MIRA INFORM REPORT

Report Date :

28.03.2007

IDENTIFICATION DETAILS

Name :	FLEX INDUSTRIES LIMITED
Registered Office :	110, First Floor, Bhanot Corner, Pamposh Enclave, Greater Kailash -I, New Delhi- 110 048
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	21.06.1988
Com. Reg. No.:	55-32166
CIN No.: [Company Identification No.]	L74899DL1988PLC032166
TAN No.: [Tax Deduction & Collection Account No.]	DELF00184C / MRTF00050B
PAN No.: [Permanent Account No.]	AAACF0109J
Legal Form :	Subject is a public limited liability company. The company’s shares are listed on the Stock Exchanges
Line of Business :	Manufacturing of flexible packing materials of printed laminated of plastics and paper based materials.

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 15000000
Status :	Satisfactory
Payment Behaviour :	Slow but correct
Litigation :	Clear
Comments :	Subject has turned the corner. Performance and financial status has shown improvement. Payments are reported as slow but correct. The company can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	110, First Floor, Bhanot Corner, Pamposh Enclave, Greater Kailash -I, New Delhi- 110 048, India
Tel. No.:	91-11-26440917/26440925
Fax No.:	91-11-26216922
E-Mail :	flexsec@vsnl.net
Website :	http://www.flexfilm.com
Corporate Office :	A-107, Sector-IV, Noida – 201 301, Uttar Pradesh, India
Marketing Offices :	· A-1, Sector 60, District Gautam Budh Nagar, Noida - 201 301, Uttar Pradesh Tel. No. 91-11-24580500 Fax No. 91-11-24580152 / 511 / 003 E Mail : ptyle@flexfilm.com · A-1, Sector 60, District Gautam Budh Nagar, Noida - 201 301, Uttar Pradesh Tel. No. 91-120-24580500 Fax No. 91-120-24580511/24580003 Website.: http://www.flexfilm.com
Plants :	· A-1, Sector-60, Noida, Uttar Pradesh · D-1-2, 15-16, Sector 59, Noida, Uttar Pradesh · 29-B, Malanpur Industrial Area, Distt. Bhind, Gwalior, Madhya Pradesh · A-2A, Sector – 60, Noida, Uttar Pradesh
Branches :	Located at:- · 118-119, Damji Shamji Udyog Bhawan, 25-A, Veera Desai Road, Andheri (West), Mumbai - 400 053, Maharashtra · A-16, FMC Fortuna, 234/3A (2^nd Floor), Acharya Jagdish Chandra Bose Road, Kolkata - 700 020, West Bengal · 443,2^nd Floor, 7^th Block, Koramangala, Bangalore - 560 095, Karnataka

DIRECTORS

Name	Mr. Ashok Chaturvedi
Designation	Chairman and Managing Director
Qualification	B.Sc.
Experience	27 years
Date of Appointment	01.08.1988
Last Employment	Flex Laminaters Limited (Chairman and Managing Director)
Name	Mr. Ravi Kathpalia
Designation	Director
Name	Mr. R. P. Agrawal
Designation	Director
Name	Mr. M.G. Gupta
Designation	Director
Name	Mr. A. Karati
Designation	Nominee – ICICI Bank
Name	Mr. S.K. Mandal
Designation	Nominee – IFCI
Name	Mr. P. Abraham
Designation	Nominee – UTI
Name	Mr. Paresh Nath Sharma
Designation	Whole Time Director
Name	Mr. S. K. Kaushik
Designation	Whole Time Director
Name :	Mr. Ajay Krishna
Designation :	Vice President (Legal) and Company Secretary
Name :	Mr. R. K. Mishra
Designation :	Assistant Company Secretary
Name :	Mr. R.P. Agrawal
Designation :	Director
Date of Birth/Age :	12.07.1932.
Qualification :	FCA, LL.B.
Date of Appointment :	19.08.1997
Directorship in other Public Limited Companies :	- Flex Engineering Limited
Member/Chairman of Committee of the Board of the Public Limited Companies on which he is Director :	Audit Committee - Flex Industries Limited - Flex Engineering Limited Shareholders'/Investors' Grievance Committee - Flex Industries Limited (Chairman) - Flex Engineering Limited (Chairman)
Name :	Mr. M.G. Gupta
Designation :	Director
Date of Birth/Age :	02.03.1934
Qualification :	I.A.A.S
Experience :
Date of Appointment :	31.01.2002
Directorship in other Public Limited Companies :	- FCL Technologies & Products Limited - B.T.W. Industries Limited - Flex Foods Limited - Credit Capital Assets Management Company Limited
Member/Chairman of Committee of the Board of the Public Limited Companies on which he is Director :	Audit Committee - Flex Industries Limited - FCL Technologies & Products Limited - Flex Foods Limited - Credit Capital Assets Management Company Limited (Chairman) Shareholders'/Investors' Grievance Committee - Flex Industries Limited - FCL Technologies & Products Limited (Chairman)

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares	Percentage of Holding
Promoters & Associates	21512389	43.84 %
Other Directors/Relatives	41140	0.08 %
Financial Institutions, Mutual Funds & Banks	10099822	20.59 %
Foreign Institutional Investors	342841	0.70 %
NRIs	36469	0.07 %
GDRs	5465840	11.14 %
Other Corporate Bodies	5912051	12.05 %
Others (General Public)	5262951	10.72 %
Shares in transit (Demat)	397034	0.81 %
Total	49070537	100.00 %

BUSINESS DETAILS

Line of Business :

Manufacturing of flexible packing materials of printed laminated of plastics and paper based materials.

Products :

Products Description	Item Code No.
Printed Articles of Plastic in Roll Form	39206290
Printed Articles of Plastic in Pouch Form	39239090
Polyester Film	39206220
Bopp Film	39202020
Rotogravure Cylinder	84425010
Hologram	49009990

PRODUCTION STATUS

Particulars	Unit	Installed Capacity	Actual Production
Printed, Laminated, Metalised, Co-Extruded, Coated, Embossed/ Hologrammed and Pain Plastic Films	MT	111000	84683
Polymer Granules (meant for captive consumption)	MT	4500	12316
Rotogravure Cylinder and Shims	Nos.	27000	--
Hologrammed Sticker Sheets	Sheets in Millions	7.000	5.61

GENERAL INFORMATION

No. of Employees :

Around 1688

Bankers :

v Canara Bank

v Bank of Baroda

v Punjab National Bank

v The Jammu & Kashmir Bank Limited, New Delhi, India

v Allahabad Bank

v State Bank of India

Facilities :

SECURED LOAN	31.03.2006
DEBENTURES
Non-Convertible Debentures
TERM LOAN
From Bank	272.222
Add: Interest accrued & due	2.081
ZERO RATE DEBENTURES
From Financial Institutions	906.634
ZERO RATE LOANS
From Financial Institutions	3178.695
From Others	77.654
CUMULATIVE RUPEE LOANS
From Financial Institutions	329.130
From Others	18.932
18%CUMULAT1VE DEBENTURES
From Financial Institution	121.704
WORKING CAPITAL FACILITIES
From Banks	1228.733
Total	6135.733

Banking Relations :	Satisfactory
Auditors :
Name :	Statutory auditors · Vijay Sehgal & Company Chartered Accountants, New Delhi, India Internal auditors · Jain Singhal & Associates Chartered Accountants New Delhi, India
Memberships :	Nil
Collaborators :	Nil
Associates :	v FCL Technologies & Products Limited v Flexvin Limited Company v Flex Foods Limited v Flex International Limited v Boeing Investments (Private) Limited v Mangalam Energy Development Company Private Limited v Anant Overseas (Private) Limited v Apoorva Extrusion (Private) Limited v Anshikha Consultants (Private) Limited v A.R. Leasing (Private) Limited v Flex Securities Limited v Flex Fincap Services Limited v Cinflex Infotech (Private) Limited v Fonet Consultants (Private) Limited v Flex Engineering Limited v Flex UC (Private) Limited
Subsidiaries	v Flex America Inc, USA v Flex Middle East FZE v Flex Europe Private Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
1,60,00,000	Preference Shares	Rs. 100/-	Rs. 1600.000 millions
5,00,00,000	Equity Shares	Rs. 10/-	Rs. 500.000 millions
	Total		Rs. 2100.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
4,90,70,537	Equity Shares	Rs. 10/-	Rs. 490.705 millions
Less :	Amount Unpaid		Rs. 0.446 millions
	Total		Rs. 490.259 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	490.259	490.255	490.254
2) Share Warrants	0.000	0.000	0.000
3] Reserves & Surplus	3472.230	3141.585	3194.629
4] Profit and Loss Account	0.000	0.000	(306.661)
NETWORTH	3962.489	3631.840	3378.222
LOAN FUNDS
1] Secured Loans	6135.785	5544.086	5081.112
2] Unsecured Loans	192.565	475.462	71.299
TOTAL BORROWING	6328.350	6019.548	5152.411
DEFERRED TAX LIABILITIES	731.116	673.871	506.821
TOTAL	11021.955	10325.259	9037.454
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]	7751.927	7361.359	7376.851
Capital work-in-progress	113.003	181.334	102.412
INVESTMENTS	1264.640	1010.511	333.797
CURRENT ASSETS, LOANS & ADVANCES
Inventories	414.734	466.793	370.454
Sundry Debtors	1868.976	1438.581	1056.295
Cash & Bank Balances	158.768	391.705	607.423
Other Current Assets	19.590	56.429	53.070
Loans & Advances	1023.759	847.764	411.422
Total Current Assets	3485.827	3201.272	2498.664
Less: CURRENT LIABILITIES & PROVISIONS
Current Liabilities	1545.132	1393.315	1297.531
Provisions	48.310	35.902	30.111
Total Current Liabilities	1593.442	1429.217	1327.642
Net Current Assets	1892.385	1772.055	1171.022
MISCELLANEOUS EXPENSES	0.000	0.000	53.372
TOTAL	11021.955	10325.259	9037.454

PROFIT & LOSS ACCOUNT

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Sales Turnover [including other income]	10140.258	9313.363	7066.337
Profit/(Loss) Before Tax	439.052	307.750	720.360
Provision for Taxation	110.391	0.772	316.700
Profit/(Loss) After Tax	328.661	306.978	403.660
Export Value	3161.493	2768.273	1587.586
Import Value	1535.398	1063.480	1632.759
Total Expenditure	9701.206	8796.707	6345.977

QUARTERLY / SUMMARISED RESULTS

PARTICULARS	30.06.2006 (1^st Quarter)	30.09.2006 (2^nd Quarter)	31.12.2006 (3^rd Quarter)
Sales Turnover	2710.700	2942.100	3226.600
Other Income	01.900	20.800	109.500
Total Income	2712.600	2962.900	3336.100
Total Expenditure	2354.600	2590.300	2841.100
Operating Profit	358.000	372.600	495.000
Interests	72.600	81.300	111.700
Gross Profit	285.400	291.300	383.300
Depreciation	155.600	158.700	188.700
Tax	17.000	17.800	24.900
Reported PAT	83.700	85.100	133.200

200606 Quarter 1 –

Gross Sales Include Gross Sales/Income from Operation Rs 3236.90 million Inter Unit Sales Rs (250.60)million Expenditure Includes (Increase)/Decrease in Stock in Trade Rs (26.70) million Consumption of Raw Materials / Traded goods Rs 1771.10 million Staff Cost Rs 127.00 million Other Expenditure Rs 483.20 million Tax Includes Provision for Taxation Rs 17.00 million Deferred Tax (asset) / Liability Rs 29.10 million EPS is Basic 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 03 Complaints disposed off during the quarter 03 Complaints unresolved at the end of the quarter Nil 1. Provision for current & deferred tax is based on the profits for the respective periods. 2. Figures have been regrouped wherever considered necessary. 3. Considering business synergies, risks & returns and assets of the Company, there is only one reportable segment of the Company. 4. The above results have been approved and taken on record by the Board of Directors of the Company at their meeting held on July 30, 2006.

200609 Quarter 2

EPS is Basic 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 02 Complaints disposed off during the quarter 02 Complaints unresolved at the end of the quarter Nil 1. Provision for current & deferred tax is based on the profits for the respective periods. 2. Figures have been regrouped wherever considered necessary. 3. Considering Business synergies, risks & returns and assets of the Company, there is one reportable segment of the Company. 4. The Scheme of Arrangement as approved by creditors and shareholders of the Company on August 11, 2006 between Flex Securities Limited, Flex Engineering Lt, FCL Technologies & Products Limited (Transferor Companies) and Flex Industries Limited (Transferee Company) has been approved by the Hon'ble High Court of Delhi at New Delhi on Octobe 6, 2006. Final order of Hon'ble High Court is awaited hence unaudited results for the quarter and half year are shown without giving effect to the aforesaid Scheme. 5. Consolidated financial results include the results of associate concern and the Wholly owned overseas subsidiaries. 6. The above results have been approved and taken on record by the Board of Directors of the Company at their meeting held on 31^st October, 2006.

200612 Quarter 3

Gross Sales Include Gross Sales/Income from Operation Rs 4462.60 million Inter Unit Sales Rs (898.70)million Expenditure Includes (Increase)/Decrease in Stock in Trade Rs 63.80 million Consumption of Raw Materials / Traded goods Rs 1967.70 million Staff Cost Rs 165.70 million Other Expenditure Rs 643.90 million Tax Includes Provision for Taxation Rs 24.90 million Deferred Tax (asset) / Liability Rs 36.50 million EPS is Basic 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 02 Complaints disposedoff during the quarter 02 Complaints unresolved at the end of the quarter Nil 1. Pursuant to order passed by the Hon'ble High court of Delhi at New Delhi vide its order dated October 06, 2006 read with order dated November 09, 2006 approving the Scheme of Arrangement with appointed date April 01, 2006 and effective date December 04, 2006 between Flex securities Ltd, Flex Engineering Ltd, FCL Technologies & Products Ltd (Transferor Companies) and Flex Industries Ltd (Transferee Company): i) the unaudited financial results for the quarter and nine months are shown after giving effect of aforesaid Scheme. ii) the corresponding figures against the current quarter and nine months are not given being the first year of reporting after giving effect of the aforesaid Scheme. iii) audited figures for the year ended March 31, 2006 bare shown without giving effect of a the aforesaid Scheme. iv) the figures of Non promoter shareholding are shown after giving effect of aforesaid scheme. 2. Provision for current & deferred tax is based on the profits for the respective periods. 3. Figures have been regrouped wherever considered necessary. 4. Considering Business synergies, risks & returns and assets of the Company, there is one reportable segment of the Company. 5. Consolidated financial results include the results of associates concern and the wholly owned subsidiary 6. The above results have been approved and taken on record by the Board of Directors of the Company at their meeting held on January 31, 2007.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005	31.03.2004
Debt Equity Ratio	1.63	1.65	1.73
Long Term Debt Equity Ratio	0.44	1.31	1.56
Current Ratio	0.55	0.97	1.32
TURNOVER RATIOS
Fixed Asset Ratio	0.89	0.90	0.77
Inventory	23.66	23.50	18.85
Debtors	6.30	7.89	7.65
Interest Cover Ratio	2.55	3.26	4.20
Operating Profit Margin (%)	12.58	13.19	18.77
Profit Before Interest and Tax Margin (%)	6.89	7.56	12.62
Cash Profit Margin (%)	8.84	8.75	11.55
Adjusted Net Profit Margin (%)	3.15	3.13	5.40
Return on Capital Employed (%)	7.21	7.91	10.71
Return on Net Worth (%)	8.66	8.41	11.32

STOCK PRICES

Face Value	Rs.10/-
High	Rs.222.45/-
Low	Rs.216.05/-

LOCAL AGENCY FURTHER INFORMATION

FIXED ASSETS

· Land

· Buildings

· Plant and Machinery

· Electrical Installations

· Office Equipments

· Furniture and Fixtures

· Vehicles

HISTORY

Subject was incorporated on 21^st June 1988 at New Delhi having Company Registration Number 32166.

Subject obtained the Certification of Commencement of Business on 8^th August. By a scheme of amalgamation, the assets and liabilities of the Flex Laminates Limited and Flex Papers Limited were taken by the company effective from 1^st August.

2215640 equity shares allotted to erstwhile Flex Laminates Limited (in proportion 82 shares : 100 shares in Flex Laminates) and 625016 shares allotted to erstwhile Flex Papers Limited (in proportion 56 shares : 100 shares in Flex Papers Limited) both consequent to the scheme of amalgamation without payment in cash.

The other companies in the group are Flex Chemicals, Flex Engineering and Flex Foods. The company manufactures flexible packaging material at its plants in Noida, Uttar Pradesh and near Gwalior, Madhya Pradesh. Its products are used in packing a variety of products like processed foods, toiletries, pharmaceuticals and automobile spare parts. The company’s products include metalised biaxially oriented polypropylene film and holographic flexible packaging material. It also provides complete system packaging.

The company was awarded The Best Paper award in the international exposition on recycling of plastics, held in May 1995 in Davos, for its technology to process mix plastic waste arising in the course of manufacturing packaging material. The famous brands like Pan Parag, Baba and Prince use the company’s packaging. The company’s clients also include big companies like Hindustan Lever, Brooke Bond, Tata Tea, Nestle, etc.

The company is ISO 9002 certified and also a recognised Trading House. In 1995-96, it completed its expansion-cum-backward integration plan involving the setting up of PET film line, BOPP film line and laminates facilities.

In 1999-2000, the company successfully developed 1 Kg. Spout pouch of Taj Mahal Tea and a specially designed Gillet Gel Big Nose Pouch. In addition to this the company has successfully developed a high performance laminate used for packaging of highly hygroscopic products, extra-clear film having excellent optical properties for holographic application.

The company’s film division was awarded ISO –14001 certification. The company’s paid up equity capital was increased by Rs. 100000000due to Preferential issues to FI’s/MF’s and further warrants have been issued in favour of the promoters.

It is also engaged in the manufacture of Rotogravure Cylinders for various types of rotogravure printing, Anilox/Coating Rollers for flexo printing and Shims for holographic embossing.

The main products of the company comprise of Polyester Films, BOPP Films, Poly Films and various combinations of packaging laminates.

Line I, II & III of Film Division are ISO 9002 and ISO 14001 certified.

Management Policy

· Proceed always with ambition and youthfulness

· Sustain a working environment that attracts, retains and develops committed share in the success of the company

· Respect sound theory, develop fresh ideas and make the most effective use

· Enjoy the work and always brighten the working atmosphere

· Strive constantly for a harmonious flow of work

· Be ever mindful of the value of research and endeavour

Pioneering the use of :

· BOPP in barrier metallising

· Holograms in packaging

· Technology Development for chemically coated films

· Producing various packaging machines of renowned technical capability

The company is exploring new technologies for the proper processing of post consumer waste.

It is in trade terms with :

· Aakash Plasto Pack Private Limited

· Anand Packaging Private Limited

· Cosmic Aluminium Wire Private Limited

· Cranex Limited

· Ess Aar Engineering Private Limited

· Gajanan Packers Private Limited

· Glenview Plastics Systems Private Limited

· Heatex Comp. Tools Private Limited

· Image Coding Techn. Private Limited

· New Pack Plastics Private Limited

· Print Pack Machinery Private Limited

YEAR IN RETROSPECT 

During the year under review, the Company achieved a turnover of Rs.10140.860 Millions including other income of Rs.681.222 Millions resulting in a growth of about 9.53% over its turnover of Rs.9258.759 Millions including other income of Rs.376.973 Millions of the previous financial year ended March, 2005.

The profit after tax for the year ended March, 2006 at Rs. 328.661 Millions was higher than the previous financial year ended March, 2005 at Rs.307.750 Millions. During the Year, the cost of raw materials went up by about 10.49% of previous year. Impact of increase in raw material prices, increased competition coupled with pressure in margins of the film business, the working of company was adversely affected even though the sales volume registered a significant growth over previous year. The Board of Directors of the Company after carefully considering the overall financial scenario, regret their inability to recommend any dividend. The operational performance of the Company has been comprehensively covered in the Management Discussion and Analysis Report and the same forms a part of this Directors' Report.

MANAGEMENT DISCUSSION AND ANALYSIS 

FORWARD-LOOKING STATEMENTS

Forward-looking statements are based on certain assumptions and expectations of future events, the Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company's actual results, performance or achievements could thus differ materially from those projected in any such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

Business Review 

The main products of the Company comprise of Polyester Films, BOPP Films, Poly Films and various combinations of these films as laminates. The Company is also engaged in the manufacture of Rotogravure Cylinders for various types of rotogravure printing, Anilox/Coating, Rollers for flexo printing and Shims for holographic embossing. BOPP film is primarily used for applications in packaging food products such as confectionery, biscuits, bakery, pasta, dried foods, meats etc. It is used in the form of over-wraps, crimp seal packs and pouches. BOPP film is also widely used in wrapping cigarette cartons and tobacco-related products, bags for ready-made garments, adhesive tapes and print lamination.

The film has high gloss and transparency and provides a strong moisture barrier, making it suitable for packing many types of consumer products.

The Company in the BOPP film business with its highly cost effective and functionally efficient product is growing at an impressive rate annually. The technologically superior and highly dependable BOPP films produced by the company in its state-of-the-art ISO 9001-2000 certified plants can be structured in upto three layers and tailored for almost any machining requirements and is capable of meeting both Rotogravure and Flexographic printing standards. The product can be used in a wide range of industry/business such as packaging, industrial coating, holography, metalizing, printing & lamination etc.

BOPET film is used in a wide range of applications. Its barrier properties, high tensile and dielectric strength, thermal and chemical stability and toughness make it suitable for a multitude of applications. The film provides a strong barrier to aroma retention and odour, which makes it especially suitable for use in food packaging, electric insulation, office supplies, graphic arts, imaging and industrial applications. Its dimensional stability and high tensile strength makes this film suitable for critical applications such as audio, video and other magnetic tape applications. BOPET film, one of the initial product of the company, has not only succeeded in retaining its market shares but continues to expand its markets in today's dynamic and rapidly changing packaging scenario mainly because of dependable quality. Produced in state of the art ISO 9001-2000 certified plants in different range of microns, the BOPET films have the capacity to sustain the high fidelity graphics and to meet therequirements of both Rotogravure as well as Flexographic printing standards.

The Company has an edge over its competitors because of the fact that it has the facility to provide both side corona treated BOPP film required for good bond strength. The Company produces more than 25 types of films like BOPP film, Polyester film, CPP film, Metallised film and Specialty film etc., thus following the concept of one stop shopping at reasonable price - a definite edge over the competitors.

Products manufactured in the packaging business are laminates made with various combinations of Polyester, Metallised Polyester, Aluminium Foil, paper, BOPP, Poly etc.These laminates are supplied in roll form and also in preformed pouches. These jobs are generally printed in multicolour designs.

With innovative solutions, the Company has cultivated the use of flexible packaging as cost effective and viable primary packs rather than only as refill packs. It offers finished packaging materials for packaging a wide variety of products. The Company's emphasis on product innovations, quality enhancement together with competitive cost has paid rich dividend in terms of significant growth in sales. It has successfully developed several new packaging solutions for various applications suitable for Food industry, the Bakery

and Confectionery Industry, Beverage Industry and the Personal Care Products Industry.

The Company also produces Rotogravure Cylinders for various types of rotogravure printing, Anilox/Coating Rollers forflexo printing and Shims for holographic embossing. The Company is one of the leading manufacturers of rotogravure cylinders in the country and enjoys a large market shares among the organized and leading cylinder manufacturers in India and is recognized for its excellent quality and service. The Company has capabilities to provide complete solutions starting from Artwork/Mockup stage to producing final printing cylinders. The Company has also introduced some value added products e.g. Hologram and the initial response to those products are encouraging. The Hologram produced by the Company has been well accepted both by the Government as well as Private Organization across the country. The Company through aggressive marketing has been able to garner substantial orders from different states and trade enquiries being received are also quite encouraging. Hologram being low cost with better margin will add to the bottom line significantly. Year 2005-2006 began against the backdrop of a historically unprecedented increase in crude oil prices and other downstream petrochemical products, the impact of which could not be fully passed to the customers. This had adverselyimpacted the bottom line.

The Company ended the financial year 2005-2006 with a turnover (net) of Rs.10140.860 Millions including other income of Rs.681.222 Millions as against turnover of Rs.9258.759 Millions including other income of Rs.376.973 Millions in the previous financial year, registering a growth of approximately 9.53%. The profit after tax for the year ended 31^st March 2006 was Rs.328.661 Millions as against Rs.307.750 Millions of the previous finf-cial year.

Directors are pleased to inform you that the Company was awarded PFFCA STAR-2005 (Paper Film and Foil Converters Association) for recognition of excellence for Smart Pack-McDowell No. 1, Soffola Gold, Press-n-Hot Chicken Bags and Laser Pouch. The Company's product, "MIRACLE GROW" package has been honoured in the FPA Awards (Flexible Packaging Association, USA) and also its product "ANKUR LO SODIUM SALT" package has been honoured at the 19^th DUPONT Awards. Their subsidiary company, Flex Middle East FZE has been awarded by JAFZA for their "CONTRIBUTION TO ENVIRONMENTAL WELL BEING".

Future Outlook

The Flexible Packaging Industry has a very crucial role to play in the life style of ordinary people and thus has a bright future. Every broad sector that consumes flexible packaging has its own unique and dynamic set of requirements. The future growth of Flexible packaging material Business is quite good in India and key drivers for its growth are: • Increasing recognition of quality of Indian BOPET & BOPP film and laminate products.

• Entry of Indian players into value added products.

• Cost competitiveness of Indian BOPET & BOPP film and laminate manufacturers.

• Availability of the world class film and laminate production technologies in India.

• Growth in consumption of western-style snack products, confectionery and baked goods, together with increasing hygiene consciousness amongst the population, resulting in even traditional food manufacturers using flexible packaging.

• Increase in new BOPP film applications, such as labels and ink jet and laser printable films.

As capacities for production of BOPP and BOPET films in India are increasing to cater to world demand, Indiais expected to emerge as a leading global supplier with its high quality products and cost competitiveness. Packaged food will deliver the largest volume increases, the majority of which will be derived from flexible packaging because of its relatively low cost andversatility in terms of its adaptability for use in a wide variety and categories in both food and non-food segments. A rising number of smaller households and a growing snacking trend will contribute greatly to the anticipated increase in flexible packaging usage.

Keeping in view the worldwide demand and the growth potential of flexible packaging industry and to facilitate future growth, the Company has expanded its businessby putting up additional manufacturing facilities at Jebel Ali Free Zone, Dubai, UAE through its Wholly Owned Subsidiary Company, i.e. Flex Middle East FZE. The Management has decided to put up another line at Dubai for manufacture of 26400 MT of Polyester Film and 59400 MT of Polyester Chips. The demand of rotogravure cylinders heavily depends on the captive consumption and growth of packaging industry. With the current positive scenario in the packaging industry, the cylinder business of the Company is expected to do well in coming years. The Management is quite hopeful and optimistic about the positive growth both in terms of sales and profitability in the coming years. In order to achieve better synergies, the Board of Directors of the company and Flex Securities Limited, Flex Engineering Limited and FCL Technologies & Products Limited at their meetings held on May, 2006 have approved the proposal for amalgamation subject to such approvals as may be necessary. The merger will result in pooling of resources and strength of all the companies and merged entity will emerge as a single entity providing end-to-end solutions in packaging industry.

Profile

They would like to extend their sincere gratitude to all their business partners and customers at home and in over sixty countries for their unending support.

They are thankful to continued belief and faith in them, in their products and in their services.

At Flex it is always their endeavor to serve customer to best of their abilities.

The world demand of plastic films is rising and is expected to grow 2.8% annually to 5.6 billion pounds by 2005. Plastic films already account for 70% of the global demand among all flexible packaging materials and will continue to post gains at the expense of paper and aluminium foil.

The Flex Industries Film Division is well equipped with plants that have unparalleled manufacturing capability and is all set to face enthusiastically the ever increasing challenges of the future. With emphasis on advancement through technological development, innovation, commitment to safety and environment, high ethical standards and integrity, Flex is expanding and growing rapidly.

People are their greatest asset and they employ highly skilled, experienced and talented individuals, dedicated and motivated to the task of producing a product to match the every need, every requirement.

Let us put their experience to help customer with complete flexible packaging solutions.
Together let us take the steps towards accomplishment of their dreams and goals, now and always!

Flex Industries Limited (Film Division), spread across an area of over 95,000 sq. meters, located in the fastest growing places, very close to the capital city of India, New Delhi, is one of the leaders in the Plastic Film Industry in the Asia Pacific region.

With a strong foundation, total commitment to exceptional standards of performance and productivity, dedication to excellence, willingness to embrace new ideas, learning continuously and working together effectively, they are what it takes to be India’s largest plastic films company.

As part of the Flex Group, they have over twenty years of experience and know-how in polymer technology, a record of success and innovation and are a publicly traded company in the DSE since 1989, manufacturing and supplying products and delivering services that are world class, world wide.

With an ISO 9001-2000 (revised) and ISO 14001 certification, they understand their commitment to the environment and society and are dedicated to supplying quality products and services that are acceptable across the entire globe.

Flex Industries Limited employs over 3,000 personnel, enjoys the support of over 28,000 shareholders and has grown at the rate of 12% over last year.

Continuing to develop their international perspective they are a major player in several dynamic and rapidly changing global markets with their market share having expanded to over 65 countries in several regions.

At Flex they are dedicated to make and supply superior products that deliver real benefit and performance improvements to their customers and they go “that extra mile” to service them. They understand the value of time of their clients and are therefore committed to deliver on schedule in order to smoothen their business operations. Over the past few decades of their existence it has been their continuous endeavor to supply complete solutions that bring a smile on the face of their customers and associates because for us it is when they smile is when they smile!

Manufacturing Facilities

In their state-of-the-art, twenty-four hour, manufacturing facility, they produce a vast variety of Plastic films suitable for a wide range of applications. All their plants are imported from Europe and the US. Their machines not only have greater capacity, they can run at very high speeds and can accommodate product widths of up to 7 meters, producing plain, corona treated or chemically coated films.

They have three production lines for manufacturing Biaxially Oriented Polyethylene Terapthalate Films (BOPET) with a capacity of over 54,000 Metric Tonnes per annum. Sold under the brand name of FLEXPET™ and available in the thickness range of 10 to 50 microns, these films offer excellent machinability, dimensional stability, clarity, moisture and gas barrier, high tensile strength, outstanding durability, runnability, printability, surface smoothness and resistance to tear and abrasion. FLEXPET™ is suitable for various applications like printing and packaging, thermal lamination, metallising, hot stamping, electrical insulation, holography, synthetic yarn etc.

Biaxially Oriented Polypropylene (BOPP) film line has an annual production capacity in excess of 18,000 Metric Tonnes and produces film of high strength, dimensional stability and stiffness, with excellent barrier to moisture and gas and is heat sealable on one or both sides. Sold under the brand name of FLEXOPP™ these films find applications in print lamination, reverse print & lamination, pressure sensitive adhesive tapes, release applications, decorative applications, reams and sheet for manual wrapping, bag application, print and pouching, cable wrapping, vacuum metallising base film, overwrap, printing and lamination.

Starting with the Polyester and Polypropylene film lines, their plant expansion has never ceased. Increasing production capacity to meet the demand for film in the domestic and international markets, Flex put up two state-of-the-art, high performance, Metallisers recently with a total capacity of 11,000 Metric Tonnes per annum, producing barrier metallised films, sold under the brand name of FLEXBARRIERMET™, that can be used for converting, packing, laminating, insulation ducting, electronic goods packaging, metallic yarns and in other decorative applications. Engineered to manufacture a high degree of barrier metallised films with optical density ranging from 0.5 to 3, this metalliser offers excellent barrier properties to substrates like polyester film (9-50 microns), BOPP film (10-80 microns), CPP films (18-40 microns), LDPE films (25-50 microns), Nylon (12-50 microns) which can be barrier metallised upto a width of 2,450mm.

Expanding the area of business and diversifying the line of products, Flex has also set up a five layered Cast Polypropylene film line with a capacity of 6,000 Metric Tonnes per annum. Designed to meet the functional requirements of the user, these films offer better heat seal strength and opticals, excellent moisture barrier, metallisation and twistability and higher tear strength, weld strength and yield as compared to many other films. These CPP films are available in the thickness range of 20-150 microns with a maximum width of 2,400mm and corona treatment on either one or both sides. The wide range of applications for these films include lamination and metallised lamination film for packaging, bakery and confectionary wraps, biscuits and cake packaging, textile bags, twist and metallised twist wraps, anti fog film for fruit, vegetable and bulk flower wrapping, over wrap of toilet papers, napkins and health care products etc.

Thus they are continually updating their “World Class Manufacturing” capabilities by investing in new equipment, technology and research and development.

Subsidiary

Flex America Inc., located in North Carolina, USA, is a fully owned subsidiary of
Flex Industries Limited.

Set up in June 2001 to cater to their esteemed customers in the United States more effectively and efficiently it has recorded growth in sales and profits since the time of its formation.

Selling a variety of Polyester, BOPP, CPP and Metallised Films to a huge customer base, Flex America Inc. is making a name for itself in the plastic film industry in the US- reaching and crossing ever higher goals and targets each day.

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.43.14
UK Pound	1	Rs.84.71
Euro	1	Rs.57.58

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	6
OPERATING SCALE	1~10	6
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	5
--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		53

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