MIRA INFORM REPORT

Report Date :

29.07.2008

IDENTIFICATION DETAILS

Name :	BALKRISHNA INDUSTRIES LIMITED
Registered Office :	H-3/1 MIDC, 'A' Road, Tarapur (Boisar), Thane - 401 506, Maharashtra
Country :	India
Financials (as on) :	31.03.2007
Date of Incorporation :	20.11.1961
Com. Reg. No.:	11-12185
CIN No.: [Company Identification No.]	L99999MH1961PTC012185
TAN No.: [Tax Deduction & Collection Account No.]	MUMB11319A
PAN No.: [Permanent Account No.]	AAACB3333J
Legal Form :	A Public Limited Liability Company. The company’s shares are listed on the Stock Exchanges.
Line of Business :	Manufacturing of Paperboards, Tyres and Tubes and Synthetics.

RATING & COMMENTS

MIRA’s Rating :

Aa

RATING		STATUS	PROPOSED CREDIT LINE
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

Maximum Credit Limit :	USD 17372360
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established company having fine track. Available information indicates high financial responsibility of the company. Financial position is good. Payments are correct and as per commitments. The company can be considered good for normal business dealings. It can be regarded as a promising business partner in a medium to long run.

LOCATIONS

Registered Office :	H-3/1 MIDC, ‘A’ Road, Tarapur (Boisar), Thane – 401 506, Maharashtra, India
Tel. No.:	91-22-66663800
Fax No.:	91-22-66663898
Email :	shares@bkt-tires.com
Website:	http://www.bkt.tires.com
Corporate Office:	418, Creative Industrial Estate, 72, N M Joshi Marg, Mumbai – 400011 , Maharashtra, India.
Plant:	Paper/Paper Board and Coating Plant: Village : Ambivli, P.O. Mohone, Taluka – Kalyan, District Thane, Maharashtra, India Textile Processing Plant (Unit Nos. 1 and 2): H/3/1 MIDC “A” Road, Tarapur, Boisar, Dist. Thane, Maharashtra, India Tyre Plant: B-66, MIDC Industrial Estate, Waluj Industrial Area, Aurangabad, Maharashtra, India SP-923, RIICO, Phase III, Post Office Bhiwadi – 301 019, District Alwar, Rajasthan RIICO, Phase VIII, Chopanki, P.O. Bhiwadi, 301 109 Dist. Alwar. Rajasthan Wind Farm: Village Soda And Mada, Tehsil, Fatehgarh, District Jaisalmer, Rajasthan Mould Plant: A 298, TTC Industrial Estate Mahape, Navi Mumbai - 400701, Maharashtra Plot No. TS-1, M.I.D.C, Phase No. II, Dombivali (E) 421 201 Dist. Thane Unit Balakrishna Tyres, 421 422, Creative 72 N M Joshi Marg, Mumbai – 400011, Maharashtra, India

DIRECTORS

Name :	Mr. Ashokkumar P. Mahansaria
Designation :	Managing Director
Date of Birth/Age :	53 Years
Qualification :	Inter Science
Experience :	34 years
Date of Commencement:	01-04-1980
Last Employment:	Shree Sitaram Dyg. And Ptg. Mills Private Limited
Name :	Mr. Pawankumar D. Poddar
Designation :	Joint Managing Director
Date of Birth/Age :	52 Years
Qualification :	B.Com
Experience :	30 Years
Date of Commencement:	23-06-2001
Last Employment:	Siyaram Silk Mills Limited, Executive Director (20 Years)
Name :	Mr. Yogeshkumar A. Mahansaria
Designation :	Executive Director
Date of Birth/Age :	30 Years
Qualification :	B.com
Experience :	11 Years
Date of Commencement:	01-04-1994
Name :	Mr. Dharaprasad R. Poddar
Designation :	Chairman
Name :	Mr. Dadi S. Mulla
Designation :	Director
Name :	Mr. Subhashchandra Mantri
Designation :	Director
Name :	Sachin Nath B. Chaturvedi
Designation :	Director
Name :	Arvind M. Poddar
Designation :	Director
Name :	Khurshed M. Doongaji
Designation :	Director
Name :	Rakesh N. Garodia
Designation :	Director
Name :	Sachin Nath B. Chaturved
Designation :	Director
Name :	Rameshkumar D. Poddar
Designation :	Director
Name :	Mr. Trilok Chand D Goel
Designation :	Director

KEY EXECUTIVES

Name :	Vipul R. Shah
Designation :	Company Secretary
Management Committee	Mr. Dilip Vaidya – Director (Technical) Mr. Anurag Poddar – Executive Mr. Rajiv Poddar – Executive

SHAREHOLDING PATTERN

AS ON 31.03.2007

Names of Shareholders	No. of Shares	Percentage of Holding
Promoters	10456764	54.09
Mutual Funds / UTI	2251296	11.65
Companis / Trusts	267813	1.39
Public	1680796	8.69
Non Resident	21766	0.11
Foreign Institutional Investors	4653284	24.07
Total	19331719	100.00

BUSINESS DETAILS

Line of Business :

Manufacturing of Paperboards, Tyres and Tubes and Synthetics.

Products :

Ø Paper / Paper Boards

Ø Fabrics

Ø Tyres

Ø Tubes

Ø Tyre Flaps

Ø P L 801 - Pneumatic Forklift / Material Handling Tyres

Ø Skid Power H D

Item Code No.	Product Description
481039	Paper and Paper Boards
401100 / 401140	Pneumatic Tyres
551511	Processing of woven fabrics of synthetic staples fibres

Exports to:

Europe, U.S.A and Australasia

PRODUCTION STATUS

Particulars	Unit	Licensed Capacity	Installed Capacity	Actual Production
Paper / Paper Boards	M. Tons	33000	54000	50383
Fabrics	Meters	264000	240000	22703367
Tyres	Nos.	4945000	2585000	1443482
Tubes	Nos.	NA	NA	NIL
Tyre Flaps	Nos.	NA	379000	52868
Wind Power Generation	KWH/Units	NA	5 MW	6840002

GENERAL INFORMATION

No. of Employees :

300

Bankers :

v Bank of Baroda, Mumbai

v Central Bank of India, Chander Mukhi, Nariman Point, Mumbai – 400 021

v State Bank of India, Commercial Branch, N G N Vaidya Marg, Horniman Circle, Mumbai – 400023, India

v State Bank of Travancore, Mumbai

v Corporation Bank

v ING Vysya Bank

v Deutsche Bank AG, Mumbai

v ABN Amro Bank

v Standard Chartered Bank

Facilities :

Particulars	As on 31.03.2007 (Rs. in Millions)
Secured Loans
From Consortium Banks:
i) Cash Credits / Packing Credits	1330.005
ii) Bills Discounting	435.983
iii) Term Loan	500.000
Total	2265.988
From Other Banks:
i) Industrial Development Bank of India Limited – Term Loan	Nil
ii) Axis Bank Limited – Term Loans	493.745
Total	493.745
Term Loans from:
i) Financial Institution Export –Import Bank of India	Nil
ii) Others	166.985
Total	166.985
Unsecured Loans
Fixed Deposits
Short Term Loans and Advances:
i) From Banks	86.037
ii) Distributors’ / Dealers’ Deposits	0.147
iii) From Others	Nil
Total	86.184
Other Loans and Advances:
i) 4.5% Foreign Currency Convertible Bonds ‘Series B’	988.980
ii) Distributors’/Dealer’s Deposits	21.542
iii) Deferred Sales Tax under the scheme of Government of Maharashtra	7.163
Total	987.685

Banking Relations :	Good
Auditors :
Name :	v Jayantilal Thakkar and Company Chartered Accountants. v Tholiya and Associates Cost Accountants. v Dilip A. Jain and Associates v Garg and Company Chartered Accountants v Kanga and Company Advocates, Solicitors and Notary
Associates/Subsidiaries :	Ø Govind Rubber Limited - It is a market leader with 30% market share with their "INTERNATIONAL" brand of tyres and tyre tubes. Ø Siyaram's Silk Mills Limited - Engaged in manufacturing of synthetic suittings and shirting And largest producer of P. V. Fabrics in the country. Ø S. P. Finance and Trading Limited Ø Poddar Brothers Investments Limited Ø Sanchana Trading and Finance Limited Ø Net Work Sales Limited Ø Sagar Silk Industries Limited Ø Cosmo Synthetics (India) Limited Ø Beetee Textiles Industries Limited Ø S. P. Invest trade Limited Ø Acumer Trading and Investments Limited Ø Yogesh Agencies and Investments Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
25000000	Equity Shares	Rs. 10/- Each	Rs. 250.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
19331719	Equity Shares	Rs. 10/- Each	Rs. 193.317 millions

Of the above Shares :

i) 1,68,73,160 Equity Shares were allotted as fully paid up, by way of Bonus Shares by capitalization of Share Premium Account and General Reserve.

ii) 97,560 Equity Shares were allotted as fully paid up on conversion of convertible portion of partly convertible Debentures.

iii) 7,60,999 Equity Shares were allotted as fully paid up on conversion of Foreign Currency Convertible Bonds-FCCB.)

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		193.317	193.317	123.804
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		3281.155	2681.702	1455.913
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		3474.472	2875.019	1579.717
LOAN FUNDS
1] Secured Loans		2926.718	1781.103	1481.227
2] Unsecured Loans		1081.269	1187.759	220.601
TOTAL BORROWING		4007.988	2968.862	1701.828
DEFERRED TAX LIABILITIES		450.615	374.117	331.274
TOTAL		7933.075	6217.998	3612.819
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		3993.686	2597.465	2195.114
Capital work-in-progress		757.820	689.091	171.632
INVESTMENT		21.828	51.168	20.748
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	1223.811	1069.070	647.823
	Sundry Debtors	1687.112	795.730	649.635
	Cash & Bank Balances	53.893	768.399	32.987
	Other Current Assets	0.793	3.636	0.048
	Loans & Advances	1949.165	1490.110	933.017
Total Current Assets		4914.774	4126.945	2263.510
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	747.022	531.013	605.061
	Provisions	1008.010	715.658	433.124
Total Current Liabilities		1755.032	1246.671	1038.185
Net Current Assets		3159.741	2880.274	1225.325
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		7933.075	6217.998	3612.819

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2007	31.03.2006	31.03.2005
Sales Turnover		8776.567	6200.149	4933.170
Other Income		88.826	58.017	0.000
Total Income		8865.393	6258.166	4933.170
Profit/(Loss) Before Tax		1334.743	1067.400	883.718
Provision for Taxation		459.139	367.851	308.943
Profit/(Loss) After Tax		875.604	699.549	574.775
Earnings in Foreign Currency :
	Export Earnings	6295.004	4196.010
	Recovery towards Freight and Insurance on Exports	350.223	289.555	3037.432
	Interest [including amount adjusted against borrowing cost capitalized	5.639	10.544
Total Earnings		6650.866	4496.870	3037.432
Imports :
	Raw Materials	2257.367	1502.421
	Stores & Spares	26.501	25.303	1135.086
	Capital Goods	668.932	206.272
	Others	0.000	0.000
Total Imports		2952.799	1733.997	1135.086
Expenditures :
	Manufacturing, Trading and other Expenses	7000.501	4800.081
	Interest (Net)	170.170	117.311	4049.451
	Depreciation and Amortization	359.979	273.374
Total Expenditure		7530.650	5190.766	4049.451

SUMMRISED RESULTS

PARTICULARS	31.03.2008 (Full Year)
Sales Turnover	9913.800
Other Income	171.900
Total Income	10085.700
Total Expenditure	7752.700
Operating Profit	2333.000
Interest	268.100
Gross Profit	2064.900
Depreciation	438.300
Tax	498.500
Reported PAT	1055.700
Dividend (%)	1050.000

KEY RATIOS

PARTICULARS		31.03.2007	31.03.2006	31.03.2005
Debt Equity Ratio		1.10	1.05	1.13
Long Term Debt Equity Ratio		0.64	0.66	0.60
Current Ratio		1.34	1.35	1.03
TURNOVER RATIOS
Fixed Assets		1.86	1.67	1.66
Inventory		7.74	6.95	7.72
Debtors		7.15	8.26	9.00
Interest Cover Ratio		8.37	9.72	11.58
Operating Profit Margin	(%)	20.57	24.52	25.23
Profit Before Interest and Tax Margin	(%)	16.51	19.94	20.63
Cash Profit Margin	(%)	13.42	16.16	16.86
Adjusted Net Profit Margin	(%)	9.37	11.58	12.26
Return on Capital Employed	(%)	21.99	26.07	34.02
Return on Net Worth	(%)	26.17	31.01	43.08

LOCAL AGENCY FURTHER INFORMATION

History:

Incorporated in 1961, subject manufactures paper besides processing synthetic textiles and tyres.  

The company embarked up on an Rs 125.000 Millions modernization-cum-expansion of its Kalyan paper division. The capacity (30, 00 TPA) was raised by 6000 TPA. The expansion was funded by the proceeds from private placement and term loans. The paper division started operating its expanded capacity in the second half of 1997.  
The company undertakes processing of cloth for other parties on a job-work basis at its plant at MIDC, Tarapur. The processing division, which started commercial production in Feb.'81, has completed its first phase of expansion-cum-modernization. It will be the country's most modern textile processing plant for polyester viscose fabrics. The total outlay for the division's plans was Rs 120.000 Millions In 1998-99; it increased the installed capacity of tyres to 1.573 Millions nos.  

During 1999-2000, the production of the tyre division reflected an increase of 8% and the company is in the midst of implementing an expansion programme in its various divisions. 

The company has carried out modernization, debottlenecking and cost reduction during November 2000. The upgradation process was completed fag end of the 2001. The company increase the installed capacity of Paper/Paper Boards to 42,000 Mt from 36,000 Mt at a cost of 8,500.000 Millions .3.3 MW capacity of Captive Power Plant is in the process and is likely to be commissioned in March 2002 and the cost is estimated around 40.000 Millions. 

The company spends Rs.40.000 Millions towards de-bottlenecking and enabling it’s to manufacture a wider range of tyres. The company is planning to introduce new designs of tyres and also improvement in process technology and product mix. During 2001-02 the company spent Rs.180.000 Millions for tyre division towards debottlenecking and for equipment to enable production of a wider product range. To achieve quality improvements for its Paper division the company completed a modernization scheme at a capex of Rs.85.000 Millions.

During 2004-05 the company has launched Tractor Radial Tyres. The company has expanded its capacity at Bhiwadi to 42000 TPA which includes the setting up of Radial Tractor Tyre Capacities and also expanded its capacity at Waluj to 18000 TPA. Further the company has commissioned new multi-fuel fired Boilers at Bhiwadi and Waluj and 3.2 MW Furnace Oil fired D G Set at Bhiwadi. The company has also commissioned a 5 MW Wind-Farm near Jaisalmer, Rajasthan captive usage through wheeling of Power to its Bhiwadi plant. The total capital outlay of this project is Rs.900.000 Millions. 

 Further in 2004-05 the company has decided to double its Radial Tractor Tyres Capacity at Bhiwadi Plant. The company has also bought land at Chopanki near Bhiwadi Plant to set up a large warehouse to maintain stock and also setting up a new mixing plant which is scheduled to be completed by 2005-06. It is also planning to set up additional production facilities at 10000 TPA in the 1st phase which is expected to be completed by 2005-06. Further the company is setting up a new mould plant in Dombivali, Thane Dist which is expecting to commence its operations by August 2005. These projects are estimated at a cost Rs.850.000 Millions. 

The company has increased the installed capacity of Tyres by 0.271 million (Nos) during 2004-05 and with this expansion the total installed capacity of Tyres has increased to 2.288 Millions (Nos). During August 2005 the company has issued bonus equity shares to its shareholders in the ratio of 1:2.

EPS is Basic and diluted. 1. The above results as reviewed by the Audit Committee have been approved by the Board of Directors at its meeting held on 30^th July, 2005. The Auditors of the Company have carried out a limited review of the results. 2. The Company's revised expansion plan under progress includes (i) Setting up of 15000 tpa Tyre production capacity at Chopanki, (ii) Doubling of Radial Tractor tyre capacity at Bhiwadi, (iii) increase in tyre production capacity at Waluj from 18000 tpa to 22500 tpa at a total capital outlay of Rs.1100.000 Millions, to be funded by the internal accruals and Term Loans. 3. The Operations at the Paper Plant are suspended since 27th July '05 due to unprecedented rain/flood. Normal operations are expected to be resumed in September'05. 4. The Board of Directors had declared Bonus Share in the ratio of one equity shares for every two equity shares held, in their meeting held on 16th May, 2005, which was approved by the Shareholders in the Annual General Meeting held on 16^th July, 2005. The record date for this purpose will be finalized in consultation with the Stock Exchange. 5. The details of number of investor complaints for the quarter: Beginning-Nil, Received-3, Disposed-3, Pending-Nil. 6. Figures for the previous periods/year have been regrouped/reclassified, wherever necessary.

Operations

The Gross Turnover and Other Income of the Company for the year ended 31st March, 2007 is higher at Rs.9084.800 millions as compared to Rs. 6386.100 millions in the previous year, reflecting an increase of over 42%. The Gross Profit is placed at Rs. 1694.700 millions as compared to Rs. 1340.800 millions in the previous year, and the Profit after taxes is Rs. 875.600 millions, as against Rs.699.500 millions in the previous year. The Company operates mainly in three business segments namely; manufacturing of Pneumatic Tyres, Coated/un-coated Paperboards and Processing of Textile Fabrics.

Tyre Division

The Company is focused on the production of a wide range of "Off Highway Tyres" that includes Agricultural, Forestry, Industrial, Material Handling, Lawn and Garden, ATV, Construction and Earth Moving Tyres (OTR). The

Company continues to develop new sizes and ranges in all these segments, and currently has in production over

1700 Stock Keeping Units (SKUs) to meet the diverse needs and applications. The Company exports over 90% of its production and balance production is sold mainly to OEMs into local market. The Company's brand "BKT" enjoys excellent reputation worldwide. During the year under review, Sales and related income of the Division was higher at Rs. 7524.900 millions as against Rs. 5144.900 millions in the previous year, out of which Exports and Export related income stood at Rs. 6852.300 millions as against Rs. 4902.4 Millions in the previous year.

EXPANSION PROGRAMS IN TYRE BUSINESS FOR FINANCIAL YEAR

2007 – 08

At Bhiwadi

i) Increase in the existing capacity by 4,500 TPA.

At Chopanki:

i) To set up OTR Radial plant of 11,500 TPA capacity

ii) Increase in the existing capacity by 13,000 TPA

iii) Increase in the mixing capacity to support the increase in tyre production facility, and iv) To set up new warehouse admeasuring 1,60,000 Sq.ft. to store finished goods and raw materials.

PAPER DIVISION:

The Paper and Paper Board plant operates in the "Coated Duplex/Triplex Boards" segment. The segment has witnessed a healthy growth over the past decade and expected to witness growth rate of 7% in times to come. The Sales and related income of the Division for the year under review is Rs. 1183.600 millions as against Rs. 887.100 millions in the previous year. The exports stood at Rs. 33.800 millions as against Rs. 43.7 millions in the previous year.

During the year, the Company has introduced new item "Premium Super Chromo Board" that is considered as a premium item that caters to premium segment of the market. The Company continues to work towards improving plant efficiency and cost reductions through removing debottleneck in the plant.

TEXTILE PROCESSING DIVISION

During the year under review, the Division earned Rs. 287.400 millions towards processing charges as compared to Rs. 296.100 millions in the previous year.

OPPORTUNITY and THREATS

OPPORTUNITIES

The Company's focused line of activity is its Tyre business, which accounts for more than 80% of its revenue. Within tyre business, the Company is focused on Agricultural and Construction tyres which are a niche segment with very few players across the globe. The said segment is predominantly represented by large varieties and low volumes, making it un-attractive for fresh investments by major players. The segment has witnessed exit of many players in the recent past.

The Company is fully geared up to take advantage of the peculiarities of the said segment and has developed more than 1700 SKUs in the last few years and is adding new SKUs every year in its basket. The Company has incremental opportunity to incubate the "Earth Moving Tyres" (OTR) markets, wherein the Company has already made some in-roads and increasing its presence into that segment. Radicalization of tyres is another positive development in the industry which has come as a new opportunity for the Company. The Company has already initiated steps to encash said opportunity by increasing its Agri Radial Tyre capacity and setting up of new OTR Radial plant. The Company would be the first one to come up with OTR Radial plant in India. The Company exports across the globe with major exports to European region.

RISKS / CONCERNS AND RISK MITIGATION

Fluctuation in Raw Material prices: The Company's major raw material is Natural Rubber, which is an agricultural commodity and its prices have moved upward very significantly in this year. Though the spurt in Natural Rubber prices is more of a speculative nature and the Company enjoys the pricing power, it is not possible to pass on the increase in prices immediately and to the full extent. Thus, the Company has to bear the brunt of the said fluctuations to some extent. In order to minimize such risks, the Company not only enters into medium-term contracts but also adopts the policy of "Buy and Stock" large quantities during the lean period. As regards prices of other raw materials, these have also been subject to increase; however, these increases were manageable and the Company does not foresee any problems out of it.

Labour Relations: Since the nature of Company's manufacturing process are that of batch processing, it requires lot of skilled as well as un-skilled workmen. Maintaining a huge work force always poses a risk. In order to mitigate the said risk, the Company follows good HR practices and spends a lot of money and Management's time for their welfare, safety and uplifiment. All workers are paid more than adequate remuneration for their work. Retention of skilled Manpower this is not a unique area of concern for the Company and it is being faced by all the Companies.

The Company is able to manage the said risk by good HR practices and rewarding its employees handsomely.

Currency fluctuation: Approximately 90% of the Company's tyre division's revenue is generated through exports and the Company also imports lot of its raw materials and capital equipments; hence it is exposed to risks due to currency fluctuations.

The Company follows the system of hedging its receivables and major payments well in advance by entering into Forward Contracts, thereby protects itself to an extent from fluctuations in currencies.

The Company has adequate system of internal controls to ensure that all the assets are safeguarded and are productive. Necessary checks and balances are in place to ensure that transactions are adequately authorized and reported correctly. The Internal Auditors of the Company conduct Audits of various departments to ensure that internal controls are in place. These are being reviewed by the Audit Committee of the Board and corrective actions are taken by the Company, when needed.

The Company's human resources continue to be the biggest asset of the Company. The team has remained as committed as ever and produced results that are considered significant. Quality, quick delivery and focus on resolving customer issues are the hallmark of the team performance. There is a strong focus on TEAM spirit. During the year, many events were conducted to develop the personality and outlook of its employees. Employee's relations continue to be cordial.

As regards tyre business, the Company has, over past few years, made its presence in almost all kind of tyres in Off Highway tyre segment in which it is operating. The Company is continuously developing its production base and has expanded its product range significantly. The Company is also expanding its market base not only through increase in its business with its existing customers but also through new customers in existing markets as well as new markets.

The Company has established its brand image through quality and after sales services and its brand "BKT" enjoys good reputation in the domestic as well as International market that is reflected through the growth rate of Company's business as well as a healthy order position of its products throughout the year.

The Coated Paperboard business is highly competitive and margins are under pressure. However, the Company will be able to protect its margins as it has decided to go into value added products where margins are better and competition is less. Further, the Company has planned to set up cogeneration plant to save on electricity cost that will further boost the margins of the Company.

The performance of the Textile Processing Division business is stable and likely to improve in times to come. Currently, the Company has three business activities under its umbrella namely tyre, paper and textile processing. The tyre business is a focused business activity of the Company that constitutes more than 80% of Company's total business and by virtue of this it becomes its core business. In order to pay more attention to its various business activities, the Company has decided to transfer its Paper business and Textile Processing business to two separate wholly owned subsidiary companies through a Court approved scheme. After such transfer, each business activity will have separate management team looking after their respective businesses separately. The Company believes that this arrangement will add value into the workings of those businesses. The Company has appointed KPMG as an advisor and consultant to frame the appropriate scheme and execute it.

SUBSIDIARY COMPANIES

1. BKT (EUROPE) LIMITED

This Company was incorporated in UK as a wholly owned subsidiary Company during last financial year to provide marketing support services to the Company in the European region. The total income and profit before tax for the current financial year stood at GBP 78,023 and GBP 3,701 respectively.

2. BKT EUROPE s.r.l

This Company was incorporated on 30th August 2006 in Italy as a wholly owned subsidiary Company during current financial year to provide marketing support services to the Company in Italy and surrounding region.

The accounts for the current financial year have been prepared for the period beginning with its date of incorporation to 31st March 2007. The total income and profit before tax for the current financial year stood at Euro 1, 98,009 and Euro 5,100 respectively.

3. BKT EXIM LIMITED

This Company was incorporated in India in the month of January 2007 as a wholly owned subsidiary

Company and has not carried out any commercial activities during the year. The first financial year of this Company will be for the period beginning from the date of its incorporation to 31st March 2008. The Company intends to sell its investments in its overseas subsidiary companies to this subsidiary Company.

4. BALKRISHNA PAPER MILLS LIMITED and BALKRISHNA SYNTHETIC LIMITED

The above Companies were incorporated in India in the month of March 2007 as wholly owned subsidiary Companies to facilitate the transfer of its paper and textile processing business respectively through a court approved scheme. No commercial activities were carried out by them during current financial year and their first financial year will be for the period beginning from the date of their incorporation to 31^st March 2008.

The Statement pursuant to Section 212 of the Companies Act, 1956 containing details of the Company's Subsidiaries, to the extent applicable, is attached.

Further pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements of the Company and it Subsidiaries form part of the Annual Report and Accounts.

The Company has made application under section 212(8) of the Companies Act, 1956 to the Department of Company Affairs, Ministry of Finance seeking their exemption from attaching the Balance Sheet, Profit and Loss Account, and Report of the Board of Directors and Auditors of its Foreign Subsidiaries Companies with the Balance Sheet of the parent Company. The Company has received approval from Department of Company Affairs vide its letter No.47/208/2007-CL-lll DT. 22nd May, 2007. However, these documents will be submitted to any shareholder wishing to have a copy on receipt of such request. These documents will also be available for inspection by any shareholder at the Registered / Head Office of the Company. However as directed by the Central Government, the financial data of the Subsidiaries Companies have been furnished under 'Details of Subsidiaries' forming part of the Annual Report.

Fixed Assets

· Freehold Land

· Leasehold Land

· Buildings And Roads

· Plant And Machinery

· Factory

· Office And Other Equipments

· Electric Installations

· Furniture And Fixtures

· Vehicles

· Air Conditioners

Website details attached:

Subject is one of the world’s premier manufacturers of pneumatic tyres for special applications such as –

• Agricultural Tyre
• Industrial and Construction Tyres
• ATV Tyres
• Lawn and Garden Tyres
• Earth Moving Equipments Tyres

Subject has a worldwide distribution network ensuring extensive reach and penetration

The Company

Their company is a proud product of the Siyaram Poddar Group. A well-diversified Indian industrial force, thanks to its successful ventures in textiles, garments, rubber products and tyres, the group has a turnover of over US $250 million. Subject is their holding company. This company also boasts of Balkrishna Paper Mills and Balkrishna Synthetics. Today, they are renowned as a manufacturer of pneumatic tyres. Their areas of specialization are:

• Tyres for Agricultural applications
• Tyres for Industrial and Construction applications
• Tyres for Utility and Recreation vehicles (ATVs)
• Tyres for Lawn and Garden applications
• Tyres for Earth Moving applications

They have a worldwide distribution network that ensures extensive reach and penetration. All their distributors keep deep inventories to match customer demands. They also ensure prompt and effective after-sales service.

Milestones

1988

BKT Tyres factory established at Aurangabad in Western India, with installed capacity of 3000 tonnes per annum having all necessary facilities, including an in house R and D department.

1992

A range of Light Commercial Vehicle Tyres launched in the international market.

1996

A program for developing Industrial and Agricultural Tyres initiated. Exports to Europe, the U.S.A and Australasia begun.

1999

Based on success in the international markets, an expansion program with an investment of US $50 million started.

2001

Started production of Flotation and MPT tyres. Installed sophisticated machines e.g. tread strip winding machine etc. Recognized as "EXPORT HOUSE" by government of India.

2002

Acquired Bhiwadi factory, thereby doubling the production capacity. Awarded with prestigious ISO 9001:2000 certificates for Quality Management System by KPMG, Netherlands.

2003

Production of tyres for All Terrain Vehicle (ATVs), Lawn and Garden and Earth Movers gets under way. An expansion program at Bhiwadi plant successfully undertaken.

2004

Participation in the Reifen Show, ESSEN, Germany, Launch of Tractor radial tyres and Solid tyres

Products

Since one of the pillars of their philosophy is to continuously expand out range, they take great pride in the fact that they have developed a vast range of tyres, the bulk of which are exported to their overseas clients.

Products Types

v Agricultural Tyres

v Industrial and Construction Tyres

v ATV Tyres

v Lawn and garden Tyres

v Earth Moving Equipment Tyres

Tomorrow

In the near future, they envisage ourselves emerging as a Single Source Supplier to a range of customers across the globe. After all, how many other companies can match the range they offer in their segments?

They have planned what some might call an ambitious expansion that will entail an investment of over US $20 million. The driving force behind this move is to further embellish their capacity and increase their range of products.

They have resident representatives in Europe who works closely with their customer, ensuring prompt services.

They also aim to fortify their markets in North America, Middle East, Australia and New Zealand. They also aim to aggressively increase their presence into new markets like Eastern Europe, Latin/South America and Africa.

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. 42.30
UK Pound	1	Rs. 84.03
Euro	1	Rs. 66.42

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	9
PAID-UP CAPITAL	1~10	8
OPERATING SCALE	1~10	7
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	7
--PROFITABILIRY	1~10	8
--LIQUIDITY	1~10	8
--LEVERAGE	1~10	8
--RESERVES	1~10	8
--CREDIT LINES	1~10	8
--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		71

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