MIRA INFORM REPORT

Report Date :

04.07.2007

IDENTIFICATION DETAILS

Name :	ELGITREAD (INDIA) LIMITED
Formerly Known as :	ELGI TYRES AND TREADS
Registered Office :	2000, Trichy Road, Singanallur, Coimbatore – 641005, Tamilnadu
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	05.09.1984
Com. Reg. No.:	18-10010
CIN No.: [Company Identification No.]	L02511TZ1981PLC010010
TAN No.: [Tax Deduction & Collection Account No.]	CMBE03058G
Legal Form :	It is a Public Limited Liability Company. The company's shares are listed on the Stock Exchanges
Line of Business :	Manufacturing and Marketing of Retreading Raw Materials, Retreading Machinery, Precure Tyre Treads, Cold Curing Cushion, Cold Curing Cement and Cold Curing Envelopes.

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 5700000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well-established company of Elgi Group, a well-established and reputed industrial house of Coimbatore. Available information indicates high financial responsibility of the company. Financial position is good. Payments are always correct and as per commitments. The company can be considered good for normal business dealings at usual trade terms and conditions. It can be regarded as a promising business partner in a medium to long-run.

LOCATIONS

Registered Office / Head Office :	2000, Trichy Road, Singanallur, Coimbatore – 641005, Tamilnadu, India
Tel. No.:	91-422-2319909 / 4321000
Fax No.:	91-422-2574178
E-Mail :	info@elgitread.co.in enquiry@elgitread.co.in secretarial@in.elgitread.com
Website :	http://www.elgitread.co.in
Administrative Office :	Elgi House, 1789, Trichy Road, Coimbatore - 641 045, Tamilnadu, India
Tel. No.:	91-422-319909
Fax No.:	91-422-574178
E-Mail :	enquiry@elgitread.co.in
Plants :	Korkadu, Pondicherry Kottayi, Palakkad, Tamilnadu Kurichi, Coimbatore Nairobi, Kenya Coromandel, Mauritius Arusha, Tanzania Colombo, Sri Lanka Lorena – SP, Brasil
Branches :	“Surya”, 35, May Flower Avenue Behind Senthil Nagar, Sowripalayam, Coimbatore – 641028, Tamilnadu, India
Tel. No.:	91-422-2314792 / 2316755
E-Mail :	coimbatore@intimespectrum.com

DIRECTORS

Name :	Mr. L. G. Varadarajulu
Designation :	Chairman
Qualification :	Diploma in Automobile Engineering
Name :	Mr. Sudarsan Varadaraj
Designation :	Managing Director
Date of Birth/Age :	48 Years
Qualification :	B.E. (Hons.), M.S. (M.E.)
Date of Appointment :	12.03.1988
Previous Employment :	LSA Engineers Inc, Houston, USA
Name :	Mr. M. John Edward
Designation :	Director ( Sales and Marketing)
Name :	Mr. T. Ashok Anand
Designation :	Director (Manufacturing)
Name :	Mr. C. Thiagarajan
Designation :	Director
Name :	Mr. Jairam Varadaraj
Designation :	Director
Name :	Mr. K. Jayaraman
Designation :	Director
Name :	Mr. Suresh Jagannathan
Designation :	Director
Name :	Mr. M. D. Selvaraj
Designation :	Director
Name :	Mr. Vijay Raghunath
Designation :	Director
Name :	Mr. C. N. Srivatsan
Designation :	Director

KEY EXECUTIVES

Name :	Mr. L. G. Varadarajulu
Designation :	Chairman
Name :	Mr. Sudrasan Varadaraj
Designation :	President
Name :	Mr. T. Ashok Anand
Designation :	Director (Manufacturing)
Name :	Mr. S. R. Venkatachalam
Designation :	Chief Finance Officer
Name :	Mr. V. M. Vennila
Designation :	Company Secretary

SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares	Percentage of Holding
Directors and their relatives	9532530	22.30
Domestic Companies	12113943	28.34
Non Domestic Companies	2170065	5.08
Mutual Funds	3950	0.01
Commercial Banks	73870	0.17
Non Resident Indians	188772	0.44
Public Financial Institutions	569390	1.33
Resident Individuals	18097480	42.33
Total	42750000	100.00

BUSINESS DETAILS

Line of Business :

Manufacturing and Marketing of Retreading Raw Materials, Retreading Machinery, Precure Tyre Treads, Cold Curing Cushion, Cold Curing Cement and Cold Curing Envelopes.

Products :

Product Description	Item Code No.
Precure Tyre Treads	4008 – 22
Cold Curing Cushion	4006 – 10
Cold Curing Cement	3506 – 00

Exports :

Countries :

Australia, Bahrain, Bangladesh, Brazil, Jordan, Kenya, Madagascar, Mauritius, Myanmar, Oman, Qatar, Sri Lanka, Tanzania, Turkey and UAE

Imports :

Countries :

Australia, Austria, Belgium, Brazil, China, France, Hong Kong, Indonesia, Japan, South Africa, Singapore, Switzerland, Thailand, The Netherlands, UK and USA

Terms :

Purchasing :

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

PRODUCTION STATUS

Particulars	Unit	Licensed Capacity	Installed Capacity	Actual Production
Retreading Raw Material	MT	18000	15000	12119
Retreading Machinery	Nos	--	--	10

GENERAL INFORMATION

Customers :	· Elgi Rubber Products Limited · Elgitreade (Kenya) Limited · Elgitreade (Mauritius) Limited · Elgitread Lanka (Private) Limited · Elgitread (Tanzania) Limited · Elgitread (Bangladesh) Limited · Elgitread Do Brasil Industria E Comercio De Artefatos De Borracha Limited · Elgitread (USA) LLC · Rayalaseema Technologies Limited
No. of Employees :	478
Bankers :	State Bank of India Commercial Branch, Coimbatore, Tamilnadu

Auditors :
Name :	Reddy Goud & Janardhan Chartered Accountants Bangalore, Karnataka, India. External Internal Auditors Delloitte Haskins and Sells Chartered Accountants Coimbatore, Tamilnadu
Collaboration :	Oliver Rubber Company, USA.
Memberships :	Confederation of Indian Industry
Associates :	Ellargi & Company Ellargi & Co Private Limited Elgi Rubber Products Limited Elgi Electric and Industries Limited Kooltread Limited L. G. Balakrishnan & Bros. L R G Technologies Private Limited Pricol Limited Rayalaseema Technologies Limited Super Spinning Mills Limited
Subsidiaries :	Elgitread (Kenya) Limited Elgitread (Mauritius) Limited Elgitread (Tanzania) Limited Elgitread Lanka (Private) Limited Elgitread (Bangladesh) Limited Elgitread Do Brasil Industrie E Comercio De Artefatos De Borracha Limited Elgitread USA LLC Elgitread Limited Geo Renewable Power Limited Elgi Equipments Limited Salem Services (P) Limited Elgi Ultra Industries Limited Geo Renewable Power Limited Greenvee Rubber Products P. Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
70,000,000	Equity Shares	Rs. 1/-	Rs. 70.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
42,750,000	Equity Shares	Rs. 1/-	Rs. 42.750 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		42.750	42.750	42.750
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		1389.948	1307.627	1202.743
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		1432.698	1350.377	1245.493
LOAN FUNDS
1] Secured Loans		0.000	0.000	0.000
2] Unsecured Loans		0.000	0.000	0.000
TOTAL BORROWING		0.000	0.000	0.000
DEFERRED TAX LIABILITIES		16.995	29.681	27.028
TOTAL		1449.693	1380.058	1272.521
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		350.504	310.259	223.120
Capital work-in-progress		0.000	0.000	37.782
INVESTMENT		300.941	403.904	355.542
DEFERREX TAX ASSETS		18.256	21.729	44.553
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	383.184	233.050	203.468
	Sundry Debtors	241.966	208.375	191.812
	Cash & Bank Balances	133.244	203.773	146.165
	Other Current Assets	7.366	11.331	47.437
	Loans & Advances	299.635	246.205	299.641
Total Current Assets		1065.395	902.734	888.523
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	127.257	131.601	197.039
	Provisions	158.146	126.967	79.960
Total Current Liabilities		285.403	258.568	276.999
Net Current Assets		779.992	644.166	611.524
TOTAL		1449.693	1380.058	1272.521

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2006	31.03.2005	31.03.2004
Sales Turnover		1200.113	1168.915	1129.909
Other Income		69.627	109.681
Total Income		1269.740	1278.596	1129.909
Profit/(Loss) Before Tax		134.019	207.344	174.820
Provision for Taxation		29.294	72.196	56.224
Profit/(Loss) After Tax		104.725	135.148	118.596
Earnings in Foreign Currency :
	Export Earnings	425.319	219.061
	Dividend	6.587	2.583	146.084
	Other Earnings	27.792	10.422
Total Earnings		459.698	232.066	146.084
Imports :
	Raw Materials	72.970	31.854
	Stores & Spares	1.453	1.066	47.749
	Capital Goods	6.222	9.468
Total Imports		80.645	42.388	47.749
Expenditures :
	Raw Material Consumed	1090.217	1030.360	--
	Depreciation & Amortization	45.504	40.891	--
	Other Expenditure	0.000	0.000	955.088
Total Expenditure		1135.721	1071.251	955.088

SUMMARISED RESULTS

PARTICULARS	31.03.2007
Type	Full Year
Sales Turnover	1418.800
Other Income	47.600
Total Income	1466.400
Total Expenditure	1297.400
Operating Profit	169.000
Interest	00.500
Gross Profit	168.500
Depreciation	41.400
Tax	25.800
Reported PAT	86.300
Dividend (%)	350.000

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt Equity Ratio	0.00	0.00	0.00
Long Term Debt Equity Ratio	0.00	0.00	0.00
Current Ratio	3.40	3.14	2.41
TURNOVER RATIOS
Fixed Assets	1.81	2.05	2.03
Inventory	4.31	5.49	5.65
Debtors	5.92	6.49	6.12
Interest Cover Ratio	144.14	343.50	362.00
Operating Profit Margin (%)	10.98	13.74	15.35
Profit Before Interest and Tax Margin (%)	7.57	10.59	12.44
Cash Profit Margin (%)	9.46	10.03	11.33
Adjusted Net Profit Margin (%)	6.05	6.87	8.42
Return on Capital Employed (%)	7.25	10.59	12.14
Return on Net Worth (%)	5.79	6.87	8.21

STOCK PRICES

Face Value	Rs.10.00/-
High	Rs.27.15/-
Low	Rs.26.45/-

LOCAL AGENCY FURTHER INFORMATION

Fixed Assets

• Land
• Building
• Plant and Machinery
• Furniture and Fixture
• Vehicles

HISTORY

Started in 1984, Elgi Tread (India), formerly Elgi Tyres and Treads, was promoted by the Elgi group of Coimbatore in technical and financial collaboration with Oliver Rubber Company, US. The company has factories at Palghat, Pondicherry, Coimbatore and Hindupur. 

The company manufactures pre-cured tyre treads, tyre inspection spreaders and retreading systems which are widely used in trucks, buses and light commercial vehicles. The company has diversified into the related areas of retreading aircraft and tractor tyres.  

EIL acquired the know-how of the cold retreading process, acclaimed as the greatest revolution in tyre retreading technology, from Oliver Rubber Company of Oakland, US, the largest manufacturer of tyre retreads in the world. The EIL-procured retreading system is being marketed in India through a network of franchisees, appointed in potential areas. Every franchisee retreads tyres on a licensed production arrangement with EIL to cater to the demands area-wise. EIL provides a single source retread manufacturing package to its franchisees. 

EIL is planning to establish operations in Nepal and Bangladesh. In order to rationalise the operating costs and to bring in better focus in operations, it is planning to combine all overseas operations into a wholly owned subsidiary. 

In 2000-2001, the Company offered a Voluntary Retirement Scheme at Hindpur Factory and the total cost was Rs.8.45 million. The company is not having any plans to diversify into other business and to focus more on core competency area.

Review of operations and future outlook: 

Sales during the year was Rs.1.33 billion as against 1.30 billion the previous year. Other income amounted to Rs.69.62 million compared to Rs.109.68 million last year. Cash profit was Rs.179.52 million as against Rs.248.23 million. Segment wise, exports increased by 96% while sales to franchisees and road transport corporations registered negative growths. The electric power generated by the company's wind mills was 3.77 million units compared to 4.70 million units during the previous year. The Company has maintained its debt free status. 

Very little has changed in terms of the structure and development in the industry since their last report. The last year has seen exponential increases in material costs and an inability on the part of the industry to pass on material cost increases. This has substantially affected the bottom line. 

Though it was anticipated that the introduction of taxes like Service Tax and VAT would bring more fiscal accountability into the industry and benefits to the organised sector, no tangible results were seen, except in states where the industry came under the scrutiny of the authorities. On the other hand, with the company's manufacturing facilities located predominantly in Tamilnadu and Pondicherry - states where VAT is yet to be introduced, the bulk of the products manufactured are not competitive in terms of pricing. Hopefully the introduction of VAT in these two states and a GST regime in the future will make the products manufactured by organized companies more competitive. 

An exhaustive study has been conducted on the Golden Quadrilateral and Corridor Highway systems with reference to their network of franchisees. Based on this analysis, a road map has been drawn up for the focus area. The company continues its efforts on exports, where the product acceptance continues to strengthen. 

Risks and Concerns: 

The company is facing all external risks pertaining to this business especially market risk. The company has taken all possible steps to overcome such risks. 

The upward spiral in raw material prices continue and until some stability is seen in this regard, the bottom line will continue to be under pressure. 

As a part of overall risk management strategy, the company has taken proper steps to insure all its assets. Due to proper hedging it also avoids foreign exchange fluctuation risks. 

Internal Control Systems: 

Internal Audit is being done every quarter by an independent firm of Chartered Accountants and observations are reported to the management. Immediate steps are taken to rectify any discrepancies. All significant audit observations were discussed in the audit committee meetings. 

Subsidiaries:

The company has made an investment of Rs. 8.77 Million in Elgitread Do Brasil Industria E Commercio De Artefatos De Borracha Limiteda towards capital for expansion of operations. 

As Per Website

Subject are committed to understanding the needs as a retreader and providing the appropriate solution through a comprehensive range of services.

They provide everything you need from market survey, project planning and know-how, to training, supply of equipment and raw material, service and technology support.

Very few companies in the industry offer such a complete range of services in retreading. This concept has made us one of the largest suppliers of retreading materials worldwide, having supplied over 600 retreading plants in 35 countries. Their manufacturing facilities include 8 plants in 6 countries to manufacture over 25 million kilograms of retreading material and a very modern facility to manufacture retreading equipment. These are backed by a state-of-the-art training facility and laboratories for research and testing of metals and polymers.

About Retreading

· For most fleets, tyres represent either the second or the third largest item in their operating budget, right after labor and fuel costs.

· The lowest possible cost-per-mile is achieved with a good tyre management program that includes the use of quality retreads.

· Retreads are the replacement tyre of choice for most truckers.

· Retreads are not only cost effective, but they are also dependable, reliable and safe. Retreads are used by truckers with scheduled delivery times, small package delivery companies with guaranteed delivery times, on commercial and military jets and by most school bus operators.

· Retreads are also environmentally friendly. tyres are basically petro-chemical products. It takes almost 100 ltrs. of oil to manufacture one new truck tyre. Most of the oil is found in the casing, which is reused in the retreading process. As a result, it takes only 30 ltrs. of oil to produce a retread.

· Retreaders, like trucking companies, have experienced considerable consolidation. Today, the most successful retreaders are those with the highest quality products, delivering the best possible return on investment to the fleets. Because of the competitive nature of the retreading industry, truckers can expect to see continuous improvement in quality, durability and reliability, as the major retread suppliers annually invest millions of dollars in research and development.

Product

• Retreading Equipment
• Retreading Material

• Repair Equipment
• Repair Material

• Retreading Tools

The company has joint venture with the following :

· Elgitread (Kenya) Limited, Kenya

· Elgitread (Mauritius) Limited, Mauritius

· Elgitread (Tanzania) Limited, Thailand

· Elgitread Lanka (Private) Limited, Sri Lanka

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.40.49
UK Pound	1	Rs.81.77
Euro	1	Rs.55.18

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