MIRA INFORM REPORT

Report Date :

14.10.2014

IDENTIFICATION DETAILS

Name :	SANGHAVI DIAMOND (SHANGHAI) cO., lTD.
Registered Office :	B-708 A, China Diamond Exchange Centre, No. 1701, Century Avenue, Pudong New Area, Shanghai, 200122 Pr
Country :	China
Financials (as on) :	31.12.2013
Date of Incorporation :	04.11.2010
Com. Reg. No.:	310115400264045
Legal Form :	Wholly Foreign-Owned Enterprise
Line of Business :	Subject is engaged in Diamond Trade in Shanghai Diamond Exchange.
No of Employees :	7

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 :	Slow but correct
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 – June 1, 2014

Country Name	Previous Rating (31.03.2014)	Current Rating (01.06.2014)
China	A2	A2

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

CHINA - ECONOMIC OVERVIEW

Since the late 1970s China has moved from a closed, centrally planned system to a more market-oriented one that plays a major global role - in 2010 China became the world's largest exporter. Reforms began with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, growth of the private sector, development of stock markets and a modern banking system, and opening to foreign trade and investment. China has implemented reforms in a gradualist fashion. In recent years, China has renewed its support for state-owned enterprises in sectors considered important to "economic security," explicitly looking to foster globally competitive industries. After keeping its currency tightly linked to the US dollar for years, in July 2005 China moved to an exchange rate system that references a basket of currencies. From mid 2005 to late 2008 cumulative appreciation of the renminbi against the US dollar was more than 20%, but the exchange rate remained virtually pegged to the dollar from the onset of the global financial crisis until June 2010, when Beijing allowed resumption of a gradual appreciation and expanded the daily trading band within which the RMB is permitted to fluctuate. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2013 stood as the second-largest economy in the world after the US, having surpassed Japan in 2001. The dollar values of China's agricultural and industrial output each exceed those of the US; China is second to the US in the value of services it produces. Still, per capita income is below the world average. The Chinese government faces numerous economic challenges, including: (a) reducing its high domestic savings rate and correspondingly low domestic consumption; (b) facilitating higher-wage job opportunities for the aspiring middle class, including rural migrants and increasing numbers of college graduates; (c) reducing corruption and other economic crimes; and (d) containing environmental damage and social strife related to the economy's rapid transformation. Economic development has progressed further in coastal provinces than in the interior, and by 2011 more than 250 million migrant workers and their dependents had relocated to urban areas to find work. One consequence of population control policy is that China is now one of the most rapidly aging countries in the world. Deterioration in the environment - notably air pollution, soil erosion, and the steady fall of the water table, especially in the North - is another long-term problem. China continues to lose arable land because of erosion and economic development. The Chinese government is seeking to add energy production capacity from sources other than coal and oil, focusing on nuclear and alternative energy development. Several factors are converging to slow China's growth, including debt overhang from its credit-fueled stimulus program, industrial overcapacity, inefficient allocation of capital by state-owned banks, and the slow recovery of China's trading partners. The government's 12th Five-Year Plan, adopted in March 2011 and reiterated at the Communist Party's "Third Plenum" meeting in November 2013, emphasizes continued economic reforms and the need to increase domestic consumption in order to make the economy less dependent in the future on fixed investments, exports, and heavy industry. However, China has made only marginal progress toward these rebalancing goals. The new government of President XI Jinping has signaled a greater willingness to undertake reforms that focus on China's long-term economic health, including giving the market a more decisive role in allocating resources.

Source : CIA

Company Name & address

SANGHAVI DIAMOND (SHANGHAI) cO., lTD.

B-708 A, China Diamond Exchange centre, No. 1701, Century Avenue, Pudong new area, Shanghai, 200122 PR CHINA

TEL: 86 (0) 21-50158333/86-13774397880

FAX: 86 (0) 21-61683092

EXECUTIVE SUMMARY

INCORPORATION DATE : NOV. 4, 2010

REGISTRATION NO. : 310115400264045

REGISTERED LEGAL FORM : WHOLLY FOREIGN-OWNED ENTERPRISE

CHIEF EXECUTIVE : MR. KALPESH VASANTLAL SANGHAVI (CHAIRMAN)

STAFF STRENGTH : 7

REGISTERED CAPITAL : USD 200,000

BUSINESS LINE : TRADING

TURNOVER : CNY 60,520,000 (AS OF DEC. 31, 2013)

EQUITIES : CNY 1,770,000 (AS OF DEC. 31, 2013)

PAYMENT : AVERAGE

MARKET CONDITION : AVERAGE

FINANCIAL CONDITION : FAIRLY STABLE

OPERATIONAL TREND : FAIRLY STEADY

GENERAL REPUTATION : AVERAGE

EXCHANGE RATE : CNY 6.1254 = USD 1

Adopted abbreviations:

ANS - amount not stated NS - not stated SC - subject company (the company inquired by you)

NA - not available CNY - China Yuan Renminbi

SC was registered as a wholly foreign-owned enterprise at local Administration for industry & commerce (AIC - the official body of issuing and renewing business license) on Nov. 4, 2010.

Company Status: Wholly foreign-owned enterprise

This form of business in PR China is defined as a legal person. It is a limited co. established within the territories of PR China with capital provided totally by the foreign investors. More than one foreign investor may jointly invest in a wholly foreign-owned enterprise. The investing party/parties solely exercise management, reap profit and bear risks and liabilities by themselves. This form of companies usually have a limited duration is extendible upon approval of Examination and Approval Authorities.

SC’s registered business scope includes diamond (excluding gold and silver) trade in Shanghai Diamond Exchange (including transit trade, processing trade, import and export business). (with permit if needed)

SC is mainly engaged in diamond trade in Shanghai Diamond Exchange.

Mr. Kalpesh Vasantlal Sanghavi is legal representative and chairman of SC at present.

SC is known to have approx. 7 employees at present.

SC is currently operating at the above stated address, and this address houses its operating office in the commercial zone of Shanghai. SC’s employee refused to release the detailed information of the premise.

SC is not known to host website of its own at present.

No significant changes were found during our checks with local AIC.

Subject passed the annual inspection of 2012 with Administration for Industry & Commerce.

Organization Code: 563091049

There is no record of litigation till now. 

MAIN SHAREHOLDERS:

Name % of Shareholding

Sanghavi Diamonds Private Limited (India) 100

Legal Representative and Chairman:

Mr. Kalpesh Vasantlal Sanghavi, Indian, he is currently responsible for the overall management of SC.

Working Experience(s):

At present Working in SC as legal representative and chairman.

Supervisor:

Sagarkumar Girishbhai Sheth

SC is mainly engaged in diamond trade in Shanghai Diamond Exchange.

SC’s products mainly include: diamond.

SC sources its materials 100% from overseas market. SC sells 100% of its products in domestic market.

The buying terms of SC include Check, L/C, T/T and Credit of 30-60 days. The payment terms of SC include Check, T/T and Credit of 30-60 days.

Note: SC’s management refused to release its main suppliers and clients.

SC is not known to have any subsidiary at present.

Overall payment appraisal: ( ) Excellent ( ) Good (X) Average ( ) Fair ( ) Poor ( ) Not yet determined

The appraisal serves as a reference to reveal SC's payments habits and ability to pay. It is based on the 3 weighed factors: Trade payment experience (through current enquiry with SC's suppliers), our delinquent payment and our debt collection record concerning SC.

Trade payment experience: SC did not provide any name of trade/service suppliers and we have no other sources to conduct the enquiry at present.

Delinquent payment record: None in our database.

Debt collection record: No overdue amount owed by SC was placed to us for collection within the last 6 years.

SC declined to release its banking details.

Balance Sheet

Unit: CNY’000

	As of Dec. 31, 2013	As of Dec. 31, 2012
Cash & bank	1,030	390
Inventory	0	15,770
Accounts receivable	19,260	19,180
Other Accounts receivable	0	270
Advances to suppliers	480	10
Interest receivable	600	0
Other current assets	120	20
	------------------	------------------
Current assets	21,490	35,640
Fixed assets net value	0	0
Long term investment	0	0
Goodwill	120	0
Long-term deferred expense	0	260
	------------------	------------------
Total assets	21,610	35,900
	=============	=============
Short-term loans	0	0
Accounts payable	21,640	33,870
Advances from clients	0	0
Interest payable	470	0
Tax payable	-2,270	-1,300
Other Accounts payable	0	1,780
Other current liabilities	0	0
	------------------	------------------
Current liabilities	19,840	34,350
Long term liabilities	0	0
	------------------	------------------
Total liabilities	19,840	34,350
Equities	1,770	1,550
	------------------	------------------
Total liabilities & equities	21,610	35,900
	=============	=============

Income Statement

Unit: CNY’000

	As of Dec. 31, 2013	As of Dec. 31, 2012
Turnover	60,520	51,200
Cost of goods sold	66,060	55,440
Sales expense	0	0
Management expense	1,760	1,600
Finance expense	-990	-50
Non-operating income	6,630	5,800
Non-operating expense	0	0
Profit before tax	320	10
Less: profit tax	100	14
Profits	220	-4

Important Ratios

=============

	As of Dec. 31, 2013	As of Dec. 31, 2012
*Current ratio	1.08	1.04
*Quick ratio	1.08	0.58
*Liabilities to assets	0.92	0.96
*Net profit margin (%)	0.36	-0.01
*Return on total assets (%)	1.02	-0.01
*Inventory /Turnover ×365	/	113 days
*Accounts receivable/Turnover ×365	117 days	137 days
*Turnover/Total assets	2.80	1.43
* Cost of goods sold/Turnover	1.09	1.08

PROFITABILITY: AVERAGE

The turnover of SC appears average in its line.

SC’s net profit margin remains in a fair level in 2012 and average in 2013.

SC’s return on total assets remains in a fair level in 2012 and average in 2013.

SC’s cost of goods sold is high, comparing with its turnover.

LIQUIDITY: AVERAGE

The current ratio of SC is maintained in a normal level.

SC’s quick ratio is maintained in a fair level in 2012 and normal in 2013.

The inventory of SC appears fairly large in 2012, and SC has no inventory in 2013.

The accounts receivable of SC appears fairly large.

There is no short-term loan in both years.

SC’s turnover is in an average level in 2012 and fairly good in 2013, comparing with the size of its total assets.

LEVERAGE: FAIR

The debt ratio of SC is high.

The risk for SC to go bankrupt is average.

Overall financial condition of the SC: Fairly stable.

SC is considered small-sized in its line with fairly stable financial conditions. The large amount of accounts receivable could be a threat to SC’s financial condition.

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.61.25
UK Pound	1	Rs.98.68
Euro	1	Rs.77.60

INFORMATION DETAILS

Analysis Done by :	DIV
Report Prepared by :	TPT

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%)

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.