MIRA INFORM REPORT

Report Date :

13.01.2007

IDENTIFICATION DETAILS

Correct Name :	MIRZA INTERNATIONAL LIMITED
Formerly Known As :	MIRZA TANNERS
Registered Office :	14/6, Civil Lines, Kanpur – 208 001, Uttar Pradesh, India
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	05.09.1979
Com. Reg. No.:	20-4821
CIN No.: [Company Identification No.]	L19129UP1979PLC004821
TAN No.: [Tax Deduction & Collection Account No.]	KNPM01745C
Legal Form :	A Public Limited Liability Company. The company’s shares are listed on the Stock Exchanges.
Line of Business :	Manufacturer and Marketer of Finished Leather, Full Shoes, Shoe Uppers, Belts/Bags, Sandals, Cotton Socks and other items.

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 4250000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well – established company having satisfactory track. Trade relations are fair. Financial position is satisfactory. Payments are usually correct and as per commitments. The company can be considered good for any normal business dealings. It can be regarded as a promising business partners in a medium to long – run.

LOCATIONS

Registered Office :	14/6, Civil Lines, Kanpur – 208 001, Uttar Pradesh, India
Tel. No.:	91-512-2210 672 / 2210 676 / 2210 844 / 2290 775
Fax No.:	91-512-2210 166
E-Mail :	mirzaknp@lw1.vsnl.net.in, mirzaknp@knp.nic.in
Website :	http://www.mirzagroupindia.com
Plants/Marketing Office	A-7, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi – 110 044
Plants / Tannery At	Ø Kanpur – Unnao Link Road, Magarwara, Unnao – 209 801, Uttar Pradesh Tel No : 91-515-2833560 Ø Kanpur – Unnao Link Road, Sahjani, Unnao – 209 801, Uttar Pradesh, Tel No : 91-515-2833113 Ø 104-106, B. M. Market, Juhi, Kanpur, Uttar Pradesh Tel No : 91-512-2650494 Ø Plot No. C-4, 5, 36 & 37, Sector – 59, Noida – 201 303, Uttar Pradesh, Tel No : 91-120-2580823

DIRECTORS

Name :	Mr. Irshad Mirza
Designation :	Chairman and Managing Director
Date of Birth/Age :	69 years
Qualification :	Leather Technologist
Experience :	43 years
Previous Employment	Promoter
Name :	Mr. Rashid Ahmad Mirza
Designation :	Managing Director
Date of Birth/Age :	48 years
Qualification :	Diploma in Leather Technology, London
Experience :	28 years
Date of Appointment :	05.09.1979
Previous Employment	Promoter
Name :	Mr. Tauseef Ahmed Mirza
Designation :	Whole Time Director
Date of Birth/Age :	36 years
Qualification :	Diploma in Shoe Technology, London
Experience :	15 years
Previous Employment	Leather Trends Private Limited
Name :	Dr. Yashveer Singh
Designation :	Director
Name :	Mr. Shahid Ahmad Mirza
Designation :	Director
Name :	Mr. Pashupati Nath Kapoor
Designation :	Director
Name :	Mr. Qazi Noorul Salam
Designation :	Director
Name :	Mr. Taneef Ahmad Mirza
Designation :	Director

Name :	Mr. N. P. Upadhyay
Designation :	Director
Name :	Mr. Kuruvila Kuriakose
Designation :	Director
Name :	Mr. Mohammed Aslam Khan
Designation :	Director
Name :	Mr. Subhash Sapra
Designation :	Director
Name :	Mr. Prem S Khamesra
Designation :	Whole Time Director
Name :	Mr. S. K. Bajpai
Designation :	Company Secretary

BUSINESS DETAILS

Line of Business :

Manufacturer and Marketer of Finished Leather, Full Shoes, Shoe Uppers, Belts/Bags, Sandals, Cotton Socks and other items.

Products :

Item Code No. (ITC Code)	410410
Product Description	Finished Leather
Item Code No. (ITC Code)	640610
Product Description	Shoe Uppers
Item Code No. (ITC Code)	640391
Product Description	Shoes

Brand Names :

‘CARVING A NICHE’, ‘RED TAPE’, ‘OAKRIDGE’, etc.

Export

UK, France, Germany and in the Scandinavian Countries of Norway, Denmark, Sweden and Finland as well as South Africa, USA, Canada, Australia, New Zealand and the Middle East.

Imports

Germany, Italy, Europe and Far East

Selling:

Parching

L/C, D/A and D/P terms

GENERAL INFORMATION

Customers :	v British Shoe Corporation (Hush Puppies Division) v Oliver Group, UK v Clarks Shoes, Australia
No. of Employees :	800
Bankers :	Punjab National Bank, The Mall, Kanpur, Uttar Pradesh
Facilities :	--

Banking Relations :	Satisfactory
Auditors :	Khamesra Bhatia & Mehrotra Chartered Accountants
Associates/Subsidiaries :	Leather Trends Private Limited Line of Business - Manufacturers of Shoe Uppers & Shoes Shoemac Engineers Line of Business - Engaged in Shoe Manufacturing & Tannery operations M. M. Shoes Line of Business - Manufacturers of Leather Sandals MTL Trading (Pty) Limited 90 Wynne Street, Parow, Cape Town, South Africa, Private Bag X 23, Parow 7499 Tel. No.: 0027-2193-03601 Fax No.: 0027-2193-01220 E-mail: mtlsa@global.co.za MCF Trading (UK) Limited 25, Peverel Drive, Granby, Milton Keynes MK1 1QZ, U.K. Tel. No.: 0044-1908-365398 Fax No.: 0044-1908-365051 E-Mail: mcf.mk2@btinternet.com Line of Business - Marketing of Leather Products

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
25,000,000	Equity Shares	Rs.10/- each	Rs.250.000 millions
20,00,0000	Cumulative Redeemable Preference Shares	Rs.100/- each	Rs.200.000 millions
	TOTAL		Rs.450.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
18540000	Equity Shares	Rs.10/- each	Rs. 185.400 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		185.400	185.400	162.893
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		923.200	859.600	659.036
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		1108.600	1045.000	821.929
LOAN FUNDS
1] Secured Loans		937.900	719.900	484.302
2] Unsecured Loans		100.500	71.000	25.000
TOTAL BORROWING		1038.400	790.900	509.302
DEFERRED TAX LIABILITIES		0.000	0.000	151.380
TOTAL		2147.000	1835.900	1482.611
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		1109.800	1074.100	970.659
Capital work-in-progress		125.400	75.400	0.067
INVESTMENT		8.100	8.600	8.461
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	983.500	893.500	572.180
	Sundry Debtors	239.300	102.600	58.718
	Cash & Bank Balances	17.700	119.200	79.569
	Other Current Assets	0.000	0.000	78.368
	Loans & Advances	422.400	373.700	28.266
Total Current Assets		1662.900	1489.000	817.101
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	417.200	509.200	313.677
	Provisions	342.000	302.000	0.000
Total Current Liabilities		759.200	811.200	313.677
Net Current Assets		903.700	677.800	503.424
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		2147.000	1835.900	1482.611

PROFIT & LOSS ACCOUNT

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Sales Turnover [including other income]	2479.100	2710.700	17846.800
Profit/(Loss) Before Tax	186.400	431.300	239.658
Provision for Taxation	69.000	158.000	72.040
Profit/(Loss) After Tax	117.400	273.300	167.618
Export Value	1994.900	1474.800	1432.343
Import Value	NA	NA	411.126
Total Expenditure	2470.500	2708.800	1607.141

QUARTERLY RESULTS

PARTICULARS	30.06.2006 (1^ST Quarter)	30.09.2006 (2^nd Quarter)
Sales Turnover	739.700	849.9
Other Income	0.100	01.3
Total Income	739.800	851.2
Total Expenditure	580.800	674.8
Operating Profit	159.000	176.4
Interest	29.400	34.0
Gross Profit	129.600	142.4
Depreciation	19.000	19.5
Tax	37.300	41.6
Reported PAT	72.300	80.3

200606 Quarter 1

Expenditure Includes (Increase) / Decrease in Stock in Trade Rs 72.525 million Consumption of Raw Materials Rs 319.266 million Staff Cost Rs 28.659 million Other Expenditure Rs 160.427 million Tax Includes Provision for Current Tax Rs 36.200 million Deferred Tax Rs 1.000 million Fringe Benefit Tax Rs 1.066 million EPS is Basic & Diluted The above results have been taken on record by the Board of Directors in their meeting held on July 25, 2006. During the First Quarter, 22 investor complaints were received and attended by the company. No Complaints were pending either at the beginning or at the end of the quarter.

200609 Quarter 2

EPS is Basic and diluted. 1. The above results have been taken on record by the Board of Directors at their meeting held on 17.10.2006. 2. During the first quarter, 11 investor complaints were received and attended by the company. No Complaints were pending either at the beginning or at the end of the quarter.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt Equity Ratio	0.85	0.70	0.73
Long Term Debt Equity Ratio	0.31	0.29	0.21
Current Ratio	1.16	1.12	1.03
TURNOVER RATIOS
Fixed Assets	1.50	1.84	1.47
Inventory	2.35	3.31	2.95
Debtors	12.90	30.11	35.37
Interest Cover Ratio	3.63	10.50	6.66
Operating Profit Margin (%)	15.04	22.37	19.61
Profit Before Interest and Tax Margin (%)	11.67	19.63	16.15
Cash Profit Margin (%)	8.69	14.00	13.06
Adjusted Net Profit Margin (%)	5.32	11.25	9.60
Return on Capital Employed (%)	12.92	30.10	19.90
Return on Net Worth (%)	10.90	29.28	20.50

STOCK PRICES

Face Value	Rs.10/-
High	Rs.164.95/-
Low	Rs.155.20/-

LOCAL AGENCY FURTHER INFORMATION

History

Mirza Tanners (MTL), promoted by Irshad Mirza and Rashid Mirza in 1979 is into manufacture of finished leather, shoe uppers, shoes and leather accessories. The company tapped the capital market in Sep 1994. 

The company to set up a factory to manufacture 0.600 Millions pairs of shoe uppers and 0.450 Millions pairs of shoes pa at Shahjani-Unnao, Uttar Pradesh, to increase the capacity of the tannery units from 5.000 Millions sq ft to 6.000 Millions sq ft of finished leather pa at Magarwara-Unnao, Uttar Pradesh. 

MTL has established itself as a high-quality shoes supplier catering to the premium segment of the market. It has supplied shoes to the Hush Puppies division of British Shoe Corporation and to reputed brand names -- Oliver Timpson of the Oliver group, UK; Saxone of Clarks shoes, Australia; etc. In the past it has received two export awards of council for leather export for its outstanding performance and unit value realisation among leather footwear exporters. In 1996-97, it allotted bonus shares in the proportion of 1:1 by capitalisation of share premium account. 

About 85% of the shoes manufactured by the company are exported. It has commenced sale of footwear under its own brands Red Tape and Oakridge and these have received encouraging response. 

Having established a national presence in the country, Red Tape, the flagship brand of Mirza Tanners Limited, is on an aggressive expansion drive adding new styles and exploring new markets in 2001. 

The Company bagged three export awards from the Council for Leather Exports for outstanding export performance for the year 1999-2000. After the successful launching of Double Density PU shoes, the company added a second plant at its Noida Factory doubling the capacity. The Company is expecting a substantial increase in this new range of footwear. During 2001-02 the company issued on private placement basis, Secured Redeemable NCD with a face value of Rs.50.000 Millions.

MTL is contemplating of restructuring of Group operations and has appointed Price Waterhouse Coopers (Private) Limited to examine various options.

The company has two segments of business namely :-

Tannery Division : Marketing Finished leather from Raw hides Wet Blue

Shoe Division : Manufacturing Finished Leather Shoes.

The company’s fixed assets of important value includes Freehold Land, Leasehold Land, Buildings, Machinery, Effluent Treatment Plant, Tools & Shoe Lasts, Furniture, Fittings & Electric Installation, Motor Vehicles and Computers.

PERFORMANCE OF THE COMPANY 

During the year under review, the Company continued its impressive performance. Gross Income of Rs. 2564.300 Millions registered a growth of 36 percent as against Rs.1881.900 Millions in the previous year. The operating profit before depreciation and interest has shown a growth of 50 percent and reached to Rs. 515.100 Millions as against Rs. 342.300 Millions in the previous year. After charging a higher interest of Rs. 42.700 Millions (Rs. 42.300 Millions) and depreciation of Rs. 63.800 Millions (Rs. 60.400 Millions) and providing for tax Rs. 131.200 Millions (Rs. 50.500 Millions) and deferred tax liability of Rs. 18.400 Millions (Rs. 21.500 Millions), the company has earned a profit after tax of Rs.259.000 Millions as against Rs. 167.600 Millions in the previous year. After making prior year adjustments, the net profit of the company has jumped to Rs.260.900 Millions as against Rs.109.600 Millions in the previous year registering a growth of 138 percent. 

DIVIDEND

The Company has already paid an Interim Dividend of 30 percent i.e. Rs.3/- per equity share aggregating to Rs. 48.800 Millions for the financial year ended 31st March, 2005. 

 Keeping in view of the improved profitability as well as expansion prorgramme of the company, the Board of Directors is pleased to recommend a final dividend of 20 percent i.e. Rs. 2/- per equity share for the year ended 31st March, 2005, subject to the approval of shareholders making a total payout of 50 percent i.e. Rs. 5/- per equity share for the year 2004-05. 

EXPANSION PROGRAMME 

The Company has achieved saturation of its existing manufacturing capacities and has chalked out an ambitious expansion plan to double its tanning and footwear manufacturing capacities. Over the next two years the company plans to incur a substantial capital expenditure towards this objective. As a first step, 70 acres of land has been acquired at Unnao for enhancement of tanning capacities and 20 acres at Greater Noida for setting up an integrated world class footwear manufacturing centre both for ladies & men's footwear and a state of the art R & D centre. 

CORPORATE GOVERNANCE

The company has been practicing the principles of good corporate governance and the board of directors lays strong emphasis on transparency, accountability and integrity. 

A separate report on Corporate Governance together with a certificate from Statutory Auditors confirming compliance with corporate governance requirement as stipulated in Clause 49 of the listing agreement with the stock exchange has been annexed as part of this report. 

MANAGEMENT DISCUSSION AND ANALYSIS 

Industry structure and developments 

Indian leather industry is gradually coming out of its traditional unorganized form and more and more individual units are now engaging into good practices resulting into better quality of products, less damage to environment and higher efficiency of operations. With the largest population of livestock in the world, India is a source of 10% of global leather requirement translating into an annual production value of 4 billion of finished leather. Value additions through downstream products like footwear can take this to an export potential of $10 billion of leather goods. During 2004-05, the exports of finished leather grew 7.35% to reach $ 2.4 billion and exports of leather footwear grew 8.8% to reach $ 0.6 billion, Indian footwear exports account for 1.66% of the global market and there is an immense potential of growth in the sector. 

Opportunities, Threats, Risks & Concerns

Having established a strong presence in U.K.'s men's footwear market, it enjoys a comfortable market share. The company has now entered the ladies shoes segment, which in value terms is 5-6 times larger. Its South African operations continue to be stable. Leveraging its international experience, it has entered the U.S. market and also mainland Europe. It is also intensifying its domestic operations with these initiatives; the company sees sustained growth in operations after its expansion program is fully implemented. 

Economic showdown in European & U.S. economies, competition from China which continues to artificially value its currency to levels highly inclined in favour of its exporters, impact of global terrorism actions, lack of proper infrastructure in line with global trade requirements, indifferent government policies, increasing fuel prices and weakening of currencies are some of the threats faced by the company. 

 Outlook 

The Company's main focus right now is strengthening of the brands in domestic and International market and developing strategies for penetration into high growth markets and their focus in the future will be on the high growth retail segment in India. 

DOMESTIC SALES 

During the year under review, domestic sales of shoes has also recorded a significant increase of 59 percent and reached to Rs. 428.300 Millions as against Rs. 270.900 Millions. 

The company's brand 'Red Tape' is being marketed more aggressively in India by endorsing 'Salman Khan' as their brand ambassador

SCHEME OF AMALGAMATION

During the year, a Scheme of Amalgamation has been filed in the Honourable High Court of Allahabad for the amalgamation of Leather Trends Private Limited with the company. The Scheme has been approved by the shareholders and Creditors of both the companies and Company Petition has been filed in the Honourable High Court seeking sanction of the Scheme of Amalgamation.

CHANGE OF NAME

Considering the nature of business of the company, the name of the company is being changed to Mirza International Limited subject to final approval of the central Govt. in terms of Sec. 21 of the Companies Act, 1956. 

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.44.31
UK Pound	1	Rs.86.82
Euro	1	Rs.57.29

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	7
PAID-UP CAPITAL	1~10	6
OPERATING SCALE	1~10	6
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	6
--PROFITABILIRY	1~10	6
--LIQUIDITY	1~10	6
--LEVERAGE	1~10	6
--RESERVES	1~10	6
--CREDIT LINES	1~10	6
--MARGINS	-5~5	-
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		55

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