ESCORTS Chairmans Speech

Dear Shareholders,

The country, economy and industry are at a cusp where the only
certainty is the inevitability of change. Food security has emerged on
top of the agenda even as food inflation has stayed rampant. Industrial
production has dipped dramatically and the green shoots of revival have
yet to create a carpet of hope for investments and return to growth.
However, the proactive cross-sectoral initiatives of the government
hold out promise for the year ahead. We are fortunate at Escorts to
have been able to read the tea leaves and forge strategies that have
kept us profitable through a very difficult year.

Even as I share with you some of our larger ambitions in the context of
continued overall optimism over the future of India, I would like to
first thank you for your support this year for the major realignment in
the way your Company does business. The combined strength of the Group
implies greater flexibility to deal with downturns and to stay
profitable in the toughest of market situations.

Restructuring for Growth

The restructured Escorts Limited will be the transformation driver for
your Company and will bring significant benefits to customers,
shareholders and wider stakeholders. In FY 2012-13, the Company has
embarked on the process of becoming a large, collaborative engineering
enterprise with seamless sharing and transfer of manufacturing best
practices between divisions. The years ahead will demonstrate the
necessity and gains from the merger of the Group companies.

As a strategic business initiative, we merged our construction
equipment division with the parent Company to synergize our efforts at
tapping the emerging market opportunities. Clearly, Escorts
Construction Equipment business is in the right sector at the right
time with the right set of products. Your Company has invested over the
years in the construction equipment business and, as a part of the
merged entity, we expect the impending construction take-off in a far
more emphatic manner.

The last fiscal was challenging and Escorts battled successfully
against the market dynamics both in the tractor and construction
industry. Escorts has decided to take the path of driving growth by
opening up markets and capturing market share while keeping a tight
rein on costs.

Co-creating the Future

Indian economy is poised to take the leap and propel us into the league
of developed countries. We as business groups have the responsibility
to strategise on how to produce profitably and tap the global markets.
We must resolve to occupy areas of innovation that can distinguish us
from the crowd and seek to provide technologically advanced solutions.

The Escorts approach to business has helped us serve our loftier
ambitions of contributing to the livelihoods of our customers. Long
term success of any business requires a happy and sustainable society
with an appetite for growth. Escorts products facilitate increased
returns and a better quality of life for all our customers. This is our
small but tangible contribution to the emerging India of 21st century.
As we resolve to take Escorts onto a new growth trajectory, we also
become part of the national endeavour towards an Indian renaissance.

In recent years, aggregate demand from the Indian market has become
significant by global standards and is projected to sustain rapid
growth over the next two decades or more. India now stands as an
important source of growth for manufacturers. Today, while economy
wakes to the necessity of customising their designs to meet the Indian
requirements, we at Escorts have already taken the lead by co-creating
the future with our customers. In times when global supply chain
patterns are making strategic shift towards Asia, we at Escorts have
renewed our trust and commitment with our suppliers to etch out
business opportunities outside the Indian market.

The continued market faith finds resonance in the organisational
strength of the Company. We believe, businesses are created and
sustained with the sweat and passion of fellow travelers. In pursuance,
we have engaged proactively with our employees. We cherish their
energetic and imaginative contribution towards the Company and its
business goals.

Drivers of Change

Turning to the overall picture, our progress will be as fast and as
sure as those that we walk with. The Working Group of the 12th Plan has
correctly pointed out that it is almost impossible to sustain 8 per
cent growth in economy and 4 per cent growth in agriculture sector if
crop sector remains stagnant. One cannot be vocal enough in endorsing
the view of the Planning Commission that the crop sector needs to
continue to remain at the centre of public measures like institutional
reforms, infrastructure creation, generation and dissemination of
improved technology, price and trade policy, spreading use of modern
inputs, increasing credit, enhancing irrigation facilities, etc.

Our entrepreneurial propulsion towards value generation gets defined
within the macro and micro economic indicators of the country and the
world at large. Recent moves towards allowing FDI in retail sector will
allow the farmers to participate more effectively in the growth story
of India. With direct corporate sourcing of farm produce from farmers
becoming a distinct possibility, India''s rural landscape could be up
for another wave of economic transformation. We, as providers of farm
mechanisation solutions, see new opportunities in this unfolding saga.
We now act with the conviction that India is on the cusp of a gigantic
leap forward in agriculture and we are prepared to be a partner to the
farmer in every facet of his powered machinery usage.

The immediate prognosis for the farm sector, though, isn''t very bright
with projections of a decline in overall sales due to lower kharif
output in this fiscal. However, over the longer term, tractor sales are
expected to continue to grow at 8 to 10 per cent. A number of reasons
seem to support this projection, particularly the continued support to
agriculture credit, rising MSPs and good crop output. Farm incomes are
expected to continue to deliver strong growth as improvement of
irrigation facilities, government support and strengthening of the
commodity market takes place. The government''s emphasis on increasing
agricultural credit has been crucial in boosting the demand for
tractors since almost 75 per cent of tractors are bought on credit.

We believe that the growth in the sector will be far more spread out,
vertically across HP and horizontally across regions. Consequently,
Escorts growth strategies have focused both on introducing higher HP
tractors and mini-tractors for specialised needs even as we are
aggressively creating a market for ourselves in the South. In addition,
there is increasing use of tractors for non-farm activities and today
accounts for around 30 per cent of the demand for tractors.

I draw your attention to the approach being taken by the agri machinery
division which is introducing new products every six months, which not
only brings value to the customers but will significantly increase
Escorts'' market share. The Company is today rolling out in the market a
lot of what we had planned over the years. Escorts today is focused on
building profitability by taking a higher share of the top end of the
tractors market by launching higher HP tractors. Further, we are
creating significant presence in the South while shoring up our
portfolio in the North and West. We see the current phase as one of
investment and expansion and we believe that we shall reap the rewards
on the upturn of the market as the industry grows.

Our focus is on building a national market base, providing customers a
range of crop solutions and implements, PTO and haulage applications
for tractors, product upgrades and improvements as well as targeted
marketing for non-agriculture usages. At the crux of our approach to
the market is the increasing demand for farm mechanisation and the
accessorised deployment of tractors for non-farm uses. We believe
multi-domain growth drivers along with cost compression measures will
enable Escorts to deliver profitable growth.

The year 2012 has continued to be a difficult one for the construction
industry. The sluggishness in economy, policy inertia and lacklustre
infrastructure projects have all impacted the much awaited boost in the
country''s infrastructure landscape. Infrastructure plays a key role in
stimulating economic growth but unfortunately the roads sector has
experienced difficulties in implementing national highway projects, the
project closure of the four Ultra Mega Power Plants is unclear, and in
the port projects too, the award rate has been around 50 per cent of
the planned rate. The government is taking cognizance of this and in
its 12th Five Year Plan envisages an increase in investment in
infrastructure to $1 trillion, taking annual investment in
infrastructure from the current level of 6% of GDP to over 10%. With
the government re-emphasising and providing the requisite impetus to
infrastructure projects, we are bullish that the construction equipment
industry will grow at a healthy pace.

With the expected return of the construction boom, Escorts Construction
Equipment business has been introducing new application-based, high-end
machines. Our focus is on innovative and optimal design, engineering,
productivity and efficiency for enhanced products catering to
customers'' current and future needs. The potential of Indian market for
lifting, loading and handling solutions is huge and we are capitalising
on our engineering strength by developing products that suit the local
application. In the recent years, our focus has been to enhance load
capacities, reach and transmissions.

The construction equipment industry is witnessing a shift towards using
safer and more advanced technology. To meet these needs we have
introduced innovative and international standard safety features in our
products. Introducing safety features in our entire range of products
forms the central theme for all future product enhancements.

Our outlook on Indian Railways is positive. Correction of rail
passenger tariffs should ease the pressure on availability of funds for
growth and maintenance, resulting in a more vibrant business sentiment.
The Indian Railways modernisation has the potential to add around 2% to
GDP growth. Under the government''s Vision 2020 plan of Indian Railways,
radical modernisation process has been envisaged as part of the 12th
Five Year Plan. Setting up of dedicated Railway Safety Authority,
introduction of high-speed trains, new generation locomotives/coaches,
installation of green toilets, capacity augmentation, manufacturing
state-of-the-art railway technologies, components and equipment for
global markets are some of the key points of the plan.

At Escorts, we are keen to help build a safer, a more reliable and a
more comfortable Indian Railways by bringing in high technology, safety
critical products available worldwide at Indian prices through
innovation, technology partnerships, frugal engineering and quality
excellence. We also look forward to tap world markets in SE Asia,
Middle East and African countries, hitherto untapped by Escorts.

The auto component industry witnessed a moderate growth of 16 per cent
in 2012, affected largely due to the rising fuel prices and high
interest rates. Low-cost, ample production capacity, world-class
technology and international quality standard products are factors that
offer Indian auto component manufacturers an edge.

At Escorts, we have already positioned ourselves to meet the future
demands by harping on global standard products and technology. We
expect a surge in domestic demand for auto products too due to recent
reform measures by the government and existing under penetration of
vehicles. We are prepared to cash the new opportunities while
continuing to tap the export market. Our strategy is to target newer
markets, enrich our product range, reduce costs, and restructure the
business. The Company won the "Best Supplier" award in 2012 from one of
its key customers, an indicator of our in-house design and development
capabilities that we can leverage to assure our global customers of our
potential.

The performance of last year shows the success of strategies that your
Company has adopted including launch of new products, deepening of
sales and distribution network and robust brand building. This good
performance is despite the market conditions which have toughened
further. In the year ahead, your Company will continue an even more
aggressive approach to expanding its product portfolio, strengthening
its current product propositions and increasing its market share by
being more aggressive in markets where it has had limited presence.
This, we believe, is just a beginning as we take a futuristic leap to
further accelerate our efforts for building a stronger Escorts, that
connects the lives of customers and communities at large.

Investing in the Future

The Escorts vision and values are the guiding force of our endeavours.
We see ourselves not as just a supplier of products but as a service
provider to our customers. Our successes are made possible by our
ability to view the market from our customer''s eyes. For us, lifetime
value of our customer based on inherent value exchange is the growth
driver and not just the price based profit motive. Our customers have
reaffirmed our faith in our value system by becoming champions for the
products they have bought and experienced.

Escorts has always believed in being a customer-centric Company for
realising its aim of becoming one of the top engineering companies of
India. We have worked towards contributing our bit to India''s growth
story and bringing in quality change in the lives of people. Our true
reward is the confidence and trust of our customers which keep us
driving and motivated for bringing the best for them. But, at the same
time, I thank all our stakeholders with whose support the journey so
far has been so comfortable.

As we enter the new fiscal, I am confident that we have the right
combination of people, products and processes to take Escorts to the
next level of performance and growth. As always, we are grateful to all
our shareholders for the immense confidence you have placed in us and
we are committed to continue to build and strengthen the Escorts brand.

Rajan Nanda

Chairman and Managing Director

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