25th Feb 2008 07:01
Promethean India PLC25 February 2008 Promethean India plc ("Promethean" or the "Company") Final results (audited) for the period ended 31 August 2007 The Company is pleased to announce its final results for the period from 16 May2006 to 31 August 2007. The report and accounts will be sent to shareholders onMonday, 25 February 2008 and will be made available on the Company's website. Anotice of the annual general meeting is included with the report and accounts,which is to be held at 3rd Floor Exchange House, 54-62 Athol Street, Douglas,Isle of Man on 20 March 2008 at 10 am. Further enquiries: Promethean India PLCGaurav Burman +44 7802 181811 Seymour Pierce LimitedNandita Sahgal +44 20 7107 8000 Notes to Editors: Promethean India PLC Promethean India PLC, an investment company that focuses on businesses that areestablished or operating in India, was admitted to trading on the AIM market ofLondon Stock Exchange plc, under the ticker symbol PTHI for the Ordinary Sharesand PTHW for the Warrants. The Company raised £50 million (gross of expenses) via a Placing of new OrdinaryShares and Warrants. The Company and its subsidiaries are advised by PrometheanInvestments LLP (the 'Investment Manager') and by an Indian resident investmentadviser, Promethean India Advisors Pvt. Ltd (the 'Investment Adviser'). Promethean Investments LLP Promethean Investments LLP is a specialist fund manager that focuses on activistprivate equity investing in both quoted and private UK and Indian businesses.Promethean Investments aims to acquire an interest in public and privatecompanies where it believes opportunities exist to create or unlock near-termvalue. It combines active management, financial leverage and flexibility tocreate bespoke deal structures for quoted and unquoted companies. Promethean Investments LLP manages Promethean Plc, a £65 million AIM quotedprivate equity fund and also manages Promethean India Plc, a £50 million AIMquoted private equity fund that targets value and growth opportunities in India. Chairman's StatementPromethean India plc listed on 25 April 2007 and consequently the Report andAccounts covers a relatively short period from inception to 31 August 2007.However, we have made a good start with satisfactory progress. We have successfully established two offices, one in Delhi and the other inMumbai and built a six person team led by Mohit and Gaurav Burman. Fourinvestments were made during the period in which we have invested £14.4 million.A brief report on these investments follows this statement. Investments areactually made through two Mauritian based funds, one for investments in publiccompanies, the other for investments in private companies. Although complicated,this is the normal route for private equity investment in India. India continues to grow rapidly and to attract substantial inward investment.Not surprisingly the result has been a rapid increase in prices. Particularlymarked in the public markets, perhaps especially in the property sector, theinflation in asset prices has been very significant. This obviously has made itmore difficult to find attractive investments at a reasonable price. Regulatorychanges both before and subsequent to our period end have not helped. Forregulatory reasons, it has been necessary to make a change to our proposedoriginal structure. The Burman family, our Indian partners, were unable to getReserve Bank of India (RBI) approval to make a direct offshore investmentdirectly in Promethean India plc. Consequently we now have a co-investmentarrangement, whereby Burman family vehicles will invest £7.5 million pro ratawith Promethean India plc on the same terms and conditions. This has had theadditional benefit that we had a larger investment pool than expected of £57.5million before deducting listing expenses. The Group faces challenges due to changes introduced in November by the RBI inregard to offshore companies investing in public companies. There are tworoutes: either one invests via 'P' notes issued by an authorised bank or oneseeks approval as a Foreign Institutional Investor (FII) under the SEBI (ForeignInstitutional Investor) Regulations. 'P' notes are a simple depository receipt:a bank buys the shares but the economic interest in those shares belongs to theinvestor. Although we have applied for FII status, we have yet to receive it andindeed there is no certainty that we shall receive it. So our public companyinvestments to date have been made via 'P' notes. The RBI also decided in November 2007 to cap 'P' notes at their then level. Inother words, banks can now only issue new 'P' notes when the sale of aninvestment releases an existing 'P' note. As the 'P' note capacity belongs tothe issuing bank, there is no guarantee that the bank which releases 'P' notecapacity as a result of an offshore investor selling an investment will givethat investor use of the released 'P' note capacity - the bank can use it foranother client. While one understands the RBI's concern about the inflow of substantial amountsof overseas capital, it is unfortunate that long-term investors such asourselves are potentially restricted in our dealings in the public market.However, this perhaps is a less obvious problem given the current level ofprices in the public market in India. In short, I think it is fair to say that we have made a solid start. It is earlydays and there are a number of challenges which we have to overcome. Weobviously will be producing an Interim Report for the period to February 2008 inthe near future, however to date our initial efforts are bearing some fruit asyou can see from the summary of the investments as at the end of August 2007below. Sir Peter Burt Investment Manager's Review IntroductionDuring the period Promethean India plc has invested £14.4m via the Mauritianbased entities Promethean India Investments Fund I and Promethean IndiaInvestments Fund II (the "Funds") into Indian related businesses. PrometheanIndia plc also agreed a co-investment facility of £7.5 million with the BurmanFamily. The co-investment facility will invest its pro-rata amount in all thedeals to which Promethean India plc subscribes. The Funds are managed byPromethean Investments LLP (the "Manager" or "Promethean") a limited liabilitypartnership which is in turn advised by Promethean India Advisors Pvt. Ltd (the"Advisor"), of which the senior executives in India are all members. The Manager and the Advisor's investment team which is led by Mohit Burman andGaurav Burman, includes the members of the Advisor all of whom have extensiveexperience within the private equity and financial services industry. The statedintention is to invest the capital committed by Promethean India plc in theFunds by 31 May 2009. Investment StrategyThe Company was established in order to execute a value activist investmentstrategy in both public and private businesses, building a concentratedportfolio of investments in which the Manager and Advisor can act as a catalystfor change and value creation. The Advisor and Manager will target companieswhich they believe have the potential to add value and growth to the portfolioby way of domestic growth, international expansion or restructuring. The Advisorand Manager will hope to utilise their knowledge of the region, and networksboth inside and outside of India to assist investee companies in developing aplan to ensure value creation. All investments, whether in public or private companies, are preceded byextensive due diligence to assess the risks and opportunities in any oneinvestment. This will include an overview of the target's market, management,business model, financial track record, prospects and the likely realisationstrategy. Should an investment lead to the Fund becoming a majority or controllingshareholder in a company, the Manager and Advisor will work with the investeecompany's management team to develop a plan outlining specifically how value isto be created and detailed actions taken to realise this opportunity. TheManager and Advisor will maintain a high ratio of investment executives toinvestee companies in order to enable it to play a hands-on role with theinvestee company in implementing and continually developing this plan. Where the Fund is a minority shareholder in a publicly listed company, theManager and Advisor will engage actively with the Board of the investee companyto find ways to realise the additional value. The Company has no fixed life and it is expected that it will continue tore-invest the proceeds of any realisations net of gains with an appropriateprovision for actual or expected future losses. Investment Origination and ActivityIn the period to 31 August 2007 the Manager and Advisor were focused on tryingto execute the pipeline of transactions that they had identified prior toconcluding the fundraising of Promethean India plc. While the Manager andAdvisor worked diligently to execute the deal pipeline, the Advisor received andactively reviewed a number of investment opportunities, of which the majoritywere originated directly by the Advisor approaching the target company. TheAdvisor has also reviewed a number of opportunities brought to it by variousprofessional intermediaries with whom the Advisor has relationships. The Manager and Advisor are very satisfied with the quality of the investmentopportunities they are originating and they believe that their originationactivities will support the continued growth of the business. The Manager and Advisor are confident of achieving their aim to have the Fundfully invested by 31 May 2009. Furthermore they believe that in the absence ofunforeseen circumstances, the investment portfolio will show strong positivereturns in the current financial year. Investment Activity During the period Promethean India plc made four new investments in thefollowing companies: Mahindra Forgings Mauritius Limited (held via Promethean 1 Limited)In May 2007 Promethean India Plc secured exclusivity to purchase a 10% stake inMahindra Forgings Mauritius Limited (MFML). MFML in turn owned 100% ofSchoneweiss & Co. GmbH., one of the leading private forging companies in Germanywith 140 years of experience which had allowed it to become one of the top fiveaxle beam manufacturers in the world, specialising in suspension, power trainand engine parts. The Mahindra Group is one of the best known industrial groups in India and aleader in the automotive space with over US$4 billion per year in revenues. TheMahindra group had decided that the automotive component sector had significantgrowth potential and was key to their automotive strategy. As a result they hadadopted a buy and build strategy in this sector. We were pleased to be investing alongside them in an asset which they intend togrow aggressively by scaling the company's manufacturing in India and by usingits history, goodwill, and relationships in Europe to supply the European OEMswith automotive components. Obopay Inc.In June of 2007 the Advisor was introduced to Obopay, an exciting privately heldCalifornia based company. After spending some time with the company and itsmanagement the Advisor was impressed by their comprehensive mobile paymenttechnology. The Obopay service allows an individual to instantly obtain, spend,and send money anywhere, anytime with anyone using their mobile phone. GivenIndia is home to over 200 million mobile phone subscribers and this base isgrowing rapidly, the Advisor approached Obopay to discuss the possibility ofhelping them scale their operations in India. Obopay already had considerable traction and was about to close a Series 'C'round of funding in the amount of £12.5 million with a number of leadingtechnology investors including Richmond, Redpoint, Onset and with a strategicinvestment from Citibank who had announced a trial of their technology for theircurrent account holders. Obopay have also recently appointed Jim Wolfensohn, theex-head of the World Bank to their board. Obopay viewed Promethean plc as avaluable ally in their India strategy and agreed to work with us to scale theiroperation there. We agreed to invest in their heavily oversubscribed Series 'C'financing. Nitco Tiles LimitedThe Advisor first became interested in Nitco Tiles Ltd in June 2007. It wasclear that the Advisor wanted to participate in the significant real estategrowth in India but was finding it difficult to justify the high valuations thatthe private or listed property companies in India were demanding. As a resultthe Advisor started to look at businesses that it felt would benefit from thesignificant amount of commercial, residential and retail construction in India.Nitco was interesting for a number of reasons, the first and foremost being thatthe company since being founded in 1956 had grown to become the second largestbranded tile manufacturer in India producing in excess of 250 million squarefeet of floor tiles per year. Over and above this the Advisor was very impressedby the management team and their ambitions for the future growth of thebusiness. Nitco had also recently announced that they were moving their production out ofthe Mumbai region to take advantage of tax subsidies that some of the lessindustrial states in India were offering to businesses that set up manufacturingunits in those regions. As a result some valuable real estate that the companyowned would be released and potentially developed into lucrative residential orcommercial use. Given all the positive attributes of the company and given thatit was not well covered by the research community in India we started to buy thestock and build our position. Project HospitalityThe Advisor has for some time been looking at one of the largest brandedhospitality businesses in India. Given the growth in tourism both domestic andinternational and the growth in the aviation sector which has resulted in bothIndians and foreign visitors having access to air travel, we are witnessing aperiod of major growth in the hospitality and catering industries. Thehospitality sector in India historically has suffered from significant underinvestment and as a result there are less 5 star luxury hotel rooms in Indiathan there are in Manhattan. The Advisor believes they have found an assetwhich, despite being one of the best portfolio of properties in India, has notbeen correctly valued by the public markets. The Advisor believes thisundervaluation may change in the medium term and has identified ways in whichPromethean India can act as a catalyst for this change. We are currently in theprocess of building our stake and have not yet disclosed the name of thistarget. As at 31 August 2007, the portfolio was as follows: Company Sector Cost Valuation* Gain £000 £000 £000------------------ --------------- ------ ---------- ---------- ---------MahindraForgingsMauritiusLimited** Automotive Unlisted 2,453 2,453 -Obopay Inc. Mobile Banking Unlisted 729 729 - ServicesNitco TilesLimited Building Listed 4,053 4,138 85 MaterialsProjectHospitality*** Hospitality Listed 7,139 7,398 259------------------ --------------- -------- --------- --------- --------Total 14,374 14,718 344------------------ --------------- -------- --------- --------- -------- * The valuations are in accordance with IFRS / IPEVCA guidelines. Valuation oflisted investments is based on the closing bid price as at 31 August 2007.Unlisted investments are held at fair value which for a limited period is cost.All investments are recognised at the transaction date.** The investment in Mahindra Forgings Mauritius Limited is held via anintermediary holding company, Promethean 1 Limited (Mauritius).*** Company name undisclosed, with the underlying investment purchased by viaP-notes. RealisationsDuring the year the Company made no substantial realisations of any of itsinvestments. Principles of valuation of unlisted investmentsInvestments are stated at amounts considered by the directors to be a reasonableassessment of their fair value, where fair value is the amountat which an asset could be exchanged between knowledgeable, willing parties inan arm's length transaction. All investments are valued according to one of the following bases:• Cost (less any provision required)• Price of recent transaction• Earnings multiple• Net assets• Sale price Investments are only valued at cost for a limited period after the date ofacquisition, otherwise investments are valued on one of the other basesdescribed above, and the earnings multiple basis of valuation will be usedunless this is inappropriate, as in the case of certain asset based businesses. When valuing on an earnings multiple basis, profits before interest and tax ofthe current year will normally be used, depending on whether or not more thansix months of the accounting period remain and the predictability of futureprofits. Such profits will be adjusted to a maintainable basis, taxed at thefull corporation tax rate and multiplied by an appropriate and reasonable price/earnings multiple. This is normally related to comparable quoted companies, withadjustments made for points of difference between the comparator and the companybeing valued, in particular for risks, earnings growth prospects and surplusassets or excess liabilities. Where a company has incurred losses, or if comparable quoted companies are notprimarily valued on an earnings basis, then the valuation may be calculated withregard to the underlying net assets and any other relevant information, such asthe pricing for subsequent recent investments by a third party in a newfinancing round that is actively being sought, then any offers from potentialpurchasers would be relevant in assessing the valuation of an investment and aretaken into account in arriving at the valuation. Where appropriate, a marketability discount (as reflected in the earningsmultiple) may be applied to the investment valuation, based on the likely timingof an exit, the influence over that exit, the risk of achieving conditionsprecedent to that exit and general market conditions. When investments have obtained an exit (either by listing or trade sale) afterthe valuation date but before finalisation of the Company's relevant accounts(interim or final), the valuation is based on the sale price. In arriving at the value of an investment, the percentage ownership iscalculated after taking into account any dilution through outstandingwarrants, options and performance related mechanisms. Principles of valuation of listed investmentsInvestments are valued at bid-market price or the conventions of the market onwhich they are quoted. Valuation review proceduresValuations are initially prepared by the Advisor. These valuations are thensubject to review by external auditors, prior to final approvalby the directors. Events after the balance sheet date Events after the balance sheet date are disclosed in note 17 to the financialstatements. Promethean Investments LLP Promethean India plcGroup Income Statement for the period 16 May 2006 to 31 August 2007 Notes Period ended 31 Aug 2007 £'000RevenueInvestment and other income 2 885Realised and unrealised gain on financial investments 2 344 ---------- 1,229Management expenses (779) Profit before finance costs and taxation 450 ---------- Finance costs 4 (1) ----------Profit before tax from trading operations 449 ---------- Income tax expense 6 - ----------Group profit after tax from trading operations 449 ---------- Attributable to:Equity holders of the parent 449 ---------- 449 ---------- Earnings per share - (basic and diluted) 7 0.01p Promethean India plcGroup Balance Sheet as at 31 August 2007 Notes 31 August 2007 £'000Non-current assetsInvestments held at fair value through profit or loss 9 14,718 --------- Non-current loans 10 3,766 --------- 18,484 --------- Current assetsTrade and other receivables 11 947Cash and cash equivalents 12 32,920 --------- 33,867 --------- ---------Total assets 52,351 --------- Current liabilitiesTrade and other payables 13 3,650 ---------Net assets 48,701 --------- EquityShare capital 14 500Share premium 47,752Unrealised investment revaluation reserve 352Retained earnings 97 ---------Equity attributable to equity holders of the parent 48,701 ---------Net asset per share 7 £0.97 --------- Promethean India plcCash Flow Statement for the period ended 31 August 2007 Group Company 2007 2007 £'000 £'000Cash flows from operating activitiesProfit after taxation 449 676Adjustments for :Interest income (885) (794)Realised and unrealised gain on financial investments (344) -Increase in trade and other receivables (947) (431)Increase in payables 3,650 342 -------- ---------Net cash from operating activities 1,923 (207) -------- --------- Income tax paid - - Cash flows from investing activitiesPurchase of investments (18,715) (18,985)Proceeds from sale of investments 4,341 -Interest received 885 794 -------- ---------Net cash used in investing activities (13,489) (18,191) -------- --------- Proceeds from issue of share capital 48,252 48,252Issue of loan (3,766) - -------- ---------Net cash used in financing activities 44,486 48,252 -------- --------- Net increase in cash and cash equivalents 32,920 29,854 -------- ---------Cash and cash equivalents at beginning of period - - -------- ---------Cash and cash equivalents at end of period 32,920 29,854 ======== ========= Promethean India plcStatement of changes in equity for the period 16 May 2006 to 31 August 2007 Group Share Share Unrealised Retained Total capital premium investment earnings revaluation distributable reserve £'000 £'000 £'000 £'000 £'000 Balance as at 16 May 2006 - - - - - -------- -------- -------- ---------- --------Issue of sharecapital 500 - - - 500Premium onshares issued - 49,500 - - 49,500Expensesrelating tothe issue ofshares - (1,748) - - (1,748)Unrealisedgains reservetransfer - - 352 (352) -Profit for theperiod - - - 449 449 -------- -------- -------- ---------- --------Balance as at31 August 2007 500 47,752 352 97 48,701 -------- -------- -------- ---------- -------- Company Share Share Unrealised Retained Total capital premium investment earnings revaluation distributable reserve £'000 £'000 £'000 £'000 £'000 Balance as at 16 May 2006 - - - - - -------- -------- ---------- ---------- --------Issue of sharecapital 500 - - - 500Premium onshares issued - 49,500 - - 49,500Expensesrelating tothe issue ofshares - (1,748) - - (1,748)Profit for theperiod - - - 676 676 -------- -------- ---------- ---------- --------Balance as at31 August 2007 500 47,752 - 676 48,928 -------- -------- ---------- ---------- -------- Notes to the financial statements for the period 16 May 2006 (date ofincorporation) to 31 August 2007 1. Accounting policies Basis of accountingThe financial statements have been prepared in accordance with applicableInternational Financial Reporting Standards. The Company was incorporated in the Isle of Man and as such is regulated by Isleof Man company law. The ordinary shares of the company are quoted on AIM. Theprincipal accounting policies adopted are set out below. Under Protocol 3 of the UK's Treaty of Accession, the Isle of Man is part of thecustom's territory of the European Union. The Group has therefore chosen toprepare financial statements in accordance with the applicable InternationalFinancial Reporting Standards. Basis of consolidationThe consolidated financial statements incorporate the financial statements ofthe Company and enterprises controlled by the Company (and its subsidiaries)made up to 31 August each year. Control is achieved where the Company has thepower to govern the financial and operating policies of an investee enterpriseso as to obtain benefits from its activities. On acquisition, the identifiableassets, liabilities and contingent liabilities of a subsidiary are measured attheir fair values at the date of acquisition. The consolidated financial statements of the group include the results of theCompany. For the period to 31 August 2007 the company achieved a profit of £0.7million. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used byother members of the Group. All significant intercompany transactions andbalances between group enterprises are eliminated on consolidation. Critical accounting estimates and judgementsThe preparation of financial statements requires the use of estimates andjudgements that affect the reported amount of assets and liabilities at the dateof the financial statements and the reported amount of revenues and expensesduring the reported period. Although these estimates are based on management'sbest knowledge of the amount, events or actions, actual results ultimately maydiffer from those estimates. The estimates and assumptions that have asignificant risk of causing a material adjustment to the carrying amounts ofassets and liabilities relate to the valuation of unlisted financial investmentsheld at fair value through profit or loss, which are valued on the basis notedbelow. Revenue recognitionInvestment income comprises interest income from treasury deposits and fromloans advanced. Interest income is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate.Dividend income from investments is recognised when the shareholders' rights toreceive payment have been established. ExpensesAll expenses are accounted for on an accruals basis. TaxationThe charge for current tax is based on the results for the period as adjustedfor items which are non-assessable or disallowed. It is calculated using ratesthat have been enacted or substantively enacted by the balance sheet date.Deferred tax is accounted for using the balance sheet liability method inrespect of temporary differences arising from differences between the carryingamount of assets and liabilities in the financial statements and thecorresponding tax basis used in the computation of taxable profit. In principle,deferred tax liabilities are recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction whichaffects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. Deferred tax is charged or credited in the income statement, except when itrelates to items credited or charged directly to equity, in which case thedeferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxeslevied by the same taxation authority and the Group intends to settle itscurrent tax assets and liabilities on a net basis. Non current loansNon current loans are initially recognised at fair value and then held atamortised cost using the effective interest method. Financial investmentsWhere a financial investment is not required to be consolidated, the equity,loan and similar instruments are designated at fair value through profit orloss, and their fair value is determined in accordance with the InternationalPrivate Equity and Venture Capital Association valuation guidelines, principlesof which are set out in the Investment Manager's Review. Gains and losses on therealisation of financial investments are dealt with through the incomestatement. The Company's and the Group's business is investing in financial assets with aview to profiting from their total return in the form of income and capitalgrowth. This portfolio of financial assets is managed and its performanceevaluated on a fair value basis, in accordance with a documented investmentstrategy, and information about the portfolio is provided internally on thatbasis to the company's Board of directors and other key management personnel.Accordingly, upon initial recognition the investments are designated by theCompany and its subsidiaries as "at fair value through profit or loss". They areincluded initially at fair value, which is taken to be their cost (excludingexpenses incidental to the acquisition which are written off in the IncomeStatement, and allocated to "capital" at the time of acquisition). Subsequently,the investments are valued at "fair value". The difference between the fair value of financial investments and cost to theGroup is shown as an unrealised gain or loss in the income statement, and takento the unrealised investment revaluation reserve. Investments in subsidiaries are valued at cost. Foreign CurrenciesTransactions in foreign currencies are translated at the exchange rate ruling atthe date of the transaction. Monetary assets and liabilities in foreigncurrencies are translated at the rates of exchange ruling at the balance sheetdate. Non-monetary items that are measured at historical cost in a foreigncurrency are translated at the exchange rate at the date of the transaction.Non-monetary items that are measured at fair value in a foreign currency aretranslated using the exchange rates at the date when the fair value wasdetermined. Any exchange differences arising on the settlement of monetary items or ontranslating monetary items at rates different from those which they wereinitially recorded are recognised in the profit or loss in the period in whichthey arise. Exchange differences on non-monetary items are recognised in thestatement of recognised income and expenses to the extent that they relate to again or loss on that non-monetary item taken to the statement of recognisedincome and expenses, otherwise such gains and losses are recognised in theincome statement. Cash and cash equivalentsCash comprises cash in hand and demand deposits. Cash equivalents areshort-term, highly liquid investments that are readily convertible to knownamounts of cash and are subject to insignificant risks of changes in value. Trade receivablesTrade receivables are initially recognised at fair value and then held atamortised cost using the effective interest method. Trade payablesTrade payables are stated at fair value less issue cost and then held atamortised cost using the effective interest method. 2. Revenue 2007 £'000 Investing operations Interest income 885 --------- Realised loss on financial investments (8) Unrealised gain on financial investments 352 --------- --------- Realised and unrealised gain on financial investments 344 --------- 1,229 --------- 3. Profit before tax from trading operations 2007 £'000 Profit before tax from trading operations arrived at after charging: Audit remuneration: Audit of company's annual accounts 25 Audit of subsidiaries' annual accounts 14 Non-audit services 41 --------- 4. Finance costs 2007 £'000 Finance charges 1 --------- 5. Employees and directors 2007 £'000 The total costs for the Group were: Directors' fees 42 --------- £'000The amount paid to the highest paid director during the year was asfollows:Directors' fees 9 --------- The Company has no other employees. 6. Taxation The standard rate of income tax for companies in the Isle of Man is 0%. No provision for taxation has, therefore, been made. As the Company is wholly owned by non-resident members and is listed on a recognised stock exchange, it meets the definition of a 'distributing company' and is therefore exempt from the distributable profits charge. The Mauritian entities are Global Business Licence Category 1 (GBL1) companies in Mauritius and under the current laws and regulations liable to pay income tax on their net income at a rate of 15%. The entities are, however, entitled to a tax credit equivalent to the higher of actual foreign tax suffered and 80% of the Mauritian tax payable in respect of their foreign source income thus reducing their maximum effective tax rate to 3%. No Mauritian capital gains tax is payable on profits arising from the sale of securities, and any dividends and redemption proceeds paid by the entities to their member will be exempt in Mauritius from any withholding tax. Deferred taxation No deferred tax asset has been recognised in respect of the tax loss carried forward in Promethean India Investment Fund 1 as no taxable income is probable in the foreseeable future. No deferred tax liability has been recognised in respect of the unrealised gain on investments in Promethean India Investment Fund 2 on the grounds of materiality. A reconciliation of the actual income tax expenses based on accounting profit and the actual income tax expenses is as follows: 2007 £'000 Analysis of charge for the year Income tax charge - --------- Total tax expense - --------- Profit before taxation 449 Taxation at standard rate - in Isle of Man nil% Taxation at standard rate (34) in Mauritius 15% Notional foreign tax (21) credit Non deductible expenses 2 Unutilised tax loss for 53 the period --------- Income tax charge - --------- 7. Earnings and net asset value per share 2007 Profit attributable to ordinary £449,483 shareholders --------- Issued ordinary shares 50,000,000 --------- Earnings per share (basic and 0.01p diluted) --------- Net asset value per share £0.97 (statutory) Net asset value per share (statutory) is based on the statutory £48,701,526 net assets at period end --------- There were no options in issue to dilute the earnings per share. Details of warrants issued are disclosed in note 14. 8. Investments in Subsidiaries Company 2007 £'000 Company shares in group undertakings Promethean India Investments Fund I (Mauritius) 6,985 Promethean India Investments Fund II (Mauritius) 12,000 --------- 18,985 --------- Name of Country of Proportion Proportion Principalsubsidiary incorporation (or of ownership of voting activity registration) and interest power operation ----------------- ---------- -------- ------- ----------- PrometheanIndia LP England 100% 100% Limited partnerPrometheanIndiaInvestmentsFund I Mauritius 100% 100% Holding Company for unlisted investmentsPrometheanIndiaInvestmentsFund II Mauritius 100% 100% Holding Company for listed investmentsPromethean 1Limited Mauritius 40% 40% Holding company for MFML investment 9. Investments 2007 Group £'000 India listed investments Cost 11,853 Disposal (661) --------- 11,192 Unrealised gain 344 --------- Listed investments 11,536 --------- India unlisted investments Cost 6,862 Disposal (3,680) --------- Unlisted investments 3,182 --------- Total Investments 14,718 --------- 10. Non current loans 2007 £'000 Non current loan 3,766 --------- During the period the Company granted a loan to Krammer Holdings Pvt. Ltd asconsideration to the disposal of its 60% interest in the share capital ofPromethean 1 Limited. The loan is repayable on 22 June 2009 and accrues interest at a rate of 9% perannum, payable annually. 11. Trade and other receivables Group Company 2007 2007 £'000 £'000 Other receivables 924 21 Prepayments and accrued income 23 410 ------- -------- 947 431 ------- -------- 12. Cash and cash equivalents Group Company 2007 2007 £'000 £'000 Cash at bank and in hand 32,920 29,854 ------- -------- 13. Trade and other payables - current Group Company 2007 2007 £'000 £'000 Trade payables 112 58 Accruals and deferred income 3,538 284 ------- -------- 3,650 342 ------- -------- 14. Share Capital Group 2007 Share capital £'000 Authorised 300,000,000 ordinary shares of 1p each 3,000 -------- Issued and fully paid 50,000,000 ordinary shares 1p each 500 -------- The Company's share capital comprises ordinary shares. Rights attached toordinary shares include the right to vote at the Company's AGM and receivefuture dividends. On listing, warrants were allocated to initial placees of theordinary shares in the ratio of one warrant for every five ordinary shares. Eachwarrant will entitle the holder to subscribe for ordinary shares at asubscription price of £1.25 (being a 25% premium to the placing price), from2007 to 2012, within 30 days of the Company's interim unaudited accounts beingsent to shareholders, subject to certain conditions. Copies of the warrant instrument are available on application to the Company'sregistered office. 15. Related party transactions 2007 £'000 Sir Peter Burt is a member of Promethean 71 Investments LLP (the Investment Manager) and a director of Promethean India plc. During the year the Company had the following 136 related party transactions with Promethean Investments LLP: Management Fees - Fixed Fee Management Fees - Manager's Balance Fee The balance outstanding to Promethean 207 Investments LLP as at 31 August 2007 was: -------- Elizabeth Tansell is a principal of Chamberlains Fund Services and a director of Promethean India plc. During the year the Company had the following relating party transactions with Chamberlain Fund Services Limited: Registrar and administrator services charged: 7 The balance outstanding to chamberlain Fund Services as at 31 7 August 2007 -------- All transactions were undertaken in the normal course of business. 16. Financial Instruments Market riskMarket risk embodies the potential for both losses and gains and includescurrency risk, fair value interest rate risk and price risk.The Group's strategy on the management of market risk is driven by itsinvestment objective, as outlined in the Manager's report. The Group invests ina range of investments, including quoted and unquoted equity securities in arange of sectors. The board monitors the Group's investment exposure againstinternal guidelines specifying the proportion of total assets that may beinvested in various sectors. Currency riskManagement monitors the currency fluctuations of underlying investments as partof its investment strategy . Interest rate riskInterest bearing financial assets and interest-bearing financial liabilitiesmature or reprice in the short term. As a result the Group is subject to limitedexposure to fair value interest rate risk due to fluctuations in the prevailinglevels of market interest rates. The non-current loan of £3.7 million to KrammerHoldings Pvt. Ltd to purchase 60% of Promethean 1 Limited has a fixed interestrate of 9% per annum. Price riskPrice risk is risk that the value of an instrument will fluctuate as a result ofchanges in market prices, whether caused by factors specific to an individualinvestment, its issuer or factors affecting all instruments traded in themarket. As the majority of the Company's financial instruments are carried atfair value with fair value changes recognised in the income statement, allchanges in the market conditions will directly affect net investment income. Price risk is mitigated by constructing a diversified portfolio of instrumentsand direct involvement in the management of the investment portfolio. As stated in the Prospectus the Company will not invest more than 25% of its NetAsset Value in any more than one investment. Credit riskThe Group's trade and other receivables are actively monitored to avoidsignificant concentrations of credit risk. The recoverability of debts frominvestee companies is monitored by directors attending board meetings and reviewof management accounts. The £3.7 million non current loan to Krammer HoldingsPvt. Ltd. is secured via a share pledge over the 60% investment in Promethean 1Limited for which the loan proceeds were utilised. The loan is fully guaranteedand is repayable on 22 June 2009. Fair value riskThe Group's investments are carried at fair value on the balance sheet. Thecarrying value of certain other financial instruments, specifically trade andother receivables and payables approximates to fair value due to the short termnature of these instruments. 17. Events after the balance sheet date The group has not made any additional investment in "Project Hospitality" since 31 August 2007. As at 14 February 2008, based on the closing bid price the investment was valued at £11.2 million, which represents an uplift of £3.8 million. At the period end our investment in Nitco Tiles was held at £4.1 million, based on a closing bid price of INR 238.75. As at 14 February 2008 the closing bid price was INR 255.10, resulting in an uplift of £0.6 million on our initial investment to a current valuation of £4.7 million. Subsequent to the balance sheet date, Mahindra Forgings Mauritius Ltd has been amalgamated with Mahindra Forgings Ltd, a company listed on the Bombay stock exchange. As at 14 February 2008, the closing bid price was INR 206.4, which has resulted in a slight reduction of £0.1m in our investment valuation (held via an intermediary holding company Promethean 1 Ltd) to £2.3 million. 18. Ultimate Controlling Party CompanyThe directors are of the opinion that there is no ultimate controlling party. 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