MIRA INFORM REPORT

Report Date :

20.09.2008

IDENTIFICATION DETAILS

Name :	ESTER INDUSTRIES LIMITED
Formerly Known As :	ESTER INDIA LIMITED
Registered Office :	Sohan Nagar, P.O. Charubeta, Khatima – 262 308, Dist. Udhamsingh Nagar, Uttaranchal
Country :	India
Financials (as on) :	31.03.2008
Date of Incorporation :	04.02.1985
Com. Reg. No.:	20-15063
CIN No.: [Company Identification No.]	L24111UR1985PLC015063
TAN No.: [Tax Deduction & Collection Account No.]	DELE02870A
PAN No.: [Permanent Account No.]	AAACE0119K
Legal Form :	A Public Limited Liability Company. The company’s shares are listed on the Stock Exchanges
Line of Business :	Manufacture of Polyester Chips, Polyester Film, Polyester / PBT, Filament Yarn and Methanol.

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 5700000
Status :	Satisfactory
Payment Behaviour :	Slow but correct
Litigation :	Unknown
Comments :	Subject is no more a ‘Sick Company’ due to improvement in performance and wiping at the previous looses. Subject is a well established company having erratic track and performance. Trade relations are fair. Payments are reported as slow but correct. The company can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	Sohan Nagar, P.O. Charubeta, Khatima – 262 308, Dist. Udhamsingh Nagar, Uttaranchal, India
Tel. No.:	91-5943-250153-57
Fax No.:	91-5943-55158
E-Mail :	info@esterindustries.com
Website :	http://www.esterindustries.com
Head Office :	DLF Building No. 8, Tower – A, II Floor, DLF City, Phase – II, Sector – 25, Gurgaon – 122022, Haryana, India
Tel. No.:	91-124-4572100 – 30
Fax No.:	91-124-4572199/ 4376426
E-Mail :	info@esterindustries.com
OVERSEAS OFFICE	ESTER INTERNATIONAL (USA) LIMITED C/o. 350 5th Avenue Suite, 5416, New York, NY 10118, USA E-mail-info@esterindustries.com
Branches :	Mumbai 204, Vishwananak Appartments, 2^nd Floor, Chakala Road, Andheri (E), Mumbai - 400 099, Maharashtra, India Tel./Fax- 91-22-28354522-23 Fax- 91-22-2835 4521. E-mail- info@esterindustries.com Bangalore 3008 A, Gowri Apartment, RMV Ext. 2^nd Stage, New BEL Road, Bangalore - 560054, India Tel./Fax- 91-80-23625243. Mobile No. - 9845118470 E-mail - info@esterindustries.com

DIRECTORS

Name :	Mr. A. K. Singhania
Designation :	Chairman and Managing Director
Name :	Mr. M. R. Hosangady
Designation :	Director
Name :	Mr. H. S. Majumder
Designation :	Director
Name :	Mr. V. B. Haribhakti
Designation :	Director
Name :	Mr. A. P. Sarwan
Designation :	Director
Name :	Mr. A. K. Newatia
Designation :	Executive Director
Name :	Palem Srikant Reddy
Designation :	Director
Name :	D K Dosi
Designation :	Executive Director

KEY EXECUTIVES

Name :	Mr. S. K. Jain
Designation :	Company Secretary
Name :	Mrs. Shweta Yadav
Designation :	Company Secretary

MAJOR SHAREHOLDERS

(As on 30.06.2008)

Names of Shareholders	No. of Shares	Percentage of Holding
Indian
Individuals/ Hindu Undivided Family	5557770	10.01
Bodies Corporate	1427100	2.57
Foreign
Bodies Corporate	30952800	55.77
Public shareholding
Institutions
Mutual Funds/ UTI	32700	0.06
Financial Institutions / Banks	785600	1.42
Insurance Companies	300	0.00
Non-institutions
Bodies Corporate	2263755	4.08
Individuals
Individuals -i. Individual shareholders holding nominal share capital up to Rs. 0.100 Millions	11051806	19.91
Individual shareholders holding nominal share capital in excess of Rs. 0.100 Millions.	2301431	4.15
Any Other
NRI	1129038	2.03
OCB	100	0.00
Total	55502400	100.00

BUSINESS DETAILS

Line of Business :

Manufacture of Polyester Chips, Polyester Film, Polyester / PBT, Filament Yarn and Methanol.

Products :

Product Description	Item Code No. (ITC Code)
Polyester Chips	392069
Polyester Film	392069
Engineering Plastic	392069

PRODUCTION STATUS

Particulars	Unit	Installed Capacity	Actual Production
Polyester Chips	MT	36000	34848
Polyester Film	MT	27000**	29020
Engineering Plastic	MT	2475$	2253

** Operating Capacity

$ Old Engineering Plastics extruder of 1500 MT per annum capacity discarded in October 2007 and New Engineering Plastics Extruders of 3600 MT per annum capacity installed in October 2007

GENERAL INFORMATION

No. of Employees :

1500

Bankers :

· Bank of India

· Bank of Baroda

· Union Bank of India

· Canara Bank

· State Bank of Bikaner and Jaipur

Facilities :

SECURED LOANS	As on 31.03.2008 (Rs. In Millions)
Rupee Term Loans
From Banks	227.806
Working Capital Loans from Banks
Cash Credit Facilities	374.979
Bills Discounting	192.673
Vehicle Loans
From Banks	6.329
From Bodies corporate	5.103
Total	806.890

Notes:

1. Rupee Term Loan

· From Bank of India of Rs.22.500 millions – Secured by first exclusive charge by way of hypothecation of all the Company’s movable assets related to Engineering Plastic Project.

· From Bank of India of Rs.35.750 millions – Secured by first exclusive charge by way of hypothecation of all the Company’s movable assets related to PET Film Line – 1 modification project.

· From Canara Bank Rs.19.499 millions – Secured by first exclusive charge by way of hypothecation of all the Company’s movable assets related to UPS Project.

· From State Bank of Bikaner and Jaipur Rs.33.000 millions - Secured by first exclusive charge by way of hypothecation of all the Company’s movable assets related to Co-Extrusion Project.

· Balance Term Loan of Rs.117.057 millions – Secured by first mortgage created by way of deposit of title deeds in respect of Company’s immovable properties, both present and future and first charge by way of hypothecation of all the Company’s balance movable assets (save and except book debts, vehicles acquired under vehicle loans) subject to prior charges created / to be created in favour of the Company’s bankers or working capital requirements in the ordinary course of business, ranking pari passu inter-se.

· All the above loans from banks are further secured by irrevocable fuarantees of a Director of the Company and his relative and a Promoter company.

2. Working Capital loans from banks are secured by hypothecation of stocks of raw materials, finished goods, semi finished goods, store and spares, book debts and other receivables (both present and future) and further secured by irrevocable guarantees of a Director of the Company, his relative and a Promoter Company. These are further secured by way of second charge in respect of Company’s immovable properties and movable fixed assets.

3. Vehicle loans are secured by hypothecation of specified vehicles acquired out of proceeds of the Loans.

4. Term Loans and Vehicle Loans installments falling due within next 12 months – Rs.114.951 millions

UNSECURED LOANS	As on 31.03.2008 (Rs. In Millions)
Foreign Currency Loan (Interest Free)
From Overseas Corporate Body (Payable with in one year Rs.55.948 millions)	55.948
	55.948

Banking Relations :	Satisfactory
Auditors :	Statutory Auditors S. R. Batliboi and Company Chartered Accountants Gurgaon Concurrent Auditors T. R. Chadha and Company Chartered Accountants New Delhi
Associates	· Spring Falls Limited · Super Leasing Limited · Saraswati Trading Company Limited · Sri Lakshmi Investment Limited
Subsidiaries :	· Ester International (USA) Limited (EIUL) · Ester Europe GmbH (EEG)

CAPITAL STRUCTURE

(As on 31.03.2008)

Authorised Capital :

No. of Shares	Type	Value	Amount
150000000	Equity Shares	Rs.5/- each	Rs.750.000 millions
600000	Cumulative Convertible Preference Shares	Rs.50/- each	Rs.30.000 millions
8000000	Redeemable Cumulative Preference Shares	Rs.50/- each	Rs.400.000 millions
	Total		Rs.1180.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
55502400	Equity Shares	Rs.5/- each	Rs.277.512 millions
559521	0.10% Redeemable Cumulative Preference Shares	Rs.50/- each	Rs.27.976 millions
	Total		Rs.305.488 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		305.488	305.488	305.500
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		825.287	758.459	901.400
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		1130.775	1063.947	1206.900
LOAN FUNDS
1] Secured Loans		806.890	866.350	749.200
2] Unsecured Loans		55.948	60.889	62.700
TOTAL BORROWING		862.838	927.239	811.900
DEFERRED TAX LIABILITIES		119.617	109.532	0.000
TOTAL		2113.230	2100.718	2018.800
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		1401.541	1468.623	1434.800
Capital work-in-progress		19.054	10.473	34.400
INVESTMENT		1.131	0.820	4.300
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	322.734	237.405	287.700
	Sundry Debtors	445.937	449.887	281.500
	Cash & Bank Balances	130.978	95.420	70.000
	Other Current Assets	39.916	16.983	0.000
	Loans & Advances	128.934	79.195	429.300
Total Current Assets		1068.499	878.890	1068.500
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	297.706	247.101	536.400
	Provisions	85.102	34.767	30.700
Total Current Liabilities		382.808	281.868	567.100
Net Current Assets		685.691	597.022	501.400
MISCELLANEOUS EXPENSES		5.813	23.780	43.900
TOTAL		2113.230	2100.718	2018.800

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2008	31.03.2007	31.03.2006
Sales Turnover		3191.821	2822.788	2747.900
Other Income		23.348	18.514	69.600
Total Income		3215.169	2841.302	2817.500
Profit/(Loss) Before Tax		125.048	(139.721)	(250.000)
Provision for Taxation		24.894	0.028	(81.900)
Profit/(Loss) After Tax		100.154	(139.749)	(168.100)
FOB Value of Export of Goods		1146.789	1098.990	0.000
Imports :
	Raw Materials	198.036	146.083	0.000
	Stores & Spares	41.128	25.019	0.000
	Capital Goods	29.377	112.614	0.000
Total Imports		268.541	283.716	0.000
Expenditures :
	Manufacturing Expenses	2416.338	2228.914	136.200
	Administrative Expenses	134.095	135.341	0.000
	Personnel Expenses	147.477	123.975	0.000
	Selling Expenses	154.548	138.866	227.500
	Financial Expenses	129.701	125.925	83.700
	Raw Material Consumed	0.000	0.000	1719.200
	Excise Duty	0.000	0.000	239.600
	Purchases made for re-sale	1.628	3.175	0.000
	Employee Cost	0.000	0.000	118.500
	Increase/(Decrease) in Finished Goods	(33.413)	63.069	37.700
	Miscellaneous Expenses	0.000	0.000	132.700
	Power & Fuel	0.000	0.000	206.100
	Depreciation & Amortization	139.747	161.758	166.300
Total Expenditure		3090.121	2981.023	3067.500

QUARTERLY RESULTS

PARTICULARS	30.06.2008
Type	1st Quarter
Sales Turnover	944.200
Other Income	3.200
Total Income	947.400
Total Expenditure	795.900
Operating Profit	151.500
Interest	30.500
Gross Profit	121.000
Depreciation	33.200
Tax	10.700
Reported PAT	57.500

KEY RATIOS

PARTICULARS	31.03.2008	31.03.2007	31.03.2006
Debt-Equity Ratio	0.98	0.87	0.61
Long Term Debt-Equity Ratio	0.45	0.48	0.39
Current Ratio	1.12	1.16	1.32
TURNOVER RATIOS
Fixed Assets	0.92	0.84	0.75
Inventory	12.45	11.76	8.45
Debtors	7.78	8.44	8.86
Interest Cover Ratio	1.96	(0.11)	(1.99)
Operating Profit Margin(%)	11.31	4.8	0
Profit Before Interest And Tax Margin(%)	7.31	(0.45)	(6.05)
Cash Profit Margin(%)	6.88	0.72	(0.07)
Adjusted Net Profit Margin(%)	2.87	(4.53)	(6.12)
Return On Capital Employed(%)	12.56	0.00	(8.53)
Return On Net Worth(%)	9.95	0.00	(14.07)

LOCAL AGENCY FURTHER INFORMATION

HISTORY

Promoted by Sitaram Singhania, (managing director of Lohia Machines), along with J P Shroff, (an NRI businessman based in Singapore) subject is having a installed capacity 36000 tpa polyester chips,18000 tpa polyester films and 6000 tpa dope-dyed coarse denier polyester filament yarn. The total cost of the project was Rs 844. 000 millions, which was part-financed by a public issue in Feb.'88. It was the first company in the country to have integrated operations to manufacture three products -- polyester chips, polyester film and dope-dyed polyester filament yarn. Its works is situated in Khatima, Uttaranchal. 

The Company is having two wholly owned foreign subsidiaries i.e Ester International (USA) Limited and Ester Europe GmbH. The Company is also planning to set up a one more subsidiary in Oman to manufacture 24000 MT of Polyster Film. 

Subject is considering various options, including private placement with FIIs, to raise around Rs 140.000 millions to pay the overdue interest as per the revival package. 

The company's expansion-cum-modernisation programme with an investment of Rs 1250.000 millions for increasing the annual production capacities of Chips from 20000 to 36000 MT and Polyester Film from 4000 to 18000 MT commenced commercial production from 1st January, 1998. 

In 2001 the Company declared as a Sick Industrial Undertaking in October, 2001 and Rehabilation package was approved by BIFR for one time settlement of Rs.552.040 millions. 

In 2004, the Company successfully completed the modernization of Chips Plant and this modernization helps the Company to produce the chips at substantially lower costs.

OPERATIONS

The directors are pleased to inform that there has been turnaround in the performance during the year and the Company has earned Net Profit after Tax of Rs. 100.154 millions as compared to Net Loss after Tax of Rs. 139.749 millions in the year 2006-07. The sales including excise duty and other income during the year are Rs. 3509.887 millions compared to Rs.3104.920 millions in the previous year, an increase of 13.04%. This increase is mainly due to higher price realization in Polyester Film, marginal increase in sales of Polyester Film by 4.78% in volume terms and increase in sale of Engineering Plastics both in quantitative & value terms. The production of Polyester Film was higher at 29,020 MT as compared to 27,215 MT during 2006-07 as a result of process improvements. The capacity utilization remained higher than the operating capacity at 107%. As a result of increase in sales of Compounded as well as OFC grade Engineering Plastics both in terms of volume and value, overall sale of Engineering Plastics has increased in value terms by 25.3%. Sales of Polyester Chips has increased in quantitative and value terms by 53.3% and 43.1% respectively.

The operational performance showed improvement over the last year due to improvement in demand supply situation both in the domestic as well as overseas market. Installation of Co-extrusion system during 2006 – 07 enabled production of Value Added products. Modernization, production of Niche products and cost reduction initiatives undertaken during the past years resulted in improved performance.

Exports accounted for 34% of the turnover during the year. Interest and Other Financial Expenses remained almost the same despite increase in interest rates due to repayment of term loans.

Details on operations and a view on the outlook for the current year are provided in the ‘Management Discussion and Analysis Report’ which forms integral part of the Annual Report.

MANAGEMENT DISCUSSIONS AND ANALYSIS

Subject is engaged in the manufacture and sale of PET Film and Engineering Plastics. During the current year, PET Film accounted for Rs.2860 millions of sales revenue. Sales of PET Film including Metallized PET Film were 28931 MT out of which 42% was exported to many countries around the globe and the balance was sold in domestic market.

Engineering Plastics accounted for Rs. 310 millions of sales revenue recording a total production of 2253 MT and sales of 2224 MT.

After 2 years of sub-optimal performance due to unfavorable market conditions, Subject turned around during 2007-08. Continued focus on improving cost structures and development of niche value-added products that fetch higher realization paid dividend and has helped Ester to return to Profits during 2007-08.

POLYESTER FILM BUSINESS

Current Scenario

There have been modest PET Film capacity additions in India since 2004. As a result of this, and the subsequent growth in Indian PET film demand of approx 15% pa, the demand supply balance was healthy. A robust economy fuelled by the organized retail business which is in an early growth stage, and an increasing use of packaged products promise a sustained growth in packaging and PET film usage. The Packaging segment which is the largest application segment is expected to grow at approx. 20% pa.

There have been no significant capacity additions internationally. Global demand for PET Film continues to grow at approx 7% pa.

On the operational front, Subject has consolidated on the improvements effected last year and stabilized productivity at higher levels in the Film extrusion and metallization process. In polymerization, they have effected changes which have resulted in improved and consistent polymer quality and higher productivity.

OUTLOOK

· The demand for PET Film in India continues to be strong and is growing at approx 15% pa. Key drivers are demand from the packaging segment. Fresh capacities will be needed to cater to this growing demand.

· Many existing and new converters are setting up additional plants and capacities in India. This will fuel the demand for further growth in packaging film which is the largest segment in the Indian market.

· Internationally, while there has been no significantly large capacity addition in any region, demand has been robust at about 7% pa. Chinese domestic demand has been high and value additions attractive, as a result of which exports from China have slowly tapered off. In fact, Chinese exports are expected to decline in the absence of newer capacity.

· Trade barriers in US and EU continue. Brazil has also imposed an anti-subsidy and anti-dumping duty on Indian PET Film producers. With the supply demand imbalance improving, the outlook for the Polyester Film industry is good. Subject continues to work at being an efficient and low cost producer of Polyester Film. The Company will continue its efforts for further reduction in costs and introduction of Value Added specialty products to maintain and improve profitability.

· Feedstock supplies are expected to remain comfortable though the prices are showing increasing trend due to increase in Crude Oil prices and the resultant effect on the petrochemical value chain.

FUTURE PLANS AND STRATEGY

· Subject has decided to install an additional capacity of 27000 MTpa of PET Film at the existing site at Khatima, India. This will result in the benefits accruing from economies of scale and will further consolidate Subject’s position as a low-cost producer.

· Subject continues to focus on both domestic and export markets in its marketing and selling strategies. They plan to pursue this strategy going forward as well.

· Product and Application development continues to be a thrust area. Extensive efforts would continue to develop value added specialty products.

· Subject is an efficient and low cost producer of Polyester Film. They intend to strengthen on the low cost production platform through focusing on efficient use of energy and other resources.

ENGINEERING PLASTICS BUSINESS

Current Scenario and Outlook

The Engineering Plastics compounds and blends market, is still an emerging market where product and application maturity is in development phase. In the India growth rates for various polymer chemistries are as below

Polymer Chemistry	2008 Estimated Annual Growth Rates
PBT Compounds	7.3% pa
Nylon compounds	15% pa
Overall Engineering Plastics compounds	11% pa

Major growth drivers are the explosive growth in the Electrical segment (growth rate of approx. 30% pa) and Automotive segment (growth rate of approx. 12.5% pa).

Almost all sectors of electrical industry indicate growth. Growth in products like Miniature Circuit Boards (11.36% pa), Compact Fluorescent Lamps (16.42% pa) and Energy Meters shows the demand stemming from infrastructure development in housing and commercial buildings. The Electrical industry however does not claim high standards of quality and cheap imports from China of both raw materials and assembled products results in some pressure on prices.

In the Automotive segment, passenger car, UV+MPV production have already crossed the 1.6 million mark. Growth rates are expected to be at least 13% pa on a conservative level. Per vehicle consumption of Engineering Plastics compounds in India is still extremely low (approx 4 kg/build) in comparison to global standards (10 kg/build). This is estimated to go up due to organic growth, as well as due to inter-substitution of materials from metals and other lower-performance materials to Engineering Plastics compounds and blends.

On the operational front, the Engineering Plastics business has successfully completed it’s expansion and infrastructure improvement project in October 2007. This included a total revamping of the manufacturing and product development infrastructure. As a result of this, Subject has expanded it’s manufacturing capacity to 3600 MTpa.

Raw Material prices have been steady in the past year. Due to the increase in crude prices and resultant increases in building blocks and energy costs, they expect polymer prices to increase next year. With some new capacities expected to come up, the focus on the development of new products, applications and customers will be important to ensure competitive success.

FUTURE PLANS AND STRATEGY

The Engineering Plastics compounds market is on a high growth path. Subject has invested in the upgradation of its manufacturing and development infrastructure. Identification of opportunities, product qualification, commercialization and high quality focus will be extremely important in this quest for expanding market presence.

Following actions will be initiated to achieve a greater market presence and capacity utilization:

· Strengthen the marketing and sales focus.

· Streamline the product and application development process.

· High internal focus on quality and efficiency improvement.

· Quality Management Systems certifications to facilitate access into the automotive markets.

CONTINGENT LIABILITIES NOT PROVIDED FOR

	31.03.2008 (Rs. In Millions)
A. Bonds amounting to Rs.51.000 millions executed in favour of Central Excise and Customs Authorities, out of which, amount to be re-credited on receiving the proof of export.	38.859
B. Excise Duty and Customs Duty pending hearing of appeals / writ petitions :
· Cenvat credit disallowed on certain items	0.806
· Removal of PET chips without payment of duty	0.695
· Goods sold from depot at higher value than one declared at factory gate price	2.696
· Cenvat credit disallowed on inputs	16.420
· Reversal of Cenvat credit availed on HSD	20.692
· Cenvat credit availed on raw material utilized on Prorata basis	1.172
· Availment of credit on importation of Dimethyl Terephalate	5.771
· Other Miscellaneous Cases	5.720
Total (B)	53.972
C. Show Case notices related to denial of Service Tax credit and Excise rebate on export	2.475
D. Sales Tax :
Stock Transferred to Noida treated as Sales	-
Demand raised during assessment	-
E. Income Tax :
Demand raised during assessment	0.184
Demand of MAT (including interest) A.Y.04-05	4.663
Demand of MAT (including interest) A.Y.05-06	1.705
F. Labour Cases
Workers, suspended, pending in High Court, Delhi	0.167
Total (A to F)	102.025
Other Claims not acknowledged as Debts	5.473
Dividend on Preference Shares	0.000

Based on favourable decisions in similar cases, legal opinion tajen by the Company, discussions with the solicitors etc. the company believes that there is fair chance of decisions in its favour in respect of all the items listed (B) to (G) above and hence no provision is considered necessary against the same.

FIXED ASSETS

· Land (Freehold)

· Buildings

· Plant and Machinery

· Furniture and Fixtures

· Lease Hold Improvements

· Office Equipments

· Vehicles

Intangible Assets :

· Softwares

AS PER WEBSITE DETAILS

PROFILE

Subject was incorporated in India in 1985. It is a widely held limited liability company. The main business activities are production and marketing of versatile ranges of polyester films and engineering plastics.

To achieve its commitment to excellence the company lays emphasis on total customer satisfaction, through continuous improvement in its overall capabilities and on total employee involvement.

Its premium quality products are backed by inbuilt statistical and analytical technique based processes and a strong research and development oriented system. Continuous upgradation of technology, customer focused marketing and technical services, are the company's other inherent strengths.

In its integrated manufacturing facilities subject produces polyester resins of various types, having different physical and chemical properties. These resins are also captively used by subject for manufacturing polyester films and engineering plastics.

Subject produces UMAPet range of Bi-axially Oriented Polyester Films on two state-of-the-art production lines. UMAPet films have high tensile and dielectric strength, good chemical and thermal stability and excellent optical and electrical properties as well as processability at the users' end.

The entire process of film production, including slitting and packing is performed in a dust free and clean environment. UMAPet is available in a wide variety suitable for a number of applications.

PRESS RELEASE

ESTER Industries Limited (EIL), a manufacturer of polyester chips, has come out of the Board for Industrial and Financial Reconstruction's (BIFR) fold.

At a recent hearing, the bench noted the company's net worth has turned positive as on March 31, 2004 and the entire accumulated losses have been wiped out.

As per EIL's audited balance sheet as on March 31, 2004, the company's accumulated loss was nil and the net worth stood at Rs 1249.100 millions. While discharging the company from the purview of the Sick Industrial Companies (Special Provisions) Act (SICA), the Board directed EIL to complete the necessary formalities with the Registrar of Companies (RoCs) concerned.

It also directed that Mr Duli Chand Chhajed, who was appointed as a special director by BIFR on the board of directors of the company, would be discharged with immediate effect. BIFR had received an application from EIL in August with a request for being discharged from the purview of SICA. The company also stated in its application that the revival scheme sanctioned by BIFR had been substantially implemented and the net worth had turned positive as on March 31, 2004.

The monitoring agency, Industrial Development Bank of India (IDBI), in its status report submitted in September 2004, stated that besides repayment of the entire one-time settlement dues of financial institutions and banks by the company and existing promoters, the sanctioned scheme had also been successfully implemented. IDBI also recommended to the bench to consider de-registration of the company from the provisions of SICA.

In keeping with the rehabilitation scheme sanctioned by BIFR, EIL had taken the Foreign Investment Promotion Board's nod in March for transfer of the 14.04 per cent stake held by a German financial institution, DEG, to the promoter, Saraswati Trading Company Ltd (STCL), for 50,000 euros.

STCL is a Mauritius-based company in which NRI investors hold a majority stake. EIL, which was originally promoted by Mr Sitaram Singhania along with STCL, manufactures polyester chips, films and yarn and PET films.

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.46.32
UK Pound	1	Rs.83.57
Euro	1	Rs.65.90

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	5
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		45

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