Interim Results

RNS Number:6782T
Promethean India PLC
06 May 2008


                                   PROMETHEAN
                                     INDIA

                            Interim Results for the
                         period ended 29 February 2008

Chairman's Statement

The past six months have been relatively quiet for your company, primarily
because of external circumstances. For both public and private companies,
vendors' price expectations reached levels at which we believed did not
represent value. For public companies, the problem was compounded by the
Securities and Exchange Board of India's (SEBI) restriction on the issuance of
"P Notes", the route by which Promethean India plc previously invested in public
companies. We reviewed a number of investment opportunities but our only
investments were modest follow-on investments in Mahindra Forgings Limited and
in Nitco Tiles Limited. However, we were very pleased to receive Foreign
Institutional Investor (FII) approval from SEBI, thus allowing us to invest
directly rather than through the P Note mechanism.

At the half year date our investment portfolio was showing an unrealised gain to
date of #5.3 million, representing an uplift of 31.2% on cost. However our
caution has been vindicated by the subsequent fall in the Indian market since 29
February 2008 which has reduced the unrealised gains by #2.5 million to #2.8
million as at 29 April 2008. In spite of these circumstances, I remain satisfied
with the quality and performance of the companies in which we are invested.
The Indian market remains very volatile but we are hopeful that there will be
more opportunities in both the public and private markets in the coming year.
In short, it has been a very quiet half year. Although the lack of opportunity
has been challenging, we are pleased that we did not allow the money to burn a
hole in our corporate pocket.

More details on each investment are given in the Investment Managers' review.

Sir Peter Burt
Chairman
6 May 2008



Investment Manager's Review

Overview

As at 29 February 2008 the Group had net assets of #54.0 million, equivalent to
108p per share (31 August 2007: #48.7 million equivalent to 97p per share) and a
portfolio of four investments. During the six month period, there was a 10.9%
uplift in Promethean India plc's net asset value due to our public market
investments rising. This increase was in part driven by the volatility in
emerging markets, and in particular, the Indian market.

While we were pleased with the valuations our investee companies commanded, it
did not make it easy for us to build our position in those companies, or indeed
in other new prospects. As we are long term investors, it becomes more
complicated to execute our added-value strategy.

During the period the Manager successfully executed the merger of Mahindra
Forgings Mauritius Limited (which in turn owned 100% of Schoneweiss & Co. GmbH,
one of the leading private forging companies in Germany), with Mahindra Forgings
Limited, a company listed on the Bombay Stock Exchange. Promethean India plc is
now a shareholder in the Indian listed entity and Mohit Burman sits on the board
of the company.

During the period Promethean India plc invested a total of #2.5 million, of
which #1.4 million was a follow-on investment in Nitco Tiles Limited and #1.1
million was a follow-on investment in Mahindra Forgings Limited. Further to
this, Gaurav Burman was appointed to the board of Nitco Tiles Limited.
Investments in the current portfolio are still relatively immature and we expect
to see continued capital growth in these investments over the next two years. In
addition we are actively working with the companies in order to generate
shareholder value and improve investment returns.
To date, the Manager has invested #16.9 million in four investments.
Investment Strategy

The Company was established in order to execute a value activist investment
strategy in both public and private businesses, building a concentrated
portfolio of investments in which the Manager and Advisor can act as a catalyst
for change and value creation.

All investments, whether in public or private companies, are preceded by
extensive due diligence to assess risks and opportunities in any one investment.
This will include an overview of the target's market, management, business
model, financial track record, prospects and the likely realisation strategy.

Portfolio

As at 29 February 2008, the portfolio was as follows:

Company          Sector                 Cost  Valuation*      Gain/
                                                             (Loss)
                                       #'000       #'000      #'000

Mahindra         Automotive            3,544       3,406      (138)
Forgings 
Limited**
Obopay Inc       Mobile Banking          729         729          -
                 Services
Nitco Tiles      Building              5,502       6,313        811
Limited          Materials
EIH Limited      Hospitality           7,131      11,731      4,600
                                      ______      ______     ______
                                      16,906      22,179      5,273
                                      ______      ______     ______

* The valuations are in accordance with IFRS / IPEVCA guidelines. Valuation of
listed investments is based on the closing bid price as at 29 February 2008.
Unlisted investments are held at fair value, which for a limited period is cost.
All investments are recognised at the transaction date.
** The investment in Mahindra Forgings Ltd made by Promethean India Investments
Fund 1 is held via an intermediary holding company.
Mahindra Forgings Limited

In May 2007 Promethean India plc secured exclusivity to purchase a 10% stake in
Mahindra Forgings Mauritius Limited (MFML). MFML in turn owned 100% of
Schoneweiss & Co. GmbH. (Schoneweiss), one of the leading private forging
companies in Germany with 140 years of experience allowing it to become one of
the leading axle beam manufacturers in the world, specialising in suspension,
power train and engine parts.

The Mahindra group is one of the best known industrial groups in India and a
leader in the automotive sector with over US$4.0 billion per year in revenues.
The Mahindra group had decided that the automotive components sector has
significant growth potential and is key to their automotive strategy. As a
result they have adopted a buy and build strategy in this sector.

We invested alongside them in MFML which purchased Schoneweiss. During the
period MFML was merged into Mahindra Forgings Limited, an Indian listed
business, in an all share transaction. As a result we are now shareholders in
the Indian listed business which has been created as a result of multiple
acquisitions in the automotive component space. We are pleased with the
company's performance and continue to be involved in the strategy going forward.
Mohit Burman is on the board of the company and we have an excellent working
relationship with the Mahindra family.

Obopay Inc.

In June 2007 the Advisor was introduced to Obopay Inc., a privately held
Californian based company. After initial due diligence on the company and its
management the Advisor was impressed by their comprehensive mobile payment
technology. The Obopay service allows an individual to instantly obtain, spend,
and send money anywhere, anytime with anyone using their mobile phone. Given
India is home to over 200 million mobile subscribers and this base is growing
rapidly, the Advisor approached Obopay to discuss the possibility of helping
them scale their operations in India.

During the period we have helped the company establish their operations in
India. We have made a number of introductions both in the banking industry and
with a number of mobile service providers with whom we have good relationships.
Although we are disappointed that the company does not seem to be willing to
allow us to fund its India business as a stand-alone entity, we take some
comfort from the fact that the business is successfully executing its strategy
and has signed a number of partner relationships. The company has signed an
agreement with Centurion Bank and Yes Bank in India, and is rolling out a trial
of the product with Citibank in Boston and Chicago.

We continue to work closely with the management of Obopay and are beginning to
witness plenty of interest in the business globally, especially amongst the
cellular service provider network in India due to the company's ability to offer
inclusive banking in a country with relatively little banking infrastructure.

Nitco Tiles Limited

The Advisor first became interested in Nitco Tiles Limited in June 2007. It was
clear to the Advisor that Promethean India plc should participate in the
significant real estate growth in India, but the question was how to do this
given the high valuations the private and listed real estate businesses in India
were commanding. As a result the Advisor started to look at businesses that it
felt would benefit from the significant amount of commercial, residential and
retail construction in India. Nitco was interesting for a number of reasons, the
first and foremost being that the company since being founded in 1956 has grown
to become the second largest tile manufacturer in India producing in excess of
250 million square feet of floor tiles per year. Over and above this, the
Advisor was very impressed by the management team and their ambitions for the
future growth of the business.

Nitco had also recently announced that they were moving their production out of
the Mumbai region to take advantage of the tax subsidies that some of the less
industrial states in India were offering to businesses that set up manufacturing
units in those regions. As a result some of the valuable real estate that the
company owned would be released and potentially developed into lucrative
residential or commercial use.

During the period we increased our stake in Nitco by purchasing shares in the
open market. We also started working with the management to help them begin to
separate their tile business and their property business into two separate
reporting entities. Shortly after we increased our stake, Gaurav Burman joined
the board of the company. We also helped the company raise a qualified
institutional placement (QIP) of approximately US$40 million from a number of
large investors such as Merrill Lynch and Citibank, which was completed at a
premium to the valuation at which we invested. We continue to be excited about
the progress the business is making and we are working closely with management
to create value.

EIH Limited

The Advisor had for some time been looking at East India Hotels, one of the
largest branded hospitality businesses in India. Given the growth in domestic
and international tourism and the growth in the aviation sector which has
resulted in both Indian and foreign visitors having access to air travel, we are
witnessing a period of major growth in the hospitality and catering industries.
The hospitality sector in India historically has suffered from significant under
investment and as a result there are less 5 star luxury hotel rooms in India
than there are in Manhattan. The Advisor believes they have found an asset
which, despite being one of the best portfolio of properties in India, has been
undervalued by the public markets. The Advisor believes this undervaluation may
change in the medium term and has identified ways in which Promethean India plc
can act as a catalyst for this change.

During the period we continued to look to starting a dialogue with the
management of the business. This became more difficult as the share price of the
company started to rise very quickly after we had started building our stake and
at one point had effectively doubled from the price we paid. This appreciation
happened without any major changes to the manner in which the business was being
managed. Although we are pleased the market is starting to realise the true
value of the asset, we are still working to engage with the management to
encourage them to divest some of their non-core assets and increase shareholder
value. While we believe there is plenty of work to be done, we are encouraged by
some of the recent announcements and actions. We continue to believe the asset
is still considerably undervalued.

Events after the Balance Sheet Date

Since 29 February 2008, the Indian stock market has seen a fall in price levels,
and as such the accumulated #5.3 million unrealised gain as at 29 February 2008
relating to listed investments had reduced by #2.5 million to #2.8 million as at
29 April 2008. A detailed summary is contained within the notes to the accounts.
On 24 April 2008, the company invested a further #0.5 million in Obopay Inc. Our
investment was part of a fourth round of funding, raising an additional US$20.0
million. This round values the company at US$220 million, an uplift of 2.5 times
cost on our original investment of #0.7 million made in May 2007.

In March 2008 one new investment of #1.3 million was made in "Project Einstein",
an undisclosed listed company. As at 29 April 2008, there had been a slight
uplift in the valuation.
Outlook

The Manager is pleased with the progress we have made in terms of investing
capital and the progress we are making with our investee companies. We have
achieved this in a relatively short amount of time. We continue to be encouraged
by the opportunities we are seeing and although we are heading toward a period
of economic difficulty, we continue to believe that India will grow faster than
most other economies and feel this is the right environment to be buying assets
and investing the capital that our discipline has allowed us to protect.

Gaurav Burman
on behalf of
Promethean Investments LLP
6 May 2008

All statements of opinion and/or belief contained in the Investment Manager's
review and all views expressed and all projections, forecasts or statements
relating to expectations regarding future events of the possible future
performance of the Company represent Promethean Investments LLP's own assessment
and interpretation of information available to it as at the date of this report.
As a result of various risks and uncertainties, actual events or results may
differ materially from such statements, views, projections or forecasts. No
representation is made or assurance given that such statements, views,
projections or forecasts are correct or that the objectives of the Company will
be achieved.

Independent review report to Promethean India plc

Introduction

We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 29
February 2008 which comprises the unaudited Group Income Statement, the
unaudited Group Balance Sheet, the unaudited Company Balance Sheet, the
unaudited Statement of changes in equity, the unaudited Group Cash Flow
Statement and notes 1 to 4. We have read the other information contained in the
half yearly financial report which comprises only the Chairman's Statement and
Investment Manager's Review and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the financial
statements.

This report is made solely to the company in accordance with guidance contained
in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information
performed by the Independent Auditor of the Entity'. Our review work has been
undertaken so that we might state to the company those matters we are required
to state to them in a review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our review work, for this report, or for the
conclusion we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved
by, the directors.

As disclosed in Note 2, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting,' as adopted by the European Union.
Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 29 February 2008 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union.

Grant Thornton
Chartered Accountants
Isle of Man
6 May 2008



Promethean India plc

Group Income Statement for the period to 29 February 2008

                                 Unaudited     Unaudited       Audited
                                    Period        Period        Period
                               1 Sept 2007   1 Sept 2006   16 May 2006
                                        to            to            to
                               29 Feb 2008   29 Feb 2007   31 Aug 2007
                                     #'000         #'000         #'000
Revenue
Investment and other income          1,024             -           885
Realised and unrealised gain         4,929             -           344
on financial investments

                                     5,953             -         1,229

Management expenses                  (630)             -         (779)

Profit before finance costs          5,323             -           450
and taxation

Finance costs                          (5)             -           (1)

Profit before tax from               5,318             -           449
trading operations

Income tax expense                       -             -             -

Group profit after tax from          5,318             -           449
trading operations

Attributable to:
Equity holders of the parent         5,318             -           449

                                     5,318             -           449

Earnings per share - (basic          10.6p             -          0.9p
and diluted)



Promethean India plc
Group Balance Sheet as at 29 February 2008

                                               Unaudited       Audited
                                             29 Feb 2008   31 Aug 2007
                                                   #'000         #'000
Non-current assets
Investments held at fair value through            22,179        14,718
profit or loss
Non current loans                                  3,708         3,766

                                                  25,887        18,484

Current assets
Trade and other receivables                          838           947
Cash and cash equivalents                         28,503        32,920

                                                  29,341        33,867

Total assets                                      55,228        52,351

Current liabilities
Trade and other payables                           1,208         3,650

Net assets                                        54,020        48,701

Equity
Share capital                                        500           500
Share premium                                     47,752        47,752
Unrealised investment revaluation reserve          5,281           352
Retained earnings                                    487            97
Equity attributable to equity holders of          54,020        48,701
the parent

Net asset per share                                #1.08         #0.97

Promethean India plc
Company Balance Sheet as at 29 February 2008

                                               Unaudited       Audited
                                             29 Feb 2008   31 Aug 2007
                                                   #'000         #'000

Non-current assets
Investments held at fair value through            20,735        18,985
profit or loss

Current assets
Trade and other receivables                          757           431
Cash and cash equivalents                         28,389        29,854

                                                  29,146        30,285

Total assets                                      49,881        49,270

Current liabilities
Trade and other payables                             308           342
Net assets                                        49,573        48,928

Equity
Share capital                                        500           500
Share premium                                     47,752        47,752
Retained earnings                                  1,321           676

Equity attributable to equity holders of          49,573        48,928
the parent



Promethean India plc
Group Statement of changes in equity for the period ended 29 February 2008
Unaudited

                    Share    Share  Unrealised      Retained   Total
                  Capital  Premium  investment      Earnings
                                   revaluation distributable
                                       reserve
                    #'000    #'000       #'000         #'000   #'000

Balance as at 31      500   47,752         352            97  48,701
August 2007
Profit for the          -        -           -         5,319   5,319
period
Unrealised gains        -        -       4,929       (4,929)       -
reserve transfer
Balance as at
29 February 2008      500   47,752       5,281           487  54,020


Audited

                         Share    Share  Unrealised      Retained   Total
                       Capital  Premium  investment      Earnings
                                        revaluation distributable
                                            reserve
                         #'000    #'000       #'000         #'000   #'000

Balance as at 16 May         -        -           -             -       -
2006

Issue of share capital     500        -           -             -     500
Premium on shares            -   49,500           -             -  49,500
issued
Expenses relating to
the issue of shares          -  (1,748)           -             - (1,748)
Profit for the period        -        -           -           449     449
Unrealised gains             -        -         352         (352)       -
reserve transfer

Balance as at
31 August 2007             500   47,752         352            97  48,701



Promethean India plc
Group Cash Flow Statement for the period ended 29 February 2008

                                 Unaudited      Unaudited        Audited
                            1 Sept 2007 to 1 Sept 2006 to 16 May 2006 to
                               29 Feb 2008    29 Feb 2007    31 Aug 2007
                                     #'000          #'000          #'000

Cash flows from operating
activities
Profit after taxation                5,318              -            449

Adjustments for:
Interest income                    (1,024)              -          (885)
Unrealised investment losses       (4,929)              -          (344)
/(gains)
Exchange loss                            5              -              -
Decrease/(increase) in trade           110              -          (947)
and other receivables
(Decrease)/increase in trade       (2,442)              -          3,650
and other payables

                                   (2,962)              -          1,923

Income tax paid                          -              -              -
Cash flows from investing
activities
Purchase of investments            (2,537)              -       (18,715)
Proceeds from sale of                    -              -          4,341
investments
Interest received                    1,024              -            885

Net cash used in investing         (1,513)              -       (13,489)
activities

Proceeds from issue of share             -              -         48,252
capital

Issue of loans                          58              -        (3,766)
Net cash used in financing              58              -         44,486
activities

Net (decrease)/increase in         (4,417)              -         32,920
cash and cash equivalents

Cash and cash equivalents at        32,920              -              -
beginning of period

Cash and cash equivalents at        28,503              -         32,920
end of period

Note 1 - General Information
The information for the six month period ended 29 February 2008 and the period 1
September 2006 to 29 February 2007 does not constitute statutory accounts as
referred to in section 9 of the Companies Act 1982. Comparative figures for the
period 16 May 2006 to 31 August 2007 are taken from the full statutory accounts,
which contain an unqualified audit report.

Note 2 - Basis of accounting
This statement has been prepared using accounting policies and presentation
consistent with those applied in the preparation of the accounts for the Company
for the period ended 31 August 2007, and in accordance with International
Accounting Standard 34, "Interim Financial Reporting".

Note 3 - Valuation of listed investments
Listed investments are valued at closing bid prices in accordance with IPEVCA
and IFRS guidelines. Where two exchanges exist, the closing bid price is
obtained from the exchange which demonstrates the largest transaction volumes.

Note 4 - Events after the Balance Sheet Date
Subsequent to the period end, there has been a fall in the value of the Indian
stock markets. This has reduced the unrealised gains reported by #2.5 million,
resulting in the following valuations:

* EIH Limited: #10.4 million (29 February 2008: #11.7 million)
* Nitco Tiles Limited: #5.4 million (29 February 2008: #6.3 million)
* Mahindra Forgings Limited: #3.1 million (29 February 2008: #3.4 million)

On 24 April 2008, the Company invested a further #0.5 million in Obopay Inc. Our
investment was part of a fourth round of funding, raising an additional US$20.0
million. This round values the company at US$220 million, an uplift of 2.5 times
cost on our original investment of #0.7 million made in May 2007.

In March 2008 one new investment of #1.3 million was made in "Project Einstein",
an undisclosed listed company. As at 29 April 2008, there had been a slight
uplift in the valuation.




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