DCM Shriram Consolidated increases capacity at Kota facility: Thursday, October 26, 2006

DCM Shriram Consolidated, [DSCL], an integrated business group, with extensive and growing presence across the entire agri-rural value chain and chloro-vinyl industry has increased capacities at Kota facility, which is now fully operational and contributing favourably to the performance. The company`s expanded capacities in its Chlor-alkali Plastics (including Calcium Carbide), cement and captive power operations at its Kota complex has made favorable contributions to overall performance during the quarter under review. The company had completed the chlor-alkali capacity expansion in FY2006 to 510 TPD. Its entire chlor-alkali capacity is now based on modern, environment friendly, efficient, membrane cell technology. The company expanded its calcium carbide capacity from 190 TPD to 340 TPD and PVC resin capacity from 115 TPD to 175 TPD in FY 2006. It further expanded its PVC resin capacity from 175 TPD to 200 TPD in Q2 FY 2007. The company has enhanced its captive power capacity at Kota to 125 MW in Q3 FY 2006, which currently operates at above 100% capacity that enables it to sell the surplus power generated to the state electricity board. The company would complete the sugar crushing capacity expansion to 33,000 TCD by the coming sugar season. The company’s co-gen power plant commissioning is progressing on schedule and will become operational by the current sugar season 2006-07. This would raise the total power export from sugar business to 27.5 MW. The company`s rural retailing initiative aims at meeting all the needs of the rural population from farming to consumer goods. During the quarter the company opened 9 new stores. The number of Hariyali stores now stands at 40, and is expected to increase significantly over the next 2 years. DSCL, had earlier indicated that its fertilizer unit in Kota had recommenced operations after a planned shut-down, which is done once every two years, for scheduled maintenance. This year the shutdown duration of about 45 days was longer for carrying out major modifications in the plant to enable use of LNG as a feedstock in place of Naphtha. The conversion aimed at improving the cost competitiveness of fertilizer business, will be completed once GAIL pipeline to the plant is commissioned and LNG becomes available. This will reduce the expenditure of the company to a large extent due to drastic fall of LNG prices in the international markets. Also the plants running on Naptha will be benefited due to fall in its prices. Due to closure of the fertilizer unit the Company’s production of urea for Q2 FY2007 was much lower than the corresponding quarter last year. Hence this took a hit at the results of this quarter. But from the next quarter the results will zoom as the losses in production, are expected to be recovered in H2 FY2007, as the Company will operate its plant at high capacity utilization to make up for significant part of the production shortfall. We can see the stock close above Rs.200 due to new developments taking effect. Also its READ ESTATE FORAY WILL BE A NEW FEATHER IN THE CAP. Keep holding the stock with a SL loss for some solid gains in the days to come. I must admit that I was thinking of much worser performance on the September, quarter, than it has given. This shows the prowess of the company in meeting the shareholder's commitments. Real Estate Foray: The Company used to have a large textile operation in the heart of Delhi. In 1996, the Hon’ble Supreme Court directed that these businesses be relocated out of Delhi so as to provide ‘green lungs’ to the city. Accordingly, it closed the operations in Delhi and set up a 9,000 spindles spinning unit in Tonk. The land upon which its Delhi unit was located is now available for development in accordance with the Hon’ble Supreme Court’s decision/rulings. But according the Times of India, the company is looking to sell the land at an astronomical price of Rs.1600 Cr--Rs.1800 Cr. A number of parties are running after the land and a deal could snapped at any time. Divisons of DCM Shriram Consolidated Ltd: 1. Agri Businesses: Sugar, Urea, Agri Inputs, Shriram Bioseed, Hariyali Kisaan Bazaar 2. Energy Intensive Businesses:Chemicals, PVC Resins, Calcium Carbide, Cement 3. Value Added Businesses: Fenesta™ Building Systems, PVC Compounds, Energy Services 4. Other Businesses: Textiles, Real Estate The company's share price came down surprisingly today, when the Cement prices rose in India. Also the company will benefit from the fall in Naptha and Crude prices. It makes PVC Resins which is a derivative of Crude oil. Its Hariyalli Kisaan Bazar is doing extremely well and is a major revenue generator from the rural sector. Government's new Urea Policy will also help the company improve its bottomline. Positive developments in this quarter: The company inspite of all these bottlenecks mentioned earlier was able to post net sales for Q2 FY2007 ,at Rs. 666 Cr, which was up 19% Q-o-Q. It Continued strong operating performance across Plastics and Cement business. Its Hariyali Kisaan Bazaar and Fenesta Building Systems continue to grow as per plan. Board has declared an interim dividend of 20%. Q2 FY 2007 performance review ( all comparisons with Q2 FY 2006): 1. Sales for Chemicals, Plastics and Cement were higher by 34% due to higher volumes for Chemicals and Plastics (consequent to completion of capacity expansion projects last year) and higher price realizations for PVC resin and Cement. 2. New Businesses Hariyali Kisaan Bazaar and Fenesta Building systems also contributed to higher turnover. 3. Sugar registered lower operating profits due to lower sales quantity consequent to lower carried over stocks and lower margins as the sales price increase was lower than the increase in costs. 4. Fertilizer had lower sales and consequently losses as the plant took a planned shutdown for 45 days to enable conversion to LNG and to carry out normal overhauling undertaken once every two years. The resultant loss of about Rs.16 crores will be partly recouped in the remaining financial year. 5. The Chemicals business recorded drop in margins due to lower prices (by almost 8%) and rising costs of furnace oil. 6. Margins in Bulk fertilizers like DAP/ MOP suffered because of uncompensated cost increases by government and high subsidy arrears leading to higher interest costs. 7. The Interest costs were higher due to high subsidy arrears of approximately Rs.300 crores, increase in borrowing costs and higher debt raised to implement several capacity expansions. 8. Depreciation costs were higher due to several capacity expansions implemented over last few quarters.

Last year the company had allotted bonus shares post the announcement, in the ratio of 1:1 and split the face value of Rs 10 share to Rs 2 per share. After the bonus and the stock split, the equity share capital has increased to Rs 33.18 crore represented by 16.59 crore equity shares of Rs 2 each paid-up. [With inputs from Internet] More in the following mails... Best wishes, Suman Mukherjee India. www.eindiabrokers.com www.bcozindia.com www.sumanspeaks.blogspot.com http://finance.groups.yahoo.com/group/SumanSpeaks/