MIRA INFORM REPORT

Report Date :

16.02.2007

IDENTIFICATION DETAILS

Name :	SURYAVANSHI SPINNING MILLS LIMITED
Registered Office :	Surya Towers, 6^th Floor, 105, Sardar Patel Road, Secunderabad-500003, Andhra Pradesh
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	27.12.1978
Com. Reg. No.:	01-2390
CIN No.: [Company Identification No.]	U18100AP1978PLC002390
TAN No.: [Tax Deduction & Collection Account No.]	HYDS00050B
Legal Form :	Public Limited Liability Company. The Company’s shares are listed on the Stock Exchanges
Line of Business :	Manufacturers of Cotton Yarn

RATING & COMMENTS

MIRA’s Rating :

Ba

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

Maximum Credit Limit :	USD 1250000
Status :	Satisfactory
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well-established and reputed company having satisfactory track. Directors are reported as experienced and respectable businessmen. Trade relations are reported as fair. Business is active. Payments are usually correct and as per commitments. The company can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	Surya Towers, 6^th Floor, 105, Sardar Patel Road, Secunderabad-500003, Andhra Pradesh, India
Tel. No.:	91-40-27843333/ 27898982
Fax No.:	91-40-27815135
E-Mail :	hyd1_svsmsec@sancharnet.in

DIRECTORS

Name :	Mr. B. N. Agarwal
Designation :	Chairman and Managing Director
Name :	Mr. R. Surender Reddy
Designation :	Director
Name :	Mr. B. N. Rathi
Designation :	Director
Name :	Mr. Akkineni Nageswara Rao
Designation :	Director
Name :	Mr. A. U. Katra
Designation :	Nominee (IDBI)
Name :	Mr. Rajendra Kumar Agarwal
Designation :	Joint Managing Director
Name :	Mr. J. K. Agarwal
Designation :	Executive Director
Name :	Mr. D. K. Agarwal
Designation :	Director
Name :	Mr. C. Narsi Reddy
Designation :	Director
Name :	Mr. S. V. Jagannath
Designation :	Director

KEY EXECUTIVES

Name :	Mr. B.R.S. Reddy
Designation :	Company Secretary

BUSINESS DETAILS

Line of Business :	Manufacturers of Cotton Yarn
Products :	Yarn, Waste and Garments
Exports to :	U.S.A., Korea, Taiwan, Hong Kong, Italy, Spain, Vietnam, Bangladesh and Malaysia

GENERAL INFORMATION

No. of Employees :

1440

Auditors :

Brahmayya & Company Chartered Accountants

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
15000000	Equity Shares	Rs.10/- each	Rs.150.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
7153787	Equity Shares	Rs.10/- each	Rs.71.538 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		71.500	56.500	56.500
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		297.300	135.900	122.300
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		368.800	192.400	178.800
LOAN FUNDS
1] Secured Loans		677.400	817.800	910.400
2] Unsecured Loans		28.100	25.600	17.100
TOTAL BORROWING		705.500	843.400	927.500
DEFERRED TAX LIABILITIES		0.000	0.000	0.000
TOTAL		1074.300	1035.800	1106.300
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		640.600	720.400	758.800
Capital work-in-progress		29.000	9.200	0.000
INVESTMENT		0.300	0.300	4.000
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	193.500	170.200	278.700
	Sundry Debtors	334.800	196.400	146.200
	Cash & Bank Balances	33.100	22.600	15.500
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	339.500	299.600	165.800
Total Current Assets		900.900	688.800	606.200
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	489.500	387.000	269.300
	Provisions	9.800	0.000	0.000
Total Current Liabilities		499.300	387.000	269.300
Net Current Assets		401.600	301.800	336.900
MISCELLANEOUS EXPENSES		2.800	4.100	6.600
TOTAL		1074.300	1035.800	1106.300

PROFIT & LOSS ACCOUNT

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Sales Turnover [including other income]	2335.400	1949.300	1971.500
Profit/(Loss) Before Tax	102.800	19.700	(17.600)
Provision for Taxation	24.400	1.200	1.900
Profit/(Loss) After Tax	78.400	18.500	(19.500)
Export Value	986.900	NA	NA
Total Expenditure	2232.6	1929.600	1989.100

QUARTERLY RESULTS

PARTICULARS	30.06.2006	30.09.2006	31.12.2006
Sales Turnover	606.800	458.300	531.400
Other Income	0.800	0.700	0.900
Total Income	607.600	459.000	532.300
Total Expenditure	552.900	401.400	481.700
Operating Profit	54.700	57.600	50.600
Interest	17.900	18.800	18.800
Gross Profit	36.800	38.800	31.800
Depreciation	16.300	16.300	17.300
Tax	2.400	2.700	1.900
Reported PAT	14.400	18.300	9.800

200606 Quarter 1

Notes

Expenditure Includes (Increase)/Decrease in Stock in Trade Rs (3.40)million Consumption of Raw Materials Rs 433.90 million Staff Cost Rs 20.90 million Power & Fuel Rs 53.10 million Other Expenditure Rs 48.40 million Tax Includes Provision for Current Tax Rs 2.30 million Deferred Taxation Net Rs 3.70 million Fringe Benefit Tax Rs 0.10 million 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 26 Complaints disposed off during the quarter 26 Complaints unresolved at the end of the quarter Nil 1. The above Unaudited Financial Results, reviewed by the Audit Committee, were approved and taken on record by the Board of Directors at its meeting held on July 28, 2006. 2. The segment reporting as defined in Accounting Standard (AS)-17 is not applicable as the entire operations of the Company relates to one business segment.

200609 Quarter 2

Notes:

Expenditure Includes (Increase)/Decrease in Stock in Trade Rs (3.10)million Consumption of Raw Materials Rs 305.00 million Staff Cost Rs 20.30 million Power & Fuel Rs 49.30 million Other Expenditure Rs 29.90 million Tax Includes Provision for Current Tax Rs 2.50 million Deferred Tax Rs 1.50 million Fringe Benefit Tax Rs 0.20 million 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 23 Complaints disposed off during the quarter 23 Complaints unresolved at the end of the quarter Nil 1. The above Unaudited Financial Results, reviewed by the Audit Committee, were approved and taken on record by the Board of Directors at its meeting held on October 28, 2006. 2. The segment reporting as defined in Accounting Standard (AS)-17 is not applicable as the entire operations of the Company relates to one business segment.

200612 Quarter 3

Notes

Expenditure Includes (Increase)/Decrease in Stock in Trade Rs (14.90)million Consumption of Raw Materials Rs 382.30 million Staff Cost Rs 21.80 million Power & Fuel Rs 46.60 million Other Expenditure Rs 45.90 million Tax Includes Provision for Current Tax Rs 1.60 million Deferred Tax Rs 2.80 million Fringe Benefit Tax Rs 0.30 million EPS is Basic & 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 51 Complaints disposed off during the quarter 51 Complaints unresolved at the end of the quarter Nil 1. The above Unaudited Financial Results, reviewed by the Audit Committee, were approved and taken on record by the Board of Directors at its meeting held on January 31, 2007. 2. The segment reporting as defined in Accounting Standard (AS)-17 is not applicable as the entire operations of the Company relates to one business segment i.e., Yarn. 3. The paid up capital stands enhanced to Rs 71.50 million from Rs 56.50 million following a further issue of capital by way of private placement.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt-Equity Ratio	2.92	5.78	5.79
Long Term Debt-Equity Ratio	1.94	3.87	4.01
Current Ratio	1.13	1.04	1.03
TURNOVER RATIOS
Fixed Assets	1.81	1.48	1.60
Inventory	12.75	8.50	7.32
Debtors	8.73	11.14	15.31
Interest Cover Ratio	2.57	1.50	0.77
Operating Profit Margin(%)	9.88	9.67	6.60
Profit Before Interest And Tax Margin(%)	7.26	6.51	3.63
Cash Profit Margin(%)	6.01	5.21	1.81
Adjusted Net Profit Margin(%)	3.38	2.04	-1.16
Return On Capital Employed(%)	15.88	11.76	0.00
Return On Net Worth(%)	27.19	22.15	0.00

STOCK PRICES

Face Value	Rs.10.00/-
High	Rs.61.00/-
Low	Rs.55.00/-

LOCAL AGENCY FURTHER INFORMATION

Promoted by L N Agarwal and B N Agarwal & Associates, in Dec.1978, subject manufactured high count cotton yarn for hosiery and for weaving up to 1992-93. Later, it diversified into the production of lower count blended yarn such as millange and polyester viscose yarn. The end-user segments are hosiery, garments and textiles. Other group companies are Suryavanshi Cotton Mills and Suryalata Spinning Mills. 

Subject came out with a rights-cum-public issue in Aug.1994. The rights issue (premium: Rs.30) aggregating Rs.60.400 millions and the Rs 67.600 millions public issue (premium: Rs.60) financed for the expansion made to the spindleage at the Rajna unit by installing 10,080 spindles; and by modernising the Bhongir unit in AP. The cost of the project was Rs 178.700 millions. The above expansion and modernisation were completed in the same year successfully. 

In 1997-98 the spinning division of Aliabad unit was awarded ISO 9002 from KPMG. 

The modernisation project under TUF which was flagged off in the year 2000 has been completed. The expenditure incurred till the year 2001 was Rs.130.074 millions out of estimated cost of Rs.160.000 millions.

OPERATIONS: 

During the year under review, the company achieved a Net Turnover of Rs.2332.500 Millions as against Rs.1939.800 Millions of the previous year. The Gross Profit of the Company was Rs.229.100 millions as against Rs.162.900 millions and earned a net profit after tax of Rs.78.400 millions as against the net profit after tax of Rs.18.600 millions during the previous year. The Company registered growth of 20.24% in Turnover, 40.63% in Gross Profit and 320.96% in Net Profit over the previous year. The production during the year was 15.073 millions kgs as against 15.005 millions kgs in the previous year. The Company's performance for the year to come is expected to be satisfactory. 

EXPORTS: 

The dismantling of quotas have given exports a boost. The Export performance of the Company has been encouraging in line with the Industry.

During the year under review the Company achieved export turnover of Rs.1025.900 millions including Raw Cotton Exports of Rs.232.600 millions as against the export turnover of Rs.483.100 millions and Raw Cotton Exports of Rs.66 millions respectively in the previous year. 

The company has not only maintained its growth in exports of Cotton Yarn and Garments but also considerably increased its raw cotton exports. These exports have helped to establish the brand in the International Markets. 

PREFERENTIAL ALLOTMENT OF SHARES: 

During the year under review, the Company raised Rs.131.087 millions through allotment of 1506747 Equity Shares of Rs.10/- at the rate of Rs.87/-(including premium of Rs.77/-) per share to the financial institutions and strategic investors. The above funds were utilized to repay the high cost debts and to augment long term capital expenditure. Consequent upon the allotment of shares, the paid up capital of the Company stands increased to Rs.71.500 millions and the share premium has gone up from Rs.147.300 millions to Rs.263.300 millions. 

FUTURE OUTLOOK: 

The future of the textile industry, is encouraging. The Raw Cotton production within the countries is at comfortable level of 27.500 millions Bales per annum. There has been a substantial increase in cotton yarn production with increased capacities put into production, machinery manufacturers order books are full and waiting periods are more than one year. 

The Government has identified the Textile Sector as a priority one, for job creation and also enhanced allocation to the Technology Upgradation Fund from Rs.4.4 billion to 5.4 billion. Given the potential in the global scenario, holds for the textile industry the measures are likely to help Textile companies become more competent and attract sizable orders from the US and European Markets. More importantly it would enable textile companies to increase capacities and gain scale, which is crucial for a global players. 

The removal of Quota system has opened flood gates for export of garments from India to US and Europe. This coupled with extended quota restrictions on China until 2008 would help the Indian Export of Garments. 

The company with well established market net-work is expected to benefit as a part of country's textile progress. 

INDUSTRY STRUCTURE, DEVELOPMENTS AND PRODUCT WISE PERFORMANCE: 

The Company has two Units at Bhongir and Aliabad in Andhra Pradesh and one Unit at Rajna in Madhya Pradesh. The Company manufactures Cotton Yarns, Blended Yarns, Polyester Viscose Yarn and Ready made Garments. 

TEXTILE INDUSTRY:

India is the world's second largest producer of textiles and garments after China. It is the world's third largest producer of cotton-after China and USA and the second largest cotton consumer after China. The textile and garment industry in India is one of the oldest manufacturing sectors in the country and is currently it’s largest. The textile and garment industry fulfils a pivotal role in the Indian economy. It is a major foreign exchange earner and, after agriculture, it is the largest employer with a total direct work force of 35 million and constitutes 14 per cent of industrial production. The Indian textile industry accounts for about 23% of the world's spindle capacity, making it the second highest after China, and around 6% of global rotor capacity. Also, it has the highest loom capacity-including handlooms-with a 61% share. India accounts for about 12% of the world's production of textile fibres and yarns. This includes jute, of which it is the largest producer. The country is the second largest producer of silk and cellulose fibre and yarn, and the fifth largest producer of synthetic fibre and yarn. The Industry plays a significant role by contributing 4% of GDP and accounting for 16% of country's export earnings. 

The Industry is labour intensive and therefore has immense potential for employment generation. The textile industry is the only industry in the country that is completely self-reliant in the entire value chain from raw materials to the highest value-added products like made ups and garments. 

The mill sector (spinning), recorded a significant growth during the last decade and as of January 2006 there are 1779 Cotton/Man-made fibre mills. Spinning is the industry's most technologically advanced segment and is made up of mostly medium and large-scale factories. 

The Government of India by considering high potential growth in the textile industry, has given pride of place in Union Budget 2006-07 and announced several measures to promote the textile industry. 

The Government has also identified the Textile Sector as a priority one for job creation. Given the latent opportunities present in the global scenario, the measures are likely to help Textile companies become more competent and attract sizable orders from the USA and European Markets. More importantly it would enable textile companies to increase capacities and gain scale, which is critical element while bidding for global orders. 

YARN: 

The Company continues to focus on production of high value added yarns like combed yarns, which in turn have contributed to the enhanced profitability. The Company is continuing the process of modernizing the Spinning Divisions to improve the quality of its products to meet the changing requirements of the garment manufacturers, and also the international market in the constantly changing market scenario. 

The Company continuous exports of value added yarns and ready-made garments to various markets including U.S.A, Italy, Spain, Portugal, Korea, Hongkong, Taiwan and China. 

In the domestic market also, the Company has improved its supplies to the high-end quality market with improved realizations. The Company is reasonably confident of maintaining its progress in this direction. 

PRODUCT WISE PERFORMANCE: 

The Production in the Spinning Units during the year 2005-06 was 15.073 millions kgs as against 15.005 millions kgs during the previous year. We sold 15.223 millions kgs of yarn during 2005-06 as against 15.206 millions kgs in the previous year. 

READYMADE GARMENTS: 

Ready-made garments are widely acknowledged as the prime growth driven for India's textile exports. Repeated statistical figures being published indicate that the Garment Sector having really been benefited from the Quota Free Policy in force from 1st January 2005. Figures indicate post quota, India's exports to USA have grown by over 27% and by over 20% to European Union. India's total textile exports had touched USD 36 Billion as on September 2005. So much so, Government of India, which had earlier fixed a target of textile exports of USD 50 Billion by 2010, has now revised the target to USD 85 Billion. It is expected that the Garment and Apparels exports would have grown up to USD 50 Billion by 2010. 

The recent reports further states that the Garment Sector has been a Star Performer during April - December 2005 notching up the impressive 34% growth. 

PRODUCT WISE PERFORMANCE: 

The Sales of Garment Division during the year 2005-06 was 1.631 millions pieces as against 0.266 millions pieces during the previous year. 

OPPORTUNITIES, THREATS, RISKS AND CONCERNS: 

The maximum benefit out of the removal of quotas is being reaped by the Garment segment. The extended restrictions on imports from China by the USA is an opportunity for the Indian Textile Manufacturers. 

Cotton, the main Raw Material, being an agricultural commodity is subject to the vagaries of monsoon and quality of Indian cotton, still much to be improved. 

Opening up of the textile industry globally brings within its fold intense competition within and international markets like China and others. 

The other risks and concerns for Indian Textiles Industry are the inflexible Labour Policies and shortage of skilled labour, shortage of quality power at competitive rates. Indian Textiles Industry continues to be plagued by poor infrastructure facilities. It also has to content with long delivery schedules from machinery manufacturers, severally affecting its expansion plans. 

The Company has continued to focus on production of high value added yarns like combed yarns which in turn have contributed to enhanced profitability. The Company has been able to maintain excellent quality standards for Yarn. In fact, in terms of many productivity parameters, the Company has been ranked among the best. The Company on its part has also modernized its machinery to improve the quality of its products to meet the changing requirements of the garment manufacturers and also the international market in the constantly changing market scenario.

The Company has been exporting a variety of high value added yarns, Raw Cotton and Ready-made Garments to various markets like USA, Italy, Spain, Portugal, Korea, Hong Kong, Taiwan and China and other countries. In the domestic market too, the company has improved its supplies to the high end quality market with improved realizations. The company is reasonably confident of maintaining its strides in this direction. 

The Company believes that the ensuing competition in the emerging market place will have to be met squarely only by developing production systems based on cost efficiency, high productivity, modern technology, quality assurance and timely deliveries. The Company is aware that design and fashion capabilities are key strength that will be required to reinforce its relationship with global players and score over main competitors like Chinese companies. 

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.44.20
UK Pound	1	Rs.86.28
Euro	1	Rs.58.22

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	6
OPERATING SCALE	1~10	5
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	9
--PROFITABILIRY	1~10	4
--LIQUIDITY	1~10	6
--LEVERAGE	1~10	6
--RESERVES	1~10	6
--CREDIT LINES	1~10	6
--MARGINS	-5~5	--
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		54

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

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

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

RATING EXPLANATIONS

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