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Dhir India Inv. plc (DHIR)

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Friday 06 August, 2010

Dhir India Inv. plc

Final Results

RNS Number : 6417Q
Dhir India Investments plc
06 August 2010
 



5 August 2010

 

 

 

 

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 2010. 

 

Highlights:

 

·      The portfolio comprises interests in five projects and one quoted business on the Bombay Stock Exchange

·      Headline net asset value per share, including deferred tax provisions, for Dhir India at the period end was 130p (133p at 31 March 2009). 

·      Significant progress made in completing the resolution of four of the six assets

·      Three projects have now entered the exit phase, with a part realisation in one of them achieved at a satisfactory price of £2.15 million

·      Further realisations are expected over the coming fiscal year

 

Charlie Hambro, Chairman of Dhir India, commented:

 

"Dhir India is well placed to take advantage of the hard work done over the past three years. Your Board now looks forward to a period of tangible progress as certain of our original investments are realised. Upon completion and the receipt of investment proceeds, we intend to make further selective investments as a result of the significant opportunities that are still available in the Indian non performing asset market."

 

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

 

"Having experienced delays, partly as a result of the economic environment, it is pleasing to be involved in the final exit phase with certain of our original investments. The Company remains focused on controlling operating costs and preserving our cash position, and looks forward to the coming year with improved confidence."

 

 

For further information, please contact:

 

Shiva Consultants

Evolution Securities

Tavistock Communications   

Alok Dhir

Jeremy Ellis

Jeremy Carey

Shivi Agarwal

Chris Clarke

Simon Hudson



Simon Compton

Tel: + 91 11 42410000

Tel: +44 (0) 20 7071 4300

Tel: + 44 (0) 207 920 3150

 

 



 

 

Chairman's Statement

 

 

I am able to report that Dhir India Investments plc ("the Company") has continued to make progress during the year ended 31 March 2010. However, as is often the case in this type of company and this type of economic environment, the progress has been mixed, with some projects continuing to show promise and moving forward and others proving to be more difficult to unlock. In my interim report to shareholders in December 2009 I stated that, as a result of the uncertain global conditions, it was likely that the realisation of our investments would take longer than envisaged, and this continues to be the case.

 

I reported previously that we expected some realisations by the middle of 2010. For reasons mentioned above, the expected realisation timetable has been extended, but in three projects we have now entered the exit phase, with a part realisation in one of them now achieved at a satisfactory price. We expect finalisation of the process during the next few months. The remainder of the portfolio consists of a spread of investment potential. In one case we remain quietly confident of a very satisfactory outcome and consequently are looking to increase our exposure, whilst on the remaining two investments the prognosis seems to indicate a longer time frame.

 

As I mentioned in my last report, your Board continues to be aware of the importance of controlling operating costs and preserving the satisfactory cash position of the Company. As last year, our Investment Manager, Shiva Consultants Private Limited, has extended its agreement to reduce its Management Fee for a further year and the Board is once again grateful for their flexibility in this matter.

 

Results

The portfolio now comprises interests in five projects and one quoted business 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 £17.37 million with a possible committed cost of the investments totalling £24.08m. 

 

The underlying investments have been valued by PriceWaterhouseCoopers India as at 31 March 2010. However, as in the previous financial year, given the ever changing economic outlook and greater visibility on each of the investments, the Board considered it prudent to take a more conservative and individual approach to the valuation of the portfolio. After taking into account both individual issues and the general arithmetic valuation calculations, the Board decided to continue its cautious policy. However, during the reporting period, the rupee has appreciated against sterling by some 8.5% and consequently, the fair value of our share of these underlying investments at the balance sheet date was £20.50 million (£19.3 million at 31 March 2009), excluding deferred tax provisions of £2.05 million (£1.86 million at 31 March 2009).

 

Headline net asset value per share, including deferred tax provisions, for Dhir India at the period end was 130p (133p at 31 March 2009).  The adjusted net asset value, excluding the deferred tax provision of £2.05 million, which the Directors anticipate should not be payable, is 143p (144p at 31 March 2009).  The statement of comprehensive income shows loss attributable to shareholders of £1.0 million and a loss per share of 6.02p.  Total consolidated cash balances at the period end were £6.3 million (£7.4 million at 31 March 2009), before taking into account receipt of the £2.15 million proceeds of the recent sale of plant and machinery at Project Cygnet detailed in the Investment Mangers' review. The Company has no borrowings.

 

The investments

The investment portfolio is diversified both by regional geography and realisation strategy.  As previously noted, over the past year there has been progress on a number of our investments.  The appropriate exit strategies for each investment continue to be reviewed and range from the turnaround and resale of operating businesses to the break-up and sale of underlying assets.

 

Outlook

Despite a continued stuttering economic performance from the large consumer economies, the growth economies, unsurprisingly, continue to enjoy a healthier outlook. India is no exception to this and internally, economic confidence continues to grow. However, India is not isolated from the knock on effects of either the economic slowdown or sovereign credit issues that have bedevilled many of the established economies.

 

We are now entering a period where your Board anticipates achieving realisations over the coming fiscal year and the Company is well placed to take advantage of the hard work done over the past three years.  Once these realisations are effected, your Board expects to make further selective investments in new projects as the Company continues to see significant opportunities in the Indian non-performing asset market, subject to taking into consideration the need to conserve cash in the current environment.

 

 

Charlie Hambro

 

 

5 August 2010



Investment Managers' Review

 

 

Introduction

The Company, through its Investment Manager, has made commitments to invest in Indian non-performing assets ("NPAs"), which have a potential cost totalling £24.08million. 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.

 

Recently a transaction for the realisation of part of the investment made by one of its SPV has been finalised for a consideration of approximately £2.15 million, all of which has now been received.

 

Investment Policy

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.

 

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 in Rajasthan.

 

The total acquisition cost is projected at £6.55 million, of which the Company's share is estimated to be £4.91 million. As at 31 March 2010, an amount of £1.84 million had been invested through a special purpose vehicle ("SPV") of which the Company's contribution is £1.38 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. Vigorous efforts are being made for the resolution of the said assets including negotiations with various stakeholders, such as workers and promoters, to resolve the asset.

 

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 Pradesh, North India.

 

As at 31 March 2010 an amount of £1.88 million had been invested through an SPV, of which the Company's contribution is £1.41 million. The SPV has since acquired 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 projected 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 2010 an amount of £1.18 million had been invested through an SPV of which the Company's contribution was £1.12 million.  The SPV has entered into agreements with all the secured creditors of the company in respect of acquisition / sale of the unit of the said company.

 

The investment with respect to the said asset is proposed to be realised through sale of the unit by Public Auction for which advertisements have been released in the Newspapers.

 

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 sqm 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 2010 an amount of £1.94 million had been invested through an SPV of which the Company's contribution was £1.85 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 promoters / 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.

 

The shares of the LCAL have been listed at the Bombay Stock Exchange; however, they are presently being thinly traded. The Company plans to exit from its investments by sale of the said shares at the appropriate time.

 

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 originally projected at £12.79 million, of which the Company's share was proposed at £11.51 million. As at 31 March 2010 an amount of £12.26 million had been invested through an SPV of which the Company's contribution was £11.04 million.  The SPV has entered into agreements with all the secured creditors of the company for acquisition of the unit of the said company. Recently a transaction for realisation of its investment by way of sale of Plant & Machinery of the said unit has been finalised for a consideration of approximately £2.15 million, of which all of the funds have now been received. Process for realisation of the remaining investment is also under way.

 

 

 

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 assets and liabilities of distressed companies and unquoted equity securities. 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 commit a large part of 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, with the remaining two indicating a longer time frame. There has been some delay in exits from such assets, partly on account of recession and liquidity issues 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.

 

Change to Investing Policy

In relation to the Investing Restrictions set out in the investing policy below, under the terms of the Management Agreement the Board has discretion to consider deviation from these parameters while evaluating specific proposals.  Any such deviation has been and would be in line with the objectives to achieve the Company's target return to Shareholders and an appropriate mitigation of risk.  The AIM Rule changes in relation to investing companies, which were published on 1 June 2009, required shareholder approval for any material changes to investing policy necessary to meet the new requirements.  The Company therefore sought and obtained shareholder approval for the following new investing policy, largely based on the information contained in the Company's AIM Admission Document dated 6 July 2007, which details inter alia the Board's discretion to consider deviation from the stated investing restriction parameters at the Annual General Meeting of the Company held on 26 October 2009.

 

New Investing Policy

 

Investing Objective

The Company intends to invest in distressed companies and distressed assets in India with the objective of providing shareholders with income and capital growth.

 

Investing Strategy

The investmentswill be structured primarily in the following four types of transaction:

 

Turnaround of companies

In these transactions, the objective is to acquire an interest in a target company through its secured debt (and a minority equity interest where appropriate). The aim will be to benefit from the control taken of the target company, its operations and its assets and, if appropriate, to change or motivate existing management and implement a new strategy to turn around the business.

 

Target companies will typically be under-performing due to financial, operational or management constraints and an overhang of debt, but with the potential for achieving a turnaround through restructuring. In such transactions, the Manager may arrange to provide the target company with a range of technical, legal, management and financial inputs, as required.

 

The Directors believe that exits from such an investment will be achieved principally through selling the controlling interest in the target company to a third party or to the target's existing management or via public offering. The Company intends to work to a time frame of 24-36 months from acquisition to exit in such transactions.

 

Re-sale of assets or companies

The objective in these transactions is to obtain benefit from a change in control of the target company or its assets through the secured debt. The Company and its subsidiaries (the "Group") will consider acquiring a minority equity interest in target companies and/or assets but the Company would not acquire a majority of the equity interest.

 

The value in such transactions lies in being able to acquire or settle the debts of the target company at a discount to the market value of the underlying assets of the business as a whole and then to restructure the debts so as to achieve the desired return upon a sale of the target company or its assets.

An exit is achieved through the sale of its assets to a third party purchaser and/or the equity when sold. The Manager will seek to identify such transactions in sectors where there is demand for consolidation and capacity addition.

 

The Company intends to work to a time frame of 9-12 months from acquisition to exit in such transactions.

 

Break-up and sale of assets

The objective of these transactions is to obtain benefit from a change in control of the target company or its assets by taking a secured debt position with a view to realising latent value through the sale of individual assets or parts of the business to different buyers. The Group will consider acquiring a minority equity interest in target companies and / or assets, but the Company would not acquire a majority of the equity interest. This process will entail the negotiation and restructuring of debts with creditors and lenders, the consolidation of security and the sale of assets to third party buyers.

 

The Directors consider that this type of transaction is particularly attractive where there are high value assets in the target company, and the Company expects that the debt can be settled at a discount to market value. The Company intends to work to a time frame of 12-15 months from acquisition to exit in such transactions.

 

Bridge financing

In these transactions the objective is to provide short term bridge financing to target companies that are in need of immediate funds to complete one time settlements with secured creditors and which have cash flows to support the repayment of the financing (together with the Company's desired return) to the Group over a period of 6-9 months.

 

Gearing

The Directors anticipate that, due to a lack of sophisticated distress lenders in India and with the exception of bridge financing transactions, the Group's transactions will generally be funded by the Group from the proceeds of equity investments into the Group and not through debt.

 

Investing Restrictions

The Company will only invest in Indian distressed companies and distressed assets. The Company will not have a predetermined preference of allocation in the type of transactions outlined above, but will aim to build a diversified portfolio by:

 

·      investing no more than £5 million in transactions relating to one single entity;

·      investing no more than 50 per cent. of the net asset value of its portfolio in one single transaction type; and

·      not investing in transactions where the intrinsic value of the underlying assets is believed to be less than the amount of the investment required.

 

The Board may however consider deviation from the above parameters while evaluating specific proposals. These investment restrictions will apply at the time of the initial investment in a particular opportunity and subsequent transactions which affect these ratios will not lead to a requirement to divest any investment to rebalance the portfolio. There are no obligations on the Company or the Manager to make any investments or to return monies to shareholders within a minimum period of time.

 

Note: The amounts mentioned in the Investment Managers Review may vary from year to year due to exchange rate differences.

 

 



Consolidated Statement of Comprehensive Income

 

For the year ended 31 March 2010



Year ended

31 March 2010


Year ended

31 March 2009



£'000


£'000

Interest income on cash balances


42


304

Dividend income


107


86

Excess provision written-off


2


1

Investment income


151


391






Investment management fees


(445)


(649)

Other administration expenses


(683)


(777)

Total expenses


(1,128)


(1,426)






Loss before taxation


(977)


(1,035)

Taxation


(48)


-

Loss for the year


(1,025)


(1,035)

Other comprehensive (loss)/income





Unrealised change in fair value of available-for-sale financial assets


(1,273)


(6,750)

        (Less)/add deferred taxation


(190)


840

        Add performance fee provision


-


1,088

Foreign currency translation differences for foreign operations


2,185


853

Other comprehensive income/(loss) for the year, net of income tax


722

 


(3,969)

Total comprehensive loss for the year


(303)


(5,004)






Loss attributable to:





            Equity holders of the Company


(1,003)


(1,002)

            Non-controlling interest


(22)


(33)

Loss for the year


(1,025)


(1,035)

 

Total comprehensive loss attributable to:




            Equity holders of the Company


(537)


(4,282)

            Non-controlling interest


234


(722)

Total comprehensive loss for the year


(303)


(5,004)






Basic and diluted loss per share (pence)


(6.02)


(6.01)

 

The Directors consider that all results derive from continuing activities.

Consolidated Statement of Financial Position 

 

As at 31 March 2010



At 31 March

2010


At 31 March 2009



£'000


£'000

Current assets





Available-for-sale financial assets


20,502


19,296

Trade and other receivables


56


152

Cash and cash equivalents


6,304


7,408

Total assets


26,862


26,856






Equity





Share capital


1,667


1,667

Share premium


21,355


21,355

Fair value reserve


(2,112)


(640)

Foreign currency translation reserve


2,793


855

Retained loss


(2,080)


(1,077)

Total equity attributable to equity holders of the Company


21,623


22,160

Non-controlling interest


3,019


2,674

Total equity


24,642


24,834






Non-current liabilities





Deferred tax liabilities


2,052


1,862

Total non-current liabilities


2,052


1,862






Current liabilities





Trade and other payables


168


160

Total current liabilities


168


160

Total liabilities


2,220


2,022

Total equity and liabilities


26,862


26,856

 

 

Approved by the Board of Directors on 5th August 2010

 

 

 

 

 

Arun Singh                                                  John Bourbon

Director                                                      Director



Company Statement of Financial Position

 

As at 31 March 2010



At 31 March

2010


At 31 March 2009



£'000


£'000

Non-current assets





Investment in subsidiary


19,998


20,839

Total non-current assets


19,998


20,839






Current assets





Trade and other receivables


6


9

Cash and cash equivalents


1,100


1,119

Total current assets


1,106


1,128

Total assets


21,104


21,967






Equity





Share capital


1,667


1,667

Share premium


21,355


21,355

Retained loss


(2,029)


(1,110)

Total equity


20,993


21,912






Current liabilities





Trade and other payables


111


55

Total current liabilities


111


55

Total liabilities


111


55

Total equity and liabilities


21,104


21,967

 

The Company made a loss for the year of £919,627 (2009: profit of £90,062)

 

Approved by the Board of Directors on 5th August 2010

 

 

 

 

 

Arun Singh                                                  John Bourbon

Director                                                      Director

 


Consolidated Statement of Changes in Equity

 

For the year ended 31 March 2010

 


Share capital

 

 

Share premium

 

Foreign Currency Translation

reserve

Fair value reserve

Retained loss

 

Total shareholders' funds

Non-controlling interest

Total equity

 


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










Balance as at 1 April 2008

1,667

21,355

205

3,290

(75)

26,442

2,727

29,169

Total comprehensive loss for the year:









Loss for the year

-

-

-

-

(1,002)

(1,002)

(33)

(1,035)










Other comprehensive income









Foreign currency translation differences

-

-

650

-

-

650

203

853

Net change in fair value of available-for-sale financial assets net of tax and performance fee provision

 

 

-

 

 

-

 

 

-

 

 

(3,930)

 

 

-

 

 

(3,930)

 

 

(892)

 

 

(4,822)

Total other comprehensive income/(loss)

-

-

650

(3,930)

-

(3,280)

(689)

(3,969)

Total comprehensive income/(loss) for the year

 

-

 

-

 

650

 

(3,930)

 

(1,002)

(4,282)

 

(722)

 

(5,004)










Transactions with owners recorded directly in equity:









Contributions from non-controlling interest

 

-

 

-

 

-

 

-

 

-

 

-

 

669

 

669

Total transactions with owners

-

-

-

-

-

-

669

669

Balance at 31 March 2009

1,667

21,355

855

(640)

(1,077)

22,160

2,674

24,834

 



 

Consolidated Statement of Changes in Equity (continued)

 

For the year ended 31 March 2010

 


Share capital

 

 

Share premium

 

Foreign Currency Translation

reserve

Fair value reserve

Retained loss

 

Total shareholders' funds

Non-controlling interest

Total equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










Balance as at 1 April 2009

1,667

21,355

855

(640)

(1,077)

22,160

2,674

24,834

Total comprehensive loss for the year:









Loss for the year

-

-

-

-

(1,003)

(1,003)

(22)

(1,025)










Other comprehensive income









Foreign currency translation differences

-

-

1,938

-

-

1,938

247

2,185

Net change in fair value of available-for-sale financial assets net of tax and performance fee provision

 

 

-

 

 

-

 

 

-

 

 

(1,472)

 

 

-

 

 

(1,472)

 

 

9

 

 

(1,463)

Total other comprehensive income/(loss)

-

-

1,938

(1,472)

-

466

256

722

Total comprehensive income/(loss) for the year

 

-

 

-

 

1,938

 

(1,472)

 

(1,003)

(537)

 

234

 

(303)










Transactions with owners recorded directly in equity:









Contributions from non-controlling interest

 

-

 

-

 

-

 

-

 

-

 

-

 

111

 

111

Total transactions with owners

-

-

-

-

-

-

111

111

Balance at 31 March 2010

1,667

21,355

2,793

(2,112)

(2,080)

21,623

3,019

24,642


Company Statement of Changes in Equity

 

For the year ended 31 March 2010

 

 

 

Share

capital

Share premium

Retained

loss

Total


£'000

£'000

£'000

£'000






Balance as at 1 April 2008

1,667

21,355

(1,200)

21,822






Total comprehensive income for the year:





Profit for the year

-

-

90

90






Other comprehensive income

-

-

-

-

Total comprehensive income for the year

 

-

 

-

 

90

 

90

Balance as at 31 March 2009

1,667

21,355

(1,110)

21,912











Balance as at 1 April 2009

1,667

21,355

(1,110)

21,912






Total comprehensive loss for the year:





Loss for the year

-

-

(919)

(919)






Other comprehensive income

-

-

-

-

 

Total comprehensive loss for the year

 

-

 

-

 

(919)

 

(919)

Balance as at 31 March 2010

1,667

21,355

(2,029)

20,993


Consolidated Statement of Cash Flows

 

For the year ended 31 March 2010



Year ended

31 March 2010


Year ended

31 March 2009



£'000


£'000






Cash flows from operating activities





Loss for the year


(1,025)


(1,035)

Adjustments for:





Interest income on cash balances


(42)


(304)

Dividend income


(107)


(86)



(1,174)


(1,425)

Increase in trade and other receivables


(19)


(6)

Increase in trade and other payables


8


39

Interest and dividends received


264


308

Net cash used in operating activities


(921)


(1,084)






Cash flows from investing activities





Receipt of refund from asset reconstruction company


628


-

Acquisition of investments


(1,251)


(3,954)

Net cash used in investing activities


(623)


(3,954)






Cash flows from financing activities





Proceeds from non-controlling interest


111


669

Net cash flow from financing activities


111


669






Net decrease in cash and cash equivalents


(1,433)


(4,369)

Cash and cash equivalents at start of year


7,408


11,232

Effect of foreign exchange rate changes on cash and cash equivalents


329


545

Cash and cash equivalents at 31 March


6,304


7,408






                                                                       


Notes to the preliminary results

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 on 20 June 2007 as a public company with registered number 120065C.

 

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

 

The Shares of the Company were admitted to trading on the Alternative Investment Market of the London Stock Exchange ("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.

 

The annual report of the Company for the year ended 31 March 2010 comprises the Company and its subsidiaries (together referred to as the "Group").

 

2          Basis of preparation

 

(a)        Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs).

 

These preliminary results were authorised for issue by the Board of Directors on 5 August 2010.

 

(b)        Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for available-for-sale financial instruments that are measured at fair value in the statement of financial position.

 

(c)        Functional and presentation currency

These consolidated financial statements are presented in Sterling, which is the Company's functional currency. All financial information presented in Sterling has been rounded to the nearest thousand.

 

(d)        Use of estimates and judgements

The preparation of the consolidated financial statements in conformity with IFRSs 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 arerecognised in the period in which the estimates are revised and in any future periods affected.

 

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5 and 12 (assessment of fair value of available-for-sale financial assets).

 

(e)        Changes in accounting policy

Presentation of financial statements

The Group applied revised IAS 1 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. 

 

Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

 

(f)         Other accounting developments

Disclosures pertaining to fair values and liquidity of financial instruments

The Company has applied Improving Disclosures about Financial Instruments (Amendments to IFRS 7), issued in March 2009, that require enhanced disclosures about fair value measurements and liquidity risk in respect of financial instruments.

 

The amendments require that fair value measurement disclosures use a three-level fair value hierarchy that reflects the significance of the inputs used in measuring fair values of financial instruments. Specific disclosures are required when fair value measurements arecategorisedas Level 3 (significant unobservable inputs) in the fair value hierarchy. The amendments require that any significant transfers between Level 1 and Level 2 of the fair value hierarchy be disclosed separately, distinguishing between transfers into and out of each level. Furthermore, changes in valuation techniques from one period to another, including the reasons therefore, are required to be disclosed for each class of financial instruments. Disclosures in respect of fair values of financial instruments are included in notes 5 and 12.

 

Furthermore the definition of liquidity risk has been amended and it is now defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

 

The amendments require disclosure of a maturity analysis for non-derivative and derivative financial liabilities, but contractual maturities are required to be disclosed for derivative financial liabilities only when contractual maturities are essential for an understanding of the timing of cash flows. For issued financial guarantee contracts, the amendments require maximum amount of the guarantee to be disclosed in the earliest period in which the guarantee could be called. Disclosures in respect of liquidity risk are included in note 20.

 

3          Summary of significant accounting policies

           

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.

 

3.2        Foreign currency

Foreign currency transactions

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 or loss, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognised in other comprehensive income.   

 

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Sterling at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to Sterling at exchange rates at the dates of the transactions.

 

Foreign currency differences are recognised in other comprehensive income. When a foreign operation is disposed of, in part or in full, the relevant amount in the Foreign Currency Translation Reserve (FCTR) is transferred to profit or loss as part of the profit or loss on disposal.

 

3.3        Investments

The Group recognises financial assets initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group isrecognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or torealise the asset and settle the liability simultaneously. The Group has the following non-derivative financial assets, available-for-sale financial assets.

 

Investments represent investments for acquisition of assets/units and unquoted shares. The investments are designated in the category of 'available for sale' and stated at fair value. 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.  Subsequent to initial recognition, the investments are measured at fair value and changes therein, other than impairment losses (see note 3.10) and foreign currency differences on available-for-sale equity instruments (see note 3.2), arerecognised in other comprehensive income and presented within equity in the fair value reserve. When an investment isderecognised, the cumulative gain or loss in other comprehensive income is transferred to profit or loss. 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. See note 12 regarding valuation methodology.

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognisedas a deduction from equity, net of any tax effects.

 

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.

 

Interest income isrecognisedin the financial statements on an accruals basis using the effective interest rate basis. Dividend income is recorded when declared. 

 

Expenses are accounted for on an accrual basis. Expenses are charged to the profit or loss 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.

3.7        Dividends

Dividends arerecognisedas a liability in the period in which they are declared and approved.

             

3.8        Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

 

3.9        Trade and other payables

            Trade and other payables are stated at their cost.

 

            3.10      Impairment

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

 

Impairment losses on available-for-sale investment securities arerecognised by transferring the cumulative loss that has beenrecognised in other comprehensive income, and presented in the fair value reserve in equity, to profit or loss. The cumulative loss that is removed from other comprehensive income and recognised in profit or loss is the difference between the acquisition cost and the current fair value, less any impairment loss previously recognisedin profit or loss.

 

If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognisedin profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

 

3.11      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 isrecognisedusing 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 isrecognisedto 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.

3.12      Future changes in accounting policies

IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations with an effective date after the date of these financial statements:

 

New/Revised International Financial Reporting Standards (IAS/IFRS)

 

 

Effective date

(accounting periods

commencing  after)

IAS 1 Presentation of Financial Statements (Revised April 2009)*

1 January 2010

IAS 7 Statement of Cash Flows (Revised April 2009)*

1 January 2010

IAS 24 Related Party Disclosures -  Revised definition of related parties

1 January 2011

IAS 32 Financial Instruments: Presentation -  Amendments relating to classification of rights issues

1 February 2010

IAS 36 Impairment of Assets (Revised April 2009)*

1 January 2010

IAS 39 Financial Instruments: Recognition and Measurement - Amendments for embedded derivatives when reclassifying financial instruments

30 June 2009

IAS 39 Financial Instruments: Recognition and Measurement - Amendments for eligible hedged items

1 July 2009

IAS 39 Financial Instruments: Recognition and Measurement (Revised April 2009)*

1 January 2010

IFRS 3 Business Combinations - Comprehensive revision on applying the acquisition method

1 July 2009

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (Revised April 2009)*

1 January 2010

IFRS 8 Operating Segments (Revised April 2009)*

1 January 2010

IFRS 9 Financial Instruments - Classification and Measurement

1 January 2013

IFRIC Interpretation


IFRIC 17 Distributions of Non-Cash Assets to Owners

1 July 2009

IFRIC 18 Transfers of Assets from Customers

1 July 2009

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

1 July 2010

*Amendments resulting from April 2009 Annual Improvements to IFRSs

 

The Directors do not expect the adoption of the standards and interpretations to 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 distressed debt, in India.

 

5.         Critical accounting estimates and assumptions

 

These disclosures supplement the commentary on financial risk management (see note 20).

 

Key sources of estimation uncertainty

 

Determining fair values

The determination of fair values for financial assets for which there is no observable market prices requires the use of valuation techniques as described in accounting policy 3.3 and note 12. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. See also "Valuation of financial instruments" below.

 

Critical judgements in applying the Group's accounting policies

 

Critical judgements made in applying the Group's accounting policies include:

 

Valuation of financial instruments

The Group's accounting policy on fair value measurements is discussed in accounting policy 3.3. The Company measures fair value using the following hierarchy that reflects the significance of inputs used in making the measurements:

 

·    Level 1: Quoted market price (unadjusted) in an active market for and identical instrument.

·    Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments: quoted market prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

·    Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments the Group determines fair values using valuation techniques.

 

The Group holds ownership interests in the debt of certain unquoted Indian distressed companies and one direct investment in the equity of one listed distressed company.  The fair value of investments, as shown in note 12, is based on independent valuations.

 

The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurements arecategorised:

 


Level 1

Level 2

Level 3

Total


£'000

£'000

£'000

£'000

Available-for-sale financial assets





Turquoise Metals and Electricals Private Limited

-

-

5,701

5,701

Aquamarine Synthetics and Chemicals Private Limited

-

-

4,119

4,119

Triton Projects India Private Limited

-

-

573

573

Destination India Projects Private Limited

-

-

1,047

1,047

Cygnet Projects Private Limited

-

-

8,551

8,551

Lords Choloro Alkali Limited

-

-

511

511


-

-

20,502

20,502

 

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in level 3 of the fair value hierarchy:





31 March 2010





£'000

Fair value brought forward


19,296

Additional investment


1,251

Refund from asset reconstruction company


(628)

Movement in fair value


(1,273)

Effect of foreign exchange fluctuations


1,856

Fair value at year end




20,502

 

6.         Investment management fees

 

Management fee

Shiva Consultants Private Limited (the "Investment Manager") was 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 Investment Manager agreed to reduce the management fee for the year from 2% to 1.5%, and has agreed to do the same for a further year.

 

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.

 

Annual management fees paid during the year ended 31 March 2010 amounted to £445,588 (2009: £649,153) and no fees were outstanding as at 31 March 2010 (2009: £nil).

 

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.

 

Due to decrease in the fair value of investments, relative to their cost, no performance fee has been provided in the financial statements or those for the year ended 31 March 2009.  The performance fee recognised in 2008 was period was accordingly reversed in 2009.

 

7.         Other administration expenses

 



Year ended

31 March 2010


Year ended

31 March 2009



£'000


£'000

Professional fees


224


317

Directors' fees (note 17)


127


133

Administration fees


77


76

Nominated and broker fees


45


49

Public relations fees


13


70

Accounting fees


33


6

Audit fees


53


58

Other expenses


111


68

Total


683


777

 

8.         Taxation

 

The standard rate of income tax for companies in the Isle of Man is 0%.  No provision for taxation has, therefore, been made in the Company. 

 

The Mauritian entity is a Global Business License Category 1 (GBL1) company in Mauritius and under the current laws and regulations is 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.

 

The Indian subsidiaries are incorporated for acquiring assets of targeted companies. As such, the funds remitted by Agate India Investments Limited, are utilized for acquiring the secured assets of the target companies. Only surplus funds are held in short-term deposits and short-term liquid mutual funds. The income earned in the form of interest on deposits is taxable as "Income from other Sources". The income earned in the form of Dividend on funds invested in short term liquid mutual funds is exempt from tax as per section 10(23G) of the Income Tax Act.

 

For the Assessment year 2010-11, the five Indian subsidiaries - Turquoise Metal & Electricals Pvt. Ltd., Aquamarine Synthetics & Chemicals Pvt. Ltd., Triton Projects Private Limited, DestinationIndia Projects Private Limited and Cygnet Projects Private Limited - do not have taxable income under the Income Tax Act 1961. As such, no income tax is levied on them.

 

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

 

The actual income tax expense is as follows:



Year ended

31 March 2010


Year ended

31 March 2009



£'000


£'000

Income tax expense


48


-

Deferred tax charge/(credit)


190


(840)



238


(840)

 

Deferred Taxation

The movement in deferred tax during the year was as follows:



31 March 2010


31 March 2009



£'000


£'000

Opening balance


1,862


2,702

Charge/(credit) for the year


190


(840)

Balance at 31 March


2,052


1,862

 

Deferred taxation provided in the financial statements is as follows:



31 March 2010


31 March 2009



£'000


£'000

Revaluation of available-for-sale financial assets

2,052


1,862

 

The deferred taxation has been provided at the standard rate for the subsidiaries of 33.66%.  The Company has no deferred taxation.

 

9.         Loss per share

 

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

 



Year ended

31 March 2010


Year ended

31 March 2009

Loss attributable to equity holders of the Company (£'000)


 

(1,003)


 

(1,002)

Number of ordinary shares in issue


16,666,667


16,666,667

Basic loss per share (pence)


(6.02)


(6.01)

 

There is no dilutive earnings per share number shown as there are no share options in issue and the warrants have expired.

 

10.        Net asset value per share

 

Net Asset Value (NAV) per share is calculated by dividing the net assets attributable to equity holders of the Company by the number of ordinary shares in issue as at 31 March 2010.

 



31 March 2010


31 March 2009

Net assets attributable to shareholders (£'000)

21,623


22,160

Number of ordinary shares in issue


16,666,667


16,666,667

Net asset value per share (pence)


130


133

 

11.        Investments in subsidiaries

 

For efficient portfolio management purposes, the Company has established the following subsidiary companies:

 

Name

Country of Incorporation

Ownership

interest

Agate India Investments Limited

Mauritius

100%

Turquoise Metal and Electricals Private Limited*

India

75%

Aquamarine Synthetics & Chemical Private Limited*

India

75%

Triton Project India Private Limited*

India

95%

Destination India Projects Private Limited*

India

95%

Cygnet Projects Private Limited*

India

90%

 

*Subsidiaries of Agate India Investments Limited

 

12.              Available-for-sale financial assets

 

Investments in unquoted Indian incorporated investee companies are designated as available-for-sale financial assets and are carried at fair value in the statement of financial position. The Group has invested in the debt of identified distressed companies (secured by way of charges on the assets) with the intention of acquiring the assets of these companies.

 

The Group's investments in the underlying investee companies are as follows as at 31 March 2010:

 

Investments

Capital invested

Fair value adjustment

Foreign exchange rate effect

Fair value


£'000

£'000

£'000

£'000

Indirect investments





Turquoise Metals and Electricals Private Limited

1,630

3,855

216

5,701

Aquamarine Synthetics and Chemicals Private. Limited

1,612

2,232

275

4,119

Triton Projects India Private Limited

1,020

(608)

161

573

Destination India Projects Private Limited

1,592

(896)

351

1,047

Cygnet Projects Private Limited

10,414

(3,711)

1,848

8,551






Direct investments





Lords Choloro Alkali Limited

1,108

(815)

218

511


17,376

57

3,069

20,502

 

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

 




31 March 2010

31 March 2009




£'000

£'000

Fair value brought forward



19,296

21,779

Additional investment



1,251

3,177

Refund from asset reconstruction company



(628)

-

Movement in fair value



(1,273)

(6,750)

Effect of foreign exchange fluctuations



1,856

1,090

Fair value at end of the year



20,502

19,296

 

Valuation methodology

The value of the Group's interest in the assets of the underlying investee companies had been determined by the Directors with the advice of an independent valuer. The value of the assets of the distressed companies is based on the Directors' best estimate of a fair value basis in a forced sale scenario. Physical assets of the distressed companies, against which the debts are secured, are valued by independent valuers and the fair value is discounted at appropriate rates taking into account costs to dispose the assets and time ofrealisation of the assets. Statutory liabilities which have a preference over secured debt, and resolution costs of between 1% and 10% (based on the valuer's opinion of the asset) of realisable value are deducted from therealisable value. Discounts are also applied based on the level of aggregation of debt achieved.

 

The investment in Lords Choloro Alkali Limited has been valued based on the lowest mid-market share price quoted in the period from 31 March 2010 to the date of agreement of the valuations by the Directors on 26 July 2010.The lowest mid-market share price during the period was INR23.1 per share on 11 June 2010.

 

13.     Trade and other receivables


Group

Company

Group

Company


31 March

2010

31 March 2010

31 March

2009

31 March 2009


£'000

£'000

£'000

£'000

Loan to subsidiary

-

-

-

2

Prepayments and accrued income

56

6

152

7


56

6

152

9

 

14.     Cash and cash equivalents


Group

Company

Group

Company


31 March

2010

31 March 2010

31 March

2009

31 March 2009


£'000

£'000

£'000

£'000

Bank balances

909

99

2,444

177

Short-term deposits

5,395

1,001

4,964

942

Cash and cash equivalents

6,304

1,100

7,408

1,119

 

15.        Share capital


No. of shares

Share capital

Share premium



£'000

£'000

Ordinary shares of £ 0.10 each

16,666,667

1,667

21,355


16,666,667

1,667

21,355

 

The authorised share capital of the Company is £10,000,000, divided into 100,000,000 Ordinary Shares of £0.10 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.

 

Warrants originally issued expired on 12 July 2009.

 

16.        Trade and other payables


Group

Company

Group

Company


31 March

2010

31 March 2010

31 March

2009

31 March 2009


£'000

£'000

£'000

£'000

Trade payables

128

35

145

11

Accruals

40

76

15

44


168

111

160

55

 

     

17.        Directors' remuneration

 

            Details of the Directors' annual remuneration are as follows:

           

Name of Director

Fee for Dhir India Investments plc

Directorship fee as member of audit committee

Total


£

£

£

C E Hambro

30,000

-

30,000

A Singh

28,172

5,781

33,953

J Bourbon

28,907

5,781

34,688

M Y Khan

25,000

-

25,000

Total

112,079

11,562

123,641

 

The Directors are each entitled to receive reimbursement of any expenses in relation to their appointment.  Total fees paid to the Directors for the year ended 31 March 2010 is £126,790 (2009: £132,784).

 

18.        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. The management fee and performance fee arrangements are set out in note 6.

 

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 used the legal services of Dhir & Dhir Associates and incurred the following charges:


Year ended

31 March 2010


Year ended

31 March 2009


£'000


£'000

Legal and professional fees

23


113

Balance outstanding as at 31 March

21


36

 

Amounts were billed based on normal market rates for such services and were due and payable under normal payment terms.

 

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.

 

Alchemist Asset Reconstruction Company Limited (formerly Dhir & Dhir Asset Reconstruction andSecuritisation Company Limited)

One of the Directors of the Company, Alok Dhir, is also a director of Alchemist Asset Reconstruction Company Limited ("AARCL"). The SPVs have entered into transactions with AARCL for acquisition of various assets/units in respect of the companies in which investments have been made. The details of outstanding balance of advances made by the SPVs to AARCL are as below:


31 March 2010


31 March 2009


£'000


£'000

Turquoise Metals and Electrical Private Limited

1,846


1,689

Aquamarine Synthetics and Chemicals Private Limited

427


391

Triton Projects India Private Limited

71


65

Destination India Projects Private Limited

-


646

Cygnet Projects Private Limited

2,873


2,616

Total

5,217


5,407

 

Co-investment

During the year to 31 March 2010, Alok Dhir has in terms of the co-investment commitments 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:


Equity Holding (%)


Investment

£'000

Turquoise Metals and Electrical Private Limited

25%


510.79

Aquamarine Synthetics and Chemicals Private Limited

25%


572.43

Triton Projects India Private Limited

5%


64.28

Destination India Projects Private Limited

5%


112.95

Cygnet Projects Private Limited

10%


913.30

 

Lords Chloro Alkali Limited

Alok Dhir is also a shareholder in Lords Chloro Alkali Limited. As at 31 March 2010, the Group has subscribed for 1.5 million equity shares at INR 60 per share in Lords Chloro Alkali Limited (see note 12).

 

19.        Exchange rates

 

The following exchange rates were used to translate assets and liabilities into the reporting currency at 31 March 2010:


2010

2010

2009

2009


Closing

rate

Average rate

Closing

rate

Average

rate

UK Sterling : Indian Rupee

67.8685

76.19825

74.1579

79.13275

           

20.    Financial risk management

 

The Group's activities expose it to a variety of financial risks: market risk (including market price risk, foreign currency risk and interest rate risk), credit risk and liquidity risk.  This note presents information about the Group's exposure to each of the above risks and the Group's objectives, policies and processes for measuring and managing risk.

 

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework.

 

The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.  The Group Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

 

Market risk

Market risk embodies the potential for both losses and gains and includes currency risk, interest risk and price risk. The Group invests in the distressed debt of unquoted companies. The Group's strategy on the management of market risk is driven by its investment objective as outlined in the Investment Manager's report. 

 

Price risk

The Group invests in a range of investments including unquoted equity securities and secured debt in a range of sectors. The Board monitors the Group's investment exposure against internal guidelines specifying the proportion of total assets that may be invested in various sectors.  Investments in such companies are inherently difficult to value.

 

Currency risk

The Groups' operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in currencies other than Sterling.  As a result, the Group is subject to the effects of exchange rate fluctuations with respect to these currencies.  The currency giving rise to this risk is primarily Indian Rupee.

 

An analysis of net assets by currency exposure is as follows:

 


31 March 2010


31 March 2009


£'000


£'000

UK Sterling

1,983


1,073

India Rupee

22,659


23,761


24,642


24,834

 

The Group's exposure to foreign currency risk was as follows based on notional amounts:

 


31 March 2010


31 March 2009


£'000


£'000

Available-for-sale financial assets

20,502


19,296

Trade and other receivables

49


143

Cash and cash equivalents

4,189


6,289

Trade and other payables

(29)


(105)

Provisions for other liabilities

(2,052)


(1,862)

Net balance sheet exposure

22,659


23,761

 

The significant exchange rates applied during the year are shown in note 19.

                                                                                                                      

A 10 percent strengthening / weakening of Sterling against the following currencies at 31 March would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

 


Profit


Equity


£'000


£'000

31 March 2009: INR

90


2,160

31 March 2010: INR

9


2,266

 

Interest rate risk

The Company is exposed to risks associated with the effects of fluctuations in prevailing market interest rates on its cash balances. Cash is invested at short-term market interest rates.

 

At the reporting date the interest rate profile of the Group's interest-bearing financial instruments was:

 


31 March 2010


31 March 2009


£'000


£'000

Variable rate instruments




Financial assets

6,304


7,408

 

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss.

 

                          A change of 100 basis points in interest rates would have increased or decreased equity by £63,000 (2009: £74,000).

 

Credit risk

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Management does not expect any counterparty to fail to meet its obligations.

 

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

 


Carrying amount


31 March 2010


31 March 2009


£'000


£'000

Available-for-sale financial assets at fair value

20,502


19,296

Trade and other receivables

56


152

Cash and cash equivalents

6,304


7,408

Total

26,862


26,856

 

There was no significant concentration of credit risk at 31 March 2009.

 

Liquidity risk

The Group maintains sufficient cash balances for working capital, and had no financial liabilities other than trade payables and provisions for liabilities and charges.  The Group had no derivative financial liabilities. The contractual cash flows are considered to be due within six months and equal to their carrying amount.

 

Fair values

All assets and liabilities at 31 March 2010 are considered to be stated at fair value.

 

Capital Management

The Board's policy is to maintain a strong capital base. Group capital comprises share capital and reserves.

There has been no change in the Groups approach to capital management in the year. Neither the Company nor any of its subsidiaries are subject to any externally forced capital requirements.

 

21.     Capital commitment

 

As at 31 March 2010 the Company had committed a total of GBP24.08million (2009: GBP24.08million) representing full investment of the funds raised in the Placing associated with Admission to AIM in July 2007. The Capital Commitment as at 31 March 2010 is therefore GBP6.70million (2009: GBP6.77million).

 

 

 


This information is provided by RNS
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