MIRA INFORM REPORT

Report Date :

05.08.2011

IDENTIFICATION DETAILS

Name :	VARDHMAN ACRYLICS LIMITED

Registered Office :	Vardhman Premises, Chandigarh Road, Ludhiana- 141010 Punjab

Country :	India

Financials (as on) :	31.03.2010

Date of Incorporation :	24.12.1990

Com. Reg. No.:	16-019212

Paid-up Capital :	Rs. 1085.325 Millions

CIN No.: [Company Identification No.]	L51491PB1990PLC019212

Legal Form :	A Public Limited Liability Company. The Company’s Shares are Listed on the Stock Exchange.

Line of Business :	Manufacturer of Acrylic Fiber/Tow.

No. of Employees :	Not Available

RATING & COMMENTS

MIRA’s Rating :

B (30)

RATING		STATUS	PROPOSED CREDIT LINE
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small

Maximum Credit Limit :	USD 7500000

Status :	Moderate

Payment Behaviour :	Slow

Litigation :	Clear

Comments :	Subject is an established company having moderate track. The company has improved its performance in the year 2009-10. Trade relations are reported as fair. Business is active. Payments are reported to be slow. The company can be considered for business dealings with some cautions.

NOTES :

Any query related to this report can be made on e-mail : infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – April 1, 2010

Country Name

Previous Rating

(31.12.2009)

Current Rating

(01.04.2010)

India

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

LOCATIONS

Registered Office :	Vardhman Premises, Chandigarh Road, Ludhiana- 141010 Punjab, India
Tel. No.:	91-161-2228943-48 (Ext. 1126) / 3206822 (Direct)
Fax No.:	91-161-2601048 / 2710/ 2222616
E-Mail :	secretarial.lud@vardhman.com bathlasanjeev@vardhman.com
Website :	www.vardhmanacrylics.com

Business Office :	5^th Floor, Sagar Plaza Building, 19, Laxmi Nagar District Center, Vikas Marg, New Delhi- 110092, India
Tel. No.:	91-11-22052845 / 22052842 / 22052847
Fax No.:	91-11-22052845
E-Mail :	choudharybk@vardhman.com

Factory :	Plot No. 755, GIDC Jhagadia Industrial Estate, Jhagadia- 393110, District- Bharuch, Gujarat, India
Tel. No.:	91-2645- 226064/ 226066 / 226069 / 226080
Fax No.:	91-2845- 226065
E-Mail :	kcbansal@vardhman.com

DIRECTORS

As On 31.03.2010

Name :	Mr. Paul Oswal
Designation :	Chairman

Name :	Mr. Sachit Jain
Designation :	Director
Date of Birth/Age :	08.07.1966
Qualification :	B.Tech, M.B.A
Date of Appointment :	30.12.1995
Directorship in other companies :	Vardhman Textiles Limited Vardhman Holdings Limited VMT Spinning Company Limited Vardhman Apparels Limited Vardhman Yarns and Threads Limited Vardhman Texgarments Limited Vardhman Spinning and General Mills Limited VTL Investments Limited Syracuse Investment and Trading Company (P) Limited Adinath Investment and Trading Company Devakar Investment and Trading Company (P) Limited Srestha Holdings Limited Anklesh Investments (P) Limited Pradeep Mercantile Company (P) Limited Plaza Trading Company (P) Limited Marshall Investment and Trading Company (P) Limited Santon Finance and Investment Company Limited Flamingo Finance and Investment Company Limited Ramaniya Finance and Investment Company Limited Mahavir Spinning Mills (P) Limited UTI Asset Management Company Limited

Name :	Mr. Munish Chandra Gupta
Designation :	Director
Date of Birth/Age :	23.07.1938
Qualification :	MA (English), Diploma in Public Administration
Date of Appointment :	17.04.2003

Name :	Mr. Sanjit Paul Singh
Designation :	Director

Name :	Dr. Arvind Kumar Bakhshi
Designation :	Director
Date of Birth/Age :	06.10.1947
Qualification :	M.Sc., Ph.d
Date of Appointment :	12.05.2008

Name :	Mr. Darshan Lal Sharma
Designation :	Director
Date of Birth/Age :	10.11.1948
Qualification :	B.Sc (Engineering), M.B.A
Date of Appointment :	24.12.1990

Name :	Mr. Surinder Kumar Bansal
Designation :	Director
Date of Birth/Age :	15.05.1946
Qualification :	B.Sc., F.C.L. C.F.E., A.L .L .A., A.H.I.A
Date of Appointment :	22.01.2009

Name :	Mr. Bal Krishna Choudhry
Designation :	Managing Director

KEY EXECUTIVES

Name :	Mr. Sanjay Gupta
Designation :	Company Secretary

Name :	Mr. K C Bansal
Designation :	Vice President

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

Not Available

BUSINESS DETAILS

Line of Business :

Manufacturer of Acrylic Fiber/Tow.

Products :

Product Description	ITC Code
Acrylic Fibre	5503.30
Acrylic Tow	5501.30

PRODUCTION STATUS (As On 31.03.2010)

Particulars	Unit	Installed Capacity	Actual Production
Acrylic Fibre and Tow	MT	20000	--
Acrylic Fibre	MT	--	15182.35
Acrylic Tow	MT	--	3323.52

GENERAL INFORMATION

No. of Employees :

Not Available

Bankers :

State Bank of India
ICICIC Bank Limited

Facilities :

Secured Loans	31.03.2010 (Rs. In Millions)	31.03.2009 (Rs. In Millions)
Working capital borrowing from banks	23.438	16.050
Total	23.438	16.050

Note:

Working Capital Borrowing from banks are secured by hypothecation of entire present and future tangible current assets, second charge on all immovable assets.

Banking Relations :	--

Auditors :
Name :	S .S Kothri Mehta and Company Chartered Accountant
Address :	New Delhi, India

Holding Company :	Vardhman Textile Limited (formerly Mahavir Spinning Mills Limited)

Fellow Subsidiaries :	VMT Spinning Company Limited VTl Investments Limited Vardhman Yarns and Threads Limited Vardhman Texgarments Limited

CAPITAL STRUCTURE

As On 31.03.2010

Authorised Capital :

No. of Shares	Type	Value	Amount
150000000	Equity Shares	Rs.10/- Each	Rs.1500.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
108532508	Equity Shares	Rs.10/- Each	Rs.1085.325 millions

Notes:

1032438 (Previous year 1032438) equity shares of Rs.10/- each are allotted as fully paid up. Pursuant to a contract with IDBI without payments being received in cash.
Out of the above 63753661 equity share (Previous year 59253378 equity shares) of Rs.10/- each fully paid up are held by Vardhman Textile Limited (formerly Mahavir Spinning Mills Limited) i. e Holding Company

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2010	31.03.2009	31.03.2008
SHAREHOLDERS FUNDS
1] Share Capital		1085.325	1085.325	1085.325
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		801.495	367.085	324.739
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		1886.820	1452.410	1410.064
LOAN FUNDS
1] Secured Loans		23.438	16.050	21.615
2] Unsecured Loans		0.000	0.000	122.500
TOTAL BORROWING		23.438	16.050	144.115
DEFERRED TAX LIABILITIES		256.921	235.632	207.240

TOTAL		2167.179	1704.092	1761.419

APPLICATION OF FUNDS

FIXED ASSETS [Net Block]		1154.962	1260.510	1369.952
Capital work-in-progress		0.034	0.000	0.000

INVESTMENT		101.475	16.475	16.475
DEFERREX TAX ASSETS		0.000	0.000	0.000

CURRENT ASSETS, LOANS & ADVANCES
	Inventories	446.088	190.766	314.765
	Sundry Debtors	31.263	13.363	19.006
	Cash & Bank Balances	33.857	16.037	6.854
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	709.732	318.684	106.255
Total Current Assets		1220.940	538.850	446.880
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditors	9.171	18.870	15.785
	Other Current Liabilities	289.370	93.962	58.026
	Provisions	11.691	(1.089)	(2.268)
Total Current Liabilities		310.232	111.743	71.888
Net Current Assets		910.708	427.107	374.992

MISCELLANEOUS EXPENSES		0.000	0.000	0.000

TOTAL		2167.179	1704.092	1761.419

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2010	31.03.2009	31.03.2008
	SALES
		Income	2704.819	2405.743	2124.827
		Other Income	40.866	20.289	5.233
		TOTAL	2745.685	2426.032	2130.060

Less	EXPENSES
		Raw Material Consumed and Purchase of Finished Goods	1753.712	1860.293	1415.442
		Manufacturing Expenses	205.883	215.373	213.191
		Personal Expenses	64.818	63.856	62.681
		Administrative and Other Expenses	40.392	42.119	22.500
		Selling and Distribution Expenses	3.135	10.593	8.475
		Increase/(Decrease) in Work-in-progress and Finished Goods	(8.700)	25.893	91.817
		Miscellaneous Expenditure Written Off	0.000	0.000	0.453
		Prior Period Adjustments	0.004	0.001	0.000
		TOTAL	2059.244	2218.128	1814.559

Less	PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION		686.441	207.904	315.501

Less	FINANCIAL EXPENSES		3.314	15.619	26.922

	PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION		683.127	192.285	288.579

Less	DEPRECIATION/ AMORTISATION		112.428	112.106	111.677

	PROFIT BEFORE TAX		570.699	80.179	176.902

Less	TAX		136.289	37.833	122.501

	PROFIT AFTER TAX		434.410	42.346	54.401

Add	PREVIOUS YEARS’ BALANCE BROUGHT FORWARD		266.470	224.124	169.723

	BALANCE CARRIED TO THE B/S		700.880	266.470	224.124

	IMPORTS
		Raw Materials	532.932	360.606	209.574
		Stores & Spares	3.308	3.542	2.920
		Acrylic Fibre	366.693	257.761	0.000
	TOTAL IMPORTS		902.933	621.909	212.494

	Earnings Per Share (Rs.)		4.00	0.39	0.50

QUARTERLY RESULTS

PARTICULARS	30.06.2010	30.09.2010	31.12.2010	31.03.2011	30.06.2011
Type	(1^stQuarter)	(2^ndQuarter)	(3^rd Quarter)	(4^thQuarter)	(5^th Quarter)
Net Sales	863.100	1032.200	1058.000	1100.200	881.700
Total Expenditure	657.500	930.600	906.500	880.200	772.500
PBIDT (Excl OI)	205.600	101.600	151.500	220.000	109.200
Operating Profit	205.600	101.600	151.500	220.000	109.200
Interest	1.500	0.900	0.500	1.200	0.900
PBDT	204.100	100.700	151.000	218.800	108.300
Depreciation	28.100	28.100	28.100	27.400	27.900
Profit Before Tax	176.000	72.600	122.900	191.400	80.400
Tax	63.800	23.700	38.700	60.300	26.500
Profit After Tax	112.200	48.900	84.200	131.100	53.900
Net Profit	112.200	48.900	84.200	131.100	53.900

KEY RATIOS

PARTICULARS		31.03.2010	31.03.2009	31.03.2008
PAT / Total Income	(%)	15.82	1.75	2.55

Net Profit Margin (PBT/Sales)	(%)	21.10	3.33	8.33

Return on Total Assets (PBT/Total Assets}	(%)	24.02	4.46	9.74

Return on Investment (ROI) (PBT/Networth)		0.30	0.06	0.12

Debt Equity Ratio (Total Liability/Networth)		0.18	0.08	0.05

Current Ratio (Current Asset/Current Liability)		3.94	4.82	6.22

LOCAL AGENCY FURTHER INFORMATION

MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

a) ACRYLIC FIBRE INDUSTRY - GLOBAL AND INDIAN PERSPECTIVE:

The year 2008 witnessed a massive drop in demand of Acrylic Fibre globally, a drop of 22% approximately. It was both on account of reduction in consumption as also reduction in stocks in the pipeline. In the year 2009, the demand picked up by 6-7% globally and almost to the same extent in India largely on account of recovery in consumption with pipeline still remaining relatively understocked. The prices of acrylonitrile dropped to the lotheyst levels seen in last more than five years in the earlier part of the year 2009. At the same time, drop in Acrylic Fibre prices was relatively lower. The difference between Acrylic Fibre and Polyster Fibre prices narrowed down to levels which encouraged reversal of some volumes of earlier substitution of Acrylic Fibre by Polyster Fibre. Also the closure of some Acrylic Fibre capacities world over in the year 2008 led to a tight supply position in earlier part of the year 2009. As a result of these factors, the spreads of Acrylic Fibre producers were healthy during this period. From third quarter of year 2009, the Acrylonitrile prices started moving up sharply both on account of significant increase in propylene prices and drop in Acrylonitrile production due to multiple reasons. By the first quarter of the year 2010, the Acrylontrile prices touched historically high levels never seen before. The increase in Acrylic Fibre prices did not keep pace with increase in raw material costs. By February - March 2010, the Acrylonitrile prices seem to be completely disconnected with the long term values in its supply chain and seem to be in speculative territory. The difference in Acrylic Fibre and Polyster Fibre prices have once again widened to levels which may encourage substitution of Acrylic Fibre by Polyester Fibre. The global Acrylic Fibre production capacity utilization in the year 2009 was close to 85%. There are pockets of substantial surplus Acrylic Fibre capacities, specially in countries which do not have matching domestic consumption. The threat of dumping of Acrylic Fibre from such countries and producers remain very real.

FINANCIAL ANALYSIS AND REVIEW OF OPERATIONS:

PRODUCTION AND SALES REVIEW:

The total production during the year under consideration was 18506 MT as against 18045 MT in the previous year. The Company has achieved a turnover of Rs. 2867.388 millions against a turnover of Rs. 2539.006 millions in the previous year. After providing for depreciation of Rs. 112.428 millions (previous year Rs. 112.106 millions) and provision for current tax (including wealth tax) of Rs. 115.000 millions (previous year Rs. 9.111 millions), deferred tax (net of adjustments) of Rs. 21.288 millions (previous year Rs. 28.392 millions), fringe benefit tax of Rs. Nil (previous year Rs. 0.330 million) and income tax adjustments for earlier years of Rs. 0.001 million (previous year Nil), profit after tax of the Company is Rs. 434.414 million as against a net profit of Rs. 42.347 million in the previous year.

RESOURCE UTILISATION:

i) Fixed Assets:

The gross fixed assets (including work-in-progress) as at 31.03.2010 were Rs. 2358.191 millions as compared to Rs. 2368.914 millions in the previous year.

ii) Current Assets:

The net current assets as on 31.03.2010 were Rs. 910.708 millions as against Rs. 427.107 millions in the previous year. Inventory level was at Rs. 446.088 millions as against Rs. 190.766 millions in the previous year.

c) BUSINESS OUTLOOK:

The general economic outlook globally is getting positive. There is an increasing return of confidence though many experts opine the recovery to be still fragile. The global economy is likely to grow around 3% in FY 2010-11 supported by robust economic growth of 10% and 8% in China and India respectively. Generally speaking, the economic outlook lends optimism, though with caution. With global economic outlook looking positive, the global textile trade is likely to witness an increase of around 10% in the FY 2010-11 over the previous year and this growth trend is likely to continue. The government of India has been encouraging modernization of Indian textile industry through several policy measures such as TUFS. Such measures shall lend support to Indian Textile Industry in becoming competitive and avail the opportunities in global Textile Trade. The Indian Acrylic Fibre industry is likely to be a beneficiary of increased textile export from India. The positive economic outlook and growth within the country is likely to lead to higher disposable incomes of the middle class, a major consumption segment of the Acrylic Fibre industry. Acrylic Fibre pipeline still remains relatively understocked and even partial restocking, if not full, is likely to lead to increased demand. Increase in cotton and wool prices over last few months may support increase in Acrylic Fibre consumption. All these indications augur well for Acrylic Fibre industry. The unprecedented high prices of Acrylonitrile in recent months and difficulties in passing on this increase to Acrylic Fibre prices is posing challenges to Acrylic Fibre industry. The widening difference between Acrylic Fibre and Polyster Fibre prices may lead to substitution to a certain extent once again. The inflationary pressures both within the country and globally have bearing on the outlook of the Acrylic Fibre industry. The extent and pattern of monsoon as also length of winter season will remain important influencing factors.

In overall analysis, the coming year is likely to be a period of difficult conditions and uncertainty. The Management shall continue to make all efforts to achieve high operating efficiencies and improved performance. It will make efforts to adopt prudent and proactive measures to mitigate the situation.

Contingent Liabilities

Particular	31.03.2010 (Rs. In Millions)
Letter of credit outstanding	29.763
Bank guarantee	20.600
Guarantee given by the company on behalf of another company to the extent utilized	23.290
Custom duty, exice duty and cenvat credit under dispute against which appeals have been filed / are being filed	6.669
Demand in respect of sales tax/ purchase tax pending appeals with appellant authorized	4.328
Bonds executed in favour of government authorized in respect of EPCG license in which export obligation has already been completed	79.339

Fixed Assets

Leasehold Land
Building
Plant and Machinery
Furniture and Fixture
Vehicles

As Per Website Details

Profile

Vardhman Group ventured into the manufacture of Acrylic Fibre/Tow in 1999. The joint venture, subject was set up together with two leading Japanese business houses namely Japan Exlan Company Limited, a part of Toyobo Group of Japan and Marubeni Corporation Japan.

The company has set up a 18000 TPA Acrylic Staple Fibre and Tow production plant at Jhagadia, Distt. Bharuch in the state of Gujarat, India.

The world class wet spun technology for the manufacture of Acrylic fiber / Tow has been sourced from Japan Exlan Company Limited, Japan. It is a state of the art, highly automated production facility making it amongst the most advanced plants of its' type in the world.

Subject’s products are marketed under the brand name "VARLAN^®".

Corporate Philosophy

The guiding philosophy of subject is uniquely different. The name subject represent one driving force, that is quality; one vision, that is innovation; one commitment, that is customer satisfaction; and one aspiration, that is to give India the world’s best and in turn give the world, India’s best in textiles. It is an enterprise that is singularly focussed on its objectives of overcoming all barriers to achieve excellence in textiles.

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.44.42
UK Pound	1	Rs.72.70
Euro	1	Rs.63.55

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	4
PAID-UP CAPITAL	1~10	4
OPERATING SCALE	1~10	3
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	3
--PROFITABILIRY	1~10	4
--LIQUIDITY	1~10	3
--LEVERAGE	1~10	3
--RESERVES	1~10	3
--CREDIT LINES	1~10	3
--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	NO
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		30

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	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
-	NB	New Business	-

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

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.

MIRA INFORM REPORT

446.088

31.263

33.857

0.000

709.732

1220.940

9.171

289.370

11.691

310.232

910.708

Unit