Contents of this Note :

Brief Overview of the Company

(P.I. Industries Ltd. - Mcap – Rs. 659 cr.) Page 2-2

Key Takeaways of Concall Page 2-4

Brief (Tabular) Overview of last 5 Years' Financials

as well as recently reported current FY11 Financials Page 4-4

Current Shareholding & Likely Shareholding

after Increase of Stake by Standard Chartered PE Page 5-5

Debt Page 5-5

Views-Inviting Request & Our Initial Take on the Company Page 5-6

Note :

Fellow members interested to procure related research materials can mail us back. We will immediately
provide them with the requested material. We have with us :

Agrochemicals Sector Report (2011 - pdf form),

Annual Reports of P.I. Industries (Last 10 Years - pdf form),

Playback of 74 minutes long Conference Call of P. I. Industries (mp3 form).

 Brief Overview of the Company :

P. I. Industries Ltd. (BSE – 523642) is a company engaged in two high-potential business segments viz. Agri-
Inputs & Custom Synthesis (CSM). It derives its strength from its strong association with leading global innovator
companies to whom it offers a unique no-conflict business model with utmost respect to IPs. The success of this
business model is evident from the fact that 95 % of PI's CSM business comes from patented molecules and that
too in early part of their lifecycle. Such early-stage association with global innovator companies makes PI their
partner rather than a supplier which derisks its business to a great extent. Another aspect which makes the
business model of PI (in CSM space) a relatively safe and derisked one is the fact that to most of its customers in
CSM space, PI either is the only or one of the only two suppliers. Hence, the only risk that remains with PI is the
delivery risk which is taken care of by the professional and efficient management at top assisted by the inputs
from Standard Chartered PE (which currently holds 5 % stake in PI that is likely to be raised to 12-15 % by April
2010) and Halcyon Resources (founded by ex-KPMG, ex-Anderson head Mr. Seshadri who himself holds 1.17 %
stake in PI).

In agri-input business too, PI adopts a very unique business model which is quite distinct from its peers.
It derives its agri-input business model from its other segment viz., CSM wherein first it draws global innovator
companies' molecules to CSM space and then, if the management feels that such innovative molecule also has a
market potential in India, then it enters into an inlicensing arrangement with the respective global innovator
company which not only enhances the trust of the customer but gives PI a privileged status in customer's
business strategy. The success of this agri-input business model is evident from the performance of PI's flagship
brand Nominee Gold, a rice herbicide, which was brought to India by PI via inlicensing arrangement with Japan's
Kumiai Chemical. Within just one and a half year of Nominee's launch, it has attained brand leadership status in
the respective category and is expected to contribute almost 20 % to the current FY11 agri-input business
revenues of PI. Agri-input business model of PI derives its strength from its strong distribution network which is
spread across 1500 + disributors and a pan-india reach to 25000 + retailers.

Hence, with such a unique business model as well as its current CSM business order-book at 250 mn.
US$, which is almost 5 times its current yearly revenue tick-rate of CSM business, PI Industries deserved a closer
look and so we have initiated detailed research on the company and as soon as we are done we will be coming
out with detailed report on the same soon. We invite fellow analysts' members inputs on the company as
complexities of the agri & csm business can be understood only by varying views.

In case you want annual reports of the company we can mail them as also we have the playback of the
74 minutes long concall held recently which can be provided on request....just for a quick update, in Jan2011
Sony has signed a collaborative R&D agreement with PI as also the MD of PI is presently Co-Chairman, CII
National Council on Agriculture.... recently PI had a concall post Q3FY11 numbers and broad takeaways from that
were :

Key Takeaways of Concall

(1) Company's Agri-input business has grown by 36 % in first nine months of FY11 which is the highest growth
achieved amongst its listed peers.

(2) Its Nominee Gold herbicide which was launched last year is doing extremely well and is expected to become
a blockbuster brand in few years in respective category.

(3) Inlicensing molecules currently constitute 30-35 % of the agri business which is expected to rise to 50 % in 2
years which will enable the co. to improve margins further.
(4) In Fy12, Co. is going to launch two molecules in agri segment (insecticides).

(5) In agri segment all its business is from retail and has no institutional contribution which is a unique model in
the listed peer space.

(6) Agri segment is going to do very well in Q4FY11 as because of rains the season has got shifted to Q4.

(7) At present Insecticides contribute 50 % to the agri business, 30 % is contributed by herbicides while other
agri-inputs contribute 20 % to the agri segment revenue.

(8) In custom synthesis space (CSM), PI is following a unique no-conflict business model which is somewhat
similar to Divis.

(9) In the CSM space it is the only or one of the only two suppliers to its clients.

(10) Its CSM business has the provision to pass on raw material increase to the customer.

(11) In CSM, majority of its clients are from agrochemicals space at present but the mix is shifting to other
sectors like imaging, electronics & pharma.

(12) 95 % of CSM business accrues from patented products and that too in their early lifecycle which makes PI
the only company with such business model in India.

(13) Order book position at the end of Dec.2010 stands at 250 mn. US$ which is to be executed in 2-3.5 years.

(14) Its new plant for CSM business is expected to get operational by December 2011. With the existing capacity
and the new plant, PI will be able to serve orders worth 700-750 cr. per year in CSM business at 100 %
utilisation.

(15) CAPEX for the new plant is put at Rs. 125 cr. by FY12 & FY13 out of which 16-18 cr. has already been spent
and initial works have started and the entire CAPEX requirement is to be met by internal accruals as well as out
of the proceeds of sale of polymer business which will get concluded by 31st March 2011.

(16) In the first 9 months of FY11, 3 to 4 molecules in CSM business are commercialised and stabilised which
has put slight pressure on the margins and the delivery offtake has started to pick-up in Q3FY11 wherein it has
attained 100 % growth YoY. Q4 is expected to see similar performance for CSM business but the full benefit of
the commercialised molecules is expected to be seen from FY12 onwards in which PI's CSM business is expected
to grow significantly.

(17) There is usually a lag period between 3-6 months for the molecules to get commercialised and stabilised but
once that happens the yields improve substantially and delivery offtake picks up.
(18) R&D capability of PI is getting recognised with Sony signing with it a collaborative R&D agreement for
carrying out joint research on organic chemicals. This parternership is expected to put PI in the big league few
years down the line.

(19) PI has sold off its polymer business to Rhodia and the funds raised out of the sale is to be utilised for the
new plant which is being set-up for CSM business.

(20) Co. is operating at approx. EBITDA margins of 16.5 % in agri segment and 20 % in CSM business. For Q3FY11,
Agri business contributed 85.80 cr. which is YoY growth of 15 % whereas CSM business contributed 87 cr. which
entails to a YoY growth of 99.5 %. For 9 months ending Dec.2010, Agri Business contributed 305.1 cr. which is 36
% growth YoY whereas CSM business contributed 150.6 cr. which is 6 % growth YoY. The sluggish growth in CSM
business is due to shift in delivery schedules in favour of second half and time taken for commercialisation of 3
molecules.

(21) Co. plans to continue its focus on innovative products in both of its operating business segments and wants
to pitch itself as a pure R&D focussed co. in the years to come.

(22) Co. believes that the business model which it is following is unique in India and in such model initial scale-
up might be slow but once a critical scale is achieved, the scale-up will be exponential with decent margins
since it is the critical supplier for most of the products it serves.

Brief Overview of last 5 Years' Financials as well as recently reported current FY11 Financials :

9 months FY'10 FY'09 FY'08 FY'07 FY'06

ending
Dec.'10

Net Revenue 506.71 542.82 462.18 375.91 318.57 268.01

Operating 72.42 74.31 52.81 27.4 21.53 17.4

Profit
Net Profit 43.73 40.94 23.08 6.28 4.46 3.97
 Current Shareholding & Likely Shareholding after Increase of Stake by Standard Chartered PE :

Currently, Promoters hold 71 % stake in the company and Standard Chartered PE holds 5 % equity (CCPS
converted last year at Rs. 327--- post bonus adjusted price works out to Rs. 218) while Mr. Seshadri & his
associates (of Halcyon Resources) hold around 2 %. Rowanhill Investments, a European investment firm holds 11
% equity in the company which (as per sources) is selling its part stake in the market to improve liquidity of the
company on the bourses.

Standard Chartered PE still has unconverted CCPS worth 8.1 cr. and unconverted OCDs worth 29.4 cr.
which, as per sources, is going to get converted into equity by next month at Rs. 500-525 per share. Evenif we
assume the price of conversion at lowest being 450 rs. which is the low of past six months, then the equity of PI
after the said conversion will not be more than 13.5 cr. with 12-14.9 % stake held by Standard Chartered PE and
62-66 % stake held by promoters with no likely equity dilution till FY13.

Current Shareholding of PI Post CCPS & OCD Coversion Shareholding of PI

Promoters - Std.Chtd. Halcyon Promoters - Std.Chtd. Halcyon

71.26 % PE - 4.98 % Res. & 65.85 % PE - 12.5 % Res. &
Ass.- 2.72 Ass.- 2.3 %
% Rowanhill Public - 9.25
Rowanhill Public - 9.89 Inv. - 10.1 % %
Inv. - 11.15 %
%

Current Debt :

Current debt is at approx. 165 cr. and as per the management concall, management will be keeping D/E
at 1 even with planned CAPEX and acquisitions because of expected internal accruals as well as proceeds from
sale of polymer business to Rhodia (which sources put at close to 80 cr.)

Fellow members' views are invited on the company which will help us in our research on the
company. The analysis that we have done so far make us believe that the story is interesting here with clean
management and backing by a respectable PE firm coupled with a closed company structure and
management's new-found willingness to share company's prospects with financial fraternity. We believe
that company will command a premium valuations on the bourses because of its unique and growth-
oriented business model as well as its underownership and make it a rare concept stock operating with
decent margins.