MIRA INFORM REPORT

Report Date :

1^st June 2006

IDENTIFICATION DETAILS

Name :	MEGHMANI ORGANICS LIMITED
Registered Office :	184, Phase – II, G.I.D.C. Industrial Estate, Vatva, Ahmedabad – 382 445, Gujarat, INDIA.
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	2^nd January, 1995
Com. Reg. No.:	04-24052
CIN No.: [Company Identification No.]	U24110GJ1995PLC024052
TAN No.: [Tax Deduction & Collection Account No.]	AHMM00341F
Legal Form :	A closely held public limited liability company.
Line of Business :	Trading and Distribution of Dyes, Pigments and Agro-Chemicals.

RATING & COMMENTS

MIRA’s Rating :

Ba

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Maximum Credit Limit :	USD 9500000
Status :	Good
Payment Behaviour :	Usually Correct
Litigation :	Clear
Comments :	Subject is a well established company having fine track. Directors are reported as experienced, respectable and resourceful businessmen. Their trade relations are fair. Financial position is good. Payments are usually correct and as per commitments. The company can be considered good for any normal business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	184, Phase – II, G.I.D.C. Industrial Estate, Vatva, Ahmedabad – 382 445, Gujarat, INDIA.
Tel. No.:	91-79-2583 1210
Fax No.:	91-79-2583 3403
E-Mail :	accounts@meghmani.com
Website :	http://www.meghmani.com
Head Office :	Meghmani House, 10 Shreenivas Society, New Vikas Road, Paldi, Ahmedabad 380007.
Tel. No.:	91-79-26640668/26640669
Fax No.:	91-79-26640670
Factory 1 :	Pigment Green Division Plot No. 184, Phase II, GIDC, Vatva, Ahmedabad 382 445, Gujarat
Tel. No.:	91-79-25831210
Fax No.:	91-79-25833403
E-Mail :	helpdesk@meghmani.com
Factory 2 :	Agro Division Plot No. 402, 403, 404 & 452 Village Chharodi, Taluka Sanand, District Ahmedabad, Gujarat
Tel. No.:	91-2717-273251
Fax No.:	91-2717-273254
E-Mail :	helpdesk@meghmani.com
Factory 3 :	Pigment Blue Division Plot No. 21, 21/1, GIDC, Panoli, District Bharuch, Gujarat
Tel. No.:	91-2646-276374
Fax No.:	91-2646-276374
E-Mail :	helpdesk@meghmani.com
Factory 4 :	Agro Division II 5001/B, GIDC Ankleshwar, Bharuch
Tel. No.:	91-2646-222971
Fax No.:	91-2646-222965
E-Mail :	helpdesk@meghmani.com
Branches :	Located at :- 22/23, Vellard View, 1^st Floor, Tardeo Road, Mumbai 400 037, Maharashtra

DIRECTORS

Name :	Mr. Jayantibhai Meghji Patel
Designation :	Chairman
Address :	Kruti-L-18/359, Satyagrah Chhavani Society Satellite, Ahmedabad – 380 015, Gujarat
Date of Birth/Age :	01.03.1952
Date of Appointment :	27.01.2000
Name :	Mr. Natubhai Meghji Patel
Designation :	Director
Address :	A/7, Ayojan Nagar, Near Shreyas Crossing, Ahmedabad – 380 015, Gujarat
Date of Birth/Age :	01.06.1953
Date of Appointment :	27.01.2000
Name :	Mr. Ashish Natwarlal Soparkar
Designation :	Managing Director
Address :	1-13/246, Satyagrah Chhavani Society Satellite, Ahmedabad – 380 015, Gujarat
Date of Birth/Age :	25.12.1952
Date of Appointment :	27.01.2000
Name :	Mr. Ramesh Meghjibhai Patel
Designation :	Whole Time Director
Address :	54, Shrinath Society, B/h. Manekbaug, Ahmedabad – 380 015, Gujarat
Date of Birth/Age :	01.06.1956
Date of Appointment :	14.08.1995
Name :	Mr. Jayaraman Namakkal Vishwanathan
Designation :	Director
Address :	Jardine Fleming India Services Limited, 16, Madame Cama Road, Mumbai – 400 001, Maharashtra
Date of Birth/Age :	21.08.1957
Date of Appointment :	06.01.1997
Name :	Mr. Anand Ishwarbhai Patel
Designation :	Director
Name :	Mr. Tian Bin Henry David Chia
Designation :	Director
Name :	Mr. Chinubhai Ramanlal Shah
Designation :	Director
Name :	Mr. Balkrishna Tulsidas Thakkar
Designation :	Director
Name :	Mr. Shreenivas Ramanlal Shah – NRI
Designation :	Director
Name :	Mr. Prakash Yashwant Karnik
Designation :	Director
Name :	Mr. Ashwin Kantilal Raythatha
Designation :	Director
Name :	Foo Meng Tong
Designation :	Director
Name :	Punkaj H Shah
Designation :	Director

MAJOR SHAREHOLDERS

Names of Shareholders	No.of SDS	Percentage of Holding
Electra Partners Mauritius Limited	28389320	18.54
Morgan Stanley Asia Sinagpore Securities Private Limited	9600000	6.27
UOB Kay Hian Private Limited	7214000	4.71
United Overseas Bank Nominees Private Limited	5544000	3.62
DBS Vickers Securities (Singapore) Private Limited	5360000	3.50
See Lop Fu James @ Shi Lap Fu James	4589000	3.00
Citibank Nominees Singapore Private Limited	4066400	2.65
Merrill Lynch (Singapore) Private Limited	3050000	1.99
OCBC Securities Private Limited	2828000	1.85
Liew Chee Kong	2725000	1.78
The Asia Life Assurance Society Limited	2600000	1.70
HSBC (Singapore) Nominees Private Limited	2495000	1.63
Raffles Nominees Private Limited	2493000	1.63
Lin Shui Chin	2420000	1.58
GK Goh Stockbrokers Private Limited	1936000	1.26
Orix Investment & Management Private Limited	1840000	1.20
Kim Eng Securities Private Limited	1823000	1.19
Citibank Consumer Nominees Private Limited	1390000	0.91
Phillip Securities Private Limited	1336000	0.87
Hoo Su Hen @ Ho Su Hen Sim Heng Hia	835000	0.55
Total	92533720	60.43

List of 20 Largest Shareholders

Name	No.of SDS	%
DBS Bank Nominees Private Limited	76582650	38.02
Natwarlal Maghjibhai Patel	25532130	12.73
Ashish Natwarlal Soparker	24158090	12.04
Jayanti Meghjibhai Patel	18560390	9.25
Ramesh Meghjibhai Patel	16354120	8.15
Anand Ishwerbhai Patel	8130200	4.05
Taraben Jayantibhai Patel	7360000	3.67
Ankit Natwarlal Patel	2500000	1.25
Naynaben Anandbhai Patel	2300000	1.15
Bhartiben Natwarlal Patel	2000000	1.00
Disha Natwarlal Patel	1500000	0.75
Kantibhai Meghjibhai Patel	1400000	0.70
Maulik Jayantibhai Patel	1270000	0.63
Kalpana Ramesh Patel	1000000	0.50
Karan Ramesh Patel	1000000	0.50
Vaishakhi Ramesh Patel	1000000	0.50
Lalit Kanti Patel	700000	0.35
Jagruti Lalit Patel	550000	0.27
Amita Kani Patel	500000	0.25
Popat Meghji Patel	450000	0.22
Name	No.of SDS

BUSINESS DETAILS

Line of Business :

Trading and Distribution of Dyes, Pigments and Agro-Chemicals.

Products :

Product Description	ITC Code
Pigment Green	32041751
Cypermethrin	38081023
Acephate	38081023

Imports from :

Raw materials, dyes and intermediates (for trading) from Germany

Terms :

Purchasing :

L/C (90 days)

GENERAL INFORMATION

Suppliers :	Ø Bayer AG, Germany Ø Chika Trading Company, Mumbai, Maharashtra
Bankers :	Ø State Bank of India, Overseas Branch, Navjivan Trust Building, Ahmedabad – 380 014, Gujarat [The company enjoys Cash Credit facility of Rs. 76.000 millions from its banker.] Ø Corporation Bank, Industrial Finance Branch, Rangoli Complex, Opp. V. S. Hospital, Ahmedabad – 380 006, Gujarat Ø ICICI Bank Limited, JMC House, OPP. Parimal Garden, Ambawadi, Ahmedabad-380009

Banking Relations :	Good
Auditors :	Deloitte Haskins and Sells Chartered Accountants 3^rd Floor Hertage, Near Gujarat Vidyapith, Off Ashram Road, Ahmedabad India
Associates/Subsidiaries :	Ø Ashish Chemicals Ø Nina Dye-Chem Ø Meghmani Industries Limited Ø Matangi Industries Ø Patel Dyestuff Industries Ø Tapshil Enterprises Ø Alpanil Industries Ø Meghmani Dyes & Intermediates Ø Meghmani Chemicals Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
37,000,000	Equity Shares	Rs.10/- Each	Rs. 370.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
20063000	Equity Shares	Rs.10/- Each	Rs.200.630 millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2006	31.03.2005	31.03.2004
SHAREHOLDERS FUNDS
1] Share Capital		200.630	200.630	165.900
2] Share Application Money		663.259	663.259	0.000
3] Reserves & Surplus		1597.916	1306.596	1242.900
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		2461.805	2170.485	1408.800
LOAN FUNDS
1] Bank Borrowing		0.000	111.189	895.800
2] Unsecured Loans		0.000	0.000	0.000
TOTAL BORROWING		0.000	111.189	895.800
DEFERRED TAX LIABILITIES		102.707	91.927	0.000
TOTAL		2564.512	2373.601	2304.600
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		1224.415	1024.756	943.700
Capital work-in-progress				--
INVESTMENT		5.462	4.549	4.500
DEFERREX TAX ASSETS
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	842.460	551.985	402.200
	Sundry Debtors	1545.123	1308.152	1184.600
	Cash & Bank Balances	57.302	54.870	117.300
	Other Current Assets	314.163	265.113	--
	Income Tax recoverable	18.431	2.784	180.700
Total Current Assets		2777.479	2182.904	1884.800
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	1442.844	838.608	500.300
	Provisions			44.900
Total Current Liabilities		1442.844	838.608	545.200
Net Current Assets		1334.635	1344.296	1339.600
MISCELLANEOUS EXPENSES		0.000	0.000	16.800
TOTAL		2564.512	2373.601	2304.600

PROFIT & LOSS ACCOUNT

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Sales Turnover [including other income]	3856.000	3308.000	2506.700
Profit/(Loss) Before Tax	441.000	408.000	368.500
Provision for Taxation	88.000	114.000	73.500
Profit/(Loss) After Tax	353.000	294.000	295.000
Total Expenditure	359.590	448.942	2138.200

KEY RATIOS

PARTICULARS		31.03.2006	31.03.2005	31.03.2004
PAT / Total Income	(%)	9.15	8.89	11.77
Net Profit Margin (PBT/Sales)	(%)	11.44	12.33	14.70
Return on Total Assets (PBT/Total Assets}	(%)	15.51	12.72	13.03
Return on Investment (ROI) (PBT/Networth)		0.18	0.19	0.26
Debt Equity Ratio (Total Liability/Networth)		0.59	0.44	1.02
Current Ratio (Current Asset/Current Liability)		1.93	2.60	3.46

LOCAL AGENCY FURTHER INFORMATION

Subject is a preferred supplier of agro chemicals, dyes and intermediates and pigments for discerning customers in 30 countries worldwide. Exporting over 95% of its output, it uses environment-friendly technology to consistently produce superior products at competitive prices.

The company has one of the largest dedicated plants in the country for the manufacture of Pigments Green 7, with an installed capacity of 1200 Metric Tonnes per annum

Subject is a flagship company of Megmani Group, which manufactures a wide range of dyes and dye intermediates, pigment powders and agro chemicals.

The company offers Phthalocyanine Green, Cabazole Violet, Phthalocyanine Blue and Copper Phthalocyanine crude to its customers sold under the brand name “MEGHAFAST” AND “ALPAFAST”.

Subject was integrated backwards to manufacture Copper Pthalocyanine Blue Crude and other forms of Blue namely Alpha and Beta Blue. This plant, located about midway between Mumbai and Ahmedabad, is one of the largest in the country built over an area of 62,000 square meters of land, the plant of capacity to produce 7200 millions tonnes of CPC and 3000 Metric Tonnes per annum of Alpha and Beta Blue together.

The company is in the process of enhancing CPC Blue and Beta Blue at its Panoli Plant. A capital investment of Rs. 90.000 millions is envisaged at Panoli plant.

The company made a proposal to BIFR for revitalization of Hifazat Chemicals Limited at Ankleshwar, G.I.D.C. and clear the dues to GIIC to the tune of Rs. 82.5 millions.

The company has been accredited with ISO 9002 Certification.

Performance :

The group achieved a profit after tax of 293.7 million rupees, on sales of 3308.9 million . the shareholder will be happy to note that the revenue earned by the group was at a new height, an increase of 35.6 % over the previous year. The basis and diluted earning per ordinary shares for the financial year review are Rs. 1.56 calculated on the profit after income tax.

Domestic sales grew a substantial 29.5 % to 209 millions rupees while export sales grew by 38.1 % to 659.9 million in export of CPC Blue, Beta Blue pigments and Acephate Technical pesticides products. The USA continues to be our major market for export sales accounting for 26 % followed by Europe with 22 %. Asia excluding India accounts for 13 %. South America is the next major buyer accounting for 7 %.

Profitability :

Along with achieving higher revenues for the financial year 2005, the company also registered an 11.4 % increase in overall gross profit at 721.03 million from 647.127 million in the previous corresponding period. However the overall gross profit margin declining to 21.8 % in 2005, compared to 26.5 % in 2004

The profitability was adversely affected by wild upward swings in crude oil prices. Which doubled to pierce the 50 dollar mark resulting in higher prices of derivatives of crude oil which are the critical raw materials. The price of metals, which are also raw materials for the pigment products increased more than twice. Further there was a slight weakening in the export sales price of the CPC Blue and Beta Blue products.

In addition, the decline in gross profit margin of the Pigment products was to some extent was made good by the increase in gross profit margin registered by the Agrochemicals division. The increase was 23.7 % in FY 2005, up from 22.9 % in FY 2004 with the selling price for most agrochemicals products rising, it was a year of good business. Here too the high cost of raw materials negated the efforts to realize the full benefits of the higher average selling prices.

Nevertheless, the a sustained focus on production and marketing as well as strategies to control costs, the company was able to redeem its promise of stabilising and improving resulting in the fourth quarter. They succeeded in attaining an overall increase in gross profit.

Stepping Growth :

With the turn around in performance achieved in the last quarter of the financial year. The company looks to a year of good business growth in FY 2006 with robust confidence, the expectations are based on the overall global environment for the company s products and the strategies which they have evolved and are implementing for expanding the products range and discovering new markets.

In the pigment segment, the world demand is likely to increase by 6.4 % this year to approximately US $ 5.5 billion. The company is fully geared up to take advance of the growing global market for pigments. The have expanded the capacity of Beta blues by adding another 600 tons to 3600 tons a year. The expounded capacity of 3600 tons a year is operational form April 2005.

Also propose to produce Pigment additives a key input for printing inks and paints. The additives help pigment to improve the flow properties of paints and inks.

In the agro chemicals segments steps have been implemented to increase the output of Chlorpyriphos at Ankleshwar plant.

The are also installing a new facilities the production of CMCA a key raw materials in agrochemicals production by 1000 tons a year. This will enhance the total capacity of CMAC to 1750 tons a year. Commercial production of expand capacity is expected to commence in January 2006. CMAC is used as captive consumption to manufacture technical pesticides, namely cypermethrin permethrin and deltamethrin.

Agro Registration in USA

They are happy to report that the company has acquired its first label registration to sell pyrethrum label directly in the USA. They have also sent dossiers to 53 countries for registration for to agrochemical products. The label registration which cost US$ 100000 has been cleared by the UA Environmental protection agency. The US agrochemical market is valued at around US $ 10 billion. The company believes the market for Pyrethrum Technical alone is worth around US $ 25 billion. The company is already an approved source of supply for three other agrochemical products in the US, Permethrin Technical 94 %, Acephate Technical and Cypermethrin 10 % EC.

Presence in Belgium and USA

The company has incorporated a wholly owned subsidiary in Belgium under the name of Meghmani Europe BVBA and in the US under Meghmani Organics USA Inc.

The Belgium subsidiary would increase the outreach of the marketing in Europe. It will provide better logistics facilities the after sales services. Catering to small customers and marketing to CIS countries.

Long Term Prospects :

The Outlook for the Indian market is in the positive mode as the economy continues to expand driving consumption of pesticides in the India. the increase in the world population will also push pesticidies demand further up. In the Pogment business the Ink Paints and Plastics Industries will continue to witness steady growth in demand. In addition more business opportunities are unfolding for Meghmani with American. Eupore, Central and South American and Japanese companies increasing their direct suppliers of pigment form India. the Indian ink industry is also expected to consume more pigments. Indian ability to provide high quality manufacturing at low cost is attracting outsourcing internal part of growth strategies for the furore the company is also strongly looking at cashing in on emerging outsourcing opportunities.

Financial Outlook for 2006

It is said that the tough gets going when the going gets tough. This is precisely what they did in FY 2005

Counteracting the challenges posed by sudden and abnormal increase in the prices of raw materials and have positioned for further growth in the time to come.

But the environment is nor entirely favourable. There could be fresh bouts of increase in crude iol prices, which will result in higher prices of raw materials that are derivatives of crude. The bullish trend in the metal continues pushing up copper and aluminium prices. The prices of chlorine gas has risen.

If this trend of rising raw materials costs contributes the company profitability will be affected in FY 2006 as well. They have been making efforts to pass the higher raw material costs on to customer.

The global market for pigment and agro chemicals continued to show signs of stabilizing with recovery in the sale price of some products. However the benefits of the stability in sale prices could nor be reflected in rupees terms due to the strengthening of the Rupee against the Dollar. Should the exchange rate continue to be unfavourable they will consider hedging of the currency exposure.

Substantial Shareholders (holding 5 % and above)

Name of Substantial Shareholders	Direct Interest	% of Issued Capital	Deemed Interest (Pursuant to section 7 of the capanies Act Cap. 50)	% of Issued Capital
DBS Bank Nominees Private Limited	76582650	38.02	--	--
Natwarlal Patel	25532130	12.73	6000000	2.99
Ashish Soparkar	24158090	12.04	821420	0.41
Jayanti Patel	18560390	9.25	9010000	4.49
Ramesh Patel	16354120	8.15	3000000	1.50

Gross profit – Company

The Company's gross profit increased by 33.5% to Rs 972.74 million in FY2006, from Rs 728.37 million in the previous financial year. The Company's overall gross profit margin increased to 25.1 % in FY2006, compared to 21.6% in FY2005, due mainly to increase in sales price of certain technical product, supported by lower RMC. The company received the special TARGET PLUS license of Rs. 39.60 Mn from government which reduced Raw Material Cost and consequently profit.

History

They were founded in 1986 as a partnership, under the name M/s Gujarat Industries, to manufacture Pigments by the Executive Chairman Mr Jayanti Patel, together with the Managing Directors, Mr Ashish Soparkar and Mr Natwarlal Patel, as well as two of the Executive Directors Mr Ramesh Patel and Mr Anand I Patel (collectively the "Founders").

On 2 January 1995, the Company, Meghmani Organics Limited, was incorporated as a joint stock company with limited liability pursuant to Part IX of the Indian Companies Act. Under Section 566 of the Indian Companies Act, "joint stock company" means a company having a permanent paid-up or nominal share capital of fixed amount divided into shares. Upon incorporation, the Company acquired the business and all existing assets and liabilities of the partnership M/s Gujarat Industries and the Founders became shareholders of the Company.

The Company has received several awards for the outstanding export performance and excellent performance since the date of the incorporation. Please refer to the section titled "Awards" on pages 118 to 119 of this Prospectus for further details. A detailed description of the manufacturing plants and office is as follows:


The Vatva Plant

In 1986, they commenced operations to manufacture Phthalocynine Green 7 more popularly known as Pigment Green 7 (PG-7) at the first manufacturing plant situated at the GIDC Industrial Estate, Vatva, which is approximately 14 km from Ahmedabad City. This industrial estate is developed by the state government's nodal agency, GIDC.

The Vatva Plant was originally set up for the manufacture of Pigment Green 7. The present production capacity of 1200 tpa at the Vatva Plant is the result of the construction of additional facilities over the years, which increased the manufacturing capacity of Pigment Green 7 from 240 tpa in 1986 to its present production capacity.

As at 30 November 2003, they have invested Rs 128.49 million in plant and machinery and building at the Vatva Plant. The manufacturing facilities at the Vatva Plant is ISO 9001-2000 certified.


The Chharodi Plant
In 1995, the Founders decided to diversify the business through the manufacture of Agrochemicals. The plant for the manufacture of Agrochemicals is located in Chharodi Village, which is approximately 40 km from Ahmedabad City. The cost of commissioning the Chharodi Plant was approximately Rs 300.7 million.

At the plant, they manufacture Technical Grade Pesticides which include synthetic pyrethroids such as Cypermethrin, Permethrin and Alpha Cypermethrin and organic phosphorous compounds such as Acephate as well as new Technical Grade Pesticides such as Imidacloprid and Triazophos, Formulations and Pesticides Intermediates such as MPB and CMAC.
As at 30 November 2003, they have invested Rs 440.7 million in plant and machinery and building at the Chharodi Plant. The manufacturing facilities at the Chharodi Plant is ISO 9001-2000 certified.


The Panoli Plant

In 1996, the Company proceeded to expand the Pigments business and to move upstream into the manufacture of CPC Blue, a raw material used in the manufacture of green Pigments and the manufacture of the blue Pigments namely, Alpha Blue and Beta Blue.

They acquired two plots of GIDC land at the GIDC Industrial Estate, Panoli, to set up the manufacturing facilities. The plant is located on the western side of India near Ankleshwar, which is approximately 200 km south from Ahmedabad and 250 km north from Bombay. This area is one of India's chemical manufacturing centres and is accessible by railway and roads, and has adequate infrastructure facilities for the industries and is in close proximity to stheces of raw materials and other inputs.


The cost of commissioning the Panoli Plant was approximately Rs 437.0 million. The project was partially funded by way of an equity injection by JF Electra (Mauritius) Limited (now known as Electra Partners Mauritius Limited), a Mauritius based private equity investment company which injected Rs 205.0 million and Pisces Re Ltd, a Mauritius based company which injected Rs 175.0 million. The construction of the plant was completed in the second half of 1997 and they commenced manufacturing CPC Blue, Alpha Blue and Beta Blue in February 1998. At present, the Panoli Plant has a production capacity of 7200 tpa, 600 tpa and 3,000 tpa for CPC Blue, Alpha Blue and Beta Blue respectively. The manufacturing facilities at the Panoli Plant is ISO 9001-2000 certified.

As at 30 November 2003, they have invested Rs 550.8 million in plant and machinery and building at the Panoli Plant. In February 2004, they acquired an adjoining plot of land of 34,000 sq m for Rs 12.0 million.

As the Company exports a majority of products manufactured at the Panoli Plant, they converted this division into an Export Oriented Unit (EOU) in FY2003, to enjoy certain tax and duty benefits.


Ankleshwar Plant

In FY2003, they acquired another plant in Ankleshwar at a purchase price of Rs 31.5 million. The Ankleshwar Plant commenced production on 1 August 2003 to manufacture Chlorpyrifos, a class of Agrochemical products, and has a current installed production capacity of 480 tpa.

As at 30 November 2003, they have invested a further Rs 53.4 million in plant and machinery and building at the Ankleshwar Plant.
Mumbai Office

In 1996, they purchased office premises in Mumbai, which is presently headed by Mr Ashvin Raythatha, the Executive Director, who oversees the imports and exports activities.

Business Overview

The Company

They are principally engaged in the manufacture and sale of Pigments and Agrochemicals. They carry out the manufacturing activities at four plants all situated in Gujarat, India.


The Pigment Products

They manufacture the following Pigment products:

• Pigment Green — Pigment Green 7;
• Pigment Blue — CPC Blue, Alpha Blue and Beta Blue.

Pigment Blue is a cyclic product of copper and reaction between phthalic anhydride and urea. Alpha Blue and Beta Blue are variations of Phthlocyanine Blues. Alpha Blue is redder in shade and of smaller particle size and is available as crystallizing type and non-crystallizing non-flocculating type. Beta Blue yields bright greenish blue shades with slightly lower tintorial strength. Beta Blue is of a more stable crystal formulation than Alpha Blue and is available as the non-crystallizing type and the non-crystallizing non-flocculating type.

Pigment Green 7, a green organic pigment, is chlorinated and a derivative of Pigment Blue. Pigment Green 7 is crystal stable and is of non-crystallising non-flocculating type. Pigment Green 7 provides a yellowish shade of green.

The range of Pigment Green and Pigment Blue products are differentiated by the following characteristics:

1. the particular intermediate shade of Pigment Green and Pigment Blue, which currently include Pigment Blue 15.1, Pigment Blue 15.2, Pigment Blue 15.3 and Pigment Blue 15.4;
2. crystallising type, which determines the brilliance and brightness of products;
3. non-crystallising type, which determines the ability of products to maintain their colour under all conditions; and
4. non-crystallising non-flocculating type, which determines the ability of products to spread evenly over the surfaces that they are applied on.

The Pigment Green and Pigment Blue products are sold and used in multiple applications, including printing inks, plastics, rubber, paints (for exterior and interior surfaces), textiles, leather and paper.

CPC Blue is an upstream product and is a raw material used for the manufacture of the Pigment Blue and Pigment Green products. CPC Blue is also sold to other manufacturers of pigments including a related party for the manufacture of textile dyestuffs.


The Agrochemical Products

They manufacture Agrochemical products which are Pesticides mainly used for basic crop protection and public health, as well as Pesticide Intermediates. The Agrochemical products are regulated products and require prior registration with the relevant governing authorities in each country before they are allowed to be sold. As such, they need to comply with the specific qualitative standards and permitted toxicity levels set by the relevant governing authorities in order to obtain the requisite product registration.

The Agrochemical products fall into three main categories:

• Pesticide Intermediates
• Technical Grade Pesticides
• Pesticide Formulations

They sell the Pesticide Intermediates and Technical Grade Pesticides in bulk packings such as in steel drums to Technical Grade Pesticides manufacturers and Formulators respectively.

The Pesticide Formulations are produced using Technical Grade Pesticides manufactured in-house as well as purchased from external suppliers. They sell the Pesticide Formulations in bulk packing directly to the institutional customers who are Formulators. In addition, they also sell the Pesticide Formulations in small packing (such as in aluminium bottles or laminated pouches) as follows:

• under the own brand name to the retail customers through the agents and distributors; or
• directly to the institutional customers where they may, at the request of these customers, affix their brand names on the small packing for their resale.

The Agrochemical products are used:

• as an active ingredient in the Agrochemicals manufacturing industry;
• by Formulators for the manufacture of Pesticide Formulations, pack into small packing for sale to direct end users;
• by the farming community; and
• by government agencies for pests control and public health.

Pesticides are applied on crops in their formulated form instead of in their technical form. For crop use, formulations in powdered form and emulsions are most commonly used. For other non-crop applications, more advanced formulations are used. The Pesticides can be used on a broad range of crops and insects, and are used on fruits, vegetables and common crops such as cotton, rice, groundnuts and chillies. Depending on the chemical nature of the Pesticides, they have different action against insects.

Apart from the application of the products on crops, the products also have non-crop uses, such as:

• the control of insects at warehouses for food grain storage;
• for public health, primarily against mosquitoes; and
• for use against termites, in wood preservations both for household and non-household purposes

The Performance

The group achieved a profit after tax of 293.7 million rupees, on sales of 3308.9 million rupees. The shareholders will be happy to note that the revenue earned by the group was at a new height, an increase of 35.6% over the previous year. The basic and diluted earnings per ordinary share for the financial year under review are Rs 1.56 calculated on the profit after income tax.

Domestic sales grew a substantial 29.5% to 209 million rupees while export sales grew by 38.1% to 659.9 million rupees in exports of CPC Blue, Beta Blue pigments and Acephate Technical pesticides products. The USA continues to be the major market for export sales accounting for 26% followed by Europe with 22%. Asia, excluding India, accounts for 13%. South America is the next major buyer accounting for 7%.

Profitability

Along with achieving higher revenues for the financial year 2005, the company also registered an 11.4 % increase in overall gross profit at 721.03 million rupees, from 647.17 million rupees in the previous corresponding period. However, the overall gross profit margin declined to 21.8% in 2005, compared to 26.5% in 2004.

The profitability was adversely affected by wild upward swings in crude oil prices, which doubled to pierce the 50-dollar mark resulting in higher prices of derivatives of crude oil, which are the critical raw materials. The price of metals, which are also raw materials for the pigment products increased more than twice. Further there was a slight weakening in the export sales price of the CPC Blue and Beta Blue products.

In addition, the decline in gross profit margin of the Pigment products was to some extent was made good by the increase in gross profit margin registered by the Agrochemicals division. The increase was 23.7% in FY 2005, up from 22.9% in FY 2004. With the selling price for most agrochemicals product rising, it was a year of good business. Here too, the high cost of raw materials negated the efforts to realize the full benefit of the higher average selling price.

Nevertheless, with a sustained focus on production and marketing as well as strategies to control costs, the company was able to redeem its promise of stabilizing and improving results in the fourth quarter. They succeeded in attaining an overall increase in gross profit.

Stepping up Growth

With the turn around in performance achieved in the last quarter of the financial year, the company looks to a year of good business growth in FY 2006 with robust confidence. The expectations are based on the overall global environment for the company's products and the strategies which they have evolved and are implementing for expanding the products range and discovering new markets.

In the pigment segment, the world demand is likely to increase by 6.4% this year to approximately US$ 5.5 billion. The company is fully geared up to take advantage of the growing global market for pigments. They have expanded the capacity of Beta blues by adding another 600 tons to 3600 tons a year. The expanded capacity of 3600 tons a year is operational from April 2005.

They also propose to produce Pigment additives, a key input for printing inks and paints. The additives help pigments to improve the flow properties of paints and inks. In the agro-chemicals segments steps have been implemented to increase the output of Chlorpyriphos at Ankleshwar plant.

They are also installing a new facility to expand the production of CMAC (Cypermethric Acid Chloride), a key raw material in agrochemicals production, by 1000 tons a year. This will enhance the total capacity of CMAC to 1750 tons a year. Commercial production of the expanded capacity is expected to commence in January 2006. CMAC is used as captive consumption to manufacture technical pesticides, namely, Cypermethrin, Alpha Cypermethrin, Permethrin and Deltamethrin.

All these expansion plans are expected to contribute towards the growth strategies of the Company.

Agro Registration in USA

They are happy to report that the company has acquired its first label registration to sell Permethrin label directly in the USA. They have also sent dossiers to 53 countries for registration of the agrochemical products.

The label registration, which cost US$100,000, has been cleared by the U S Environmental Protection Agency. The US agrochemical market is valued at around US$ 10 billion. The company believes the market for Permethrin Technical alone is worth around US$ 25 million. The company expects to reap returns from its Permethrin label (Purity 98.5%) in the US in the next financial year. Permethrin is mainly used for public health purposes like termite control, treatment of livestock and pets and treatment of wood. The company is already an approved source of supply for three other agrochemical products in the US, Permethrin Technical 94%, Acephate Technical and Cypermethrin 10% EC.

Presence in Belgium and USA

The company has incorporated a wholly owned subsidiary (WOS) in Belgium under the name of Meghmani Europe BVBA and in the US under Meghmani Organics USA Inc. The Belgium subsidiary would increase the outreach of the marketing in Europe. It will provide better logistics facilitating the after sales service, catering to small customers and marketing to CIS countries.

The US subsidiary will focus mainly on developing the Agrochemical business in North and South Americas. The North and South Americas, together, account for around 45% of US$30 billion world agrochemicals market.

The Tsunami Disaster

It is difficult to move on from last year without mentioning on the terrible Tsunami disaster which brought tears, pain and sufferings to so many people in the region. While nothing happened to the people and production facilities, most were not as fortunate. The Company made contributions in recognized charitable trusts in India. They also offered the pesticides, to combat with sudden spread of malaria, at a subsidized rate, covering only the manufacturing costs.

Long Term Prospects

The outlook for the Indian market is in the positive mode as the economy continues to expand, driving consumption of pesticides in India. The increase in the world population will also push pesticides demand further up.

In the Pigments business, the Ink, Paints and Plastics industries will continue to witness steady growth in demand. In addition, more business opportunities are unfolding for Meghmani with American, European, Central and South American and Japanese companies increasing their direct supplies of pigments from India. The Indian ink industry is also expected to consume more pigments.

India's ability to provide high quality manufacturing at low cost is attracting outsourcing contracts form many multinationals from the developed countries. As an integral part of growth strategies for the future, the company is also strongly looking at cashing in on emerging outsourcing opportunities, as there is a trend in formulators and distributors in developed countries sourcing supplies from India. Our company is theyll poised to take advantage of the outsourcing wave.

Financial Outlook for 2006

It is said that the tough gets going when the going gets tough. This is precisely what they did in FY 2005 counteracting the challenges posed by sudden and abnormal increase in the prices of raw materials and have positioned us for further growth in the times to come.

But the environment is not entirely favorable. There could be fresh bouts of increases in crude oil prices, which will result in higher prices of raw materials that are derivatives of crude. The bullish trend in the metal market continues pushing up copper and aluminum prices. The price of chlorine gas too has risen. If this trend of rising raw materials costs continues, the company's profitability will be affected in FY 2006 as well. They have been making efforts to pass the higher raw material costs on to customers. However, this is a market-dependent and a time consuming process.

The global market for pigment and agro chemicals continued to show signs of stabilizing with recovery in the sale price of some products. However, the benefit of the stability in sale prices could not be reflected in rupee terms due to the strengthening of the Rupee against the Dollar. Should the exchange rate continue to be unfavorable, they will consider hedging of the currency exposure.

Acknowledgement

They take this opportunity to convey the sincere thanks to all the shareholders and business associates for their unstinted support in meeting various challenges, which the company encountered last year. The thanks also go to various institutions and individuals in Singapore for their trust and investment in the company.

They assure you that leadership capacity at various levels of management will continue to be strengthened in such a manner that the team will respond quickly and act decisively in implementing the growth strategies.

On behalf of Management and on my own behalf, I express the gratitude and heartfelt thanks to the staff members for their deep commitment and contribution to the progress of the company.

Jayanti M Patel
Executive Chairman

Board of Directors

Jayanti Meghjibhai Patel
Executive Chairman

Jayanti Meghjibhai Patel is the Executive Chairman of the Company. Together with the Managing Director Mr. Ashish N. Soparkar, the Managing Director Mr. Natwarlal M. Patel and the Executive Directors Mr. Ramesh M. Patel and Mr. Anand I. Patel, he was a co-founder and partner of M/s. Gujarat Industries, which was subsequently converted to the Company in 1995. He currently oversees the international marketing of the Company and is responsible for all major policy decisions.

Mr. Jayanti M. Patel has more than 28 years experience in the Dyes and Pigments industry, and more than 9 years experience in the Agrochemicals industry. Mr. Jayanti M. Patel was appointed as the Executive Chairman since the incorporation of the Company in 1995.

Mr. Jayanti M. Patel holds a Bachelors of Chemical Engineering degree from Maharaja Sayajirao University, Baroda. He is currently the executive member of the Gujarat Chamber of Commerce and Industry, Ahmedabad.

Ashish Natwarlal Soparkar
Managing Director

Mr. Ashish Natwarlal Soparkar is the Managing Director of the Company. Together with the Executive Chairman Mr. Jayanti M. Patel, the Managing Director Mr. Natwarlal M. Patel and the Executive Directors Mr. Ramesh M. Patel and Mr. Anand I. Patel, he was a co-founder and partner of M/s. Gujarat Industries, which was subsequently converted to the Company in 1995. He was responsible for pioneering the export division of the Company. He currently oversees the corporate affairs and finance matters of the Company.

Mr. Ashish N. Soparkar has more than 28 years experience in the Dyes and Pigments industry, and more than 9 years experience in the Agrochemicals industry. Mr. Ashish N. Soparkar was appointed as the Managing Director since the incorporation of the Company in 1995.

Mr. Ashish N. Soparkar holds a Bachelors of Chemical Engineering degree from Maharaja Sayajirao University of Baroda.

Natwarlal Meghjibhai Patel
Managing Director

Mr. Natwarlal Meghjibhai Patel is the Managing Director of the Company. Together with the Executive Chairman Mr. Jayanti M. Patel, the Managing Director Mr. Ashish N. Soparkar and the Executive Directors Mr. Ramesh M. Patel and Mr. Anand I. Patel, he was a co-founder and partner of M/s. Gujarat Industries, which was subsequently converted to the Company in 1995. He currently oversees the technical matters of the Agrochemicals divisions, as well as the international and domestic marketing of the Agrochemical products.

Mr. Natwarlal M. Patel has more than 26 years experience in the Dyes and Pigments industry, and more than 12 years experience in the Agrochemicals industry. Mr. Natwarlal M. Patel was appointed as the Managing Director since the incorporation of the Company in 1995.

Mr. Natwarlal M. Patel holds a Masters of Science degree from Sardar Patel University, Gujarat.

Ramesh Meghjibhai Patel
Executive Director

Mr. Ramesh Meghjibhai Patel is the Executive Director of the Company. Together with the Executive Chairman Mr. Jayanti M. Patel, the Managing Directors Mr. Ashish N. Soparkar and Mr. Natwarlal M. Patel and the Executive Director Mr. Anand I. Patel, he was a co-founder and partner of M/s. Gujarat Industries, which was subsequently converted to the Company in 1995. He is currently in charge of overseeing purchases made by the Company (including domestic purchases and global imports) and is responsible for all liaisons between the Company and government authorities or other regulatory bodies.

Mr. Ramesh M. Patel has 26 years experience in the Dyes and Pigments Industry and 12 years experience in the Agrochemicals Industry. He was appointed as the Executive Director since the incorporation of the Company in 1995.

Mr. Ramesh M. Patel holds a Bachelors of Arts degree from Saurashtra University.

Anand Ishwerbhai Patel
Executive Director

Mr. Anand Ishwerbhai Patel is the Executive Director of the Company. Together with the Executive Chairman Mr. Jayanti M. Patel, the Managing Directors Ashish N. Soparkar and Mr. Natwarlal M. Patel and the Executive Director Mr. Ramesh M. Patel, he was a co-founder and partner of M/s. Gujarat Industries, which was subsequently converted to the Company in 1995. He currently oversees the manufacturing of Pigments as well as the domestic marketing of Pigments.

Mr. Anand I. Patel has 19 years experience in the Pigments Industry. Mr. Anand I. Patel was appointed as the Executive Director since the incorporation of the Company in 1995.

He holds a Bachelor of Science degree from the Gujarat University.

Ashvin Kantilal Raythatha
Executive Director

Mr. Ashvin Kantilal Raythatha is the Executive Director of the Company. He was appointed as the Executive Director in 2000 and currently oversees the international marketing of the Company.

Mr. Ashvin K. Raythatha has had more than 31 years of experience in international marketing. Prior to joining the Company, he was the general manager of international marketing at Mafatlal Group of Industries, a manufacturer of dyes and pigments, from May 1969 to October 1995.

He holds a Bachelors of Science (Chemistry) degree from the Gujarat University, and a Masters of Business Administration degree from the Indian Institute of Management, Ahmedabad

Chinubhai Ramanlal Shah
Independent Director

Mr. Chinubhai Ramanlal Shah was appointed as an Independent Director of the Company on April 17, 2000. He is currently a practising company secretary and management consultant of C R Shah Associates.

Mr. Chinubhai R. Shah has had more than 41 years experience in the areas of management, finance and accounting. Mr. Chinubhai R. Shah holds a diploma in Labour Practice and diploma in Taxation Practice, both from the Gujarat University.

He also holds a Masters of Law degree and a Master of Arts degree, both from the Gujarat University. He is a fellow member of the Institute of Company Secretaries of India. In addition, he is the President of the Gujarat Chamber of Commerce and Industry.

Balkrishna Tulsidas Thakkar
Independent Director

Mr. Balkrishna Tulsidas Thakkar was appointed as an Independent Director of the Company on April 17, 2000. Mr. Balkrishna T. Thakkar has been a qualified chartered accountant since 1975.

He is currently a practising chartered accountant of Balkrishna Thakkar & Co., a sole proprietorship that he founded in 1975, and is associated with the practice of audit and taxation. Mr. Balkrishna T. Thakkar holds a Bachelors of Commerce degree from Gujarat University.

He is also a chartered accountant of the Institute of Chartered Accountants of India.

Jayaraman Vishwanathan
Non-Executive Director

Mr. Jayaraman Vishwanathan was appointed as a Non-Executive Director of the Company in July 2003. Mr. Vishwanathan has more than 23 years of experience in industry, banking private equity and entrepreneurial related work, both in India as well as in other countries.

Prior to his position in Qiosk, Mr. Vishwanathan was the director and head of direct investments in Jardine Fleming India Securities Ltd. ("JF Electra")(now Electra Partners Asia Limited ("Electra Asia") from December 1995 to July 1999. Mr. J. Vishwanathan, on rejoining Electra Partners Asia Limited ceased to be an independent director and is continuing as Non Executive Director.

Mr. Vishwanathan holds a Bachelors of Commerce (Honours) degree from the University of Delhi, India. He is also a Chartered Accountant of the Institute of Chartered Accountants of India and a Management Accountant of the Chartered Institute of Management Accountants, London, U.K.

Foo Meng Tong
Independent Director

Mr. Foo Meng Tong was appointed as an Independent Director of the Company on March 5, 2004. Prior to joining the private sector in 1993, he was with the Economic Development Board ("EDB") for 26 years from 1963 to 1993. His last appointment was as director (Industry) and concurrently general manager, EDB Investment Pte. Ltd. where he was involved in industry planning and development as well as venture capital investment. From 1994 to 1997, he served as the Ambassador in Paris, accredited to France and concurrently to Spain, Portugal, Switzerland (from 1994 to 1996) and Israel (from 1996 to 1997).

He holds a diploma in Electrical Engineering from the Singapore Polytechnic. He was awarded the Public Administration Medal (Silver) in 1986 and the French Government conferred him as a Chevalier in the Order of the Palmes Academiques in 1988. He is a Fellow of the Institution of Engineers in Singapore.

Pankaj Hiralal Shah
Independent Director

Mr. Pankaj Hiralal Shah has been appointed on March 28, 2005 as Additional Director on the Board under the designation Independent Director.

Prior to Joining the Board Pankaj H. Shah, served for 31 years primarily in the Senior Executive position, business management, marketing and operation. He served as Chairman and CEO of DuPont India Limited from 1998-2004 and as Regional Managing Director of DuPont Automative business at Seoul, South Korea from 1996-1998.

Mr. Shah holds a Bachelors of Science Chemical Engineering degree from Banaras Hindu University, India. Master of Science (1969) Chemical Engineering from University of South Western Lousiana USA (1971) and MBA from University of Northeast Lousiana, USA (1973).

Review of Performance

Review of Results
The principal activities of the group are manufacture and sale of Pigments, Agrochemicals and trading of dyes, dyes intermediates and Agrochemicals technical and intermediates products which are not manufactured by the group

Commentary

Industry Prospects

Pigments
The Ink, Paints and Plastics industries continue to witness steady growth in demand. India's ability to provide high quality manufacturing is also attracting a higher level of outsourcing from more companies from the developed countries. In addition, companies in the US, Europe, Central and South America, and Japan are also increasing their direct supplies of Pigments from India. The Indian ink industry is also expected to consume more Pigments. To better position itself group has installed the facility to manufacture 17 DA additives and gearing it self to manufacture high performance pigments.

Agrochemicals
To meet the growing demand for Organo phosphorous and Synthetic pyrothid, the company installed multifaceted production capacities to produce Permethrin, Alpha Cypermethrin and Acephate at the Ankleshwar Plants. The Cypermethric Acid Chloride Plant at Ankleshwar commenced commercial production from 01.01.2006.

Registrations
The group continued to make its concerted efforts to obtain overseas registrations. The company has already sent registration dossiers to 53 countries. The company has received 39 registrations worldwide. The registrations are in countries such as China, Bangladesh, Indonesia, Nigeria, Paraguay, Thailand, Turkey, and Vietnam. These new registrations will further strengthen the growth plan of the company.

Outlook for FY 2007

Raw Material Price
During FY 2006 crude oil price continued to increase resulting in higher prices for raw materials that are derivatives of crude oil, such as Phathlic, Ortho Nitro Toluene and solvents. There was also a bullish trend in the metal market, resulting in increases in the prices of Copper and Aluminium. In recent months, the price of crude oil has once again begun to increase. Nevertheless, should the trend of rising raw material costs resume, the profitability is likely to be affected in the first quarter of FY 2007. They are also continuously negotiating with customers to pass on the higher raw material costs.

Market Price
The global market for pigment and agro products continued to show signs of recovery in the sales price of some products. Profitability The group achieved higher revenue in FY 2006 on a year-on-year basis. Gross profit and Net Profit margin increased. The group endeavours to manage finance cost, inventory level, speedy realisation of debtors and is continuously negotiating with customers for better prices so as to pass on cost increases.

CMT REPORT [Corruption, Money laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No records exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs. 46.17
UK Pound	1	Rs. 86.06
Euro	1	Rs. 59.14

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	6
OPERATING SCALE	1~10	6
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	6
--PROFITABILIRY	1~10	6
--LIQUIDITY	1~10	6
--LEVERAGE	1~10	6
--RESERVES	1~10	6
--CREDIT LINES	1~10	6
--MARGINS	-5~5	--
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	NO
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		54

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average/normal.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions