MIRA INFORM REPORT

Report Date :

24.10.2008

IDENTIFICATION DETAILS

Name :	AUSTIN ENGINEERING COMPANY LIMITED
Registered Office :	Village Patla, Taluka Bhesan, District Junagadh – 362030, Gujarat
Country :	India
Financials (as on) :	31.03.2008
Date of Incorporation :	26.07.1978
Com. Reg. No.:	04 – 3179
CIN No.: [Company Identification No.]	L27259GJ1978PLC003179
TAN No.: [Tax Deduction & Collection Account No.]	RKTA00736B
PAN No.: [Permanent Account No.]	AABCA8189N
Legal Form :	Subject is a Public Limited Liability Company. The company’s shares are listed on the Stock Exchanges.
Line of Business :	Manufactures all kinds of bearings viz. ball bearings, tapered roller bearings, cylindrical order bearings, spherical roller bearings, needle roller bearings, etc.

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 1500000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established and reputed company having satisfactory track. Available information indicates high financial responsibility of the company. Trade relations are fair. General financial position is satisfactory. Payments are usually correct and as per commitments. The company can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	Village Patla, Taluka Bhesan, District Junagadh – 362030, Gujarat, India
Tel. No.:	91-2873-252267/252268/ 252223 91-285-2680270/2680570
Fax No.:	91-285-2661505/ 91-2873-252268
E-Mail :	sales@aecbearings.com, ifo@aecbearings.com
Website :	http://www.aec-bearings.com
Factory :	Village Patla, Taluka Bhesan, District Junagadh – 362030, Gujarat, India
Tel. No.:	91-2873-252267/252268 91-285-2680270/2680570
Fax No.:	91-285-2661505
E-Mail :	sales@aecbearings.com
Junagadh Office :	101, G. I. D. C. Estate, Vadal Road, Junagadh – 362003, Gujarat, Indiaa

DIRECTORS

Name :	Mr. N. C. Vadgama
Designation :	Chairman and Executive Director
Name :	Mr. S. M. Thanki
Designation :	Managing Director
Name :	Mr. R. R. Bambhania
Designation :	Joint Managing Director
Name :	Mr. J. R. Bhogayta
Designation :	Executive Director
Name :	Mr. S. V. Vaishnav
Designation :	Non Executive Director
Name :	Dr. B. R. Sureja
Designation :	Non Executive Director
Name :	Mr. K. J. Mehta
Designation :	Non Executive Director
Name :	Mr. D. B. Nakum
Designation :	Non Executive Director

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

As on 31.03.2008

Names of Shareholders	No. of Shares	Percentage of Holding
Indian Promoters/ Relatives	1187337	33.63
Resident Individual and Corporate	2289621	64.84
Financial Institutions/ Banks/ Mutual Fund	7000	0.20
NRIs	4702	1.33
Total	3488660	100.00

BUSINESS DETAILS

Line of Business :

Manufactures all kinds of bearings viz. ball bearings, tapered roller bearings, cylindrical order bearings, spherical roller bearings, needle roller bearings, etc.

Products :

Product Description	ITC Code
All Kinds of Rolling Bearings	84.82

PRODUCTION STATUS

Particulars	Unit	Installed Capacity	Actual Production
Bearings	Nos.	1700000	1172080
Components	Nos.	--	2308439
Wind Power (Electricity)	MW/ KWh	0.800 MW	1328164 KWH

GENERAL INFORMATION

Suppliers :

Ø Bharadia Engineering Industries

Ø Forward Precision Engineering Private Limited

Ø Meta Com Industries

Ø Abhishek Forging Private Limited

Ø Alpha Industries

Ø Make- Well Industries

Ø Ankur Engineers

Ø Pioneer Industries

Ø Ravi Industries

Ø Sagar Industries

Ø Shailesh Steel Forging

Ø Accumax Engineering Works

Ø V. V. Engineering Works

Ø Jay Engineers

Ø Payal Forging

Ø Shailesh Techno Forging

Ø Spark Engineering Company

Ø T. K. Industries

Ø Vinayak Industries

No. of Employees :

About 1600

Bankers :

· Bank of Baroda, Azad Chowk Branch, Jugadh-362001, Gujarat, India

· ICICI Bank Limited

· HDFC Bank

Facilities :

SECURED LOAN	31.03.2008 Rs. In Millions
(A) Deferred Payment Loan
From ICICI Bank	0.842
From HDFC Bank	0.512
From CHOLAMANDLAM DBS Finance Limited	1.183
(B) Term Loan
a) From Bank of Baroda	12.290
b) From bank of Baroda	21.001
(C) Working Capital Loan
From Bank of Baroda	128.886
Total	164.715

· Borrowing under Item (A) is Secured against Hypothecation of Cars and Buses

· Borrowings under item (B) (a) is secured against Hypothecation of Machinery

· Borrowings under Item (B) (b) is Secured against Hypothecation of Wind Power Machinery

· Borrowing under Item (C) is Secured against Hypothecation of all stocks. Bill discount and Book-debts and all movable machinery including stores and spares. Equitable Mortgage of all Land and Building of the Company and against the personal guarantees of Managing and Whole-time Director

Banking Relations :	Satisfactory
Auditors :
Name :	Dhirubhai Dand and Company Chartered Accountants
Address :	Gokul Chamber, Junagadh – 362001, Gujarat, India
Cost Auditors:	S. B. Parikh and Company Cost Accountants
Address:	Vadodara
Associates/Subsidiaries :	Acurate Engineering Inc, U.S.A.

CAPITAL STRUCTURE

As on 31.03.2008

Authorised Capital :

No. of Shares	Type	Value	Amount
4000000	Equity Shares	Rs. 10/- each	Rs. 40.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
3531000	Equity Shares	Rs. 10/- each	Rs. 35.310 Millions

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		35.310	35.310	32.750
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		266.961	227.371	130.592
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		302.271	262.681	163.342
LOAN FUNDS
1] Secured Loans		164.715	125.512	92.011
2] Unsecured Loans		0.000	0.000	0.000
TOTAL BORROWING		164.715	125.512	92.011
DEFERRED TAX LIABILITIES		7.197	13.175	2.819
TOTAL		474.183	401.368	258.172
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		134.579	122.817	72.315
Capital work-in-progress		0.000	0.000	0.000
INVESTMENT		3.760	3.508	4.414
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	284.665	202.923	160.558
	Sundry Debtors	179.199	187.721	139.346
	Cash & Bank Balances	17.884	7.297	5.367
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	63.107	53.471	30.034
Total Current Assets		544.855	451.412	335.305
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	160.455	148.318	147.615
	Provisions	48.556	28.051	6.247
Total Current Liabilities		209.011	176.369	153.862
Net Current Assets		335.844	275.043	181.443
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		474.183	401.368	258.172

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2008	31.03.2007	31.03.2006
Sales Turnover		729.950	648.629	411.587
Other Income		15.252	13.958	0.000
Total Income		745.202	662.587	411.587
Profit/(Loss) Before Tax		92.946	85.547	21.996
Provision for Taxation		26.772	30.999	8.295
Profit/(Loss) After Tax		66.174	54.548	13.701
Earnings in Foreign Currency :
	Raw Material	6.590	1.348	104.856
	Capital Goods	1.039	5.644	0.000
Total Earnings		7.629	6.992	104.856
Imports :
	Import Value	335.165	284.927	1.436
Expenditures :
	Manufacturing Expenses	615.343	503.440
	Purchases of trade goods	68.771	61.624
	Loss on Sale of Assets	0.171	0.480
	Increase/(Decrease) in Finished Goods	[63.123]	[17.702]	389.590
	Interest	17.761	17.737
	Depreciation & Amortization	13.333	11.461
	Other Expenditure	715.379	594.742
Total Expenditure		652.256	577.040	389.590

QUARTERLY RESULTS

PARTICULARS	30.06.2008 1^st Quarter	31.09.2008 2^nd Quarter
Sales Turnover	200.100	231.700
Other Income	11.300	4.800
Total Income	211.400	236.500
Total Expenditure	167.400	186.700
Operating Profit	44.000	49.800
Interest	4.900	5.300
Gross Profit	39.100	44.500
Depreciation	3.600	4.100
Tax	12.500	13.400
Reported PAT	23.200	26.300

KEY RATIOS

PARTICULARS	31.03.2008	31.03.2007	31.03.2006
Debt-Equity Ratio	0.51	0.55	0.61
Long Term Debt-Equity Ratio	0.13	0.15	0.10
Current Ratio	1.59	1.50	1.37
TURNOVER RATIOS
Fixed Assets	2.63	2.53	2.37
Inventory	3.17	3.60	3.36
Debtors	4.21	4.06	3.92
Interest Cover Ratio	6.22	5.83	4.24
Operating Profit Margin(%)	16.07	16.59	12.92
Profit Before Interest And Tax Margin(%)	14.34	14.93	11.30
Cash Profit Margin(%)	10.15	9.40	7.19
Adjusted Net Profit Margin(%)	8.43	7.74	5.57
Return On Capital Employed(%)	25.91	29.34	22.74
Return On Net Worth(%)	23.04	23.60	18.08

LOCAL AGENCY FURTHER INFORMATION

History:

Incorporated in Junagadh on 27 Jul.'78, Austin Engineering Company went public in 1985. It was promoted by qualified engineers having vast experience in the bearings industry.It manufactures all kinds of bearings -- ball bearings, tapered roller bearings, cylindrical roller bearings, spherical roller earings, needle roller bearings, etc. 

Austin came out with a rights issue in Mar.'92 to meet the cost of expansion and to augment long-term working capital requirements. 

The company's products find application in the automobile and engineering industries. Its major clients are OEMs like TELCO, Premier Automobiles, Bhilai Steel Plant and Punjab Tractors.

It exports its products to Italy and the UK. 

During 1998-99, the company received ISO-9001 Certificate from Rheinland/Berlin-Brandenburg Group of companies for design and manufacturing of Ball, Roller and Needle Bearings.

Operation Results:

The Company has faired well during the year. The sales of the Company have increased both in domestic and export segment. The Sales during the year were Rs. 772.356 Millions as against Rs.694.410 Millions in the previous year, The sales thus registered an overall increase of 11.71% including an increase in export to the tune of 46.69% as compared to the last year export. 

The net profit of the Company is also increased from Rs. 54.548 Millions to Rs.66.174 Millions registering the growth of about 21.31%. The prospect of the Company for the current year both in domestic and export segment is also good. The Company has earned a revenue of Rs. 5.575 Millions making net Profit of Rs. 1.768 Millions out of the Wind Mill project installed last year. 

The Company continued to launch a numbers of new and higher value added products which will further strengthen the Company's competitiveness in the future. 

 DIVIDEND:

In view of the Company's profitable performance, the Directors are pleased to recommend for approval of shareholders a dividend of Rs. 2.20 (Tax Free) per Equity share of the Company in respect of the financial year ended on 31st March, 2008. (Previous Year Rs.2.00) The said dividend shall be payable to those members whose names appear on the Register of member of the company on record date. 

MANAGEMENT DISCUSSION AND ANALYSIS REPORT 

 OVER VIEW OF BEARING INDUSTRY: 

The strong fundamentals of the Indian economy provides the necessary optimism for achieving the 11th Five-Year Plan Projections of 9% Annual GDP growth rate and in fact, provides a room for improving the same. 

Two key elements during the next 5 years will be 1) increasing contribution of private investment in India's capital formation and 2) investment in infrastructure to increase from current levels of around 3% of GDP to about 9% of GDP. 

The domestic market size in bearing industry is estimated at 54 billion. Approximately 45% of the demand is met through imports and the balance through indigenous product. The sales of organized bearings industry in India in domestic market are estimated at Rs. 24 billion and it recorded a growth of 7% during the year 2007 in terms of sales value. 

Bearing industry comprises ball bearings and roller bearings. In India to a large extend ball bearings account for about 50% of the total bearings market. The prospects of bearing industry are directly linked to performance to key sectors namely automotive and infrastructure. 

Increase in bank lending rates in the recent past and excess capacity of medium and heavy trucks that was created during the last 5 years, led to slow down in the commercial vehicle sector. A general slow down was also experienced in motorcycles and passenger car segments. However, the growth in infrastructure sector compensated more than the slowdown in the automotive sector. 

 Given the growth prospectus of economy and industry drivers, significant capacity expansion is being planned by most bearing manufactures. Most of the investments on ground and expansion programmes cater to the automotive sector. Large size bearings, used pre-dominantly in heavy industry, continue tobe imported into India. Reduction of import tariffs has made this route more viable. 

OPPORTUNITIES AND THREATS: 

Indian economy has witnessed impressive rates of industrial growth in last four years and the same was 11.5% in 2006-07. The growth of manufacturing was even more at about 12.5% during 2006-07. Though growth of manufacturing has slightly decreased in financial year 2007 on account of slackening of consumer durable sector, the smart growth in capital goods is suggestive of significant addition to industrial capacity. 

The counterfeiting of bearings is the biggest threat to the industry since these spurious bearings affect the business and brand image. The company is taking steps to curtail spurious trade by improved packaging creating awareness and other necessary action. Necessary action has also been taken at industry level to check the menace of counterfeit, which has increased over last few years. 

OUTLOOK:

There has been marked change in the way the Indian economy is viewed, both within the country and in other countries of the world. This is largely due to the sustained, well directed efforts of the government that have resulted in globally acclaimed rates of economic growth, increased global competitiveness of Indian industries, strong macro fundamentals and a highly favourable economic outlook. In the face of the huge opportunities provided by the automobile sector, capital goods industry and sizzling Indian economy, the Company expects to build up demand from various industries, which will provide growth to the bearing industry. 

 They are also actively working on the following areas which are very close to commercialization which are:  

 1. Developing bearings for aerospace applications.

 2. One of the few manufacturers in the world to manufacture SPB's of 1200 mm diameter.  

 3. Development of Geared Slewing Rim bearings for Heavy Earth Moving and construction equipment. 

Fixed Assets:

· “aec” Trade Marks

· Freehold Land

· Leasehold Land

· Factory Building

· Plant and Machinery

· Electric Installation

· Tools Dies and Measuring Instruments

· Furniture and Fixture

· Office and Factory Equipments

· Vehicles

· Computer Machine

· Wind Electric Power Converter

AS PER WEBSITE:

Profile:

They would like to introduce themselves as the manufacturer of widest range of ball and roller bearings in a single manufacturing unit in India. They are in this business since 1978 without any foreign collaboration and having two manufacturing units at present. They can manufacture bearings up to 1000 mm OD and 10 mm ID according to customer specifications.

Rapid development and flexible manufacturing system are the strengths enabling them to meet most of the customers' needs. Batch size is not at all a constraint to them for developing as well as manufacturing, if the same is production-wise feasible for new and/or developed bearings. They also export the bearings to developed countries like USA, UK, Germany, Italy and others.

Interest:

· Export of Bearings & Components.

· Instruments for the same.

· Import of raw materials, components and machinery.

Technical Introduction:

A long service life, high degree of reliability and economic efficiency are the prime criteria when designing rolling bearing arrangements. The findings on the rolling bearing life are actually attainable. The method on the adjusted life calculation is based on international standard recommendation, extensive investigations by AEC research department and practical experience. It takes into account failure probability, material, lubrication, magnitude of load, bearing type, and cleanliness. It is found that fail-safe bearings are possible with a fully separating lubricant film, the highest degree of cleanliness and stress which is absolutely realistic.

Milestones:

1973

Partnership firm formed by five technocrats.

Started manufacturing needle roller cage assemblies with the manpower of 10 and the capital investment of 3500 US Dollars.

1974

Started manufacturing cylindrical roller bearings and deep groove ball bearings up to 50mm diameter.

1975

Started manufacturing single row spherical roller bearings.

1978

Partnership firm converted into Private Limited Company.

Started manufacturing tapered Roller Bearing up to 100mm diameter.

1980

Manufacturing capacity of all aforesaid bearings increased up to 150mm diameter.

1982

Started supplying bearings for gear box application to Premier Automobiles Limited (FIAT-Italy Collaboration) for passenger cars.

1984

Started supplying case carburized specially heat treated ground components (exclusive supplier) and King-pin bearings to TELCO for light and heavy commercial vehicles.

1985

Converted into Public Llimited Company and offered shares to public.

1986

Started New Plant (Unit II) with installation of machinery and testing/measuring equipment imported from Germany.

Started exporting bearings to developed countries such as UK, USA, and Italy.

1987

Started manufacturing import substitute bearings for military tanks and armed vehicles of Indian Defense Department.

1990

Increased manufacturing capacity to 600mm diameter.

Started manufacturing double row tapered and spherical roller bearings.

1991

Awarded indefinite rate contract with All India State Road Transport Undertakings (ASRTU) for 78 sizes of bearings for their passengers vehicles.

1993

Started manufacturing flexible roller bearings.

1995

Manufacturing capacity increased to 800mm diameter.

1997

Started manufacturing flush ground single row angular contact ball bearings for US and European Markets.

1998

Started production of four row tapered roller and mutli-row cylinderical roller bearings for roll-neck application in

steel plants.

1999

Awarded ISO 9001 Certification for design and manufacturing of all type of rolling bearings from TUV Rheinland.

2000

Established AEC Europe S.R.L in Milan, Italy.

2002

Developed stainless steel (Grade 440C) bearings (for Atomic Energy Plant).

2003

Developed and supplied Screw Down bearing (equivalent to Torrington 202 TTSX 942 EE2000).

2004

Developed Slim bearings (Constant Section Bearings) up to 18 inch.

Established Accurate Engineering Inc. (WOS of AEC Limited) in USA.

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.49.79
UK Pound	1	Rs.81.27
Euro	1	Rs.63.91

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	5
OPERATING SCALE	1~10	5
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	5
--PROFITABILIRY	1~10	5
--LIQUIDITY	1~10	5
--LEVERAGE	1~10	5
--RESERVES	1~10	5
--CREDIT LINES	1~10	5
--MARGINS	-5~5	-
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		46

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average.	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