MIRA INFORM REPORT

Report Date :

21.01.2011

IDENTIFICATION DETAILS

Name :	LOYAL TEXTILE MILLS LIMITED
Registered Office :	21/4, Mill Street, Kovilpatti – 628 501, Tamilnadu.
Country :	India
Financials (as on) :	31.03.2010
Date of Incorporation :	09.04.1946
Com. Reg. No.:	18-1361
CIN No.: [Company Identification No.]	L17111TN1946PLC001361
TAN No.: [Tax Deduction & Collection Account No.]	MRIL00006G
Legal Form :	Public Limited Liability Company. The company’s shares are listed on the Stock Exchanges.
Line of Business :	Manufacturer of Cotton Yarn, Fabric, Hosiery Cloth, Caps, etc.

RATING & COMMENTS

MIRA’s Rating :

Ba (46)

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Maximum Credit Limit :	USD 3300000
Status :	Satisfactory
Payment Behaviour :	Usually Correct
Litigation :	Clear
Comments :	Subject is an established company having satisfactory track. Trade relations are reported as fair. Business is active. Payments are reported to be usually correct and as per commitments. The company can be considered normal for business dealings at usual trade terms and conditions.

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	A1	A1

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

LOCATIONS

Registered Office :	21/4, Mill Street, Kovilpatti – 628 501, Tamilnadu, India.
Tel. No.:	91-44-2853 5111 / 4375 / 2858 8284 91-4632-220001
Fax No.:	91-44-2853 3852
E-Mail :	loyal@giasmd01.vsnl.net.in loyal@vsnl.com secretarial@loyaltextile.com
Website :	http://www.loyaltextiles.com
Corporate Office :	New No.83, 1st Main Road, R A Puram, Chennai - 600 028, Tamilnadu, India.
Tel. No.:	91-44-28535111 / 4375 / 28588284
Fax No.:	91-44-28533852
Division/ Unit :	Valli Textile Mills N.Venkateswarapuram, N.Subbiahpuram, Sattur Post - 626 205. TamilNadu, India. Loyal Super Fabrics C-7-1, Sipcot Complex, Kudikadu, Cuddalore 607 005, TamilNadu, India. Ginning Division APIIC Industrial Park, Talladha, Khammam District, Andhra Pradesh, India. Shri Chintamani Textile Mills (Private) Limited Arasanur, Thirumancholai - 630 561, Sivagangai Taluk, Tamilnadu, India. Menakur SEZ Park, Naidupettah, Nellore District, Andhra Pradesh. India.
Showroom :	Showroom No. 518, Apparel House, Industrial Area, Sector 44, Gurgaon- 122003, India.
Branches :	Located at : v Flat D2, 788, First Cross Street, Indira Nagar, Chennai - 600 020,Tamilnadu v Fourth Seaward Road, Valmiki Nagar, Tiruvanmiyur, Chennai - 600 041, Tamilnadu v 10, Greenways Road, Bishops Gardens, Chennai - 600 028, Tamilnadu v 116 / 6, Theagaraya Road, Chennai - 600 017, Tamilnadu
Overseas Office :	UK Loyal Textiles (Uk) Limited, Church Cottage, Main Street, Ingoldsby, Lincs. Ng33 4ej Germany Schaefer Loyal Alter Postweg 101 D-86159, Germany

DIRECTORS

As on 31.03.2010

Name :	Mr. Manickam Ramaswami
Designation :	Chairman and Managing Director
Address :	Satyanarayana Avenue, Boat Club Road, Chennai - 600 028, Tamilnadu, India
Qualification :	B. Tech.
Date of Appointment :	01.06.1979
Name :	Mr. K.J.M. Shetty (I.A.S. – Retd.)
Designation :	Director
Name :	Mr. S. Venkataramani
Designation :	Director
Name :	Mr. R. Poornalinggam (I.A.S. – Retd.)
Designation :	Director
Name :	Mr. Shridhar Subramanyam
Designation :	Director
Name :	Mr. P. Manivannan
Designation :	Director

KEY EXECUTIVES

Name :	Ms. Deepa V Ramani
Designation :	Company Secretary

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

As on 30.09.2010

Names of Shareholders	No. of Shares	Percentage of Holding
(A) Shareholding of Promoter and Promoter Group
(1) Indian
Individuals / Hindu Undivided Family	197,643	4.20
Bodies Corporate	3,231,334	68.69
Sub Total	3,428,977	72.90
(2) Foreign
Total shareholding of Promoter and Promoter Group (A)	3,428,977	72.90
(B) Public Shareholding
(1) Institutions
Financial Institutions / Banks	5,200	0.11
Sub Total	5,200	0.11
(2) Non-Institutions
Bodies Corporate	182,889	3.89
Individuals
Individual shareholders holding nominal share capital up to Rs.0.100 million	820,327	17.44
Individual shareholders holding nominal share capital in excess of Rs.0.100 million	228,680	4.86
Any Others (Specify)	37,873	0.81
Non Resident Indians	37,873	0.81
Sub Total	1,269,769	26.99
Total Public shareholding (B)	1,274,969	27.10
Total (A)+(B)	4,703,946	100.00
(C) Shares held by Custodians and against which Depository Receipts have been issued	-	-
Total (A)+(B)+(C)	4,703,946	100.00

BUSINESS DETAILS

Line of Business :

Manufacturer of Cotton Yarn, Fabric, Hosiery Cloth, Caps, etc.

Products :

Item Code No. (ITC Code)	Product Description
5202, 5203, 5204, 5205, 5206, 5207, 5208, 5209 5210, 5211, 5212, 5301, 5306, 5308, 5309, 5311, 5503, 5504, 5505, 5506, 5507, 5509 5510, 5511, 5512, 5513, 5514, 6001 6203, 6204	Textiles falling within the above Code Nos.

PRODUCTION STATUS (As on 31.03.2010)

Particulars	Unit	Installed Capacity
Ring Spindles	Nos.	120456
Rotors	Nos.	1680
Automatic Looms	Nos.	256
Cloth Processing	Mtrs.	14400000
Hosiery Processing	Kgs.	5400000
Sewing Machines	Nos.	585
Knitting Machines	Nos.	98

Note: Licensed capacity not stated in view of abolition of licensing requirements as per notification No. 477 (E)

dated 25.07.1991 of Ministry, government of India.

Actual Production

	Unit	Quantity
Yarn (4221839.41 Kgs Manufactured by outsiders) (Previous year 4028464.32 Kgs) of which 11317.1 kgs were processed (Previous year 19056.50 Kgs)	Kgs.	19462
Cloth net of Shrinkage(including 1759873.00 mtrs by outsiders) (Previous year 1416026 mtrs) manufactured by others and NIL mtrs manufactured for others) of which 3371446.70 mtrs were processed (previous year 3917413.45 mtrs)	Mtrs.	256931
Hosiery Cloth (including produced by others) of which 887567.25 kgs were processed (Previous year 934146.56 kgs.)	Kgs.	9729

GENERAL INFORMATION

No. of Employees :

8000 (Approximately)

Bankers :

· Export Import Bank of India

· Central Bank of India

· State Bank of India

· Karur Vysya Bank Limited

· Indian Bank

· State Bank of Mysore

Facilities :

Secured Loan	As on 31.03.2010 (Rs. In Millions)	As on 31.03.2009 (Rs. In Millions)
Term Loan
From Financial Institutions (including interest accrued thereon)	86.866	89.624
From Banks	2515.176	2524.763
Working Capital Loans from Banks	972.907	1306.110
Total	3574.949	3920.497

Notes:

Term loans are secured by Joint and equitable mortgage of all immovable properties, present and future, and by hypothecation of machineries ranking pari passu with one another.

Working Capital loans from Banks are secured by hypothecation of raw materials, stock in process, finished goods, stores, consumables, spares and book debts and are also secured by a second charge on block assets.

Guarantee:

Term loans and working capital loans are guaranteed by the Chairman and Managing Director.

Unsecured Loan	As on 31.03.2010 (Rs. In Millions)	As on 31.03.2009 (Rs. In Millions)
Fixed Deposits	2.466	3.974
Interest accrued and due on fixed deposits	0.245	0.245
Total	2.711	4.219

Banking Relations :
Auditors :
Name :	Suri and Company Chartered Accountants
Address :	Madurai
Associates/Subsidiaries :	v Loyal Textiles (UK) Limited v Uniloyal Expotex Limited, Chennai, Tamilnadu v Loyal Dimco Grouppo S. A. , Greece v Shri Teyem Pricemill Limited v Gruppo P and P Loyal Italy

CAPITAL STRUCTURE

As on 31.03.2010

Authorised Capital :

No. of Shares	Type	Value	Amount
8000000	Equity Share	Rs.10/- Each	Rs.80.000 millions
600000	Redeemable Cumulative Preference Shares	Rs.100/- each	Rs.60.000 millions
	Total		Rs.140.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
4703946	Equity Share	Rs.10/- Each	Rs.47.040 millions

Note:

Equity Shares of the above

i) 2769970 Equity Shares of Rs.10/- each were issued as fully paid up Bonus Shares by way of

Capitalizing part of General Reserve.

ii) 60000 Equity Shares of Rs.10/- each were issued as fully paid up shares pursuant to a scheme of

Reorganisation of Capital Structure without the payment being received in Cash.

iii) 1538266 Equity Shares of Rs.10/- each were issued as fully paid up shares pursuant to amalgamation of “Valli Cotton Traders Limited” and “Loyal Super Fabrics Limited”.

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		47.040	47.040	47.040
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		789.170	785.954	927.271
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		836.210	832.994	974.311
LOAN FUNDS
1] Secured Loans		3574.949	3920.497	3751.022
2] Unsecured Loans		2.711	4.219	5.169
TOTAL BORROWING		3577.660	3924.716	3756.191
DEFERRED TAX LIABILITIES		231.160	230.778	301.528
TOTAL		4645.030	4988.488	5032.030
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		2650.079	3041.521	3209.095
Capital work-in-progress		12.794	13.870	110.280
INVESTMENT		18.019	18.019	18.629
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	1110.203	920.857	830.231
	Sundry Debtors	671.415	810.591	785.847
	Cash & Bank Balances	30.950	17.635	32.991
	Other Current Assets	96.023	91.347	134.606
	Loans & Advances	534.923	407.819	392.753
Total Current Assets		2443.514	2248.249	2176.428
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditors	449.416	316.268
	Other Current Liabilities	4.686	5.169	453.801
	Provisions	25.274	11.734	28.601
Total Current Liabilities		479.376	333.171	482.402
Net Current Assets		1964.138	1915.078	1694.026
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		4645.030	4988.488	5032.030

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2010	31.03.2009	31.03.2008
	SALES
		Income	4440.834	4405.484	4087.115
		Other Income	194.326	18.886	55.739
		TOTAL (A)	4635.160	4424.370	4142.854
Less	EXPENSES
		Raw Material Consumed	2128.135	2074.605	1815.997
		Conversion and Processing Charges	183.409	198.033	146.727
		Stores Consumed	192.300	213.515	183.916
		Purchase of Item traded/ processed	277.400	413.212	422.012
		Power & Fuel	297.043	304.219	326.991
		Salaries, Wages, Bonus, etc.	279.874	240.695	218.508
		Repairs & Maintenance	134.064	129.716	127.239
		Other Expenditure	371.837	389.868	327.722
		Increase/(Decrease) in Finished Goods	81.250	(3.822)	(78.733)
		TOTAL (B)	3945.312	3960.041	3490.379
Less	PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C)		689.848	464.329	652.475
Less	FINANCIAL EXPENSES (D)		211.318	221.239	152.430
	PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E)		478.530	243.090	500.045
Less/ Add	DEPRECIATION/ AMORTISATION (F)		448.606	453.187	422.595
	PROFIT BEFORE TAX (E-F) (G)		29.924	(210.097)	77.450
Less	TAX (H)		10.252	351.414	30.100
	PROFIT AFTER TAX (G-H) (I)		19.672	(141.317)	47.350
Add	PREVIOUS YEARS’ BALANCE BROUGHT FORWARD		0.000	49.034	NA
Less	APPROPRIATIONS
		Transfer to General Reserve	2.000	92.283	NA
		Proposed divided on equity shares	14.112	0.000	NA
		Provision for tax on distributed profits	2.344	0.000	NA
	BALANCE CARRIED TO THE B/S		1.216	0.000	NA
	EARNINGS IN FOREIGN CURRENCY
		Export Earnings	2810.101	2681.329	2588.573
		Other Earnings	0.000	0.000	7.243
	TOTAL EARNINGS		2810.101	2681.329	2595.816
	IMPORTS
		Raw Materials	420.318	568.259	287.059
		Capital Goods	28.563	158.631	402.910
		Stores & Spares	82.521	47.566	113.443
	TOTAL IMPORTS		531.402	774.456	803.412
	Earnings Per Share (Rs.)		4.18	(30.04)	10.07

QUARTERLY RESULTS

PARTICULARS	30.06.2010 (1^st Quarter)	30.09.2010 (2nd Quarter))
Net Sales	1727.200	2011.200
Total Expenditure	1514.400	1752.500
PBIDT (Excl OI)	212.800	258.700
Other Income	2.200	17.500
Operating Profit	215.00	276.200
Interest	55.500	36.700
Exceptional Items	0.000	0.000
PBDT	159.500	239.500
Depreciation	111.500	118.300
Profit Before Tax	48.000	121.200
Tax	15.600	37.600
Provisions and contingencies	0.000	0.000
Profit After Tax	32.400	83.600
Extraordinary Items	0.000	0.000
Prior Period Expenses	0.000	0.000
Other Adjustments	0.000	0.000
Net Profit	32.400	83.600

KEY RATIOS

PARTICULARS		31.03.2010	31.03.2009	31.03.2008
PAT / Total Income	(%)	0.42	(3.19)	1.14
Net Profit Margin (PBT/Sales)	(%)	0.67	(4.77)	1.89
Return on Total Assets (PBT/Total Assets}	(%)	0.59	(3.97)	1.44
Return on Investment (ROI) (PBT/Networth)		0.04	(0.25)	0.08
Debt Equity Ratio (Total Liability/Networth)		4.85	5.11	4.35
Current Ratio (Current Asset/Current Liability)		5.10	6.75	4.51

LOCAL AGENCY FURTHER INFORMATION

HISTORY:

Subject, the Tamilnadu based company was incorporated in 1946 and has it's plant at Kovilpatti. It manufactures cotton yarn, fabric, hosiery cloth, caps etc.It exports yarn and cloth to the US, Russia, Germany, Spain, Switzerland, UK, Portugal and other countries. The company exports around 27% of its production. Loyal Textiles was the first to introduce tandem carding in the early seventies, and the earliest to introduce air splicing and automatic cone winding technology, which allows sophisticated electronic controls to detect and mend defects in yarn automatically. The company undertook modernisation of it's facility. In 1987, the company has embarked upon an expansion-cum-modernisation project and set up 100 air-jet looms for weaving polyester-blended suitings. The looms were supplied by Loyal Machine Works, a subsidiary. Again in 1998-99, it increased the installed capacity of ring spindles, rotors and automatic looms to 53,492 nos, 3,768 nos and 285 nos respectively. The company has spent Rs.173.300 millions, Rs.53.900 millions and Rs.133.700 millions on modernisation and replacement of machinery during 1998-99, 99-2000 and 2000-01 respectively. The company had set up an Joint Venture company in Italy in the name of M/s Gruppo PandP Loyal Spa. In the year 2000-01, the company has increased it's stake in the JV company to 47.50 %. Apart from this the company has also entered into a JV agreement with M/s Dimco SA, Greece for formation of a JV company in Greece for marketing of Garments during 2000-01. For replacement of machinery/modernisation and installing power plant the company has spent about Rs.335.844 millions.

PERFORMANCE REVIEW, MANAGEMENT DISCUSSION, ANALYSIS REPORT AND OUTLOOK FOR THE CURRENT YEAR :

GENERAL ECONOMY AND ITS IMPACT ON TEXTILES :

The Indian economy grew by 7.40% in spite of global issues and not so favorable a monsoon.

Exports from the country registered a -3.98% growth, lower growth than the previous year.

Textile exports registered a growth rate of 6.18% Although the GDP growth rate came down, various factors have

made the income at the bottom of the pyramid go up steeply. NREGA.Farm loan write off, higher support prices for agricultural produce have directly improved the income accruing at the bottom of the pyramid. More than this, the indirect benefit of NREGA of raising the minimum wages paid across all low paying sectors mainly farming and textiles has been significant. It is estimated that NREGA's direct and indirect impact would be in excess of

Rs.200,0000 millions getting added to the income of the bottom of the pyramid.

This huge additional income will most certainly positively impact textile consumption. One meter increase in per capita consumption will need 10 lac bales of cotton and 18 lac spindles. It is clear that for the next few years the domestic consumption growth in textiles will be robust and textile industry will enjoy a good domestic market. Since the Textile industry is predominantly export oriented, improvements in domestic consumption alone will not be sufficient to keep demand exceeding supply.

Textile exports and government policies : Textile industry in India is very highly export dependent, almost 50% of the factory gate turnover of textiles comes from exports. Textile exports from India suffered heavily during this period due to government policies.

1. Unrestricted flow of foreign currency into India including large in flows through ECB's even after RBI put it on a restricted list together with speculative news of rupee appreciating to very high levels, made rupee appreciate for the wrong reasons. This affected Indian exports as a whole.

2. Government from krishi youjana gave incentives to cotton traders with retrospective effect and government controlled CCI (Cotton corporation of India) gave these large exporters 10% discount in various forms thus making their Indian cotton at least 10% cheaper to their competitors in China, Pakistan and Bangladesh.

3. During the period of global slow down all other textile exporting nations gave upto 100% additional incentives to the labour intense textile industry, their government on the other hand reduced incentives.

4. TUF's loan interest subsidy to an extent of 2000 crores was not disbursed.

However ever since the new Minister took over textiles he has in quick time rectified all those issues in his control and the Rupee which appreciated for the wrong and unsustainable reasons retraced its path. Today the textile industry is back on tracks and the exports are set to grow. The policies on exports are thus favorable for value added exports for the first time and auger well for Indian.

Textles Power Scenario : The power situation in Tamil Nadu where their factories are located continues to be critical. More than the actual shortage, the inequal distribution of the shortage and poor grid maintenance, frequent power tripping is causing huge losses to their company. It is estimated that their company would have suffered an additional loss of Rs.200 millions due to the inequal distribution of shortage and poor grid quality in addition to the normal losses due to genuine power shortage.

Interest rate : The market remained sluggish as the government during most part of the financial year was following wrong policies and encouraging exports from their competitors they were forced to give longer credit, carry much larger finished goods inventory etc, and their borrowings on working capital went up steeply.

Fixed investment made was not utilized fully due to nonavailability of power. With creeping increase in interest rate, interest costs went up both in absolute terms and in % terms. However, since November of 2009 there is a marked improvement in the all round performance; interest rates are coming down, working capital is also being reduced, uttilisation is improving. It is expected that very soon interest rate as a % of their turnover will come down.

Current working and future prospects : The year has been better than the previous year and we have been able to return to profits, the year ahead certainly looks better and they can expect to do much better both in terms of turnover and profits. The policies are favoring value addition which their company is focused on. The levels of in equality in power distribution will certainly come down and board has promised to improve the quality of power. Both domestic market; due to the bottom of the pyramid getting more money and the export markets due to the stoppage of subsidized exports of cotton to their competitors are showing good improvements. Expansion of capacity: Their new investment in Andhra Pradesh is progressing well and the new state of art spinning with a capacity of 22500 spindles and 100 Air Jet looms will get completed and commissioned by the end of this year.

Industrial relations: The Company has cordial industrial relations at all its plants, the total employee strength stands at 3100.

FINANCE:

During the year the Company availed term loans to the extend of Rs.83.200 millions and repaid loans to the extent of Rs.96.400 millions to Banks/ Financial institutions.

Fixed Assets:

· Land

· Buildings

· Furniture

· Plant and Machinery

· Vehicles

Website Details:

Company Profile:

Committed to philanthropy and socio-environmental development, Loyal Group is a multi-faceted organization, providing an array of products and services for textile and apparel industries. In more than its seven decades of establishment, the Group has created several benchmarks and established milestones for the forthcoming generations.

Loyal Group comprises of two composite mills, one spinning mill, one dye house, three garment manufacturing units, one trading cum retailing company and two international trading companies (a Joint Venture with an Italian firm and a 100% owned trading company in United Kingdom). Besides, the Group has in its fold the 158-year-old watch trading company "P'orr and Sons", which has 8 operational stores in Tamil Nadu and Andhra Pradesh (India).

An ISO 9002:2000 accredited, The Loyal Group follows a strict ethical code of conducts in its business operations. The Group's annual turnover is Rs.4,500 million (US$ 110 Million), out of which, Rs.3,000 million

(US$ 75 Million) revenue was generated from exports. Loyal Group exports products to various countries which includes Israel, Egypt, Turkey, U S A, EU Countries, United kingdom, Japan, Thailand, South Korea, Dubai,

Sri Lanka, Bangladesh, Brazil, Argentina, Columbia.

In recognition of its continual improvement in export performance, the Government of India has awarded Group with "Three Star Export House". Over the years, the group has been credited with several accolades and awards in recognition of its consistent export performance

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.45.58
UK Pound	1	Rs.72.73
Euro	1	Rs.61.45

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	NO
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	NO
--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	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	--

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