Document 0JJMKDQJLpoezG3y5L2YwkvOn

FILE NAME: Shree Digvijay (SDV) DATE: 1970 DOC#: SDV003 DOCUMENT DESCRIPTION: Johns-Manville File on Shree Digvijay SHREE DIGVIJAY CEMENT CO. GENERAL - june ,1970-Oct.,1970 J o h n s -M a n v il l e In d ia L im it ed 22 EAST 40th STREET NEW YORK, N. Y. 10016 CABLE ADDRESS "JOHNMANVIL" in I `,3 Mr. V, N, oomani ' Shree Digvijay Cement Company Limited Shreeniwaa House V/audby Road, Fort. Bombay - 1 " INDIA July 15, 1970 Dear Mr. Somani: I wish to supplement m y letter of July 8, 1970 in response to your letter R P T : A: 1480 dated June 1, 1970 and also RDT:A;1342 of M a y 26, 1970 with particular reference to an alleged claim against International JohnsManville Beirut which you indicated as amounting to approximately Canadian $1,415. I can only assume that at the time you wrote this letter you had not familiarized yourself with the file because if you had, I think you could establish the fact that Johns-Manville had no responsibility whatsoever on this particular claim. I see no reason, therefore, that we should belabor this point further. This s a m e subject has c o m e up over and over again and I would suggest that w e close the books on that particular subject. With kindest regards. Sincerely, RSO/lvr G. Read W. E. L e h m a n n N. B . Oliphant D. G. Colwell pL\ * A. J. Steneri L. V. Z avatone - Bellegarde M. I. Fatovich - Rueil D. Poutiatine R. S. Olson In 1962 J-M acquired 10% of the stock of Shree Digvijay for a total cost of $473,000. The investment was made in connection with the company's expansion into the manufacture of Asbestos Cement sheets and pipes using J-M "know-how". The technical assistance agreement for a 15 year period, provides for 3% on domestic sales, and 5% on export sales. Shree also agreed to purchase all of their asbestos fibre requirements from J-M, to the extent permitted by the Government of India. The majority stockholders of Shree are the Banqurs brothers, a large industrial group in India, and is managed by the Somani brothers. The following year, 1963, Shree increased its equity capital to finance the second phase of the expansion project. In order to maintain our 10% equity, and to qualify for the foreign tax deemed paid credit, J-M elected to make an additional investment of $115,000, bringing our total investment up to $588,600. Our investment was insured with A.I.D. against inconvertability and expropriation for 100% of our investment. In 1964 there was a change in the Indian tax laws, whereby Indian income paid to a non-resident taxpayer became liable for withholding taxes up to and exceeding 80%. Had J-M qualified as a company in India under the Indian Tax Act of 1961, withholding taxes on dividends and royalty income w o u l d have been reduced to 50%. J-M's Legal Department would not approve having Johns-Manville Corporation qualified as a corporation for Indian income taxes, since it would have made it possible for the Indian Government to levy income taxes on a portion of J-M's total income. Rather than have J-M qualify as a Indian Corporation, a Delaware subsidiary, J-M India, was organized, which was then qualified in India for purposes of taxation. The technical assistance agreement with Shree was then assigned to J-M India and the royalty income from Shree is paid to J-M I at the reduced wi t h h o l d i n g tax rate of about 50%. The dividend income from Shree is paid to J-M Corp. after w i t h h olding taxes which have averaged 70% - 80%. J-M is now trying to transfer its shares of Shree to J-M India; but the transfer has not yet taken place since the Indian tax authorities will assert an unknown amount of gift and/or capital gains taxes on the transaction. Page 2 July 10, 1970 In 1966 the Indian Rupee was devalued 36.7%, from 4.76 Rupees to the dollar to 7.50 Rupees to the dollar. ' SHREE DIGVIJAY OPERATIONS - APPENDIX A Shree sales in Rupees increased from 46 million Rupees in 1962 to 120 million Rupees in 1969. Net earnings in 1962 of 5.0 million Rupees, increased to about 10 million Rupees in 1966, then decreased to 6.3 mill i o n Rupees in 1969. Sales and earnings in U. S. dollars show a different trend due to the devaluation of the Rupee in 1966, as follows : r` YEAR SALES M RUPEES . NET " EARNINGS RATE OF EXCHANGE M. U.S . $ NET SALES EARNINGS 1962 R s . 46,450 Rs. 4,893 (Rs. 4.76/$l) 9,755 1,028 1963 61,778 6,148 ( " ) 12,937 1,291 1964 76,430 7,790 ( " ) 16,050 1,636 1965 8 5 f424 7,790 ( " ) 17,939 1,636 1966 95,348 9,978 (RS. 7.5/$l) 12,710 1,330 1967 .84,125 8,836 ( " ) 11,214 1,178 1968 81,000 2,859 ( " ) 10,797 381 1969 119,821 6,271 ( " ) 15,973 836 A p p e n d i x "A" shows the sales and earnings in U. S. dollars, and the rate of net earnings to sales. From 1962 to 1967 the ratio of net earnings to sales ranged from 9.1% to sales to 10.5%, and declined to 3.5% in 1968 to 5.2% in 1969. J-M INCOME AND YIELD - APPENDIX B Accumulated dividends to date amounted to $259,000 before with holding tax, and $57,000 after tax. Accumulated royalties before withholding tax were $360,000 and $117,000 after tax. The total income J-M received, therefore, amounted to $174,000, and over the seven year period (1963-1969) has an average yield of 4.2% on the investment of $589,000. On a DCF basis the yield on our investment was nil over the same period. J-M's share of S.D.C.'s net worth at its inception amounted to $657,000 and appreciated $264,000 to $921,000 at the end of 1969, including $362,000 loss on exchange due to the devaluation of the Indian Rupee in 1966. rage 3 July 10, 1970 ASBESTOS FIBRE PURCHASES - APPENDIX B Purchases of Asbestos Fibre from J-M, ranged from $176,000 in 1962 to $425,000 in 1969. Asbestos fibre shipped in 1962 valued at $ Can. 183,000 was shipped to Shree to avoid any delay in starting production, and was made in the form of a loan, w i t h 6% interest. The Government of India w o u l d only allow the debt and interest to be remitted to the extent Shree realized export sales. As of June, 1970 $13,700 of the principal amount and $60,250 in interest are still outstanding. To hasten the repayment of this long over-due debt, we had offered to aid Shree in promoting their export sales with the services of our J-M Beirut staff. However, prices offered by Shree for their products by and large have not been competitive. In 1969 Canadian J-M Asbestos L td., assigned and transferred the accounts receivable to J-M India for tax savings on the interest portion. P r e p a r e d by Anne C. Fraser Office of the Controller APPENDIX A SHREE DIGVIJAY - SALES AND NET EARNINGS 000 $ YEAR 1962 1963 1964 1965 1966 1967 1968 1969 NET SALES NET EARNINGS 9,755 1,028 12,973 1,291 16,050 1,636 17,939 1,636 12,710 1,330 11,214 1,178 10,797 381 15,973 836 % EARNINGS 'TO SALES 10.5 10.0 10.1 9.1 10.5 10.5 3.5 5.2 J-M'S SHARE OF EARNINGS 103 129 164 164 133118 38 84. DIVIDENDS PAID TO J-M AFT. GROSS (A) W/H TAX - - - - 46 7 63 14 40 7 - - 50 (B) 9 59 (C) 20 (A) Dividends paid out of prior years earnings (B) Dividends for the year 1966 (C) Dividends for the years 1967 & 1968 APPENDIX B SHREE DIGVIJAY CEMENT CO. , LTD. YEARS 1962 1963 1964 1965 1966 (A) 1967 1968 1969 % EQUITY 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 NET WORTH J-M . TOTAL J - M 1S COST COMPANY SHARE 47 3 6,569 657 J - M 'S INCOME AFT. W/H TAX DIV ROY TOTAL - - - '589 8,588 859 - - - 589 9,498 950 7 12 19 589' 10,401 1,040 14 29 43 589 8,576(A) 858 7 21 28 589 8,950 895 - - - 589 8,935 893 9 - 9 589 9,215 921 20 55 75 57 117 174 % RETURN ON INVEST. 3.2 7.4 4.8 1.5 12.9 (A) Includes $2,600,000 loss on exchange - Indian Rupee Devaluation in 1966. PURCHASES OF J-M ASBESTOS FIBRE YEAR M $ 1962 176 1963 212 1964 327 1965 . 94 1966 215 1967 51 1968 1969 425 PHONfc: 268241 CABLE : JAMCEMENT Telex : L O T U S -2735 SHREE DIGVIJ AY CE ME NT COMPANY LIMITED W ORKS : SIKKA . AHMEDABAD . BOMBAY. fPTtJ\ SHREENIWAS HOUSE, WAUDBY ROAD. BOMBAY-1. INDIA Ref.'. RDT :A: 1342 Date: 26th I'ay M/s. JOHNS MANVILLE INTERNATIONAL CORPN., 22 East 40th Street, New York - N.Y10016, U, S. A. Attn: i^r. R.S.Olson Dear Sirs, we have yesterday cabled you as under ATTENTION MR RS OLSON YOURI;ET NINTEEHTH REMIMT=D CANADIAN DOLLARS 80000 APPROXIMATELY Sa -P L^-.lR FOLLO..S REGARDS " ... enclose herewith a statement of account si-.-n position as on date from wnich you v.ill^ki. e-lse orv e that as on date only a small amouru. o; -an. - remains payable on capital account to y cl-,ljr\bic Associates, w's are making every effort to cLar thi. balance as early as possible. As regards interest charges, in the statement ajtes^- by Mr. N.T .Olsen and forwarded to us wit,, you. 1--- of 13th March 1970, the interest charges >.er. C3."CU ]atedat compound rate. In this connection our V.- Somani had cordial discussions ^ Mew York when he requested you *o c.mr^ _oi.1^ interest. You have very kindly assured n i m ^ Y ^ vourable consideration of his request a* - >- - 1 ful to you for the same. j_ t 'a ,, Tc* *1c Krvn ^f: ,,> v-.v now to request you vO -...nc --- I' ` up-to-date signed statement after akin^in.o _ ^ the latest remittances and crargin^, th; ^ n s-.-- terest at six per e.n. P-r ^ 1 a e * Vvn. oositi0n as on Contd,..2.. NOTE All contratt, ihall b . aubiect to the exclusive )uridiction of th . Court, in Bombay, and to the Arbitration law a, in force in India PH O N E: 268241 CAPLE : JAMCEMENT Telex : L O T U S -2735 SHREE DIGVIJAY CEMENT COMPANY LIMITED W ORKS : SIKKA . AHMEOA8AD . BOMBAY. SHREENIWAS HOUSE. WAUDBY ROAD, BOMBAY-1. INDIA R e f; Date 2 3Cth May 1970 and may bs sent to us in sextuplicate. I t would be better if this statement is sent to us from Canada duly signed by the Canadian Johns Mar.ville Asbestos Ltd. We are endorsing a copy of this letter to them. We take this opportunity to thank you for the very helpful attitude you have extended to us all through out despite the delay which has been occasioned much against our will. Thanking you, " Yours faithfully, c^. rdt/pb /Lf-z. / I ' c c to Mr. N.T.Olsen, Vice President, M/s. JOHNS MAMVILLS U. S. A INDIA LTD., cc: to Mr. David G.Colwell, Asst. Treasurer, Executive Offices, M/s. JOHNS MAiWILLE INTERNATIONAL CORPN., U. S. A. cc: to M/s. CANADIAN JOHNS MANVII.LE ASBESTOS LTD., Asbestos, Oucbec, Canada NOTE i All contracts shall be subject to the exclusive Jurisdiction of the Courts in Bombay, and to the Arbitration law a* in force in India (Asbestos Products vision) M/s. CANADIAN JOHNS MANVI LI.E ASBESTOS LIMITED - CANADA J2-9-1962 31-8-1964 1-9-1964 by cost of fibre supplied by cash remittance - do - 1-1-1965 Debit C. S 54,045.03 1,12,606.73 1,83,013.36 Credit C. 0 1,83,013.36 1,83,013.36 1,12,606.73 REMITTED On 8-4-1970 On 23-4-1970 On 22-5-1970 On 25-5-1970 - ' - Rs.3,02,875.58 Rs.2,99,982.51 Rs.6,02,858.09 - r 9,595.20 - c lT 3,253.62 say C.X 85,000 65,000.00 97,848.82 Due to Can. J.M. on Capital A/c. as on 1-1-1965 Less proceeds remitted " Balance on capital A/c. C.S 1,12,606.73 C. s 97, 848.82 C.S 14, 757.91 l,ss : Value of A.C. Sheets supplied to 1/ s . Gobelin, Joriiah valued '*t 2 o37-lC-C in Jovemb^r 1965 as pr instructions n f <-/s . International Johns Manville, Beirut for 'which payment has not been received - say C.~ 1,415.00 C.O L3,342.91 (Note: Amounts remitted on 22nd and 25th ''.ay 197^ are taken at C. * 85,000/- v.hich is approximate. Actual amourjts 'Mil ~e taken into account after hearing from Canada; John*-M anv illa India lim ited Mr. R . D. Tripathi Shree D igvijay Cement Company Lim ited Shreeniw as House Waudby Road, F o rt. Bombay - 1 INDIA Juno 18, 1970 Doar M r. Tripathi: Thank yon fo r your lo iter of May 2ft, 1970 and I note that you sank cap ias to M o ssrs. N. T . Olson and D. G. Colw ell. M r. Colwell or I w ill acknowledge your lo iter form ally in Iho v ary n aar fukuro. With kindsst re g a rd s. S in c e re ly , RSO /lvr beet D. G. Colwell N. T . Olson G. Road R , 3 . Olson J o h n s -M a n v il l e In d ia L im it ed 22 EAST 40th STREET NEW YORK, N. Y. 10016 CABIE ADDRESS "JOHNMANVIL" June 18, 1970 Mr. V. N. Somani Shree Digvijay Ce m e n t Shreeniwas House W a u d b y Road, Fort. Bombay 1 INDIA ' Company Limited Dear Mr. Somani: I hope you will overlook m y delay in replying to your letter Ref. 1398 of M a y 25, 1970 but I have been out of the office for a few weeks. W e will formally acknowledge the receipt of funds that you have been able to send us and w e appreciate very m u c h that this matter is progressing. Mr. Gomez, of course, gave m e a complete review of your visit at our various plants and I a m glad to note that you found your visit to be helpful to you. . There must be s o m e misunderstanding on a visit to Hong Kong because I have no plans whatsoever to visit Hong Kong in July. If things work out, however, I would hope to visit you in N o v e m b e r but will advise you further on this at a later date. With kindest regards. Sincerely, RSO/lvr bcc: D. G. Colwell N. T. Olsen G. Read R. G o m R. S. Olson TELEPHONE OFFICE : 263241 ( 10 LINES) TELEGRAMS : JAMC MFNT POMP-' TELEX : 2735-LOTUS IP 'MPA Hljree Works at SUCKA, BOMBAY 15, AHMEDABAD, S. Biijiitjan f f t n u m t ( C m n p s u u j REGISTERED OFFICE : S I K K * . (GUJARAT) REF.____ 13>. R. S. Olson, Esq. Johns-Manville International 22 East 40th Street NEW YORK N.Y.10016 U.S.A. Corporation Administrative Or eo : SHREEN1WAS HOUSE, i WAUDBY ROAD, IOET, ` BOMBAY 1. BK. DAt e 25th May,_19 70.----- ">> A' *-*1 I Dear Mr. Olson, X arrived here on the 19th instant. I had spent 2-3 days in Hongkong and I had a detailed discussion vith Mr.Mottier and other members of your office. I am really thankful to you to have arranged ray visits to the Research Centre, Manville, Long Beach, Stockton, Pittsburg, so also for sparing Mr.Gomez to accompany me to all these places. visits have been of great education to me and Mr.Gomez a great e p in understanding the intricacies of manufacture of Asbestos products. I am sure, with the knowledge and experience 1 have gained, the working of the installation at Ahmedabad would improve. Many ,, have be.n given to by Mn.Go.oz, which .ill be ol o, d up in Ahmedabad and, as has been discussed, when Mr.Gomez is in ;India in the latter half of the year matters will be discussed then as well. I have to only request that the programme of Mr.Gomez be so arranged that he will spend at least a week with us. Kindly note that we have been able to remit to you an amount of Rs. and 3,02,875,58 an amount (Can.042,658.5) of Rs.2,99,982.52 on(Calna.st$4S2a,t2u5r2d.aby), the 23rd today. In instant, this we have remitted to you the entire foreign exchange earned by our ewnorts so far. Enclosed please find a statement which gives what to b u r n e d d remitted to ,.u and also the thereon. So far as compounding of interest is concerned, t was discussed and 1 am thankful that your office has been sympathetic enough to waive compounding of interest. I understand that you have a programme for Hongkong next month or in the month of July, and 1 request you to retuTM * 1 ` via. India, spending a couple of days m Bombay and also seeing contd. TELEPHONE OFFICE : 2602-11 (10 LINES) TELEGRAMS JAMi"TMr:.\? .r^n TELEX:2735-LOTUSBOMBAY ^ Ijm Woiks at SBIOKM KABA, Y15, AHMEDABAD, 5. REF. J)t0frijatr d e lim it (Km npam i REGISTEREDomCE: SIKH At (CUJARAT) Xxnut^it Admmistrativo Ofnco SHREENIV/AS HOUSE, WAUDBY ROAD, FORT, BOMBAY 1 BR. DATEi 25th May, 1970 2 the operations in Ahraedabad. It would be our pleasure to welcome you here on your return trip to New York, With kind regards, Yours sincerely, ( V. N. Somani ) u> b 1/ 5`-4EE DIGVIJa Y CEMENT COMPANY l t d . (\skestos Products Division) `M/s. CANADIAN JOHNS MANVII..LE ASBE3T05 LTD - 12-9-1962 31-9-1964 1-9-1964 by cost of fibre supplied by cash remittance - do - 1-1-1965 Debit C. *~ 24,045.03 1,12,606.7? 1,83,013.36 REMITTED Credit C. * 1,03,013.36 1,83,012P,3' 1,12,606.7: On 8-4-1970 On 23-4-1970 On 22-5-1970 On 25-5-1970 Rs.3,02,875.58 Rs.2,99,982.51 Rs.6,02,858.09 C. $ 9,595.20 C.l 3,253,62 -- say C.5 85,000 85,000.00 97,848,8^ Due to Can, J.M, on Capital A/c as on 1-1-1965 C.i 1,12,606.73 Less Proceeds remitted 1 -lance or. capital \ / c . c , % 97,848.32 c . ; 14,7^7.91 Less: V 'c lu - of AC sheets cup o 1i ? d to M /s , Gobz 1 in , Jeddah valued at 2 v57 -10-0 ih ! Jovember 1965 as per instructions of M/s. International Johns Manville, Beirut for which payment has noc been received - say C >y 1,4 1 5 . 9 3 1 u r ii 1 1-0- II 1 * 1! l O II 13,342.91 (Note: Amounts remitted on 22nd and 25th May 1970 are taken at C. : 3^,0 0/- which is approximate. Actual amounts /.ill be taken into account after hearing from Canada) 2 P. S. to W , E. L e h m a n n I agree fully with your letter of July 9, 1970. I might, however, point out that everything is not quite as bad with Shree Digvijay as it used to be because we have not only no w received nearly all the overdue payments on asbestos fiber amounting to at least $100, 000, but we are also receiving substantial royalties. The fact that we are not receiving large dividends is because of a miserable India tax problem, which we partially created. Again, I believe your c o m m e n t s are perfectly in order but I thought you would like to know that we are n o w making s ome m o n e y from Shree Digvijay in royalties; dividends and also from asbestos fiber sales. ew R. S. Olson July 9, 1970 R. S. Olson Shr ee Digvijay - Export Sales I consider Somani's letter to you a joke. Other people in m y organization wpuld probably be rather upset, as Somani has either been given a snow job by his people, or he is deliberately making false statements. The present and previous Beirut Managers (Fatovich and Zavatone) could give us a long list of sad tales with details about the unbelievable lack of cooperation fro m Shree, but I a m not going to ask the m to waste any time in dragging out skeletons. Somani personally reviewed the situation with Zavatone and other m e m b e r s of the Beirut staff on several occasions, and was shown ample proof of his firm*s complete lack of performance. I believe you should refute the statements m a d e by Mr. Somani just for the record, without going into details as I a m not interested in any dispute with these people. Our experience is just 100% negative or, as Leo would say, "sad. " WEL:JA cc;L. V. Zavatone - Bellegarde M. I. Fatovich - Rueil W . E. L e h m a n n