Preliminary Results

3rd Jun 2008 07:00



Press Release  3rd June, 2008 

Preliminary Results

Year ended 31 March 2008 

Great Eastern Energy Corporation Ltd. (Great Eastern), a Company involved in the exploration, development and production of coal bed methane (CBM) natural gas in India, is pleased to announce its Preliminary Results for the 12 months ended 31 March 2008. 

Highlights:

Production:

 

In line with expectations

16% increase since November '07 to 2.9 MMSCFD in March '08

565% increase since June '07

 

Drilling and Completion Activities:

 

Atlas Copco RD20 III rig commissioned 

Consistent & reliable source of consulting & engineering services established

Second well drilling programme commenced as expected

New fraccing technique being used to improve efficiency and completion

 

Infrastructure:

 

Gas Gathering Station complete

Producing wells connected through the internal pipeline

Steel pipeline to the City Gate Station - 75% complete

Connecting new wells to the Gas Gathering Station

YK Modi, Chairman and CEO of Great Eastern, commented:

"The last six months since the Interim results has seen good progress on all fronts. Drilling and completion activities have continued as planned and we are now well into our second planned phase of drilling. The new rig has given us far greater flexibility and we are also looking at alternative completion techniques to help improve efficiency. The gas gathering station is also now complete, which is a significant milestone for the Company. We are well positioned to again make further progress in the year ahead".

  For further information:

Great Eastern Energy
YK Modi Prashant Modi	Chairman & CEO President & COO	+ 44 (0) 20 7743 6363 + 44 (0) 20 7743 6363
Pelham Public Relations
Philip Dennis		+44 (0)20 7743 6363
Hugh Barker		+44 (0)20 3008 5509
Arden Partners
Richard Day		+44 (0)20 7398 1632
Tom Fyson

  Chairman's Statement

Introduction:

The second half of the year saw good progress in all core areas of the business. This is after experiencing a significant increase in production levels in the first half of the year. The increase was as a result of installing new sand filters at the wells which settled problems relating to the dewatering process. 

The Company is in a good overall position. Per well production profiles are better than initially expected, the market and pricing environment for gas is also stronger, significant progress has been made developing the distribution infrastructure and the financing is in place to achieve commercial production levels. 

Operational Update:

Completion of the Gas Gathering Station (GGS) is a significant milestone for the Company. The Station was commissioned in March following comprehensive testing of all the systems. The producing wells have been connected to the GGS and the new wells being drilled are in the process of being connected. The steel pipeline from the GGS to the City Gate Station is also 75% complete.

Following the conclusion of the first phase drilling programme we are also now making solid progress with our second phase drilling programme. Since the second phase started at the end of January we have successfully completed the drilling of six wells and we are currently in the process of drilling the seventh well. Drilling time per well varies from one location to another but overall this year we are aiming to drill 30 wells. 

The commissioning of the Atlas Copco RD20 III rig in January will also add significant flexibility to the second phase drilling programme as well as reduce the overall cost per well. 

We have entered into a contract with New Tech Engineering for them to provide good quality consulting and engineering people and services. New Tech Engineering is a US based industry leader in the supply of these services with over 400 consultants worldwide and a 'Blue Chip' client list. With this arrangement in place, any manpower issues will be covered through them providing a consistent and reliable resource. 

The conclusion of the first phase includes all drilling and completion works on 23 wells. Of these wells, 18 are currently dewatering and produce gas at an average rate of 161 MMSCFD in March. This production level represents a 16% increase over that reported in the Interim Results in November. Production in April was brought down to 2.0 MMSCFD as a result of slowing the dewatering process through reducing the pump speed. The aim of this reduction was to avoiding excessive flaring while one section of the distribution pipeline is being completed. We expect to be able to increase production again to around 3.0 MMSCFD once the pipeline is in place.

Out of the first phase, 22 of the wells have been fractured in only two seams out of a potential of 10 coal seams. The intention is to frac all 10 seams, which is likely to have a corresponding positive impact on production per well. 

We are currently also in the process of testing a new fracturing technique at well #24. By using Coil Tubing it will enable us to complete 2 fracs per day as opposed to the same outcome for every 3.6 days on average using explosives. Using Coil Tubing is also likely to improve well completion.

Market

The gas pricing environment for Great Eastern is now significantly stronger than had originally been expected and all signs currently indicated that this positive environment will continue. The national network for gas distribution in India is limited, although it is developing, and as such markets tend to be localised. Great Eastern's licence area is strategically extremely well positioned near to major industries and urban areas and as such our market is essentially on our door step. 

Within that local market, we are seeing regular gas price increases, with some major industrial users currently paying as much as US$28.55 per MMbtu and with an average price of US$22.02 paid per MMbtu by a basket of 19 local companies. There is a strong incentive for both industrial and domestic users to switch demand from existing more expensive fuel sources to Great Eastern's gas. For industrial and domestic use there is a fuel conversion cost but in both cases the payback is quick and as such this represents a minimal hurdle to over come.

The Company's sales for both industrial and domestic use are currently being serviced through canisters of compressed natural gas (CNG), which are distributed by truck. As our pipeline network develops sales will be serviced via this route. Once the pipeline is completed, in the next 3 to 4 months, we expect sales to increase significantly.

We have now established 5 filling stations for gas powered vehicles. We have developed 3 stations ourselves and these are located at wells #10, #16 and #20. The remaining filling stations have been developed as part of the agreement with the Indian Oil Corporation (IOC). The regulatory hurdles to overcome in order to establish a filling station are extensive and the agreement with the IOC enables us to by pass a number of these and as such allows quicker roll out of these outlets. With these dispensers being positioned within existing IOC outlets, the agreement also provides a strong marketing presence. Further outlets are currently being established, both at Great Eastern and also IOC locations.

Financials:

With the Rs. 3.5 billion ($88m) bank financing in place to fund the completion of the first 100 wells of our 300 well programme on the current licence area, the overall project is now self financing. The debt was provided after extensive due diligence by each of the 9 banks in the syndicate, which also provides further strong independent validation of the project. 

Since the bank financing was put in place, we have drawn down Rs. 750m ($19m), which has gone to fund the operations.

As production and sales grow the Company will increasingly benefit from the positive pricing environment for gas and competitor resources in India. 

Outlook:

Whilst our focus will remain on the current project, we are also looking at acquiring additional CBM acreage and also a potential secondary listing on the Indian Stock Exchange within the next year.

Great Eastern is in a strong position, with solid progress having been made towards commerciality. We expect the year ahead to see further good progress being made in all areas of the business and look forward to the future with confidence.

-ENDS-

   

BALANCE SHEET

		As at 31March (US$) As at March 31
	Notes	2008	2007
ASSETS
Non-current Assets
Property, plant and equipment		16,818,701	1,181,024
Capital work in progress		44,477,852	31,913,627
Intangible assets		370,944	368,571
Prepayments		202,637	66,122
Trade and Other receivables	3	65,297	57,689
		61,935,431	33,587,033
Current assets
Prepayments		123,848	54,267
Trade and other receivables	3	1,936,281	1,374,093
Advance income tax		770,744	629,129
Restricted deposits with bank		927,938	29,239
Cash and cash equivalents	4	2,102,197	11,002,941
		5,861,008	13,089,669
Total assets		67,796,439	46,676,702
EQUITY
Ordinary Shares	5	12,246,781	12,246,781
Share premium		33,301,944	33,301,944
Other reserves		4,930,843	945,822
Retained earnings		(4,815,414)	(2,305,483)
Total equity		45,664,154	44,189,064
LIABILITIES
Non-current liabilities
Borrowings	6	18,663,070	- --
Deferred income tax liabilities		-	-
Retirement benefit obligations		98,304	40,122
Provisions		107,588	45,882
		18,868,962	86,004
Current Liabilities
Borrowings	6	148,667	-
Trade and other payables	7	3,114,656	2,387,869
Provisions		-	13,765
		3,263,323	2,401,634
Total liabilities		22,132,285	2,487,638
Total equity and liabilities		67,796,439	46,676,702

  

INCOME STATEMENT

	Notes	Year ended 31 March (US$)
		2008	2007
Income
Revenue		122,761	- --
Other income		44,801	49,488
Repairs and Stores and Consumables		(56,051)	-
Personnel expenses		(663,829)	(385,862)
Depreciation and amortization		(196,438)	(43,533)
Other operating expenses		(2,133,769)	(1,257,622)
Foreign exchange gain/(Loss)		25,458	2,818
Operating profit / (Loss)		(2,857,067)	(1,634,711)
Finance income	8	375,243	1,301,176
Finance costs	9	(27,287)	(8,432)
Finance income/ expenses net		347,956	1,292,744
Profit/(Loss) before income tax		(2,509,111)	(341,967)
Income tax expenses		(820)	-
Profit /(Loss) for the year		(2,509,931)	(341,967)
Loss per share	11
- basic and diluted loss per share		0.0046086	0.0005976

CASH FLOW STATEMENT 

		Year ended 31 March (US$)
	Note	2008	2007
Cash flows from operating activities
Net cash flow from operating activities	10	(2,503,366)	(2,506,633)
Interest paid		-	-
Income tax paid		-	-
Net cash flows from operating activities		(2,503,366)	(2,506,633)
Cash flows from investing activities
Cash paid for purchase of property, plant and equipment		(4,387,486)	(303,119)
Cash paid for capital work in progress (Development of wells)		(20,957,104)	(15,592,140)
Cash paid for purchase of intangibles		(3,056)	(128,691)
Proceeds/ (payments) on encashment/ (acquisitions) of short term bank deposits (net)		(890,039)	20,548,488
Sale proceeds from Fixed Assets		24,401	-
Interest received from investments		375,243	1,324,294
Net cash flows from investing activities		(25,838,041)	5,848,832
Cash flows from financing activities
Proceeds from issue of shares		-	-
Proceeds from borrowings		24,924,526	-
Repayment of borrowings		(6,386,680)
Interest expense		(27,287)	-
Net cash flows from financing activities		18,510,559	-
Net (decrease)/increase cash and cash equivalents		(9,830,848)	3,342,199
Cash and cash equivalents at beginning of year		11,002,941	7,350,980
Exchange gains/losses on cash and cash equivalents		930,104	309,762
Cash and cash equivalents at end of year		2,102,197	11,002,941

Cash and cash equivalents are the same as that disclosed under note 10.

Cash and Cash Equivalents exclude $ 463,822 (2007:$29,239) which are restricted deposits with less than three months maturity. These constitute margin money deposits against letters of credit issued by banks on behalf of the company. Restrictions on such deposits are released on the expiry of terms of respective arrangements.

  

 

 

 

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards [IFRSs] applicable to the company's reporting for the year ended 31 March 2008. The financial statements have been prepared on a historical cost basis. The financial statements are presented in US Dollar and all values are rounded to the nearest US dollar except where otherwise indicated.

The financial statements of Great Eastern Energy Corporation Limited have been prepared on the basis of all the IFRSs applicable to the company's reporting for the year ended 31 March 2008.

These financial statements were approved by the Board of Directors on 27 May 2008 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial information are disclosed in the critical Accounting Estimates and Judgments section.

IFRS 7, 'Financial instruments: Disclosures', and the complementary amendment to IAS 1, Presentation of financial statements - Capital disclosures', introduces new disclosures relating to financial instruments and does not have any impact on the classification and valuation of the Company's financial instruments, or the disclosures relating to taxation.

The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after 1 April 2007 but they are not relevant to the Company's operations:

IFRS 4, 'Insurance contracts';

IFRIC 7, 'Applying the restatement approach under IAS 29, Financial reporting in hyper-inflationary economies'; 

IFRIC 8, 'Scope of IFRS 2', and

IFRIC 9, 'Re-assessment of embedded derivatives' and

The following standards, amendments and interpretations to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after 1 April 2008 or later periods, but the Company has not early adopted them:

IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). It requires an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. The standard is not expected to have significant impact on the Company's financial information as the Company has adopted the option of capitalization of borrowing costs under current version of IAS 23.

IFRIC 11, 'IFRS 2-Company and treasury share transactions' (effective from 1 January 2009). IFRIC 11 provides guidance on whether share-based transactions involving treasury shares or involving Company entities (for example, options over a parent's shares) should be accounted for as equity-settled or cash-settled share-based payment transactions in the stand-alone accounts of the parent and group companies. This interpretation does not have an impact on the Company's financial statements.

IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction' (effective from 1 January 2008). IFRIC 14 provides guidance on assessing the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. Company has not applied the provisions of IFRIC 14. This interpretation does not have any impact on Company's financial statement.

IFRS 8, 'Operating segments'(effective from 1 January 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, 'Disclosures about segments of an enterprise and related information'. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. IFRS 8 is not relevant to the Company's operations because the company does not operate any segments.

The following interpretations to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after 1 April 2008 or later periods but are not relevant for the Company's operations:

IFRIC 12, 'Service concession arrangements' (effective from 1 January 2008). IFRIC 12 applies to contractual arrangements whereby a private sector operator participates in the development, financing, operation and maintenance of infrastructure for public sector services. This interpretation does not have an impact on the Company's financial statements.

IFRIC 13, 'Customer loyalty programmes' (effective from 1 July 2008). IFRIC 13 clarifies that where goods or services are sold together with a customer loyalty incentive (for example, loyalty points or free products), the arrangement is a multiple-element arrangement and the consideration receivable from the customer is allocated between the components of the arrangement in using fair values. IFRIC 13 is not relevant to the Company's operations because the company does not operate any loyalty programmes.

(i) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The functional currency of the Company is Indian Rupees ("Rs." or "INR"). The financial statements are presented in US Dollar (US $), which is the Company's presentation currency. 

For the purpose of conversion from the functional currency to the presentation currency the assets and liabilities except for equity for each balance sheet presented is translated at the closing rate at the date of that balance sheet. Income and expense for each income statement presented are converted using an average rate and all resulting exchange difference is recognized as a separate component of equity. 

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities are translated into functional currency at the exchange rates ruling at the balance sheet date. Exchange differences arising on the settlement of monetary items or translation at rates that are different from those at which they were initially recorded, are recognized as income or expense in the period in which they arise. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

 

 

i) Foreign Exchange Risk: The company's exposure to foreign currency risk arises from foreign-currency denominated liabilities on account of purchase of services and materials from foreign contractors and suppliers. 

The Company measures the foreign currency exchange risk as a product of the carrying value of its financial assets and liabilities denominated in currencies other than the functional currency of the company and the forward rate between INR and the foreign currency as at the next reporting date. It has not entered into any forward contracts to hedge such exposure in absence of practice of taking cover against such risk.

The following table gives a quantitative summary of the exposures by foreign-currency (carrying amounts of foreign currency financial assets and financial liabilities) as at the balance sheet date:

Particulars	Denomination Currency	As at 31 March 2008	As at 31 March 2007
Financial Assets:
Trade and other receivables
Capital Advances, net of provision	USD	122,972	129,429
Financial Liabilities:	USD	373,267	645,153
	GBP	33,900	36,412

The above amounts are disclosed on the basis of information provided internally to the key management personnel of the company.

At 31 March 2008, if INR had weakened/strengthened by 5% against the US dollar with all other variables held constant, post-tax loss for the year would have been $ 12,431 higher/lower, mainly as a result of foreign exchange gains/losses on translation of US dollar-denominated financial assets and liabilities. The amount of loss is more sensitive to movement in currency/US dollar exchange rates in 2008 than 2007 because of the increased amount of fluctuations in INR versus US Dollar rates.

At 31 March 2008, if INR had weakened/strengthened by 5% against the Sterling with all other variables held constant, post-tax loss for the year would have been $ 3,350 higher/lower, mainly as a result of foreign exchange gains/losses on translation of Sterling denominated financial assets and liabilities. 

The sensitivity analysis is based on a reasonably possible change in the underlying foreign currency against the Indian rupee computed from historical data and is representative of the foreign exchange currency risk inherent in financial assets and financial liabilities reported at the balance sheet date.

ii) Interest Rate Risk

The company has taken secured term loan from a consortium of banks consisting of State Bank of India, State Bank of Patiala, State Bank of Mysore, Union Bank of India, and L&T Infrastructure finance Limited at different floating rates. The carrying value of the Loan as at 31 March 2008 and 2007 is $18,663,070 and NIL respectively. The company is exposed to cash flow interest rate risk on its secured loans.

The company analyses its interest rate exposure regularly. Various scenarios are simulated taking into consideration refinancing, alternative financing etc. Based on these scenarios, the company calculates the impact on profit and loss of a defined interest rate shift. 

At 31 March 2008, if lending rates had weakened/strengthened by 100bp with all other variables held constant, post-tax loss for the year would have been $185,378 higher/lower, mainly as a result of fluctuation in floating interest rates for term loan.

The above amounts are disclosed on the basis of information provided internally to the key management personnel of the company.

 

The sensitivity analysis is based on a reasonably possible change in the market interest rates computed from historical data and is representative of the interest rate risk inherent in financial assets and financial liabilities reported at the balance sheet date.

 

	As at 31 March  2008	As at 31 March  2007
	As at 31 March  2008	As at 31 March  2007
Trade receivables	21,445	-
Less: provision for impairment of receivables	-	-
	21,445	-
Capital advance, net of provision	641,473	407,291
Service and value added tax due from Statutory authorities	1,246,108	954,423
Due from related parties	26,464	23,120
Advances to employees	4,129	4,153
Others	61,959	42,795
Total trade and other receivables	2,001,578	1,431,782
Less: Non current portion:
Due from related parties	24,588	22,546
Advances to employees	2,127	2,581
Other Deposits	38,582	32,562
Current portion	1,936,281	1,374,093

As at 31 March 2007, Advance to Vendors at nominal value of $54,125 (2007: $49,631) were impaired and fully provided for. Movements in the provision for impairment of advances were as follows:

	As at 31 March  2008	As at 31 March  2007
As at beginning of the year	49,631	48,496
Exchange difference on translation	4,494	1,135
As at end of the year	54,125	49,631

Other Financial Assets- Current

4. Cash and cash equivalents

	As at 31 March  2008	As at 31 March  2007
	As at 31 March  2008	As at 31 March  2007
Cash at banks and in hand	1,319,978	105,748
Short Term Deposits	782,219	10,897,193
	2,102,197	11,002,941

Notes:

Cash at banks is non-interest bearing.

Short-term deposits are made for varying periods ranging from one day to three months depending on the immediate cash requirements of the Company, and earn fixed interest at the respective short-term deposit rates. 

The carrying amounts of Cash and cash equivalents are representative of their fair values as at the respective balance sheet dates.

Cash and Cash Equivalents exclude $ 463,822 (2007:$29,239) which are restricted deposits with less than three months maturity. These constitute margin money deposits against letters of credit issued by banks of behalf of the company. Restrictions on such deposits are released on the expiry of terms of respective arrangements. These are included in restricted deposits.

	As at 31 March  2008	As at 31 March  2007
	As at 31 March  2008	As at 31 March  2007
Authorised share capital
650,000,000 ordinary shares of INR. 1 each	14,724,745	14,724,745
[USD equivalent 0.0226 ( 2007: 0.0226)]
	14,724,745	14,724,745
Issued, Subscribed and Paid-up
544,619,499 ordinary shares of INR. 1 each	12,246,781	12,246,781
	12,246,781	12,246,781

During the year ended 31 March 2007, the Company has increased its authorized share capital by $2,153,316 comprising of 100,000,000 equity shares of INR 1 each.

During the year ended 31 March 2007, the Company has issued sponsored Global Depository Receipts (GDRs) comprising of 57,418,843 GDRs against 287,094,215 equity shares of Re 1 each offered by the existing shareholders of the company, at a price of 127.50 pence per GDR. These GDRs have been listed in the Alternative Investment Market (AIM) of the London Stock Exchange. However, this does not increase the amount of issued capital of the Company.

 

	As at 31 March  2008	As at 31 March  2007
	As at 31 March  2008	As at 31 March  2007
Non current
Borrowings from financial institutions	18,663,070	-
Current
Interest accrued and due on borrowings	148,667	-
	18,811,737	-

The fair value of borrowings equals their carrying amount, as the debts are at floating rates of interest.

Total borrowings are secured against first charge by way of hypothecation of all immovable properties including plant and machinery and all other movable properties both present and future, and mortgage of land and buildings and all other immovable properties both present and future. 

The average annual interest rates for the borrowings are:

	As at 31 March  2008	As at 31 March  2007
	As at 31 March  2008	As at 31 March  2007
	%	%
Average rate of borrowings	12.56	-

The carrying amount of financial assets pledged as collateral for liabilities as on 31 March 2008 is $ 5,031,713 (2007: NIL) 

	As at 31 March  2008	As at 31 March  2007
	As at 31 March  2008	As at 31 March  2007
Trade Payables	2,422,450	1,875,234
Other Payables	191,200	123,426
Due to related parties	19,028	29,405
Employee benefit liability	209,204	185,866
Statutory dues	193,738	114,037
Other liabilities	79,036	59,901
	3,114,656	2,387,869
Less: Non current portion:	-	-
Current portion	3,114,656	2,387,869

Notes:

i) Trade and Other Payables are non-interest bearing and are generally payable within one year.

ii) The carrying amounts of Trade and Other payables are representative of their fair values at respective balance sheet dates and are contractually payable within a period of 1 year or less.

8. Finance Income

 

	As at 31 March  2008	As at 31 March  2007
Interest on bank deposit	375,243	1,301,176
	375,243	1,301,176

 

9. Finance Costs

	As at 31 March  2008	As at 31 March  2007
Interest expense	988	354
Bank charges	26,299	8,078
	27,287	8,432

	As at 31 March  2008	As at 31 March  2007
	As at 31 March  2008	As at 31 March  2007
Cash flows from operating activities
Profit/(loss) after tax	(2,509,111)	(341,967)
Adjustments for:
Liabilities written back	(37,797)	-
Loss on sale of assets / CWIP written off	125,191	-
Finance costs	27,287	-
Interest Income	(375,243)	(1,301,275)
Depreciation / Amortization	196,438	139,507
Foreign exchange loss/(gain)	(7,629)	(49,488)
Provisions for employee benefits	34,829	(155,849)
Income tax charge	(820)	-
Operating profit before working capital changes	(2,546,855)	(1,709,072)
(Increase)/decrease in trade receivables	(1,923,289)	-
(Increase)/decrease in other receivables	962,618	(939,167)
(Increase)/decrease in prepayments	242,495	(281,613)
Increase/(decrease) in payables and accruals	761,665	423,219
Net cash flows from operating activities	(2,503,366)	(2,506,633)

  

	As at 31 March  2008	As at 31 March  2007
	As at 31 March  2008	As at 31 March  2007
Loss after tax attributable to equity share holders for the year	2,509,931	341,967
Weighted average number of ordinary shares for basic loss per share	544,619,499	544,619,499
Diluted weighted average number of shares	544,619,499	544,619,499
Basic and Diluted Loss per Share	0.0046086	0.0005976

Basic Loss per share amounts are calculated by dividing net loss for the year attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year.

.

The Company operates in a single geographical segment, being India, and in a single business segment, being the production and sale of gas. Hence, no separate segment information has been furnished herewith.

 

The company has during the year paid an amount of Rs $ 723,042 to Mr. Y.K.Modi, a director of the company, in relation to approval of debt facility of $ 87,565,674 from the consortium of banks led by State Bank of India (SBI). 

The bankers had withheld approval of the aforesaid loan as an old personal guarantee furnished by Mr. Modi to SBI for the borrowings of Spark Plug Limited (SPL), a company of which he was then a director, was outstanding, and the dues of SPL were not cleared . Mr. Modi contested the matter and it was subjudice for a long period.

On the grounds of commercial expediency and after taking into account the interests of the company the board after obtaining legal advice has approved payment of the aforesaid amount. The company has paid the amount to Mr. Modi after obtaining the sanction letter for the term loan from SBI and ensuring that such sum was actually paid by him to the bank. 

The above payment has been included under the head "Capital Work in Progress" as a part of Borrowing Cost.

The company has converted INR balances to $ equivalent balances on the following basis:

For conversion of all assets and liabilities, other than equity, as at the reporting dates, the exchange rates prevailing as at the reporting date have been used, which are as follows:

o as at 31 March 2008: $ 1 = INR 39.97

o as at 31 March 2007: $ 1= INR 43.59

For conversion of all expenses and income on income statement and the cash flow statement, for the respective periods, periodic average exchange rates have been used, which are as follows:

o For the year ended 31 March 2008: $ 1 = INR 40.24

o For the year ended 31 March 2007: $ 1 = INR 45.38

For conversion of issued Share Capital and Share Premium, historical exchange rates prevailing on the respective dates of issue of shares have been taken into consideration.

A full copy of these results is available on the Company's website

ENDFR EAEKAEFDPEAE

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