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Delivering Excellence, Partnering Success

XYZ Limited

Due Diligence Report

Table of Contents

Scope and Process Summary 1

I. Background 3

II. Industry Overview 5

III. Financial Overview 11

IV. Key Issues / Observations 17

V. Other Matters 38

VI. Projected profitability 45

VII. Annexure

Scope and Process Due Diligence Process This report is based on significant and material findings of the due diligence review performed on

accounting, financial, and tax information of XYZ Limited, made available by the Management.

Information relied on the Due diligence Process

Management Representations

The Management representations stated in this report, have been orally confirmed by them. In addition, in respect of any factual information given to us by the management of XYZ Limited ,we require from them, written confirmation that such information was accurate and that no significant information, essential to the due diligence review, has been withheld from us. Till the date of this report, the Management has not provided us with written confirmation in this respect. Accordingly, our report is subject to this limitation.

For the purpose of this report, we have placed reliance on: • Audited financial statements of XYZ Limited as at and for the year ended 31 Mar 11 and 31 Mar 12

(‘FY11’ and ‘FY12’) • Unaudited financial statements of XYZ Limited (without notes to the financial statements) as at and

for the year ended 31 Mar 13 (‘FY13’) • Information made available for Q1FY14 • Agreements, select documents and details provided by the Management • Information and explanations provided by the Management. • Management information system (MIS) details provided by the Management

Significant scope matters .

Report structure

.

Our period under review was FY11, FY12 and FY13 and Q1FY14. The following was the scope of work: • Analyses of the financial statements including profit and loss account and balance sheets • Analyses of the MIS presented to us by the Management • Calculation of the future projections and assessment of viability of the project

This is an exception based report and matters which have come to our knowledge through our interviews and analyses have been highlighted by us. We make no representation regarding the sufficiency of our work either for purposes for which this report has been requested or for any other purpose.

1

Scope and Process

Limitations The following information was not available which could have a material bearing on our analyses • Area wise (Area 1, Area 2 and Area 3) revenue breakup in units • Area wise (Area 1, Area 2 and Area 3) breakup of variety of products sold • Details of the age and location of deep freezers • Costing of certain products were not made available • Further, our work did not constitute an audit conducted in accordance with generally accepted

auditing standards, or an examination of internal controls or other attestation or review services in accordance with standards established by the Institute of Chartered Accountants of India (ICAI). Accordingly, this report should not be considered as an expression of opinion or any other form of assurance on the financial statements of the Company or on its financial or other information, or on the operating and internal controls of the Company.

• It may be noted that in our work we have relied on the integrity of the information provided to us by the Management for the purpose, and, other than reviewing the consistency of such information, we have not sought to carry out an independent verification, thereof.

2

Background

3

XYZ Pvt. Ltd. (‘XYZ’) was incorporated on 20th May 1998 and is engaged in the business of production and distribution of ‘Classified’ brand of Ice Creams. The Company was converted into a limited company and the name of the Company was changed to XYZ Limited on 5th Aug 2001. The Management represented that this was done to raise funds.

The manufacturing unit is located at ABC Industrial Estate, Plot X,– Area 1, and the registered office is located at PQR City – Area 4

XYZ has a large number of distributors and dealers for the sale of

its product in Area 1 and the neighbouring states of Area 2 and Area 3. XYZ either provides its own deep freezers to such distributors / dealers for the exclusive sale of its ice cream or supplies its product to the distributor / dealer who have their own deep freezers.

The Classified range of ice creams has 25 different product categories with over 180 products on offer.

The current Directors of the company are Mr. A, Mr. B, Ms. C, Mrs. D and Mrs. I

Proposed Transaction

EFG Limited (‘EFG’) is evaluating a buy out of XYZ Limited. In this connection, EFG has appointed Mangal Advisory Services (‘MAS’) to carry out a due diligence review on XYZ.

Background Shareholding Details

Name No. of Shares % holding

Mr. A 80,000 8%

Mr. B 80,000 8%

Ms. C 200,000 20%

Mrs. D 100,000 10%

Mr. E 60,000 6%

Mrs. F 59,600 6%

Ms. G 82,000 8%

Mr. H 40,000 4%

Mrs. I 298,400 30%

Total 1,000,000 100%

Equity Shares of Rs. 10 each

4

Industry Overview

5

2500 2800 3136

3512 3934

2012 2013 2014 2015 2016

Market Size (INR Crore.)

The industry is growing steadily with the western and northern regions accounting for the largest consumption

• Size and Growth

– Total Industry valued at over INR 5500 Crore.

– Organised sector worth INR 2500 Cr. in 2012 (45%)

– Growing over 15% p.a. in 2009-2012

– Forecast to grow at a CAGR of 12% p.a. upto 2016

• Characteristics

– Western and Northern regions together account for 65% of total market consumption

– 60% of ice cream sales occur during the summer months of April-June

– Vanilla is the highest selling flavour and together with strawberry and chocolate it accounts for 70% of the market

Overview Size and Growth

30%

20%

Source: Euromonitor International, Ice cream in India (2012)

Geographic Distribution

North,

30%

South,

20%

East,

15%

West,

35%

6

Market Players

• Fiercely competitive due to attractive economics.

• Organized sector comprises GCMMF’s Amul, HUL’s Kwality Walls, Mother Diary, Baskin Robbins and a number of regional brands

• Amul is the market leader and is at the forefront of targeting the rural market

• For most national players viz. GCMMF, HUL and Mother Diary, revenue from ice cream accounts for a small portion of their total revenues

• Premium segment:

– Baskin Robbins is the single largest premium ice cream brand

– New entrants include Amul, Movenpick, Haagen Dazs and Snowberry

Market share

Source: Economic Times Cold Wars (2011), FNB News The Ice cream industry (2012)

GCMMF

37% Vadilal

15%

Mother Diary

14%

HUL

13%

Baskin Robbins

5%

Others

16%

55% Unorganized

45%

Organized

7

Key Trends

Growing per-capita consumption (from 250 ml in 2010 to 350 ml in 2012)

Increasing manufacturing of “frozen Desserts” (using cheaper vegetable fats rather than Dairy Fats)

Targeting specific niche segments (probiotics, Diet, etc.)

Franchise model and strategic partnerships to enhance distribution

8

Enhancing network through franchises and strategic partnerships Company Projects

HUL Kiosks - Swirls

GCMMF Increase Amul Parlours from 1,800 to 3,000 in 2008 and 10,000 by 2009, Cyber stores in 100 cities, Cyber clubs in 125 cities

Hatsun Agro Premium ice cream outlet – Arun Ice Cream Unlimited

Milkway

Express 1000 outlets in southern and central India by 2009, counters at corporate campuses

Baskin

Robbins Outlets in malls and multiplexes

Company Affiliation Purpose

HUL Indian Oil Corporation (IOC) Retail stores at petrol stations

Oxicash Marketing via scratch and win contests

GCMMF Bharat Petroleum Corporation Ltd (BPCL) Mobile kiosks at petrol stations

Baskin Robbins

Lifestyle, Coca-Cola, ICICI credit cards and Cox & Kings

Exclusive retailing

Milkway Express

Spencer Retail Ltd and Foodworld Targeting the southern market

Movenpick Rhapsody Foods & Beverages

Re-launch brand in Mumbai, Delhi, Bangalore, Hyderabad, Kolkata and Chennai

Part

ner

ship

s F

ran

chis

ing

Source: FnBnews “Coops, the mainstay of India's dairy model”, October 2008; Business Standard “Ice-cream makers add healthy

flavours”, April 2008; FoodIndustryIndia “Gelato ice creams is a hit at AAHAR”, March 2008 9

Source: Financial Express “Ice cream war begins as HUL, Amul oil plans”, February 2008

• Producers have launched more “Indianised” flavours such as Kulfi, Shahi Tukda

• Naturally flavoured ice cream i.e. without any artificial or synthetic flavour has been introduced for the premium segment

• Players are capitalizing on the market which has become extremely health conscious

Product diversification to target specific segments

Company Product Health Benefits

Hindustan Unilever

(HUL)

Moo High calcium content, low

calorie and fat

GCMMF

Probiotic

range –

Amul Prolife

Increases immunity, help in

digestion, prevents

diarrhoea and growth of

colon cancer

Mother Dairy

Diet Low sugar and fat content

10

Financial Overview

11

Overview of Profit & Loss Accounts Profit & Loss Account of XYZ

INR FY13 FY12 FY11

% variance

FY13 over

FY12

% variance

FY12 over

FY11

% to total

FY13

% to total

FY12

% to total

FY11

Revenue

Sales 57,999,179 63,902,156 61,411,260 -9% 4% 101% 102% 98%

Other Income 48,534 29,029 67,006 67% -57% 0% 0% 0%

Difference in WIP and FG

Closing Stock-535,755 -982,288 1,221,269 -45% -180% -1% -2% 2%

Total Income 57,511,958 62,948,898 62,699,535 -9% 0% 100% 100% 100%

Expenses

Raw Material Consumed 16,899,036 17,006,415 16,182,289 -1% 5% 29% 27% 26%

Packaging Material Consumed 8,961,886 10,115,923 10,067,964 -11% 0% 16% 16% 16%

Direct Expenses 5,277,346 6,347,909 6,112,275 -17% 4% 9% 10% 10%

Employee Benefit Expense 14,261,028 12,880,628 11,335,060 11% 14% 25% 20% 18%

Administrative Overheads 3,149,865 3,966,525 3,970,806 -21% 0% 5% 6% 6%

Sales/Distribution Overheads 8,045,023 9,263,617 9,018,900 -13% 3% 14% 15% 14%

Total Expenses 56,594,183 59,581,017 56,687,294 -5% 5% 98% 95% 90%

EBITDA 917,775 3,367,881 6,012,240 -73% -44% 2% 5% 10%

Depreciation 4,671,875 4,779,593 4,695,271 -2% 2% 8% 8% 7%

EBIT -3,754,101 -1,411,712 1,316,970 166% -207% -7% -2% 2%

Interest 1,261,906 1,568,946 1,489,357 -20% 5% 2% 2% 2%

EBT -5,016,006 -2,980,658 -172,388 68% 1629% -9% -5% 0%

Source: Audited / Unaudited Financial Statements

12

Overview of Profit & Loss Accounts (1/2) Revenue from sales includes income from sale of Ice creams. Net sales have reduced by 9% in FY13

over FY12. Net sales in FY12 however increased by 4% in FY12 over FY11. The Management represented that the decline is on account of shortage of funds to deploy additional deep freezers in the market and for various sales promotion schemes.

Revenue from Other Income includes Credit Balances written off, Interest on Bank deposits and dividend on Money Bank shares.

Raw Materials consumption includes expenses for the flavors, milk and other ingredients required for production of Ice Creams. In FY13, raw material consumption has dropped marginally by 1%, in comparison to a 9% drop in sales.

Packing Materials includes a variety of lids, boxes and spoons used for the packaging of the Ice Cream produced. Costs associated with it have declined by 11% in FY13, in line with the drop in sales.

Direct Expenses primarily includes costs incurred for the production process like electricity INR 26.7 lakhs, repairs and maintenance of plant and machinery and deep freezers INR 9 lakhs and generator diesel INR 6 lakhs. In FY13, Direct Expenses have gone down by 17% primarily on account of reduction in repairs and maintenance cost of Plant and Machinery and Deep freezers. Refer Annexure II for details.

Employee benefit expense comprising of salaries, wages and bonus of INR 1.2 cr along with other staff costs. These costs has shown a steady increase over the years, forming 25% of total Income in FY13, which is on the higher side. Refer Annexure II for details.

Administrative overheads primarily comprise of conveyance INR 7.8 lakhs, security charges of INR 5 lakhs and other expenses required for daily administration. These expenses have declined by 21% in FY13. This is primarily due to no bonus being declared in FY13 while in FY12 bonus of INR 3.8 lakhs was declared and reduction in rent of Area 6 Depot, which has been discontinued in FY13. Refer Annexure II for details.

13

Overview of Profit & Loss Accounts (2/2) Sales/Distribution overheads includes cost incurred in the distribution of Ice creams from the factory to

the distributors/retailers. It primarily comprises of advertising of INR 2.8 lakhs, excise duty of INR 11. 4 lakhs, vehicle maintenance costs INR 30.4 lakhs, repairs and maintenance of vehicles INR 9.3 lakhs. Sales/Distribution Overheads have declined on account of reduction in Advertisement costs in FY13. The Management represented that this was on account of fund constraints. Refer Annexure II for details.

Interest costs primarily comprise interest on term loans, cash credit balance and hire purchase accounts on vehicles. The interest costs have reduced primarily on account of reduction in term loans and lesser utilisation of cash credit. The Management represented that over last 6 months the cash credit has been freezed by the Bank due to non deposit of any cash flows.

The Company has incurred a loss after depreciation of Rs. 50.16 lakhs in FY13, in comparison to a loss of Rs. 29.8 lakhs in the previous year, primarily on account of drop in sales.

14

Overview of Balance Sheets (1/2) Share capital as at 31 March 2013 comprises of 10,00,000

equity shares, of Rs. 10 each, fully paid .

Secured Loans primarily comprise of Term loans availed from Money Bank of Rs. 14.97 lakhs, cash credit limit with Money Bank of Rs. 47.14 lakhs, Fund financiers of Rs. 4.4 lakhs, Cash Bank of Rs. 2.58 lakhs and Business Finance of Rs. 7.23 lakhs.

Unsecured Loans primarily comprise loans given by Mr. A of Rs. 18.05 lakhs, Mr. B of Rs. 11.2 lakhs and Finance Services Pvt Ltd of Rs. 105 lakhs.

As at 31 March 2013, Sundry Creditors includes payments outstanding with the suppliers of raw materials and packing materials. A large amount of the same was found to be overdue.

Advance from customers comprises of the security deposits taken against the deep freezers provided to the distributors. The Management represented that for every deep freezer provided to the distributors, the Management collects security deposit ranging from Rs. 10,000-17,000. This is primarily to secure against any damages to deep freezers or non payment of dues. The deposit is equally apportioned over 5 years.

Outstanding expenses mainly consists of employees and other statutory payable. A large portion of such amounts was found to be overdue.

Balance Sheets of XYZ

INRAs at 31 March 2013

As at 31

March 2012

I. Equity and LiabilitiesShareholders Funds

Share Capital 10,000,000 10,000,000

Reserves & Surplus 2,500,000 2,500,000

Less: Accumulated losses 21,328,934 16,312,927

Net worth (8,828,934) (3,812,927)

Non Current Liabilities

Secured Loans 7,635,188 8,627,688

Unsecured Loans 14,378,328 16,648,340

Current Liabilities

Sundry Creditors 9,321,169 9,905,765

Advance form Customers 10,852,403 9,199,674

Outstanding Expenses 4,624,686 3,311,424

Total 37,982,840 43,879,965

II. AssetsNon Current Assets

Fixed Assets (Net) 26,316,675 30,221,263

Investments 100,000 100,000

Current Assets

Cash and Bank Balances 87,065 319,019

Sundry Debtors 1,954,093 2,597,708

Closing Stock 8,219,813 9,389,156

Advances recievable in cash/kind

for value to be recieved640,994 531,954

Deposits and Other advances 664,200 720,865

Total 37,982,840 43,879,964

Source: Audited / Unaudited Financial Statements

15

Overview of Balance Sheets (2/2)

Fixed assets as at 31 Mar 13 primarily comprise deep freezers INR 82.8 lakhs, plant and machinery INR 59 lakhs, factory building INR 31.8 lakhs.

Investments include 4000 shares of Money Bank of Rs. 25 each.

As at 31 March 2013, of the total debtors, 10% is overdue for more than 6 months. Refer Annexure VI for details.

Closing stock primarily comprise raw material of INR 8 lakhs and packing material of INR 68.2 lakhs in stock as at 31 Mar 13.

Advances recoverable primarily includes advance to creditors INR 2.6 lakhs and prepaid expenses INR 2.9 lakhs.

Deposits and other advances primarily includes income tax for FY09 INR 1.4 lakhs and input credit on VAT INR 1.5 lakhs.

Refer Annexure I for break-up of Fixed Assets, Advances Receivable and Deposits.

Balance Sheets of XYZ

INRAs at 31 March 2013

As at 31

March 2012

I. Equity and LiabilitiesShareholders Funds

Share Capital 10,000,000 10,000,000

Reserves & Surplus 2,500,000 2,500,000

Less: Accumulated losses 21,328,934 16,312,927

Net worth (8,828,934) (3,812,927)

Non Current Liabilities

Secured Loans 7,635,188 8,627,688

Unsecured Loans 14,378,328 16,648,340

Current Liabilities

Sundry Creditors 9,321,169 9,905,765

Advance form Customers 10,852,403 9,199,674

Outstanding Expenses 4,624,686 3,311,424

Total 37,982,840 43,879,965

II. AssetsNon Current Assets

Fixed Assets (Net) 26,316,675 30,221,263

Investments 100,000 100,000

Current Assets

Cash and Bank Balances 87,065 319,019

Sundry Debtors 1,954,093 2,597,708

Closing Stock 8,219,813 9,389,156

Advances recievable in cash/kind

for value to be recieved640,994 531,954

Deposits and Other advances 664,200 720,865

Total 37,982,840 43,879,964

Source: Audited / Unaudited Financial Statements

16

Key Issues / Observations

17

Sales from September 2012 have shown a declining trend resulting in an overall drop of 10% in sales value in FY13 over FY12

o Overall Sales have dropped by 10% in FY13, in comparison with FY12. Consistent drop in sales is observed from Sep 12 till Mar 13. Feb 13 and Mar 13 sales have dropped by over 40% in FY13 over FY12.

o The Management represented that the drop in sales have been primarily due to:

o lack of funds to buy new deep freezers to increase market reach through new distributors/retailers

o increased competitors providing lucrative incentives to XYZ’s distributors also impacted sales. XYZ on account of fund shortage had to cut down its sales spending.

o Mining ban in Area 2 and Area 1 further had its impact on sales

Monthly Sales Comparison

FY13 FY12 FY11% Variance FY13 over

FY12

% Variance FY12

over FY11

Apr 1,43,58,261 1,28,80,636 1,35,32,388 11% -5%

May 1,40,30,496 1,44,07,863 1,40,57,690 -3% 2%

Jun 57,80,062 39,18,714 52,99,546 47% -26%

Jul 32,19,998 27,07,042 20,27,525 19% 34%

Aug 32,73,379 30,64,871 23,50,320 7% 30%

Sep 31,74,293 36,51,149 35,57,117 -13% 3%

Oct 53,91,986 66,76,237 52,33,259 -19% 28%

Nov 54,76,046 66,67,120 57,44,543 -18% 16%

Dec 49,11,613 57,94,921 50,18,965 -15% 15%

Jan 43,69,728 51,60,872 43,33,775 -15% 19%

Feb 44,80,951 75,80,055 65,50,994 -41% 16%

Mar 67,38,930 1,12,72,238 1,03,47,812 -40% 9%

Total 7,52,05,743 8,37,81,718 7,80,53,934 -10% 7%

The sales figures above are gross sales including excise

Source: Sales data are as per the Management Information System and are significantly higher than the sales

reported in the financial statements

18

o The Management represented that the sharp drop in sales in the last 3 months has been primarily due to the news spread in the market about the possible sale of the company, which has been used by the competitors to their advantage. As a result many of the distributors/retailers, especially the ones using their own deep freezers have switched to other brands. The Management further represented that the ban on mining in Area 1 has also had an impact on the sales in Q1FY14.

o The Management however expressed confidence that fund infusion primarily targeted towards a sales and incentive strategy could turn around this situation.

Monthly Sales Comparison

2013 2012 2011 2010% Variance 2013

over 12

% Variance 2012

over 11

% Variance 2011

over 10

Apr 8,454,973 14,358,261 12,880,636 13,532,388 -41% 11% -5%

May 8,560,090 14,030,496 14,407,863 14,057,690 -39% -3% 2%

Jun 1,604,839 5,780,062 3,918,714 5,299,546 -72% 47% -26%

Total 18,619,902 34,168,819 31,207,213 32,889,624 -46% 9% -5%

Q1 FY14 sales have dropped by 46% as compared to Q1 FY13.

Using June month as a base the off season sales in 2013 (June – Sep) may drop by 70% Seasonal Comparison

2012-13 2011-12 2010-11% Variance

2013 over 12

% Variance

2012 over 11

Peak Season Sales* 48,384,317 71,540,200 64,517,847 -32% 11%

Off Season Sales** 4,585,254 15,447,732 13,341,776 -70% 16%

Total 52,969,571 86,987,932 77,859,623 -39% 12%

*from Oct to May

**from June to Sept

Off Season Sales for 2013 have been extrapolated based on the June Sales to rest of the off season sales ratios

for the previous years.19

17 out of 179 products currently offered to customers constitute 60% of unit-wise sales and 57% of net sales in FY13.

39 out of 179 products in the Normal moving category constitute to 31% of net sales in FY13.

The remaining 123 products in the Slow moving category constitute to the remaining 12% of sales.

The Management represented that the non moving products were produced on a ‘made-to-order’ basis as and when there was a request. Furthermore, the minimum order quantity for such products had to be 10 units.

It would be more prudent to focus and increase the market for the fast moving variety rather than waste production space and time for the non moving items.

88% of the revenue is attributed to just 56 out of 179 products

Number of

Products Unit Sales Revenue

% Unit

Sales

%

Revenue

Sales

Fast Moving 17 4,68,186 3,71,24,389 60% 57%

Normal Moving 39 2,31,444 2,04,32,810 30% 31%

Slow Moving 123 74,897 79,15,879 10% 12%The sales figure from our analysis does not reconcile with total sales figures in the MIS. The unit price

provided to us was the net price obtained from Area 2 which would differ from the net sales obtained

from Area 1 and Area 3 due to the difference in VAT rates

20

XYZ has a distribution network in Area 1, Area 3 and Area 2. The Management represented that at one time Area 1 and Area 3 were contributing equally to the total sales. However, Area 1 sales have declined over the period to the current status.

Sales from Area 1, Area 2 and Area 3 contributed 29%, 25% and 46% to the total sales, respectively.

Sales in Area 3 declined the most at 13% followed by Area 1 11% and Area 2 5%.

Sales in all three Areas had increased in FY12 over FY11. However, the main increase was in Area 2 of 23%. The Management represented that this was on account of opening of new markets in Area 2.

Sales in all three states are primarily categorised as:

Sales through Company deep freezers which exclusively houses Classified brand

Sales through deep freezers belonging to distributors, wherein he could store other brands as well.

The Management however could not provide us the exact break up between own deep freezer and distributor owned deep freezer sales. We were informed that Area 1 has a large number of distributor owned deep freezer sales.

Sales from all three states have dropped in FY13 over FY12. Area-wise Sales

FY13 FY12 FY11% Variance

FY13 over 12

% Variance

FY12 over 11

% to Total

Sales FY13

% to Total

Sales FY12

Area 1 22,123,838 24,743,479 24,278,616 -11% 2% 29% 30%

Area 2 18,713,955 19,683,174 15,956,648 -5% 23% 25% 23%

Area 3 34,367,950 39,355,065 37,818,670 -13% 4% 46% 47%

Total 75,205,743 83,781,718 78,053,934 -10% 7% 100% 100%

21

Sales in Area 1 contributed 29% of the total sales in FY13. Sales in Area 1 have declined by 11% in FY13 over FY12 while remaining steady in FY12 over FY11.

Except for Market 1, Market 3 and Market 6, sales from the remaining 10 markets have declined in FY13 in comparison with FY12.

Sales from Market 4, Market 7, Market 10, Market 12, Market 13 and other sales (party orders, exhibition and staff sales) have been falling year on year since 2011.

Only Market 1 has shown steady growth over the period.

Largest drop in sales of 31%, amounting to approx. 7 lakhs is seen from Market 13 distributor in FY13.

Area 1 – Sales from 10 out of 13 locations have declined in sales in FY13, in comparison to FY12 in Area 1 (1/2)

Area 1

Distributor FY13 FY12 FY11% Variance

FY13 over 12

% Variance

FY12 over 11

% tot total in

FY13

% tot total in

FY12

Market 1 1,964,805 1,852,917 1,783,890 6% 4% 3% 2%

Market 2 2,540,828 2,905,521 2,796,050 -13% 4% 3% 3%

Market 3 2,634,143 2,621,135 2,359,127 0% 11% 4% 3%

Market 4 1,703,184 2,058,504 2,250,900 -17% -9% 2% 2%

Market 5 636,065 784,990 648,581 -19% 21% 1% 1%

Market 6 132,327 126,795 173,609 4% -27% 0% 0%

Market 7 2,070,060 2,200,978 2,255,509 -6% -2% 3% 3%

Market 8 2,644,612 2,752,985 2,420,792 -4% 14% 4% 3%

Market 9 818,916 842,747 693,123 -3% 22% 1% 1%

Market 10 936,155 1,086,862 1,104,183 -14% -2% 1% 1%

Market 11 833,135 1,105,043 1,061,214 -25% 4% 1% 1%

Market 12 1,285,630 1,408,697 1,422,340 -9% -1% 2% 2%

Market 13 1,493,676 2,175,546 2,278,264 -31% -5% 2% 3%

Other Sales 1,997,506 2,374,717 2,887,255 -16% -18% 3% 3%

Differences in

sales432,796 446,042 143,779

Total 22,123,838 24,743,479 24,278,616 -11% 2% 29% 30%

Total sales 75,205,743 83,781,718 Source: Management information and MAS analyses

22

Area 1 – Sales from 10 out of 13 locations have declined in sales in FY13, in comparison to FY12 in Area 1 (2/2)

The Management represented that the strategy in Area 1 has been primarily to target the low income groups and no brand awareness especially in major cities has ever been created about the product. Further, on account of working capital constraints, institutional sales have not been targeted due to the requirement of offering a credit period.

The Management represented that decline in sales in Area 1 is due to:

Increased competition from several brands in Area 1 providing various sales incentives to distributors have reduced market size especially among distributor owned freezer sales

Ban on mining

Area 1

Distributor FY13 FY12 FY11% Variance

FY13 over 12

% Variance

FY12 over 11

% tot total in

FY13

% tot total in

FY12

Market 1 1,964,805 1,852,917 1,783,890 6% 4% 3% 2%

Market 2 2,540,828 2,905,521 2,796,050 -13% 4% 3% 3%

Market 3 2,634,143 2,621,135 2,359,127 0% 11% 4% 3%

Market 4 1,703,184 2,058,504 2,250,900 -17% -9% 2% 2%

Market 5 636,065 784,990 648,581 -19% 21% 1% 1%

Market 6 132,327 126,795 173,609 4% -27% 0% 0%

Market 7 2,070,060 2,200,978 2,255,509 -6% -2% 3% 3%

Market 8 2,644,612 2,752,985 2,420,792 -4% 14% 4% 3%

Market 9 818,916 842,747 693,123 -3% 22% 1% 1%

Market 10 936,155 1,086,862 1,104,183 -14% -2% 1% 1%

Market 11 833,135 1,105,043 1,061,214 -25% 4% 1% 1%

Market 12 1,285,630 1,408,697 1,422,340 -9% -1% 2% 2%

Market 13 1,493,676 2,175,546 2,278,264 -31% -5% 2% 3%

Other Sales 1,997,506 2,374,717 2,887,255 -16% -18% 3% 3%

Differences in

sales432,796 446,042 143,779

Total 22,123,838 24,743,479 24,278,616 -11% 2% 29% 30%

Total sales 75,205,743 83,781,718 Source: Management information and MAS analyses

23

Q1 FY14 Sales have fallen by 34% in comparison with Q1 FY13 in Area 1.

Sales from all the areas have fallen in Q1 FY14 as compared to the previous period.

The Management represented that the main reason was ban on mining and the markets news that XYZ was to be sold. This caused several distributors to stop ordering Classified products and switch to competitors.

The Management further represented that Area 1 dealers get more lucrative offers (in terms of no or very less deposit for deep freezers and other variable incentives) from other competitor brands , while XYZ has been unable to do the same due to shortage of funds.

Further, competitor entry providing low priced products like Hangyo has also eaten into Classified’s market.

Area 1 FY14 FY13 FY12

Quarter 1 Quarter 1 Quarter 1% Variance

2013 over 12

% Variance

2012 over 11

Market 1 521,185 788,499 594,612 -34% 33%

Market 2 703,394 1,043,174 867,135 -33% 20%

Market 3 723,923 1,022,116 695,182 -29% 47%

Market 4 327,345 722,188 631,559 -55% 14%

Market 5 181,226 249,628 215,786 -27% 16%

Market 6 31,939 49,735 33,200 -36% 50%

Market 7 510,076 701,099 697,659 -27% 0.5%

Market 8 645,123 1,029,147 761,420 -37% 35%

Market 9 158,339 268,576 252,118 -41% 7%

Market 10 245,906 331,007 337,702 -26% -2%

Market 11 169,262 376,856 346,622 -55% 9%

Market 12 261,386 484,508 454,888 -46% 7%

Market 13 482,189 730,378 770,030 -34% -5%

Other Sales 734,193 891,541 952,542 -18% -6%

Total 5,695,486 8,688,452 7,610,455 -34% 14%

Source: Management information and MAS analyses

24

Sales in Area 3 contributed 46% of the total sales in FY13. Sales in Area 3 have declined by 13% in FY13 over FY12, contrary to growing by 4% in FY12 over FY11.

The major reason for this decline has been discontinuance of Area 6 Depot, which was contributing 16% of the total sales in FY12. The Area 6 depot which was managed by XYZ was discontinued in mid FY13.The Management represented that apart from day to management issues, the cost of running the depot including rent, salaries of staff, pilferages etc were found to be very high and hence unprofitable. Thus, the Management decided to appoint individual distributors in Area 6. However, it was found that the distributors have not performed at par with the Depot in FY13 resulting in an overall drop in sales from Area 6 of 16%.

Market 7 and Market 8, contributing 11% and 7% of total revenue, dropped in sales by 16% and 19% respectively in FY13. The Management represented that lack of marketing efforts in FY13 (holding promotional events and distributing marketing material / incentives) and increased competition (distributors stocking low price products of competitors) led to a decrease in sales from these regions.

Except for Market 23, all old distributors (in operation before 2009) have lagged behind in sales in FY13. Further, 28% of sales were generated from new distributors.

The Management represented that it was a regular practice to discontinue with underperforming distributors, who do not meet the sales target as laid out in the agreement, and shift to other new distributors to achieve higher sales.

Area 3 sales in FY13 have dropped by 13% over FY12 sales

Area 3

Distributor FY13 FY12 FY11% Variance

FY13 over 12

% Variance

FY12 over 11

% total in

FY13

% total in

FY12

Market 1 6,872,970 13,110,152 11,993,206 -48% 9% 9% 16%

Market 2 2,367,012 - - - - 3% 0%

Market 3 1,293,567 - - - - 2% 0%

Market 4 427,207 - - - - 1% 0%

Market 5 8,449,802 10,046,681 9,198,648 -16% 9% 11% 12%

Market 6 5,609,829 6,954,320 6,200,641 -19% 12% 7% 8%

Market 7 749,743 2,240,942 2,384,008 -67% -6% 1% 3%

Market 8 1,470,260 - - - - 2% 0%

Market 9 1,009,078 2,178,067 2,246,008 -54% -3% 1% 3%

Market 10 394,748 1,127,710 1,429,750 -65% -21% 1% 1%

Market 11 1,474,343 - - - - 2% 0%

Market 12 - 802,421 1,327,421 -100% -40% 0% 1%

Market 13 - 91,974 14,951 -100% 515% 0% 0%

Market 14 429,178 1,028,927 982,976 -58% 5% 1% 1%

Market 15 491,562 - - - - 1% 0%

Market 16 792,633 1,057,842 980,643 -25% 8% 1% 1%

Market 17 - - 595,772 - -100% 0% 0%

Market 18 460,643 300,674 381,629 53% -21% 1% 0%

Market 19 - - 83,017 - -100% 0% 0%

Market 20 - 415,355 - -100% 0% 0%

Market 21 77,949 - - - - 0% 0%

Market 22 1,434,108 - - - - 2% 0%

Market 23 563,318 - - - - 1% 0%

Total 34,367,950 39,355,065 37,818,670 -13% 4% 46% 47%

Total sales 75,205,743 83,781,718

Source: Management information and MAS analyses

25

Sales from all the distributors have dropped in Quarter 1 of FY14, in comparison with Quarter 1 of FY13.

The distributors in Area 6 have achieved sales of approx. Rs. 15.4 lakhs, whereas the Depot had generated sales of Rs. 64.9 lakhs in the same duration in the previous year.

Sales from major markets like Market 5 and Market 6 have dropped by 32% and 66% respectively in Q1 FY14 in comparison with the previous year.

Similarly no sales was seen from promising markets like Market 23, Market 11 etc.

The Management represented that this decline is largely due a lack of focus on marketing due to lack of funds and believe that an inflow of funds is immediately required to launch an aggressive marketing strategy and reposition the brand.

Area 3 FY14 FY13 FY12

Distributor Quarter1 Quarter 1 Quarter 1% Variance

2013 over 12

% Variance

2012 over 11

Market 1 - 6,459,868 5,435,611 -100% 19%

Market 2 965,773 - - - -

Market 3 580,666 - - - -

Market 4 - - - - -

Market 5 2,877,258 4,240,655 4,620,523 -32% -8%

Market 6 1,040,332 3,090,514 2,842,456 -66% 9%

Market 7 - 706,477 1,024,943 -100% -31%

Market 8 432,887 - - - -

Market 9 - 577,277 1,037,120 -100% -44%

Market 10 - 419,247 438,584 -100% -4%

Market 11 461,428 - - - 0%

Market 12 - - 583,108 - -100%

Market 13 - - - - -

Market 14 - 429,178 451,802 -100% -5%

Market 15 419,286 - - - -

Market 16 144,168 499,537 443,053 -71% 13%

Market 17 - - - - -

Market 18 112,665 213,778 176,321 -47% 21%

Market 19 - - - - -

Market 20 - - - - -

Market 21 - - - - -

Market 22 - 223,053 - -100% -

Market 23 558,195 - - - -

Total 7,592,658 16,859,584 17,053,521 -55% -1%

Source: Management information and MAS analyses

Q1 FY14 sales have gone down by 55% in comparison with Q1 FY13 sales in Area 3.

26

Sales in Area 2 contributed 25% of the total sales in FY13. Sales in Area 2 have declined by 5% in FY13 over FY12, contrary to growing by 23% in FY12 over FY11. Area 2 region has had the lowest drop in revenue, while it had the highest increase in revenue in FY12.

Market 1 is an important territory contributing 10% of the overall sales and has been able to generate a 5% higher sales in FY13.

Market 2, one of the major contributors to sales in FY11 discontinued operations with XYZ since FY12. The new distributor in Market 2, has not generated par sales. The Management represented that the new distributor has a wider network and believes he will generate more sales in the immediate future.

Several distributors outperformed their FY12 sales levels including Market 4, Market 7, Market 8, and Market 11.

FY13 sales have dropped by 5% in comparison to a 23% increase in FY12 over FY11 in Area 2 (1/2)

Area 2

Distributor FY13 FY12 FY11% Variance

FY13 over 12

% Variance

FY12 over 11

% total

in FY13

% total in

FY12

Market 1 7,348,459 6,986,310 4,715,634 5% 48% 10% 8%

Market 2 - - 4,028,715 - -100% 0% 0%

Market 3 3,226,326 3,846,841 - -16% - 4% 5%

Market 4 3,124,188 3,064,337 3,525,753 2% -13% 4% 4%

Market 5 - 1,104,271 2,337,270 -100% -53% 0% 1%

Market 6 850,879 1,582,871 1,349,276 -46% 17% 1% 2%

Market 7 1,998,333 1,148,735 - 74% - 3% 1%

Market 8 293,077 124,906 - 135% - 0% 0%

Market 9 - 20,695 - -100% - 0% 0%

Market 10 1,347,044 1,453,823 - -7% - 2% 2%

Market 11 525,649 336,489 - 56% - 1% 0%

Market 12 - 13,896 - -100% - 0% 0%

Total 18,713,955 19,683,174 15,956,648 -5% 23% 25% 23%

Total sales 75,205,743 83,781,718 Source: Management information and MAS analyses

27

Amongst the old distributors (in operation before 2008), Market 8 dropped by 46%. The Management represented that though the Market 8 distributor had performed well there were long outstanding dues from him amounting to Rs. 2 lakhs. Hence, the Management decided to discontinue supplies to him till he paid off the old outstanding.

It was observed that the significant increase in sales in FY12 over FY11 was due to new distributors appointed in FY12. In FY12, 35% of total sales came from new distributors. It was also observed that all these new distributors had better sales in FY13 over FY12.

It was observed that no additions to distributors was done in FY13. The Management represented that on account of lack of funds to buy deep freezers they could not venture into new markets.

FY13 sales have dropped by 5% in comparison to a 23% increase in FY12 over 11 in Area 2 (2/2)

Area 2

Distributor FY13 FY12 FY11% Variance

FY13 over 12

% Variance

FY12 over 11

% total

in FY13

% total in

FY12

Market 1 7,348,459 6,986,310 4,715,634 5% 48% 10% 8%

Market 2 - - 4,028,715 - -100% 0% 0%

Market 3 3,226,326 3,846,841 - -16% - 4% 5%

Market 4 3,124,188 3,064,337 3,525,753 2% -13% 4% 4%

Market 5 - 1,104,271 2,337,270 -100% -53% 0% 1%

Market 6 850,879 1,582,871 1,349,276 -46% 17% 1% 2%

Market 7 1,998,333 1,148,735 - 74% - 3% 1%

Market 8 293,077 124,906 - 135% - 0% 0%

Market 9 - 20,695 - -100% - 0% 0%

Market 10 1,347,044 1,453,823 - -7% - 2% 2%

Market 11 525,649 336,489 - 56% - 1% 0%

Market 12 - 13,896 - -100% - 0% 0%

Total 18,713,955 19,683,174 15,956,648 -5% 23% 25% 23%

Total sales 75,205,743 83,781,718 Source: Management information and MAS analyses

28

Area 2 FY14 FY13 FY12

Quarter 1 Quarter 1 Quarter 1% Variance

2013 over 12

% Variance

2012 over 11

Market 1 2,180,629 2,838,469 2,204,477 -23% 29%

Market 2 1,144,009 1,530,780 1,552,909 -25% -1%

Market 3 632,833 1,595,037 1,009,946 -60% 58%

Market 4 - - 1,017,937 - -100%

Market 5 351,718 579,153 757,968 -39% -24%

Market 6 609,802 871,218 - -30% -

Market 7 - 293,077 - -100% -

Market 8 - - - - -

Market 9 270,634 679,997 - -60% -

Market 10 142,133 233,052 - -39% -

Total 5,331,758 8,620,783 6,543,237 -38% 32%

Source: Management information and MAS analyses

Sales from Area 2 had gone up 32% in Q1 FY13 over FY12, but dropped by 38% in Q1 FY14 over FY13.

Sales from all the distributors have dropped in Q1FY14 over Q1FY13.

The distributors who had outperformed in FY13 had a drastic decline in sales primarily Market 4 by 60%, Market 8 by 100%, Market 11 by 39% and Market 7 by 30%.

The Management represented that they have stopped offering incentive schemes for distributors/dealers and organizing events for publicity due to unavailability of funds. This has made it easy for low price competitors like Hangyo and Adityaa Ice Creams to take over XYZ market share.

Further, market 2 is currently experiencing strong competition from brands like Creambell and Vadilal.

Q1 FY14 sales have dropped by 38% in comparison with Q1 FY13 sales in Area 2.

29

Raw Material and Packing Materials costs constitute of 51% on Net sales in FY13.

o Raw Material and Packing Material form 51% of total sales in FY13.

o The cost sheets maintained by the management indicated that these items would constitute 45% of the total sales, however upon verification of prices of raw materials and packing materials against purchase bills, it was found that most of the costs taken were understated by 10-15%.

Raw Material/Packing

Material37,429,421

Net Sales 73,454,086

% to Net Sales 51%

o The Management represented that there was an error in the rates taken in their costing and agreed that the input costs were high.

o The management further represented that they would be able to achieve a lower cost by bulk purchases during non-peak season thereby reducing the cost levels to about 42 % of sales. For this however, they would require some additional working capital infusion.

o The claims made by the Management would need to be verified by holding dialogues with some critical suppliers regarding the extent in drop in prices if bulk purchases are made.

30

42 products with gross margins below 20%

These 42 products account for 22% of total unit sales in FY13.

5 of the products have negative margins and have accounted for gross loss of INR 1,17,034

Management has represented that they did not possess the financial expertise to conduct such an analysis before and hence these margins had never come to light.

Management has further represented that they would take immediate steps to discontinue products with low/ negative gross margins

31

Product Unit Sales Gross Margins Gross Profit

Product 1 73 20% 4478

Product 2 360 20% 22085

Product 3 2527 20% 92018

Product 4 800 20% 28388

Product 5 30 19% 1752

Product 6 8 19% 117

Product 7 17 19% 993

Product 8 7150 19% 96147

Product 9 1746 19% 21478

Product 10 3 19% 37

Product 11 4 19% 49

Product 12 16587 19% 204042

Product 13 1 19% 12

Product 14 2904 19% 89110

Product 15 62116 18% 759387

Product 16 30303 18% 363705

Product 17 61 17% 2825

Product 18 573 17% 13939

Product 19 186 17% 4525

Product 20 100 17% 608

Product 21 217 17% 5279

Product 22 2671 17% 63973

Product 23 2093 17% 50130

Product 24 5479 16% 87911

Product 25 629 15% 13350

Product 26 345 15% 7322

Product 27 446 11% 8697

Product 28 992 11% 19343

Product 29 126 11% 2457

Product 30 9 10% 60

Product 31 6 10% 40

Product 32 8395 10% 55593

Product 33 4768 8% 25970

Product 34 2677 8% 29008

Product 35 1397 6% 5197

Product 36 849 5% 3615

Product 37 1012 5% 4309

Product 38 2212 -5% -8308

Product 39 5067 -10% -32063

Product 40 2871 -12% -26327

Product 41 315 -22% -10074

Product 42 1083 -45% -40262

Product FY13Value after

Excise

Variable

Cost

Contribution

Margin %Contribution

Cumulative

%

Product 76 46869 118 65 45% 2,497,811 11%

Product 77 22177 131 68 48% 1,404,323 17%

Product 78 63911 68 48 29% 1,266,122 23%

Product 79 23711 103 59 43% 1,035,961 27%

Product 80 25644 82 46 44% 923,078 32%

Product 81 62116 68 56 18% 759,387 35%

Product 82 20863 82 49 40% 688,631 38%

Product 83 8237 197 120 39% 629,398 41%

Product 84 27734 82 60 27% 605,733 43%

Product 85 11794 80 31 61% 573,166 46%

Product 86 30294 68 50 27% 551,996 48%

Product 87 8537 131 74 44% 489,522 51%

Product 88 19957 82 58 29% 475,182 53%

Product 89 17813 82 56 32% 464,429 55%

Product 90 7867 131 74 44% 451,104 57%

Product 91 13447 80 49 39% 419,619 59%

Product 92 4402 164 78 52% 378,692 60%

60% of the contribution is achieved by 17 products in FY13.

Product 76 is the highest contributor to net margin in FY13, amounting to approx. Rs. 25 lacs with 46,869 units sold at 45% contribution margin .

In spite of low unit sales, the following items have contributed significantly to profits, due to higher contribution margins and moderate to high demand.

Product 83

Product 85

Product 90

Product 92

Even with a large number of units sold, the following products have not significantly contributed to

profits due to low contribution margins:

Product 91

Product 88

Product 84

Product 81

It is important to note that most of the products with the highest contribution margins do not feature in the top 60% of the gross profit contributors. The Management has to have a relook at the sales strategy.

33

High Margin items account for 7% of total unit sales

Although these are high margin items, many of them do not contribute significantly to overall gross profit.

The gross margins do not show any co-relation to the pack size, nor to the flavour.

This indicates that pricing methodology has to be revised.

Products in Category X and Category Y were the highest to be sold, but the same could not be benefited from due to low contribution margins from them.

32

Product Unit Sales Gross Margins Gross Profit

Product 43 1214 73% 116794

Product 44 3180 62% 180818

Product 45 1729 61% 124751

Product 46 11794 61% 573166

Product 47 243 59% 28356

Product 48 1144 57% 46190

Product 49 6 57% 485

Product 50 336 55% 36638

Product 51 240 55% 26057

Product 52 1055 55% 114542

Product 53 419 55% 37475

Product 54 271 53% 28406

Product 55 4402 52% 378692

Product 56 22 52% 1360

Product 57 2043 52% 126315

Product 58 15 52% 927

Product 59 6749 52% 346665

Product 60 148 51% 8961

Product 61 2748 51% 166379

Product 62 312 51% 51586

Product 63 113 51% 18683

Product 64 21 51% 3472

Product 65 5 51% 827

Product 66 201 51% 33233

Product 67 62 51% 10251

Product 68 6 51% 992

Product 69 29 51% 4795

Product 70 349 51% 8267

Product 71 2732 51% 64718

Product 72 2980 51% 70593

Product 73 3354 51% 79453

Product 74 2013 50% 119934

Product 75 6234 50% 368663

Insufficient Control Over Assets with Third Parties

•A large portion of the value of fixed assets in the form of deep freezers is with the distributors/ dealers. While the Management maintained that they are aware of the location of each deep freezers, including the switching between distributors, we were not provided sufficient data to verify this claim. As at 31 Mar 13 INR 82.8 lakhs of deep freezers, comprises 31.5% of total assets are lying with such third parties. Appropriate controls and checks and balances need to be put in place to ensure complete controls on such assets.

Controls over deep freezers

•Agreements are entered into with distributors at the time of allotting the deep freezers. A deposit is collected from the distributor against such deep freezers. The agreement states that each year 20% of such deposit would be adjusted. At the end of the 5th year the asset belongs to the distributor. In other words he is permitted to keep the products of XYZ’s competitors in the freezer. While on account of no records maintained we were unable to verify such instances, it may result in the loss of business to XYZ as beyond the 5th year the sales generation may significantly diminish. The Management however represented that the life of the freezers is on an average 3-5 years and the cost of repairs / maintenance goes up after such period.

•The agreement also states that if the cumulative sales till 4th year does not match the targets set, XYZ has the right to take back such freezers. Considering that the life of the freezer is 3-5 years, it is more prudent to have sales targets set for 1-2 years to take such decisions. Though the Management represented that there have been instances wherein a distributor has been discontinued due to non performance within a year, no data was provided for our review.

Agreements pertaining to deep freezers

•The accounts team correctly accounts for the deposit received from distributors as a liability. However, as per the agreement each year 20% of the deposit becomes non – refundable. Hence, it amounts to an income to XYZ and ceases to be a liability, However, we did not come any income accounted for in the period under review. It was also observed that the amount of liability was increasing year on year. A verification of distributor wise deposit status revealed that such adjustments of deposits were not carried out. A reconciliation activity would be required to be conducted to estimate the actual amount of liability, while the balance would need to be accounted for as income. The tax impact on the same would need to be examined in detail.

Liability pertaining to

deposits collected from distributors not

properly accounted for

34

The average income per deep freezer has dropped by Rs.16,000 on an average in FY13 over 12.

The Management represented that the agreement with the distributors with regards the deep freezers has a clause for re-possession of the deep freezer by XYZ if a sales target of INR 300 per day is not met. However we did not come across any sales target in the agreement.

As per the targets, the sales per deep freezer should have been INR 1,09,400 against the three year high of 94,573.

In spite of targets not being achieved, there was no evidence of any freezers being re-possessed.

The Management represents that lack of marketing efforts was one of the main reasons for this drop as earlier they used to provide advertising material worth Rs. 5,000-6,000 ( for P.O.P displays, Glow signs etc.) on an average to newly acquired distributors, which they have now discontinued, along with the withdrawal of attractive dealer schemes (variable incentives).

Revenue per Deep freezer is showing a declining trend since FY11. Income per Deep Freezer

FY13 FY12 FY11

Total Sales 75,205,743 83,781,718 78,053,934

Sales from Company

Owned Deep freezers*56,404,307 62,836,289 58,540,451

No. of company owned

Deep freezers 829 745 619

Average Income per

Deep Freezer68,039 84,344 94,573

*Sales from company owned deep freezers i s taken as 75% of tota l sa les .

as informed by the management.

35

Over due payments requiring immediate clearance

Over due payments as at 30 June 2013

Balance sheet items

Statutory Liabilities 30-Jun-13

Consultation Charges 11,000

Employees Labour Welfare Fund 2,205

Employer's Labour Welfare Fund 6,615

ESI - Employees Contribution Payable 63,314

ESI - Employers Contribution Payable 171,265

Group Gratuity Premium with LIC 505,992

LIC in lieu of EDLI 77,602

PF - Employers PF Payable 747,741

PF - Employees PF Payable 164,940

PF Admn. Charges 53,625

Area 1 VAT for the month of April 13 62,000

Area 1 VAT for the month of May 13 66,000

Area 1 VAT for the month of June 14 15,000

Area 1 Vat for the year 2012-13 80,000

Area 2 Vat for the month of May 13 218,182

Area 2 Vat for the month of June 13 37,630

Area 3 Vat For the month May 13 268,906

Area 3 Vat For the month June 13 45,984

Electricity Bill for the month of June 2013 150,000

Mediclaim of Employee 115,000

LIC Group Grauity 2011-12 242,285

LIC Group Grauity 2012-13 240,000

LIC Group Grauity Previous Years 1,343,109

Bank Guarantee ( Electricity Department ) 600,000

Statutory dues total 5,288,395

Other Loans

Mr. Y 500,000

Classified Agencies, Area 3 100,000

Other loans total 600,000

Money Bank Term Loan Up to June 2013 1,712,968

Money Bank ( O/D Account ) CC Up to June13 4,733,830

Total loans 6,446,798

Bonus (2011-12) 948,034

Overdue Sundry Creditors 5,837,338

Balance sheet payments 19,120,565

Off Balance sheet payments

Other Loans

X Cold Drinks, Area 1 34,006

Classified Agencies, Area 3 275,000

Cash Bank 65,000

Other advances (Oct 12 to June 2013) 722,000

Secret Enterprises, Area 3 200,000

The Management represented that the following payments were over-due and needed to be cleared off immediately.

However, there could be interest and penalty on certain statutory liabilities which need to be examined and quantified.

Further, it would be advised that dialogue be held with the creditors to be repaid to understand their present and future commitment with the Company as several of them are critical suppliers of raw materials.

36

Adjustments to Current Assets and Liabilities

Note 1: The Management represented that certain debtors are irrecoverable and would need to be written off.

Note 2: The amount of inventory is revalued to the cost price / NRV as at 31 Mar 13, whichever is lower.

Note 3: Certain loans and advances were found to be irrecoverable and need to be written off. The Management represented that an amount excess paid for construction in 2011 would be repaid. However, considering the period lapsed we have assumed the amount to be irrecoverable.

Particulars As per balance sheet

as at 31 Mar 13

Adjustments Note Revised numbers

Current Assets 11,479,100 -6,207,154 5,271,946

Sundry debtors 1,954,093 -101,015 1 1,853,078

Inventory 8,219,813 -6,015,061 2 2,204,752

Loans and advances 640,994 -86,423 3 554,572

Deposits 664,200 -4,656 4 659,544

Total

Current liabilities 24,798,258 734,448 25,532,705

Sundry creditors 9,321,169 2,637,501 5 11,958,669

Advances from customers 10,852,403 -2,566,762 6 8,285,641

Outstanding expenses 4,624,686 663,709 7 5,288,395

Net current assets -20,260,759

Source: MAS analyses

Note 4: Comprises FBT payment made which is irrecoverable.

Note 5: Certain sundry creditors and loans off the balance sheet have been added to the amount of sundry creditors.

Note 6: We have assumed the amount of liability to be equal to the WDV of deep freezers, hence excess liability is written off. For details refer slide on insufficient control over deep freezers.

Note 7: The Management represented a higher outstanding liability including some off balance sheet items. Further, there could arise some amount of interest and penalty on the delayed payments of statutory liabilities. However, it would not be possible to quantify the same.

37

Other Matters

38

Status of Statutory Dues Income Tax

The assessment for FY08 and FY09 has been completed. A refund of Rs. 30,184 is due to be received for FY08. No assessment notice has been received from FY10 onwards, as represented by the Management. In the absence of such assessment orders we cannot comment on any probable liability.

Sales Tax Assessment

Area 3 – no assessment notice received till date as represented by Management.

Area 2 – Assessments till FY09 is completed. No assessment orders received from FY 10 onwards as represented by Management.

Area 1 – Assessment completed till FY10. Liability of Rs. 35,634 payable as on date. No assessment orders received from FY11 onwards as represented by Management.

Excise duty

The Management represented that excise duty became applicable for the Company from March 2011 as per Amendment to Notification No. 1/2011-C.E.

There was a minor delay in payment of excise duty for the month of December 2012. Interest amounting to approximately Rs. 71 was found to be payable.

Service Tax

The Management represented that service tax is payable by the Company when their logistics supplier does not charge service tax in his bill.

There was a minor delay in payment of service tax in FY11. Interest amounting to approximately Rs. 22 was found to be payable, in case a query is raised by the Department.

39

Status of Statutory Dues

Area 1 VAT

Delays were observed in the payment of whole amount of VAT month on month from FY11. However, it was also observed that the Management was paying such amounts every quarter together with interest on such delayed payments. In certain cases however the interest paid was calculated to be less than the amount found payable. In the absence of the details of month-wise delay in payment of VAT we cannot calculate such liability.

Further, in FY13 there were delays in payment of VAT on which no interest was paid. The amount approximately works out to be Rs. 1,020.

Area 3 VAT

In FY11 there were delays observed in payment of VAT. The interest liability could work to approx. Rs, 1,042.

In FY13 there were major delays observed in payment of VAT. There were also some payments made towards interest on such delayed payments. However the total interest liability net of such payments could work out to approx. Rs. 76,270.

Area 2 VAT

In FY13 there were significant delays observed in payment of VAT. There were also some payments made towards interest on such delayed payments. However the total interest liability net of such payments could work out to appox. Rs. 14,895.

40

Status of Statutory Dues

Provident Fund

Delays were observed in the payment of Provident Fund (PF) (employer’s and employees contribution) for the FY11 and FY12 and for employee’s contribution till June 2012. Further, the employer’s contribution was not paid from July 2012 till June 2013 and employees contribution from April – June 13 together amounting to Rs.9,66,306. However, interest on all such delayed payments as mentioned above and admin charges from April – June 2013 have not been considered.

The Management represented that the total amount payable on account of PF was Rs. 9,98,193.

ESIC

There were significant delays observed in payment of ESIC in FY11 and FY12. From Jan 13 to June 13 the Company has not paid ESIC amounting to Rs. 2,34,579. Further, interest on all such delayed payments as mentioned above have not been considered.

The Management represented that the total amount payable on account of ESIC was Rs. 2,53,066.

41

Other Observations Fixed Assets Register

The fixed assets register was not found to be in the preferred format. Details pertaining to the date of additions to assets, name of supplier, date of purchase, units of purchase, identification codes etc., were not maintained. Considering a large value of the assets of XYZ are with third parties it is important to have a proper documentation of such assets.

Physical verification of assets

While we were informed that physical verification of assets was conducted, we were not provided any records. A large value of assets in the form of deep freezers lie with third parties. A physical verification is a requisite at least once a year to check if the value of any deep freezer has diminished. Appropriate action against the distributor could be immediately taken in such cases rather than waiting for the contract period to end.

Physical verification of inventories

We were informed that physical verification of inventories was conducted and a segregation between fast moving items and slow moving items was done. However, we were not provided any documents to support this claim. Our checks however did not reveal any significant mismatches. However, going forward, we suggest a thorough process of physical verification and segregation of the stock into fast and slow moving.

As 15 on gratuity and leave encashment not complied with

Accounting Standard 15 of the Institute of Chartered Accountants of India (‘ICAI’) requires the Company to make a provision in its books for gratuity and leave encashment payable from the 1st day of the employee joining the organisation. However, in case of XYZ such provisions were done only at times of payment. Considering the high cost of employees and a large number of employees having served a long time in the organisation, the liability payable towards gratuity and leave encashment would need to be calculated and a provision would need to be made into the books. 42

Other Observations

No agreements for unsecured loans

The shareholders of XYZ have provided unsecured loans to the Company to the tune of INR 1.44 cr. However, there are no agreements in place which define the terms and conditions of such loans. In the absence of such agreements we suggest the Management of EFG to obtain a written statement from XYZ that such loans do not bear any interest or any other form of returns.

Finance team requirement

It was observed that while XYZ had a good production and marketing team, it was lacking in the finance department. This was reflective in the way critical records which could help take important decisions were maintained. The Management expressed that no support in terms of financial analyses was ever made available to it. Going forward, we suggest a finance team to be appointed to instill financial discipline in the company.

HR review

We suggest the Management of EFG to do an HR review to decide the requirement of the staff going forward. Our analyses shows that the number of staff maintained for administrative / support functions may be in excess of the requirements.

IDC lease agreement

The IDC agreement was entered into on 29th April 1999 for a lease period of 30 years. The total plot area was 4,836 sq mts with a permission to built up to 50% of the plot area.

Licence for Foods Safety and Standard Act 2006 has expired on 31 Dec 12 and has been applied for renewal

The annual returns under Payment of Bonus Act Standard of Weight and Measurement Act have not been filed.

43

Maximum Production Costs per day (Peak Season)

Production

ProcessNo. of Hours

per batch

Manpower

required Electricity cost

Day Shift Overtime

Preparation of Ageing Mix 3.5

Ageing 8

Filling & Storage 8 8 1,851 3,703 2,975

Total Production Cost per Day 6,096

Cost of Raw material

Cost per batchMaximum No.

of Batches

Raw Material

Cost

Raw Material 13,613 4 54,451

Cost of Packing Material

Cost of

Packing

Material per

Maximum No.

of Units

produced

Packing

Material Cost

Packing Material 30 3,000 89,903

Maximum Cost per day 159,475

Manpower cost

9,026

5 1,157 3,120 2,314

Maximum Production (Variable) Cost per day

Based on Management representation,

following are the assumptions made to arrive at the cost.

16 hour workday has been assumed

Manpower will be working for 8 hours at regular wages and 8 hours at OT wages (double)

All machinery has been assumed to be used.

Raw material and Packing Material cost has been taken as the cost of the most produced ice cream

Manpower cost has been arrived at assuming that the most labour intensive ice-cream is being produced.

The output per day (FG ) is assumed as 3,000 units as represented by Management.

The Intermediate mix output per day has been assumed at maximum possible in the 16 hours i.e. 2,000 Litres. 44

Projected Profitability Statement

45

Projected Profitability Statement

46

Projected Profitability of XYZ Ltd.

INR April-Dec Jan - Mar FY14 FY15 FY16 FY17 FY18

Revenue from operations 33,249,825.0 20,222,814.9 53,472,639.9 107,520,000.0 119,340,000.0 133,660,800.0 149,700,096.0Total income 33,249,825.0 20,222,814.9 53,472,639.9 107,520,000.0 119,340,000.0 133,660,800.0 149,700,096.0

Expenditure

Raw Material and packing

material consumed

16,624,912.5 10,111,407.5 26,736,320.0 52,416,000.0 56,723,793.8 61,942,382.8 67,641,082.0

Direct Expenses 2,992,484.3 1,820,053.3 4,812,537.6 9,676,800.0 10,740,600.0 12,029,472.0 13,473,008.6

Employee Benefit Expense 12,300,136.7 4,510,050.1 16,810,186.8 19,331,714.8 22,231,472.0 25,566,192.8 29,401,121.7

Administrative Overheads 2,676,657.5 1,159,666.6 3,836,324.0 4,603,588.8 4,833,768.3 5,075,456.7 5,329,229.5

Sales/Distribution Overheads 4,453,013.3 1,931,074.5 6,384,087.8 8,853,581.5 9,982,864.8 10,482,008.1 11,006,108.5

39,047,204.1 19,532,252.0 58,579,456.1 94,881,685.1 104,512,498.8 115,095,512.3 126,850,550.3EBITDA -5,797,379.1 690,562.9 -5,106,816.2 12,638,314.9 14,827,501.2 18,565,287.7 22,849,545.7EBITDA % to sales -17% 3% -10% 12% 12% 14% 15%Depreciation 3,503,906.3 1,355,468.8 4,859,375.1 5,255,468.8 4,729,921.9 4,256,929.7 3,831,236.7EBIT -9,301,285.4 -664,905.9 -9,966,191.2 7,382,846.1 10,097,579.2 14,308,358.0 19,018,308.9Interest cost 983,005.33 566,238.82 1,549,244.15 2,253,896.96 3,176,040.00 3,542,011.20 3,967,052.54 PBT -10,284,290.7 -1,231,144.7 -11,515,435.4 5,128,949.2 6,921,539.2 10,766,346.8 15,051,256.4Tax - - - - - - - PAT -10,284,290.7 -1,231,144.7 -11,515,435.4 5,128,949.2 6,921,539.2 10,766,346.8 15,051,256.4

-31% -6% -22% 5% 6% 8% 10%

Inference

47

• Based on our analysis there would entail a significant amount of initial investment to turn around XYZ. Considering that the sales in Q1FY14 have dropped drastically due to negative sentiments in the market, it could well be a challenge to revive the distribution network which is critical to XYZ.

• The IRR in the first 5 years would be negative and EFG can expect a payback period of not less than 7-8 years.

• The net asset value as on date is very low which does not give much security to EFG in case the expected turn around does not happen.

• In addition EFG would also need to pay off past accumulated liabilities and bear losses in the first year together with repayment of unsecured loan to the existing shareholders.

• Considering the above the following could be the investment envisaged to be done by EFG:

Investment envisaged by EFGINR FY14 FY15 FY16 FY17 FY18

Investment into the company 5,000,000 7,500,000 - 1,250,000 -

Investment to clear old dues 15,311,268 - - - -

Investment to clear unsecured loan of shareholders 14,378,328 - - - -

Losses incurred in FY14 6,656,060

Investment to replace old shareholders 5,061,666 - - - -

Total investment 46,407,322 7,500,000 - 1,250,000 -

Assumptions for Profitability projections P&L Head

Assumption Management Representation

MAS Take

Sales for FY 14 (April – Dec)

Sales for FY 14 have been extrapolated based on the sales achieved upto June and the average percentage these sales have formed in the past years of the total sales.

The Management feels that the sales can be improved with the infusion of funds to purchase deep freezers and invest into marketing

MAS has considered that it would take at least six months for all takeover formalities to be completed prior to fresh investment into deep freezers/ marketing.

Sales for FY 14 (Jan – Mar)

Sales for the period have been considered based on the average sale per deep freezer achieved in FY 13. A fresh investment into 200 deep freezers has been considered for this period.

- do - MAS has considered that investment into deep freezers would happen in a phased manner of 200 in the last quarter of FY 14, 200 in the first quarter of FY15 and 100 in the Second quarter of FY 15.

Sales FY15 Sales for the period have been calculated assuming that each freezer invested into (including old freezers) will generate sales of approximately INR 18K in Q1, 20K in Q2, 22K in Q3 and 22.5K in Q4

Management represented that they generally consider a target of INR 300 per day per deep freezer.

The target is a bit aggressive considering the past three years’ data, hence the same has been discounted by INR 14,000 to INR 90,000 which will be achieved gradually by Q4

48

Assumptions for Profitability projections P&L Head Assumption Management

Representation

MAS Take

Sales FY16 onwards Sales for FY16 have

been assumed to

meet the target of

INR 90,000 per deep

freezer p.a.,

thereafter increasing

at 12% p.a.

Management was not

able to provide any data

on growth rate

As per research, the ice cream

industry has been growing @

15% per annum for the last 3

years, additionally, Experts

estimate a growth rate of 12%

p.a. for the next 5 years.

Raw Material Cost For the FY 14, this

cost has been

assumed to be 50%

of the sales. Subsequently a 1-2%

drop in costs has

been assumed every

year.

Management

represented the cost to

be pegged at 45% of

sales, Management further represented that

through bulk purchase

and by introducing

“frozen Desserts” the raw

material cost could be further reduced to about

40% of sales.

Upon analysis and verification

through bills, the actual cost

was found to be 50% of sales.

A drop in prices due to bulk purchases is possible, however

the extent could not be

verified. MAS has assumed that

the cost could be reduced

from the present level of 50% to about 45%.

Direct Expenses This has been

assumed to remain

constant at 9% of

sales.

Management represents

that through the

introduction of newer

machinery, efficiency

would increase and

hence costs would go

down.

Since there was no substantial

evidence provided to the

extent of reduction of costs,

the direct costs have been

assumed as stable.

49

Assumptions for Profitability projections P&L Head Assumption Management

Representation

MAS Take

Employee Benefits Employee Benefits for FY

14 have been

considered the same as

FY 13 levels. There after

an increase of 15% p.a.

has been assumed

considering the expansion of distribution

network

Management

represented that

employee cost would

be reduced by at

least 20% due to

better machinery

being introduced.

The reduction in employee cost

would be offset by the

expansion of the distribution

network. Considering the

number of additions of deep

freezers, the strength of the

marketing/ distribution team would need to increase.

Administrative

Expenses

These expenses have

been considered to remain constant in FY14

and a 15% increase has

been considered

thereafter

N/a N/a

Sales and Distribution

Expenses

This has been assumed

to be directly

proportional to the

number of deep

freezers. The numbers

have been taken

based on historical

average.

N/a N/a

50

Appendix I – Balance Sheet Break-up

51

Fixed Assets DEPRECIATION

ASSETS RATE OF OPENING ADDI- DELE- AS ON 31.03.2013 DEPRECIATION AS ON AS ON

DEPR BALANCE TIONS TIONS TOTAL TILL DATE 31.03.2013 31.3.2012

TANGABLE ASSETS

Lease hold Land 0.00 19,99,010 19,99,010 19,99,010 19,99,010

Air Confitioner 13.91 1,10,200 1,10,200 57,885 52,315 60,768

Factory Building 10.00% 91,63,784 91,63,784 59,78,202 31,85,582 35,39,535

Deep Freezers 13.91% 2,18,99,243 14,72,348 57,120 2,33,14,471 1,50,28,830 82,85,641 80,93,788

Effluent Treatment 13.91% 13,81,313 13,81,313 11,05,137 2,76,176 3,20,799

Electrical Installation 13.91% 17,35,226 17,35,226 11,56,950 5,78,276 6,71,711

Furniture & Fixture 18.10% 7,56,593 7,56,593 6,25,357 1,31,236 1,60,240

Generators 13.91% 18,36,624 18,36,624 5,81,186 12,55,438 14,58,286

Handling Equipments 13.91% 47,26,807 43,996 47,70,803 32,80,873 14,89,930 16,85,602

Laboratory Equipments 13.91% 20,584 20,584 15,271 5,313 6,172

Office Equipments 13.91% 4,87,240 4,87,240 3,71,407 1,15,833 1,34,549

Vehicles 30.00% 1,44,97,451 3,14,142 1,41,83,309 1,13,69,624 28,13,685 41,50,760

Plant & Machinery 13.91% 2,05,91,569 29,307 9,48,229 1,96,72,647 1,37,50,010 59,22,637 77,28,299

Computers 40.00% 7,87,336 1,03,810 8,91,146 7,13,590 1,77,556 1,65,002

TOTAL 7,99,92,981 16,49,461 13,19,491 8,03,22,951 5,40,34,322 2,62,88,629 3,01,74,519

INTANGABLE ASSETS

Microsoft Software 40.00% 1,29,845 1,29,845 1,01,799 28,046 46,744

TOTAL 8,01,22,826 16,49,461 13,19,491 8,04,52,796 5,41,36,120 2,63,16,675 3,02,21,263

PREVIOUS YEAR 7,51,13,306 66,80,557 16,71,037 8,01,22,826 4,99,01,562 3,02,21,263 2,84,79,415

GROSS BLOCK NET BLOCK

52

Advances Receivable Advances

Advances to Creditors INR

Creditor 1 867

Creditor 2 348

Creditor 3 3

Creditor 4 151,400

Creditor 5 25,000

Creditor 6 26

Creditor 7 639

Creditor 8 15

Creditor 9 1,500

Creditor 10 84,873

Creditor 11 13

Sub-total 264,683

Prepaid Expenses

Prepaid Gr. Med. Mktg/Personal

Accidental (Dr. Loader) 57,996

Prepaid Group Insurance(in Lieu

Of EDLI Scheme) -

Prepaid Insurance (P & M /

Building) 37,239

Prepaid Insurance (Vehicles) 90,654

Prepaid Rates & Taxes 100,124 Prepaid Membership &

Subcription 2,000

Advances to Staff 88,298

Total 640,994

53

Deposits Deposits

INR

Income Tax 08-09 1,42,758

Cylinder Deposit 52,000

Electricity Deposit 4,400

Entry Tax ( recoverable agst VAT) 4,644

Excess MAT paid 2007-2008 ( refund) 30,184

Fringe Benefit Tax 07-08 ( excess paid) 4,656

Fixed Deposit ( APMC Bank Guarantee) 21,120

Deposits 10,800

Guest House Deposit 40,500

Input Vat @ 5% (Capital Goods) 1,38,211

Input Vat @ 12.5% (Capital Goods) 9,363

Interest receivable on security deposit 32,561

Internet Deposit 700

Lease Deposit 25,000

Mobile Deposit 16,017

Area 3 Depot Deposit 20,000

Area 3 Guest House Deposit 5,000

Money Bank Guarantee 75,000

Sales Tax Deposit 22,936

Telephone Deposit 8,350

Total 6,64,200

54

Appendix II – Profit and Loss Account Break-up

55

Direct Expenses and Employee Benefit Costs Direct Expenses

Particulars FY13 FY12 FY11% Variance

FY13 over FY12

% Variance

FY12 over FY11

% to Total

FY13

% to Total

FY12

% to Total

FY11

Consumable Stores and Spares 4,25,540 4,87,912 6,32,372 -13% -23% 1% 1% 1%

Generator Diesel 5,99,742 6,23,210 4,11,011 -4% 52% 1% 1% 1%

Electricity Charges 26,79,553 29,33,506 29,32,228 -9% 0% 5% 5% 5%

Freight Charges 2,30,270 3,71,883 4,78,412 -38% -22% 0% 1% 1%

Insurance (Plant and Machinery) 42,227 46,819 44,868 -10% 4% 0% 0% 0%

Laboratory Consumables 17,563 54,403 18,990 -68% 186% 0% 0% 0%

Loading and Unloading 1,450 7,040 14,888 -79% -53% 0% 0% 0%

Loss on Sale of Asset 1,57,327 13,116 69,310 1100% -81% 0% 0% 0%

Repairs and Maintenance (Plant and

Machinery& Deep Freezer)9,09,430 15,42,158 13,13,525

-41% 17% 2% 2% 2%

Printing & Stationery Manufacturing 2,14,245 2,67,862 1,96,672 -20% 36% 0% 0% 0%

Power & Fuel 0% 0% 0%

Total 52,77,346 63,47,909 61,12,275 -17% 4% 9% 10% 10%

Employee Benefit Expense

Particulars FY13 FY12 FY11% Variance

FY13 over FY12

% Variance

FY12 over FY11

% to Total

FY13

% to Total

FY12

% to Total

FY11

Salaries, Wages & Bonus 1,19,57,402 1,07,61,554 95,28,752 11% 13% 21% 17% 15%

Provident & Family Pension Fund 8,70,440 7,84,261 6,90,616 11% 14% 2% 1% 1%

Employees State Insurance 3,85,754 3,60,128 3,07,692 7% 17% 1% 1% 0%

Gratuity Fund 2,63,707 2,61,736 2,18,977 1% 20% 0% 0% 0%

Employees Group Insurance 1,40,960 54,341 66,905 159% -19% 0% 0% 0%

Group Medi/Accidental Insurance 1,86,923 1,87,144 1,94,465 0% -4% 0% 0% 0%

L.W.F - Employer's Contribution 17,175 18,990 17,460 -10% 9% 0% 0% 0%

Leave Encashment 15,263 41,062 19,719 -63% 108% 0% 0% 0%

Staff Welfare Expenses 4,23,404 4,11,412 2,90,474 3% 42% 1% 1% 0%

Total 1,42,61,028 1,28,80,628 1,13,35,060 11% 14% 25% 20% 18%

56

Administrative Overheads Other Administrative Overheads

Particulars FY13 FY12 FY11% Variance

FY13 over FY12

% Variance

FY12 over FY11

% to Total

FY13

% to Total

FY12

% to Total

FY11

Analysis Charges - 15,222 11912 -100% 28% 0% 0% 0%

Bonus 34,675 3,81,188 335387 -91% 14% 0% 1% 1%

Books and Periodicals - - 8375 -100% 0% 0% 0%

Broker Charges - 4,000 4000 -100% 0% 0% 0% 0%

Consultation Charges 3,23,000 2,89,736 208500 11% 39% 1% 0% 0%

Conveyance Expenses 7,76,934 7,19,777 580609 8% 24% 1% 1% 1%

Entry Tax 1,47,808 1,76,249 196780 -16% -10% 0% 0% 0%

Fax Charges - 1,167 430 -100% 171% 0% 0% 0%

Garden Material & Expenses - 1,685 21977 -100% -92% 0% 0% 0%

General Expenses 22,737 80,868 160578 -72% -50% 0% 0% 0%

Guest House Rent goa / Others 2,99,000 2,13,108 384500 40% -45% 1% 0% 1%

Guest House Maintenance 17,690 53,734 66756 -67% -20% 0% 0% 0%

Hardware Maintenance Charges 70,479 67,234 32000 5% 110% 0% 0% 0%

Lease Rent 36,270 36,270 36270 0% 0% 0% 0% 0%

Legal Fees 3000 -100%

Mobile Expenses 2,81,236 3,42,022 332990 -18% 3% 0% 1% 1%

Office Expenses 1,32,303 1,69,373 168256 -22% 1% 0% 0% 0%

Pooja Expenses 270 5,087 6329 -95% -20% 0% 0% 0%

Postage and Courier Charges 13,245 11,880 13143 11% -10% 0% 0% 0%

Printing and Stationery 1,42,092 2,62,723 183590 -46% 43% 0% 0% 0%

Professional Charges, Statutory & Tax

Audit Fees55,944 54,062 82777 3% -35% 0% 0% 0%

Rates & Taxes 1,22,439 67,317 102595 82% -34% 0% 0% 0%

Rent Pune Depot /Godown 20,800 2,79,630 204870 -93% 36% 0% 0% 0%

Repairs & Maintenance of Land &

Building1,567 2,080 175039 -25% -99% 0% 0% 0%

Security Service Charges 5,31,568 5,13,852 415863 3% 24% 1% 1% 1%

Service Tax 5,673 7,534 9354 -25% -19% 0% 0% 0%

Software Maintenance Charges - 70,200 64200 -100% 9% 0% 0% 0%

Subscription & Membership A/c. 12,300 18,350 12350 -33% 49% 0% 0% 0%

Telephone Expenses 1,01,835 1,22,177 148376 -17% -18% 0% 0% 0%

Total 31,49,865 39,66,525 39,70,806 -21% 0% 5% 6% 6%

57

Sales and Distribution Overheads

Sales & Distribution Overheads

Particulars FY13 FY12 FY11% Variance

FY13 over FY12

% Variance

FY12 over FY11

% to Total

FY13

% to Total

FY12

% to Total

FY11

Advertisement 2,81,494 12,85,663 9,18,885 -78% 40% 0% 2% 1%

Debit Balance Written Off A/c 40,872 84,199 3,105 -51% 2612% 0% 0% 0%

Discount Paid 5,15,027 2,38,427 10,26,596 116% -77% 1% 0% 2%

Excise Duty 11,38,803 6,21,549 59,707 83% 941% 2% 1% 0%

Lodging & Boarding 84,307 1,14,182 84,177 -26% 36% 0% 0% 0%

Insurance of Vehicles 1,87,776 1,47,521 1,49,977 27% -2% 0% 0% 0%

Octroi Charges 4,13,066 6,86,673 7,30,818 -40% -6% 1% 1% 1%

Rates and Taxes of Vehicles 1,12,964 1,13,780 1,33,563 -1% -15% 0% 0% 0%

Repairs & Maintenance Vehicles/others 9,32,141 10,84,304 12,58,428 -14% -14% 2% 2% 2%

Sundry Expenses 14,402 21,546 58,432 -33% -63% 0% 0% 0%

Toll Charges 91,373 1,09,615 95,561 -17% 15% 0% 0% 0%

Travelling Expenses 1,73,378 2,35,020 1,25,277 -26% 88% 0% 0% 0%

Travelling Expenses (TA/DA) 3,40,637 4,19,484 3,51,253 -19% 19% 1% 1% 1%

Value Added Tax 6,12,854 5,54,321 7,01,319 11% -21% 1% 1% 1%

Van Hire Charges 61,350 84,230 48,190 -27% 75% 0% 0% 0%

Vehicle Maintenance (Diesel/Petrol) 30,44,578 34,63,104 32,73,613 -12% 6% 5% 6% 5%

Total 80,45,023 92,63,617 90,18,900 -13% 3% 14% 15% 14%

58

Appendix III – Key Employee Details

59

Key Employee Details Sr. No. EMPLOYEES NAME DOJ Designation No of Yrs. of Service Gross

salary

1 MR. K Since

inception Managing Director14 years 4 months 59,500

1 MRS. L 9/1/1999 Manager - Accounts 13Yrs 10 Months 30,000

4 MR. M 1/1/2002 Marketing Manager 11Yrs 6 Months 31,000

5 MR. N 3/2/2009 Marketing Manager (Area 2) 4 Yrs 3 Months 29,000

6 MR. O 9/15/2004 Assistant Sales Manager (Area 1) 8 Yrs 9 months 21,000

7 MR. P 6/1/2005 Assistant Sales Manager (Area 1) 8 Yrs 11,000

8 MRS. Q 12/10/1999 Market Coordinator 13Yrs 6 Months 14,300

9 MR. R 12/1/2011 Production Manager 1 Year 6 Months 22,000

10 MR. S 1/12/2012 Maintenance Manager 1 Year 5 Months 25,000

11 MR. T 10/16/2012 Assistant Sales Manager (Area 1) 8 months 15,000

60

Appendix IV – Insurance Cover

61

Insurance Cover Sr. No. Description of Assets Sum Insured Policy Premium

1 Building 62,00,000

2 Compund Wall 3,60,000

3 Plant and Machinery 1,73,83,000

4 Boiler 1,68,000

5 Homogenizer 4,80,000

6 Addition to Boiler 66,000

7 Continious Freezer 11,30,000

8 Harding Tunnel 20,00,000

9 Furniture, Fixtures and Fittings 12,00,000

10 Stock of Row Material, Packing Materials,

Finished Goods and Stock in Process 46,00,000

TOTAL 3,35,87,000 40,333

62

Appendix V – Secured Loans Details

63

Secured Loan Details

64

Appendix VI – Ageing of Debtors

65

Ageing of Debtors SUNDRY DEBTORS <6 MONTHS >6 MONTHS TOTAL

Debtor 1 57,959 57,959

Debtor 2 14,273 14,273

Debtor 3 2,553 2,553

Debtor 4 1,414 1,414

Debtor 5 22,148 22,148

Debtor 6 3,026 3,026

Debtor 7 1,514 1,514

Debtor 8 970 970

Debtor 9 4,394 4,394

Debtor 10 1,157 1,157

Debtor 11 2,661 2,661

Debtor 12 696 696

Debtor 13 1,459 1,459

Debtor 14 5,215 5,215

Debtor 15 1,096 1,096

Debtor 16 1,876 1,876

Debtor 17 1,259 1,259

Debtor 18 798 798

Debtor 19 3,514 3,514

Debtor 20 4,521 4,521

Debtor 21 509 509

Debtor 22 566 566

Debtor 23 2,603 2,603

Debtor 24 3,476 3,476

Debtor 25 803 803

Debtor 26 1,694 1,694

Debtor 27 2,072 2,072

Debtor 28 3,384 3,384

Debtor 29 4,667 4,667

Debtor 30 6,206 6,206

Debtor 31 1,033 1,033

Debtor 32 562 562

Debtor 33 8,770 8,770

Debtor 34 6,308 6,308

Debtor 35 2,231 2,231

Debtor 36 574 574

Debtor 37 1,767 1,767

Debtor 38 5,508 5,508

Debtor 39 202,575 202,575

Debtor 40 528 528

Debtor 41 244 244

Debtor 42 638 638

Debtor 43 3,755 3,755

Debtor 44 134,560 134,560

Debtor 45 1,617 1,617

SUNDRY DEBTORS <6 MONTHS >6 MONTHS TOTAL

Debtor 46 1,700 1,700

Debtor 47 1,387 1,387

Debtor 48 595 595

Debtor 49 125,149 125,149

Debtor 50 6,219 6,219

Debtor 51 508 508

Debtor 52 1,297 1,297

Debtor 53 388 388

Debtor 54 4,162 4,162

Debtor 55 949 949

Debtor 56 72,091 72,091

Debtor 57 570 570

Debtor 58 552 552

Debtor 59 1,310 1,310

Debtor 60 200 200

Debtor 61 2,419 2,419

Debtor 62 481 481

Debtor 63 991 991

Debtor 64 2,313 2,313

Debtor 65 5,141 5,141

Debtor 66 484 484

Debtor 67 1,163 1,163

Debtor 68 2,306 2,306

Debtor 69 1,620 1,620

Debtor 70 339 339

Debtor 71 1,032 1,032

Debtor 72 884 884

Debtor 73 1,471 1,471

Debtor 74 4,632 4,632

Debtor 75 884 884

Debtor 76 3,000 3,000

Debtor 77 3,380 3,380

Debtor 78 3,149 3,149

Debtor 79 13,660 13,660

Debtor 80 1,240 1,240

Debtor 81 62,039 62,039

Debtor 82 2 2

Debtor 83 3,672 3,672

Debtor 84 1,339 1,339

Debtor 85 3,315 3,315

Debtor 86 1,390 1,390

Debtor 87 4,502 4,502

Debtor 88 1,586 1,586

Debtor 89 2,272 2,272

Debtor 90 6,247 6,247

Debtor 91 2,862 2,862

SUNDRY DEBTORS <6 MONTHS >6 MONTHS TOTAL

Debtor 92 1,605 1,605

Debtor 93 1,079 1,079

Debtor 94 137,334 137,334

Debtor 95 700 700

Debtor 96 23,150 23,150

Debtor 97 4,927 4,927

Debtor 98 1,538 1,538

Debtor 99 499 499

Debtor 100 1,261 1,261

Debtor 101 10,734 10,734

Debtor 102 108,157 108,157

Debtor 103 398 398

Debtor 104 1,225 1,225

Debtor 105 1,491 1,491

Debtor 106 5,220 5,220

Debtor 107 1,494 1,494

Debtor 108 1 1

Debtor 109 2,383 2,383

Debtor 110 795 795

Debtor 111 1 1

Debtor 112 3,557 3,557

Debtor 113 1,300 1,300

Debtor 114 1,140 1,140

Debtor 115 3,181 3,181

Debtor 116 2,949 2,949

Debtor 117 259,696 259,696

Debtor 118 5,408 5,408

Debtor 119 798 798

Debtor 120 2,566 2,566

Debtor 121 3,948 3,948

Debtor 122 4,998 4,998

Debtor 123 803 803

Debtor 124 10,497 10,497

Debtor 125 1,888 1,888

Debtor 126 156,776 156,776

Debtor 127 3,755 3,755

Debtor 128 2,167 2,167

Debtor 129 7,459 7,459

Debtor 130 12,020 12,020

Debtor 131 61,187 61,187

Debtor 132 657 657

Debtor 133 764 764

Debtor 134 3,877 3,877

Debtor 135 2,863 2,863

Debtor 136 824 824

TOTAL 1,781,586 172,507 1,954,093

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