MIRA INFORM REPORT

Report Date :

27.06.2014

IDENTIFICATION DETAILS

Name :	HITACHI HOME AND LIFE SOLUTIONS (INDIA) LIMITED
Registered Office :	9th Floor, Abhijeet, Mithakhali Six Roads, Ahmedabad – 380006, Gujarat
Country :	India
Financials (as on) :	31.03.2014
Date of Incorporation :	07.12.1984
Com. Reg. No.:	04-007470
Capital Investment / Paid-up Capital :	Rs. 271.909 Millions
CIN No.: [Company Identification No.]	L29300GJ1984PLC007470
Legal Form :	A Public Limited Liability Company. The Company’s Shares are Listed on the Stock Exchanges.
Line of Business :	Manufacturing, Selling and Trading of ‘Hitachi’ brand of Air Conditioners, Refrigerators, Chillers and VRF (Variable Refrigerant Flow) Systems.
No. of Employees :	1160 (Approximately)

RATING & COMMENTS

MIRA’s Rating :

A (63)

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

Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is an established company having good track record. There seems some dip in the profits of the company during current year. However, financial position of the company is sound. Fundamentals are strong. Trade relations are reported as fair. Business is active. Payment terms are reported to be regular and as per commitment. 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.

INDIAN ECONOMIC OVERVIEW

N E W S

The economy grew 4.7 %in 2013/14, marking a second straight year of sub-5 % growth – the worst slowdown in more than a quarter of a century. The data was below an official estimate of 4.9 % annual growth and compared with 4.5 % in the last fiscal year. However, the current account deficit narrowed sharply to $ 32.4 billion at 1.7 % of gross domestic product, in 2013/14 from a record high of $ 98.8 billion or 4.7 %, the year before.A sharp fall in gold imports due to restrictions on overseas purchases and muted import of capital goods helped shrink the current account deficit.

Online retailer Flipkart has acquired fashion portal Myntra as it prepares to battle with the rapidly expanding India arm of the global e-commerce giant Amazon. The company raised $ 210 million from Russian Investment firm DST Global which has also invested in companies like Facebook, Twitter and Alibaba Group.

General Motors will start exporting vehicles from its Talegaon plant near Pune in the second half of 2014. GM was one of the few global carmakers that was using its India plant only for the domestic market.

Google has overtaken Apple as the world’s top brand in terms of value, according to global market research agency Millward Brown. Google’s brand value shot up 40 % in a year to $ 158.84 billion. The top 10 of the 100 slots were dominated by US companies.

Infosys lost another heavy weight when B G Srinivas, a board member put in his papers. He is the third CEO-hopeful to quit after Chairman N R Narayana Murthy’s return to the company – Ashok Vemuri and V Balakrishnan being the other two.While Vemuri went on to lead IGate, Balakrishnan joined politics.

Naresh Goyal – promoted Jet Airways posted biggest quarterly loss – Rs 2153.37 crore – in the three months ended March 31, mainly because it has been offering discounts to passengers to fill planes.

William S Pinckney – Chairman and CEO of Amway India was arrested by the Andhra Pradesh Police in connection with a complaint against the direct selling firm. This is the second time that he has been taken into custody. A year, ago the Kerala Police had arrested Pinckney and two company directors on charges of financial irregularities.

China has told its state-owned enterprises to sever links with American consulting firms after the United States charged five Chinese military officers wih hacking US companies. China’s action which targets consultancies like McKinsey & Co. and the Boston Consulting Group, sterns from fears that the first are providing trade secrets to the US governments.

India has emerged as a country with some of the highest unregistered businesses in the world. Indonesia has the maximum number of shadow businesses, says a study of 68 countries by Imperial College Business School in London.

Pfizer has abandoned its attempt to buy AstraZeneca for nearly $ 118 billion after the latter refused an offer of 55 pounds a share.

EXTERNAL AGENCY RATING

Rating Agency Name	CRISIL
Rating	Long-term rating = AA-
Rating Explanation	High degree of safety and very low credit risk.
Date	August 26, 2013

Rating Agency Name	CRISIL
Rating	Short-term rating = A1+
Rating Explanation	Highest degree of safety it carry lowest credit risk.
Date	August 26, 2013

RBI DEFAULTERS’ LIST STATUS

Subject’s name is not enlisted as a defaulter in the publicly available RBI Defaulters’ list.

EPF (Employee Provident Fund) DEFAULTERS’ LIST STATUS

Subject’s name is not enlisted as a defaulter in the publicly available EPF (Employee Provident Fund) Defaulters’ list as of 31-03-2012.

INFORMATION DECLINED

MANAGEMENT NON-COOPERATIVE

(CONTACT NO.: 91-79-26402024)

LOCATIONS

Registered Office :	9th Floor, Abhijeet, Mithakhali Six Roads, Ahmedabad – 380006, Gujarat, India
Tel. No.:	91-79-26402024/ 30414800/ 26400673
Fax No.:	91-79-26400672
E-Mail :	sales@hitachi-hli.com customercare@hitachi-hli.com hitachi@hitachi-hli.com parag.dave@hitachi-hli.com
Website :	http://www.hitachi-hli.com
Head Office/ Factory 1 :	Hitachi Complex, Karan Nagar Kadi, District Mehsana – 382727, Gujarat, India
Tel. No.:	91-2764-277571
Fax No.:	91-2764-233425/ 277930
Factory 2 :	Canal Road, Bari Brahmna - 181133, Jammu, Jammu and Kashmir, India
Corporate Office :	A-15, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi, India
Tel. No.:	91-11-26991361/ 62/ 63
Branch Offices :	Located at: North · New Delhi · Gurgaon · Ghaziabad · Lucknow · Chandigarh · Ludhiana · Jaipur West · Mumbai · Pune · Nagpur · Ahmedabad · Surat · Indore South · Chennai · Coimbatore · Hyderabad · Bangalore · Cochin East · Kolkata · Bhubaneshwar · Patna

DIRECTORS

AS ON 31.03.2014

Name :	Mr. Shinichi Iizuka
Designation :	Chairman
Name :	Mr. Shoji Tsubokuta
Designation :	Managing Director
Name :	Mr. Amit Doshi
Designation :	Executive Director
Name :	Mr. Anil Shah
Designation :	CFO and Executive Director
Name :	Mr. Vinay Chauhan
Designation :	Executive Director
Name :	Mr. Ashok Balwani
Designation :	Director
Name :	Dr. Devender Nath
Designation :	Director
Name :	Mr. L G Ramakrishnan
Designation :	Director
Name :	Mr. Mukesh Patel
Designation :	Director
Name :	Mr. R S Mani
Designation :	Director
Name :	Mr. Ravindra Jain
Designation :	Director
Name :	Mr. Vinesh Sadekar
Designation :	Director

KEY EXECUTIVES

Name :	Mr. Parag Dave
Designation :	Company Secretary

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

AS ON 31.03.2014

Category of Shareholder	Total No. of Shares	As a %
(A) Shareholding of Promoter and Promoter Group
(1) Indian
Bodies Corporate	500000	1.84
Sub Total	500000	1.84
(2) Foreign
Bodies Corporate	19689894	72.41
Sub Total	19689894	72.41
Total shareholding of Promoter and Promoter Group (A)	20189894	74.25
(B) Public Shareholding
(1) Institutions
Mutual Funds / UTI	71460	0.26
Financial Institutions / Banks	275	0.00
Insurance Companies	800	0.00
Foreign Institutional Investors	197500	0.73
Sub Total	270035	0.99
(2) Non-Institutions
Bodies Corporate	2376651	8.74
Individuals
Individual shareholders holding nominal share capital up to Rs. 0.100 Million	3309730	12.17
Individual shareholders holding nominal share capital in excess of Rs. 0.100 Million	836794	3.08
Any Others (Specify)	207780	0.76
Any Other	207780	0.76
Sub Total	6730955	24.75
Total Public shareholding (B)	7000990	25.75
Total (A)+(B)	27190884	100.00
(C) Shares held by Custodians and against which Depository Receipts have been issued
(1) Promoter and Promoter Group	0	0.00
(2) Public	0	0.00
Sub Total	0	0.00
Total (A)+(B)+(C)	27190884	100.00

Shareholding of securities (including shares, warrants, convertible securities) of persons belonging to the category Promoter and Promoter Group

Sl. No.	Name of the Shareholders	Details of Shares held
		No. of Shares held	As a %
1	Hitachi Appliance Inc	19689894	72.41
2	Hitachi India Private Limited	500000	1.84
	Total	20189894	74.25

Shareholding of securities (including shares, warrants, convertible securities) of persons belonging to the category Public and holding more than 1% of the total number of shares

Sl. No.	Name of the Shareholders	No. of Shares held	Shares as %
1	Bajaj Allianz Life Insurance Company Limited	1213672	4.46
2	Meenakshi Mercentiles Limited	320000	1.18
	Total	1533672	5.64

BUSINESS DETAILS

Line of Business :	Manufacturing, Selling and Trading of ‘Hitachi’ brand of Air Conditioners, Refrigerators, Chillers and VRF (Variable Refrigerant Flow) Systems.
Brand Name :	‘Hitachi’

GENERAL INFORMATION

No. of Employees :

1160 (Approximately)

Bankers :

· State Bank of India

· ICICI Bank

· Standard Chartered Bank

Facilities :

SECURED LOANS	31.03.2014 (Rs. In Millions)	31.03.2013 (Rs. In Millions)
SHORT TERM BORROWINGS
Loans repayable on demand from banks: - Working capital loans *	347.312	570.614
Others: Buyers’ credit	0.000	268.286
Total	347.312	838.900
LONG-TERM BORROWINGS * ECB of USD 100 lacs, taken from a Bank, carries interest @ 6 month LIBOR plus 125 basis points which is repayable in two equal installments due in year 2014-15 and 2016-17. The principal and interest payment under above loan has been fully hedged under Indian Rupees and interest liability has been swapped against fixed interest @ 7.45% per annum. SHORT TERM BORROWINGS * Working capital loans (Rate of Interest ranging from 10.15% to 13.25% per annum) and Buyers’ credit (Rate of Interest ranging from LIBOR plus 70 basis points to LIBOR plus 120 basis points per annum) facilities from banks are secured by hypothecation of inventories, book debts, movable fixed assets and by equitable mortgage of certain land and buildings of the Company. ** Working capital loans from banks which are unsecured, carries interest rate from 11% to 14% per annum.

Banking Relations :	--
Auditors :
Name :	S. R. Batliboi and Associates LLP Chartered Accountants
Address :	Ahmedabad, Gujarat, India
Ultimate Holding Company :	Hitachi Limited, Japan
Holding Company :	Hitachi Appliances Inc., Japan
Fellow Subsidiaries :	· Hitachi Air Conditioning Products (M) Sdn. Bhd. · Hitachi Asia Limited – Singapore · Hitachi Household Appliances (Wuhu) Company Limited · Hitachi Procurement Service Company Limited · Hitachi Metglass (India) Private Limited · Shanghai Hitachi Electrical Appliances Company Limited · Hitachi Consumer Products (Thailand) Limited · Hitachi Koki India Limited · Hitachi Air Conditioning and Refrigerating Products (Guangzhou) Company Limited · Hitachi India Private Limited · Hitachi Lift India Private Limited · Hitachi Transport System India Private Limited · Shizuoka Hitachi Company Limited · Hitachi Data Systems · Hitachi Hi-rel Power Electronics Private Limited · Taiwan Hitachi Company Limited · Hitachi Cable Asia Pacific (HCAP) Pte Limited · Hitachi High Technologies Hong Kong Limited · Luvata Heating Cooling Technologies (Thailand) Limited · Flyjac Logistics Private Limited · Tata Hitachi Construction Machinery Company Limited · Hitachi Plant Technologies India Private Limited · Hitachi Tochigi Electronics (Thailand) Company Limited · Hitachi Metals Singapore Pte Limited · Hitachi Solution India Private Limited · Highly Electrical Appliances India Private Limited

CAPITAL STRUCTURE

AS ON 31.03.2014

Authorised Capital :

No. of Shares	Type	Value	Amount
30,000,000	Equity Shares	Rs. 10/- each	Rs. 300.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
27,190,884	Equity Shares	Rs. 10/- each	Rs. 271.909 Millions

47281 (Previous year 39401) Equity shares of Rs. 10/- each have been kept in abeyance pending final allotment of Rights issue (2003-04) and Rights issue (2013).

(a) Reconciliation of the Equity shares outstanding at the beginning and at the end of the reporting period

Equity Shares	March 31, 2014
	Nos.	Rs. In Millions
At the beginning of the period	22,960,008	229.600
Add : Issued during the period	4,230,876	42.309
Outstanding at the end of the period	27,190,884	271.909

(b) Terms / rights attached to Equity shares

The Company has only one class of Equity shares having a face value of Rs.10/- per share. Each holder of Equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend recommended by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting.

During the year ended March 31, 2014, the amount per share recognised as dividend distributions to Equity shareholders is Rs. 1.50 (Previous year: Rs.1.50).

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(c) Shares held by Holding Company and subsidiaries of Ultimate holding Company

Out of Equity shares issued by the Company, Equity shares held by Holding Company and subsidiary of Ultimate holding Company are as below:

	March 31, 2014 Rs. In Millions
Hitachi Appliances Inc., Japan - Holding Company 19,689,894 (Previous year: 15,550,000) Equity Shares of Rs.10/- each fully paid up	196.899
Hitachi India Private Limited - Subsidiary of Ultimate holding Company 500,000 (Previous year: 500,000) Equity Shares of Rs. 10/- each fully paid up	5.000

(d) Details of shareholders holding more than 5% shares in the Company

Equity shares of Rs.10 each fully paid (Nos.)	March 31, 2014
Hitachi Appliances Inc., Japan - Holding Company	19,689,894
% holding	72.41%

As per of the company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents legal ownerships of shares.

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS	31.03.2014	31.03.2013	31.03.2012
I. EQUITY AND LIABILITIES
(1)Shareholders' Funds
(a) Share Capital	271.909	229.600	229.600
(b) Reserves & Surplus	2128.358	1587.879	1482.563
(c) Money received against share warrants	0.000	0.000	0.000
(2) Share Application money pending allotment	0.000	546.684	0.000
Total Shareholders’ Funds (1) + (2)	2400.267	2364.163	1712.163
(3) Non-Current Liabilities
(a) long-term borrowings	276.000	552.000	0.000
(b) Deferred tax liabilities (Net)	0.000	0.453	0.000
(c) Other long term liabilities	0.064	0.096	0.459
(d) long-term provisions	276.716	137.533	103.273
Total Non-current Liabilities (3)	552.780	690.082	103.732
(4) Current Liabilities
(a) Short term borrowings	697.312	838.900	703.136
(b) Trade payables	3041.613	3462.654	2564.395
(c) Other current liabilities	811.221	870.040	778.800
(d) Short-term provisions	100.490	86.234	91.741
Total Current Liabilities (4)	4650.636	5257.828	4138.072
TOTAL	7603.683	8312.073	5953.967
II. ASSETS
(1) Non-current assets
(a) Fixed Assets
(i) Tangible assets	1724.256	1614.743	1124.031
(ii) Intangible Assets	230.395	160.707	171.581
(iii) Capital work-in-progress	3.191	42.942	60.374
(iv) Intangible assets under development	18.478	65.789	67.052
(b) Non-current Investments	0.000	0.000	0.000
(c) Deferred tax assets (net)	5.780	0.000	25.782
(d) Long-term Loan and Advances	305.860	179.330	166.043
(e) Other Non-current assets	0.000	0.051	0.051
Total Non-Current Assets	2287.960	2063.562	1614.914
(2) Current assets
(a) Current investments	0.000	0.000	0.000
(b) Inventories	2904.775	3056.429	2680.737
(c) Trade receivables	1883.799	1645.260	1481.377
(d) Cash and cash equivalents	219.935	715.790	26.405
(e) Short-term loans and advances	292.783	281.669	143.677
(f) Other current assets	14.431	549.363	6.857
Total Current Assets	5315.723	6248.511	4339.053
TOTAL	7603.683	8312.073	5953.967

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2014	31.03.2013	31.03.2012
	SALES
		Revenue from operations	10997.259	9299.916	7980.891
		Other Income	57.485	16.070	8.741
		TOTAL (A)	11054.744	9315.986	7989.632
Less	EXPENSES
		Cost of Materials Consumed	5641.750	5076.532	4309.344
		Purchases of Stock-in-Trade	1360.355	1294.905	571.563
		Changes in inventories of finished goods, work-in-progress and Stock-in-Trade	(32.644)	(332.614)	336.225
		Employees benefits expense	818.452	645.065	527.850
		Other expenses	2733.698	2151.575	1933.265
		TOTAL (B)	10521.611	8835.463	7678.247
Less	PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C)		533.133	480.523	311.385
Less	FINANCIAL EXPENSES (D)		119.498	72.073	100.284
	PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E)		413.635	408.450	211.101
Less/ Add	DEPRECIATION/ AMORTISATION (F)		300.382	201.842	183.174
	PROFIT BEFORE TAX (E-F) (G)		113.253	206.608	27.927
Less	TAX (H)		32.761	53.574	(4.690)
	PROFIT AFTER TAX (G-H) (I)		80.492	153.034	32.617
	EARNINGS IN FOREIGN CURRENCY
		Export of trading goods (on FOB basis)	0.000	0.016	0.002
		Commission income	14.048	19.139	21.815
		Reimbursement of advertisement and other expenses	23.398	14.700	12.792
	TOTAL EARNINGS		37.446	33.855	34.609
	IMPORTS
		Capital Goods	48.954	468.968	33.939
		Raw materials, components and spares parts	2856.941	2845.201	2223.899
		Stock-in-trade	839.714	694.374	230.467
	TOTAL IMPORTS		3745.609	4008.543	2488.305
	Earnings Per Share (Rs.)		2.97	6.67	1.42

KEY RATIOS

PARTICULARS		31.03.2014	31.03.2013	31.03.2012
PAT / Total Income	(%)	0.73	1.64	0.41
Net Profit Margin (PBT/Sales)	(%)	1.03	2.22	0.35
Return on Total Assets (PBT/Total Assets}	(%)	1.49	2.52	0.48
Return on Investment (ROI) (PBT/Networth)		0.05	0.09	0.02
Debt Equity Ratio (Total Debt/Networth)		0.41	0.59	0.41
Current Ratio (Current Asset/Current Liability)		1.14	1.19	1.05

FINANCIAL ANALYSIS

[all figures are in Rupees Millions]

DEBT EQUITY RATIO

Particular	31.03.2012	31.03.2013	31.03.2014
	(Rs. In Millions)	(Rs. In Millions)	(Rs. In Millions)
Share Capital	229.600	229.600	271.909
Reserves & Surplus	1482.563	1587.879	2128.358
Share Application money pending allotment	0.000	546.684	0.000
Net worth	1712.163	2364.163	2400.267
long-term borrowings	0.000	552.000	276.000
Short term borrowings	703.136	838.900	697.312
Total borrowings	703.136	1390.900	973.312

YEAR-ON-YEAR GROWTH

Year on Year Growth	31.03.2012	31.03.2013	31.03.2014
	(Rs. In Millions)	(Rs. In Millions)	(Rs. In Millions)
Sales	7980.891	9299.916	10997.259
		16.527	18.251

NET PROFIT MARGIN

Net Profit Margin	31.03.2012	31.03.2013	31.03.2014
	(Rs. In Millions)	(Rs. In Millions)	(Rs. In Millions)
Sales	7980.891	9299.916	10997.259
Profit	32.617	153.034	80.492
	0.41%	1.65%	0.73%

LOCAL AGENCY FURTHER INFORMATION

CURRENT MATURITIES OF LONG TERM DEBT

Particulars	31.03.2014 (Rs. In Millions)	31.03.2013 (Rs. In Millions)	31.03.2012 (Rs. In Millions)
Current maturities of long-term borrowings	276.000	268.189	288.509

Sr. No.	Check List by Info Agents	Available in Report (Yes / No)
1]	Year of Establishment	Yes
2]	Locality of the firm	Yes
3]	Constitutions of the firm	Yes
4]	Premises details	No
5]	Type of Business	Yes
6]	Line of Business	Yes
7]	Promoter's background	No
8]	No. of employees	Yes
9]	Name of person contacted	No
10]	Designation of contact person	No
11]	Turnover of firm for last three years	Yes
12]	Profitability for last three years	Yes
13]	Reasons for variation <> 20%	--
14]	Estimation for coming financial year	No
15]	Capital in the business	Yes
16]	Details of sister concerns	Yes
17]	Major suppliers	No
18]	Major customers	No
19]	Payments terms	No
20]	Export / Import details (if applicable)	No
21]	Market information	--
22]	Litigations that the firm / promoter involved in	--
23]	Banking Details	Yes
24]	Banking facility details	Yes
25]	Conduct of the banking account	--
26]	Buyer visit details	--
27]	Financials, if provided	Yes
28]	Incorporation details, if applicable	Yes
29]	Last accounts filed at ROC	Yes
30]	Major Shareholders, if available	Yes
31]	Date of Birth of Proprietor/Partner/Director, if available	No
32]	PAN of Proprietor/Partner/Director, if available	No
33]	Voter ID No of Proprietor/Partner/Director, if available	No
34]	External Agency Rating, if available	Yes

INDEX OF CHARGES

S.NO.	CHARGE ID	DATE OF CHARGE CREATION/MODIFICATION	CHARGE AMOUNT SECURED	CHARGE HOLDER	ADDRESS	SERVICE REQUEST NUMBER (SRN)
1	10421920	30/03/2013	1,040,800,000.00	STATE BANK OF INDIA	COMMERCIAL BRANCH, PARAMSIDDHI COMPLEX, ELLISBRIDGE, AHMEDABAD, GUJARAT - 380006, INDIA	B73797714
2	10410045	27/02/2013	2,348,900,000.00	STATE BANK OF INDIA	COMMERCIAL BRANCH, PARAMSIDDHI COMPLEX, ELLISBRIDGE, AHMEDABAD, GUJARAT - 380006, INDIA	B70174693
3	10085622	15/03/2010 *	1,100,000,000.00	STATE BANK OF INDIA	COMMERCIAL BRANCH, PARAMSIDDHI COMPLEX, ELLISBRIDGE, AHMEDABAD, GUJARAT - 380006, INDIA	A80626336
4	80041615	31/07/2012 *	2,348,900,000.00	STATE BANK OF INDIA	COMMERCIAL BRANCH, PARAMSIDDHI COMPLEX, ELLISBRIDGE, AHMEDABAD, GUJARAT - 380006, INDIA	B56217409
5	80019453	27/05/1996	62,500,000.00	CORPORATIONBANK	INDUSTRIAL FINANCE BRANCH, ELLISBRIDGE, AHMEDABAD, GUJARAT - 380006, INDIA	-

* Date of charge modification

UNSECURED LOANS

UNSECURED LOANS	31.03.2014 (Rs. In Millions)	31.03.2013 (Rs. In Millions)
LONG-TERM BORROWINGS
External commercial borrowing (ECB) from a Bank	276.000	552.000
SHORT TERM BORROWINGS
Loans repayable on demand from banks: - Working capital loans **	350.000	0.000
Total	626.000	552.000

BACKGROUND

Subject was incorporated in December 1984 as “Acquest Air conditioning Systems Private Limited” under the provisions of Companies Act, 1956.

The Company is engaged in the business of manufacturing, selling and trading of ‘Hitachi’ brand of Air conditioners, refrigerators, chillers and VRF (variable refrigerant flow) systems. Manufacturing facility for Air conditioners is set up at Kadi (North Gujarat) and Jammu. The Company performs its marketing activities through twenty one branches and thirty five service centers spread across India.

The Company is a subsidiary of Hitachi Appliances Inc., Japan.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Hitachi Home and Life Solutions (India) Limited (HHLI) is a subsidiary of Hitachi Appliances Inc., Japan. Since its inception HHLI has focused on developing and supplying quality products and technology that contribute to the overall prosperity of the society. As of today, HHLI produces a range of Air conditioners and trades in Refrigerators. Within Air conditioners, it has a slew of offerings including Room Air conditioners, Commercial Air conditioners, Chillers, VRF Systems and Rooftops. The refrigerators range focuses mainly on high end consumer refrigerators.

Company’s manufacturing facility at Kadi, North Gujarat, is among the ten Hitachi Air conditioner manufacturing facilities worldwide. With a total installed capacity of 230,000 units (in a single shift) a year, HHLI is amongst the top Air conditioning companies in India.

The products are supported by a strong nationwide distribution consisting of 5 regional offices, 21 branch offices and over 200 exclusive sales and service dealers, over 1,500 sales points, 37 Company owned service centres (HCS) and 600 other service points including multibrand S and S and franchisees. HHLI has a Company owned and operated 24x7 customer care centre.

The overall objective at Hitachi is to simplify life and to meet this objective the Company constantly innovates, brings in technology, adopts newer concepts and incorporates advanced features in its products to lead changes in making life comfortable.

MACRO ECONOMIC ENVIRONMENT

With real economic growth slowing down to below 5% levels in 2012-13 and 2013-14, private consumption expenditure has been reducing quarter on quarter over the last 3 years (see chart A) even reaching lows of 1.9% in Q1,2013-14 and 2.5% in Q3, 2013-14. Thus, India’s strong consumer demand driven economy has taken a beating.

Growth in government consumption, which sharply picked up in the first quarter, remained subdued for the rest of the year as fiscal pressures intensified. Investment flattened during the year, registering no growth. While structural and procedural delays continued to hamper investment, new headwinds appeared in the form of monetary tightening and the heightened challenge of repayment in foreign currency as the currency weakened. Domestic demand contributed less than half of growth.

Consumer price inflation averaged 9.8% in 2013-14, while wholesale price inflation averaged 5.9%. Both picked up from May 2013 with higher food prices and periodic increments in fuel prices. However, from December 2013, inflation decelerated sharply due to a drop in food prices, especially for vegetables. Marked currency depreciation during the year increased import prices affecting companies like them, who have a reasonable proportion of imports, though to pass through the final prices has been limited by weak demand, which has curtailed firms’ pricing power and forced them to tighten margins.

While the economic slowdown bottomed out last year, a spell of global financial turbulence caused capital outflows and pressure on the exchange rate, but strong policy measures stabilized the currency, rebuilt reserves, and narrowed the excessive current account deficit. Some weaknesses remain: persistent inflation, fiscal imbalances, bottlenecks to investment, and inefficiencies that require structural reform. One expects the new government that has come to power with a clear mandate will take necessary steps to resolve these weaknesses systematically and play a large role in accelerating the economic revival. However, given the challenges one expects the recovery process to be gradual.

AIR CONDITIONERS

Broadly, the Air conditioning market can be divided into room Air conditioners and ductable Air conditioners.

ROOM AIR CONDITIONERS

Room Air conditioner industry has grown by approximately 3% in 2013-14 compared to de-growth of about 5% in 2012-13. Despite the low industry growth, HHLI has registered a growth with sales of 2.75 Lac units against 2.34 Lac units in the last financial year.

The Room Air conditioners category consists of both the Window type and Split type Air conditioners for cooling applications in residential and commercial spaces. The share of Split ACs in overall industry sales is increasing from around 49% in 2007-08 to over 79% in 2013-14. This growing trend of share of Split ACs is expected to continue due to lower noise levels, no security problems, aesthetic look and space adaptability.

Hitachi has a strong presence in the Split AC category in terms of products. The Company’s Split AC range comprises 43 models, with capacities ranging from 1.0 Tr. to 3.25 Tr. The product line up has 1,2,3 and 5 star rated Air conditioners. The range comprises of ‘i-Clean Inverter’, ‘ACE Inverter’, ‘Kampa Inverter’, ‘ACE Reidan (Hot and Cold)’, ‘Star’, ‘Star Sumo’, ‘Ace Followme’, ‘Sugoi’, ‘Ace Cutout’, ‘Kaze Plus’, ‘Logicool’ and ‘Kampa’.

While essentially Split ACs are sold to individual consumers, there is a significant proportion of the market which is actually project sales to companies for their offices, outlets or facilities. Rough estimates suggest this is around 30% of Split Ac sales. Traditionally, HHLI has been a consumer focused Company in this space. It has now launched a new initiative to effectively penetrate the project sales market of Split ACs. Not only does this thrust offer growth opportunities but also makes the revenue flow less seasonal.

The Company also continues to sell its other room ACs. The Window Air conditioners range comprises 11 models to offer to the customers, with capacities ranging from 1.0 Tr. to 2.0 Tr. The product line up has 1, 2, 3 and 5 star rated Air conditioners. The range comprises of ‘Summer TM’, ‘Summer QC’, ‘Kaze Reidan’ and ‘Kaze Plus series’.

The cassette Air conditioner range has 5 models to offer to the customers with capacities ranging from 1.5 tr to 4.0 tr.

With a slight uptick in consumer sentiments, the room AC market is poised for strong growth in the near term. Lower market penetration, rising income levels, increasing number of households, high temperatures and humidity, urbanization are strong growth drivers for this Air conditioning industry. It is particularly important to note that the household penetration of ACs in India is abysmally low when compared to the rest of the world. Hence, there is considerable scope of further penetration in Tier 2 and 3 towns and rural India.

In the Indian market, energy efficiency star rating, aesthetic look, maintenance, cooling capacity, warranty, price and technology are currently the major influential factors while purchasing an Air Conditioner. While Hitachi is focusing on these elements, its prime focus is on effective cooing with optimal energy consumption.

COMMERCIAL RANGE OF AIR CONDITIONERS

The commercial range of Air conditioners includes ductables, chillers and VRF (Variable Refrigerant Flow) product categories and HHLI has a presence in all these. The Company is now strengthening its projects team to become even more aggressive in this market with a focus on its technological advantages.

Ductable: While the market witnessed around 4% de-growth in the ceiling suspended ductable category, HHLI grew by 16%. The major reasons of de-growth in industry were cost escalations due to high fluctuation in Forex, political uncertainties leading to poor investor sentiment and lower growth of economy. However, HHLI managed to grow despite these odds because of its strong brand recall in the segment, presence in medium to large size orders, availability of material and a wide product basket that could meet the requirements of all kinds of commercial customers.

Chiller: The overall market has grown marginally in 2013-14. HHLI was affected with the rupee depreciation that made its products which had large import content more expensive in the market. Consequently, there was major delay in sales finalization. The Company is going for greater localization and it launched a new range of R134a water cooled water chillers from the India Plant with enhanced capacity upto 180 HP. This has received good response from the market. During the period, Hitachi overseas plant has introduced higher efficiency model and is available for sales in India market.

VRF: This product category continues to show growth trend despite weak economic conditions. In fact, during the year, the industry has grown by approximately 12%. With its inverter technology, VRF products save around 25% to 30% energy compared to conventional technology products. HHLI’s manufactured Front Flow ‘Set Free’ system in a capacity range of 6, 8, 10 and 12 HP, which was designed to meet Indian hot weather conditions, achieved good success in the year.

Keeping this success in mind and to meet growing market demand with good price propositions, the Company has decided to develop and produce Top Flow ‘Set Free’ Out Door Units in a capacity range of 8 to 54 HP from its own factory at Kadi, Gujarat. These Out Door Units again are being developed to meet Indian hot weather conditions.

Their “Set Free” systems are fitted with “Scroll Compressor” and advanced heat exchangers to tackle such situation and to deliver the improved efficiency. The commercial production of Top Flow ‘Set Free’ Out Door Units is planned to start from July’2014.

TELECOM AIR CONDITIONERS

In addition to the commercial AC segment discussed above, there is a specialized set of products that cater to the telecommunications industry. However, the Telecom Industry in India continues to be under severe debt burden and in difficulty. HHLI continued to be the market leader but volumes went down despite diversifying into power and railways. Free Cooling unit supported this category well. Going forward one expects a further consolidation of telecom operators, which will add further challenge to already difficult segment for AC suppliers. Consequently, efforts are being put to use the technology to diversify to other related industries.

REFRIGERATORS

While the global market leans towards larger refrigerators with frost free technology, the Indian market is largely categorized by smaller single door below 200 litre refrigerators that use direct cool technology. In fact, the 165-litre fridge was the standard in almost all households until the arrival of competition and the need to differentiate, coupled with economic development, which led to the development of higher capacities. Over the last 6-8 years, fridges with 341-540-litre capacities continued to gain momentum to account for 20% of total fridge volume sales in 2013. While, today, the market is split around 70% with direct cool technology and 30% with frost free, growth is being driven by lowering of prices and greater adoption of frost free technology.

Hitachi is positioning itself aggressively with its technology advantage in above 300 litre refrigerators with frost free technology. Its product range is also fast adopting inverter compressors technology for better energy utilization.

It is launching several new models in this segment and currently 85% of the range is with Inverter Compressors, which is estimated to become 100% by the middle of next year. Given the trust in the Company’s product and for increasing customer satisfaction, HHLI has started offering 10 years warranty on Compressors. The Company’s Gross capacity ranges from 251Lts to 655Lts and is available in 2-Doors, 3-Doors, and 4-Doors, which are all imported from the factory in Thailand. India and Thailand have an FTA agreement so this import does not have major import duty based price escalations.

During the year Company’s refrigerator sales has grown by 15.3%.

OUTLOOK

One expects a gradual improvement in macroeconomic conditions in FY2015. Consumer sentiments are expected to improve. Given the growing middle class and low penetration levels, the AC market will grow. The refrigerator segment will see regular growth with higher growth in the larger and more technologically advanced segment. Across its businesses, HHLI is focusing on meeting customer requirements by being leaders in product technology and better equipped for servicing. There will be impetus on the project related business to create more even business through the year. The Company recognizes that costs and product effectiveness while being energy efficient will play a critical role in future growth and is focusing on these factors.

CONTINGENT LIABILITIES:

Particulars	31.03.2014 (Rs. In Millions)	31.03.2013 (Rs. In Millions)
Legal matters under dispute *: Service tax	73.454	14.480
Sales tax	37.339	28.418
Customs duty	0.000	0.092
Excise duty	1.916	1.716
Guarantees given by the bankers on behalf of the Company	17.830	7.815
Claims against the Company not acknowledged as debts	7.203	6.432
Total	137.742	58.953
* The company is contesting the demands and the management believes that its position is likely to be upheld in the appellate process. It is not practicable to estimate the timing of cash outflows, if any in respect of legal matters, pending resolution of the proceedings with the appellate authorities.

FIXED ASSETS:

Tangible assets:

· Freehold Land

· Buildings

· Plant & Machinery

· Computers

· Furniture and fixture

· Office equipments

· Electrical installations

· Vehicles

Intangible assets:

· Trade mark

· Software capitalisation

· Technical know how

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 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. 60.16
UK Pound	1	Rs. 102.23
Euro	1	Rs. 82.04

INFORMATION DETAILS

Information Gathered by :	HTL
Analysis Done by :	DIV
Report Prepared by :	BVA

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	8
PAID-UP CAPITAL	1~10	7
OPERATING SCALE	1~10	7
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	7
--PROFITABILIRY	1~10	6
--LIQUIDITY	1~10	7
--LEVERAGE	1~10	7
--RESERVES	1~10	7
--CREDIT LINES	1~10	7
--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
DEFAULTERS
--RBI	YES/NO	NO
--EPF	YES/NO	NO
TOTAL		63

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.