Brushman (India) Ltd

Statements in the Management Discussion and Analysis describing the Company'sobjectives, projections, estimates, and expectations may be 'forward looking statements'within the meaning of applicable securities laws and regulations. Actual results coulddiffer materially from those expressed or implied Important factors that could make adifference to the Company's operations include economic conditions affecting demand/supplyand price conditions in the domestic and overseas markets in which the Company operates,changes in the Government regulations, tax laws and other statutes and other incidentalfactors.

Overview : Past, Present & Future:

The Company has further consolidated its leadership position and has achievedsignificant growth in the Paint Brush division, both in terms of volume and value. BIL istoday, the largest manufacturer of Paint Brushes in India by a wide margin. The Companyenjoys substantial brand niche in an industry largely dominated by unorganized sector andhas significant market share To retain its industry leadership, the Company has dulyfocussed its attention on constant upgradation and innovations in the paint brushindustry. It has successfully introduced 'Synthetic Mono- Filament' as substitute to'Animal Hair' for bristles and 'Plastic Moulded Handles' for Wooden Handles' With the newmanufacturing facility coming up at Pantnagar, Uttarakhand, India, it expects to furtherincrease its market share in a growing industry

The Cosmetic Division comprises of brands which are market leaders in their respectivesegments. Denman is the World's No 1 brand of hair brushes while Keune is a highlyrespected global brand in hair colours, shampoos, styling products Both of these brandscomplement each other and meet the requirements of salon professionals and provideconsumers with a wide range of innovative, high-performance products.

With the upcoming manufacturing facility for Denman combs and hair brushes atPantnagar, Uttarakhand, India, the Company expects to reduce costs and consequentlyprices, which will enable it to mass market the products. This will give the Company ahuge competitive advantage over others The Company will also foray into exports withcertain varieties of combs and hairbrushes being supplied to Denman International for itsworldwide distribution

Over the last year the Company's foray into beauty and hair care business has beenexpanding, both in terms of market penetration and product range. The Company hasintroduced marquee brands such as Toni & Guy and Farmasi, which are well recognisedglobally and are considered leaders in their segments New complementing product lines likehair dryers, clippers, scissors etc have also been added into the distribution range. TheCompany further plans to launch Sally Hansen, a leader in nail care in the global market,with largest market share in the US.

The Company has formulated strategic entry into Hair Accessories market in India, inassociation with Conair Corporation, one of the largest players globally in this segmentand Denman It is planned to open a subsidiary HEADSTART FASHIONS LIMITED to venture intowholesale distribution of hair accessories and also open branded stores called HEADSTARTthrough franchisee route or directly, as permitted under the prevailing Govt, regulations.

Financial Performance as a measure of Operational Performance

The Company's financial performance continued to improve in this Financial Year owingto the following heads enlisted below.

a) Turnover: The turnover of the Company increased by 99.58% from Rs.257 65 million inFY 2005-06 to Rs. 514.23 million in FY 2006-07

b) Profit before depreciation, interest, exceptional items and tax: The profits of theCompany increased by 327 88 % from Rs. 23.53 million in FY 2005-06 to Rs. 100 68 millionin FY 2006-07.

c) Profit After Tax: The Profits after Tax increased by 609 98 % from Rs. 6.01 millionin FY 2005-06 to Rs 42.67 million in FY 2006-07.

d) Fixed Assets. The fixed assets of the Company increased by 197.30 % from Rs.66 01million in FY 2005-06 to Rs. 196.25 million in FY 2006-07.

e) Balance Sheet Size of the Company increased by 124.99 % from Rs 266.32 million inthe FY 2005-06 to Rs. 599.20 million in FY 2006-07.

f) Net Worth: Net Worth of the Company increased by 23.78% from 179.46 million in FY2005-06 to Rs 222.14 million in FY 2006-07

SWOT ANALYSIS OF BIL Strengths

• The Company is a market leader in Paint Brush industry by a wide margin.

• Brushman enjoys a strong brand recognition in the Paint Brush segment for itsinnovations

• It has successfully introduced alternative raw materials, which have increasedmargins

• Brushman is recognised as one of the leading distribution houses for marqueebeauty and cosmetic brands

• Brushman has been able to recognize and influence emerging fashion trends andintroduce contemporary brands and products

Weaknesses

• Paint Brush market is still an unorganised sector resulting in huge investmentsin user awareness and training.

• Grey market for some beauty and cosmetic products exists, though is small insize.

Opportunities

• Growing user industry of paint brushes owing to boom in the economy.

• Increasing affluence of consumers due to high GDP growth

• Rising awareness due to globalisation.

Threats

• Ever evolving fashion trends

• Increasing presence of competitive brands in the market

Outlook

With the boom in the construction industry the Paint Brush market is set for a growthand the Company being a leader is expected to be a major gainer. In the beauty andcosmetic industry, the rise in GDR income levels and awareness of latest fashion andtrends, is leading to double digit growth. The ongoing retail boom and growth in thebeauty salon is acting as a catalyst to the growth of the cosmetic trading division of theCompany. The Company is expected to gain substantially with all these developments in themedium to long term.