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Dhir India Inv. plc (DHIR)

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Thursday 10 July, 2008

Dhir India Inv. plc

Final Results

RNS Number : 7454Y
Dhir India Investments plc
10 July 2008
 



10 July 2008


Dhir India Investments plc

("Dhir India", "DII", or the "Company")


Maiden Final Results


Dhir India (AIM: DHIR), the first UK quoted company established to invest in the US$50 billion Indian non-performing assets sector, announces maiden final results for the period from incorporation on 20 June 2007 to 31 March 2008. The Company was admitted to AIM on 12 July 2007.


Highlights:

  • Successful placing at 150p per share to raise £25 million at the time of admission to AIM


  • Entire placing proceeds committed for investment by the period end on 31 March 2008.


  • Current portfolio of six investments, diversified by sector and geography, five of which are in special purpose vehicles (set up to acquire projects in a tax efficient manner) and the sixth is a direct investment in an Indian company.


  • The fair value of underlying investments in debt and securities held by the Group was valued by Grant Thornton India at 31 March 2008, giving rise to fair value gains of £8.1 million on the total investments and an adjusted (to exclude deferred tax provisions) net asset value of 175p per share.


  • Exit strategies established for each investment and the first realisations are anticipated in the current financial year


  • Indian non-performing asset sector expected to grow significantly in the run up to the adoption of the Basel II Accords in March 2009


Charlie Hambro, Chairman of Dhir India, commented:


"Dhir India has now established itself as a credible and serious added value investor with banks and financial institutions in India.  I expect to be able to report continued progress during the current financial year and further hope to be able to announce the first realisations of investments. As a Board we remain optimistic for, and excited by, the outlook for the Company."


Alok Dhir, Non-Executive Director of Dhir India, added:

"We have seen a constant flow of transactions both from banks and financial institutions as well as from borrower companies or their sponsors, which were seeking exits from distressed asset investments. I am delighted that we have been able to commit all of the funds raised in the placing.


The uplift in the value of our investments for Dhir India to date provides endorsement of our business model and target markets, ahead of the first realisations. We expect to deliver further value to our shareholders in the course of the current financial year."


For further information, please contact: 


Shiva Consultants

Evolution Securities

Tavistock Communications   

Alok Dhir

Tom Price

Jeremy Carey

Shivi Agarwal

Jeremy Ellis

Simon Hudson


Chris Clarke

Simon Compton

Tel: + 91 11 42410000

Tel: +44 (0) 20 7071 4300

Tel: + 44 (0) 207 920 3150




Chairman's Statement


I am pleased to report to shareholders that Dhir India Investments plc (the 'Company') has made good progress since its shares were admitted to AIM on 12 July 2007, following a £25 million placing with institutional investors. These maiden final results cover the period from the Company's Dhir India's incorporation on 20 June 2007 to 31 March 2008. 


Introduction

The Company is the first UK quoted company investing in Indian non-performing asset (NPA), a sector created largely as a consequence of India's very high commercial lending rates in the 1990s, which resulted in much of Indian industry becoming uncompetitive with international companies whose cost of capital was significantly lower. The Board, and the Company's investment Manager - Shiva Consultants Pvt. Limited - believes that the successful resolution of selected, over-leveraged NPAs can generate substantial profits to provide shareholders with both income and capital growth.


Results

The Company had committed the entire net proceeds of the placing by the end of the period under review,. The Company has invested in six projects to date for an eventual total cost to the Company of £24.42 million and which had absorbed £13.77 million as at 31 March 2008. The fair value of underlying investments in debt and securities held by the Company and its subsidiaries was valued by Grant Thornton India at that date, valuing the Company's share at £17.54million, excluding deferred tax provisions of £2.70million. This represents an uplift over the costs of investment to date of 27.30% and has resulted in a net asset value per share for the Company at the period end of 159p (139p at 30 September 2007). The increase in the fair value of the investments has not been taken to the profit and loss account but taken direct to equity as an unrealised revaluation reserve. 


The adjusted net asset value excluding the deferred tax provision of £2.70million, which the directors anticipate should not be payable, is 175p (139p at 30 September 2007)  The consolidated income statement shows profit attributable to shareholders of £0.13 Million and earnings per share of 0.78 p. The Group has cash balances of £11.23 million at 31 March 2008.  I believe the increase in NAV demonstrates, ahead of any realisations, the initial success of the business model and the value the Company can deliver to its shareholders. 


Review

The Company owns a portfolio of investments that is diversified by sector, geography and realisation strategy. The investments have been made in assets in industries such as chemicals and artificial rubber, stainless steel, in the hospitality sector and in commercial real estate. The appropriate exit strategies for each investment are considered throughout the investment selection and management processes and range from the turnaround and resale of operating businesses to the break-up and sale of underlying assets. A full review of each project is contained within the Investment Managers' Review which follows my statement.


Outlook

The Indian NPA sector continues to grow and the Company has now established itself as a credible and serious added value investor with banks and financial institutions. Many of India's leading lending banks have continued to exit their distressed loan portfolios. This process is expected to accelerate in the run-up to the adoption of the stricter capital obligations for banks worldwide contained in the Basel II Accord, which comes into effect from April next year. This should mean that the number of transactions available to our Investment Managers and the Company will increase significantly.


I expect to be able to report further progress during the current financial year and hope to announce soon the Company's first realisations of investments. As a Board we remain optimistic for, and excited by, the outlook for Dhir India.  


Charlie Hambro

9 July 2008




Investment Managers' Review


During the period, Dhir India, through its investment adviser, made commitments to invest in Indian non-performing assets (NPAs) totalling £24.42 million, representing full investment of the funds raised in the Placing associated with Admission to AIM in July 2007.  The Company's investment manager is Shiva Consultants Private Limited (the "Investment Manager"), which is responsible for sourcing, appraising and managing investment opportunities. The Investment Manager is controlled by one of Dhir India's non-executive directors, Alok Dhir, who is the managing partner of Dhir & Dhir Associates, a leading specialist legal practice in India, with over 20 years' experience in corporate and industrial insolvency. 


The Investment Manager's senior team between them have over 60 years' experience in the Indian distressed assets market. This includes the structuring and resolving of distressed assets transactions on a professional basis, as well as investing in non-performing assets (NPAs) as principal and undertaking the turnaround of distressed assets. The Investment Manager is very well connected within the business and financial community in India in all the regions in which it operates. 


Investment Strategy

The Company has a risk-diversified portfolio of six current investments in Indian NPAs, largely sourced from Indian lending banks and financial institutions. The exits from such investments are based on the different realisation strategies outlined in the Admission Document - turnaround and resale or break-up and sale of acquired assets. When determining the appropriate realisation strategy, the Board considers in each case the nature of the asset, together with the management skills and resources required for resolution.


The market for distressed debt has deepened significantly during the year since Admission. The Investment Manager has seen a constant flow of transactions both from banks and financial institutions as well as from borrower companies or their sponsors, which were seeking exits from such investments. The investments made by the Company in distressed assets since the fund raising have also strengthened the Company's position as a credible and serious distressed asset investor with banks/financial institutions and borrowers in India.


Additionally, with the Basel II Accord norms becoming mandatory for banks from 31 March 2009, several banks have started the process of putting distressed assets for sale through bidding/auctioning processes, both as portfolios and as stand alone assets. Some of the banks and financial institutions which conducted sales of their distressed assets during the last year included Bank of Baroda, Punjab & Sind Bank, UCO Bank, Dena Bank, State Bank of India, Union Bank of India and Industrial Investment Bank of India.


Portfolio

The current portfolio companies are as follows:


Project Turquoise (Rajasthan)

The investment is in respect of a company which was originally engaged in manufacture of electrical and electronic meters but ceased production in 1998 due to an inability to restructure the business and invest in plant and machinery. The plant is located on a 41,000 sq m site in the centre of the largest city of Rajasthan. 


The total acquisition cost is projected at £6.54 million, of which the Company's share is estimated to be £4.91 million. As at 31 March 2008, an amount of £1.57 million had been invested through a special purpose vehicle (SPV) The Company's contribution was £1.18 million. The investment is secured against the building and land of the target company. The principal shareholders have now invited proposals for participation in the revival of the company through the purchase of its shares and transfer of the management. Turquoise has decided to participate in the bid for the proposal.


Project Aquamarine (Uttar Pradesh)

The investment is in respect of a company which was originally engaged in manufacture of styrene butadiene rubber, nitrite rubber, styrenated phenol and alcohol. It suspended works in July 1999 due to severe capital constraints and labour and power supply issues. Its plant is located over 1,200 acres of land which is situated in a tier II industrial city in Uttar Pradesh, in North India.


The total projected investment is £1.87 million of which the Company's proposed share is £1.40 million. As at 31 March 2008 an amount of £1.22 million has been invested through an SPV, of which the Company's contribution was £0.92 million.  The SPV has since then acquired an interest in the secured debt of the target company at a cost lower than the original projected cost and has now commenced negotiations with other secured creditors for acquiring further debt within the original cost.


Project Triton (Gujarat)

The investment is in respect of a company which was originally engaged in the manufacture of edible oil at its refining unit in Gujarat.  Its factory, which has a daily capacity of 250 MT per day is built on a 21,524 sq m site at a prominent city of Gujarat The unit has been lying closed since 2006.


The total acquisition cost is projected at £2.13 million, of which the Company's share will be £0.89 million. As at 31 March 2008, an amount of £0.94 million had been invested through an SPV,of which the Company's contribution was £0.92 million.  It was initially proposed that the edible oil unit could be turned around and managed. However, after extensive discussions, the Board thought it more appropriate that the exit should be by way of a re-sale of assets and mandated the Investment Manager to obtain suitable offers for re-sale of the assets.  


Project Destination India (Goa)

The investment is in respect of a company which had proposed to set up a resort in Goa. Goa is a popular tourist destination and the land, with its planning consent, is an attractive site with significant development potential.  

  

The total acquisition cost is projected at £8.10 million, of which the Company's share is proposed at £7.70 million. As at 31 March 2008 an amount of £1.60 million had been invested through an SPV of which the Company's contribution was £1.52 million.  


Project LCAL (Alwar, Rajasthan)

LCAL manufactures caustic soda based products, supplying the paper, soap, dyes, chemicals and plastic industries. It performed satisfactorily until 1997 when it incurred significant losses as a result of lengthy power cuts and increases in input production costs. Thereafter, from 2003, a new management team has effected a recovery of the business. 


The Company acquired 1,500,000 new equity shares in LCAL at a price of 74p per share, representing 5.96% of the issued share capital. The company has started the process with the Bombay Stock Exchange for the re-listing of its shares. The Company would exit from its investments by sale of shares.


Project Cygnet (Haryana)

The investment is in respect of a company which was originally engaged in the manufacture of stainless steel at its plant located on a 51 acre prime site in Haryana, around 50km from New Delhi. 

  

The total acquisition cost was initially projected at £9.56 million, of which the Company's share was £7.17 million. As at 31 March 2008, an amount of £7.26 million had been invested through an SPV, of which the Company's contribution was £5.44 Million. This investment is secured on the assets belonging to the aforesaid company, including existing buildings on the site and plant and machinery. 


Since the year end, the projected cost of investment increased to £ 12.79 million on account of demands from statutory authorities and the Company has increased its shareholding in the SPV from 75% to 90% thereby increasing its total investment to £11.51 million fro meeting the increased investment required by the project.


Project

Sector

DII Committed Investment

at 31.03.2008

£m


DII Investment

at 31.03.2008

£m

Valuation (including Minority Holding)

at 31.03.2008*

£m

Turquoise

Metals & Electricals 

4.91

1.18

6.56

Aquamarine

Artificial Rubber 

1.40

0.92

3.24

LCAL

Chemicals 

1.11

1.13

1.88

Triton

Edible Oil

2.13

0.89

1.16

Destination India

Hospitality

7.70

1.52

2.37

Cygnet

Steel

7.17 

5.44

6.57

Investments 


24.42 

11.08

21.78

Trade Receivable & Payables




(1.17)

Bank Balances 




11.23

Deferred Tax 




(2.70)

Total NAV




29.14

Minority Interest 




(2.73)

Dhir India NAV




26.44

NAV per share




159p

Adjusted NAV per share*




175p

*excluding provisions for deferred tax


Risks 

In spite of the Company investing in diversified assets and industries, the investments are exposed to certain illiquidity and market risks as they are principally investments in unquoted equity securities and secured debts of distressed companies. Further, investments in such companies are inherently difficult to value. In addition, the Company's operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in currencies other than sterling. As a result, the Company is subject to the effects of exchange rate fluctuations with respect to these currencies. The currencies giving rise to this risk are primarily the Indian Rupee.


Outlook

As set out in the Admission Document, the distressed asset market in India was estimated to be worth over £25 billion. The fact that the Company was able to fully commit the IPO proceeds within a period of six months underscores the strong deal flow available to the Investment Manager for investment and the continued growth of its target market. Indeed, as a result of having committed largely all funds available from the initial placing, the Investment Manager has had to decline a significant number of available investment opportunities. This increased availability of investment opportunities is also largely on account of Indian banks looking to clean up their stock of non-performing assets to prepare themselves better for compliance with the Basel II banking accords which come into force from April 2009.


The Investment Manager believes, in common with other market participants, that the availability of distressed assets for sale will increase significantly in the period from now until March 2009, which would enable the Company to increase its scope of business.  


Consolidated Income Statement

For the period from 20 June 2007 (date of incorporation) to 31 March 2008



Period ended

31 March 2008


(unaudited)

£'000

Interest received

725

Investment income

725

Administrative expenses

(814)

Foreign exchange gains

226

Profit before tax

137

Income tax expense

-

Profit for the period

137

Attributable to:


Equity holders of the company

130

Minority interest

7


137

Earnings per share on profit attributable to the equity holders of the company

Basic and diluted

0.78p



Consolidated Statement of Recognised Income and Expense

For the period from 20 June 2007 (date of incorporation) to 31 March 2008



Period ended

31 March 2008


(unaudited)

£'000

Fair value gains


Unrealised change in fair value on available for sale financial assets

8,080

Less : Deferred taxation 

(2,702)

Less : Performance fee

(1,088)

Net income recognised directly in equity

4,290

Profit for the period

137

Total recognised income for the period

4,427

Attributable to:


Equity holders of the company

3,420

Minority interest

1,007

Total

4,427


  Consolidated Balance Sheet



At 31 March 2008

Current assets 

(unaudited)

£'000

Available for sale financial assets 

21,779

Trade and other receivables

64

Cash and cash equivalents

11,232

Total assets

33,075

Equity 


Issued share capital

1,667

Share premium

21,355

Unrealized investment revaluation reserve 

3,290

Retained profit

130

Total equity attributable to equity holders of the Company 

26,442

Minority interest in equity

2,727

Total equity 

29,169

Non-current liabilities


Deferred income tax liabilities

2,702

Provisions for other liabilities and charges

1,088

Total non-current liabilities

3,790

Current liabilities


Trade and other payables

116

Total current liabilities

116

Total liabilities

3,906

Total equity & liabilities

33,075




Consolidated Cash Flow Statement 

For the period from 20 June 2007 (date of incorporation) to 31 March 2008


Period ended

31 March 2008


(unaudited)

£'000



Operating activities


Profit before tax for the period

137

(Increase) in trade and other receivables

(64)

Increase in trade and other payables

116



Cash generated from operating activities

189



Cash generated from investing activities


Acquisition of investments

(13,699)

Cash used in investing activities

(13,699)



Cash generated from financing activities


Proceeds from the issue of ordinary share capital

25,000

Share issue expenses paid

(1,978)

Proceeds from minority interests

1,720

Cash flow generated from financing activities

24,742



Net increase in cash and cash equivalents

11,232

Cash and cash equivalents at start of period

-

Cash and cash equivalents at 31 March 2008

11,232



Interest received in the period

683




Notes


1.    Significant Accounting Policies


The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below.


The annual report of the Company for the period ended 31 March 2008 comprises the Company and its subsidiaries (together referred to as the "Group").


The preliminary announcement does not constitute the Group's statutory financial statements. It is an extract from the financial statements for the year ended 31 March 2008 which have not yet been approved. 


1.1.    Basis of presentation

The financial information included in this announcement has been extracted from the Group consolidated financial statements prepared in accordance with International Financial Reporting Standards promulgated by the International Accounting Standards Board ("IFRS"). Management has concluded that this announcement fairly represents the entity's financial position, financial performance and cash flows.


The Company is denominated in GBP ("£") and therefore the amounts shown in these financial statements are presented in £.


1.2.    Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. 


Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.


The most significant area requiring estimation and judgement by the Directors is the valuation of investments, see note 1.4.


1.3.    Foreign currency translation

Each company has its own functional currency. However the Group uses £ as the presentation currency for its IFRS financial statements. Transactions in foreign currencies are translated to the presentation currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the presentation currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the presentation currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit and loss account.  


The assets and liabilities of subsidiaries are translated to £ at average exchange rates during the period of transaction. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to £ at exchange rates at the dates of the transactions.


1.4.    Investments

Investments represent investment in secured debts and unquoted shares. The investments are designated in the category of 'available for sale'. In valuing these investments, the Directors follow the principles recommended in the International Private Equity and Venture Capital Valuation Guidelines which were effective from January 2005. Investments are valued at Fair Value at the reporting date. In the small minority of cases where Fair Value cannot be reliably measured, existing book value, less any impairment, is used as the basis of valuation.


Fair Value represents the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction. In estimating Fair Value, the Directors use a methodology which is appropriate in light of the nature, facts and circumstances of the investment and its materiality in the context of the total investment portfolio. Methodologies are applied consistently from one period to another except where a change results in a better estimate of Fair Value. Because of the inherent uncertainties in estimating the value of private equity investments, the Directors exercise due caution in applying the various methodologies.


The principal methodologies applied in valuing these investments include the following:


  • Price of recent investment

  • Earnings multiple

  • Net assets

  • Discounted cash flows or earnings of the underlying business

  • Discounted cash flows from the investment

  • Industry valuation benchmarks


The "Price of Recent Investment" method (cost) will be used for investments up until such time as work has been performed in enhancing the value of the underlying assets, or there are external factors which indicate this method is no longer applicable.


1.5.    Deposit Interest

Deposit interest is accounted for on an accrual basis. 


1.6.    Cash and cash equivalents

Cash in hand and in banks and short-term deposits, which are held to maturity, are carried at cost. Cash and cash equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value.


For the purpose of the Cash Flow Statement, cash and cash equivalents consist of cash in hand and deposits at banks.


1.7.    Revenue and expense recognition

Interest income is recognised in the financial statements on an accruals basis. Dividend income is recorded when declared.  


Expenses are accounted for on an accrual basis. Expenses are charged to the income statement except for expenses incurred on the acquisition of an investment which are included within the cost of that investment. Expenses arising on the disposal of an investment are deducted from the disposal proceeds.


1.8.    Basis of consolidation


Subsidiaries

Subsidiaries are those enterprises controlled by the Company. Control exists where the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases.


Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.


Financial statements of foreign operations

The assets and liabilities of foreign operations, including fair value adjustments arising on consolidation, are translated to £ at the foreign currency exchange rates ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised directly in equity.


1.9.    Dividends

Dividends are recognised as a liability in the period in which they are declared and approved. There was no dividend declared as at 31 March 2008.


1.10.    Other receivables

Trade and other receivables are stated at their cost.


1.11.    Trade and other payables

Trade and other payables are stated at their cost.


1.12.    Income tax expense

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.


Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.


Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.


A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.


Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.



2.    Investment Management


Management Fee

Shiva Consultants Private Limited (the 'Investment Manager') is entitled to a management fee of 1.8 per cent per annum of the NAV (payable quarterly in advance) in the first year and a management fee of 2 per cent per annum of the NAV (payable quarterly in advance) thereafter, provided that any fee for any commencing or terminating period shall be the pro-rated amount.


The NAV calculation of each financial year is based on semi-annual independent valuations of such investments in accordance with IFRS as at the end of the relevant financial year and at the date which is six months after the relevant financial year end. Throughout the relevant financial year, the management fee paid on each quarter date is based on the latest NAV calculation. The management fee payments are then adjusted retrospectively following the next NAV calculation.



Performance Fee

The Investment Manager is entitled to a performance fee, calculated as follows, in respect of net proceeds received by the relevant member of the Group in respect of an investment:


  • the Net Investment Proceeds will first be allocated to the Group, until the Group has received an amount equal to the Investment Outlay and an Investment IRR of 12 per cent.

  • any remaining balance of the Net Investment Proceeds will then be allocated to the Investment Manager until the Investment Manager has received an amount equal to 25 per cent of the return already allocated to the Group;

  • any remaining balance of the Net Investment Proceeds will then be allocated between the Group and the Investment Manager in the ratio 80:20 up to an Investment IRR of 25 per cent; and

  • any remaining balance of the Net Investment Proceeds will then be allocated between the Group and the Investment Manager in the ratio 65:35.


A performance fee contingent on realisation of £1,088,000 has been provided on the net fair value increase in the investments.



3.    Related Party Transactions


Management Arrangement


Alok Dhir is the controlling shareholders of Shiva Consultants Private Limited (the Investment Manager) and a director of Dhir India Investments PLC. During the period the Company had the following related party transactions with Shiva Consultants Private Limited.


Management fees


Fees payable to the Investment Manager for the period till 31.03.2008 is £375. 39 (£ '000) out of which £ 336.23 (£ '000) has been paid and balance £ 39.16 (£ '000) is to be paid. 


Performance Fees


In addition, based on the fair value increase in the valuation of the investments, a performance fee contingent on investment realisation has been provided of £1.09Million. This performance fee is not payable until the investments are realised and, as such, is not outstanding to Shiva Consultants Private Limited at 31 March 2008.


Legal services 


Alok Dhir is also the principal of Dhir & Dhir Associates, the Company's lawyers in India. During the period the Company had the following related party transactions with Dhir & Dhir Associates.



Period to 31 March 2008


£'000

Legal and Professional Fees

81.98

Balance Outstanding 31 March, 2008

23.80



Save as disclosed above, none of the Directors had any interest during the period in any material contract for the provision of services which was significant to the business of the Company.



Dhir & Dhir Asset Reconstruction Construction and Securitisation Company Limited


The SPVs have entered into transactions with Dhir & Dhir Asset Reconstruction Construction and Securitisation Company Limited for acquisition of debts and underlying secured assets in respect of the companies in which investments have been made. The details of payments made by the SPVs to DDARC are as below:


Group Subsidiary

Amount paid as on 31.03.2008 

(£ in Million) 

Turquoise Metals and Electrical Private Limited

1.57

Aquamarine Synthetics and Chemicals Private Limited

1.22

Triton projects India Private Limited

0.94

Destination India Projects Private Limited

1.57

Cygnet Projects Private Limited

2.33

Total 

7.63 


Co-investment 


Alok Dhir also beneficially controls Turnaround Consultants Private Limited. During the period Turnaround Consultants Private Limited has co-invested with the group's subsidiary Agate India Investments Limited in the following group special purpose vehicle subsidiaries.


Group Subsidiary

Equity Holding %

Investment £'000

Aquamarine Synthetics and Chemicals Private Limited

25%

305.27

Triton projects India Private Limited

5%

46.98

Destination India Projects Private Limited

5%

79.77

Cygnet Projects Private Limited

25%

1,815.79


Alok Dhir also beneficially controls Sopan Securities Private Limited. During the period Sopan Securities Private Limited has co-invested with the group's subsidiary Agate India Investments Limited in the following group special purpose vehicle subsidiary.


Group Subsidiary

Equity Holding %

Investment £'000

Turquoise Metals and Electrical Private Limited

25%

393.19


Lords Chloro Alkali Limited 


Alok Dhir is also a shareholder in Lords Chloro Alkali Limited. During the period till 31.03.2008, the Group has subscribed for 1.5 million equity shares at INR 60 per share, £ 1.07 Million in Lords Chloro Alkali Limited.


4.    Taxation


The standard rate of income tax for companies in the Isle of Man is 0%. No provision for taxation has, therefore, been made. As the Company is wholly owned by non-resident members and is listed on a recognised stock exchange, it meets the definition of a 'distributing company' and is therefore exempt from the distributable profits charge.


The Mauritian entity is a Global Business License Category 1 (GBL1) company in Mauritius and under the current laws and regulations liable to pay income tax on their net income at a rate of 15%. The entity is however entitled to a tax credit equivalent to the higher of actual foreign tax suffered and 80% of the Mauritian tax payable in respect of the foreign source income thus reducing the maximum effective tax rate to 3%. No Mauritian capital gains tax is payable on profits arising from the sale of securities, and any dividends and redemption proceeds paid by the entity to their members will be exempt in Mauritius from any withholding tax.


Deferred taxation has been recognised within each individual subsidiary as on the basis that the fair valued investments are realised within the subsidiary rather than as a sale of the shares of the subsidiary.



Details of actual income tax expenses based on accounting profits and the actual income tax expenses is as follows.


Charge for the period

31st March 2008 

£'000

(unaudited)

Income tax

0

Deferred taxation (at standard rate for subsidiaries @ 33.6%)

2,703


2,703

Profit after taxation

137

Investment income not taxable

725



5.    Earnings and net asset value per share


Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the number of ordinary shares in issue during the period.



2008


(£'000)

(unaudited)

Profit attributable to equity holders of the Company 

130

Number of ordinary shares in issue

16,666,667

Basic earnings per share (pence per share)

0.78p


There is no dilutive earnings per share number shown as there are no share options in issue and the subscription value of the warrants is £1.875.


Net Asset Value per share is calculated by dividing the net assets attributable to equity holders by the number of ordinary shares in issue.

                                   


2008

(unaudited)

Net Assets Attributable to shareholders (£'000)

26,442 

No. of ordinary shares in issue 

16,666,667

Net Assets per share 

159p



Adjusted Net Asset Value per share is 175p calculated by dividing the net assets attributable to equity holders before deducting £2.702 million for the deferred tax provision .


6.    Investments


Investments are carried at fair value under IAS 39.


All project investee companies are incorporated in India and are unquoted. Such investments are principally routed by the Company through its wholly owned subsidiary Agate India Investment Limited, which is incorporated in Mauritius.


Name of Investee Companies

Percentage of equity held

Turquoise Metals and Electricals Pvt Ltd


75%

Aquamarine Synthetics And Chemicals Pvt Ltd

75%

Triton Projects India Private Limited

95%

Destination India Projects Pvt Ltd


95%

Cygnet Projects Private Limited

75%

Lords Chloro Alkali Limited

5.96%


The percentages shown refer to the ownership of the Indian SPVs/investee company and not to the ownership of the underlying assets.

                               


(£'000)

Total cost of financial assets available for sale  

11,080

Foreign Exchange Effect (£'000):

2,620


Fair Value Gain

8,080

TOTAL

21,780


7.    Issued share capital


Share capital


Ordinary Shares of £0.10 each

Number

£'000




On incorporation 

2

-

Issued during the period

16,666,665

1,665

In issue at 31 March 2008

16,666,667

1,667


The authorised share capital of the Company is £10,000,000, divided into 100,000,000 Ordinary shares of 10p. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's assets.


The Company issued 16,666,665 Ordinary Shares of 10p for cash at a placing price of 150p per share on 12 July 2007. At the placing on 12 July 2007, for each Ordinary Share received the subscriber also received one Warrant for every five Ordinary Shares.





Subscription Period


Allotted

Exercise Price


Warrants

3,333,333

£1.875

12 July 2008 - 12 July 2009



8.    Consolidated Statement of Changes in Equity



Share capital



(unaudited)

Share premium



(unaudited)

Unrealised investment revaluation reserve

(unaudited)

Retained profit/



(unaudited)

Total




(unaudited)


£'000

£'000

£'000

£'000

£'000







Shares issued in the period (including at incorporation)

1,667

23,333

-

-

25,000

Share issue costs

-

(1,978)

-

-

(1,978)

Net unrealised change in fair value on available for sale financial assets 

-

-

3,290

-

3,290 

Retained profit/(loss) for the period

-

-

-

130

130

Balance at end of period

1,667

21,355

3,290

130

26,442

Minority interest in equity

-

-

-

-

2,727

Total equity

-

-

-

-

29,169


9.    Capital Commitment


As at 31 March 2008 the Company had committed a total of £24.42 million of which it has already invested £11.08 million. The capital commitment as at 31 March.2008 is therefore £13.34 million. 



10.    Events After the Balance Sheet Date


The estimated cost for Project Cygnet has increased from £9.56 million to £12.79 million on account of additional demands raised by stutory authorities. Pursuant to this, the Board of the Company has resolved on 29 April 2008 to increase the Company's investment in the relevant SPV from £7.17 million to £11.51 million. Consequently, the share of Alok Dhir and his associates in the relevant SPV has come down to 10% from 25%. 


In Project Aquamarine, the SPV has acquired interest in the secured debt of the company in respect of which the investment is made at a cost lower than the projected cost and has now negotiated with secured creditors for acquiring further debt within the earlier projected cost. 



This information is provided by RNS
The company news service from the London Stock Exchange
 
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