MIRA INFORM REPORT

Report Date :

03.02.2007

IDENTIFICATION DETAILS

Name :	MICRO INKS LIMITED
Formerly Known As :	HINDUSTAN INKS AND RESINS LTD
Registered Office :	Bilakhia House, Muktanand Marg, Chala, Vapi – 396191, Gujarat
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	20.11.1991
Com. Reg. No.:	04-16598
TAN No.: [Tax Deduction & Collection Account No.]	SRTM01621E
PAN No.: [Permanent Account No.]	AAACH7063F
Legal Form :	It is a public limited liability company. The company's share are listed on the Stock Exchanges.
Line of Business :	Manufacturing and Marketing of Printing Inks, Resins, Adhesives, Wire Enamels, Pigments, Flush Colors and Fine Chemicals.

RATING & COMMENTS

MIRA’s Rating :

A

RATING		STATUS	PROPOSED CREDIT LINE
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

Maximum Credit Limit:	USD 30000000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Micro Inks Limited, a Bilakhia Group Company has its US based wholly owned subsidiary called – Micro Inks Corporation. It is engaged in manufacturing and marketing of Printing Inks, Resins, Adhesives, Wire Enamels, Pigments and fine chemicals. The company is progressing well. Financial position is good. Payments are correct and as per commitments. It can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	Bilakhia House, Muktanand Marg, Chala, Vapi – 396 191, Gujarat, India
Tel. No.:	91-260-2462811/2460284
Fax No.:	91-260-2463733
E-Mail :	info@hindustaninks.com mitsu.hirl@vapi.lwbbs.net
Website :	http://www.hindustaninks.com
Head Office :	Bilakhia House, Muktanand Marg, Chala, Vapi – 396191, Gujarat
Tel. No.:	91-260-2462811/2460280
Fax No.:	91-260-2463932/2463733
E-Mail :	info@hindustaninks.com mitsu.hirl@vapi.lwbbs.net
Factory 1 :	Plot No. 2803/2, Phase III, GIDC, Vapi – 396 195, Gujarat
Factory 2 :	Survey No. 137/1, Jani Vankad, Daman (Union Territory)
Factory 3 :	Survey No. 11, Village Morkhal Silvassa (Union Territory of Dadra & Nagar Haveli)
Factory 4 :	Plot No. 808/E, Phase II, GIDC, Vapi – 396 195, Gujarat
Factory 5 :	Plot No. 808/E/P, 305/6, 305/7 (100% Export Oriented Unit), II Phase, GIDC, Vapi – 396 195, Gujarat
Factory 6 :	Survey No. 8/1/2/P, 9/Proprietory, 10/3, 10/4, 10/5, 8/2 Village Morkhal, Unit II, Silvassa (U.T. of Dadra and Nagar Haveli), India
Branches :	512/513, Midas, Sahar Plaza Complex, J.B.Nagar, Andheri (East), Mumbai, Maharashtra 415, Patpargunj Industrial Estate, New Delhi – 110 092, India 9, Transport Depot Road, Kolkata – 700 088, West Bengal, India Plot No. 1418, Phase III, GIDC, Vatva, Ahmedabad, Gujarat, India No. 15, Patullos Road, Mount Road, Chennai – 600 002, Tamil Nadu, India F6, Naveen Apartment, 10,13^th Main, Off. Palace Road, Vasanth Nagar, Bangalore – 460 052, Karnataka, India 716, Siddharth, Near Hotel Express, R. C. Dutt Road, Alkapuri, Baroda, Gujarat, India C-13, Sector-3, Phase-1, Noida – 201 301, Uttar Pradesh, India 4 & 5, Rasoolpura, Behind Usha Godown, Secunderabad – 500 003, Andhra Pradesh, India A-2, Sussex Industrial Estate, Dadoji Kondeo Cross Marg, Byculla, Mumbai – 400 027, Maharashtra, India
Overseas Office 1	2850, Festive Drive, Kankakee, Illinois 60901, USA
Tel No	1815 929 9293
Fax No	1815 929 9298
E-mail	info@microinks.com
Overseas Office 2	6, Corrin Court, Wattle Grove, NSW, 2173, Australia
Tel No	61 298252880
E-mail	au@microinks.com
Overseas Office 3	1410 B, New Town Centre, No. 83 Lou Shan Guan Road, Shanghai – 200336, China
Tel No	861 3052419983
E-mail	ch@microinks.com

DIRECTORS

Name :	Mr. Yunus G. Bilakhia
Designation :	Chairman
Name :	Mr. Anjum Bilakhia
Designation :	Executive Vice Chairman and Managing Director
Name :	Mr. Heinrich Ringer
Designation :	Executive Vice Chairman and Managing Director [From 03.02.2006]
Name :	Mr. M. L. Bhakta
Designation :	Director
Name :	Mr. K. K. Unni
Designation :	Director
Name :	Mr. Prashant Desai
Designation :	Director [Up to 30.01.2006 – Independent, Non-Executive Directors]
Name :	Mr. Shivram Angne
Designation :	Whole Time Director
Name :	Prof. Pradip N. Khandwalla
Designation :	Director
Name :	Mr. Hasmukh Shah
Designation :	Director
Name :	Mr. Vinay Pandya
Designation :	Director [During 24.04.2005 to 30.01.2006]
Name :	Ms. Ursula Borgmann
Designation :	Director – Technology [From 03.02.2006]
Name :	Mr. Shivram Angne
Designation :	Director – Systems & IT
Name :	Mr. Rammohan Chari
Designation :	Director – Finance
Name :	Mr. Ramkrishna Kamat
Designation :	Director – Domestic Sales
Name :	Mr. Sanjay Shah
Designation :	Director – Commercial
Name :	Mr. Snehal Shah
Designation :	Director – International Business
Name :	Mr. R. G. Vyas
Designation :	Director – Manufacturing

OTHER PERSONNEL

Name :	Mr. Umesh Sharma
Designation :	Senior Vice President – Human Resources & IT
Name :	Mr. Tarak Buch
Designation :	Vice President – International Business
Name :	Mr. Hitesh Parikh
Designation :	Vice President & Company Secretary

MANAGEMENTS

Mr. Anjum Bilakhia	Chairman of EB & Managing Director
Mr. Shivram Angne	Director (Technology & Systems)
Mr. Zakir Builakhia	Director (Technical)
Mr. Ramkrishna Kamat	Director (Domestic Sales)
Mr. Vinay Pandya	Director (Finance)
Mr. Sanjay Shah	Director (Operation)
Mr. Snehal Shah	Director (International Business Development)

MAJOR SHAREHOLDERS

Names of Shareholders	No. of Shares	Percentage of Holding
Other Bodies Corporate	1668330	6.7077
Clearing Member	44407	0.1785
Foreign Institutional Investors	1738483	6.9897
GIC & Its Subsidiaries	10050	0.0404
Mutual Funds	41518	0.1669
Nationalized Banks	1500	0.0060
Non Resident Indians	34040	0.1369
Overseas Corporate Bodies	46056	0.0185
Public	1859382	7.4758
Promoters	18653955	75.0000
Directors and their relatives [excluding promoter directors]	10926	0.0440
Top 50 individual Shareholders (excluded in the above)	763294	3.0689
Total	24871941	100.0000

As on 31.12.2006

Names of Shareholders	No. of Shares	Percentage of Holding
Indian :
Bodies Corporate	1119237	4.50
Foreign :
Bodies Corporate	17534718	70.50
Institutions :
Mutual Funds /UTI	961580	3.87
Financial Institutions / Banks	11507	0.04
Insurance Companies	10050	0.04
Foreign Institutional Investors	1506779	6.06
Non Institutions :
Bodies Corporate	1130865	4.55
Individual shareholders holding nominal	2019470	8.12
Share capital up to Rs. 0.100 million	520341	2.09
Clearing Member	18993	0.08
Directors & Relative of Directors	2461	0.01
NRIs & Foreign Company	32540	0.13
Overseas Corporate Bodies	3400	0.01
TOTAL	24871941	100.00

BUSINESS DETAILS

Line of Business :	Manufacturer and Marketer of Printing Inks, Resins, Adhesives, Wire Enamels, Pigments, Flush Colors and Fine Chemicals.
Products with its Generic Names :	Item Code No. (ITC Code) 32151100 Product Description Printing Inks Item Code No. (ITC Code) 32081001 Product Description Wire Enamels Item Code No. (ITC Code) 35069100 Product Description Adhesives
Exports to :	Europe, Asia Pacific, Latin America, Africa, Middle East, USA, Germany, Japan, UK, France, Italy, Spain and China.

PRODUCTION STATUS

Particulars	Unit	Installed Capacity	Actual Production
Printing Inks	MT	203000	96387
Resins and Varnish	MT	52600	43395
Adhesives	MT	7800	1304
Wire Enamels	MT	3450	1993
Pigments/Flush Colours	MT	46500	14373
Fine Chemicals	MT	640	292
Press Chemicals	MT	5000	668
By Products	MT	--	127

GENERAL INFORMATION

Trade Terms

· Abhideep Chemicals Private Limited

· Akry Organics Private Limited

· Bharat Resins Limited

· Baijnath Plastic Products Private Limited

· Bhabani Pigments Private Limited

· Chemfilt

· Chemiefine

· Dakle Industrial Plastics

· Delta Corporations

· Hans Chemicals

· Inmarco Industrial Maintenance Private Limited

· Kangaroo Industries

· K. L. J. Polymers and Chemicals Limited

· Mahalaxmi Wood Industries

· Maximaa Systems Limited

· Mechwell Industries

· Mehta Petro Refineries Limited

· Mech Form

· Metal Shapers

· Newpar Aromatic Private Limited

· NTP Tar Products Private Limited

· Panorma Industries

· Pragati Industries

· Polygel Specialities

· Rahul Dyestuff Private Limited

· Raj Lubricants (Madras) Limited

· Selcan Packaging Private Limited

· Shri Plastics

· Shyam Chemicals Private Limited

· Silva Printing and Packaging

· Spectra Specialities

· Sudish Chemicals Private Limited

· Sun Bright Pigments Private Limited

· Sun Colours and Chemicals

· United Barrel Supply Company

· Bell Hydromatics

· Elder Instruments Private Limited

· Ideal Dye Chem Industries

· Joy Closures Private Limited

· Noble Polymers

· Polycab Wires Private Limited

· Rishi Petro Chem Private Limited

· Ratnagiri Chemicals Private Limited

· Shah Enterprises

· Shri Plastics

· Stan Pack Industries

· Stoplik Services India Private Limited

No. of Employees :

1700

Bankers :

Punjab National Bank

Standard Chartered Bank

Bank of India

UTI Bank Limited

State Bank of India

Development Credit Bank

ICICI Bank Limited

Central Bank of India

The Karur Vysya Bank Limited

Facilities :

	As on 31.03.2006 [Rs. in Millions]
SECURED LOANS :
From Banks
Working Capital Loans	734.790
Term Loans from Banks	981.860
UNSECURED LOANS :
From Banks	100.00

Banking Relations :	Satisfactory
Auditors :	Deloitte Haskins and Sells Chartered Accountants
Hold Company :	· Bilakhia Holdings Private Limited
Associates :	German Ink -- Plot No. 303/6, II Phase, GIDC, Vapi, Gujarat, India -- Engaged in the manufacture of Printing Inks, Flexo Gravire, Letter Press Requisites, etc. Bilag Industries Private Limited
Subsidiaries :	· Micro Inks GmbH, Austria · Micro Inks Corporation, U.S.A.

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
3000000	Equity Shares	Rs. 10/- each	Rs. 300.000 millions
5500000	Preference Shares	Rs. 100/- each	Rs. 550.000 millions
	Total		Rs. 850.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
24872000	Equity Shares	Rs. 10/- each	Rs. 248.720 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	248.720	683.720	653.580
2] Reserves & Surplus	7476.900	7366.950	4794.810
3) Share Capital Suspense	0.000	0.000	0.000
NETWORTH	7725.620	8050.670	5448.390
LOAN FUNDS
1] Secured Loans	1716.650	1232.240	3002.450
2] Unsecured Loans	100.000	530.000	259.280
TOTAL BORROWING	1816.650	1762.240	3261.730
DEFERRED TAX LIABILITIES	413.700	386.200	331.200
TOTAL	9955.970	10199.110	9041.320
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]	3330.740	3018.190	2721.540
Capital work-in-progress	74.660	91.870	76.870
INVESTMENTS	3691.560	3655.930	3635.460
CURRENT ASSETS, LOANS & ADVANCES
Interest Accrued on Investments	0.010	0.010	0.010
Inventories	1417.000	1271.340	884.800
Sundry Debtors	2664.110	3003.650	2006.020
Cash & Bank Balances	395.460	552.060	630.730
Loans & Advances	840.340	906.400	643.850
Total Current Assets	5316.920	5733.460	4165.410
Less: CURRENT LIABILITIES & PROVISIONS
Current Liabilities	2275.320	2114.500	1393.030
Provisions	182.590	185.840	164.930
Total Current Liabilities	2457.910	2300.340	1557.960
Net Current Assets	2859.010	3433.120	2607.450
MISCELLANEOUS EXPENSES	0.000	0.000	0.000
TOTAL	9955.970	10199.110	9041.320

PROFIT & LOSS ACCOUNT

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Sales Turnover (including other income]	9416.170	8583.900	6404.300
Profit/(Loss) Before Tax	722.240	1296.010	882.870
Provision for Taxation	113.210	220.310	44.000
Profit/(Loss) After Tax	609.030	1075.700	106.500
Export Value	4512.660	4227.150	2614.710
Import Value	2785.530	2800.220	1560.440
Total Expenditures	8693.930	7287.890	5521.690

QUARTERLY RESULTS

PARTICULARS	30.06.2006 [1^st Qtr.]	30.09.2006 [2^nd Qtr.]
Sales Turnover	2337.300	2355.300
Other Income	7.200	17.400
Total Income	2344.500	2372.700
Total Expenditure	2295.800	2314.200
Operating Profit	48.700	58.500
Interest	124.500	72.900
Gross Profit	[75.800]	[14.400]
Depreciation	68.900	72.500
Tax	1.700	1.200
Reported PAT	[137.400]	[74.100]

Notes

200606 Quarter 1

EPS is Basic & Diluted Status of Investor Complaints for the quarter ended June 30, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 09 Complaints disposed off during the quarter 09 Complaints unresolved at the end of the quarter Nil 1.The aforesaid Results have been taken on record by the Board of Directors of the Company at its meeting held on July 15, 2006. 2.In accordance with the requirement of clause 41 of the Listing Agreement with the Stock Exchanges, the Statutory Auditors have performed a Limited Review of the financial results of the Company for the quarter ended June 30, 2006. 3.Q1 FY 2006-07 consolidated net loss is after taking into account (i) foreign currency fluctuation loss of Rs 169.90 million (corresponding previous year loss of Rs 80.90 million). (ii) Rs 39.50 million being reversal of target plus benefit accrued in FY 05-06, due to reduction of rate from 10% to 5% as per notification issued in June 2006 by the Government of India. (iii) termination of contractual obligation Rs 24.30 million. 4. The Company has implemented Accounting Standard -15 (revised 2005) 'Employee Benefits' which is applicable from April 01, 2006, and pursuant thereof the additional provision for the current quarter is Rs 4.60 million. 5.During the quarter, the Company has invested an amount of Rs 22.50 million equivalent to USD 0.50 million in Micro Inks (Singapore) Ltd., a wholly owned subsidiary company, which in turn has invested USD 0.5 million in Micro Inks International Trading (Shanghai) Company Limited, its wholly owned Subsidiary. Also, during the quarter, the Company has invested an amount of Rs 2.7 million equivalent to Euro 0.05 million in Micro Inks GmbH, Austria, a wholly owned subsidiary company. 6. The previous period figures have been regrouped / rearranged, wherever necessary, for comparison purpose. 7. Sales by Micro Inks Corporation USA are as under: (US$ in Million) Particulars FY2006-07 FY2005-06 FY2005-06 FY2005-06 FY2004-05 Q1 Q1 Q4 Sales 21.3 19.6 22.6 85.3 68.3 Growth over corresponding Qtr of Previous Year(%) 9% 25% Growth over immediately previous Quarter (%) -7%

200609 Quarter 2

EPS is Basic & 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 21 Complaints disposed off during the quarter 21 Complaints unresolved at the end of the quarter Nil 1. The aforesaid Results have been taken on record by the Board of Directors of the Company at its meeting held on October 17, 2006. 2. In accordance with the requirement of clause 41 of the Listing Agreement with the Stock Exchanges, the Statutory Auditors have performed a 'Limited Review' of the financial results of the Company for the quarter and half year ended September 30, 2006. 3. 3,013,341 Global Depository Receipts (GDRs) have been delisted from the Luxembourg Stock Exchange effective September 15, 2006 as all listed GDRs were converted into equivalent underlying equity shares. 4. Interest for the six months ended September 30, 2006 includes net loss Rs 94.5 million on revaluation of foreign currency loans (corresponding previous six months net loss of Rs 16.7 million). 5. The Company has implemented Accounting Standard - 15 (revised 2005) 'Employee Benefits' which is applicable from April 01, 2006 and pursuant thereof the additional provision for the current half year is Rs 4.5 million. The past liability in terms of the transitional provisions of the Standard would be adjusted against the opening reserves during the financial year. 6. The previous period figures have been regrouped / rearranged wherever necessary, for comparison purpose.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt Equity Ratio	0.23	0.37	0.83
Long Term Debt Equity Ratio	0.07	0.15	0.51
Current Ratio	1.37	1.31	1.09
TURNOVER RATIOS
Fixed Assets	2.40	2.44	2.01
Inventory	7.42	8.22	8.26
Debtors	3.52	3.54	3.28
Interest Cover Ratio	4.11	7.63	3.65
Operating Profit Margin (%)	12.03	19.16	21.28
Profit Before Interest and Tax Margin (%)	9.56	16.83	18.47
Cash Profit Margin (%)	8.58	14.47	13.93
Adjusted Net Profit Margin (%)	6.11	12.14	11.12
Return on Capital Employed (%)	9.85	16.10	15.76
Return on Net Worth (%)	7.78	16.16	17.58

STOCK PRICES

Face Value	Rs.10/- each
High	Rs.374.70/-
Low	Rs.362.00/-

LOCAL AGENCY FURTHER INFORMATION

HISTORY

The company was incorporated on 20^th November, 1991 at Vapi in Gujarat having Company Registration Number 16598.

The name of the Company, effective March 03, 2004, has been changed to Micro Inks Limited. As it is known that the Company’s subsidiaries are known as Micro Inks and its products, across more than 50 countries, are known and sold under the name Micro International Revenues during the year, at consolidated level, was more than 57%. Therefore with a view to provide a global identity the name of the Company has been changed to Micro Inks Limited. This way the Company will be known by one name, the world over. One world, one name, Micro Inks.

Incorporated in 1991 Hindustan Inks and Resins (HIRL) flagship company of the Bilakhia group, is one of the largest ink companies in the country. The company has made a presence in the market for liquid inks, resins, adhesives and enamels. It has increased its market share to 30% from negligible levels in the last ten years by focusing on high volume – low price segment.

It has a presence in printing inks, synthetic resins, industrial adhesives and wire enamel segment. The company has diversified into a number of related products and has undertaken a backward integration programme for manufacturing pigments, flushes, resins and additives – the critical raw materials for inks. The backward integration has enabled the company to offer significant cost competitiveness, in terms of quality and price.

Till date the company has roughly incurred a capital expenditure of around Rs. 1000 millions in various expansion-cum-backward integration projects. They consist of new ink manufacturing facility at Silvassa, which is one of the largest single-location ink plants in the world, a backward integration plant at Vapi. Nearly 50% of the capital expenditure was financed through preferential allotment of 900000 shares to promoters at price of Rs. 550 per share, while the rest came from borrowings and internal accruals. The Silvassa plant was commissioned in March 2000, while the Vapi plant was commissioned in August 2000.

The main user industries for printing inks are packaging, printing and publishing industry. The printing ink industry essentially consists of four elements. These are pigments, resins, additives and solvents. Pigment is the main raw material for manufacturing inks. Resins give special properties to the inks while additives are necessary for maintaining the flow. The two main varieties of inks are general inks and liquid inks. General inks are used for printing of newspaper, magazines, cartons and corrugated boxes used in packaging and textiles. Liquid inks are mainly used for printing on polyester BOPP, LDPE, HDPE, aluminium foils and paper.

Its major customers include Times of India Group, Hindustan Times, Business India, Navneet Publications, Chitralekha, Sharp Industries, Tata Press, Pragati Press, etc. At the same time there are also some major packaging converters, which include Paper Products Limited, Hindustan Lever, Proctor & Gamble, SmithKline Beecham, Reckitt & Coleman, Nestle and Cadbury.

Nearly 80% of its revenues is derived from printing inks. The total size of the printing ink industry is about Rs. 6000 millions in value terms and about 50000 tonnes in volume terms. Eight countries account for about 80% of the printing ink market – USA, Germany, Japan, UK, France, Italy, Spain and China. The US is the single largest market, accounting for nearly 30% of the global market share.

To build up its global presence the company has set up a wholly owned subsidiary in USA, Micro Inks. The company also plans to leverage the large size of its product portfolio and its manufacturing cost advantage, to offer tailor made strategies for different markets. The company expects to substantially increase its global presence in the coming years. In November 2000 the company allotted bonus shares to its shareholders in the proportion of one new equity share for every one equity shares held.

In October 2001, the company has commercially commissioned its 100% Export Oriented Unit at Vapi having 30000 MT p.a. of flushed pigments and 100000 MT p.a. if Inks manufacturing facilities.

It exports its products to USA, Germany, Japan, UK, France, Italy, Spain and China. The USA is the single largest market accounting for nearly 30% of the global market share.

Alliance with Huber Group 

Micro Inks Limited and Huber Group, the World's fifth largest printing ink manufacturer from Munich, Germany, have formed an alliance during the year. Huber Group acquired a majority stake in the company. Both the companies have similarity in overall business philosophy with distinct complementary strengths. Huber Group is a long standing `family run' Business and Micro Inks has been built with significant enterprise and contributions from its Promoters. 

Huber manufactures printing inks since 1765, and has 29 manufacturing facilities in Europe/North America and over 200 sales and service points world-wide. While Huber's global presence provides reach, depth, penetration and superior customer servicing, Micro Inks has well-established strategy in developing and manufacturing key raw materials for printing inks and strong customer base in Asia region. The ongoing consolidation and the increasing cost pressures, both on manufacturing as well as the raw materials, has prompted the Huber Group and the Company to look for opportunities to secure and develop business further together. 

The manufacturing facilities of both the entities will be maintained and will support each other with focus on two aspects, one for the quality objectives for which both the companies have been striving for and second for the optimal customer service and supply within the various global areas. The Management Structure and teams will be fully integrated with each other to deliver the Global goals and support the supply chain-customer service matrix. The combination of know-how of both the companies will further enhance the Group capabilities to deliver better value to customers through `quality - innovation' leadership. 

Changes in Paid-up Capital 

During the year, by exercising call option and in terms of the issue, the company redeemed its Cumulative Redeemable Preference Shares as detailed herein below: 

* 2,50,000, 65% Cumulative Redeemable Preference Shares of Rs. 100/- each were redeemed, at a premium of Rs. 900/- per shares, on May 24, 2005 (150,000 Shares) and on September 21, 2005 (100,000 Shares); and 

* 40,00,000, 6.5% Cumulative Redeemable Preference Shares of Rs. 100/- each were redeemed, at par, on July 05, 2005. 

Economic Review 

During the year, under report, Indian economy was vibrant and continued its growth story. It has the world attention like never before. India emerged as the second most attractive market in the world for doing business. Indian economy grew by nearly 7.5%, and is expected to expand by nearly 8.1% in the year 2006-2007. Overall demand in India was strong with good GDP growth, increased exports, low cost of capital and an all-time high foreign exchange reserves. No doubt, India's growth is robust, and is expected to remain so, because of its sheer population and favourable demographic structure. This in itself is a huge demand driver. And if all goes well, India's growth can be sustained at 7-8% over the next decade, making it the World's third or fourth largest economy. 

However, the world economy is growing at a very slow pace. Consumer sentiments remained cautious because of high oil prices and high commodity prices. 

The World Printing Ink Industry, with a view to tackle the increasing cost pressures, both on manufacturing as well as on the raw materials, has seen major consolidations. As a result, the whole profile of Printing Ink Industry has undergone a major change. 

Ink Industry in India grew by more than 11.5% p.a. during the year. USA and Euro Zone had a flat growth in 2005. Asia was the fastest growing market, excluding India it grew by nearly 6%. 

Performance Review 

Consolidated net revenue grew by 14% and stood at Rs. 10,822 million led by 16% growth in domestic market, 25% (in dollar terms) growth in US market and 3% in the Rest of World (other than USA and India) markets. 

The Company's stand alone net sales grew by 9%, on year-on-year basis, from Rs. 8,415 million to Rs. 9,181 million. 

Domestic Sales 

The Domestic net sales and other Operating Income grew by 16% from Rs. 3,844 million to Rs. 4,443 million. The company continues to maintain its leadership position in the Indian printing ink market due to superior products, efficient customer services and innovative marketing strategies. Micro ATM (Unique computerized colour matching system) introduced during the last year has been a grate success. This has significantly enhanced the Company's customers, servicing capabilities. Encouraged by this success, the Company has extended the said concept from offset inks to liquid inks, screen inks and metal decorative inks. 

Exports 

Consolidated international sales stood at Rs. 6,379 million contributing 59% of total sales on account of increased penetration across geographies and new customer additions. 

Company's international sales to the Rest of World was Rs. 2,660 million compared to Rs. 2,580 million in the previous year, with region-wise contribution from Europe 42%, Asia Pacific 27%, Latin America 14%, Africa 6% and Middle East 11%. During the year, the Company grew its presence to more than 70 countries. 

The sales of US subsidiary grew by 25% (in dollar terms), on year-on-year basis, from US $68.3 million to US$ 85.3 million. 

Profitability 

During the year, the Company's consolidated PBDIT was lower at Rs. 1,218 million compared to Rs. 1,419 million of the previous year, mainly because of increase in raw material cost on back of higher rosin and crude oil prices and exceptional item like accelerated provisioning for inventory and receivables, one time contractual obligation and lower export benefit due to reduction in custom duty. The Net Profit at consolidated level of the Company was lower at Rs. 468 million compared to Rs. 662 million of the previous year. 

Finance 

During the year, the consolidated interest increased to Rs. 268 million from Rs. 217 million mainly on account of: 

* Translation and hedging losses of Rs. 76 million (P.Y. Rs. 15 million) on foreign currency borrowings. 

* Increase in LIBOR linked interest rates. 

Overall debt reduced by Rs. 127 million and stood at Rs. 2,918 million as on March 31, 2006 on improvement of sales to capital employed to 1.35 times from 1.10 times and Net Working Capital to 2.90 times from 2.11 times. 

The interest cost as a percentage of sales stood at 2.5% against 2.3% in the previous year on increased sales. 

Outlook 

Alliance with Huber Group will bring more stability to the Company and will safeguard the Company against adverse developments in the international markets. The Company will not only benefit from the strong sales network of Huber Group but will also be in position to leverage its manufacturing capabilities predominantly through the captive supply in the coming years. 

Significant increase in the raw materials cost, mainly because of unprecedented increase in prices of crude, and its derivative remains the area of grate concern. However, the Company will continue its efforts of bringing improvement in internal efficiencies and raising the bar, further higher by innovations and improving productivity, to absorb the significant increase in the raw material costs apart from seeking unabsorbed price increase from its customers.

International business including the US business is expected to grow steadily but slowly on increased reach and depth derived through the alliance with Huber Group, apart from the normal industry growth in the said markets. The alliance will provide to the Company additional international business. 

The company’s fixed assets of important value include Freehold Land, Leasehold Land, Buildings, Plant & Machineries, Laboratory Equipments, WindMills, Computers, Furniture & Fixtures and Vehicles.

As Per Web Details

Profile

Micro Inks Limited (MICRO) is a part of US $ 239 million Bilakhia group, which has diverse interests in printing inks, resins, flushed pigments and crop protection chemicals. Today, through the years of growth, MICRO has transformed itself into a multi-dimensional, multi-national company offering a comprehensive range of quality products, efficient customer service and a wide distribution network.

MICRO is the undisputed market leader in the country commanding a market share of 30%+ in the US $ 200 million domestic inks industry. In the process, it also created an enviable track record of one of the fastest growing company. And took its annual sales figures galloping from a mere US $ 5 million in 1993 - 94 to an astonishing increase to US $ 146 million. The meteoric ascent of MICRO to the position of a market leader was primarily the result of the efforts of the people at the helm of affairs - The Bilakhia Group.

Through the years of growth, MICRO has transformed itself into a multi-dimensional, multi- location company offering a comprehensive range of quality products, efficient customer service and a wide distribution network. In India, It is a marketing powerhouse with 12 branches, 5 technical centers and around 500 distributors. Today, MICRO has spread its wings globally with a distribution network in more than 50+ countries.

MICRO is also the only Printing Inks company in India, and amongst two or three companies in the world, to have successfully implemented SAP / R3 ERP solution, integrating its marketing offices through satellite links.

Together all the elements will work as a single force to offer value to its customers.

Today the company with a modest beginning has grown and consolidated its strengths, skills and people to achieve a unique enterprise. One which is on its way to becoming a major player in the global market. A reality, which it achieved through a well thought out and executed business strategy.

Setting up operations in the world's most highly competitive ink market, USA with a company called Micro Inks Corporation is the first step towards MICRO'S vision of leaving behind an impression of being the most dynamic inks company in the world.

Here the Company's core strategy is to offer better value to its customers on the price quality matrix and participating in their programs to deliver better value to the customers' customer. At MICRO we starve for having customers' delight and not only customers' satisfaction.

To make this strategy a success, the Company has stepped up its R&D efforts in order to develop superior products. On a parallel front, Micro Inks has developed technology for backward integration into flushed colours, pigments, resins and additives - the key raw materials for inks. By doing so, MICRO is today the only company in the world to be self sufficient in all the critical raw materials of Printing Inks.

The next thing on its agenda was to accelerate its inks manufacturing capacities to keep pace with the global demand. This was done with by MICRO with the setting up of one of the world's largest ink manufacturing facilities at a single location, in India.

This plant at Silvassa has a world-size capacity of 60,000 metric tones. Here MICRO manufactures a wide range of inks with innovative and unique process technologies that have never been attempted before in the industry. Apart from this, another world size plant has been set up at Vapi, which produces a wide range of flushed colours, pigments and resins in a single-stream plant for 'seamless' manufacturing of inks.

Finally, all this is to be backed by the best of technical support and customer service. All translating ultimately into one fact, MICRO is poised to make an indelible mark on the world.

From Chairman Desk :

The year 2004-05 saw growth and consolidation and was an important year in achieving our milestones.

During the year, the world economy witnessed structural changes whose impact is gradually unfolding. The US economy showed signs of gradual recovery with a GDP growth of 3%. However, concerns remain on rising deficits and weakening of the US Dollar against major currencies. Europe is also beset with deep structural problems and has delivered a growth rate of 2% in 2004 and is expected to deliver weak economic growth (just 1%) in the current calendar year.

These changes have impacted the ink industry as well. Intensified competition has prompted industry players to seek consolidation so as to protect their market positions. BASF exited the ink business, SICPA exited the packaging ink segment, Siegwerk acquired SICPA's packaging inks business thereby consolidating its own position. The North American markets witnessed similar consolidation.

India, China and the rest of Asia continued their growth momentum. While the overall ink industry grew in the Asia region (excluding India) by 5-6%, both India and China witnessed growth of more than 10% in printing inks. Strong GDP growth, favorable demographics, print quality, reading habits, radical change in buying attitudes, packaging of commodities and information inflow drove this growth. This trend is expected to continue.

Against this backdrop, we have been cautious in making a full entry into Europe and have focused on consolidating our US position. Many operational initiatives have been taken by the management to improve the US subsidiary's performance and I believe that we should soon see the US company turning the corner. Deeper commitments have been made in Asia Pacific markets during the last year and we expect good growth from this region. We will continue to evaluate opportunities and timing for a longer term presence in the European markets during the year and watch the scenario carefully before making any major moves.

During the year, spiraling oil prices resulted in increased input costs and put pressure on operating margins. The ink industry resorted to price hikes to partially offset the increased input costs and adopted measures to enhance its operational efficiencies and cost position. The effect on your company is lesser compared to other players largely due to deep backward integration and superior cost management.

In this scenario, the company has performed well during the last fiscal. Consolidated sales grew 22% to Rs. 9473 million and net profit grew 155% to Rs. 662 million. International revenues contributed 59% of total revenues. In a span of just four years since venturing into the international market, we have built international sales of more than US$ 125 million with a presence in over 70 countries. The derisking of the business has been timely and we are well positioned to overcome economic challenges as well as utilize any opportunities which we might come across.

I believe that our unique business model, wide product portfolio, research and development strengths, vertical and horizontal integration, geographical and customer diversification which have been outlined in this report offer us strength and diversity to mitigate risks inherent in the environment.

We have continued to take steps to strengthen our management team and depth. Notably, our faith in the business model is further reinforced by senior industry management people joining us to lead the company's growth in North America, Europe and Asia.

Growing expectations are a natural outcome from a growing global company such as ours. This report illustrates how we are taking a measured and cautious approach in meeting our goals and the expectations from our customers, investors, employees and the communities we operate in.

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 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.44.11
UK Pound	1	Rs.86.58
Euro	1	Rs.57.04

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	5
PAID-UP CAPITAL	1~10	8
OPERATING SCALE	1~10	8
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	9
--PROFITABILIRY	1~10	7
--LIQUIDITY	1~10	6
--LEVERAGE	1~10	6
--RESERVES	1~10	9
--CREDIT LINES	1~10	8
--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		66

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		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