel capacity by 2012 and 120 million tonnes by 2020.

EXPANSION & NEW PROJECTS

The Company continues to focus on achieving reduction in production costs at every conceivable level of activity to match global standards.

As part of our vertical integration strategy, we intend to reduce our dependence on third party raw material suppliers and exposure to price volatility of basic inputs.

With this end in view, it is proposed to undertake creation of certain additional cost-saving and capacity-enhancing capital projects as under:

a) 1 million tonnes per annum Coke Oven plant at Dolvi by mid 2009. The facility would reduce the risk of restricted coke availability, ensure consistency in coke quality and also reduce the cost substantially.

b) 4.5 million tonnes per annum Pellet Plant at Vishakhapatnam by third quarter of 2009. The facility shall not only reduce the risk of availability of pellets but would also ensure consistent quality in addition to cost savings.

c) Enhancement of the existing Hot Rolled Coil plant capacity from 3.0 million tonnes to 3.6 million tonnes per annum along with auxiliary facilities, enhancing capacity of existing Sponge Iron and Sinter Plants and addition of a Blast Furnace by third quarter of 2008. The installation of an additional Blast Furnace would provide adequate quantities of Hot Metal to meet the enhanced requirements of the HRC Plant.

The Company proposes to enhance its Sinter plant and Sponge Iron plant capacities to 2.5 million tonnes per annum and 1.80 million tonnes per annum, respectively.

These projects will have an impact of Rs 600 crores to Rs 1000 crores from 2010 onwards.

CAPTIVE POWER PLANT OF ISPAT ENERGY LTD

The financial tie-up for the Captive Power Plant (combined capacity 110 MW) of Ispat Energy Limited has been achieved. Project activities have commenced and it is expected to be operational by early 2009.

MARKETING INITIATIVES

Marketing dynamics of Steel business, worldwide, continues to change and evolve constantly. I had earlier indicated to you that the company would continue to drive its avowed CRM initiative to ensure that there is a perceptible and gradual move towards value-added products and growth-segments.

The Company partners with International steel majors and research institutions for augmenting its efforts towards increasing production of value-added steel. Consequent to Company’s effort to increase production of value added steel, sales of value-added grades of Hot Rolled Coils during the year had increased by 32% over the previous year. Strategies aimed at enhancing market share in the State of Maharashtra have helped achieve reduction in logistics costs and optimize the value-added tax chain.

ISPAT STRATEGIES

The Company’s internal mechanism is robust enough to adjust strategies to meet its diverse market challenges.

The Strategies are:

Ø Increase vertical integration by reducing dependence on third parties for supplies of key raw materials.

Ø Reduce exposure to volatility in prices of raw materials and risks of shortages by producing pellets and coke.

Ø Acquiring mining and prospecting leases for iron-ore, non-coking, coking coal and fluxes

Ø Develop value added grades of steel through continuous research and developmental activities.

Ø Install and operate a dedicated power plant to meet energy needs and ensure availability of cost-effective power supply.

Ø Enhance operational efficiencies at all stages of production, by using advanced technologies and processes and implementing best practices through knowledge integration programme.

CONCLUSION

I thank you all for your support and continuing patronage. I would also like to take this opportunity to thank our employees without whose support we would not have achieved what we have.

Pramod Mittal
Chairman, Ispat Industries Limited