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Dhir India Inv. plc (DHIR)

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Tuesday 28 July, 2009

Dhir India Inv. plc

Final Results

RNS Number : 3636W
Dhir India Investments plc
28 July 2009
 



Dhir India Investments plc

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


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 final results for the year ended 31 March 2009.  


Highlights:


  • Successful cost cutting measures put in place that will produce savings in 2009-10 of approximately £200,000 per annum


  • Headline net asset value per share, including deferred tax provisions, for Dhir India at the period end was 133p (159p at 31 March 2008 and 143p at 30 September 2008)


  • The Company has sufficient cash resources to enable it to realise its investments at the optimum time and price


Charlie Hambro, Chairman of Dhir India, commented: "Your Board anticipates some realisations over the coming fiscal year and I would stress that the current projections regarding reduced operating costs mean that the Company is very well placed to take full advantage of the hard work done over the past two years. Once these realisations are effected, your Board expects to make further investments in new projects as the Company continues to see significant opportunities in the Indian non-performing asset market."

 

Alok Dhir, Non-Executive Director of Dhir India, added: Despite experiencing some delay in investment exits on account of recession in economies across the world, including India, the Company was able to largely commit the IPO proceeds within a short period post admission and has progressed significantly towards completing the resolution of four of the six assets that it has invested into."






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 that despite the continuing difficult global economic conditions during the reporting period, Dhir India Investments plc (the "Company") has made progress during the year to 31 March 2009. In my interim report to shareholders in December 2008 I stated that as a result of the lack of availability of debt financing and the worldwide recession, it was likely that the realisation of our investments would take longer than envisaged when we were admitted to AIM in July 2007. This is proving to be the case but the Board remains convinced that attractive levels of returns on our investments will be achievable following a sustained recovery in economic conditions and confidence.


Your Board was aware that as a consequence of this longer realisation timetable, we would need to address operating costs to preserve the cash position of the Company. We have now successfully done so and have put in place measures that will produce savings in 2009-10 of approximately £200,000 per annum, representing some 20% of current Dhir India administrative operating costs. Furthermore, as part of this exercise, reduced investment requirements in existing projects have enabled us to release some of the discretionary cash resources available for investments. I am pleased to report to shareholders that the Board now considers that the Company has sufficient cash resources to enable it to realize its investments at the optimum time and price. I would like to thank all those involved in these discussions, not least our Investment Manager, Shiva Consultants Private Limited, for their flexibility and constructiveness.


Results


As we have reported to shareholders, the Company's investment portfolio is underpinned by what the Board and the Investment Manager believe to be high quality assets whose value we seek to unlock. The portfolio comprises interests in five projects and one business currently seeking an IPO on the Bombay Stock Exchange. These are reviewed in detail in the Investment Managers' Review below. The total cost to date of the investments is £17.53 million with an eventual total cost of £24.08 million anticipated as the projects mature.  


The underlying investments have again been valued by Grant Thornton India as at 31 March 2009 using the same criteria as before. However, given the changed economic outlook in India and around the world, the Board considered it prudent to take a more conservative view on investment valuations. Consequently, the fair value of our share of these underlying investments at the balance sheet date was £19.3 million (£21.8 million at 31 March 2008 and £22.9 million at 30 September 2008), excluding deferred tax provisions of £1.86 million (£2.70 million at 31 March 2008).  


Headline net asset value per share, including deferred tax provisions, for Dhir India at the period end was 133p (159p at 31 March 2008 and 143p at 30 September 2008). The adjusted net asset value, excluding the deferred tax provision of £1.86 million, which the directors anticipate should not be payable, is 160p (175p at 31 March 2008 and 160p at 30 September 2008). The consolidated income statement shows a loss attributable to shareholders of £1.0 million and a loss per share of 6.01p. Total consolidated cash balances at the period end were £7.4 million (£11.2 million at 31 March 2008 and £6.7 million at 30 September 2008). The Company has no borrowings.


The Investments


The investment portfolio is diversified both by regional geography and realisation strategy. Over the past year there has been significant progress in the vital resolution process on a number of our investments and, taken as a whole, the cost of acquisition of these investments has been reduced compared to the original anticipated capital outlay. The appropriate exit strategies for each investment continue to be reviewed and range from stock market (re)listings and the turnaround and resale of operating businesses to the break-up and sale of underlying assets. The directors personally visited the investments in early June 2009 and, after reviewing each one, concluded that the quality of the underlying assets is such that attractive returns will be realisable in a reasonable time frame, particularly if the recent stabilisation in financial markets and the improved Indian economic confidence continues.


Outlook


The recent slightly more optimistic outlook for the global economy and more specifically the decisive re-election of the Indian Government in the spring of 2009 has produced a noticeable upturn in confidence in India although this is tempered by a note of caution for prospects in 2010. I believe that whilst the very worst is behind us, there is still some way to go before global - and Indian - growth rates resume their historical trend.


Your Board anticipates some realisations over the coming fiscal year and I would stress that the current projections regarding reduced operating costs mean that the Company is very well placed to take full advantage of the hard work done over the past two years. Once these realisations are effected, your Board expects to make further investments in new projects as the Company continues to see significant opportunities in the Indian non performing asset market.



Charlie Hambro


27 July 2009




Investment Managers' Review


Introduction


During the period, the Company, through its Investment Manager, completed its commitments to invest in Indian non-performing assets ("NPAs") , which it is anticipated will have an eventual cost totalling £24.08 million. This would represent 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, which is responsible for sourcing, appraising and managing investment opportunities.  


The Investment Manager's senior team between them has 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 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 AIM 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.


Going forward, looking to the current recessionary trends in different parts of the world which has delayed the exits from current investments, the Board is of the view that any further investment should appropriately take into consideration the need to conserve cash. 


Portfolio


The current portfolio comprises:


Project

Sector

DII Committed Investment

as at 31.03.2009

£m


DII Investment

at 31.03.2009

£m

Valuation (including Minority Holding)

at 31.03.2009*

£m

Turquoise

Metals & Electricals 

4.91

1.27


Aquamarine

Artificial Rubber 

1.40

1.08


LCAL

Chemicals 

1.11

1.21


Triton

Edible Oil

1.09

1.02


Destination India

Hospitality

5.28

1.43


Cygnet

Steel

10.29

9.45



Investments 


    

24.08

    

15.46


Valuation (including Minority holding)




19.30 

Trade Receivable & Payables




(0.01)

Bank Balances 




7.40 

Deferred Tax 




(1.86)



Total NAV




24.83 

Minority Interest 




(2.67)

The Company's NAV




22.16 

NAV per share




132.96 

Adjusted NAV per share*




144.12 


*excluding provisions for deferred tax


Project Turquoise (Rajasthan)


The investment is in respect of a company which was originally engaged in the manufacturing 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 sqm site in the centre of a prominent 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 2009 an amount of £1.69 million had been invested through a special purpose vehicle ("SPV") of which the Company's contribution was £1.27 million. The SPV has entered into an agreement with the first charge holder, holding 33% of the total secured debt for acquisition of the unit of the said company. The SPV is now negotiating with the other secured creditors and stakeholders for completing acquisition of the said unit.


Project Aquamarine (Uttar Pradesh)


The investment is in respect of a company which was originally engaged in the manufacturing 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 PradeshNorth India.


The total projected investment is £1.87 million of which the Company's proposed share is £1.40 million. As at 31 March 2009 an amount of £1.44 million had been invested through an SPV, of which the Company's contribution was £1.08 million. The SPV has since acquired an interest in the company through agreements executed with creditors having 33.46% of the secured debt of the target company. Such interest has been acquired at a cost lower than the original projected cost and the SPV is therefore in negotiations with other stakeholders for acquiring further interest in the target company within the original cost.


Project Triton (Gujarat)


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


The total acquisition cost was originally projected at £2.24 million, of which the Company's share was £2.13 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. Accordingly, since the plant is not required to be operated, the projected costs have been reduced to £1.15 million, of which the Company's share is projected at £1.09 million. As at 31 March 2009 an amount of £1.07 million had been invested through an SPV of which the Company's contribution was £1.02 million. The SPV has entered into agreements with all the secured creditors of the company for acquisition of the unit of the said company and the unit is being transferred to the SPV.


Project Destination India (Goa)

The investment is in respect of a company which had proposed to set up a resort in Goa on 369,814 sqmt of land, for which the company obtained all permissions and consents and had commenced construction. 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 was originally projected at £8.10 million, of which the Company's share was proposed at £7.70 million. However, in view of various litigations, the offer to secured creditors for the purchase of the hotel assets has been reduced. Consequently, the projected acquisition cost has come down to £5.56 million of which the Company's share is proposed at £5.28 million. As at 31 March 2009 an amount of £1.51 million had been invested through an SPV of which the Company's contribution was £1.43 Million. The SPV has entered into an agreement with the first charge holder, holding just over 25% of the total secured debt for acquisition of the hotel asset of the said company. The SPV is now negotiating with the other secured creditors and stakeholders for completing the acquisition of the said hotel asset.


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, for a total of £1.1 million. The proceeds of the issue were utilised by LCAL, inter alia, towards the purchase of 230 TPD plant of Standard Industries, Mumbai. Of this, LCAL has completed installation of 130 TPD plant, which along with its existing capacity has taken the total installed capacity to 230 TPD and the balance 100 TPD plant shall be installed in due course of time.


The company has completed the formalities with the Bombay Stock Exchange for the re-listing of its shares and is now awaiting permission from the stock exchange for commencement of trading. 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 located on a 51 acre site in Haryana, on the outskirts of Delhi

The total acquisition cost was projected at £12.79 million, of which the Company's share was proposed at £11.51 million. However, subsequently, due to reduction achieved in settlement of certain liabilities, the projected acquisition cost has been reduced to £11.43 million, of which the Company's share is £10.29 million. As at 31 March 2009 an amount of £10.50 million had been invested through an SPV of which the Company's contribution was £9.45 million. The SPV has entered into agreements with all the secured creditors of the company for acquisition of the unit of the said company. The SPV is taking steps for getting the unit transferred in its favour.


Risks 


Inspite 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 assets 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 currency giving rise to this risk is primarily the Indian Rupee.


Outlook


The Company was able to largely commit the IPO proceeds within a short period post Admission and has progressed significantly in completing the resolution of four of the six assets that it has invested into. There has been some delay in exits from such assets on account of recession in economies across the world, including India. Therefore, while the Investment Manager is taking more intensive steps for realisation of such assets, the valuations provided in this Annual Report reflect suitable discounts on account of such illiquidity and delay in realisation.



Consolidated Income Statement

For the year ended 31 March 2009



Notes


Year ended

31 March 2009


Period ended

31 March 2008



£'000

£'000

Interest received


391

725

Investment income


391

725

Administrative expenses


(1,426)

(814)

Foreign exchange (loss)/gains


-

21

Profit before tax


(1,035)

(68)


Income tax expense


-

-

(Loss)/Profit for the year/period


(1,035)

(68)

Attributable to




Equity holders of the company


(1,002)

(75)

Minority interest


(33)

(7)



(1,035)

(68)

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


Basic and diluted earnings per share                                                                (6.01p)

(4.50p)


The Directors consider all results to derive from continuing activities.


The accompanying notes form an integral part of these consolidated financial statements


Consolidated Statement of Recognised Income and Expense

For the year ended 31 March 2009



Notes


Year ended

31 March 2009

Note 20

Period ended

31 March 2008



£'000

£'000

Fair Value Gains




Unrealised change in fair value of available for sale financial assets

  7

(6,750)

8,080

Less : deferred taxation 


840

(2,702)

Less : performance fee

6

1,088

(1,088)

Net income recognised directly in equity


(4,822)

4,290

(Foreign exchange differences)


650

205

Net income recognized directly in equity


(4,172)

4,495

Loss for the year/period


(1,035)

(68)

Total recognised (loss)/income for the year/period


(5,207)

4,427

Attributable to:




Equity holders of the Company


(4,282)

3,420

Minority interest


(925)

1,007

Total


(5,207)

4,215


The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Balance Sheet

Notes



At 31 March 2009

At 31 March 2008

Current assets 


£'000

£'000

Available for sale financial assets 

7

19,296

21,779

Trade and other receivables

8

152

64

Cash and cash equivalents

9

7,408

11,232

Total assets


26,856

33,075





Equity




Issued share capital

10

1,667

1,667

Share premium


21,355

21,355

Unrealised investment revaluation reserve


(640)

3,290

Foreign currency translation reserve


855

205

Retained profit


(1,077)

(75)

Total equity attributable to equity holders of the Company 


22,160

26,442

Minority interest in equity


2,674

2,727

Total equity


24,834

29,169





Non current liabilities




Deferred income tax liabilities


1,862

2,702

Provisions for other liabilities and charges

6

-

1,088

Total non-current liabilities


1,862

3,790





Current liabilities




Trade and other payables


160

116

Total current liabilities


160

116

Total liabilities


2,022

3,906

Total equity & liabilities


26,856

33,075


Approved by the Board of Directors on 27th July 2009 



Arun Singh

John Bourbon 

Director

Director 



The accompanying notes form an integral part of these consolidated financial statements. 


Company Balance Sheet



Notes

At 31 March 2009

At 31 March 2008



£'000

£'000





Investment in subsidiaries


20,839

18,340

Total non-current assets


20,839

18,340





Trade and other receivables

8

9

32

Cash and cash equivalents

9

1,119

4,613

Total current assets


1,128

4,645

Total assets


21,967

22,985





Issued share capital

10

1,667

1,667

Share premium


21,355

21,355

Retained loss


(1,110)

(1,200)

Total equity


21,912

21,822





Non current liabilities




Provisions for other liabilities and charges

6

-

1,088

Total non current liabilities


-

1,088





Current liabilities




Trade and other payables


55

75

Total current liabilities


55

75

Total liabilities


55

1,163

Total equity & liabilities


21,967

22,985


The profit made by the Company for the year ended 31 March 2009 was £90,000 (2008: loss £1,200,000).


Approved by the Board of Directors on 27th July 2009

 



Arun Singh

John Bourbon 

Director

Director 


The accompanying notes form an integral part of these consolidated financial statements. 


Consolidated Cash Flow Statement 


For the year ended 31 March 2009




Year ended

31 March 2009

Period ended

31 March 2008



£'000

£'000





Operating activities




Profit before tax for the year/period


(1,035)

137

(Increase) in trade and other receivables


(88)

(64)

Increase in trade and other payables


39

116

Cash (applied)/generated from operating activities


(1,084)

189





Investing activities 




Acquisition of investments


(3,954)

(13,576)

Cash used in investing activities


(3,954)

(13,576)





Financing activities 




Proceeds from the issue of ordinary share capital


-

25,000

Share issue expenses paid


-

(1,978)

Proceeds from minority interests


669

1,720

Cash generated from financing activities


669

24,742





Net increase/(decrease) in cash and cash equivalents


(4,369)

11,232

Cash and cash equivalents at start of period


11,232

-

Effect of exchange rate fluctuations


545

(123)

Cash and cash equivalents at 31 March 2009


7,408

11,232





Interest received in the year/period


308

683


The accompanying notes form an integral part of these consolidated financial statements


Notes to the Consolidated Financial Statements


1.    The Company


Dhir India Investments plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 (as amended) on 20 June 2007 as a public company with registered number 120065C.


Following the close of the Pacing on 12 July 2007, 16,666,665 shares were issued.


The Shares of the Company were admitted to trading on AIM on 12 July 2007 when dealings also commenced.


The Company's agents and the Investment Manager perform all significant functions. Accordingly, the Company itself has no employees.


Financial year end


The financial year end of the Company is 31 March in each year.


2.    The Subsidiaries


During the period and for efficient portfolio management purposes, the Company established the following subsidiary companies:-


Subsidiaries






Agate India Investments Limited

Mauritius

100% Subsidiary

Turquoise Metal and Electricals Private Limited

India

75% Subsidiary of Agate India Investments Limited

Aquamarine Synthetics & Chemical Private Limited

India

75% Subsidiary of Agate India Investments Limited

Triton Project India Private Limited

India

95% Subsidiary of Agate India Investments Limited

Destination India Projects Private Limited

India

95% Subsidiary of Agate India Investments Limited

Cygnet Projects Private Limited *

India

90% Subsidiary of Agate India Investments Limited




* 90% Subsidiary of Agate India Investments Limited from 29 April 2008. (2008 : 75%)


3.    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 year ended 31 March 2009 comprises the Company and its Subsidiaries (together referred to as the "Group").


3.1    Basis of presentation


The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards an interpretations 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 Sterling ("£") and therefore the amounts shown in these financial statements are presented in £.


3.2    Use of estimates and judgments


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 3.4.


3.3    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 the income statement.  


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 date of the transactions. The exchange differences arising on the translation are recognised in a separate component of equity.


3.4    Investments


Investments represent investments for acquisition of assets/unit 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.


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.


The valuations are based on valuations carried out by independent valuers.


3.5    Deposit interest


Deposit interest is accounted for on an accruals basis. 


3.6    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.


3.7    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.


3.8    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.


3.9    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 2009 (2008: nil).


3.10    Other receivables


Trade and other receivables are stated at their cost.


3.11    Trade and other payables


Trade and other payables are stated at their cost.


3.12    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.


3.13    Future changes in accounting policies IFRS and IFRIC Interpretations not applied


IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:


International Financial Reporting Standards (IAS/IFRS)




Effective Date



Period beginning

IFRS 2

Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations

1 January 2009

IFRS 3

Business combinations

1 July 2009

IFRS 8

Operating Segments

1 January 2009

IAS 1

Presentation of Financial Statements

1 January 2009

IAS 16

Amendment to IAS 16 - Property, Plant and Equipment

1 January 2009

IAS 19

Amendment to IAS 19 - Employee Benefits

1 January 2009

IAS 23

Amendment - Borrowing Costs

1 January 2009

IAS 27

Consolidated and Separate Financial Statements

1 July 2009

IAS 32

Amendments to IAS 32 - Financial Instruments: Presentation

1 January 2009

IAS 36

Amendments to IAS 36 - Impairment of Assets

1 January 2009

IAS 39

Amendments to IAS 39 - Financial Instruments:

Recognition and Measurement

1 January 2009


International Financial Reporting Interpretations Committee (IFRIC)




Effective Date



Period beginning

IFRIC 13 

Customer loyalty programmes

1 July 2008

IFRIC 15

Agreements for the Construction of Real Estate

1 January 2009

IFRIC 18

Transfers of Assets from Customers

1 July 2009

The Directors do not anticipate that the adoption of the other standards and interpretations will have a material impact on the Group's financial statements in the period of initial application.  


4.    Segment Reporting


The Group operates as one business and geographic segment, being investment in distress debt, in India.


5.    Related Party Transactions


Management Arrangement


Alok Dhir and his associates are the significant shareholders of Shiva Consultants Private Limited (the Investment Manager) and a Director of Dhir India Investments PLC. During the year the Company had the following related party transactions with Shiva Consultants Private Limited. The management fee and performance fee arrangements are set out in note 6.


Performance fee


Due to decrease in the fair value of investments, no performance fee was provided in the financial statements. The performance fee recognised in the prior period was accordingly reversed.


Performance fee is not payable until the investments are realised.


Legal Services 


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



31 March 2009

31 March 2008


£'000

£'000

Legal and Professional Fees

112.72

81.98

Balance Outstanding 31 March

36.27

23.80


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


Dhir & Dhir Asset Reconstruction and Securitisation Company Limited


The SPVs have entered into transactions with Dhir & Dhir Asset Reconstruction and Securitisation Company Limited ("DDARC") for acquisition of various assets/units in respect of the companies in which investments have been made. The details of the outstanding balance of advances made by the SPVs to DDARC are as below:



Group Subsidiary

Amount as on 31.03.2009 

(£ in million)

Amount as on 31.03.2008 

(£ in million) 

Turquoise Metals and Electrical Private Limited

1.69

1.57

Aquamarine Synthetics and Chemicals Private Limited

0.39

1.22

Triton Projects India Private Limited

0.06

0.94

Destination India Projects Private Limited

0.64

1.57

Cygnet Projects Private Limited

2.62

2.33

Total 

5.40

7.63 


Co-investment 


During the year to 31 March 2009, Alok Dhir has in terms of the co-investment commitments ensured that along with Turnaround Consultants Private Limited and Sopan Securities Private Limited, which are some of his connected persons, co-invested with the Group's subsidiary Agate India Investments Limited in the following group SPVs Subsidiaries.


Group Subsidiary

Equity Holding %

Investment £'000

Turquoise Metals and Electrical Private Limited

25%

450.05

Aquamarine Synthetics and Chemicals Private Limited

25%

523.88

Triton projects India Private Limited

5%

58.83

Destination India Projects Private Limited

5%

103.37

Cygnet Projects Private Limited

10%

757.63


Lords Chloro Alkali Limited 


Alok Dhir is also a shareholder in Lords Chloro Alkali Limited. During the period to 31st March.2009, the Group has subscribed for 1.5 million equity shares at INR 60 per share, £1.21 million in Lords Chloro Alkali Limited.


6.     Charges & Fees

6.1    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. 


Fees paid to the Investment Manager (£ '000) £649.15                          (2008 :£336.23)

Fees payable to the Investment Manager on basis of NAV (£ '000) Nil    (2008 :£39.16)


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.


Nominated Adviser and Broker fees (£'000): nil (2008: £1,411.70) out of which 1,379.95 was paid for fund raising


Administrator's fees (£'000) : £76.15

(2008 : £13.22)



Audit fees (£'000) : £58.40

(2008 : £34.15)



31 March 2009

31 March 2008


£'000

£'000

Audit of IOM Company & Group consolidation

43.46

21.15

Audit of Subsidiary companies 

14.94

13.00


7.    Investments


Investments are carried at fair value under IAS 39. All investments are made through the investee companies, which are all incorporated in India and are unquoted.  





Name of Investee Companies

Group

31 March 2009


Percentage of equity held

Group

31 March 2008


Percentage of equity held

Turquoise Metals and Electricals Pvt Ltd

75%

75%

Aquamarine Synthetics And Chemicals Pvt Ltd

75%

75%

Triton Projects India Private Limited

95%

95%

Destination India Projects Pvt Ltd

95%

95%

Cygnet Projects Private Limited

90%

75%

Lords Chloro Alkali Limited

5.96%

5.96%


The fair value of the financial assets held by the above investee companies are as follows:




Group


31 March 2009

31 March 2008


£'000

£'000

Total cost of financial assets available for sale  

17,529

13,577

Foreign exchange effect

437

122

Fair value gain

1,330

8,080

Total fair value at 31 March 

19,296

21,779


8.    Trade and Other Receivables



Company 

Group

Company

Group


31 March 2009

31 March 2009

31 March 2008

31 March 2008


£'000

£'000

£'000

£'000

Trade and other receivables

9

152

32

64







9.    Cash and Cash Equivalents



Company

Group

Company

Group


31 March 2009

31 March 2009

31 March 2008

31 March 2008


£'000

£'000

£'000

£'000

Cash and cash equivalents

1,119

7,408

4,613

11,232







10    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 and 2009


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 each. 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.


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