MIRA INFORM REPORT

Report Date :

08.03.2011

IDENTIFICATION DETAILS

Name :	PENNA CEMENT INDUSTRIES LIMITED
Registered Office :	H. No. 8-2-268/A/1/S and S1, Plot No. 705, Road No. 3, Banjara Hills, Hyderabad – 500034, Andhra Pradesh
Country :	India
Financials (as on) :	31.03.2010
Date of Incorporation :	24.10.1991
Com. Reg. No.:	013359
CIN No.: [Company Identification No.]	U26942AP1991PLC013359
TAN No.: [Tax Deduction & Collection Account No.]	HYDP00534C
PAN No.: [Permanent Account No.]	AABCP2290D
Legal Form :	A closely held Public Limited Liability Company
Line of Business :	Manufactures and Distributes of Cements

RATING & COMMENTS

MIRA’s Rating :

A (66)

RATING		STATUS	PROPOSED CREDIT LINE
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

Maximum Credit Limit :	USD 27834044
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established and reputed company having fine track. Financial position of the company is good. Directors are reported as experienced and respectable business. Their trade relations are reported as fair. Business is active. Payments are reported to be regular and as per commitment. The company can be considered good for normal 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

INFORMATION DECLINED BY

Management non co-operative [Name not disclosed]

LOCATIONS

Registered Office :	H. No. 8-2-268/A/1/S and S1, Plot No. 705, Road No. 3, Banjara Hills, Hyderabad – 500034, Andhra Pradesh
Tel. No.:	91-40-44565100
Fax No.:	91-40-23353947/2 3328073,23355941
E-Mail :	cs@pennacement.com bookings@pennacement.com
Website :	www.pennacement.com
Branches:	Andhra Pradesh   Karnataka   Tamilnadu   Goa

DIRECTORS

AS ON 30.09.2010

Name :	Mr. P Prathap Reddy
Designation :	Director
Address :	8-2-309/M/1 to 4, Navodaya Colony, Road 14, Banjara Hills, Hyderabad – 500034, Andhra Pradesh, India
Date of Birth/Age :	06.04.1958
Date of Appointment :	24.10.1991
Name :	Mr. P. Munikrishna
Designation :	Director
Address :	Plot No.263, Kamalapuri Colony, Hyderabad – 500073, Andhra Pradesh, India
Date of Birth/Age :	01.02.1944
Date of Appointment :	10.02.1992
Name :	Mr. P. Venugopal Reddy
Designation :	Director
Address :	Plot No.702, Sriniketan Colony, Banjara Hills, Hyderabad – 500034, Andhra Pradesh, India
Date of Birth/Age :	17.04.1953
Date of Appointment :	01.01.2001
Name :	Mr. Sairam Mocherla
Designation :	Director
Address :	8-2-472/6, Raod No.4, Banjara Hills, Hyderabad – 500034, Andhra Pradesh, India
Date of Birth/Age :	27.08.1964
Date of Appointment :	10.03.2007
Name :	Mr. Y. Santosh Kumar Reddy
Designation :	Director
Address :	Plot No.275, MLA & MPs colony, Road No.10c, J Hills, Hyderabad – 500033, Andhra Pradesh, India
Date of Birth/Age :	01.07.1950
Date of Appointment :	27.09.2007
Name :	Mr. B Vikram
Designation :	Director
Address :	H.NO. 8-2-309/M/6, Road No. 14, Banjara Hills, Hyderabad – 500034, Andhra Pradesh, India
Date of Birth/Age :	01.05.1978

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

AS ON 30.09.2010

Names of Shareholders	No. of Shares
P.Prathap Reddy	1358500
P.Prathap Reddy (HUF)	45000
P.Prathap Reddy	7009480
P.V.Lakshmi	75000
Deepthi.P	25000
Divya Priyanka. P	40000
P.Padmaja	35000
P.Ramesh Reddy	60000
P.Venugopal Reddy	30000
Chandana P	35000
Neelima.P	35000
Niharika.P	50000
Nirupama.P	40000
Samyukta.P	40000
P.R. Investments Limited, Hyderabad	4460010
N.Radha Krishna Reddy,	210
Arunachala Investments Limited (formerly known as M/s Sujith investments and Properties Limited), Hyderabad	2500
B.Ramanarasaiah	100
Anubhav Gupta	1000
Dalip Kumar Gupta	1000
Sudhir Kumar Gupta	1000
Anil Kumar Gupta	1000
Shankuntla Gupta	1000
Sheela Devi	1100
Rajeev Gupta	1000
Vijay Gupta	1000
Sanjeev Kumar	1900
Venkata Surya Narasimha	300
S.Rajan	100
P.L.N.Srinivas	100
Usha Sobhan Kumar	200
Sunil Chandra Reddy	2500
Priti. P	6000
Prabhakar Reddy.R	5000
P.Supriya	15000
Total	13380000

AS ON 30.09.2010

Category	Percentage
Bodies corporate	33.35
Directors or relatives of Directors	66.35
Others	0.30
Total	100.00

BUSINESS DETAILS

Line of Business :

Manufactures and Distributes of Cements

GENERAL INFORMATION

No. of Employees :

Not divulged by the management

Bankers :

State Bank of India, Corporate Accounts Group Branch - 13039,, 'Ozone', 2^nd Floor, 6-3-669, Punjagutta, Main Road, Hyderabad - 500082, Andhra Pradesh, India

Facilities :

Secured Loan	Rs. In Millions 31.03.2010	Rs. In Millions 31.03.2009
Rupee Term Loans : From Financial Institutions / Banks	4278.426	3575.277
Working Capital Loan: From Banks: Cash Credit	495.961	399.553
Total	4774.388	3974.830
Unsecured Loan	Rs. In Millions 31.03.2010	Rs. In Millions 31.03.2009
Short Term Loan – From Banks	1000.000	0.000
Interest Free Sales Tax Deferment	2548.620	2368.217
Total	3548.620	2368.217

Banking Relations :	--
Auditors :
Name :	Ayyadevara and Co Chartered Accountant
Address :	1-2-386/A/1, Gagan Mahal, Hyderabad – 500029, Andhra Pradesh, India
Subsidiaries :	Penna Global Investments FZ-LLC

CAPITAL STRUCTURE

AS ON 31.03.2010

Authorised Capital :

No. of Shares	Type	Value	Amount
75000000	Equity Shares	Rs.10/- each	Rs.750.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
13380000	Equity Shares	Rs.10/- each	Rs.133.800 Millions

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		133.800	133.800	133.800
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		6824.711	5378.845	3449.032
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		6958.511	5512.645	3582.832
LOAN FUNDS
1] Secured Loans		4774.388	3974.830	2650.014
2] Unsecured Loans		3548.620	2368.217	2028.445
TOTAL BORROWING		8323.008	6343.047	4678.459
DEFERRED TAX LIABILITIES		1248.747	925.502	691.829
TOTAL		16530.266	12781.194	8953.120
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		11491.394	6947.640	6887.033
Capital work-in-progress		1877.972	3512.614	716.799
INVESTMENT		2974.632	1407.608	712.820
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	667.903	795.933	450.901
	Sundry Debtors	361.204	425.424	361.673
	Cash & Bank Balances	177.115	453.811	152.847
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	1336.453	1383.877	1247.831
Total Current Assets		2542.675	3059.045	2213.252
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditors	1575.210	1558.183	978.483
	Other Current Liabilities	715.777	463.028	379.574
	Provisions	65.420	124.502	218.727
Total Current Liabilities		2356.407	2145.713	1576.784
Net Current Assets		186.268	913.332	636.468
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		16530.266	12781.194	8953.120

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2010	31.03.2009	31.03.2008
	SALES
		Cement	15146.199	14601.921	11397.243
		Power	6.355	0.000	20.809
		Trading (Exports)	4.267	11.058	9.254
		Other Income	48.021	645.685	25.319
		TOTAL (A)	15204.842	15258.664	11452.625
Less	EXPENSES
		Increase /(Decrease) in Stocks	60.908	(65.325)	(25.319)
		Manufacturing Expenses	5510.552	5435.908	3593.707
		Cost of trading goods	3.729	10.181	20.307
		Central Excise Duty	1316.966	1701.422	1558.127
		Sales Tax	1576.591	1505.995	1182.860
		Administrative and Selling Expenses	3781.156	3161.835	2528.042
		TOTAL (B)	12249.902	11750.016	8857.724
Less	PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C)		2954.940	3508.648	2594.901
Less	FINANCIAL EXPENSES (D)		269.058	394.702	224.846
	PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E)		2685.882	3113.946	2370.055
Less/ Add	DEPRECIATION/ AMORTISATION (F)		401.350	374.374	199.141
	PROFIT BEFORE TAX (E-F) (G)		2284.530	2739.573	2170.914
Less	TAX (I)		461.269	484.826	479.332
	PROFIT AFTER TAX (G-I) (J)		1823.260	2254.746	1691.582
	Deferred Tax for the year		323.245	233.672	222.572
	Fringe Benefit Tax for the year		0.000	2.809	8.847
	Prior period Income Tax		15.015	9.854	9.784
	Prior period expenditure		0.000	0.328	1.121
	APPROPRIATIONS
		Transfer to General Reserve	150.000	250.000	150.000
		Dividend	33.450	66.900	133.800
		Tax on Dividend	5.685	11.369	22.739
	PREVIOUS YEARS’ BALANCE BROUGHT FORWARD		4623.117	2943.304	1800.585
	BALANCE CARRIED TO THE B/S		5918.983	4623.117	2943.304
	Earnings Per Share (Rs.)		111.00	150.08	--

KEY RATIOS

PARTICULARS		31.03.2010	31.03.2009	31.03.2008
PAT / Total Income	(%)	11.99	14.77	14.77
Return on Total Assets (PBT/Total Assets}	(%)	16.28	27.38	23.85
Return on Investment (ROI) (PBT/Networth)		0.33	0.50	0.61
Debt Equity Ratio (Total Liability/Networth)		1.53	1.54	1.40
Current Ratio (Current Asset/Current Liability)		1.08	1.43	1.40

LOCAL AGENCY FURTHER INFORMATION

Sundry Creditors Details:

Particulars	Rs. In Millions 31.03.2010	Rs. In Millions 31.03.2009	Rs. In Millions 31.03.2008
Sundry Creditors
-- For Raw Materials and Stores -- Trading Operations -- Capital Goods -- Other Liabilities	642.400 17.732 405.897 509.180	957.530 17.777 140.713 442.163	597.910 19.934 47.664 312.975

Note:

The registered office address of the company has been shifted from Plot No.703, Sriketan Colony, Road no.3, Hyderabad – 500034, Andhra Pradesh, India to present address w.e.f. 01.10.2009

Review of Operations:

The Company could perform to this satisfactory levels in this challenging environment prevailing in South India despite the increase in capacities resulted in supplies outpaced the demand.

The Company has continued to maintain the growth trend in production and sales and achieved production of 40,88,766 MTs during the year under review as against the production of 34,49,964 MTs during the previous year. Even though increase in turnover, it has recorded a drop in profits due to less realisations. The increased capacity, productivity and cost containment measures have contributed to this performance.

Cement Sector Outlook:

India is the world’s second largest producer of cement. The Indian cement industry has outpaced the growth rates of other prominent industries in the country on the back of growing demand from the housing sector and increased activity in infrastructure development. Government supportive policies are attracting global cement giants and sparking off a spate of mergers and acquisitions to spur growth. Research has noted that the Indian cement industry sustained its growth rate even in the tough condition of economic slowdown. Cement production increased by 10.8% year-on-year. Major Producers have expanded their installed capacity in the backdrop of government backed infrastructure projects deriving creation of strong demand for cements in the country. Moreover, it is anticipated that industry players will continue to increase their annual cement output in coming years and the country’s total cement production will grow at a CAGR of around 10.5% during 2010-11 to 2013-14. However, being seasonal, the cement sector is seeing some sort of downturn within the monsoon months, except in the last two years where it was defying gravity even during the months of monsoon.

Growth in domestic cement demand is expected to remain strong, given the revival in the housing markets, continued Government spending on the rural sector, and the gradual increase in the number of infrastructure projects being executed by the private sector. Thus, the trend in demand growth seen during the last five years is expected to continue over the medium term. Also, with Government targeting an over 8% GDP growth rate, cement demand should grow at 8-10% over the next few years. The industry may be expected to add another 130-135 million tones of cement capacity in phases over the next four years.

Despite the expected continuance of strong demand growth, the significant capacity additions particularly in South likely to continue exerting downward pressure on cement prices in the short & medium term. Research has outlined that surplus capacity as a proportion of total effective capacity in the southern region is estimated to be 28% in FY- 11, lower than the 40% recorded in the previous down-cycle in FY02. However, only 65% (~28.1Mtpa) of incremental capacity is likely to be effective over FY11-14. Cement consumption in the region is expected to grow by 13% by FY-12 from a modest 6.5% in FY-10. In a worst-case scenario, effective utilization in Cycle-4 (FY10-14) may be 76%, higher than the 67% level recorded during Cycle-2 (FY 00-04). As in the past, cement prices would continue to vary across regions, depending on the regional supply-demand balances. It was noted that in an oversupply scenario, cement prices in various markets of a particular region tend to converge closer to the regional average; currently, cement prices have been varying from Rs.150 to Rs.250/bag within regions.

Transporting cement beyond a radius of 700km is unviable since it is bulky, low in value and a Freight intensive commodity. This has resulted in regional cement players largely serving their home markets, exerting pricing pressure. Currently, the industry transports 36% of its dispatches through the railways, 62% through the roadways and the balance via the sea route.

Assuming a lead distance of up to 700 km and a road-rail mix of 50% each, the freight cost is likely to be INR 900/tonne. Thus, the price differential between surplus and deficit markets reflects the incremental freight cost, which is unlikely to be more than INR 50/bag. Strong inter-regional movement allows the western and eastern markets absorb the surplus production from north and south India. Thus, it is estimated the cement prices to remain stable at current levels.

Power Sector Outlook:

Energy is one of the major contributors to the economic development of a country. With the rising population and growth story of India, the need of fast paced growth in power generation is increasingly gaining importance. The demand of electricity is growing exponentially, given the surging electricity demand in industry, transport, and housing and with the Government’s targeted electricity for all by 2012 by the end of 11th Five Year of Establishment Plan. The Budget 2010 announcement has laid emphasis on the development of non conventional energy resources such as Solar and Wind Energy with more than doubled the planned allocation for this Power Sector. Reflected by the demand and growth, the Indian power Sector holds a great potential for Private as well global players in the coming years. The outlook for the current year is good and your Directors foresee bright prospects for your company in the coming years.

FORM 8:

Corporate identity number of the company	U26942AP1991PLC013359
Name of the company	PENNA CEMENT INDUSTRIIES LIMITED
Address of the registered office or of the principal place of business in India of the company	H.No.8-2-268/A/1/S and S1, Plot No.705 Road No.3, Banjara Hills, Hyderabad – 500034, Andhra Pradesh, India
This form is for	Creation of charge Modification of charge
Type of charge	Book Debts Movable Property Others
Particular of charge holder	STATE BANK OF INDIA
Nature of instrument creating charge	i) Agreement of Loan for overall Limit - C.1 ii) Agreement of Hypothecation Assets and Goods - C.2 iii) Letter regarding the grand of individual limits within the overall limit (Form C.5) iv) Letter of Sanction
Date of instrument Creating the charge	13.12.2010
Amount secured by the charge	Rs.1400.000 Millions
Brief of the principal terms an conditions and extent and operation of the charge	Rate of Interest 4.15% above Base rate, present effective rate being 11.75% (more particularly prescribed in the attached sanction letter dated 02.12.2010) Terms of Repayment NA (more particularly prescribed in the attached sanction letter dated 02.12.2010 and other docs) Margin Raw Materials - 25% Stock in Process - 25% Finished Goods - 25% Receivables - 25% (maximum cover period for book-debts 60 days) Letter of Credit - 5% (usance period 30 days) Bank Guarantee - 5% Extent and Operation of the charge i) Hypothecation of all current assets (first charge) ii) Second charge on fixed assets of the Company (more particularly prescribed in the attached sanction letter dated 02.12.2010 and other loan documents attached hereby) Others (more particularly prescribed in the attached sanction letter dated 02.12.2010 and other loan documents attached hereby)
Short particulars of the property charged	Hypothecation of all current assets including entire stock,Book debts and movable fixed assets (first charge), of the Company, wherever located. 2nd Charge on Company's Fixed Assets. (more particularly prescribed in the attached sanction letter and other loan docs)
Particulars of the property charged	29/03/2010
Particulars of the present modification	Working capital limits are enhanced as follows: (Rs. in Millions) LIMITS EXISTING REVISED Cash Credit 700.000 100.00 LCs *150.000 40.00 Bank Guarantees *15.000 (20.00)# Derivatives and fw contracts (1.31) (1.24) TOTAL 1000.000 1400.000

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.45.13
UK Pound	1	Rs.73.35
Euro	1	Rs.63.06

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	8
PAID-UP CAPITAL	1~10	8
OPERATING SCALE	1~10	7
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	7
--PROFITABILIRY	1~10	8
--LIQUIDITY	1~10	7
--LEVERAGE	1~10	7
--RESERVES	1~10	8
--CREDIT LINES	1~10	6
--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	NO
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		66

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.