MIRA INFORM REPORT

Report Date :

14.08.2008

IDENTIFICATION DETAILS

Name :	VST INDUSTRIES LIMITED
Registered Office :	1-7-1063/1065, Azambad, Hyderabad – 500020, Andhra Pradesh
Country :	India
Financials (as on) :	31.03.2008
Date of Incorporation :	10.11.1930
Com. Reg. No.:	000576
CIN No.: [Company Identification No.]	L29150AP1930PLC000576
TAN No.: [Tax Deduction & Collection Account No.]	HYDV00023C
Legal Form :	A Public Limited Liability Company. The Company’s Shares are Listed on the Stock Exchange.
Line of Business :	Manufacturer and Marketer of Cigarettes.

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 12000000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established company having fine track. Available information indicates high financial responsibility to the company. Financial position is healthy. Fundamentals are strong. Trade relations are fair. Payments are correct and as per commitments. The company can be considered good for your proposed business dealings of USD 29000 on clean credit terms. Maximum credit line of USD 3 million can be considered against D/A or D/P terms.

LOCATIONS

Registered Office/ Factory :	1-7-1063/1065, Azambad, Hyderabad – 500020, Andhra Pradesh, India
Tel. No.:	91-40-27610460/ 27615161/ 27617531
Fax No.:	91-40-27615336
E-Mail :	saisankar@vstind.com
Corporate Office :	P O Box 1804, Hyderabad – 500020, Andhra Pradesh, India
Tel. No.:	91-40-27610460
Fax No.:	91-40-27615336
Correspondence Address:	Plot No.15, Hindi Nagar, Near Sai Baba Temle, Panjagutta, Hyderabad – 500034, India
Tel No.:	91-40-23356507/ 23350586/ 23356975/ 6662190
Fax No.:	91-40-23354042
Email :	sta@sathguru.com

DIRECTORS

Name :	Mr. Abhijit Basu
Designation :	Chairman
Name :	Mr. Raymond S. Noronha
Designation :	Managing Director
Date of Birth/Age :	57 years
Qualification :	BA (Hons.)
Experience :	34 years
Date of Appointment :	01.11.1998
Name :	Mr. Jayampathi Divale Bandaranayake
Designation :	Director
Name :	Mr. T. Lakshmanan
Designation :	Director
Name :	Mr. V. Sekar
Designation :	Director
Name :	Mr. R. V. K. M. Suryarau
Designation :	Director
Name :	Mr. S. Thirumalai
Designation :	Director

KEY EXECUTIVES

Name :	Mr. Devraj Lahiri
Designation :	Vice President Brands
Date of Birth/Age :	35 years
Qualification :	B. Com, MBA
Experience :	10 years
Date of Appointment :	12.03.2001
Name :	Mr. Madhava Reddy
Designation :	Vice President Leaf
Date of Birth/Age :	55 years
Qualification :	B. Sc.
Experience :	31 years
Date of Appointment :	15.09.1976
Name :	Mr. Ramadhar Reddy
Designation :	Vice President – HR
Date of Birth/Age :	51 years
Qualification :	B. Com, MBA, Diploma in Labour Law
Experience :	28 years
Date of Appointment :	13.11.2000
Name :	Mr. Sai Sankar N.
Designation :	Finance Director and Company Secretary
Date of Birth/Age :	50 years
Qualification :	B. Com (Hons.), FCA, FICWA, FCS
Experience :	27 years
Date of Appointment :	17.03.1995
Name :	Mr. Sanjay Khanna
Designation :	Corporate General Cousel
Date of Birth/Age :	52 years
Qualification :	BA, LLB
Experience :	27 years
Date of Appointment :	15.03.1983
Name :	Mr. Dr. Subba Rao M.
Designation :	Vice President Technical
Date of Birth/Age :	57 years
Qualification :	MSC, Ph.D
Experience :	31 years
Date of Appointment :	06.11.1984
Name :	Mr. Venkatnarayan Rao
Designation :	Shift Manager Secondary Manufacturing Department
Date of Birth/Age :	58 years
Qualification :	L.E.E.
Experience :	35 years
Date of Appointment :	01.10.1970

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

(As on 31.03.2008)

Names of Shareholders	No. of Shares	Percentage of Holding
Promoters and Associates	4965902	32.16
Foreign Institutional Investors	59354	0.38
Public Financial Institutions	1791090	11.60
Mutual Funds	250	0.00
Nationalised Banks and Other Banks	16270	0.11
NRIs and OCBs	55745	0.36
Bodies Corporate	6195634	40.13
Indian Public and Others	2357675	15.26
Total	15441920	100.00

BUSINESS DETAILS

Line of Business :

Manufacturer and Marketer of Cigarettes.

Products :

Products Description	Item Code No
Cigarettes Containing Tobacco	24022000
Unmanufactured Tobacco Tobacco Others	24011009
Other Articles of Paper or Paper Board	48239009

Brand Name :

VST

Trade Name :

• 'Charms'
• Charminar'
• 'Gold'
• ‘Charminar Specials’
• ‘Shah-I-Deccan’
• ‘Qila’
• ‘High Court’
• ‘Vazir’
• ‘Ambassador’

GENERAL INFORMATION

No. of Employees :	1400
Bankers :	Andhra Bank, Hyderabad, Andhra Pradesh State Bank of India, Hyderabad, Andhra Pradesh Bank of India, Hyderabad, Andhra Pradesh

Banking Relations :	Good
Auditors :
Name :	Lovelock and Lewes Chartered Accountant
Address :	Hyderabad – 500034, Andhra Pradesh, India
Membership :	Confederation of Indian Industry
Associates/Subsidiaries :	Hallmark Tobacco Company Private Limited VST Distribution, Storage and Leasing Company Private Limited, (VDSL) Tobacco Diversification Investments Private Limited, (TDIL) Hallmark Investment Limited Tobacco Leaf Investments Limited Vazir Investments Limited Tobacco Diversification Investment Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
50000000	Ordinary Shares	Rs.10/- each	Rs.500.000 Millions
5000000	Preference Shares	Rs.100/- each	Rs.500.000 Millions
	Total		Rs.1000.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
15441920	Ordinary Shares	Rs.10/- each	Rs.154.419 Millions

OF THE ABOVE ORDINARY SHARES

No. of Shares	Type	Value	Amount
81065	Ordinary Shares of Rs.10 each were partly paid for in cash to the extent of Rs.6,94,843 and partly paid to the extent of Rs.1,15,807 for a consideration other than cash as Bonus Shares by Capitalisation of Reserves	Rs.10/- each	Rs.0.810 Millions
918935	Ordinary Shares of Rs.10 each were partly paid to the extent of Rs.1,54,286 pursuant to an agreement without payment being received in cash and partly paid to the extent of Rs.90,35,064 for a consideration other than cash as Bonus Shares by Capitalisation of Reserves	Rs.10/- each	Rs.9.189 Millions
12671920	Ordinary Shares of Rs.10 each were allotted for a consideration other than cash as Bonus Shares by Capitalisation of Reserves	Rs.10/- each	Rs.126.719 Millions
	Total

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2008	31.03.2007	31.03.2006
SHAREHOLDERS FUNDS
1] Share Capital		154.419	154.419	154.400
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		2164.901	1947.916	1763.300
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		2319.320	2102.335	1917.700
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		0.000	0.000	0.000
TOTAL		2319.320	2102.335	1917.700
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		1188.553	948.261	880.700
Capital work-in-progress		28.683	22.537	9.600
INVESTMENT		2233.391	1872.992	1643.400
DEFERREX TAX ASSETS		92.376	109.813	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	760.969	579.996	494.700
	Sundry Debtors	43.176	52.478	38.700
	Cash & Bank Balances	45.787	314.558	148.700
	Other Current Assets	2.113	14.220	0.000
	Loans & Advances	130.292	111.092	269.700
Total Current Assets		982.337	1072.344	951.800
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	1883.607	1539.041	1347.700
	Provisions	322.413	384.571	220.100
Total Current Liabilities		2206.020	1923.612	1567.800
Net Current Assets		(1223.683)	(851.268)	(616.000)
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		2319.320	2102.335	1917.700

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2008	31.03.2007	31.03.2006
Sales Turnover		3399.679	3361.960	7164.800
Other Income		157.822	158.072	239.000
Total Income		3557.501	3520.032	7403.800
Profit/(Loss) Before Tax		860.574	847.626	827.900
Provision for Taxation		277.043	296.709	396.900
Profit/(Loss) After Tax		583.531	550.917	431.000
Export Value		607.457	468.971	NA
Imports :
	Raw Materials	51.582	37.742	NA
	Stores & Spares	5.983	3.407	NA
	Capital Goods	257.136	120.748	NA
Total Imports		314.701	161.897	NA
Expenditures :
	Manufacturing Expenses	1190.663	1392.287	36.800
	Administrative Expenses	0.000	0.000	417.700
	Raw Material Consumed	1369.072	1165.359	1172.800
	Excise Duty	0.000	0.000	4040.300
	Salaries, Wages, Bonus, etc.	0.000	0.000	394.400
	Employment Cost	0.000	0.000	388.720
	Interest	0.000	0.000	0.080
	Power & Fuel	0.000	0.000	22.700
	Depreciation & Amortization	137.192	114.760	102.400
Total Expenditure		2696.927	2672.406	6575.900

QUARTERLY RESULTS

PARTICULARS	30.06.2008 1^st Quarter
Sales Turnover	597.900
Other Income	65.900
Total Income	663.800
Total Expenditure	494.100
Operating Profile	169.700
Interests	0.100
Gross Profit	169.600
Depreciation	40.500
Tax	25.500
Reported PAT	106.800

KEY RATIOS

PARTICULARS	31.03.2008	31.03.2007	31.03.2006
Debt-Equity Ratio	0.000	0.00	0.00
Long Term Debt-Equity Shares	0.000	0.00	0.00
Current Ratio	0.57	0.62	0.71
TURNOVER RATIOS
Fixed Assets	3.73	4.03	4.48
Inventory	11.54	13.50	14.48
Debtors	161.81	159.22	141.60
Interests Cover Ratio	662.92	942.67	1357.88
Operating Profit Margin (%)	12.92	13.28	16.59
Profit Before Interests and Tax Margin (%)	11.14	11.70	15.16
Cash Profit Margin (%)	9.32	9.18	10.83
Adjusted Net Profit Margin (%)	7.54	7.60	9.40
Return On Capital Employed (%)	39.78	43.24	61.61
Return On Net Worth (%)	26.94	28.08	38.21

LOCAL AGENCY FURTHER INFORMATION

HISTORY:

Some of the successful brands of VST, (the erstwhile Vazir Sultan Tobacco Company) are Charminar, Charminar Special Filter, Charms Mini Kings and Charms Virginia Filter. VST was incorporated in 1930 at Hyderabad, AP, and has a factory at Secunderabad, AP. It has collaboration with the BAT Group, UK, which holds a 32.16% stake in the company. In 1990, the company entered the United Arab Emirates market, launching Kingston Mini Kings.  

To develop the export business, it introduced fire-cured, light-soil Burley and other non-traditional varieties of tobacco, followed by another brand, Kingston Dual Filter, in 1991. In the same year, it was accorded the status of an export house. It also acquired an import licence for two sophisticated high-speed precision Log Max cigarette manufacturing machines from France. The company also exports agricultural products. 

Subject subsidiaries are Hallmark Tobacco Company Private Limited, VST Distribution, Storage and Leasing Company Private Limited, (VDSL) and Tobacco Diversification Investments Private Limited, (TDIL). During the year 2004-05 Tobacco Diversification Investments Private Limited, amalgamated with VST Distribution, Storage & Leasing Company which came into effect on 1st April 2004. The company has alloted 3030000 1% Usecured Optionally Convertable Debentures of Rs.10 each, in lieu of VST's holding in the TDIL in the ratio of 1:1. 

 VST'S PLANT LOCATION IS AT AZAMABAD IN HYDERABAD. 

VST introduced Gold Premium Filter in Jul.'93. In 1992-93, it entered into a technical collaboration agreement with High Value Horticulture, UK. It has signed an agreement with Science and Technology Ventures, Israel. In 1994, the company incorporated VST Natural Products (formerly VST Agro Tech), to establish manufacturing facilities to process high value horticultural crops, for export. In 1994-95, the company had launched two brands - Vijay Deluxe and Charminar Standard. VST is the largest exporter of cigarettes to the middle-east from India. 

SEBI cleared the open offer of Brightstar Investment to acquire 20% equity stake in the company. The Open Offer made by Bright Star Investments Ltd at Rs.112 per share was revised to Rs.151 per share and the counter offer made by Russell Credit Ltd at Rs.115 per share was also revised to Rs.125 per share respectively. Both the offer was closed in during June, 2001.

Processing lines of the company have been modernised during the year 2003-04 by inducting Hauni KT2 Stem Cutter to improve filling values and reduce tobacco wastage and New Design spillage free Cut Stem and Cut Lamina Autofeeds to reduce tobacco wastage in the year 2004-05.It also installed a new humidification system with auto controls on Relative Humidity to improve stored cut tobacco moisture consistency and freshness. 

In the year 2003-04 the secondary manufacturing department has also modernised by incorporated new Auto Feed Systems on individual making machines in order to ensure consistency of the product in . The secondary department has been modernised by inducting two Molmac MK9 MTF (one for filter and one for micros), New weight control systems (TEWS and MRK3), IPMs (individual Parcellers) and installed new Quality Test modules to improve and maintain consistent product quality in the year 2004-05.

INDUSTRY STRUCTURE & DEVELOPMENT 

The financial year 2007-08 was one of the most challenging one for the industry and in particular, for the Company. Two issues namely imposition of Value Added Tax (VAT) and Graphic Health Warnings (GHW) on cigarette packets dominated the year and made the markets remain in a turbulent state. 

INDUSTRY ISSUES 

On 1st April, 2007, VAT on cigarettes was imposed for the first time in most markets where the Company operates. VAT being ad valorem in nature, is imposed on the invoice price and had an impact of 12.5% in the price to the consumer. This coupled with an increase of 6% (inclusive of cess) in Excise Duties in the Union Budget 2007 resulted in increase of cigarette prices by more than 22%. It was expected that the industry would shrink in the current year as this rise was unprecedented in the cigarette industry. GHW has been the other issue which remained in news throughout the year. Originally scheduled for implementation during February, 2007, it was postponed a number of times during the year and the current revised date is June 2008. This uncertainty of the GHW being implemented resulted in creating uncertain market conditions through the year. 

SEGMENT WISE PERFORMANCE 

The Company considers tobacco and related products as the primary segment for reporting. Geographical segments considered for disclosure mainly consist of sales within India and sales outside India. The entire activity pertaining to sales outside India is carried out from India. 

 MARKET SCENARIO 

In spite of the twin challenges mentioned above, the Company was able to grow volumes by 1% during the current financial year. More heartening, was the change in mix with filters share improving substantially. The value for money filter brand 'Moments' was launched during the last quarter of the year 2006-07 and continues to show promise. It is also pertinent to add that brands launched during the last five years, namely Special Extra Smooth, Moments, Shaan, etc. have continued to show great promise and currently their share in the total volume is around 20%. 

The improved economic conditions as well as the Company's strategic thrust in concentrating on the tobacco business have helped your Company to continue on the growth path despite great adversities. 

The current Union Budget 2008-09 has dealt yet another unprecedented blow to the cigarette industry as a whole and has much more significant adverse effect on your Company in particular. The excise duty for non-filter cigarettes has been increased by two and a half times to five times, a selective increase not seen in the history of the cigarette industry. Upto length of 60mm brands the duty has been increased from Rs.168 per 1000 cigarettes to Rs.819 per 1000 cigarettes, nearly 5 times. For cigarettes between 60mm to 70mm, the excise duty has been increased from Rs.546 per 1000 cigarettes to Rs.1323 per 1000 cigarettes, an increase of nearly two and a half times. On the other hand, Excise Duty rates for the entire filter segment, accounting for 70% of industry volume remain unchanged. 

Two plain segments constitute around 55% of your Company's market and such record increases can only create significant competitive disadvantages for us in the market place. As this move by the Government is selectively punitive, representations have been made to the Finance Ministry in New Delhi and also been taken up by the industry to moderate duty increases. Nevertheless, the Company has responded to such challenges in the past and is confident that it will overcome the current crises. For the industry however, this translates to impact of 30% on volumes and it would be fair to estimate that there would be substantial reduction in volumes in these two segments, as to render them virtually insignificant. 

During the year the cigarette volumes grew from 8653 mns in 2006-07 to 8823 mns in 2007-08. The value realizations were also higher at Rs.7099.400 Millions up from Rs.6749.800 Millions in the previous year. 

LEAF TOBACCO 

They are happy to report that the Company has recorded Rs.595.500 Millions leaf export turnover, which is 32% higher than the year 2006-07, despite severe competition and rupee appreciation. 

The Company has established special tobaccos for niche markets, which are being produced by the large farmer base of your Company. This has helped in optimising the turnover and profit and also helped in economic uplift of the backward regions. The Company had entered into long term (10 years) tie-ups with potential customers for Oriental Tobacco development and marketing. They are now in the second year of commercial operations, and they look forward to 13% export growth for next three years. They have established markets with premium customers for Air cured Burley exports and Fire cured tobaccos and this will also ensure steady export growth in the years to come. The Company continues to retain the premier status in Sun/Air/Fire cured tobaccos. There is however increased incidence of freelancers getting into development areas due to spurt in demand for Sun/Air/Fire cured tobaccos. 

As a social responsibility to conserve greenery, the Company is continuing social forestry through afforestation and Trees for Life and also actively discouraging child labour involvement in tobacco growing/processing. Leaf function has been recommended for SA 8000 Certification by Registro Italiano Navale India (RINA). 

FINANCE

PROFITS 

The Profit after Tax for the year at Rs.583.500 Millions is the highest ever recorded by the Company in its history. Tight Working Capital Management and cost control measures with specific emphasis on non-value added activities have contributed to improvement in profitability. Further the Company's focus on improving the tobacco business has yielded favorable results. 

The performance is all the more commendable, having been achieved under the most difficult conditions. 

TREASURY OPERATIONS

The Company continues to follow a conservative approach in deploying its temporary surplus funds. Predominantly these have been invested in Fixed Maturity Plans (Debt Scheme). A very small portion has been deployed in Equity Schemes. Capital preservation with optimal returns has been the principle the Company has been following consistently. 

DIRECTORS 

DIRECTORS RETIRING BY ROTATION 

In accordance with Article 93 of the Articles of Association of the Company, Air Chief Marshal I.H. Latif (Retd.) and Mr. Raymond S. Noronha retire from the Board and being eligible, offer themselves, for re-election. The Board recommends their re-appointment. 

AIR CHIEF MARSHAL I.H. LATIF (RETD.) 

Air Chief Marshal Latif was appointed a Director on the Board of the Company with effect from 22nd May, 1990. He was appointed under the provisions of Section 257 of the Companies Act, 1956 at the Annual General Meeting held on 20th July, 1990 and was last retired and reappointed at the Annual General Meeting held on 28th July, 2005. Air Chief Marshal Latif is now due to retire by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment.  

Air Chief Marshal Latif has had nearly 52 years of experience in Government service, first in the Air Force where he became the Chief, and thereafter as Governor of Maharashtra and finally as Ambassador to France. He thus brings to the Board valuable experience and expertise not only in technology and engineering but also organization and management of human resources. In addition to being a Member on the Board of the Company, he is also the Chairman of Shareholders Grievance Committee and a Member of Audit Committee and Committee of Directors of your Company. He is also a member of various institutes, committees and societies. 

MR. RAYMOND S. NORONHA 

Mr. Raymond S. Noronha was appointed a Director on the Board of your Company with effect from 1st November, 1998. He was appointed under the provisions of Section 257 of the Companies Act, 1956 at the Annual General Meeting held on 27th September, 1999 and was last retired and reappointed at the Annual General Meeting held on 28th July, 2005. Mr. Noronha is due to retire by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for reappointment. 

Mr. Noronha is a B.A. (Hons.) from St. Stephen's College, Delhi and attended the Wharton Advanced Management Program (1995) at Philadelphia, USA. He has had over 34 years of varied experience in the cigarette business both international and domestic and has held several top level positions for over a decade. He is a Member of the Committee of Directors and Shareholders Grievance Committee of your Company. He is a director on the board of the Tobacco Institute of India. 

DIRECTORS' RESIGNATION AND APPOINTMENTS 

MR. JAYAMPATHI DIVALE BANDARANAYAKE 

Mr. J.D. Bandaranayake was nominated by British American Tobacco as a Director of the Company with effect from 29th October, 2007 in place of Mr. Andrew O'Regan. He holds office upto the date of the forthcoming Annual General Meeting. A notice has been received from a Member pursuant to Section 257 of the Companies Act, 1956 intimating the intention to propose a resolution for the appointment of Mr. Bandaranayake as a Director of the Company. 

Mr. Bandaranayake is a graduate of Law (Sri Lanka) and a Fellow of the Institute of Chartered Secretaries and Administrators (UK) and a Fellow of Institute of Personnel Management (Sri Lanka). Mr. Bandaranayake retired as Deputy Managing Director of Ceylon Tobacco Company, Sri Lanka in July 2007 after 40 years of service. He is a director on the board of Ceylon Tobacco Company Limited Coca Cola Beverages, Sampath Bank Limited James Finlay and Company Limited Union Assurance Limited, Hayleys Limited and West Coast Power (Pvt) Limited all in Sri Lanka. He is also a director on the Board of Investment of Sri Lanka. He is the Vice Chairman of the Ceylon Chamber of Commerce. 

The Board of Directors place on record their deep appreciation of the contribution made to the Company by Mr. Andrew O'Regan. 

MR. V. SEKAR 

Mr. V. Sekar was nominated by General Insurer's (Public Sector) Association of India as a Director of the Company with effect from 29th October, 2007 in place of Mr. T. Lakshmanan. He holds office upto the date of the forthcoming Annual General Meeting. A notice has been received from a Member pursuant to Section 257 of the Companies Act, 1956 intimating the intention to propose a resolution for the appointment of Mr. Sekar as a Director of the Company. 

Mr. Sekar is a Chartered Accountant. He joined the General Insurance Industry in 1975 and has held various positions in the Oriental Insurance Company Limited, prior to his assignment as General Manager of United India Insurance Company Limited; He has rich experience of more than three decades in the Oriental Insurance Company Limited. He is also a director on the board of United India Insurance Company Limited, Chennai. 

MR. T. LAKSHMANAN 

Mr. T. Lakshmanan resigned from the Board of the Company as a Nominee Director and was appointed as Additional Director of your Company with effect from 29th October, 2007. He holds office upto the date of the forthcoming Annual General Meeting. A notice has been received from a Member pursuant to Section 257 of the Companies Act, 1956 intimating the intention to propose a resolution for the appointment of Mr. Lakshmanan as a Director of the Company. 

Mr. Lakshmanan is a Post Graduate in Science and a Member of FFII. He has over 33 years of experience in various departments of General Insurance Corporation (GIC) and retired as General Manager of GIC in 2001. He was a nominee Director on the Board of your Company prior to his appointment as an Additional Director.  

Separate Resolutions for the appointments of Mr. J.D. Bandaranayake, Mr. V. Sekar and Mr. T. Lakshmanan are being put up for the approval. 

FINANCIAL SERVICES BUSINESS 

The Company had entered into the Financial Services Business in 1993 through its subsidiary company, VST Investments Limited (VSTI). Since the Company wanted to exit from the financial services business, Subject was amalgamated with ITC Agro Tech Finance and Investments Limited (ITCATF) with effect from 1st April, 1996 and the said amalgamation was approved by the Hon'ble A.P. High Court by its Order dated 30th December, 1996. However, certain amounts due to the Company remained with ITCATF. 

The Company had also nominated two of its employees as directors on the Board of ITCATF to look after the investments and seek their recovery.  

Subsequently, ITCATF went into losses and eventually a winding up petition was instituted. The Andhra Pradesh High Court, by an Order dated 28th June, 2001 directed winding up of ITCATF and appointed the Official Liquidator (OL) as its Liquidator to take necessary steps. A Company petition was filed by the OL in the Hon'ble A.P. High Court seeking directions to some of the ex-Directors of ITCATF to file a Statement of Affairs which had not been done. An application was also filed by the OL against some of the Directors of ITCATF (in liquidation) for a direction to deliver possession of the assets, books and records of ITCATF and pursuant to the said directions, some records pertaining to ITCATF were received by the OL. The Hon'ble A.P. High Court decided to implead the Company along with ITC Limited and Agro Tech Foods Limited in order to assist in the matter. Discharge petitions have been filed by all five ex-Directors of ITCATF and their trial commenced. Meanwhile, one of the ex-Directors has filed the Statement of Affairs in the prescribed format.  

By order dated 28th February, 2006, the Hon'ble A.P. High Court had directed investigation into the matter to find out the whereabouts of records and documents. The Company along with ITC filed an Appeal against this order and the Division Bench was pleased to grant stay of the said Order. By its Order dated 10th July, 2007, the Division Bench was pleased to allow the Company's appeal and directed the Regional Director, Corporate Affairs, Chennai to conduct an investigation and submit a report showing who were the persons who promoted ITCATF and who were the persons responsible for running its affairs until its winding up. This investigation is still in progress. 

In the meantime, one of the ex-Directors of ITCATF filed an application for the Court to summon original documents and also to recall the OL for cross examination. This was dismissed by a single judge of the Hon'ble A.P. High Court by its Order dated 27th September, 2006. Against this an Appeal was filed before the Division Bench who, by Order dated 12th February, 2007, was pleased to grant stay of proceedings until further orders. As a result of this, the learned single judge of Hon'ble A.P. High Court has indefinitely stayed further proceedings in the trial of the five ex- Directors of ITCATF. 

Fixed Assets:

• Goodwill and Trade Marks
• Land Freehold
• Buildings Freehold
• Leasehold Property
• Plant and Machinery
• Leasehold Equipment
• Motor Vehicles

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.42.67
UK Pound	1	Rs.80.92
Euro	1	Rs.63.71

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	7
PAID-UP CAPITAL	1~10	6
OPERATING SCALE	1~10	7
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	7
--PROFITABILIRY	1~10	7
--LIQUIDITY	1~10	7
--LEVERAGE	1~10	7
--RESERVES	1~10	7
--CREDIT LINES	1~10	7
--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	NO
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		62

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.	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