a.

Nature of the business

Progeochem Industries Pvt. Ltd. (PIPL - Previously National Polyplast Industries Pvt. Ltd.) was initially registered
under the Partnership Act 2020, with the named partners being Mr. Binay Kumar Shah and Mr. Birendra Kumar
Shah in 2056 BS. Later on Bhadra 13, 2059 BS, the legal status of the company was changed to private limited
company being jointly promoted by Bagaria group (Nimbus Holdings), Shah Family of Birgunj and a Indian National
Mr. Ravi Kumar Bahatey.

On Falgun 07, 2069 BS, the company’s shareholding structure was further revised whereby Nimbus Holdings Pvt.
Ltd. stood as the single owner of the company. Nimbus Holdings Pvt. Ltd. the company is being promoted by
Bagaria family members namely Jagdish Prasad Argawal (34%), Anand Kumar Argawal (33%) and Mr. Umang
Argawal (33%).

Nimbus Holdings Pvt. Ltd is a holding company (NIMBUS) registered with the aim of making investment in diverse
sector of business including manufacturing, trading and services in the form of equity shares, debentures, bond etc.
Initially, the company was registered in the name of Nimbus Marketing, which was later changed to Nimbus
Holdings Pvt. Ltd

The BOD team of the Nimbus Holdings Pvt. Ltd consists of Mr. Jagdish Prasad Agrawal, Mr. Anand Kumar
Agrawal and Mr. Umang Agrawal who, in altogether, hold entire shares of Nimbus Holdings Pvt. Ltd. The brief
introductions of these persons are as follows:

Mr. Jagdish Prasad Agrawal –Chairman

Mr. Jagdish Prasad Agrawal was born on 19th November 1954. He completed his B.A. from Kolkata University and
started his career from Rangeli and Biratnagar after which he took over the reins of the first brewery of Nepal called
Nepal brewery Co. Pvt. Ltd. He managed Nepal brewery Co. Pvt. Ltd. for a number of years and thereon establish
Pro-biotech Industries Pvt. Ltd. He is currently the Chairman of Pro-biotech Industries Pvt. Ltd. and Progeochem
Industries Pvt. Ltd.

During his career he was closely associated with FNCCI and was the secretary general for 2 terms. Thereon he
founded CNI and remained the Vice President for a few years. He has also served as the president of Nepal
Beverage association and vice president of Management association of Nepal and held the position of secretary
general of Nepal US chamber of commerce and industries.

Mr. Anand Agrawal –Managing Director

Mr. Ananda Kumar Agrawal is the eldest son of Mr. Jagdish Prasad Agrawal. He was born on 10th March 1972.
He is mechanical engineer by education, graduated from RV college of Engineering, Bangalore. He started his career
in Nepal as the CEO/MD of Global Writing Systems manufacturing writing pens for a few years, thereafter co-
established Pro-biotech Industries Pvt. Ltd. along with his father. He has been closely associated with CNI
where he was elected as Vice President also. Currently he is the MD of Nimbus Holdings Pvt. Ltd.

Mr. Umang Agrawal – Director

Mr. Umang Bagaria is second son of Mr. Jagdish Prasad Agrawal. He was born on 19 July 1980. Having studied with
Modern Indian School for first few years, he went to Bishop Cottons Boys School, Bangalore and then graduated
from Symbiosis College, Pune. He then went to Sydney to complete his MBA with major in Finance and he also
worked there for three years in the area of banking and finance. He returned from Sydney and worked as Executive
director in Pro-biotech Industries Pvt. Ltd. to learn the ropes of local way of doing business. He currently resides in
Australia

OVERVIEW OF BIRGUNJ & HETAUDA PLANT (PIPL)

Established in the 2000 AD, Progeochem Industries Pvt. Ltd. (earlier National Polyplast Industries Pvt. Ltd.) is
involved in the manufacturing of PP woven fabrics, PP stitched bags, non woven fabric, DOP, Alkyd resin and PVC
drum. It was an export oriented unit supplying majority of goods to India. It produces high quality poly woven
fabrics which are supplied to industries like animal feed, fertilizers, cement, grain packaging amongst others.

Birgunj Plant:
The plant site is located at Bahuari VDC, ward no. 6, Bara near Gandak Chowk 100 meters away from the
Tribhubhan Highway. The factory is spread over 2 Bighas (Approx 26 Ropanies) of land. The company has
constructed four blocks in the site (Block A: Factory Building; Block B: Office Equipments Building; Block C:
Vehicle Parking; Block D: Software). It has also added one more building for storing purpose of raw materials and
finished goods. Many more industries are established along this corridor the reason being availability of manpower,
easy transportations and availability of other required infrastructures like telephone, electricity and water. The
controlling office of the company is located at Adarsh Nagar Birgunj, which is looked after by Mr. Jagdish Prasad
Agrawal. Mr. Agrawal looks after overall control and supervision of the factory.

Existing Infrastructure and Product Portfolio of Birgunj Plant:

Birgunj plant primarily deals in manufacturing of PP woven fabrics i.e. polyplast sheets/films which are used to make
woven sacks. The company has also commenced forward integration of the plant through installing bag stitching
machine. Further, they have also installed simple lamination machine which produces laminated bags primarily used
for storing grains amongst others. Majorly PP woven fabrics are sold in form of sheets and woven sacks with
lamination in small quantity based on direct demand from producers like rice mills, fertilizer factories, maida mills
etc. The installed capacity of the plant is 7,000 MT per annum consisting of 3 tapelines, 144 looms and 2 lamination
machines. Besides this, they also have 1 set of bag printing and stitching machines. The plant is running at around
90% of the installed capacity.

The company supplies its products to cement industries, sugar factories, chemical industries and grocery industries
like rice mills, fertilizer factories, maida mills etc. in domestic market as well as in India. Presently, the proportion of
export to domestic sales of the company is around 85:15. However, the company has also been gradually increasing
the proportion of domestic share in the annual turnover to lessen the risk of dependency over international market.

Expansion of Product Portfolio of Birgunj Plant:

(Note: Civil Bank has not participated in Expansion project)

Block Bottom Bags/AD Star Laminated Bags:

Capacity 3 Corer Bags (2,400 MT) per Annum Block Bottom bags (AD Star- is a registered trade mark of a block
bottom bag producer) is a sack made without adhesives from coated polypropylene fabric. The company has been
currently manufacturing PP woven fabric. The PP woven fabric is the major raw material for the production of AD
Star Laminated bags. The existing looms of the company shall produce the fabric which then shall be processed
through the new machine which then shall produce the AD Star block bottom bags thus instead of selling the fabric
the company will manufacture block bottom bags.

The major target market for the BBG is the cement factories in Nepal along with various pallets, grains manufacturer
amongst others. Currently there are around 30 Cement Manufacturers in Nepal and there are some 5 to 6 new
companies in pipeline. The total production of cement in Nepal currently account to roughly 6.5 Mio MT per
annum. The market of cement is growing annually and substitution of import is in increasing trend. Thus, if we look
at the total market of Nepal and India the requirement of BBG is around 5,350 Million bags per Annum. If we target
1% of the market of India and Nepal, the available market size would be 53.50 Mio Bags per annum. The capacity of
PIPL in compassion to the targeted 1% of the available market would be 62% and that to the total available market
would be 0.62%. The installed capacity of PIPL against the available market size is 33%. With more and more
cement manufactures opting for expansion and with few more companies in pipeline the demand side of the market
is secured.

Tarpaulin: Capacity 500 MT per Annum

Tarpaulin is a large sheet of strong, flexible, water resistant material. It is made by laminating PP or HDPE woven
fabric which is currently being produced by the Birgunj plant. Tarpaulin has various uses, mainly as protection from
the elements such as rain sunlight and wind. Tarpaulin is used for industrial as well as domestic purposes, ranging
from truck coverings, manufacturing of tents, temporary shed covers etc.

The estimated local market size of Tarpaulin for covering transporting vehicle such as trucks, tractors etc is 1000 MT
per annum. The demand for Tarpaulin in India is also huge based on their market size. Further there is no any
manufacturer in Nepal currently producing Tarpaulin so there is no direct threat of competition.

Flexible Intermediate Bulk container (FIBC): 500 MT per Annum

A flexible intermediate bulk container (FIBC) or bulk bag, or big bag, is an industrial container made of flexible
fabric that is designed for storing and transporting dry free flowing products, such as sand, fertilizer, and granules of
plastic. These bags are used in several industries to transport its finished products such as Chemicals, fertilizers,
fiberglass, food products, grains, seeds, plastics, pigments, construction material as it provides a cost effective
method of storage and transportation. The bag capacity is normally 1,000 kg and larger bags as per the requirement
can also be made. The weight of a 1 MT storage bag can be between 2-3 KG depending on thickness of material.

Major market of FIBC bag is US and Europe which is a huge market. As this industry is labor intensive and
manpower cost in India and Nepal are lower as compared to western countries export potential is higher. Market of
FIBC in India is at its infancy however it is expanding at 10% per annum specially in packaging of cement, Plastic
granules, edible items etc. In addition PIPL has also already initiated talks with agents in India who are involved in
export of FBIC bags to US and Europe.

The actual market size of FBIC bags is difficult to ascertain however a research conducted by Transparency Market
Research (TMR) has released a new research report, titled “Bulk Container Packaging Market - Global Industry Analysis,
Size, Share, Growth, Trends and Forecast 2014 - 2020”. TMR states that the global bulk container packaging market stood
at US$2.22 billion in 2013 and will reach US$4.21 billion by 2020. Out of the total market FIBC accounted as the
largest product segment of the market in 2013.

Leno Fabric and nets: 600 MT per Annum

Leno fabric is used to make bags that are used for packing of fresh vegetables, fruits, potatoes, onions, etc. They are
specially woven and designed to maintain freshness of the packed goods by allowing air inside the bags to prevent
inner moisture that may spoil the goods. There is no manufacturer of this product in Nepal. Some quantity is being
imported from china but commercially PIPL will be in better position than imported one because transportation cost
is very high for importer. PIPL will not directly manufacture the bags; PIPL will be producing Leno Fabric and nets,
which will get converted in bags by other convertors as per their requirements. Leno bags are a very good alternative
against jute bags. Market estimates suggest around 22 Million tons of demand for leno fabric and nets from the
marketers of Onion, Potato and oranges in India alone. The potential clients of leno bags are Agri business traders
and processers. As Bihar and UP are one of the major contributors of Agri products in India, supplying the leno
fabrics and nets to this part of India will have advantages to PIPL in terms of transportation cost.

Hetauda Plant:
PIPL has acquired the entire project of Everest Polymers Pvt. Ltd. in Hetauda Industrial area in 2068/69. The
factory at Hetauda is spread over around 20 Ropanies of land which lies within the Hetauda Industrial Area.

Existing Infrastructure and Product Portfolio of Hetauda Plant: The company has been producing the
following product categories:
 DOP
 PVC Drum
 Non Woven Fabrics
 Alkyd Resin

DOP:
DOP is used as industrial raw material as a plasticizer in manufacturing articles made up of PVC. DOP is also
used as hydraulic fluid, dielectric fluid, and solvent in glow sticks. Further, it is also used in medical devices such
an intravenous tubing and bags, catheters, nasogastric tubes, dialysis bag, blood bag, air tubes etc.
DOP is a colorless and odorless oily liquid, free of foreign materials which are, slightly soluble in water but
highly soluble in alcohols, hexane etc. 95% of DOP are used as a Plasticizer in PVC resins for fabricating flexible
vinyl Product like vinyl upholstery, tablecloth, shower, curtain, raincoat, shoes, garden hoses, swimming pools
liners, polymeric coating, cable coating, component of paper & paperboard, defoaming agents, surface lubricants
amongst others. The miscellaneous use for DOP constitutes as the solvent in erasable ink, as an inert ingredient
in pesticides, as an vacuum pump oil in detecting leaks in respirators amongst others. DOP are packed in
200/225 KG Iron drum/HDPE drum, 20-22 MT in Flexi tank / ISO tank / road tanker. It is stored in tightly
closed container, in a cool & dry, ventilated place. The Shelf Life of DOP remains intact for 24 month, if kept in
recommended storage. The installed annual capacity of DOP of Progeochem Industries is around 6,000 MT.

PVC Drum
The Drum plant produces drums using PVC as base input. The drum is primarily used in packaging of hazardous
chemicals, storing of oil, lubricants etc. The identified market for this product is local as well in India. The
installed annual capacity of PVC Drum of Progeochem Industries is around 120,000 units.

Non woven fabric (NWF)

 The non woven fabric – PP spun bonded Non Woven fabric is being manufactured using polypropylene (PP),
the same input used by the Birgunj plant. This type of fabric is commonly used in garment linings, shopping
bags, shoes lining, surgical dressing, hospital apparel, mask, sanitary napkins, baby diapers etc. It has the
properties of anti tear, anti pull, and environmentally friendly with good tensile strength. This product is also non
toxic, water resistant and air permeable. The installed capacity of NWF plant is 1,440 MT per annum. They have
been supplying these products in the domestic market as well as in India with a mix of around 50:50.

Alkyd Resin
Alkyd resin is the base input of commercial and industrial oil based paint manufacturing industry. The major
input for this plant is refined soya oil and chemicals like pthalyic anhydride (PA). The company uses the Soya Oil
produced from their sister concern unit Pro-biotech Industries Pvt. Ltd. and import chemical pthalyic anhydride
(PA) from IG petrochemicals, Andhra petrochemicals, etc. The installed annual capacity of the plant is 3,600
MT.

Expansion of Product Portfolio of Hetauda Plant:

1. Emulsion Plant: 4,200 MT per Annum. Emulsion is a chemical which is used in several industries as a raw
material. The uses include Paint industry for manufacture of water based paints. Adhesive Industry for
manufacture of different types of adhesives Ink Industry for manufacture of ink. PIPL plans to manufacture 3
kinds of emulsion namely Pure Acrylic, Styrene Acrylic, and Vam Acrylic. Emulsion serves as a base product for
all the above products in which other chemicals and pigments are added in small quantities. There are several
chemicals which are required for manufacture of Emulsion. PIPL will be sourcing these products locally as well
as from India and 3rd world countries. The company is planning to produce 30% Pure Acrylic, 50% Styrene
Acrylic and 20% Vam Acrylic Emulsion. PIPL is already into the business of providing raw materials Alkyd
Resin to Oil base paint industry.

Market:
PIPL expects to export 50% of the production and the remainder shall be consumed by local industries. As
stated above emulsion is a base product for the paint, adhesive and ink industry and currently there is no
substitute raw material available for emulsion. The market for emulsion thus stays very large. The estimated total
local market size of Emulsion is 12,000 MT per annum and the major buyers of Emulsion are Asian Paints,
Nerolac, Shalimar Paints and other local paint manufacturers. All these manufacturers are currently importing the
product from India. In addition the estimated market size of Emulsion in India is around 1 Mio MT per annum.
Major buyers include Asian paints, Berger paints, Nerolac Paints, RCI paints and other paint industries. Besides
the paint manufacturers this material also can be supplied to various adhesive and ink manufacturers there are
over a 1,000 ink manufacturers in India alone. Further the market of Bangladesh and North East India are very
lucrative and a lot of opportunities are there as there are no units producing Emulsion.

2. Paint Bucket: 530 K Buckets Per Annum

PIPL plans to manufacture buckets for the paint industry with a capacity of 10 – 20 liters. PIPL expects to
supply the bucket to same paint industries to whom supply of Alkyd Resin are made. PIPL already have a basic
plant and machinery in place in the Hetauda unit in which they are currently manufacturing PVC Drums.
Injection mould machines as additional equipment for the manufacturing of Paint Buckets will be installed as per
expansion. There are three manufacture of paint bucket in Nepal located at Kathmandu, Birgunj and Hetauda
with unorganized and have outdated machineries hence multinational company like Asian and Berger are more
interested to work with PIPL. Moreover PIPL is already supplying Alkyd resin to two major buyers Asian and
Berger Paints.

ORGANIZATION STRUCTURE (PIPL)

Board of Directors

Managing Director

Production Administration Procurement &Purchase Sales & Marketing Banking, Finance

& Collection
 Total Manpower Capacity:
The Company has altogether 430 employees (including factory labor and sales force) associated with the
company. The factory is running 2 shifts, 12 hours each shift (day & night). During the period of political
instability the company based on the future expansion plan of the company and requirement of manpower
thereto has laid off around 100 plus workers which shall help the company to bring down its operating cost.

Raw Material and other Inputs

The major inputs required for the production of PP woven fabrics/bags compromise of mainly PP Granules,
HDPE Granules, master batch (Coloring Agent) and Calcium Carbonate Powder (Rigidity Agent). All these
materials are imported mainly from:
 Exxon Mobil, Singapore
 Haldia Petrochemicals, India
 Reliance Industries Limited, India

Production Process
The manufacturing process involves the following steps:
1. PP Granules + CaCo3
2. Mixing/ Hopping
3. Melting/Extruding + Films/ Sheets
4. Cutting in stripes
5. Oven/ Godget
a. Godget 1
b. Godget 2
c. Godget 3
6. Cheese Winding
7. Bobbins
8. Circular Loom Weaving
9. Woven Fabrics/ Sack Sheets

MAJOR LOCAL/INDIAN BUYERS

The company has established a good network for the supply of their goods in India and Nepal. The main buyers
of the company are as follows:

1. A.S. International - India 17. Kanakdhara Polyfab - India 33. Rukmani Poly Pack - India
2. Aarti Enterprises - India 18. Kanchan Adchem - India 34. S. S. Footware - Nepal
3. Annapurna Jutta Chappal - Nepal 19. Ma Durga Polyplast – India 35. Sattyam Bag Industries - India
4. Ashish Trading Co. - India 20. Manakama Krishi Pipe – Nepal 36. Shree Emanuya Chala Jutta
5. B.P. Footware - Nepal 21. Manish & Co. - India Company - Nepal
6. Bansal Poly Products - India 22. Maruti Plastic - Nepal 37. Shree Krishna Global - India
7. Bharat Solvent - India 23. Navodaya Enterprises - India 38. Shree Laxmi Traders - India
8. Binita Trade Link - Nepal 24. NepalWire & Cable - Nepal 39. Shreya overseas - India
9. Delite Rubber - India 25. Noida Polychem - India 40. Sikhar Cable - Nepal
10. Future Flex - India 26. P&P Trading - Nepal 41. Sri Sai Traders - India
11. Guru Kripa Polyfab - India 27. Patna Polymers - India 42. Surbhi Slipper - Nepal
12. Hari Om Trading - India 28. Pragati sales - India 43. Tirupati Balajee Bag Udyog - India
13. IB Enterprises - India 29. Prestage Loopmat - Nepal 44. Urotech Industries - India
14. Jain Rubber - Nepal 30. Rahul Sales - India 45. Vardham Plastics - India
15. Jay Jagdmaba Bhandar - India 31. Reema Polychem - India 46. Vinayak Poly Pack - India
16. Jay shree Company - Nepal 32. RMG Polyvinayal India Ltd. - India 47. Virendra Trade Link - India
48. Yeti Polychem - Nepal

COMPETETION:

There are many companies in Nepal of which 6 are major players. The main competitors are as follows:
SN Unit Group
1. Triveni Synpacks Shanghai Group
2. Nicon K.B. Plasto Industries Kamal Begani & Patwari Group
3. Shiv Shakti Chemicoplast Gadia Group
4. Jagadamba Synthetics Shanker Group
5. Shivam Plastic Industries Golyan Group
6. Sri Krishna Polywoven Industries Pvt. Ltd. Rijal Group
7. Polymer Industries P. Ltd. HA Group

The Major competitors of Progeochem Industries based on the current product portfolio are as follows:

Non Woven
S.N Woven Fabrics Stitched Bags Alkyd Resin DOP PVC Drum
Fabric
Shiv Shakti
1 United Group Jagadamba
Chemicoplast No Local
No Local No Local
Triveni Shivam Plastic Manufacturer, In
2 Manufacturer Manufacturer Arihant
Synpacks Industries India major
3 Jagadamba Adarash Polyplast Competitors are Pasupati
K.L.J Group and Sri Krishna
Nicon K.B. Payal Industries
4 Triveni Synpacks Polywoven
Plasto Industries
Ind. Pvt. Ltd.

Current Project Status and Project Progress

Raw Materials
PIPL procures raw material from India and third country. Final product manufactured by PIPL is
generally raw materials to other manufacturing industries. Such as Woven Fabric used for packing
material. Non-Woven Fabric uses in manufacturing of wipes, diapers, Shopping bags, surgical
instruments, lining for shoes and other garments. Major raw materials of PIPL are as follows:

Polypropylene (PP)
Polypropylene also known as polypropene, is a thermoplastic polymer used in a wide variety of
applications including packaging and labeling (e.g., ropes, thermal underwear and carpets), stationery,
plastic parts and reusable containers of various types, laboratory equipment, loudspeakers, automotive
components, and polymer banknotes. An addition polymer made from the monomer propylene, it is
rugged and unusually resistant to many chemical solvents, bases and acids.

2EH
It is a colorless liquid that is poorly soluble in water but soluble in most organic solvents. It is produced
on a massive scale for use in numerous applications such as solvents, flavors, and fragrances and
especially as a precursor for production of other chemicals such as emollients and plasticizers.

Pthalyic Anhydride(PA)
Phthalic anhydride is a principal commercial form of phthalic acid. It was the first anhydride of a
dicarboxylic acid to be used commercially. This colourless solid is an important industrial chemical,
especially for the large-scale production of plasticizers for plastics.

Refined Soya Oil

Soybean oil is a vegetable oil extracted from the seeds of the soybean . Refined form of Soya oil is used as
raw materials in manufacturing of Alkyd Resin.

Pentaerhtyritol
 Pentaerhtyritol is a white, crystalline, water-soluble powder used chiefly in the manufacture of alkyd
resins, varnishes, polyvinyl chloride stabilizers, tall oil esters, and olefin antioxidants.

 Hetauda plant is running smoothly and market acceptance of paint chemicals is increasing.
 Local Paint Industries are excited about the prospect of local availability of Emulsions.
 As understood from the client, Birgunj factory was temporarily shut in the month of Bhadra, Ashwin
and kartik due to worker issues. However from mid of Mangsir, 60% of the workers re-joined
unconditionally & from Falgun rest of workers also have joined unconditionally with an agreement in
the CDO office.
 Production work and project work is running simultaneously.

Capacity utilization and status of existing project:

 Allkyd resin : Capacity 300 MT per month. : Current sales is approx 170 MT average per month.
 Non Woven Fabric: Capacity 120 MT per month
 Current sales as approx 80 MT per month
 Full capacity will be utilized after the machine is moved to Birgunj and will run along with
the new Non Woven bag making machine .
 This plant is understood to shut down for 3 months for shifting of machine.

 Drum : Capacity 10,000 pieces per month

 Current average sales 2000 drums per month.
 Will increase sales once Emulsion & other liquid sales increase
 Market response of recently launched low weight water drum encouraging.

 Woven Fabric:
 Current sales of bag are understood to be approx 500,000 bag per month & local fabric is
approx 75 MT per month.
 With the arrival and installation of valvomatic bag machine , BCS bag machine & printing
machines, sales is presumed to reach 1000,000 bags in next 3- 4 months
 After installation of Block bottom bag the sales is presumed to increase gradually. Machinery
pertaining to it is yet to be arrive whilst LC has already been established. As confirmed by
the client, fabrication of machinery is currently being carried out at suppliers end.

Capacity utilization and status of new project:

 Block bottom bag: Capacity 24,000,000 bags per annum. As understood from the client, production
will start from the beginning of coming fiscal year.
 Emulsion: 36OO MT annual capacity
 Adhesives: 36OO MT annual capacity
 Wood Preservative: 5000 MT annual capacity
 Leno Nets: 600 MT : prodution will start next FY
 Tarpaulin : 500 MT : production will start next FY
 Paint Buckes/ Pails : production will start next year
 Dust Bins 200 Ltr
 Milk Pails 100 ltr
 Poultry equipment

As confirmed by the client, commercial production of the above will start in the 2nd qtr of coming Fiscal
Year.

BLOCK BOTTOM VALVE BAG

 Single Tapeline Plant installed & commercial production started recently.
 Printing machine installed. Commercial production started recently.
 Valvomatic Bag making machine, installed.
  BCS machine has also been installed.
 Block Bottom Valve(BBV) bag machine should be ready for dispatch by supplier. BBV bag machine
customization is in progress, taking longer than anticipated.
 Other smaller machines such as Cuttex, Slittex and other utilities such as compressors, chilling units
etc are under order placement process.
 Lamination Plant is expected to be dispatched in April 2018, installation will start in july end 2018

TARPAULIN
 The lamination plant is understood to be awaited.
 Smaller jigs and fixtures, such as eyelet and hemming machines will be ordered as soon as the
lamination machine is dispatched.

LENO Net & Fabric

 Machine has been finalised
 PI is awaited to L/C to Open in Baishakh.

EMULSION
 Plant designing work is almost completed.
 Consultant already appointed.
 Fabricator of reactor also visited & awaiting final offer.
 Fabrication of the structures under progress
 Apart from paint emulsions, this plant will also produce Adhesives such as fevicol, dendrite and
araldite.
 Part of the allkyd plant is being modified to produce MF/UF resin

PAINT PAIL / BUCKET:

 Machine and dies are finalized .Waiting PI for opening of LC .
 The machine is being configured such that Poultry Equipment too can be produced
 Another twin screw blow moulding machine has been finalized to produce MILK pails and Large
Dustbins.

Major Highlights of last consortium meetings:

Working Capital Position:

The requirement to bring down the draw-down under working capital facilities within 80% by FYE 2073-74
was agreed on the first Syndicated Facility Agreement of the project. The assumption that the leverage under
working capital financing will be within 80% by FYE 2073-74 was made on the basis that the company
would diversify into Emulsion and Block Bottom Bag Business and the financial health of the company
would improve as perceived during the financial closure at that point in time. However, despite execution
of the First SLA in FY 2071, the consortium has just fully funded the project requirements under expansion
and also LC’s are just being established. In addition to this project faced Earthquake of April 2015 and
unofficial Terai Blockade during this period, which has majorly impacted the business. To add into the
situation, the Birgunj Factory was shut down for around 6 months in last fiscal year due to Labor issue. But
despite these huge challenges the company has been able to bring down the leveraging under working capital
financing from 128% in FY 2069/70 to current around 90% in FY 7034/74. Ind. adding to this the company
also been fully funding the losses incurred by means of injection of Equity and Near Equity into the business.
In FY 2073-74 alone the company had injected around NPR 180 Mio additional Equity and Near Equity into
the business. Further as per the expansion plan the company is required to inject additional equity in excess
of NPR 200 Mio as well. Hence for this purpose, PIPL has submitted the projection to the consortium to
bring down the WC drawdown gradually as below:

1. FYE 2074-75 - Within 87%

2. FYE 2075-76 – Within 84%
3. FYE 2076-77 - Within 80%
Therefore the consortium meeting dated 20th August 2017, had agreed to client proposal for bringing down
the leverage under working capital financing as within 87% by FY 2074-75, within 84% by FYE 2075-76 and
within 80% by FYE 2076-77 subject to approval from competent authority. This has been duly being notified
/ approved.

Bank Guarantee:
Bank Guarantee facility has been provided for issuance of bank guarantee favoring custom offices to release
raw materials imported under bonded warehouse facility. However as per requirement the limit can also be
utilized for participation in bid tender, performance of awarded job or for advance mobilization.

Import duties and VAT does not apply in the case where raw materials are imported for the purpose of
adding value and then re-exporting the finished goods. However, the importer is required to provide customs
guarantee to the Customs Office to ensure the product is actually exported. Since Progeochem Industries
imports the raw materials from India and then exports the finished product, they need to provide Customs
Guarantee to the Customs Office in Birgunj.

For this purpose client had been utilizing BG of NPR 180 Million from the consortium. However, with
export margin being minimized due to various reasons like Duty Advantage got reduced, Indian
government’s policy safe guarding their local production, the export business of PPIL was no more
financially feasible. Another major reason behind slowdown of export business was due to blockade of
borders when PPIL was unable to import essential raw material resulting in PPIL disable to meet the export
demand. This gap eventually was replaced by Indian local factories.

This therefore resulted in expiry of Bank Guarantee with Birgunj Custom and claims followed by. As of date,
only NPR 60 Million is o/s in BG facility out which NPR 40 Million is with us and remaining NPR 20
Million from Century Bank. Client has gradually repaid the Bank Guarantee Claim from their own source.
However, in the consortium meeting dated client has requested the consortium member banks to convert
their existing BG limit with the consortium into demand loan as BG limit is no more of use for the unit.

As explained above as the project was under expansion phase added with WC financing ratio far above the
agreed ground of 80%, the cash flow situation of the company was not sufficient enough to settle the BG
claim on time. PPIL however has been managing the payments from equity injection. Likewise, considering
the present business scenario, client had requested the consortium to convert their BG limit into funded limit
for WC financing as there is no more significance of having BG limit. Kumari Bank (Lead Bank) has already
approved the interchangeability of funded and non funded line. PPIL has been continuously requesting the
member banks to provide 50% of non funded limit into funded limit to other existing consortium member
banks. Also consortium meeting dated 20th August 2017 has consented to provide No-Objection to each
other to provide interchangeabillty of limits to the borrowing company subject to approval from their
competent authority. However, the total limit of the borrowing company shall not exceed the limit as per
Supplementary facility agreement.