MIRA INFORM REPORT

Report Date :

17.02.2007

IDENTIFICATION DETAILS

Name :	SESHASAYEE PAPER AND BOARDS LIMITED
Registered Office :	Pallipalayam, Cauvery R. S. P. O., Erode – 638 007, Tamil Nadu
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	22.06.1960
Com. Reg. No.:	18-364
CIN No.: [Company Identification No.]	L21012TZ1960PLC000364
TAN No.: [Tax Deduction & Collection Account No.]	CHESI7099F
Legal Form :	It is a public limited liability company. The company’s shares are listed on the Stock Exchanges.
Line of Business :	Manufacture of Paper and Paper Boards

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 4000000
Status :	Good
Payment Behaviour :	Usually Correct
Litigation :	Clear
Comments :	Subject is a well established company having fine track. Financial position is good. Payments are usually correct and as per commitments. Trade relations are fair. The company is doing well. It can be considered good for normal business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	Pallipalayam, Cauvery R. S. P. O., Erode – 638 007, Tamil Nadu, India.
Tel. No.:	91-4289-240221 TO 240228
Fax No.:	91-4289-240229
Factory :	Pallipalayam, Cauvery R. S. P. O., Erode – 638 007, Tamil Nadu, India.
Tel. No.:	91-4289-240221 TO 240228
Fax No.:	91-4289-240229

DIRECTORS

Name :	Mr. N Gopalaratnam
Designation :	Chairman and Managing Director
Qualification :	B.Sc., B.E. (Mech.)
Date of Appointment :	01.04.1988
Previous Employment :	Project Specialist, SPB-PC Limited
Name :	Mr. R V Gupta
Designation :	Director (Nominee of IDBI)
Name :	Mr. Bimal Kumar Poddar
Designation :	Director
Name :	Mr. M R B Punja
Designation :	Director
Name :	Mr. N Ravindranathan
Designation :	Director
Name :	Mrs. D Sabitha, I. A. S.
Designation :	Director (Nominee of TIIC)
Name :	Mr. Surjit K Chaudhary, I. A. S.
Designation :	Director
Name :	Mr. K S Kasi Viswanathan
Designation :	Director (Operations)
Name :	Mr. V Pichai
Designation :	Director (Finance)

KEY EXECUTIVES

Name :	Mr. V Pichai
Designation :	Company Secretary

MAJOR SHAREHOLDERS

Names of Shareholders	No. of Shares	Percentage of Holding
Individuals	3384357	30.08
Companies	3543732	31.50
Flls, NRIs, OCBs	1580703	14.05
Mutual Funds, Insurance Companies and Banks	346637	3.08
Fls	2394571	21.29
Total	11250000	100.00

BUSINESS DETAILS

Line of Business :

Manufacture of Paper and Paper Boards

Products :

Item Code No. (ITC Code)	Product Description
480200.00	Uncoated Paper and Paper Boards used for Writing and Printing
480400.00	Uncoated Kraft Paper and Paper Boards in Sheets or Rolls
480500.00	Other Uncoated Paper and Paper Boards in Sheets or Rolls

Exports to :

Dubai, Egypt, Ghana, Iran, Jordan, Malaysia, Mauritius, Middle East, Nigeria, Saudi Arabia, Singapore, Sri Lanka, Sudan, Sultanate of Oman and Taiwan.

Imports from :

Germany, Singapore, UK and USA.

PRODUCTION STATUS

Particulars	Unit	Installed Capacity	Actual Production
Paper and Paper Boards	Tonnes	115000	122003

GENERAL INFORMATION

No. of Employees :

About 1500

Bankers :

ª Industrial Development Bank of India

ª UCO Bank

ª Syndicate Bank

ª Central Bank of India

ª Canara Bank

ª United Bank of India

ª State Bank of India

Facilities :

Secured Loans

(Rs. in millions)

	2006	2005
Working Capital Advances	346.400	464.431
Term Loans (a) Captive Power Project (b) Expansion Project	382.500 318.000	450.000 426.000
Total	1046.900	1340.431

Notes :

1. Secured by:

a) a charge, by way of mortgage of immovable properties of the company, consisting of land, building, fixed plant and machinery, fixtures and fittings (exclusive of 18.30 acres of land, together with structures thereon and items enumerated in (c) below) and

b) by way of hypothecation of all company’s movables, including movable plant and machinery, other than items enumerated in (c) below, save and except book debts, subject to prior charge in favour of company’s bankers, for securing working capital advances.

c) by way of hypothecation of movable plant, machinery, fixtures, implements, fittings and other installations and all other articles and things purchased for the Captive Power Projects.

2. The working capital advances, sanctioned by the bankers are secured:

- by way of hypothecation of stocks of stores, raw materials, including goods-in-transit, stock-in-trade, stock-in-process and book debts and

- by a second charge, on the fixed assets of the company, enumerated in 1 (a) above, to the extent of Rs. 850.000 millions.

Banking Relations :	Satisfactory
Auditors :	î Suri & Company Chartered Accountants, Chennai, Tamil Nadu, India î S. Viswanathan, Chartered Accountants, Chennai, Tamil Nadu, India Cost Auditors Mr. M B Kannan Internal Auditors Maharaj N R Suresh and Company, Chennai, Tamil Nadu India
Memberships :	Confederation of Indian Industry

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
25,000,000	Equity Shares	Rs. 10/-	Rs. 250.000 millions
30,000,000	Cumulative Redeemable Preference Shares	Rs. 10/-	Rs. 300.000 millions
	Total		Rs. 550.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
11,250,000	Equity Shares	Rs. 10/-	Rs. 112.500 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		112.500	112.500	112.500
2 Reserves & Surplus		930.400	783.300	740.600
NETWORTH		1042.900	895.800	853.100
LOAN FUNDS
1] Secured Loans		1046.900	1340.400	1047.500
2] Unsecured Loans		204.000	131.600	65.500
TOTAL BORROWING		1250.900	1472.000	1113.000
TOTAL		2293.800	2367.800	1966.100
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		2152.800	2211.100	1728.300
Capital work-in-progress		90.700	45.300	114.600
INVESTMENT		74.600	73.500	78.200
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	499.600	469.500	434.100
	Sundry Debtors	448.300	431.900	441.600
	Cash & Bank Balances	618.900	595.700	478.900
	Loans & Advances	225.100	228.000	162.500
Total Current Assets		1791.900	1725.100	1517.100
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	1784.200	1664.100	1149.200
	Provisions	32.000	23.100	22.900
Total Current Liabilities		1816.200	1687.200	1172.100
Net Current Assets		(24.300)	37.900	45.000
TOTAL		2293.800	2367.800	1966.100

PROFIT & LOSS ACCOUNT

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Sales Turnover [including other income]	4764.800	4370.100	4236.100
Profit/(Loss) Before Tax	272.300	116.100	315.200
Provision for Taxation	93.200	50.200	118.600
Profit/(Loss) After Tax	179.100	65.900	196.600
Export Value	679.194	668.022	NA
Import Value	1263.625	959.693	NA
Total Expenditure	4347.300	4141.200	3809.800

QUARTERLY RESULTS

PARTICULARS	30.06.2006	30.09.2006	31.12.2006
Type	1^st Qtr.	2^nd Qtr.	3^rd Qtr.
Sales Turnover	1013.200	1167.800	1139.200
Other Income	0.400	7.100	1.100
Total Income	1013.600	1174.900	1140.300
Total Expenditure	898.400	1004.200	1013.200
Operating Profit	115.200	170.700	127.100
Interest	14.500	15.500	12.300
Gross Profit	100.700	155.200	114.800
Depreciation	39.300	39.300	39.300
Tax	12.500	22.600	15.300
Reported PAT	64.900	123.400	79.700

Notes

200606 Quarter 1

EPS is Basic & Diluted 1.Paper is the only segment of operation of the company. 2. Investor complaints: Pending at the beginning of the quarter-NIL Received and disposed off during the quarter-NIL Un-resolved at the end of the quarter-NIL 3. Figures have been re-grouped, wherever necessary, to conform to current quarter's classification. 4. The implementation of the Mill Development Plan is progressing as per schedule. 5. The above results were reviewed by the Audit Committee of the Board and approved by the Board of Directors at the meeting held on July 29, 2006.

200609 Quarter 2

1. Paper is the only segment of operation of the Company. 2. Investor complaints: Pending at the beginning of the Quarter Nil Received and disposed off during the Quarter 2 Un-resolved at the end of the Quarter Nil 3. The Implemention of Mill Development Plan is progressing as per schedule. 4. Figures have been re-grouped, wherever necessary, to conform to current quarter's classification. 5. The above results were reviewed by the Audit Committee of the Board and taken on record by the Board of Directors at the meeting held on October 28th, 2006.

200612 Quarter 3

EPS is Basic and Diluted Status of Investor Complaints for the quarter ended December 31, 2006 Complaints Pending at the beginning of the quarter Nil Complaints Received during the quarter 1 Complaints disposed off during the quarter 1 Complaints unresolved at the end of the quarter Nil 1. Paper is the only segment of operation of the Company. 2. Figures have been re-grouped, wherever necessary, to conform to current quarter's classification. 3. The above results were reviewed by the Audit Committee of the Board and approved by the Board of Directors at the meeting held on 18-01-2006. 4. The implementation of the Mill Development Plan is Processing as per schedule.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt Equity Ratio	1.40	1.48	1.71
Long Term Debt Equity Ratio	0.99	0.95	1.21
Current Ratio	0.82	0.79	0.88
TURNOVER RATIOS
Fixed Assets	1.27	1.28	1.36
Inventory	9.68	9.56	11.71
Debtors	10.66	9.89	9.91
Interest Cover Ratio	3.20	2.02	2.85
Operating Profit Margin (%)	11.54	7.94	14.28
Profit Before Interest and Tax Margin (%)	8.44	5.33	11.62
Cash Profit Margin (%)	6.91	4.14	7.36
Adjusted Net Profit Margin (%)	3.82	1.53	4.70
Return on Capital Employed (%)	17.00	10.63	23.43
Return on Net Worth (%)	18.48	7.54	25.66

STOCK PRICES

Face Value	Rs. 10/-
High	Rs. 134.00/-
Low	Rs. 128.50/-

LOCAL AGENCY FURTHER INFORMATION

History

Incorporated in 1960 and promoted by S Viswanathan and N Gopalaratnam, Seshasayee Paper & Boards manufactures and markets almost all varieties of paper boards and also effects substantial exports of not only paper and boards but also merchandise like cashew. The manufacturing capacity of paper is 115000 tpa (average weightage:82 gsm). 

The company derives 70% of its turnover from writing and printing paper, while the balance comes from industrial varieties like poster paper, duplex boards, kraft paper, etc. The company uses bagasse as raw material to enjoy tax benefits.  

The company completed the first phase (cost: Rs 100 millions) of its Modernization Programme in 1994, for which it came out with a rights issue at a premium of Rs 10 in Dec.'93. In the same year, the company spent over Rs 60 millions on energy conservation, financed by term loans from IDBI. It has enhanced its capacity to 115000 tpa from 69000 tpa. Company's quality systems continue to be covered by the "ISO 9001" accreditation awarded by Det Norske Veritas, The Netherlands. The company is repaying its term loans for which it availed for Expansion/Modernization projects, due to the Financial Institution/ Banks. A multi-purpose business paper 'SPRINT' was launched during 2003 and the same was well accepted in the market.

Operations

During the year, the company achieved a production of 122003 tonnes, at an overall average basis weight of 75 gsm, compared to 118854 tonnes in the previous year. The production of 122003 tonnes is the highest achieved by the company, so far.

The gross turnover was Rs.4692.500 millions, for the year 2005-06, compared to Rs 4321.200 millions, during the previous year. The turnover achieved, during the year, the highest so far, exceeded the previous year's by 8.6%. 

The Profit before interest, depreciation and tax was Rs 480 millions, as compared to Rs 295.400 millions, in the previous year. 

Major factors that contributed to better profitability for the year, as compared to the previous year are: 

1. Increase in contribution due to increased production.  

2. Increase in net sales realisation on account of better product mix and prices.  

3. Decrease in raw materials cost due to use of higher in-house pulp and reduced use of imported pulp.  
4. Reduction in energy cost, mainly on account of higher captive generation of power consequent on

implementation of Captive Power Project.  

5. Reduction in interest and financing charges. 

After absorbing interest and financing charges and depreciation of Rs.62.500 millions and Rs 145.200 millions, respectively, the profit before tax was Rs.272.300 millions, as compared to Rs 116 millions, in the previous year. 

A sum of Rs 8.700 millions has been provided for liability towards Current tax after netting off MAT Credit Entitlement of Rs 13.800 millions, as against Rs 9 millions in the previous year. 

Section 115JAA to the Income tax Act, 1961 provides that where a company is liable to pay Minimum Alternate Tax (MAT) for the assessment year 2006-07 and any subsequent assessment year, then the said company is entitled to take credit of MAT paid. The credit to be allowed shall be the difference of the tax under MAT and the amount of tax payable by the assessor on his total income computed in accordance with the other provisions of the Act. The tax credit so determined shall be carried forward and set-off not beyond the seventh assessment year immediately succeeding the assessment year in which tax credit becomes allowable. The tax credit shall be allowed set-off in a year when tax becomes payable on the total income computed in accordance with the provisions of the Act, other than provisions relating to MAT. The set-off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on the total income and the tax payable under MAT for that assessment year. 

Under the above provisions, the Company is entitled for a MAT Credit of Rs 13.800 millions for the year 2005-06, to be set-off in the financial year 2006-07 or thereafter. As per the guidance note of the Institute of Chartered Accountants of India, the said MAT Credit Entitlement is netted to MAT liability for the year and correspondingly shown as a separate item under Loans and Advances in Schedule 'I' to the Balance Sheet. 

As per the Accounting Standard AS-22 of the Institute of Chartered Accountants of India, a sum of Rs 81.800 millions has been transferred to Deferred Tax from Profit and Loss Account, as against Rs 41.200 millions in the previous year. 

A sum of Rs 2.700 millions has been provided towards Fringe Benefit Tax. 

In the result, profit after tax for the year was Rs 179.100 millions, as compared to Rs 65.600 millions, in the previous year. 

Finance

During the year, the Company reached financial closure for the ongoing Mill Development Plan. A consortium of five Banks, consisting of State Bank of India, UCO Bank, Syndicate Bank, Central Bank of India and Canara Bank, has sanctioned term loan assistance totaling Rs 2700 millions for the Project. 

The Company paid the instalments of the Term Loans and the interest dues on Term Loans and Working Capital Limits, on or before the respective due dates.

Export Performance

The company exported 21359 tonnes of US $ 17104564, equivalent to Rs. 760.100 millions, as compared to Rs. 725.500 millions, during the previous year. The Company’s products are now being exported to over 15 countries.

Besides the above, the company also sold 4341 tonnes, under deemed exports whose proceeds amounted to Rs. 146.600 millions.

Awards

Export House Status:

The company continues to enjoy “Two Star Export House” Status, awarded by the Government of India, Ministry of Commerce, Directorate General of Foreign Trade, in recognition of its export performance.

Special Export Award:

The company received a Special Export Award from Chemicals and Allied Products Export Promotion Council (CAPEXIL), in recognition of its outstanding export performance during the year 2004-2005, in respect of Paper and Paper Boards.

ISO 9001 / ISO 14001 Accreditation:

The company’s quality systems continue to be covered by the ‘ISO 9001’ accreditation awarded by Det Norske Veritas, The Netherlands. Company’s Environmental Management Systems, continues to enjoy “ISO 14001” accreditation.

The company’s fixed assets of important value include land & betterment, buildings (leasehold and others), railways sidings, plant and machinery on lease to others), furniture, fixtures, equipments and vehicles.

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.44.09
UK Pound	1	Rs.86.59
Euro	1	Rs.57.92

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	7
PAID-UP CAPITAL	1~10	7
OPERATING SCALE	1~10	7
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	7
--PROFITABILIRY	1~10	7
--LIQUIDITY	1~10	7
--LEVERAGE	1~10	7
--RESERVES	1~10	7
--CREDIT LINES	1~10	7
--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		63

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