CREDIT APPLICATION(cover page)

BORROWER Kansai Nerolac Ltd.

BRANCH

DATE OF C.A.

C.A. REFERENCE NO.

CUSTOMER ID

RELATIONSHIP MANAGER

APPROVING CREDIT COMMITTEE *

IA / IB / II / III / IV / Board

DATE OF DISPOSAL BY C.C. *

NATURE OF DISPOSAL * Approved as recommended / Approved with modifications / Deferred / Declined

RESOLUTION REFERENCE NO. *

REPORTED TO NEXT LEVEL ON *

OBSERVATIONS OF CORPORATE RISK

INDUSTRY SPECIFIC:– Prices of Raw materials: Rise in raw material prices especially crude oil

prices may affect margins adversely.– Foreign Currency Risk: Due to weakening of rupee there will be a

negative impact on the performance of the company as it is a net importer.– Highly dependent on repaint business, which increases the correlation to

the GDP and disposable income

BORROWER RELATED:

Forex Risk: KNL limited sources approximately 33.3% of its raw materials from imports. Also foreign sales form 16% of its revenue. So a change in foreign exchange prices like recent strengthening of Indian Rupee can have an adverse impact on the company’s profitability.

Joint Ventures: KNL has an important joint venture with Kansai

Management Risk: The overall management quality is good involving no special risks.

CREDIT POLICY COMPLIANCE:

Nerolac Corporate Finance / SME

Turnover Rs. 1326 crore Corporate:Above Rs.50 CroreSME: Up to Rs.50 Crore

Profitability Yes Profits in the last 3 yearsCredit Rating

AAA Minimum I-A or facility rating of minimum A

DSCR* 1.83 Min 1.25 with average of at least 1.50.

Leverage** 0.67 TOL to TNW of max 2.00Current Ratio

2.07 To be acceptable

Promoter Contribution

NA NA

Credit History

No known willful default by Raymonds

No known willful default by Coy or group

PROPOSAL

FACILITY

FB:CC/WCDL/STL/FCNR (B)/EPC

Term Loan

Unsecured Loans

Total FB

Outstanding

202

240

216

658

TOTAL FBTOTAL NFBTOTAL FX LINETOTAL EXP

EXISTINGLIMIT

0

0

0

0

PROPOSEDLIMIT

40

40

25

105

10560111

TENOR/ PRICING/ PURPOSE / MARGIN

WCDL 35 Crore – BPLR – 1%

STL 5crore – RH to decide price Min 8.75%% pa

Tenor:- 48 monthsInstallments of 5 Crores each for 12 quarters after moratorium of 12 months after first draw drown. Ternor 2 Years at BPLR with annual reset

Other recommendations (including change, if any, in terms of previous sanction):

MODULE 1: CUSTOMER PROFILE

COMPANY Kansai Nerolac

i-RISK – CURRENT A+ BASE YEAR: 2005-2006

i-RISK - PREVIOUS BASE YEAR:

EXTERNAL CREDIT RATINGS

AGENCY RATING MEANING

CRISIL AAA For Non Convertible Debentures

CRISIL P1+ Short Term Debt

GROUP Kansai Group

INCORPORATED ON 1920

CORPORATE STATUS Listed

INDUSTRY Paints

BUSINESS Industrial paints, decoratives

MODULE 4: FINANCIALS(Rs in Crores)

Year ended Year-3(A)

Year-2(A)

Year-1 (A)

Current Year (A)

Year+1 (P)

Net Sales 925.95 1061.34 1287.48 1404.14 1562.545Other Income 28.45 75.01 24.05 24.85 39.87PBDIT 190.27 259.58 211.37 247.69 284.78PBDIT/NS% 20.55% 24.46% 16.42% 17.64% 18.23%Interest Cover 220.22 292.05 185.22 147.58 227.85Cash AccrualPBT 168.8 227.02 176.85 206.68 262.92PAT 121.74 178.48 160.25 153.61 220.60PAT/NS% 13.15% 16.82% 12.45% 10.94% 14.12%Tangible Net Worth 264.93 323.4 406.06 510.29 593.69TOL/TNW 0.82 0.85 0.84 0.62 0.56Net Working Capital 226.46 241.01 289.62 368.5 444.41Current Ratio 2.29 2.09 2.07 2.56 2.74NCFO 128.54 188.97 257.91 210.54 247.64DSCRCAR (for NBFCs) - - - - -Net NPA% (for NBFCs) - - - - -Contingent Liab. (normal) Contingent Liab (disputed) - - - - -Contingent Liab (other) - - - - -TOL+Cont Liab / TNW

Financials of Major Group Companies (including corporate guarantor)

Asian Paints

Berger Paints

Nerolac ICI Paints Shalimar

Net Sales 3585.86 1559.75 1404.14 1025.84 256.05 Net Sales growth % 21.78 18.49 13.18 5.4 17.97 PBDIT 619.55 130.16 247.69 115.87 16.14 PAT 375.2 83.07 153.61 60.21 4.75 PAT growth % 37.92 18.18 10.94 -86.57 39.3 TNW 928.5 274.46 510.29 761.5 27.25 TOL /TNW 0.85 0.72 0.62 0.35 2.43 Current Ratio 1.15 1.33 2.56 0.81 1.18 NWC 61.1 243.74 368.5 -73.35 68.21

MODULE 5: MANAGEMENT

BOARD OF DIRECTORS

Chairman : J J IraniVice Chairman : D M KothariDirector : Y KawamoriManaging Director : H M BharukaDirector : S M DattaDirector : Y TajiriDirector : H IshinoDirector : Pradip P ShahAdditional director : Noel N TataWhole-Time Director : Pravin D ChaudhariCompany Secretary : G T Govindarajan

CAPITAL MARKET STATUS

PAID-UP SHARE CAPITAL: 30,401.70 croresMARKET VALUE PER SHARE: 52-WEEK HIGH /LOW: 911.00P/E: 15.60 INDUSTRY P/E: 19.35

SHAREHOLDING PATTERN

Particulars Mar-08 Dec-07

Indian promoters - -

Foreign promoters 66.41 66.41

Acting person - -

Other promoters - -

MFs/UTI 4.73 7.93

Banks/FIs 4.97 4.97

FIIs 7.20 7.32

Public corporate bodies 7.00 3.61

Indian public 9.58 9.65

NRIs/OCBs - -

Others 0.11 0.11

No of shares 26945986 26945986

QUALITY OF TOP MANAGEMENT

Mr. D. M. Kothari

A qualified C.A. by profession, Mr. Kothari has also been the President/member of several leading trade

Associations such as the Indian Paint Association, The Chemicals & Allied Products Export Promotion

Council (CAPEXIL), The Indian Chemical Manufacturers Association (ICMA), The Bombay Chamber of

Commerce and Industry (BCCI) and The Federation of Indian Export Organisation (FIEO). During his

tenure as Managing Director, Kansai Nerolac became undisputed leader in industrial paints.

Mr. S. M. Datta

He is a Non-Executive Director on the Board of the Company & is a reputed management expert. Mr. Datta

graduated with Honours in Chemistry, Presidency College, Kolkata and obtained a Post-graduate Degree in

Science & Technology from the Kolkata University. Mr. Datta is a Chartered Engineer, Fellow, Institution

of Engineers, Fellow, Indian Institute of Chemical Engineers, Member, Society of Chemical Industry

(London) and Honorary Fellow of All India Management Association.

Mr. H. Ishino

Mr. H. Ishino is a Non – Executive Director on the Board of the Company. Mr. Ishino is an expert in the

field of Marketing. Mr. Ishino is a Nominee Director of Kansai Paint Co. Ltd., Japan, the Company’s

holding Company.

Mr. Noel N. Tata

Mr. Noel N. Tata is the Managing Director of Trent Ltd. and director of various Tata companies including

Voltas Ltd., Titan Industries Ltd., Tata Investment Corporation, Trent Brands and Landmark. He is also a

director at Bombay Chamber of Commerce & Industry and Satnam Developers & Finance. Before joining

Trent, Mr. Tata worked with Nestle, UK and Tata Exports (now Tata International). He is a graduate of

Sussex University (UK) and INSEAD.

Mr. Pravin D. Chaudhari

Mr. Pravin D. Chaudhari has been appointed as an Additional Director and a Wholetime Director of the

Company with effect from 1st May, 2008. Mr. Chaudhari is B.E. (Production), MMS and was Director-

Supply Chain prior to his appointment on the Board.

Mr. H.M. Bharuka

Mr. H.M. Bharuka is a qualified Cost Accountant with a varied experience of around 24 years in various

facets of management and profound knowledge of the Paints Industry. The Company has shown

remarkable performance during the tenure of Mr. Bharuka as Managing Director of the Company from 1st

April, 2001.

TRACK RECORD

Kansai Nerolac Paints Ltd won the coveted ICSI National Award for Excellence in Corporate Governance,

2007, established by the Institute of Company Secretaries of India. The award was presented to the

Company in Kolkata on November 26, 2007. The Award was conferred on the Company in recognition of

the Company’s creative and contributive capabilities, sustainable relationship with major stakeholders in

delivering value and its future vision and sustainability. 

The Company was appreciated for its open culture with transparency in operations and professional

approach, its strong value system that serves as a guide for exhibiting appropriate behavior, internally and

externally and its endeavor to make corporate governance as a part of the Company’s culture.

The company also established Experience centres where the customers get an opportunity to see colours,

colour schemes, designer finishes, this helped the company get first-hand knowledge of exactly what

customer need. The company has pursued Environmental protection policies & has introduced new

generation Cathodic Electro Deposition which can be baked at low temperatures & emits less volatile

components.

Awards & Recognitions

The company’s commitment to building a brand centric model towards leveraging quality products and

service to customers to generate sustainability and assured annuity revenues has earned them recognition in

various circles. Few of the awards they received last year :

Best Vendor Award from customers like Toyota Kirloskar Motors (TKML) for Cost and from Maruti

Udyog Limited (MUL) on overall commendation.

• Awards for Marketing initiatives like Cannes 2007 Bronze for press Ad.• Emvies 2007 Gold & Silver for Best Media innovation, Best case study – Media innovation (Impression Rang Jama De), Best Integrated Campaign, Best Media strategy & People’s Choice Award.• Reader’s Digest Trusted Brands Gold Award for 2008.• Frost & Sullivan Market Leadership Award in Indian Industrial Paints & Coating Market.• ‘Hall of Fame’ from CTO Forum, PC Quest & Best Implementation-APO in IT.• ICSI National Award for Excellence in Corporate Governance – 2007 from the Institute of Company Secretaries of India. • Greentech Environment Excellence Gold and Silver for Bawal and Chennai units.• ABCI Silver for Annual Environment Report.

MODULE 6: BUSINESS

1. PRODUCTS

Kansai Nerolac Paints Ltd, the country’s leading paint manufacturing company which has always been at

the forefront for launching technologically superior and innovative products that deliver more value to its

customers. The company has five strategically located manufacturing units all over India and a strong

dealer network of over 11000 dealers across the country. The company manufactures a diversified range of

products ranging from architectural coatings for homes, offices, hospitals and hotels to sophisticated

industrial coatings for most of the industries.

Its products are divided catering to its two segments which are:

1. Decorative paints

Interior

Emulsions

Distemper

Lustre

Flat oil

Enamel

Exterior

Emulsions

Textured

Cement

Nerolac Impression Everlast

2. Industrial Paints

Automotive Coatings

General Industrial coatings

High performance coating

Powder coating

Automotive Coatings of Kansai Nerolac have been tested and certified by global automotive manufacturers

who have set up base in India, like: Suzuki Motors Honda Motors, Toyota Motors, Ford Motor

Company, General Motors Corporation, IVECO Motors, and Peugeot.

Through its various strategic collaborations, Kansai Nerolac offers a total painting system to auto makers in

India with a range of products, starting from Pretreatment Chemicals, Electro Deposition Primers,

Intermediate Coats/primer Surfacers, Solid & Metallic Top Coats, Clear Coats Touch-up Paints.

The product range is backed up by a strong technical service network of experts placed at customers’ end,

training programs, VA/ VE activities in co-ordination with customers resulting in ultimate delivery of

optimized painting solutions.

2. PRICE MOVEMENTS

We have plotted the stock prices of Nerolac corresponding to the market prices over a period of 5 years i.e.

from 2003 – 2008. We can see that the stock price of Nerolac is heavily dependent on the market

conditions so it’s highs correspond with the market high and low correspond to the market lows . This

shows that the stock does not have a movement of it’s own and instead is guided by the market sentiments

3. MARKET SEGMENT

The market can be further split into decorative paints and industrial paints. The demand for

decorative paints is highly price-sensitive and also cyclical. Monsoon is a slack season while the peak

business period is Diwali festival time, when most people repaint their houses. The industrial paints

segment, on the other hand, is a high volume-low margin business. In the decorative segment, it is the

distribution network that counts while in the industrial segment the deciding factor are technological

superiority and tie-up with automobile manufacturers for assured business.

The share of industrial paints in the total paint consumption of the nation is very low compared to global

standards. It accounts for 30 per cent of the paint market with 70 per cent of paints sold in India for

decorative purposes. In most developed countries, the ratio of decorative paints vis-à-vis industrial paints

is around 50:50. But, with the decorative segment bottoming out, companies are increasingly focussing on

industrial paints. The future for industrial paints is bright. In the next few years, its share would go up to 50

per cent, in line with the global trend.

4. MAIN CUSTOMERS

NPL dominates the industrial paints segment with 41 per cent market share. It has a lion's share of 70

per cent in the OEM passenger car segment, 40 per cent share of two wheeler OEM market and 20 per cent

of commercial vehicle OEM market.

It supplies 70 per cent of the paint requirement of Maruti, India's largest passenger car manufacturer,

besides supplying to other customers like Telco, Toyota, Hindustan Motors, Hero Honda, TVS-Suzuki,

Mahindra & Mahindra, Ashok Leyland, Ford India, PAL Peugeot and Bajaj Auto.

NPL also controls 20 per cent of the consumer durables segment with clients like Whirlpool and Godrej

GE.

The company is also venturing into new areas like painting of plastic, coil coatings and cans.

5. COMPETITORS & MARKET SHARE

The leaders in the organised paint industry are Asian Paints (India) Ltd. (APIL), Nerolac Paints Ltd.

(KNPL), Berger Paints, Jenson & Nicholson Ltd. (J&N) and ICI (India) Ltd.

Asian paints is the industry leader with an overall market share of 33 per cent in the organised paint market.

It has the largest distribution network among the players and its aggressive marketing has earned it strong

brand equity. The Berger Group and ICI share the second slot in the industry with market shares of 17 per

cent each. KNPL has a market share of 15 percent in the organised sector.

APIL dominates the decorative segment with a 38 per cent market share. The company has more than

15,000 retail outlets and its brands Tractor, Apcolite, Utsav, Apex and Ace are entrenched in the market.

NPL, the number-two in the decorative segment, with a 14 per cent market share too, has now increased its

distribution network to 10,700 outlets to compete with APIL effectively. Berger and ICI have 9 per cent

and 8 per cent shares respectively in this segment followed by J&N and Shalimar with 1 and 6 per cent

shares.

APIL, the leader in decorative paints, ranks a poor second after Nerolac in the industrial segment with a 15

per cent market share. But with its joint venture Asian-PPG Industries, the company is aggressively

targeting the automobile sector. It has now emerged as a 100 per cent OEM supplier to Daewoo, Hyundai,

Ford and General Motors and is all set to ride on the automobile boom. Berger and ICI are the other players

in the sector with 10 per cent and 9 per cent shares respectively. Shalimar too, has an 8 per cent share.

6. SUPPLIERS

1. Khakhu Enterprises

They introduce ourselves as one of the leading OIL BROKERS in India since the last 58 years started by

our ancestor, Mr. HAFIZ TARMOHAMMED KHAKHU. They are rendering their prompt & efficient

services for all the Indian Paints, Resins & Chemical Manufacturing Multinational Companies like, M/s.

Asian Paints (India) Ltd., M/s. Berger Paints India Ltd., M/s. Goodlass Nerolac Paints Ltd., & many more

to name

7. COMPETITIVE ADVANTAGE

Kansai Paints of Japan, which has a 65% stake in Goodlass,is a global leader in industrial paints. This is a

prime competitive advantage. No wonder domestic auto majors like Telco and Maruti, as well as most

MNC auto companies, prefer Goodlass over others.

Goodlass is able to leverage Kansai's R&D efforts and product innovations to make deep inroads into auto

OEMs in India .

For Goodlass Nerolac, the implementation of ERP and datawarehousing solutions have helped the

company gain a competitive advantage. In 1999, Goodlass Nerolac decided to simultaneously implement

an ERP (SAP R/3) system and a datawarehousing solution. Finally, the company selected the SAS suite of

datawarehousing tools as it provided facilities for multi-dimensional analysis of data and allowed for

import of data from all platforms. The implementation of SAP R/3 enabled the company to move from

multiple servers to a centralised SAP system and have everyone log on to a single server.

Backed by Kansai Japan's product innovations, Goodlass has a 60% share in auto paints and 44% share in

industrial paints. In decoratives (24% share), it has products for various price points and a strong dealer

network.

Goodlass was the first to introduce Acrylic CED (cathodic electro-deposition) coat for 2-wheelers in

India. This saved OEMs significant cost and time, because of only one top-coat for the vehicle instead of

primer plus top-coat earlier. Likewise, Goodlass introduced the 3C- 1B (3 coat 1 bake) system for Maruti's

Swift. Here, the OEM saves production time as the 2nd and 3rd coats can be applied without having to wait

for the previous one to dry.

8. STRATEGIES / PLANS

The Company this year has ventured into setting up Impressions Style Zones – Experience Centers and has

started two franchise stores in the South at Chennai and Hyderabad. The response from the consumers is

encouraging and based on the learning of this pilot run we will take the initiative forward.

Continuing with the platform of innovation taken up in the past, new products have been launched in order

to offer unique products and finishes to the consumers. Some of the new products are Flexi Coat, Stucco

Marble finish, Tile Guard, Exterior Texture finish.

The 3 coat-1bake technology introduced last year at Maruti Udyog, Manesar plant has been well

established. This eco-friendly coating, with low VOC (Volatile Organic Compounds), has helped the

customer increase its productivity and reduce power cost.

9. ADEQUACY OF PRODUCTION CAPACITY & RELEVANCE OF TECHNOLOGY

All the paint majors have tie-ups with global paint leaders for technical know-how.

Asian Paints has formed a JV with PPG Industries Inc to service the automotive OEMs.

Berger has a series of tie-ups for various purposes. It has a technical tie-up with Herbets Gmbh of

Germany in addition to its joint venture with Becker Industrifag.

Berger has now allied with the Japanese major Nippon Paints to boost its OEM turnover since the

Indian roads are being flooded with Japanese automobiles. It also has an agreement with Orica

Australia Pvt. Ltd. to produce new generation protective coatings. The company also has tie-ups

with Valspar Corp and Teodur BV for manufacturing heavy duty and powder coatings.

ICI makes paints with the technical support of Herbets, which has been recently acquired by by E

I Du Pont de Nemours of the US.

Du Pont, which is a leader in automotive coatings in the US, has a technical tie-up with Goodlass

Nerolac for the manufacture of sophisticated coatings for the automotive sector.

Goodlass has technical collaborations with Ashland Chemicals Inc, USA, a leader in the

petrochemical industry, Nihon Tokushu Toryo Co and Oshima Kogyo Co Ltd, Japan.

MODULE 7: INDUSTRY

10. DEMAND-SUPPLY POSITION – LOCAL & GLOBAL

Demand Supply Dynamics

The Indian Paint Industry grew by 18% from Rs. 95 bn. in FY06 to Rs. 112 bn in

FY07 (Source: Company). The industry has a positive correlation with GDP as both

have same drivers for growth. Demand for paints is both, derived as well as direct.

The demand for decorative paints is a direct demand whereas the demand for industrial paints is a derived

demand.

Demand drivers for Paints Industries

1. Increase in Per capita consumption of paints:

India’s contribution to world paint markets is 0.6% with per capita consumption of around 800-900 gms.

Based on the expenditure in the construction activity and increase in the repaint activity coupled with

industrial growth, the industry is expected to increase at a 11.85% CAGR over next three years.

2. Increase in Real Estate Investments:

The demand for decorative paints is directly related to the increase in the investment in the real estate thus

increasing the cement area. Out of the total demand for decorative paints, around 30-40% of the demand

comes from the fresh construction (Source: Cris-Infac). The size of real estate industry is estimated to grow

to Rs. 18,517 Bn, over next five years period (Source: Cris-Infac).

Investment in real estate will be primarily led by housing, which is expected to account for nearly 90% of

total investment in the

sector (Source: Cris-Infac).

Housing investments (permanent, non-slum houses) are expected to grow at a

TAGR of 12% over the next 5 years period.

On other hand, repainting activity which accounts for 70% of the decorative

paint demand is also increasing, mainly due to increase in per capita income. The

demand from the repainting activity has increased by 6-7 percent in last two year.

Based on the expected investment in the housing, demand for paint is expected to

increase at a CAGR of 12 percent over the next 5 years (source: CRISINFAC).

3. Increase in Industrial Paints:

Increase in income levels of the consumers contributes towards the growth in the auto-segment and growth

in the industrial segments like power, road and infrastructure leads to growth in the non-automotive

segment. Along with these, growing needs for consumer durables and export opportunity for auto

ancillaries will also contribute towards the growth of industrial paints.

4. Increase in Per Capita Income:

Due to increase in disposable income, Indian consumer is expected to shift from lime wash to paints and

those already consuming paints would move up the value chain. On other hand, the increasing capacity

would also drive automotive and consumer durable, thereby increasing the consumption of industrial

paints.

5. Prices in line with substitute product:

Large scale of operations and technical know-how has helped prices of paints to come down. They are now

in line with those of substitute products like lime wash, distemper etc., manufactured by local players. This

gives consumers the incentive to shift from lime to paints.

Supply

1. Distribution

In case of industrial paints, distribution network doesn’t play an important role,

whereas the situation is totally different in case of the decorative paints. India being

a wide and scattered market having a large distribution network becomes prime

requirement for any company in decorative paints business.

2. Outsourcing:

The organized players in the decorative paint segment have to compete directly with

those in the unorganized sector manufacturing low cost paints like distemper and

enamels. In-order to face this competition organize players outsource small part of

their production (25-30%).

3. Import Scenario:

Indian climatic conditions are not conducive for foreign formulations and modification cost in product

formulation is quite high. As a result, imports are no threat to the Indian players. In case of industrial

paints, most of the major players in the industry already have a tie-up with global players, for latest

technology and markets accessible to them.

It negates the further supply from the international markets even after reduction of

import duty from 40% to 15.3% in last 8 years.

11. GOVT POLICY / OTHER REGULATIONS

The benefit in General Excise Duty Cut from 16% to 14% is restricted due to cut in Abatement Rates from

40% to 35%.

Also the industrial paint segment would benefit from the excise duty cuts in the auto sector.

Excise duty on small cars reduced from 16% to 12%

Excise duty on hybrid motor vehicles is being reduced from 24% to 14%.

Excise duty on three-wheelers (for transport of not more than 7 persons, including the driver)

is being reduced from 16% to 12%.

Excise duty on Motorcycles (including mopeds and scooters) is being reduced from 16% to

12%.

The cut in Personal income tax and waiver of Agricultural Debt which results in the rise of

disposable income would be beneficial for the decorative paint segment.

The reduction in the rate of Central sales tax from 4% to 2%. is also a positive change for the

paint industry.

Overall the Union budget 2008-09 is favourable to the paint industry.

12. RECENT DEVELOPMENTS

The paints sector is raw material intensive, with over 300 raw materials (30% petro-based derivatives)

involved in the manufacturing process. The raw material costs amount to around 60% of the net sales. With

the increase in the crude oil prices and rupee depreciating costs are bound to increase in the paint sector.

Recent Developments for KANSAI NEROLAC

Net profit rose 11.26% to Rs 119.79 crore in the year ended March 2008 as against Rs 107.67

crore during the previous year ended March 2007. Sales rose 7.97% to Rs 1319.75 crore in

the year ended March2008 as against Rs 1222.38 crore during the previous year ended March

2007. 

The board of Kansai Nerolac Paints has recommended dividend at the rate of 120% on 2nd of

May 2008

Kansai Paint Co, Japan Kansai Nerolac Paints is di-investing its 55%stake consisting of

1,65,00,000 equity shares of RM 1 each, in Kansai Coatings Malaysia Sdn. Bhd. to Kansai

Paint Co, Japan. on 3rd May 2008

On 26 November 2007 Kansai Nerolac Paints has won the ICSI national award for excellence

in Corporate Governance, 2007

MODULE 8: ASSESSMENT OF LIMITS

13. FUND BASED WCAP

The assessment of the limits is based on the Actuals for FY06, FY07, FY08 and projection for FY09

and FY10. We have determined that the company will need excess working capital financing of 79.2

Crores. Also it has not taken any Working Capital loan to finance the net working capital position of

Rs 424.17 cr. as at FY 2008. For that matter we have provided a limit of 100 Crores to the company for

Working Capital and would advice them to stop financing the same from their equity to increase their

EPS or announce higher dividens.

14. FUND BASED TERM

Pants is not a capital intensive business. This can be understood from the fact that Fixed Assets to

Sales Ratio is just at 0.16 for FY 08. This is expected to remain so going into the future as well. Hence,

we are not offering any Term loans to them.

15. LC

The company requires LC’s for purchasing raw materials as it has raw material imports of 1,806 crores

for FY 08 implying 20% of the total raw material requirement of Rs 8,370 cr. A limit of 50 crores has

thus been provided for letters of credit for the company.

16. BG

NPL does not need any bank guarantees since it can easily avail of corporate guarantee from its holding company, Kansai Paint Co. Ltd., Japan

17. OTHERS

FACILITY

Forex Swaps

PURPOSE

For hedging against foreign exposures.

REPAYMENT DATE

TAKE-OUT

COMPUTATION OF WORKING CAPITAL REQUIREMENT

MODULE 9: TERMS 1. SECURITY2. MARGINS

TERM EXISTING PROPOSEDCOVENANTS NIL - The company will provide financial information to the

bank on a regular basis- The assets can’t be sold off to the tune of more than 30% of the asset value as at FY 2008- Factoring should be availed of for debtors outstanding of more than 6 months

EVENTS OF DEFAULT

NIL - Financials - Current Ratio above 2.0- TOL/TNW below 1.00 (annual)-

- Others - Cross default (as and when)- Change in Management (as and when)- CARE rating above A (as & when)

PRIMARY SECURITY(Indicate type of charge; seniority of charge; value of assets; location; our share in asset value in absolute terms; status of creation)

NIL Consortium limits of Rs. ******** Lacs (FB Rs. *** Lacs and NFB Rs. *** Lacs) are to be secured by First charge on all current assets of the company ranking pari passu with other participating banks for WC limits.LCBD limit and TL against BG: is on unsecured basis.

MARGINS NIL COLLATERAL(Indicate type of charge; seniority of charge; value of assets; location; residual value of assets if 2nd charge; our share in asset value in absolute terms; status of creation)

NIL 3rd/Residual charge on all fixed assets of the company including factory and buildings on pari passu terms with other banks.

GUARANTEES(Indicate net worth of guarantors; date of compilation of net worth report; status of creation)

NIL

MODULE 10: RECOMMENDATIONS

1. STRENGTHS OF THE CREDIT:

NPL has secured loans of only Rs 192 crores that has been secured by a charge on the fixed assets of the

factory at Jainpur, hence the credit given is very safe even if third charge is given on the assets of the

company.

2. RISKS PERCEIVED AND MITIGANTS:

Risks Perceived:

Prices of Raw materials: Rise in raw material prices especially crude oil prices may affect margins adversely.

Foreign Currency Risk: Due to weakening of rupee there will be a negative impact on the performance of the company as it is a net importer.

Mitigants:

The company can hedge itself against oil price fluctuations by employing various futures and options contracts.

The company has hedged itself against currency fluctuations by employing various forwards and options.

3. CERTIFICATION:

a. There are no unrectified audit irregularities in respect of the account, except for the following:

b. The company / its directors / promoters / group companies / guarantors do not figure in RBI’s defaulters’ list, except for the following:

c. There are no deviations from the credit policy, RBI instructions, and other regulatory provisions, except for the following:

d. There are no litigations existing against the company

RELATIONSHIP MANAGER SR. MANAGER / AVP –CB BRANCH HEAD

INSTRUCTIONS

1. Entire document to be e-mailed / couriered with enclosures to Corporate Office / Regional Head2. Branch to fill entire document, excluding items marked * which are to be filled in at Corporate Office /

Regional Level, as appropriate.3. Mini CA to comprise Cover Page, Recommendation, Profile, Analysis Sheet4. No portion of the document should be deleted / amended.5. Uniform font style and size – Times New Roman / 10.6. Date of CA will be date of despatch from Branch.7. Number all pages in the form page no./total no. of pages8.9. Compliance with standard accounting / classification norms10. Comments for variations between estimates and actuals in respect of critical items11. Analysis of associate companies financials and business – inter unit linkages12. Data on utilization of bill limit, LC, BG13. Comments on fund flow, cash flow statements14. Specific confirmation that promoters / directors / borrower / group companies / guarantors do not

appear in RBI defaulter list. In case existing, full details of defaults and role / involvement with concerned companies to be stated, liability potential, impact.

15. Audit comments16. Copy of audited balance sheet17. Security / guarantors worth – residual value , our share