Emmbi Industries Ltd.

Himanshu Chhajer.

About--

• Emmbi Industries Limited,

engaged in the manufacturing of

technical textile products: flexible

intermediate bulk container (FIBC) /

various polymer based packaging

products, Advanced Composites,

water conservation products (Aqua

Sure) (Flexi Tank) etc.

• Water Conservation Emmbi manufactures a range of products that help in the storage,

transportation, conservation and harvesting of water, apart from fulfilling the irrigationneeds of farmers across the country.

• Advanced Composites This refers to a range of products that are primarily meant to

take care of human safety, especially in hazardous environments. Our protective films andfabrics are used for transportation and management of hazardous material.

• Specialty Packaging Emmbi caters to a range of customers globally, serving industries

as varied as chemicals, e-commerce, oil and water, through a range of products fortransportation and storage.

• Agri Products This refers to a range of products especially made for the farming

community. Typical applications include those for yield improvement through cropprotection systems, fermentation, storage, radiation- and hailstorm-control and weedmanagement products

IPO Issues-

• “Market regulator Sebi has slapped a penalty of Rs 25 lakh on Keynote Commodities for fraudulent trade practices related to the initial public offer of Emmbi Polyarns in 2010”

• The regulator found that at the end of the first day when the issue opened for subscription, it got a very poor response and was thus at a risk of failure.      Sebi said that Keynote Commodities had transferred funds to certain known entities for subscribing to the issue.      These connected entities had made large applications to Emmbi's IPO and procured significant allotments using the transferred funds.      According to Sebi's probe "these large applications played a major role in the success of the issue".

About--• Emmbi came out with a public issue for which it appointed KCSL as its BRLM. As BRLM it was KCSL's

responsibility to prepare and file offer document and to take all steps to manage the IPO so that Emmbi is

able to raise the requisite finances for the purpose as stated in the offer document.• the other entities of Keynote group are (i) KCL, the underwriter to the issue, is a broker/trading member of

BSE and NSE and (ii) the Noticee, a trading member of MCX. KCL is 100% subsidiary of KCSL, and the Noticee is 100% subsidiary of KCL.

• The IPO subscription was open for 3 days— the IPO of the company received poor response on day 1 when only 5.7% of the issue was subscribed. . This would be an alarming situation in the eyes of any BRLM and the company.

Concept – Concept held 29% stake in KCSL and chairman of KCSL, Nirmal Suchanti is director of Concept. Team India –common directorship within group entities Platinum – One of the owners Mehul Patel is a director in KCSL

KCL & the Noticee advanced money to certain entities namely, Concept, Team India, Anidhi, Platinum who made large applications in the IPO. Large applications were also made by other related entities such as Gulu Watumal, Lalit Kr. Sharma (directorPlatinum), directors of Anidhi & their wives. Consequently, on day 2, the subscription figure for IPO was 0.9859 times

• The main aim of the Keynote Group was to ensure success of the issue so that whatever application money received from the public could be retained. If the issue failed, all the application money received would have to be refunded.

• Entities of Keynote group during the time of IPO of the company was for inducing those connected entities to subscribe to the shares of the company only with the intention of securing the minimum subscription to issue. The entities connected to the Keynote Group made large applications and eventually cornered around 73% of the issue. The remaining portion of the shares were subscribed to by the general public.

• The applications made on the second day of IPO indicated a reasonable response to the IPO and the general investors, who were unaware of the nature of the major quantum of the subscriptions received, got lured into making their applications and thus got trapped. Hence, the activities of the Noticee, who is a part of the Keynote Group, actively participating in a scheme whereby it had advanced money to connected entities and induced them to subscribe to the IPO of the company with the intention of securing the minimum subscription to the issue

It was revealed that the IPO opened on 1st February 2010 and closed on 3rd February 2010 and finally the allotment was done at the higher end of the band i.e., 45. Trading in the shares commenced on both National Stock Exchange Limited (NSE) and BSE Limited (BSE) from February 24, 2010. On the day of listing, the price of the scrip opened at 45.5/46 at BSE/NSE and closed at 28.65/28.75 on BSE/NSE respectively, thus registering a fall of around 37% from

the issue price. A summary can be as follows-

• The advances/transfers were made exactly at the time when the company's IPO was floundering.

Advances were made to entities/persons associated/connected to Keynote group. Some of the entities to whom the advances were made already had debit balances. Most entities had no funds/inadequate funds when they submitted their application

for the IPO and their application was successful only with the funds received. Immediate sale of all allotted shares on day one of listing whereby most of these

applicants incurred heavy losses.

Emmbi Industries Ltd.

• EMMBI INDUSTRIES LIMITED is a Public Company, Limited by Shares, registered on 29/11/1994.

• Emmbi Industries Limited raised about ₹43.6 cr and paid ₹3.9 cr as issue expenses, which is about 9% (3.9/43.6) of the total IPO proceeds.

• Paying 9% as commission to merchant bankers/underwriters for raising funds seems high and might be an indicator of the urgency on part of the company to raise the funds.

• As we know that Emmbi Industries Limited had been facing continuous years of negative cash flow from operations over the years and the issue price of ₹45 in February 2010 with FY2009 EPS of 1.62 meant that the issue was priced at a P/E of 27.7 times. Such P/E levels look high for a company which is not making cash profits.

Paying 9% as commission to merchant bankers/underwriters for raising funds seems high and might be an indicator of the urgency on part of the company to raise the funds.

Directors--

• Mr. Makrand Appalwar, Chairman & Managing Director Makrand Appalwar a first generation entrepreneur was instrumental in envisioning, and transforming Emmbi from a trading company, to a large-scale manufacturer. He has over two decades of experience in the polymer industry, and is the recipient of many awards. He lays great emphasis on teamwork, mentors the sales team, drives product development, and is continually seeking ways to enhance sustainability, in the ecosystem around Emmbi. Makrand is a graduate Mechanical Engineer, from Maharashtra Institute of Technology, Pune, (India) and an alumnus of MIT Sloan School of Management, Boston (US)

• Mrs. Rinku Appalwar Director & CFO Rinku Appalwar, the cofounder oversees the finance, purchase, logistics, and administrative functions of the company. She is a firm believer in setting high standards and this has translated to her being felicitated as the leading lady in manufacturing for three years in a row. Rinku was instrumental in taking the company public, and ensuring it’s five-fold growth in five years from the time Emmbi became a publicly traded company. Rinku is a graduate in Chemistry from Mumbai University and holds an MBA

Sales Growth--

2007 08 09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘1629% 34% 30% 45% 36% 37% 13% 16% 13%

Emmbi Industries Limited had been growing its sales at a good pace of 28% over last 10 years (FY2007-16). However, as the size of the company is increasing the pace of sales is going down year on year. The sales growth has toned down to 27% in last 7 years (FY2009-16) and further down to 22% in last 5 years (FY2011-16) and 14% in last 3 years (FY2013-16).

Raw Materials Cost--07 08 09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16

Sales Growth 29% 34% 30% 45% 36% 37% 13% 16% 13%

Sales 22.91 29.64 39.74 51.84 75.4 102.26 140.19 159.05 183.82 207.94

Raw Mat.% 74% 66% 65% 70% 77% 73% 78% 74% 75% 69%

• From the above comparison, we can somehow link the cost of raw material(polymer or PP granules) moving in line with crude oil prices.

• Mgmt. commentary on the above—” The relationship between crude prices,

and polymer prices is not entirely direct, for crude constitutes only a fraction of the overall price. The crude-linked raw materials that go into our products, are multi-stage derivatives of crude, and fluctuations in crude prices have a negligible impact on our margins”

• “Contribution of crude oil to the raw material cost is not even 10% because it is broked into four parts and that become their raw materials.

Crude needs to broke into Naphtha and that needs to be cracked to become propane or ethane and then needs to be polymerized to become polyethylene or polypropylene. And that is processed to become a product.Yeah crude oil does impact but very little…there can be changes in cost due to refining margin between crude to naphtha or refining margin between naphtha to propane”.

So according to Mr. Markand Agarwal, cost of raw material should not be a judging factor.

• As stated in annual report— .” The energy required for the production is the electricity and fuel. “

• The raw Materials cost has been around 70-75% of revenues over years, which can be seen in improvement and sustained operating margins due to company’s shifting focus on more value added and high margin products. Also the power and fuel cost has been constant over years around 2%

• As stated in Annual report—” The management had devised various research programmes to conserve the energy, keeping in view the peculiarity of the production process. “

2007

‘08 ‘09 ‘10 11 12 13 14 15 16

Sales 22.91 29.64 39.74 51.84 75.4 102.26 140.19 159.05 183.82 207.94

Raw 74% 66% 65% 70% 77% 73% 78% 74% 75% 69% Power & Fuel 3% 3% 3% 3% 2% 2% 2% 2% 2% 2%

Operating Margin--

2007 ‘08 ‘09 ‘10 11 12 13 14 15 1611.91% 11.98% 10.92% 9.55% 9.63% 8.97% 9.66% 10.70% 12.34%

A look at the profitability trend of Emmbi Industries Limited would indicate that the operating profitability margin (OPM) has been largely stable over the last 10 years (FY2007-16) within the range of 9% - 11%. In the recent years, the OPM has improved to 13%. Sustained and improving profitability margins are a good sign for any business 

Sustained Margins--

•  the management of Emmbi Industries Limited has mentioned that the order booking and procurement of raw material happen simultaneously, therefore the fluctuation of raw material does not impact the profitability. It leads an investor to conclude that the orders are priced to the customers based on ongoing raw material prices by adding a profitability margin, which in turn leads to stable profitability.

• the increasing capacity utilization levels of the manufacturing capacity of Emmbi Industries Limited is leading to the operating leverage coming into play and the company is able to further improve its margins recently. As per the company, its capacity utilization has increased from 83% in H1-FY2016 to 89% in H1-FY2017, which effectively leads to the production of more products with same fixed costs and thereby increasing the profit margin per product unit.

Economy & Outlook(Macro Environment)

The US, UK, Germany, and France (all Emmbi’s focus markets) continued to show improvements, both on account of better labour market conditions, and easy monetary policies.

• The outlook is expected to be divergent in the coming years, with the developed economies, showing improved prospects on account of recovery in labour markets, fiscal consolidation, and the low interest rate scenario.

• around 53% of revenues are from export, depreciating currency has also been very helpful.

• Crude oil, which forms a part of Polymer material, its downtrend has also helped to some extent.

Interest Expense as a part of Operating Profit-

2007 ‘08 ‘09 ‘10 11 12 13 14 15 1652% 52% 50% 36% 28% 33% 42% 41% 45% 35%

Around 40% of operating profits goes into interest Payments., which means it is constantly in need of debt funds to carryout the operations.

Depreciation as a part of Operating Profits.

Company has to do capex which leads to higher depreciation expense resulting around 15-18% of operating profits going onto depreciation.

2007 ‘08 ‘09 ‘10 11 12 13 14 15 1624% 20% 17% 15% 14% 17% 20% 19% 16% 14%

Net Margins--

2007 ‘08 ‘09 ‘10 11 12 13 14 15 162% 2% 3% 3% 4% 3% 2% 3% 3% 5%

The net profit margin (NPM) of Emmbi Industries Limited has been fluctuating at a very low level of 2%-4% during last 10 years (FY2007-16) and has touched 5% in FY2016. The major reason for the low net profit margin is the capital-intensive nature of the business of the company. High capital intensity leads to higher depreciation as well as high interest cost due to debt funded operations. As a result, major portion of the operating profit of the company is eaten up by interest and depreciation expenses.

Working Capital—

Working capital turnover has been constantly deteriorating. However, when we see the working capital position of the Emmbi Industries Limited, then we notice that working capital has been consuming a lot of funds for the company.

Now let’s look at Cash Conversion cycle –

Currently it takes around 136 days to convert cost of raw materials into cash received. Which means capital is blocked around for 4.5 months.

2007 ‘08 ‘09 ‘10 11 12 13 14 15 160.33 0.22 0.22 0.55 0.45 0.32 0.27 0.23 0.20 0.24

07

‘08 ‘09 ‘10 11 12 13 14 15 16

Working Capital

7.92

11.74

14.04

29.93

37.04

52.17

65.98

75.28

88.15

72.35

Receivable's Days--

2007 ‘08 ‘09 ‘10 11 12 13 14 15 16 62.29

75.24

64.75

84.98

77.07

72.92

66.52

71.49

66.38

56.38

Receivables days of Emmbi Industries Limited has been range bound within 60-68 days over last 10 years (FY2007-16). Therefore, more or less about 2 months’ worth of sales proceeds are tied up as receivables with the customers at any point of time.

Emmbi Industries Limited has about 50% of its sales coming from exports. We see that most of the exports are usually backed by a letter of credit, which in turn are discounted by the companies to get immediate access to funds. In such a case, the receivables days of 2 months for a company into exports seems a bit higher.

Inventory Turnover--

2007 ‘08 ‘09 ‘10 11 12 13 14 15 16 5.21

5.06

5.24

4.48

3.71

3.48

3.46

3.27

3.36

3.65

then the inventory turnover of Emmbi Industries Limited has deteriorated over the years from 5.9 in FY2009 to 3.7 in FY2016. An inventory turnover of 3.7 means that about 3.25 months of sales (12/3.7) are tied up in inventory at any point in time.

The combined impact of receivables days and inventory turnover means that at any point of time about 5.25 months (2+3.25) worth of sales proceeds are tied up in the inventory at any point in time. For a small size corporate, having about 5-6 months’ sales worth of funds (i.e. about ₹80-₹100 cr. for sales of ₹200 cr.) tied up in receivables and inventory is a huge cost and has been one of the major reasons for the financial drag on the company leading to debt overhang.

DEBT--

• total debt levels of Emmbi Industries Limited increased from ₹15 cr in FY2007 to ₹62 cr in FY2016

• When the said capacity becomes operational, then as per the high working capital needs of the company’s business, it would need more working capital funds. Such pattern indicates that Emmbi Industries Limited would be in continuous need of debt for sustaining its growth.

• high debt has the potential of increasing the risk of bankruptcy and reduced profitability under tough business conditions.

2007 ‘08 ‘09 ‘10 11 12 13 14 15 1614.97 19.16 20.39 13.98 23.46 45.95 59.39 69.37 80.5 62.35

Payable’s--

• When we assess the company on the front of payment to its vendors, then we notice that Emmbi Industries Limited buys most of its raw material from Reliance Industries Limited, where it has to pay entire money advance.So there seems to be little that Emmbi Industries Limited can do at the suppliers’ end to improve its working capital efficiency.

Net Fixed assets turnover--• NFAT of the company indicates that the company has been

doing well on utilization levels of its fixed assets.

The improving NFAT of the company is in line with the growing capacity utilization of the existing manufacturing capacity of the company, which was installed post the IPO of Emmbi Industries Limited in FY2010 from the IPO proceeds.

Fulfilled its commitment from 2010 Statement—” If you recollect at the time of the IPO in 2010, we had sourced capital to invest in a new production facility of 17,800 metric tons, with the intention of achieving revenues of ` 2 billion by 2015. We have today an installed capacity of 18,200 metric tons, and have crossed ` 1.93 billion in revenues, with the potential to take this up to ` 3 billion”

2007 ‘08 ‘09 ‘10 11 12 13 14 15 161.84 2.20 2.80 3.20 2.29 2.59 2.95 3.06 3.31 3.37

Accounting vs. Cash Profits—

The investor would notice that Emmbi Industries Limited has not been able to convert its profits into cash flow from operations.the company has been continuously reeling under debt and high interest payments due to the working capital intensity of its business

 the excerpt of the April 2015 credit rating report of Emmbi Industries Limited by rating agency CARE Limited, which highlights the insufficiency of operating cash flow along with working capital-intensive nature of the business being funded by debt

Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 SumCFO

-2.06

-0.60

2.85

-10.99

-4.84

-4.78

-6.68

4.33

7.90

36.65

22.00

PAT 0.52

0.63

1.27

1.77

2.66

3.31

3.24

4.33

5.97

10.60

34.00

Capacity Expansion & Utilization--IPO 2010 2011 2012 2016(forward)The Company is under implementation to enhance its manufacturing capacity from present level of 5000 M/Ts per year with addition of around 13000 M/Ts per year. The final installed capacity of the Company will be around 18,000 M/Ts. per year.

EXPANSION PROJECT The planned capacity expansion project for the company was for increasing production capacity from the 5000 MTA in pre IPO period to 17200 MTA after completion of IPO. The expansion was planned in two phases and the first phase of expansion to increase the capacity to 12000 MTA has been completed during the year as per schedule. Second phase of increasing the capacity from 12000 MTA to 17200 MTA will be completed before 30th September 2011 as per schedule. 

The expansion was planned in two phases and the first phase of expansion to increase the capacity to 12000 MTA has been completed during the last financial year as per schedule. Second phase of increasing the capacity from 12000 MTA to 18200 MTA has been successfully completed during this financial year

“We have also embarked on the manufacture of food grade packaging and this would add to another 2,400 tonnes of capacity by the end of this calendar year. We expect a real jump on capacity to come in the year 2019, and to meet that the strategic planning is currently underway.”

Capex.• Over last 10 years (FY2007-16), Emmbi Industries Limited has done a capital

expenditure (capex) of ₹67 cr whereas we noticed above that its cash flow from operations for the same period was only ₹22 cr leaving a gap of ₹45 cr [negative free cash flow (FCF)] to be funded from other sources. The company has relied on a mix of debt and equity to meet the fund's shortfall in its business.

• The continuous high debt levels have ensured that the company had to pay about ₹ 40-45 cr as interest to its lenders, assuming 12% rate of interest, which is reasonable for a BBB (negative/neutral) rated company.

• Emmbi Industries Limited has been operating in a business, which is capital intensive and eats up a lot of funds as working capital and the company had to rely on equity dilution as well as debt funding to meet its growing fund requirements to sustain its sales growth.

• As per the company its current capex plans of ₹22 cr are to be funded by ₹15 cr of debt and ₹10 cr of equity.

Debt to Equity—

Debt/Equity ratio of Emmbi has been deteriorating post-IPO. It rose from 0.3times(2010) to 1.3(2015).Only in the recent year, it is able to show improvement in its debt equity dilution. Which means the growth in revenue and margins has been debt funded.

2007 ‘08 ‘09 ‘10 11 12 13 14 15 16D/E 2.8 3.2 2.6 0.3 0.5 0.9 1.1 1.2 1.3 0.9

Promoter’s Remuneration vs. PAT

‘10 11 12 13 14 15 16PAT 1.77 2.66 3.31 3.24 4.33 5.97 10.6

Remuneration 0.57 0.64 0.69 0.75 0.81 1.116 1.506

% 32% 24% 21% 23% 19% 19% 14%

The companies act mandates that the remuneration of all the executive directors/whole time directors including MD should be capped at 10% of the profits of the company as per section 197 of the companies act, 2013. The company needs to take central govt. approval to give remuneration higher than the stipulated cap, to its executive directors.

However, promoters’ remuneration of 14% of net profits after tax seems high from conventional standards.

Promoter’s Stake after IPO—

Promoter’s stake has been increased by 10% from around 47% in 2010 to 58% in 2016, which shows a good sign on promoter’s side.

Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

Stake 47.09% 47.32% 48.67% 51.50% 52.36% 55.94% 58%

2012-13

12,00,000 Equity Shares out of Shares Issued, Subscribed and Paid up were allotted during the year ended 31st March, 2013 on conversion of share warrant monies.

(millions) 2013 2012

Equity Shares at the beginning of the year 16.49

Markand(held shares in million) 4.2 2.99

Add : Equity Shares allotted on Conversion of Share Warrants 1.2Equity Shares at the end of the year 17.69 7%

of equity given as warrant.

Dividends--2011 12 13 14 15 16

PAT 2.66 3.31 3.24 4.33 5.97 10.6 Dividend amount 0.33 0.5 0.35 0.44 0.53 0.89 Divided payout% 12.41% 15.11% 10.80% 10.16% 8.88% 8.40%

 in the light of the company being free cash flow negative over the years and even since FY2011 (CFO for FY2011-16 is 33 cr whereas Capex for FY2011-16 is 61 cr. leading ₹ ₹to negative FCF of 28 cr), the dividends seem to be effectively funded by debt (as the ₹money is fungible).Moreover, if the shareholders including promoters of such free cash flow negative companies use these dividends (which are effectively paid out of debt raised by the company), then the situation might tantamount to increasing personal shareholding by leveraging the company balance sheet. An investor would note that the promoters of Emmbi Industries Limited have increased their shareholding in the company from about 47% to about 57% in last 5 years. And the use of such dividends by shareholders including promoters (which also get a comparative higher salary) to increase stake in the company, as mentioned above, is tantamount to benefiting at the cost of the company.

Implementation of ISO – 22000 HACCP

upgrading the present ISO 9001:2000 standard certification to ISO 9001-2008 level

First Non European FIBC Manufacturing Company to be part of European FIBC Manufacturing Association.

in process of “Integrated Management System”(IMS) of Quality Management Standards (QMS) ISO 9001:2015, & Environmental Management Standards (EMS) 14001:2015 and Occupational Health & Safety Standards (OSAHAS) 45001:2015

Certifications--

Exports driven growth--

Around 53% of revenues are from exports.

• Emmbi has been very focused in increasing its Global presence and seems export oriented by increasing its exports percentage from 37% to 53% in 5 years.

Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

Exports % 37 48 44.5 54.54 55 52.24Country Presence 18 29 38 45 45 51 52

Exports Share with major countries--

16%

41%1%

42%

2015

UK—14%Europe—36%Asia—1%North America—37%

33%

34%

19%

11%4%

2016

AMERICAS 31%EUROPE 32%THE UK 18%OCEANIA 10%Africa 4%

Some Additional Points--

• Around 1.88% of turnover goes to R&D center.• As stated in annual report—” getting an accrediton as a full-fledged R&D

Development centre by the Government of India. This not only helps us getting tangible benefits like tax breaks, excise and customs benefits, preferred bidder for Government projects etc. We also get invaluable intangible benefits such as visibility in the international arena, through government initiatives.”

• Innovation & Diversification—”The Company is focusing on new product development to increase its offerings to existing customers and also to tap demand from the new customers. The planned capacity addition will enable us to achieve growth and increase our geographical coverage. The Management intends to increase the share of higher value added products in total sales mix.”

• Emmbi Inds. Has filed for 11 Patents i.e. 6 designs and 5 processes.

Commentary from ConCall—” We have filed 11 patents and ideas for different reasons like for processes as well as product. But the few in India is around 5 years right now so I don't think I said that within five months I would get the patent.”

• Strength of company is designing and processing.

• Design expertise difficult to replicate. Some of its products are like—Aqua Sure,, Flexi-Tank etc.

• Emmbi Polyarns Ltd., as it was known till 2014, after that they changed their name to Emmbi Industries Ltd.

• It’s an owner operated business.

• Business Model– it has lower bargaining power as buyer ( need to pay advance to Reliance) also low bargaining power as seller( haven’t been able to improve its receivables, only in recent year).

• Right now they are moving away from packaging (which formed around 37% share of revenues) to advanced composites(Higher Margins) and water and agri. products.

• Forward looking—” we have essentially been a B2B company, and now we are moving into the B2C category as well”.

Valuations-

Emmbi KanpurGarware Wall Flexituff

Essel Propack Excel Inds U Flex

EarningsYield(against 6.9%)(higher) 8.82 16.77 9.05 9.19 6.94 9.24 15.38P/e(lower) 17.18 7.8 17.48 100.72 23.01 16.79 5.64P/cf(lower) 5.85 4.85 10.48 3.86 10.87 10.54 2.1P/FCF(lower) -95.77 -238.12 18.69 -145.13 -761.12 533.85 9.59P/Sales(lower) 0.98 0.5 1.63 0.4 1.83 1.03 0.31EV/Ebitda(lower) 9.76 5.26 9.91 6.58 10.29 8.45 4.25p/bv(lower) 2.71 1.52 3.31 1.26 3.67 2.12 0.54Current Ratio(higher) 4.25 2.91 1.45 2.18 2.75 1.85 2.22Cash Conversion Days(lower) 136.36 95.77 26.26 89.28 85.96 71.59 66.05Promoter Stake(higher) 57.66% 69.19% 50.65% 32.88% 57.03% 52.39% 44.02%Export % 52.24% 82.68% 0% 0% 0% 0% 0%Dividend yield 0.42% 0.41% 0.53% 0.00% 0.87% 1.18% 1.22%Cash by Mcap(higher) 0.01% 0.01% 0.03% 0.01% 0.02% 0.01% 0.15%Mcap to Sales(lower) 0.98 0.5 1.63 0.40 1.83 1.03 0.31

Emmbi ROE & ROCE over years.

Return on Equity: ROA: ROCE: 10 Years:8.87% 10Years-3% 10 Years: 9%5 Years:9.66% 5 Years-4% 5 Years:9%3 Years:11.33% 3 Years-4% 3 Years:11%TTM:15.54% TTM—6% TTM:15.69%

2007 ‘08 ‘09 ‘10 11 12 13 14 15 16ROE 10% 10% 16% 4% 6% 7% 6% 7% 9% 15%

ROCE 9% 10% 12% 8% 6% 7% 7% 8% 10% 14%

Growth Rate—

Sales Growth—(CAGR 28%) Earnings Growth(cagr 27%)10 year—28 10 year--327 year—27 7 year--265 year—23 5 year--333 year– 14 3 year--50

07 ‘08 ‘09 ‘10 11 12 13 14 15 16Revenue 29.38% 34.08% 30.45% 45.45% 35.62% 37.09% 13.45% 15.57% 13.12%EPS Growth Rate 21.15% 88.46% -33.80% 50.28% 24.44% -8.75% 33.64% 37.88% 77.55%

• Net Cash– (-2 cr.)

• CFO – 37 cr.

• LTD– 62 cr

• Total Debt—92 cr

• Mcap- 209cr

• Revenues– 208cr

Prof. Sanjay Bakshi on business--

• I quote him-” Great businesses are much more likely to have the

winning combination of: (1) being debt-free; (2) being cash rich; and (3)

with a negative working capital”

• Emmbi– (1) it has debt funded operations( only recently it reduced its debt) (2) it’s a negative FCF company (3) its working capital turnover has been constantly deteriorating and also its working capital intensive business where 50% worth of revenues are blocked at any point of time leading to debt overhang.

Thank You Himanshu Chhajer.