MIRA INFORM REPORT

Report Date :

25.10.2008

IDENTIFICATION DETAILS

Name :	PUDUMJEE PULP AND PAPER MILLS LIMITED
Registered Office :	Thergaon, Chinchwad, Pune - 411033, Maharashtra
Country :	India
Financials (as on) :	31.03.2008
Date of Incorporation :	19.11.1964
Com. Reg. No.:	11-13058
CIN No.: [Company Identification No.]	L21012MH1964PLC013058
TAN No.: [Tax Deduction & Collection Account No.]	PNEP07501E
Legal Form :	Public Limited Liability Company. The company’s shares are listed on the Stock Exchange.
Line of Business :	Manufacturing and sale of paper like opaque laminating base paper, kraft paper and glassine paper.

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 5000000
Status :	Very Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well-established and reputed company having satisfactory track. Directors are reported as experienced, respectable and having satisfactory means of their own. Their trade relations are fair. 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/Factory	Thergaon, Chinchwad, Pune - 411033, Maharashtra, India
Tel. No.:	91-20-30613333/ 27275381
Fax No.:	91-20-27273294/ 30613388
E-Mail :	sk@pune.pudumjee.com inv_compl_ppm@pune.pudumjee.com
Website :	http://www.pudumjee.com
Corporate/ Sales Office:	Jatia Chambers, V.B. Gandhi Marg, Mumbai- 400023, Maharashtra, India
Tel. No.:	91-22-30213333
Fax No.:	91-22-22658316
E-Mail :	mumbai@mumbai.pudumjee.com sk@pune.pudumjee.com rsr@mumbai.pudumjee.com
Website :	http://www.pudumjee.com

DIRECTORS

Name :	Mr. M. P. Jatia
Designation :	Chairman & Managing Director
Name :	Mr. V. O. Somani
Designation :	Director
Name :	Mr. O. P. Gupta
Designation :	Director
Name :	Mr. V. K. Jatia
Designation :	Joint Managing Director
Date of Ceasing :	01.04.2001
Name :	Mr. J. P. Shaw
Designation :	Director
Name :	Mr. K. D. Pudumjee
Designation :	Director
Date of Ceasing :	23.06.2001
Name :	Mr. R. N. Sethna
Designation :	Director
Name :	Mr. V. P. Leekha
Designation :	Director
Name :	Mr. A. K. Jatia
Designation :	Director
Name :	Mr. S. M. Chitnis
Designation :	Additional Director
Date of Appointment :	24.01.2001

KEY EXECUTIVES

Name :	Mr. S. K. Bansal
Designation :	Company Secretary & Senior General Manager (Finance)
Name :	Mr. M. P Jatia
Designation :	Chairman and Managing Director
Date of Birth/Age :	70 years
Experience :	45 years experience in Business Administration and Finance
Date of Appointment :	01.03.1975
Other Directorships :	Chem Mach Private Limited – Whole Time Director
Name :	Mr. V. K. Jatia
Designation :	Joint Managing Director
Date of Birth/Age :	43 years
Qualification :	B.Com.
Experience :	25 years experience in Business Administration and Finance
Date of Appointment :	01.07.1991
Other Directorships :	Hard Castle & Waud Manufacturing Company Limited – Executive Director

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

(As on 31.03.2008)

Names of Shareholders	No. of Shares	Percentage of Holding
Promoters	4581497	55.87
Banks/ Institution	454148	5.54
Bodies Corporate	607379	7.41
Public	2556976	31.18
Total	8200000	100.00

BUSINESS DETAILS

Line of Business :

Manufacturing and sale of paper like opaque laminating base paper, kraft paper and glassine paper.

PRODUCTION STATUS

Particulars	Unit	Licensed Capacity	Installed Capacity
Paper	MT	Not Applicable	38,500
Pulp	MT	--	--

GENERAL INFORMATION

Suppliers :	800
Bankers :	Ø State Bank of India, Pune, Maharashtra Ø The United Western Bank Limited, Pune, Maharashtra Ø Citibank N.A., Pune, Maharashtra Ø HDFC Bank Limited, Pune, Maharashtra Ø Centurion Bank Limited, Pune, Maharashtra Ø Bank of India, Pune, Maharashtra Ø Industrial Development Bank of India Ø The Hong Kong and Shanghai Banking Corporation limited

Banking Relations :	Satisfactory
Auditors :
Name :	Khare and Company Chartered Accountants
Associates/Subsidiaries :	Associates Ø Pudumjee Agro Industries Limited Ø Kimberly Clark Pudumjee Limited Ø Pudumjee Plant Laboratories Limited Ø Prime Developers Ø Pudumjee Industries Limited Ø Pudumjee Hygiene Products Limited Subsidiaries Ø Pudumjee Investment & Finance Company Limited Ø Gresham Investments & Finance Limited Ø Darjeeling Pulp & Paper Limited

CAPITAL STRUCTURE

Authorised Capital:

No. of Shares	Type	Value	Amount
9500000	Equity Shares	Rs.10/- each	Rs.95.000 millions
50000	14% (free of company’s tax but subject to deduction of tax at source at the prescribed rates) Redeemable Cumulative Preference Shares	Rs.100/- each	Rs.5.000 millions
	Total		Rs.100.000millions

Issued, Subscribed & Paid-up Capital:

No. of Shares	Type	Value	Amount
8200000	Equity shares	Rs.10/- each	Rs.82.000 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		82.000	82.000	82.000
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		952.107	876.954	930.622
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		1034.107	958.954	1012.622
LOAN FUNDS
1] Secured Loans		548.026	476.874	525.153
2] Unsecured Loans		273.789	203.453	178.632
TOTAL BORROWING		821.815	680.327	703.785
DEFERRED TAX LIABILITIES		242.600	238.500	224.500
TOTAL		2180.522	1959.781	1940.907
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		1249.124	1205.247	1035.005
Capital work-in-progress		23.588	60.342	143.271
INVESTMENT		24.277	24.277	21.180
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	457.383	385.101	432.181
	Sundry Debtors	314.941	208.284	184.206
	Cash & Bank Balances	27.235	10.758	15.187
	Other Current Assets	52.540	54.995	0.047
	Loans & Advances	434.092	317.918	436.835
Total Current Assets		1286.191	977.056	1068.456
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	343.563	258.357	291.982
	Provisions	60.904	54.336	44.318
Total Current Liabilities		404.467	312.693	336.300
Net Current Assets		881.724	664.363	732.156
MISCELLANEOUS EXPENSES		1.809	5.552	9.295
TOTAL		2180.522	1959.781	1940.907

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2008	31.03.2007	31.03.2006
Sales Turnover		2195.662	1902.727	1284.740
Other Income		5.348	2.934	0.000
Total Income		2201.010	1905.661	1284.740
Profit/(Loss) Before Tax		65.231	61.338	65.152
Provision for Taxation		18.300	21.600	17.800
Profit/(Loss) After Tax		46.931	39.738	47.352
Earnings in Foreign Currency :
Total Earnings		NA	NA	18.389
Imports :
Total Imports		NA	NA	447.727
Expenditures :
	Cost of Goods	1260.820	1078.240
	Manufacturing Expenses	520.058	466.736
	Selling Expenses	31.566	24.262
	Salaries, Wages and Other Expenses	130.148	105.969
	Managerial Remuneration	7.497	11.366	1219.588
	Interests	54.429	33.311
	Depreciation	95.985	88.623
	Auditors Remuneration	0.310	4.053
	Provision for Doubtful Debts and Advances	6.743	1.314
	Other Expenditure	31.223	30.449
Total Expenditure		2138.779	1844.323	1219.588

QUARTERLY RESULTS

PARTICULARS	30.06.2008 1^st quarter
Sales Turnover	786.600
Other Income	1.500
Total Income	788.100
Total Expenditure	738.300
Operating Profit	49.800
Interest	12.300
Gross Profit	37.500
Depreciation	24.900
Tax	8.800
Reported PAT	8.200

KEY RATIOS

PARTICULARS	31.03.2008	31.03.2007	31.03.2006
Debt-Equity Ratio	0.70	0.67	0.57
Long Term Debt-Equity Ratio	0.61	0.48	0.39
Current Ratio	1.61	1.35	1.33
TURNOVER RATIOS
Fixed Assets	1.30	0.91	0.69
Inventory	5.52	4.90	3.22
Debtors	8.89	10.20	8.81
Interest Cover Ratio	1.85	1.83	2.26
Operating Profit Margin(%)	10.23	9.53	14.17
Profit Before Interest And Tax Margin (%)	6.10	5.11	8.20
Cash Profit Margin(%)	6.15	5.92	9.29
Adjusted Net Profit Margin(%)	2.02	1.50	3.32
Return On Capital Employed(%)	7.77	5.98	7.56
Return On Net Worth(%)	4.35	2.92	4.76

LOCAL AGENCY FURTHER INFORMATION

HISTORY:

Subject incorporated in Nov 1964 is into manufacture of all varieties of paper, paper boards, paper products and cellulose pulp. N P Jatia along with persons acting in concert holds 51.52% in PPPM as on Dec 1, 2003. 

Company which started manufacturing operations at Thergoan, Pune, in Jan.'68, with an installed capacity of 6000 tpa, now produces 22,000 tpa of speciality paper.  

For the first time in India the company has manufactured grease-proof and glassine paper (used for specific packaging purposes) in 1968. The company is also the pioneer in manufacture of chemical pulp using/from straw and bagasse, to make speciality paper.  

Company has evolved a technology for cleaner manufacture of pulp from bagasse which is the main raw material. This method is solvent-based and has been patented as the PUNEC (Pudumjee non-wood ethanol cellulose) process. 

The company has installed an imported second hand paper making machinery during the year 1997-98. Further in 1998-99 the tissue making machine and power plant commenced commercial production. With the view of reducing cost of raw material, the company has installed during the year 1999-2000, waste paper recycling plant of capacity of 75 tonnes per day.  

In 1988, the company set up a waste-water treatment plant which reduces the impurities in the waste water while generating as a by-product, methane which is used as a substitute fuel in the boilers.  

In recognition of the work done on treatment of waste water, the company has been selected as a model unit by the United Nations Enviornmental Programme. The British Standards Insitution has granted the company certificate under ISO 14001, in view of the commitment of the company to environmental protection. 

Company subsidiaries are Pudumjee Investment & Finance and Gresham Investment & Finance.

OPERATIONS

As a result of capital expenditure incurred by the Company in the earlier years as also due to change in product mix, the production of paper during the year under review increased by about 20%. The gross profit before interest and depreciation has also increased by about 17%. However, increased burden of interest and depreciation has offset the benefit. 

The continuous rise in cost of various inputs especially in respect of fuel oil, raw materials and impact of weakening Rupee is putting pressure on the margins of the Company which concern is being addressed partly by way of revision in prices of paper and partly by improving product mix, cost reduction measures adopted and continue to be adopted by the Company. 

The Company has upgraded its Waste Paper Recycling Plants at an aggregate cost of about Rs.80.000 Millions both in terms of capacity as also in respect of quality of the output. This has enabled the Company better flexibility in raw material usage and reduction in cost. 

With regard to the Company's business in Real Estate Development, the Bhoomi Poojan for the first project has been performed on 16th May, 2008 on the land at Thergaon, Pune for constructing residential and/ or commercial units of an aggregate area of about 8 lacs sq. ft in partnership with G. Corp Properties Private Limited. The work on the project has just commenced. 

The negotiations for the wage settlement with workers, which expired on 31st March, 2008 are in progress. 

78 Foxed Deposits amounting to Rs.1.945 Millions which had matured for payment as at the close of 31st March, 2008 were not claimed by the deposit holders. Out of this amount 16 deposits of the value of Rs.0.490 Million have been chimed upto 18th June, 2008. 

MANAGEMENT DISCUSSION AND ANALYSIS: 

The Company operates in the specialty paper segment. In view of higher value addition in these papers there is an intense unfair competition from imports which has resulted in limiting the Company's ability to improve margins. Further the Company's dependance on import of raw material, both Pulp and Waste Paper for recycling continues in view of scarce fibre resources in the country. The continuous rise in cost of various inputs, especially in respect of fuel oil, raw materials and impact of weakening Rupee coupled with general higher inflation in the economy is making the task of improving the margins more difficult. The Company is addressing these concerns partly by way of rise in the prices of output and partly by way of measures of cost reduction and improved product mix. 

Waste Paper Recycling Plants have been upgraded during the year which has resulted in better flexibility in usage of different waste papers and raw material mix as well as reduction in cost. 

The work on the project for construction of residential and/or commercial units of an aggregate area of about 8 lacs sq.ft. has just begun. This is the first project in the Company's business of Real Estate Development which is taken up in Partnership with G. Corp Properties Private Limited. 

The existing internal controls of the Company are periodically reviewed by the Audit Committee and are considered quite adequate. 

The Company employs about 500 employees and Company's relations with the labour remain cordial.  

Contingent Liabilities

	31.03.2008 (Rs. In Millions)
Bank Guarantee and Letters of Credit in Favour of Suppliers of raw Materials, Spares etc.*	116.342
Guarantee for other Companies*	3.500
Claims against the company not acknowledged as debts for excise duty property tax and commercial claims etc.**	23.126

*will not affect the future profitability

**May affect the future profitability to the extent indicated, if such liabilities crystallise

Website Details:

Subject is a Pune (Maharashtra, India) based Company engaged in the manufacture and sale of Specialty Papers is a flagship Company of the M.P. Jatia Group of Companies.

Beginning with manufacture of India’s first indigenous Greaseproof and Glassine papers for packaging for the first time in India, Company went on to extend range of papers to include Security Papers such as MICR Paper, Sensitized Paper, Postal Stamp, Impressed Stamp, Passport and Excise Banderoll, Laminating Base, Silicone base paper, Wax Match paper, Packaging Papers of various kinds and types, Tissue Papers, etc. catering to wide range of industrial applications specially manufactured to meet customers specific requirements. Starting with a capacity of 6,000 MT of paper per annum in 1968, Company has now reached a capacity of 42,500 MT per annum of Specialty Papers.

The Company which has its plant and registered office at Thergaon, Pune (India) is managed by Board of Directors comprising eminent personalities from various fields and discipline headed by Mr. M. P. Jatia. The company’s equity shares are listed at Pune, Mumbai and National Stock Exchanges.

Subject which comes with a tradition of over 100 years in the Paper Industry was incorporated in November 1964 and commenced production in January 1968 at its plant at Pune (Maharashtra, India).

Landmark:

Ø Company was the first Mill in India to make Greaseproof and Glassine, starting in 1968.

Ø In 1972 Company pioneered for the first time in the country, manufacture of chemical pulp from agricultural residues such as straws and bagasse to be used for making Specialty Papers.

Ø In 1972 Company became the first Mill in the country to install a full scale activated sludge system for treatment of its wastewater.

Ø Company has also been the first Mill in the country to technologically upgrade its operations by installing microprocessor-based controls in various process applications.

Ø In 1982 Company pioneered the anaerobic digestion process for treatment of wastewater by installation of a plant, which is one of the first few in the world and the first one in India in the Pulp and Paper Industry.

Ø In recognition of the work done on treatment of wastewater, the Company had been selected as a model unit by the United Nations Environment Programme for dissemination of information about the Mill throughout South East Asia to Governments and Pollution Boards as a guide.

Ø In 1972 Company after considerable research and development evolved and patented a technology for cleaner manufacture of pulp from sugarcane residue, which is its main raw material.

Ø In late 1990’s Company carried out an expansion-cum-modernization programme at a cost of about Rs.900 million to set up a Tissue Paper Making Machine, Captive Power Plant, De-inking Pulping Plant and upgradation of effluent treatment system.

Ø In 1966 & 1993 the Company had made Public Issues of equity shares, which are currently listed at Pune, Mumbai and National Stock Exchanges.

Ø In 2004-05, the Company has undertaken a programme to modernize one of the papermaking machines at an aggregate cost of Rs.265.000 Millions to increase the production capacity by about 3000 MT per annum.

Management:

The Management of the Company is vested in the Board of Directors consisting of persons from various disciplines headed by Mr. Mahabirprasad Jatia, Chairman and Managing Director and assisted by experienced and qualified team of professionals.

Mr. M.P. Jatia, Chairman and Managing Director has an overall experience of over 51 years in Business administration and Corporate Finance and is a Director of many well-known companies.

Mr. Ved P. Leekha, the Director-Technical is a B.E. (Mech.) and has a wide and varied experience of over 44 years in Paper Mills.

Mr. S.K. Bansal, the Director-Finance & Administration and Company Secretary is a Bachelor of Commerce, a Chartered Accountant and an Associate Member of the Institute of Company Secretaries of India and has over 24 years of experience in Finance and Business Administration.

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.49.95
UK Pound	1	Rs.79.56
Euro	1	Rs.63.65

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	8
PAID-UP CAPITAL	1~10	7
OPERATING SCALE	1~10	7
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	9
--PROFITABILIRY	1~10	6
--LIQUIDITY	1~10	9
--LEVERAGE	1~10	9
--RESERVES	1~10	9
--CREDIT LINES	1~10	9
--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	YES
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		73

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