Speech of Sical Chairman Ashwin C Muthiah at the Annual General meeting of share holders on 24 September 2008

Ladies and Gentlemen

It gives me immense pleasure in welcoming you all to the 53rd Annual General Meeting of your Company.

The Annual Report including the Audited Accounts of the Company for the year ended 31st March, 2008 is with you for quite some time. With your consent, I shall take them as read.

I feel it a great privilege to address before you and share my thoughts on the logistics scenario and the performance of your company during the year under review.

Economic Scenario

The year 2007-08 was the third year in a row, when the Indian economy grew at the rate of 9.0 per cent and above. Its growth at 9 per cent was supported by an agricultural growth of 4.5 per cent, industrial growth of 8.1 per cent and the services growth of 10.7 per cent. As per the quick estimates of the Central Statistical Organisation, its gross domestic savings rate stood at a healthy level of 34.8 per cent, whereas its gross domestic investment rate attained the level of 35.9 per cent. Moreover, India attracted an investment of 37.5 per cent of GDP – up by around 9.3 percentage points from the investment figure of 28.2 per cent in 2003-04. With the improved productivity and rising investment, India's medium term prospects for growth certainly looks promising.

The services sector continued to record double digit growth for the third successive year, notwithstanding some moderation to 10.7 per cent in 2007-08 from 11.2 per cent in 2006-07. Financial sector activity also witnessed some deceleration.

In the short run, however, one sees some stresses on India's macroeconomic indicators. Towards the end of 2007-08, inflation started inching up due to steadily rising prices of foodgrains, metals and crude oil across the globe. International crude oil prices were steadily and sharply rising since June 2007, reflecting tight supply situation, geo-political tensions and weakening of the dollar. The industrial growth too slowed down to 5.1 per cent in Q4 of 2007-08 as a result of higher prices of key intermediates and a slowdown in the world economic demand.

Indian equity markets recovered somewhat during April – May 2008, but declined thereafter in tandem with the trends in major international equity markets as well as edging up of domestic inflation.

Inflation has emerged as the biggest risk to the global outlook, having risen to very high levels across the world, levels that have not been generally seen for a couple of decades.

Foreign exchange reserves increased by USD 110.5 Billion during 2007-08 to USD 309.7 Billion. In the foreign exchange market, the Indian rupee generally depreciated against major currencies during the first quarter of 2008-09.

Logistics Environment

The logistics industry has over the years faced a few challenges such as central and state taxes, local levies licenses, registrations and paperwork. The market although large is predominantly fragmented with multiple factors such as demographic, retail, land, supplier fragmentation, etc. But the scenario is fast improving with an enthusiastic upswing in infrastructure. The Golden Quadrilateral Project, a planned network of divided 4-lane highways to connect all its major cities, is a good start. This will enable a significant increase in inbound and outbound cargo. Another initiative in planning has been the development of six world class airports and 20 seaports. There are several emerging trends in India.

Logistics is an important activity for economic development. Organizations offering Logistics services are facing cut throat competition. Increasing competitiveness in the market has led to wafer thin margins affecting the bottom-line growth of the organization. The increasing number of players is one of the major reasons which can be attributed to this situation. These organizations are leaving no stone unturned to cut costs and boost efficiencies. Over the last few decades the role of logistics management has undergone a paradigm shift. It is widely recognized as an extremely important aspect of the overall business strategy. At the same time, a number of factors have increased the complexity of logistics management. This has led many companies to outsource their logistics activities to Third Party Logistics (3PL) providers.

The logistics business is estimated at around 13% of India's GDP or about US$125 billion. Investments in infrastructure, introduction of VAT, development of retail and agri processing, private participation in ports and railways, increase in 3PL / outsourced logistics are the drivers for sustained growth.

The logistics business is fragmented and the operators [transporters, freight forwarders] are large in number and small in size. Poor quality of infrastructure, congestion and requirement of large initial investments are also major constraints. The opportunity lies in providing end to end services.

One of the major entry barriers is the requirement of land at critical locations near Ports, Railway Stations, industrial belts, etc. Other barriers include large capital investments with long gestation periods, managing regulatory issues and building up long term relationship with the trade.

SICAL LOGISTICS

The year 2007-08 has been a successful one for Sical as many milestones were achieved during this fiscal. Raising capital to the extent of Rs.219 crores in April and July 2007, FIPB approval for investment of USD 26 million by Old Lane Mauritius IV Limited in Sical Infra Assets Limited in November 2007 and approval of the Scheme of Arrangement for demerger of the Trading, Services and Coffee Plantation undertakings to Sicagen India Limited by the Honourable High Court of Madras in December, 2007.

Sical continues to be the largest bulk cargo handling service provider in the sub-continent by volume. Sical handled 26.2 million MT of cargo at various ports during the FY 2007-08. Your company received the Best Business Partner award from the Chennai Port Trust for the fourth consecutive year and was commended for excellence in Traffic Performance in stevedoring by the Tuticorin Port Trust.

The CHA division and Ship Agency Division performed well during the year. Trucking division faced stiff competition from unorganized sectors where middle-men dominate the freight rates.

Container terminal operations at Tuticorin are carried out by the joint venture company PSA Sical and the Container Freight Station operations are carried out by the subsidiary Sical Distriparks Limited at Chennai, Visakhapatnam and Tuticorin. The volume handled at these locations are surging towards north. This Company also extends container logistics solutions with container yards, bonded and general warehousing, reefer storage and third party logistics.

In off-shore logistics segment, Bergen's platform supply vessel 'Sical Torino' is in operation in the North Sea providing services to the global oil companies. The cutter suction dredger 'Sical Portofino' is currently on charter at Jubail.

I am happy to say that as you could see from the cover page of the Annual Report, Sical Multimodal and Rail Transport Limited, the SPV formed for operation of container trains started its journey from Hatta Road in March 2008 carrying copper concentrates. This is an integrated contract involving both rail and road movement clearly depicting Sical's ideology of providing multi modal logistics services. Sical Multimodal and Rail Transport Limited has now augmented its fleet by adding the second rake, which runs between Melpakkam near Arakkonam in Tamil Nadu and Delhi. Procurement of land for development of terminals and additional rakes is in progress.

OPERATIONS

For the FY2007-08, Sical registered a Consolidated Turnover of Rs.720.45 crore and the Profit After Tax at Rs.43.51 crore.

ONGOING PROJECTS

* Development of Iron Ore Terminal at Ennore Port

EPC contracts have been awarded and the detailed engineering activities are in progress for the Sical Iron Ore Terminals Limited, the SPV formed for implementing the project of establishing a Common User Iron Ore Terminal on BOT basis at Ennore Port. This Company has successfully completed its financial closure in March, 2008 and the project is scheduled to be completed by April 2010.

* MIHAN Rail & Road Terminals

Special purpose vehicles have been formed for implementing the project of developing Road and Rail terminals at the Multi-modal International Hub Airport at Nagpur [MIHAN]. Designing is in progress and in-principle approval has been obtained from the Railways for the rail terminal. On completion of the project, the terminal will have a capacity of handling 150,000 TEUs. The company is awaiting land allocation by MADC and signing of concession agreement for the Rail terminal. As regards the Road terminal, concession agreement has been signed. Land development and detailed engineering activities are in progress.

* Development of Second container terminal at Chennai Port

Project activities for the second container terminal being developed in JV with PSA at Chennai Port on a BOT basis are in progress. On completion of the railway sidings inside the port area, rail movement of cargoes will commence providing ample opportunity to Sical Multimodal and Rail Transport Limited for containerized rail cargo movement.

* Sical Infra Assets Limited

A subsidiary company viz. Sical Infra Assets Limited has been formed for housing the infrastructure assets and also for taking up the business of developing, implementing and operating infrastructure projects. Sical is in the process of obtaining necessary clearances from the concerned authorities for transferring its holdings in the project companies to this subsidiary.

FUTURE PROSPECTS OF SICAL

I wish to state here that your Company will continue to grow in on-shore logistics with consolidation of bulk business and focus on container related growth. The activities of the Company in the container traffic through operating container terminals and container freight stations are promising. India has one of the largest railway networks in the world. Indian Railways accounts for 30% of total freight traffic. Movement of cargo through trains is reliable, faster and cheaper and the traffic volumes are set to grow in the future years. Sical through Sical Multimodal and Rail Transport Limited is better placed in movement of containerised cargo through trains. In the Ports sector, lot of opportunities are available for development of existing and new ports, container and bulk terminals and building up logistics infrastructure. In association with a leading international port operator, Sical will explore port development opportunities in India to scale up its business volumes. Your Company is constantly bidding for port terminal projects that are coming up from time to time. On the Offshore segment, your Company is strengthening its position globally through its subsidiary Bergen Offshore by providing support services to the oil exploring and dredging activities contributing effectively to the growth of the company. No doubt your Company prefers to take up the business areas which have entry barriers in terms of technology, financial resources and size of opportunity and overcome the challenges and prove to be a leader in on-shore multi modal logistics services by having its presence in Road, Rail and Ports.

I am happy to inform you that your Company has over a period of time built up its Management Team by inducting the achievers who have put in their best efforts in leading quasi-government / public sector enterprises at the Top Management level and the Board has been strengthened with independent directors who have vast experience in the logistics and financial areas. Your Company is constantly taking measures to tap the best potentials in the market for strengthening its core Management Team and leadership.

The focus of the Management is to sharpen the Company's profitability, improve the financial health by reorganizing the assets and to achieve financial closure of the remaining infrastructure projects in a time bound manner.

Indeed it is my pleasure to inform you that your Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement entered into with the Stock Exchanges with regard to Corporate Governance and practicing the good governance policies for establishing a good investor relationship. As a policy, your Company is sharing the information on the important events of the organization with the stakeholders and the community at large through various press releases and I assure you, that we will always keep the members abreast of the happenings.

In conclusion, I would like to emphasise here that there will be a focused and sincere endeavour in every respect to take the organization to a higher level of competency and performance in the years to come. We are confident of the success of our growth plans and will work sincerely to deliver enhanced value to our stakeholders.

ACKNOWLEDGEMENT

I take this opportunity to thank all the stakeholders, my colleagues on the Board for their support, advice and guidance and all the employees for their unstinted efforts to the performance of the Company.

I wish to place on record my sincere gratitude to our bankers, financial institutions, port and customs authorities, State and Central governments, principals, collaborators, customers, suppliers, SEBI, stock exchanges and other regulatory authorities.

Thank you.

Note : This does not purport to be the proceedings of the Annual General Meeting.