MIRA INFORM REPORT

Report Date :

24.01.2008

IDENTIFICATION DETAILS

Name :	AVON ORGANICS LIMITED
Registered Office :	Survey No. 18, Yawapur Village, Sadashivpet Mandal, Medak District – 502 291, Andhra Pradesh
Country :	India
Financials (as on) :	31.03.2007
Date of Incorporation :	03.08.1993
Com. Reg. No.:	01-16112
CIN No.: [Company Identification No.]	L24110AP1993PLC016112
TAN No.: [Tax Deduction & Collection Account No.]	HYDA01193D / HYDA01216F
Legal Form :	It is a public limited liability company. The company's shares are listed on the Stock Exchanges.
Line of Business :	Manufacturer and Exporter of diketene and its derivatives for pharmaceuticals, agro chem, dyestuff and pigment industries.

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 1240000
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 fair. Business is active. Payments are reported as usually correct and as per commitments. The company can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	Survey No. 18, Yawapur Village, Sadashivpet Mandal, Medak District – 502 291, Andhra Pradesh, India
Tel. No.:	91-8455-52290
Mobile No.:	91-9949828083 /84
Fax No.:	91-8455-251536
E-Mail :	avon@avonorganicltd.com
Website :	www.avonorganicsltd.com
Corporate Office :	6-3-865, 4th Floor, Madhupald Towers, Opposite: Greenland Apartments, Ameerpet, Hyderabad, India
Tel. No.:	91-40-23414432/23405042
Fax No.:	91-40 -23404438
E-Mail :	cs_l@avonorganicsltd.com
Factory 1 :	Diketene Division: Survey No. 18, Yawapur, Sadasivpet (M), Medak District, Andhra Pradesh, India
Tel. No.:	91-9498-28083/84
Factory 2 :	Bio-Tech Division: Plot No. E-2, Chincholi Industrial Area Solapur, Maharashtra; India
Tel. No.:	91-217.- 2357339 / 2357339

DIRECTORS

Name :	Dr. P.M. Bhargava
Designation :	Chairman
Name :	Mr. P.R. Agarwal
Designation :	Managing Director
Date of Birth/Age :	68 Years
Qualification :	M. S.
Experience :	41 Years
Date of Appointment :	05.08.1993
Name :	Mr. Rajesh Agarwal
Designation :	Executive Director
Address :	B. Tech [BITS], MBA [IIM]
Date of Birth/Age :	43 Years
Experience :	19 Years
Date of Appointment :	01.10.1994
Name :	Mr. Umesh Agarwal
Designation :	Director-Marketing
Name :	Dr. T. Krishna
Designation :	Director
Name :	Mr. C. K. C. Gupta
Designation :	Director
Name :	Mr. S. Chidambaram
Designation :	Director
Name :	Dr. T. V. Krishna Rao
Designation :	Alternate Director

KEY EXECUTIVES

Name :	Mr. T. Venkateswara Prasad
Designation :	Chief Financial Officer
Name :	Ms Runa Karan
Designation :	Company Secretary

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares	Percentage of Holding
Resident Individuals	6662222	52.50
NRI's, Fll's, OCB's	467612	3.68
Bodies Corporate	2152294	16.96
Promoters, Directors, Associates	3079949	24.27
Mutual funds, Banks, Fl's	158600	1.25
Others	170223	1.34
Total	12690900	100.00

BUSINESS DETAILS

Line of Business :

Manufacturer and Exporter of diketene and its derivatives for pharmaceuticals, agro chem, dyestuff and pigment industries.

Products :

Item Code No. (ITC Code)	291590
Product Description	Mono Methyl Aceto Acetamide

Item Code No. (ITC Code)	29241002
Product Description	Aceto Acetanilide (AAA)

Item Code No. (ITC Code)	30039089
Product Description	Ephedrine HCL

PRODUCTION STATUS

Particulars	Unit	Installed Capacity	Actual Production
Diketene Division – Diketene	MT [TPA]	2000	--
Biotech Division – Ephedrine HCL	MT [TPA]	300	--
Mono Methyl Aceto Acetamide (MMAA)	MT [TPA]	--	860.47
Aceto Acetanilide (AAA)	MT [TPA]	--	488.06
Other Derivatives	MT [TPA]	--	615.89

GENERAL INFORMATION

Suppliers :

Ø Sri Ram Enterprises

Ø Sarita Enterprises

Ø Mysore Amonia (Private) Limited

Ø Ravi Industries, Hyderabd Traders

Ø Standard Seals Engineering

Ø Vedsri I.T Solutions Private Limited

Ø S.V. Engineering Works,

Ø Standard Solutions Swiss Glascoat Equipments Limited

Ø Fine Pac Centrifuges

Ø Fluorosheild Equipments

Ø Standard Products Manufacturing Company

Ø Sri Sai Ram Polymers

Ø Amit Industries

Ø Coroshield Equipments,

Ø Osho Coatings Private Limited

No. of Employees :

Around 250

Bankers :

Ø State Bank of Hyderabad

Ø State Bank of India

Ø UTI Bank Limited

Ø UCO Bank

Ø ING Vysya Bank Limited

Ø Punjab National Bank

Ø ICICI Bank Limited

Ø IDBI Bank Limited

Facilities :

Particulars	As on 31.03.2007 [Rupees in Millions]
SECURED LOAN
Term Loans
From Banks
ICICI bank Limited, Hyderabad	7.775
UCO Bank, Secunderabad.	43.541
State Bank of India, Hyderabad	8.714
Axis Bank Limited, Hyderabad	46.693
ING Vysya Bank Limited, Secunderabad	42.659
Punjab National Bank, Hyderabad	22.312
IDBI Bank Limited, Hyderabad	12.172
WORKING CAPITAL LOAN
FROM BANKS:
State Bank of Hyderabad, Hyderabad	114.406
ING Vysya Bank Limited, Secunderabad	57.013
Axis Bank Limited, Hyderabad	46.647
Punjab National Bank, Secunderabad	20.287
UCO Bank, Secunderabad.	99.582
State Bank of India, Hyderabad	141.345
VEHICLE LOANS UNDER HIRE PURCHASE	0.719
Total	663.865
UNSECURED LOANS
Deferred Sales Tax Loan from State Governments	146.975
From Body Corporates	36.101
Total	183.076

Banking Relations :	Satisfactory
Auditors :
Name :	Shyam Sharma and Company Chartered Accountants
Address :	1-10-5, Near Inspector of Factories, Ashok Nagar, Hyderabad-500 020

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
18000000	Equity Shares	Rs. 10/- each	Rs. 180.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
12690900	Equity Shares	Rs. 10/- each	Rs. 126.909 Millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2007	31.03.2006	31.03.2005
SHAREHOLDERS FUNDS
1] Share Capital		126.909	123.909	97.800
2] Share Application Money		0.000	28.077	0.000
3] Reserves & Surplus		185.246	351.188	204.900
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		312.155	503.174	302.700
LOAN FUNDS
1] Secured Loans		663.865	543.986	628.600
2] Unsecured Loans		183.076	141.931	128.900
TOTAL BORROWING		846.941	685.917	757.500
DEFERRED TAX LIABILITIES		14.065	14.066	0.000
TOTAL		1173.161	1203.157	1060.200
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		532.303	498.326	431.900
Capital work-in-progress		0.000	0.000	19.200
INVESTMENT		0.519	0.519	0.500
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	357.878	330.106	284.800
	Sundry Debtors	202.621	274.656	300.400
	Cash & Bank Balances	12.024	88.799	29.800
	Other Current Assets	53.632	41.610	0.000
	Loans & Advances	98.265	119.286	129.900
Total Current Assets		724.420	854.457	744.900
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	83.381	148.756	138.900
	Provisions	0.700	2.400	0.000
Total Current Liabilities		84.081	151.156	138.900
Net Current Assets		640.339	703.301	606.000
MISCELLANEOUS EXPENSES		0.000	1.011	2.600
TOTAL		1173.161	1203.157	1060.200

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2007	31.03.2006	31.03.2005
Sales Turnover		774.376	986.872	891.000
Other Income		2.870	4.041	4.300
Total Income		777.246	990.913	895.300
Profit/(Loss) Before Tax		[188.219]	39.772	[10.900]
Provision for Taxation		0.700	3.400	0.000
Profit/(Loss) After Tax		[188.919]	36.372	[10.900]
Earnings in Foreign Currency :		NA	NA	NA
Total Imports		249.474	NA	NA
Expenditures :
	Manufacturing Expenses	48.270	31.919	31.700
	Administrative Expenses	85.636	116.714	93.000
	Raw Material Consumed	458.270	503.778	436.200
	Power and Fuel	110.498	105.215	91.800
	Excise Duty	73.598	89.814	60.200
	Increase/(Decrease) in Finished Goods	[3.196]	[75.744]	18.600
	Salaries, Wages, Bonus, etc.	60.830	53.186	51.700
	Financial Charges	87.952	89.337	77.900
	Miscellaneous Expenses			5.900
	Depreciation & Amortization	43.607	36.922	39.200
Total Expenditure		965.465	951.141	906.200

QUARTERLY RESULTS

PARTICULARS	30.06.2007	30.09.2007
Type	1^st Quarter	2^nd Quarter
Sales Turnover	202.800	158.300
Other Income	0.100	0.100
Total Income	202.900	158.400
Total Expenditure	208.100	144.400
Operating Profit	-5.200	14.000
Interest	22.800	24.600
Gross Profit	-28.000	-10.600
Depreciation	11.100	11.500
Tax	00.200	0.200
Reported PAT	-39.300	-22.300

KEY RATIOS

PARTICULARS		31.03.2007	31.03.2006	31.03.2005
PAT / Total Income	(%)	[24.30]	3.67	[1.21]
Net Profit Margin (PBT/Sales)	(%)	[24.30]	4.03	[1.22]
Return on Total Assets (PBT/Total Assets}	(%)	[14.97]	2.94	[0.92]
Return on Investment (ROI) (PBT/Networth)		[0.60]	0.07	[0.03]
Debt Equity Ratio (Total Liability/Networth)		2.98	1.66	2.96
Current Ratio (Current Asset/Current Liability)		8.61	5.65	5.36

LOCAL AGENCY FURTHER INFORMATION

Fixed Assets:

Ø Land & Site Development

Ø Buildings

Ø Non-Factory

Ø Factory

Ø Plant & Machinery

Ø Electrical Installation

Ø Furniture

Ø Office Equipment

Ø Computers

Ø Vehicles

Ø Live Stock

Ø Capital Work-in-Progress

PERFORMANCE REVIEW 

During the year the company has achieved sales and operational income of Rs.774.376 Millions as against Rs. 986.873 Millions in the previous year. The Net loss was Rs.188.919 Millions as against Net Profit of Rs.36.372 Millions in the previous year. The Export sales are Rs.249.474 Millions in the current year, which are around 32% of the total sales. 

OPERATIONS AND FUTURE OUTLOOK 

During the year 2006-07 the operations of the Company were affected due to the following reasons, consequently affecting the performance of the company: 

1. Delay in obtaining Regulatory permissions for Export of Ephedrine & Pseudoephedrine, resulting in uncertainty of export schedules, affecting the sales & performance. 

2. Reduction in domestic selling prices of Ephedrine & Pseudoephedrine. 

3. Exorbrant increase in Platinum price, which is one of the major raw material (catalyst) for the Bio Tech Division. 

4. With the ever increasing crude oil prices in the international market, the domestic petroleum products like Toluene, Benzene, Acetone etc., have also been increasing month after month. 

5. The selling prices of the Diketene products are under severe pressure from China resulting in reduction in the sales of the product 

6. Appreciation of rupee against dollar also affected the profitability of the Company. Due to various reasons explained above, the Company has suffered substantial sales loss and consequently profitability and cash flows were affected. 

The company has taken the effective steps to overcome the above problems and is hopeful of increasing the turnover and profitability by addition of new products / increase in capacities of the existing high value products. 

The Board of Directors are pleased to inform that the Company has received USFDA approval for its facilities at Biotech Division, situated at Solapur, Maharashtra for manufacture of Psuedoephedrine. This will enable the Company to enter into regulated markets in US. 

QUALITY SYSTEMS 

The Company's certificate for quality systems under ISO 9001:2000 continues to be valid. 

MANAGEMENT DISCUSSION AND ANALYSIS 

Industry Structure and Development: 

India ranks twelfth in the world for production of chemicals by volume. India's chemical industry contributes about 13% to the nation's Gross Domestic Produce. 

India was a net importer of chemicals in early 1990s, but has now become a net exporter due to reduction in imports because of implementation of many large scale petrochemical plants and also because of tremendous growth of exports in sectors like bulk dugs and pharma, pesticides, dyes and intermediates. The drugs and pharmaceuticals and the organic/ inorganic/ agro-chemicals contributed as much as 63% of total exports. This has been a Herculean task, which has been achieved by competing with big multinational corporations of the world. 

With more than 70000 products in its kitty, the chemical industry is growing at 2.5 times the global GDP growth rate, the industry is expected to touch $ 2.5 trillion by 2010 from current production of US $ 1.95 trillion. It is now well recognized that this growth was fuelled to great extent by 2 countries- China & India. Asia will see the highest growth with considerable production shifting from high cost countries like Europe and the US to Asia. India is becoming the second fastest growing GDP in the world, after China. India demonstrates considerable potentials for collaborative and outsourced R&D in drug development, biotechnology and chemicals. According to industry sources, bulk drug production in India is valued at $1.76 billion with more than 400 drugs and 100 manufacturers in market. The market is highly fragmented with about 15,000 small licensed generic manufacturers and about 250 R&D based pharmaceutical companies. 

Indian economy has been doing very well and is expected to do extremely well in the next 5-10 years, with sustained growth of over 8%. With a size of US$ 40 billion, the Indian Chemical Industry accounts for 14% of the country's total industrial production and 17.6% in the Indian Manufacturing sector. It also accounts for about 13-14% of total exports. 

In the next 12 to 18 months, Rs.300000 Millions to Rs.400000 Millions (US $ 7 billion to 9 billion) worth of projects are expected to take off in the chemical industry. These figures are from an analysis of the investment plans of 300 leading business houses in India. 

In 2007, the Indian pharmaceutical industry looks ahead at a colourful horizon, what with contract research and clinical trials businesses taking wing, and the new patent regime opening new avenue for players in the country. Driven by the knowledge skills, growing enterprises, low costs, improved quality and buoyant demand (both domestic and international), the pharmaceutical sector's value of output grew more than tenfold from US$ 1.1 billion in 1990 to over US$ 12.4 billion during 2005-06. With value of exports at over US$ 4.7 billion in 2005-06, India is today recognised as one of the leading global players in pharmaceuticals. 

The Indian pharmaceutical industry valued at $12 billion has portrayed tremendous progress with reference to infrastructure development, technology base creation and a wide range of production. The pharmaceutical industry produces bulk drugs belonging to major therapy groups. India ranks 4th worldwide, accounting for 8 per cent of the world's production (in terms of volume) and 13th in terms of value. It is estimated that by the year 2010, the Indian pharmaceutical industry has the potential to achieve over $ 1,00,000 crore in formulations and bulk drug production. The industry now produces bulk drugs belonging to all major therapeutic groups requiring complicated manufacturing process and has also developed Good Manufacturing Practices (GMP) facilities for the production of different dosage forms. 

The pharma industry exports drugs and pharmaceuticals worth over $ 4.5 billion. It ranks 17th in terms of export value of bulk actives and dosage.

Indian exports cover more than 200 countries including the highly regulated markets of USA, Europe, Japan and Australia. 

Growing consistently at 9.5 per cent in the last 5 years, the Indian pharmaceutical industry could zip at 13.6 per cent between 2006 and 2010 and reach a market size of US$ 9.48 billion by 2010 from its present level of about US$ 5.7 billion. Foreign direct investment into the country's pharma industry is estimated to have touched US$ 172 million during 2005-06 having grown at a CAGR of 62.6 per cent during the period beginning 2005-06. The sector recorded strong growth in the second quarter ended September '06, driven by launch of new generic drugs with 180 days exclusivity period in the US market.

Today, Indian chemical, petrochemical and pharmaceutical industry and companies like Asian Paints, Reliance, Ranbaxy, DRL and Wockhardt and several others including state companies from Gujarat have completed a full circle starting with import substitution to globalization. 

Indian Government is providing industry with friendly policies for encouraging exports and increasing domestic production by setting up SEZs (Special Economic Zones) as well as PCPIRs (Petroleum, Chemicals and Petrochemicals Investment Regions). It is just a matter of decade when India is expected to be placed among the top 3 chemical producing and consuming nations by 2015. 

Segment wise Performance and Future Outlook of the Company: 

Rs. In Millions

Segment	Turnover	Profit before Interest and Tax
Diketene	418.021	[150.591]
Biotech	359.551	85.504

The Company's outlook for the next year is positive and it expects to consolidate its business and grow in line with the industry growth rated. 

During the year 2006-07 the operations of the Company were affected due to delay in obtaining Regulatory permissions for Export of Ephedrine & Pseudoephedrine, reduction in domestic selling prices of Ephedrine & Pseudoephedrine, Exorbrant increase in Platinum price, Increase in crude oil prices in the international market, severe pressure from China on selling prices of Diketene and appreciation of rupee against dollar, consequently affecting the performance of the Company 

Due to various reasons explained above, the Company has suffered substantial sales loss and consequently profitability and cash flow were affected. The company has taken the effective steps to overcome the above problems and is hopeful of increasing the turnover and profitability by addition of new products / increase in capacities of the existing products. 

During the year under review, the company has incurred capital expenditure of Rs.77.000 Millions. The company has incurred the capital expenditure towards creation of facilities for addition of high value derivatives, backward integration for some of the finished products and also for various fixed assets at Diketene division and Bio-tech division. 

With the steps initiated, the Company is confident to achieve a growth in the year 2007-08 and the Directors are confident that the steps initiated in both the divisions will place the company in a strong position in the near future. 

Risks and Concerns: 

Acetic Acid is one of the major raw materials for diketene division. The price of the same is highly fluctuating and is moving north due to increase in prices of petroleum products. The Company plans to mitigate the impact of acetic acid by the addition of high value products wherein the cost component of acetic acid will be relatively less than the traditional products. 

Some of the Company's diketene derivatives are import substitutes and the prices are under severe pressure from China. This is further aggravated on account of reduction in customs duty and appreciation of Rupee against Dollar. The Company plans to counter the same by adding new high value pharma intermediaries, wherein the pressure from China is less. 

Molasses, one of the major raw material for biotech division, price of the which is also volatile. The company has increased the storage capacity of molasses, which will meet six months production requirements of the unit.

During the crushing season of four months the company is maintaining the storage levels at full and thus covering the future requirements at lower costs. 

The chemical industry continues to face pressure from environmental groups. 

The company is confident of managing the risks discussed above by adopting appropriate cost control measures and improvement in productivity, operating efficiencies and adding of high value products and safeguarding the environment. 

Finance 

a. Financial Performance 

Ø Networth: The networth of the Company has come down to Rs.312.55 Millions Rs.502.163 Millions in the previous year 

Ø Net Working Capital: The Net Current Assets of the Company has decreased to Rs 161.058 Millions from Rs.349.489 Millions in the previous year. 

Ø Fixed Assets: During the Company has incurred capital expenditure of Rs.770.000 Millions towards acquisition of plant and machinery and other fixed assets. 

b. Operational Performance 

Ø Sales: During the year 2006-07 the Company has achieved sales and operational income of Rs.774.376 Millions as against Rs.986.873 Millions in the year 2005-06. During this period the export sales are Rs.249.474 Millions

Ø Net Profit /Loss: The Net loss was Rs.188.919 Millions as against Net Profit of Rs. 36.372 Millions in the previous year.

Contingent Liabilities on account of

	2006-07 [Rs. In Millions]
Estimated Amount of Unexecuted Capital Contracts	4.500
Letters of Credit	33.112
Bank Guarantees.	0.050

AS PER WEBSITE DETAILS:

HISTORY

Being in the business of manufacturing machinery for chemical, bulk drug and resin plants proved to be a head start to two visionary entrepreneurs who shared the dream of constructing and operating their own high-tech chemical plant. The two entrepreneurs, Mr. P R Agarwal, Mr. Rajesh Agarwal along with late Dr G S Sidhu, 'combined' their strengths to set up Avon Organics Limited (AOL) with an objective to serve worldwide markets with high value-added industrial products for the pharmaceuticals, agro and dyestuff & pigment industries. The company's main focus is on producing fine chemicals for these industries.

The transition from a machinery manufacturer to a full-fledged chemical manufacturer saw the company foraying into the highly technology-intensive area of Diketene and its derivatives. Hence began an era of excellence beyond compare in the manufacture of chemicals as initiated and benchmarked by AOL.

The year 1996 saw the establishment and successful commissioning of AOL's first grass root Diketene plant. Diligently run and controlled by a dedicated 300-strong team comprising of managers, engineers, chemists, supervisors and workmen, each hand-picked for their expertise, the plant has been garnering accolades and achievements on a regular basis.

The company's growth pinnacled when it doubled its production capacity by commissioning an additional 1000 TPA unit as part of its second phase in 1998.

Hyderabad, a city where the chemical industry has carved a comfortable niche for itself, was the unanimous choice of the promoters to locate the company. A prominent marquee among the prominent "Profit Making Companies" in India, AOL has been on a steady and unabated upward journey. Uncompromising quality standards, intelligent innovations that redefine manufacturing and a commitment to the customer needs has been their mantra for success.

An ISO 9000 certification by the Lloyds Register Quality Assurance (LRQA) highlighted the company's quality standards and instills a deserving sense of confidence in the elaborate quality control procedures followed in the plant.

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. 39.56
UK Pound	1	Rs. 77.45
Euro	1	Rs. 57.89

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	7
--PROFITABILIRY	1~10	5
--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		54

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