LEASING & INSURANCE FINANCE

FINAL PROJECT LEASE PROPOSAL OF DG KHAN CEMENT FOR BOARD OF DIRECTORS

Submitted to: Prof. Tehseen Mohsin

Submitted By: Somia Ibrahim Saira Javed Mahmood Amin Bilal Asif L1F08BBAM2039 L1F08BBAM2132 L1F08BBAM2208 L1F08BBAM2152

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COMPANYS HISTORY:
D.G. Khan Cement Company Limited (DGKCC), a unit of Nishat group, is the second largest cement manufacturing unit in Pakistan with a production capacity of 13,400 tons clinker per day. It has a countrywide distribution network and its products are preferred on projects of national repute both locally and internationally due to the unparallel and consistent quality. It is list on all the Stock Exchanges of Pakistan.

NISHAT
DGKCC was established under the management control of State Cement Corporation of Pakistan Limited (SCCP) in 1978. DGKCC started its commercial production in April 1986 with 2000 tons per day (TPD) clinker based on dry process technology. Plant & Machinery was supplied by UBE Industries of Japan.

Group History:
Nishat Group is one of the leading and most diversified business groups in South East Asia. With assets over PRs.300 billion, it ranks amongst the top five business houses of Pakistan. The group has strong presence in three most important business sectors of the region namely Textiles, Cement and Financial Services. In addition, the Group has also interest in Insurance, Power Generation, Paper products and Aviation. It also has the distinction of being one of the largest players in each sector. The Group is considered at par with multinationals operating locally in terms of its quality of products & services and management skills. Mian Mohammad Mansha, the chairman of Nishat Group continues the spirit of entrepreneurship and has led the Group successfully to make it the premier business group of the region. The group has become a multidimensional corporation and has played an important role in the industrial development of the country. In recognition of his unparallel contribution, the Government of Pakistan has also conferred him with Sitara-e-Imtiaz, one of the most prestigious civil awards of the country.

Vision Statement
To transform the Company into modern and dynamic cement manufacturing company with qualified professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.

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Mission Statement
To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the Company for sustainable and equitable growth and prosperity of the Company.

Products of DG Khan Cement Company:

Two different products are produced at DGKCC namely Ordinary Portland Cement and Sulphate Resistant Cement. These products are marketed through two different brands:

DG brand & Elephant brand Ordinary Portland Cement DG brand Sulphate Resistant Cement

Products:
Ordinary Portland Cement Sulphate Resistant Cement

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LEASE PROPOSAL OF DG KHAN CEMENT FOR BOARD OF DIRECTORS

NAME OF THE ORGANIZATION: NATURE OF BUSINESS: STATUS OF THE ORGANIZATION: REGISTERED OFFICE ADDRESS:

DG KHAN CEMENT CEMENT Products Public Limited Company Nishat House, 53-A, Lawrence Road, Lahore-Pakistan Phone: 92-42-36367812-20 UAN: 111 11 33 33 Fax: 92-42-36367414 Email: info@dgcement.com Web site: www.dgcement.com

IAT
DATE OF INCORPORATION:

1978. 223444-09

NTN OF COMPANY:

TERMS & CONDITIONS OF LEASE

TYPE OF LEASE: DESCRIPTION OF ASSET: LEASE AMOUNT: SECURITY DEPOSIT [10%]: RESIDUAL VALUE [10%]:

SALE AND LEASE BACK *MACHINERY. RS. 35,448,679 RS. 3544867.9 RS. 3544867.9 **16%. RS. 8,119,769.35 RS. 354486.79

IRR:
LEASE RENTALS MONTHLY: PROCESSING FEE @ 1%:

COMMITMENT

FEE

@ 1%

PER ANNUM OR PART THEREOF ON UNDISBURSED AMOUNT COMMENCING

30

DAYS

FROM THE APPROVAL OF THE LEASE FACILITY.

DOCUMENTATION CHARGES:

RS. 10,000

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PAYMENT TERMS: LEASE TERM: SECURITY:

IN ARREARS ON MONTHLY BASIS.

04 YEARS
A. PERSONAL GUARANTEES OF DIRECTORS.

B. CORPORATE GUARANTEE OF ASSOCIATED CONCERN C. 47-POST DATED CHEQUES. *MACHINERY. Description. Crushing MACHINERY Qty. 01 Amount (Rs). 35,448,679

The present market and forced sale value of machinery is determined for rupees 37,000,000 and 35,448,679 by LAP approved valuator (copy of valuation report attached) ** The rentals calculated are indicative / tentative, actual rentals will be calculated and shall be fixed as FLOOR on the date of agreement according to the KIBOR prevalent at that time and will be revised every six months according to the KIBOR prevalent seven days before the expiry semi annually. REFERENCES

CIB Report:

As the lease proposal is for a corporate therefore Corporate Information Report is generated and according to the report results the specific perspective customer is clear from overdue as its credit history has revealed.

Creditors:

Dg Khan Cement Company is clean as per the letter received from MCB bank and letters from other creditors are awaited

Suppliers:

From the suppliers of the company the company has good payment schedule and never got late in terms of payments.

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INTRODUCTION

Establishment:
DG Khan Cement Company Limited (DGKCC) was established under the management control of State Cement Corporation of Pakistan Limited (SCCP) in 1978 as private limited company. DGKCC started its commercial production in April 1986 with 2000 tons per day (TPD) clinker based on dry process technology.

Acquisition by Nishat:
Nishat acquired DGKCC in 1992 under the privatization initiative of the government. After privatization the company was listed on Stock Exchanges in September 1992. Standard Certifications Obtained for Export (different countries) DG Khan Cement Co. Ltd. is ISO 9001:2008 & ISO 14001:2004 certified systems Following are the group concerns of DG KHAN CEMENT. POWER GENERATION PIPE SECTOR: NISHAT POWER LIMITED (200 MW)

Construction was started in April 2008. Its gross capacity of production is 200 MW and plan output is 195.260 MW. Power generation agreement is of 25 years. Nishat Chunian Power Limited(200MW)

Nishat Chunian Power Limited (NCPL) is a public limited company incorporated in February 2007. It is listed on both Karachi and Lahore Stock Exchanges. The Company is established as a power generation project having gross capacity of 200 Mega Watts under a 25 year take or pay agreement with National Transmission & Dispatch Company Limited (NTDCL). The project has been commissioned under 2002 Power Policy of GOP and has been granted a generation license by the National Electric Power Regulatory Authority (NEPRA) in September 2007. The company started its commercial operations on July 21, 2010.

Lalpir Power Limited

(362MW)

Lal Pir (Pvt.) Limited owns and operates Lal Pir Thermal Power station, most efficient power plant in Pakistan, Located near "Muzaffargarh". Lalpir is one of the world's leading power companies. Generate and distributes electric power in 26 countries through an array of world class power business.

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Electricity is mainly used to drive supercomputers, cutting edge industrial technologies, hospitals, homes schools and businesses.

Pak Gen Power Limited 365MW)

Pakgen power Limited is 365 MW fuel oil based power plant with a net generation capacity of 347MW, located in Muzaffargarh, Pakistan. Pakgen had achieved commercial operation date on Feb 0198 and has an operating life of 35yrs with a 30yr power purchase agreement. The PPA was signed between Pakgen and WAPDA on Sep 0595 after which it was granted a generation license with an implementation agreement with the GOP.

TEXTILES SECTOR

Nishat Mills Limited (The largest composite Unit in Pakistan)

Nishat Mills Limited is the flagship company of Nishat Group. It was established in 1951. It is one of the most modern, largest vertically integrated textile company in Pakistan. Nishat Mills Limited has 198,120 spindles, 655 Toyota air jet looms. The Company also has the most modern textile dyeing and processing units, 2 stitching units for home texitle, one stitching unit for garments and Power Generation facilities with a capacity of 89 MW. The Companys total export for the year 2011 was Rs. 36.015 billion (US$ 416 million). Due to the application of prudent management policies, consolidation of operations, a strong balance sheet and an effective marketing strategy, the growth trend is expected to continue in the years to come. The Company's production facilities comprise of spinning, weaving, processing, stitching and power generation. Nishat (Chunian) Limited (The largest composite Unit in Pakistan)

Nishat Chunian Group has an enviable business history of over two decades. From a modest start in 1990 with a spinning mill of only 14,400 spindles, the group today has a vertically integrated textile company which prides itself of being the fourth largest textile company in Pakistan (in terms of turnover). In 2007, the group diversified into the power sector by setting up a 200 MW Independent Power Producer. Today, Nishat Chunian Group contains two companies Nishat Chunian Limited (a textile company) and Nishat Chunian Power Limited (a power generation company).

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FINANCIALS AND INSURANCE

MCB Bank Limited (The 3rd largest Bank in Pakistan)

Adamjee Insurance Company Limited (The largest insurance business)

Security General Insurance Co. Limited

OTHERS

Nishat Hotels & Properties Limited Nishat Developers (Pvt.) Ltd. Pakistan Aviators & Aviation (Pvt.) Ltd.

Directors Information: Following are the directors of the DG KHAN CEMENT (Pvt) Limited. Name Mrs. Naz Mansha Mian Raza Mansha Mr. Khalid Qadeer Qureshi Mr. Zaka-ud-Din Mr. Farid Noor Ali Fazal Mr. Inayat Ullah Niazi Status Chairperson Chief Executive Director Director Director Chief Financial Officer

Ms. Nabiha Shahnawaz Cheema

SHARES HELD PERCENTAGE

Shares held

Percentage

Directors, Chief Executive Officer, And their spouse and minor children

18,709,311

4.27

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PESTS ANALYSIS
Political factors include government regulations and legal issues and define both formal and informal rules under which the firms operate. The rule and regulations that the cement industries follow are as follows: According to the tax memorandum 2008, the cement industries have to abide by the following rules:

The tax rates on telephones will be collected at the rate of 10 % of the amount exceeding Rs. 1000.

General sales tax is enhanced from 15 % to 16 % including sales tax on services under the Provincial Sales Tax Ordinance, etc.

Due to the increase in the general rates of sales tax, the rate sales tax on the natural gas has been increased from 24 % to 25 %.

Duty on cement (that includes Portland cement, aluminous cement, slag cement, super sulphate cement and similar hydraulic cements, whether or not colored or in the form of clinkers) has been enhanced from Rs. 750 to Rs. 900 per metric ton.

The government has put special excise duty of 1 % as well.

Duty on the services such as goods insurance, fire Insurance, theft Insurance, marine Insurance, other Insurance, non-fund services provided by banking companies or non-banking companies has been enhanced from 5 % to 10 %.

The rate of tax for the collection at the import stage for all imports of goods has been reduced to 2 % from 5 %.

According to the tax memorandum 2008, the importer will not be taxed at the importing stage of goods such as mineral fuels, mineral oils and products of their distillation

Under SRO 575 (I)/ 2006, raw materials, machinery, components &equipments etc. were exempted from the whole of the sales tax and subjected to the custom duty at 0 to 5 per cent, with the condition that such

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imported goods were not locally manufactured. Now the condition of not being locally manufactured for the import of capital goods worth US $50 million or above for setting up of new industrial projects has been removed.

Employment Laws: The labor policy issued by the Government of Pakistan lays down the parameters for the growth of trade unionism, the protection of workers' rights, the settlement of industrial disputes, and the redress of workers' grievances. The policy also provides for the compliance with international labor standards ratified by Pakistan. At present, the labor policy as approved in year 2002 is in force. The minimum wages for unskilled worker is Rs. 2,500. The minimum threshold of income for taxation of salaried individuals has been enhanced from Rs. 150,000 to 180,000 per annum.

Environment regulations At present Pakistan industries follow the Pakistan Environmental Protection Act, 1997. The Pakistan government has now become conscious of the environmental pollution. It has set some specific laws that all the manufacturing industries have to follow according to the Pakistan Environmental Protection act, 1997.

Political stability The present situation regarding the political stability is negative in Pakistan. This political instability has been in process since the fate full attack of9/11, 2001. This instability has affected the businesses adversely. The poor security situation and uncertainty leading up to the parliamentary elections in February have caused a capital flight from Pakistan, and its rupee currency has fallen 13% against the US dollar since January 2008. However, the stepping down of Pervaiz Musharraf as president has shown some hope for the reviving of the political stability. According to the survey conducted by IRI (international republican institute), 52 % of the people expected that the things will get better now that there is a new government But still there are many factors that are prevailing up till now and are the cause of the unrest. More over, the geographical region where Pakistan is located, having the neighbors such as India and Afghanistan, and the pertaining international situation regarding the war against terrorism, not only

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the direct investors have stepped back even the investors who have made investments in the country are backing up. The demonstrations, social unrest, suicidal attacks and terrorists attacks on different areas as well are highest risks to the companys operations

Economic factors Economic factors affect the purchasing power of potential customers and the firms cost of capital. Following are the factors affecting the macro economy: Economic growth According to the report of UN Economic and Social Commission for Asia and the Pacific Pakistan maintained its momentum in 2007, slightly more than the 6.6 % for 2006. The manufacturing sector growth continued 8.4 % in 2007, which is slightly more moderate than 10 % for the year 2006

The industry also suffered from a drastic decline in profitability as industry profits declined by 56% from Rs 12.3 billion in FY06 to Rs 5.3 billion in FY'07. Growth in Pakistans exports and imports slowed sharply in 2007: the rate for exports fell to 3.4%, for imports to 6.9%. Pakistan has formulated sound macro economic policies that will help the Pakistani economy to grow stronger but the recent political violence and uncertainties could slow down the growth.

However according to the report, including all the sectors Pakistans economic growth is expected to remain strong at 6.5 % in 2008

Inflation rate Pakistan, with a population of about 16 million people has undergone a remarkable macroeconomic growth during last few years, but the core problems of the economy are still unsolved. Inflation is one of these core problems. The inflation in year 2008 has recorded to be the highest according to the Federal Bureau of Statistics. Consumer Price jumped to 17.21% in March 2008 according to the statistics given by Federal Bureau of Statistics. In April 2008, the Pakistan inflation accelerated at it fasted pace and the inflation is still increasing.

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The reason behind this is that in April 2008 the food prices rose 25.5percent from a year ago and fuel prices climbed 8.6 percent and the tension among the political leaders

Interest rates The monetary policy of Pakistan is controlled by the state bank of Pakistan. The state bank, in order to control the inflation has taken measures and tightened up the monetary policies. Pakistan has raised its main interest rate by 1 percentage point to 13 % to help fight inflation.

Exchange rates The exchange rates of Pakistan with respect to the U.S. dollar, has declined .The Pakistani rupee has depreciated since the proclamation of emergency rule in November 2007. In other words we can say that the value of the rupee has fallen as the time passed by. In figure we can see the rise in the value of dollar in the month of July. Minimum was recorded as Rs. 71.2556 and maximum as Rs. 76.2183

Social factors Health consciousness Health consciousness among the people of Pakistan has been increasing day by day. The citizens of Pakistan are getting aware of their duties in order to maintain the healthy environment. Government is taking several steps in order to educate, how important it is for the people to live in the healthy environment. The government discourages the operation of the industries within the city by charging these factories with environmental charges.

In spite of this discouragement, there are many factories that are running inside the city, discharging poisonous gases and chemicals. By the passage of time, the people as well along with the government are discouraging such activities and demand for clean environment.

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Technological factors Automation This is the era of high competition The Pakistani industries not only have to compete among them selves but with the international market as well. Pakistan is steadily automating particularly its development sectors to stir quality production and ensure skilled management, as it would ensure a good place for the country in the global competitive market. The ERP is being implemented or is in the phase of being implemented in the cement industry.

Technology incentives According to the report issued by the ministry of technology, the government will invest in various fiscal and non-fiscal incentives to nurture, develop, and promote the use of IT in organizations, to increase their efficiency and productivity. The strategies focus on promotion of venture capital industry through incentives, recognition of software development as a priority industry for financing by the banks and DFIs, creation of investment friendly environment, and building investors confidence.

Rate of technological change In recent years, technology has been seen to be progressing at very fast rate all over the world It has helped to raise income and alleviate poverty in the developing countries. The change in technology can be seen in the Pakistani industries as well

SWOT ANALYSIS
SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis is a technique that many companies use during strategic planning; basically an organized way to evaluate where to focus time, money and energy to improve productivity and growth. A SWOT analysis can be a valuable tool for setting milestones or approaching a venture investor, because it demonstrates a solid understanding of your company performance and the factors influencing productivity.

Explanation of SWOT Analysis

STRENGTHS

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Availability of raw material The easy availability of the key raw material Gypsum, Shale and limestone all over Pakistan gives a smoother start as which I think is a very good for any cement industry. And the plants are installed quite near to raw material which is a competitive edge. Cheaper labor As we all know the labor of Pakistan is very cheap. So this is a healthy sign for the company as the company has to pay less to their labor which result in saving of their income and later on can be utilized in the expansion of cement plant. Resultant increases the cement production. Latest machinery The plant of the company is equipped with the latest machinery having a latest technology In Pakistan as compared with others. Although it is expensive but it saves the cost by producing quality cement and creating value in mind of customers. Quality Product As the plant equipped with the modern technology so it has a capability to produce better quality using less energy than others. The company has been certified for Environment Management System ISO 14001 by Quality Assurance Services, Australia. The company was also certified for ISO-9002 (Quality Management System) in 1998. By achieving this landmark, DG Khan Cement became the first and only cement factory in Pakistan certified for both ISO 9002 & ISO14001. Self Power Generation The company has its own power generation plants in the factory area so to meet the plant requirements and we all know that Pakistan these days suffer with serious energy crisis so the company do not totally depends upon WAPDA even from its own generation the company produces energy with much less cost so I think it is another main strength that DGKCC have if compared with other cement industry because not other cement plants in Pakistan have such energy generation system so they have to depend upon WAPDA. Durability Yes, DGKCC has a very good image in mind of its customers reason being they produce the finest quality since day first of its production and take steps to make it better and even charge less compared with its competitors. The company has its positioning through its slogan, which represents durability. Competitive Edge Company launches its new plant near chakwal, which double its production capacity. So this new plant helps in gaining the competitive edge over others in north region.

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Profitable Organization At present and from few years organization is earning profit which is its strength because in profitable organizations more and people invest more and more. So profitability is a good sign for the organization. Here are some figures to prove further:

Use of Coal and Waste Products Coal is found in all the four provinces of Pakistan. The country has huge coal resources, about185 billion tones, out of which 3.3 billion tones are in proven/measured category and about 11 billion are indicated reserves, the bulk of it is found in Sindh. At present, DGKCC switch to coal and gas as basic fuel. According to data the cost of cement production per tone by furnace oil was around Rs2, 083 whereas the cost of production per tone by coal was Rs8,68, saving Rs1,215 per tone. Similarly, the saving per bag was Rs60.75, which is a huge difference. Now husk is also introduce as basic fuel in order to minimize production cost as much as possible. Own Paper Bag Plant DGKCC has now installed its own paper bag plant and became pioneer in that to even minimize its bag cost even that plant also sells bags to other cement plants as per demand. WEAKNESESS Low Promotional Campaign If we analyze this they are not paying much attention to promotional campaign. They are not advertising their product as per requirement because through promotional campaign they can also gain more market. They are only using trade promotions, which are not enough to have a good positioning in the market. No Performance Appraisal

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There is no proper performance appraisal program. If one works hard and want to showcreativity his performan ce is not appraised by any instrument. The managerial staff is not promoted on the basis of performance, as they have no any tool to measure performance of managers. They only one way to measure the performance which is annual confidential report, which is prepared by only one person who is immediate boss of any employee. Seniority Issues In management there is a seniority virus means there is no proper mechanism for the promotion of the seniors. Experienced persons have a lot of experience and they know the organization be stand how to effectively run that organization. They know that what to promote and what not to promote about the organization. This irregularity in promotion of managerial staff creates job dissatisfaction and lowers down their productivity. It may happen that staff is not dissatisfied with the job but at the same time they may not be satisfied with their job. Centralized Decision Making Although the decision making style of DGKCC is decentralized that what the company says but the ground reality is that in decision making process the middle level management is not much consider by the upper management which creates sense of irresponsibility among the members of company. So ultimately it creates job dissatisfaction. Their decisions are not praised and honored much as they expect. OPPORTUNITIES Location of Project Location always matters, if we see in southern Punjab there is not enough cement factories other than DG Cement. So we can say that there is somewhat monopolist in that part and it controls the whole market. If the company upgrades its production capacity they have a good chance to cover the foreign market of Afghanistan from that plant. Increase in demand of cement due to the upcoming sports event South Africa is schedule to host the football world cup of 2010 due to which they need to makethe football stadiums for the World Cup and Sri Lanka are also expected to approach Pakistani companies for cement imports because Sri Lanka to co-host the cricket world cup of 2011. Sothis is a good chance for a company to maximize profit. Export Demand As there is a war like situation in Afghanistan and Iraq so there is a huge demand of cement in rehabilitation process, most of Indian cement plants are in north region so from there it costs a lotto reach in southern region so this also again is a huge market to be capture, also there is a huge demand in UAE and Russia. Result there is a huge cake of international market which a company have a chance to cater. Introduction to New Product Line The company still produces OPC and SRC but there is also a room for producing the White Cement so I think by introducing the new product line they can also increase their sales and profit also

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Rehabilitation and New Construction Projects in Country As we all know theres started a rehabilitation phase in north areas of Pakistan after war against militants and in South Waziristan there is a rehabilitation phase to be coming and a lots of projects have started in the country. So this increase in demand creates a new opportunity for the company to earn more profit. THREATS Increase in Fuel Prices Increase in the international prices of coal and oil is a major threat. As Pakistan coal contains high percentage of sulphur due to which the company is not able to use the local coal as a source of energy. So the company has to import the coal from different countries like South Africa, China and Indonesia at high prices. This will restrict the profit margin. Economic Recession There is a global recession going these days so this is also a threat to cement industry as it affects a lot to export market. Political Instability That instability always remains threat to Pakistan and its cement industry also because due to this theres not as much growth and now the war like situation in a country is really a big issue. IMF Loan IMF Package in Future can cause to decrease GDP and economical development in Pakistan. This will also be cause to stop development of infrastructure. So it will have huge effect on company also in fact on whole industry. Increase in Interest Rates Unanticipated increase in interest rates or less than expected demand growth might create severe crises for the sector couple of years forward. Decrease profitability due to competition The sharp decline in cement prices has been witnessed due to domestic competition among companies has dampened the profitability of the company. This increase in competition among the players have further decreased the prices of cement in the local market. So the company decrease the prices of products in order to get high market as compared to its competitor. High level of taxation Presently, the company is heavily burdened due to levy of Federal Excise Duty @ Rs. 750 per ton and General Sales Tax @ 15% on duty paid value. In addition to Federal Excise Duty and General Sales Tax, company is

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also paying the provincial levies (Royalty and Excise Duty) on acquiring of raw material for production of cement i.e. lime stone, shale and clay.

BACKGROUND INFORMATION

Dg Cement Company is not our existing lease, however the associated companies (Nishat power limited) has taken facilities from us previously and following is their credit history with our financial institution:

CONTRACT DATE

ASSET DESCRIPTION

LEASE AMOUNT (RS.)

SECURITY DEPOSIT (RS.)

LEASE TERM

IRR

JUN 2006

MACHINERY 3,000,000 300,000 03 YEARS

K +4.00

EXPOSURE TO THE GROUP CONCERN

CONTRACT CONTRACT 01 TOTAL

CAPITAL COST

PRINCIPAL OUTSTANDING 937,221 937,221

RENTALS OUTSTANDING 997,440 997,440

MONTHLY RENTAL 87,825 87,825

RENTALS OVERDUE Nil.

3,000,000 3,000,000

GROUP DISBURSED / FRESH EXPOSURE

STATUS

CAPITAL COST (RS.) 3,000,000

PRINCIPAL OUTSTANDING (RS.) 937,221

Rentals Outstanding (Rs.) 997,440

DISBURSED

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APPROVED UNDISBURSED FRESH EXPOSURE TOTAL

BUT

NIL 35,448,679 10,128,000

NIL 6,236,710 7,173,931

NIL 8,389,030 9,386,470

FINANCIAL INFORMATION

This financial statement is audited by M/s A. F. Ferguson & Co., Chartered Accountants as auditors for the year ending 30 June 2012 BALANCE SHEET

Equity and liabilities:

2011

2010

---- (Rupees in thousands) ---Noncurrent Liabilities

Long term finances Long term deposits Retirement and other benefits Deferred Taxation

4,880,579 70,893 139,213 1,707,886 ----------6,798,571

5,089,507 81,138 104,029 1,456,960 -----------6,740,634

Current Liabilities Trade and other payables Accrued markup Short term borrowing-secured Current position of non-current liabilities Provision for taxation 1,644,045 284,511 8,691,982 2,001,566 35,090 ------------12,657,194 1,679,749 346,125 9,585,642 2,139,283 35,090 -----------13,786,189

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ASSETS 2011 2010

---- (Rupees in thousands) ----

NON CURRENT ASSETS Property, plant and equipment Capital work in progress Investments Long term loans, advances and deposits 24,611,565 1,373,820 5,259,416 133,219 ----------31,378,020 CURRENT ASSTES Stores, spares and loose tools Stock in trade Trade debts Investments Advances, deposits, prepayments And other receivables Cash and bank balances 1,136,564 167,642 ------------18,295,030 1,087,161 230,792 -----------16,417,492 3,543,034 862,141 459,300 12,126,349 3,017,742 1,036,876 303,949 10,740,972 25,307,302 465,650 4,696,922 158,677 -----------30,628,551

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Profit and Loss Account for the year ended June 30, 2011

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COMMENTS
1. As per the balance sheet companys total liability ratio is only 39% which means company has equity of more than 60% in its total capital. Which shows that Dg cement is in a strong equity position and has very less chance to get bankrupt 2. As per balance sheet data companys total long term liability ratio is only 71% 3. Current ratio f year 2011 is 1.44 which is neither below the prescribed limit of 1 nor above than 2.5 4. TIE (EBIT/Interest) for the year ended June 30, 2011 is 1.3 only 5. Total assets of the company is increasing at 89% 6. Net financial debt is decreased by 7.38% 7. Working capital for the year ended June 30, 2011 is 56,37,836 which means company is able to pay off its short term liabilities on immediate basis.

REQUIREMENT OF THE REGULATORY BODIES Long-term Debt/Equity ratio is within the prescribed limit of 60/40. Current ratio is within the prescribed limit which shows that company has strong liquidity position. Borrowers total facilities are within the limit of 10 times of capital & reserves free of losses. The prescribed exposure limit is within 20% of equity. TIE is under the prescribed limits of 4.

LEASE JUSTIFICATION Profitability of the prospect is improving. Existing relationship with one of its group company with satisfactory repayment behavior. Guarantee of one of the group concern is strong enough to rely upon

LEASE PROPOSAL PROCESSED BY

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