GRIMS MICRO INKS

COMPANY PROFILE

2006-2008

GRIMS MICRO INKS

Name of the Unit Year of Establishment Micro Inks Limited 1986

Registration No. Address of registered office

16598 Bilakhia House, Muktanand Marg, Chala, Vapi - 396191

Form of Organization Size of Unit

Public limited Large scale industry

Installed Capacity

Resin T/month

varnish

5000

Ink 2000 T/month Utilized Capacity Weekly holidays Name of Promoters

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Resin 100%

varnish

&

Ink

Sundays Bilakhia Brothers

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Name Bankers of Standard Chartered Bank, Bank of India, UTI Bank Ltd, State Bank Of India, Authorized Capital Issued, Subscribed and capital Name of Products Inks, Resins, Pigments & Wire Enamels. Auditors STOCK CODE: BSE NSE AGM OF THE COMPANY DIVIDEND PAYMENT 523886 MICRO 28TH APRIL, 2007
Final Dividend @ 45% will be paid on or after April 28, 2007 if approved by member

ICICI Bank Ltd. Rs. 850 million Rs. 248.72 million

Paid-up

Deloitte Haskins & Sells, Chartered Accountants.

AVG PRICE OF SHARE (as per BSE &NSE data) till DEC 06 TOTAL SHARES HELD
2006-2008

342.00 (B) 341.56(N)

4

24,871,941

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ORIGIN
Ink is essence of life. Centuries ago, it communicate. Life without ink is hard to conceive. used to express thoughts and

was

And even today, its impact on our life is

remarkable, crucial and indelible.

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Imagine a life where there are no books to learn from. No

morning newspaper to bring us the news. No magazines to leaf through. No letters to be exchanged. No fairy tales to read to our children as we put them to sleep. It's no wonder they say; a world without inks is unimaginable. But where did the story of inks begin? Perhaps from our desire to communicate with each other across the barriers of time and space. and tree barks. History saw the invention of paper in 105 AD and the earliest use of inks in the form of coal, gum rosin and tung oil. This was clearly amongst the major influences that led to the rapid progress of human civilization. Despite its ancient origin, little has been said or written about the influence of inks throughout history. Today, inks are our silent companions present in our lives in some form or the other in almost everything that we do. Thanks to modern printing technology in particular. A saga, which began in 1450 AD, when Johan Gutenberg invented the letterpress. Thereafter, ink technology evolved in tandem with the evolution of printing technologies. In the present day, Printing Inks are a blend of various ingredients, formulated to create graphic design or text on a variety of substrates or surfaces ranging from paper to
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Centuries

ago, this was conducted through carving on stones, cave walls

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polyfilms, foils and metals. These inks are a complex mixture of pigments, flushes, resins, vegetable oils, waxes and solvents. Today, varieties in ink are as extensive as printing methods themselves. Broadly, these consist of Lithography, Flexography, Gravure, Screen printing etc. Developments in printing technology and processes made it necessary for Printing Inks to have very high quality. a highly complex one. Truly an art and science in itself. Fact remains, Printing Inks business, though apparently simplistic, is

The world market of Printing Inks is around US $15 to US $ 16 billion. The USA leads with a global market share of 30%. Among the leading Ink manufacturing companies worldwide, Dainippon Ink / Sun Chemicals is the largest. Micro Inks ranks the 4th largest globally and No.1 in India. Printing Inks are a unique blend of various ingredients, which ultimately find expression in creating exciting graphic designs or text, on a variety of substrates or surfaces. Advancing printing technology has also accelerated the creation of high quality inks. The global ink industry has matched progressing technology, stride for stride. The world market for Printing Inks was valued at US $ 14.3 billion in 1999 2000 and is growing at a rate of around 2% to
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3%. It is estimated that by the year 2004 the world market will be around US$15 to US $ 16 billion. The USA is by far the largest market for Printing Inks with nearly 30% + global share. Among the ink manufacturing companies worldwide, Sun Chemicals is the largest. The other key players are Flint Ink Corp., Sakata Inx, Sicpa, Toyo Inks etc. The global Printing Inks Industry has witnessed major These

consolidations and alliances in the past and all this has led to a few dominant players controlling the ink markets. majors have achieved a high growth rate because of vertical integration, which ensured consistency and high quality at a low cost.

CLASSIFICATION OF PRINTING INKS

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According to the printing process

Printing Inks

Letter Press

Offset

Gravure

Flexo

Silk Screen

Sheeted

Web

Coldset

Heatset

THE MARKET FOR PRINTING INKS REGION WISE

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USA is the largest market for Printing Inks with a 31% Followed by Europe with a collective 28% share or US Asia Pacific growing at a rate of 6.73%.

share and growing at a rate of 2% to 3%.

$3.8 billion.

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GLOBAL PRINTING INKS INDUSTRY AN OVERVIEW:

Global market valued at US$ 15 billion in '03. Estimated rate of growth 2% to 3% annually. By process largest segment lithographic Printing Inks (paste/offset), US$ 6.6 billion. Estimated rate of growth 4.5% annually. This is followed by flexographic inks (liquid) with a global share of US$ 2.9 billion. Growing at 6% annually. Gravure inks US $ 2 billion 14.9% global share.

Market for Printing Inks - Process Wise

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PROCESS OF MANUFACTURING INKS

Rosins, etc.

Oil

&

Petrochemicals,
NaturalProd ucts

Sulphur, Salts, Copper, Linseed/Soya

4B Acid, Bon Acid, Carbon Black, CPC, IPA, Soya Oil, Linseed Oil, Aniline, Phenol, ONCB,

Chemical Products/ Inte rmediates

Solvent/ More than 500 Raw Materials

Pigme nts Flush es

Resi ns Varnis hes

Additiv es

Oils

Packing Press/End Customer

Print er

Materials
BOPP, Polyesters, Bonded Paper, Coated Paper

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STRATEGIC PARTNERSHIP HUBER MICRO INKS

Micro Inks Ltd. is a JV between MHM Holding GmbH and Bilakhia Holding Private Limited. Hubergroup has acquired 50.5% from Bilakhia family @ Rs 675 per share. Further public offer to purchase the 20% of share capital @ Rs 675 per share has been successfully completed. Post such acquisition and open offer Equity holding of MHM Holdings is 70.5% and Bilakhia Holdings 4.5%. Changes in the Board with induction of Mr. Heinrich Ringer as Executive Vice chairman & Managing Director & Ms. Ursula Borgmann as Director. Bilakhia Huber Partnership at global level with Bilakhia participating in Huber group worldwide.Fourth Largest post merger globally. Long term sustainable model with full backward

integration giving quality and cost leadership.

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GLOBAL STRENGTHS
15 Production facilities across the globe. Micro has 6 large manufacturing set-ups in Vapi, Gujarat in India within a range of 30 Km and one Plant in USA. Huber has a plant each in Canada, USA, Switzerland and Italy, 2 plants in Ireland and 3 plants in Germany. Backward Integrated paste inks production facilities, presence in various product segments.

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Shares held by leading companies worldwide:

Dainippon Ink & Chemicals is the largest company worldwide, accounting for a 24% share in the market. Other key players in the market include Flint Inks and BASF.

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MIL KEY HIGHLIGHTS

4th Largest ink company in the World;

11th Largest in USA total revenues USD 216 Mio . International revenues exceeds 59% spread over 70 countries .

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One of the fastest growing Ink companies in the world. Among the fastest growing companies in India CAGR of sales exceeds 45% in 10 years. Strong R&D, process Chemistry and Technology. Wide product portfolio, Quality and cost leadership. Biggest and only fully backward integrated, seamless ink manufacturing plant in the World. Promoters and management have built market leadership in inks and have created global power house in Agro Chemical, the most profitable unlisted Company.

Global Strengths
15 Production facilities across the globe. Micro has 6 large manufacturing setups in Vapi, Gujarat in India within a range of 30 Kms and one Plant in USA. Huber has a plant each in Canada, USA, Switzerland and Italy, 2 plants in Ireland and 3 plants in Germany.
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Backward Integrated paste inks production facilities, presence in various product segments.

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PRODUCTION DEPARTMENT

What is production and what does it do?

Production is the basic activity of all industrial units. Production is the process by which goods and services are created. The other word used synonymously is with production to is manufacturing.
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Manufacturing

understood

mean
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production of only tangible goods whereas production includes creation of both, tangible goods and intangible services. All other activities revolve around production activities. The end product of production activities is the creation of goods and services for the satisfaction of human wants. Production activity is nothing but step-by-step conversion of one form of materials into another, either chemically or mechanically. Production function is the conversion of raw materials into finished products.

Plant location
Plant location may be understood as the function of determining where the plant should be located for maximum operating and effectiveness. The selection of the place for locating a plant is one of the problems, perhaps the most

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important, which is faced by any person while launching a new company. A selection on pure economic considerations will ensure an easy and regular supply of raw materials, labour force, efficient plant layout, proper utilization of production capacity and reduced cost of production. An ideal location, may not, by itself, guarantee success, but it certainly contributes to the smooth and efficient working of an organization.

Factors affecting plant location:

Availability of labour: - Labour is easily available at cheap wage rate.

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Cost of land: - Being located in an industrial area, the cost of land is relatively low and hence, proves economic. Nearness to source of raw material: - As Micro Inks is implementing Backward Integration, all the units are located near to each other. So it becomes easy to access the raw materials, with minimum transportation cost. Income Tax Exemption (for Daman units & EOU Plant.)

Proper infrastructure facilities:- Easy availability of basic infrastructural facilities like high power supply, water supply, etc. due to its location in industrial area.

Power supply: They have their own 2 power plants, which generates electricity at minimal cost and helps them to reduce the cost of production.

The production plant of the company is spread over 90 acres, which enables workers to get proper place of undertaking the production activities in proper manner.

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Plant layout
A plant layout refers to the arrangement of machinery, equipment and other industrial facilities for the purpose of achieving the quickest and smoothest production at the least cost. A layout essentially refers to the arranging and grouping of machines which are meant to produce goods.
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Grouping is done on different lines. The choice of the particular line depends on several factors. Micro inks follows Process Layout style of plant layout in its production unit. Process layout is also called functional layout, a layout for job lot manufacture or batch production layout, the process layout a grouping together of like machines in one department. For example, all reactors are located at one place and all flushers at another place.

Production planning and scheduling

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NORMAL PRODUCTION

Process order

Confirmation with Back flush for Raw material from Sub stores GR for Prcoess order (auto) to Sub stores Sub stores

Sales

Rejection

Internal consumption

BSR

Deviated Material to Dev. Sub stores

Next stage sub stores

Issue to next stage process order Rejected Reprocessing

Scrap

Issue to Reprocessing

This is the normal production every company follows. But micro inks do the production planning and scheduling through SAP system. It uses the production planning (PP) module for this purpose. This module also has many sub modules in it and the module named PI is specifically used for this purpose.

Quality system
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All manufacturing sites of Micro Inks Limited have been confirmed with ISO 9001:2000 certifications for the entire range of products. Apart from this, the Morkhal (Silvassa), VAPI-2 and 100% EOU plants have been certified for ISO 14001:1996 (EMS). Micro Inks is currently implementing Six Sigma program to ensure zero defect level in operation. By 1995 - 96, Micro Inks Limited, then Hindustan Inks & Resins Limited, was poised for rapid growth. With a view of sustaining this growth and also ensuring consistency in every thing it did, Micro Inks Limited, zeroed down on a business strategy focused on Quality
Management Systems.

It therefore, identified a well-defined resource plan using systems approach, which led to the following initiatives.

ISO 9001: 2000

The 9002:1994 task force assigned was to this by quality KPMGinitiative Quality commenced activities in Sept. 96. At the first stage ISO certification obtained Registrar, for the Daman Plant in March '97. Subsequently, it was rolled out to other plants that were commissioned. The same was upgraded to ISO9001: 2000 in July 2001, keeping KPMG-QR as their certifying registrar. Currently, Micro Inks Limited at Locations - Daman, VAPI (VAPI-1, VAPI-2, 100% EOU), (Morkhal) Silvassa plants with the
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Sales and distribution network are under the cover of the ISO 9001: 2000 certification for the following product Range, from July2004 through July 2007: Product Development & Manufacture of Liquid inks, Sheet fed offset inks, Web offset inks, Screen inks, Metal Decorative Coatings, Resins, Pigments, varnishes, Wire - enamels, Water based adhesives, Lamination adhesives, Speciality Inks, Wax Compounds. The entire ISO documentation and quality records, through SAP, are on electronic media Micro Inks Limited, is already reaping the benefits of this ISO consolidation with improvements that have lead to the benefits like uniform work flow, quality assurance and high customer satisfaction and rapid sales growth.

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HUMAN RESOURCE DEPARTMENT

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HUMAN RESOURCE MANAGEMENT

HRM is a management function concerned hiring, motivating and maintaining people in the organization. It focuses on people in the organization. The primary objective of the HRM is to ensure the availability of the competent and willing workforce to an organization. HRM is not a stand alone department, but rather a means to assist the organization with its primary objective.

Whereas HRD is a function more concerned with training and development, career planning and development and organization development. Therefore, HRD is a part of HRM. At Micro Inks, the HRM activities include: HR planning Job analysis and design Recruitment and selection Orientation and placement
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Training and development [proposed] Job evaluation and Performance appraisal Remuneration Safety and health

Let us understand each of these functions in the general aspect as well as how does the company does it.

HR PLANNING
Identificatio n manpower Matching requirement Recruiting the personnel at a particular post as per is qualification. Giving them targets and furnishing timely reporting to measure the standards against the actual achievements. the supply of deficiency of Source supply through references with the of

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JOB ANALYSIS
It is the process of collecting job related information. It results in two sets of data, job description and job specification. Job description implies listing of job title, tasks, duties and responsibilities involved in a job. Job specification, on the other hand, involves listing of employees qualifications, skills and abilities.

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RECRUITMENT AND SELECTION

It is usually done through references of present employees and workers. The need for recruitment arises when, Surge of workload ( at shop floor level) Vacancies ( both at top and shop floor level)

After approving the Manpower Requisition Form, the HR Department looks into two sources: Internal and External for the purpose of Recruitment.

Internal Source

Transfers: Transferring employees from one department to other or from one location to other as per the requirement. Promotions: By shifting an eligible and competent

employee to higher position.

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Databank: One more internal source that lies with Micro Inks Ltd. is that of a huge data bank of those applications which has been received earlier from various sources such as past applicants who were not selected, references of present employees, etc. HR department goes through this data bank and if any suitable applicant is found in the data bank he/she is called for an interview.
External Source

There are only two external sources through which it fulfills its requirement for manpower: e Recruitment: Micro Inks Ltd has registered itself at websites like naukri.com, timesjob.com, monster.com to get new talent and competencies from all over at the world. Campus: Micro Inks Ltd. also conducts campus interviews to recruits fresher for their new competencies. For the purpose, company goes to various Institutes and Universities.

ORIENTATION AND PLACEMENT

Orientation for different level employees is given differently by Micro Inks. For Employees

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Induction is done through presentation its giving

overview of the company,

policies, rules &

regulations, and duties & responsibilities

For Workers Training regarding safety measures and making them familiar with the operations of the machines. Training regarding ISO is also provided to the workers.

TRAINING AND DEVELOPMENT

The HR department at the corporate, has a online systems of arranging training. This module currently has a limited usage. HR department at the Micro plants does give various types of HR and technical training to their workers and new recruities. They give following types of training: Induction training: Here the recruties are given an induction training of 1 week where, the new trainee has to

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work in all to plants as well as in all the departments of the plant in which he is recruited. Safety training: It is given to all employees in batches for 4 days a week for 1 hour. HR training: This training is for the team building and self up-gradation of the employees, not directly related to his job. Operators training: When ever any new machine or new system is adopted in the plant, the person who has to handle it is given training regarding its working, safety and maintenance.

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PERFORMANCE APPRAISAL
It is the policy of Micro Inks Ltd. to undergo an exercise of goal setting before reviewing the performance of its employees. The practice in Micro Inks Ltd. for an effective Performance Management is described as follows: Firstly, every employee fills up a document in consultation with his superiors. This document consists of details such as Employee information, Company Objectives / Goals, Functional Objectives / Goals and Individual Objectives / Goals. Then after a period of 3 months employee has to fill up a Performance Review Form. This form consists of Individual Objectives / Goals, weightage, appraise and appraiser remarks.
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This review states the status of the employee in

accordance to his standard Objectives / Goals. If any deviations are found they are eliminated and again the Objectives / Goals are revised for next 3 months. The process continues every quarter for the whole year. After one year one more form is filled up which shows an account of the individuals significant contributions in the appraisal year, its impact and Appraisers comments.

REMUNERATION
The remuneration system which Micro Inks uses is that, it sees the experience and qualification of a particular designated person, compares it with the same of that of the other companies and pays them 10% higher and manage their remuneration system. Remuneration to the workers is as per the minimum wages as specified from time to time by the government authorities. remuneration than that prevailing in other companies. This is how they retain

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SAFETY AND HEALTH

Safety in simple terms means freedom from the occurrence or risk of injury or loss. Industrial safety or employees safety refers to the protection of worker from the danger of industrial accidents.

Need for safety and health. An accident free plant enjoys certain benefits like: o o o o Cost saving. Increased productivity. Moral Legal

Safety programme o For the safety of workers Plant Incharge, Safety Incharge, as well as Engineering Incharge are responsible. The safety department consists of 1 manager, 4 officers and 12 firemen. All the workers are given a compulsory safety training for 1 hour for 4 days in a week. they are scheduled in batches. The
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12 firemen are permanent in plant and they cotinously check the safety gadgets.

Safety systems used in the plant are: o Fire handling system. o Work permit system. o Certification system. o Fire extinguishers.

EMPLOYEE BENEFITS & SERVICES

Leave System
Company gives 7 days sick leave in a year and the worker has to produce Doctors certificate if he takes sick leave for more than 2 consecutive days. It also gives 7 days of casual leave which a worker can under any emergency situation utilize it.
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Through out a year the company gives 30 privilege leaves which a worker can utilize within only 3 times a year. Any worker can in no chance ask for less than 5 leaves at a time. But if a worker does not use any of his sick leave or privilege leave round the year, they can be carried forward to next year. The worker can also encash his leaves if they accumulate more than 75 days. And a worker cannot accumulate his leaves to more than 150 days. And encashment of his leaves will be done on the basis of his basic salary, not considering, any bonus or fringed benefits into account.

Welfare activities
Micro Inks Ltd. offers the benefits of Bilakhia Group Employees Welfare Trust Schemes to its employees. The various schemes under this trust include:

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Health Insurance / Medi claim This scheme covers reimbursement of hospitalization expenses for illness / diseases or injury sustained. Under this scheme all employees and their family members get free medical check up. Education Aid & Maa Foundation Bilakhia Group Employees Welfare Trust offers education and training aid for employees and their children. The salient features include: For the employee Aid for upgrading skills Employee development For employees children Assistance for the children taking admission first time to the school. Reimbursement of fees for employees children from schooling to post graduation. Merit Awards for Academic Performances. Merit Awards for performance in sports and cultural activities.

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FINANCE DEPARTMENT

OVERVIEW OF THIS DEPARTMENT

The primary purpose of any business is to earn profits. To earn
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profit, the business has to produce goods or render services. To do either, management of business must have adequate supply of funds. It is the responsibility of the finance department to ensure the supply of the needed funds. Financial management is the application of planning and control to the finance function of a business to ensure that the funds needed are raised and used effectively for its benefits. Financial management means procurement of funds at minimum cost and its effective use in order to maximize the wealth of shareholders.

Financial planning and control

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Financial planning is the process of analyzing the firms investment option and estimating the fund requirement and deciding the sources of funds.

Thus, the financing planning process involves the following facets: Evaluating the current financial condition of the firm Analyzing the future growth prospects and options. Analyzing the investment options to achieve the stated growth objective. Projecting the future growth and profitability Estimating funds requirement and considering alternative financing option Comparing and choosing from alternative growth plans and financing options. Measuring performance. actual performance with planned

The company follows a practice of monthly and quarterly review of budgeted and actual cash flows. They plan the requirement of working capital for an annual period, and according to the review of the cash flow statement, they come to a conclusion of requirement of finance for the company.
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From the review of each category in the cash flow, what are the capital requirements, the company will need in a special segment, according to it will acquire loan from the bank from the total permissible amount under that particular segment.

A. Ratio analysis

(i)

Liquidity ratios :
The liquidity ratios measure the ability of a firm to meet its short term obligations and reflect the short term financial strength or solvency of a firm. These ratios indicate the ease of turning assets into cash.

(a) Current ratio: The current ratio is a measure

of the firms short term solvency. The higher current ratio, the larger is the amount of rupees available per rupee of current liability, the more is the firm ability to meet current obligation and greater is the safety of the funds of short term creditors. so this ratio is a measure of margin of safety to the creditors. A satisfactory current ratio would enable a firm to meets its obligations even when the value of the current assets declines.
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Current ratio =

Current assets Current liabilities

Current ratio of the year of 2007 = 618098125 14382801 = 42.97:1 489317741 73071869 = 6.69

Current ratio of the year of 2006 =

Interpretation :
Current ratio is standard measure of a business financial condition. Mitsu Ltd has Current ratio of 43:1 it is interpreted to be more than sufficient liquidity. It is important that very high current ratio may be indicate of slack management practices, as it might signal excessive inventory for the current requirements and poor credit management in terms of overextended account receivable and also may not be making full use of its current assets. so, firm should have a proportional to cycle. our operating

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A very high current ratio might imply that management is not investing idle assets productively. Generally, we want to have a current ratio that is proportional to our operating cycle. We will look at the Operating Cycle as part of asset management ratios. What is a satisfactory ratio will differ depending on the development of capital market, availability of long term fund to finance current assets, nature of industry etc.

(b) Quick ratio : The quick ratio is measurement of a firms

ability to convert its current assets quickly into cash without decrease of value in order to meet its current liability. Quick ratio = stock) (current liabilities -bod) Quick ratio of the year of 2007 = 19959079 14382801 = 41.58: 1 489317741 618098125Quick assets (current assets

Quick ratio of the year of 2006 = - 42211720

73071869
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6.12:1

Interpretation :
The quick ratio of 0.975 : 1 of the year of 2006 is represent satisfactory current financial condition. Here, we can interpret that the current ratio is 1.41:1 and quick ratio 0.98:1 is that large part of current assets of BSL is tied up in fast moving and saleable inventories and fast paying debts.

(III) Activity ratio

Fund of creditors and owners are invested in various assets to generate sales and profits. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets.
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(a)

Inventory turnover ratio:ratio indicates the number of times

This

inventory is replaced and the efficiency of the firm in selling its product. during the year Inventory turnover ratio = goods sold Average inventory Inventory turnover ratio of the year of 2007 = 239952076 9979539 = 24.44 times =0.49month(12month/7.39times) = (360days/7.39times) Inventory 421784439 21105860 = 20 times turnover ratio of the year of 2006 = 15 days cost of

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= 0.6 months ( 12 month/8 times) =1 8 days (360days/8times)

Interpretation :
Company is turning its inventory of finished goods into sales 24.44 times in a year of 2007. In other words, it holds average inventory of: 0.49 months or 15 days (days of inventory holdings). A careful high analysis. ratio it implies may good be inventory indicative management. yet, a very high ratio calls for a underinvestment in inventory. and a very low level of inventory will adversely affect the ability to meet
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customer demand as it may not cope with its requirements. As the inventory turnover is more operating cycle is fast and company is able to do more turnover and need working capital mean less investment in current asset required.

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ANY TIME MICRO

ATM (ANY TIME MICRO)

Just like a bank ATM gives customers access to relatively small amounts of cash, the Micro Inks ATM gives printers access to small quantities of ink.
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Each Micro Inks ATM is equipped with technology to match colors accurately. So printers get accurate, high quality colors on time, every time. This saves them the unpredictability of manual color matching. It also saves them time and inventory.

It replaces manual color matching with a

technology that provides accurate colors and stores the data to produce an identical color time after time. Every time. Any time. In double quick time. (At most times, the Micro Inks ATM delivers a printers ink requirements in less than an hour). Just like a bank ATM uses technology to help you instantly meet your needs for relatively small amounts of cash, a Micro Inks ATM helps you instantly meet your needs for small quantities of ink.

Introduction
Micro Inks ATM was a concept developed by one of the senior most person in Micro Inks.
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It gradually ended the method of manual ink matching and brought up the new latest and effective process.

1st Micro Inks ATM centre was launched on February 2005 at DAMAN.

18th

The success of ATM is revealed by the fact that today there are 40 ATMS operating successfully in INDIA and abroad.

ATMS commercial head is guiding the success of ATM onto the path of excellence.

PURPOSE OF LAUNCHING ATM

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market. Also the customers today are very color Now a days there is a tough competition in

this job. More and more competitors are entering the

specific than they were in the past. Manual matching of color requires a lot of

time, money, and labor. Also to the worst its also not very accurate. So the need of the time was a faster and

shades.

accurate method of getting inks of desired colors and

This was quickly recognized by Micro Inks. They thought an idea of setting up a depot

where peoples according to their requirements can get colored inks by a faster and accurate means. This gave them the idea of ATM (Any Time

Micro).

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But launching up such a thing was not as

easy as it looked to be. Three years of hard work by the R&D team

and many trials finally gave the way of launching up the 1st ATM at DAMAN.

Basic Process:

1) Customers walk in with a color reference.

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2) It is scanned, substrate is specified & a recipe is obtained.

3) The recipe is prepared & the color specs are matched.

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4) The correct specs are instantly sent into production at the mini plant in the ATM itself.

5) Customers wait in the lounge, sip tea or coffee and go through some of the worlds leading magazines (printed using Micro Inks).

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6) quantity customers

The

color

and

the

want is delivered on the spot in as little as 45 minutes.

Role of Micro Inks

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Micro inks do not own all the ATM Centers. Instead it gives the distributorship of ATM to the interested people. These are the people who are in the same business of inks or interested to join it.

This is the first time when Micro Inks has got so nearer to the small printing presses and other customers. It was possible only with the help of ATM.

Onto to these micro inks provide all the help and support to the distributors on setting up the whole ATM. This help is on the basis of quality guideline, is it profitable to join ATM, etc.

This help is also related with the technical aspects, the process and the technology.

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All the furniture, tables, sofas are also provided by MicroInks.

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BRANDS OF MICRO INKS : 1. LIQUID INKS : - Esteralm + - Esteralm - Microlame - Microglass 2.PASTE INK : - Persection. - sunrise - Rapida - Reflecta. - Turbo chrome. - Mitsu.

3. Wet offset Black & Colors. Cold set Black & Colors. Heatset Black & Colors.

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4. Screen Inks - Polybond - Cry 10 - Winfix Gloss & matt - Dry fix gloss - Special product Competitors. 1. D/c DiaNippon Ink co./ 2. Sakata inks. 3. Sicpa Inks. 4. Serial Inks. 5. Local ink monitor. Promotions methods: 1. Telephone & E-mail - Customer Satisfaction Measures. - E-mail and Telephonic Complaint. - Order Conformation. 2. Competitive approach - ATM - Seminars - Industrial Trade Fair. MARKET SHARE

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Domestic market share 33% DIC Rest Others 25% 52%

Target Market : 15% growth for current year 9% growth was for last year Zero Level Distributors get over - riding commission (ORC) at the rate of 6% for introducing new customers.

One- Level

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Distributor earns commission on turn over discount (TOD) on following basis:

Marketing Communication Mix E- mails, letters and telephone to industrial customers. Seminars for regular customers and distributors. Advertisements in the magazines of Printing Industry. Stall in Trade Fairs relating to Packaging & Printing Industries. Any Time Micro [ATM] to distributors to facilitate smaller requirements of customers.

Brochures and leaflets to communicate to the external organizations. Statues and Circles in Vapi as well as Sign Symbols at the street lights on the roads of Vapi is also the part of promotion.

Target Markets
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The target market of the Micro Inks Ltd : Packaging Industry Commercial & Advertising Industry Publication Industry Government for Currency Notes

INTERNATIONAL BUSINESS DEPARTMENT

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International Business Department

We met Mr.Tipnis Harshan who gave us an overview as to how IBD department came into existence with the growing challenges from Ink industry way back in 1999 with MNCs capturing the market share and becoming world leaders. So Micro Inks came up with its IBD department when it started its operations in USA with the name Micro Inks Corporations, USA. Micro Inks was already ranked No.1 in Indian Market and was still setting up a firm base in USA , still settling with the norms, specifications and regulations of abroad companies and it wanted to grow and expand as quick and fast it could so this strategy to grow fast led to its merging with Huber Group in 2005. The world market for Printing Inks was valued at around US$ 14-15 billion in 1999 and is growing at a rate of around 4-5%. It is estimated that by the year 2004, the world market will be around US$ 18 billion. Of all the markets, USA was the largest for Printing Inks, with a 30% global share.

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Micro Inks promptly plunged itself into a thorough study of the major ink markets of the world, covering U. S. A., Europe and Asia. Through its study, the company gained valuable insights into the marketplace. For Micro Inks, this was the beginning. Set in its vision of becoming a truly world-class company, it had a few things on its immediate agenda. Such as benchmarking quality and cost, establishing a marketing and distribution network and building a team of people to compete globally. With a clear focus on the challenges ahead, Micro Inks set its target on the largest market for Printing Inks - that of United States of America. Growth has spiraled upwards in the Group's inks business at a compounded rate of more than 45%.The US market was rife with consolidations through acquisitions leading to a few large players dominating the market. To penetrate this market, a sound strategy was required along with determination. A prime step in this direction was through the establishment of physical presence in the market. Micro Inks is having a factory near Chicago at Kankakee, having 2,68,000 sq. ft. built up area on 44 acres of land. The plant has been successfully commissioned and product trial runs carried out for customers have been successful. Merging with Huber Group

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Huber is a long standing family run company

manufacturing inks since 1765 with 29 manufacturing facilities in Europe and North America. Huber has 29 manufacturing facilities in Europe / North America and over 200 sales and service points worldwide. Micro Inks is a relatively newer entrant to the global printing ink market and its activities have up to now been focused on India and North America. Micro Inks has five locations in Daman and Vapi in India and a plant in near Chicago in the USA. Huber becomes the market leader in India through this integration with the largest Indian printing ink manufacturer and improves its position in Europe, North America and Asia. One of the main objectives of this move from the Hubers point of view is the backward integration into pigments and resins. From the Bilakhia groups point of view the forward integration into the sales and service network of the Huber is the main attraction. Micro Inks is a relatively newer entrant to the global printing ink market and its activities have up to now been focused on India and North America although it has been exporting inks, flushes and pigments to 63 countries. Micro Inks has developed a significant cost effective manufacturing base by a unique backward integration into pigments and resins for printing inks especially for paste inks in a relatively short period of time. However, with limited global
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distribution and marketing it was imperative to either buy a larger ink company or to be bought by one. This prompted Micro Inks to seek an alliance that would mitigate risks as well as provide access to an existing distribution network. Huber with industry and the ongoing consolidation initiatives in the the increasing cost pressure both on

manufacturing as well as raw material costs has prompted the group to look for opportunities to secure its business further. The need to be present in the fast growing Asian region compared to the slower growth rates in Europe and North America resulted in the current transaction. Huber group acquired majority stake in Micro inks.(2006 sales Rs 3550 mn) Huber group is the 3rd largest in Europe , Micro Huber combine revenues more than $150 mn ,making it in Top 5 US companies. Huber group has acquired 50.5% from Bilakhia family @ Rs 675 per share. Further public offer to purchase the 20% of share capital @ Rs675 per share has been successfully completed. Fourth Largest post merger globally. The name of Micro Inks Corporation, USA has been changed to Hostmann-Steinberg Inc. USA

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TRANSFER PRICING
Overview:
Over the last few years the cross border business between entities belonging to same business group have increased considerably and due to integration of domestic economy with global economy & growth of MNEs. The MNEs together with their associated enterprises have been playing a critical role in international trade and business. Many studies so far indicated that 2/3rd of the world trade is controlled by multinational groups and trade among them accounts for the bulk of it.The business activities may span from trading of goods and services to undertaking production internationally.
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Now, A multinational corporation may have business transactions with its associated enterprises situated in several other countries having different or similar tax systems. The enterprises may transfer goods to its associated enterprises at prices which are not market driven and not comparable with uncontrolled transactions entered between unrelated entities. This may affect the tax base system of a country having higher rate of taxation to the advantage of another country having lower tax rates. The issues concerning transfer pricing are of importance to all countries because of their impact on tax revenues and importance in economic activities. When enterprises of a group have business activities in different countries ,they can determine the level of taxation in a particular country by adjusting the price mechanism.They can combine the available resources and save on interest ,other costs and research and development expenses.They can also employ methods to minimize their tax liability ; by shitfting their profit base, from high to low tax jurisdictions.

Historical Background
The transfer pricing legislation was first introduced in UK in 1915.This was followed by United States in 1917.The provisions were introduced to discourage companies from shifting profit to overseas associates through under or overpricing of cross-border transactions. Prior to 1961 , transfer pricing was not considered important as there was no significant international trade during this period.But the period after sixties witnessed a substantial growth in business of multinational corporations.
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The Indian economy witnessed major restructuring after its opening up in the early nineties( Liberalisation).The MNCs realized that our country offered a big market for their goods and also a cheap place for carrying on manufacturing activities and development of software. This all led to spurt of foreign direct investment into the country. There was a feeling that multinational companies pay less tax than comparable domestic companies due to absence of transfer pricing provisions. It was also felt that Indian companies could abuse transfer pricing by entering into transactions of exports of raw material and ancillary goods to their associated enterprises that in turn may sell finished goods back to these companies at prices than prevailing market prices.

Basic Components of Transfer Pricing

International Transaction

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Documentation b /w Associated Enterprise

Penalties Resident

One of the AE in Non-

Adjustment of Difference

Methods of ALP

Definition of Transfer Pricing: OECD DEFINITION ( Organization of Economic

Cooperation and Development)

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Transfer pricing refers to prices at which an enterprise transfers physical goods and intangible property or provides services to associated enterprises GENERAL DEFINITION It relates to the system of pricing the transfer of goods, services and intangibles between associated enterprises of a multinational enterprise. RATIONALE OF REGULATIONS

The Regulations provide a statutory framework which can lead to computation of reasonable,fair and equitable profits and tax.

It protects the right of the country to collect due share of tax in respect of transactions between enterprises. associated

Absence of regulations allows multinationals to shift profits to low tax jurisdictions by manipulating prices of intra group transactions.

ASSOCIATED ENTERPRISE
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OECD model convention defines an associated enterprise as an enterprise, which participates directly or indirectly in the management control or capital of another enterprise, and impose commercial or financial conditions, which differ from those, which would be made between independent enterprises. Arms Length Price The arms length principle governs the determination of

transfer prices among associated enterprises. The principle follows the approach of treating associated enterprises of a group as independent entities and puts associated enterprises and independent entities on equal footing for tax purposes.

Arms length price may be defined as a price, which is

applied in a transaction between persons other than associated enterprises in uncontrolled conditions. It is therefore a price, which is ordinarily determined by market forces and would be charged in transactions between independent enterprises that deal with each other.

TRANSFER PRICING METHODS

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TRANSACTION BASED METHODS
1. 2. 3.

Comparable uncontrolled price method Resale Price method Cost Price method

PROFIT BASED METHODS

1. 2.

Profit Split Method Transactional Net margin Method

ANY OTHER METHOD AS MAY BE PRESCRIBED BY MGMT.

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Comparable uncontrolled price method compares price charged for property or services transferred in a controlled transaction to price charged in a comparable uncontrolled transaction. It is price for identical or nearly identical property traded between two independent parties under the same or similar circumstances. SOURCES OF CUP DATA Internal CUP- Internal Company Data External CUP

Company Price Lists Website Trade Directories Govt. Publications. Data Base.

DETERMINING ALP UNDER CUP METHOD

Identify the price charged or paid in a comparable uncontrolled transaction. Adjust such price to account for material differences which would affect the price in open market. Price so adjusted is taken as the arms length price in relation to international transaction.

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Hypothetical Example: Problem: Lets say X ltd , company incorporated in US ,sells laser printer cartridge to its 100% Indian Subsidiary @ $50 per cartridge. X Ltd also sells its laser printer cartridge to another company Y Ltd in India @ $80 per cartridge. Total Income of A ltd for the assessment year 06-07 is Rs 12,00,000 after making the payment for 100 cartridges $50 ( 1$= Rs.40 ). A ltd has deducted the tax at sourcewhile making payments to X Ltd. In this case sold to unrelated party Y Ltd is @ $80.Compute the arms Length price and taxable income of X Ltd and A Ltd by CUP method

Solution: Arms Length Price (ALP) of laser printer which is sold to A Ltd will be $80 per cartridge
Income of A ltd Income 12,00,000 ADD: Amount charged by X Ltd [$50 *100 * 40 ] 2,00,000 LESS: Arms Length Price 3,20,000
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as

per

books

of

account = =

[$80 *100* 40]

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_________________ INCOME Rs. 10,80,000

RESALE METHOD

The method begins with the price at which a product purchased from an associated enterprise is resold to an independent enterprise. The price is then reduced by appropriate gross resale price margin. This represents the amount out of which a reseller would cover its other costs and selling expenses. The residuary figure is the arms length price for the transfer of property. The resale margin may be determined by reference to margin that may be earned by a reseller in a comparable uncontrolled transactions or margin earned by an independent enterprise in comparable transactions. DETERMINATION OF ALP UNDER RESALE METHOD

Identify price at which goods, articles or things are ultimately resold to an unrelated enterprise.

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Deduct

reasonable

expenses

and

normal

profit

margin. Adjust resultant price for material differences, if any, in the transactions being compared.

The adjusted price thus arrived at is taken to be arms length price.

Hypothetical Example: Finished Goods from MIL are transferred to USA at $2.5 but the it is sold by subsidiary at $3 and Gross profit margin is at 10%. Calculate the ALP.

Solution: Resale price Less:G.P @ 10%

$3 $0.3 _______

ALP

$2.7

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Cost Plus Method

The cost plus method begins with the costs incurred by the supplier of property or services in a controlled transaction to which an appropriate mark-up is added to account for an appropriate profit considering the functions performed, assets involved and risk assumed.

The price arrived at after adding the cost plus mark up to these costs is regarded as arms length price of the controlled transaction.

Under this method the sellerss cost plus mark up is bench marked against that of comparable enterprises. The cost plus mark-up is normally the gross profit of the

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transaction, which covers the general, administrative and selling expenses and allows an appropriate net profit.

DETERMINING ALP UNDER COST PLUS

Determine

direct

and

indirect

costs

of

production.

Determine normal gross profit mark up to such costs. Adjust normal gross profit mark-up to take into account the functional and other differences, if any between international transaction and comparable uncontrolled transactions.

The costs so arrived are increased by adjusted profit mark up.

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The price so arrived is taken to be an arms length price in relation to supply of property or provision of services.

Transactional Net Margin Method (TNMM)

Transactional net margin method compares the net profit margin from a controlled transaction with net margin earned in comparable uncontrolled transactions. The net margin of the transactions so compared forms the basis of determining arms length price.

The net margin is calculated with reference to appropriate base say costs, sales or assets.

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It is used where the data available is inadequate or unreliable to apply traditional transaction methods

DETERMINING ALP UNDER TNMM

Compute net profit margin of associated enterprise transactions. Compute net profit margin of comparable uncontrolled transactions. Adjust net profit margin of uncontrolled transactions for material differences.

The net profit so established is taken into account to arrive at the arms length price.

Micro Inks Ltd Case

Micro Inks Ltd (MIL) under takes the Transactional Net margin method. Under this method the EBIT is taken ,(that is the earnings before interest and tax is taken.) This TNP method examines the operating profit (the profit after fixed and

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variable costs) from controlled transactions as a percentage of a base , for example sales, costs , assets etc. Generally MIL looks at the peers who are paying the tax with reference to their operating margins earned by the same tax payers in comparable uncontrolled transactions.The arms length price is taken on that basis. MIL has huge variety of products for which it has to decide the transfer price. Due to the confidentiality reasons we would use an hypothetical example to understand the Transfer pricing between MIL and Micro Inks ,USA (which is its subsidiary).

Lets take the price of Resins & Varnish(Product A) Plant the where Raw Material (Z)
88

Packaging cost

product

is (RM) Cost

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made(X) 5 (Y) 60

So the total or Net RM Cost is X+Y+Z = Rs. 66 + Variable Cost ( Manufacturing cost) = Rs 6 + Fixed Overheads + Depreciation + Freight Total Cost (TC ) + Interest ( 5%) ______ TC + TI Profit Margin of(8%) Total Transfer price = @ Exchange rate 98.80/ 40 TP @ USA = $ 2.47 /Kg 91.50 7.30 _______ Rs 98.80 40 = Rs 3 = Rs 2 = Rs 10 ________ Rs 87 4.50

ADVANTAGES OF USING TNMM

Less affected by transactional differences than is the case with price, as used in the CUP.

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GRIMS MICRO INKS It is not necessary to determine the functions performed and responsibilities assumed by more than one of the associated enterprise. The method is also advantageous when one of the parties to the transaction is complex and has many interrelated activities

This method is useful when it is difficult to obtain reliable information about one of the parties.

REASONS FOR USING TNMM

A TNMM approach is useful because global profits could
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influenced

by

many

factors

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Net profit margin method is also used when third party data are not sufficiently similar in the transactional elements (eg. The product being transferred, the functions being performed..) Moving to net profit margin can factor out some of this differences.

BIBLIOGRAPHY

1.MICRO INKS ANNUAL REPORT 2007

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2.TRANSFER PRICING BY V.S.WAHI 3.MANAGEMENT OF CONTROL SYSTEM BY S.SHARMA

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