MIRA INFORM REPORT

Report Date :

15.03.2007

IDENTIFICATION DETAILS

Name :	KANSAI NEROLAC PAINTS LIMITED
Formerly Known As :	GOODLASS NEROLAC PAINTS LIMITED
Registered Office :	“Nerolac House”, Ganpatrao Kadam Marg, Lower Parel, Mumbai – 400 013, Maharashtra
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	02.09.1920
Com. Reg. No.:	11-825
CIN No.: [Company Identification No.]	L24202MH1920PLC000825
TAN No.: [Tax Deduction & Collection Account No.]	MUMG00234D
Legal Form :	Public Limited Liability Company. The company’s shares are listed on the Stock Exchanges
Line of Business :	Manufacturing and Marketing of Paints, Varnishes and Enamels, Oils and Synthetic Resins.

RATING & COMMENTS

MIRA’s Rating :

Aa

RATING		STATUS	PROPOSED CREDIT LINE
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

Maximum Credit Limit :	USD 16000000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established company having fine track. Available information indicates high financial responsibility of the company. Fundamentals are strong and healthy. The company is doing very well. It’s payments are always correct and as per commitments. The company can be considered good for your proposed business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	“Nerolac House”, Ganpatrao Kadam Marg, Lower Parel, Mumbai – 400 013, Maharashtra, India
Tel. No.:	91-22-2493 4001 / 2493 4003–08 / 2493 4010
Fax No.:	91-22-2493 6296 / 24973704
E-Mail :	info@nerolac.com
Website :	http://www.goodlassnerolac.com http://www.nerolac.com
Factory :	• B I , B2, Jainpur Industrial Estate, Kanpur Dehat, Kanpur, U.R • F/2, Midc, Lote Parshuram, Taluka Khed, District Ratnagiri, Maharashtra. • Bibi Talav Vatva, Ahmedabad, Gujarat • 142, Tiruporur Road, Perungudi, Chennai, Tamil Nadu • 36, Sector-7, Hsidc Igs, Bawal, District Rewari, Haryana
Branches :	Located at :- Jammu, Jalandhar, Ludhiana, Bhatinda, Patiala, New Delhi, Mumbai (Goregaon), Parwanoo, Chandigarh, Ambala, Dehradun, Ghaziabad, Sahibabad, Faridabad, Bareilly, Agra, Lucknow, Kanpur, Patna, Siliguri, Guwahati, Varanasi, Jamshedpur, Kolkata, Vishakhapatnam, Vijayawada, Trichy, Madurai, Trivandrum, Thiruvalla, Cochin, Calicut, Mangalore, Bangalore, Hubli, Tirupati, Panji, Gulbarga, Kolhapur, Hyderabad, Pune, Bhiwandi, Nagpur, Cuttack, Raipur, Jabalpur, Varanasi, Surat, Baroda, Narol, Ahmedabad, Chennai, Rajkot, Indore, Udaipur, Gwalior, Bhopal, Jaipur and Jodhpur.

SOLE PROPRIETOR/PARTNERS/DIRECTORS

Name :	Dr. J.J. I Ran I
Designation :	Chairman
Name :	Mr. D. M. Kothari
Designation :	Vice Chairman
Name :	Mr. Y Kawamori
Designation :	Director
Name :	Mr. K. C. Mehra
Designation :	Director
Name :	Mr. H. M. Bharuka
Designation :	Managing Director
Name :	Mr. S. M. Datta
Designation :	Director
Name :	Mr. Y Tajiri .
Designation :	Director
Name :	Mr. V K. Khurana
Designation :	Director - Industrial Marketing
Name :	Mr. H. Ishino
Designation :	Director

KEY EXECUTIVES

Name :	Mr. G. T Govindarajan
Designation :	Company Secretary

SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares	Percentage of Holding
Foreign Promoters (Kansai Paint Company Limited, Japan)	16457080	64.52
Non-Promoter's Holding
Mutual Funds and UTI	2894536	11.35
Banks, Financial Institutions, Insurance Companies (Central/State Government Institutions/ Non-Government Institutions)	1390837	5.44
Foreign Institutional Investors (Flls)	1526859	5.99
Others
Private Corporate Bodies	343355	1.35
Indian Public	2858296	11.21
NRIs/OCBs	29010	0.11
Any Other (Trust)	7693	0.03
GRAND TOTAL	25507666	100.00

BUSINESS DETAILS

Line of Business :	Manufacturing and Marketing of Paints, Varnishes and Enamels, Oils and Synthetic Resins.
Products :	Item Code No. 320890.03 Product Description: Paints
Exports to :
Product :	Paints and Coating Material.
Country :	Asian and Far East countries
Imports from :
Product :	Raw materials & packing materials, stores & spares, capital goods and finished goods.
Country :	Japan, Germany and U.S.A.
Terms :
Selling :	L/C terms
Purchasing :	L/C, D/P or D/A terms

PRODUCTION STATUS

Particulars	Unit	Installed Capacity	Actual Production
Paints, Varnishes and Enamels	MT	153900	99130
Synthetic Resins	MT	36250	30743
Pretreatment Chemicals	MT	2400	1150

GENERAL INFORMATION

Customers :

v Bajaj Auto Limited

v Whirlpool of India Limited

v Hero Honda

v Godrej

v Maruti - 70% of Maruti's paint requirement-accounts for 12% of sales

No. of Employees :

2000

Bankers :

v Union Bank of India

v Standard Chartered Bank

v Bank of Tokyo-Mitsubishi Limited

v HDFC Bank Limited

v BNP Paribas

Facilities :

SECURED LOANS (Rs. In millions)	31.03.2006
Sales Tax Deferral, secured by a charge on the fixed assets of the factory at Jainpur [Including Rs. 6,4.702 Millions (2004-2005 Rs. 4,8.731 Millions) due within one year]	285.417
Demand Loan, Cash Credit and Packing Credit, secured by hypothecation of stocks and book debts	100.148
Total	385.565

Banking Relations :	Good
Auditors :	A. F. Ferguson & Company Chartered Accountants Mumbai
Subsidiaries :	Ø Chemguard Coatings Limited (Associate-upto 31.10.2004 Ø P.T. Kansai Paint Indonesia Ø Saurashtra Paints Limited Ø GNP (Madras) Limited
Associates :	Ø Anupam Silk & Chemical Industries Limited, (upto 25.03.2004) Ø Nipa Chemicals Limited Ø Polycoat Powders Limited Ø Drewtreat Chemicals Limited In financial and technical collaboration with Drew Chemicals, New Jersey, U.S.A., subject is a leading company offering Water and Fuel treatment Chemicals. On the lines of the American partner, the company manufactures Water Treatment Chemicals. Ø Nipa Chemicals Limited This company specializes in the manufacture of Pre-Treated Chemicals. It is a joint venture of Nihon Parkerizing Company Limited, Tokyo, Japan, and Goodlass Nerolac. The technical and the marketing support is provided by the subject company.
Memberships :	Paint Manufacturers Association of India
Holding Company :	Kansai Paint Company Limited, Japan
Collaboration :	Ø E.I. du Pont de Nemours and Company Inc., USA – for manufacture of sophisticated coatings for automotive sector Ø Kansai Paint Company Limited, Japan-for manufacture of sophisticated architectural coatings Ø Oshima Kogyo Company Limited, Japan – for manufacture of heat resistant paints. Ø DuPont Performance Coatings GmbH & Company, KG, Germany – for know-how relating to the manufacture of anodic Electro-deposition coatings system.

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
30,000,000	Equity Shares	Rs.10/- each	Rs.300.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
2,55,07,666	Equity Shares fully paid-up Of the above: 43,500 Equity Shares of Rs. 10 each are allotted as fully paid-up pursuant to contracts without payments being received in cash; and 1,56,19,316 Equity Shares of Rs. 10 each are allotted as fully paid-up by way of Bonus Shares by capitalisation of Share Premium, Profits and Reserves ] 1,64,57,080 Equity Shares are held by the Holding Company, Kansai Paint Co. Limited, Japan	Rs. 10/-each	Rs. 255.077 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		255.077	255.077	153.046
3] Reserves & Surplus		3805.452	2978.885	2496.305
NETWORTH		4060.529	3233.962	2649.351
LOAN FUNDS
1] Secured Loans		385.565	325.939	297.002
2] Unsecured Loans		712.184	545.491	407.177
TOTAL BORROWING		1097.749	871.430	704.179
DEFERRED TAX LIABILITIES
TOTAL		5158.278	4105.392	3353.530
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		1598.893	1316.300	873.664
Capital work-in-progress		155.935	175.974	158.116
Advance for capital expenditure		23.674	116.607	53.378
INVESTMENT		1639.349	1791.249	1303.976
DEFERREX TAX ASSETS		82.266	97.237	121.602
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	1782.438	1145.569	1072.111
	Sundry Debtors	1439.159	1048.412	1117.221
	Cash & Bank Balances	157.862	133.179	187.078
	Loans and Advances	576.199	486.158	342.717
Total Current Assets		3955.658	2813.318	2719.127
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	1520.514	1439.924	1246.870
	Provisions	776.983	765.369	629.463
Total Current Liabilities		2297.497	2205.293	1876.333
Net Current Assets		1658.161	608.025	842.794
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		5158.278	4105.392	3353.530

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2006	31.03.2005	31.03.2004
Sales Turnover		10845.907	9016.879	7702.502
Other Income
Total Income		10845.907	9016.879	7702.502
Profit/(Loss) Before Tax		1995.965	1372.580	887.614
Provision for Taxation		610.070	453.000	308.000
Profit/(Loss) After Tax		1385.895	919.580	579.614
Earnings in Foreign Currency :
	Export Earnings
	Commission Earnings	35.301	159.697	863.974
	Other Earnings
Total Earnings		35.301	159.697	863.974
Imports :
	Raw Materials
	Stores & Spares	1417.910	91.164	2.892
	Capital Goods
	Others
Total Imports		1417.910	91.164	2.892
Expenditures :
	Cost of Goods Sold
	Manufacturing Expenses
	Administrative Expenses
	Raw Material Consumed
	Purchases made for re-sale
	Consumption of stores and spares parts	8532.182	7437.296	6594.471
	Increase/(Decrease) in Finished Goods
	Salaries, Wages, Bonus, etc.
	Managerial Remuneration
	Payment to Auditors
	Interest
	Insurance Expenses
	Power & Fuel
	Depreciation & Amortization
	Other Expenditure
Total Expenditure		8532.182	7437.296	6594.471

QUARTERLY RESULTS

PARTICULARS	30.06.2006 [1^st Quarter]	30.09.2006 [2^nd Quarter]	31.12.2006 [3^rd Quarter]
Sales Turnover	2676.000	3170.800	3091.000
Other Income	56.900	32.600	48.700
Total Income	2732.900	3203.400	3139.700
Total Expenditure	2260.200	2709.500	2680.500
Operating Profit	472.700	493.900	459.200
Interest	1.900	2.300	02.300
Gross Profit	470.800	491.600	456.900
Depreciation	71.800	78.000	88.100
Tax	130.100	136.400	125.800
Reported PAT	271.000	279.100	243.300

200606 Quarter 1 -

EPS is Basic and Diluted 1.The name of the Company has been changed from Goodlass Nerolac Paints Limited to Kansai Nerolac Paints Limited with effect from 11^th July, 2006. 2. As the Company's business activity falls within a single segment viz. 'Paints' and the sales substantially being in the domestic market, the disclosure requirements of Accounting Standard-17 'Segment Reporting', issued by the Institute of Chartered Accountants of India are not applicable. 3. There were no investor complaints pending at the beginning of the quarter. 5 complaints were received during the quarter and were duly attended. There is no pending complaint for the quarter. 4. The Board of Directors has approved a scheme of amalgamation between the company and Polycoat Powders Limited, with effect from 1^st April, 2006; no effect thereof has been given pending completion of statutory requirements. 5. A fire broke out at the company's Jainpur Factory in April, 2006. Management has taken appropriate action and has filed relevant insurance claims and there is no material effect on the results. 6. Figures of the previous period / year have been regrouped wherever necessary. Also, figures of the previous period have been restated to include figures (not significant to the results of the Company) in respect of Chemgward Coatings Limited, amalgamated with the Company with effect from first November, 2004 but given effect to during the quarter ended 30th September, 2005 on completion of statutory requirements. 7. The above results have been reviewed by the Audit Committee and approved by the Board of Directors at their meeting held on 27^th July, 2006. These results have been subjected to a 'Limited Review' by the statutory auditors of the company.

2006-09 Quarter 2

Expenditure Includes (Increase) / Decrease in Stock in Trade Rs (326.50) million Consumption of Raw Materials Rs 2293.90 million Staff Cost Rs 146.40 million Other Expenditure Rs 595.70 million Tax Includes Provision for Current Tax Rs 132.90 million Deferred Tax Rs (1.90)million Fringe Benefit Tax Rs 3.50 million EPS is Basic and Diluted Status of Investor Complaints for the quarter ended September 30, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 05 Complaints disposed off during the quarter 05 Complaints unresolved at the end of the quarter Nil 1. As the Company's business activity falls within a single segment viz. 'Paints' and the sales substantially being in the domestic market, the disclosure requirements of Accounting Standard-17 'Segment Reporting', issued by the Institute of Chartered Accountants of India are not applicable. 2. The Board of Directors has approved a scheme of amalgamation between the Company and Polycoat Powders Limited, with effect from April 1, 2006, no effect thereof has been given pending completion of statutory requirements. 3. Figures of the previous period / year have been regrouped wherever necessary. Also, figures of the previous period have been restated to include figures (not significant to the results of the Company) in respect of Chemguard Coatings Limited, amalgamated with the company with effect from November 1, 2004 but given effect to during the quarter ended September 30, 2005 on completion of statutory requirement. 4. The above results have been reviewed by the Audit Committee and approved by the Board of Directors at their meeting held on October 31, 2006. These results have been subjected to 'Limited Review' by the statutory auditors of the Company.

200612 Quarter 3 –

EPS is Basic and Diluted Status of Investor Complaints for the quarter ended 31st December, 2007 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 03 Complaints disposed off during the quarter 03 Complaints unresolved at the end of the quarter Nil 1. As the Company's business activity falls within a single segment viz. 'Paints' and the sales substantially being in the domestic market, the disclosure requirements of Accounting Standard-17 'Segment Reporting', issued by the Institute of Chartered Accountants of India are not applicable. 2. The Board of Directors has approved a scheme of amalgamation between the Company and Polycoat Powders Limited, with effect from April 1, 2006, no effect thereof has been given pending completion of statutory requirements. 3. Figures of the previous period / year have been regrouped wherever necessary. 4. The above results have been reviewed by the Audit Committee and approved by the Board of Directors at their meeting held on 30th January, 2007. These results have been subjected to 'Limited Review' by the statutory auditors of the Company.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt-Equity Ratio	0.27	0.27	0.29
Long Term Debt-Equity Ratio	0.25	0.26	0.27
Current Ratio	1.49	1.39	1.55
TURNOVER RATIOS
Fixed Assets	3.78	4.02	4.14
Inventory	8.37	9.58	8.89
Debtors	9.86	9.82	7.91
Interest Cover Ratio	186.44	179.236	68.24
Operating Profit Margin(%)	14.45	149.400	12.12
Profit Before Interest And Tax Margin(%)	11.86	129.900	9.74
Cash Profit Margin(%)	10.74	106.00	8.65
Adjusted Net Profit Margin(%)	8.15	86.500	6.27
Return On Capital Employed(%)	31.40	370.100	28.39
Return On Net Worth(%)	27.40	312.600	23.49

STOCK PRICES

Face Value	Rs. 10/-
High	Rs. 805.00/-
Low	Rs. 790.00/-

LOCAL AGENCY FURTHER INFORMATION

History

Goodlass Nerolac Paints Limited (GNPL), the Indian subsidiary of Japan based Kansai Paint Company Limited, is the second largest paint company in India with presence in decorative paints as well as industrial paints & marine paints, enamels, varnishes, coatings, resins etc. It is the second largest coating company in India. The company markets its products under the brand names Nerolac, Glossolite, Goody, Allscapes, Excel, in decorative. The Company was established in 1920 as Gahagan Paints and Varnish Company Limited at Lower Parel in Bombay. In 1930, three British companies merged to formulate Lead Industries Group Limited In 1933, Lead Industries Group Limited acquired entire share capital of Gahagan Paints in 1933 and thus, Goodlass Wall (India) Limited was born.  

Subsequently, by 1946, Goodlass Wall (India) Limited was known as Goodlass Wall Private Limited. In 1957, Goodlass Wall Private Limited grew popular as Goodlass Nerolac Paints (Private) Limited. Also, it went public in the same year and established itself as Goodlass Nerolac Paints Limited. It came into the fold of Tata Forbes Group in 1976, as its foreign holdings were acquired by Forbes Gokak. It turned into Joint Venture company in 1986 as the foreign collaborator Japan based Kansai Paints picking 36% of equity capital of the company. With the acquisition of entire stake of Forbes Gokak and its associates by Kansai Paints it became the subsidiary of the latter in 1999. The stake of Kansai Paints in the company now stood at 64.52% of the total equity of the company. The company has five manufacturing facilities at kanpur, Ratnagiri, Ahmedabad, Perungudi, Rewari spread across India. The Company serves its customers through 66 Sales locations and five strategically located factories. 

Technical Assistance Agreements of the company with renowned players in paint industry at international level puts the company in a strong position to offer products which meets stringent international specifications. It started in 1993 when the company tied-up with Kansai Paints of Japan (for manufacture of Sophisticated architectural Coatings) and Nihon Tokushu Torya Company Limited also of Japan(for body seal and under seal coatings). And the latest being the technical assistance agreement with Dupont Performance Coatings GmbH & Co. KG, Germany for know-how of manufacture of Anodic Electro-deposition Coatings System during the year 2000-01. The company's other Technical Assistance agreements include E.I. Dupont De Nemours & Co. Inc. of USA for automotive coatings; Oshima Kogyo Company Limited, of Japan for heat resistant paints; Valspar Corporation of US for powder coatings; Drew Chemicals Corporation of US for water and fuel treatment chemicals and Ameron Inc. USA for high performance coatings.  

The company has strong presence in automotive paints as it controls 45% of the organized Industrial paint segment. Its major clients include OEMs like Maruti Udyog, Bajaj Auto, TELCO and Mahindra & Mahindra. It was a pioneer in introducing electro-deposition (ED) technology for Maruti, capturing a sizeable share of the automotive paint market. The company has two wholly owned subsidiaries namely Saurashtra Paints and GNP (Madras). The above subsidiary companies were amalgamated with the company from April, 2002 with consent approval from both the states High courts. 

It has the software package, computerized colour dispensing machine from Fluid Management Holland, Gyroshaker of 10-Litre capacity touch screen monitor, 136 column palette-share display unit and a Kirloskar Champion UPS 1 KVA. The system has an ability to supply over 1305 shades accurately, consistently and instantly in several products covering a variety of application viz doors, windows, walls, exteriors, gates, grills etc. 

During 2001-02, the company has entered into a technical agreement with EFTEC Shroff (India) Limited for the manufacture and supply of Automotive Paint Shop Sealers and Underbody Compounds. 

The Company is in the process of setting up a new manufacturing unit at Bawal, Haryana at an estimated cost of Rs.1000.000 Millions with an annual capacity of 20000 MT p.a. The above project is being financed through internal accruals. During 2004-05 the company has setup a new green field plant, with a capacity of 20400 MT, at Bawal, district Rewari of Haryana and this was commissioned on 19th March 2005. 

During 2003-04, the capacity at the Jainpur was increased by 24% for water based paints, by setting a new facility. 

Consequent to the approval of the High Court of Madras and Bombay the amalgamation of Chemguard Coatings Limited with the company was completed on 1st September 2005 

During 2005-2006, the company made an investment in a Malaysian Company, a joint venture company between the company and Kansai Paint Company Limited, Japan (Kansai), Where the company will hold 55% stake and 45% Stake by Kansai. Further the Malaysian company has entered into an agreement to acquire the paint business of Sime Coatings Sdn. Bhd., Malaysian and this is subject to approval. 

During the same period the companies Production capacity of Paints Varnishes and enamels has increased from 138400 MT to 153900 MT. The capacity of Synthetic Resins stood at 36250 MT and Capacity of Pretreatment Chemicals stood at 2400 MT.

Company

Goodlass Nerolac Paints Limited (GNP), headquartered in Mumbai was established in 1920. Over the years, the Company has enjoyed market leadership in Industrial Coatings with a clear dominance in the Automobile segment and a good standing in Architectural coatings business. On overall basis it enjoys number two position. GNP is known for its innovative products, superior coating technology with a clear emphasis on high quality of service. GNP has five manufacturing facilities spread across India. The Company services customers through 66 marketing offices in India.

Established on 2nd of September 1920, Goodlass Nerolac Paints Limited (GNP) has been a forerunner in Industrial and Automotive coating business. GNP has a good reputation and its brands are well known in the Architectural coatings business as well. On an overall basis, GNP enjoys number two position in the market and is renowned for its technologically superior and innovative products, processes, value engineering and service to its customers. 

The Company serves its customers through 66 Sales locations and five strategically located factories. It operates on SAP R-3 platform and uses advanced tools like Advanced Planning Optimizer (APO) for demand planning & Supplies, Data Intelligence Warehousing (DIW) for informed decision making, Employee Portal to harness Knowledge Management (KM) and Balanced Score Card (BSC) for review of performance. 

Industry Structure and Developments-Outlook: 

The robust growth of the Indian economy continued for the third year in succession. The GDP growth is expected to be at 8.1%, with the manufacturing sector growing at around 9.4%. This is despite the disturbances caused by the rains and the rising crude oil prices. Agriculture is expected to have grown by 2.3% during the year. Inflation remained under check and at a level of around 4%, the economy retained its buoyancy. 

In light of this, the Paint Industry has performed well by registering a growth of 14% and the size is now estimated to be Rs. 88000.000 Millions. The growth, this year, is driven by the architectural coatings business. The organized sector business of the paint industry is estimated to be Rs. 63000.000 Millions for this year and has grown better than the unorganized sector. GNP has registered a growth of 15%. 

Mission 2010 initiatives embarked upon by the Company are giving good results in all the targeted areas with all the departments. To maintain relevance to the current prevailing trends, Mission 2010 has been revisited and revised to make it contemporary and relevant to both the present and the future context. 

Marketing Initiatives: 

GNP remained the fore runners in introducing new products and new technologies to the market. GNP products enjoy good brand image and its brands are also well trusted by the consumers. 

 It has been an action filled year for decorative marketing with product launches and an equally effective effort on activities aimed at consumers and influencers. The new products launched are based on consumer needs identified and those offering good market growth potential. 

Keeping in mind the growing trend and shift in consumer preferences - from distemper to emulsion, Nerolac Beauty Emulsion has been launched at an affordable price point, thus making it an entry level interior emulsion. 

Suraksha Advanced, an upgraded exterior emulsion and a product at another affordable price point, was also launched. Suraksha Advanced has superior anti-algal properties designed to give the walls a fresh look for years. 

Both Nerolac Beauty Emulsion and Suraksha Advanced have shown promising growth pattern. 

Nerolac Disney Emulsion is a unique product offered with a tie up with Disney, bringing Disney characters on walls, thus bringing excitement in painting walls of the kids' rooms. 

The all new Excel Hi performance enamel is for those discreet customers who would like to provide high protection to their doors, windows and furniture. It offers superior finish in a single coat, is anti-fungal and offers 30% more coverage compared to conventional enamels. 

During the year, the company undertook campaign to educate consumers and the influencers, and also focused on creating colour-stylebooks for the professionals. 

The Company believes in pioneering efforts towards giving painting solutions and working towards customer delight. Keeping this in mind, GNP introduced painting solution service Nerolac Assured Paint Solution (NAPS) giving end-to-end solutions. Customers can call up on the centralized toll free No. 1800 220024 or SMS `NEROLAC' at 4646 to get their homes painted by company trained professionals. This service has been launched in select cities. 

In the industrial business, the focus has been on recording growth from new opportunity areas like new customers, products and segments. This to an extent has helped in negating the impact of lower growth in the automobile sector. The technical team has supported industrial sales in servicing customers by offering new and appropriate products. 

During the year, the Company undertook a project to enhance the level of excellence in providing technical service to its customers. The emphasis is on adding value to their customers and increasing customer satisfaction. The team of technical service personnel focuses on problem resolution and reduction in cost to OEM customers through value engineering activities. 

Opportunities & threats: 

GNP continuously seeks new opportunities in expanding its current product portfolio of brands and in improving services through constantly gathering new insights into consumer choice and preferences. 

The profile of the Indian consumer has been witnessing a change with over 70% of the population being in the age group of below 35 years of age. A new consumer class has emerged due to the rise in service sector and the resultant white-collar jobs and their needs too are unique. Independent flats, new automobiles - all these have led to opportunities in the various sectors of the Indian economy. GNP is evolving strategies to exploit these opportunities and grow its business both in industrial and architectural coating business areas. 

Customer satisfaction, protection of market share and maintaining profitability in the face of increasing raw material prices, especially the continuous rise in crude oil prices, are challenges that need to be tackled on an ongoing basis. Product and service differentiation through genuine value addition hold the key for survival and growth. GNP has been making continuous improvements in areas like product improvement and innovation, formulation and distribution. It has introduced various new products in architectural coatings addressing the discerning needs of consumers. All along GNP has maintained the approach of a profitable growth rather than chasing volumes and taking decisions on pricing based on the understanding and study of the raw material price trends and the market requirements - a strategy, which has paid well. 

Segment wise performance: 

The Company has only one segment of activity (namely paints), in accordance with the definition of 'Segment' as per the Accounting Standard 17 issued by The Institute of Chartered Accountants of India. The performance of the Company is discussed separately in this Report. 

Risks & Concerns:

Macro-economic factors like subdued demand, political uncertainty, vagaries of monsoon and other natural calamities may affect the Company and industry at large. 

No business is risk free. Proactive recognition of the risks, assessing their influence and initiating action to mitigate their impact becomes critical. 

The Company has classified broad risk areas for its business - statutory compliances, economy, financial, government policies, market, operational, product related and technology. 

With increasing competitive pressures, the challenge is to increase sales and the consumer base, successfully address changing customer preferences and produce the right product at right time and at a competitive price. Technology is a critical area to be focused upon. 

Availability of raw materials is crucial to ensure that supplies to the end consumer are not affected. 

Challenges arising out of forex fluctuations and increasing crude oil prices could be causes of concern. 

Getting into new product areas and businesses would carry associated business risks. 

The Company has not been significantly impacted by these risk factors due to its brand equity amongst consumers, superior technology, strong distribution network, service-backup, efficient materials and foreign exchange management, proper monitoring mechanism to ensure statutory compliances and proactive actions against anticipated hindrances. 

Research & Development (R&D): 

In R&D, the Company has been working on long-term projects in the area of development of eco-friendly products, high solid automotive coatings and novel-effect architectural coatings. The focus has also been maintained on medium to short-term programs for the products that address both the present and future requirements of the market. This year the priority has been two fold - (a) To deliver dependable new revenue stream generating products. (b) To introduce exciting futuristic products that will deliver higher revenue in the long run. Due importance is given to Quality upgradation, development of new resins, value engineering, process-development and import substitution. 

Technology absorption & adaptation has been the other focus area in this year. The Company has been working on absorbing and commercializing technology received from the collaborators. 

Financials:

Gross Turnover for the year increased by 15.3% from Rs. 10630.000 Millions in 2004-05 to Rs. 12260.000 Millions in 2005-06. 

Rigorous monitoring of operating overheads ensured that these remained under control. 

Profit before Depreciation, Interest and Taxes (PBDIT) increased from Rs.1587.300 Millions to Rs. 2321.500 Millions in 2005-06. PBDIT (without other income) for the year at Rs. 1571.400 Millions is 20.6% higher as compared to Rs. 1302.800 Millions of previous year. 

Depreciation for the year is higher at Rs. 317.800 Millions as against Rs.207.000 Millions of the previous year. This is primarily on account of commissioning of the Bawal plant in March 2005. 

Interest cost was contained by efficient cash management. 

During the year, there was an extraordinary gain of Rs. 503.900 Millions by way of profit on sale of investments in Polycoat Powders Limited, an associate Company. 

Profit Before Tax increased from Rs. 1372.500 Millions to Rs. 1996.000 Millions reflecting an increase of 45.4%. 

Return on Net Worth has increased from 28.4% in 2004-05 to 34.1% in 2005-06. 

Earnings Per Share (EPS) for the current year at Rs. 54.40 reflects an improvement of 51% over 2004-05. 

The Company has posted a Net Profit of Rs. 1387.600 Millions for the year, as compared to Rs. 919.600 Millions in 2004-05, an increase of 51%. 

Collaboration 

The Directors record their appreciation for the contribution made and support provided by Kansai Paint Company Limited, Japan (Kansai). Kansai continues to provide support on process design, quality improvement, world class technology, which has helped the Company in maintaining market leadership in the industrial business including automotive coatings, by servicing existing customers better and adding new lines. Kansai also provides technology for manufacture of architectural coatings. 

The Company also has Technical Assistance Agreement with E.I. du Pont de Nemours and Company Inc., USA for automotive coatings, Oshima Kogyo Company Limited, Japan for manufacturing heat resistant paints, Dupont Performance Coatings GmbH & Company KG, Germany, for Anodic Electrode position Coating System and Ameron International Performance Coatings and Finishes, USA for high performance coatings. The Directors record their appreciation of the cooperation from these collaborators. 

Fixed Assets:

v 1 Freehold Land

v 2. Leasehold Land

v 3. Buildings

v 4. Building for Scientific Research

v 5 Plant & Machinery

v 6. Plant & Machinery for Scientific Research

v 7 Laboratory Equipment

v 8 Furniture Fittings and Equipment

v 9 Furniture Fittings for Scientific Research

v 10 Electrical Installation

v 1 1 . Electrical Installation for Scientific Research

v 12 Motor Cars and Vehicles

v 13. Assets acquired on Finance : Lease — Motor Cars

v 14. Asset given on Operating : Lease - Colour Dispensers

v Aryavart Chemicals Limited

v Apollo Plastic Industries

v Alpha Chemie

v H.A.H. Bachooali Tin Factory

v Dimple Drums & Barrels Limited

v Delta Industrial Resins Private Limited

v The Good Earth Chemicals

v Gujarat Containers Limited

v Gopal Metals Containers Private Limited

v Hem Paints Private Limited

v Kamani Oils Industries

v Kromiium & Chemicals Private Limited

v Lachemi Organics

v Laxmi Organics Industries Limited

v Maharashtra Metal Works Private Limited

v Mercury Containers Private Limited

v Span Chemicals

v Soujesh Chemicals Private Limited

v Unicat Chemical Private Limited

v Vidya Metals Containers

v Vapi Pigments Chemicals & Allied Products

v Mountain Minerals & Microns Limited

v Suvidha Drums

v Raymer Engineering

v Sanchem Engineers Private Limited

v Durga Paints

v Soujnya Enterprises

v Metal Seam Company Private Limited

As Per Website Details

Kansai Nerolac Paints Limited Announces Q1 Results IQ-FY 2006-07

Net Sales up 18% to Rs. 2676.000 Millions , Net Profit up 23.2  % to Rs.271.000 Millions

Mumbai, July 27, 2006

Kansai Nerolac Paints Limited, one of the leading Paint companies in the country announced its unaudited financial results for the first quarter ended 30^th June 2006 at the Board Meeting held today.

The Company has registered gross sales of Rs. 3263.400 millions, an increase of 18.1% as compared to Rs 2762.500 Millions in the previous period while the Profit Before Tax increased by 19.1% to Rs 399.000 Millions.  The net profit of the company for the quarter increased by 23.2% over the corresponding period last year and stood at Rs.271.000 Millions.

Commenting on the growth, Mr. H. M. Bharuka, Managing Director, Kansai Nerolac Paints Limited said, “They are looking forward to an eventful year ahead, with a Corporate Identity makeover in the anvil. They have had a very fruitful year the last fiscal and what kept us ahead in the industry was their relentless effort to continue with their research, community development initiatives, technology in developing new products & shades and keeping abreast of all the latest trends in the sector. The boom in housing & automobiles sector continues to accentuate the sales both in decorative & industrial. The company has also bettered its performances because of its cost efficiencies and has hence been able to perform amply well, which has been the highlight of the quarter gone by.”

NEROLAC & DISNEY PRESENT

WALLS THAT TELL A STORY

Mumbai, January 3, 2006

The New Year began with an announcement from one of the biggest paint companies in the country, Goodlass Nerolac Paints Limited who declared the launch of their latest range of products for kids, ‘Nerolac Disney’ today at a Press Conference in Mumbai.

With a buoyant 50% population in India that is young and below the age of 20, ‘Catch them Young’ seems to be the tagline of this age.  Nerolac has always understood the decision making power and the importance of communicating to children and hence creating a product for them was always a part of the marketing strategy.

In this day and age when home decor is beyond just a clean house and is indicative of personal style statements, dressing up children’s dens is fast catching up as a necessity. Decorating children’s rooms is getting more attention today then ever before because of two major trends:

v      The average number of children in Indian homes today is two or less which leaves with more

resources to indulge in materializing the fantasies of their little ones

v      Across the board, there is more disposable income today. With houses generally smaller and with

fewer rooms to absorb the resources, more money can be spent making each room a delight unto

itself

Research conducted by Nerolac threw up facts of parents being more than eager to dress up their kids’ rooms, which was one of the biggest motivations for Nerolac to start working on a concept around Kids’ Rooms.

While working on the concept of ‘Kids Room Decor’ the idea of tying up with Disney Consumer Products and using their characters to beautify the ‘Kids Room was found to be very exciting and hence the birth of the partnership between - Nerolac & Disney.

Speaking about the partnership, Mr. H. M. Bharuka, Managing Director – Goodlass Nerolac Paints Limited said, “Disney was considered due to its high awareness, especially of characters like Mickey, Donald and Pluto among children. Besides, none other than Disney brings childhood imagination and fantasies alive. In fact what makes this association so endearing is that they too have grown up with an entire generation of Disney characters.”

Mr. Rajat Jain, Managing Director, The Walt Disney Company (India) said, “Ensuring an enriching, engaging and relevant brand experience for kids in India has been an important agenda for us. The Nerolac-Disney product provides an outlet for families to magnify their imagination and experience the real magic. On their part, they are excited about this partnership with Nerolac in providing this creative, high quality and reasonably priced solution for kids and their families across India.”

Nerolac Disney is being positioned as a paint that helps you ‘Bring The Kids Dreams Alive’ through wall designs that tells a story of their own. Initially only to be launched in 8 markets viz; Mumbai, Delhi, Kolkata, Chennai, Ahmedabad, Pune, Hyderabad and Bangalore, the product pack will contain Wall designs which consists of a ‘Paint for the wall’ and ‘Custom made Stencils’ to capture the designs on the wall. In spite of being a premium product, the product has been economically priced for the Indian Household. For design and painting of one wall with Nerolac Disney design will cost around Rs 2,500/-.

An elaborate service model has been put in place for implementation. A call center is being set up with a toll free number in Mumbai to take calls from any consumer from the eight launch cities, to begin with. At each city level ‘Relationship Officers’ have been recruited who will consult households individually going in for ‘Nerolac Disney’. A panel of contractors and painters is being constituted in each city who will be specially trained by Nerolac for executing the job as per highest quality standards and in a hassle free manner. One can avail of this service by calling in to the toll free number 1600 2200 24 and also SMS to 4646 “Kids aspire to live in an imaginary world of their own. And Nerolac found lot of opportunity in helping kids getting an imaginary world by conceptualizing this product. The key insight being used, which will create a need in the minds of the consumer is that each one of us aspires to provide the best to their kids. The initiative will be rolled out in the launch cities with TV & Print, which will be the core communication tools. To reach out to a larger audience base they will also drive the entire venture in creating an experience for their consumers in each city for which they are targeting multiplex, malls and other such attractive venues for children.” Added Mr. Anuj Jain – Vice President Sales and Marketing, Goodlass Nerolac Paints Limited

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.43.13
UK Pound	1	Rs.85.36
Euro	1	Rs.57.64

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	8
PAID-UP CAPITAL	1~10	8
OPERATING SCALE	1~10	8
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	9
--PROFITABILIRY	1~10	9
--LIQUIDITY	1~10	9
--LEVERAGE	1~10	9
--RESERVES	1~10	9
--CREDIT LINES	1~10	9
--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	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		78

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
NR		In view of the lack of information, we have no basis upon which to recommend credit dealings	No Rating

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