1. NIRMA LIMITED-Capital Structure Equity:Nirma Ltd. (Rs. Crore ) Mar 2003Mar 2004Mar 2005 Mar 2006 Mar 2007 Mar 2008Authorized capital100 95 9595 95 140 Issued equity capital 79.4 79.4 79.479.4 79.4 79.59 Paid up equity capital 79.3879.3879.38 79.3979.39 79.57 Paid up preference capital 0 2.79 2.792.79 2.792.79 Reserves & surplus1348.281553.391792.51 1965.812347.42 2502.62 Net worth 1427.661635.561874.68 2047.992429.78 2584.98 The authorized capital has increased in Mar 2008 to Rs 140 Crores from Mar 2007 (Rs. 95 Crores).The paid-up equity capital (face value of each share is Rs. 5) is however only Rs. 79.57 Crores, 56.83% of the authorized capital.Nirma has 6% Redeemable non-cumulative non-convertible Preference Shares (of Rs.100 each) worth Rs. 2.79 Crores.Nirma has huge reserves (96% of Net Worth as on FY 2008).Long-term Debt: Secured borrowings (in Rs. Mar Mar Mar MarMar Mar Crores)2003200420052006 20072008 Bank borrowings115.98150.6966.548.48239.15 182.54Short term bank borrowings20.9895.6966.548.48239.15 182.54Long term bank borrowings95 55 0 0 00 Since the company has been a net re-payer of loans for the past few years (ref: Companys cash flow statements), the long term borrowings were all paid by FY 2004 and the company has no pending long term bank borrowings in FY 2008.

2. The short term borrowing (in FY 2008) from banks are secured on pari passu basis (Paripassu a legal term referring to the equal treatment of two or more parties in anagreement, extracted from: http://mba.tuck.dartmouth.edu/pecenter/resources/ glossary_p_r.html), by a first charge, by way of hypothecation of specified stock of raw materials,stock in process, finished goods, other merchandise being movable, book debts, bothpresent and future and by way of second charge on specified fixed assets, both presentand future, of the Company. Nirmas Cash flow from operations was pretty healthy till FY 2007, when it fell to172.49 crores from 373.55 crores last year. The company also did not issue any otherdebt instruments in FY 2007; rather, it borrowed from banks in this year. This mightexplain the rise in borrowings from bank in FY 2007 to Rs. 239.15 Crores. The company has reduced its Bank Borrowings (Secured Loans) in FY 2008 by around23% as compared to FY 2007.MarMar Mar Mar MarMar Unsecured borrowings (in Rs. Crores)2003 2004200520062007 2008 Short-term loans from banks in foreign 140.080 0 043.57 87.94 currency Non-Convertible debentures 140250 00 140.00 Borrowings from corporate bodies0 28.94 10.89 2.16 41.12 33.37 Deferred credit3.833.072.35 1.630.960.04 The short-term loans from banks in foreign currency have nearly doubled from FY 2007to FY 2008. This might be to support the acquisition of Searles Valley Minerals Inc.(SVM) and Searles Valley Minerals Operations Inc. (SMVO), the USA based Soda Ashproducer in FY 2008. Privately placed Floating Rate Non-Convertible Debentures worth Rs. 140 Croreswere issued by Nirma in FY 2008 to raise money for the above mentioned acquisition. The borrowings from other corporate bodies decreased by around 19 % from FY 2007 toFY 2008. 3. The total unsecured borrowings in FY 2008 (Rs. 261.35 Crores) is triple than that in theyear 2007 (Rs. 85.65 Crores)MarMar MarMar MarMar Nirma Ltd. (Rs. Crore) 2003 20042005 20062007 2008 Secured Borrowings 450.01 570.91 564.46 344.3239.15 182.54 Unsecured Borrowings 143.83 108.36 13.24 3.79 85.65 261.35 Total Borrowings 593.84 679.27 577.7348.09324.8 443.89 Secured : Unsecured 3.13 5.2742.6390.84 2.79 0.70 BorrowingsThe ratio of secured borrowings to unsecured borrowings was lowest in FY 2008. Froman investor point of view, this is not a healthy sign as unsecured borrowing outweighssecured borrowings. This might indicate the companys credibility might have gone downas far as secured borrowings are concerned and hence it has to opt for unsecuredborrowings to fund its projects and acquisitions. The aggregate level of loan funds increased from Rs.324.85 crores in the previous year toRs.443.94 crores at the end of 31st March 2008. The debt to equity ratio of the Company is 0.17 in FY 2008 indicating that Nirma isnearly and all-equity (or zero-debt) company. Nirma is predominantly all-equity based company with very little loans ( Pd= 0.099) Hence, the Wacc of Nirma is higher (since cost of equity is higher than cost of debt) Nirma also has preference shares issued with cost of preference share of 6% (and Pps=0.0066) Since Nirma has very low debt, it is nearly risk-free. 4. HENKEL INDIA Equity:Dec DecDec Dec DecDec Henkel India Ltd. (all fig. in Rs. Crore)20022003 200420052006 2007 Authorized capital 1.4 1.4172 172 172172 Issued equity capital0.8 0.8116.46116.46116.46 116.46 Paid up equity capital (net of forfeited0.8 0.8116.46116.46116.46 116.46 capital) Paid up preference capital (net of forfeited0.1 0.1686868 68 capital) Reserves & surplus 13.62 15 17.78 22.86 27.3937.86 Net worth14.52 15.9 202.24207.32211.85 222.32Henkels capital structure hasnt changed in recent years. Henkel also has preference shares worth Rs. 68 Crores like Nirma Ltd. however,Henkels preference shares are like the following:9% Redeemable NonCumulative Preference Shares (of Rs 10 each) worth Rs. 28 Crores 4% Redeemable Cumulative Preference Shares (of Rs 10 each) worth 40 Crores The paid-up equity capital (face value of each share is Rs. 10) is however only Rs.116.46 Crores, 67.70% of the authorized capital of Rs. 172 Crores. Henkel has very less reserves (only 17% of the Net Worth as on Dec. 2007)Long-term Debt:Henkel India Ltd. ( All Fig. in Rs. Crore) Dec 2004 Dec 2005 Dec 2006Dec 2007Secured borrowings31.89 15.7415.55 10.18Unsecured borrowings 168.25150.02 171.13 282.1Bank borrowings125.95110.78 186.68292.28 Short term bank borrowings125.95110.78 186.68292.28 Total Borrowings200.14165.76 186.68292.28Henkel India has no long term borrowings as on Dec 2007. 5. All borrowings are short-term bank borrowings. However, the borrowings are greater than the net worth clearly indicating that Henkel islevered to a large extent. Henkel is a well balanced company (Net-Worth nearly equal to liabilities). The Wacc of Henkel is lower than Nirma (as it is well-balanced) Higher short-term loans however have a higher cost of debt. Henkel has high debt and hence is more risky. Comparisons between Nirma Ltd. and Henkel Ltd: Mar-04Mar-05 Mar-06Mar-07Mar-08 Nirma Ltd. Debt-equity ratio0.420.310.170.130.17 Henkel India Ltd. Debt-equity ratio0.890.990.8 0.881.31 Nirmas debt-to-equity ratio is very less as compared to that of Henkel India. Henkel India shows a more aggressive financing as compared to the stable approach byNirma Ltd. Textiles. Nirma is not raising much debt because it has huge reserves (96% of Net Worth as onFY 2008). Nirma is a well-established brand in detergents and its cost of debt is lower as comparedto Henkel whose cost of debt will be higher because it has only short-term loans.