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Dhir India Inv. plc (DHIR)

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Wednesday 23 December, 2009

Dhir India Inv. plc

Half Yearly Report

RNS Number : 6021E
Dhir India Investments plc
23 December 2009
 




22 December 2009



Dhir India Investments plc

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


Half Year Results to 30 September 2009


Dhir India (AIM: DHIR), the first UK quoted company established to invest in the $50 billion Indian non-performing assets sector, announces half year results for the six months to 30 September 2009.  Comparative figures are taken from the unaudited accounts for the six months to 20 September 2008 and the audited accounts for the year to 31 March 2009. 


Summary



  • Strong balance sheet with cash and cash equivalents of £4.2 million (31 March 2009: £7.4 million) and no borrowings 

  • Adjusted (to exclude deferred tax provisions) net asset value per share 131(31 March 2009: 144p)

  • Realisation time frame extended as a result of current economic circumstances but initiatives being undertaken to increase value 


Charlie Hambro, Non-Executive Chairman of Dhir India, commented: 


"Since my last report we have continued to review our investments and I am pleased to report significant progress on a number of our investments since my last report in July 2009. 


As you will be aware your Company has six ongoing investments and we are now sufficiently encouraged to the extent that we expect finalisation on two investments within the next six months. We expect a third to be realisable within a nine month timeframe.  At present, the Board's view is that, of these three projects, we are hopeful of realising a significant return on our initial investment on two whilst the third should produce an adequate financial result.

 

As regards to the other three investments, whilst one may produce a disappointing result, the other two have significant potential value, but the realisation timeframe has been extended to one of 12 month plus. 


In the light of the above, your Board has decided not to seek an updated valuation at the interim stage but will revalue in the light of circumstances as at 31 March 2010. 


Given the above and the action taken by your Board six months ago, the overall cash position of the Company remains satisfactory. However, your Board continues to be aware of the importance of cash in the business and constantly keeps the position under review".


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


"While the western world is in the throes of a financial meltdown with the spectre of recession facing some of the developed economies, the long term India growth story is somewhat less affected by these developments. On the other hand the Indian economy has achieved a growth rate of nearly 8%.  Nonetheless, as a fall-out of the worldwide crisis, there is certainly a slowdown as investors have adopted a "wait and watch" policy and have become more cautious in committing to transactions. 


As a strategy, we are planning to work assiduously on completing the workout of the investments made by the Company and to seek exit options for existing investments while keeping our options open on lucrative lower priced deals coming into the market".




For further information, please visit www.dhirindia.com or contact: 


Shiva Consultants

Evolution Securities

Tavistock Communications   

Alok Dhir

Jeremy Ellis

Jeremy Carey

Shivi Agarwal

Chris Clarke 

Simon Hudson




Tel: + 91 11 6557 8855

Tel: +44 (0) 20 7071 4300

Tel: + 44 (0) 207 920 3150



Chairman's Statement


Strategy


Dhir India aims to capitalise on the non-performing assets (NPAs) largely created in the 1990s by the transformation of the Indian economy from a centrally regulated one to a quasi-free market economy. The NPAs resulting from this process, during a time of very high domestic interest rates in India, are typically over-leveraged capital structures with insufficient liquidity and in default of their obligations to creditors. However, many of the NPAs are underpinned by high quality manufacturing or other assets whose value can be unlocked through the resolution of the existing debt. The successful exit from such NPA investments made by Dhir India should deliver expected profits, providing shareholders with both income and capital growth.


As I have noted previously, the speed of any realisation is to a large extent dependant on macro economic conditions specifically in India but indirectly on the global situation. Over the last six months the global economic background appears to have stabilised whilst the previously noted optimism with regard to India has proved accurate.  


As a result, since my last report we have continued to review our investments and I am pleased to report significant progress on a number of our investments since my last report in July 2009. 


As you will be aware your Company has six ongoing investments and we are now sufficiently encouraged to the extent that we expect finalisation on two investments within the next six months. We expect a third to be realisable within a nine month timeframe. At present, the Board's view is that, of these three projects, we are hopeful of realising a significant return on our initial investment on two whilst the third should produce an adequate financial result.


As regards the other three investments, whilst one may produce a disappointing result, the other two have significant potential value, but the realisation timeframe has been extended to one of a 12 month plus. 


Your Board therefore expects the portfolio to change significantly over the next few months and is hopeful that some pleasing overall results will be obtained. In light of the above, your Board has decided not to seek an updated valuation at the interim stage but will revalue in the light of circumstances as at 31 March 2010. 


Results


The results produced a value for Dhir India's share of these investments of £18.7 million (31 March 2009: £19.3 million), excluding deferred tax provisions of £1.8 million (31 March 2009£1.8 million). This represents an uplift over the cost of investment to date of 1.6% and has resulted in a net asset value per share for the Company at the half year end of 120p (31 March 2009133p).


The adjusted net asset value excluding the deferred tax provision, which the Directors anticipate should not be payable, is 131(31 March 2009144p).  The consolidated income statement shows a loss attributable to shareholders of £0.6 million (period to 31 March 2009loss of £1.0 million) and a loss per share of 3.46p (period to 31 March 2009loss per share of 6.01p). The Group had cash balances of £4.2 7.4 million at 31 March 2009) and no borrowings.


Review


Dhir India has made six investments to date for a total potential cost of £24.58 million (assuming maximum positions are taken), of which £18.39 million had been invested by the half year end. The portfolio of investments is diversified by regions of India, by sector and by resolution strategy. The Company and its Investment Manager, Shiva Consultants Private Limited have been active in the process of cleaning up the encumbrances on the assets and have also been in discussions relating to the resolution of certain of the existing investments which are ongoing.


Summary of Investments


Project Turquoise 

The investment relates to a company which was originally engaged in the manufacture of electrical and electronic meters but ceased production in 1998 due to an inability to restructure the business and invest in plant and machinery. The plant is located on a 41,000 sq m site in the centre of the State Capital of a prominent state in North India. Investment to date totals £1.63 million.


Project Aquamarine 

Project Aquamarine relates to a company which was originally engaged in the manufacture of styrene butadiene rubber, nitrite rubber, styrenated phenol and alcohol. It suspended work in July 1999 due to severe capital constraints, labour and power supply issues. Its plant is located over 1,200 acres of land which is situated in a tier II industrial city in Uttar Pradesh, in North India. Investment to date totals £1.66 million.


Project Triton 

The company was originally engaged in the manufacture of edible oil at its refining unit in Western India. Its factory, which has a daily capacity of 250 MT per day is built on a 21,524 sq m site in a prominent city of Gujarat. The unit has been closed since 2006. Investment to date totals £1.04 million.


Project Destination

The company to which this investment relates had proposed to set up a resort in an internationally popular tourist destination in Western India. The land, with its planning consent, is an attractive site with significant development potential. Investment to date totals £2.34 million.


Project LCAL 

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. Investment to date totals £1.11 million.


The Bombay Stock Exchange (BSE) has approved listing of its shares. LCAL is now in the process of dematerialising the shares to be held in electronic format with the National Securities Depository Limited to enable trading to commence.


Project Cygnet

This investment relates to a company which has been engaged in the manufacture of stainless steel at its plant located on a 51 acre prime site in North India close to New Delhi. Investment to date totals £10.61 million.


Outlook


As I have reported in my main statement the Company has developed its investments to a point where realisation on a number of projects, subject of course to the normal caveats, is expected within the next few months. It is always unwise to anticipate final results on these types of investments but your Board is cautiously optimistic. In this vein your Board looks forward to reporting once again on the progress of the Company in July 2010. 


Charlie Hambro

22 December 2009



Independent Review Report to Dhir India Investments Plc


Introduction


We have been engaged by the Company to review the condensed set of financial statements in the half-yearly report for the six months ended 30 September 2009 which comprises the Condensed Consolidated Statement of Incomethe Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Cash Flows, the Condensed Consolidated Statement of Changes in Equity and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 


This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.


Directors' responsibilities


The half-yearly report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.


As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRS. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with IAS 34 Interim Financial Reporting.


Our responsibility


Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review. 


Scope of review


We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.


Conclusion


Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with IAS 34 and the AIM Rules.



KPMG Audit LLC

Chartered Accountants 
Heritage Court,

41 Athol Street
Douglas

Isle of ManIM99 1HN


22 December 2009


DHIR INDIA INVESTMENTS PLC 

CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE SIX MONTHS TO 30 SEPTEMBER 2009



Notes


Unaudited

From 1 April 2009

to

30 September 2009

Unaudited

From 1 April 2008 

to

30 September 2008

Audited

From 1 April 2008

to 

31 March 2009




£'000


£'000


£'000









Bank interest 



11


189


391

Administrative expenses



(588)


(587)


(1,426)


Loss Before Taxation



(577)


(408)


(1,035)

Taxation



-


-


-


Loss After Taxation



(577)


(408)


(1,035)









Attributable to:








Equity Shareholders of the Company



(569)


(407)


(1,002)

Minority interest



(8)


(1)


(33)


Total



(577)


(408)


(1,035)


Basic and diluted loss per Ordinary Share

7


(3.46p)


(2.44p)


(6.01p)


DHIR INDIA INVESTMENTS PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 

FOR THE SIX MONTHS TO 30 SEPTEMBER 2009




Notes


Unaudited

From 1 April 2009

to

30 September 2009

Unaudited

From 1 April 2008 

to

30 September 2008

Audited

From 1 April 2008

to

31 March 2009




 £'000


£'000


£'000









Loss for the period



(577)


(408)


(1,035)









Fair value gains 








Unrealised change in fair value of available for sale financial assets

8


(1,035)


54


(6,750)

Add/(Less): deferred taxation



34


(18)


840

Less : performance fee

6


-


(9)


1,088




(1,001)


27


(4,822)

Foreign currency translation differences 



(796)


(2,624)


853

Other comprehensive income for the period



(1,797)


(2,597)


(3,969)









Total comprehensive income for the period



(2,374)


(3,005)


(5,004)









Attributable to:








Equity Shareholders of the Company



(2,136)


(3,166)


(4,282)

Minority interest



(238)


161


(722)


Total



(2,374)


(3,005)


(5,004)


DHIR INDIA INVESTMENTS PLC 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE SIX MONTHS TO 30 SEPTEMBER 2009



Notes


Unaudited

From 1 April 2009

to

30 September 2009

Unaudited

From 1 April 2008 

to

30 September 2008

Audited

From 1 April 2008

to

31 March 2009




£'000


£'000


£'000









Current assets








Available for sale financial assets

8


18,681


23,918


19,296

Trade and other receivables



41


69


152

Money market investment



1,549


-


-

Cash and cash equivalents



4,163


6,674


7,408


Total assets



24,434


30,661


26,856









Equity








Issued share capital

9


1,667


1,667


1,667

Share premium



21,355


21,355


21,355

Unrealised investment revaluation reserve



(1,509)


3,152


(640)

Foreign currency translation reserve



157


(2,419)


855

Retained reserves



(1,646)


7


(1,077)

Equity attributable to equity holders 



20,024


23,762


22,160


Minority interest in equity



2,436


2,888


2,674


Total equity



22,460


26,650


24,834









Non-current liabilities








Deferred income tax liabilities



1,828


2,720


1,862

Provision for other liabilities and charges




-


1,169


-

Total non-current liabilities



1,828


3,889


1,862









Current liabilities








Trade and other payables



146


122


160


Total current liabilities



146


122


160


Total liabilities



1,974


4,011


2,022


Total equity and liabilities



24,434


30,661


26,856



DHIR INDIA INVESTMENTS PLC 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS TO 30 SEPTEMBER 2009


Group

Share

capital

Share

premium

Foreign

currency

translation

reserve


Unrealised

investment

revaluation

reserve

Retained

profit


Total

Minority

 Interest

Total

Equity



£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

Balance at

31 March 2008

(audited)

1,667

21,355

205

3,290

(75)

 26,442

2,727

29,169

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

-

-

-

(3,930)

-

(3,930)

(892)

(4,822)

Loss for the year

-

-

-

-

(1002)

(1,002)

(33)

(1,035)

Addition of minority interest

-

-

-

-

-

-

669

669

Foreign currency translation differences

-

-

650

-

-

650 

203

853

Balance at

31 March 2009

(audited)

1,667

21,355

855

(640)

(1,077)

22,160

2,674

24,834

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

-

-

-

(869)

-

(869)

(132)

(1,001)

Loss for the period

-

-

-

-

(569)

(569)

(8)

(577)

Foreign currency translation differences

-

-

(698)

-

-

(698)

(98)

(796)

Balance at

30 September 2009

(unaudited)

1,667

21,355

157

(1,509)

(1,646)

20,024

2,436

22,460


DHIR INDIA INVESTMENTS PLC 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 30 SEPTEMBER 2009



Unaudited

From 1 April 2009

to

30 September 2009

Unaudited

From 1 April 2008 

 to

30 September 2008

Audited

From 1 April 2008

to 

31 March 2009



£'000


£'000


£'000








Operating activites







Loss for the period


(577)


(408)


(1,035)

Decrease/(increase) in trade and other receivables


111


(5)


(88)

(Decrease)/increase in trade and other payables


(14)


6


39


Cash used in operating activities



(480)


(407)


(1,084)


Investing activities







Investment in money market funds


(1,549)


-


-

Acquisition of investments


(1,035)


(2,865)


(3,954)


Cash used in investing activities



(2,584)



(2,865)



(3,954)


Financing activities







Proceeds from minority interests


-


-


669


Cash generated from financing activities


-


-


669








Net decrease in cash and cash equivalents



(3,064)


(3,272)


(4,369)


Effect of exchange rate fluctuations


(181)


(1,286)


545

Cash and cash equivalents at start of period


7,408


11,232


11,232

Cash and cash equivalents at 30 September 2009



4,163



6,674



7,408








Interest received in period 


11


185


308



Notes to the Unaudited Interim Results

For the period ended 30 September 2009


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 placing 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.


2. Significant accounting policies


These unaudited interim results have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting". They do not include all the information required for full consolidated financial statements and should be read in conjunction with the consolidated financial statements for the year ended 31 March 2009.


No IFRSs have been adopted early, however it is likely that any Standards issued (but not yet effective) would only require changes in disclosure and not result in changes to the accounting policies for recognition and measurement.


The accounting policies applied by the Group in these condensed consolidated statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 March 2009.


3. Taxation


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


4. Segmental reporting


The Group operates as one business and geographical segment, being investment in distressed debt in India.


5. Related party transactions


Alok Dhir is the controlling shareholder of Shiva Consultants Private Limited (the Investment Manager) and a Director of Dhir India Investments plc. During the period the Company had the following related party transactions with the Investment Manager. The management fee and performance fee arrangements are set out in note 5.


6. Investment Manager


The Investment Manager is entitled to a management fee of 1.8 per cent per annum of the Net Asset Value of the Group's investments ("NAV") which is 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 fee for the period commencing on the day after the second anniversary of Admission up to and including the third anniversary of the Admission for which fees are payable is 1.5 per cent per annum. 


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: £240,148 (31 March 2009£649,000).

Fees payable to the Investment Manager on the basis of NAV: £nil (31 March 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.


Performance fee contingent on realisation of £nil (31 March 2009£nil) has been provided on the net fair value increase in the investments. 


7.  Loss per Ordinary Share


Basic


The basic loss per Ordinary Share has been calculated by dividing the loss for the period of £577,000 (31 March 2009: loss £1,035,000) by the average number of Ordinary Shares of 16,666,677 in issue throughout the period.


Fully Diluted


The fully diluted and basic earnings per Ordinary Shares are the same, as based on the exercise price of the Warrants, the Warrants are not dilutive.


8. Available for Sale - Financial Assets



Unaudited

From 1 April 2009

to

30 September 2009

Unaudited

From 1 April 2008

 to

30 September 2008

Audited

From 1 April 2008

to

 31 March 2009



£'000


£'000


£'000








Balance at beginning of period


19,296


21,779


17,529

Additions


985


2,865


-

Advances 


50


1,000


-

Movement in unrealised (depreciation) / appreciation



(1,035)



54



1,330

Foreign exchange effects


(615)


(1,780)


437


End of period


18,681


23,918


19,296


9. Share Capital




Unaudited

From 1 April 2009

to

30 September 2009

Unaudited

From 1 April 2008

 to

30 September 2008

Audited

From 1 April 2008

to

31 March 2009




£'000


£'000


£'000









Authorised








100,000,000 Ordinary shares of 10p



10,000


10,000


10,000

Allotted, called up and fully paid issued during the period








16,666,677 Ordinary shares of 10p



1,667


1,667


1,667


The Company issued 16,666,665 Ordinary Shares of 10p for cash at a placing price of 1.50p per share on 12 July 2007.


10. Warrants


At the placing on 12 July 2007, for each Ordinary Share received the subscriber also received one Warrant for every five Ordinary Shares.



Allotted

Exercise Price

Subscription Period

Warrants

3,333,333

£1.875

12 July 2008 - 12 July 2009



11. Capital Commitments


The total potential cost of investment as on 30 September 2009 is £24.58 million (31 March 2009£24.08 million). As far as committed funds are concerned, there are no legal commitments pending at that date. However, as per the original investment proposals, the maximum positions that could be taken in the six investment opportunities total £24.42 million.


12. Financial instruments and risks


The Group's financial risk management objectives and risks are consistent with those disclosed in the consolidated financial statements for the year ended 31 March 2009.





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