Karuturi Networks Limited

1. Karuturi Networks Limited “The sweet smell and taste of success”

2. Contents • A glance at Karuturi Networks Ltd. • Our Vision • Floriculture Business • Global Industry Trends • India’s Floriculture Industry • The Karuturi Proposition • Beyond floriculture. To agro-based industries • Gherkins, an attractive opportunity • Information Technology • Financials

3. A quick glance at our company • Incorporated in 1994-95, we started with an annual capacity to process 12 million premium cut roses at our state-of-the-art facilities. • Promoted by Mr Ramakrishna Karuturi, today, our company is one of the oldest floriculture units in the country. • We set up a wholly owned subsidiary in Ethiopia, Africa named Ethiopian Meadows Plc to produce roses with a special focus on HT roses. • And today with the combined production capacities of India and Ethiopia, Karuturi ranks amongst one the largest cut rose producers in the world. • In addition to cut roses, we also supply cut rose products such as rose plants, coco peat and coco cups to customers across the globe.

4. Strong global presence - products are exported to Holland, Germany, United Kingdom, Italy, Singapore, Hong Kong, Taiwan, Bahrain, Muscat, Dubai, Australia, Japan, New Zealand, Brunei and North America and are also consumed in India. • Diversified into IT and network solutions. • This division provides bandwidth to MNCs and develops software for the auction portal for its floriculture business.

5. In a snapshot • Total acreage under cultivation: 60 hectares ( 50 hectares under implementation in Ethiopia and 10 hectares in India). • Greenhouse size: 0.5 hectare per greenhouse • Yield per hectare: 1.1 mn • Roses per annum: 65 mn (15 mn from India and 50 mn from Ethiopia) • Realisation per stem: Rs 10 per stem • Export presence: 80 per cent from Ethiopia and 50 per cent from India.

6. Having established our presence in floriculture, this is where we are headed. Our Vision To emerge as a completely integrated service provider having a comprehensive presence in the fields of floriculture, agro-based products and food processing.

7. Floriculture business “Every rose tells a story, conveys an untold message and continues to be steeped deep in tradition. Its enduring symbolism has helped express many of our most heartfelt sentiments.” No wonder the global cut rose business has today grown into a flourishing USD 64 bn business and blooming at 10-12.5 per cent each year.

8. Global Floriculture Industry An overview: • Global floriculture industry: USD 80 bn • Major flowers under greenhouse: Rose, Orchids, Gerbera, carnations • Area under cultivation: 50,000 hectares • In India: 500 hectares Global Rose Industry • Major consuming nations: USA, Canada, Europe, Japan, Australia, Middle East and New Zealand. • Major producing nations: Europe, North America, South America, Africa and Asia. • Total area under greenhouse: 40,000 hectares • Existing segments • Upper end: bouquets/occasions-large buds • Middle/lower end: mass consumption-small buds

9. The attractiveness of this industry can be gauged from the following instances: Growth of ISRAEL as a floriculture center: Despite heavy odds like arid climate, severe shortage of water and high wages, Israel ventured into the export of the floricultural business in 1960s. Today Israel is the third largest exporter after Holland and Columbia, exporting almost 1.5 bn steams per annum. COLUMBIA: World’s second largest Columbia, not a traditionally floriculture industry ventured into the flower business in 1965. Today, the country exports flowers worth USD 556.2 mn.

10. Rose: the queen of flowers Million $ 556.2 31.9% Rose 177.4 Million $ 50 Others 25.2% 30.7% Standard Carnation 140.2 Million$ Alstroemeria, Gypsophila, Asters, Gerbera, Callas, Limonium 10.5% Spray Carnation 171 Million $ 58.2 Million$ 1.7% Chrysanthemum Source: DANE (National Statistics Department) 9.4 Million$

11. Global Industry trends • Continuous Increase in demand • Improved varieties replacing other flowers • Improved distribution network, new demand areas discovered • Increasing incomes, e.g. Eastern Bloc • Slower growth in supplies • Dutch cultivation area declines • Increased area compensated by rising domestic consumption -- reducing exports • Sharp increase of transportation costs (oil prices) and labour charges are forcing many European floriculture units to close operations. • Several floricultural producers in Spain have even converted their rose farms into holiday villas. Leading to the growth of newer floriculture hubs across Latin America, Africa, Asia with countries including Ethiopia, Ecuador, Columbia, India, China, Kenya and Tanzania.

12. Upward price movement - demand-supply imbalance pushing prices up - Average US cut rose price increased from $0.377 per stem to $0.390 per stem. • New emerging segment: Large buds/HT rose, driven by increasing incomes and changing cultural patterns. - Cut roses evolving into a trans-border trade. - Production bases shifting to southern hemisphere - Strong demand impetus in northern hemisphere with EEC growing into a 25 nation bloc.

13. Major Cut Flower Consumption Areas Source:International Society for Horticulture Science

14. Sourcing of rose plants Cultivation in greenhouses Harvesting Storage and refrigeration Processing and packing Transportation to marketplace Auctions and bouquet manufacturers Green House Cut rose supply chain Grading Cold Storage

15. Transportation to Airport Loading to the Flight To auctions abroad The Dutch Auctions

16. Cut rose value chain HT • Determinants on choice of rose type : HT, Intermediates, Sweethearts • Climatic conditions • Transportation costs vs market price • Harvesting/Handling costs Intermediates Sweethearts

17. Valentine Christmas Mother’s day Product Prices - Occasion/Opportunities 105 FIRST RED Weekly Av Prices Alsmeer 90 75 60 Euro Cents 45 30 15 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Weeks

18. India’s floriculture industry • Less than 1 % of the global floricultural market. Expected to touch USD 16 bn by 2010. • Dried flowers, cut foliage and cut flowers are among the major export varieties. • Roses make up 95 per cent of the cut flowers category. • Major export markets : US, the European Union, the Middle East and Japan. • Major competitor : Kenya • Of the 1,10,000 hectares of land under flower cultivation in the country, only 500 hectares is under organised floriculture. • Indian government has accorded sunrise industry status to floriculture and offering export-oriented units several tax benefits ( income tax holidays and exemptions from certain import duties, besides granting subsidies for establishing cold storage, pre cooling units, refrigerated vans and green houses, and air freight subsidy).

19. Domestic market • The domestic floriculture business is in the region of Rs 600 crore. • Rise in per capita income and numerous festivals is fuelling huge flower consumption. • Domestic demand growing at the rate of 40 per cent per annum, significantly higher than the global average. • Of the total industry demand, almost 85 per cent of the demand is for cut roses. • Delhi has evolved as the largest domestic market for flowers, followed by Mumbai and Kolkata.

20. The Karuturi Proposition Leveraging locational advantage: Ethiopia and Bangalore Leveraging operational strengths Leveraging low production cost Leveraging natural strengths Leveraging the inorganic growth route Leveraging scale to service prestigious clients Leveraging opportunities unfolding in new markets. Leveraging domestic boom.

21. Leveraging strategic locationEthiopia and Bangalore ETHIOPIA : a superior value proposition to grow our floriculture business Benefits : • Wholly owned subsidiary on the outskirts of Addis Ababa in Ethiopia has helped gain faster and cost effective access to the European and American countries. • Favourable attitude of the Ethiopian government augurs well for promoting floriculture activities in the country. • High altitude, close to Equator – similar flowers to world’s best, Ecuador. • Helps us address the high margin HT - premium segment rose variety and which is fairly recession-proof. (Ethiopia is best suited for HT roses due to the high altitude and colder climate).

22. Ethiopia advantage • Facilitates the completion of our basket of product offerings: sweethearts, intermediates and HT and a presence across all price points. • Abundant cheap labour • Flood-safe geography • The freight benefits the region enjoys lets it compete with floriculture companies based out of Ecuador. Ethiopia Project • Set up 50 ha of rose at high altitude in Ethiopia. Completing the balance 50-hectare project by the third quarter of 2006-07 • Capital Investment - $ 6 million • Mainly HTs, latest varieties • Was In production for Valentine’s 2006 • Target markets – Europe, Russia, M.East • IRR > 50%

23. Ethiopia advantage Looking at the advantages the Ethiopian operations brings to the table, Karuturi intends to scale up its operations in Ethiopia to 100 hectares by 2007-08 with an investment of USD 35 mn of which USD 15 mn has already been deployed. By 2007 end, Karuturi, with its ramped up capacities, will be well placed to produce 100 mn stems per year and by end 2010, total production is estimated to touch 300 mn per year.

24. Bangalore We have 10 hectares under cultivation in Bangalore. Bangalore advantages: • Ranked among one of the largest flower-growing area in India due to its cool climate and is located at perfect altitude location conducive to horticultural activities. • Bangalore also offers the perfect logistics required for post harvest handling • Receives focused government thrust to propel the sector growth. • Encashing on Bangalore’s locational advantage, the Karnataka government plans to commission an international flower auction centre in Bangalore. For this purpose it has already set up a commission to conduct a feasibility study for setting up a container facility in Bangalore airport.

25. Leveraging operational strengths • Ten years experience in producing and marketing cut roses • Low cost production • Indigenously built greenhouses (as against importing from Holland) • Indigenous sourcing of flowers (savings of Rs 40 per plant). • Rainwater harvesting. • In-house power generation through bio-gas. • Broad product range: cut roses, rose plants, coco peat, coco cups. • Complete technology available – greenhouse, irrigation, planting material, agronomy, pest management, post harvest, marketing, experienced personnel Result: • Karuturi is the largest multi-location, quality cut rose producer. • And the lowest cost producer in the country (Rs 0.57 per stem as compared to Rs 1.25 per stem)

26. Leveraging the inorganic growth route To further augment our capacities with a minimum capital investment and in the shortest lead time, we acquired about six greenhouses across the globe with an investment of over Rs 87 mn and successfully translocated five of them to Ethiopia. Our acquisition of over 25 hectares of greenhouses (from Greengold in Pune, Camson Biotechnologies Ltd. in Bangalore and Crystal Agritech, TransIndia Floritech Ltd., Asian Flora) helped cut down on costs of setting up a full-fledged greenhouse by 1/5th from USD 25 per sq mt to USD 5 per sq mt and simultaneously help crunch project implementation time from 180 days to 90 days

27. Leveraging scale to service prestigious order • Apart from receiving business from supermarkets, we bagged a prestigious order worth Rs 3,000 mn from a leading retail chain in UK having a presence across 500 stores in the country. • This order is one of the largest order bagged by our company till date. • It requires Karuturi to supply 1 mn stems per week over the next five years. • We started shipping from December 17, 2005, from both Ethiopia and India. • These roses are being used to prepare bouquets priced at USD 1.99 a bouquet, with each bouquet comprising 10 roses and a total of 2,000 bouquets shipped per store per week (aggregating to 1 mn stems). To service this huge and recurring order, we have launched regular freight services thrice a week from January 15, 2006.

28. Leveraging the opportunities in new markets Having come so far, we have identified two more new markets to extend our presence into: a. Dubai b. and Japan – which have excellent prospects and a number of factors confirm our optimism.

29. a. Dubai • Although Netherlands plays an important role in selling and redistributing floricultural products across the globe, it may not alone be able to serve the logistical and commercial needs of the growing global floriculture market. • Redistribution hubs like the Dubai Flower Centre will help expand trade opportunities for flower producers in developing economies, particularly Africa and Asia. Advantage of Dubai as a redistribution hub: • Location • Historical trading ties, • increasing global connectivity available at the Dubai International Airport, makes it a perfect 21st century hub for perishables trade between Africa, Asia and the rest of the world. Advantages for Karuturi • Will offer high-quality transit point with a rapid turn around. • With our proposed value-added services like packaging for the end market, Dubai will offer us an even more cost-effective access to the western markets and throw open new sales channels.

30. b. Japan • Return of prosperity in Japan has had a favourable impact in the demand for roses. • With our proximity to this market, we are looking to strengthen our exports to Japan. • Without incurring any additional marketing costs and getting involved in the logistics of shipments and transportations, we intend to supply flowers to Bangalore Rose, a marketing company that has entered into collaboration with a Japanese company and who will then be selling and auctioning flowers in the Japanese market. • Have already executed orders through this route and received a good response for our high quality HT roses and received almost 60 per cent higher realisations. • To better serve this market, we have acquired land in Nilgiris, a region that possesses similar climatic conditions as Ethiopia. • To speed up the cultivation time, we have acquired greenhouses and will relocate it to Nilgiri to produce high quality HT roses. • From the second quarter of FY 06-07, we are optimistic of exporting 10 mn stems to Japan.

31. Leveraging the benefits of scale in the future • To reach our ultimate goal - of becoming the largest rose producer in the world - we are actively looking at acquiring one of the largest floriculture companies based out of Africa. Key benefits: • Will provide us with aircrafts (as rose farms of this size are usually well-equipped with their own transportation equipment) and in turn help us manage our freight costs better. • Facilitate our foray into more value-added business segments such as readymade bouquets, • Help us add variety in our flower offerings, • Allow us to deliver roses in pristine conditions (as they can be dispatched in wet buckets rather than dry packs) • And finally help us address the highest end in the business: the retail segment. Leveraging the Ethiopian comfort On the back of multiple advantages we are looking at expanding our capacity in Ethiopia by 433 per cent, which will be completed by the end of FY 2008.

32. Funding expansion plans • Size of the GDR issue: $10 million • Proceeds of the Issue; Used for the Ethiopian project to increase the area under rose cultivation from 50 hectares to 100 hectares by December 2007. • Project details: The money raised would be used to set up rose cultivation facility of 50 hectares and additional project utility facilities of 50 hectares. • Procedure of raising money: The GDR issue would be raised by the parent company KNL and the money would be routed via equity investments to the subsidiary Ethiopian Meadows Plc.

33. Leveraging natural strengths • We intend to leverage our strong engineering skills to indigenously manufacture greenhouses at cost-effective rates and propose to enter the agri-infrastructure space. • The rising popularity of horticulture and floriculture has created a huge market exists for outsourcing quality polyhouses in the country. • We are in the process of negotiating with leading international players for manufacturing these in India. • We intend to invest close to Rs 10 crore in this venture, which would also supply to the global market. • The installed capacity of the plant is pegged at 2,000 tonnes annually.

34. Leveraging domestic boom • Till recently, focused on global customers as the realisations were better and orders from supermarket chains left little or no surplus for the domestic markets. • But with improved realisations, we are eyeing the domestic market. • We enjoy a modest presence in the domestic markets by selling flowers through auctions ( revenues worth Rs 40-50 mn) • Entering the domestic retail business by tying up with one of India's leading food and grocery chains. • The initial mandate allows Karuturi to retail flowers from select stores. • Based on this performance; Karuturi will be provided space across all the stores. This could result in a national footprint in a category that has yet to be tapped in India. • We are also in talks with one of the leading companies in the domain of retail knowledge who are in the process of setting up and managing stores for one of India's largest petroleum companies. • Based on the performance in the first few stores, Karuturi could be provided the opportunity of retailing flowers from a large number of fuel stations belonging to the petroleum company. • talking to leading retailers in the country to establish retail presence through a mix of shop-in-shop, kiosks and exclusive flower boutiques. • Tied up with PRIL , leading retailer in India, to sell flowers thru their food and grocery store format food baz. Currently 50 stores. Expected to scale uo to 100. stoe.s • Given space in 9 stores to sell flowers. Based on performance – product will be taken across all stores to get national visibility. • Creating brand, intangibles to leverage this recall in the future. • Optimistic of an initial rollout in 9 stores of a leading retailer, across formats, by Q2, following which we intend to ramp it across at least 50 stores. • Tying with Images Multimedia – leading expert on the domains of retail and fashion in India – Images given a mandate by one of India's leading petrol retailers – IOC – to ramp up non petroleum sales • Looking at selling products through kiosks and Convenios in Petrol Pumps ( a concept highly popular in the west), initially as a pilot project, and later as a part of a well-drawn out strategy.

35. Beyond floriculture. To agro-based industries. As Ethiopia offers a better value proposition for consolidating our floriculture business, we intend to expand our rose business from that geography and leverage our knowledge built in the floriculture business for entering into other synergistic and attractive segments within the agro-based and horticulture industry out of India. Gherkins - pasteurized cucumbers - emerged as one such lucrative option. And this is why.

36. Gherkins are extremely popular in the international markets with the global production of gherkins estimated at close to approximately 23 lakh metric tons per annum. • The US produces almost 40 per cent of the total global production and also accounts for 50 per cent of total global consumption, making it the largest producer and importer of gherkins, followed by Russia, Canada and Germany. • The market size of gherkin exports from India is Rs 3000 mn by value (orders in place) and 100,000 MT by volume, which is expected to increase to Rs 5000 mn over the next two years. • Russia is emerging as a new market (1 lakh MT) and is looking to outsource gherkins from India. • Hungary, Ukraine and Turkey were large producing nations but haverecently been losing their market share to India, an emerging production site. Gherkins producing nations • Country Capacity (in MT) • USA and Canada 200,000 - 250,000 • Germany 200,000 - 250,000 • Poland 100,000 • Hungary 50,000 • India 100,000

37. Gherkins; an attractive opportunity Why India: Low labour cost, all year production (Bangalore), rationalizes cost (10 times cheaper to outsource from India), good quality. Except Unilever most food global FMCGs are looking at moving Gherkins operations to India. Today, Gherkins is the only successful contract farming instance in the country. Scope for value addition: Earlier, gherkins was exported in bulk (medium processed) which in turn was cut to size and reciped according to specific country tastes, packed in bottled and sold by food processing companies to super markets. However, now international agro-based processing companies, to save on costs, are outsourcing even the cutting, recipe-treatment, packing and labeling in bottles to Indian processing units: a big opportunity.

38. A glance into the gherkins industry • The gherkins supply chain: sowing – growing – harvesting – daily collection from farmers – processing. • Steps involved in processing are as follows: • Bottling: dry grading and sorting, cold storage, culling (removing waste fruit), washing, pickling in media flavours, bottling and vacuum capping in glass jarsand pasteurizing,coding,labeling and cartoning. • Bulk: Gherkins are graded, culled, washed and packed in Containers in suitable Media. • Three Medias in which Gherkins are popularly treated: brine, ascetic acid, natural vinegar. • A combination of grade and media are the key determinants of price. • Different markets have different preferences for grade and media of gherkins. For instance, in US, 0-100 grade Gherkins treated in brine is popular, whereas in Spain, 160+ grade treated in ascetic acid are preferred, in Europe – natural vinegar and small sized gherkins are popular. • The emerging segment: Fresh gherkins packed in glass jars. • Realisations: euro 1.25 cents per kg for bottled, and euro 0.70 cents per kg(bulk – 160 + grade). • Margins depend on the customer you are supplying to. Excellent margins in the smaller grades: Average profit margins in the range of 15 – 20 per cent. • In bottling, average margins are 15% per jar, with one container filling 22,000 jars: huge volumes.

39. The Karuturi Advantage Our decade plus experience in floriculture has helped us understand the intricacies of contract farming and cold chain logistics, two factors which are critical for succeeding in the gherkins business. Also. Gherkins can be grown throughout the year in South India, where Karuturi is located, whereas gherkin growing countries like US, Canada, Germany and parts of Russia can grow only one crop a year, when the temperature is conducive. This makes South India, especially Bangalore an ideal location for gherkin cultivation and processing.

40. The Karuturi Proposition • Setting up a gherkins processing and bottling unit in Bangalore for bulk and bottled gherkins ( margins are considerably higher here). • Intend to supply to international processed food firms and super markets in major consuming nations such as the US, Europe and Russia - the company's key rose markets. • We have also enlisted key functionaries to drive this business, the product rollout of which is expected to start in the second quarter of 2006-07. We have set an ambitious target of achieving a turnover of Rs 300 mn in the first year itself from this business segment. • Also intend to explore the possibility for foraying into the bottling of baby corn, jalapenos and green ball peppers.

41. Success achieved • We have already bagged a prestigious order worth Rs 3000 mn to be executed over a span of five years. • This order is a mix of bulk as well as processed gherkins. • Initially, the company will focus on processing and bottling of gherkins for the export markets of Russia, Eastern Europe and Japan. • The company plans to export 12 containers per day translating into sales of USD 84000 per day. • The company has firm orders from existing supermarket chains, which it already services..

42. Information Technology Services and Product Offerings: ISP (Called KARNET) 2. Software Development ISP business Offers high speed cost-effective Broadband connectivity. Products include: Dedicated Leased Lines (24-hour dedicated leased line access to the Internet), ISDN Lines, VPN and VoIP. Other services: Hosting Services, E-Infrastructure and E-business Consultancy, Supply and install mail servers, proxy servers, and firewalls.  USP, ISP services: Guaranteed 99.9% uptime Fixed rate tariff, Connection to a fully switched redundant network with full UPS backup and massive broadband capability Service reputed clientele comprising MNC companies, mid-size software companies and R&D units where bandwidth is critical component. State-of-art infrastructure from Sun Microsystems and Nortel Networks of USA and with subscriptions to Bharti and Reliance gateways for uninterrupted supply.

43. Future Looking to develop plug and play Broad band service product which will lead to a significant increase in revenue flows. Looking at acquiring smaller ISPs in South India. (Revenues in FY 05-06: Rs 2.4 cr.)Expect an approx 60 per cent increase in revenues over current levels. Information Technology

44. Software Development • Developed the e-commerce site for the floriculture division: www.rosebazar.com - unique flower auction portal which is the only flower auction portal in India and South East Asia. • Specialize in offering customized solutions in the fields of e-Commerce which can be used for various perishable goods, paper industries and government agencies for their tendering work, workflow automation and telecommunication. Revenues in FY 05-06: Rs 0.25 cr. Expect three times growth over current levels in FY 06-07.

45. Financial Highlights (In Rs Mn)

46. Quarterly Highlights (In Rs Mn)

47. Future Projections (In Rs Mn)

48. Thank You Disclaimer: The information contained in this document is intended only for use during the presentation and should not be distributed to parties outside the presentation. Karuturi Networks Limited accepts no liability whatsoever with respect to the use of this document or its content.