MIRA INFORM REPORT

Report Date :

21.08.2013

IDENTIFICATION DETAILS

Name :	S T S GEMS THAI LIMITED
Registered Office :	31^st Floor, Jewelry Trade Center Building, 919/390 Silom Road, Silom, Bangrak, Bangkok 10500
Country :	Thailand
Financials (as on) :	31.03.2012
Date of Incorporation :	18.11.1991
Com. Reg. No.:	0105534109121
Legal Form :	Private Limited Company
Line of Business :	Importer, Distributor and Exporter of Diamonds, Gemstones And Jewelry Products.
No. of Employees :	4

RATING & COMMENTS

MIRA’s Rating :

B

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

Status :	Moderate
Payment Behaviour :	No complaints
Litigation :	Clear

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 – March 31^st, 2013

Country Name	Previous Rating (31.12.2012)	Current Rating (31.03.2013)
Thailand	B1	B1

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

THAILAND - ECONOMIC OVERVIEW

With a well-developed infrastructure, a free-enterprise economy, generally pro-investment policies, and strong export industries, Thailand achieved steady growth due largely to industrial and agriculture exports - mostly electronics, agricultural commodities, automobiles and parts, and processed foods. Thailand is trying to maintain growth by encouraging domestic consumption and public investment to offset weak exports in 2012. Unemployment, at less than 1% of the labor force, stands as one of the lowest levels in the world, which puts upward pressure on wages in some industries. Thailand also attracts nearly 2.5 million migrant workers from neighboring countries. The Thai government is implementing a nation-wide 300 baht ($10) per day minimum wage policy and deploying new tax reforms designed to lower rates on middle-income earners. The Thai economy has weathered internal and external economic shocks in recent years. The global economic crisis severely cut Thailand's exports, with most sectors experiencing double-digit drops. In 2009, the economy contracted 2.3%. However, in 2010, Thailand's economy expanded 7.8%, its fastest pace since 1995, as exports rebounded. In late 2011 growth was interrupted by historic flooding in the industrial areas in Bangkok and its five surrounding provinces, crippling the manufacturing sector. Industry recovered from the second quarter of 2012 onward with GDP growth at 5.5% in 2012. The government has approved flood mitigation projects worth $11.7 billion, which were started in 2012, to prevent similar economic damage, and an additional $75 billion for infrastructure over the next seven years with a plan to start in 2013.

Source : CIA

COMPANY NAME AND ADDRESS

S T S GEMS THAI LTD.

SUMMARY

BUSINESS ADDRESS : 31^st FLOOR, JEWELRY TRADE CENTER BUILDING,

919/390 SILOM ROAD, SILOM, BANGRAK,

BANGKOK 10500, THAILAND

TELEPHONE : [66] 2237-5722-4

FAX : [66] 2630-0428

E-MAIL ADDRESS : stsgems@ststhai.co.th

stsgem@stsgems.com

REGISTRATION ADDRESS : SAME AS BUSINESS ADDRESS

ESTABLISHED : 1991

REGISTRATION NO. : 0105534109121

TAX ID NO. : 3011031476

CAPITAL REGISTERED : BHT. 35,000,000

CAPITAL PAID-UP : BHT. 35,000,000

SHAREHOLDER’S PROPORTION : THAI : 51.00%

INDIAN : 49.00%

FISCAL YEAR CLOSING DATE : MARCH 31

LEGAL STATUS : PRIVATE LIMITED COMPANY

EXECUTIVE : MR. SUNIL AGRAWAL, INDIAN

MANAGING DIRECTOR

NO. OF STAFF : 4

LINES OF BUSINESS : DIAMONDS, GEMSTONES AND JEWELRY

PRODUCTS

IMPORTER, DISTRIBUTOR AND EXPORTER

CORPORATE PROFILE

OPERATING TREND : STABLE

PRESENT SITUATION : OPERATING NORMALLY

REPUTATION : FAIR WITH NORMAL BUSINESS ENGAGEMENT

MANAGEMENT STANDARD : MANAGEMENT WITH FAIR PERFORMANCE

HISTORY

The subject was established on November 18, 1991 as a private limited company under the registered name S T S GEMS THAI LTD., by Thai and Indian groups, with the objective to operate as an importer, distributor and exporter of jewelry products. It currently employs 4 staff.

The subject is an affiliated company of Vaibhav Gems Ltd., in India.

The subject’s registered address is 31^st Flr., Jewelry Trade Center Building, 919/390 Silom Rd., Silom, Bangrak, Bangkok 10500, and this is the subject’s current operation address.

THE BOARD OF DIRECTOR

Name	Nationality	Age
Mr. Sunil Agrawal	Indian	56
Mr. Gulzar Sharif	Indian	49

AUTHORIZED PERSON

One of the above directors can sign on behalf of the subject with company’s affixed.

MANAGEMENT

Mr. Sunil Agrawal is the Managing Director.

He is Indian nationality with the age of 56 years old.

Mr. Gulzar Sharif is the Deputy Managing Director.

He is Indian nationality with the age of 49 years old.

BUSINESS OPERATIONS

The subject is engaged in importing and distributing various kinds of diamonds and gemstones, as well as exporting of Thai jewelry products, including rings, earrings, necklace, bracelet, pendants and etc.

PURCHASE

Diamonds and gemstones are imported from India, Brazil and South Africa, while jewelry products are purchased from local suppliers.

MAJOR SUPPLIER

Vaibhav Gems Ltd. : India

SALES [LOCAL]

100% of diamonds and gemstones are sold locally by wholesale to jewelry manufacturers and end-users.

EXPORT [COUNTRIES]

Jewelry products are exported to Hong Kong, India, Taiwan, Japan, Republic of China, U.S.A. and the countries in Europe.

MAJOR CUSTOMERS

S T S Jewels Inc. : U.S.A.

S T S Gems Limited : Hong Kong

RELATED AND AFFILIATED COMPANY

Vaibhav Gems Ltd.

Adress : India

LITIGATION

Bankruptcy and Receivership

There are no litigation on bankruptcy and receivership cases filed against the subject found at Legal Execution Department for the past five years.

Others

There are no legal suits filed against the subject for the past two year.

CREDIT

Sales are by cash or on the credits term of 30-60 days.

Local bills are paid by cash or on the credits term of 30-60 days.

Imports are by T/T.

Exports are against T/T.

BANKING

Bangkok Bank Public Co., Ltd.

Kasikornbank Public Co., Ltd.

EMPLOYMENT

The subject currently employs 4 staff.

LOCATION DETAILS

The premise is rented for administrative office at the heading address. Premise is located in a prime commercial area.

COMMENT

The subject’s business performance in 2012 was slowdown with a drop of sales revenue comparing to the previous year. Slow consumption of diamonds and gemstones has seen continuously since the previous year due to a shrinkage of domestic purchasing power. The economic slowdown in overseas has also affected jewelry exported from Thailand.

FINANCIAL INFORMATION

The capital was registered at Bht. 4,000,000 divided into 40,000 shares of Bht. 100 each with fully paid.

The capital was increased later as follows:

Bht. 10,000,000 on November 8, 1995

Bht. 14,000,000 on September 17, 1996

Bht. 16,000,000 on May 17, 1997

Bht. 20,000,000 on November 24, 1999

Bht. 30,000,000 on September 1, 2003

Bht. 32,500,000 on March 28, 2006

Bht. 35,000,000 on August 29, 2006

The latest registered capital was increased to Bht. 35 million, divided into 350,000 shares of Bht. 100 each with fully paid.

THE SHAREHOLDERS LISTED WERE : [as at July 30, 2012]

NAME	HOLDING	%
Vaibhav Gems Ltd. Nationality: Indian Address : India	171,479	48.99
Ms. Jiraporn Promsa-ard Nationality: Thai Address : 109/293 Soi Bangkradi 25, Rama 2 Rd., Samaedam, Bangkhunthien, Bangkok	89,250	25.50
Mrs. Nutjaree Pattanaviriyanont Nationality: Thai Address : 377/57 Moo 2, Klongsuan, Phrasamutjaedee, Samutprakarn	89,250	25.50
Mr. Girdhad Lai Sharma Nationality: Indian Address : India	7
Mr. Sunil Agrawal Nationality: Indian Address : New York, U.S.A.	7	= 0.01
Mr. Thanwar Das Panjabi Nationality: Indian Address : India	7

Total Shareholders : 6

Share Structure [as at July 30, 2012]

Nationality	Shareholders	No. of Share	% Shares
Thai	2	178,500	51.00
Foreign - Indian	4	171,500	49.00
Total	6	350,000	100.00

NAME OF AUDITOR & CERTIFIED PUBLIC ACCOUNTANT NO. :

Mrs. Ajcharee Densirimongkol No. 6610

Note:

Financial statement as of March 31, 2013 was not submitted to the Commercial Registration Department during investigation. As soon as it is available, we will arrange to send it without delay.

BALANCE SHEET (BAHT)

The latest financial figures published for March 31, 2012, 2011 & 2010 were:

ASSETS

Current Assets	2012	2011	2010
Cash and Cash Equivalents	398,620	849,404	1,152,346
Trade Accounts Receivable	112,110	-	290,885
Trade Accounts Receivable - Related Company	80,550,833	78,395,545	85,052,660
Short-term Lending to Related Company	4,590,000	12,270,000	12,270,000
Inventories	32,030	33,364	-
Other Current Assets	394,856	403,033	953,850
Total Current Assets	86,078,449	91,951,346	99,719,741
Investment in Related Company	9,000,000	-	-
Fixed Assets	8,409	33,348	508,044
Other Non-current Assets	94,552	94,552	104,552
Total Assets	95,181,410	92,079,246	100,332,337

LIABILITIES & SHAREHOLDERS’ EQUITY [BAHT]

Current Liabilities	2012	2011	2010
Trade Accounts Payable	800	127,315	1,752,457
Trade Accounts Payable - Related Company	50,428	890,530	-
Other Current Liabilities	485,176	149,724	188,189
Total Current Liabilities	536,404	1,167,569	1,940,646
Long-term Loan from Parent Company	92,970,000	91,304,400	97,580,400
Total Liabilities	93,506,404	92,471,969	99,521,046
Shareholders' Equity
Share capital : Baht 100 value authorized, issued and fully paid share capital 350,000 shares	35,000,000	35,000,000	35,000,000
Capital Paid	35,000,000	35,000,000	35,000,000
Premium on Share Capital	148,100,000	148,100,000	148,100,000
Retained Earning
Appropriated for Statutory Reserve	2,000,000	2,000,000	2,000,000
Unappropriated	[183,424,994]	[185,492,723]	[184,288,709]
Total Shareholders' Equity	1,675,006	[392,723]	811,291
Total Liabilities & Shareholders' Equity	95,181,410	92,079,246	100,332,337

PROFIT & LOSS ACCOUNT

Revenue	2012	2011	2010
Sales	43,839,850	56,068,642	43,883,041
Gain on Exchange Rate	-	354,933	-
Other Income	8,817,778	346,111	70,705
Total Revenues	52,657,628	56,769,686	43,953,746
Expenses
Cost of Goods Sold	39,140,781	51,000,725	40,252,213
Selling Expenses	2,940,074	2,031,794	2,870,260
Administrative Expenses	4,596,870	4,941,181	8,325,999
Bad Debts	3,370,000	-	22,302,785
Loss on Exchange Rate	542,174	-	1,602,207
Total Expenses	50,589,899	57,973,700	75,353,464
Net Profit / [Loss]	2,067,729	[1,204,014]	[31,399,718]

FINANCIAL ANALYSIS

ITEM	UNIT	2012	2011	2010
LIQUIDITY RATIO
CURRENT RATIO	TIMES	160.47	78.75	51.38
QUICK RATIO	TIMES	159.68	78.38	50.89
ACTIVITY RATIO
FIXED ASSETS TURNOVER	TIMES	5,213.44	1,681.32	86.38
TOTAL ASSETS TURNOVER	TIMES	0.46	0.61	0.44
INVENTORY CONVERSION PERIOD	DAYS	0.30	0.24	-
INVENTORY TURNOVER	TIMES	1,222.00	1,528.62	-
RECEIVABLES CONVERSION PERIOD	DAYS	0.93	-	2.42
RECEIVABLES TURNOVER	TIMES	391.04	-	150.86
PAYABLES CONVERSION PERIOD	DAYS	0.01	0.91	15.89
CASH CONVERSION CYCLE	DAYS	1.22	(0.67)	(13.47)
PROFITABILITY RATIO
COST OF GOODS SOLD	%	89.28	90.96	91.73
SELLING & ADMINISTRATION	%	17.19	12.44	25.51
INTEREST	%	-	-	-
GROSS PROFIT MARGIN	%	30.83	10.29	8.43
NET PROFIT MARGIN BEFORE EX. ITEM	%	4.72	(2.15)	(71.55)
NET PROFIT MARGIN	%	4.72	(2.15)	(71.55)
RETURN ON EQUITY	%	123.45	-	(3,870.34)
RETURN ON ASSET	%	2.17	(1.31)	(31.30)
EARNING PER SHARE	BAHT	5.91	(3.44)	(89.71)
LEVERAGE RATIO
DEBT RATIO	TIMES	0.98	1.00	0.99
DEBT TO EQUITY RATIO	TIMES	55.82	(235.46)	122.67
TIME INTEREST EARNED	TIMES	-	-	-
ANNUAL GROWTH
SALES GROWTH	%	(21.81)	27.77
OPERATING PROFIT	%	(271.74)	(96.17)
NET PROFIT	%	271.74	96.17
FIXED ASSETS	%	(74.78)	(93.44)
TOTAL ASSETS	%	3.37	(8.23)

ANNUAL GROWTH : ACCEPTABLE

An annual sales growth is -21.81%. Turnover has decreased from THB 56,068,642.00 in 2011 to THB 43,839,850.00 in 2012. While net profit has increased from THB -1,204,014.00 in 2011 to THB 2,067,729.00 in 2012. And total assets has increased from THB 92,079,246.00 in 2011 to THB 95,181,410.00 in 2012.

PROFITABILITY : EXCELLENT

PROFITABILITY RATIO

Gross Profit Margin	30.83	Impressive	Industrial Average	21.85
Net Profit Margin	4.72	Impressive	Industrial Average	1.70
Return on Assets	2.17	Impressive	Industrial Average	1.73
Return on Equity	123.45	Impressive	Industrial Average	3.85

Gross Profit Margin used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. The company’s figure is 30.83%. When compared with the industry average, the ratio of the company was higher, indicated that company was more profitable than the same industry.

Net Profit Margin is the indicator of the company's efficiency in that net profit takes into consideration all expenses of the company. A low profit margin indicates a low margin of safety, higher risk that a decline in sales will erase profits and result in a net loss. The company’s figure is 4.72%, higher figure when compared with those of its average competitors in the same industry, indicated that business was an efficient operator in a dominant position within its industry.

Return on Assets measures how efficiently profits are being generated from the assets employed in the business when compared with the ratios of firms in a similar business. A low ratio in comparison with industry averages indicates an inefficient use of business assets. Return on Assets ratio is 2.17%, higher figure when compared with those of its average competitors in the same industry, indicated that business was an efficient profit in a dominant position within its industry.

Return on Equity indicates how profitable a company is by comparing its net income to its average shareholders' equity, ROE measures how much the shareholders earned for their investment in the company. Return on Equity ratio is 123.45%, higher figure when compared with those of its average competitors in the same industry, indicated that business was an efficient profit in a dominant position within its industry.

Trend of the average competitors in the same industry for last 5 years

Return on Assets Downtrend

Return on Equity Downtrend

LIQUIDITY : EXCELLENT

LIQUIDITY RATIO

Current Ratio	160.47	Impressive	Industrial Average	1.51
Quick Ratio	159.68
Cash Conversion Cycle	1.22

The Current Ratio is to ascertain whether a company's short-term assets are readily available to pay off its short-term liabilities. The company's figure is 160.47 times in 2012, increased from 78.75 times, then it is generally considered to have good short-term financial strength. When compared with the industry average, the ratio of the company was higher, indicated that company was an efficient operator in a dominant position within its industry.

The Quick Ratio is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid current assets there are to cover current liabilities. The company's figure is 159.68 times in 2012, increased from 78.38 times, although excluding inventory so the company still have good short-term financial strength.

The Cash Conversion Cycle measures the number of days a company's cash is tied up in the production and sales process of its operations and the benefit from payment terms from its creditors. It meant the company could survive when no cash inflow was received from sale for 2 days.

Trend of the average competitors in the same industry for last 5 years

Current Ratio Downtrend

LEVERAGE : RISKY

LEVERAGE RATIO

Debt Ratio	0.98	Acceptable	Industrial Average	0.77
Debt to Equity Ratio	55.82	Risky	Industrial Average	3.27
Times Interest Earned	-		Industrial Average	-

Debt to Equity Ratio a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed. A higher the percentage means that the company is using less equity and has stronger leverage position.

Debt Ratio shows the proportion of a company's assets which are financed through debt. The company's figure is 0.98 greater than 0.5, most of the company's assets are financed through debt.

Trend of the average competitors in the same industry for last 5 years

Debt Ratio Uptrend

Times Interest Earned Downtrend

ACTIVITY : IMPRESSIVE

ACTIVITY RATIO

Fixed Assets Turnover	5,213.44	Impressive	Industrial Average	-
Total Assets Turnover	0.46	Deteriorated	Industrial Average	1.02
Inventory Conversion Period	0.30
Inventory Turnover	1,222.00	Impressive	Industrial Average	2.22
Receivables Conversion Period	0.93
Receivables Turnover	391.04	Impressive	Industrial Average	1.85
Payables Conversion Period	0.01

The company's Account Receivable Ratio is calculated as 391.04 and 0.00 in 2012 and 2011 respectively. This ratio measures the efficiency of the company in managing its trade debtors to generate revenue. A lower ratio may indicate over extension and collection problems. Conversely, a higher ratio may indicate an overtly stringent policy. In this case, the company's A/R ratio in 2012 increased from 2011. This would suggest the company had good performance in the management of its debt collections.

Inventory Turnover in Days Ratio indicates the liquidity of inventory. It estimates the number of days that it will take to sell the current inventory. Inventory is particularly sensitive to change in business activities. And Inventory turnover has decreased from 1528.62 times in year 2011 to 1222 times in year 2012.

The company's Total Asset Turnover is calculated as 0.46 times and 0.61 times in 2012 and 2011 respectively. This ratio is determined by dividing total assets into total sales turnover. The ratio measures the activity of the assets and the ability of the firm to generate sales through the use of the assets.

Trend of the average competitors in the same industry for last 5 years

Fixed Assets Turnover Downtrend

Total Assets Turnover Downtrend

Inventory Turnover Downtrend

Receivables Turnover Downtrend

DIAMOND INDUSTRY – INDIA

- From time immemorial, India is well known in the world as the birthplace for diamonds.  It is difficult to trace the origin of diamonds but history says that in the remote past, diamonds were mined only in India. Diamond production in India can be traced back to almost 8^th Century B.C.  India, in fact, remained undisputed leader till 18^th Century when Brazilian fields were discovered in 1725 followed by emergence of S. Africa, Russia and Australia.

- The achievement of the Indian diamond industry was possible only due to combination of the manufacturing skills of the Indian workforce and the untiring and unflagging efforts of the Indian diamantaires, supported by progressive Government policies.

- The area of study of family owned diamond businesses derives its importance from the huge conglomerate of family run organizations which operate in the diamond industry since many generations.

- Some of the basic traits of family run business enterprises include spirit of entrepreneurship, mutual trust lowers transaction costs, small, nimble and quick to react, information as a source of advantage and philanthropy.

- Family owned diamond businesses need to improve on many fronts including higher standard of corporate governance, long-term performance – focused strategies, modern management and technology.

- Utmost caution is to be exercised while dealing with some medium and large diamond traders which are usually engaged in fictitious import – export, inter-company transactions, financially assisted by banks. In the process, several public sector banks lost several hundred million rupees. They mostly diverted borrowed money for diamond business into real estate and capital markets.

- Excerpts from Times of India dated 30^th October 2010 is as under –

- Gem & Jewellery Export Promotion Council in its statistical data has shown the export of polished diamonds to have increase by 28 % in February 2013. Compared to $ 1.4 bn worth of polished diamond export in February, 2012, India exported $ 1.84 billion worth of polished diamonds in February 2013. A senior executive of GJEPC said, “Export of cut and polished diamonds started falling month-wise after the imposition of 2 % of import duty on the polished diamonds. But February, 2013 has given a new ray of hope to the industry as the export of polished diamonds has actually increased by 28 %. It means the industry  is on the track of recovery and round tripping of diamonds has stopped completely.” Demand has started coming from the US, the UK, Japan and China. India’s polished diamond export is expected to cross $ 21 bn in 2013-14.

- The banking sector has started exercising restraint while following prudent risk management norms when lending money to gems and jewellery sector. This follows the implementation of Basel III accord – a global voluntary regulatory standard on bank capital adequacy, stress testing and market liquidity.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs. 63.73
UK Pound	1	Rs. 99.79
Euro	1	Rs. 85.07

INFORMATION DETAILS

Report Prepared by :

NIS

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	--

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%)

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