MIRA INFORM REPORT

Report Date :

12.03.2007

IDENTIFICATION DETAILS

Name :	DELTA PAPER MILLS LIMITED
Registered Office :	Vendra, Palakodeur Mandal, West Godavari – 534210, Andhra Pradesh
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	23.05.1975
Com. Reg. No.:	01-1891
CIN No.: [Company Identification No.]	L99999AP1975PLC001891
TAN No.: [Tax Deduction & Collection Account No.]	HYDD01989B
PAN No.: [Permanent Account No.]	AAACD6022C
Legal Form :	A public limited liability company. The company’s shares are listed on the Stock Exchanges.
Line of Business :	Manufacturer of Paper and Ice.

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 450000
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 :	Vendra, Palakodeur Mandal, West Godavari – 534210, Andhra Pradesh, India
Tel. No.:	91-8816-248881
Fax No.:	91-8816-248885
E-Mail :	elr_deltpap@sancharnet.in

DIRECTORS

Name :	Mr. Gokaraju Ganga Raju
Designation :	Chairman
Address :	40-15-14, Brindavan Colony, Labbipet, Vijaywada – 520010, Andhra Pradesh, India
Date of Birth/Age :	14.06.1948
Date of Appointment :	25.06.1998
Name :	Mr. Gokaraju Benkata Kanaka Ranga Raju
Designation :	Managing Director
Address :	Flat # 552, Road # 92, H. No. 8-2-273/J, III/552, Jubilee Hills – 500032, Hyderabad - 500032, Andhra Pradesh, India
Date of Birth/Age :	23.03.1969
Date of Appointment :	25.06.1998
Name :	Mr. Gokaraju Rama Raju
Designation :	Director
Address :	40-15-14, Brindavan Colony, Labbipet, Vijaywada – 520010, Andhra Pradesh, India
Date of Birth/Age :	24.04.1971
Date of Appointment :	30.12.1998
Name :	Mr. G V Narasimha Raju
Designation :	Executive Director
Address :	27-18-14, ASR Nagar, Bhimavaram, West Godavari – 534202, Andhra Pradesh
Date of Birth/Age :	24.03.1949
Date of Appointment :	30.12.1998
Name :	Mr. B H K K Kasturi
Designation :	Director
Address :	Kallakurivari Street, Sri Ramapuram Bhimavaram, West Godavari - 534202, Andhra Pradesh
Date of Birth/Age :	29.10.1940
Date of Appointment :	27.11.1994
Name :	Mr. P Anand Varma
Designation :	Director
Address :	C/o. Sri Rama Dental Clinic, Punjagutta, Sri Nagar Colony, Hyderanad, Andhra Pradesh
Date of Birth/Age :	15.08.1970
Date of Appointment :	01.07.2002
Date of Ceasing :	08.07.2005
Name :	Mr. A Narasimha Rao
Designation :	Director
Address :	Brindavan Colony, Vijayawada, Krishna District, Andhra Pradesh
Date of Birth/Age :	27.05.1933
Date of Appointment :	01.07.2002
Name :	Mr. Mantane Subba Raju
Designation :	Director
Address :	E-1, Madhava, Madhava Plaza, Moghalraj Puram, Vijayawada, Andhra Pradesh, India
Date of Birth/Age :	05.12.1964
Date of Appointment :	08.07.2005

MAJOR SHAREHOLDERS

Names of Shareholders	No. of Shares
Vijay Kumar Raju	1000
Bhupathi Raju	1000
Katari Seetarama Raju	1000
Bhupathi Raju Kantha Kamala Kasturi	500
Alluri Vijaya Laxmi	500
Bhupathi Raju Bangaramma	500
Alluri Venkata Suryanarayana Raju	500
Total	5000

BUSINESS DETAILS

Line of Business :

Manufacturer of Paper and Ice.

Products :

Product Description	ITC Code No
Printing and Writing Paper	480260-09
Ice	2201-90

PRODUCTION STATUS

Particulars	Unit	Licensed Capacity	Installed Capacity	Actual Production
Paper	MT	42000	42000	31098
Ice	MT	240000	240000	160452

GENERAL INFORMATION

Suppliers :

Surya Lime Chemicals

Lakshmi Vinayaka Minerals

Vijayalakshmi Chemicals Industries

Raj Polypacks

S. V. Swamy Engineering Works

Mallikarjuna Mining Works

No. of Employees :

About 600

Bankers :

UCO Bank

Attili Mangal, West Godavari, Attili – 534134, Andhra Pradesh, India

Canara Bank, Bhimavaram Branch, P P Road, West Godavari, Bhimavaram – 534201, Andhra Pradesh, India

Facilities :

Secured Loan	Rs in Millions
Term Loans
UCO Bank	87.900
Bank – Working Capital Facilities
Cash Credit – UCO Bank	80.149
Cash Credit – Canara Bank	39.803
Bills Discount – Canara Bank	50.670
Interest accrued and due	0.861

Banking Relations :	Satisfactory
Auditors :
Name :	Raju and Mahendra Chartered Accountants
Address :	5-8-512/8, Abibs Shopping Centre, First Floor, Chirag Ali Lane, Abids, Hyderabad – 500001, Andhra Pradesh, India
Associates/Subsidiaries :	Ø Laila Finance Limited Ø Laila Infotech Limited Ø Laila Credits Private Limited Ø Laila Global Feeds Private Limited Ø Delta Sugars Limited Ø DPM Power Private Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
13,300,000	Equity Shares	Rs. 10/- each	Rs. 133.000 Millions
170,000	Preference Shares	Rs. 100/- each	Rs. 17.000 Millions
	Total		Rs. 150.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
3,307,000	Equity Shares	Rs. 10/- each	Rs. 33.070 Millions
170,000	Preference Shares	Rs. 100/- each	Rs. 17.000 Millions
	Total		Rs. 50.070 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		50.070	50.070	50.070
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		62.226	29.206	4.632
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		112.296	79.276	54.702
LOAN FUNDS
1] Secured Loans		564.697	259.383	221.113
2] Unsecured Loans		209.463	111.359	95.007
TOTAL BORROWING		774.160	370.742	316.120
DEFERRED TAX LIABILITIES		11.459	2.362	0.000
TOTAL		897.915	452.380	370.822
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		359.622	240.918	161.841
Capital work-in-progress		319.410	26.753	82.538
INVESTMENT		0.364	0.364	0.364
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	245.410	161.730	134.173
	Sundry Debtors	154.005	201.928	144.653
	Cash & Bank Balances	41.945	18.325	10.690
	Other Current Assets	49.264	10.655	14.274
	Loans & Advances	55.812	20.013	17.482
Total Current Assets		546.436	412.651	321.272
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	327.917	228.306	183.599
	Provisions	0.000	0.000	11.594
Total Current Liabilities		327.917	228.306	195.193
Net Current Assets		218.519	184.345	126.079
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		897.915	452.380	370.822

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2006	31.03.2005	31.03.2004
Sales Turnover		1048.955	791.622	737.312
Other Income		6.348	5.127	7.789
Total Income		1055.303	796.749	745.101
Profit/(Loss) Before Tax		53.112	30.476	2.776
Provision for Taxation		13.566	4.752	0.848
Profit/(Loss) After Tax		39.546	25.724	1.928
Imports :
	Raw Materials	NA	213.826	171.429
	Stores & Spares	NA	177.022	150.596
Total Imports		NA	390.848	322.025
Expenditures :
	Excise Duty and Sales Tax	0.000	0.000	93.738
	Repair and Maintenance	0.000	0.000	22.420
	Manufacturing Expenses	0.000	0.000	319.778
	Administrative Expenses	0.000	0.000	43.307
	Raw Material Consumed	330.554	213.826	171.429
	Consumption of stores and spares parts	215.725	177.022	0.000
	Increase/(Decrease) in Finished Goods	4.948	[1.671]	[3.641]
	Salaries, Wages, Bonus, etc.	66.636	61.338	47.893
	Managerial Remuneration	0.847	0.679	0.000
	Payment to Auditors	0.080	0.056	0.000
	Interest	35.809	36.260	0.000
	Insurance Expenses	4.488	2.934	0.000
	Power & Fuel	191.798	145.238	0.000
	Depreciation & Amortization	24.316	20.797	0.000
	Other Expenditure	126.990	109.794	0.000
Total Expenditure		1002.191	766.273	694.924

KEY RATIOS

PARTICULARS		31.03.2006	31.03.2005	31.03.2004
PAT / Total Income	(%)	3.75	3.23	0.26
Net Profit Margin (PBT/Sales)	(%)	5.06	3.85	0.38
Return on Total Assets (PBT/Total Assets}	(%)	5.86	4.66	0.57
Return on Investment (ROI) (PBT/Networth)		0.47	0.38	0.05
Debt Equity Ratio (Total Liability/Networth)		9.81	7.56	9.35
Current Ratio (Current Asset/Current Liability)		1.67	1.81	1.65

LOCAL AGENCY FURTHER INFORMATION

Business

To carry on the business of manufacturers and dealers to all kinds and classes of Paper, Board and Pulp including writing paper, printing paper, absorbent paper, news print paper, wrapping paper, tissue paper, cover paper, blotting paper, filter paper, antique paper, ivory finish paper, coated paper, art paper, blank or bond paper, bedlam brown or buff paper, bible paper, cartridge paper, cloth lined paper, azure laid and wove paper, cream laid paper, grease proof paper, gummed paper, hand made paper, parchment paper, drawing paper, crafts paper, envelop paper, tracing paper, vellum paper, water proof paper, carbon paper, sensitized paper, chemically treated paper, printing ink, cork, cork sheets, hard board, plywood board, post cards, chemical pulp and all kinds of articles in the manufacture of which in any form of paper, board or pulp is used and also to deal in manufacture of any other articles or things of a character similar or analogous to the foregoing or any of them or connected therewith.

Fixed Assets

Ø Land

Ø Roads and Drainages

Ø Fencing

Ø Plant and Machinery

Ø Buildings

Ø Laboratory Equipments

Ø Fire Fighting Equipments

Ø Furniture and Fixture

Ø Air Conditioners

Ø Refrigerators

Ø Office Equipments

Ø Computers

Ø Light Vehicles

Ø Heavy Vehicles

History

Delta Paper Mills, the Andhra Pradesh based company is into manufacture of paper from its 18000 MT capacity paper mill at Vendra in West Godavari district of Andhra Pradesh. 

The company has diversified into Sugar by acquiring two Cooperative sugar mills i.e Sri Hanuman Cooperative Sugar Mills at Hanuman Junction & Sri ASM Cooperative Sugar mill at Palacole, which are privatised by Government of Andhra Pradesh during the year 2000-01.

Term Loan

Term Loan availed from UCO Bank secured by deposit of title deeds for 65.51 acres of land and buildings with UCO Bank and by hypothecation of Plant and Machinery of the company in favour of UCO Bank, both present and future subject to prior charge created to be created on movable assets in favour of the company’s banks for securing working capital requirements. The loan are further secured by personal guarantees of Dr. G. Ganga Raju, Chairman, Sri GVK Ranga Raju Managing Director and Shri G Rama Raju Executive Director.

Working Capital Loan

Cash Credit facility with banks are secured by hypothecation of Stocks of Raw Materials, Goods in Process, Finished Goods, stores, Spares, Book Debts and also secured by Second Charges on Fixed Assets of the company and personal guarantees of Dr. G. Ganga Raju, Chairman, Sri GVK Ranga Raju Managing Director

Bankers Charges Report as per Registry

Name of the company	DELTA PAPER MILLS LIMITED
Presented By	Mr. P Ananda Varma, Director
1) Date and description of instrument creating the change	06.06.1978 Hypothecation agreement in favour of UCIO Bank and Canara Bank
2) Amount secured by the charge/amount owing on the securities of charge	Rs. 0.500 Millions
3) Short particular of the property charged. If the property acquired is subject to charge, date of the acquired of the property should be given	Hypothecation agreement in favour of UCO Bank in respect of hypothecation of Raw Materials , Stock in process, semi finished and finished goods, stores and spares and also second charge on fixed assets of the company on pari passu basis with other member of the consortium.
4) Gist of the terms and conditions and extent and operation of the charge.	Repayment on demand. Rate of interest subject to a minimum of Rs. 15.5 % p.a.
5) Name and Address and description of the person entitled to the charge.	UCO Bank Attili Mangal, West Godavari,
6) Date and brief description of instrument modifying the charge	06.08.2003, Supplemental deed of Hypothecation and deposit of Title deeds of the company as per Form D along with annexure to secure OCC limit of Rs. 30.000 Millions
7) Particulars of modifications specifying the terms and conditions or the extent of operations of the charge in which modification is made and the details of the modification.	No change in the OCC Limit of Rs. 30.000 Millions. Secured by Hypothecation of Stock of raw materials stores and semi spares and semi finished and finished goods and on all current assets. Second charge on fixed assets by depositing of title deeds of the company as per form D along with annexure on pari passu basis with other member of the consortium.

Corporate identity number of the company	L99999AP1975PLC001891
Name of the company	DELTA PAPER MILLS LIMITED
Address of the registered office or of the principal place of business in India of the company	Vendra, Palakodeur Mandal, West Godavari – 534210, Andhra Pradesh
This form is for	Modification of charges
Type of charge	Hypothecation and Simple mortgage
Particular of charge holder	UCO Bank Attili Mangal, West Godavari, Attili – 534134, Andhra Pradesh, India ucoattili@sancharnet.in
Amount secured by the charge	Rs. 50.000 Millions
Brief of the principal terms an conditions and extent and operation of the charge	No change in Book debts finance limit of Rs. 50.000 Millions. The rate of interest is 11 %
Description of the property charged indicating whether it is a charged on	Stock in trade, Book dents and fixed deposit
Particulars of the property charged	Secured by Book debts and on all the current assets of the company, presents and future ranking pari passu 1^st charge with other members of he consortium. Second charge on fixed assets situated at factory at Vendra, subject to 1^st charge in favour of the banks for the term loans on pari passu basis with other members of the consortium.
Charge identification number of the charge to be modified	80007539
Brief description of the instrument modifying the charge under section 135	Supplemental deed of hypothecation Supplemental working capital consortium agreement
Date of instrument Creating the charge	08.06.2006
Particular of the present modification	No change in the Book debts finance of Rs. 50.000 Millions. The interest rate has been reduced to 11 %. No change in other terms and conditions.

Delta Paper pips Gelcon for 4 Nizam Sugar units

Bureau

HYDERABAD, April 3

IN a significant development which deviates from the earlier proposal for outright sale, Delta Paper Mills has pipped the Goldstone Exports Limited consortium (Gelcon) to be associated as a joint venture company with four units of Nizam Sugars Limited, which includes a distillery at Shakkarnagar.

The Principal Secretary Public Enterprises, Andhra Pradesh Government, Mr Deepak Kumar Panwar, on Wednesday said the Cabinet Sub-committee had approved the highest bid proposed by Delta Paper Mills, which envisages establishing a joint venture with the Government of Andhra Pradesh/Nizam Sugar.

As per the arrangement, a new company will be formed on a joint venture basis with the equity share capital of Rs 200 Millions in which the Delta Paper Mills will hold 51 per cent stake (Rs 102 Millions) of equity and NSL/GoAP will hold the balance 49 per cent of equity, which works out to Rs 98 Millions.

The assets of four units — two units at Shakkarnagar including a distillery and the units at Metpally and Mombojipalli — will be transferred to the new company at a total value of Rs 654 Millions free of encumbrances as offered by the Delta Paper Mill. It may be recalled that Delta Paper had earlier acquired two units one each at Hanuman Junction and ASM Palakole.

As against the earlier proposal to offer these units on outright sale, it was decided to take up the development based on the formation of a joint venture company. Earlier, some of the units were sold outright to private companies.

Though the Gelcon Consortium, which includes representation from GR Cables, Dhampur Sugars and Ganpathi Sugar Mills, was responsible for the sustained interest in the long-drawn bidding process, it lost out due to lower bid amount.

It may be recalled that when the sugar units were placed for sale last year, it received poor response. Following this, it was decided to go in for a re-bid process. Based on the re-bid process, Gelcon came forward with its proposal under the `Swiss Challenge' method wherein it will have the right to offer higher value after other bidders come up with the offer.

However, it was decided to abandon this method as not suitable for manufacturing and infrastructure projects. However, this method was being continued in the tourism projects, Mr Panwar said.

Following a fresh bidding process, Delta Paper, Gelcon and Kundan Exports, a Delhi-based firm, had bid for these mills. However, only Delta and Gelcon remained in the fray and Delta's bid was cleared for Rs 650 Millions, he said.

More units on chopping block: In yet another development, as a part of the on-going privatisation process, the Cabinet Sub-committee cleared eight more units to be put on the chopping block. They include units in Nizamabad, Sri Venkata Co-operative Sugar Mills (Chittoor), Palair, Chittoor Co-operative Sugar Mill, Anakapalle, Amadalavalasa, VR Co-operative Sugar Mill, Tenali, and the Cuddapah unit, which is now under a receiver following representation by IDBI.

All of these units are sick and their share capital has been totally eroded and they have piled up huge losses. With regard to two more co-operative units located at Kovvur and West Godavari, an option study was proposed to be initiated, Mr Panwar said.

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.43.98
UK Pound	1	Rs.85.59
Euro	1	Rs.58.49

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	5
OPERATING SCALE	1~10	5
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	6
--PROFITABILIRY	1~10	4
--LIQUIDITY	1~10	5
--LEVERAGE	1~10	5
--RESERVES	1~10	5
--CREDIT LINES	1~10	5
--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	NO
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		46

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