ALOK INDUSTRIES LIMITED

Transcription

1 Letter of Offer March 19, 2009 For Equity Shareholders of the Company only ALOK INDUSTRIES LIMITED Our Company was incorporated on March 12, 1986 by way of a certificate of incorporation dated March 12, 1986 as Alok Textile Private Limited, a private limited company under the provisions of the Companies Act, Subsequently, by way of a fresh certificate of incorporation dated November 17, 1992, the name of our Company was changed to Alok Textiles Industries Private Limited. Our Company was thereafter converted into a public limited company on February 11, 1993 by way of a certificate of incorporation dated February 11, Consequently, by way of a fresh certificate of incorporation dated November 8, 2000, our Company s name was changed to Alok Industries Limited. (For further details please refer to the chapter titled History of the Company and Other Corporate Matters on page 123 of this Letter of Offer.) Registered Office: B-43 Mittal Tower, Nariman Point, Mumbai , Maharashtra, India. Tel: / ; Fax: Corporate Office: Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai , Maharashtra, India. Tel: / 6500; Fax: Contact Person & Compliance Officer: Mr. K. H. Gopal alokrights@alokind.com Website: FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF THE COMPANY ONLY LETTER OF OFFER ISSUE OF 40,87,23,061 EQUITY SHARES WITH A FACE VALUE OF RS. 10/- EACH ( RIGHTS EQUITY SHARES ) FOR CASH AT A PRICE OF RS. 11/- INCLUDING A PREMIUM OF RE. 1/- AGGREGATING TO RS. 4,49,59,53,671/- TO THE EXISTING EQUITY SHAREHOLDERS OF THE COMPANY ON RIGHTS BASIS IN THE RATIO OF 83 RIGHTS EQUITY SHARES FOR EVERY 40 EQUITY SHARES HELD ON THE RECORD DATE I.E. MARCH 25, 2009 ( ISSUE ) THE ISSUE PRICE FOR THE RIGHTS EQUITY SHARES IS 1.1 TIMES THE FACE VALUE OF THE RIGHTS EQUITY SHARES. PAYMENT METHOD Amount payable per Rights Equity Share (Rs.) Payment Method 1* Payment Method 2 Applicable to all categories of Investors except NRIs, FIIs and Non-Residents Applicable to all categories of Investors Face Value (Rs.) Premium (Rs.) Total (Rs.) Face Value (Rs.) Premium (Rs.) On Application First and Final Call Total * Please refer to risk factor no. 54 in the chapter titled Risk Factors beginning on page xiii of this Letter of Offer for risks associated with Payment Method 1. For details on the payment methods please refer to the chapter titled Terms and Procedure of the Issue beginning on page 259 of this Letter of Offer. GENERAL RISKS Investments in equity and equity related securities involve a degree of risk and Investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in this Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document. Investors are advised to refer to the chapter titled Risk Factors beginning on page xiii of this Letter of Offer before making an investment in this Issue. ISSUER S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in the context of this Issue, that the information contained in this Letter of Offer is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing Equity Shares of the Company are listed on the Bombay Stock Exchange Limited ( BSE ) and the National Stock Exchange of India Limited ( NSE ). The Company has received in-principle approval from BSE and NSE for listing the Rights Equity Shares arising from this Issue vide letters dated February 18, 2009 and February 20, 2009 respectively. BSE is the Designated Stock Exchange for this Issue. LEAD MANAGERS TO THE ISSUE (represented in alphabetical order) REGISTRAR TO THE ISSUE Total (Rs.) Axis Bank Limited Central Office, Maker Tower F, 11th Floor, Cuffe Parade, Colaba, Mumbai Maharashtra, India Tel: Fax: alokind@axisbank.com Investor Grievance I.D.: axbmbd@axisbank.com Website: Contact Person: Mr. Dipen Kapadia/ Mr. Amit Shah. SEBI Registration No. INM Edelweiss Capital Limited 14th Floor, Express Towers Nariman Point, Mumbai Maharashtra, India Tel: Fax: alokind.rights@edelcap.com Investor Grievance I.D.: customerservice.mb@edelcap.com Website: Contact Person: Mr. Sachin Kapoor SEBI Registration No. INM Fortune Financial Services (India) Limited K.K. Chambers, 2nd Floor, Sir. P. T. Marg, Fort, Mumbai Maharashtra, India Tel: Fax: alok.rights@ffsil.com Investor Grievance I.D.: invrelation@ffsil.com Website: Contact Person: Mr. Vinay Rane SEBI Registration No. INM Link Intime India Private Limited C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup West, Mumbai , Maharashtra, India Tel: Fax: alok.rights@linkintime.co.in Website: Contact Person : Mr. Nilesh Chalke SEBI Registration No. INR IDBI Capital Market Services Limited 5th floor, Mafatlal Centre, Nariman Point, Mumbai Maharashtra, India Tel: / 1256 Fax: alok.rights@idbicapital.com Investor Grievance I.D.: redressal@idbicapital.com Website: Contact Person: Mr. Neelabh Dubey/ Ms. Menka Jha SEBI Registration No. INM Punjab National Bank Capital Market Services Branch 2nd Floor, PNB House, Sir. P. M. Road, Fort, Mumbai Maharashtra, India Tel: / 1123 Fax: pnbcaps.alok@pnb.co.in Investor Grievance I.D.: pnbcaps.alok@pnb.co.in Website: Contact Person: Mr. S. K. Khanna SEBI Registration No. INBI SBI Capital Markets Limited 202, Maker Tower E, Cuffe Parade, Mumbai Maharashtra, India Tel: Fax: alokrights@sbicaps.com Investor Grievance I.D.: investor.relation@sbicaps.com Website: Contact Person: Mr. Gitesh Vargantwar SEBI Registration No. INM ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR REQUEST FOR ISSUE CLOSES ON SPLIT APPLICATION FORMS Tuesday, March 31, 2009 Monday, April 13, 2009 Wednesday, April 22, 2009

2 TABLE OF CONTENTS NO OFFER IN UNITED STATES II PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA III EXCHANGE RATES IV FORWARD LOOKING STATEMENTS VI ABBREVIATIONS AND TECHNICAL TERMS VII RISK FACTORS XIII SUMMARY 1 SELECTED FINANCIAL INFORMATION 5 THE ISSUE 21 GENERAL INFORMATION 23 CAPITAL STRUCTURE 34 OBJECTS OF THE ISSUE 60 BASIS FOR ISSUE PRICE 66 STATEMENT OF TAX BENEFITS 68 INDUSTRY OVERVIEW 75 OUR BUSINESS 97 REGULATIONS AND POLICIES 117 HISTORY OF THE COMPANY AND OTHER CORPORATE MATTERS 123 OUR SUBSIDIARIES 129 DIVIDENDS 144 MANAGEMENT 145 OUR PROMOTERS 166 PROMOTER GROUP 168 FINANCIAL STATEMENTS 194 STOCK MARKET DATA FOR EQUITY SHARES OF OUR COMPANY 195 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 197 FINANCIAL INDEBTEDNESS 211 OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS 215 GOVERNMENT APPROVALS 220 STATUTORY AND OTHER INFORMATION 245 TERMS AND PROCEDURE OF THE ISSUE 259 MAIN PROVISIONS OF THE ARTICLES OF ASSOCIATION OF THE COMPANY 282 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 297 DECLARATION 299

3 NO OFFER IN UNITED STATES The Rights Equity Shares and the Rights Entitlement of the Company have not been and will not be registered under the United States Securities Act of 1933, as amended ( Securities Act ) or any U.S. state securities laws and may not be offered, sold, resold or otherwise transferred within the United States of America or the territories or possessions thereof (the United States or U.S. ), except in a transaction exempt from the registration requirements of the Securities Act. The Rights Entitlement and Rights Equity Shares referred to in this Letter of Offer are being offered in India but not in the United States of America. The offering to which this Letter of Offer relates is not, and under no circumstances is to be construed as, an offering of any securities or rights for sale in the United States of America, or as a solicitation therein of an offer to buy any of the Rights Equity Shares and / or Rights Entitlement. Accordingly, this Letter of Offer should not be forwarded to or transmitted in or into the United States of America at any time. The Company, or any person acting on behalf of the Company, will not accept subscriptions from any person, or his agent, who appears to be, or who the Company, or any person acting on behalf of the Company, has reason to believe is, a resident of the United States of America and to whom an offer, if made, would result in requiring registration of this Letter of Offer with the United States Securities and Exchange Commission. The Company is making this Issue on a rights basis to its Eligible Equity Shareholders and the Letter of Offer / Abridged Letter of Offer will be dispatched to the Eligible Equity Shareholders who have an Indian address. Any person who acquires Rights Entitlements and Rights Equity Shares will be deemed to have declared, represented, warranted and agreed (i) that it is not and that at the time of subscribing for the Rights Equity Shares, it will not be, in the United States when the buy order is made, (ii) it is not a U.S. person (as defined in Regulation S), and does not have a registered address (and is not otherwise located) in the United States, and (iii) is authorized to acquire the Rights Entitlements and the Rights Equity Shares in compliance with all applicable laws and regulations. The Company is informed that there is no objection to a United States shareholder selling its Rights Entitlements in India. ii

4 PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA Unless stated otherwise, the financial information used in this Letter of Offer is derived from our Company s restated financial statements as of fiscal 2004, 2005, 2006, 2007, 2008 and the six month period ended on September 30, 2008 prepared in accordance with Indian GAAP and the Companies Act and restated in accordance with the SEBI DIP Guidelines, as stated in the report of our Statutory Auditors, M/s. Gandhi & Parekh, included in this Letter of Offer. Our fiscal year commences on April 1 and ends on March 31 of the next year. Unless stated otherwise, references herein to a fiscal year (eg. fiscal 2006), are to the fiscal year ended March 31 of a particular year. In this Letter of Offer, any discrepancies in any table between the total and the sum of the amounts listed may be due to rounding off. Unless otherwise stated, throughout this Letter of Offer all figures have been expressed in INR Unless otherwise stated, market and industry data used in this Letter of Offer, has been obtained from industry publications and governmental sources. Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable and that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe market data used in this Letter of Offer is reliable, it has not been independently verified. iii

5 EXCHANGE RATES The following table sets forth, for the periods indicated, information with respect to the exchange rate between the Indian Rupee and the American Dollar (in Rupees per American Dollar). The exchange rate as at March 31, 2008 was Rs = USD No representation is made that the Rupee amounts actually represent such American Dollar amounts or could have been or could be converted into American Dollars at the rates indicated, any other rate or at all. (in Rs.) Fiscal Year Period End Average High Low 2006 March 31, March 30, March 31, September 29, December 31, January 31, February 27, Source: Reuters The following table sets forth, for the periods indicated, information with respect to the exchange rate between the Indian Rupee and the British Pound Sterling (in Rupees per British Pound). The exchange rate as at March 31, 2008 was Rs = GBP No representation is made that the Rupee amounts actually represent such British Pound amounts or could have been or could be converted into British Pounds at the rates indicated, any other rate or at all. (in Rs.) Fiscal Year Period End Average High Low 2006 March 31, March 30, March 31, September 29, December 31, January 31, February 27, Source: Reuters The following table sets forth, for the periods indicated, information with respect to the exchange rate between the Indian Rupee and the Euro (in Rupees per Euro). The exchange rate as at March 31, 2008 was Rs = EUR No representation is made that the Rupee amounts actually represent such Euro amounts or could have been or could be converted into Euros at the rates indicated, any other rate or at all. (in Rs.) Fiscal Year Period End Average High Low 2006 March 31, March 31, March 31, September 29, iv

6 Fiscal Year Period End Average High Low 2008 December 31, January 31, February 27, Source: Reuters The following table sets forth, for the periods indicated, information with respect to the exchange rate between the Indian Rupee and the Czech Koruna (in Rupees per Czech Koruna). The exchange rate as at March 31, 2008 was Rs = CZK No representation is made that the Rupee amounts actually represent such Czech Koruna amounts or could have been or could be converted into Czech Koruna at the rates indicated, any other rate or at all. (in Rs.) Fiscal Year Period End Average High Low 2006 March 31, March 31, March 31, September 29, December 31, January 31, February 27, Source: Reuters v

7 FORWARD LOOKING STATEMENTS We have included statements in this Letter of Offer which contain words or phrases such as will, aim, is likely to result, believe, expect, will continue, anticipate, estimate, intend, plan, seek to, future, objective, goal, project, should and similar expressions or variations of such expressions, that are forward looking statements. All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our expectations include but are not limited to: General economic and business conditions in the markets in which we operate and in the local, regional and national economies; Increasing competition in or other factors affecting the industry segments in which our Company operates; Changes in laws and regulations relating to the industries in which we operate; Our ability to successfully implement our growth strategy and expansion plans, and to successfully launch and implement various projects and business plans; Our ability to meet our capital expenditure requirements and/or increase in capital expenditure; Fluctuations in operating costs and impact on the financial results; Our ability to attract and retain qualified personnel; Changes in technology in future; Changes in political and social conditions in India or in countries that we may enter, the monetary policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices; Variations in exchange rates; The performance of the financial markets in India and globally; and Any adverse outcome in the legal proceedings in which we are involved. For a further discussion of factors that could cause our actual results to differ, please refer to the sections titled Risk Factors, Our Business and Management s Discussion and Analysis of Financial Condition and Results of Operations on page nos. xiii, 97 and 197, respectively, of this Letter of Offer. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither the Company nor the Lead Managers nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI / Stock Exchange requirements, the Company and Lead Managers will ensure that investors in India are informed of material developments until the time of the grant of listing and trading permission by the Stock Exchanges. vi

8 ABBREVIATIONS AND TECHNICAL TERMS In this Letter of Offer, all references to Rupees, Rs. or INR refer to Indian Rupees, the official currency of India; references to the singular also refer to the plural and reference to a gender also refers to any other gender, wherever applicable, and the words Lakh or Lac mean 100 thousand and the word million means 10 lakh and the word crores means 10 million or 100 lakhs and the word billion means 1,000 million or 100 crores. Company related terms A Bonds Term AOA/ Articles / Articles of Association Auditors B Bonds Balitha Unit Processing I Balitha Unit Processing II Bhiwandi Factory Board / Board of Directors Compliance Officer Description US$ 15 million 1% A convertible bonds due 2010 convertible into Equity Shares of our Company. Articles of Association of our Company. M/s. Gandhi & Parekh, the statutory auditors of our Company. US$ 55 million 1% B convertible bonds due 2010 convertible into Equity Shares of our Company. Survey No.268, 261/P (A, B and C), 114/1 situated within the village limits of Balitha, Taluka Pardi, District, Valsad in the State of Gujarat. Survey No.254, 251/1/A, 263/P.1, 251/2/p, 263/p1/p1, 278/p2, 278/p4, 278/p5, 278/p2, 280/p, 251/3, 222/1, 113, 259, 139/2/1, 143/1, 146/1, 146/2, 149/1, 144/1, 144/4, 145/02, 147/1, 148/1, 149/3, 148/2, 149/2, 139/1, 130/2/2, 149/4, 150/3, 257/1/1, 258, 260, 253/2/2, 353/2/2, 144/3, 145/2, 139/2/2 situated at Village Balitha, Registration and Sub-Registration District Pardi of Valsad. Survey No.37, Hissa No.1 (part), Plot No.11 (part) within the village limits of Bhiwandi Nizampur Municipal Council, Taluka Bhiwandi, Registration Sub-District Bhiwandi, Registration and District Thane, in the State of Maharashtra. The Board of Directors of our Company or a Committee authorized to act on their behalf. Mr. K. H. Gopal, President (Corporate Affairs) & Company Secretary Corporate Office Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai , Maharashtra, India. Director(s) Garment Unit at Village Saily, Silvassa, Hemming Unit at Village Rakholi, Silvassa A director on the Board of our Company a. Survey No.374/2/2, 374/4 Sayli Village, Silvassa, in the Union Territory of Dadra & Nagar Haveli; b. Survey No.377/2 Sayli Village, Silvassa, in the Union Territory of Dadra & Nagar Haveli; c. Survey No.384/1, 377/7, 377/1P, 377/5, 379/1, 377/9, 377/3, 380, 378/P, 529, 531, Sayli Village, Silvassa, in the Union Territory of Dadra & Nagar Haveli; and d. The same gets covered in Weaving, Knitting and Texturising Unit. Survey No.103/2 (Survey No.103, Hissa-2) within the village limits of Rakholi in the Union Territory of Dadra & Nagar vii

9 Term Haveli. Description MOA / Memorandum / Memorandum of Association our Company / the Company / Issuer / Alok / We / Us / Our Process House at Navi Mumbai Promoters Promoter Group Registered Office ROC / RoC Spinning Unit at Village Silvassa Subsidiaries Weaving, Knitting and Texturising Unit at Village Rakholi and Saily, Silvassa: Weaving Unit at Village Dadra, Silvassa Memorandum of Association of our Company. Except as stated otherwise, refers to Alok Industries Limited, a company incorporated under the Act having its Registered Office at B-43 Mittal Tower, Nariman Point, Mumbai , India. Plot No.C-16/2, Village Pawane, TTC Industrial Area, MIDC, Navi Mumbai. Promoters of our Company i.e. Mr. Ashok B. Jiwrajka; Mr. Dilip B. Jiwrajka; and Mr. Surendra B. Jiwrajka. Individuals, companies and entities enumerated in the section titled Promoter Group beginning on page 168 of this Letter of Offer. B-43 Mittal Tower, Nariman Point, Mumbai , India. Registrar of Companies. Survey No.412/1, 412/2, 412/3, 412/4, 412/5, 412/6, 412/7, 415/1, 415/2, 415/3, 415/4, 415/5, 415/6, 415/7, 410/4, 417/1, 417/2, 411/2/3, 419, 420/19, 420/20 situated within the village limits of Sayli, Silvassa in the Union Territory of Dadra and Nagar Haveli (Freehold Property). Companies enumerated in the section titled Our Subsidiaries beginning on page 129 of this Letter of Offer. a. Survey No. 18/1, 18/2, 18/3, 34/2/1, 22/1(P), 527/P, 19/3, 22/2, 143/10, 143/11, 23/1, 20/2, 34/1, 23/2, 31/1, 31/2, 32/P, 33, 30, 19/1, 19/2, 20/1, 22/1P/2, 17/5/1, 17/2/3, 17/4, 17/2/2, 17/3, 17/2/4, Rakholi Village in the Union Territory of Dadra & Nagar Haveli; b. Survey No. 529, 531, 516/2/2, 516/2/3, 520/1, 520/2, 520/3, 530/1, 526, 519/P, 527/P, 525/P, 516/P, 520/4, 391/1, 390, 143/7, 527/P, 516/2/4/2, 143/3, 143/4, 143/5, 143/6, 392/2, 143/9, 514, 515, 516/4 (P), 512, 513/1, 148/2, 150/3, 521/1, 521/2/1, 521/2/2, 521/4, 521/3, 523, 524, 516/2/1, 522/3/2, Sayli Village in the Union Territory of Dadra & Nagar Haveli; and c. Survey No. 516/2, 518, 143/13, 143/1, 148/1 and 143/8, Paiki, Sayli Village in the Union Territory of Dadra & Nagar Haveli. Survey No.209/1 situated within the village limits of Dadra, Silvassa in the Union Territory of Dadra and Nagar Haveli. Issue related terms Term Abridged Letter of Offer Allotment Description The abridged letter of offer to be sent to Eligible Equity Shareholders of our Company with respect to this Issue in accordance with SEBI DIP Guidelines Unless the context otherwise requires, the allotment of Rights Equity Shares pursuant to the Issue. viii

10 Term Description Allottee Application Axis Bankers to the Issue Business Day Composite Application Form / CAF Designated Stock Exchange Draft Letter of Offer Edelweiss Eligible Equity Shareholders An Investor to whom Rights Equity Shares are allotted. Unless the context otherwise requires, refers to an application for allotment of the Rights Equity Shares in the Issue. Axis Bank Limited Axis Bank Limited Canara Bank The Hongkong And Shanghai Banking Corporation Limited IDBI Bank Limited The Karur Vysya Bank Limited Punjab National Bank Standard Chartered Bank State Bank of India Yes Bank Limited Any day, other than a Saturday or a Sunday, on which commercial banks in Mumbai are open for business. The form used by an Investor to make an application for allotment of the Rights Equity Shares in the Issue. BSE The draft letter of offer dated February 10, 2009 filed with the SEBI on February 11, Edelweiss Capital Limited The Equity Shareholders of our Company as on the Record Date. Equity Shares Equity Shares of our Company having a face value of Rs. 10 each. Equity Shareholders First and Final Call Fortune Financial IDBICAPS Investors The Equity Shareholders of our Company. Call notice as shall be sent by our Company to each of the Investors for making the payment towards the balance amount payable under Payment Method 1. Fortune Financial Services (India) Limited IDBI Capital Market Services Limited The Eligible Equity Shareholders of our Company as on the Record Date and the Renouncees. Issue Issue of 40,87,23,061 Rights Equity Shares of face value Rs. 10/- each at a premium of Re. 1/- aggregating to Rs crores to the Eligible Equity Shareholders of our Company on rights basis in the ratio of 83 Rights Equity Shares for every 40 Equity Shares held on the Record Date March 25, Issue Closing Date April 22, 2009 Issue Opening Date March 31, 2009 Issue Price Issue Proceeds Lead Managers Rs. 11/- per Rights Equity Share. The proceeds of this Issue that is available to our Company. Axis, Edelweiss, Fortune Financial, IDBICAPS, PNB, and SBICAPS. ix

11 Term Letter of Offer Payment Method 1 Payment Method 2 PNB Description The letter of offer filed with the Stock Exchanges after incorporating SEBI comments on the Draft Letter of Offer dated February 10, Amount payable on application is Rs. 6/- per Rights Equity Share and the balance amount payable on First and Final Call. Payment Method 1 is not available to NRIs, FIIs and Non- Residents. The entire Issue Price of Rs. 11/- per Rights Equity Share is payable on application. Payment Method 2 is available to all the Investors including NRIs, FIIs and Non-Residents Punjab National Bank Record Date March 25, 2009 Renouncee(s) Rights Entitlement Rights Equity Shares Registrar to the Issue SBICAPS Stock Exchange(s) Underwriters Underwriting Agreement Any person(s) who has / have acquired Rights Entitlements from the Eligible Equity Shareholders. The number of Equity Shares that an Eligible Equity Shareholder is entitled to in proportion to his / her shareholding in the Company as on the Record Date. The Equity Shares being offered to the Eligible Equity Shareholders of our Company in this Issue. Link Intime India Private Limited SBI Capital Markets Limited The BSE and the NSE where the Equity Shares of our Company are listed and where the Rights Equity Shares are proposed to be listed. Axis Bank Limited IDBI Capital Markets Services Limited Marwadi Shares and Finance Limited Punjab National Bank State Bank of India The agreement amongst the Underwriters and our Company dated March 19, Business and industry related terms Term Description POY PTA MEG FDY TiO2 DEG HTM TPA Partially Oriented Yarn Purified Terephthalic Acid Mono Ethylene Glycol Fully Drawn Yarn Titanium DiOxide Di-Ethylene Glycol Heat Transfer Medium Tons Per Annum x

12 MW KL CFM TR Term Mega Watt Kilo Liters Cubic Feet Per Minute Tonnage of Refrigeration Description General and conventional terms Term Description Air Act Air (Prevention and Control of Pollution) Act, AGM AS Asst. Act BSE BIFR CAGR CAIIB CARE CDSL Annual General Meeting. Accounting Standard as issued by The Institute of Chartered Accountants of India. Assessment. The Companies Act, 1956 as amended from time to time. The Bombay Stock Exchange Limited. Board for Industrial and Financial Reconstruction. Compounded Annual Growth Rate. Certified Associate of the Indian Institute of Bankers. Credit Analysis & Research Limited. Central Depository Services (India) Limited. Contract Labour Act Contract Labour (Regulation & Abolition Act), CRISIL DP Depository Depositories Act Depositories Regulations EBIDTA EGM EPCG Scheme EPF Act EPS FCCBs FCNR FEMA FICCI CRISIL Limited. Depository Participant. A depository registered with SEBI under the SEBI (Depository and Participant) Regulations, 1996, as amended from time to time. The Depositories Act, 1996, as amended from time to time. The SEBI (Depository and Participant) Regulations, 1996, as amended from time to time. Earnings before Interest Depreciation, Tax and Amortization. Extra-Ordinary General Meeting. Export Promotion Capital Goods Scheme. Employees Provident Funds and Miscellaneous Provisions Act, Earnings Per Share. Foreign Currency Convertible Bonds. Foreign Currency (Non-Resident) Account Scheme. Foreign Exchange Management Act, 1999, and the subsequent amendments thereto. Federation of Indian Chambers of Commerce and Industry. xi

13 FII FIPB Term Description Foreign Institutional Investor as defined Under SEBI (Foreign Institutional Investors) Regulations, 1995 registered with SEBI and as defined under FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 and under other applicable laws in India. Foreign Investment Promotion Board. FY/ Fiscal Year ended March 31. GDP GIR No. Gross Domestic Product. General Index Reference Number. Indian Boiler Act Indian Boiler Act No. V, ISIN IT Act N. A. Not applicable. International Securities Identification Number allotted by the Depository. Income Tax Act, 1961, as amended from time to time. NBFC Non-Banking Financial Company as defined under Section 45- IA of the RBI Act. NI Act NRE NRO NSE NSDL OCB(s) PAN PAT PLR RBI Negotiable Instrument Act, 1881 as amended from time to time. Non- Resident (External) Rupee Account Scheme. Non-Resident Ordinary Rupee Account Scheme. National Stock Exchange of India Limited. National Securities Depository Limited. Overseas Corporate Body(ies). Permanent Account Number. Profit after Tax. Prime Lending Rate. Reserve Bank of India. RBI Act Reserve Bank of India Act, SEBI Securities and Exchange Board of India. SEBI DIP Guidelines SEBI (Disclosure and Investor Protection) Guidelines, 2000 issued by SEBI on January 19, 2000 read with amendments issued subsequent to that date. Takeover Code UIN Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 read with amendments issued subsequent to that date. Unique Identification Number. Water Act Water (Prevention and Control of Pollution) Act, xii

14 RISK FACTORS An investment in our Company s Rights Equity Shares involves a high degree of risk and you should not invest any funds in this Issue unless you can afford to take the risk of losing your investment. You should carefully consider all the information in this Letter of Offer, including but not limited to the risks and uncertainties described below, before making an investment in our Company s Rights Equity Shares. Unless specified or quantified in the relevant risk factors below, our Company is not in a position to quantify the financial or other implications of any of the risks described in this section. Prior to making an investment decision, prospective Investors should carefully consider all the information contained in this Letter of Offer, including the sections entitled Our Business, and Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on pages 97 and 197 respectively, of this Letter of Offer as well as other financial information contained in this Letter of Offer. The occurrence of any of the following events could have a material adverse effect on our business, results of operations, financial condition and prospects and cause the market price of our Company s Equity Shares to fall significantly, and you may lose all or part of your investment. Additionally, our business operations could also be affected by additional factors that are not presently known to us or that we currently consider as immaterial to our operations. The following factors have been considered for determining the materiality: 1. Some events may not be material individually but may be found material collectively; 2. Some events may have material impact qualitatively instead of quantitatively; 3. Some events may not be material at present but may have material impact in future. The numbering of the risk factors has been done to facilitate ease of reading and reference and does not in any manner indicate the importance of one risk factor over another. Risks Related to our Company and business 1. We and our Promoter Group companies are party to certain legal proceedings that, if decided against us / them, could have an adverse effect on our reputation, business prospects and results of operations. The total amount involved in the legal proceedings, to the extent quantifiable, can be quantified at approximately Rs crores and the impact thereon on our profitability, to the extent quantifiable, would be approximately Rs crores The following table sets out the summary details of pending litigation against our Company and our Promoter Group Companies: Our Company Category No. of cases Aggregate Amount involved Civil 3 The total amount claimed with regard to civil cases filed against our Company is not quantifiable. However, with regard to Summary Suit No of 1994, the amount in dispute is Rs. 1,16,186/- plus 18% p.a. Labour 3 The total amount claimed with regard to labour cases filed against our Company is not quantifiable. However, with regard to IDA 11 of 2007, the amount claimed is Rs. 4,42,224/-. Promoter Group Companies Category No. of cases Aggregate Amount involved xiii

15 Civil 1 Rs. 64,639/- plus 18% p.a. For further details of outstanding litigation pending against our Company and our Promoter Group Companies, please refer to the section titled Outstanding Litigation and Material Developments on page 215 of this Letter of Offer. In the event of any legal proceedings being decided against our Company, our business, reputation and results of operations could be adversely affected. 2. We have a substantial amount of indebtedness, which, in the event of inadequate accruals may pose constraints in servicing our debt As of September 30, 2008, we had Rs. 5, crores of outstanding debt. Our ratio of total debt (net of cash and bank balances) to equity as on that day stood at 2.90 (as on March 31, 2008 it was at 2.86). For further details on our indebtedness, please refer to the chapter titled Financial Indebtedness beginning on page 211 of this Letter of Offer. Our ability to meet our debt service obligations and to repay our outstanding borrowings will depend primarily upon the cash flow generated by our business. There can be no assurance that we will generate sufficient cash to enable us to service our existing or proposed borrowings, comply with covenants or fund other liquidity needs. Adverse developments or a reduced perception of our creditworthiness in credit markets could increase our debt service costs and the overall cost of our funds. If we fail to meet our debt service obligations or financial covenants required under the financing documents, our lenders could, if so stated in the financial documents, declare us in default under the terms of our borrowings, accelerate the maturity of our obligations, enforce the security interest, take possession of our Company s assets. There can be no assurance that, in the event of any such acceleration, we will have sufficient resources to repay these borrowings. 3. Some of our Subsidiaries and Promoter Group entities have incurred losses during the last three financial years Some of our Subsidiaries and Promoter Group entities have incurred losses in the recent past. The details of losses incurred by our Subsidiaries and Promoter Group entities are set out below: (Rs. in crores) Subsidiaries For the half year ended September 30, 2008 March 31, 2008 For the year ended March 31, 2007 March 31, 2006 Alok Apparels Private Limited (2.66) (0.50) - - Amigo Sports Private Limited* (0.00) (0.01) - - Alok Land Holdings Private Limited (0.28) (0.19) - - Alok Realtors Private Limited (0.05) (0.04) - - Alok Auranagabad Infratex Private Limited (0.04) (0.01) - - Mileta a. s. (15.75) (6.37) - - Alok Industries International Limited - (0.50) (0.04) - Alok Retail (India) (0.01) (0.01) - - xiv

16 Subsidiaries Limited For the half year ended September 30, 2008 March 31, 2008 For the year ended March 31, 2007 March 31, 2006 Alok European retail s.r.o (0.48) Alok HB Properties Private Limited (0.01) Alok HB Hotels Private Limited (0.01) Alok New City Infratex Private Limited (0.01) (0.01) - - * With effect from December 23, 2008, our Promoters and our Company have disassociated from Amigo Sports Private Limited by sale of its stake therein to persons having no connection with our Company, its Directors, Promoter/ Promoter Group and / or their relatives. (Rs. in crores) Promoter Group entities For the year ended March 31, 2008 March 31, 2007 March 31, 2006 Grabal Alok International Limited - (0.23) (0.02) Grabal Alok (UK) Limited (196.59) - - Jiwrajka Associates Private Limited (1.21) - - Niraj Realtors and Shares Private Limited - (2.12) (1.84) Alok Denim (India) Private Limited (0.64) - - M/s. Green Park Enterprises (0.01) (0.01) - Alspun Infrastructure Ltd (0.00) - - In the event that our Subsidiaries and Promoter Group entities (whose accounts are consolidated with our Company) incur losses or continue to incur losses, our Company s consolidated results of operations and financial condition will continue to be adversely affected. For further details, please refer to the sections titled Our Subsidiaries and Promoter Group beginning on pages 129 and 168 respectively, of this Letter of Offer. 4. Our contingent liabilities, amounting to Rs crores, could adversely affect our financial condition As of September 30, 2008, our Company has contingent liabilities amounting to Rs crores as disclosed in our restated standalone financial statements. In the event that our Company is unable to meet these contingent liabilities, as and when they become due, our Company s business and financial condition may be adversely affected. (Rs in Crores) Period Ended Particulars September 30, 2008 xv

17 Customs duty on shortfall in export obligation in accordance with EXIM Policy. (The Company is hopeful of meeting the export obligation within the stipulated period) Amount Unascertained Guarantees given by banks on behalf of our Company Guarantees given to financial institutions for third parties - Corporate Guarantees given to bank for loans taken by subsidiary company Bills discounted Total For further details of our contingent liabilities, please refer to the section titled Financial Statements beginning on page 194 of this Letter of Offer. 5. Currency rate fluctuations could have an adverse effect on our financial results As at September 30, 2008, our Company had borrowings in currencies other than INR in an amount equal to approximately Rs. 1, crores, representing 16.95% of our borrowings. We also import various equipment for our facilities for which we make payment in foreign currency. Accordingly, depreciation of the INR against the U.S. dollar and other currencies may adversely affect our financial position and results of operations by increasing the Rupee cost of servicing and repaying our foreign borrowings and spending. Our Company is exposed to foreign exchange risks by virtue of being an exporter of products whereby an appreciation of the INR against the U.S. Dollar could adversely impact receivables. While our Company may enter into forward contracts or other derivative instruments in order to appropriately mitigate risks on account of currency fluctuation, there can be no assurance that the risks arising out of fluctuations by the INR against the US dollar can be fully mitigated. 6. We may be adversely affected by a slowdown in the global economy especially the USA As of September 30, 2008, exports form 39.05% of our total sales of which the United States accounts for approximately 27%. Hence any slowdown in the global economy would adversely affect our performance. The United States continues to be an important market for our Company. As at September 30, 2008 we derived 27% of our exports from the United States, compared with 11% as at March 31, However, a slowdown in the United States economy may translate into lower exports for our Company. 7. Certain Equity Shares of our Company held by our Promoters and Promoter Group are pledged As on March 16, 2009, 61.83% of our Promoters and Promoter Group holding in our Company i.e % of the total paid-up equity share capital of our Company, held by our Promoters and Promoter Group, have been pledged in favour of various banks, NBFCs and institutions. Further, as per the documentation executed between our Promoters and Promoter Group with such banks, NBFCs and institutions, these entities have the right to obtain a pledge on further Equity Shares in the case of certain events, including inter alia if the value of the pledged Equity Shares is insufficient. In the event of non-compliance with certain terms of the pledge agreements entered into by our Promoters and Promoter Group with such banks, NBFCs and institutions, these banks and financial institutions may invoke their respective pledges on these Equity Shares, which may result in dilution of our Promoters stake in our Company. For further details please refer to Notes to Capital Structure on page 34 of this Letter of Offer. 8. A failure / inability to manage our growth could disrupt our business and reduce profitability xvi

18 Over the past few years, we have expanded our capacities and have grown in terms of our sales and profitability. For further details on such expansions and growth, please refer to the chapters titled Our Business and Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on pages 97 and 197 of this Letter of Offer respectively. Such continued growth will place significant demands on us and will require us to continuously evolve and improve our operational, financial and internal controls across the organisation. An inability to keep up with the demands of such growth could disrupt our business thereby reducing profitability. 9. Our core business being textiles, any slowdown in this industry and consequent reduction in demand for our products could have a negative effect on our business Our future success depends on continued demand for our products in the market. The textile industry may be sensitive to changes in economic conditions, cyclicality and unforeseen events, including recession, inflation or other adverse occurrences. Any event that results in decreased demand in the market could have an adverse effect on our business and financial condition and results of operations. 10. There were shortfalls in the performance of our Company when compared to the promises made in our Company s last three issues Our Company undertook its initial public offering of Equity Shares in 1993, a rights offering of Equity Shares in 1997 and a rights offering of secured fully convertible debentures in There were shortfalls in the performance of the initial public offering and the rights issue undertaken in 1997 when compared with the projections made in the offer documents on the following parameters: Initial Public Offering 1993 Sales of Rs crores against a projection of Rs crores in FY 1994; PBDIT of Rs crores against a projection of Rs crores in FY 1994;and Time overrun of five months for the weaving project. Rights Issue PBDIT of Rs crores against a projection of Rs crores in FY 1997; Cost overrun of Rs crores over an estimated project cost of Rs. 48 crores; and Time overrun of six months in processing project and eight months in knitting project. For further details, please refer to the section titled Statutory and Other Information beginning on page 245 of this Letter of Offer. 11. We have limited experience in non-textile sectors which may affect our ability to operate these businesses or implement our strategies in these sectors successfully Given our limited experience in non-textile sectors, it is possible that we may not be able to anticipate or evaluate business risks, especially in a volatile economic scenario. Our strategy of penetrating these sectors involves understanding different market dynamics and building-up in-house expertise and resources for the same. Failure to implement these strategies successfully could affect our consolidated performance. For further details on our foray into non-textile sectors please refer to the section titled Our Business beginning on page 97 of this Letter of Offer. 12. Inability to identify, understand or cater to evolving industry trends, changing customer tastes and preferences may adversely affect our business To remain competitive and to meet our customers needs in our businesses, we continuously innovate and invest in new technologies or processes. Our inability to identify and understand contemporary and evolving trends could adversely affect our business. In the export market, the demand is based on the prevailing trends in European countries and the USA, the major export regions for our Company. Our xvii

19 Company s manufacturing facilities need to be flexible to deliver quick changeovers and handle a variety of fabrics to meet with such trends. 13. Our failure to compete effectively in the highly competitive global textile market could result in the loss of customers, which could have an adverse impact on our operations We need to compete on a global scale to gain and retain market share. Our customers have global standards for product quality and delivery schedules. In meeting such standards, our Company faces competition in the domestic market from both the organised and unorganised sectors. Failure to continuously adhere to these global standards in quality, cost and delivery parameters could result in adverse customer perception thereby resulting in a reduction, or cancellation of orders. These competitive pressures may increase as more companies come up with similar strategies to enter and capture market share. 14. Shortages of raw materials or volatility of raw material prices may adversely affect the operations and businesses of our Company Net material consumption cost, which consists of cotton, cotton yarn, polyester chips and partially oriented yarn (POY), has constituted 49.38% of our total sales for the half year ended September 30, 2008 and 51.68%, 57.21% and 59.70% of our total sales for FY 2008, 2007 and 2006 respectively. Failure to procure appropriate quantities of these raw materials in a timely manner and at reasonable prices may adversely impact the cost and quality of our products with a consequent negative impact on our Company s business and financial results. 15. Our operations are subject to varied business risks and there may be inadequate insurance coverage to cover our economic losses as well as certain other risks including those pertaining to claims by third parties and litigation Our operations are subject to various risks and hazards which may adversely affect our profitability, including natural calamities, breakdown of operations, failure or substandard performance of network equipment, third party liability claims, labour disturbances, employee frauds, infrastructure failure and terrorist activities. Though we have, in our opinion, taken adequate safeguards to protect our assets from various perceived risks, it is possible that our insurance may not provide adequate coverage in certain circumstances. These may include claims by third parties and litigation. Also, insurance policies are usually subject to certain deductibles, exclusions and limits on coverage. For further details, please refer to the section titled Our Business Insurance on page 116 of this Letter of Offer. We cannot assure that the operation of our business will not be affected by any of the incidents and hazards listed above. If our arrangements for insurance or indemnification are not adequate to cover claims, including those exceeding policy aggregate limitations or exceeding the resources of the indemnifying party, we may be required to make payments that may adversely affect our financial condition and results of operations. 16. Our Company has an insurance claim of Rs. 82 crores. Any short recovery of this claim may adversely impact our financial results On August 16, 2007, a fire broke out at our Texturising Unit at Saily, Silvassa. Our Company filed a claim of Rs. 217 crores (Rs. 190 crores for building, machinery, inventory and Rs. 27 crores for loss of profit) with our consortium of insurers, the lead insurer being United India Insurance Company Limited. Our Company has received interim relief amounting to Rs. 135 crores. The claim is currently under final assessment. In the event that we are unable to recover the balance amount in full we may be required to provide for the short payment that may adversely impact our financial results. 17. Our Company s aggregate export obligations under the EPCG scheme as at December 31, 2008, amounting to Rs crores, may not be fulfilled, which could result in a retrospective levy of import duty with penalty which may adversely affect our Company s financial results xviii

20 Our Company has assumed export obligations against licenses issued under the EPCG scheme. As at December 31, 2008, the aggregate amount of our Company s outstanding export obligations was Rs crores to be achieved by FY For further details of the total outstanding export obligations of our Company under these EPCG licenses, please refer to the chapter titled Our Business, beginning on page 97 of this Letter of Offer. The consequence of not meeting the above commitment would be a retrospective levy of import duty with penalty on items previously imported at concessional duty which may adversely affect our Company s financial results. 18. We are dependent on our management team and key personnel and loss of any key team member may adversely affect our business performance Our business is managed by a core management team that supervises the day-to-day operations, strategy and growth of our business. If one or more members of our key management team are unable or unwilling to continue in their present positions, such persons may be difficult to replace and our business, prospects, financial condition and results of operations could be adversely affected. 19. Our business and results of operations could be adversely affected if we are unable to meet our employee needs Our success in expanding our business will also depend, in part, on our ability to attract, retain and motivate appropriately qualified people at various levels. If we fail to successfully manage our employee needs, it could adversely affect our business prospects, financial condition and results of operations. 20. If our Company is not able to obtain, renew or maintain the permits and approvals required to operate our business, this may have a material adverse effect on our business Our Company requires certain permits and approvals to operate its businesses and / or facilities, including such permits required by the environmental regulatory authorities. Some of the licenses of environmental consents, petroleum storage licenses and factory licenses have expired. Although our Company has made renewal applications in respect of these expired licenses, there can be no assurance that the relevant authorities will issue any such permits or approvals in the time-frame anticipated by us or at all. In addition, our business operations require us to obtain certain approvals, licenses, registrations and permits, for which our Company has not yet made an application. We cannot assure you that we will be able to obtain approvals in respect of such applications or any application/ renewals made by us in the future. Failure by our Company to renew, maintain or obtain the required permits and approvals, and technology licenses in a timely manner or at all may interrupt our Company s operations or delay or prevent the implementation of our capacity expansion programme and may have a material adverse effect on our Company s results of operations, financial condition and prospects. For further details on the licenses obtained by our Company and the applications for the same, please refer to the section titled Government Approvals beginning on page 220 of this Letter of Offer. 21. If our Company fails to comply with environmental laws and regulations, or faces environmental litigation, its costs may increase or revenues may decrease Our Company may incur substantial costs to comply with requirements of environmental laws and regulations. In addition, currently unknown environmental problems or conditions may be discovered. Environmental laws and regulations are gradually becoming more stringent and are being brought in line with international standards. It is possible that some of our current plants and operations may not be compliant with such future regulations and standards. In such a case, our Company would need to incur costs in order to make such facilities regulation compliant, which would then adversely impact our Company s profitability. The scope and extent of new environmental regulations, including their effect on our operations, cannot be predicted. xix

21 Some of our operations are subject to risks generally associated with manufacture and equipment, which can cause personal injury, loss of life, environmental damage and damage to property. The measures we implement in order to comply with these new laws and regulations may not be deemed sufficient by governmental authorities and our compliance costs may significantly exceed our estimates. If we fail to meet environmental requirements, we may also be subject to administrative, civil and criminal proceedings by governmental authorities, as well as civil proceedings by environmental groups and other individuals, which could result in substantial fines and penalties against us as well as orders that could limit or halt our operations and could include us being required to incur substantial clean up costs. There can be no assurance that we will not become involved in future litigation or other proceedings or be held responsible in any such future litigation or proceedings relating to safety, health and environmental matters in the future, the costs of which could be material. Clean-up and remediation costs, as well as damages, other liabilities and related litigation, may adversely affect our business, prospects, financial condition and results of operations. Also, there is a risk that such changes may necessitate a temporary cessation of operations in some of our plants while they are brought up to the desirable standards. If such an occasion does arise, our Company may be adversely impacted both in terms of topline and bottomline. 22. We may be unable to adequately protect our intellectual property since certain of our trade marks, logos and other intellectual property are currently not registered and therefore do not enjoy any statutory protection. Furthermore, we may be subject to claims alleging breach of third party intellectual property rights We currently have 49 trade mark applications pending under the provisions of the Trade Marks Act. For further details of our pending approvals, please refer to the section titled Government Approvals beginning on page 220 of this Letter of Offer. We cannot assure that we will be able to register these trade marks or that third parties will not infringe our intellectual property, causing damage to our business prospects, reputation and goodwill. Our efforts to protect our intellectual property may not be adequate and any third party claim on any of our unprotected brands may lead to erosion of our business value and our operations could be adversely affected. We may need to litigate in order to determine the validity of such claims and the scope of the proprietary rights of others. Any such litigation could be time consuming and costly and a favourable outcome cannot be guaranteed. We may not be able to detect any unauthorised use or take appropriate and timely steps to enforce or protect our intellectual property. We also can provide no assurance that the unauthorised use by any third parties of these trade marks will not damage our business prospects, reputation and goodwill. 23. Our Company may engage in future acquisitions, investments, strategic partnerships or other ventures that may harm its performance or change its business strategy Our Company s growth strategy may involve acquiring or making investments in similar or related businesses, subsidiaries, technologies, or products, or entering into strategic partnerships with parties who can provide access to new markets and new products. In the past, our Company has relied on expanding some of its service offerings and gaining new clients through strategic acquisitions. For further details on the acquisitions and joint ventures by our Company, please refer to the chapter titled History of the Company and Other Corporate Matters beginning on page 123 of this Letter of Offer. It is possible that in the future our Company may not succeed in acquiring suitable entities on reasonable terms or have difficulty in accessing the capital required to finance potential acquisitions or be able to consummate any acquisition. In such a case, our Company s future growth prospects, especially through the inorganic route, may be adversely impacted. 24. Our Company s business is capital intensive and our inability to meet our financing requirements for our future expansion projects may adversely affect our Company s growth and operations xx

22 Our business is capital-intensive and investments in capacities, new technologies and processes are among the key factors that would contribute to our future growth and profitability. Our inability to raise funds to meet the future capital requirements may adversely affect our growth and operations. 25. Our Company is subject to high working capital requirements and our inability to fund these requirements in a timely manner may adversely impact our financial performance Our Company s working capital requirement is high due to higher holding level of inventory and debtors. Inability of our Company to raise corresponding working capital in line with the growth of the Company s operations may result in adversely affecting our operations and financial performance. 26. Under-utilisation of expanded capacities may adversely impact our financial performance Our Company has undertaken expansion of its production capacities based on its estimates of market demand and profitability. In the event of non-materialisation of our estimates and expected orders due to factors including adverse economic scenario, change in demand, change in fashion, etc., our capacities may not be fully utilised thereby adversely impacting our financial performance. 27. Possibility of funds lying idle due to failure in increase in capacity utilisation due to the economic slowdown Our working capital requirements are based on the assumption of requirement of expansion of capacities to cater to increasing demand. A slowdown in the Indian and/ or global economy may affect the demand for our products. In the event that increased demand for our product does not meet our expectations, we may not be able to increase our capacities and the funds being raised for the long-term working capital requirements will remain idle without any returns. 28. We have entered into loan agreements which impose restrictive covenants on us and enable third parties to exercise control over our business The agreements and instruments governing our existing indebtedness contain several restrictions and limitations, including but not limited to restrictions on issuance of shares or other securities, incurring further indebtedness, creating further encumbrances on assets, disposing of assets, undertaking new projects, effecting any scheme of amalgamation or restructuring, undertaking guarantee obligations, declaring dividends or incurring capital expenditures beyond certain limits, incorporating subsidiary companies, amending our Memorandum and / or Articles of Association, affecting a change in control. In addition, some of these financing agreements contain financial covenants, which may require us or the specific borrower entity to maintain, amongst other things, a specified debt to equity ratio, debt service coverage ratio, other leverage ratios and maintenance of collateral. Further, in the event of default in repayment, certain agreements provide for conversion of the outstanding amount of the loan or part thereof into fully paid-up Equity Shares of our Company, at the option of the lenders. Most of our financing arrangements are secured by specific immovable and movable assets. Many of our financing agreements also include various conditions and covenants that require us to obtain lender consents prior to carrying out certain activities and entering into certain transactions. Failure to meet these conditions or obtain these consents could lead to defaults or cross defaults and as such, repayments of outstanding indebtedness and termination of such financing agreements. Further, in the event of default, we may have to compulsorily redeem / repay our respective indebtedness. There can be no assurance that we will be successful in obtaining any consent in the future, including consents that may be necessary for us to implement our business and expansion plans. The consent of our existing lenders for incurring additional debt or issuing equity may be required and there can be no assurance that such consent will be granted. If such consents are withheld it may restrict our Company s ability to further develop and expand its business. 29. Our shareholders, (i) IL&FS Private Equity Trust through its scheme, the Leverage India Fund, (ii) South Asian Regional Apex Fund, (iii) IVC Employees Welfare Trust, have certain affirmative voting rights and transfer rights under our Shareholders Agreement xxi

23 Pursuant to the terms of our Shareholders Agreement, our shareholders, (i) IL&FS Private Equity Trust through its scheme, the Leverage India Fund, (ii) South Asian Regional Apex Fund, and (iii) IVC Employees Welfare Trust have certain affirmative voting rights in the shareholders meetings of our Company, including inter alia in relation to the amendment of the Memorandum and Articles of Association of our Company, alteration of the authorized or paid up share capital of our Company, any issue of Equity Shares by our Company, any material deviations of more than 20% to the annual budget etc. Further, these shareholders also have certain rights with regard to transfer of Equity Shares including, inter alia, right of first offer in the event of a further issue of Equity Shares by our Company, tag-along rights in the event of a sale of all or any of the Equity Shares held by any of the Promoters etc. For further details, please refer to the section titled History of the Company and Certain Corporate Matters beginning on page 123 of this Letter of Offer. 30. There are potential conflicts of interest with and within our Promoter Group entities Our Promoters and our Promoter Group have equity interests or investments in the following entities that may offer services that are related to our business, i.e. the textiles business. Sr. No. 1. Grabal Alok Impex Limited 2. Alok Knit Exports Limited Promoter Group Entities 3. New City of Bombay Manufacturing Mills Limited 4. Aurangabad Textiles & Apparel Parks Limited 5. Alok Denims (India) Private Limited 6. Jiwrajka Associates Private Limited 7. Pramita Creation Private Limited 8. M/s. Alok Textile Traders 9. M/s. D. Surendra & Co 10. M/s. Nirvan Exports 11. M/s. Pramatex Enterprises There may be conflicts of interest in addressing business opportunities and strategies where these entities are also involved. In addition, new business opportunities may be directed to these entities instead of our Company. We may also be prevented from entering into certain businesses which relate to our business and which may be important for our future growth, as our Promoters or members of our Promoter Group may already have interests in such businesses. For further details, please refer to the section titled Promoter Group beginning on page 168 of this Letter of Offer. 31. Our operations involve hiring of contract labour, which involves compliance with various applicable regulations the non-compliance of which may have financial implications In order to retain flexibility and keep our fixed overhead to the minimum, in line with industry practice, we appoint contractors who in turn engage on-site contract labour for performance of our low skill operations. From a regulatory perspective, we face the risk that on an application made by the contract labourers, the appropriate court / tribunal may direct us that the contract labourers are required to be regularized or absorbed, and / or that we pay certain contributions in this regard that can adversely impact our financial performance. 32. Our business and financial results could be adversely affected by strikes or work stoppages by our employees or employees of our customers xxii

24 Strikes, agitations or work stoppages can adversely affect the results of our operations. We operate in a labour intensive industry; consequently, work stoppages or slow-downs or other instances of industrial unrest, if any may adversely affect our production, which in turn, may have a material adverse effect on our business. 33. Our continued operations are critical to our business and any shutdown of our manufacturing facilities may have a material adverse effect on our business and financial results Our manufacturing facilities are subject to operating risks, such as the breakdown or failure of equipment, power supply or processes, performance below expected levels of efficiency, obsolescence, labour disputes, natural disasters, industrial accidents and the need to comply with the directives of relevant government authorities. Our customers rely significantly on the timely delivery of our products and hence the continuity of our operations is critical to our business. Any disruption to our operations due to breakdown, fire, natural calamity, etc. may adversely affect our operations. Further, any insurance cover we have may not be adequate to indemnify our Company for our losses entirely. 34. Inability to successfully complete the projects undertaken on time and within budget may adversely impact our financial performance Our Company is currently in the midst of various expansion projects. Our Company runs an inherent risk of non-completion of these projects or completion at an additional cost. This may result in an adverse impact on our financial performance. 35. Any failure in the SAP based ERP system could adversely impact the business of our Company Any disruption in the functioning of our existing ERP system, which is based on SAP, could disrupt our ability to track, record and analyze the work in progress, cause loss of data and disruption in operations including, among others, an ability to assess the progress of the projects, process financial information or manage creditors/debtors or engage in normal business activities. This may have an adverse effect on our operations. 36. Our business trend is such that our last quarter (January March) exhibits maximum sales. Decrease in our sales during this quarter could impact our financial performance Our business generally exhibits an upward trend due to higher sourcing in the last quarter of our Financial Year, during which, historically, we have reported higher sales. Any substantial decrease in sales for this quarter could impact our financial condition and results of operations. Risks relating to our objects of this Issue 37. We have not commissioned an independent appraisal or an independent monitoring agency for the use of the proceeds of this Issue The requirement of funds for meeting the objects of this Issue have not been appraised by any bank or financial institution and are based on our management s internal estimates. Further, the deployment of funds is at the discretion of our Board of Directors and not subject to monitoring by any independent agency. External Risks 38. We are subject to regulatory and legal risk which may adversely affect our business. Our operations are subject to regulations framed by various regulatory authorities in India and other jurisdictions, including regulations relating to foreign investment in India. Compliance with many of the regulations applicable to us across jurisdictions including any restrictions on investments and other activities currently being carried out by our Company involve a number of risks, particularly in areas xxiii

25 where applicable regulations may be subject to varying interpretations. If the interpretation of the regulators and authorities varies from our interpretation, we may be subject to penalties and our business could be adversely affected. We are also subject to changes in Indian laws, regulations and accounting principles. There can be no assurance that these laws will not change in the future or that such changes or the interpretation or enforcement of existing and future laws and rules by governmental and regulatory authorities will not affect our business and future financial performance. 39. Terrorist attacks or war or conflicts involving countries in which we operate or where our customers are located could adversely affect the financial markets and adversely affect our business Terrorist attacks and other acts of violence, war or conflicts, particularly those involving India, as well as the U.S. and the EU, may adversely affect Indian and worldwide financial markets. Such acts may negatively impact business sentiment, which could adversely affect our business and profitability. India has from time to time experienced and continues to experience, social and civil unrest, terrorist attacks and hostilities with neighbouring countries. Also, some of India s neighbouring countries have experienced, or are currently experiencing internal unrest. Such events could also create a perception that investments in companies such as ours involve a higher degree of risk than investments in companies in other countries in our geo-political region. This, in turn, could have a material adverse effect on the market for securities of such companies, including our Equity Shares. The consequences of any armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business. 40. We are subject to risks arising from interest rate fluctuations, which could adversely affect our business, financial condition and results of operations Changes in interest rates could significantly affect our financial condition and results of operations. If the interest rates for our existing or future borrowings increase significantly, our cost of funds will increase. This may adversely impact our results of operations, planned capital expenditures and cash flows. Although we may in the future enter into hedging arrangements against interest rate risks, there can be no assurance that these arrangements will successfully protect us from losses due to fluctuations in interest rates. 41. Natural calamities could have a negative impact on the Indian economy and harm our Company s business India, Bangladesh, Indonesia and other Asian countries have experienced natural calamities such as earthquakes, floods, droughts and a tsunami in recent years. Some of these countries have also experienced pandemics. The extent and severity of these natural disasters and pandemics determines their impact on these economies. Prolonged spells of abnormal rainfall and other natural calamities could have an adverse impact on the economies in which we have operations, which could adversely affect our business and the price of our Equity Shares. 42. Compliance with, and changes in, safety, health and environmental laws and regulations may adversely affect our business, prospects, financial condition and results of operations. Some of our operations are subject to risks generally associated with manufacture and equipment, which can cause personal injury, loss of life, environmental damage and damage to property. The scope and extent of new environmental regulations, including their effect on our operations, cannot be predicted. The costs and management time required to comply with these requirements could be significant. The measures we implement in order to comply with these new laws and regulations may not be deemed sufficient by governmental authorities and our compliance costs may significantly exceed our estimates. If we fail to meet environmental requirements, we may also be subject to administrative, civil and criminal proceedings by governmental authorities, as well as civil proceedings by environmental groups and other individuals, which could result in substantial fines and penalties against us as well as orders that could limit or halt our operations and could include us being required xxiv

26 to incur substantial clean up costs. There can be no assurance that we will not become involved in future litigation or other proceedings or be held responsible in any such future litigation or proceedings relating to safety, health and environmental matters in the future, the costs of which could be material. Clean-up and remediation costs, as well as damages, other liabilities and related litigation, may adversely affect our business, prospects, financial condition and results of operations. 43. We may be subject to material change in regulation Our Company is subject to changes in Indian corporate laws as well as to the changes in the government regulations, policies and accounting principles. Any changes in the regulatory framework affecting our Company including capital adequacy requirements would adversely affect the profitability of our Company s business, its future financial performance and the price of its Equity Shares. 44. The market value of an investment in our Equity Shares may fluctuate due to the volatility of the Indian securities markets The Indian Stock Exchanges have, in the past, experienced substantial fluctuations in the prices of listed securities. Such fluctuations and volatility could affect the market price and liquidity of the securities of Indian companies, including our Equity Shares. Moreover, there have been occasions when secondary market operations have been interrupted and/or affected due to temporary exchange closures, broker defaults, settlement delays and strikes by brokerage firm employees. In addition, the governing bodies of the Indian Stock Exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time, disputes have occurred between listed companies and stock exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment. The level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other participants is not as stringent compared to more mature economies. SEBI received statutory powers in 1992 to assist it in carrying out its responsibility for improving disclosure and other regulatory standards for the Indian securities markets. Subsequently, SEBI has prescribed certain regulations and guidelines in relation to disclosure requirements, insider dealing and other matters relevant to the Indian securities markets. There may, however, be less publicly available information about Indian companies than is regularly made available by public companies in other countries. 45. Changes in the policies of the Government of India or political instability could delay the further liberalisation of the Indian economy and adversely affect economic conditions in India generally, which could impact our Company s business and prospects The role of the Indian central and state governments in the Indian economy has remained significant over the years. Since 1991, the Government has pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector. There can be no assurance that these liberalization policies will continue in the future. The rate of economic liberalization could change, and specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting investments in Indian companies could change as well. A significant change in India s economic liberalization and deregulation policies could disrupt business and economic conditions in India, thus affecting our business. The current Government is a coalition of several parties. The withdrawal of one or more of these parties could result in political instability. Any political instability could delay the reform of the Indian economy, which could materially adversely impact our business. 46. Currency exchange rate fluctuations may affect the value of the Equity Shares Fluctuations in the exchange rate between the Rupee and the U.S. dollar will affect the dollar equivalent of the Rupee price of the Equity Shares on the Indian Stock Exchanges, as well as the U.S. dollar value of the proceeds a holder would receive upon the sale in India of any Equity Shares. Equity Shareholders may not be able to convert Rupee proceeds into U.S. dollars or any other currency, and there is no guarantee of xxv

27 the rate at which any such conversion will occur, if at all. 47. Investors may have difficulty enforcing judgments against our Company or its management Our Company is a limited liability company incorporated under the laws of India. Most of our Company s Directors and executive officers and some of its advisors and experts named in this Letter of Offer are residents of India. Further, a substantial portion of our Company s assets and the assets of such persons are located in India. As a result, it may not be possible for investors to affect service of process upon our Company or such persons in jurisdictions outside India or to enforce judgments obtained against it or such persons outside India. India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments. Recognition and enforcement of foreign judgments is provided for under Section 13 of the Code of Civil Procedure, 1908 (the Civil Code ). Section 13 of the Civil Code provides that a foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon except (i) where it has not been pronounced by a court of competent jurisdiction, (ii) where it has not been given on the merits of the case, (iii) where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases where such law is applicable, (iv) where the proceedings in which the judgment was obtained were opposed to natural justice, (v) where it has been obtained by fraud or (vi) where it sustains a claim founded on a breach of any law in force in India. Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court in any country or territory outside India which the Government has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Code is applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty. The U.S. has not been declared by the Government to be a reciprocating territory for the purpose of Section 44A of the Civil Code. However, the U.K. has been declared by the Government to be a reciprocating territory. Accordingly, a judgment of a court in the U.S. may be enforced only by a fresh suit upon the judgment and not by proceedings in execution. The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. A party seeking to enforce a foreign judgment in India is required to obtain approval from the RBI to repatriate outside India any amount recovered. 48. Significant differences exist between Indian GAAP and other accounting principles such as IFRS, UK GAAP and US GAAP, which may be material to investors assessments of our Company s financial condition The Indian GAAP financial statements included in this Letter of Offer are prepared and presented in conformity with Indian GAAP consistently applied during the periods stated in those reports, except as otherwise provided therein, and no attempt has been made to reconcile any of the information given in this Letter of Offer to any other principles or to base it on any other standards. Indian GAAP differs from accounting principles with which prospective investors may be familiar in other countries, such as IFRS, UK GAAP and US GAAP. You should rely upon your own examination of us, the terms of the Issue and the financial information contained in this Letter of Offer. Risks related to the Equity Shares 49. Our Equity Shareholders bear the risk of fluctuation in the price of our Equity Shares It is impossible to predict whether the price of our Equity Shares will rise or fall. Trading prices of our Equity Shares will be influenced by, among other things, the financial position of and the results of operations of our Company, and political, economic, financial and other factors. There can be no assurance that the prices at which the Rights Equity Shares are initially traded will correspond to the prices at which the Equity Shares will be traded in the market subsequent to the Issue. 50. Conversion of our Company s outstanding warrants and B Bonds and any future issues or xxvi

28 sales of our Company s Equity Shares may dilute Investors shareholding and significantly affect the trading price of the Equity Shares A conversion of our Company s outstanding warrants and B Bonds and any future issue of Equity Shares by our Company may lead to dilution of Investors shareholding or affect the market price of our Equity Shares, similarly the disposal of Equity Shares by any of our Company s major shareholders, or the perception that such issues or sales may occur, may significantly affect the trading price of the Equity Shares. 51. Non-conversion of our Company s outstanding warrants Pursuant to the meeting of the Executive Committee of our Board of Directors on February 26, 2008, 1,98,00,000 warrants were allotted to our Promoter Group Company, Jiwrajka Associates Private Limited. Out of these 1,98,00,000 warrants, 98,00,000 warrants were converted into 98,00,000 Equity Rs. 102/- each aggregating to Rs crores. The balance 1,00,00,000 warrants are required to be converted into Equity Shares on or before July 31, In the event that Jiwrajka Associates Private Limited chooses not to exercise its right to convert these warrants, these warrants shall lapse and the funds paid by Jiwrajka Associates Private Limited on the date of allotment of the warrants shall stand forfeited and our Company would not be required to issue any Equity Shares to Jiwrajka Associates Private Limited. In addition, as a result, our Company will not receive any additional payment from Jiwrajka Associates Private Limited with regards to the conversion of these warrants, and our Company may require to seek alternative sources of capital. 52. There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect an Equity Shareholder s ability to sell, or the price at which it can sell Equity Shares at a particular point in time Our Company is subject to a daily circuit breaker imposed by all stock exchanges in India which does not allow transactions beyond certain volatility in the price of the Equity Shares. This circuit breaker operates independently of the index-based market-wide circuit breakers generally imposed by SEBI on Indian Stock Exchanges. The percentage limits on our Company s circuit breakers are set by the NSE and the BSE. The NSE and the BSE do not inform our Company of the percentage limit of such circuit breakers and may change it without our Company s knowledge. This circuit breaker effectively limits the upward and downward movements in the price of the Equity Shares. As a result of this circuit breaker, there can be no assurance regarding the ability of our Equity Shareholders to sell the Equity Shares or the price at which shareholders may be able to sell their Equity Shares at a particular point in time. 53. A proportion of the Rights Equity Shares will be partly paid-up until the First and Final Call The Issue Price of our Rights Equity Shares is Rs. 11/- per Rights Equity Share. The Investors excluding NRIs, FIIs and Non-Residents will have the option to pay Rs. 11/- i.e. the entire Issue Price on Application or pay Rs. 6/- of the Issue Price towards the Application and the balance Rs. 5/- of the Issue Price on the First and Final Call. The price movements of the partly paid-up Rights Equity Shares (for Investors who opt for Payment Method 1) may be greater in percentage terms than the price movements if the Rights Equity Shares were fully paid-up. Investors in this Issue will be required to pay the money due on First and Final Call, even if, at that time, the market price of our Equity Shares is less than the Issue Price. If the Investor fails to pay the balance amount due with any interest that may have accrued thereon after notice has been delivered by our Company, then any of our Rights Equity Shares in respect of which such notice has been given may, at any time thereafter, before payment of the call money and interest and expenses due in respect thereof, be forfeited by a resolution of our Board to that effect. Such forfeiture shall include all dividends declared in respect of such forfeited Rights Equity Shares and actually paid before such forfeiture. 54. Our partly paid Rights Equity Shares will be suspended from trading as per the rules and regulations of the Stock Exchanges prior to the record date fixed for the determination of the Investors liable to pay the First and Final Call. xxvii

29 The Rights Issue of Rights Equity Shares is being made at a price of Rs. 11/- per Rights Equity Shares. The Investors (except NRIs / FIIs / non-residents) will have an option either to pay Rs. 11/- i.e. the entire Issue Price on Application or pay Rs. 6/- of the Issue Price towards the Application and the balance Rs. 5/- of the Issue Price on the First and Final Call. Till such time as the total Issue Price is paid, the Rights Equity Shares shall be considered to be partly paid up. The partly paid-up Rights Equity Shares offered under the Issue will be traded under a separate ISIN for the period as may be applicable under the rules and regulations prior to the record date for the First and Final Call. The ISIN representing partly paid-up Rights Equity Shares will be terminated after the record date for the First and Final Call. On payment of the call money in respect of the partly paid-up Rights Equity Shares, such partly paid-up Rights Equity Shares would be converted into fully paid-up Equity Shares and merged with the existing ISIN for our Equity Shares. Our Company would fix a record date for the purpose of determining the list of Allottees to whom the notice for call money would be sent. Once the record date has been fixed, trading in the partly paid Rights Equity Shares for which First and Final Calls have been made would be suspended for the period as may be applicable under the rules and regulations. 55. There is no assurance that the Rights Equity Shares will be listed on the BSE and the NSE in a timely manner or at all and any trading closures at the BSE and the NSE may adversely affect the trading price of the Equity Shares In accordance with Indian law and practice, permission for listing of the Rights Equity Shares will not be granted until after the Rights Equity Shares have been issued and allotted. Such permission will require that all other relevant documents authorising the issue of the Rights Equity Shares to be submitted. There could be a failure or a delay in listing the Rights Equity Shares on the BSE and the NSE. Any failure or delay in obtaining the approval would restrict the Investor s ability to dispose of their Rights Equity Shares. 56. Future sale of Equity Shares by some of our current Shareholders could affect the price of our Equity Shares in the secondary market The market price of our Equity Shares could decline if some of our existing shareholders sell a substantial number of Equity Shares post listing or the perception that such sales or distributions could occur. This, in turn, could make it difficult for you to sell Equity Shares in the future at a time and at a price that you deem appropriate. 57. You will not be able to sell immediately on an Indian stock exchange any of the Rights Equity Shares you purchase in the Issue The Rights Equity Shares will be listed on the NSE and the BSE. Pursuant to Indian regulations, certain actions must be completed before the Rights Equity Shares can be listed and trading may commence. Investors book entry or demat accounts with depository participants in India are expected to be credited within two working days of the date of allotment. Thereafter, upon receipt of final approval from the NSE and the BSE, trading in the Rights Equity Shares is expected to commence within seven working days of the date on which the basis of allotment is approved by the Designated Stock Exchange. We cannot assure that the Rights Equity Shares will be credited to investors demat accounts, or that trading in the Rights Equity Shares will commence, within the time periods specified above. Notes to Risk Factors: 1. The net worth of our Company, on a consolidated basis, is Rs. 1, crores, as at September 30, 2008, as per the restated consolidated financial statements of our Company under Indian GAAP in the section titled Financial Statements beginning on page 194; 2. This is a Rights Issue of upto 40,87,23,061 Rights Equity Shares of Rs. 10/- each for cash at a price of Rs. 11/- per Rights Equity Share including premium of Re. 1/- per Rights Equity Share, resulting in aggregate gross proceeds of Rs crores to the Equity Shareholders of our Company on rights basis in the ratio of 83 Equity Shares for every 40 Equity Share held as on the Record Date i.e. March 25, 2009; xxviii

30 3. The average cost of acquisition of our Equity Shares by our Promoters, Mr. Ashok B. Jiwrajka, Mr. Dilip B. Jiwrajka and Mr. Surendra B. Jiwrajka is Rs per Equity Share, Rs per Equity Share and Rs per Equity Share respectively. For further information, please refer to the section titled Capital Structure beginning on page 34. The average cost of acquisition of Equity Shares by our Promoters has been calculated by taking the average of the amounts paid by them to acquire the Equity Shares currently held by them; 4. Other than as stated in the section titled Capital Structure, our Company has not issued any Equity Shares for consideration other than cash; 5. Except as disclosed in the sections titled Capital Structure, Our Promoters Promoter Group or Management beginning on pages 34, 166, 168 and 145, respectively, none of our Promoters, our Directors and our key managerial employees have any interest in our Company except to the extent of remuneration and reimbursement of expenses and to the extent of the Equity Shares held, if any, by them or their relatives and associates or held by the companies, firms and trusts in which they are interested as directors, members, partners or trustees and to the extent of the benefits arising out of such shareholding; 6. The transaction-wise aggregate values for the related party transactions have been set out in the following table. For further details on our related party transactions, see the section titled Financial Statements beginning on page 194 of this Letter of Offer; (Rs. in Crores) April 1, During the period 2008 to Transactions September , 2008 Unsecured Loan Granted during year (Net) Received / Adjustment during the year (Net) Share Application Money Received during the year Allotted during the year Refunded during the year Investments Invested during the year Loans and Advances Granted during year (Net) Received / Adjustment during the year (Net) (0.30) Sundry Debtors Advance for Capital xxix

31 Expenditure Transactions April 1, 2008 to September 30, 2008 During the period Turnover Sales of Goods Expenditure Dividend paid Income For details of transactions in the securities of our Company by our Promoters in the last six months, refer to the section titled Capital Structure beginning on page 34; 8. Trading in the Rights Equity Shares of our Company for all Investors shall be in dematerialized form only. For further details, see the section titled Terms and Procedure of the Issue beginning on page no. 259; 9. Investors are advised to refer to the section titled Basis for Issue Price beginning on page 66; 10. Any clarification or information relating to the Issue shall be made available by the Lead Managers and our Company to the investors at large and no selective or additional information would be available for a section of investors in any manner whatsoever; 11. Investors may contact the Compliance Officer or the Lead Managers for any complaints pertaining to the Issue; 12. The net asset value / book value per Equity Share was Rs as at September 30, 2008, as per the restated consolidated financial statements of our Company under Indian GAAP in the section titled Financial Statements beginning on page 194; 13. Certain Promoter Group entities which hold Equity Shares in our Company are interested only to the extent of shareholding in our Company. For details, see the section titled Capital Structure beginning on page 34; and 14. The details of loans and advances as on September 30, 2008 made by our Company to persons and companies in which our Directors / Promoters are interested is as follows: Name Nature of interest Amount (Rs. in Crores) Niraj Realtors and Shares Private Limited Promoter Group Company 0.12 Amigo Sports Private Limited* 100% Subsidiary 0.96 Alok Apparels Private Limited 100% Subsidiary 3.79 xxx

32 Name Nature of interest Amount (Rs. in Crores) Alok Inc. 100% Subsidiary 0.17 * With effect from December 23, 2008, our Promoters and our Company have disassociated from Amigo Sports Private Limited. Amigo Sports Private Limited was a 100% subsidiary of our Company. There were no commercial activities undertaken by Amigo Sports Private Limited since its incorporation i.e. July 25, Our Company sold its entire holding to the following persons: Sr. No. Name of the Person No.of Shares % Holding 1 Sanjiv Mehta % 2 Rajiv Mehta % Total % The above persons have no connection with our Company, our Directors, Promoter/ Promoter Group and / or their relatives. 15. The Lead Managers and our Company shall keep the shareholders / public informed of any material changes till the listing and trading commences as per the terms of the listing agreement and the SEBI DIP Guidelines. xxxi

33 SUMMARY Industry Overview The information in this section is derived from a combination of various official and unofficial publicly available materials and sources of information. It has not been independently verified by the Company, the Lead Manager or their respective legal or financial advisors, and no representation is made as to the accuracy of this information, which may be inconsistent with information available or compiled from other sources. Overview of global textile and apparel trade The Global textile and apparel trade is USD 580 Bn and is expected to reach USD 805 Bn by Global textile trade is growing at a CAGR of 5.8% and apparel at 9.6%. China is the leading sourcing base for textile and apparel with a majority share of over 30% of global exports followed by Italy and Hong Kong contributing 8% each. Intra Asia trade is also growing and Asia has 50% share of the global exports. Global Textile and Apparel Trade (Source: Technopak Analysis dated February, 2009 and UN Comtrade dated 2008) Country-wise Break up Global Textile & Apparel (2007) (Source: Technopak Analysis dated February, 2009 and UN Comtrade dated

34 Current global situation in Textiles As stated earlier, Asian economies are likely to be the key gainers in the new global textiles scenario. Whereas China is expected to grow significantly, there are apprehensions that China s growth rate may be tempered by quotas imposed by Western countries on Chinese goods and textiles. India is likely to be the next likely gainer after China. With a stable currency, knowledge based industry and a very strong domestic market, India is bound to win the race. With favourable import duties and one of the lowest labour costs for producing apparel, Bangladesh is consolidating its position as a supplier of low cost textile and apparel products for the mass market. Though Pakistan has both the raw material supply (in terms of cotton) and a fairly mature textile industry, its present economic situation does not prophesise great growth. Vietnam is fast becoming another strong Asian exporter of textiles and its government has actively encouraged investments in the sector. Vietnam also has the lowest labour rates globally Overview of the Indian Textile and Apparel industry The Indian Textile and Apparel Industry is an integrated sector and occupy a significant position in Global Trade. It not only processes high value products such as fabrics, garments and made-ups but also grows its own raw materials (cotton, jute, silk and wool). The textile industry is served by the organized, modern and mechanized mill sector, the small scale largely unorganized power loom sector and the highly fragmented handloom (hand spinning and hand weaving) sector. India is one of the few countries that has presence across the entire value chain of the textiles and clothing business starting from raw material (fiber), spinning, weaving/knitting, processing to highest value added products garments and made ups.. Business Overview Our Company is one of India s leading integrated textile manufacturers. With more than two decades of involvement in the textile industry, our Company is present across the textile value chain from spinning to home textiles, garments and retailing of our manufactured products. Our Company operates in five major divisions, Cotton Yarn, Apparel Fabrics (Woven & Knitted), Home Textiles, Garments and Polyester Yarn. In addition to these, which are our Company s core businesses, our Company, through its subsidiaries, has also recently ventured into retailing of products manufactured by us and realty. Our presence across the textile value chain can be best depicted by the following graphic. 2

35 In our core business, our Company s vertically integrated facilities and flexibility of operations enables us to produce cotton and cotton blended fabrics in various counts and construction and a wide range of finishes. Our global size, modern technology in equipments, integrated plants and manufacturing flexibility coupled with our product development team and competent marketing force facilitates a deep understanding of customer needs and its satisfactory fulfilment. This product, customer and market diversification also ensures risk mitigation and stability of earnings and places our Company at a competitive advantage over other players in the industry. Our core competency lies in manufacturing of quality textile products and assuring our customers of product consistency and timely delivery schedules at international prices. Over a period of time our Company has been the recipient of several awards and trophies including trophies by Texprocil for our Company s export performance. For further details on awards and trophies please refer chapter titled History of the Company and Other Corporate Matters beginning on page 123 of this Letter of Offer. For the year ended March 31, 2008, our Company s total consolidated revenue was Rs. 2, crores and our Company s consolidated profit after tax after minority interest was Rs crores. As at March 31, 2008, our Company s total consolidated assets were Rs. 8, crores and our Company s consolidated net worth was Rs. 1, crores. For the half year ended September 30, 2008, our Company s total consolidated revenue was Rs. 1, crores and our Company s consolidated profit after tax after minority interest was Rs crores. As at September 30, 2008, our Company s total consolidated assets were Rs. 8, crores and our Company s consolidated net worth was Rs. 1, crores. Our Company is headquartered in Mumbai, Maharashtra and has eleven manufacturing facilities across three locations in India including Navi Mumbai, Silvassa and Vapi. Our Company employs approximately 11,250 employees across these locations and 3,750 employees on contract labour basis. Competitive Strengths Our principal competitive strengths are as follows: 1. Integrated Operations and Economies of Scale 2. State of the art equipment and technology 3

36 3. Locational Advantages 4. Cost Effectiveness 5. Diversified Customer Base 6. Product design and development 7. Organic Cotton Strategy The key elements of our strategy are as follows: 1. Strengthening the Product Portfolio 2. Expanding Geographic Reach 3. Become a Nominated Supplier to Global Customers 4. Inorganic Growth Opportunities 5. Expansion of retail of products manufactured by us 6. Become an Employer of Choice For further details of Industry and our Business, please refer to the sections titled Industry Overview and Our Business beginning on pages 75 and 97 of this Letter of Offer respectively. 4

37 SELECTED FINANCIAL INFORMATION The following tables set forth the summary financial information derived from our restated standalone financial statements as of and for the half year ended September 30, 2008, Fiscal 2008, Fiscal 2007, Fiscal 2006, Fiscal 2005, Fiscal 2004 and the consolidated financial statements as of and for the half year ended September 30, 2008, Fiscal 2008 and Fiscal Our restated standalone financial statements and the consolidated financial statements have been prepared in accordance with Indian GAAP and the SEBI DIP Guidelines and are presented in the section titled Financial Statements beginning on page 194 of this Letter of Offer. The summary financial information presented below should be read in conjunction with our restated standalone financial statements, note thereto and the consolidated financial statements and the notes thereto beginning from page 194 of this Letter of Offer. SUMMARY STATEMENT OF ASSETS & LIABILITIES, AS RESTATED Sr. Particulars As at As at March 31, No. A Fixed Assets : Gross Block (Refer note no.6(i) of Part E of Annexure 4 ) Less : Depreciation (Refer note no.6(ii) of Part E of Annexure 4 September 30, 2008 (Rs. in Crores) , , , , Net Block 3, , , , Add: Capital Work in Progress / Incidental Expenditure During Construction Period (Refer note no.6(iii) of Part E of Annexure 4 ) 1, , , , , B Investments C D Current Assets, Loans and Advances Inventories Sundry Debtors (Refer note no.7 of Part E of Annexure 4 ) Cash and bank balances * Loans and Advances Liabilities and , , , , , , ,

38 Sr. Particulars As at As at March 31, Provisions Secured Loans 5, , , , , Unsecured Loans Current Liabilities and Provisions (Refer note no.8 of Part E of Annexure 4 ) 6, , , , , E Deferred Tax Liability (Refer note no.9 of Part E of Annexure 4 ) Networth (A+B+C-D-E) , , , Networth Represented by : Share Capital Share Application Money - Share Warrants Reserves (Refer note no.10 of Part E of Annexure 4 ) 1, , Networth 1, , , * Includes Rs Crores (Rs Crores as at ) towards 100% LC margin against import of Plant & Machinery and Rs Crores (Rs Crores as at ) kept in bank deposits as at , pending utilisation towards ongoing expansion. Note: 1. The Net block has increased from Rs crores as on to Rs. 1, crores as on Further it has increased to Rs. 1, crores as on and to Rs. 2,901.7 crores as on Increase in Net block is on account of investment in capacities, new technologies and processes. 2. The Capital work in progress has increased from Rs crores as on to Rs crores as on The company had initiated Greenfield expansion drive in FY The textile projects generally take about 2 years for implementation. Hence as on March 31, 2006, the capacities were under implementation e.g. plant and machinery under erection and therefore the amount under capital work in progress showed a substantial increase over the previous year. 6

39 3. There has been an increase in investment from Rs crores as on to Rs crores as on and further to Rs crores as on and to Rs crores as on The increase is primarily on account of investments in realty and retail subsidiaries. 4. There has been an increase in Loans and Advances from Rs crores as on to Rs crores as on and further to Rs crores as on to Rs crores as on The increase is primarily on account of increase in our company s operations thereby increase in subsidy receivable, MODVAT receivable and other advances given to suppliers. SUMMARY STATEMENT OF PROFIT & LOSSES, AS RESTATED Particulars For 6 months INCOME Sales of products manufactured by the Company (Net of Excise) ended Sept. 30, 2008 For the year ended March 31, (Rs. in Crores) , , , , , Sale of traded goods Other Income Total Income 1, , , , , , EXPENDITURE Raw Materials consumed , Purchase of traded goods (Increase) / Decrease in (119.42) (65.33) (20.59) (72.75) Inventories (101.44) Staff Costs Operating & Administrative Expenses Selling and Distribution Expenses Profit Before Interest, Depreciation & Tax Interest & Finance Charge (Net) Depreciation / Amortisation Profit before Tax Provision for Tax Current Tax 7

40 Particulars For 6 months For the year ended March 31, - MAT Credit entitlement - (4.12) (1.11) Deferred tax Fringe Benefit Tax Profit after Tax before extraordinary Items Extraordinary Items Profit after Tax after extraordinary Items Adjustment (Refer Note no.9 of Part B of Annexure 4) (1.38) (3.56) (0.73) Current Tax Impact of (0.60) (0.46) (0.02) 0.06 Adjustment Deferred Tax Impact of (0.01) 0.68 (0.97) (0.83) (0.40) (0.01) Adjustment Net Profit as restated Add : Balance brought forward from previous year Balance available for Appropriation, as restated APPROPRIATIONS Less : Transfer to General Reserve Transfer to Debenture Redemption Reserve Excess/ (short) provision of Dividend Dividend on Equity Shares Dividend on Preference Shares Corporate Dividend Tax thereon Balance carried to Balance Sheet as restated (0.19) (0.39) (2.08)

41 STATEMENT OF CASH FLOW, AS RESTATED Sr. No. Particulars For 6 months A] Cash Flow from Operating Activities ended Sept. 30, 2008 For the year ended March 31, (Rs. in Crores) Net Profit Before Tax Adjustments on account of restatement (1.38) (3.56) (0.73) (Refer note no. 9 of part B of Annexure - 4) Restated Profit Before Tax Adjustments: Depreciation / Amortisation (Refer note no.9(viii) of part B of Annexure -4) Unrealised gain/(loss) on Cash and cash equivalent Excess of Cost over Fair value of current Investments Prior period items (Refer note no. 9(vii) of part B of Annexure -4) Dividend Income Interest Paid (net) (Profit) / Loss on sale of fixed assets (0.28) 1.53 (1.32) - (2.52) (0.25) 0.40 (0.02) 0.10 (0.23) 0.18 (0.01) (0.30) (0.27) (1.57) (1.26) (0.15) (0.89) (3.13)

42 Sr. No. Particulars For 6 months ended Sept. 30, 2008 (net) Profit on sale of Current Investments (net) Provision for Leave Encashment written back (Refer note no.9(ix) of part B of Annexure -4) For the year ended March 31, (0.30) (0.19) (0.24) (2.25) (0.76) (0.01) (0.13) Operating Profit before working capital changes Adjustments for (Increase)/Dec rease in Inventories (Increase)/Dec rease in Trade Receivable (Increase)/Dec rease in Loans and Advances Increase/(Decr ease) in Current Liabilities Cash Generated from operations Income Taxes Paid Net cash Generated from operating activities (A) (105.36) (223.12) (106.31) 5.12 (159.74) (64.47) (61.01) (192.05) (153.33) (48.89) (186.93) (50.41) (45.61) (44.93) (39.35) (18.82) (48.06) (21.71) (15.70) (12.01) (5.17) B] Cash flow from Investing 10

43 Sr. No. Particulars For 6 months ended Sept. 30, 2008 Activities Purchase of fixed assets Sale / Adjustment of fixed assets Purchase of Investments (Net) Sale of Investments Margin Money Deposits matured/(plac ed) net Dividends Received Interest Received Share Application Money received back Share Application Money (given) Inter Corporate Deposits (Granted) / Refunded - Net For the year ended March 31, (661.42) (1,623.89) (845.06) (1,082.68) (356.95) (236.81) (134.39) (56.48) (173.66) (174.62) (123.78) (5.00) (17.97) (63.18) (217.30) (32.00) (126.58) (427.93) (139.36) (5.81) (16.38) - - Net cash used in Investing Activities (B) (627.31) (1,661.54) (1,016.08) (1,027.59) (571.01) (266.56) C] Cash flow from Financing Activities Proceeds from issue of Equity Share Capital (including

44 Sr. No. Particulars For 6 months ended Sept. 30, 2008 premium) Proceeds from issue of Share warrants Proceeds from Preference Share Capital For the year ended March 31, Redemption of Preference Share Capital Proceed from Equity Share Application Money Proceeds from borrowings (net) Share / Debenture / FCCB issue expenses and Premium on redemption adjusted in Securities Premium Account Dividend Paid (Including Tax thereon) (16.33) (0.34) (0.33) , , (13.05) (14.46) (3.76) 0.00 (27.70) (23.95) (25.31) (17.92) (10.92) Interest Paid (143.26) (238.87) (133.38) (67.59) (68.51) (70.94) Net cash generated from Financing Activities (' C) Net Increase in Cash and Cash equivalents ( A+B+C) , , (387.11) Cash and Cash equivalents at the beginning of 1,

45 Sr. No. Particulars For 6 months ended Sept. 30, 2008 the year For the year ended March 31, at the end of the year Net Increase in Cash and Cash equivalents 1, , (387.11) NOTES TO CASH FLOW STATEMENT 1 Components of Cash & Cash Equivalents include Cash, Cheques on hand and Bank balances in Current, debit balance of Cash Credit and Fixed Deposit Accounts. 2 Proceeds from borrowings reflect the increase in Secured and Unsecured Loans and is net of repayments 3 Purchase of Fixed assets are stated inclusive of movements of Capital Work In Progress between the commencement and end of the years/period and is considered as part of investing activity. 4 Cash and Cash equivalents includes : (Rs. in Crores) September 30, 2008 March 31, 2008 March 31, 2007 March 31, 2006 March 31, 2005 March 31, 2004 Cash and Bank Balances Less: Margin Money Deposits * Unrealised (gain) / loss on foreign currency 1, , (1.25) Total Cash and Cash equivalents 1, , * Margin money being restricted for its use have been excluded from cash and cash equivalent and grouped under the investment activity 5 Figures have been regrouped / rearranged wherever necessary. 6 The Cash Flow Statement has been prepared in accordance with the requirements of Accounting Standard "AS 3" Cash Flow Statement 13

46 Sr. No. STATEMENT OF ASSETS & LIABILITIES - CONSOLIDATED (AS RESTATED) (Rs. in Crores) As at As at March 31, A Fixed Assets : Particulars Gross Block (Refer note no.8(i) of part E of Annexure IV) Less : Depreciation (Refer note no.8(ii) of part E of Annexure IV) September 30, , , , Net Block 3, , , Add: Capital Work in Progress / Incidental Expenditure During Construction Period (Refer note no. 8(III) of part E of Annexure IV) 1, , , , , B Investments C (Includes goodwill on consolidation of Associate Company for FY Rs Crores) Current Assets, Loans and Advances Inventories Sundry Debtors (Refer note no. 9 of part E of Annexure IV) Cash and bank balances* 1, , Loans and Advances D Liabilities and Provisions : 3, , , Secured Loans 5, , , Unsecured Loans Current Liabilities and Provisions (Refer note no. 10 of part E of Annexure IV) , , , E Deferred Tax Liability (Refer note no. 11 of part E of Annexure IV) F Minority Interest G Networth (A+B+C-D-E-F) 1, , , H Represented by 14

47 Sr. No. Particulars As at As at March 31, September 30, Share Capital Share Application Money Share Warrants Reserves & Surplus (Refer note no. 12 of part E of Annexure IV)# 1, , Networth 1, , , * Includes Rs Crores (Rs Crores as at ) towards 100% LC margin against import of Plant & Machinery and Rs Crores (Rs Crores as at ) kept in bank deposits as at , pending utilisation towards ongoing expansion. # Includes Capital Reserve on consolidation of Subsidiary Company Rs Crores as at , Rs Crores as at

48 STATEMENT OF PROFIT & LOSS ACCOUNT - CONSOLIDATED (AS RESTATED) Particulars For six months ended Sept. 30, 2008 (Rs. in Crores) For the year ended March 31, INCOME Sale of products manufactured by the company (Net 1, , , of Excise) Sale of Traded Goods Other Income Total Income 1, , , EXPENDITURE Raw Materials consumed , , Purchase of Traded Goods (Increase)/Decrease in Inventories (122.55) (103.83) (65.33) Staff Costs Operating & Administrative Expenses Selling and Distribution Expenses Profit Before Interest, Depreciation & Tax Interest & Finance Charge (Net) Depreciation / Amortisation Profit before Tax Provision for Tax - Current Tax MAT Credit entitlement - (4.12) (1.11) - Deferred tax Fringe Benefit Tax Profit after Tax before extraordinary Items Extraordinary Items Profit after Tax after extraordinary Items Adjustment (Refer Note no7 of part B of Annexure (1.38) (3.46) 5.31 IV) Current Tax Impact of Adjustment (0.60) Deferred Tax Impact of Adjustment (0.90) Net Profit as restated before Minority interest and Share in associate Share of Minority interest Share of profit in respect of investment in associate (40.15) companies 16

49 Particulars For six months ended Sept. 30, 2008 For the year ended March 31, Net Profit as restated Add : Balance brought forward from previous year Balance available for Appropriation, as restated APPROPRIATIONS Transfer to General Reserve Transfer to Debenture Redemption Reserve Excess/ (short) provision of Dividend - (0.19) (0.39) Dividend on Equity Shares Dividend on Preference Shares Corporate Dividend Tax thereon Balance carried to Balance Sheet as restated

50 CASH FLOW STATEMENT- CONSOLIDATED (AS RESTATED ) Particulars A] Cash Flow from Operating Activities For six months ended Sept. 30, 2008 (Rs. in Crores) for the year ended March 31, Net Profit Before Tax Adjustment on account of restatement (Refer Note no. 7 of part B of Annexure IV) (1.38) (3.46) 5.31 Restated Profit Before Tax Adjustments for: Depreciation / Amortisation (Refer Note no. 7 of part B of Annexure IV) Unrealised gain on Cash and cash equivalent - (0.28) 1.53 Prior period items (Refer Note no. 7 of part B of (0.25) 0.04 (0.02) Annexure IV) Excess of Cost over Fair value of current Investments Effect of exchange rate change on investment (3.49) (1.37) Dividend Income (0.01) (0.30) (0.27) Interest Paid (net) (Profit) / Loss on sale of fixed assets (net) (0.89) (1.08) 0.09 (Profit) / Loss on sale of Current Investments (net) (0.30) (0.19) (0.24) Operating Profit before working capital changes Adjustments for (Increase)/Decrease in Inventories (107.09) (306.79) (106.31) (Increase)/Decrease in Trade Receivable (44.50) (91.54) (192.05) (Increase)/Decrease in Loans and Advances (73.29) (343.20) (130.67) Increase/(Decrease) in Current Liabilities Cash Generated from operations Income Taxes Paid (21.31) (51.03) (21.71) Net cash Generated from operating activities B] Cash flow from Investing Activities Purchase of fixed assets (672.13) (1,649.20) (902.83) Sale / Adjustment of fixed assets

51 Particulars For six months ended Sept. 30, 2008 for the year ended March 31, Purchase of Investments (222.60) (207.82) (195.82) Sale of Investments Margin Money Deposits matured/(placed) (17.93) (228.93) Dividends Received Interest Received Share Application Money Paid (87.59) (106.69) Inter Corporate Deposits (Granted) / Refunded - Net 4.00 (5.81) Net cash used in Investing Activities (815.08) (1,510.81) (1,100.13) C] Cash flow from Financing Activities Proceeds from issue of Equity Shares (including premium) Proceeds from Share Application Money Proceeds from Issue of Share Warrants Proceeds from borrowings (net) , , Dividend Paid (Including Tax thereon) - (27.70) (23.95) Interest Paid (147.48) (248.24) (133.38) Net cash generated from Financing Activities , , Net Increase in Cash and Cash equivalents ( A+B+C) (338.75) 1, Cash and Cash equivalents at the beginning of the year 1, at the end of the year 1, , Net Increase in Cash and Cash equivalents (338.75) 1, NOTES TO CASH FLOW STATEMENT 1. Components of Cash & Cash Equivalent s includes Cash, Cheques on hand and Bank balances in Current, debit balance of Cash Credit and Fixed Deposit Accounts. 2. Proceeds from borrowings reflect the increase in Secured and Unsecured Loans and is net of repayments. 3. Purchase of Fixed assets are stated inclusive of movements of Capital Work In Progress between the commencement and end of the period/year and is considered as part of investing activity. 19

52 4. Cash and Cash equivalents includes : September 30, 2008 March 31, 2008 March 31, 2007 (Rs. in Crores) (Rs. in Crores) (Rs. in Crores) Cash and Bank Balances 1, , Less: Margin Money Deposits * Unrealised (gain) / loss on foreign currency Cash and cash equivalents Total Cash and Cash equivalents 1, , * Margin money being restricted for its use have been excluded from cash and cash equivalent and grouped under the investment activity. 5. Figures have been regrouped / rearranged wherever necessary. 6. The Cash Flow Statement has been prepared in accordance with the requirements of Accounting Standard "AS 3" Cash Flow Statement. 20

53 THE ISSUE Pursuant to the resolutions passed by the Board of Directors of our Company under Section 81(1) of the Companies Act at the meetings held on October 27, 2008 and January 3, 2009, it has been decided to make the following offer to the Eligible Equity Shareholders of the Company, with a right to renounce. The FIPB by its letter dated February 3, 2009, has approved the Issue and allotment of Rights Equity Shares by our Company to the Eligible Equity Shareholders, including persons resident outside India, such as FIIs and NRIs with a right to renounce in accordance with the provisions of the SEBI (DIP) Guidelines, The following is a summary of the Issue. This summary should be read in conjunction with, and is qualified in its entirety by, more detailed information in the chapter titled Terms and Procedure of the Issue beginning on page 259 of this Letter of Offer. Rights Equity Shares proposed to be issued by the Company Rights Entitlement for Equity Shares Record Date March 25, 2009 Issue Price per Rights Equity Share Face Value per Rights Equity Share Equity Shares outstanding prior the Issue Equity Shares outstanding after the Issue Use of Issue Proceeds Payment terms 40,87,23,061 Rights Equity Shares 83 Rights Equity Shares for every 40 Equity Shares held on the Record Date Rs. 11/- Rs. 10/- 19,69,74,969 Equity Shares 60,56,98,030 Equity Shares The payment terms available to the Investors are as follows: For further information, please refer to the chapter titled Objects of the Issue beginning on page 60 of this Letter of Offer. Amount Payment Method 1* Payment Method 2 payable Applicable to all categories of Investors Applicable to all categories of per Rights except NRIs, FIIs and Non-Residents Investors Equity Share (Rs.) Face Value Premium Total Face Value Premium Total On Applicatio n First and Final Call Total * The Investors shall be required to make the balance payment towards the First and Final Call by the due date which shall be separately notified by our Company. The Investors should indicate the manner of payment i.e. Payment Method 1 or Payment Method 21

54 2 as applicable) in the Composite Application Form, subject to the Investors eligibility for the same. No Investor can select both payment methods in a Composite Application Form. In case no payment method is selected, then the default payment method shall be Payment Method 2. Payment Method 1 1. All categories of Investors except NRIs, FIIs and Non-Residents are eligible for this payment method. 2. While making an Application, the Investor shall make a payment of Rs. 6/- per Rights Equity Share. 3. Out of the amount of Rs. 6/- paid on application, Rs. 5/- would be adjusted towards the face value of the Rights Equity Shares and Re. 1/- shall be adjusted towards the share premium of the Rights Equity Shares. 4. Our Company reserves the right to adjust the amount received over and above the Application money towards the call money if such adjustment makes the total Rights Equity Shares allotted by our Company into fully paid-up Rights Equity Shares. 5. First and Final Call shall be sent by our Company for making the payment towards the balance amount due. 6. Rights Equity Shares in respect of which the balance amount payable remains unpaid may be forfeited, at any time after the due date for payment of the balance amount due. Payment Method 2 1. Investors under all categories, including NRIs, FIIs and Non-Residents, can opt for this method. 2. Investors shall have to make the full payment of the Issue Price of Rs. 11 per Rights Equity Share at the time of making an Application. For further information please refer to the chapter titled Terms and Procedure of the Issue beginning on page 259 of this Letter of Offer. 22

55 GENERAL INFORMATION Dear Equity Shareholder(s), Pursuant to the resolutions passed by the Board of Directors of the Company under Section 81(1) of the Companies Act at the meetings held on October 27, 2008 and January 3, 2009, it has been decided to make the following offer to the Existing Equity Shareholders of the Company, with a right to renounce: ISSUE OF 40,87,23,061 EQUITY SHARES WITH A FACE VALUE OF RS. 10/- EACH ( RIGHTS EQUITY SHARES ) FOR CASH AT A PRICE OF RS. 11/- INCLUDING A PREMIUM OF RE. 1/- AGGREGATING TO RS. 4,49,59,53,671 TO THE EXISTING EQUITY SHAREHOLDERS OF THE COMPANY ON RIGHTS BASIS IN THE RATIO OF 83 RIGHTS EQUITY SHARES FOR EVERY 40 EQUITY SHARES HELD ON THE RECORD DATE I.E. MARCH 25, 2009 ( ISSUE ). For further details please refer to the chapter titled Terms and Procedure of The Issue on page 259 of this Letter of Offer. Registered Office B-43 Mittal Tower, Nariman Point, Mumbai , Maharashtra, India Tel: / Fax: There have been no changes to our registered office since incorporation. Corporate Office Peninsula Towers, A Wing Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai , Maharashtra, India. Tel: / 6500 Fax: Registration No.: Corporate Identification Number: L17110MH1986PTC Registrar of Companies Registrar of Companies, State of Maharashtra Everest House, 100 Marine Drive, Mumbai Maharashtra, India. The Equity Shares of our Company are listed on the BSE and the NSE. 23

56 Board of Directors Sr. No. Name & Designation Age Residential Address 1. Mr. Ashok B. Jiwrajka Executive Chairman 2. Mr. Dilip B. Jiwrajka Managing Director 3. Mr. Surendra B. Jiwrajka Joint Managing Director 4. Mr. Chandrakumar Bubna Executive Director 5. Mr. Ashok G. Rajani Independent Director 6. Mr. K. R. Modi Independent Director 7. Mr. K. D. Hodavdekar Independent Director Nominee of IDBI 8. Mr. K. J. Punnathara Independent Director Nominee of Life Insurance Corporation of India 9. Ms. Hiroo S. Advani Independent Director Nominee of Export Import Bank of India 10. Mr. Timothy Ingram Non-Executive Director Nominee of Caledonia Investments plc 11. Mr. Rakesh Kapoor Independent Director Nominee Director of IFCI 12. Mr. A. B. Dasgupta Independent Director Nominee Director of IDBI 58 years 52 years 50 years 55 years 59 years 68 years 57 years 66 years 63 years 61 years 53 years 67 years Flat No. 301, Krishnakunj, 3rd floor, Plot No. FP-170, Shivaji Park, Road No. 5, Mahim, Mumbai Flat No. 6, 6th Floor, Bay View, Khan A. G Road, Worli Sea Face, Worli, Mumbai , Palm Beach, Pochkhanwala Road, Worli, Mumbai /5, Krishna Kunj, Sainik Farm, Central Avenue, New Delhi /102, Red Rose Apts, Pochkhanwala Rd, Mumbai , Pushpanjali, Prabhadevi, Mumbai A-163, Twin Tower, Prabhadevi, Mumbai House No. 29, Rajalakshmi Nagar, Pattom, Thiruvananthapuram. Kerala , Shivala, Sobani Road, Off Cuffe Parade, Colaba, Mumbai , Buckingham Gate, London SW1E 6NN England Plot No B: - 21, Flat No:- 104, IFCI Colony, Ramprashtra, Ghaziabad. C. L. 92, Salt Lake, Sector II, Calcutta For further details regarding our Directors please refer to the chapter titled Management on page 145 of this Letter of Offer. 24

57 Company Secretary and Compliance Officer Mr. K. H. Gopal, President (Corporate Affairs) & Company Secretary Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai , Maharashtra, India Tel: Fax: alokrights@alokind.com Investors may contact the Compliance Officer / Registrar to the Issue for any pre-issue / post-issue related matters including inter alia non-receipt of Letter of Offer / Abridged Letter of Offer, CAF, allotment advice, share certificate(s), refund order(s) etc. Lead Managers to the Issue Axis Bank Limited Central Office, Maker Tower F, 11 th floor, Cuffe Parade, Colaba Mumbai Maharashtra, India Tel: Fax: alokind@axisbank.com Investor Grievance I.D.: axbmbd@axisbank.com Website: Contact Person: Mr. Dipen Kapadia/ Mr. Amit Shah. SEBI Registration No. INM Fortune Financial Services (India) Limited K.K. Chambers, 2 nd floor, Sir. P. T. Marg, Fort Mumbai Maharashtra, India Tel: Fax: alok.rights@ffsil.com Investor Grievance I.D.: invrelation@ffsil.com Website: Contact Person: Mr. Vinay Rane SEBI Registration No. INM Punjab National Bank Capital Market Services Branch 2nd Floor,PNB House, Sir. P. M. Road, Fort, Mumbai Maharashtra, India Tel: / 1123 Fax: pnbcaps.alok@pnb.co.in Investor Grievance I.D.: pnbcaps.alok@pnb.co.in Website: Contact Person: Mr. S. K. Khanna SEBI Registration No. INBI Edelweiss Capital Limited 14th Floor, Express Towers Nariman Point, Mumbai Maharashtra, India Tel: Fax: alokind.rights@edelcap.com Investor Grievance I.D.: customerservice.mb@edelcap.com Website: Contact Person: Mr. Sachin Kapoor SEBI Registration No. INM IDBI Capital Market Services Limited 5 th floor, Mafatlal Centre, Nariman Point, Mumbai Maharashtra, India Tel: / 1256 Fax: alok.rights@idbicapital.com Investor Grievance I.D.: redressal@idbicapital.com Website: Contact Person: Mr. Neelabh Dubey/ Ms. Menka Jha SEBI Registration No. INM SBI Capital Markets Limited 202, Maker Tower E, Cuffe Parade, Mumbai Maharashtra, India Tel: Fax: alokrights@sbicaps.com Investor Grievance I.D.: investor.relation@sbicaps.com Website: Contact Person: Mr. Gitesh Vargantwar SEBI Registration No. INM

58 Legal Advisor to the Issue AZB & Partners Express Towers, 23 rd Floor Nariman Point Mumbai Tel : Fax : mumbai@azbpartners.com Registrar to the Issue Link Intime India Private Limited C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup West, Mumbai , India Tel: Fax: alok.rights@linkintime.co.in Website: Contact Person: Mr. Nilesh Chalke SEBI Registration No.: INR The SEBI registration of Link Intime India Private Limited has been renewed by SEBI by way of a letter dated September 1, Further, Link Intime India Private Limited has by way of a letter dated January 13, 2009 intimated SEBI of the change in name of Link Intime India Private Limited from Intime Spectrum Registry Limited to Link Intime India Private Limited. Bankers to the Issue AXIS Bank Limited Maker Tower E, 3 rd Floor, Cuffe Parade, Colaba, Mumbai Tel: Fax: prashant.fernandes@axisbank.com The Hongkong and Shanghai Banking Corporation Limited Plot No B, Western Express Highway, Sahar Road Junction, Vile Parle (East), Mumbai Tel: Fax: sonambajaj@hsbc.co.in The Karur Vysya Bank Limited Kamanwala Chambers, Ground Floor, Sir P. M. Road, Fort, Mumbai Tel: Fax: subramaniansm@kvbmail.com Canara Bank Capital Market Services Branch, 11 Homji Stree, Verma Chambers, Fort, Mumbai Tel: Fax: mcity2422@canbank.co.in IDBI Bank Limited Cash Management Services 224- A Wing, Mittal Court, Nariman Point, Mumbai Tel: Fax: nitin.rokhade@idbi.co.in Punjab National Bank Capital Market Services Branch PNB House, 2nd Floor, P. M. Road, Fort, Mumbai Tel: Fax: pnbcapsmumbai@pnb.co.in 26

59 Standard Chartered Bank Wholesale Banking, 90, Mahatma Gandhi Road, Fort, Mumbai Tel: Fax: State Bank Of India Capital Market Branch, Mumbai Main Branch Building, Mumbai Samachar Marg, Fort, Mumbai Tel: Fax: Yes Bank Limited Tiecicon House, Dr. E. Moses Road, Mahalaxmi, Mumbai , India Tel: Fax: Bankers of the Company State Bank of India Backbay Reclamation Branch, Raheja Chambers, Free Press Journal Marg, Nariman Point, Mumbai Tel: Fax: The Federal Bank Ltd. Crawford Market branch, Mimson House, 92, L. T. Marg, Mumbai Tel: / 3203 / 3315 Fax: bbyd@federalbank.co.in State Bank of Hyderabad, Nariman Point Branch, 11-C, Mittal Tower, 1st Floor, Nariman Point, Mumbai Tel: / 3550 Fax: narimanpoint@sbhyd.co.in State Bank of Bikaner & Jaipur Gr. Floor, NIRMAL Building Nariman Point, Mumbai Tel: / Fax: sbbj10731@sbbj.co.in Bank of India, Mumbai Large Corporate Banking Branch Bank of India Building, 4 th Floor 70-80, M. G. Road, Fort, Punjab National Bank, PNB House, Sir P.M.Road, Fort, Mumbai Tel: / Fax: / bo0062@pnb.co.in The Karur Vysya Bank Limited. Kamanwala Chambers, Sir P.M. Road, Fort, Mumbai Tel: / Fax: kmohan@kvbmail.com Standard Chartered Bank 90, M.G. Road, 2 nd Floor Fort, Mumbai Tel: Fax: / pallav.sangal@standardchartered.com Andhra Bank, Fort Branch, 18, Homi Modi Street, Mumbai Tel: / / Fax: / bmmum051@andhrabank.co.in ING Vysya Bank Limited Regional Office, Poonam Chambers, A Wing, Dr. Annie Besant Road, 27

60 Mumbai Tel: / / Fax: / mumbai.lcbb@bankofindia.co.in The Jammu & Kashmir Bank Limited 79A, Mehta House, Bombay Samachar Marg, Fort, Mumbai Tel: / Fax: akpandita@jkbmail.com State Bank of Indore Commercial Branch Mittal Court, 'B' Wing, Nariman Point, Mumbai Tel: / Fax: / sbn3342@sbindore.co.in Bank of Baroda Corporate Financial Services Branch, 1st Floor, 3rd Walchand Hirachand Marg, Ballard Pier, Mumbai Tel: / Fax: cfsbal@bankofbaroda.com State Bank of Travancore Corporate Finance Branch Tulsiani Chambers, West Wing, 1st Floor,212, Free Press Journal Marg, Nariman Point, Mumbai Tel: Fax: cfb@sbt.co.in Dena Bank C-10, G - Block Bandra Kurla Complex Bandra (E), Mumbai Tel: / Fax: bankur@denabank.co.in Calyon Bank Hoechst House 11th, 12th, 14th Floor Nariman Point Mumbai Tel: Fax: vishwanathan.iyer@in.calyon.com Worli, Mumbai Tel: / Fax: hiren.vora@ingvysyabank.com Syndicate Bank Syndicate Bank Building, 26A, Sir P.M. Road, Fort, Mumbai Tel: / / Fax: mh.5000mumfort@syndicatebank.co.in State Bank of Patiala, Commercial Branch, 1st Floor, Atlanta, Nariman Point, Mumbai Tel: Fax: sbp313@gmail.com State Bank of Mysore Corporate Accounts Branch 224-Mittal Court C Wing, Nariman Point, Mumbai Tel: / 536 / 534 / 502 / 501 Fax: / mumbai@sbm.co.in Industrial Development Bank of India Limited Large Corporate Group, IDBI Tower, WTC Complex, Cuffe Parade, Mumbai Tel: Extn Fax: , sk.verma@idbi.co.in AXIS Bank Limited Atlanta, Ground Floor, 209 Nariman Point Branch Mumbai Tel: / Fax: kirti.nimbre@axisbank.com Canara Bank Prime Corporate Branch II, IInd Floor, World Trade Tower, Barakhamba Lane, New Delhi Tel: / Fax: delhi1942@canbank.co.in 28

61 Auditors of our Company M/s. Gandhi & Parekh 6, Saraswati Darshan, 2nd Floor, Opp. New Era Cinema, S. V. Road, Malad (West), Mumbai Tel: Fax: mailto: Contact Person: Mr. Devang Parekh Inter-se Responsibilities of the Lead Managers The responsibilities and co-ordination roles for various activities in this Issue have been distributed between Axis, Edelweiss, Fortune Financial, IDBICAPS, PNB and SBICAPS as the Lead Managers as under: No Activities Responsibility* Coordinator 1. Capital structuring with the relative components and formalities such as the composition of debt and equity, type of instruments, etc. 2. Liaison with Stock Exchanges and SEBI, including obtaining in-principle listing approval and completion of prescribed formalities with the Stock Exchanges and SEBI 3 Due diligence of our Company s operations / management /legal/ business plans etc. 4. Drafting & design of the offer document and of statutory advertisement/publicity material including newspaper advertisements and memorandum/ brochure containing salient features of the offer document. The designated Lead Manager shall ensure compliance with stipulated requirements and completion of prescribed formalities (including finalization of Letter of Offer) with Stock Exchanges, the Registrar of Companies and SEBI. 5. Drafting and approval of all publicity material other than statutory advertisement (mentioned in (4) above) including corporate advertisement, brochure, corporate film, etc. 6 Marketing of the Issue, which will cover, inter alia, formulating marketing strategies, preparation of publicity budget, arrangements for selection of (i) ad-media, (ii) centres of holding conferences (iii) collection centres, (iv) distribution of publicity and issue material including application form, Letter of Offer, Abridged Letter of Offer and brochure and deciding on quantum of issue material. 7 Selection of various agencies connected with the issue, namely Registrars to the Issue, Bankers to the Issue, printers and advertisement agencies. 8 Follow-up with Bankers to the Issue to get estimates of Collection and advising the Issuer about closure of the Issue, based on correct figures. 9 The post Issue activities will involve essential follow up steps, which must include finalization of basis of allotment / weeding out of multiple applications, listing of instruments All All All All All All All All All AXIS SBICAPS SBICAPS SBICAPS Edelweiss AXIS IDBICAPS PNB AXIS 29

62 No Activities Responsibility* Coordinator and dispatch of certificates and refunds, with the various agencies connected with the work such as Registrar to the Issue, Bankers to the Issue and the bank handling refund business. Lead Managers shall be responsible for ensuring that these agencies fulfill their functions and enable them to discharge this responsibility through suitable agreements with the Issuer Company. * For the purpose of allocation of responsibilities in this Issue, All means each of the Lead Managers Credit Rating As this is an issue of equity shares, credit rating is not required for this Issue. The details of the ratings received and outstanding by our Company for various securities in the last three years are as follows: Borrowing Programs Short term borrowings / securities Non-convertible debentures Short Term Debt Programme Commercial Paper/ MIBOR linked Short Term NCDs/ other Short Term instrument Commercial Paper Programme Amount (Rs.) Rating Agency Rating Date of Rating Letter 20 crores CARE PR1 (Indicating superior capacity for repayment of short-term promissory obligations). 40 crores CRISIL P1 (Indicates that the degree of safety with regard to timely payment of interest and principal on the instrument is very strong). Rs. 50 crores CARE PR1 (Indicating strong capacity for timely payment of short term debt obligations and carrying lowest credit risk) Rs. 80 crores Fitch Ratings India Private Limited F1 (ind) (Indicates the strongest capacity for timely payment of financial commitments relative to other issuers or issues in the country. Under the national rating scale, this rating is assigned to the best credit risk relative to all others in the country. ) January 19, 2006 January 5, 2006 June 20, 2006 June 19, 2006 Commercial Rs. 100 crores CARE PR1 (Indicating August 7,

63 Borrowing Programs Paper/ MIBOR linked Short Term NCDs/ other Short Term instrument Commercial Paper/ MIBOR linked Short Term NCDs/ other Short Term instrument Commercial Paper/ MIBOR linked Short Term NCDs/ other Short Term instrument Commercial Paper/ MIBOR linked Short Term NCDs/ other Short Term instrument Short term bank facilities under Basel II Commercial Paper/ MIBOR linked Short Term NCDs/ other Short Term instrument Commercial Paper/ MIBOR linked Short Term NCDs/ other Short Term instrument Amount (Rs.) Rating Agency Rating Date of Rating Letter (enhanced from Rs.50 crores) Rs. 200 crores (enhanced from Rs.100 crores) Rs.300 crores (enhanced from Rs.200 crores) Rs. 500 crores (enhanced from Rs.300 crores) Bank facilities of Rs. 1, crores (including outstanding term loans) Rs. 750 crores (enhanced from 500 crores) Rs. 750 crores (enhanced from 500 crores) Long term borrowings / securities Long term rating Fitch Ratings India Private Ltd strong capacity for timely payment of short term debt obligations and carrying lowest credit risk) CARE PR1 (Indicating strong capacity for timely payment of short term debt obligations and carrying lowest credit risk) CARE PR1 (Indicating strong capacity for timely payment of short term debt obligations and carrying lowest credit risk) CARE PR1 (Indicating strong capacity for timely payment of short term debt obligations and carrying lowest credit risk) CARE PR1 (Indicating strong capacity for timely payment of short term debt obligations and carrying lowest credit risk) CARE PR1 (Indicating strong capacity for timely payment of short term debt obligations and carrying lowest credit risk) CARE PR1 (Indicating strong capacity for timely payment of short term debt obligations and carrying lowest credit risk) May 18, 2007 December 27, 2007 March 5, 2008 April 22, 2008 July 22, 2008 October 24, 2008 A-(ind) June

64 Borrowing Programs Non-convertible debentures Non-convertible debentures Long term bank facilities (Under Basel II) Amount (Rs.) Rating Agency Rating Date of Rating Letter Rs. 125 crores Fitch Ratings India Private Ltd Rs. 100 crores Fitch Ratings India Private Ltd Rs. 4, crores (including outstanding term loans) A-(ind) June 2006 A-(ind)) June 2006 CARE CARE A (Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk). April 22, 2008 Trustees As this is an issue of equity shares, the appointment of trustees is not required. IPO Grading This being a Rights Issue of Equity Shares, no IPO Grading is required. Monitoring Agency A monitoring agency is not required to be appointed in terms of Clause 8.17 of the SEBI DIP Guidelines. The Board of Directors of our Company will monitor the use of the proceeds of this Issue. Underwriters Axis Bank Limited Central Office, Maker Tower F, 11 th floor, Cuffe Parade, Colaba Mumbai Maharashtra, India Tel: Fax: alokind@axisbank.com Website: Contact Person: Mr. Advait Majmudar SEBI Registration No. INM Marwadi Shares and Finance Limited A/5, Turakhia Park, Near Corporation Bank, M.G. Road, Kandivali (West), Mumbai Maharashtra, India Tel: Fax: tushit. mangukiya@marwadionline.net Website: Contact Person: Mr. Tushit Mangukiya IDBI Capital Market Services Limited 5 th floor, Mafatlal Centre, Nariman Point, Mumbai Maharashtra, India Tel: / 1256 Fax: alok.rights@idbicapital.com Investor GrievanceI.D.:redressal@idbicapital.com Website: Contact Person: Mr. Gyan Mohan SEBI Registration No. INM Punjab National Bank Capital Market Services Branch 2nd Floor,PNB House, Sir. P. M. Road, Fort, Mumbai Maharashtra, India Tel: / 1123 Fax: pnbcaps.alok@pnb.co.in Investor Grievance I.D.: pnbcaps.alok@pnb.co.in 32

65 SEBI Registration No. INB State Bank of India Global Markets, Corporate Centre, 15 th Floor, State Bank Bhavan, Madame Cama road, Nariman Pont, Mumbai Tel: / 1011 Fax: gm.tr@sbi.co.in Website: Contact Person: Mr. R. C. Verma SEBI Registration No. INU Website: Contact Person: Mr. S. K. Khanna SEBI Registration No. INBI Underwriting Agreement Our Company has entered into an Underwriting Agreement dated March 19, 2009 in relation to the Issue. The details of such Underwriting Agreement have been disclosed in the chapter titled Capital Structure beginning on page 34 of this Letter of Offer. In the opinion of the Board of Directors of our Company, the resources of the Underwriters are sufficient to enable them to discharge their underwriting obligations in full. Impersonation As a matter of abundant caution, attention of the Investors is specifically drawn to the provisions of subsection (1) of Section 68A of the Act which is reproduced below: Any person who makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or otherwise induces a company to allot, or register any transfer of shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years Minimum Subscription If our Company does not receive the minimum subscription of 90% of the Issue including devolvement of Underwriters, the entire subscription amount shall be refunded to the Investors within fifteen days from the date of closure of the Issue. If there is delay in the refund of subscription by more than 8 days after the Company becomes liable to pay the subscription amount (i.e. fifteen days after closure of the issue), the Company will pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act. 33

66 The share capital of our company is as under: CAPITAL STRUCTURE Authorized share capital Aggregate nominal value (In Rs.) Aggregate Value at Issue Price (In Rs.) 65,00,00,000 Equity Shares of Rs. 10/- each 6,50,00,00,000 Total 6,50,00,00,000 Issued share capital 19,69,74,969 Equity Shares of Rs. 10/- each 1,96,97,49,690 Subscribed and paid-up share capital 19,69,74,969 Equity Shares of Rs. 10/- each fully paid-up 1,96,97,49,690 Present Issue being offered to the Eligible Equity Shareholders through the Letter of Offer 40,87,23,061 Rights Equity Shares of Rs. 10/- each 4,08,72,30,610 4,49,59,53,671 Paid up capital after the Issue 60,56,98,030 Equity Shares of Rs. 10/- each 6,05,69,80,300 Share premium account Existing securities premium account 5,96,93,97,476 Securities premium account after the Issue 6,37,81,20,537 Notes to capital structure: 1. Details of increase / reclassification of Authorised Share Capital since incorporation Sr. No. Particulars of increase Date of shareholders meeting 1. Increase in authorised share capital from Rs. 1 lakh to Rs. 10 lakh. November 26, Increase in authorised share capital from Rs. 10 February 18,

67 Sr. No. Particulars of increase Date of shareholders meeting lakh to Rs. 20 lakh. 3. Increase in authorised share capital from Rs.20 lakh to Rs. 50 lakh. 4. Our equity shares were sub-divided into Equity Shares of face value of Rs. 10 each i.e. 2,47,500 Equity Shares of Rs. 10 each. March 14, 1988 July 20, Increase in authorised share capital from Rs. 50 lakh to Rs crores. 6. Increase in authorised share capital from Rs crores to Rs. 5 crores. 7. Increase in authorised share capital from Rs. 5 crores to Rs. 12 crores. 8. Increase in authorised share capital from Rs. 12 crores to Rs. 25 crores. 9. Increase in authorised share capital from Rs. 25 crores to Rs. 30 crores comprising of 2,00,00,000 Equity Shares of Rs. 10/- each and 1,00,00,000 preference shares of Rs. 10/- each. 10. Increase in authorised share capital from Rs. 30 crores to Rs.45 crores comprising of 2,50,00,000 Equity Shares of Rs.10/- each and 2,00,00,000 preference shares of Rs.10/- each. 11. Increase in authorised share capital from Rs. 45 crores to Rs. 75 crores comprising of 5,00,00,000 Equity Shares of Rs. 10/- each and 2,50,00,000 preference shares of Rs. 10/- each. 12. Increase in authorised share capital from Rs. 75 crores to Rs. 80 crores comprising of 5,50,00,000 Equity Shares of Rs. 10/- each and 2,50,00,000 preference shares of Rs.10/- each. 13. Increase in authorised share capital from Rs. 80 crores to Rs. 120 crores comprising of 9,50,00,000 Equity Shares of Rs. 10/- each and 2,50,00,000 preference shares of Rs. 10/- each. 14. Increase in authorised share capital from Rs. 120 crores to Rs. 300 crores comprising of 17,50,00,000 Equity Shares of Rs. 10/- each and 12,50,00,000 preference shares of Rs. 10/- each. 15. Reclassification of un-issued 3,50,00,000 preference shares of Rs. 10/- each into 3,50,00,000 Equity Shares of Rs.10/- each. After reclassification, the authorized share capital comprised of 21,00,00,000 Equity Shares of Rs. 10/- each and 9,00,00,000 preference shares of Rs.10/- each. 16. Reclassification of un-issued 6,50,00,000 preference shares of Rs. 10/- each into 6,50,00,000 Equity Shares of Rs. 10/- each. After reclassification, the authorized share capital September 30, 1992 August 9, 1994 November 24, 1994 December 27, 1995 April 14, 1998 June 25, 1998 March 21, 2000 September 27, 2002 March 29, 2004 October 28, 2005 January 31,

68 Sr. No. Particulars of increase Date of shareholders meeting comprised of 27,50,00,000 Equity Shares of Rs. 10/- each and 2,50,00,000 preference shares of Rs. 10/- each. 17. Reclassification of un-issued 2,50,00,000 preference shares of Rs. 10/- each into 2,50,00,000 Equity Shares of Rs. 10/- each. After reclassification, the authorized share capital comprised of 30,00,00,000 Equity Shares of Rs. 10/- each. December 19, Increase in authorised share capital from Rs. 300 crores to Rs. 525 crores comprising of 52,50,00,000 Equity Shares of Rs.10/- 19. Increase in authorised share capital from Rs. 525 crores to Rs. 650 crores comprising of 65,00,00,000 Equity Shares of Rs.10/- February 27, a. Build up of Equity Share Capital Build up of Equity Share capital of our Company Date of allotment No. of Equity Shares Allotted Face Value (Rs.) Issue Price (Rs.) Cumulative Number of shares Cumulative paid-up capital (Rs.) Consideration (Rs.) Nature of consideration Remarks June 16, 1986 March 14, 1988 January 2, Cash Allotted to Promoters 21, ,540 21,54,000 21,50, Cash Allotted to Promoters 3, ,750 24,75,000 3,21, Cash Allotted to Promoters By way of a shareholders resolution dated July 20, 1992, our equity shares were sub-divided into Equity Shares of face value of Rs. 10/- each i.e. 2,47,500 Equity Shares of Rs. 10 each. September 30, ,37, ,84,700 48,47,000 23,72, Cash Allotted to Promoters 74, N. A. 5,58,800 55,88,000 7,41, Bonus issue Allotted to Promoters by way of bonus 1,73, N. A. 7,32,200 73,22,000 17,34, Bonus issue Allotted to Promoters by way of bonus March 9, 1993 October 30, ,97, N. A. 12,30,096 1,23,00,960 49,78, Bonus issue Allotted to Promoters by way of bonus 2,65, ,95,096 1,49,50,960 53,00, Cash Allotted to Promoters 22,50, ,45,096 3,74,50,960 4,50,00, Cash Public Issue March 18, 74,90, ,23,52,880 14,98,03, Cash Rights issue 36

69 Date of allotment No. of Equity Shares Allotted Face Value (Rs.) Issue Price (Rs.) Cumulative Number of shares Cumulative paid-up capital (Rs.) Consideration (Rs.) Nature of consideration Remarks 1997 of Equity Shares to the existing Equity Shareholders of our Company in the ratio of two Equity Shares for every one Equity Share held. December 22, 1997 July 28, 1998 November 24, 1998 March 21, 2000 April 28, 2000 January 6, ,40, ,24,75,288 12,47,52,880 2,23,20, Cash Private placement Indiaman Mauritius Fund Ltd. 22,50, ,47,25,288 14,72,52,880 4,50,00, Cash Private placement to our Promoters 87,77, ,35,02,288 23,50,22,880 15,35,97, Cash Private placement to Century Direct Fund (Mauritius) L.L.C. 3,65, ,38,67,988 23,86,79,880 63,99, Cash Private placement to TCFC Finance Limited. 25,90, ,64,57,988 26,45,79,880 6,99,30, Cash Conversion of optionally fully convertible debentures into Equity Shares.(1) 14,19, ,78,77,488 27,87,74,880 8,99,96, Cash Conversion of preference shares into Equity Shares. 4,73, ,83,50,488 28,35,04,880 2,99,88, Cash Conversion of preference shares into Equity Shares. 1,19,40, ,02,90,688 40,29,06,880 15,99,98, Cash Conversion of privately placed secured fully to 37

70 Date of allotment March 20, 2002 December 4, 2002 March 31, 2004 July 16, 2004 July 19, 2004 July 23, 2004 July 28, 2004 August 10, 2004 August 16, 2004 August 31, No. of Equity Shares Allotted Face Value (Rs.) Issue Price (Rs.) Cumulative Number of shares Cumulative paid-up capital (Rs.) Consideration (Rs.) Nature of consideration Remarks convertible debentures into Equity Shares. (2) 20,00, ,22,90,688 42,29,06,880 2,00,00, Cash Conversion of privately placed secured fully convertible debentures into Equity Shares. (3) 4,54,01, ,76,91,828 87,69,18,280 51,03,08, Cash Conversion of 14% secured fully convertible debentures issued on a rights basis into Equity Shares.(4) 5,38, ,82,30,718 88,23,07,180 3,00,00, Cash Issue of Equity Shares to Khandelwal Polyesters Private Limited on a preferential basis. (4a) 30,54, ,12,85,686 91,28,56,860 14,63,32, Cash Conversion of FCCBs into Equity Shares. 9,57, ,22,42,757 92,24,27,570 4,61,49, Cash Conversion of FCCBs into Equity Shares. 90,98, ,13,40,849 1,01,34,08,490 43,87,09, Cash Conversion of FCCBs into Equity Shares. 7,66, ,21,07,667 1,02,10,76,670 3,69,75, Cash Conversion of FCCBs into Equity Shares. 19,25, ,40,33,423 1,04,03,34,230 9,28,59, Cash Conversion of FCCBs into Equity Shares. 9,58, ,49,91,980 1,04,99,19,800 4,62,59, Cash Conversion of FCCBs into Equity Shares. 2,38, ,52,30,396 1,05,23,03,960 1,15,77, Cash Conversion of FCCBs into 38

71 Date of allotment 2004 September 2, 2004 September 4, 2004 September 8, 2004 September 9, 2004 September 20, 2004 October 1, 2004 November 18, 2004 No. of Equity Shares Allotted Face Value (Rs.) Issue Price (Rs.) Cumulative Number of shares Cumulative paid-up capital (Rs.) Consideration (Rs.) Nature of consideration Remarks Equity Shares. 1,43, ,53,73,445 1,05,37,34,450 69,46, Cash Conversion of FCCBs into Equity Shares. 9,54, ,63,27,728 1,06,32,77,280 4,63,39, Cash Conversion of FCCBs into Equity Shares. 4,77, ,68,04,869 1,06,80,48,690 2,31,69, Cash Conversion of FCCBs into Equity Shares. 2,38, ,70,43,439 1,07,04,34,390 1,15,84, Cash Conversion of FCCBs into Equity Shares. 11,92, ,82,36,293 1,08,23,62,930 5,79,24, Cash Conversion of FCCBs into Equity Shares. 3,33, ,85,70,292 1,08,57,02,920 1,62,18, Cash Conversion of FCCBs into Equity Shares. 2,38, ,88,08,811 1,08,80,88,110 1,15,82, Cash Conversion of FCCBs into Equity Shares. 2,38, ,90,47,433 1,09,04,74,330 1,15,87, Cash Conversion of FCCBs into Equity Shares. 11,93, ,02,40,544 1,10,24,05,440 5,79,37, Cash Conversion of FCCBs into Equity Shares. 12,63, ,15,04,423 1,11,50,44,230 6,13,73, Cash Conversion of FCCBs into Equity Shares. 9,53, ,24,58,294 1,12,45,82,940 4,63,19, Cash Conversion of FCCBs into Equity Shares. 6,67, ,31,26,004 1,13,12,60,040 3,24,23, Cash Conversion of FCCBs into Equity Shares. 1,27, ,32,53,865 1,13,25,38,650 69,04, Cash Conversion of FCCBs into Equity Shares. 1,70, ,34,24,827 1,13,42,48,270 92,31, Cash Conversion of FCCBs into Equity Shares. 8,31, ,42,56,190 1,14,25,61,900 4,50,09, Cash Conversion of FCCBs into Equity Shares. 39

72 Date of allotment November 25, 2004 November 26, 2004 December 9, 2004 December 13, 2004 December 15, 2004 March 14, 2005 No. of Equity Shares Allotted Face Value (Rs.) Issue Price (Rs.) Cumulative Number of shares Cumulative paid-up capital (Rs.) Consideration (Rs.) Nature of consideration Remarks 7,27, ,49,83,632 1,14,98,36,320 3,93,83, Cash Conversion of FCCBs into Equity Shares. 16,62, ,66,46,358 1,16,64,63,580 9,00,19, Cash Conversion of FCCBs into Equity Shares. 4,16, ,70,62,686 1,17,06,26,860 2,25,39, Cash Conversion of FCCBs into Equity Shares. 8,27, ,78,90,538 1,17,89,05,380 4,50,59, Cash Conversion of FCCBs into Equity Shares. 16,55, ,95,46,242 1,19,54,62,420 9,01,19, Cash Conversion of FCCBs into Equity Shares. 5,46, ,00,92,642 1,20,09,26,420 3,33,30, Cash Issue of Equity Shares to the Promoter Group on a preferential basis. (4b) 17,48, ,18,41,342 1,21,84,13,420 10,66,70, Cash Issue of Equity Shares to the Promoter Group on a preferential basis. (4b) 32,78, ,51,19,942 1,25,11,99,420 19,99,94, Cash Issue of Equity Shares to the Promoter Group on a preferential basis. (4b) 57,37, ,08,57,642 1,30,85,76,420 34,99,99, Cash Issue of Equity Shares to IL&FS Group on a preferential basis. (4b) 5,54, ,14,12,452 1,31,41,24,520 3,28,72, Cash Conversion of FCCBs into Equity Shares. 26,04, ,40,17,086 1,34,01,70,860 14,49,99, Cash Conversion of optionally fully 40

73 Date of allotment June 7, 2005 July 1, 2005 July 21, 2005 August 11, 2005 August 18, 2005 August 19, 2005 August 29, 2005 October 5, 2005 No. of Equity Shares Allotted Face Value (Rs.) Issue Price (Rs.) Cumulative Number of shares Cumulative paid-up capital (Rs.) Consideration (Rs.) Nature of consideration Remarks convertible debentures into Equity Shares.(5) 26,04, ,66,21,720 1,36,62,17,200 14,49,99, Cash Conversion of optionally fully convertible debentures into Equity Shares.(5) 1,10,46, ,76,68,330 1,47,66,83,300 65,17,49, Cash Conversion of FCCBs into Equity Shares. 3,74, ,80,42,856 1,48,04,28,560 2,17,59, Cash Conversion of FCCBs into Equity Shares. 18,20, ,98,63,704 1,49,86,37,040 13,03,49, Cash Conversion of FCCBs into Equity Shares. 47,90, ,66,59, Cash Conversion of warrants into Equity Shares. (6) 11,76, ,58,30,104 1,55,83,01,040 6,54,90, Cash Conversion of warrants into Equity Shares. (6) 4,55, ,62,85,316 1,56,28,53,160 3,25,87, Cash Conversion of FCCBs into Equity Shares. 10,76, ,73,61,522 1,57,36,15,220 7,70,42, Cash Conversion of FCCBs into Equity Shares. 59, ,74,20,529 1,57,42,05,290 34,81, Cash Conversion of FCCBs into Equity Shares. 1, ,74,21,531 1,57,42,15,310 71, Cash Conversion of FCCBs into Equity Shares. 11, ,74,33,434 1,57,43,34,340 8,52, Cash Conversion of FCCBs into Equity Shares. 4, ,74,37,560 1,57,43,75,600 2,95, Cash Conversion of FCCBs into Equity Shares. November 4, 30, ,74,68,456 1,57,46,84,560 22,11, Cash Conversion of 41

74 Date of allotment No. of Equity Shares Allotted Face Value (Rs.) Issue Price (Rs.) Cumulative Number of shares Cumulative paid-up capital (Rs.) Consideration (Rs.) Nature of consideration Remarks 2005 FCCBs into Equity Shares. April 3, 2006 May 15, 2006 May 30, 2006 June 2, 2006 June 2, 2006 September 27, 2007 October 11, 2007 October 26, 2007 November 16, 2007 December 11, ,00, ,88,68,456 1,58,86,84,560 8,54,00, Cash Equity Shares issued on conversion of optionally convertible preference shares.(7) 97,47, ,86,15,996 1,68,61,59,960 59,45,99, Cash Equity Shares issued on conversion of optionally convertible preference shares. (7) 6,06, ,92,22,945 1,69,22,29,450 4,34,49, Cash Equity Shares issued on conversion of FCCBs 31, ,92,54,367 1,69,25,43,670 22,49, Cash Equity Shares issued on conversion of FCCBs 11,17, ,03,71,974 1,70,37,19,740 8,00,06, Cash Equity Shares issued on conversion of FCCBs 13,64, ,17,36,011 1,71,73,60,110 9,76,47, Cash Equity Shares issued on conversion of FCCBs 13,66, ,31,02,676 1,73,10,26,760 9,78,36, Cash Equity Shares issued on conversion of FCCBs 6,84, ,37,87,514 1,73,78,75,140 4,90,25, Cash Equity Shares issued on conversion of FCCBs 3,09, ,40,96,626 1,74,09,66,260 2,21,28, Cash Equity Shares issued on conversion of FCCBs 1,37, ,42,34,488 1,74,23,44,880 98,69, Cash Equity Shares issued on conversion of FCCBs 42

75 Date of allotment January 11, 2008 January 21, 2008 January 24, 2008 January 25, 2008 February 12, 2008 No. of Equity Shares Allotted Face Value (Rs.) Issue Price (Rs.) Cumulative Number of shares Cumulative paid-up capital (Rs.) Consideration (Rs.) Nature of consideration Remarks 6,20, ,48,54,870 1,74,85,48,700 4,44,11, Cash Equity Shares issued on conversion of FCCBs 10,38, ,58,93,230 1,75,89,32,300 7,43,33, Cash Equity Shares issued on conversion of FCCBs 6,92, ,65,85,470 1,76,58,54,700 4,95,55, Cash Equity Shares issued on conversion of FCCBs 6,92, ,72,78,468 1,77,27,84,680 4,96,09, Cash Equity Shares issued on conversion of FCCBs 28,77, ,01,56,379 1,80,15,63,790 20,60,22, Cash Equity Shares issued on conversion of FCCBs 11,44, ,13,00,765 1,81,30,07,650 8,19,23, Cash Equity Shares issued on conversion of FCCBs 1,73, ,14,74,418 1,81,47,44,180 1,24,31, Cash Equity Shares issued on conversion of FCCBs 1,38, ,16,13,359 1,81,61,33,590 99,46, Cash Equity Shares issued on conversion of FCCBs 3,82, ,19,95,501 1,81,99,55,010 2,73,56, Cash Equity Shares issued on conversion of FCCBs 69, ,20,65,019 1,82,06,50,190 49,76, Cash Equity Shares issued on conversion of FCCBs 2,08, ,22,73,488 1,82,27,34,880 1,49,23, Cash Equity Shares issued on conversion of FCCBs 34, ,23,08,232 1,82,30,82,320 24,87, Cash Equity Shares issued on conversion of FCCBs 43

76 Date of allotment February 14, 2008 February 26, 2008 April 28, 2008 No. of Equity Shares Allotted Face Value (Rs.) Issue Price (Rs.) Cumulative Number of shares Cumulative paid-up capital (Rs.) Consideration (Rs.) Nature of consideration Remarks 18,07, ,41,16,207 1,84,11,62,070 12,94,28, Cash Equity Shares issued on conversion of FCCBs 12,54, ,53,70,287 1,85,37,02,870 8,97,76, Cash Equity Shares issued on conversion of FCCBs 69, ,54,39,958 1,85,43,99,580 49,87, Cash Equity Shares issued on conversion of FCCBs 8,01, ,62,41,176 1,86,24,11,760 5,73,57, Cash Equity Shares issued on conversion of FCCBs 9,33, ,71,74,969 1,87,17,49,690 9,52,46, Cash Preferential allotment of Equity Shares to our Promoter Group Company, Jiwrajka Associates Private Limited 98,00, ,69,74,969 1,96,97,49,690 99,96,00, Cash Equity Shares issued to our Promoter Group Company, Jiwrajka Associates Private Limited on conversion of warrants. (8) (1) Private placement of 17% 7,00,000 optionally fully convertible debentures of Rs. 100/- each aggregating to Rs. 7 crores with IDBI in two tranches on January 29, 1999 and March 31, (2) Our Board had passed a resolution dated July 7, 2000 for private placement of 16% 10,00,000 secured fully convertible debentures of Rs. 100/- each, with IDBI and 16% 8,00,000 secured fully convertible debentures of Rs. 100 each, with Unit Trust of India aggregating to Rs. 18 crores. However, IDBI subscribed to 16% 10,00,000 secured fully convertible debentures aggregating to Rs. 10 crores and Unit Trust of India subscribed to 16% 6,00,000 secured fully convertible debentures aggregating to Rs. 6 crores. (3) Private placement of 16% 2,00,000 secured fully convertible debentures of Rs. 100/- each aggregating to Rs. 2 crores with Development Credit Bank Limited on September 21,

77 (4) Rights issue of 14% 56,70,098 secured fully convertible debentures of Rs. 90/- each aggregating to Rs crores to the Equity Shareholders of our Company in the ratio of one secured fully convertible debenture for every five Equity Shares held as on March 12, (4a) Our Company s statutory auditor, M/s. Gandhi & Parekh, have, by way of their certificate dated March 14, 2005, certified that the provisions of the SEBI DIP Guidelines have been complied with in respect of this preferential allotment. (4b) Our Company s statutory auditor, M/s. Gandhi & Parekh, have, by way of their certificate dated November 9, 2004, certified that the provisions of the SEBI DIP Guidelines have been complied with in respect of this preferential allotment. (5) Private placement by way of preferential allotment of 10% 29,00,000 optionally fully convertible debentures of Rs. 100/- each aggregating to Rs. 29 crores with Life Insurance Corporation of India on March 31, Our Company s statutory auditor, M/s. Gandhi & Parekh, have, by way of their certificate dated March 14, 2005, certified that the provisions of the SEBI DIP Guidelines have been complied with in respect of this preferential allotment. (6) Private placement of 59,66,400 warrants of Rs each, aggregating to Rs crores with TAD (Mauritius) Ltd. on March 31, Our Company s statutory auditor, M/s. Gandhi & Parekh, have, by way of their certificate dated March 14, 2005, certified that the provisions of the SEBI DIP Guidelines have been complied with in respect of this preferential allotment. (7) Private placement of 10% 6,80,00,000 optionally convertible preference shares of Rs. 10/- each aggregating to Rs. 68 crores with TAD (Mauritius) Ltd. on December 9, Our Company s statutory auditor, M/s. Gandhi & Parekh, have, by way of their certificate dated November 9, 2004, certified that the provisions of the SEBI DIP Guidelines have been complied with in respect of this preferential allotment. (8) Pursuant to the meeting of the Executive Committee of our Board of Directors on February 26, 2008, 1,98,00,000 warrants were allotted to our Promoter Group Company, Jiwrajka Associates Private Limited at a pre-determined price of Rs. 102/- per warrant. As per the terms of this issuance, 10% of the issue price was to be paid upfront at the time of allotment. Out of these 1,98,00,000 warrants, 98,00,000 warrants were to be converted into Equity Shares on or before March 31, 2009 and the balance 1,00,00,000 warrants are convertible into Equity Shares on or before July 31, Accordingly, Jiwrajka Associates Private Limited exercised its option for conversion of these 98,00,000 warrants into 98,00,000 Equity Rs. 102/- each aggregating to Rs crores on April 28, Our Company s statutory auditor, M/s. Gandhi & Parekh, have, by way of their certificate dated January 18, 2008, certified that the provisions of the SEBI DIP Guidelines have been complied with in respect of this preferential allotment. 2b. Details of Equity Shares Bought Back Nil 2c. Details of outstanding warrants Allottee Jiwrajka Associates Private Limited No. of Warrants Outstanding Date of Issue 1,00,00,000 February 26, 2008 Exercise Period On or before July 31, 2009 Price (Rs.) Amount Paid on allotment (10%) (Rs. In crores) Amount payable on exercise (Rs. In crores) In order to meet our Company s requirement of funds during the period July - September 2008, Jiwrajka Associates Private Limited (our Promoter Group entity) without exercising the option to convert these warrants, voluntarily infused Rs crores (i.e. the balance 90% amount payable upon exercise of the option of conversion of warrants into equity shares) as share application money. This share application money has since been refunded in February 2009 at the request of the warrant holder. The option to exercise these warrants has not yet been exercised by the warrant holder. For risks relating to the non-conversion of these warrants, please refer to risk factor no. 51 in the chapter titled Risk Factors beginning on page xxvii of this Letter of Offer. 45

78 3. Current shareholding pattern of the Company as on March 13, 2009 Category of shareholders A. Promoters No. of Equity Shares held pre-issue Percentage of pre-issue Share Capital No. of Equity Shares held post-issue (assuming allotment of all Rights Equity Shares) Percentage of post-issue Share Capital (assuming allotment of all Rights Equity Shares) Ashok B. Jiwrajka 65,19, ,00,46, Dilip B. Jiwrajka 65,96, ,02,82, Surendra B. Jiwrajka 68,52, ,10,70, Total Promoters (A) 1,99,67, ,13,99, B. Promoter Group Chandrakumar Bubna 99, ,07, Chandrakala A. Jiwrajka 1,56, ,82, Pramila D. Jiwrajka 3,91, ,03, Geeta S. Jiwrajka 1,35, ,15, Narbada B. Jiwrajka 1,21, ,73, Jayshree Jiwrajka 22, , Vinod Jiwrajka 22, , Santosh Jiwrajka 28, , Kiran Jiwrajka 28, , Nirvan Holdings Private Limited 27,20, ,64, Niraj Realtors and Shares Private Limited 1,93,08, ,93,72, Jiwrajka Investment Private Limited 10,67, ,81, Ashok Realtors Private Limited 3,11, ,57, Alok Knit Exports Limited 28,56, ,82, Grabal Alok Impex Limited 57,10, ,59, Jiwrajka Associates Private Limited 1,11,11, ,68, Alok Finance Private Limited 59,95, ,36,

79 Category of shareholders No. of Equity Shares held pre-issue Percentage of pre-issue Share Capital No. of Equity Shares held post-issue (assuming allotment of all Rights Equity Shares) Percentage of post-issue Share Capital (assuming allotment of all Rights Equity Shares) Total Promoter Group (B) 5,00,87, ,40,18, Promoter Group Shareholding (A+B) 7,00,54, ,54,18, C. Public Shareholding Institutions Mutual Funds/UTI 35,49, ,09,13, Financial Institutions/Banks 13,63, ,91, Venture Capital Funds 56,55, ,73,91, Insurance Companies 1,23,45, ,79,63, Foreign Institutional Investors 45,27,08, ,92,07, Sub-Total (C1) 6,81,84, ,96,67, Non-Institutions Bodies Corporate 2,61,77, ,04,96, Individuals holding nominal share capital upto Rs. 1 lakh Individuals holding nominal share capital in excess of Rs. 1 lakh 2,40,64,066 42,65, ,39,97, ,31,17, Clearing Members ,51, Market Maker ,20, Non Resident Indians ,91, Overseas Corporate Bodies 3, , Trusts 3, , HUF ,18, Sub-Total (C2) 5,87,35, ,06,11, Total Public 12,69,20, ,02,79,

80 Category of shareholders Shareholding (C) No. of Equity Shares held pre-issue Percentage of pre-issue Share Capital No. of Equity Shares held post-issue (assuming allotment of all Rights Equity Shares) Percentage of post-issue Share Capital (assuming allotment of all Rights Equity Shares) Grand Total (A+B+C) 19,69,74, ,56,98, Our Company shall ensure compliance with the provisions of SEBI Circular No. SEBI/CFD/DIL/LA/2009/3/2 dated February 3, 2009, in accordance with the period specified by the Listing Agreement entered into with the Stock Exchanges. 4. Details of Share Premium prior to the Issue: Financial Year Particulars No. of Equity Shares Premium per share Amount (In Rs. lakhs) Cumulative Amount (In Rs. lakhs) Allotted to Promoters Allotted to Promoters 21, Allotted to Promoters 3, By way of a shareholders resolution dated July 20, 1992, our equity shares were sub-divided into Equity Shares of face value of Rs. 10/- each i.e. 2,47,500 Equity Shares of Rs. 10 each Allotted to Promoters and allotment to Promoters by 9,82,596 way of bonus Allotted to Promoters 2,65, Public issue 22,50, Right Issue 74,90, , Private Placement to Indiaman Mauritius Fund Ltd. 12,40, , Private Placement to Promoters 22,50, , Private Placement to Century Direct Fund (Mauritius) L.L.C. and TCFC Finance Limited 91,42, , Conversion of optionally fully convertible debentures 25,90, , Conversion of preference shares 14,19, , Conversion of preference shares 4,73, , Conversion of privately 1,19,40, ,

81 Financial Year Particulars placed secured fully convertible debentures No. of Equity Shares Premium per share Amount (In Rs. lakhs) Cumulative Amount (In Rs. lakhs) Conversion of privately placed secured fully convertible debentures 20,00, ,867.3 Conversion of 14% secured fully convertible debentures issued on a rights basis 4,54,01, , Issue of Equity Shares to Khandelwal Polyesters Private Limited on a preferential basis. 5,38, , Conversion of FCCBs 30,54, , , Conversion of FCCBs 1,27,47, , , Conversion of FCCBs 9,58, , Conversion of FCCBs 81,34, , , Conversion of FCCBs 2,98, , Conversion of FCCBs 36,37, , , Conversion of FCCBs 24,83, , , Issue of Equity Shares to the Promoter Group & IL&FS Group on a preferential basis 1,13,11, , , Conversion of FCCBs 5,54, , Conversion of optionally fully convertible debentures 26,04, , , Conversion of optionally fully convertible debentures 26,04, , , Conversion of optionally fully convertible debentures 59,66, , , Conversion of FCCBs 3,74, , Conversion of FCCBs 1,11,05, , , Conversion of FCCBs 34,00, , , Conversion of optionally convertible preference shares into Equity Shares 1,11,47, , , Conversion of FCCBs 17,55, , , Conversion of FCCBs 1,58,69, , , Preferential issue of Equity Shares to our Promoter Group Company, Jiwrajka Associates Private Limited 9,33, , Conversion of warrants issued 98,00, , ,

82 Financial Year Particulars to our Promoter Group Company, Jiwrajka Associates Private Limited No. of Equity Shares Premium per share Amount (In Rs. lakhs) Cumulative Amount (In Rs. lakhs) 19,69,74, Details of locked-in Equity Shares Name of the Shareholder Jiwrajka Associates Private Limited Date of allotment and fully paid up February 26, 2008 April 28, 2008 No. of Equity Shares Total 1,07,33,793 Face Value (Rs.) Lock-in upto 9,33, February 26, ,00,000(*) February 28, 2011 * 98,00,000 warrants were allotted to Jiwrajka Associates Private Limited on February 26, Details of the shareholding of the Promoter, Promoter Group and our Directors in our Company Promoters Category of shareholders Percentage of Shareholding No. of Equity Shares Mr. Ashok B. Jiwrajka ,19,168 Mr. Dilip B. Jiwrajka ,96,036 Mr. Surendra B. Jiwrajka ,52,263 Sub-total (a) ,99,67,467 Promoter Group (individuals) Mr. Chandrakumar Bubna ,920 Mrs. Chandrakala A. Jiwrajka ,56,749 Ms. Pramila D. Jiwrajka ,91,357 Ms. Geeta S. Jiwrajka ,35,130 Mrs. Narbada B. Jiwrajka ,21,617 Ms. Jayshree Jiwrajka ,500 Mr. Vinod Jiwrajka ,500 Mr. Santosh Jiwrajka ,500 Ms. Kiran Jiwrajka ,500 Sub-total (b) ,06,773 50

83 Category of shareholders Percentage of Shareholding No. of Equity Shares Promoter Group Nirvan Holdings Private Limited ,20,163 Niraj Realtors and Shares Private Limited ,93,08,027 Jiwrajka Investment Private Limited ,67,314 Ashok Realtors Private Limited ,11,477 Alok Knit Exports Limited ,56,022 Grabal Alok Impex Limited ,10,368 Jiwrajka Associates Private Limited ,11,11,729 Alok Finance Private Limited ,95,600 Sub-total (c) ,90,80,700 Total Promoter and Promoter Group Shareholding ,00,54,940 Directors Mr. Ashok G. Rajani Mr. K. R. Modi ,500 Mr. K. D. Hodavdekar Nil Nil Mr. K. J. Punnathara Nil Nil Ms. Hiroo S. Advani Nil Nil Mr. Timothy Ingram Nil Nil Mr. Rakesh Kapoor Mr. A. B. Dasgupta Nil Nil 7. Details of purchases / sales / financing in our Company s Equity Shares by the Promoters, directors of Promoters and the Promoter Group during the last six months Nil 8. Details of Equity Shares of our Promoters and Promoter Group currently pledged Name of the pledgor Details of pledge transactions Date of i Number of E i Aggregate details after the pledge transactions Total no. fe i Information on pledge 51

84 Total no. of Equity Shares pledged % of total Equity Shares pledged to total no. of Equity Shares held by the pledgor in our Company % of the Equity Shares pledged to the total no. of outstanding Equity Shares of our Company Mr. Ashok B. Jiwrajka April 6, ,36,706 65,19,168 50,31, % 2.55% December 26, ,50,000 February 23, ,28,797 June 24, ,15,500 50,31,003 Mr. Dilip B. Jiwrajka April 6, ,85,949 65,96,036 57,77, % 2.93% December 26, ,00,000 February 23, ,00,000 June 24, ,15,500 July 8, ,76,000 57,77,449 Mr. Surendra B. Jiwrajka April 6, ,04,579 68,52,263 58,10, % 2.95% December 26, ,50,000 February 23, ,13,104 June 24, ,97,900 July 8, ,43,523 March 3, ,01,122 58,10,228 52

85 Details of pledge transactions Aggregate details after the pledge transactions Information on pledge Name of the pledgor Date of transaction Number of Equity Shares pledged Total no. of Equity Shares held by the entity in our Company Total no. of Equity Shares pledged % of total Equity Shares pledged to total no. of Equity Shares held by the pledgor in our Company % of the Equity Shares pledged to the total no. of outstanding Equity Shares of our Company Mrs. Narbada B. Jiwrajka Mr. Chandrakumar Bubna Mrs. Chandrakala A. Jiwrajka April 6, 1999 April 6, 1999 April 6, ,02,400 1,21,617 1,02, % 0.05% 1,02,400 58,600 99,920 58, % 0.03% 58,600 1,01,800 1,56,749 1,01, % 0.05% 1,01,800 Mrs. Pramila D. Jiwrajka April 6, ,01,800 3,91,357 3,90, % 0.20% February 25, ,89,000 3,90,800 Mrs. Geeta S. Jiwrajka April 6, ,01,800 1,35,130 1,01, % 0.05% 1,01,800 Jiwrajka Investment Private Limited April 6, 1999 February 23, ,13,200 2,47,000 10,67,314 10,67, % 0.54% June 24, ,07,000 10,67,200 Nirvan Holdings Private Limited April 6, 1999 February 23, ,32,500 8,94,700 27,20,163 19,69, % 1.00% June 24, ,000 53

86 Details of pledge transactions Aggregate details after the pledge transactions Information on pledge Name of the pledgor Date of transaction Number of Equity Shares pledged Total no. of Equity Shares held by the entity in our Company Total no. of Equity Shares pledged % of total Equity Shares pledged to total no. of Equity Shares held by the pledgor in our Company % of the Equity Shares pledged to the total no. of outstanding Equity Shares of our Company 19,69,200 Niraj Realtors and Shares Private Limited April 6, 1999 February 12, ,46,600 58,19,000 1,93,08,027 1,47,77, % 7.50% February 23, ,00,000 February 25, ,38,377 June 24, ,400 March 12, ,00,000 1,47,77,377 Grabal Alok Impex Limited August 30, 2006 February 23, ,00,000 15,96,400 57,10,368 25,96, % 1.32% 25,96,400 Alok Knit Exports Limited February 23, 2008 February 25, ,64,900 28,56,022 15,64, % 0.79% 15,64,900 Alok Finance Private Limited Ashok Realtors February 23, 2008 January 2, ,78,600 59,95,600 32,78, % 1.66% 32,78,600 3,11,477 3,11,477 3,11, % 0.16% 54

87 Details of pledge transactions Aggregate details after the pledge transactions Information on pledge Name of the pledgor Date of transaction Number of Equity Shares pledged Total no. of Equity Shares held by the entity in our Company Total no. of Equity Shares pledged % of total Equity Shares pledged to total no. of Equity Shares held by the pledgor in our Company % of the Equity Shares pledged to the total no. of outstanding Equity Shares of our Company Private Limited 3,11,477 Jiwrajka Associates Private Limited September 16, ,77,936 1,11,11,729 3,77, % 0.19% 3,77,936 Total 4,33,17, % Our Company has complied with the provisions of SEBI Circular No. SEBI/CFD/DCR/TO/152758/2009 dated February 3, Equity Shares issued for consideration other than cash. Except for 2,47,500 Equity Shares and 4,97,896 Equity Shares allotted to our Promoters by way of bonus on September 30, 1992 and March 9, 1993, respectively, our Company has not issued any Equity Shares for consideration other than cash. 10. The list of our top ten Equity Shareholders and the number of Equity Shares held by them is as under: a) On the date of filing of Letter of Offer with the Stock Exchanges is as follows: Sr. No. Name of shareholder Shareholding % of Equity Share Capital 1. Caledonia Investments plc* 2,93,49, Niraj Realtors and Shares Private Limited 1,93,08, Jiwrajka Associates Private Limited 1,11,11, Life Insurance Corporation of India 85,80, Sonata Investments Limited 69,50, Surendra B. Jiwrajka 68,52, Dilip B. Jiwrajka 65,96, Ashok B. Jiwrajka 65,19, Alok Finance Private Limited 59,95,

88 Sr. No. Name of shareholder Shareholding % of Equity Share Capital 10. Grabal Alok Impex Limited 57,10, * Caledonia Investments plc. is an investment firm based out of the United Kingdom. They had initially invested in our Company via the FCCB route in May 2005 and have since enhanced their holding through the secondary market in a gradual manner. Their shareholding in our Company as on date is 7.46% (by way of conversion of the aforesaid FCCBs) and 7.44% (by way of secondary market purchase) aggregating to 14.90%. The Promoters of our Company are not nor have they ever been associated with Caledonia Investments plc in any capacity. Further, Caledonia Investments plc interest in our Company is merely that of an equity investor. Hence, Caledonia Investments plc is not a promoter or a part of the promoter group of the Company. b) Ten days prior to filing of the Letter of Offer with the Stock Exchanges is as follows: Sr. No. Name of shareholder Shareholding % of Equity Share Capital 1. Caledonia Investments PLC (FDI) 2,93,49, Niraj Realtors and Shares Private Limited 1,93,08, Jiwrajka Associates Private Limited 1,11,11, Life Insurance Corporation of India 85,80, Sonata Investments Limited 69,50, Surendra B. Jiwrajka 68,52, Dilip B. Jiwrajka 65,96, Ashok B. Jiwrajka 65,19, Alok Finance Private Limited 59,95, Grabal Alok Impex Limited 57,10, c) Two years prior to filing of the Letter of Offer with the Stock Exchanges is as follows: Sr. No. Name of shareholder Shareholding % of Equity Share Capital 1. Caledonia Investments plc 2,44,43, Niraj Realtors and Shares Private Limited 1,30,18, TAD (Mauritius) Limited 97,47, Life Insurance Corporation of India 85,80, Citigroup Global Markets Mauritius Private Limited 69,54, Surendra B. Jiwrajka 68,52, Dilip B. Jiwrajka 65,96, Ashok B. Jiwrajka 65,19, Grabal Alok Impex Limited 51,13, Sloane Robinson LLP A/c Sr Global (Mauritius) Ltd Class B Asia 49,63, The total number of members of the Company as on February 6, 2009 is 58, The present Issue being a rights Issue, as per extant SEBI DIP Guidelines, the requirement of promoters contribution and lock-in are not applicable. 13. The Company has not availed of bridge loans to be repaid from the proceeds of the Issue for incurring expenditure on the Objects of the Issue. 14. The terms of issue to Non-Resident Investors have been presented under the section Terms and Procedure of the Issue on page 259 of this Letter of Offer. 56

89 15. Our Company had, by way of applications to the Stock Exchange, Ahmedabad, Madras Stock Exchange Limited and The Delhi Stock Exchange Association Limited applied for delisting of our Equity Shares from the said exchanges The above referred three stock exchanges had considered our request and had accordingly accorded their approval for delisting of our Equity Shares of our Company, the details of which are as under: Sr. Name of the Stock Letter reference no. and date Securities No. Exchange Delisted from 1. Stock Exchange Ahmedabad Ref/ase_delist/03-04 dated December 8, Madras Stock Exchange MSE/LD/PSK/731/961/03 dated December 12, Limited The Delhi Stock Exchange DSE/LIST//NR /228 dated January 23, Association Limited Our Company had issued foreign currency convertible bonds aggregating to USD million divided into % unsecured FCCBs of face value USD 50,000 each and the same were listed on the Luxembourg Stock Exchange in June These foreign currency convertible bonds were divided into A Bonds aggregating to USD 15 million and B Bonds aggregating to USD 55 million. With regard to the A Bonds, there are no outstanding foreign currency convertible bonds as on date. However, with regard to the B Bonds, 475 bonds of USD 50,000 each, aggregating to USD million are currently outstanding. The maturity date for our B Bonds is May 27, Our Company s authorized dealer, Standard Chartered Bank, on our Company s behalf, has by way of a letter dated January 15, 2009 to the RBI, applied for the approval of the RBI to buy back the B Bonds to the extent outstanding, i.e. USD million. 17. At any given time, there shall be only one denomination of the Equity Shares of the Company and the Company shall comply with such disclosure and accounting norms specified by SEBI from time to time. 18. Except for the possible conversion of 1,00,00,000 warrants and the possible conversion of the B Bonds currently outstanding, no further issue of capital by way of issue of bonus shares, preferential allotment, rights issue or public issue or in any other manner which will affect the equity capital of the Company, shall be made during the period commencing from the filing of the Letter of Offer with the SEBI and the date on which the Rights Equity Shares issued under the Letter of Offer are listed or application moneys are refunded on account of the failure of the Issue. Further, presently the Company does not have any intention to alter the equity capital structure by way of split/ consolidation of the denomination of the shares on a preferential basis or issue of bonus or rights or public issue of shares or any other securities within a period of six months from the date of opening of the Issue. 19. Except as stated above, our Equity Shareholders do not hold any warrants, options or any other convertible instruments which would entitle them to acquire further Equity Shares. 20. The Rights Equity Shares being offered in this Issue shall be made fully paid-up within 12 months from the date of Allotment. 21. Our Promoters and certain Promoter Group entities have brought in an amount of Rs crores as share application money towards part of their Rights Entitlement in the Issue, which will be adjusted against the total amount payable. 22. The Issue will remain open for a minimum of 15 days. However, the Board will have the right to extend the Issue period as it may determine from time to time but not exceeding 30 days from the Issue Opening Date. 23. Our Company has never revalued our assets and has never issued any Equity Shares out of revaluation reserves. 57

90 24. Our Promoters and Promoter Group have confirmed, by their letters dated February 9, 2009 that they intend to subscribe to the full extent of their Rights Entitlement in the Issue. Our Promoters and Promoter Group reserve their right to apply for additional Rights Equity Shares, either by themselves or a combination of entities controlled by them, including by subscribing for renunciation if any, made by any of the other Promoter Group entities. In addition to the subscription to the Rights Equity Shares as stated above, our Promoters and Promoter Group reserve their right to subscribe to, and / or make arrangements for the subscription of, additional Rights Equity Shares in the Issue post the receipt of the minimum subscription of 90% of the Issue. As a result of subscription to their Rights Entitlement, additional Rights Equity Shares and / or any unsubscribed portion and consequent allotment, our Promoters and Promoter Group may acquire Rights Equity Shares over and above their Rights Entitlement in this Issue, which may result in an increase of our Promoters and Promoter Group shareholding in our Company. This subscription and acquisition of such additional Rights Equity Shares (whether undersubscribed or otherwise) by our Promoters and Promoter Group, if any, will not result in change of control of the management of our Company and shall be exempt in terms of the proviso to Regulation 3(1)(b)(ii) of the Takeover Code. As such, other than meeting the requirements indicated in the section titled Objects of the Issue beginning on page 60 of this Letter of Offer, there is no other intention / purpose for this Issue, including any intention to delist our Company, even if, as a result of such allotments to our Promoters and Promoter Group, in this Issue, their shareholding in our Company exceeds their current shareholding. Presently our Company is complying with Clause 40A of the Listing Agreement and the minimum public shareholding required to be maintained for continuous listing is 25% of the total paid up equity capital Allotment to our Promoters and Promoter Group of any unsubscribed portion of Rights Equity Shares, over and above their Rights Entitlement, if exercised, shall be done in compliance with the Listing Agreement and other applicable laws prevailing at that time relating to continuous listing requirements. If our Company does not receive the minimum subscription of 90% of the Issue including devolvement of Underwriters, the entire subscription amount shall be refunded to the Investors within fifteen days from the date of closure of the Issue. If there is delay in the refund of subscription by more than 8 days after the Company becomes liable to pay the subscription amount (i.e. fifteen days after closure of the issue), the Company will pay interest for the delayed period, at rates prescribed under sub-sections (2) and (2A) of Section 73 of the Companies Act. 25. Our Company, our Promoters, the Directors of our Company and Lead Managers of the Issue have not entered into any buy-back, standby or similar arrangements for any of the securities being issued through this Letter of Offer other than any proposed underwriting arrangement to be entered into pursuant to the Underwriting Agreement. 26. Our Company has entered into an Underwriting Agreement dated March 19, 2009 in relation to the Issue. In the event that the Company does not receive the minimum subscription of 90% of the Issue as on the Issue Closing Date, the Underwriters shall be required to purchase and / or procure subscription to the extent of such undersubscribed portion of the Issue in accordance with the terms of the Underwriting Agreement. The obligation to underwrite will be subject to at least 35.57% of the Issue being subscribed to by the Promoters / Promoter Group. However, prior to calling upon the Underwriters to underwrite their respective underwriting obligations under the terms set out in the Underwriting Agreement, our Board of Directors or a committee thereof, may, at their sole discretion, in accordance with the requirements of applicable law, offer the unsubscribed Rights Equity Shares to such person as they may deem fit 58

91 Devolvement upon the Underwriters to the extent undersubscribed shall be on a pro-rata basis between Axis Bank Limited, IDBI Capital Market Services Limited, Marwadi Shares and Finance Limited, Punjab National Bank and State Bank of India in the ratio of 9:9:5:9:18 and the extent of their underwriting commitment shall be as described below: Sr. No. Underwriter Underwriting Commitment 1. Axis Bank Limited Not exceeding Rs. 45 crores* 2. IDBI Capital Market Services Limited Not exceeding Rs. 45 crores 3. Marwadi Shares and Finance Limited Not exceeding Rs. 25 crores 4. Punjab National Bank Not exceeding Rs. 45 crores 5. State Bank of India Not exceeding Rs. 90 crores * Participation by Axis Bank Limited in the Issue, to the extent of their Rights Entitlement and any Additional Rights Equity Shares over and above their Rights Entitlement shall be reduced from their Underwriting Commitment. However, the provision of such reduction to the Underwriting Commitment to Axis shall not be available to the other Underwriters. Illustration on manner of individual devolvement Particulars No. of Rights Equity Shares Minimum Subscription (90% of the X Rights Equity Shares offered in the Issue) Less: subscription as on the Issue Y Closing Date including the Assured Subscription (defined as 35.57% of the Issue) Devolved Shares (X-Y) Z* * Rounded off to the next highest integer. The Devolved Shares i.e. Z shall devolve on a prorata basis between Axis Bank Limited, IDBI Capital Market Services Limited, Marwadi Shares and Finance Limited, Punjab National Bank and State Bank of India in the ratio of 9:9:5:9:18. As per the terms of the Underwriting Agreement, the Promoters and the Promoter Group shall not without the prior written consent of the Underwriters, for a period of 3 years from the date of listing of the Rights Equity Shares, pledge and / or sell their respective stakes in our Company. Further, our Company shall not, without the prior written consent of the Underwriters, for a period of 3 years from the date of listing of the Rights Equity Shares, issue any Equity Shares or any securities convertible into or exercisable or exchangeable for Equity Shares or publicly announce any intention to do so during the aforesaid period except as disclosed in the section titled Capital Structure in the Letter of Offer; and acquire or initiate any steps to acquire any business in India or abroad or publicly announce any intention to do so during the aforesaid period. Our Board shall ensure that the Underwriters appointed shall have sufficient resources to enable them to discharge their underwriting obligations in full. 59

92 OBJECTS OF THE ISSUE The objects of this Issue are to raise funds for (i) Long Term working capital margin requirement; (ii) General corporate purposes and (iii) To meet the rights issue expenses. The main object clauses of our Memorandum of Association and objects incidental to the main objects enable us to undertake our existing activities and the activities for which funds are being raised through this Issue. Proceeds of the Issue The gross proceeds of the Issue are Rs crores. The net proceeds of the Issue, after deduction of any Issue expenses, are estimated to be approximately Rs crores ( Net Proceeds ). The details of the proceeds of the Issue are summarized in the following table: Particulars (Rs. in crores) Amount Gross proceeds of the Issue Less: Issue Expenses Net proceeds of the Issue The details of the utilization of Net Proceeds of this Issue will be as per the table set forth below: Particulars Total Estimated Amounts / Costs Amount to be funded out of internal accruals / other sources Amount estimated to be utilized through the Net Proceeds of this Issue Estimated Net Proceeds utilization in FY 2009 Estimated Net Proceeds utilization in FY 2010 (Rs. in crores) Estimated Net Proceeds utilization in FY 2011 Long Term working capital margin requirement * General corporate purposes Nil Total *Our Promoters and certain Promoter Group entities have brought in an amount of Rs crores as share application money towards part of their Rights Entitlement in the Issue, which will be adjusted against the total amount payable. In case of a shortfall in the Net Proceeds, we may explore a range of options including utilizing our internal accruals, and / or seeking additional debt from existing and future lenders. The fund requirement and deployment are based on internal management estimates and have not been appraised by any bank or financial institution. These are based on the current status of our business and are subject to change in light of variations in external circumstances or costs, or in our financial condition, business or strategy, as discussed further below. Our management, in response to the competitive and dynamic nature of the industry, will have the discretion to revise its business plan from 60

93 time to time and consequently our funding requirements and deployment of funds may also change. This may also include rescheduling the proposed utilization of Net Proceeds and increasing or decreasing expenditure for a particular object vis-à-vis the utilization of Net Proceeds. Means of Finance The stated objects of the Issue are proposed to be entirely financed by the Net Proceeds of the Issue and our Company s internal accruals / other sources. Thus, Clause 2.8 of the SEBI DIP Guidelines for firm arrangements of finance through verifiable means towards 75% of the stated means of finance, excluding the amount to be raised through the proposed Issue, does not apply to our Company. Our Promoters and certain Promoter Group entities have brought in an amount of Rs crores as share application money towards part of their Rights Entitlement in the Issue, which will be adjusted against the total amount payable. Further, in case of a shortfall in the Net Proceeds, we may explore a range of options including utilizing our internal accruals, and / or seeking additional debt from existing and future lenders. Capacity utilisation vis-à-vis business growth The capacity utilisation of the Company for the last three Fiscals 2006, 2007 and 2008 and estimated for Fiscals 2009, 2010 and 2011 are as under:- Past Capacity Utilisation Divisions Fiscal 2006 Fiscal 2007 Fiscal 2008 Spinning % Home Textiles Made-ups 60% 60% 90% Terry towels Apparel Fabrics Woven 76% 56% 66% Knits 75% 80% 69% Garments 89% 57% 77% Polyester Yarn 94% 91% 84% POY - 89% 87% Estimated * Divisions Fiscal 2009 Fiscal 2010 Fiscal 2011 Spinning 90% 90% 90% Home Textiles 61

94 Made-ups 90% 90% 90% Terry towels - 70% 80% Apparel Fabrics Woven 78% 80% 90% Knits 70% 80% 90% Garments 80% 85% 90% Polyester Yarn 76% 82% 90% POY 90% 90% 90% * Based on management estimates The current trend of growth in revenue of our Company had been: Financial Year Revenue Growth % % % Six months ended September 2008 N.A. Details of the objects of the Issue The details of the requirement of funds are as provided below: 1. Long term working capital margin requirement The long term working capital margin requirement has been calculated on the basis of additional working capital which will be required over a period from FY 2009 to FY 2011 based on expansion plans our Company. These expansions are expected to be completed in FY , thereby increasing the operations of our Company and the requirement of working capital. Raw Material (RM), Work in Progress (WIP), Finished Goods (FG) and Auxiliary material have been taken at various levels, which is in consonance with the industry practice and past trends. (Rs. in crores) Particulars Holding level (days) FY 2008 Holding level (days) FY 2009 FY 2010 Current Assets Audited Estimated FY 2011 Raw Material Total Other Consumable spares Stock In Process Finished Goods

95 Particulars Holding level (days) FY 2008 Holding level (days) FY 2009 FY 2010 FY 2011 Sundry Debtors , , Other Current Assets Total Working Capital (A) Current Liabilities (Other than bank borrowings for working capital) , , , Creditors Advances from Customers / Other current liabilities Statutory Liabilities Total of other Current Liabilities (B) Net Working Capital (A-B) Working Capital Borrowings , , , , Margin , , Total Incremental Margin Justification for holding period levels: Inventory Receivables Creditors Inventory holding levels of Raw Materials, Semi-finished goods, Finished goods, etc. are expected to be in line with March 08 levels. Receivables on account of domestic sale, which constitutes more than 60.95% of total sales, will be higher in view of the growing competition. Level of creditors is expected to come down in future due to our Company availing cash discounts. All the above projections are based on management estimates and have not been appraised by any bank or financial institution. Our Company proposes to meet the incremental margin money requirement to the extent of Rs crores from the Net Proceeds of the Issue and the balance would be met out of the internal accruals of our Company. Our Company has fully tied-up its entire requirement of Rs crores fund based limits from various banks as on the date of this Letter of Offer. 2. General corporate purposes We intend to use approximately Rs crores from the net proceeds of the Issue towards general corporate purposes. Our Board of Directors will have the flexibility in sanctioning the utilization of 63

96 these proceeds for general corporate purpose including assessment of new opportunities, expansion of our operations domestically, and / or internationally through the organic / inorganic route and other strategic initiatives. Our Board of Directors will review various requirements from time to time and in response to the competitive and dynamic nature of the industry, our management will have the discretion to revise our Company s business plan from time to time. To the extent that we seek to advance on any of the above mentioned fronts, we will utilize part of the funds raised in this Issue towards this purpose. In the interim, if opportunities for inorganic growth or any other strategic initiatives arise these funds will be utilized for the said initiatives. 3. Issue Related Expenses The expenses of this Issue include, among others, lead management expenditure, printing and distribution expenses, legal fees, advertisement cost, registrar fees, depository charges and listing fees. The total Issue expenses are estimated to be approximately Rs crores as per the following breakup: Issue Expenses Amount (Rs. in Crores) Lead Management Expenses, Underwriting Commission and Selling Commission Advertisement and marketing expenses 1.00 Printing & Stationery (including courier and transportation charges) 0.75 Others (Legal fees, Registrar s fees, Listing Charges etc.) 1.85 Total Interim Use of Net Proceeds Pending utilization of the funds, the management of our Company, in accordance with policies established by our Board from time to time, will have flexibility in deploying the Net Proceeds. Pending utilisation for the purposes described above, our Company intends to temporarily invest the funds in high quality interest / dividend bearing liquid instruments including money market mutual funds, deposits with banks for the necessary duration and other investment grade interest bearing securities, as may be approved by the Board of Directors or a committee thereof. Such transactions would be at the prevailing commercial rates at the time of investment. Our Company confirms that pending utilization of the Issue proceeds; it shall not use the funds for any investments in the equity markets. Monitoring of utilisation of funds Our Board will monitor the utilization of the Issue proceeds. We will disclose the details of the utilization of the Issue proceeds, including interim use, under a separate head in our financial statements for FY 2009, FY 2010 and FY 2011, specifying the purpose for which such proceeds have been utilized or otherwise disclosed as per the disclosure requirements of our listing agreements with the Stock Exchanges. As per Clause 49 of the listing agreements with the Stock Exchanges, we shall disclose to the Audit Committee, the uses / applications of funds on a quarterly basis as a part of our quarterly declaration of financial results. Further, we shall, on a quarterly basis, prepare a statement indicating material deviations, if any, in the use of Issue proceeds. Such statement shall be furnished to the Stock Exchanges along with the interim and / or annual financial statements and shall be published in the newspapers simultaneously with the interim or annual financial results, after placing it before our Audit Committee. Other confirmations 64

97 No part of the proceeds from the Issue will be paid by us as consideration to our Promoters, our Directors, Promoter Group or key managerial employees, except in the normal course of our business. 65

98 BASIS FOR ISSUE PRICE Investors should also refer to the section Risk Factors on page xiii and Financial Statements on page 194 to get a more informed view before making an investment decision. Qualitative Factors a. Our Company is one of the largest vertically integrated textile companies in India. b. Our Company has invested in modern technology and equipment across all areas of its operations. c. Our Company has a track record of paying dividend consistently for the last 17 years since FY For more qualitative factors, please refer to Sections titled Our Business Competitive Strengths and Our Business Strategy on page 102 and page 104 respectively, of this Letter of Offer. Quantitative Factors Information presented in this section is derived from our audited restated standalone financial statements prepared in accordance with Indian GAAP. Some of the quantitative factors, which form the basis for deciding the price, are as follows: 1. Weighted average earnings per share (Diluted EPS) Period EPS (Rs.) Weight FY FY FY Weighted Average 8.48 Six month ended 30 th September 2008 (Not Annualised)* * Calculated after taking into consideration further allotment made in FY Price/Earning (P/E) ratio in relation to Issue Price of Rs. 11/- a. Based on Diluted EPS for the year ended March 31, 2008 of Rs. 8.93is 1.23 b. Based on weighted average diluted EPS of Rs.8.48 is 1.30 c. Peer Group (1) i) Highest: 9.30 ii) Lowest: 2.00 iii) Average (composite): 4.90 (1) Source: Capital Market Vol XXIV/01 March 09-22, Weighted average return on average net worth Period Return on Net Worth (%) Weight FY % 1 FY % 2 FY % 3 Weighted Average 14.43% Six month ended 30 th September 2008 (Not 4.15% 66

99 Period Return on Net Worth (%) Weight Annualised) 4. The minimum return on increased net worth required to maintain pre-issue EPS of Rs is 26.50%. 5. Net Asset Value (NAV) a. NAV per Equity Share at September 30, 2008 on a standalone basis is Rs per Equity Share. b. NAV per Equity Share after the Issue on a standalone basis is Rs /- per Equity Share. Period Net Asset value per Equity Share (Rs.) Weight FY FY FY Weighted Average Comparison of Accounting Ratios (Alok Industries Limited Standalone Basis) for the year ended March 31, 2008 with other listed companies. Being the vertically intergrated textile company,our Company is not exactly compararble with the indian listed players. However, we have drawn comparision with the listed companies mentioned hereunder based on individual product segments that our Company operates in. EPS (Rs.) P/E Return On Net Worth (%) Book Value Per Share (Rs.) Face Value (Rs.) Alok Industries Limited % Peer Group Arvind Ltd % Bombay Rayon Fashions Ltd % Vardakas Textiles Ltd % Nahar Spinning Ltd % JBF Industries Ltd % Welspun India Ltd % Source: Capital Market Vol XXIV/01 March 09-22, 2009 The Lead Managers believe that the Issue Price of Rs. 11/- is justified in view of the above qualitative and quantitative parameters. See the section titled Risk Factors on page xiii of this Letter of Offer and the financials of the Company including important profitability and return ratios, as set out in the Financial Statements on page 194 of this Letter of Offer to have a more informed view. 67

100 STATEMENT OF TAX BENEFITS To, The Board of Directors, Alok Industries Limited B-43, Mittal Tower, Nariman Point, Mumbai Dear Sir, We hereby report that the attached Annexure states the possible tax benefits available to Alok Industries Limited ( the Company ) and to the shareholders of the Company under the Income Tax Act, 1961, Wealth Tax Act, 1957 presently in force in India, subject to the fact that several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which based on the business imperatives, the Company may or may not choose to fulfill. The benefits discussed in the Annexure are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for the professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue. We do not express any opinion or provide any assurance as to whether: The Company or its shareholders will continue to obtain these benefits in future; or The conditions prescribed for availing of these benefits have been / would be met with. The contents of this Annexure are based on the information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company and interpretations of the current tax laws. For Gandhi & Parekh, Chartered Accountants Devang B. Parekh Partner Membership Number: Place of Signature : Mumbai Date : March 19,

101 The following key tax benefits are available to the Company and the prospective shareholders under the current direct tax laws in India. The tax benefits listed below are the possible benefits available under the current tax laws presently in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which based on business imperative it faces in the future, it may or may not choose to fulfill. This statement is only intended to provide the tax benefits to the company and its shareholders in a general and summary manner and does not purport to be a complete analysis or listing of all the provisions or possible tax consequences of the subscription, purchase, ownership or disposal etc. of shares. In view of the individual nature of tax consequence and the changing tax laws, each investor is advised to consult his/her own tax adviser with respect to specific tax implications arising out of their participation in the issue. I. SPECIAL TAX BENEFITS 1. SPECIAL TAX BENEFITS AVAILABLE TO THE COMPANY There are no special tax benefits available to the Company. 2. SPECIAL TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY There are no special tax benefits available to the Shareholders of the Company. II. GENERAL TAX BENEFITS (these benefits are available to all companies or to the shareholders of any company, after fulfilling certain conditions as required in the respective Act) 1. Key benefits available to the Company under the Income Tax Act, 1961 ("the Act") A) BUSINESS INCOME: a) Depreciation: The Company is entitled to claim depreciation on specified tangible and intangible assets owned by it and used for the purpose of its business under Section 32 of the Act. In case of new machinery or plant that is acquired by the company (other than ships and aircrafts), the company is entitled to a further sum equal to twenty per cent of the actual cost of such machinery or plant subject to conditions specified in Section 32 of the Act. b) Amortization of Preliminary Expenses: As per Section 35D of the Act, the company is eligible for deduction in respect of preliminary expenses incurred in connection with the extension of an industrial undertaking or setting up of a new industrial units, of an amount equal to 1/5 lh of such expenses every year for a period of 5 years subject to conditions specified in that section. c) Deductions under Chapter VI-A of the Act: As per Section 80-IB(4) of the Act, the Company is eligible for deduction of an amount equal to specified per cent of the profit and gains derived by specified undertaking for 10 assessment years subject to the fulfillment of the conditions specified in that section. As per section 80G of the Act, the Company is entitled to claim deduction of an specified amount in respect of eligible donations subject to the fulfillment of the conditions specified in that section. 69

102 d) MAT Credit: As per Section 115JAA(1A) of the Act, the company is eligible to claim credit for Minimum Alternate Tax ("MAT") paid for any assessment year commencing on or after April 1, 2006 against normal income-tax payable in subsequent assessment years. MAT credit shall be allowed for any assessment year to the extent of difference between the tax payable as per the normal provisions of the Act and the tax paid under section 115JB for that assessment year. Such MAT credit is available for set-off upto 7 years succeeding the assessment year in which the MAT credit arises. B) CAPITAL GAINS: a) i) Long Term Capital Gain (LTCG) LTCG means capital gain arising from the transfer of a capital asset being Share held in a company or any other security listed in a recognized stock exchange in India or unit of the Unit Trust of India or a unit of a mutual fund specified under clause (23 D) of section 10 or a Zero coupon bond held by an assesses for more than 12 months. In respect of any other capital assets, LTCG means capital gain arising from the transfer of an asset, held by an assessee for more than 36 months. ii) Short Term Capital Gain (STCG) STCG means capital gain arising from the transfer of capital asset being Share held in a company or any other security listed in a recognized stock exchange in India or unit of the Unit Trust of India or a unit of a mutual fund specified under clause (23D) of section 10 or a Zero coupon bonds, held by an assessee for 12 months or less. In respect of any other capital assets, STCG means capital gain arising from the transfer of an asset, held by an assessee for 36 months or less. b) LTCG arising on transfer of equity shares of a company or units of an equity oriented fund (as defined which has been set up under a scheme of a mutual fund specified under Section 10(23D) are exempt from tax under Section 10(38) of the Act provided the transaction is chargeable to securities transaction tax (STT) and subject to conditions specified in that section. Income by way of long term capital gain exempt u/s 10(38) is to be taken into account in computing the Book profit and income tax payable under section 115JB of the Act. c) As per section 48 of the Act and subject to the conditions specified in that section, LTCG arising on transfer of capital assets, other than bonds and debentures (excluding capital indexed bonds issued by the Government) and depreciable assets, is to be computed by deducting the indexed cost of acquisition and indexed cost of improvement from the full value of consideration. As per section 112 of the Act, LTCG is 20% plus applicable surcharge thereon and 3% Education and Secondary & Higher Education Cess on tax plus Surcharge (if any) (hereinafter referred to as applicable Surcharge and Education Cess and Secondary & Higher Education Cess) However, if such tax payable on transfer of listed securities or units or Zero coupon bonds exceed 10% of the LTCG, without indexation benefit, the excess tax shall be ignored for the purpose of computing the tax payable by the assessee. d) As per section 111A of the Act, STCG arising on sale of equity shares or units of equity oriented mutual fund (as defined which has been set up under a scheme of a mutual fund specified under Section 10(23D)), arc subject to tax at the rate of 15% (plus applicable 70

103 Surcharge and Education Cess and Secondary & Higher Education Cess) provided the transaction is chargeable to STT. No deduction under chapter VIA shall be allowed from such income. e) STCG arising on sale of equity shares or units of equity oriented mutual fund (as defined which has been set up under a scheme of a mutual fund specified under Section 10(23D)), where such transaction is not chargeable to STT, shall be taxable at the rate of 30% (plus applicable Surcharge and Education Cess and Secondary & Higher Education Cess). f) As per section 71 read with section 74 of the Act, short term capital loss arising during a year is allowed to be set-off against short term as well as long term capital gains. Balance loss, if any, shall be carried forward and set-off against any capital gains arising during subsequent 8 years. g) As per section 71 read with section 74 of the Act, long term capital loss arising during a year is allowed to be set-off only against long term capital gains. Balance loss, if any, shall be carried forward and set-off against long term capital gains arising during subsequent 8 years. h) As per section 54EC of the Act, capital gains arising from the transfer of a long term capital asset shall be exempt from capital gains tax if such capital gains are invested within a period of 6 months after the date of such transfer in specified bonds issued by the following and subject to the conditions special therein: National Highway Authority of India constituted under Section 3 of National Highway Authority of India Act, 1988 Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1856 If only part of the capital gains is reinvested, the exemption shall be proportionately available. However, if the new bonds are transferred or converted into money within three years from the date of their acquisition, the amount so exempted shall be taxable as Capital Gains in the year of transfer/conversion. As per this section, the investment in the Long Term Specified Asset cannot exceed 50 lakh rupees. C) OTHER INCOME: Dividend (both interim and final), if any, received by the company on its investments in shares of another Domestic Company shall be exempt from tax under Section 10(34) read with Section 115-O of the Act. Income received in respect of units of a mutual fund specified under Section 10(23D) of the Act (other than income arising from transfer of such units) shall be exempt from tax under Section 10(35) of the Act. 2. Key benefits available to the Members of the Company under the Act. 2.1 Resident Members a) Dividend income: Dividend (both interim and final), if any, received by the resident shareholders from a Domestic Company shall be exempt from tax under Section 10(34) read with Section 115-O of the Act. 71

104 b) Capital gains: i) Benefits outlined in Paragraph 1(B) above are also applicable to resident shareholders. In addition to the same, the following benefit is also available to a resident shareholder being an individual or a HUF. ii) As per Section 54F of the Act, LTCG arising from transfer of shares shall be exempt from tax if net consideration from such transfer is utilized within a period of one year before, or two years after the date of transfer, for purchase of a new residential house, or for construction of residential house within three years from the date of transfer and subject to conditions and to the extent specified therein. 2.2 Non-Resident Indians / Members Other than FIIs & Foreign Venture Capital Investors a) Dividend Income: Dividend (both interim and final), if any, received by the non-resident shareholders from a Domestic Company shall be exempt from tax under Section 10(34) read with Section 115-O of the Act, b) Capital gains: Benefits outlined in paragraph 2.1(b) above are also available to a non-resident shareholder except that as per first proviso to Section 48 of the Act, the capital gains arising on transfer of shares of an Indian Company need to be computed by converting the cost of acquisition, expenditure incurred in connection with such transfer and full value of the consideration received or accruing as a result of the transfer, into the same foreign currency in which the shares were originally purchased. The resultant gains thereafter need to be reconverted into Indian currency. The conversion needs to be at the prescribed rates prevailing on dates stipulated. Further, the benefit of indexation as provided in second proviso to section 48 is not available to non-resident shareholders. c) Tax Treaty Benefits: As per Section 90 of the Act, the shareholder can claim relief in respect of double taxation, if any, as per the provision of the applicable double taxation avoidance agreement entered into by the Government of India with the country of residence of the non-resident investor. d) Special provisions in case of non-resident Indians in respect of income / LTCG from specified foreign exchange assets under Chapter XII-A of the Act. i) Non-Resident Indian (NRI) means a citizen of India or a person of Indian origin who is not a resident. Person is deemed to be of Indian origin if he, or either of his parents or any of his grand parents, were born in undivided India. ii) iii) iv) Specified foreign exchange assets include shares of an Indian company which is acquired/purchased/subscribed by NRI in convertible foreign exchange. As per section 115E of the Act, income (other than dividend which is exempt under Section 10(34)) from investments and LTCG (other than gain exempt under section 10(38)) from assets (other than specified foreign exchange assets) shall be 20% (plus applicable Surcharge and Education Cess and Secondary & Higher Education Cess). No deduction in respect of any expenditure or allowance or deductions under chapter VI-A shall be allowed from such income. As per section 115E of the Act, LTCG arising from transfer of specified foreign exchange assets shall be 10% (plus applicable Surcharge 72

105 and Education Cess and Secondary & Higher Education Cess). v) As per section 115F of the Act, LTCG arising on transfer of a foreign exchange asset shall be exempt in case net consideration from such transfer is invested in the specified assets or savings certificates within six months from the date of such transfer, subject to the extent and conditions specified in that section. vi) As per section 115G of the Act, in case total income of a NRI consists only of income/ltcg from such foreign exchange asset/specified asset and tax thereon has been deducted at source in accordance with the Act, then, it shall not be necessary for a NRI to file return of income under Section 139(1) of the Act. vii) As per section 115H of the Act, where a person who is a NRI in any previous year, becomes assessable as a resident in India in respect of the total income of any subsequent year, he may furnish a declaration in writing to the assessing officer, along with his return of income under section 139 of the Act for the assessment year in which he is first assessable as a resident, to the effect that the provisions of the chapter XII-A shall continue to apply to him in relation to investment income derived from the specified assets for that year and subsequent years until such assets are transferred or converted into money. viii) As per the provisions of Section 115-I of the Act, Non Resident Indian may elect not to be governed by the provisions of Chapter XII-A for any assessment year under section 139 of the Act, declaring therein that the provisions of Chapter XII-A shall not apply to him for that assessment year and accordingly his total income for that assessment year will be computed in accordance with the other provisions of the Act. ix) As per section 115J of the Act, the NRI can opt not be governed by the provisions of chapter XII-A for any assessment year by furnishing return of income for that assessment year under section 139 of the Act, declaring therein that the provisions of this chapter shall not apply, in which case the other provisions of the income tax act shall apply. 2.3 Foreign Institutional Investors (Flls) a) Dividend Income: Dividend (both interim and final), if any, received by the shareholder from the domestic company shall be exempt from tax under Section 10(34) read with Section 115O of the Act. b) Capital Gains: i) As per Section 115AD of the Act, income (other than income by way of dividends referred to Section 115O) received in respect of securities (other than units referred to in Section 115AB) shall be taxable at the rate of 20% (plus applicable Surcharge and Education Cess and Secondary & Higher Education Cess). No deduction in respect of any expenditure/allowance shall be allowed from such income. ii) As per Section 115AD of the Act, capital gains arising from transfer of securities shall be taxable as follows: As per Section 111A of the Act, STCG arising on transfer of securities where such transaction is chargeable to STT shall be taxable at the rate of 15% (plus applicable Surcharge and Education Cess and Secondary & Higher Education Cess) 73

106 STCG arising on transfer of securities where such transaction is not chargeable to STT shall be taxable at the rate of 30% (plus applicable Surcharge and Education Cess and Secondary & Higher Education Cess). LTCG arising on transfer of a long term capital asset, being an equity share in a company or a unit of an equity oriented fund, where such transaction is chargeable to STT is exempt from tax under Section 10(38) of the Act, LTCG arising on transfer of securities where such transaction is not chargeable to STT shall be taxable at the rate of 10% (plus applicable Surcharge and Education Cess and Secondary & Higher Education Cess). The indexation benefit shall not be available while computing the capital gains. iii) Benefit of exemption under Section 54EC of the Act shall be available as outlined in Paragraph l(b)(h) above. c) Tax Treaty Benefits: 2.4 Mutual Funds As per Section 90 of the Act, a shareholder can claim relief in respect of double taxation, if any, as per the provision of the applicable double taxation avoidance agreements entered into by the Government of India with the country of residence of the non-resident investor, As per the provisions of Section 10(23D) of the Act, any income of mutual funds registered under the Securities and Exchange Board of India, Act, 1992 or Regulations made there under, mutual funds set up by public sector banks or public financial institutions and mutual funds authorized by the Reserve Bank of India, would be exempt from income-tax, subject to the prescribed conditions. 3. Benefits available to the shareholders of the Company under the Wealth Tax Act, 1957 Shares in a company, held by a shareholder are not treated as an asset within tile meaning of Section 2(ea) of the Wealth Tax Act, 1957; hence, wealth tax is not applicable on shares held in a company. Notes: a. All the above benefits are as per the current tax law and will be available only to the sole/first names holder in case the shares are held by joint holders. b. In respect of non-resident investors, the tax rates and the consequent taxation mentioned above shall be further subject to any benefits available under the relevant Double Tax Avoidance Agreement (DTAA), if any, between India and the country of residence of the non-resident investor. 74

107 INDUSTRY OVERVIEW The information in this section is derived from a combination of various official and unofficial publicly available materials and sources of information. It has not been independently verified by the Company, the Lead Manager or their respective legal or financial advisors, and no representation is made as to the accuracy of this information, which may be inconsistent with information available or compiled from other sources. OVERVIEW OF GLOBAL TEXTILE AND APPAREL TRADE The Global textile and apparel trade is USD 580 Bn and is expected to reach USD 805 Bn by Global textile trade is growing at a CAGR of 5.8% and apparel at 9.6%. China is the leading sourcing base for textile and apparel with a majority share of over 30% of global exports followed by Italy and Hong Kong contributing 8% each. Intra Asia trade is also growing and Asia has 50% share of the global exports. Global Textile and Apparel Trade (Source: Technopak Analysis dated February, 2009 and UN Comtrade dated 2008) Country-wise Break up Global Textile & Apparel (2007) (Source: Technopak Analysis dated February, 2009 and UN Comtrade dated 2007 GLOBAL TEXTILE AND APPAREL MARKET IS GROWING 75

108 Major growth of textile and apparel consumption is expected to come from US, EU and emerging markets like China and India. China and India would together become one of the largest consumption bases by 2015 Apparel Retail Market of Major Countries Country Market Size 2007 (US $bn) US 237 Japan 110 China 93 UK 66 Italy 52 Germany 51 France 30 India 26 (Source: UN Comtrade dated 2007) US$ 480Bn 280 US$ 510Bn 300 US$ 550Bn 325 US$ 580Bn 345 US$ 650Bn 390 US$ 805Bn Textile Apparel (Source: Technopak Analysis dated February, 2009) KNIT AND WOVEN APPAREL FORMS MAJORITY OF GLOBAL TRADE Knit and Woven apparel contributes approximately 55% to the global textile and apparel trade and Home textiles contributes around 6% 76

109 (Source: UN Comtrade dated 2007) CURRENT GLOBAL SITUATION IN TEXTILES: As stated earlier, Asian economies are likely to be the key gainers in the new global textiles scenario. Whereas China is expected to grow significantly, there are apprehensions that China s growth rate may be tempered by quotas imposed by Western countries on Chinese goods and textiles. India is likely to be the next likely gainer after China. With a stable currency, knowledge based industry and a very strong domestic market, India is bound to win the race. With favourable import duties and one of the lowest labour costs for producing apparel, Bangladesh is consolidating its position as a supplier of low cost textile and apparel products for the mass market. Though Pakistan has both the raw material supply (in terms of cotton) and a fairly mature textile industry, its present economic situation does not prophesise great growth. Vietnam is fast becoming another strong Asian exporter of textiles and its government has actively encouraged investments in the sector. Vietnam also has the lowest labour rates globally. KEY FUTURE TRENDS Consolidation, Collaboration and Relocation: Large suppliers will look to consolidate and collaborate with other large suppliers to gain more competencies. The Industry will see more and more JVs and some large suppliers will relocate to more competitive countries. Large companies will also buy companies in low cost contributing to maintain competitiveness. Redefinition of traditional roles: Design and product responsibilities are shifting from buyer to supplier. The buyers are redefining the structure of their sourcing organization and more and more sharing of processes is happening between the buyers and suppliers. Design outsourcing to establish supply bases is not distant. Emergence of Conglomerates: Textile conglomerates with turnover exceeding US $3 Billion will emerge in the next 5-7 years Emergence of China and India as consumption bases: China would become the second biggest market for apparel consumption by Growing domestic markets in China and India will stabilize the growth of textile and apparel exports from these countries. Speed and Reliability: Speed to delivery and reliability will make or break the business of suppliers in the coming years Better Planning, Quality Control, IT Tools, Design and Product Development is the key to success. Scarcity of Resources would lead to development of new technologies: New technologies which use resources efficiently are expected to emerge in next 6-8 years Migration of skilled manpower from buying to supplying countries: Migration of skilled manpower is expected to happen in next 6-8 years from established textile nations like Italy, UK, US, Germany etc. to emerging textile bases like India, Pakistan, Vietnam, China. Environmental friendly manufacturing: Large suppliers are moving towards green buildings. The building has a 'cool roof' that reflects 79 percent of sunlight back to the sky and makes the building naturally cooler. The energy use in these buildings is 40 percent lower than regular manufacturing 77

110 plants of the same size. The payback period for the added costs of making a green building is only five years as the operation is very efficient. (Source: Technopak Analysis dated February, 2009) OVERVIEW OF INDIAN TEXTILE AND APPAREL INDUSTRY The Indian Textile and Apparel Industry is an integrated sector and occupies a significant position in Global Trade. It not only processes high value products such as fabrics, garments and made-ups but also grows its own raw materials (cotton, jute, silk and wool). The textile industry is served by the organized, modern and mechanized mill sector, the small scale largely unorganized power loom sector and the highly fragmented handloom (hand spinning and hand weaving) sector. India is one of the few countries that has presence across the entire value chain of the textiles and clothing business starting from raw material (fiber), spinning, weaving/knitting, processing to highest value added products garments and made ups. The Textile and Garment Industry in India is a major contributor to the GDP, exports, employment and foreign exchange earnings: During the year the sector accounted for 14% to industrial production, 4% to the GDP and 17% to the country s export earnings It provides direct employment to over 35 million people in spinning, weaving, knitting, processing, readymade garments, sericulture and jute sector. Textiles sector is the second largest provider of employment after agriculture. The industry is self reliant to the extent that the entire value chain from raw materials to made up garments is contained within the country. As on December 31, 2007, there were 1,744 textiles mills in organized sector with a capacity of million spindles, 4, 57,000 rotors and 56,000 looms. The production of spun yarn, including unorganized sector was 3, Mn. kg. in and about 4,000 Mn. Kg. in Fabric production in was 53,389 million square meter registering an annual growth of 4.5% during the last five years and about 57,491 Mn. sq.mt. in During April to September 2008, readymade garments worth 4.87 billion dollars were exported from India, up 7.04% from 4.56 billion dollars in the corresponding period of previous year. In rupee terms, the figures work out to Rs. 20,760 crores, up 11.47% from Rs 18,631 crores in April to September (Source: Technopak Analysis dated February, 2009) 78

111 GROWING INDIAN TEXTILE AND APPAREL INDUSTRY: Indian textiles and apparel industry has grown from USD 46 Bn to USD 61 Bn in just 2 years. (Source: Technopak Analysis dated February, 2009) It is further expected to grow to USD 110 Bn by 2012 Billion USD Domestic Clothing & Textiles Domestic Home Textiles Export (Source: Technopak Analysis dated February, 2009 and Ministry Of Textiles) It is interesting to see that almost 2/3 rd of the total Indian apparel and textile industry is from domestic 79

112 consumption, which will keep it buffered from the ups and downs of the global trade and the economic uncertainties of the developed market. THE VALUE CHAIN The broad based vertically integrated textiles industry consumes a diverse range of textiles fibers, and yarns to produce various types of products for the domestic and export markets. Natural fibers like Cotton, Wool etc. Synthetic fibers like Polyester, Rayon etc. form the primary raw materials for the textile industry. The textile value chain begins with spinning which converts fibers into yarns. The yarns are then converted into fabrics through weaving/ knitting. The fabric undergoes various processes like scouring, bleaching, mercerizing, dyeing/printing, washing, finishing, etc. to produce processed fabric that is suitable for manufacturing apparels or home textiles. The chemical process for manufacturing fabrics with properties like anti-crease, oil repellence, water repellence, etc, are undertaken in the processing stage. In the final stage of garmenting, that is, before the processed fabric is converted into a ready-to-wear garment, a series of sub-stages such as laying, cutting, stitching, etc. are involved. The garments are finally marketed through a range of distribution channels in the domestic market or are exported. The Value Chain: 80

113 Note: VSF: Viscose Staple Fiber, PSF: Polyester Staple Fiber, PFY: Polyester Filament Yarn, VFY: Viscose Filament Yarn MAJOR COMPONENTS OF THE VALUE CHAIN FIBER A fiber is the smallest part of a fabric. It is an individual, fine, hair like substance. Fibers have a comparatively high ratio of length to width, thus ensuring the flexibility required for manufacturing and end use. Differences among the textiles fibers result from their different chemical compositions, the arrangement of their molecules as well as their external feature like shape. Fibers can be categorized as Natural (Cotton, linen, Wool, Silk) and Man-made (Polyester, Spandex, Rayon etc) Natural fiber - Raw Cotton: Cotton is one of the principal crops of India and plays a vital role in the Indian economy. India was the 3 rd largest producer (31.5 Million bales) of cotton in the world during According to Cotton Advisory Board (CAB), India is expected to harvest 32.2 Mn. bales (1 bale=170 Kg.) during cotton season , a little higher than last year s production. Area under cultivation is 81

114 expected to be lower at 9.3 million hectare, but the decline will be offset by improved yield i.e. 591 kgs./ha as against 560 kgs/ha during the previous cotton season. (Source: Cotton Corporation of India) Man-made fiber: The industry comprises fiber and filament yarn manufacturing units. The production of man-made fiber during showed an increasing trend as compared to the corresponding period of The total man made fiber production increased by 9.5% as compared to the corresponding period of the previous year. Manmade fibers are used for the production of blended fabrics and 100 percent non-cotton fabrics. These fabrics are used for the production of both ready made garments and home textiles. The installed capacity and details of production of man-made fiber and filament yarn are given in Table under: (Source: Textile Ministry Annual Report ) YARN Fibers when grouped and twisted together into a continuous stands are called yarns. The yarns are then used to make various textile materials; for example, woven fabrics, knitted fabrics and lace. Yarns are classified into 2 main categories: Spun and Filament Yarn Spinning Capacities: India is at the second position with yarn producing capacity of more than 4 Crores spindles while China leads the charts for Yarn spinning capacities with capacity of above 5 Crores spindles. The below graphs depicts India s position in yarn spinning capacities in the World. (Year 2007) 82

115 Major Yarn Spinning Capacities Yr No. of Spindles (Source: Global Textile and Apparel Industry Report) In India, total spun yarn production for the year is 4180 million kgs. The dominant share in spun yarn production is that of cotton yarn, which accounts for about 76% of the total spun yarn production. According to Textile Commissioner Office, India s total cotton yarn production has remained flat in the first half of India s cotton fabric production has decreased by 1.3 per cent in the first half of (April-September) in comparison with the first half of India s Cotton Yarn Production Production of Spun Yarn ( ) (Mn Kg) 9% 15% 76% Cotton Blended 100% Non Cotton 83

116 (April Sept) (P) (April Sept) (Source: Office of the textile Commissioner, India) The total filament yarn production in India for the year is 1458 million kgs. The dominant share in filament yarn production is that of polyester, which accounts for about 92% of the total filament yarn production. Production of Filament Yarn ( ) (Mn Kg) 1% 4% 3% Viscose Nylon Polyester Polypropylene 92% (Source: Office of the textile Commissioner, India) FABRIC The Indian Fabric Industry is classified into Woven Fabric and Knitted Fabric. The classification in detail appears as under: 84

117 (Source: Technopak Analysis dated February, 2009) India s weaving and knitting sector is highly fragmented, small-scale, and labour-intensive. Knitted Fabric: In last 5 years, total knitted fabric production has grown with a CAGR of 13%. The growth has been mainly due to increased production of 100% cotton and blended knitted fabric. While production of 100% non cotton knitted fabric has decreased in last 5 years (665 million m2 to 420 million m2). 100% Cotton Blended 100% non cotton Million m ,847 8% 13% 79% 12,645 3% 13% 84% (Source: Technopak Analysis dated February, 2009 and Annual Report of Ministry of Textiles, ) Woven Fabric: The woven fabric production industry can be divided into three sectors: Power loom, Handloom and the Mill sector. The percent share of each sector has remained same in the last 5 years with power loom sector contributing 80% of the total cloth production, Handloom sector 16% and mill sector 4%. During this period overall growth in woven fabric production was ~ 7%, with mill sector showing the least growth. Weaving capacities: In Weaving activity, India is at third position with 2 lakhs looms whereas China is the leader with Installed capacities of 8 lakhs looms followed by Indonesia with more than 2 lakhs looms. 85

118 Weaving Installed Capacities Yr 2007 China India Pakistan Indonesia Thailand Brazil total looms (Source: Global Textile and Apparel Industry Report) During last 5 years, 100% non cotton fabric has steadily lost its share to 100% cotton fabric while share of blended fabric has remained almost similar. The graph explains the position better: Cotton Blended 100% Non Cotton 50% 49% 47% 46% 46% 15% 14% 13% 13% 14% 35% 37% 39% 40% 41% (Source: Technopak Analysis dated February, 2009, Annual Report of Ministry of Textiles, ) HOME TEXTILES DOMESTIC HOME TEXTILES MARKET: Home textiles market in India is USD 2.6 Bn in and is expected to reach USD 4.8 Bn by 2012 EXPORT HOME TEXTILES MARKET: Though the Home Textile Trade has been growing significantly in the last couple of years, the global recession this year has hit the home textile sector as well. There is a downturn in demand and prices, even as raw materials prices are maintaining their rising trend. Though India s home textile trade has grown at a CAGR of 9% in the last 4-5 years, the value of exports in the last 2 years has remained constant at around USD billion. The below table shows the major exporters of textiles for the year and

119 (All figures in US $ billion) (Source: UN Comtrade dated 2007) Export of Home Textiles from India is growing at a much lower rate of 9%. However export of Bed, Table, Toilet and Kitchen Linen is growing at a much higher rate of 29% and the US home textiles imports are increasing substantially over the years. Increasingly large retailers/ brands are looking to source from Asian countries, as they have a competitive advantage in terms of cost and quality. The below table shows the break-up of Indian home textiles exports from the year to (All figures in US $ million) (Source: Ministry of Commerce, India) 87

120 For Indian Home Textiles Export, USA has been the major market with the share of 40-43% Germany, Japan, Italy, UK are the other markets for Indian Home Textiles. The below table shows the major markets for Indian home textiles export from to (Source: Ministry of Commerce, India) APPAREL DOMESTIC APPAREL MARKET: Apparel market in India is USD 26 Bn in 2007 with urban demand contributing to more than 60% of the total apparel market. Apparel market in India has evolved from being dominated by small tailors to the one being dominated by retailers and brands. Market growth is happening not only on account of increased consumption but also on account of growing fashion consciousness and proliferation of organized retailers. 88

121 INDIAN APPAREL MARKET SEGMENTATION: The domestic market can be segmented into men, women and kids. The size of each of this segment for the year is detailed in the below chart (all figures in Bn USD). (Source: Technopak Analysis dated February, 2009) EXPORT APPAREL MARKET: India is facing intense competition not only from traditional competitors such as China and Bangladesh, but also from smaller countries such as Vietnam and Indonesia. To counter competition the Ministry of Textiles has launched a scheme Scheme for Integrated Textile Parks. This scheme aims integration of facilities and to provide the industry with world class infrastructure facilities. The below table details the category wise break-up of Indian Apparel exports from to (all export values in USD Million). 89

122 (Source: Ministry Of Commerce, India) Suits category is growing at a CAGR of 19% for both men and women, which is the highest among all apparel categories COMMODITY WISE GROWTH OF INDIAN TEXTILE AND APPAREL EXPORTS: In India, Textile Exports continues to grow faster than Apparel. Textile Exports is growing at 15% vis-à-vis Apparel at 12%. The below table details the commodity wise break-up of Indian textiles and apparel exports from to (all export values in USD Million) (Source: Ministry Of Commerce, India) INDIA EXPORTS OF KNITTED AND WOVEN APPAREL TO US (YR-2007): 90

123 Total knit apparel imports by the US stood at USD billion in India s share in knitted apparel exports to US was 2% while China was the largest exporter in this category to the US (market share of 20% in 2007), with a CAGR of 34.6% between 2004 and Total woven apparel imports by the US stood at USD billion in India s share in woven apparel exports to US was 3% while China was the largest exporter in this category to the US (market share of 22% in 2007), with a CAGR of 24.3% between 2004 and (Source: Technopak Analysis dated February, 2009) INDIA EXPORTS OF KNITTED AND WOVEN APPAREL TO EU-25 (YR-2007): Total knit apparel imports by EU-25 (extra) stood at Euro billion in India s share in knitted apparel exports to EU-25 (extra) was 7% while China was the largest exporter in this category to EU- 25 (market share of 29% in 2007), with a CAGR of 25.7% between 2004 and Total woven apparel imports by the EU-25 (extra) stood at Euro billion in India s share in woven apparel exports to US was 6% while China was the largest exporter in this category to the EU (market share of 40% in 2007), with a CAGR of 22.2% between 2004 and

124 (Source: Technopak Analysis dated February, 2009) SWOT ANALYSIS OF INDIAN TEXTILE INDUSTRY STRENGTHS: WEAKNESSES: Strong and diverse raw material base - Third largest producer of cotton - Fifth largest producer of man-made fiber and yarn Vertical and horizontal integrated textile value chain Globally competitive spinning industry - Average cotton yarn spinning cost at US$ 2.5 per kg, which is lower than all the countries including China Low wages: Rate at 0.51 US$ per operator hour as compared to USD 1 of China and USD 2.5 of Turkey Unique strength in traditional handlooms and handicrafts Flexible production system Diverse design base Structural weaknesses in weaving and processing - 2% of shuttle-less looms as percentage of total looms as against world average of 16% and China, Pakistan and Indonesia 15%, 9% and 10% respectively. Highly fragmented and technology backward textile processing sector Highly fragmented garment industry Except spinning, all other segments are predominantly decentralized. Rigid labor laws: proving a bottleneck particularly to the garment sector. Large seasonal orders cannot be taken because the labour strength cannot be reduced during the slack season. Inadequate capacity of the domestic textile machinery manufacturing sector. Big demand and supply gap in the training facilities in textile sector. Infrastructural bottlenecks in terms of power, utility, road transport etc. OPPORTUNITIES THREATS Quota phase out pushing the export growth Buoyant domestic economy - Increasing disposable income levels. - Increasing working female population: The Possibility of a global recession triggered by a weakening dollar. Higher competition especially after 2008 when China cannot be restrained under WTO. 92

125 propensity to spend in the case of working women is higher by 1.3 times as compared to a house wife. Increased usage of credit cards and availability of cheap finance would also provide fillip to impulsive apparel purchases. The revolution in organized retailing would increase the consumption of apparel and madeups. Non-availability of indigenous textile machinery. Lack of domestic capital and absence of appetite of domestic industries to invest in the quantities envisaged for 12 percent growth target. (Source: Office of the Textile Commissioner, India) INDIAN GOVERNMENT INCENTIVES TO TEXTILE SECTOR The textile industry is highly fragmented with a few organised players and a large number of unorganised players. Hence, the industry does not enjoy economies of scale. In case of investment in infrastructure, the weaving and processing stages are under-developed due to lack of adequate investments, which has resulted in limited supply of good quality processed fabric. Technology Up-gradation Fund Scheme (TUFS) was launched in 1999 to provide firms access low interest loans for technology up-gradation and setting up new units with state-of-art technology. TUFS has been skewed towards the spinning sector. Of the total disbursements, 34 per cent has been disbursed for spinning while only 17 per cent has been allocated to processing and garment manufacturing as on March 31, This has forced several large domestic and export apparel manufacturers to depend on imported fabrics, which reduces the turnaround time and lowers competitiveness in the industry. As a solution to these problems, the Ministry of Textiles launched a scheme called Scheme for Integrated Textile Parks (SITP) in SCHEME FOR INTEGRATED TEXTILE PARKS (SITP) Though the Indian textiles industry has some inherent advantages, infrastructure bottlenecks have been a prime area of concern. To take advantage of the post Multi-Fibre Arrangement (MFA) scenario, the Apparel Parks for Exports Scheme (APES) and the Textiles Centre Infrastructure Development Scheme (TCIDS) were launched in 2002 to provide world class export infrastructure at important textiles centres. The performance of both the schemes was restrained by the nature of assistance permitted. Therefore, both were merged into a new scheme called the 'Scheme for Integrated Textile Park (SITP)' in 2005 to neutralise the weakness of fragmentation of various sub-sectors of the textiles industry and nonavailability of quality infrastructure. Objective of the scheme: The primary objective of the scheme is to provide the industry with worldclass infrastructure facilities for setting up textile units. The scheme would facilitate textile units to meet international environmental and social standards. These parks would incorporate facilities for spinning, sizing, texturing, weaving, processing, apparels and embellishments and is based on the public private partnership (PPP) model. Apart from SITP, the Government promoted the Textile Industry by Increase in Duty Entitlement Passbook Scheme (DEPB) & duty drawback rates and reduction in interest rates for exporters to compensate for US$ devaluation, continuous reduction of import duties on textile machinery etc. Some of the other Government initiatives are: a) Policy related to foreign investment: Upto 100% foreign direct investment allowed in textile and apparel manufacturing industry, with approval of the Foreign Investment Promotion Board (FIPB) b) Upgrading Infrastructure: Scheme for Integrated Textile Parks (SITP), based on public- 93

126 private partnership model to build world class infrastructure facilities c) Product specific Cluster Approach targeting development of 100 additional clusters in textiles d) Technology Mission on Cotton (TMC), focusing on cotton R&D, dissemination of technology to farmers, improvement of market infrastructure and modernization of ginning and pressing sector Projections for The Eleventh Five Year Plan ( ) On the basis of past trends in fiber-wise cloth production, and the expected trends in fiber/yarn consumption, fiber-wise projection of cloth for the Eleventh Five Year Plan has been projected as under: The year-wise, fiber-wise projected cloth production and per capita availability during the Eleventh Five Year Plan is as under: (Source: Office of the Textile Commissioner, India) Projections of Spun Yarn The dominant share in spun yarn production is that of cotton yarn, which accounts for about 73 of the total spun yarn production. A growth rate of 12 per cent is projected for the Eleventh Plan period, considering the higher growth expected in fabric production. 94

127 PROJECTED PRODUCTION OF SPUN YARN DURING THE ELEVENTH PLAN (Mn. Kg.) (Source: Office of the Textile Commissioner, India) Projections of Exports: Textiles exports have recorded an annualized rate of growth of 12 percent in dollar terms during the first four years of the Tenth Plan. However, after the phasing out of quotas, there has been significant growth in exports, and during the year , they have risen by 22 percent. Considering the growth in textile exports, subsequent to the phasing out of quotas, and the investment flowing in this sector to expand / modernize the capacity in the entire value chain, the Working Group decided to project the overall growth for exports at 20 percent. Segment wise growth in exports has been projected based on the trend in growth, post-mfa, in the respective segments. PROJECTED EXPORTS OF TEXTILES AND APPAREL DURING THE ELEVENTH PLAN (Figures in million US$) (Source: Office of the Textile Commissioner, India) CONCLUSION The Global textile and apparel trade is USD 580 Bn and is expected to reach USD 805 Bn by Global textile trade is growing at a CAGR of 5.8% and apparel at 9.6%. Major growth of textile and 95

128 apparel consumption is expected to come from US, EU and emerging markets like China and India. China and India would together become one of the largest consumption bases by Growing domestic markets in China and India will stabilize the growth of textile and apparel exports from these countries. Indian textiles and apparel industry is presently at USD 58 Bn and is further expected to grow to USD 110 Bn by Almost 2/3 rd of the Indian apparel and textile industry is from domestic consumption, which will keep it buffered from the ups and downs of the global trade and the economic uncertainties of the developed market. India s home textile trade has grown at a CAGR of 9% in the last 4-5 years. However, the value of exports in the last 2 years has remained constant at around USD billion. Interestingly the export of Bed, Table, Toilet and Kitchen Linen is growing at a much higher rate of 29% Indian domestic apparel market is USD 26 Bn in 2007 with urban demand contributing to more than 60% of the total apparel market. Indian apparel export market is USD 9.7 Bn for the year However, India is facing intense competition not only from traditional competitors such as China and Bangladesh, but also from smaller countries such as Vietnam and Indonesia. Indian Government is promoting the Textile Industry by various initiatives like SITP, TUFS, Increase in Duty Entitlement Passbook Scheme (DEPB) & duty drawback rates and reduction in interest rates for exporters to compensate for US$ devaluation, continuous reduction of import duties on textile machinery etc. The Indian textile and apparel industry is well placed with its diversified production base, abundant availability of domestic raw materials, well developed network of R & D, design and testing institutes and growing pool of skilled workers. The labor intensive made-ups and garment industries have witnessed vibrant growth and have the capability of meeting the quality requirements of the global market. All these above factors, point out to the immense potential of the Indian textile and apparel industry, which is poised to take maximum advantage of the quota free regime. 96

129 OUR BUSINESS In this section our Company refers to the Company, while we, us and our refers to our Company and its Subsidiaries. Overview Our Company is one of India s leading integrated textile manufacturers. With more than two decades of involvement in the textile industry, our Company is present across the textile value chain from spinning to home textiles, garments and retailing of products manufactured by us. Our Company operates in five major divisions, Cotton Yarn, Apparel Fabrics (Woven & Knitted), Home Textiles, Garments and Polyester Yarn. In addition to these, which are our Company s core businesses, our Company, through its subsidiaries, has also recently ventured into retailing of products manufactured by us and realty. Our presence across the textile value chain can be best depicted by the following graphic. In our core business, our Company s vertically integrated facilities and flexibility of operations enables us to produce cotton and cotton blended fabrics in various counts and construction and a wide range of finishes. Our global size, modern technology in equipments, integrated plants and manufacturing flexibility coupled with our product development team and competent marketing force facilitates a deep understanding of customer needs and its satisfactory fulfilment. This product, customer and market diversification also ensures risk mitigation and stability of earnings and places our Company at a competitive advantage over other players in the industry. Our core competency lies in manufacturing of quality textile products and assuring our customers of product consistency and timely delivery schedules at international prices. Over a period of time our Company has been the recipient of several awards and trophies including trophies by Texprocil for our Company s export performance. For further details on awards and trophies please refer chapter titled History of the Company and Other Corporate Matters beginning on page 123 of this Letter of Offer. For the year ended March 31, 2008, our Company s total consolidated revenue was Rs. 2, crores and our Company s consolidated profit after tax after minority interest was Rs crores. As at March 31, 2008, our Company s total consolidated assets were Rs. 8, crores and our Company s consolidated net worth was Rs. 1, crores. 97

130 For the half year ended September 30, 2008, our Company s total consolidated revenue was Rs. 1, crores and our Company s consolidated profit after tax after minority interest was Rs crores. As at September 30, 2008, our Company s total consolidated assets were Rs. 8, crores and our Company s consolidated net worth was Rs. 1, crores. Our Company is headquartered in Mumbai, Maharashtra and has eleven manufacturing facilities across three locations in India including Navi Mumbai, Silvassa and Vapi. Our Company employs approximately 11,250 employees across these locations and 3,750 employees on contract labour basis. Manufacturing process A schematic overview of the manufacturing process for various products that our Company manufactures is given below: INTEGRATED TEXTILE SOLUTIONS Spinning Weaving Knitting Processing Garment / Home Textiles POY & Texturising Blow Room Warping (Warp Yarn) Cotton Yarn Grey Wovens, Knits Design creation & Pattern making Polyester Chips Roving Frame Sizing (Warp Yarn) Interloping of yarn Checking & Desizing Fabric checking & sampling Partially Oriented Yarn Ring Frame Interlacing of Warp Yarn & Weft Yarn Grey Knits Scouring Bleaching & Cutting / sorting stitching Texturising Roto- Setting Twisting Grey Wovens Dyeing / Printing Mid Processing Checking & Packing Cotton yarn Embroidery (If required) Stentering & Sanforising Embroidery (If required) Sold to Customers or used in weaving Folding & Packing Washing & Ironing Checking & packing C U S T O M E R S Spinning Spinning is the process of manufacturing spun yarn from cotton and staple fiber like polyester and viscose. The yarn manufacturing process includes opening, picking, carding, drawing, roving, and ring spinning in the production of carded yarn. For combed yarn, three steps culminating in combing are 98

131 included after the carding operations. Polyester Cotton blended yarn can also be produced in cotton spinning system. Weaving Weaving is a process of forming fabric by the interlacing of warp and weft yarn. Warp yarn (commonly known as ends) runs along the length of the fabric and weft yarn (also known as fillings / picks) run at right angle to the warp yarn i.e. across the fabric. The fundamental weaves are plain, twill and satin, all other weaves, employ one of these basic weaves in their composition. Weaving includes the following manufacturing process steps: Warping Sizing Weaving Checking Folding Packing Processing Yarn Dyeing Yarn is dyed in high-pressure yarn dyeing machines. During dyeing in cone / cheese form, the dye liquor flows inside out and outside in from the dye packages and by repeating this number of times the shade is built-up and dyes are fixed on yarn by alkaline solution. The excess loose color is then washed out for obtaining better fastness. Normally cotton yarns are dyed with reactive dyes or vat dyes to obtain brilliance and fastness. The cones are then pressure dried by means of super saturated steam pressure. Fabric Processing The processing of greige woven fabrics involves inspection for unwanted threads etc. The fabric is then sent for de-sizing/singeing and scouring where the starch, oil, grease etc. are removed from the fabric, which is then bleached to remove the natural colouring matter. The bleached fabric is mercerised to increase its lustre and also to increase its affinity to dyes. The fabric is then dyed on dyeing machines after which the dyed cloth is dried, finished and stretched to the required width. The fabric can also be printed by applying colours in definite, repeated patterns depending on the design requirement. It is then finished by giving complete shrinkage control and dimensional stability In case of knit processing, although the steps involved are similar to those of woven processing, great care has to been taken for handling the knitted fabric, as it cannot be subject to any kind of stretch or tension in any of the processes. The processing of knitted fabrics can be carried out in two forms viz., tubular or open width. The processing is done upto the dyeing stage in tubular form only, and thereafter, for printing, the fabric can be processed in open width form or in tubular form. The basic raw materials required for processing of fabrics are dyes and chemicals, which comprise of caustic soda, colours, dyes, hydrogen peroxide, detergents etc. The requirement of dyes depends on the type of printing and dyeing shades. Looking to the growing concern over the use of AZO based dyes in processing, the company ensures that all the dyes and chemicals used in the processing are ecofriendly. Made Ups Our Company converts part of its wider width processed fabrics into Made-Ups. The manufacturing process of Made Ups would begin with checking of fabrics received from the Process House Before being issued for production. While a typical Made up set generally consumes about six meters of fabric, it may vary as per the requirement of customers. The stages involved in the Made Up unit are as follows: Fabric Checking Design Creation / Pattern Making Cutting and Sorting Stitching Embroidery (if required) Inspection & Quality Control Packing Folding Garments 99

132 Our Company procures fabric from its Process House which is then checked before issuing to Production Department. Designing is an important factor in the ready-made garments industry. The garments are designed either as per the latest trends in the fashion world or the design is received from the buyer according to which samples are prepared. The sample is then sent to the buyer for approval. After receipt of the approval, the design is given for bulk production. The summarized process is as follows: Fabric Checking Design Creation / Pattern Making Sampling Cutting and Sorting Stitching Inspection Folding Packing POY Our Company uses the melt spinning process in the manufacture of POY. In melt spinning, the fiberforming substance i.e. polymer chips is melted for extrusion through the spinneret and then directly solidified by cooling. The polymer is melted and pumped through a spinneret (die) with numerous holes (one to thousands). The molten fibers are cooled, solidified, and collected on a take-up wheel. Stretching of the fibers in both the molten and solid states provides for orientation of the polymer chains along the fiber axis. This process of stretching the fiber is called drawing. Drawing is typically accomplished by passing the filament around a series of drum or rolls. Each drum is increased in speed to stretch the filament. Continuous Polymerization While the process defined above for POY is currently in use, our Company as a backward integration measure is setting up continuous polymerization plant for manufacture of POY. Under this process, polyester polymer is produced using PTA (Purified Terephthalic Acid) and MEG (Mono Ethylene Glycol) as the main raw materials. By reacting these ingredients in the continuous polymerization plant, a polymer melt is formed that can be used for making polyester filament yarn (POY and FDY) and textile grade chips. Textile grade chips can be used for further processing in manufacturing of POY, FDY or staple fiber. In addition to the main raw materials, other additives such as TiO2, Catalyst and DEG are used for making textile grade polymer. Electrical power and fuel oil (or natural gas) is required as main sources of energy. Power is used for driving the rotating parts in the plant and Fuel oil (or natural gas) is used for heating of the HTM vaporizers, which provide heating of process systems. Texturising Texturising is a thermo mechanical process to make POY more suitable for manufacturing of fabric by permanent re-orientation of its molecular structure and providing better and superior texture to the yarn. The POY threads are first passed through a yarn feed device where it is stretched to the required denier. It then goes through the first heater for initial set-up. It is then passed through a cooling panel and a friction disc unit where it is twisted and untwisted about times. It then passes through another set of rollers stabilizing heater and then through a third set of feed rollers and then finally through oil rollers. Ultimately the yarn is wound on the paper cones running on the take up roller. The yarn now becomes suitable for twisting, weaving (only for weft) and knitting. For making the yarn suitable to use as warp yarn (in weaving), roto yarn is produced. For producing roto yarn, interlacing jets are fitted next to second set of feed rollers in the yarn path. Compressed air is blown while passing through the jets, wherein the filaments are intertwined by a series of prescribed short periodic compact nodes (nips) without causing any radical disarrangement of the filaments. The yarn becomes suitable for using as warp yarn for weaving application. It also eliminates downstream operations like twisting or sizing thereby reducing cost of warp yarn for weaving application. The basic raw material and finished products in each of these divisions are tabulated below. 100

133 Division / Product Key Raw Materials Output Spinning Weaving Processing Yarn Dyeing Made-ups Garments POY Cotton Polyester Staple Fibre Cotton yarn Viscose, polyester and rayon yarns Greige fabric Dyes and chemicals Water Greige yarn Dyes and colours Wider width fabric Apparel width fabric Purified Terephthalic Acid (PTA) Mono Ethylene Glycol (MEG) Polyester Chips Cotton yarn Blended Yarn Wider width griege fabric for home textiles Apparel width griege fabrics for garments Wider Width finished fabric for home textiles Apparel width finished fabric for garments in different finishes Dyed Yarn Sheet-sets, duvets, comforters, blankets, quilts, bed-in-a-bag, Curtains in prints, solids, embroidery, sateens, flannel, Jacquards, dobbies, yarn-dyed Knitted / woven garments for ladies and gents for sportswear, active wear, casual wear and sleepwear Partially Oriented Yarn Texturising POY Texturised Yarn Products & Markets Our Company s products are either used for captive consumption (as a part of the textile chain) or sold to the following target markets: Products Markets Cotton Yarn Apparel Fabrics Woven & Knits Home Textiles - Sheet sets, Comforters, etc. Garments Polyester Yarn - POY and Texturised yarn Direct Exports Domestic weaving mills Garment exporters in India / converter countries Domestic garment manufacturer / traders / retailers Direct Exports Domestic Market Direct Exports Domestic Market Direct / Overseas Texturising Units 101

134 Competitive Strengths Our principal competitive strengths are as follows: 1. Integrated Operations and Economies of Scale Our Company s operations are vertically integrated across the textile value chain. Our facilities are also versatile enough to allow us the flexibility to produce cotton, polyester, and viscose blended fabrics in various counts and construction. This in turn has enabled our Company to meet the time, quantity and quality requirement of our customers. By virtue of our integrated operations from cotton procurement to spinning and weaving, making of apparel and home textile fabrics, made-ups and garments, our Company derives benefits of economies of scales and quality control. This along with our wide product range makes our Company a preferred partner for sourcing of textile goods. Being vertically integrated from fibre to garments/made-ups has also helped our Company to de-risk variations in input cost thereby improving margins over a period of time. Our Company s large production capacity in each of its divisions as on December 31, 2008: about 300,000 ring frame spindles, about 1,200 shuttleless looms, about 178 knitting machines and 68 texturising machines at Silvassa, 5 continuous processing ranges at Vapi, etc. provides advantages of economies of scale. The large volumes ensure bulk quantity discounts on purchases and wide spread of overheads result in reduced cost per unit. We believe that our Company s high level of modernization, trained work force and managerial expertise results in a consistently high level of productivity. Global buyers today are increasingly looking to consolidating their sourcing strategy. This would mean sourcing from fewer countries and fewer vendors. Our Company therefore, we believe, is a preferred vendor because of our size, integrated operations and modern facilities. 2. State of the art equipment and technology Our Company has invested in modern technology and equipment across all areas of its operations. Our management believes that our Company s manufacturing technology is on par with global competitors. Our technology while ensuring that labour requirement is minimal facilitates quick turnaround times, innovative finishes like aroma finish, insect repellent finish, anti bacterial finish, soil resistant finish etc., flexibility to adapt to changing fashion trends, consistency in quality etc. Additionally, Our Company also keeps abreast with the latest changes in technology by attending international fairs & various other seminars & expositions and regular interactions with existing machinery suppliers. 3. Locational Advantages Our Company s plants are located at Navi Mumbai, Silvassa and Vapi. These centres have, over the recent past, developed into textile manufacturing hubs, on par with the traditional hubs of Ahmedabad, Surat and Tirupur. Vapi and Silvassa are well-connected by road and rail to the rest of the country and are in close proximity to major Indian ports at Mumbai and Nhava Sheva, while Navi Mumbai is, to all intents and purposes, an extended suburb of Greater Mumbai. This facilitates the movement of raw material into the factory locations (from Mumbai and Nhava Sheva ports in case of imports and from Madhya Pradesh, Maharashtra and Gujarat in case of key indigenous raw materials). The proximity to premier Indian ports and the international airport at Mumbai also facilitates the export of our finished goods to various countries a matter of considerable importance given that about 35% - 40% of our turnover is exported. Mumbai (the Indian commercial and financial capital) is approximately 200 kilometers from Vapi and 180 kilometers from Silvassa; thus these locations are proximate to a major Indian metropolis. 4. Cost Effectiveness Our Company s manufacturing facilities are located at Silvassa, where power cost is approximately Rs 3.00 per unit, which is amongst the lowest in the country. This coupled with the captive power sub- 102

135 station at Silvassa & Vapi and other various power saving devices ensures optimum utilization and minimum waste resulting in low power cost. Our Company has set up utilities including inter alia captive power generation at our manufacturing facilities at Silvassa & Vapi. In Vapi we have installed a co-generation plant and at Silvassa we draw power directly from a grid to our sub-station and as a back-up we have a captive power plant. Our Company is also setting up a captive power plant of 50 MW at Silvassa, which will assist our Company in meeting current power requirements and ensure an adequate supply of power for Company s ongoing expansion plans. With the installation of modern equipment, the manpower requirement of the company is comparatively lower than industry standards. The Company s labour cost to capacity ratio is competitive and the manpower cost as a percentage to sales is about 3.5%. We believe that our company s infrastructure facilities are adequate to meet the current and ongoing expansion plans. 5. Diversified Customer Base Our Company has a well-diversified customer base, both in India and overseas. In the Indian market, our Company supplies its products to well-known retailers and garment and home textile manufacturers and exporters. In the overseas markets, our company is the nominated / preferred vendor for several brands / retailers. Besides USA, our company has a diversified market spread over countries in EU, South-East Asia, Africa and South America. The table below traces our Company s export performance. Particulars Unit Total Sales Rs. In Crores Exports Rs. In Crores Half year ended September 30, , , , , Share of Total Sales % Share of Exports to USA % Countries Exported Nos Product design and development Design development and sampling form an integral part of our Company s operations and considered as effective tools for converting an enquiry into an order. Our Company has design studios across all its plants supported by qualified designers from reputed fashion design institutes such as the National Institute of Fashion Technology and JD Institute of Fashion Technology. The jacquard knitting and weaving machines are directly connected to computers for design generation. New designs are developed on a daily basis in each of our divisions to add to our library of over 30,000 designs in numerous varieties of solids prints, jacquards, dobbies etc. This vibrant design development and our extensive design database pitches us as a trendsetter in the market, giving us the opportunity to cash in on the initial premium. Our Company has also focused on new product offerings in order to gain customer and marketshare. In wovens, our Company has moved up the value chain, making finer count yarn dyed fabric that is used for high-end shirting. In bottom weights (used for the manufacture of trousers) production levels have increased, with finishes such as peach finish, wrinkle-free finish and stain and oil-free finishes. Our Company has also recently forayed into work wear fabrics; specialized fabrics ideally suited for industrial customers like the armed forces, aviation companies, fire departments, hospitals, the hospitality sector and the infrastructure industry. These specialty fabrics would include High visibility 103

136 fabrics, Fire retardant fabrics, Soil release and repel fabrics, Infra-red resistant fabrics, Water resistant fabrics, Anti bacterial fabrics, Insect repellent fabrics, Aroma finishes fabrics, etc. In the knitting segment, our Company has increased the range to include high value-add yarn dyed knits and fleece, which are used for sweatshirts. In addition our Company develops fabric samples with a mix of yarns including cotton and polyester with new age fibers like Lurex, Tencel, Modal, etc. in different designs in its endeavour to create new markets. Our Company s constant efforts to develop new customers and new markets have enabled us to lately penetrate the lingerie goods segment too in terms of manufacturing knitted fabric for lingerie makers. In Home Textiles our Company has a full fledged design and product development team that is in regular interaction with the customers and offer them home textile samples in different prints, designs and yarn count. In keeping with our philosophy to explore new product segments and customers our Company also recently commissioned the Terry Towel unit to complete the product suite being offered in our home textile range. 7. Organic Cotton Our Company has been at the forefront of the organic cotton initiative in India. Sustainable cotton is a socially responsible version of cotton, which is projected to grow significantly in the coming years. It involves paying a fair price to the cultivator, redistributing part of the value addition (from cotton to branded end product) down the value chain to the farmer and helping him to reduce his input costs. It works through three aspects increasing cultivation yields, increasing total and per unit realizations and reducing the input costs. Cultivation yields can be increased through focused R&D knowledge widely disseminated to the farmer. Input costs can be reduced by reducing the farmer s dependence on chemical fertilisers and pesticides. And, per unit realizations can be increased by equitably re-distributing the premium that the world is willing to pay for organically grown cotton products. To develop the organic cotton initiative in India and stimulate the transition to supply and demand of the organic and sustainable cotton industry, our Company has tied up with various organic and fair trade cotton projects for various purposes including inter-alia: To provide a secure supply of organic fair-trade cotton to meet customer needs To provide a secure market to small cotton farmers by creating recognition among textile customers To facilitate meaningful communication between customers and farmers To ensure that farmers receive at least the minimum price for fair-trade organic cotton, which would at least cover their cost of production To provide pre-financing opportunities to the farmers during the time of sowing Our Company has started manufacturing organic cotton products, retailed by large department stores in the UK and USA, which apart from benefiting the organic cotton growing farmer, also brings in higher realizations. Strategy The key elements of our strategy are as follows: Our Company s growth strategies over the short and medium term are based on the following factors. 1. Strengthening the Product Portfolio It is our Company s endeavour to constantly develop new products and finishes to capture our customers requirements both within its traditional product framework as well as for new specialty fabrics. While our Company has traditionally been dealing with the fashion market, off late however, our 104

137 Company has also ventured into the work wear and protective wear market usually meant for institutional customers like the armed forces, aviation companies, fire departments, oil refineries, hospitals, the hospitality sector and the infrastructure industry. In recent expansions, our Company has acquired technology inputs and capabilities to produce high quality and diversified fabrics and textile products. Over a period of time these should greatly contribute to developing and enhancing our Company s product diversification strategies. 2. Expanding Geographic Reach About 40% of our Company s products are directly exported to about 70 countries across the world. A substantial portion of our Company s domestic sales are also made to Indian garment exporters and converters, who, in turn, supply to major international labels and brands. Whereas the US does remain a major market of our Company s exports, our Company has, over a period of time, explored opportunities in other international markets: both for growth as well as to derisk itself from an over-dependence on a single export market. Apart from the US (where our Company sells about 25% - 30% of its exports), our Company also sells in about 70 countries spread across North and Latin America, Europe, Africa, UAE and Asian countries like Bangladesh, Sri Lanka, etc. Our Company will continue exploring opportunities in various countries where it can supply value added textile products to enhance its geographic reach. This will be a strategy that our Company will adopt in the near and middle term. The domestic market also offers opportunities in term of sub-geographic penetration and product/market diversification. Our company will seek to grow its marketing reach domestically to explore hither to untapped markets and segments as part of its strategy to mitigate market risk and widen growth prospects. 3. Become a Nominated Supplier to Global Customers Over the recent past, a trend that is emerging is that of large global customers looking at increasing the efficiency of their supply chain by consolidating their vendors and relying on large vendors who would have the capability to service large volume orders on time and within stringent quality parameters. Our Company, with its capacities in design and manufacturing and with quality control practices, makes such sourcing cost effective and efficient for its customers. Therefore, as part of its growth strategy, our Company is making conscious efforts to move up the value chain with its customers and become a nominated supplier to some of the global brands. This would also have the additional advantage of being able to procure large ticket orders from such customers. 4. Inorganic Growth Opportunities Textile capacities in the developed economies are shrinking, mainly due to high production and labour costs. These entities, however, offer synergies in terms of the product range, marketing network and technology knowledge. In India, too, the industry is gradually seeing a trend of consolidation, where large players with their scale of operations, market reach, reputation for quality and on-time delivery, are taking centre-stage, especially for exports. Our Company recognises that inorganic growth opportunities would be a growth and value driver in its future strategic plans. To that effect, our Company via its wholly owned Subsidiary, Alok Industries International Limited, has acquired already 79.8% stake in Mileta a.s. in Horice, Czech Republic, a leading vertical textile manufacturing company with weaving, administration and processing facilities in the Czech Republic. The Mileta range of products includes amongst others, handkerchiefs, high quality shirting, batistes and voiles, as well as a complete line of functional table linen and bed linen. Through the acquisition of Mileta a.s., our Company has also acquired brands such as Mileta, Erba, Cottonova, Lord Nelson, etc. Our Company shall, in the future, explore such inorganic growth opportunities wherever they are synergistic and cost-effective. 105

138 5. Expansion of retail of products manufactured by us In India, our Company through its wholly owned Subsidiary Alok Retail (India) Limited has started retail operations of its manufactured product under the brand name of H&A stores, 54 stores of which are now established across India. Our Company s domestic retail foray targets the value and fashion conscious Indian consumer, catering to its apparel and home textile needs. We propose to increase the number of our stores across India in a phased manner. Our Company has, over the last two decades of its operations, been primarily known as a supplier of quality textile and apparel products to the intermediate sector but not so much to the end-customer. Over the near and medium future, our Company intends to grow and sustain this retail venture, which would then enable our Company not only to address demand from the manufacturers of garments and apparel but also to the end-consumer. In order to do so, our Company would also build and develop suitable marketing and branding initiatives for its retail venture. 6. Become an Employer of Choice We place particular emphasis on attracting and retaining the best talent in the industry. We have implemented various human resource programmes at every level in the organisation, which has helped in developing and retaining our talent pool. We believe it is imperative that we have a well trained and experienced pool of resources in order to execute our global strategy and manage the substantial business and capacity growth that is expected. We intend to continue attracting the appropriate level of talent on a global basis through the right mix of recruitment and retention strategies. Divisions Our Company has broadly organized its divisions into following categories. 8. Apparel Fabrics Our Company has considerably scaled up its weaving, knitting, knit processing and apparel width processing facilities at Silvassa and Vapi towards achieving its objective of being a global textile player. Our Company offers a range of tailor made services to garment exporters and domestic garment manufacturers, wholesalers, traders and retailers both directly and through distribution networks. These services include design development, weaving, knitting and finishing as per specifications. Due to our adherence to quality, control and delivery parameters, we believe our Company has emerged as one of the preferred partners for sourcing of textile merchandise. 9. Home Textiles In 2003, our Company ventured into home textiles for the manufacturing of bed sheets, fitted sheets, pillow covers, quilt covers and duvet covers primarily for exports. Our Company has installed modern wider width air jet / rapier shuttle less weaving looms at Silvassa, state of the art continuous wide width processing plants at Vapi and yarn dyeing facilities. Our Company has also set up made-up stitching units at Silvassa and Vapi. Our Company has tied up with AISLE 5, LLC a New York based company to manufacture and distribute bathing, sleeping, dining and home décor textile products. Such products include sheets, pillow cases, blankets, duvets, robes, bathmats, towels, table linens and decorative pillows to be distributed to supermarket retail stores in the United States and Canada. Looking to the future high growth areas, especially in value added bed linen and home textile products, our Company has set-up a terry towel unit to further capitalize on this emerging opportunity. 10. Cotton Yarn 106

139 With the expansion of our apparel fabrics and home textile divisions, our Company s requirement of cotton yarn has increased considerably. In order to avoid total dependence on the market for cotton yarn, our Company commenced its own spinning facilities in The expansion of ring frame spinning capacity is being done in a phased manner. 11. Texturising Our Company commenced its polyester yarn manufacturing operations in February 1989 by setting up a texturising division with an installed capacity of 511 tpa at Silvassa. Over the years the capacity of the texturising division has been expanded considerably and currently is about 75,000 tpa with 68 machines installed. 12. POY The basic raw material for texturising is partially oriented yarn (POY). Our Company as a backward integration measure has set up a POY capacity of 54,000 tpa in November It is further enhancing its POY capacity mainly for the following reasons: a) To source speciality yarn like micro filament yarn for manufacturing of micro roto texturised yarn, which fetches better margins. b) Texturising is a low margin and volume driven business. With backward integration, our Company will be able to reduce the cost of raw material and thus improve its margin. As an initiative of backward integration in POY, our Company is gearing up to implement a continuous polymerization project. This would help our Company reduce lead time for procuring raw materials resulting in lower raw material cost. 13. Garments Our Company started garment stitching by setting up a unit of 100 stitching machines at Navi Mumbai, in November 2002 for manufacturing woven and knitted garments with an eye on the export market. Our Company s integrated manufacturing facilities distinguish us from an independent garment manufacturer. Our Company has since expanded garmenting capacities by setting up a new unit at Silvassa. Facilities Our Company s main operations are located in India and its principal facilities include eleven manufacturing plants across three locations in India including Navi Mumbai, Silvassa and Vapi. No. Unit Leasehold/ Freehold 1. Hemming Unit at Village Rakholi, Silvassa Freehold 2. Weaving, Knitting and Texturising Unit at Village Rakholi and Saily, Silvassa: Freehold 3. Garment Unit at Village Saily, Silvassa, Freehold 4. Weaving Unit at Village Dadra, Silvassa Freehold 5. Spinning Unit at Village Silvassa Freehold 6. Balitha Unit Processing I Freehold 7. Balitha Unit Processing II Freehold 8. Bhiwandi Factory Freehold 9. Process House at Navi Mumbai Leasehold 107

140 Capacity The table below sets out our installed capacity as of December 31, 2008 and future projected capacities after our ongoing capacity expansions are completed: Spinning Division Units Capacities as on December 2008 Capacities Under Implementation Total Capacities Post March 2009 Spinning Open end Tons / Annum 2,000 11,520 13,520 Rotors (936) (2,856) (3,792) Spinning Ring Frame Tons / Annum 31,300 13,680 44,980 Home Textile Spindles (251,712) (48,000) (299,712) Wider Width Weaving Mn Meters Wider Width Processing Mn Meters Made Up Mn Sets Terry Towels - Processing Tons / Annum 6, , Apparel Fabrics Normal Width Weaving Mn Meters Normal Width Processing Mn Meters Knitting Tons / Annum 18,200 49,000 67,200 Knit - Processing Tons / Annum 18,200 49,000 67,200 Yarn Dyeing Tons / Annum 3,000-3, Garments Mn Pieces Texturising Tons / Annum 75,000 39, ,000 POY Tons / Annum 54, , ,500 Raw materials Raw Material requirements of the various divisions of our Company are given below: Particulars Production capacity Raw material required Unit Quantity Raw material type Unit Quantity Spinning Tons 33,300 Fiber Tons 58,000 Home Textiles: Weaving Mn. Mtrs Yarn Tons 18,400 Wider Width Processing Mn. Mtrs Grey Fabric Mn. Mtrs Made ups Mn. Pcs Finished fabrics Mn. Mtrs Terry Towel: 108

141 Particulars Production capacity Raw material required Terry weaving Tons 6,700 Yarn Tons 7,011 Terry Towel Processing Terry Towel Making up Apparel Fabrics: Tons 6,700 Grey Terry Fabric Tons 6,871 Tons 6,700 Finished Terry Fabric Tons 6,700 Weaving Mn. Mtrs Yarn Tons 14,200 Woven Processing Mn. Mtrs Grey Fabric Mn. Mtrs Knitting Tons 18,200 Yarn Tons 18,200 Knit Processing Tons 18,200 Grey Knit Fabric Tons 18,200 Yarn Dyeing Tons 3,000 Grey Yarn Tons 3,618 Garments Mn. Pcs Polyester Yarn: Finished Fabrics Woven Mn. Mtrs Finished Knit Fabrics Tons 4,770 Texturising Tons 75,000 POY Tons 70,755 POY Tons 54,000 MEG/PTA Tons 70,200 Spinning The main raw material for the spinning unit is raw cotton, which is available indigenously. Our Company has forged relationships with large raw material stockists in India. The complete cotton requirement is covered by procuring cotton from traders and ginners during the cotton season. Our Company has also entered into contracts with farmers for the supply of organic and fair trade cotton. Weaving The main raw material for the weaving unit is cotton, viscose, polyester and rayon yarns of various counts, which are available indigenously. Our Company procures its yarn from various manufacturers or their agents in India besides importing certain specialty counts. Our Company also procures polyester and viscose staple fibers for manufacturing blended yarns. The staple fiber is available indigenously from well known suppliers. In addition to yarn, our Company also purchases fabrics in bulk quantities from other organized mills and the power loom sector to meet its requirement. Knitting The raw material required for manufacturing knitted fabrics is mostly cotton yarn of 20s, 30s, 34s and 40s count and 80 /150 Denier texturised yarn in case of polyester. The requirement is based on the product mix and prevailing fashion. Our Company has contracts with major yarn manufacturers and suppliers besides its own production for the supply of cotton yarn. The polyester yarn is procured from our own texturised yarn division Processing The basic raw material required for processing of fabrics is dyes and chemicals, which comprises of caustic soda, colour dyes, hydrogen peroxide and detergents, all of which are available indigenously from various manufacturers and suppliers. The requirement of dyes depends on the type of printing and 109

142 dyeing shades. Looking to the growing concern over the use of carcinogenic dyes in processing, our Company ensures that all the dyes and chemicals used in processing are eco-friendly. Our Company is presently procuring dyes and chemicals either directly from manufacturers or through their distributors and agents. Made Up& Garments The basic raw material requirement for our made-up and garment unit is fabrics. Our Company primarily uses its own fabrics, but also at times outsources from domestic suppliers as and when required. POY / PTY The basic raw material required for manufacturing POY is a polyester chip, which is available indigenously. Our Company procures chips from established domestic suppliers. Upon the commissioning of our continuous polymerization plant our Company would use PTA / MEG as the basic raw material for production of POY. In house capacity of POY will be the raw material for the texturising unit. Utilities The existing utilities for the various divisions of our Company are tabulated below: Division Maximum Power Water Air conditioning Compressed air Spinning - Silvassa MW 3,900 KL per day - 3,800 CFM Weaving - Silvassa MW 3,425 KL per day - 34,000 CFM Weaving - Dadra 0.27 MW 100 KL per day - - Weaving - Bhiwandi 0.31 MW 10 KL per day - 40 CFM Knitting - Silvassa 0.57 MW 100 KL per day - 2,000 CFM Process House Vapi I (Home Textiles) Process House Vapi II (Apparel Fabrics) (Knit Fabrics) (Yarn Dyeing) Process House Pawane, Navi Mumbai Terry Towel plant - Vapi 2.60 MW 5,110 KL per day 66 TR 800 CFM 1.99 MW 3,900 KL per day CFM 1.14 MW 2,400 KL per day CFM 7.12 MW 3,840 KL per day - 6,632 CFM CP & POY - Silvassa 9.5 MW 675 KL per day 1,000 TR 3, kg/cm2 6, kg/cm2 2, kg/cm2 Texturising - Silvassa 9.5 MW 500 KL per day - From centralized compressor installation for weaving, knitting, 110

143 Division Maximum Power Water Air conditioning Compressed air POY & Texturising Embroidery Mahape, Navi Mumbai 0.29 MW CFM Embroidery - Silvassa 1.38 MW 20 KL per day 481 TR 602 CFM Made ups and Garment - Silvassa 1.19 MW 400 KL per day CFM Made ups - Vapi 0.13 MW 15 KL per day - - Garment - Turbhe, Navi Mumbai Alok Apparels - Silvassa Hemming - Silvassa 0.48 MW - 14 CFM 0.29 MW 163 KL per day CFM 0.07 MW Material Subsidiaries and Joint Ventures and their businesses Our Company through its subsidiaries is engaged in the business of domestic and overseas retailing. In domestic retailing, the subsidiary sells products manufactured by our Company. Our Company also has interests in realty through four subsidiary companies. A summary of the investments made by our Company in subsidiaries engaged in retail and realty is as follows: (Rs. In crores) Sr. No. Particulars Total Investment* September 30, 2008 Total Investment* March 31,2008 Total Investment* March 31, Alok Industries International Ltd Alok Inc Alok International Inc Alok Infrastructure Ltd Alok Land Holdings Ltd Alok Apparels Pvt. Ltd Alok Retail (India) Ltd Amigo Sport Pvt. Ltd Aurangabad Textiles & Apparels Park Ltd. 10 New City of Bombay Manufacturing Ltd Total * Includes Equity Share capital, Preference Shares and Share Application Retailing Our Company forayed into domestic retailing of products manufactured by us under the name H&A in FY To leverage growth opportunities, our retail operations have been hived off into our 100% Subsidiary, Alok Retail (India) Limited. As at December 31, 2008, Alok Retail (India) Limited 111

144 had 54 stores across India. In its bid to establish an international presence, our Company through a 100% subsidiary Alok Industries International Limited acquired a substantial stake (41.56%) in Grabal Alok (UK) Limited (formerly known as Hamsard 2353 limited). As of September 30, 2008, our Company has invested Rs crores in Alok Industries International Limited (Rs crores through preference shares, Rs crores through share application towards equity shares and Rs crores through equity shares). AIIL has, in turn, invested, Rs crores in Grabal Alok (UK) Ltd. (Rs crores through equity shares, Rs crores through share application money towards equity shares), Rs crores in Mileta a.s. and Rs crores in Grabal Alok International Ltd. and others respectively. As on December 31, 2008 Grabal Alok (UK) Ltd operates out of 218 value format retail stores around Scotland, England & Wales in the UK vending value for money ranges for mens wear, women wear, children wear, foot wear, home ware, accessories etc. These stores originally known as qs are being gradually refurbished and re-laid out in an attempt to spruce up the image. The refurbished stores have been rechristened as Store Twenty One. The stores are now being repositioned to move from being a discount retailer to a value retailer and they are also setting up shopin-shop in tandem with large format stores in order to widen their reach. Realty Our subsidiary, Alok Infrastructure Limited is engaged in the business of purchasing and taking on lease or exchange, build, develop, maintain, cultivate, sale, exchange and deal with moveable and immovable properties, construction buildings (including SEZ and ITPs) etc. As on September 30, 2008, our Company has invested Rs crores in Alok Infrastructure Limited (Rs crores as share application money towards equity shares and Rs crores as equity share capital). Alok Infrastructure Limited has invested Rs crores in Alok Realtors Pvt. Ltd. (its 100% subsidiary) and Rs crores in Ashford Infotech Pvt. Ltd. (50% stake with the other 50% being held by the Ashford group). These investments were funded out of our Company s investment as well as debt and internal accruals of Alok Infrastructure Limited. Alok Realtors Pvt. Ltd. has contracted to acquire commercial space in Peninsula Business Park, Lower Parel, Mumbai for Rs crores. As of September 30, 2008, Alok Realtors Pvt. Ltd. has also paid an advance amount of Rs. 75 crores towards the same. Ashford Infotech Pvt. Ltd. has acquired a plot of land in Nahur, Mumbai where it proposes to develop a commercial complex in a joint venture with the Ashford Group. As of September 30, 2008, our Company has also invested Rs crores in Alok Land Holdings Private Limited, for exploring joint venture opportunities. As on September 30, 2008, Alok Infrastructure Limited has also contracted to acquire Ashford Centre, commercial premises in Lower Parel for Rs crore for which an advance of Rs crores has been paid for the purposes of setting up office for our own use. For further details on the businesses of our Subsidiaries and our joint ventures please refer to the chapter titled Our Subsidiaries and History of the Company and Other Corporate Matters beginning on pages 129 and 123, respectively, of our Letter of Offer. Sales and marketing We have established marketing offices at Mumbai, Bangalore, Chennai, Delhi, Sri Lanka, Bangladesh, Czech Republic, UK and USA (New York and Dallas). Our Company s customer profile for apparel fabric and home textiles include garment exporters in India and converter countries, export and international buying houses, overseas brands, retailers and importers, domestic wholesalers and traders. Our texturised yarn is sold through a network of domestic agents. The distribution channels used by our Company for the marketing of its products are set out below: 112

145 Products / Market Segments Distribution Channel Home Textiles Direct exports Alok International Buying Houses/ Retailers/ Overseas Manufacturer Apparel fabrics (Woven & Knits) for Garment Exporters- Domestic and overseas Apparel Fabrics (Woven & Knits)-Domestic Market Garments- Direct Exports Texturised Yarn Domestic Market Retailing of our manufactured products (H&A) Competition Alok Domestic / Overseas Garment Manufacturer / Exporters / International Buying Houses/ Retailers Alok Marketing Agents / Wholesalers/ Trader Small Garment Manufacturer / Retailer. Alok International Buying Houses/ Retailers Alok Marketing Agents Powerloom Weavers Own / Franchise retail Stores Our Company due to our varied product lines cannot be directly compared with any particular company. However, within each of the product segment, our Company faces competition from the various players as given below: Segment Cotton Yarn Texturised Yarn Apparel Fabrics Wovens Apparel Fabrics Knits Garments (Knits and woven) Home Textiles (Bed Linen, etc) Competitors Rajasthan Spinning, Vardhaman Spinning, Nahar Spinning, etc. Bhilosa Synthetics Ltd., Welspun Polyester Ltd., Reliance Industries Ltd., Indo- Rama, JBF, etc. Vardhaman Textiles, Century Textiles & Industries Ltd, Nahar Industrial Enterprises Ltd, Arvind Ltd., JCT Ltd and un-organized power loom sector, etc. Krishna Lifestyle Technologies Ltd, Pratibha Syntex Limited, New Fab, Maral Industries, Chiripal Industries Ltd. and various Tirupur based manufacturers. Garment exporters like Bombay Rayon Fashions Limited, Sonal Garments, Creative Garments, Midas Touch Exports, Texport Garments, Richa & Co., Gokaldas & Co., and others. Bombay Dyeing Mills Ltd., Welspun India, GHCL, Indo-Count, Creative Mombus Fabrics Limited, Orient Craft Limited, and un-organized players. Intellectual property Our Company has the following registered trade marks in India: Sr. No. Application No. Class Name Date of filing of application Status K.B 58 April 13, 2006 Registration valid till April 13, TOUCH OF CLASS December 30, 2005 Registration valid till December 30, ALOK (logo) May 18, 2005 Registration valid till May 18, ALOK (word) May 18, 2005 Registration valid till May 18, ALOK (with logo) April 15, 2004 Registration valid till April 113

146 Sr. No. Application No. Class Name Date of filing of application 14, 2014 Status ALOK (with logo) April 15, 2004 Registration valid till April 14, ALOK (with logo) April 15, 2004 Registration valid till April 14, Integrated Textile Solutions Integrated Textile Solutions November 7, 2003 Registration valid till November 7, 2013 November 7, 2003 Registration valid till November 7, Reflection November 7, 2003 Registration valid till November 7, SOLID November 7, 2003 Registration valid till November 7, 2013 Our Company has the following copyright registrations Sr. No. Registration No. Registration Date Class and Description of Work Title of the Work Name of Author 1. A-77206/2006 July 24, 2006 Artistic Reflection Mr. Dilip B Jiwrajka 2. A-73541/2005 March 22, A-73542/2005 March 22, 2005 Artistic Solid Mr. Alok A. Jiwrajka Artistic Alok Mr. Alok A. Jiwrajka Year and Country of First Publication 2003, India 2003, India 2000, India Corporate Social Responsibility Philosophy Our Company understands the importance of building and sustaining prosperity without depleting and despoiling nature. Our Company believes in growing smart, through investing in process innovations that lead to increased efficiency in the use of materials. It has committed resources in aligning new, clean technology with production in order to produce textiles without damaging or diminishing the natural environment. Our Company believes that environment and economics do not necessarily need to be in conflict. Investing more in renewable energies and technologies that combat pollution, foster growth and protection are not just socially responsible behaviour, they make sound economic sense, especially in the long run. Therefore, as a philosophy, the Company has a strong bias for active measures that help in the protection of the environment going beyond the levels demanded by regulatory processes and guidelines. Our Company s Corporate Social Responsibility (CSR) agenda reflects its social conscience and commitments to the community and society at large. Its CSR activities can be broadly grouped as under. Community Development Our Company looks to adopt measures that help to raise the quality of life in the communities where it operates. Our Company partners with government bodies, local administration, and village panchayats 114

147 to the benefit the residents of the rural areas and tribal belt of Dadra & Nagar Haveli. Our Company employs tribal women for operating looms and stitching machines after due orientation through intensive training, thereby providing them sustained livelihood. Education Our Company s community-based development project called Early Learning Centre to help educate the community s children is one such initiative nearing completion at Silvassa. Our Company also helps in refurbishing and supporting poor schools in its area of operations. Our Company is also now proposing to set-up a day school in Silvassa under the Central Board of Secondary Education (CBSE) curriculum. Our Company has been chosen to collaborate with the government and the local administration in upgrading the government Industrial Training Institute, Silvassa into a centre of excellence. Charitable Hospital and Medical Care Our Company has been invited to partner the government in taking over a 50 bed primary health centre-cum-hospital in Dadra & Nagar Haveli. The health centre delivers healthcare services to an estimated one million patients annually. Other Activities Our Company actively participates in periodic blood donation camps and is in the forefront to offer help to the local administration in the event of floods and other natural calamities. Creating a Sustainable Environment The Company s manufacturing plants are energy efficient, environmentally friendly and rated for their sustainable designs. Our Company has installed best in class effluent treatment systems in order to minimise any pollution impact that may take place during its manufacturing process. The plants at Silvassa fall under the restricted zone and do not involve any process with toxic effluents. The main effluent is domestic in nature and hence the treatment consists of filtration through sand beds in a sewage tank prior to disposal in village stream. The Vapi processing plant has an advanced effluent treatment plant (ETP) with primary, secondary and tertiary treatment facilities. The effluent generated from the process house due to various processing activities is finally treated in the ETP to make treated wastewater suitable for disposal in the sea. This treated waste water has no suspended solids and our Company discharges the same into the estuary of Kolak River through a 9 km. long pipeline. The Navi Mumbai process plant also has a fairly modern ETP for treatment of effluents discharged by the processing activities. The primary treatment of effluents is conducted in the ETP and discharged into the Common Effluent Treatment Plant co-sponsored by the World Health Organization (WHO). Water Treatment & Conservation Our Company is keenly aware of its responsibilities as a corporate citizen, especially when it comes to the responsible usage of water and water treatment. A number of processes ensure that the discharge of water at the plants do not have any trace of suspended solids, after which it is pumped through nine kilometres of pipeline from the plant area into deep sea waters. The Company has also installed reverse osmosis (RO) plants at its manufacturing sites, thus ensuring the optimum level of water recycling. Moreover, active measures are undertaken for rain water harvesting and recharging of ground water, thereby creating a sustainable and renewable environmental resource. The organisation is also actively involved in transforming brown fields in the plant vicinity into green zones, which, in turn, help in recharging the ground water system. Energy Conservation In our Company s plants, exhaust fans are driven by wind-power and the Company has actively used solar energy to provide lighting solutions. Export obligation Our Company has imported a major quantum of capital goods under the EPCG scheme. Under the 115

148 scheme, the imports are allowed at a concessional rate of duty which is to be off-set through export of finished product to the extent of five times of the value of the duty saved within a period of eight years from the date of imports. Failure to achieve this export obligation entails payment of the duty saved amount alongwith interest at the specified rates. As at December 31, 2008, the aggregate amount of our Company s outstanding export obligations was Rs. 3, crores to be achieved by Human resources As at December 31, 2008, our Company had over 11,250 employees on its roll and over 3,750 on contract labour basis. In addition to salary and allowances, we provide benefits to our employees, such as medical reimbursement, housing or rent assistance, educational loans, health-care and retirement benefits depending upon the position of the employee. Insurance Our Company has insurance coverage which we consider reasonably sufficient to cover all normal risks associated with our operations and which we believe is in accordance with industry standards in the countries in which we operate. Quality Assurance Our Company has been successful in developing and maintaining a very healthy customer base, which include some of the global textile brands. This has been made possible by incorporating well defined quality systems in our working. We have an established, strong Quality Assurance (QA) department, which oversees the quality of processes followed in the plants as well as the quality of work-inprogress. Our Quality Control (QC) department inspects all the incoming materials and also the final product for adherence to all laid down specifications. Close co-ordination between these two departments and their interaction with manufacturing ensures a steady supply of high quality output from our plants. All quality related parameters are captured live through the Quality module in SAP at all our plants. In recognition of our quality standards, we have certified our products for: 1. OEKO TEX Product I (certification for use of materials, not harmful for human beings) 2. GOTS/OE (Global Organic Textile System : Certification for use of organic cotton) 3. ECO CERT certification (Certification for use of Eco friendly materials) 4. KRAV (Certification for use of Organic & Fair Trade cotton) Apart from the above, we are in the process of certifying our products for EU Flower (Certification required for some EU countries for non-utilisation of harmful substances). Other than the above product certifications, our manufacturing plants have also been certified for Business Social Compliance Initiative (BSCI) registration and Fair Trade. While all our facilities are currently certified under ISO 9000 from International Organisation of Standards for our Systems standardisation, we are now in the final stage of inspection for IMS (Integrated Management System), which will be a consolidated certification for ISO 9001:2000, (upgraded standardisation certification), QMS (Quality Management System), ISO 14001:2004 (upgraded certification of standards including testing laboratories), OHSAS 18001:2007 for Operational Health & Safety Assessment System and SA 8000:2008 for Social Accountability. This certification is expected to be in place shortly. 116

149 REGULATIONS AND POLICIES The following description is a summary of the relevant regulations and policies as prescribed by the Government of India and the Ministry of Textiles. The information detailed in this chapter has been obtained from the websites of the relevant regulators and publications available in the public domain. The regulations set out below are not exhaustive, and are only intended to provide general information to the Investors and is neither designed nor intended to be a substitute for professional legal advice. Taxation statutes such as the Income Tax Act, 1961, Central Sales Tax Act, 1956 and applicable local sales tax statutes, labour regulations such as the Employees State Insurance Act, 1948 and the Employees Provident Fund and Miscellaneous Act, 1952, and other miscellaneous regulations such as the Trade Marks Act, 1999 and applicable shops and establishments statutes apply to us as they do to any other Indian company. For details of government approvals obtained by our Company in compliance with these regulations, see the section titled Government Approvals beginning on page 220 of this Letter of Offer. The statements below are based on the current provisions of Indian law, and the judicial and administrative interpretations thereof, which are subject to change or modification by subsequent legislative, regulatory, administrative or judicial decisions. The Multi Fiber Arrangement (MFA) & the WTO Agreement on Textiles & Clothing (ATC) The Multi Fiber Arrangement governed world trade in textiles and garments from 1974 through 1994, imposing quota restrictions on the textile exports from developing countries to developed countries. Though the MFA was signed in 1974, its roots stretched back to the 1930s. At that time, during a period of global economic distress, Japan emerged as the largest exporter of cotton textiles, and the U.S. and Europe moved to limit imports from Japan to preserve their domestic markets for their own textile industries. These restraints never really went away. By the 1960s, they were extended to Hong Kong, Pakistan, and India. As the restraints on textile trade were globalized, multilateral negotiations ensued, leading to a series of agreements. Initially, the agreements covered only cotton, but they eventually expanded into multi fiber arrangements covering textiles and clothing made from all fibers. The MFA was hence introduced in 1974 as a short-term measure intended to allow developed countries to adjust to imports from the developing world. On January 1, 1995, the MFA was replaced by the WTO Agreement on Textiles and Clothing, which set out a transitional process for the ultimate removal of the aforesaid quotas. The ATC was signed by the signatories to the General Agreement on Tariff and Trade (GATT) on the basis of securing the eventual integration of the textiles and clothing sector into the GATT on the basis of strengthened GATT rules and disciplines whereby quotas were phased out on the basis of an agreed timetable i.e. 16% of imports were made quota-free by January 11, 1995, a further 17% by January 1, 1998, a further 18% by January 1, 2002 and the remaining 49% by January 1, The ATC was a transitional instrument, built to ensure the progressive integration of textile and clothing products into the GATT 1994 rules and thereby ensure a liberalization process to progressively enlarge existing quotas (until they are removed) by increasing annual growth rates at each stage. The abolition on January 1, 2005 of the 42-year-old system of quotas for exports of textiles and clothing has led to the biggest buyer s market in history. From a situation where normal market rules of caveat emptor (let the buyer beware) applied, we have moved to caveat vendor, where unwary or unprepared suppliers will find themselves without clients. The elimination of quotas has changed the global clothing industry forever, raising the bar for suppliers. National Textile Policy 2000 (NTxP 2000) The Government of India in November 2000 announced the National Textile Policy 2000, thereby replacing the previous Textile Policy of The main objective of the NTxP 2000 was to enable the industry to attain and sustain a preeminent global standing in the manufacture and export of clothing. It aimed at achieving textiles and apparel exports of upto $50 billion by 2010 from the present $ 11 billion. It also dereserved the garments sector from the SSI reservation list and lifted the foreign direct investment cap of 24 per cent. The NTxP 2000 took note of the new challenges and opportunities presented by the changing global environment, particularly the initiation of the process of gradual phasing out of quantitative restrictions on imports and the lowering of tariff levels for an integration of the world textile and clothing markets 117

150 by the end of This policy promotes joint ventures and strategic alliances with leading world manufacturers. The objectives of the NTxP 2000 were to: Facilitate the textile industry to attain and sustain a pre-eminent global standing in the manufacture and export of clothing; Equip the textile industry to withstand pressures of import penetration and maintain a dominant presence in the domestic market; Liberalize controls and regulations so that the different segments of the textile industry are enabled to perform in a greater competitive environment; Enable the textile industry to build world class state-of-the-art manufacturing capabilities in conformity with environmental standards, and for this purpose to encourage Foreign Direct Investment as well as research and development in the sector; Develop a strong multi-fibre base with thrust on product upgradation and diversification; Sustain and strengthen the traditional knowledge, skills and capabilities of our weavers and craftspeople; Enrich human resource skills and capabilities, with special emphasis on those working in the decentralized sectors of the textile industry; and for this purpose to revitalize the institutional structure; Expand productive employment by enabling the growth of the textile industry, with particular effort directed to enhancing the benefits to the north east region; Make Information Technology (IT), an integral part of the entire value chain of textile production and thereby facilitate the textile industry to achieve international standards in terms of quality, design and marketing and; Involve and ensure the active co-operation and partnership of the State Governments, Financial Institutions, Entrepreneurs, Farmers and Non-Governmental Organisations in the fulfillment of these objectives Further, the Government has conveyed it s commitment towards providing a conducive environment to enable the Indian textile industry to realise its full potential, achieve global excellence, and fulfill its obligation to different sections of society. Technology Upgradation Fund Scheme (TUFS) Given the significance of the textile industry to the overall health of the Indian economy, its employment potential and the huge historical backlog of technology upgradation, particularly in the context of the liberalization of the national industrial and trade policy and globalization of textile trade, it has been emphasized that in order to sustain and improve its competitiveness and overall long term viability, it is essential for the textile industry to have access to timely and adequate capital at internationally comparable rates of interest in order to upgrade its technology level. In light of the foregoing, it has been felt necessary to make operational a focused and time-bound Technology Upgradation Fund Scheme (TUFS) which would provide a focal point for modernization efforts through technology upgradation in the textile industry. The main feature of the TUFS would be a five percent reimbursement on the interest actually charged by the identified financial institutions on the sanctioned projects. The TUFS was launched from April 1, 1999 to March 31, 2007 in order to provide an impetus for the modernization of the textile and jute industry and to further enhance its viability and competitiveness in the domestic and the international markets. Technology upgradation under TUFS would ordinarily mean induction of state-of-the-art or near-state-of-the-art technology. But in the widely varying mosaic of technology obtained in the Indian textile industry, at least a significant step up from the present technology level to a substantially higher one for such trailing segments would be essential. Accordingly, technology levels are bench-marked in terms of specified machinery for each sector of the textile industry. Machinery with technology levels lower than that specified will not be permitted for funding under the TUFS Scheme. 118

151 The Hon ble Finance Minister, in his Budget Speech for the year , had announced that the TUFS will be continued during the Eleventh Five Year Plan and has also made a provision of Rs. 911 crores for TUFS during It will further help domestic textile industry to upgrade the technology of existing units, and also to set up new units with state-of the- art technology for enhancing their viability and competitiveness in the domestic and international markets. According to the Budget, a provision of Rs.1,090 crores has been made for TUFS which has been further extended till Textiles Committee Act, 1963 The Textiles Committee Act, 1963 came into force on August 22, The said Act calls for constitution of a Textiles Committee by the Central Government. The said Textiles Committee shall ensure a standard quality of textiles both for internal marketing and export purposes and the manufacture and use of standard types of textile machinery, assisting and encouraging scientific, technological and economic research in the textile industry and textile machinery. The Textiles Committee shall also promote export of textiles and textile machinery and carry on propaganda for that purpose. The said Act also imposes a duty of excise on textiles and textile machinery manufactured in India at such rate, not exceeding one per cent ad valorem as the Central Government may, by notification in the Official Gazette, fix provided that, no such cess shall be levied on textiles manufactured out of the handloom or powerloom industry. However, the Central Government may exempt any variety of textiles or textiles machinery if it is required to do so in the public interest. The Textiles Committee recognizes standard specifications for textiles and packing materials used in the packing of textiles or textile machinery, for the purposes of export and for internal consumption and affix suitable marks on such standardized varieties of textiles and packing materials. By a notification dated January 17, 2007, the Central Government has exempted ready made garments, being a variety of textiles from the levy of whole of the cess, so as to rationalize the tax and cess burden on the readymade garments in the changed scenario of global competitiveness and thus improve the competitiveness of the Indian readymade garment sector in global markets. Further, by a press release dated May 24, 2007, the Union Cabinet gave its approval for exemption of all textiles and all textile machinery manufactured in India from Textiles Committee cess under the Textiles Committee Act, Textile (Development and Regulation) Order, 2001 The Textile (Development and Regulation) Order, 2001 was brought into force by the Central Government under Section 3 of the Essential Commodities Act, 1955 and repealed the Textile (Development and Regulation) Order, Under the said Order every manufacturer of textiles, textile machinery and every person dealing with textiles shall keep books of accounts, data and other records relating to his business in the matter of production, processing, import, export, supply, distribution, sale, consumption, etc. and shall furnish such returns or information in respect of their business as and when directed by the Textile Commissioner. The said Order further prescribes filing of an Information Memorandum as per the requisite form with the Textile Commissioner, Mumbai in the event of: installation of textile machinery for the manufacture of textiles within thirty days of the installation of such machinery; relocation, selling, transferring or otherwise disposing of any textile machinery referred to above, within thirty days from the date of such re-location, sale, transfer or disposal; and modernization of a textile unit. The Order further provides that no person shall make any markings on any textiles resembling the brand name or trade name of any other person who has applied for or obtained a registration to that effect under the Trade and Merchandise Marks Act, 1958 (43 of 1958), except under and limited to the extent of specific authorization by the holder of or applicant for such brand or trade name. 119

152 Scheme for Integrated Textiles Parks (SITP) The Scheme for Integrated Textile Parks (SITP) was launched in August, 2005, by merging the Apparel Parks for Export Scheme (APE) and the Textile Centre Infrastructure Development Scheme (TCIDS). The primary objective of the SITP is to provide the industry with world-class infrastructure facilities for setting up of textile units in clusters. Under the SITP, an amount of Rs. 625 crores has been provided by the Government of India (GOI) for the development of these Parks. The Government of India s (GOI) support under the SITP by way of Grant or Equity will be limited to 40% of the project cost, subject to a ceiling of Rs. 40 crores. The SITP is being implemented through Special Purpose Vehicles (SPVs). Industry Associations/Groups would be the main promoters of the Integrated Textile Parks (ITPs). The Infrastructure Leasing & Financial Services (ILF&S) has been appointed as the Project Management Consultant for implementing the SITP. The Project Management Consultant will be responsible for the speedy implementation of the Project in a transparent and professional manner, so as to achieve a high degree of quality at a low cost acceptable to the members of the SPV for which a fee will be paid to the Project Management Consultant. The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 provides for the levy and collection of an additional 10% of the total amount of excise duty chargeable on certain textiles and textile articles as specified in the schedule to the said Act. Export Promotional Measures under the Foreign Trade Policy The following export promotional measures of the Government of India are applicable to our Company: 1. Export Houses Export Houses are eligible to avail of several facilities including inter alia: Authorization and customs clearances for both imports and exports on self-declaration basis; Fixation of Input-Output norms on priority within 60 days; Exemption from compulsory negotiation of documents through banks. Remittance / Receipts, however, would be received through banking channels; 100% retention of foreign exchange in Exchange Earner s Foreign Currency account; Enhancement in normal repatriation period from 180 days to 360 days; Exemption from furnishing of bank guarantee in Schemes under Foreign Trade Policy; and Star Export Houses shall be permitted to establish Export Warehouses, as per Department of Revenue Guidelines. 2. Export Promotion Capital Goods Scheme (EPCG Scheme) Under the scheme, the imports are allowed at a concessional rate of duty which is to be off-set through export of finished product to the extent of five times of the value of the duty saved within a period of eight years from the date of imports. Failure to achieve this export obligation entails payment of the duty saved amount alongwith interest at the specified rates.the EPCG Scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers. 3. Advance Authorization Scheme Advance Authorization Scheme is a duty exemption scheme issued to allow duty free import of inputs, which are physically incorporated in export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts which are consumed / utilized to obtain export product, may also be allowed. The DGFT, by means of Public Notice, may exclude any product(s) from the purview of 120

153 Advance Authorization. Advance Authorizations are exempted from payment of basic customs duty, additional customs duty, education cess, antidumping duty and safeguard duty, if any. The facility of Advance Authorization shall also be available where some or all inputs are supplied free of cost to exporter by foreign buyer. 4. Duty Entitlement Passbook Scheme (DEPB) DEPB is a duty remission scheme enabling post export replenishment / remission of duty on inputs used in export products. The Objective of DEPB is to neutralize the incidence of customs duty on import content of export product. Component of Special Additional Duty and customs duty on fuel shall also be allowed under DEPB (as a brand rate) in case of non- availment of CENVAT credit. The neutralization shall be provided by way of grant of duty credit against the export product. An exporter may apply for credit, at a specified percentage of FOB value of exports, made in freely convertible currency or payment made from foreign currency account of SEZ unit / SEZ Developer in case of supply by DTA. Credit shall be available against such export products and at such rates as may be specified by DGFT by way of public notice. Credit may be utilized for payment of Customs Duty on freely importable items. The DEPB holder shall have the option to pay additional customs duty in cash as well. DEPB is being continued till May Duty Free Import Authorization Scheme (DFIA) DFIA is a duty exemption scheme issued to allow duty free import of inputs, fuel, oil, energy sources, catalyst which are required for production of export product. DGFT, by means of Public Notice, may exclude any product(s) from purview of DFIA. This scheme is in force from 1st May, Duty Drawback Scheme (DBK) DBK is a duty remission scheme enabling post export replenishment / remission of duty on inputs used in export products, whereby exporters are allowed refund of the excise and import duty suffered on raw materials under DBK so as to make the products more competitive in the international market. 7. Target Plus Scheme Target Plus Scheme is a duty remission scheme issued to allow duty free import of capital goods including spares, office equipments, professional equipments and office furniture provided the same are freely importable under ITC (HC) and are non transferable. The objective of the scheme is to accelerate growth in exports by rewarding star export houses who have achieved a quantum growth in exports. The duty free entitlement certificate shall be valid for a period of twelve (12) months. Investment in Special Economic Zones (SEZs) With a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April The Special Economic Zones Act, 2005 ( SEZ Act ), was passed by Parliament in May, 2005 supported by SEZ Rules, which came into effect on February 10, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to the central as well as state governments. A developer, who proposes to establish an SEZ, is required to obtain appropriate in-principle and formal approvals for the establishment of such SEZ from the Board of Approval, which is a designated committee set up by the Government of India under the SEZ Act. Furthermore, SEZs set up in the sectors set out below are required to satisfy the following area requirements: multi-product SEZs are required to have a contiguous area of 1000 hectares or more not exceeding 5000 hectares, with at least 50% of the area being earmarked for developing a processing area. The area requirement has been relaxed to 200 hectares for certain specified States and Union Territories; SEZs in a specific sector or for one or more services or in a port or airport shall have a contiguous area of 100 hectares or more, with at least 50% of the area being earmarked for developing a 121

154 processing area. The area requirement has been relaxed to 50 hectares for certain specified States and Union Territories; SEZs set up exclusively for electronics hardware and software, including information technology enabled services shall have a contiguous area of 10 hectares or more with a minimum built up area of not less than 100,000 square metres; SEZs set up exclusively for bio-technology, nonconventional energy (including solar energy equipment/cell), or the gem and jewelry sectors shall have a contiguous area of not less than 10 hectares, with at least 50% of the area being earmarked for developing a processing area; and SEZs set up for free trade and warehousing shall have an area of 40 hectares or more, with a built up area of not less than 100,000 square metres. However, a free trade and warehousing SEZ set up for a specific sector may be permitted with no minimum area requirement but subject to the condition that the maximum area of such free trade and warehousing zone shall not exceed 20% of the processing area. SEZs are entitled to certain fiscal and tax benefits. A developer of an SEZ will be inter alia entitled to the following benefits under the Indian tax laws: 100% tax holiday on the profits of the developer company for a period of 10 consecutive years within a block of 15 years, beginning from the year in which the SEZ gets notified. Exemption from payment of any tax on declaration of dividend by the developing company. Exemption from payment of Minimum Alternate Tax ( MAT ) provisions, as contained under Section 115JB of the Income-Tax Act. Procurement, without payment of import duty, of all types of goods (other than prohibited items of import) including capital goods, whether new or second hand. Sourcing of goods from the Domestic Tariff Area ( DTA ) without payment of Excise Duty, Value Added Tax / Sales Tax and Central Sales Tax for use in the approved activity as the supplies by the DTA are treated as exports. 122

155 HISTORY OF THE COMPANY AND OTHER CORPORATE MATTERS Our Company was incorporated on March 12, 1986 as Alok Textile Private Limited, a private limited company under the provisions of the Companies Act. Subsequently, on November 17, 1992, the name of our Company was changed to Alok Textiles Industries Private Limited. Our Company was thereafter converted into a public limited company on February 11, Consequently, on November 8, 2000, our Company s name was changed to Alok Industries Limited. Milestones and achievements of our Company: Year Event 1986 Incorporated on March 12, 1986 as a private limited company Conversion into a public limited company and an initial public offering of 22,50,000 equity shares of Rs.10/- each for cash at a premium of Rs.10/- each per Equity Share aggregating Rs crores to part finance expansion of our Company s weaving capacity at Bhiwandi and expansion of texturising capacity at Silvassa Export House Status awarded by Office of the Joint Director General of Foreign Trade 2004 Foray in to Home Textiles (Bed Sheets) for Direct Exports Received Texprocil Silver Trophy for 2 nd highest export award in the Manufacturer Exporter Made ups Category. Foray into domestic retailing under the name Homes & Apparel Awarded Silver Trophy for highest fabric exports and Bronze Trophy for highest madeups exports Acquisition of Mileta a. s. (60% stake), a company based in Czech Republic, by Alok Industries International Limited (our 100% subsidiary). ISO 9001:2000 certification obtained Awarded Gold Trophy for Best Export performance to Focus LAC Countries by Synthetic & Rayon Textile Export Promotion Council (SRTEPC) Commenced Organic Cotton contract farming Awarded Outstanding Exporter of the year Textiles at the International Trade Awards : presented by DHL CNBC TV 18. Awarded Trading House Status by Office of Zonal Joint Director General of Foreign Trade JV with National Textile Corporation (NTC) for development and revival of New City Mills at Mumbai and Aurangabad Textile Mills at Aurangabad. Awarded by TEXPROCIL for Gold Trophy For Highest Exports of Bleached/Yarn Dyed/ Printed Fabrics - Silver Trophy for Highest Export of Made-ups - Bronze Trophy for Highest Global Exports - Special Achievement Award for Exports in Fabrics Our Company s main objects as set forth in the Memorandum of Association, inter-alia, are: To carry on the business of processing, texturising, crimping, spinning, twisting, weaving, knitting, testing, throwing, reeling, doubling, combing, mixing, scouring, finishing in any form, bleaching, dyeing, mercerising, printing, buying and selling, of yarn cloth and fabrics made from cotton, wool, silk, artsilk, rayon, nylon, polyester, acrylic or any other natural or man-made and synthetic fibres, yarns, staple fabrics, wastes, cotton and wool ginning, rocking and generally to carry on the 123

156 business of spinning and weaving mill and proprietors in all their branches. To carry on the business of manufacturing, trading, commission agents, buying, selling, exchanging, converting, altering, importing, exporting, pressing, twisting or otherwise handling, storing or dealing in cotton yarn, rayon yarn, nylon yarn and such other fibre, fibres or fibrous materials or yarn or yarns for textile or fabrics made from cotton, woolen, silk, nylon, polyester, rayon or any other natural or man-made fibre. The main object clause of our Memorandum of Association and objects incidental to the main objects enables our Company to undertake our existing activities. Changes in Memorandum of Association Since our incorporation, the following changes have been made to our Memorandum of Association: Date November 26, 1987 February 18, 1988 March 14, 1988 July 20, 1992 September 30, 1992 August 9, 1994 November 24, 1994 December 27, 1995 April 14, 1998 June 25, 1998 March 21, 2000 September 27, 2002 March 29, 2004 October Changes Increase in authorised share capital from Rs. 1 lakh to Rs. 10 lakh. Increase in authorised share capital from Rs. 10 lakh to Rs. 20 lakh. Increase in authorised share capital from Rs.20 lakh to Rs. 50 lakh. Our equity shares were sub-divided into Equity Shares of face value of Rs. 10/- each i.e. 2,47,500 Equity Shares of Rs. 10 each. Increase in authorised share capital from Rs. 50 lakh to Rs crores. Increase in authorised share capital from Rs crores to Rs. 5 crores. Increase in authorised share capital from Rs. 5 crores to Rs. 12 crores. Increase in authorised share capital from Rs. 12 crores to Rs. 25 crores. Increase in authorised share capital from Rs. 25 crores to Rs. 30 crores comprising of 2,00,00,000 Equity Shares of Rs. 10/- each and 1,00,00,000 preference shares of Rs. 10/- each. Increase in authorised share capital from Rs. 30 crores to Rs.45 crores comprising of 2,50,00,000 Equity Shares of Rs.10/- each and 2,00,00,000 preference shares of Rs.10/- each. Increase in authorised share capital from Rs. 45 crores to Rs. 75 crores comprising of 5,00,00,000 Equity Shares of Rs. 10/- each and 2,50,00,000 preference shares of Rs. 10/- each. Increase in authorised share capital from Rs. 75 crores to Rs. 80 crores comprising of 5,50,00,000 Equity Shares of Rs. 10/- each and 2,50,00,000 preference shares of Rs.10/- each. Increase in authorised share capital from Rs. 80 crores to Rs. 120 crores comprising of 9,50,00,000 Equity Shares of Rs. 10/- each and 2,50,00,000 preference shares of Rs. 10/- each. Increase in authorised share capital from Rs. 120 crores to Rs. 300 crores comprising of 17,50,00,000 Equity Shares of Rs. 10/- each and 12,50,00,000 preference shares of Rs. 10/- each. 28, Reclassification of un-issued 3,50,00,000 preference shares of Rs. 10/- each into 124

157 Date Changes ,50,00,000 Equity Shares of Rs.10/- each. After reclassification, the authorized share capital comprised of 21,00,00,000 Equity Shares of Rs. 10/- each and 9,00,00,000 preference shares of Rs.10/- each. January 31, 2008 December 19, 2008 Reclassification of un-issued 6,50,00,000 preference shares of Rs. 10/- each into 6,50,00,000 Equity Shares of Rs. 10/- each. After reclassification, the authorized share capital comprised of 27,50,00,000 Equity Shares of Rs. 10/- each and 2,50,00,000 preference shares of Rs. 10/- each. Reclassification of un-issued 2,50,00,000 preference shares of Rs. 10/- each into 2,50,00,000 Equity Shares of Rs. 10/- each. After reclassification, the authorized share capital comprised of 30,00,00,000 Equity Shares of Rs. 10/- each. Increase in authorised share capital from Rs. 300 crores to Rs. 525 crores comprising of 52,50,00,000 Equity Shares of Rs.10/- February 27, 2009 Increase in authorised share capital from Rs. 525 crores to Rs. 650 crores comprising of 65,00,00,000 Equity Shares of Rs.10/- Changes in the registered office of our Company There have been no changes to our registered office since incorporation. Shareholders agreements Subscription-cum-shareholders agreement dated December 10, 2004 ( Shareholders Agreement ) amongst our Company and (i) IL&FS Private Equity Trust through its scheme, the Leverage India Fund ( Investor 1 ), (ii) South Asian Regional Apex Fund ( Investor 2 ), (iii) IVC Employees Welfare Trust ( Investor 3 ), (iv) Mr. Ashok Jiwrajka ( AJ ), (v) Mr. Dilip Jiwrajka ( DJ ), (vi) Mr. Surendra Jiwrajka ( SJ ), (vii) Grabal Alok Impex Limited ( Grabal ), (viii) Nirvan Holdings Private Limited ( NHPL ), (ix) Niraj Realtors and Shares Private Limited ( NRSPL ), (x) Jiwrajka Investment Private Limited ( JIPL ), (xi) Alok Knit Exports Limited ( AKEL ), and (xii) Alok Finance Private Limited ( AFPL ). (Our Company, Investor 1, Investor 2, Investor 3, AJ, DJ, SJ, Grabal, NHPL, NRSPL, JIPL, AKEL and AFPL are together referred to as Parties, and individually as Party. Investor 1, 2 and 3 shall collectively be referred to as Investors and individually as Investor. AJ, DJ, SJ, Grabal, NHPL, NRSPL, JIPL, AKEL and AFPL shall collectively be referred to as SHA Promoters and individually as SHA Promoter). The Shareholders Agreement is valid for as long as the Investors, in the aggregate, hold at least 28,68,850 Equity Shares in our Company, during which the SHA Promoters shall not transfer their Equity Shares, except in accordance with the provisions of the Shareholders Agreement. The SHA Promoters (either by themselves or their affiliates) shall at all times, individually hold at least 26% (twenty six percent) of the paid-up and issued equity share capital of our Company. In addition, in the event of a further issue of Equity Shares by our Company, the Investors would have the right to subscribe to such additional Equity Shares, at the same price and terms as are offered to other investors, so as to enable the Investors to maintain their shareholding in our Company. Further, the Investors also have a tag along right in the event of a sale of all or any of the Equity Shares held by any of the SHA Promoters. The Investors are entitled to appoint a representative to act as an observer at all the meetings of our Board of Directors including all the committees of our Board except for our Audit Committee. Further, in the event of the occurrence of certain specified events including inter-alia closure of any units of our Company, initiation of suits against our Company valued contingently at more than Rs. 50,00,00,000 etc., the Investors shall be entitled to jointly appoint a non-retiring nominee director on our Board of Directors, who shall upon appointment, be appointed on all the committees of our Board. Further, upon such appointment, the presence of this investor director is necessary to constitute quorum for all Board meetings. 125

158 Further, the Investor has certain affirmative vote items including inter-alia mergers, demergers, spinoffs, amalgamations, consolidations, divestments, increase, decrease, or other alteration or modification in authorized or issued share capital, or creation or issuance or delisting of securities, any material deviations of more the 20 % to the annual budget, winding up or liquidation of the Company, appointing or changing the statutory auditor of the Company, amendments to our Memorandum of Association or Articles of Association, selling, transferring licensing or creating a lien or in any way disposing of the assets of the Company exceeding Rs. 250 crores in aggregate in a financial year, changing the accounting year or registered address of the Company, etc. It is expressly provided under the Shareholders Agreement, that the SHA Promoters shall not undertake (either themselves or through their affiliates) any activities or expansion of any business that shall be in direct competition with the business of our Company. Further, the SHA Promoters and the management of the Company are restricted by the Shareholders Agreement from assuming any executive positions in any other company without the prior approval of all the Investors, so long as the SHA Promoters or management are severally employed by our Company, or are Directors of our Company, and/or hold and executive responsibilities in our Company. Joint venture agreements and other acquisitions 1. Joint venture agreements with National Textile Corporation Limited ( NTC ) The BIFR had approved the restructuring scheme for revival of certain textile mills of NTC via the joint venture route. Pursuant to the request for proposal issued by NTC on September 28, 2007 for inviting bids for private participation to form a joint venture along with NTC for reviving and modernizing these textile mills. Our Company was, on October 19, 2007, declared as the successful bidder for forming two joint ventures with NTC for owning, operating and running of the mills located at (i) New City of Bombay Mfg. Mills, 63, T. B. Kadam Marg, Mumbai ; and (ii) Aurangabad Textile Mills, Kotwalpura, Aurangabad. In this regard our Company had entered into two share subscription and shareholders agreements with NTC, the details of which have been setout below. a) Share Subscription and Shareholders Agreement ( Agreement ) dated November 20, 2007 between National Textile Corporation Limited ( NTC ) and our Company and New City of Bombay Manufacturing Mills Limited ( JV Co ). For the purpose of this joint venture, NTC had incorporated the JV Co which would own, operate and run the textile mill located at New City of Bombay Mfg. Mills, 63, T. B. Kadam Marg, Mumbai ( Mill ). The JV Co was initially incorporated as a wholly owned subsidiary of NTC having an authorized share capital of Rs. 10 crores and a paid-up equity share capital of Rs. 4,67,67,000/- divided into 46,76,700 equity shares of Rs. 10/- each. Under the terms of this Agreement, the share capital of the JV Co shall be held in the proportion of 51:49 between NTC and our Company respectively. Further, NTC had the right to subscribe to an additional 44,93,300 equity shares of the JV Co of Rs. 10/- each, which, on subscription, constituted 49% of the paid-up equity share capital of the JV Co. In lieu of payment of Rs crores by our Company to NTC, NTC has relinquished this right to subscribe to 44,93,300 equity shares in favour of our Company at a premium of Rs per equity share. Towards the revival / modernization of the JV Co, our Company had submitted (i) a business plan ( Business Plan ) for a period of five years from the date of subscription by our Company to the equity shares of the JV Co; and (ii) an initial investment plan for the revival / modernization of the Mill ( Initial Investment Plan ) for a period of two years from the date of subscription by our Company to the equity shares of the JV Co based on the Business Plan approved by the board of directors of the JV Co. As stated above, the share capital of the JV Co shall be held in the proportion of 51:49 between NTC and our Company respectively. However, the shareholding of NTC in the JV Co shall not fall below 51%. Further, the shareholding of our Company in the JV Co is subject to a lock-in period of five years 126

159 from the date of subscription, subject to completion of the Initial Investment Plan to the satisfaction of the board of the JV Co. This lock-in period would apply to direct or indirect sale, transfer, assignment, pledge, charge, grant of beneficial interest, grant of option or right to purchase or in any other way dispose or encumber the aforesaid shares in the JV Co. In addition to the above, the Agreement grants various rights to the parties, vis-à-vis the shares in the JV Co, including a right of first refusal, tag along rights etc. The board of directors of the JV Co shall initially comprise of eight directors, subject to a minimum of six directors and a maximum of twelve directors. Further, as long as NTC owns not less than 51% of the equity share capital of the JV Co, NTC shall have the right to (i) appoint the chairman of the JV Co; (ii) appoint a minimum of five directors on the board of the JV Co; and (iii) have the right to appoint the majority of directors on the board of the JV Co. Our Company shall, in the event of our Company owning not less than 49% of the equity share capital of the JV Co, have the right to appoint three directors on the board of the JV Co and, in the event of our Company owning not less than 26% but not more than 49% of the equity share capital of the JV Co, to appoint two directors on the board of the JV Co. However, in the event that the shareholding of our Company falls below 26 % of the equity share capital of the JV Co, our Company shall forthwith lose the right to appoint and directors on the board of the JV Co. In addition to the above, the CEO of the JV Co shall be nominated by our Company. The Agreement further provides that in the event that our Company and / or its affiliates decide to undertake any activities or business that may be in competition with that of the JV Co, our Company shall be under an obligation to disclose the strategy for avoiding such potential conflict and shall always act in the best interest of the JV Co. For further details on the JV Co, please refer to the chapter titled Promoter Group, beginning on page 168 of this Letter of Offer. b) Share Subscription and Shareholders Agreement (Agreement) dated November 20, 2007 between National Textile Corporation Limited ( NTC ) and our Company and Aurangabad Textiles and Apparel Parks Limited ( JV Co ). For the purpose of this joint venture, NTC had incorporated the JV Co which would own, operate and run the textile mill located at Aurangabad Textile Mills, Kotwalpura, Aurangabad ( Mill ). The JV Co was initially incorporated as a wholly owned subsidiary of NTC having an authorized share capital of Rs crores and a paid-up equity share capital of Rs. 1,06,08,000/- divided into 10,60,800 equity shares of Rs. 10/- each. Under the terms of this Agreement, the share capital of the JV Co shall be held in the proportion of 51:49 between NTC and our Company respectively. Further, NTC had the right to subscribe to an additional 10,19,200 equity shares of the JV Co of Rs. 10/- each, which, on subscription, constituted 49% of the paid-up equity share capital of the JV Co. In lieu of payment of Rs. 3.5 crores by our Company to NTC, NTC has relinquished this right to subscribe to 10,19,200 equity shares in favour of our Company at a premium of Rs per equity share. Towards the revival / modernization of the JV Co, our Company had submitted (i) a business plan (Business Plan) for a period of five years from the date of subscription by our Company to the equity shares of the JV Co; and (ii) an initial investment plan for the revival / modernization of the Mill (Initial Investment Plan) for a period of two years from the date of subscription by our Company to the equity shares of the JV Co based on the Business Plan approved by the board of directors of the JV Co. As stated above, the share capital of the JV Co shall be held in the proportion of 51:49 between NTC and our Company respectively. However, the shareholding of NTC in the JV Co shall not fall below 51%. Further, the shareholding of our Company in the JV Co is subject to a lock-in period of five years from the date of subscription, subject to completion of the Initial Investment Plan to the satisfaction of the board of the JV Co. This lock-in period would apply to direct or indirect sale, transfer, assignment, pledge, charge, grant of beneficial interest, grant of option or right to purchase or in any other way dispose or encumber the aforesaid shares in the JV Co. In addition to the above, the Agreement grants various rights to the parties, vis-à-vis the shares in the JV Co, including a right of first refusal, tag along rights etc. 127

160 The board of directors of the JV Co shall initially comprise of eight directors, subject to a minimum of six directors and a maximum of twelve directors. Further, as long as NTC owns not less than 51% of the equity share capital of the JV Co, NTC shall have the right to (i) appoint the chairman of the JV Co; (ii) appoint a minimum of five directors on the board of the JV Co; and (iii) have the right to appoint the majority of directors on the board of the JV Co. Our Company shall, in the event of our Company owning not less than 49% of the equity share capital of the JV Co, have the right to appoint three directors on the board of the JV Co and, in the event of our Company owning not less than 26% but not more than 49% of the equity share capital of the JV Co, to appoint two directors on the board of the JV Co. However, in the event that the shareholding of our Company falls below 26 % of the equity share capital of the JV Co, our Company shall forthwith lose the right to appoint and directors on the board of the JV Co. In addition to the above, the CEO of the JV Co shall be nominated by our Company. The Agreement further provides that in the event that our Company and / or its affiliates decide to undertake any activities or business that may be in competition with that of the JV Co, our Company shall be under an obligation to disclose the strategy for avoiding such potential conflict and shall always act in the best interest of the JV Co. For further details on the JV Co, please refer to the chapter titled Promoter Group, beginning on page 168 of this Letter of Offer. 2. Mileta a.s. acquisition Our Company had entered into a into a Share Sale Agreement dated February 2, 2007 with Mr. Elard Marwin Maron and Coptex AG, through our Subsidiary, Alok Industries International Limited (the Share Sale Agreement ), in order to acquire 60% of the fully paid-up equity share capital of Mileta a.s. in Horice, Czech Republic for a consideration of EUR 3,960,000. Pursuant to the Share Sale Agreement, on February 2, 2007, Alok Industries International Limited had entered into a Trade Mark Assignment Agreement with Coptex AG (the beneficial owner of the trade mark), Levin D OR Consulting SA, Mileta a.s. and Mr. Elard Marwin Maron pursuant to which Coptex AG assigned certain trade marks used by Mileta a.s. in the course of its business to Alok Industries International Ltd for a consideration of EUR 10,000,000 ( Trade Marks ). Further, by entering into a Variation Agreement dated June 26, 2007 between Alok Industries International Ltd, Mr. Elard Marwin Maron, Coptex AG, Levin D OR, Mileta a.s. and Alok Industries Limited (the Variation Agreement ), our Company became a party to the Share Sale Agreement. Pursuant to the Variation Agreement and becoming a party to the Share Sale Agreement, our Company entered into a Replacement Trade mark Assignment Agreement dated June 26, 2007 with Coptex AG, Levin D OR Consulting SA, Mileta a.s., Mr. Elard Marwin Maron and Alok Industries International Ltd, pursuant to which Coptex AG and Alok Industries International Ltd assigned the Trade marks that were previously assigned to Alok Industries International Limited to our Company. Our Company has subsequently entered into a replacement trade mark license agreement whereby Mileta a. s. has been granted a non-exclusive license to use the Trade Marks in connection with its business. Our Company had, on January 14, 2008, entered into a memorandum of understanding with Mr. Elard Marwin Maron for acquisition of 19.80% shares held by him in Mileta a.s. at an aggregate consideration of EUR 1.75 million. 128

161 OUR SUBSIDIARIES Our Company has 7 (seven) directly owned Subsidiaries: Sr. No. 1. Alok Infrastructure Limited 2. Alok Apparels Private Limited 3. Alok Retail (India) Limited 4. Alok Land Holdings Private Limited 5. Alok Industries International Limited 6. Alok Inc. 7. Alok International Inc. Name We have 7 (seven) indirectly held Subsidiaries including 2 (two) foreign subsidiaries, which are held through directly owned Subsidiaries. None of our Subsidiaries have undertaken any public or rights issues in the last three years. Further, none of our Subsidiaries are listed on any stock exchange or is under winding up. Sr. No. 1. Alok Realtors Private Limited 2. Alok New City Infratex Private Limited 3. Alok Aurangabad Infratex Private Limited 4. Alok HB Properties Private Limited 5. Alok HB Hotels Private Limited 6. Mileta a.s. 7. ALOK European retail s.r.o. 1. Alok Infrastructure Limited ( AInL ) Name AInL was incorporated on September 1, 2006 as a private limited company as Alok Infrastructure Private Limited under the provisions of the Companies Act. Subsequently, on October 13, 2008, the name of AInL was changed to Alok Infrastructure Limited. The registered office of AInL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of AInL contemplate inter-alia dealing, purchasing, leasing or exchanging with movable and immovable properties including construction etc., and producing, buying, selling or otherwise dealing in machines, tools, materials required for the aforesaid purposes. AInL is currently engaged in the business of purchasing and taking on lease or exchange, build, develop, maintain, cultivate, sale, exchange and deal with moveable and immovable properties, construction buildings (including SEZ and ITPs) etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka

162 Shareholders No. of equity shares % shareholding Mr. Alok A. Jiwrajka Mr. Varun S. Jiwrajka Mr. Niraj D. Jiwrajka Alok Industries Limited 49, Total 50, Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Financial performance Designation Director Director Director (Rs. in crores except per share data) March 31, 2007 March 31, 2008 Half year ended September 30, 2008 Sales and other income Profit/(Loss) after tax Equity capital (*) ^ Earnings per share (Rs.) Basic # Book value per equity share (Rs.) Reserves & Surplus *The face value of each equity share is Rs. 10/- each. # Not annualised ^ As of September 30, 2008, our Company has invested Rs cores as share application money in AInL. AInL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. However, 2,000 secured non-convertible debentures of a face value of Rs. 10,00,000 each, of AInL were are listed in the Wholesale Debt Market segment of the BSE. Further, AInL has not become a sick company under the meaning of SICA and it is not under winding up. 2. Alok Apparels Private Limited ( AAPL ) AAPL was incorporated on June 20, 2007 as a private limited company under the provisions of the Companies Act. The registered office of AAPL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of AAPL contemplate inter-alia carrying on business of producing all kinds of apparels, clothes and garments and manufacturing, trading, exchanging any natural or man-made fibre. AAPL is currently engaged in the business of producing all kinds of apparels, clothes, garments, processing, texturising, Spinning, twisting, weaving, knitting etc. and to carry on the business of manufacturing, trading, commission agents, buying, selling, exchanging, converting etc. 130

163 Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Alok Industries Limited 9,99, Total 10,00, Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Financial performance Designation Director Director Director (Rs. in crores except per share data) March 31, 2008 Half year ended September 30, 2008 Sales and other income Profit/(Loss) after tax (0.50) (2.66) Equity capital (*) ^ Earnings per share (Rs.) Basic (78.37) (26.57)# Book value per equity share (Rs.) 5.04 (21.53) Reserves & Surplus (0.50) (3.15) *The face value of each equity share is Rs.10/- each. #Not annualised ^ As of September 30, 2008 our Company has invested Rs. 9 cores as share application money in AAPL. AAPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 3. Alok Retail (India) Limited ( ARIL ) ARIL was incorporated on September 7, 2007 as a private limited company as Alok Homes & Apparel Private Limited under the provisions of the Companies Act. Subsequently, on August 8, 2008, the name of ARIL was changed to Alok Retail (India) Private Limited and on September 30, 2008, was changed to Alok Retail (India) Limited. The registered office of ARIL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of ARIL contemplate inter-alia carrying on business of producing all kinds of apparels, clothes and garments and manufacturing, trading, exchanging any natural or man-made fibre. ARIL is currently engaged in the business of producing all kinds of home textiles, apparels, clothes, garments and /or processing, texturising, spinning, twisting, weaving, knitted, testing etc. 131

164 Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Mr. Alok A. Jiwrajka Mr. Varun S. Jiwrajka Mr. Niraj D. Jiwrajka Alok Industries Limited 49, Total 50, Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Financial performance Designation Director Director Director (Rs. in crores except per share data) March 31, 2008 Half year ended September 30, 2008 Sales and other income - - Profit/(Loss) after tax (0.01) (0.01) Equity capital (*) Earnings per share (Rs.) Basic (0.99) (0.87)# Book value per equity share (Rs.) Reserves & Surplus (0.01) (0.01) *The face value of each equity share is Rs. 10/- each. #Not annualised ARIL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 4. Alok Land Holdings Private Limited ( ALHPL ) ALHPL was incorporated on February 19, 2008 as a private limited company under the provisions of the Companies Act. The registered office of ALHPL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of ALHPL contemplate inter-alia dealing, purchasing, leasing or exchanging movable and immovable properties including construction etc. ALHPL is currently engaged in the business of purchasing, taking on lease or exchanging, building, developing, maintaining, cultivating, selling, exchanging and dealing with moveable and immoveable properties, constructing, buildings (including SEZs and ITPs) developing 132

165 etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Alok Industries Limited 2,49, Directors Total 2,50, Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Financial performance Designation Director Director Director (Rs. in crores except per share data) March 31, 2008 Half year ended September 30, 2008 Sales and other income - - Profit/(Loss) after tax (0.19) (0.28) Equity capital (*) Earnings per share (Rs.) Basic (27.91) (22.42)# Book value per equity share (Rs.) 2.29 (8.95) Reserves & Surplus (0.19) (0.47) *The face value of each equity share is Rs. 10/- each #Not annualised ^ As of September 30, 2008, our Company has invested Rs cores as share application money in ALHPL. ALHPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 5. Alok Industries International Limited ( AIIL ) AIIL was incorporated on January 25, 2007 in the British Virgin Islands as a BVI Business Company. The registered office of AIIL is located at Pasea Estate, Road Town, Tortola, British Virgin Islands. AIIL is utilized as a special purpose vehicle for overseas joint ventures and acquisitions. Equity shareholders as on December 31,

166 Shareholders No. of equity shares % shareholding Alok Industries Limited 50, Total 50, Our Company also holds 8,36,86,305 cumulative redeemable preference shares of USD 1 each of AIIL. Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Director Director Director Financial performance March 31, 2007 (Rs. in crores) March 31, 2007 (USD in crores) March 31, 2008 (Rs. in crores) March 31, 2008 (USD in crores) Half year ended September 30, 2008 (Rs. in crores) Half year ended September 30, 2008 (USD in crores) Sales and other income Profit/(Loss) after tax (0.04) (0.01) (0.50) Equity capital (*) Earnings per share Basic Book value per equity share (78.09) (1.78) (140.49) (3.50) # 16.50# (236.57) 0.83 ( ) (1.66) 12, Reserves & Surplus (1.40) (0.00) (10.33) (0.01) *The face value of each equity share is USD 1 each. #Not annualised ^ As of September 30, 2008 our Company has invested Rs cores as share application money in AIIL. AIIL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 6. Alok Inc., ( AI ) AI was incorporated on May 4, 2006 in New York Corporation, established in USA. The registered office of AI is located at 7 West, 34th Street, Suit#607, New York, NY AI is currently engaged in carrying on the business of customer relationship management and a liasioning office. Equity shareholders as on December 31, 2008 Shareholders No. of equity % shareholding 134

167 shares Alok Industries Limited Total Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Director Director Director Financial performance March 31, 2007 (Rs. in crores) March 31, 2007 (USD in crores) March 31, 2008 (Rs. in crores) March 31, 2008 (USD in crores) Half year ended September 30, 2008 (Rs. in crores) Half year ended September 30, 2008 (USD in crores) Sales and other income Profit/(Loss) tax after Equity capital (*) Earnings per share - Basic Book value per equity share 3, , ,040.20# # 11, , Reserves & Surplus *The face value of each equity share is USD 200 each. #Not annualised AI is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 7. Alok International Inc., ( AII ) AII was incorporated on May 5, 2008 in Corporation Section, P.O. Box 13697, Austin, Texas The registered office of AII is located at 123 Oak Lawn Avenue, Dallas, TX AII is currently engaged in carrying on the business of customer relationship management and a liasioning office. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares* % shareholding Alok Industries Limited 1,

168 Shareholders No. of equity shares* % shareholding * The face value of each equity share is USD1. Directors Total 1, Name Designation Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Mr. Alok A. Jiwrajka Director Director Director Director Financial performance Half year ended September 30, 2008 (Rs. in crores) Half year ended September 30, 2008 (USD in crores) Sales and other income Profit/(Loss) after tax Equity capital (*) Earnings per share - Basic # 5.36# Book value per equity share Reserves & Surplus *The face value of each equity share is USD 200 each. #Not annualised AII is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 8. Alok Realtors Private Limited ( ARPL ) ARPL was incorporated on January 16, 2008 as a private limited company under the provisions of the Companies Act. The registered office of ARPL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of ARPL contemplate inter-alia dealing, purchasing, leasing or exchanging with movable and immovable properties including construction etc. ARPL is currently engaged in the business of purchasing, taking on lease or exchanging, building, developing, maintaining, cultivating, selling, exchanging and dealing with moveable and immoveable properties, constructing, buildings (including SEZs and ITPs) developing etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka

169 Alok Infrastructure Limited 99, Total 1,00, Directors Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Name Designation Director Director Mr. Surendra B. Jiwrajka Director Financial performance (Rs. in crores except per share data) March 31, 2008 Half year ended September 30, 2008 Sales and other income Profit/(Loss) after tax (0.04) (0.05) Equity capital (*) ^ Earnings per share (Rs.) Basic (6.70) (10.43)# Book value per equity share (Rs.) Reserves & Surplus (0.04) (0.09) *The face value of each equity share is Rs. 10/- each. #Not annualised ^ As of September 30, 2008 our Company has invested Rs cores as share application money in ARPL. ARPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 9. Alok New City Infratex Private Limited ( ANCIPL ) ANCIPL was incorporated on March 25, 2008 as a private limited company under the provisions of the Companies Act. The registered office of ANCIPL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of ANCPL contemplate inter-alia dealing, purchasing, leasing or exchanging with movable and immovable properties including construction etc. carrying on business of producing all kinds of apparels, clothes and garments and manufacturing, trading, exchanging any natural or man-made fibre. ANCPL is currently engaged in the business of purchasing, taking on lease or exchanging, building, developing, maintaining, cultivating, selling, exchanging and dealing with moveable and immoveable properties, constructing, buildings (including SEZs and ITPs) developing etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Alok Land Holdings Private Limited 49,

170 Shareholders No. of equity shares % shareholding Total 50, Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2008 Half year ended September 30, 2008 Sales and other income - - Profit/(Loss) after tax (0.01) (0.01) Equity capital (*) ^ Earnings per share (Rs.) Basic (0.34) (1.20)# Book value per equity share (Rs.) Reserves & Surplus (0.00) (0.01) *The face value of each equity share is Rs. 10/- each #Not annualised ^ As of September 30, 2008 our Company has invested Rs cores as share application money in ANCIPL. ANCIPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 10. Alok Aurangabad Infratex Private Limited ( AAIPL ) AAIPL was incorporated on March 25, 2008 as a private limited company under the provisions of the Companies Act. The registered office of AAIPL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of AAIPL contemplate inter alia dealing, purchasing, leasing or exchanging with movable and immovable properties including construction etc. carrying on business of producing all kinds of apparels, clothes and garments and manufacturing, trading, exchanging any natural or man-made fibre. AAIPL is currently engaged in the business of purchasing, taking on lease or exchanging, building, developing, maintaining, cultivating, selling, exchanging and dealing with moveable and immoveable properties, constructing, buildings (including SEZs and ITPs developing) etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka

171 Shareholders No. of equity shares % shareholding Mr. Surendra B. Jiwrajka Alok Land Holdings Private Limited 49, Total 50, Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2008 Half year ended September 30, 2008 Sales and other income - - Profit/(Loss) after tax (0.01) (0.04) Equity capital (*) Earnings per share (Rs.) - Basic (0.34) (15.31)# Book value per equity share (Rs.) Reserves & Surplus (0.00) (0.04) *The face value of each equity share is Rs. 10/- each. #Not annualised ^ As of September 30, 2008 our Company has invested Rs cores as share application money in AAIPL. AAIPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 11. Alok HB Properties Private Limited ( AHPL ) AHPL was incorporated on May 2, 2008 as a private limited company under the provisions of the Companies Act. The registered office of AHPL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of AHPL contemplate inter-alia dealing, purchasing, leasing or exchanging with movable and immovable properties including construction etc.,. AHPL is currently engaged to carry on the business of purchasing, taking on lease or exchanging, building, developing, maintaining, cultivating, selling, exchanging and dealing with moveable and immoveable properties, constructing, buildings (including SEZs and ITPs developing) etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka

172 Shareholders No. of equity shares % shareholding Mr. Surendra B. Jiwrajka Mr. Haribansh R. Singh Alok Infrastructure Limited 49, Total 50, Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Director Director Director Financial performance (Rs. in crores except per share data) Half year ended September 30, 2008 Sales and other income - Profit/(Loss) after tax (0.01) Equity capital (*) 0.05 Earnings per share (Rs.) - Basic (1.59)# Book value per equity share (Rs.) 9.34 Reserves & Surplus (0.01) *The face value of each equity share is Rs. 10/- each. #Not annualized AHPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 12. Alok HB Hotels Private Limited ( AHHPL ) AHHPL was incorporated on May 2, 2008 as a private limited company under the provisions of the Companies Act. The registered office of AHPL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of AHHPL contemplate inter-alia owning, constructing, developing, leasing etc., and carrying on business of all types of hotels, long stay apartments café, bars, etc., in India or in any other part of the world and/ or rendering advisory, consultancy, technical and operational services in India and abroad for the same. AHHPL is currently engaged in carrying on the business to own, construct, develop, promote, furnish, run, handle, takeover, lease, license, let on hire, manage, operate, carry on the business of all types of hotel, long stay apartments, service apartments, motel, restaurant, café, tavern, bars etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka

173 Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Mr. Haribansh R. Singh Alok Infrastructure Limited 49, Total 50, Directors Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Name Designation Director Director Director Financial performance (Rs. in crores except per share data) Half year ended September 30, 2008 Sales and other income - Profit/(Loss) after tax (0.01) Equity capital (*) 0.05 Earnings per share (Rs.) - Basic (1.59)# Book value per equity share (Rs.) 9.34 Reserves & Surplus (0.01) *The face value of each equity share is Rs. 10/- each. #Not annualized AHHPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 13. Mileta a.s., ( MAS ) MAS was incorporated on April 24, 1992 in the Czech Republic. The registered office of MAS is located at Husova 2153, Horice v Podkrkonoší, Czech Republic. The main object of MAS contemplate inter-alia manufacturing, producing, wholesale and cater trading, specialized retailing, producing of machines and equipment, accommodation services and operation of water- supply and canalization networks for public needs. MAS is currently engaged in manufacturing of textile fibres, fabrics production of textile goods, wholesale trade and specialised retail. CZK holders as on December 31, 2008 Shareholders No. of CZK % shareholding Alok Industries International Limited 3,13, obec Víchová 1, Město Jaroměř THEMOS I, a.s

174 Shareholders No. of CZK % shareholding Linefin a.s S.S.I. s.r.o Česká tisková kancelář ISOP Invest, s.r.o. v likvidaci MA Management, a.s Compas Capital Consult s.r.o Úřad pro zast.stát u ve věcech majetkových Lillingston Mark Campbell 1, Řeháček Ladislav Ing Pišl Miloš Ing. 2, Sobotka Miroslav RNDr. 12, Chmelíř Václav Hlavnička Tomáš ing Dragounová Jarmila Streitberg Petr MUDr. 3, Others 55, Total 3,93, Directors Mr. Ing. Otakar Petráček Mr. Gopinath Kamath Mr. Dinesh Mall Name Designation Chairman Vice Chairman Member Financial performance March 31, 2008 (Rs. in crores except per share data) March 31, 2008 (CZK in crores except per share data) Half year ended September 30, 2008 (Rs. in crores except per share data) Half year ended September 30, 2008 (CZK in crores except per share data) Sales and other income Profit/(Loss) after tax (6.37) (3.02) (15.75) (5.98) Equity capital (*) Earnings per share Basic (161.87) (76.75) (400.37)# (151.92)# Book value per equity share Reserves & Surplus (37.86) (15.51) (57.61) (21.49) *The face value of each equity share is CZK 1000/- each. #Not annualised 142

175 MAS is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 14. ALOK European retail s.r.o. ( AER ) AER was incorporated on January 24, 2008 in the Czech Republic. The registered office of AER is located at Praha 3, Žižkov, Biskupcova 1867, PSČ AER is engaged in the business of leasing of property, apartments and non-residential premises without delivery of any ones than basic services connected with the lease of properties, apartments and non-residential premises wholesale specialized retail and retail with general merchandise promotional activity and marketing trade and service agency Equity shareholders as on December 9, 2008 Shareholders No. of equity shares % shareholding Alok Industries International Limited 1,50, Societe Financiere Robichon S.A. 50, Total 2,00, Directors Mr. Dalibor Hudák Name Designation Director Financial Performance Half year ended September 30, 2008 (Rs. in crores except per share data) Half year ended September 30, 2008 (CZK in crores except per share data) Sales and other income Profit/(Loss) after tax (0.48) (0.18) Equity capital (*) Earnings per share Basic (23,877.17)# (8,892.44)# Book value per equity share (21,944.13) ( ) Reserves & Surplus (0.50) (0.18) *The face value of each equity share is CZK 1000/- each. #Not annualised 143

176 DIVIDENDS Our Company has been a dividend paying company and has paid dividends in each of the last five years including for the FY The following are the dividend pay outs in the last five years by the Company: Particulars March 31, 2008 March 31, 2007 For the year ended March 31, 2006 March 31, 2005 March 31, 2004 Rate of Dividend 12.00% 14.00% 12.00% 12.00% 10.00% Dividend Amount (Rs. in crores) Tax on above dividend (Rs. in crores) Dividend per Equity Share (Rs.) The amounts paid as dividends in the past are not necessarily indicative of our dividend policy or dividend amounts, if any, in the future. 144

177 MANAGEMENT Board of Directors The following table sets forth details regarding our Board of Directors: Sr. No. Name, Address, Designation, Occupation and Term 1. Mr. Ashok B. Jiwrajka (s/o Mr. Bhagirathmal Jiwrajka) Flat No. 301, Krisnakunj, 3rd floor, Plot No. FP-170, Shivaji Park, Road No. 5, Mahim, Mumbai Designation: Executive Chairman Occupation: Industrialist Term: 5 years with effect from March 10, 2008 DIN Nationality Age Other Directorships Indian 58 years Grabal Alok Impex Limited Alok Knit Exports Limited New City of Bombay Manufacturing Mills Limited Alspun Infrastructure Limited Alok Infrastructure Limited Alok Apparels Private Limited Alok Realtors Private Limited Alok Retail (India) Limited Alok Land Holdings Private Limited Alok Aurangabad Infratex Private Limited Alok New City Infratex Private Limited Alok Industries International Ltd. Grabal Alok International Limited. Grabal Alok (UK) Limited Alok Inc. Alok Denims (India) Private Limited Alok Finance Private Limited Ashok Realtors Private Limited Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Niraj Realtors and Shares Private Limited Nirvan Holdings Private Limited Ashford Infotech Private Limited 145

178 Sr. No. Name, Address, Designation, Occupation and Term 2. Mr. Dilip B. Jiwrajka (s/o Mr. Bhagirathmal Jiwrajka) Flat No. 6, 6th Floor, Bay View, Khan A. G Road, Worli Sea Face, Worli, Mumbai Designation: Managing Director Occupation: Industrialist Term: 5 years with effect from March 10, 2008 DIN Nationality Age Other Directorships Indian 52 years Gogri Properties Private Limited Alok International Inc. Alok HB Properties Private Limited Alok HB Hotels Private Limited Grabal Alok Impex Limited Alok Knit Exports Limited Aurangabad Textiles & Apparel Parks Limited Alspun Infrastructure Limited Alok Infrastructure Limited Alok Apparels Private Limited Amigo Sport Private Limited Alok Realtors Private Limited Alok Retail (India) Limited Alok Land Holdings Private Limited Alok Aurangabad Infratex Private Limited Alok New City Infratex Private Limited Alok Industries International Ltd. Grabal Alok International Limited. Grabal Alok (UK) Limited Alok Inc. Alok Denims (India) Private Limited Alok Finance Private Limited Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Niraj Realtors and Shares Private Limited Nirvan Holdings Private Limited Ashford Infotech Private 146

179 Sr. No. Name, Address, Designation, Occupation and Term 3. Mr. Surendra B. Jiwrajka (s/o Mr. Bhagirathmal Jiwrajka) 901, Palm Beach, Pochkhanwala Road, Worli, Mumbai Designation: Joint Managing Director Occupation: Industrialist Term: 5 years with effect from March 10, 2008 DIN Nationality Age Other Directorships Indian 50 years Limited Gogri Properties Private Limited Alok International Inc. Alok HB Properties Private Limited Alok HB Hotels Private Limited Grabal Alok Impex Limited Alok Knit Exports Limited Aurangabad Textiles & Apparel Parks Limited Alspun Infrastructure Limited Alok Infrastructure Limited Alok Apparels Private Limited Alok Realtors Private Limited Alok Retail (India) Limited Alok Land Holdings Private Limited Alok Aurangabad Infratex Private Limited Alok New City Infratex Private Limited Alok Industries International Ltd. Grabal Alok International Limited. Grabal Alok (UK) Limited Alok Inc. Alok Denims (India) Private Limited Alok Finance Private Limited Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Niraj Realtors and Shares Private Limited Nirvan Holdings Private Limited Ashford Infotech Private 147

180 Sr. No. Name, Address, Designation, Occupation and Term 4. Mr. Chandrakumar Bubna (S/ o Mr. Govindram Bubna) 124/5, Krishna Kunj, Sainik Farm, Central Avenue, New Delhi Designation: Executive Director DIN Nationality Age Other Directorships Indian 55 years Limited Gogri Properties Private Limited Alok International Inc. Alok HB Properties Private Limited Alok HB Hotels Private Limited Grabal Alok Impex Limited Jiwrajka Associates Private Limited Occupation: Industrialist Term: 5 years with effect from May 1, Mr. Ashok G. Rajani (S/o Mr. Giridardas Rajani) 101/102, Red Rose Apts, Pochkhanwala Rd, Mumbai Indian 59 years Midas Touch Apparel Private Limited Flair Apparel Industries Private Limited Vision Apparel Private Limited Designation: Independent Director Occupation: Industrialist Term: Liable to retire by rotation. 6. Mr. K. R. Modi (S/o Mr. Ratanchand Modi), Indian 68 years Rolta India Limited 148

181 Sr. No. Name, Address, Designation, Occupation and Term DIN Nationality Age Other Directorships 901, Pushpanjali, Prabhadevi, Mumbai Designation: Independent Director Occupation: Advocate Solicitor and Term: Liable to retire by rotation. 7. Mr. K. D. Hodavdekar (S/o Mr. D.B.Hodavdekar) A-163, Twin Tower, Prabhadevi, Mumbai Indian 57 years Nil Designation: Independent Director (Nominee of IDBI) Occupation: Chief General Manager Term: As decided by IDBI 8. Mr. K. J. Punnathara (S/o Mr. P. K. Jacob) House No. 29, Rajalakshmi Nagar, Pattom, Thiruvananthapuram. Kerala Indian 66 years Nil Designation: Independent Director (Nominee of Life Insurance Corporation of India) Occupation: Retired 149

182 Sr. No. Name, Address, Designation, Occupation and Term DIN Nationality Age Other Directorships Term: As decided by LIC 9. Ms. Hiroo S. Advani (d/o Mr.Parmanand Menghraj Sadarangani) 403, Shivala, Sobani Road, Off Cuffe Parade, Colaba, Mumbai Indian 63 years Ind-Bharat Commodities Private Limited Vidyut Metalics Private Limited Sahil Resorts & Spa India Limited Designation: Independent Director (Nominee of Export Import Bank of India) Occupation: Consultant EXIM Bank Term: As decided by EXIM Bank 10. Mr. Timothy Ingram (s/o Mr. Stanley Charles Ingram) 30, Buckingham Gate, London SW1E 6NN England British 61 years ANZ Bank (Europe) Ltd The Sage Group plc Savills plc Eddington Capital Management Ermitage Group Designation: Non- Executive Director (Nominee director of Caledonia Investments plc) Occupation: CEO of Caledonia Investments plc Term: As decided by Caledonia Investments plc 11. Mr. Rakesh Kapoor Indian 53 Jindal Praxair Oxygen Co. 150

183 Sr. No. Name, Address, Designation, Occupation and Term (s/o Mr. Vishwanath Kapoor) Plot No B: - 21, Flat No:- 104, IFCI Colony, Ramprashtra, Ghaziabad. DIN Nationality Age Other Directorships years Private Limited Foremost Factors Limited Biotech Consortium India Private Limited Designation: Independent Director (Nominee Director of IFCI) Occupation: General Manager Term: As decided by IFCI 12. Mr. A. B. Dasgupta (s/o Late Sailesh Chandra Gupta Dasgupta) C. L. 92 Salt Lake, Sector II, Kolkatta Indian 67 (provisional) years NIL Designation: Independent Director (Nominee Director of IDBI) Occupation: Retd. Term: As decided by IDBI Brief Biography of our Directors Mr. Ashok B. Jiwrajka is the Executive Chairman of the Company. He completed his schooling and college from Mumbai. Immediately after his graduation, he joined the family partnership firm and incorporated our Company in Mr. Jiwrajka has over three decades of experience in textiles. His functions as the Executive Chairman include envisioning our Company's strategic initiatives and overseeing the home textiles business. Mr. Dilip Jiwrajka is the Managing Director of our Company. He completed his schooling and college from Mumbai. Subsequently, he completed his post-graduation in business entrepreneurship and management. He began his career as a management trainee and thereafter he started the business of trading in textiles as sole selling agent for Bombay Dyeing for the Readymade Garment Sector. Starting with a partnership firm, he incorporated Alok Industries Limited in His functions as the 151

184 Managing Director include envisioning our Company's growth strategy, responsibility for the apparel fabric and garment divisions and overseeing the finance, administration and overall working of our Company and its group companies. Mr. Surendra Jiwrajka is the Joint Managing Director of our Company. He completed his schooling and college from Mumbai. Immediately after his graduation, he joined the family partnership firm and incorporated Alok Industries Limited in Mr. Jiwrajka has over two decades of experience in Textiles. His functions as the joint managing director include envisioning our Company s growth strategy, overseeing the manufacturing, marketing functions of the polyester and spinning businesses and project implementation of our Company. Mr. Chandra Kumar Bubna is the executive director of our Company. He is commerce graduate and associated with the textile industry in the field of marketing for more than two decades. He manages our Company s marketing operations for the northern region and is also actively involved in planning and executing our Company's marketing strategies. Mr. Ashok G. Rajani is a B.Com Graduate. He is the Founder Chairman of the M/s Midas Touch Group and Midas Touch Apparel Private Limited, an Indian garment exporting company. He is experienced in the field of garment manufacturing and exports and is associated with various garment and textile organizations. He was the Chairman of the Export Promotion Committee of the Apparel Export Promotion Council and is a member on its Executive Committee. Till recently he was the President of The Clothing Manufacturers Association of India and has also been on the Board of Governors of the National Institute of Fashion Technology. Mr. K. R. Modi is an Advocate and Solicitor by profession with over 40 years experience. His academic qualifications include a Bachelor Degree in Arts and Law. He is a Senior Partner with M/s. Kanga & Company, a firm of Advocates & Solicitors in Mumbai and is an independent director on our Board. Mr. K. D. Hodavdekar has been nominated as a Director by IDBI Limited. He is a post graduate in Commerce. During his career in IDBI Bank Limited over three decades, he has assumed responsibilities in diverse areas of banking operations in Corporate Loan Appraisals, Project Lending and Credit Administration. He has headed major branch offices of IDBI Bank and was Zonal Manager of Western Region. Before taking over the present challenging task as Chief General Manager and Head of Resolutions, he has handled the amalgamation of erstwhile United Western Bank with IDBI Bank Limited as its Chief General Manager in charge. Mr. K. J. Punnathara has been nominated as a Director by Life Insurance Corporation of India. He has completed his Masters in Arts. He has over 37 years of experience in the Insurance industry. He was Executive Director of LIC of India and Director of J & K State Financial Corporation and Kerala State Financial Corporation. He was Senior Divisional Manager of LIC of India in Srinagar, Satara and Thrivandrum and Regional Manager Personnel and Industrial Relations in Mumbai. He was a General Manager, LIC Mutual Fund before becoming Executive Director of LIC of India. Ms. Hiroo S. Advani has been nominated as a Director by Export Import Bank of India. She completed her Masters in Arts from Bombay University and completed a CAIIB course. She has close to 42 years of experience in international banking and domestic development banking. She has assumed responsibilities in diverse areas of trade finance, export marketing finance, overseas investment finance and corporate debt restructuring. She worked as the Chief General Manager, Export Import Bank of India till March 31, She was also a Director of Global Procurement Consultants Limited till March 31, Mr. Timothy Ingram is the representative of Caledonia Investments plc. He completed his Masters in Arts in Economics from Cambridge University, an MBA from INSEAD Business School and is a Fellow of the Chartered Institute of Bankers. He was appointed as Chief Executive of Caledonia Investments plc in June Caledonia Investments is a FTSE-250 investment company taking large stakes in other businesses, both in the UK and internationally. He began his career in banking with Grindlays Bank (now part of ANZ Bank and Standard Chartered Bank subsequently) in 1969 and had his first CEO experience running a bank in the Congo (then called Zaire) in the mid 1970s. He was then 152

185 put in charge of a number of banks in various parts of the world and in 1989 took charge of ANZ s corporate bank in Australia. He returned to the UK in 1991 to run First National Finance Corporation which was taken over by Abbey National in He joined the Abbey National Board in 1996 and left Abbey National in 2002, becoming CEO of Caledonia Investments. Mr. Rakesh Kapoor has been nominated as a Director by IFCI Limited. He is a B.Sc (Hons.) Chemistry, PGDM from AIMA and has completed a certificate course in International Marketing from IIFT. He has 10 years experience with the corporate sector in process, production control / project exports and has worked with IFCI in various capacities for 22 years. He is presently the Chief General Manager of IFCI and has handled business development, project appraisals, NPA resolutions, corporate debt restructuring etc. From last five months he is associated with Foremost Factors Limited (A subsidiary of IFCI) on deputation as Managing Director which is into factoring business. Mr. A. B. Dasgupta is a B.Com graduate (Calcutta University) and ICWA (Inter) and CAIIB. He joined State Bank of India as Probation Officer in the mid sixties and retired as General Manager (Commercial Banking) after 34 years of service w.e.f. January 1, As a General Manager (Commercial Banking), he controlled the entire range of strategic exposure of the Bank in an important circle, having a large number of critical industries and companies as clients in the sectors of steel, power, fertilizer, automobile and automobile ancillaries, textiles etc. The active responsibility areas included financial planning and quantitative control of growth implementations with its implied rationalistic decision making strategies. Earlier, for nearly 4 years he headed the Banking Operations and Audit department at SBI Corporate head quarters with concomitant manifestations as can be imagined in the largest bank of India. The responsibilities included overseeing of the external audit of SBI, involving about 500 audit firms, as well as ensuring compliance with various accounting standard and including that of RBI and BASEL norms. Compensation to our Directors A. Executive Directors Executive Chairman Mr. Ashok B. Jiwrajka, was appointed as the Executive Chairman of our Company vide Board resolution dated January 31, 2008 which was ratified and confirmed by the members at the Annual General Meeting held on September 29, The significant terms of his employment as per the Executive Chairman s Agreement dated March 10, 2008 are as follows: Tenure Appointment Annual Remuneration: Perquisites of 5 years with effect from March 10, 2008 Rs. 1,80,00,000/- Would include: i) accommodation or house rent allowance in lieu thereof; house maintenance allowance together with reimbursement of expenses/or allowances for utilization of gas, electricity, water, furnishing and repair, medical reimbursement; leave travel concession for self and his family including dependants; ii) club fees, credit card payment, Life Insurance Premium, medical insurance and such other perquisites and/ or iii) other allowances,subject to overall ceiling of remuneration stipulated in Section 198 and 309 of the Companies Act. The said perquisites and allowances shall be evaluated, wherever applicable, as per the Income Tax Act, 1961 or any rules thereunder (including any 153

186 Commission statutory modification(s) or re-enactment thereof, for the time being in force). Not more than 1% of the net profit, subject to the provisions of relevant sections of the Companies Act. Managing Director Mr. Dilip B. Jiwrajka, was appointed as the Managing Director of our Company vide Board resolution dated January 31, 2008 which was ratified and confirmed by the members at the Annual General Meeting held on September 29, The significant terms of his employment as per the Managing Director s Agreement dated March 10, 2008 are as follows: Tenure Appointment Annual Remuneration: Perquisites of 5 years with effect from March 10, 2008 Rs. 1,80,00,000/- Would include: i) accommodation (furnished or otherwise) or house rent allowance in lieu thereof; house maintenance allowance together with reimbursement of expenses/or allowances for utilization of gas, electricity, water, furnishing and repair, medical reimbursement; leave travel concession for self and his family including dependants; ii) club fees, credit card payment, Life Insurance Premium, medical insurance and such other perquisites and/ or iii) other allowances,subject to overall ceiling of remuneration stipulated in Section 198 and 309 of the Companies Act. Commission The said perquisites and allowances shall be evaluated, wherever applicable, as per the Income Tax Act, 1961 or any rules thereunder (including any statutory modification(s) or re-enactment thereof, for the time being in force). Not more than 1% of the Net Profit, subject to the provisions of relevant sections of the Companies Act. Joint Managing Director Mr. Surendra B. Jiwrajka, was appointed as the Joint Managing Director vide Board resolution dated January 31, 2008 which was ratified and confirmed by the members at the Annual General Meeting held on September 29, The significant terms of his employment as per the Joint Managing Director s Agreement dated March 10, 2008 are as follows: Tenure Appointment Annual Remuneration: Perquisites of 5 years with effect from March 10, 2008 Rs. 1,80,00,000/- Would include: i) accommodation (furnished or otherwise) or house rent allowance in lieu thereof; house maintenance allowance together with reimbursement of expenses/or allowances for utilization of gas, electricity, water, furnishing and repair, medical reimbursement; leave travel concession for self and his family including dependants; ii) club fees, credit card payment, Life Insurance Premium, medical insurance and such other perquisites and/ or 154

187 iii) other allowances,subject to overall ceiling of remuneration stipulated in Section 198 and 309 of the Companies Act. Commission The said perquisites and allowances shall be evaluated, wherever applicable, as per the Income Tax Act, 1961 or any rules thereunder (including any statutory modification(s) or re-enactment thereof, for the time being in force). Not more than 1% of the Net Profit, subject to the provisions of relevant sections of the Companies Act. Executive Director Mr. Chandrakumar Bubna, was appointed as an Executive Director of our Company vide Board resolution dated April 29, 2004, which was ratified and confirmed by the members at the AGM held on September 30, 2004 and subsequently amended at our EGM held on April 25, 2005 and AGM held on September 25, The significant terms of his employment as per the Executive Director s Agreement dated May 1, 2004, subsequently modified by way of resolutions passed at our EGM held on April 25, 2005 and Annual General Meeting held on September 25, 2007, are as follows: Tenure Appointment of 5 years with effect from May 1, 2004 Annual Salary: Rs. 1,80,00,000/- Perquisites Would include: i) accommodation (furnished or otherwise) or house rent allowance in lieu thereof; house maintenance allowance together with reimbursement of expenses/or allowances for utilization of gas, electricity, water, furnishing and repair, medical reimbursement; leave travel concession for self and his family including dependants; ii) club fees, credit card payment, Life Insurance Premium, medical insurance and such other perquisites and/ or iii) other allowances,subject to overall ceiling of remuneration stipulated in Section 198 and 309 of the Companies Act. Commission The said perquisites and allowances shall be evaluated, wherever applicable, as per the Income Tax Act, 1961 or any rules thereunder (including any statutory modification(s) or re-enactment thereof, for the time being in force). Not more than 1% of the Net Profit, subject to the provisions of relevant sections of the Companies Act. Subsequently, at our Board meeting dated January 30, 2009, the appointment of Mr. Chandrakumar Bubna was renewed for a period of five years effective from May 1, 2009 till April 30, 2014, subject to ratification at the ensuing general meeting of our Equity Shareholders. B. Non-Executive Directors Name of Director All elements of remuneration package Amount Rs. (crores) Performance bonus Amount Rs. (crores) Total Amount Rs. (crores) Mr. Ashok G. Rajani NIL NIL NIL 155

188 Name of Director All elements of remuneration package Amount Rs. (crores) Performance bonus Amount Rs. (crores) Total Amount Rs. (crores) Mr. K. R. Modi NIL NIL NIL Mr. K. D. Hodavdekar NIL NIL NIL Mr. K. J. Punnathara NIL NIL NIL Ms. Hiroo Advani NIL NIL NIL Mr. Timothy Ingram NIL NIL NIL Mr. Rakesh Kapoor NIL NIL NIL Mr. A. B. Dasgupta NIL NIL NIL Our non-executive Directors do not draw any remuneration from our Company other than sitting fees as determined by the Board. Our Company currently pays sitting fees of Rs. 20,000/- to the nonexecutive Directors. Shareholding of our Directors in our Company The following table details the shareholding of our Directors in their personal capacity and either as sole or first holder: Name of Directors Number of Equity Shares (Pre-Issue) % of Total Paid- Up Share Capital (%) Number of Equity Shares* (Post-Issue) % of Total Paid- Up Share Capital (%)* Mr. Ashok B. Jiwrajka 65,19, ,35,27, Mr. Dilip B. Jiwrajka 65,96, ,36,86, Mr. Surendra B. Jiwrajka 68,52, ,42,18, Mr. Chandrakumar Bubna 99, ,07, Mr. Ashok G. Rajani Mr. K. R. Modi 1, , Mr. Rakesh Kapoor *The number of Equity Shares for the column entitled Number of Equity Shares (Post-Issue) has been calculated assuming full subscription to Rights Entitlements in this Issue Details of the transactions in Equity Shares by our Directors and their relatives during the last six months Name of Director/Relative of Director Details of Transaction No. of Equity Shares of Rs. 10 each 156

189 Nil Nil Nil Changes in our Board of Directors during the last three years Name Date of Appointment Date of Cessation Reason Mr. A. K. Bhan September 6, 2003 January 31, 2006 Nomination withdrawn by IFCI Limited. Mr. R. J. Kamath May 21, 2005 December 30, 2008 Mr. Timothy Ingram July 29, 2005 and confirmed on September 29, 2005 Nomination of Mr. R. J. Kamath, withdrawn by IDBI Limited and in his place appointed Mr. A. B. Dasgupta Appointed as representative of Caledonia Investments plc. Mr. Rakesh Kapoor January 31, Nomination of Mr. A. K. Bhan withdrawn by IFCI Limited and in his place appointed Mr. Rakesh Kapoor. Mr. S. Sridhar June 27, 2005 April 19, 2006 Nomination withdrawn by EXIM Bank. Ms. Hiroo Advani April 19, Nomination of Mr..S. Sridhar, withdrawn by EXIM Bank and in his place appointed Ms. Hiroo Advani. Mr. K. C. Jani July 31, 2003 September 8, 2008 Nomination withdrawn by IDBI Limited Mr. K. D. Hodavdekar September 8, Nomination of Mr. K. C. Jani, withdrawn by IDBI Limited and in his place appointed Mr. D. Hodavdekar. Mr. A. B. Dasgupta December 30, Nomination of Mr. R. J. Kamath, withdrawn by IDBI Limited and in his place appointed Mr. B. Dasgupta. Borrowing powers of our Directors Pursuant to a resolution dated February 14, 2008, passed by our Equity Shareholders in accordance with the provisions of the Companies Act, our Board has been authorised to borrow sums of money for and on behalf of our Company, provided that the money so borrowed (apart from temporary loans obtained from time to time by our Company in the ordinary course of business) shall not exceed Rs. 7,500 crores. Corporate Governance Our Company has complied with the provisions of the Listing Agreement in respect of corporate governance, especially with respect to broad basing of our Board of Directors and constituting committees. There are four Board level committees in our Company, which have been constituted and 157

190 function in accordance with the relevant provisions of the Act and the Listing Agreement. These are the (i) Audit Committee, (ii) Shareholders /Investors Grievances Committee; (iii) Remuneration Committee and (iv) Executive Committee. Brief particulars of each committee, its scope, composition and meetings for the year have been setout herein below. (i) Audit Committee Members Name of Director Category Status No. of Meetings Held Attended Mr. K. C. Jani* Nominee Director Ex-Chairman 4 4 Mr. Ashok G. Rajani Independent Director Member 4 3 Mr. K. R. Modi Independent Director Member 4 3 Mr. Rakesh Kapoor Nominee Director Chairman 4 4 Mr. K. J. Punnathara Nominee Director Member 4 3 Mr. Dilip B. Jiwrajka Managing Director Member 4 4 Mr. K. D. Hodavdekar Nominee Director Member - - * At the meeting of our Board of Directors of the Company on October 27, 2008, Mr. Rakesh Kapoor was appointed as the chairman of our Audit Committee in place of Mr. K. C. Jani, as the nomination of Mr. K. C. Jani was withdrawn by IDBI Limited on September 8, Further, Mr. K. D. Hodavdekar, a nominee of IDBI Limited, was inducted in the Audit Committee w.e.f. October 27, The Audit Committee is comprised of the above named directors. All the members of our Audit Committee have accounting and financial management expertise. Our Audit Committee met 4 times during the course of FY 2008 on April 26, 2007, July 31, 2007, October 31, 2007 and January 31, The CFO and representatives of our Statutory Auditors and internal auditors are regularly invited by the Audit Committee to its meetings. Mr. K. H. Gopal, President (Corporate Affairs) & Company Secretary, is the secretary to the Audit Committee Scope and terms of reference The scope of the Audit Committee is defined under Clause 49 of the Listing Agreement and the provisions of the Act. The Audit Committee acts as a link between the management, the statutory, cost and internal auditors and the Board of Directors and oversees the financial reporting process. Functions of the Audit Committee: - 1. Overseeing our Company s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible; 2. Recommending to our Board, the appointment, re-appointment and, if required, the replacement or removal of our Statutory Auditors and the fixation of audit fees; 3. Approval of payment to our Statutory Auditors for any other services rendered 4. Reviewing, with the management, the annual financial statements before submission to the Board for approval, with particular reference to: a) Matters required to be included in the Director s Responsibility Statement to be included in the Board s report in terms of clause (2AA) of section 217 of the Companies Act. b) Changes, if any, in accounting policies and practices and reasons for the same. c) Major accounting entries involving estimates based on the exercise of judgment by management. d) Significant adjustments made in the financial statements arising out of audit findings. 158

191 e) Compliance with listing and other legal requirements relating to financial statements. f) Disclosure of any related party transactions. g) Qualifications in the draft audit report. 5. Reviewing, with the management, the quarterly financial statements before submission to our Board for approval. 6. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems. 7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. 8. Discussion with our internal auditors about any significant findings and follow up thereon. 9. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. 10. Discussion with our Statutory Auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern. 11. Reviewing our Company s risk management policies. 12. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors. 13. Reviewing any changes in the accounting policies or practices as compared to the last completed financial year and commenting on any deviation from the Accounting Standards. 14. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee. Our Audit Committee is empowered, pursuant to its terms of reference, to: 1. Investigate any activity within its terms of reference and to seek any information it requires from any employee. 2. Obtain legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise, when considered necessary. Our Company has systems and procedures in place to ensure that our Audit Committee mandatorily reviews: Management discussion and analysis of financial condition and results of operations. Statement of significant related party transactions (as defined by the Audit Committee), submitted by the management. Management letters / letters of internal control weaknesses issued by the statutory auditors Internal audit reports relating to internal control weaknesses. The appointment, removal and terms of remuneration of the chief internal auditor. Whenever applicable, the uses/applications of funds raised through public issues, rights issues, preferential issues by major category (capital expenditure, sales and marketing, working capital, etc), as part of the quarterly declaration of financial results. If applicable, on an annual basis, statement certified by the statutory auditors, detailing the use of funds raised through public issues, rights issues, preferential issues for purposes other than those stated in the offer document/prospectus/notice. In addition, the Audit Committee of the company is also empowered to review the financial statements, in particular, the investments made by the unlisted subsidiary companies (if any), in view of the requirements under Clause 49. The Audit Committee is also apprised on information with regard to related party transactions by being presented: A statement in summary form of transactions with related parties in the ordinary course of business. Details of material individual transactions with related parties which are not in the normal course of business. Details of material individual transactions with related parties or others, which are not on an arm s length basis along with management s justification for the same. (ii) Shareholders /Investors Grievances Committee 159

192 Members Name of Director Category Status No. of Meetings Held Attended Mr. Ashok G. Rajani Independent Director Chairman Mr. Ashok B. Jiwrajka Executive Chairman Member Mr. Dilip B. Jiwrajka Managing Director Member Mr. Surendra B. Jiwrajka Joint Managing Director Member The Shareholders /Investors Grievances Committee looks into all matters related with the transfer of securities; it also specifically looks into redressing complaints of shareholders and investors such as transfer of shares, issue of share certificates, non-receipt of Annual Report and non-receipt of declared dividends. The Shareholders /Investors Grievances Committee met 15 times during FY Scope and Terms of Reference The Investors Grievances Committee was constituted in terms of the mandatory requirement of Clause 49 of the Listing Agreement to look into the redressal of grievances of investors like non-receipt of share certificates, non-receipt of balance sheet, non-receipt of dividend warrants etc. (iii) Remuneration Committee Members Name of Director Category Status No. of Meetings Held Attended Mr. K. C. Jani* Nominee Director Ex-Chairman 1 1 Mr. K. J. Punnathara Nominee Director Member 1 1 Mr. Ashok G. Rajani Independent Director Chairman 1 1 Mr. Dilip B. Jiwrajka Managing Director Member 1 1 * At the meeting of the Board of Directors of the Company held on October 27, 2008, Mr. Ashok G. Rajani was appointed as the chairman of the Remuneration Committee in place of Mr. K. C. Jani, as the nomination of Mr. K. C. Jani was withdrawn by IDBI Limited on September 8, The Remuneration Committee met once during FY 2008 on July 31, 2007 (iv) Executive Committee Our Board of Directors has delegated the authority to supervise and monitor the day-to-day activities of our Company to an Executive Committee. The Executive Committee comprises of Mr. Ashok B. Jiwrajka, Mr. Dilip B. Jiwrajka and Mr. Surendra B. Jiwrajka. The Executive Committee met 80 times during FY (v) Committee of Directors Our Board of Directors has constituted a Committee of Directors on October 27, 2008 for finalization of the terms and all other consequential conditions pertaining to the Issue. The Committee comprises of Mr. Dilip B. Jiwrajka and Mr. Surendra B. Jiwrajka, Mr. K. R. Modi, Mr. K. D. Hodavdekar and Mr. Timothy Ingram. The Committee of Directors has met twice since its constitution. Key Managerial Personnel 160

193 The details of our key managerial personnel excluding our Directors are as follows: Sr. No. Name Age Designation Qualifications Previous Employment Total years of experience Date of joining Gross Salary (FY 2008) (Amount in Rs.) Corporate Office 1. Sunil O. Khandelwal 44 Chief Financial Officer B.Com, A.C.A. M/S A.K luharuka and associates C.A 18 years June 1, ,54, K.H. Gopal 42 President (Corporate Affairs) & Company Secretary B.Com, ACS,LLB(G) Hinditron Group 18 years July 22, ,95, Rohit Seru 54 President Marketing (Apparel Fabrics) B.Sc. Mafatlal India Limited 35 years April 4, ,00, R Rajaram 58 President (Processing & systems) B.E.(Mech), M.Tech. IIT, PGDM IIM Kolkatta Reliance Industries Limited 31 years November 1, ,53, Shaji Varghese 45 Head - Information Technology MSc, PGDCM CTM Cirrius Software Limited 20 years March 17, ,68,332 Balitha Unit Processing I & II 6. S. S. Aich 55 Chief Executive Officer B. Tech Nahar Group of Industries 33 years January 3, ,00, Ashok Kumar Pal 54 President Processing B.Sc. Tech (Textile) Sri Lanka 33 years August 8, ,17,056 Weaving, Knitting and Texturising Unit at Village Rakholi and Saily, Silvassa; Spinning Unit at Village Silvassa; and Garment Unit at Village Saily, Silvassa, R. B. Mahapatra Sapan K. Mukerjee Vice President Chief Executive Officer Spinning B.Sc, B.Tech (Textiles), M.Tech B.Tech Welspun Limited, Palghar Eurotex industries & exports Limited 22 years 37 years August 1, 1994 January 19, ,50,648 33,67, Romi Agarwal 41 Chief Executive PG in Diploma Apparel Silvia Apparels 16 years October 15, ,79,

194 Sr. No. Name Age Designation Qualifications Officer - Garments Manufacturing from NIFT and Masters of Management Study from Asian Institute of Management, Manila. Previous Employment Limited (Arvind Mafatlal Group) Total years of experience Date of joining Gross Salary (FY 2008) (Amount in Rs.) All the abovementioned key managerial personnel are permanent employees of our Company. 162

195 Organizational Structure Chart The organizational structure of our Company is given below: Shareholding of key managerial personnel in our Company as on February 6, 2009 Name of Key Managerial Personnel Corporate Office Sunil O. Khandelwal K.H. Gopal Rohit Seru No. of Equity Shares held (Pre-Issue) Nil Nil Nil 163

196 Name of Key Managerial Personnel R Rajaram Shaji Varghese No. of Equity Shares held (Pre-Issue) Nil Nil Vapi Factory S. S. Aich Nil Ashok Kumar Pal Nil Silvassa Factory R. B. Mahapatra 2,300 Sapan K. Mukerjee Romi Agarwal 1,000 Interest of Directors and key managerial personnel Except as stated in Related Party Transactions appearing in the Financial Statements beginning on page 194 of this Letter of Offer, and to the extent of shareholding in our Company, our Promoters and Promoter Group do not have any other interest in our business. All our Directors may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a Committee. The Managing Director will be interested to the extent of remuneration paid to him for services rendered by him as an officer of our Company. All our Directors may also be deemed to be interested to the extent of Equity Shares, if any, already held by them or their relatives in our Company and also to the extent of any dividend payable to them and other distributions in respect of the said Equity Shares. Our Directors may also be regarded as interested in their Rights Entitlements, if any, held by or that may be subscribed by and allotted to the companies, firms and trust, in which they are interested as directors, members, partners and/or trustees. Our Company has not entered into any contract, agreement or arrangement during the preceding two years from the date of this Letter of Offer in which our Directors are interested directly or indirectly and no payments have been made to them in respect of these contracts, agreements or arrangements or are proposed to be made to them. Further, our Directors may be deemed to be interested in contracts, agreements / arrangements entered into or to be entered into by us with any company in which they hold directorships or any partnership firm in which they are partners. Additionally, Mr. K. R. Modi, being a partner of M/s. Kanga & Company, is also interested to the extent of benefits arising out of the charges payable by our Company to Kanga & Company for rendering legal services to our Company. Further, our Directors do not have any interest in any property acquired by our Company within the two years preceding the date of this Letter of Offer or proposed to be acquired by our Company. The key managerial personnel of our Company do not have any interest in our Company other than to the extent of the remuneration or benefits to which they are entitled to as per their terms of appointment and reimbursement of expenses incurred by them during the ordinary course of business and to the extent of the Equity Shares held by them in our Company, if any. Bonus or Profit Sharing Plan We do not have a fixed bonus and profit sharing plans with our key managerial personnel. However, Nil 164

197 we pay performance linked incentive to our key managerial personnel. Details of loans taken by key managerial personnel in the Company Name of Key Managerial Personnel Corporate Office Amount Outstanding as on December 31, 2008 Rate of Interest Monthly Deduction K.H. Gopal 22,55,250 5% 46,500 Silvassa Factory R. B. Mahapatra 2,14,216 5% 20,000 Changes in our key managerial employees during the last three years Name Designation Date of joining/leaving Reasons G.C. Gupta President Operations January 21, 2008 Expired Hari Venkatesan Chief Executive Officer Apparel Fabrics September 30, 2008 Resignation Rajiv Kapur Director (Operations) January 31, 2009 Resignation Rohit Seru President Marketing (Apparel Fabrics) April 4, 2006 Appointment Devang Mehta Chief Executive Officer Processing December 10, 1999 Resignation S. S. Aich Chief Executive Officer Vapi January 3, 2009 Appointment Sapan K. Mukerjee Chief Executive Officer Spinning January 19, 2006 Appointment Romi Agarwal Chief Executive Officer Garments October 15, 2007 Appointment R Rajaram President (Processing & systems) November 1, 2007 Appointment Relationship of key managerial personnel with our Promoters and Directors and other key managerial personnel None of the key managerial personnel mentioned above are related to our Promoters and Directors and none of them have been selected pursuant to any arrangement / understanding with major shareholders / customers / suppliers. 165

198 OUR PROMOTERS Our Company was originally promoted by the late Mr. Bhagirathmal Jiwrajka and his sons; Mr. Ashok B. Jiwrajka, Mr. Dilip B. Jiwrajka and Mr. Surendra B. Jiwrajka. Our current Promoters are as follows: Mr. Ashok B. Jiwrajka PAN: AACPJ3610K Passport No.: F Voter ID No.: N.A. Driving License No.: N.A. Mr. Dilip B. Jiwrajka PAN: AAGPJ8756J Passport No.: F Voter ID No.: N.A. Driving License No.: N.A. Mr. Surendra B. Jiwrajka PAN: AACPJ4316L Passport No.: G Voter ID No.: N.A. Driving License No.: N.A. For details of the background, address, educational qualification, experience, terms of appointment of our Promoters, please refer to the section titled Management beginning on page 145 of this Letter of Offer. Declaration The Permanent Account Number ( PAN ), Bank Account No. and Passport No. have been submitted to the Stock Exchanges at the time of filing the Letter of Offer with the Stock Exchanges. Further, our Promoters and Promoter Group entities (mentioned below), including relatives of the Promoters, have confirmed that they have not been detained as wilful defaulters by the RBI or any other Governmental authority. Additionally, there are no violations of securities laws committed by them in the past or are pending against them and none of our Promoters or persons in control of bodies corporate forming part of our Promoter Group have been restricted from accessing the capital markets for any reasons, by SEBI or any other authorities. Common Pursuits Our Promoters and our Promoter Group have equity interests or investments in other entities that may offer services that are related to our business, i.e. the textiles business. For further details on these companies, please refer to the chapter titled Promoter Group beginning on page 168 of this Letter of Offer. There may be conflicts of interest in addressing business opportunities and strategies where other companies in which our Promoters or our Promoter Group have equity interests are also involved. We shall adopt the necessary procedures and practices as permitted by law to address any conflict situations, as and when they may arise. For further details on the related party transactions, to the extent of which our Company is involved, please refer to the section titled Financial Statements beginning on page 194. Interest of our Promoters Our Promoters are interested in our Company to the extent of the Equity Shares held by them as well as 166

199 the Rights Equity Shares offered under this Issue and Equity Shares due to them on conversion of outstanding convertible instruments and also to the extent of any dividend payable to them and other distributions in respect of the aforesaid Equity Shares and Rights Equity Shares. Further, our Promoters may also be interested to the extent of Equity Shares held by or that may be subscribed by and allotted to the companies, firms and trust, in which either of them are interested as a director, member, partner or trustee. In addition, our Promoters, being executive Directors of our Company, may be deemed to be interested to the extent of fees, if any, payable for attending meetings of the Board or a committee thereof as well as to the extent of remuneration and reimbursement of expenses, if any, payable under our Articles of Association and to the extent of remuneration, if any, paid for services rendered as an officer or employee of our Company. Interest in the property of our Company Our Promoters do not have any interest in any property acquired by our Company within the two years preceding the date of this Letter of Offer or proposed to be acquired by our Company. Payment of benefits to our Promoters during the last two years Except as stated in the section titled Financial Statements beginning on page 194, there has been no payment of benefits to our Promoters during the last two years from the date of filing of this Letter of Offer. Related Party Transactions For details on the related party transactions, please refer to the section titled Financial Statements beginning on page 194. Litigation details pertaining to our Promoters For details on litigations and disputes pending against the Promoter and defaults made by the Promoter please refer to the section titled Outstanding Litigations and Material Developments on page 215 of this Letter of Offer. 167

200 PROMOTER GROUP Promoter Group The following natural persons (inter alia being the immediate relatives of our Promoters) form part of our Promoter Group: (1) Mr. Chandrakumar Bubna; (2) Mrs. Manju Bubna, wife of Mr. Chandrakumar Bubna; (3) Ms. Pooja Bubna, daughter of Mr. Chandrakumar Bubna; (4) Mr. Rishi Bubna, son of Mr. Chandrakumar Bubna; (5) Mr. Suryaprakash Bubna, brother of Mr. Chandrakumar Bubna; (6) Mrs. Anita Bubna, wife of Mr. Suryaprakash Bubna; (7) Ms. Neha Bubna, daughter of Mr. Suryaprakash Bubna; (8) Mr. Harsh Bubna, son of Mr. Suryaprakash Bubna; (9) Mrs. Chandrakala A Jiwrajka, wife of Mr. Ashok B. Jiwrajka; (10) Mr. Alok A. Jiwrajka, son of Mr. Ashok B. Jiwrajka; (11) Ms. Pramila D Jiwrajka, wife of Mr. Dilip B. Jiwrajka; (12) Mr. Niraj D. Jiwrajka, son of Mr. Dilip B. Jiwrajka; (13) Ms. Prita D. Jiwrajka, daughter of Mr. Dilip B. Jiwrajka; (14) Ms. Geeta S Jiwrajka, wife of Mr. Surendra B. Jiwrajka; (15) Mr. Varun S. Jiwrajka, son of Mr. Surendra B. Jiwrajka; (16) Ms. Vidhi S. Jiwrajka, daughter of Mr. Surendra B. Jiwrajka; (17) Mrs. Narbada B Jiwrajka, mother of Mr. Ashok B. Jiwrajka, Mr. Dilip B. Jiwrajka and Mr. Surendra B. Jiwrajka; (18) Mr. Vinod B. Jiwrajka, brother of Mr. Ashok B. Jiwrajka, Mr. Dilip B. Jiwrajka and Mr. Surendra B. Jiwrajka; (19) Ms. Jayshree Jiwrajka, wife of Mr. Vinod B. Jiwrajka; (20) Mr. Santosh Jiwrajka, brother of Mr. Ashok B. Jiwrajka, Mr. Dilip B. Jiwrajka and Mr. Surendra B. Jiwrajka; and (21) Ms. Kiran Jiwrajka, wife of Mr. Santosh B. Jiwrajka Our Promoter Group Companies and Entities Except as disclosed, none of our Promoters or any of their immediate relatives holds 10.00% or more of the share capital of any company or entity specified under Clause (k) and (l) of the SEBI DIP Guidelines. The following companies form part of our Promoter Group: S. No. Name Listed Companies 1. Grabal Alok Impex Limited Unlisted Companies 2. Alok Knit Exports Limited 3. New City of Bombay Manufacturing Mills Limited 4. Aurangabad Textiles & Apparel Parks Limited 5. Alspun Infrastructure Limited 6. Grabal Alok International Limited 7. Grabal Alok (UK) Limited 8. Alok Denims (India) Private Limited 9. Alok Finance Private Limited 168

201 S. No. Name 10. Ashok Realtors Private Limited 11. Jiwrajka Associates Private Limited 12. Jiwrajka Investment Private Limited 13. Niraj Realtors and Shares Private Limited 14. Nirvan Holdings Private Limited 15. Gogri Properties Private Limited 16. Ashford Infotech Private Limited 17. Pramita Creation Private Limited The proprietary concerns, partnership firms, trusts and HUFs that form part of our Promoter Group are as follows: S. No. Name of the proprietary concern / firm / trust / HUF 1. M/s. Alok Textile Traders 2. M/s. Pramatex Enterprises 3. M/s. D. Surendra & Co 4. M/s. Nirvan Exports 5. M/s. Green Park Enterprises 6. Ashok B. Jiwrajka HUF 7. Dilip B. Jiwrajka HUF 8. Surendra B. Jiwrajka HUF Listed Companies 1. Grabal Alok Impex Limited ( GAImL ) GAImL was incorporated on December 17, 1993 as a public limited company as Grabal Alok Exports Limited under the provisions of the Companies Act and received its certificate of commencements of business on January 13, Subsequently, on September 27, 2000, the name of GAImL was changed to Grabal Alok Impex Limited. The registered office of GAImL is located at Peninsula Towers- A, Peninsula Corporate Park, G K Marg, Lower Parel, Mumbai The main objects of GAImL contemplate inter alia carrying on business as dealers, manufacturers, importers and exporters in all kinds of embroidery products, knitting articles and any other article related to garments(both retail and wholesale) in India or abroad. GAImL is currently carrying on its business as dealers, manufacturers, importers and exporters in all kinds of descriptions of embroidery products. Shareholding Pattern The equity shares of GAImL are listed on the BSE and NSE. GAImL s shareholding pattern as of December 31, 2008 is as given below: Category of Shareholder No. of Shareholders Total No. of Shares Total No. of Shares held in Dematerialized Form Total Shareholding as a % of Total No. of Shares 169

202 (A) Shareholding of Promoter and Promoter Group As a % of (A+B) As a % of (A+B+C) (1) Indian Individuals / Hindu Undivided Family 9 925, , Bodies Corporate 6 6,557,750 6,557, Sub Total 15 7,483,250 7,483, (2) Foreign Bodies Corporate 1 787, Sub Total 1 787, Total shareholding of Promoter and Promoter Group (A) 16 8,270,750 7,483, (B) Public Shareholding (1) Institutions Mutual Funds / UTI 1 1,000,000 1,000, Foreign Institutional Investors 3 1,213,304 1,213, Sub Total 4 2,213,304 2,213, (2) Non-Institutions Bodies Corporate 75 2,949,129 2,946, Individuals Individual shareholders holding nominal share capital up to Rs. 1 lakh Individual shareholders holding nominal share capital in excess of Rs. 1 lakh , , ,207,765 1,207, Any Others (Specify) 71 6,767,534 4,767, Clearing Members 9 201, , Market Maker 7 249, , Hindu Undivided Families , , Non Resident Indians Foreign Corporate Bodies 5 6,168,852 4,168,

203 Category of Shareholder No. of Shareholders Total No. of Shares Total No. of Shares held in Dematerialized Form Total Shareholding as a % of Total No. of Shares As a % of (A+B) As a % of (A+B+C) Sub Total 1,083 11,350,946 9,287, Total Public shareholding (B) 1,087 13,564,250 11,501, Total (A)+(B) 1,103 21,835,000 18,984, (C) Shares held by Custodians and against which Depository Receipts have been issued Total (A)+(B)+(C) 1,103 21,835,000 18,984, Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Mr. Chandrakumar Bubna Mr. Erich Grabher Mr. Suresh Rajani Mr. Indru Vaswani Mr.S. K. Bhoan Designation Chairman Director Managing Director Independent Director Director Independent Director Independent Director Independent Director Financial Performance The following are selected financials of GAImL for the past three years: (Rs. in Crores) Particulars March 31, 2006 March 31, 2007 March 31, 2008 Sales and Other Income Profit After Tax Equity Capital (equity shares of Rs. 10 each) Basic Earning Per Share (Rs.) (Face Value Rs.10/-) Book Value per share Reserves and Surplus GAImL has not made any public or rights issue in the last three years. Further, GAImL is not a sick 171

204 company within the meaning of the Sick Industrial Companies (Special Provisions) Act, Promise vis-à-vis performance GAImL issued 28,61,300 equity shares vide an initial public offering aggregating approximately Rs lakhs which closed on June 17, The said equity shares were consequently listed on the Ahmedabad Stock Exchange Limited, and the Pune Stock Exchange Limited with effect from July 10, 1998 and July 9, 1998 respectively. The objects of the issue were to part finance the cost of a project set up for the manufacture of embroidery fabrics and laces with an installed capacity of crores stitches per annum. The objects of the issue were met with. The equity shares of GAImL are currently listed on the Ahmedabad Stock Exchange Limited, the Pune Stock Exchange Limited, the BSE (listed on the BSE with effect from October 29, 2007) and the NSE (listed on the NSE with effect from April 8, 2008). The monthly high and low price and the volume of shares of GAImL traded at the BSE and NSE during the past six months are as follows: BSE Month September, 2008 October, 2008 November, 2008 December, 2008 High (Rs.) Date of High September 4, 2008 Volume on date of high (No. of shares) Low (Rs.) Date of Low September 18,2008 Volume on date of low (No. of shares) Average price for the month (Rs.) October 3, October 20, November 5, December 19, November 26,2008 2,00, December 10, January January 13, , January 30, , February, February 25, , February 17, NSE Month High (Rs.) Date of High September, 2008 October, 2008 November, 2008 December, September 4, October 6, November 4, December 16,2008 Volume on date of high (No. of shares) Low (Rs.) Date of Low Volume on date of low (No. of shares) Average price for the month (Rs.) 1, September 30, October 16,2008 1,99, November 19,2008 1,01, December 22,

205 Month High (Rs.) Date of High January, 2009 February, January 01, February 27, 2009 Volume on date of high (No. of shares) Low (Rs.) Date of Low Volume on date of low (No. of shares) Average price for the month (Rs.) January 16, February 24, Current market price on the BSE as on March 17, 2009 is Rs and current market capitalization is Rs crores and on the NSE is Rs and Rs crores respectively. Changes in capital structure in the last 6 months Particulars Conversion of FCCBs into equity shares. No. of shares Issued (of Rs. 10 each) Year / date of issue 2,00,000 June 5, 2008 Mechanism Evolved by GAImL for redressal of investor grievances GAImL has constituted a share transfer and investors grievance committee comprising of: Sr. No. Name of directors Designation 1. Mr. S. K. Bhoan Chairman 2. Mr. Ashok B. Jiwrajka Member 3. Mr. Dilip B. Jiwrajka Member 4. Mr. Surendra B. Jiwrajka. Member The share transfer and investors grievance committee met 6 times during FY 2008 and twice for the half year ended September 30, 2008 and there are no valid requests pending for share transfers as on September 30, Further, on the basis of the records maintained by the shareholders / investor s grievance committee, no investor grievance is pending against GAImL for a period exceeding one month. Unlisted Companies 2. Alok Knit Exports Limited ( AKEL ) AKEL was incorporated on March 18, 1988 as a private limited company as Jiwrajka Texturiser Private Limited under the provisions of the Companies Act. Subsequently, on January 19, 1994, the name of the Company was changed to Alok Knit Exports Private Limited and on December 29, 1995, the name of the company was changed to Alok Knit Exports Limited with Registrar of Companies, Maharashtra, Mumbai. The registered office of AKEL is located at Peninsula Towers- A, Peninsula Corporate Park, G K Marg, Lower Parel, Mumbai The main objects of AKEL contemplate inter alia carrying on the business of processing, texturizing, buying and selling etc. of yarn, cloth and fabrics made from any natural or man-made fibres and carrying on business of spinning and weaving mill in all their branches. AKEL is currently engaged in the business of processing, texturising, crimping, spinning, twisting, weaving, knitting, testing, reeling, doubling, combing, mixing, scouring, finishing etc. Equity shareholders as on December 31,

206 Shareholders No. of equity shares % shareholding Narbada B Jiwrajka 48, Ashok B Jiwrajka 89, Chandrakala A.Jiwrajka 57, Dilip B Jiwrajka 1,18, Pramila D Jiwrajka 28, Surendra B Jiwrajka 1,16, Geeta S Jiwrajka 29, Total 4,88, Directors Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Director Director Director Designation Financial performance (Rs. in crores except per share data)- March 31, 2006 March 31, 2007# March 31, 2008 Sales and other income Profit/(Loss) after tax Equity capital (*) Earnings per share (Rs.) - Basic Book value per equity share (Rs.) Reserves & Surplus *The face value of each equity share is Rs. 10/- each. # The sales and other income and profit after tax figures are the same due to rounding off differences. AKEL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 3. New City Of Bombay Manufacturing Mills Limited ( NCBMML ) NCBMML was incorporated on November 13, 2007 as a government company under the provisions of the Companies Act. The registered office of NCBMML is located at Core 4, 5 th Floor, Scope Complex, Lodhi Road, New Delhi The main objects of NCBMML contemplate inter alia carrying on the business of textile/ textile mill in all its branches, to acquire similar entities and to manage any such business, or undertaking of any person or a company entrusted to it by the government, NCBMML is currently engaged in the business of textile/ textile mill in all its branches and to manage any such business, or undertaking of any person or a company entrusted to it by Government. Equity shareholders as on December 31,

207 Shareholders No. of equity shares % shareholding M/s. National Textiles Corporation Limited 46,76, % Mr. Ravinder Kumar Sharma 1 - Mr. Kishore Nandi Mazumdar 1 - Mr. Satya Pal 1 - Mr. K. Subramanian 1 - Mr. Shamsher Bahadur Singh 1 - Mr. Rajeshwar Kumar Sharma 1 - Alok Industries Limited 44,93,300* * Yet to be Allotted Directors Name Mr. Ashok B. Jiwrajka Mr. Krishna Ramachandran Pillai Mr. Rameshchandra B. Kuril Mr. Ravinder Kumar Sharma Mr. Ravindra Badaya Mr. Vasant Dinkar Zope Mr. Akhilesh Rathi Mr. B.K. Mishra Designation Director Director Director Director Director Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2008 Sales and other income 1.32 Profit/(Loss) after tax 0.68 Equity capital (*) 5.80 Earnings per share (Rs.) - Basic 1.29 Book value per equity share (Rs.) Reserves & Surplus *The face value of each equity share is Rs. 10/- each. NCBMML is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. For further details on the joint venture with the National Textile Commission Limited, in which regard NCBMML is the joint venture company, please refer to the chapter titled History of the Company and Other Corporate Matters beginning on page 123 of this Letter of Offer. 175

208 4. Aurangabad Textiles & Apparel Parks Limited ( ATAPL ) ATAPL was incorporated on November 12, 2007 as a private limited company under the provisions of the Companies Act. The registered office of ATAPL is located at Core 4, 5 th Floor, Scope Complex, Lodhi Road, New Delhi The main objects of ATAPL contemplate inter alia carrying on the business of textile/ textile mill in all its branches, to acquire similar entities and to manage any such business, or undertaking of any person or a company entrusted to it by the government. ATAPL is currently engaged in the business of textile/ textile mill in all its branches and to manage any such business, or undertaking of any person or a company entrusted to it by Government. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding M/s. National Textiles Corporation Limited 10,60,794 51% Mr. Ravinder Kumar Sharma 1 - Mr. Kishore Nandi Mazumdar 1 - Mr. Satya Pal 1 - Mr. K. Subramanian 1 - Mr. Shamsher Bahadur Singh 1 - Mr. Rajeshwar Kumar Sharma 1 - Alok Industries Limited 10,19,200* * Yet to be Allotted Directors Name Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Mr. Krishna Ramachandran Pillai Mr. Rameshchandra B. Kuril Mr. Ravinder Kumar Sharma Mr. R. Narayan Mr. Vasant Dinkar Zope Mr. B.K. Mishra Designation Director Director Director Director Director Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2008 Sales and other income 0.29 Profit/(Loss) after tax 0.12 Equity capital (*) 0.13 Earnings per share (Rs.) Basic 0.98 Book value per equity share (Rs.)

209 March 31, 2008 Reserves & Surplus 2.86 *The face value of each equity share is Rs. 10/- each. ATAPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. For further details on the joint venture with the National Textile Commission Limited, in which regard ATAPL is the joint venture company, please refer to the chapter titled History of the Company and Other Corporate Matters beginning on page 123 of this Letter of Offer. 5. Alspun Infrastructure Limited ( AInL ) AInL was incorporated on April 7, 2007 as a public limited company under the provisions of the Companies Act. AInL received its Certificate of Commencement of Business on May, 28, The registered office of AInL is situated at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of AInL contemplate inter alia purchasing, acquiring lands, houses, building sheds and other fixtures and letting them on lease, rent etc. and carrying on business of builders, civil contractors, engineers etc. AInL is currently engaged in the business of purchasing or otherwise acquire lands, houses, buildings, sheds and other fixtures and let them on lease, rent, contract or any agreement or arrangement. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Mr. Alok a. Jiwrajka Alok Infrastructure Limited 24, Mr. Balkrishan G. Goenka 10, Mrs. Dipali B. Goenka 10, Mr. Rajesh R. Mandawewala 5, Total 50, Directors Name Ashok B. Jiwrajka Dilip B. Jiwrajka Surendra B. Jiwrajka Alok a. Jiwrajka Balkrishan G. Goenka Dipali B. Goenka Rajesh R. Mandawewala Designation Director Director Director Director Director Director Director 177

210 Financial performance (Rs. in crores except per share data) March 31, 2008 Sales and other income - Profit/(Loss) after tax (0.00) Equity capital (*) 0.05 Earnings per share (Rs.) Basic (0.96) Book value per equity share (Rs.) 9.04 Reserves & Surplus (0.00) *The face value of each equity share is Rs. 10/- each. AInL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 6. Grabal Alok International Limited ( GrAIL ) GrAIL was incorporated on November 14, 2005 in the Territory of The British Virgin Islands. The registered office of GrAIL is located at Pasea Estate, Road Town, Tortola, British Virgin Islands. GrAIL is currently engaged as a special purpose vehicle for overseas joint ventures and acquisitions Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Grabal Alok Impex Limited 50, Directors Ashok B. Jiwrajka Dilip B. Jiwrajka Surendra B. Jiwrajka Financial performance Name Designation Director Director Director March 31, 2006 (Rs. in crores) March 31, 2006 (USD in crores) March 31, 2007 (Rs. in crores) March 31, 2007 (USD in crores) March 31, 2008 (Rs. in crores) March 31, 2008 (USD in crores) Sales and other income Profit/(Loss) after tax (0.02) (0.00) (0.23) (0.01) 0.26 (0.23) Equity capital (*) Earnings per share Basic (52.56) (1.18) (170.44) (3.88) (188.32) (4.73) Book value per 0.92 (0.12)

211 March 31, 2006 (Rs. in crores) March 31, 2006 (USD in crores) March 31, 2007 (Rs. in crores) March 31, 2007 (USD in crores) March 31, 2008 (Rs. in crores) equity share (535.54) (142.89) March 31, 2008 (USD in crores) Reserves & Surplus (2.64) - (0.93) 0.00 *The face value of each equity share is USD 1 each. GrAIL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 7. Grabal Alok (UK) Limited ( GAL ) GAL was incorporated on July 4, 2001 with the Registrar of England and Wales as HAMSARD 2353 LIMITED. Subsequently, on April 2, 2007 the name of the Company changed to Grabal Alok (UK) Limited. The registered office of GAL is located at Tureck House, Drayton Road, Shirley, Solihull, Birmigham B90 4NG. The main objects of GAL contemplate inter alia acquiring and taking over any business or undertakings carried on upon or in connection with land or building and carrying on the activities related to the same. GAL is currently engaged in business as a general commercial company. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Grabal Alok International Limited 236,950, Alok Industries International Limited 207,197, Dhamecha Foods Ltd 18,367, The Trustees of the Raj Chatha 2004 Family Trust 8,000, Bakerloo Commercial Inc. 2,847, Whittals Wines Limited 4,272, European Food Brokers Ltd 4,272, Norham House 1019 Limited 5,898, Dhothar Investments Ltd 1,792, M/s Amardip S Bhullar, Karanbir S Bhullar and Ujjal S Bhullar 1,768, Innis Associates S.A. 1,517, Pradip Dhamecha 887, Rupen Dhamecha 887, Amit Dhamecha 887, Manish Dhamecha 887, Fairfield Trustees Ltd as Trustees of Dinanagar Trust 360, Royal Silver Investments Ltd 307, H J Roeloffs (UK) Ltd 244, Mr. Dalvinder Aujla 244, Mrs. Baljeet Aujila 244,

212 Shareholders No. of equity shares % shareholding Mandep Kaur Basra 160, Trustees of the Leam Settlement for L Tucker 144, Findlay Caldwell 100, Trustees of the Alne Settlement for D Tucker 57, Trustees of the Avon Settlement for D Tucker 57, Trustees of the Itchen Settlement for C Tucker 39, Trustees of the Dean Settlement for B Tucker 39, Trustees of the Stour Settlement for N Tucker 39, Trustees of the UK Settlement for Children 21, Jane Hotz 20, Peter Leach 20, Colin Ingram Surgeet Khela Total 498,536, Directors Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Name Designation Director Director Mr. Surendra B. Jiwrajka Mr. Anupam Jhunjhunwala Ms. Catherine Norgat-Hart Mr. Kingpal Singh Tatla Mr. Indru Vaswani Director Director Director Director Director Financial performance March 31, 2008 (Rs. in crores) March 31, 2008 (GBP in crores) Sales and other income Profit/(Loss) after tax (196.59) (2.47) Equity capital (*) Earnings per share Basic (4.67) (0.06) Book value per equity share Reserves & Surplus *The face value of each equity share is GBP GAL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 180

213 8. Alok Denims (India) Private Limited ( ADIPL ) ADIPL was incorporated on March 8, 1995 as a private limited company as Alok Denims Private Limited under the provisions of the Companies Act. Subsequently, on November 14, 2000, the name of the Company was changed to Alok Denims (India) Private Limited. The registered office of ADIPL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of ADIPL contemplate inter alia carrying on the business of processing, texturizing, buying and selling etc. of yarn, cloth and fabrics made from any natural or man-made fibres. ADIPL is currently engaged in the business of manufacturing, trading, commission agents, buying, selling, exchanging, converting, altering, importing, exporting etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Ashok B. Jiwrajka 3,53, Dilip B. Jiwrajka 3,53, Surendra B. Jiwrajka 3,53, Total 10,60, Directors Ashok B. Jiwrajka Dilip B. Jiwrajka Surendra B. Jiwrajka Name Designation Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2006 March 31, 2007 March 31, 2008 Sales and other income Profit/(Loss) after tax (0.64) Equity capital (*) Earnings per share (Rs.) - Basic (6.07) Book value per equity share (Rs.) Reserves & Surplus (0.05) 0.03 (0.61) *The face value of each equity share is Rs. 10/- each. ADIPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 9. Alok Finance Private Limited ( AFPL ) AFPL was incorporated on September 1, 1994 as a private limited company under the provisions of the Companies Act. The registered office of AFPL is located at Peninsula Towers- A, Peninsula Corporate Park, G K Marg, Lower Parel, Mumbai The main objects of AFPL contemplate inter alia carrying and undertaking the business of leasing and hire purchase financing. AFPL is 181

214 currently engaged in the business of leasing and hire purchase finance company. Equity shareholders as on December 8, 2008 Shareholders No. of equity shares % shareholding Dilip B Jiwrajka 3, Chandrakala A. Jiwrajka 3, Surendra B Jiwrajka 3, Total 10, Directors Ashok B. Jiwrajka Dilip B. Jiwrajka Surendra B. Jiwrajka Name Designation Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2006 March 31, 2007 March 31, 2008 Sales and other income Profit/(Loss) after tax Equity capital (*) Earnings per share (Rs.) - Basic Book value per equity share (Rs.) Reserves & Surplus *The face value of each equity share is Rs. 10/- each. AFPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 10. Ashok Realtors Private Limited ( ARPL ) ARPL was incorporated on March 24, 1995, as a private limited company under the provisions of the Companies Act. The registered office of ARPL is located at 302, Krishnakunj, 3rd floor, Plot no. FP- 170, Shivaji Park Road No.5, Mahim, Mumbai The main objects of ARPL contemplate inter alia carrying the business of investment in and acquiring and holding residential property, plots etc., and/ or selling, buying or otherwise deal in securities and similar instruments whether in India or abroad. ARPL is currently carrying on the business of investment in and acquire and hold, residential property, plots, office premises, godowns, industrial gala, warehouses and or sell, buy or otherwise deal in shares, debentures, bonds, units etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding 182

215 Mr. Ashok B. Jiwrajka 5, Mrs. Chandrakala A. Jiwrajka 5, Total 10, Directors Mr. Ashok B. Jiwrajka Name Mrs. Chandrakala A. Jiwrajka Designation Director Director Financial performance (Rs. in crores except per share data) March 31, 2006 March 31, 2007# March 31, 2008# Sales and other income Profit/(Loss) after tax Equity capital (*) Earnings per share (Rs.) - Basic (38.77) Book value per equity share (Rs.) (138.66) Reserves & Surplus *The face value of each equity share is Rs. 10/- each. # The sales and other income and profit after tax figures are the same due to rounding off differences. ARPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 11. Jiwrajka Associates Private Limited ( JAPL ) JAPL was incorporated on November 17, 1992 as a private limited company as Jiwrajka Trading Private Limited under the provisions of the Companies Act. Subsequently, On December 8, 2000, the name of JAPL was changed to Jiwrajka Associates Private Limited. The registered office of JAPL is located at Peninsula Towers- A, Peninsula Corporate Park, G K Marg, Lower Parel, Mumbai The main objects of JAPL contemplate inter alia carrying on the business as exporters, importers, merchants, traders, dealers in textile, fabric etc. JAPL is currently engaged to carry on the business as exporters, importers, merchants, traders, dealers in distributors or in any other capacity and to import export, buy, sell, textiles, fabric, yarn, cloth, fiber, man made fabric, nylon, synthetic, reyon, staple. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B Jiwrajka 2,80, Mrs. Chandrakala A. Jiwrajka 2, Mr. Dilip B Jiwrajka 2,80, Mrs. Pramila D Jiwrajka 2, Mr. Surendra B Jiwrajka 2,80, Mrs. Geeta S Jiwrajka 2,

216 Shareholders No. of equity shares % shareholding Mr. Chandrakumar Bubna 2, Mrs. Manju Bubna Total 8,50, Directors Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Name Designation Director Director Mr. Surendra B. Jiwrajka Mr. Chandrakumar Bubna Director Director Financial performance (Rs. in crores except per share data) March 31, 2006 March 31, 2007 March 31, 2008 Sales and other income Profit/(Loss) after tax (1.21) Equity capital (*) Earnings per share (Rs.) - Basic (14.29) Book value per equity share (Rs.) Reserves & Surplus (0.52) *The face value of each equity share is Rs. 10/- each. JAPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 12. Jiwrajka Investment Private Limited ( JIPL ) JIPL was incorporated on October 15, 1992 as a private limited company under the provisions of the Companies Act. The registered office of JIPL is located at Peninsula Towers- A, Peninsula Corporate Park, G K Marg, Lower Parel, Mumbai The main objects of JIPL contemplate inter alia selling, buying or otherwise deal in securities and similar instruments whether in India or abroad. JIPL is currently carrying on the business of an investment company. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B Jiwrajka 54, Mr. Dilip B Jiwrajka 54, Mr. Surendra B Jiwrajka 54, Total 1,62, Directors 184

217 Name Mr. Ashok B Jiwrajka Mr. Dilip B Jiwrajka Mr. Surendra B Jiwrajka Designation Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2006# March 31, 2007 March 31, 2008# Sales and other income Profit/(Loss) after tax Equity capital (*) Earnings per share (Rs.) - Basic Book value per equity share (Rs.) (10.50) (8.43) (5.90) Reserves & Surplus (0.33) (0.30) (0.26) *The face value of each equity share is Rs.10/- each. # The sales and other income and profit after tax figures are the same due to rounding off differences. JIPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 13. Niraj Realtors and Shares Private Limited ( NRSPL ) NRSPL was incorporated on June 14, 1994 as a private limited company under the provisions of the Companies Act. The registered office of NRSPL is located at Peninsula Towers, A, Peninsula Corporate Park, G K Marg, Lower Parel, Mumbai The main objects of NRSPL contemplate inter alia carrying on the business of investment in and acquiring and holding residential property, plots etc., and/ or selling, buying or otherwise deal in securities and similar instruments whether in India or abroad. NRSPL is currently carrying on the business of investment in and acquisition and holding of residential property, plots, office premises, godowns, industrial gala, warehouses, and or sell, buy or otherwise deal in shares, debentures etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka 7,72, Mr. Dilip B. Jiwrajka 7,72, Mr. Surendra B. Jiwrajka 7,72, Total 23,16, Directors Name Mr. Ashok B Jiwrajka Mr. Dilip B Jiwrajka Mr. Surendra B Jiwrajka Designation Director Director Director 185

218 Financial performance (Rs. in crores except per share data) March 31, 2006 March 31, 2007 March 31, 2008 Sales and other income Profit/(Loss) after tax (1.84) (2.12) Equity capital (*) Earnings per share (Rs.) - Basic (7.97) (9.15) Book value per equity share (Rs.) 6.48 (2.67) Reserves & Surplus (0.81) (2.93) *The face value of each equity share is Rs. 10/- each. NRSPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 14. Nirvan Holdings Private Limited ( NHPL ) NHPL was incorporated on October 19, 1992 as a private limited company under the provisions of the Companies Act. The registered office of NHPL is located at Peninsula Towers- A, Peninsula Corporate Park, G K Marg, Lower Parel, Mumbai The main objects of NHPL contemplate inter alia selling, buying or otherwise dealing in securities and similar instruments whether in India or abroad. NHPL is currently carrying on the business of an investment company. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Surendra B Jiwrajka 30, Mr. Dilip B Jiwrajka 13, Mrs. Pramila D Jiwrajka 10, Dilip B Jiwrajka HUF 7, Mrs. Chandrakala A Jiwrajka 30, Total 90, Directors Mr. Ashok B Jiwrajka Mr. Dilip B Jiwrajka Name Designation Director Director Mr. Surendra B Jiwrajka Director Financial performance (Rs. in crores except per share data) March 31, 2006 March 31, 2007 March 31, 2008 Sales and other income

219 Profit/(Loss) after tax Equity capital (*) Earnings per share (Rs.) Basic Book value per equity share (Rs.) Reserves & Surplus *The face value of each equity share is Rs. 10/- each. NHPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 15. Gogri Properties Private Limited ( GPPL ) GPPL was incorporated on June 6, 1988 as a private limited company under the provisions of the Companies Act. The registered office of GPPL is located at Peninsula Towers, A, Peninsula Corporate Park, G K Marg, Lower Parel, Mumbai The main objects of GPPL contemplate inter alia constructing, executing, etc., building work and conveniences of public or private utility and carrying on business of builders and contractors. GPPL is currently carrying on the business of constructing, executing, carrying out, equipping, improving, working, developing, administering, managing or controlling building work and conveniences. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B Jiwrajka Mr. Dilip B Jiwrajka Mr. Surendra B Jiwrajka Niraj Realtors and Shares Private Limited 2,51, Total 2,51, Directors Name Mr. Ashok B Jiwrajka Mr. Dilip B Jiwrajka Mr. Surendra B Jiwrajka Designation Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2006 March 31, 2007 March 31, 2008 Sales and other income Profit/(Loss) after tax 0.00 (0.00) (0.00) Equity capital (*) Earnings per share (Rs.) Basic 0.23 (0.05) (0.05) Book value per equity share (Rs.)

220 March 31, 2006 March 31, 2007 March 31, 2008 Reserves & Surplus *The face value of each equity share is Rs. 10/- each. GPPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 16. Ashford Infotech Private Limited ( AIPL ) AIPL was incorporated on August 2, 2007 as a private limited company as Ashford Estates Private Limited under the provisions of the Companies Act. Subsequently, on January 9, 2008, the name of AIPL was changed to Ashford Infotech Private Limited. The registered office of AIPL is located at 3 B, Court Chambers, 35, New Marine Lines, Mumbai The main objects of AIPL contemplate inter alia providing complete solutions in computer operations and related business activities and various related consultancy services. AIPL is currently engaged in the business of information technology, internet, networking, e-commerce, computers, development of software, hardware etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Alok Infrastructure Limited 50, Ashford Investment & Trading Company Private Limited 50, Total 1,00, Directors Name Mr. Ashok B Jiwrajka Mr. Dilip B Jiwrajka Mr. Surendra B Jiwrajka Mr. Shamji Hirji Gogri Mr. Ketan Shamji Gogri Mrs. Sonia Ketan Gogri Designation Director Director Director Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2008 Sales and other income 0.8 Profit/(Loss) after tax 0.58 Equity capital(*) 1.0 Earnings per share (Rs.) 5.82 Book value per equity share (Rs.) Reserves & Surplus 0.58 *The face value of each equity share is Rs. 10/- each. AIPL is an unlisted company and it has not made any public issue (including any rights issue to the 188

221 public) in the preceding three years. It has not become a sick company under the meaning of SICA, it is not under winding up and does not have 17. Pramita Creation Private Limited ( PCPL ) PCPL was incorporated on October 27, 1999 as a private limited company as Pramita Fashion Private Limited under the provisions of the Companies Act. Subsequently, on February 6, 2001, the name of the PCPL was changed to Pramita Creation Private Limited. The registered office of PCPL is located at Peninsula Towers, A Wing, Peninsula Corporate Park, G. K. Marg, Lower Parel, Mumbai The main objects of PCPL contemplate inter alia trading, distributing, commissioning agents, importing, exporting etc. in natural and / or man made fiber. PCPL is currently carrying on the business of trading, distributors, commission agents, buying, selling, importing, exporting, handling or dealing in cotton yarn, rayon yarn etc. Equity shareholders as on December 31, 2008 Shareholders No. of equity shares % shareholding Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Mr. Alok A. Jiwrajka 1,70, Mrs. Pramila D. Jiwrajka 1,70, Mrs. Geeta S. Jiwrajka 1,70, Total 5,10, Directors Name Mr. Alok A. Jiwrajka Mrs. Pramila D. Jiwrajka Mrs. Geeta S. Jiwrajka Designation Director Director Director Financial performance (Rs. in crores except per share data) March 31, 2006 March 31, 2007# March 31, 2008 Sales and other income Profit/(Loss) after tax Equity capital (*) Earnings per share (Rs.) Book value per equity share (Rs.) Reserves & Surplus *The face value of each equity share is Rs. 10/- each. # The sales and other income and profit after tax figures are the same due to rounding off differences. PCPL is an unlisted company and it has not made any public issue (including any rights issue to the public) in the preceding three years. It has not become a sick company under the meaning of SICA and it is not under winding up. 189

222 Proprietary Concerns, Partnership Firms, Trusts and HUFs 1. M/s. Alok Textile Traders ( ATT ) ATT, a registered partnership firm, was constituted on January 24, ATT is currently engaged in inter-alia partnership of cloth merchants and or such other business or businesses as may be mutually agreed upon from time to time in the name and style of M/s. Alok Textile Traders and is currently operating its business from B-43 Mittal Tower, Nariman Point, Mumbai Partners Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Partner Partner Partner Financial performance (Rs. in crores) March 31, 2006* March 31, 2007 March 31, 2008 Sales and other income Profit/(Loss) after tax Assets & Liabilities * The sales and other income and profit after tax figures are the same due to rounding off differences. 2. M/s. Pramatex Enterprises ( PE ) PE, a registered partnership firm, was constituted on September 5, PE is currently engaged in inter-alia yarn and cloth merchants & commission agents under the name and style of M/s. Pramatex Enterprises and is currently operating its business from B-43 Mittal Tower, Nariman Point, Mumbai Partners Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Partner Partner Partner Financial performance (Rs. in crores) March 31, 2006* March 31, 2007* March 31, 2008* Sales and other income Profit/(Loss) after tax Assets & Liabilities * The sales and other income and profit after tax figures are the same due to rounding off differences. 3. M/s. D. Surendra & Co ( DSC ) DSC, a registered partnership firm, was constituted on October 21, DSC is currently engaged in 190

223 inter-alia of yarn and cloth merchants & commission agents under the name and style of M/s. D. Surendra & Co and is currently operating its business from B-43 Mittal Tower, Nariman Point, Mumbai Partners Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Partner Partner Partner Financial performance (Rs. in crores) March 31, 2006 March 31, 2007* March 31, 2008 Sales and other income Profit/(Loss) after tax Assets & Liabilities * The sales and other income and profit after tax figures are the same due to rounding off differences. 4. M/s. Nirvan Exports ( NE ) NE, a registered partnership firm, was constituted on July 1, NE is currently engaged in inter-alia in the partnership of import and exports of cloth, yarn, processed cloth, grey, shirting, suiting, sarees, dress material etc. and or such other business or businesses as may be mutually agreed upon from time to time in the firm name and style of M/s. Nirvan Exports its currently operating its business from B-43 Mittal Tower, Nariman Point, Mumbai Partners Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Partner Partner Partner Financial performance (Rs. in crores) March 31, 2006 March 31, 2007 March 31, 2008* Sales and other income Profit/(Loss) after tax Assets & Liabilities * The sales and other income and profit after tax figures are the same due to rounding off differences. 5. M/s. Green Park Enterprises ( GPE ) GPE, a registered partnership firm, was constituted on October 25, GPE is currently engaged in inter-alia in the partnership of builders and developers, commission agents, dealing of purchase and sale of land, buildings, flats, shops and other estates or to purchase the land to develop the same its currently operating its business from Survey No. 128 at village Tighra, Union Territory of Dadra and Nagar Haveli. Partners 191

224 Name Mr. Ashok B. Jiwrajka Mr. Dilip B. Jiwrajka Mr. Surendra B. Jiwrajka Designation Partner Partner Partner Financial performance (Rs. in crores) March 31, 2006 March 31, 2007 March 31, 2008 Sales and other income Profit/(Loss) after tax 0.78 (0.01) (0.01) Assets & Liabilities Ashok B. Jiwrajka HUF ( AHUF ) AHUF was formed on May 31, 1991, with Mr. Ashok B. Jiwrajka as its Karta. AHUF is currently carrying on the business of investment in securities and properties. Financial performance (Rs. in crores) March 31, 2006 March 31, 2007 March 31, 2008 Capital Sales Profit / loss After Tax Dilip B. Jiwrajka HUF ( DHUF ) DHUF was formed on May 31, 1991, with Mr. Dilip B. Jiwrajka as its Karta. DHUF is currently carrying on the business of carrying on the business of investment in securities and properties. Financial performance (Rs. in crores) March 31, 2006 March 31, 2007 March 31, 2008 Capital Sales Profit / loss After Tax Surendra B. Jiwrajka HUF ( SHUF ) SHUF was formed on May 31, 1991, with Mr. Surendra B. Jiwrajka as its Karta. SHUF is currently carrying on the business of investment in securities and properties. Financial performance (Rs. in crores) March 31, 2006 March 31, 2007 March 31, 2008 Capital Sales

225 Profit / loss After Tax Litigation Details Pertaining to Promoter Group For details on litigations and disputes pending against the Promoter Group and defaults made by the Promoter Group please refer to the section titled Outstanding Litigations and Material Developments on page 215 of this Letter of Offer. Details of disassociations by our Promoters in the last three years Our Promoters have disassociated from the following entities in the last three years: Sr. No. Entity Date of disassociation Reasons for disassociation 1. M/s. Honeycomb Knit Fabrics April 7, 2008 Dissolved 2. M/s. Tulip Textiles April 7, 2008 Dissolved 3. M/s. Vaibhav Knit Fabs April 7, 2008 Dissolved 4. Amigo Sport Private Limited December 23, 2008 Sale of our Promoters and our Company s stake Related party transactions For details of related party transactions, please refer to the section Related Party Transaction in the chapter titled Financial Statements beginning on page 194 of this Letter of Offer. 193

226 FINANCIAL STATEMENTS Sr. No Contents Page Number 1 Five years and half year ended September 30, 2008 Audited Restated Standalone financial statements for the Company with the report issued by M/s. Gandhi & Parekh Chartered Accountants 2 Two years and half year ended September 30, 2008 Audited Restated Consolidated financial statements for the Company with the report issued by M/s. Gandhi & Parekh Chartered Accountants F-1 F-36 F-37 F

227 AUDITORS REPORT The Board of Directors, Alok Industries Limited, B-43, Mittal Tower, Nariman Point, Mumbai Dear Sirs; A. We have examined the attached standalone financial information of Alok Industries Limited (the Company ), as approved by the Board of Directors of the Company prepared in terms of the requirements of : a. Paragraph B (1) of Part II of Schedule II of the Companies Act, 1956 ( the Act ); b. the Securities and Exchange Board of India( SEBI ) (Disclosure and Investor Protection)Guidelines, 2000 as amended till December 8, 2008 ( SEBI Guideline ); c. The Guidance Note on Reports in Company Prospectus and Guidance Note on Audit Reports/ Certificates on Financial Information in Offer Documents issued by the Institute of Chartered Accountants of India and terms of reference received from the Company in connection with the proposed issue of Equity shares of the Company on Right basis ( Right Issue ). B. This financial information have been extracted by the Management from the financial statements for the year ended March 31, 2008, 2007, 2006, 2005 and 2004 audited by us. C. We have also examined the financial information of the Company for the period April 1, 2008 to September 30, 2008 prepared and approved by the Board of Directors of the Company in its meeting held on January 3, 2009 for the purpose of disclosures in the Offer Document of the Company. The said information have been extracted by the Management form the financial statements audited by us for the period April 1, 2008 to September 30, D. In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI Guidelines and terms of our engagement agreed with you; we further report that: 1. We have examined the attached Summary Statement of Assets and Liabilities, as restated of the Company as at September 30, 2008 and March 31, 2008, 2007, 2006, 2005, 2004, as set out in Annexure 1 to this report are after making adjustments and regrouping as in our opinion were appropriate and more fully described in Significant Accounting Policies, Changes in Significant Accounting Policies and Selected Notes (Refer Annexure 4). 2. The Summary Statement of Profit and Loss, as restated of the Company for the period April 1, 2008 to September 30, 2008 and year ended March 31, 2008, 2007, 2006, 2005, 2004, examined by us, as set out in Annexure 2 to this report are after making adjustments and regrouping as in our opinion were appropriate and more fully described in Significant Accounting Policies, Changes in Significant Accounting Policies and Selected Notes (Refer Annexure 4). 3. The Summary Statement of Cash Flow, as restated of the Company for the period April 1, 2008 to September 30, 2008 and year ended March 31, 2008, 2007, 2006, 2005, 2004, examined by us, as set out in Annexure 3 to this report are after making adjustments and regrouping as in our opinion were appropriate and more fully described in Significant Accounting Policies, Changes in Significant Accounting Policies and Selected Notes (Refer Annexure 4). 4. We draw attention to note no: 12 of part E Annexure 4 regarding investment in subsidiary companies, aggregating Rs Crores, considered good for the reasons stated in the said note and note no: 14 of part E of Annexure 4 regarding insurance claim receivable amounting to Rs Crores, considered recoverable for the reasons stated in the said note. 5. Based on the above, we are of the opinion that the restated financial information have been made after incorporating: (i) (ii) (iii) Adjustments for the changes in accounting policies retrospectively in respective financial years to reflect the same accounting treatment as per changed accounting policy for all the reporting periods. Adjustments for the material amounts in the respective financial years to which they relate. And there are no extra-ordinary items that need to be disclosed separately in the accounts and qualification adjustments. F-1

228 6. We have also examined the following restated other financial information set out in Annexure prepared by the management and approved by Board of Directors relating to the Company for the period April 1, 2008 to September 30, 2008 and year ended March 31, 2008, 2007, 2006, 2005, a) Statement of List of Related Parties and Transactions carried out with Related Parties enclosed in Annexure 5 b) Statement of Segment Reporting enclosed in Annexure 6 c) Statement of Secured and Unsecured Loans enclosed in Annexure 7 d) Statement of Investment enclosed in Annexure 8 e) Statement of Sundry Debtors enclosed in Annexure 9 f) Statement of Loans and Advances enclosed in Annexure 10 g) Statement of Current Liabilities and Provisions enclosed in Annexure 11 h) Statement of Other Income and operating revenues enclosed in Annexure 12 i) Statement of Dividend enclosed in Annexure 13 j) Statement of Accounting Ratios enclosed in Annexure 14 k) Capitalisation Statement enclosed in Annexure 15 l) Tax Shelter Statement enclosed in Annexure 16 In our opinion the financial information contained in Annexure 1 to 16 of this report read along with the Significant Accounting Policies, Auditors Qualifications, Comments in Annual Reports and Selected Notes (Refer Annexure 4) prepared after making adjustments and regrouping as considered appropriate have been prepared in accordance with Part IIB of Schedule II of the Act and the DIP Guidelines. 7. This report should not, in any way be construed as a re-issuance or re-dating of any of the previous audit reports issued by the auditors for the respective period and years nor should this reports be construed as a new opinion on any of the financial statements referred to herein. 8. Our report is intended solely for use of the management and for inclusion in the offer document in connection with the proposed issue of equity shares on Right basis of the Company. Our report should not be used for any other purpose except with our consent in writing Yours faithfully, For Gandhi & Parekh Chartered Accountants Place: Mumbai Date: February 09, 2009 Devang Parekh Partner Membership No.: F-2

229 ANNEXURE 1 SUMMARY STATEMENT OF ASSETS & LIABILITIES, AS RESTATED (Rs. in Crores) Sr. Particulars As at As at March 31, No. September 30, A Fixed Assets : Gross Block (Refer note no.6(i) of Part E of Annexure 4 ) 3, , , , Less : Depreciation (Refer note no.6(ii) of Part E of Annexure 4 Net Block 3, , , , Add: Capital Work in Progress / Incidental Expenditure During Construction Period (Refer note no.6(iii) of Part E of Annexure 4 ) 1, , , , , B Investments C Current Assets, Loans and Advances Inventories D Sundry Debtors (Refer note no.7 of Part E of Annexure 4 ) Cash and bank balances * 1, , Loans and Advances , , , , , Liabilities and Provisions Secured Loans 5, , , , , Unsecured Loans Current Liabilities and Provisions (Refer note no.8 of Part E of Annexure 4 ) , , , , , E Deferred Tax Liability (Refer note no.9 of Part E of Annexure 4 ) Networth (A+B+C-D-E) 1, , , Networth Represented by : Share Capital Share Application Money Share Warrants Reserves (Refer note no.10 of Part 1, , E of Annexure 4 ) Networth 1, , , * Includes Rs Crores (Rs Crores as at ) towards 100% LC margin against import of Plant & Machinery and Rs Crores (Rs Crores as at ) kept in bank deposits as at , pending utilisation towards ongoing expansion. F-3

230 ANNEXURE 2 SUMMARY STATEMENT OF PROFIT & LOSS, AS RESTATED Particulars For 6 months INCOME Sales of products manufactured by the Company (Net of Excise) ended Sept. 30, 2008 For the year ended March 31, (Rs. in Crores) , , , , , Sale of traded goods Other Income Total Income 1, , , , , , EXPENDITURE Raw Materials consumed , Purchase of traded goods (Increase) / Decrease in Inventories (119.42) (101.44) (65.33) (20.59) (72.75) Staff Costs Operating & Administrative Expenses Selling and Distribution Expenses Profit Before Interest, Depreciation & Tax Interest & Finance Charge (Net) Depreciation / Amortisation Profit before Tax Provision for Tax - Current Tax MAT Credit entitlement - (4.12) (1.11) Deferred tax Fringe Benefit Tax Profit after Tax before extraordinary Items Extraordinary Items Profit after Tax after extraordinary Items Adjustment (Refer Note no.9 of Part (1.38) (3.56) (0.73) B of Annexure 4) Current Tax Impact of Adjustment (0.60) (0.46) (0.02) 0.06 Deferred Tax Impact of Adjustment (0.01) 0.68 (0.97) (0.83) (0.40) (0.01) Net Profit as restated Add : Balance brought forward from previous year Balance available for Appropriation, as restated APPROPRIATIONS Less : Transfer to General Reserve Transfer to Debenture Redemption Reserve Excess/ (short) provision of - (0.19) (0.39) (2.08) Dividend Dividend on Equity Shares Dividend on Preference Shares Corporate Dividend Tax thereon Balance carried to Balance Sheet as restated F-4

231 ANNEXURE 3 SUMMARY STATEMENT OF CASH FLOW, AS RESTATED Sr. No. Particulars For 6 months ended Sept. 30, 2008 F-5 For the year ended March 31, (Rs. in Crores) A] Cash Flow from Operating Activities Net Profit Before Tax Adjustments on account of (1.38) (3.56) (0.73) restatement (Refer note no. 9 of part B of Annexure -4) Restated Profit Before Tax Adjustments: Depreciation / Amortisation (Refer note no.9(viii) of part B of Annexure -4) Unrealised gain/(loss) on Cash and - (0.28) 1.53 (1.32) - (2.52) cash equivalent Excess of Cost over Fair value of current Investments Prior period items (Refer note no. (0.25) 0.40 (0.02) 0.10 (0.23) (vii) of part B of Annexure -4) Dividend Income (0.01) (0.30) (0.27) (1.57) (1.26) (0.15) Interest Paid (net) (Profit) / Loss on sale of fixed (0.89) (3.13) assets (net) Profit on sale of Current (0.30) (0.19) (0.24) (2.25) (0.76) (0.01) Investments (net) Provision for Leave Encashment written back (Refer note no.9(ix) of part B of Annexure -4) (0.13) Operating Profit before working capital changes Adjustments for (Increase)/Decrease in Inventories (105.36) (223.12) (106.31) 5.12 (159.74) (Increase)/Decrease in Trade (64.47) (61.01) (192.05) (153.33) Receivable (Increase)/Decrease in Loans and (48.89) (186.93) (50.41) (45.61) (44.93) (39.35) Advances Increase/(Decrease) in Current Liabilities Cash Generated from operations Income Taxes Paid (18.82) (48.06) (21.71) (15.70) (12.01) (5.17) Net cash Generated from operating activities (A) B] Cash flow from Investing Activities Purchase of fixed assets (661.42) (1,623.89) (845.06) (1,082.68) (356.95) (236.81) Sale / Adjustment of fixed assets Purchase of Investments (Net) (134.39) (56.48) (173.66) (174.62) (123.78) (5.00) Sale of Investments Margin Money Deposits (17.97) (63.18) (217.30) (32.00) matured/(placed) - net Dividends Received Interest Received

232 Sr. No. Particulars For 6 months ended Sept. 30, 2008 For the year ended March 31, Share Application Money received back Share Application Money (given) (126.58) (427.93) (139.36) Inter Corporate Deposits (Granted) 4.00 (5.81) (16.38) - - / Refunded - Net Net cash used in Investing Activities (B) (627.31) (1,661.54) (1,016.08) (1,027.59) (571.01) (266.56) C] Cash flow from Financing Activities Proceeds from issue of Equity Share Capital (including premium) Proceeds from issue of Share warrants Proceeds from Preference Share Capital Redemption of Preference Share (16.33) (0.34) (0.33) Capital Proceed from Equity Share Application Money Proceeds from borrowings (net) , , Share / Debenture / FCCB issue (13.05) (14.46) (3.76) expenses and Premium on redemption adjusted in Securities Premium Account Dividend Paid (Including Tax 0.00 (27.70) (23.95) (25.31) (17.92) (10.92) thereon) Interest Paid (143.26) (238.87) (133.38) (67.59) (68.51) (70.94) Net cash generated from Financing Activities (C) , , Net Increase in Cash and Cash (387.11) equivalents ( A+B+C) Cash and Cash equivalents at the beginning of the year 1, at the end of the year 1, , Net Increase in Cash and Cash equivalents (387.11) NOTES TO CASH FLOW STATEMENT 1 Components of Cash & Cash Equivalent s includes Cash, Cheques on hand and Bank balances in Current, debit balance of Cash Credit and Fixed Deposit Accounts. 2 Proceeds from borrowings reflect the increase in Secured and Unsecured Loans and is net of repayments 3 Purchase of Fixed assets are stated inclusive of movements of Capital Work In Progress between the commencement and end of the years/period and is considered as part of investing activity. 4 Cash and Cash equivalents includes : (Rs. in Crores) September 30, 2008 March 31, 2008 March 31, 2007 March 31, 2006 March 31, 2005 March 31, 2004 Cash and Bank Balances 1, , Less: Margin Money Deposits * Unrealised (gain) / loss on foreign (1.25) currency Total Cash and Cash equivalents 1, , * Margin money being restricted for its use have been excluded from cash and cash equivalent and grouped under the investment activity 5 Figures have been regrouped / rearranged wherever necessary. F-6

233 6 The Cash Flow Statement has been prepared in accordance with the requirements of Accounting Standard "AS 3" Cash Flow Statement. ANNEXURE 4 SIGNIFICANT ACCOUNTING POLICIES, CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND SELECTED NOTES A) SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Preparation of Financial Statements The accompanying financial statements have been prepared under the historical cost convention in accordance with generally accepted accounting principles in India, the applicable Accounting Standards and the provisions of the Companies Act, Use of Estimates The preparation of financial statements in conformity with the generally accepted accounting principles require estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between, the actual results and estimates are recognised in the period in which the results are known / materialise. 3. Revenue Recognition a) Revenue on sale of products is recognised when the products are dispatched to customers, all significant contractual obligations have been satisfied and the collection of the resulting receivable is reasonably expected. Sales are stated net of trade discount, returns and sales tax collected. b) Revenue in respect of insurance/other claims, interest etc. is recognised only when it is reasonably certain that the ultimate collection will be made. 4. Fixed Assets a) Own Assets: Fixed Assets are stated at cost of acquisition or construction including directly attributable cost. They are stated at historical cost less accumulated depreciation and impairment loss, if any. b) Assets taken on lease: 5. Investments a) Finance Lease: Assets taken on lease after April 1, 2001 are accounted for as fixed assets in accordance with Accounting Standard on Leases AS-19. Accordingly, the assets have been accounted at fair value. Lease payments are apportioned between finance charges and reduction of outstanding liability. b) Operating Lease: Assets taken on lease under which, all the risk and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under operating leases are recognised as expenses on accrual basis in accordance with the respective lease agreements. Investments classified as Long Term Investments are stated at cost. Provision is made to recognise a decline, other than temporary, in the value of investments. Current investments are carried at cost or fair value whichever is lower. 6. Capital Work- in- Progress Projects under commissioning are carried forward at cost as capital work in progress and represent payments made to contractors including advances and directly attributable cost. 7. Depreciation / Amortisation F-7

234 a) Depreciation on Fixed Assets is provided on Straight Line Method at the rates and in the manner specified in Schedule XIV to the Companies Act, b) Cost of leasehold land is amortised over the period of lease. c) Trade marks are amortised over a period of ten years from the date of capitalization. d) Computer software is amortised for a period of five years from the date of capitalization. 8. Foreign Currency Transactions a) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transactions. b) Monetary items denominated in foreign currencies at the year end are restated at the year end rates. In case of monetary items, which are covered by forward exchange contracts, the difference between the year end rate and rate on the date of the contracts is recognised as exchange difference over the life of the contract together with premium/discount thereon. c) Non-monetary foreign currency items are carried at cost. d) Any income or expense on account of exchange difference either on settlement or on translation is recognised in the profit and loss account. 9. Inventories Items of Inventories are valued on the basis given below: 1. Raw Materials, Packing Materials, Stores and Spares and Trading goods: at cost determined on First In First Out (FIFO) basis or net realisable value, whichever is lower. 2. Process stock and Finished Goods: At weighted average cost or net realisable values whichever is lower. Cost comprises of cost of purchase, cost of conversion and other costs incurred in bringing the inventory to their present location and condition. 10. Employee Benefits (Refer Note No. 1 of Part B ) a) Defined Contribution Plan Company s contribution paid/ payable for the year to defined contribution retirement benefit scheme is charged to Profit and Loss account. b) Defined Benefit Plan and other long term benefit plan Company s liabilities towards defined benefit scheme and other long term benefit plans are determined using the projected unit credit method. Actuarial valuation under projected unit credit method are carried out at Balance Sheet date, Actuarial gains/losses are recognised in Profit and Loss Account in the period of occurrence of such gains and losses. Past service cost is recognised immediately to the extent benefits are vested otherwise it is amortized on straight line basis over running average periods until the benefits become vested. The retirement benefit obligation recognised in Balance Sheet represents present value of the defined benefit obligations as adjusted for unrecognised past service cost and as reduced by fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, the present value is available refunds and reduction in future contribution to the scheme. c) Short Term Employee Benefits Short term employee benefits expected to be paid in exchange for the services rendered by the employees are recognised undiscounted during the period the employee renders the services, these benefits include incentive, bonus. 11. Accounting of CENVAT credit Cenvat credit available is accounted by recording material purchases net of excise duty. Cenvat credit availed is accounted on adjustment against excise duty payable on dispatch of finished goods. 12. Government Grants Grants, in the nature of interest subsidy under the Technology Upgradation Fund Scheme (TUFS), are accounted for when it is reasonably certain that ultimate collection will be made. Government grants not specifically related to fixed assets are recognised in the Profit and Loss Account in the year of accrual / receipt. 13. Borrowing Costs F-8

235 Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue. 14. Income taxes Tax expense comprises of current tax, deferred tax and fringe benefit tax (FBT). Current tax and deferred tax are accounted for in accordance with Accounting Standard 22 (AS-22) on Accounting for taxes on Income. Current tax is measured at the amount expected to be paid / recovered from the tax authority using the applicable tax rates. Deferred tax assets and liabilities are recognised for future tax consequence attributable to timing difference between taxable income and accounting income that are capable of reversing in one or more subsequent periods and are measured at relevant enacted/ substantively enacted tax rates. At each balance sheet date, the Company reassesses unrealised deferred tax assets to the extent they become reasonably certain or virtually certain of realisation, as the case may be. FBT is recognised in accordance with the relevant provision of Income-tax Act, 1961 and the Guidance Note on FBT issued by ICAI. Minimum Alternate Tax (MAT) credit entitlement is recognised in accordance with the Guidance Note on Accounting for credit available in respect of Minimum Alternate Tax under the Income-tax Act, 1961 issued by ICAI. 15. Intangible Assets Intangible assets are recognised only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprise and the cost of the assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortisation and accumulated impairment losses, if any. 16. Impairment of Fixed Assets At the end of each year, the Company determines whether a provision should be made for impairment loss on fixed assets by considering the indications that an impairment loss may have occurred in accordance with Accounting Standard 28 (AS-28) ''Impairment of Assets''. An impairment loss is charged to the Profit and Loss Account in the year in which, an asset is identified as impaired, when the carrying value of the asset exceeds its recoverable value. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount. 17. Provisions, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognised but are disclosed in the Notes. Contingent Assets are neither recognised nor disclosed in the financial statements. 18. Issue Expenses Expenses incurred in connection with the issue of shares, debentures and Foreign Currency Convertible Bonds, are adjusted against Securities Premium Account. 19. Accounting for Derivatives The Company uses derivative instruments to hedge its exposure to movements in foreign exchange rates, interest rates and currency risks. The objective of these derivative instruments is to reduce the risk or cost to the Company and is not intended for trading or speculation purposes. Interest Rate Swaps, Currency Option and Currency Swaps, in the nature of firm commitment and highly probable forecast transactions, entered into by the Company for hedging the risks of foreign currency exposure (including interest rate risk) are accounted based on the principles of prudence as enunciated in Accounting Standard 1 (AS-1) Disclosure of Accounting Policies. B) SIGNIFICANT CHANGES IN ACCOUNTING POLICIES 1. Consequent to revision of Accounting Standard AS 15 Employee Benefits, the Company has adopted the revised accounting standard with effect from April, 1, Consequent to the notification of the Companies (Accounting Standards) Rules, 2006, with effect from April 1, 2007, the foreign exchange differences in respect of liabilities for the acquisition of imported assets are recognised in the profit and loss account against the earlier requirement of adjusting these to the carrying cost of such fixed assets except for such differences in respect of liabilities incurred prior to April 1, 2004, accordingly these exchange differences, which were earlier included in Fixed Assets have been recognised to the respective earlier years. F-9

236 3. Consequences to the withdrawal of guideline, on Expenditure During Construction Period (EDCP), by ICAI, on August 19, 2008, the Company has charged only directly attributable cost to the carrying cost of the fixed asset from the financial year Upto financial year the Company amortised public issue expenses & preliminary expenses over a period of 10 years and debentures issue expenses over a period of 5 years in accordance with accounting policy followed by the Company in this respect. Consequent to the Accounting Standard AS 26 Intangible Assets becoming applicable, the Company has written off entire balance outstanding as on March 31, 2004 in public issue expenses, preliminary expenses and debenture issue expenses amounting to Rs Crores to the profit & loss account in the year Debts, which were considered doubtful and written off and Sundry Credit balance in the previous year/period ended and which have been subsequently recovered and written back during the subsequent year ended, have been adjusted in the years when such debts were originally written off. Accordingly, adjustments have been made to the summary statement of profits and losses, as restated for the each of the years or period. 6. In the financial statements for the period ended September 30, 2008, March 31, 2008, 2007, 2006, 2005 and 2004, certain items of income / expenses have been identified as prior period items. For the purpose of this statement, such prior period items have been appropriately adjusted in the respective years. 7. The Profit & Loss Account of some years include amounts paid / provided for or refunded / written back in respect of shortfall / excess income tax arising out of assessments, appeals, etc., which has now been adjusted in the respective years. Also, income tax (current tax and deferred tax) has been computed on adjustments made as detailed above and has been adjusted in the restated profits and losses for the period ended September 30, 2008, March 31, 2008, 2007, 2006, 2005 and In the year , consequent to the introduction of new Accounting Standard AS 29 Provisions, Contingent Liabilities and Contingent Assets, the Company has adopted the new accounting standard with effect from April, 1, Summarised Statement of impact of restatement made in the audited accounts for the respective years and its impact on Profits of the Company: - (Rs. in Crores) Sr. No. Particulars Period Ended Year Ended September March March March March March 31, 30, , , , , (i) Employee Benefits (Refer Note No. 1 above) (ii) Exchange Differences on Fixed (0.06) (0.12) Assets (Refer Note No. 2 above) Incidental Expenditure During - - (1.56) (0.95) (0.90) (0.64) (iii) Construction (Refer Note No. 3 above) Restatement of Miscellaneous (iv) Expenditure (Refer Point No. 4 above) (v) Provision for doubtful debts (1.06) (2.18) 2.06 (0.07) 0.76 (1.48) (Refer Note No. 5 above) (vi) Sundry Credit balance Written (0.01) (0.42) (1.50) Back (Refer Note No. 5 above) (vii) Prior Period Items (Refer Note 0.25 (0.40) 0.02 (0.10) 0.23 (0.18) No. 6 above) (viii) Depreciation (0.56) (0.56) (0.23) (0.00) (ix) Leave encashment written back (0.13) 0.13 Sub Total [A] (1.38) (3.56) (0.73) (x) (xi) Current Tax Impact (Refer Note No. 7 above) (0.60) (0.46) (0.02) 0.06 Deferred Tax Impact (Refer (0.01) 0.68 (0.97) (0.83) (0.40) (0.01) Note No.7 above) Sub Total [B] = (x) + (xi) (1.57) (1.29) (0.42) 0.05 Total [A] + [B] (1.23) (2.48) (0.21) (0.68) C) COMPARABILITY The figures for the six months period from April 1, 2008 to September 30, 2008 are not comparable with figures for all previous years. D) COMMENTS IN AUDITORS REPORTS : 1. Comments, which do not require corrective adjustment in the financial information are as follows: F-10

237 a) In the Auditor s Report of period from April 1, 2008 to September 30, 2008 and year ended March 31, 2008 attention was drawn to investment made in subsidiary company namely Alok Industries International Limited aggregating to Rs Crores and Rs Crores respectively, considered good. b) In the Auditor s Report of period from April 1, 2008 to September 30, 2008 and year ended March 31, 2008 attention was also drawn regarding insurance claim receivable amounting to Rs Crores for being considered recoverable. c) During the period from April 1, 2008 to September 30, 2008, the Company has not carried out physical verification of fixed assets. However, the fixed assets are physically verified under a phased verification programme, which in our opinion, is reasonable. E) SELECTED NOTES TO ACCOUNTS 1 Contingent Liabilities in respect of: Particulars Customs duty on shortfall in export obligation in accordance with EXIM Policy. (The Company is hopeful of meeting the export obligation within the stipulated period) Guarantees given by banks on behalf of the Company Guarantees given to financial institutions for third parties Corporate Guarantees given to bank for loans taken by subsidiary company Period Ended September 30, 2008 Amount Uncertained March 31, 2008 Amount Uncertained March 31, 2007 Amount Uncertained Year Ended March 31, 2006 Amount Uncertained March 31, 2005 Amount Uncertained (Rs. in Crores) March 31, 2004 Amount Uncertained Bills discounted Capital Commitments: Particulars Estimated amount of contracts remaining to be executed on Capital Account and not provided for (Net of advances) (Rs. in Crores) Period Ended Year Ended September March 31, March 31, March 31, March 31, March 31, 30, The Company in accordance with the resolution passed by members by way of Postal Ballot on 14 th February 2008 issued for cash on preferential basis 1,98,00,000 warrants to the Promoter Group of the Company, which are convertible in to equity shares by giving the warrant holder, the option of subscribing for one equity share of the Company of Rs. 10/- each per warrant at a price of Rs.102/- per share, (including premium of Rs. 92/- per share), determined in accordance with the SEBI guidelines, at any time within 18 months from the date of allotment of the Warrants, in two stages viz. (a) 98,00,000 Warrants to be converted into Equity Shares on or before 31 st March, Against same 98,00,000 equity shares allotted on 28 th April 2008; and (b) 1,00,00,000 Warrants to be converted at the option of the warrant holder into Equity Shares on or before 31st July 2009, against which 10% of the issue price was received on the date of allotment of warrants in the previous year ended March 31, As at the date of this balance sheet (i.e. September 30, 2008) Rs crores has been brought in as share application money which has been treated as the balance 90% amount payable upon exercising of the option of conversion of warrants into equity shares. The said application money has since been refunded at the request of the warrant holder subsequent to the date of this balance sheet Foreign Currency Convertible Bonds are carried forward from earlier year and pending conversion / redemption as at September 30, 2008 aggregating to Rs Crores are disclosed under unsecured loans. The total proceeds on this account have been fully utilized during the earlier year. 5 Lease: F-11

238 The Company has acquired plant and machinery and computers on lease on hire purchase in nature of finance lease. The company capitalised the said assets at their fair value as the lease are in the nature of finance leases as defined in AS-19. Lease payments are apportioned between finance charge and reduction of outstanding liabilities. The details of lease rentals payable in future are as follows: (Rs. in Crores) Due Period / Year Total minimum lease payments outstanding Future interest on outstandings Present value of minimum lease payments Within one year April to September, Later than one year April to September, and not later than years Later than 5 years April to September, Fixed Assets : (Rs. in Crores) Period End Year End Sr. Particulars September March 31, March 31, March 31, March 31, March 31, No. 30, I) Gross Block as per annual report Adjustments on account of (0.18) (0.12) exchange difference (Refer Note no 9(ii) of part B of Annexure 4) Gross Block as restated II) Depreciation as per annual report Adjustments on account of (0.01) (0.01) 0.00 exchange difference (Refer Note no 9(viii) of part B of Annexure 4) Depreciation as per restated Capital Work In Progress/ III) Expenditure During Construction Period as per annual report Adjustments on account of (4.05) (4.05) (4.05) (2.49) (1.54) (0.64) indirect expenses ( Refer Note no 9(iii) of part B of Annexure 4) Capital Work In Progress/ Expenditure During Construction Period as restated 7 Sundry Debtors : (Rs. in Crores) Period End Year End Sr. Particulars September March 31, March 31, March 31, March 31, March 31, No. 30, Sundry Debtors as per annual F-12

239 Sr. No. Particulars report Adjustments on account of provision for doubtful debts (Refer Note no 9(v) of part B of Annexure 4) Period End September 30, 2008 March 31, 2008 March 31, 2007 Year End March 31, 2006 March 31, 2005 March 31, 2004 (1.97) (0.91) 1.27 (0.79) (0.72) (1.48) Sundry Debtors as restated Current Liabilities & Provisions : (Rs. in Crores) Period End Year End Sr. Particulars September March 31, March 31, March 31, March 31, March 31, No. 30, I) Current Liabilities as per annual report Adjustments on account credit - (0.01) (0.43) (1.93) - - balance written back (Refer Note no 9(vi) of part B of Annexure 4) Current Liabilities as restated II) Provisions as per annual report Adjustments on account change (2.79) (2.79) (2.79) (1.22) (0.71) (0.41) of policy for leave encashment (Refer Note no 9(i) of part B of Annexure 4) Tax effect of adjustments on (0.04) (0.06) account of Restatement (Refer Note no 9(x) of part B of Annexure 4) Provisions as restated Total (I+II) Deferred Taxation: Sr. No. Deferred Tax Assets and Liabilities arising on account of timing differences are as under: Particulars Period End September 30, 2008 March 31, 2008 March 31, 2007 Year End March 31, 2006 March 31, 2005 (Rs. in Crores) March 31, 2004 I) Deferred Tax Liability (DTL) i) Depreciation II) Deferred Tax Asset (DTA) i) Other items ii) FCCB issue Expenses (I- II) Total Deferred Tax Liability (Net) as per annual report Adjustments on account of Restatement (Refer Note no 9(XI) of part B of Annexure 4) Deferred Tax Liability (net) as restated Reserve & Surplus : Sr. No. I) Particulars Reserve & Surplus as per annual report (Rs. in Crores) Period End Year End September March 31, March 31, March 31, March 31, March 31, 30, F-13

240 Adjustments on account of (0.89) (0.68) restatement (Refer Note no 9 of part B of Annexure 4) Restatement of Miscellaneous (1.15) (1.15) (1.15) (1.15) (1.15) (1.15) Expenditure (Refer Point No. 4 above) Prior Period Items (Refer Note (0.05) 0.18 No. 6 above) Leave encashment written back (0.13) Reserve & Surplus as restated The company in accordance with the resolution passed by members by way of Postal Ballot on 28 th November, 2008 hived off it s retail business to a 100% subsidiary, namely Alok Retail (India) Limited w.e.f 1 st December, The Company has investment in Alok Industries International Limited (AIIL), the 100% subsidiary of the Company, aggregating to Rs Crores (including share application money) as at period end, which is a strategic long-term investment. During the period AIIL made investment in it s 100% subsidiary, namely: Alok European Retail S.R.O (AER), of Rs Crores and granted an advance aggregating to Rs.0.68 Crores. As per the financials statements as at September 30, 2008, the AER has incurred losses. AIIL for the time being, does not intend to continue with the business plans of investing further in AER and out of abundant caution, has made provision towards diminution in the value of investment of Rs Crores and for doubtful advances Rs Crores. Further, AIIL has also made investment in and given loans to its various other subsidiary companies and associates, and these entities have accumulated losses at the year end, though have positive net worth. These entities have embarked upon the growth plan, consequent to involvement of the Company by renovating the production facilities, opening trendy stores and wider reach in the market and the directors of these entities expect such new initiatives to increase the sales volume and consequently the profitability. On the above mentioned basis, in the opinion of the management of the Company, the investment in the aforesaid subsidiary is considered good. 13 Derivative Contracts: a) The Company, during the period based on the Announcement of The Institute of Chartered Accountants of India Accounting for Derivatives along with the principles of prudence as enunciated in Accounting Standard 1 (AS-1) Disclosure of Accounting Polices has accounted for derivative forward contracts at fair values. The ICAI has mandated disclosures regarding derivatives instruments for the accounting periods ending on or after March 31, On that basis, changes in the fair value of the derivative instruments as at September 30, 2008 aggregating to Rs Crores (March 31, 2008 Rs Crores) have been debited to the Profit and Loss Account. The charge on account of derivative losses has been computed on the basis of MTM values based on the report of counter parties. b) For hedging currency and interest rate related risks, category wise break-up of nominal amounts of derivative contracts entered and outstanding are given below. (Rs in Crores) Sr. No. Particulars As at September 30, 2008 As at March 31, 2008 As at March 31, 2007 As at March 31, Interest Rate Swaps Currency Swaps Currency Options , Total c) The foreign currency exposure that has not been hedged by derivative instruments or otherwise as on September 30, 2008 are as below: a. Amount receivable in foreign currency on account of the following Particulars Rupees (in Crores) Amount in foreign currency (in Crores) Foreign Currency Debtors USD GBP EUR Cash & Bank Balance USD b. Amount payable in foreign currency on account of the following Particulars Rupees Amount in foreign (in Crores) currency (in Crores) F-14 Foreign Currency

241 Secured Loans USD EUR JPY Interest accrued but not due on loans USD EUR Unsecured Loan USD EUR 14 The Company during the year ended March 31, 2008, consequent to the damage caused to the assets by fire at its Texturising unit located at Silvassa, computed the loss of such assets in accordance with the terms of the policy and submitted the claim together with the details to the surveyors of the insurer for an amount aggregating to Rs Crores including for loss of profit and accounted the same in the books of account. During the year ended March 31, 2008, the insurer released payment aggregating to Rs Crores (including loss of profit) pending finalisation of the claim which has been adjusted to the claim receivable to the extent and the balance claim receivable of Rs Crores is carried forward under Loans and Advances which would be adjusted on receipt of the final claim amount. On November 25, 2008 the Company has received Rs.25 Crores against Insurance claim lodged. 15 Subsequent to the date of this Balance sheet i.e. September 30, 2008, the company has proposed a Right issue of Equity shares aggregating up to Rs.450 Crores and the Promoter group has since brought in an amount of Rs Crores towards their part entitlement in the aforesaid issue. 16 Provision for Income Tax of Rs Crores (Rs Crores as at ) as at has been computed on the basis of Minimum Alternate Tax (MAT) in accordance with Section 115JB of the Income Tax Act,1961, in view of deductions available to the company. Considering the future profitability and taxable positions in the subsequent years, the company has recognized MAT credit entitlement amounting to Rs. Nil (Rs Crores as at ) as at , aggregating to Rs. Nil Crores (Rs Crores as at ) as at , as an asset by crediting the Profit and Loss Account for an equivalent amount and disclosed under Loans and Advances (Schedule 11) in accordance with the Guidance Note on Accounting for credit available in respect of Minimum Alternate Tax under the Income Tax Act, 1961 issued by The Institute of Chartered Accountants of India. 17 The amounts in balance Sheet, Profit and Loss account and cash flow statement are rounded off to the nearest lakh and denominated in Crores of rupees. 18 The figures of the previous years have been reclassified / regrouped wherever necessary to correspond with those of the current period. F-15

242 ANNEXURE 5 A) LIST OF RELATED PARTIES As at As at As at As at As at As at I Associates Alok Denims (India) Private Limited Alok Denims (India) Private Limited Alok Finance Private Limited Alok Finance Private Limited Alok Denims (India) Private Limited Alok Finance Private Limited Alok Denims (India) Private Limited Alok Finance Private Limited Alok Denims (India) Private Limited Alok Finance Private Limited Alok Denims (India) Private Limited Alok Finance Private Limited Alok Knit Exports Limited Alok Knit Exports Limited Alok Knit Exports Limited Alok Knit Exports Limited Alok Knit Exports Limited Alok Knit Exports Limited Alok Textile Traders Alok Textile Traders Alok Textile Traders Alok Textile Traders Alok Textile Traders Alok Textile Traders Ashok B. Jiwrajka (HUF) Ashok B. Jiwrajka (HUF) Ashok B. Jiwrajka (HUF) Ashok B. Jiwrajka (Huf) Ashok B. Jiwrajka (Huf) Ashok B. Jiwrajka (Huf) Ashok Realtors Private Limited Ashok Realtors Private Limited Ashok Realtors Private Limited Ashok Realtors Private Limited Ashok Realtors Private Limited Ashok Realtors Private Limited Buds Clothing Co. Buds Clothing Co. Buds Clothing Co. Buds Clothing Co. Buds Clothing Co. Buds Clothing Co. D. Surendra & Co. D. Surendra & Co. D. Surendra & Co. D. Surendra & Co. D. Surendra & Co. D. Surendra & Co. Dilip B. Jiwrajka (HUF) Dilip B. Jiwrajka (HUF) Dilip B. Jiwrajka (HUF) Dilip B. Jiwrajka (Huf) Dilip B. Jiwrajka (Huf) Dilip B. Jiwrajka (Huf) Grabal Alok Impex Limited Grabal Alok Impex Limited Grabal Alok International Limited Grabal Alok International Limited Grabal Alok Impex Limited Grabal Alok International Limited Grabal Alok Impex Limited Grabal Alok International Limited Grabal Alok Impex Limited Grabal Alok Impex Limited Vaibhav Knit Fab Vaibhav Knit Fab Vaibhav Knit Fab Vaibhav Knit Fab Vaibhav Knit Fab Vaibhav Knit Fab Grabal Alok (UK) Ltd. (Formerly known as Hamsard 2353 Ltd.) Grabal Alok (UK) Ltd. (Formerly known as Hamsard 2353 Ltd.) Grabal Alok (UK) Ltd. (Formerly known as Hamsard 2353 Ltd.) Gogri Properties Private Gogri Properties Private Limited Limited Green Park Enterprises Green Park Enterprises Green Park Enterprises Green Park Enterprises Green Park Enterprises Green Park Enterprises Honey Comb Knit Fabrics Honey Comb Knit Fabrics Honey Comb Knit Fabrics Honey Comb Knit Fabrics Honey Comb Knit Fabrics Honey comb Knit Fabrics Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Niraj Realtors & Shares Private Limited Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Niraj Realtors & Shares Private Limited Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Niraj Realtors & Shares Private Limited Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Niraj Realtors & Shares Private Limited Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Niraj Realtors & Shares Private Limited Tulip Textiles Tulip Textiles Tulip Textiles Tulip Textiles Tulip Textiles Tulip Textiles F-16 Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Niraj Realtors & Shares Private Limited Nirvan Exports Nirvan Exports Nirvan Exports Nirvan Exports Nirvan Exports Nirvan Exports Nirvan Holdings Private Limited Nirvan Holdings Private Limited Nirvan Holdings Private Limited Nirvan Holdings Private Limited Nirvan Holdings Private Limited Nirvan Holdings Private Limited Pramatex Enterprises Pramatex Enterprises Pramatex Enterprises Pramatex Enterprises Pramatex Enterprises Pramatex Enterprises Pramita Creation Private Limited Pramita Creation Private Limited Surendra B. Jiwrajka (HUF) Surendra B. Jiwrajka (HUF) Pramita Creation Private Limited Surendra B. Jiwrajka (HUF) Pramita Creation Private Limited Pramita Creation Private Limited Pramita Creation Private Limited Surendra B. Jiwrajka (Huf) Surendra B. Jiwrajka (Huf) Surendra B. Jiwrajka (Huf)

243 As at As at As at As at As at As at Alspun Infrastructure Alspun Infrastructure Limited Limited Ashford Infotech Private Ashford Infotech Private Limited Limited II Subsidiaries Alok Inc. Alok Inc. Alok Inc. Alok Industries International Limited Alok Retail (India) Ltd (Formerly known as Alok Homes & Apparel Pvt. Ltd.) Alok Land Holdings Private Limited Alok Aurangabad Infratex Private Limited Alok Industries International Limited Alok Homes & Apparel Private Limited Alok Land Holdings Private Limited Alok Aurangabad Infratex Private Limited Alok International, Inc. Alok European Retail S.R.O. Mileta, a.s. Mileta, a.s. Alok Infrastructure Limited Alok Infrastructure Private Limited Alok Apparels Private Limited Amigo Sport Private Limited (Formerly known as Alok Clothing Private Limited) Alok Apparels Private Limited Alok Clothing Private Limited Alok Industries International Limited Alok Infrastructure Private Limited Alok I-Tex Limited Alok I-Tex Limited Globus E-Commerce Limited Globus E-Commerece Limited F-17

244 As at As at As at As at As at As at Alok New City Infratex Alok New City Infratex Private Limited Private Limited Alok Realtors Private Alok Realtors Private Limited Limited Alok HB Hotels Private Limited Alok HB Properties Private Limited III Key Management Sunil O. Khandelwal Sunil O. Khandelwal Personnel Ashok B. Jiwrajka Ashok B. Jiwrajka Ashok B. Jiwrajka Ashok B. Jiwrajka Ashok B. Jiwrajka Ashok B. Jiwrajka Chandrakumar Bubna Chandrakumar Bubna Chandrakumar Bubna Chandrakumar Bubna Chandrakumar Bubna Chandrakumar Bubna Dilip B. Jiwrajka Dilip B. Jiwrajka Dilip B. Jiwrajka Dilip B. Jiwrajka Dilip B. Jiwrajka Dilip B. Jiwrajka Surendra B. Jiwrajka Surendra B. Jiwrajka Surendra B. Jiwrajka Surendra B. Jiwrajka Surendra B. Jiwrajka Surendra B. Jiwrajka Alok A. Jiwrajka Alok A. Jiwrajka Alok A. Jiwrajka Alok A. Jiwrajka Alok A. Jiwrajka Alok A. Jiwrajka K. H. Gopal K. H. Gopal IV Relatives of Key Management Personnel Prita D. Jiwrajka Prita D. Jiwrajka Prita D. Jiwrajka Prita D. Jiwrajka S. P. Bubna S. P. Bubna S. P. Bubna S.P. Bubna Geeta S. Jiwrajka Geeta S. Jiwrajka F-18

245 B) STATEMENT OF TRANSACTIONS CARRIED OUT WITH THE RELATED PARTIES IN THE ORDINARY COURSE OF BUSINESS (Rs. in Crores) Transaction April 1, 2008 to Sept 30, During the period ) Transaction with Associates Unsecured Loan Balance as at 1st April Granted during year (Net) Received / Adjustment during the year (Net) Balance as at period end Share Application Money Balance as at 1st April Received during the year Allotted during the year Refunded during the year 7.09 Balance as at period end Loans and Advances Balance as at 1st April Granted during year (Net) Received / Adjustment during the (0.30) year (Net) Balance as at period end Investments Balance as at 1st April Balance as at period end Sundry Debtors Balance as at period end Advance for capital Expenditure Sundry Creditors Balance as at period end Advance from customer Balance as at period end Guarantees (Financial Guarantees) Balance as at period end Turnover Sales of Goods Expenditure Purchase of goods / Job charges Sale of Fixed Assets Purchase of Fixed Assets Rent Interest Dividend Paid Dividend Income F-19

246 Transaction April 1, 2008 to Sept 30, During the period Income Dividend Sale of Fixed Assets and Stores & Spares Rent Purchase Consideration towards assets and liabilities taken over Fixed Assets Investments Current Assets Current Liabilities Dues to Bank Net consideration paid ) Transaction with Subsidiaries Loans and Advances Balance as at 1st April Granted during year (Net) Received / Adjustment during the year (Net) Balance as at period end Investments Balance as at 1st April Invested during year Balance as at period end Share Application Money Balance as at 1st April Given/(received) during the year (35.62) Allotted during the year Balance as at period end Sundry Debtors Balance as at period end Sundry Creditors Balance as at period end Turnover Sales of Goods Expenditure Purchase of goods / Job charges Purchase of Fixed Assets Marketing Service Charges Sale of Fixed Assets and Stores & Spares Rent Reimbursement of Rent F-20

247 Transaction April 1, 2008 to Sept 30, During the period ) Transaction with Key Management Personnel Share Application Money Balance as at 1st April Received during the year Refunded during the year Balance as at period end Sundry Debtors Advance for capital Expenditure Expenditure Remuneration ) Transaction with Relative of Key Management Personnel Sundry Debtors Advance for capital Expenditure Expenditure Remuneration F-21

248 ANNEXURE 6 STATEMENT OF SEGMENT REPORTING a. Primary Segment: Geographical Segment The company considering its higher level of international operations and present internal financial reporting based on geographical location of customer, has identified geographical segment as primary segment. The geographic segment consist of: a) Domestic (Sales to customers located in India) b) International (Sales to customers located outside India) Revenue directly attributable to segments is reported based on items that are individually identifiable to that segment. The company believes that it is not practical to allocate segment expenses, segment results, fixed assets used in the company's business or liabilities contracted since the resources/services/assets are used interchangeably within the segments. Accordingly, no disclosure relating to same is made (Rs. in Crores) Particulars For 6 months For the year ended March 31, ended Sept. 30, A) Geographical Segment Operating Revenue* Domestic , , , International , , , , , , , Restated Profit Before Interest & Tax (Segment Results Unallocable) Less : Interest & Finance Charges (Net) Less : Tax Restated Profit After Tax b. Secondary Segment : Business Segment The company is operating into a single business i.e. Textile and such all business activities revolve around this segment. Hence, there is no separate segment to be reported considering the requirement of AS 17 on Segment Reporting" * Operating revenue mainly comprises of sale of products manufactured and traded by the Company, job charges and export incentives F-22

249 ANNEXURE 7 STATEMENT OF SECURED & UNSECURED LOANS (Rs. in Crores) Particulars As at As at March 31, Rate Of September Interest 30, 2008 A) SECURED LOANS a) Convertible/Non Convertible Debentures Varied b) Term Loans (1) From Financial Institutions -Rupee Loans Varied Foreign currency loans Varied (2) From banks -Rupee Loans Varied 3, , , Foreign currency loans Varied , , , , c) From Banks on Cash Credit Accounts, Working Capital Demand Loans etc d) Loans under Hire Purchase/Lease Arrangements Varied Varied Total - Secured Loans 5, , , , , B) UNSECURED LOANS (a) Fixed Deposits 9% (b) Term Loans and Advances From Banks and Financial Institutions -Commercial Paper From Banks and Financial Institutions -Rupee Loans From Banks and Financial Institutions -Foreign Currency Loans From Banks and Financial Institutions %-14% % - 13% (c) Other Loans and Advances From Banks -Foreign Currency Loans Non Convertible Debentures From Others (d) Foreign Currency Convertible Bonds (FCCBs) 1% F-23

250 Total - unsecured Loans Note: No unsecured loan taken from Promoter/Group Company/Associates except in FY short term loan of Rs Crores taken from an associate company at an interest rate of 10% p.a. Notes for security: 1. The debentures are secured by pari passu charge on the immovable property situated at Mouje Irana, Taluka Kadi, District Mehsana in the state of Gujarat 2. Term loans from financial institutions (Including foreign currency loans) to the extent of Rs Crores are secured by (i) a pari passu first charge created/to be created on all present and future movable and immovable assets of the company subject to exclusive charges created/to be created on specific fixed assets in favour of specified lenders. (ii) a charge created/ to be created on all current assets of the company subject to a prior charge on such current assets created/to be created in favour of the company's bankers towards working capital requirements and (iii) the personal guarantees of three promoter directors. 3. Term loans from Financial Institutions to the extent of Rs Crores are secured by (i) subservient charge on all movable assets of the Company present and future subject to prior charge on specific movable assets in favour of the company s term lenders and towards working capital requirements (ii) the personal guarantee of three Promoter Directors of the Company. 4. Term loan from Financial Institution of Rs Crores is secured by (i) subservient charge on all the present and future moveable fixed assets of the company. 5. Term loans from banks (Including foreign currency loans) to the extent of Rs Crores are secured by (i) a pari passu first charge created/to be created on all present and future movable and immovable assets of the company subject to exclusive charges created/to be created on specific fixed assets in favour of specified lenders. (ii) a charge created/ to be created on all current assets of the company subject to a prior charge on such current assets created/to be created in favour of the company's bankers towards working capital requirements and (iii) the personal guarantees of three promoter directors. 6. Term loan from banks to the extent of Rs Crores is secured by (i) an exclusive charge created on specific assets financed by them and (ii) the personal guarantees of three promoter directors. 7. Term loans from the Banks to the extent of Rs Crores are secured by (i) subservient charge on all movable assets of the Company present and future subject to prior charge on specific movable assets in favour of the company s term lenders and towards working capital requirements (ii) the personal guarantee of three Promoter Directors of the Company. 8. Term loans from the Banks to the extent of Rs Crores are secured by (i) subservient charge on all assets of the Company excluding Land and Building (ii) Pledge of company's investment in a subsidiary viz. Alok Industries International Limited (ii) the personal guarantee of three Promoter Directors of the Company. 9. Term loan from the Bank to the extent of Rs Crores are secured by subservient charge on all present and future moveable assets of the Company. 10. Working Capital limits from banks are secured by (i) hypothecation of Company s inventories, book debts etc. (ii) second charge created / to be created on the fixed assets of the Company (iii) immovable properties belonging to the Company / Guarantors and (iv) the personal guarantees of three promoter directors of the Company. 11. Hire Purchase Loans are secured by the respective assets, mainly Plant and Machinery and Equipments, purchased under the said loans. 12. Unsecured loan for the company are repayable as under: Before March 31, 2009 Before March 31, 2010 Before March 31, 2011 Rs Crores Rs Crores Rs Crores F-24

251 ANNEXURE 8 STATEMENT OF INVESTMENTS (Rs. in Crores) Particulars As at As at March 31, September 30, Nos. Rs. Nos. Rs. Nos. Rs. Nos. Rs. Nos. Rs. Nos. Rs. Long Term Investments In Equity shares - Unquoted (Trade) In subsidiary companies Alok Inc. (FV USD 200/-) Alok Industries International 50, , , Limited (FV USD 1/-) (Pledged against finance availed) Alok International Inc. (Rs. 43,225/- 1, ) (FV USD 1/-) Alok Apparel Private Limited (FV 1,000, ,000, Rs. 10/-) Amigo Sport Pvt. Ltd(FV Rs. 10/-) 50, , Alok Retail (India) Limited (FV Rs. 50, , /-) Alok Land Holdings Private 250, , Limited (FV Rs. 10/-) Alok Infrastructure Limited (FV Rs. 50, , , /-) Others Shirt Company (India) Limited 100, , , , Dombivali Nagri Sahakari Bank Limited Kalyan Janata Sahakari Bank Limited In Equity shares - Quoted (Trade) Associate Grabal Alok Impex Limited (FV Rs. 10/-) 10, , , , , , , , , , , , ,900, ,900, ,900, ,900, ,900, ,900, F-25

252 Particulars As at As at March 31, September 30, Nos. Rs. Nos. Rs. Nos. Rs. Nos. Rs. Nos. Rs. Nos. Rs. In Preference shares - Unquoted (Trade) In subsidiary companies Alok Industries International 83,686, ,074, ,074, Limited FV of USD 1 each (50,74,240 shares Pledged against finance availed) Current Investments In Equity Shares Quoted In Bonds Unquoted In Debentures Unquoted In Mutual Funds Unquoted Less: Provision for Diminution in value (0.34) (0.04) (0.48) (0.70) (0.76) Share Application Money Subsidiary companies Alok Apparel Private Limited Alok Industries International Limited Alok Infrastructure Limited Alok Land Holdings Private Limited Others Aurangabad Textiles & Apparel Parks Limited New City Of Bombay Mfg. Mills Limited Aggregate Book Value: Quoted Investments Unquoted Investments F-26

253 Aggregate Market Value: Quoted Investments F-27

254 ANNEXURE 9 STATEMENT OF SUNDRY DEBTORS Particulars (Rs. in Crores) For Six For the year ended March 31, months ended Sept. 30, Debts Outstanding for a period exceeding six months Other Debts Gross Less : Provision TOTAL Considered Good Considered Doubtful Debtors includes : Due from Subsidiary Companies Alok Apparels Private Limited TOTAL Alok International Inc Alok inc Mileta, a. s Due from Associates Companies Alok Denims(India) Private Limited Alok Knit Export Limited Buds Clothing Co Grabal Alok (UK) Limited F-28

255 ANNEXURE - 10 STATEMENT OF LOANS & ADVANCES Particulars Advances recoverable in cash or in kind or for value to be received Loans - Inter Corporate Deposits (Rs. in Crores) For Six For the year ended March 31, months ended Sept. 30, Deposits Balances with Central Excise Collectorate Share Application Money (Subsequently allotted / refunded) Advance Tax (Net of provision for tax) MAT Credit Entitlement Gross Less : Provision TOTAL Loans and Advances included : Considered Good Considered Doubtful TOTAL Loans and advances includes : a) Due from Officers of the Company Maximum during the year b) Due from Associate Companies Niraj Realators Private Limited Ashok.B. Jiwrajka (HUF) Dilip B. Jiwrajka (HUF) Surendra B. Jiwrajka (HUF) D. Surendra & Co Grabal Alok Impex Limited Honey Comb Knit Fabric Tulip Textiles Vaibhav Knit Fab Pramita Creation Private Limited Jiwrajka Associates Private Limited c) Due from Subsidiary Companies Amigo Sports Private Limited Alok Apparels Private Limited Alok Inc Alok Infrastructure Limited Alok Industries International Limited F-29

256 ANNEXURE 11 STATEMENT OF CURRENT LIABILITIES & PROVISIONS (Rs. in Crores) Particulars For Six months ended For the year ended March 31, Sept. 30, A) CURRENT LIABILITIES : Sundry Creditors Total Outstanding dues to : - Micro Enterprises and Small Enterprises* - Creditors other than Micro Enterprises and Small Enterprises * As per information available with the Company. There are no dues outstanding for more than 30 days exceeding Rs 0.01 Crore Unclaimed Dividend Interest accrued but not due on loans Advance from customers TOTAL (A) B) PROVISIONS Provision for Gratuity and Compensated Absences Proposed Dividend Provision for Tax on Dividend Provision for Taxation (Net of Advance Tax) TOTAL (B) TOTAL (A+B) F-30

257 ANNEXURE 12 STATEMENT OF OTHER INCOME (Rs. in Crores) Particulars For Six months ended For the year ended March 31, Sept. 30, Directly business related Recurring Exchange Rate difference (Net) Provision for Doubtful Debts and Advances written back Sundry Credit Balances written back Provision for Leave Encashment written back Non - recurring Miscellaneous Income Profit on sale of Assets (Net) Directly non-business related Recurring Dividend Income : Non - recurring Interest on advance payment of taxes Rent Profit on sale of Current Investments (Net) TOTAL F-31

258 ANNEXURE 13 STATEMENT OF DIVIDEND (Rs. in Crores) Particulars For Six months ended For the year ended March 31, Sept. 30, Rate of Dividend on equity shares Dividend Proposed on Equity Shares (Excess)/Short provision for Dividend of earlier year (including tax thereon) Dividend proposed on Preference Shares - 12% 14% 12% 12% 10% (0.19) (0.39) (2.08) Corporate Dividend Tax Equity Shares Preference Shares F-32

259 ANNEXURE 14 STATEMENT OF ACCOUNTING RATIOS Particulars For Six months ended Sept. 30, 2008 For the year ended March 31, (Rs. in Crores) Profit attributable to equity shareholders Restated Net profit after tax Less: Dividend on Preference Shares including Dividend tax Net Profit Available for Equity Shareholders (Basic) Add: Interest payable on FCCBs and exchange rate difference on FCCBs (Net of Tax) Add: Preference Dividend payable Add: Interest on convertible debenntures (Net of tax) Net profit available for Equity Shareholders (Dilutive) Net Worth 1, , , Weighted average Number of equity shares outstanding Weighted average number of Equity Shares Basic (Nos.) Add: Effect of Share Application Money (Nos.) Add: Effect of potential equity shares on conversion of warrants (Nos.) Add: Effect of potential Equity Shares on conversion of FCCBs (Nos) Add: Effect of potential Equity Shares on conversion of OFCD (Nos) Add: Effect of potential Equity Shares on conversion of OCPSs (Nos) Weighted average number of Equity Shares Dilutive (Nos.) Outstanding Shares at Year End (Nos) 195,529, ,233, ,860, ,392, ,272,171 87,693,304 1,111,912 11,499,454 19,800, , ,788 16,346 14,861,438 28,461,359 31,311,247 27,912,204 5,068, ,197 5,080,298 14, ,213, ,889, ,494, ,385, ,328, ,248,206 88,835, ,974, ,174, ,371, ,468, ,017,086 88,230,718 Face Value of Equity Shares Earning per share (EPS) Basic EPS (in Rs.)* (Net Profit Available for Equity Shareholders - (Basic)* / Weighted average number of Equity Shares Basic (Nos.)) Diluted EPS (in Rs.)* F-33

260 (Net Profit Available for Equity Shareholders - (Diluted)* / Weighted average number of Equity Shares Diluted (Nos.)) Return on Net Worth (in %)* 4.15% 13.68% 16.37% 12.79% 13.13% 17.19% (Restated Net Profit after Tax/ Net Worth * 100) Net Asset value per Share (in Rs.)* (Net Worth* / Outstanding Shares at Year End (Nos)) * Not annualised in case of Sept, F-34

261 ANNEXURE - 15 CAPITALIZATION STATEMENT * Borrowings Short 1, Long Term 4, , Shareholders' Funds Equity Share Capital Share Warrants Share Application Money Reserve and Surplus 1, Total Shareholders Fund 1, Long Term Debt / Equity 2.60 (Rs in Crores) Pre-Issue Post-Issue# * Based on Statement of Assets & Liabilities, as restated as at # The corresponding post issue figures are not determinable at this stage pending finalisation of size & price of Rights Borrowings which are repayable with in a year from the date of sanction is considered as short term loan. F-35

262 ANNEXURE - 16 TAX SHELTER STATEMENT (Rs in Crores) Particulars For Six months ended For the year ended March 31, Sept. 30, Tax Rate 33.99% 33.99% 33.66% 33.66% 36.59% 35.88% Tax Rate ( MAT ) 10.30% 10.30% 10.20% 10.20% 7.84% 7.84% Profit Before Tax Tax at Notional Rate Tax at MAT rate Adjustments : Timing Differences Difference between tax depreciation and book depreciation Other Adjustments (7.56) (15.31) Permanent Differences Net Adjustment Tax Saving on above adjustment Total taxation (Current Tax) Taxation of September 30, 2008 is on estimated basis as actual tax liability will be determined after 31st March, F-36

263 AUDITORS REPORT The Board of Directors, Alok Industries Limited B-43, Mittal Tower, Nariman Point, Mumbai Dear Sirs; A. We have examined the attached Consolidated Financial Information( CFI ) of Alok Industries Limited (the Company ), its subsidiaries and associates (the Company, subsidiaries and associates constitute the Group ), as approved by the Board of Directors of the company prepared in terms of the requirements of : a. Paragraph B (1) of Part II of Schedule II of the Companies Act, 1956 ( the Act ); b. the Securities and Exchange Board of India( SEBI ) (Disclosure and Investor Protection)Guidelines, 2000 as amended till Date ( SEBI Guideline ); c. The Guidance Note on Reports in Company Prospectus and Guidance Note on Audit Reports/ Certificates on Financial Information in Offer Documents issued by the Institute of Chartered Accountants of India and terms of reference received from the Company in connection with the proposed issue of Equity shares of the Company on Right basis ( Right Issue ). B. These CFI have been extracted by the Management from the Consolidated Financial Statements (CFS) for the year ended March 31, 2008, 2007 audited by us. The Company had not prepared CFS for the year ended March 31, 2006, 2005, 2004 as the same was not applicable to the Company at that time. C. We have also examined the CFI of the Group for the period April 1, 2008 to September 30, 2008 prepared and approved by the Board of Directors of the Company in its meeting held on January 30, 2009 for the purpose of disclosures in the Offer Document of the Company. The said information have been extracted by the Management form the financial statements audited by us for the period April 1, 2008 to September 30, CFI includes followings from the financial statements of certain subsidiaries as referred to in note no. 1(A), 1(J), 1(K), 1(L) and 1(O) of part E of Annexure IV which we did not audit: (Rs in Crores) As at and for the year/period ended Total assets (net) Total revenue Net cash inflows / (outflow) September 30, (61.90) March 31, March 31, CFI includes followings from the financial statements of Associate as referred to in note no. 2(A) and 2(B) of part E of Annexure IV, which we did not audit: (Rs in Crores) As at and for period ended Share of Profit / (Loss) September 30, 2008 (40.12) These financial statements and other financial information were audited by other auditors, whose reports were furnished to us by the Management of the Company, and our opinion was based solely on the report of these other auditors. 2. CFI includes followings from the financial statements of certain subsidiaries and associates as referred to in note no. 1(H), 1(I), and 2(B) of part E of Annexure IV which are unaudited: (Rs in Crores) As at and for the year ended March 31, 2008 September 30, 2008 Subsidiaries: Assets Net Cash inflows Associates: Profit / (Loss) These financial statements and other financial information were unaudited; we have relied upon the such financial statements as provided by the Company s Management for the purpose of consolidated financial statement of the F-37

264 Group. D. In accordance with the requirements of Paragraph B of Part II of Schedule II of the Act, the SEBI Guidelines and terms of our engagement agreed with you; we further report that: 1. The Consolidated Summary Statement of Assets and Liabilities of the Group, as restated as at September 30, 2008 and March 31, 2008, 2007, examined by us as set out in Annexure I to this report are after making adjustments and regrouping as in our opinion were appropriate and more fully described in Significant Accounting Policies, Changes in Significant Accounting Policies and Selected Notes (Refer Annexure - IV). 2. The Consolidated Summary Statement of Profit and Loss A/c of the Group, as restated for the period April 1, 2008 to September 30, 2008 and year ended March 31, 2008, 2007, examined by us, as set out in Annexure II to this report are after making adjustments and regrouping as in our opinion were appropriate and more fully described in Significant Accounting Policies, Changes in Significant Accounting Policies and Selected Notes (Refer Annexure - IV). 3. The Consolidated Summary Statement of Cash Flow Statement of the Group, as restated for the period April 1, 2008 to September 30, 2008 and year ended March 31, 2008, 2007, examined by us, as set out in Annexure-III to this report are after making adjustments and regrouping as in our opinion were appropriate and more fully described in Significant Accounting Policies, Changes in Significant Accounting Policies and Selected Notes (Refer Annexure - IV). 4. We draw attention to note no:14 of part E Annexure-IV regarding investment in subsidiary companies and Associates, considered good for the reasons stated in the said note and note no:16 of part E of Annexure IV regarding insurance claim receivable amounting to Rs Crores, considered recoverable for the reasons stated in the said note. 5. Based on the above, we are of the opinion that the restated financial information have been made after incorporating: Adjustments for the changes in accounting policies retrospectively in respective financial years to reflect the same accounting treatment as per changed accounting policy for all the reporting periods. Adjustments for the material amounts in the respective financial years to which they relate. And there are no extra-ordinary items that need to be disclosed separately in the accounts and qualification adjustments. 6. We have also examined the following consolidated other financial information set out in Annexure prepared by the management and approved by Board of Directors relating to the Company and its Subsidiaries and Associates for the period April 1, 2008 to September 30, 2008 and year ended March 31, 2008, a) Statement of Consolidated Related Party transactions enclosed in Annexure-V. b) Statement of Segment Reporting Consolidated (As Restated) enclosed in Annexure-VI. c) Statement of Secured and Unsecured Loans (Consolidated), As Restated enclosed in Annexure-VII. d) Statement of Investment (Consolidated) enclosed in Annexure-VIII. e) Statement of Sundry Debtors Consolidated (As Restated) enclosed in Annexure-IX. f) Statement of Loans, Advances and Current Assets Consolidated (As Restated) enclosed in Annexure-X. g) Statement of Current Liabilities and Provisions Consolidated (As Restated) enclosed in Annexure-XI. h) Statement of Other Income Consolidated (As Restated) enclosed in Annexure-XII. i) Statement of Dividend enclosed in Annexure-XIII. j) Statement of Accounting Ratios (Consolidated) enclosed in Annexure-XIV. k) Capitalisation Statement (Consolidated) enclosed in Annexure-XV. In our opinion the financial information contained in Annexure I to XV of this report read along with the Significant Accounting Policies, Notes and Changes in Significant Accounting Policies, as restated (Refer Annexure - IV) prepared after making adjustments and regrouping as considered appropriate have been prepared in accordance with Paragraph B of Part II of Schedule II of the Act and the DIP Guidelines. 7. This report should not, in any way be construed as a re-issuance or re-dating of any of the previous audit reports issued by the auditors for the respective period and years nor should this reports be construed as a new opinion on any of the financial statements referred to herein. 8. Our report is intended solely for use of the management and for inclusion in the offer document in connection with the proposed issue of equity shares on Right basis of the Company. Our report and should not be used for any other purpose except with our consent in writing. F-38

265 Yours faithfully, For Gandhi & Parekh Chartered Accountants Devang Parekh Partner Membership No.: Place: Mumbai Date: February 09, 2009 F-39

266 Sr. No. ANNEXURE - I STATEMENT OF ASSETS & LIABILITIES - CONSOLIDATED (AS RESTATED) Particulars A Fixed Assets : September 30, 2008 (Rs. in Crores) As at As at March 31, Gross Block (Refer note no.8(i) of part E of Annexure IV) 3, , , Less : Depreciation (Refer note no.8(ii) of part E of Annexure IV) Net Block 3, , , Add: Capital Work in Progress / Incidental Expenditure During Construction Period (Refer note no. 8(III) of part E of Annexure IV) 1, , , , , B Investments (Includes goodwill on consolidation of Associate Company for FY Rs Crores) C Current Assets, Loans and Advances Inventories Sundry Debtors (Refer note no. 9 of part E of Annexure IV) Cash and bank balances* 1, , Loans and Advances , , , D Liabilities and Provisions : Secured Loans 5, , , Unsecured Loans Current Liabilities and Provisions (Refer note no. 10 of part E of Annexure IV) 6, , , E Deferred Tax Liability (Refer note no. 11 of part E of Annexure IV) F Minority Interest G Networth (A+B+C-D-E-F) 1, , , H Represented by Share Capital Share Application Money Share Warrants Reserves & Surplus (Refer note no. 12 of part E of Annexure 1, , IV)# Networth 1, , , * Includes Rs Crores (Rs Crores as at ) towards 100% LC margin against import of Plant & Machinery and Rs Crores (Rs Crores as at ) kept in bank deposits as at , pending utilisation towards ongoing expansion. # Includes Capital Reserve on consolidation of Subsidiary Company Rs Crores as at , Rs Crores as at F-40

267 ANNEXURE - II STATEMENT OF PROFIT & LOSS ACCOUNT - CONSOLIDATED (AS RESTATED) Particulars (Rs. in Crores) For six months ended For the year ended March 31, Sept. 30, INCOME Sale of products manufactured by the company (Net of Excise) 1, , , Sale of Traded Goods Other Income Total Income 1, , , EXPENDITURE Raw Materials consumed , , Purchase of Traded Goods (Increase)/Decrease in Inventories (122.55) (103.83) (65.33) Staff Costs Operating & Administrative Expenses Selling and Distribution Expenses Profit Before Interest, Depreciation & Tax Interest & Finance Charge (Net) Depreciation / Amortization Profit before Tax Provision for Tax - Current Tax MAT Credit entitlement - (4.12) (1.11) - Deferred tax Fringe Benefit Tax Profit after Tax before extraordinary Items Extraordinary Items Profit after Tax after extraordinary Items Adjustment (Refer Note no7 of part B of Annexure IV) (1.38) (3.46) 5.31 Current Tax Impact of Adjustment (0.60) Deferred Tax Impact of Adjustment (0.90) Net Profit as restated before Minority interest and Share in associate Share of Minority interest Share of profit/(loss) in respect of investment in associate companies (40.15) Net Profit as restated Add : Balance brought forward from previous year Balance available for Appropriation, as restated APPROPRIATIONS Transfer to General Reserve Transfer to Debenture Redemption Reserve Excess/ (short) provision of Dividend - (0.19) (0.39) Dividend on Equity Shares Dividend on Preference Shares Corporate Dividend Tax thereon Balance carried to Balance Sheet as restated F-41

268 ANNEXURE - III CASH FLOW STATEMENT- CONSOLIDATED (AS RESTATED ) Particulars For six months ended Sept. 30, 2008 (Rs. in Crores) for the year ended March 31, A] Cash Flow from Operating Activities Net Profit Before Tax Adjustment on account of restatement (Refer Note no. 7 of part (1.38) (3.46) 5.31 B of Annexure IV) Restated Profit Before Tax Adjustments for: Depreciation / Amortisation (Refer Note no. 7 of part B of Annexure IV) Unrealised gain on Cash and cash equivalent - (0.28) 1.53 Prior period items (Refer Note no. 7 of part B of Annexure IV) (0.25) 0.04 (0.02) Excess of Cost over Fair value of current Investments Effect of exchnage rate change on investment (3.49) (1.37) Dividend Income (0.01) (0.30) (0.27) Interest Paid (net) (Profit) / Loss on sale of fixed assets (net) (0.89) (1.08) 0.09 (Profit) / Loss on sale of Current Investments (net) (0.30) (0.19) (0.24) Operating Profit before working capital changes Adjustments for (Increase)/Decrease in Inventories (107.09) (306.79) (106.31) (Increase)/Decrease in Trade Receivable (44.50) (91.54) (192.05) (Increase)/Decrease in Loans and Advances (73.29) (343.20) (130.67) Increase/(Decrease) in Current Liabilities Cash Generated from operations Income Taxes Paid (21.31) (51.03) (21.71) Net cash Generated from operating activities B] Cash flow from Investing Activities Purchase of fixed assets (672.13) (1,649.20) (902.83) Sale / Adjustment of fixed assets Purchase of Investments (222.60) (207.82) (195.82) Sale of Investments Margin Money Deposits matured/(placed) (17.93) (228.93) Dividends Received Interest Received Share Application Money Paid (87.59) (106.69) Inter Corporate Deposits (Granted) / Refunded - Net 4.00 (5.81) Net cash used in Investing Activities (815.08) (1,510.81) (1,100.13) C] Cash flow from Financing Activities Proceeds from issue of Equity Shares (including premium) Proceeds from Share Application Money Proceeds from Issue of Share Warrants Proceeds from borrowings (net) , , Dividend Paid (Including Tax thereon) - (27.70) (23.95) Interest Paid (147.48) (248.24) (133.38) Net cash generated from Financing Activities , , Net Increase in Cash and Cash equivalents ( A+B+C) (338.75) 1, Cash and Cash equivalents at the beginning of the year 1, at the end of the year 1, , Net Increase in Cash and Cash equivalents (338.75) 1, F-42

269 NOTES TO CASH FLOW STATEMENT 1. Components of Cash & Cash Equivalent s include Cash, Cheques on hand and Bank balances in Current, debit balance of Cash Credit and Fixed Deposit Accounts. 2. Proceeds from borrowings reflect the increase in Secured and Unsecured Loans and is net of repayments. 3. Purchases of Fixed assets are stated inclusive of movements of Capital Work In Progress between the commencement and end of the period/year and are considered as part of investing activity. 4. Cash and Cash equivalents includes : September 30, 2008 March 31, 2008 March 31, 2007 (Rs. in Crores) (Rs. in Crores) (Rs. in Crores) Cash and Bank Balances 1, , Less: Margin Money Deposits * Unrealised (gain) / loss on foreign currency Cash and cash equivalents Total Cash and Cash equivalents 1, , * Margin money being restricted for its use have been excluded from cash and cash equivalent and grouped under the investment activity. 5. Figures have been regrouped / rearranged wherever necessary. 6. The Cash Flow Statement has been prepared in accordance with the requirements of Accounting Standard "AS 3" Cash Flow Statement. F-43

270 ANNEXURE IV CONSOLIDATED SUMMURY OF SIGNIFICANT ACCOUNTING POLICIES AND SUMMARY OF CHANGE IN ACCOUNTING POLICY TO THE RESATED SUMMARY STATMENTS A) SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Preparation of Financial Statements The Consolidated financial statements of the Group are prepared under the historical cost convention and in accordance with the requirements of the Companies Act, Principles of Consolidation The consolidated financial statements relate to Alok Industries Limited, its subsidiaries and associates ( the Group ). The consolidated financial statements (drawn up to the same reporting date as of the company, except in the case of Grabal Alok (UK) Limited where the financial statements have been drawn up to September 27, 2008) have been prepared on the following basis. a) The financial statements of the company and its subsidiary companies are combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra-group balances and intra-group transactions in accordance with Accounting Standard (AS) 21 Consolidated Financial Statements. b) The consolidated financial statements include the share of profit / loss of associate companies, which are accounted under the Equity Method as per which the share of profit of the associate company has been added to the cost of investment. An associate is an enterprise in which the investor has significant influence and which is neither a subsidiary nor a joint venture. c) The excess of cost to the company of its investment in subsidiary companies over its share of equity of the subsidiary companies at the dates, on which the investments in the subsidiary companies are made, is recognised as Goodwill being an asset in the consolidation financial statements. Alternatively, where the share of equity in the subsidiary companies as on the date of investment is in excess of cost of investment of the company, it is recognised as Capital Reserve and shown under the head Reserves & Surplus, in the consolidated financial statements. d) Minority Interest in the net assets of consolidated subsidiaries consist of the amount of equity attributable to the minority shareholders at the dates on which investments are made by the company in the subsidiary companies and further movements in their share in the equity, subsequent to the dates of investments. e) As per Accounting Standard Interpretation (ASI) 15 on Notes to the Consolidated Financial Statements, only the notes involving items which are material need to be disclosed. Materiality for this purpose is assessed in relation to the information contained in the consolidated financial statements. Further, additional statutory information disclosed in separate financial statements of the subsidiary and / or a parent having no bearing on the true and fair view of the consolidated financial statements are not disclosed in the consolidated financial statements. f) Consolidated Financial Statement have been prepared using uniform accounting policies for like transaction & other events in similar circumstances, however in case of depreciation it was not practicable to use uniform accounting policy in the case of a subsidiary company Mileta, a.s., as at September 30, 2008 having gross block of assets Rs Crores i.e. 3.08% of group fixed assets and depreciation on the same for the period is Rs Crores i.e. 2.84% of total depreciation has been calculated on written down value method. 3. Use of Estimates The preparation of financial statements in conformity with the generally accepted accounting principles require estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between the actual results and estimates are recognized in the period in which the results are known / materialize. 4. Revenue Recognition Revenue on sale of products is recognized when the products are dispatched to customers, all significant contractual obligations have been satisfied and the collection of the resulting receivable is reasonably expected. Sales are stated net of returns and sales tax collected. Revenue in respect of insurance / other claims, interest etc. is recognized only when it is reasonably certain that the ultimate collection will be made. F-44

271 Revenue from construction contracts is recognised by adopting Percentage Completion Method. It is stated on the basis of physical measurement of work actually completed at the balance sheet date, taking into account contract price and revision thereto. 5. Fixed Assets 2. Own Assets: Fixed Assets are stated at cost of acquisition or construction including directly attributable costs. They are stated at historical cost less accumulated depreciation and impairment loss, if any. 3. Assets taken on lease: 6. Investments a) Finance Lease: Assets taken on lease after April 1, 2001 are accounted for as fixed assets in accordance with Accounting Standard (AS) 19 on Leases. Accordingly, the assets have been accounted at fair value. Lease payments are apportioned between finance charges and reduction of outstanding liability. b) Operating Lease: Assets taken on lease under which, all the risk and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under operating leases are recognized as expenses on accrual basis in accordance with the respective lease agreements. Investments classified as Long Term Investments are stated at cost. Provision is made to recognise a decline, other than temporary, in the value of investments. Current investments are carried at cost or fair value whichever is lower. 7. Capital Work- in-progress / Incidental Expenditure During Construction Projects under commissioning are carried forward at cost as capital work in progress and represent payments made to contractors including advances and directly attributable costs. 8. Depreciation / Amortisation a) Depreciation on Fixed Assets is provided on Straight Line Method at the rates and in the manner specified in Schedule XIV to the Companies Act, b) Cost of leasehold land is amortized over the period of lease. c) Trademarks are amortized over the period of ten years from the date of capitalization. d) Computer Software is amortized over the period of five years from the date of capitalization. 9. Foreign Currency Transactions Income or Expenses in foreign currencies are converted at exchange rate prevailing on the date of the transaction. Non-monetary foreign currency items are carried at cost. Foreign currency monetary assets and liabilities other than net investment in non-integral foreign operations are translated at the exchange rate prevailing on the balance sheet date. Exchange difference arising on monetary items that, in substance, form part of an enterprise s net investments in a non-integral foreign operation are accumulated in a foreign currency translation reserve. 10. Inventories Items of Inventories are valued on the basis given below: 1. Raw Materials, Packing Materials, Stores and Spares and Trading goods: at cost determined on First In First Out (FIFO) basis or net realisable value, whichever is lower. 2. Process stock and Finished Goods: At weighted average cost or net realisable values whichever is lower. Cost comprises of cost of purchase, cost of conversion and other costs incurred in bringing the inventory to their present location and condition. 11. Employee Benefits (Refer Note No. 1 of Part B ) a) Defined Contribution Plan Company s contribution paid/ payable for the year to define contribution retirement benefit scheme is charged to Profit and Loss account. b) Defined Benefit Plan and other long term benefit plan F-45

272 Company s liabilities towards defined benefit scheme and other long term benefit plans are determined using the projected unit credit method. Actuarial valuation under projected unit credit method are carried out at Balance Sheet date, Actuarial gains/losses are recognised in Profit and Loss Account in the period of concurrence of such gains and losses. Past service cost is recognised immediately to the extent benefits are vested otherwise it is amortized on straight line basis over running average periods until the benefits become vested. The retirement benefit obligation is recognised in Balance Sheet represents present value of the defined benefit obligations as adjusted for unrecognized past service cost and as reduced by fair value of scheme assets any asset resulting from this calculation is limited to past service cost, the present value is available refunds and reduction in future contribution to the scheme. c) Short Term Employee Benefits Short term employee benefits expected to be paid in exchange for the services rendered by the employee are recognised undiscounted during the period the employee renders the services, these benefits include incentive, bonus. 12. Accounting of CENVAT credit Cenvat credit available is accounted by recording material purchases net of excise duty. Cenvat credit availed is accounted on adjustment against excise duty payable on dispatch of finished goods. 13. Government Grants Grants, in the nature of interest / capital subsidy under the Technology Up gradation Fund Scheme (TUFS), are accounted for when it is reasonably certain that ultimate collection will be made. Government grants not specifically related to fixed assets are recognised in the Profit and Loss Account in the year of accrual / receipt. 14. Borrowing Costs Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue. 15. Income taxes Tax expense comprises of current tax, deferred tax and fringe benefit tax (FBT). Current tax and deferred tax are accounted for in accordance with Accounting Standard (AS) 22 on Accounting for taxes on Income. Current tax is measured at the amount expected to be paid / recovered from the tax authority using the applicable tax rates. Deferred tax assets and liabilities are recognised for future tax consequence attributable to timing difference between taxable income and accounting income that are capable of reversing in one or more subsequent periods and are measured at relevant enacted / substantively enacted tax rates. At each balance sheet date, the Company reassesses unrealised deferred tax assets to the extent they become reasonably certain or virtually certain of realisation, as the case may be. FBT is recognised in accordance with the relevant provision of Income-tax Act, 1961 and the Guidance Note on FBT issued by ICAI. Minimum Alternate Tax (MAT) credit entitlement is recognised in accordance with the Guidance Note on Accounting for credit available in respect of Minimum Alternate Tax under the Income-tax Act, 1961 issued by ICAI. 16. Intangible Assets Intangible assets are recognised only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprise and the cost of the assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortisation and accumulated impairment losses, if any. 17. Impairment of Fixed Assets At the end of each year, the company determines whether a provision should be made for impairment loss on fixed assets by considering the indications that an impairment loss may have occurred in accordance with Accounting Standard (AS 28) ''Impairment of Assets''. An impairment loss is charged to the Profit and Loss Account in the year in which, an asset is identified as impaired, when the carrying value of the asset exceeds its recoverable value. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount. 18. Provisions, Contingent Liabilities and Contingent Assets F-46

273 Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the Notes. Contingent Assets are neither recognized nor disclosed in the financial statements. 19. Issue Expenses Expenses incurred in connection with the issue of shares, debentures and Foreign Currency Convertible Bonds, are adjusted against Securities Premium Account. 20. Accounting for Derivatives The company uses derivative instruments to hedge its exposure to movements in foreign exchange rates, interest rates and currency risks. The objective of these derivative instruments is to reduce the risk or cost to the company and is not intended for trading or speculation purposes. Interest Rate Swaps, Currency Option and Currency Swaps, in the nature of firm commitment and highly probable forecast transactions, entered into by the Company for hedging the risks of foreign currency exposure (including interest rate risk) are accounted based on the principles of prudence as enunciated in Accounting Standard 1(AS 1) Disclosure of Accounting Policies. B) SIGNIFICANT CHANGES IN ACCOUNTING POLICIES 1. Consequent to revision of Accounting Standard AS 15 Employee Benefits, the group has adopted the revised accounting standard with effect from April, 1, Consequent to the notification of the Companies (Accounting Standards) Rules, 2006, with effect from April 1, 2007, the foreign exchange differences in respect of liabilities for the acquisition of imported assets are recognised in the profit and loss account against the earlier requirement of adjusting these to the carrying cost of such fixed assets except for such differences in respect of liabilities incurred prior to April 1, 2004, accordingly these exchange differences, which were earlier included in Fixed Assets have been recognised to the respective earlier years. 3. Consequences to the withdrawal of guideline, on Expenditure During Construction Period (EDCP), by ICAI, on 19 th August 2008, the group has charged only directly attributable cost to the carrying cost of the fixed asset from the financial year Debts, which were considered doubtful and written off and Sundry Credit balance in the previous year/period ended and which have been subsequently recovered and written back during the subsequent year ended, have been adjusted in the years when such debts were originally written off. Accordingly, adjustments have been made to the summary statement of profits and losses, as restated for the each of the years or period. 5. In the financial statements for the period ended September 30, 2008, March 31, 2008, 2007, certain items of income / expenses have been identified as prior period items. For the purpose of this statement, such prior period items have been appropriately adjusted in the respective years. 6. The Profit & Loss Account of some years include amounts paid / provided for or refunded / written back in respect of shortfall / excess income tax arising out of assessments, appeals, etc., which has now been adjusted in the respective years. Also, income tax (current tax and deferred tax) has been computed on adjustments made as detailed above and has been adjusted in the restated profits and losses for the period ended September 30, 2008, March 31, 2008, Summarised Statement of impact of restatement made in the audited accounts for the respective years and its impact on Profits of the Company: Sr. No. (i) (ii) (Rs. in Crores) Period Ended Year Ended Particulars September 30, March 31, March 31, Employee Benefits (Refer Note No. 1 of part B above) Exchange Differences on Fixed Assets (Refer Note No. 2 of part B above) F-47

274 (iii) (iv) (v) (vi) Incidental Expenditure During Construction (Refer Note No. 3 of part B above) Provision for doubtful debts & Sundry Credit balance (Refer Note No. 4 of part B above) Sundry balances written back (Refer Note No. 4 of part B above) Prior Period Items (Refer Note No. 5 of part B above) - (0.26) (1.56) (1.06) (2.18) 2.06 (0.01) (0.42) (1.50) 0.25 (0.04) 0.02 (vii) Depreciation (0.56) (0.56) (0.23) Sub Total [A] (1.38) (3.46) 5.31 (viii) (ix) Current Tax Impact (Refer Note No. 6 of part B ) Deferred Tax Impact (Refer Note No.6 of part B ) (0.60) (0.90) Sub Total [B] {(viii) + (ix)} (1.50) Total [A] + [B] (1.03) (2.32) 3.81 C) COMPARABILITY The figures for the six months period from April 1, 2008 to September 30, 2008 are not comparable with figures for all previous years. D) COMMENTS IN AUDITORS REPORTS : 1. Comments, which do not required any corrective adjustment in the consolidated financial information are as follow :- I. Holding Company d) In the Auditor s Report for the period April 1, 2008 to September 30, 2008 and year ended March 31, 2008 attention was drawn to investment made in subsidiary company considered good. e) In the Auditor s Report for the period April 1, 2008 to September 30, 2008 and year ended March 31, 2008 attention was also drawn regarding insurance claim receivable amounting to Rs Crores for being considered recoverable. II. Subsidiaries Alok Industries International Limited: a) In the Auditor s Report for the year ended March 31, 2008, attention was invited regarding investment in subsidiary company & associates and loans to such entities aggregating to Rs.2,969,000,783/-(USD 74,327,034/-), considered good and recoverable. b) In the Auditor s Report for the period April 1, 2008 to September 30, 2008, attention was invited regarding investment aggregating to Rs. 3,680,769,302/- (USD 77,739,300/-) in subsidiaries/associates companies, loans aggregating to Rs. 579,451,201/- (USD12,238,238/-)to such subsidiaries/associates and advance subscription aggregating to Rs. 417,133,682/- (USD 8,810,028/-), considered good and recoverable. Alok International Inc. a) In the Auditor s Report for the period April 1, 2008 to September 30, 2008, it is reported that auditor did not observed the physical counting of the inventories since that date was prior to the time of appointment as auditors of the company and reference was invited regarding physical verification of inventories purchased from holding company and lying in stock amounting to Rs. 78,118,379/- (USD 1,649,891/-) done by management and independent local accountant and being relied upon by statutory auditors. 2. MAOCARO 1988/CARO2003 F-48

275 I. Holding Company During the period April 1, 2008 to September 30, 2008, the Company has not carried out physical verification of fixed assets. However, the fixed assets are physically verified under a phased verification program, which is in our opinion, is reasonable. II. Subsidiaries Alok Infrastructure Limited: a) In the financial year ended March 31, 2007, auditor has reported that, as it was the first year of the existence of the company and the Fixed Assets are under construction, no physical verification of the fixed assets was considered necessary by the management. b) In the Financial year ended March 31, 2007, 2008 and for the period April 1, 2008 to September 30, 2008, auditor has reported that, there is no formal internal audit system/department as such, but the company s control procedures ensures reasonable internal checking of its financial and other records. Alok Realtors Private Limited a) In the financial year ended March 31, 2008 and for the period April 1, 2008 to September 30, 2008, the auditor has reported, that during the period the company has incurred a cash loss. b) For the period April 1, 2008 to September 30, 2008, the auditor has reported, that as at period end the company has accumulated loss which is more then 50% of its net worth. c) For the period April 1, 2008 to September 30, 2008, auditor has reported that, there is no formal internal audit system/department as such, but the company s control procedures ensures reasonable internal checking of its financial and other records. Alok Apparels Private Limited a) In the financial year ended March 31, 2008, the auditor have reported that, being the first year, the company is under process of developing & implementing Internal Control System with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. b) In the financial year ended March 31, 2008, the auditor has reported that, the company has incurred losses, which is more than 50% of its net worth. The company has incurred cash loss during the year. c) For the period April 1, 2008 to September 30, 2008, the auditor has reported that, the company has incurred losses, which exceeds its net worth. The company has incurred cash loss during the period. Alok Land Holdings Private Limited a) In the financial year ended March 31, 2008 and for the period April 1, 2008 to September 30, 2008, the auditor has reported, that during the period the company has incurred a cash loss. b) For the period April 1, 2008 to September 30, 2008, the auditor has reported, that as at period end the company has accumulated loss which is more then 50% of its net worth. c) For the period April 1, 2008 to September 30, 2008, the auditor has reported, that the Company has no formal Internal Audit system/department as such. However, its control procedures ensure reasonable internal checking of its financial and other records. Alok Retail (India) Limited (Formerly Alok Homes & Apparels Private Limited) a) In the financial year ended March 31, 2008 and for the period April 1, 2008 to September 30, 2008, the auditor has reported, that during the period the company has incurred a cash loss. Amigo Sport Private Limited (Formerly Alok Clothing Private Limited) a) In the financial year ended March 31, 2008 and for the period April 1, 2008 to September 30, 2008, the auditor has reported, that during the period the company has incurred a cash loss. F-49

276 Alok New City Infratex Private Limited a) For the period March 25, 2008 to September 30, 2008, the auditor has reported, that during the period the company has incurred a cash loss. Alok Aurangabad Infratex Private Limited a) For the period March 25,2008 to September 30, 2008, the auditor has reported, that during the period the company has incurred a cash loss. Alok HB Hotels Private Limited a) For the period May 2, 2008 to September 30, 2008, the auditor has reported, that during the period the company has incurred a cash loss. Alok HB Properties Private Limited a) For the period May 2, 2008 to September 30, 2008, the auditor have reported, that during the period the company has incurred a cash loss. E) SELECTED NOTES TO ACCOUNTS 1. The subsidiary / fellow subsidiaries companies considered in the consolidated financial statements are: Sr. No. Name of Subsidiaries Country of Incorporation Name of Holding company Ownership Interest A Alok Industries International Limited. British Virgin Alok Industries Limited 100% Island B Alok Infrastructure Limited # India Alok Industries Limited 100% C Amigo Sport Private Limited (Formerly India Alok Industries Limited 100% known as Alok Clothing Private Limited) * D Alok Retail (India) Limited (Formerly India Alok Industries Limited 100% known as Alok Homes & Apparels Private limited) + E Alok Apparels Private Limited India Alok Industries Limited 100% F Alok Land Holdings Private Limited India Alok Industries Limited 100% G Alok Realtors Private Limited India Alok Infrastructure Limited 100% H Alok New City Infratex Private Limited India Alok Land Holdings Private Limited 100% I Alok Aurangabad Infratex Private India Alok Land Holdings Private 100% Limited Limited J Alok Inc. U.S.A. Alok Industries Limited 100% K Mileta a. s. $ Czech Republic Alok Industries International 79.62% Limited L Alok International Inc. U.S.A Alok Industries Limited 100% M Alok HB Properties Private Limited. India Alok Infrastructure Limited 100% N Alok HB Hotels Private Limited. India Alok Infrastructure Limited 100% O Alok European retail S.R.O. Czech Republic Alok Industries International Limited 100% # The status of the company has been changed from Private Limited to Public Limited w.e.f. 13 th October, * The name of the company has changed from Alok Clothing Private Limited to Amigo Sport Private Limited w.e.f 18 th September The name of the company has changed from Alok Homes & Apparels Private limited to Alok Retail (India) Limited w.e.f. 8 th August 2008 $ The stake in the company has been increased from 60% to 79.62% from 16 th July, The associate companies considered in the consolidated financial statements are: Sr. No. Name of associates Country of Incorporation Ownership Interest A Grabal Alok (UK) Limited (Formerly known as Hamsard 2353 Limited) British Virgin Island 42.90% F-50

277 Sr. No. Name of associates Country of Incorporation Ownership Interest B Ashford Infotech Private Limited India 50.00% C Alspun Infrastructure Limited India 50.00% 3. Contingent Liabilities in respect of : Sr. No. A B Particulars 30 th Sep Customs duty on shortfall in export obligation in accordance with EXIM Policy (The company is hopeful of meeting the export obligation within the stipulated period) Guarantees given by banks on behalf of the Company Guarantee given to bank for loan taken by Subsidiary Company Amount Unascertained Amount Unascertained (Rs. In Crores) As at march 31, Amount Unascertained C D Bills discounted E Arrears of fixed cumulative dividend on preference Shares (Not subject to deduction of income-tax) Capital Commitment (Rs. in Crores) Particulars 30 th Sep Estimated amount of contracts remaining to be executed on Capital Account and not provided for (Net of advances) The Company in accordance with the resolution passed by members by way of Postal Ballot on 14 th February 2008 issued for cash on preferential basis 1,98,00,000 warrants to the Promoter Group of the Company, which are convertible in to equity shares by giving the warrant holder, the option of subscribing for one equity share of the Company of Rs. 10/- each per warrant at a price of Rs.102/- per share, (including premium of Rs. 92/- per share), determined in accordance with the SEBI guidelines, at any time within 18 months from the date of allotment of the Warrants, in two stages viz. (a) 98,00,000 Warrants to be converted into Equity Shares on or before 31 st March, Against same 98,00,000 equity shares allotted on 28 th April 2008; and (b) 1,00,00,000 Warrants to be converted at the option of the warrant holder into Equity Shares on or before 31st July 2009, against which 10% of the issue price was received on the date of allotment of warrants in the previous year ended March 31, As at the date of this balance sheet (i.e. September 30, 2008) Rs crores has been brought in as share application money which has been treated as the balance 90% amount payable upon exercising of the option of conversion of warrants into equity shares. The said application money has since been refunded at the request of the warrant holder subsequent to the date of this balance sheet Foreign Currency Convertible Bonds are carried forward from earlier year and pending conversion / redemption as at September 30, 2008 aggregating to Rs Crores are disclosed under unsecured loans. The total proceeds on this account have been fully utilized during the earlier year. 7. Lease : The Company has acquired plant and machinery and computers on hire purchase in nature of finance lease. The company capitalized the said assets at their fair value as the leases are in the nature of finance leases as defined in AS 19. Lease payments are apportioned between finance charge and reduction of outstanding liabilities. The details of lease rentals payable in future are as follows: (Rs. in Crores) Due Total minimum lease payments outstanding Future interest on outstanding Present value of minimum lease payments Within one year April to September, Later than one year and not later than 5 years April to September, F-51

278 Due Total minimum lease payments outstanding Future interest on outstanding Present value of minimum lease payments Later than 5 years April to September, Fixed Assets : (Rs. in Crores) Period End Year End Sr. Particulars No. September 30, March 31, March 31, I) Gross Block as per annual report Adjustments on account of exchange difference of earlier years Adjustments on account of exchange difference (Refer Note no 7 (ii) of part B of Annexure IV) Gross Block as restated II) Depreciation as per annual report Adjustments on account of exchange difference of earlier years (0.01) (0.01) (0.01) Adjustments on account of exchange difference (Refer Note no 7 (vii) of part B of Annexure IV) Depreciation as per restated III) Capital Work In Progress/ Expenditure During Construction Period as per annual report Adjustments on account of indirect expenses of earlier years (2.49) (2.49) (2.49) Adjustments on account of indirect expenses ( Refer Note no 7 (iii) of part B of Annexure IV) (1.82) (1.82) (1.56) Capital Work In Progress/ Expenditure During Construction Period as restated Sundry Debtors : (Rs. in Crores) Period End Year End Sr. Particulars No. September 30, March 31, March 31, Sundry Debtors as per annual report Restatement on account of provision for doubtful debts of earlier year (0.79) (0.79) (0.79) Adjustments on account of provision for doubtful debts (Refer Note no 7 (iv) of part B of Annexure IV) (1.18) (0.12) 2.06 Sundry Debtors as restated Current Liabilities & Provisions : (Rs. in Crores) Period End Year End Sr. Particulars No. September 30, March 31, March 31, I) Current Liabilities as per annual report Restatement on account credit balance written back of earlier year (1.93) (1.93) (1.93) Adjustments on account credit balance written back (Refer Note no 7 (v) of part B of Annexure IV) Current Liabilities as restated II) Provisions as per annual report Restatement on account change of policy for leave encashment of earlier year (1.22) (1.22) (1.22) F-52

279 Restatement on account restatement of current tax of earlier year Adjustments on account change of policy for leave encashment (Refer Note no 7 (i) of part B of Annexure (1.57) (1.57) (1.57) IV) Tax effect of adjustments on account of Restatement (Refer Note no 7 (viii) of part B of Annexure IV) Provisions as restated Total (I+II) Deferred Taxation Deferred Tax Assets and Liabilities arising on account of timing differences are as under: (Rs. in Crores) Particulars 30 th Sep I) Deferred Tax Liability (DTL) i) Depreciation II) Deferred Tax Asset (DTA) i) Other items ii) Business / Depreciation loss as per I. T. Act iii) FCCB issue Expenses (I-II) Total Deferred Tax Liabilities (Net) Adjustments on account of restatement (0.04) (Refer Note no 7 (ix) of part B of Annexure IV) Restatement of earlier year Restated Deferred Tax Liabilities (Net) Reserves & Surplus : Sr. No. Period End Particulars September 30, 2008 (Rs. in Crores) Year End March 31, 2008 March 31, 2007 I) Reserve & Surplus as per annual report Adjustments on account of restatement (Refer Note no 7 of part B of Annexure IV) Restatement on account of prior period items of earlier year Prior Period Items (Refer Note No. 7 (vi) of part B of Annexure IV) (0.23) 0.02 (0.02) Reserve & Surplus as restated The company in accordance with the resolution passed by members by way of Postal Ballot on 28 th November, 2008 hived off it s retail business to a 100% subsidiary, namely Alok Retail (India) Limited w.e.f. 1 st December, During the period AIIL made investment in it s 100% subsidiary, namely: Alok European Retail S.R.O (AER), of Rs Crores and granted an advance aggregating to Rs.0.68 Crores. As per the financials statements as at September 30, 2008, the AER has incurred losses. AIIL for the time being, does not intend to continue with the business plans of investing further in AER and out of abundant caution, has made provision towards diminution in the value of investment of Rs Crores and for doubtful advances Rs Crores. Further, AIIL has also made investment in and given loans to its various other subsidiary companies and associates, and these entities have accumulated losses at the year end, though have positive net worth. These entities have embarked upon the growth plan, consequent to involvement of the company by renovating the production facilities, opening trendy stores and wider reach in the market and the directors of these entities expect such F-53

280 new initiatives to increase the sales volume and consequently the profitability. On the above mentioned basis, in the opinion of the company, the aforesaid investments and loans are considered good. 15. Derivative Contracts a) The company, during the period based on the Announcement of the Institute of Chartered Accountants of India Accounting for Derivatives along with the principles of prudence as enunciated in Accounting Standard (AS) 1 Disclosure of Accounting Policies has accounted for derivative forward contracts at fair values. The ICAI has mandated disclosures regarding derivatives instruments for the accounting periods ending on or after March 31, On that basis, changes in the fair value of the derivative instruments as at September 30, 2008 aggregating to Rs Crores (March 31, 2008 : Rs.9.95 Crores) have been debited to the Profit and Loss Account. The charge on account of derivative losses has been computed on the basis of MTM values based on the report of counter parties. b) For hedging currency and interest rate related risks, Category wise break-up of nominal amounts of derivative contracts entered and outstanding are given below. (Rs. in Crores) Sr. Particulars 30 th Sep No. 1 Interest Rate Swaps Currency Swaps Currency Options Total c) The period end foreign currency exposure that has not been hedged by derivative instruments or otherwise are as below: Amount receivable in foreign currency on account of the following (Rs. in Crores) Particulars Rupees (in Crores) Amount in foreign currency (in Crores) Foreign Currency Debtors USD GBP EUR Cash & Bank Balance USD Amount payable in foreign currency on account of the following (Rs. in Crores) Particulars Rupees (in Crores) Amount in foreign currency (in Crores) Foreign Currency Secured Loans USD EUR JPY Interest accrued but not due USD on loans EUR Unsecured Loan USD EUR 16. The Company during the year ended March 31, 2008, consequent to the damage caused to the assets by fire at its Texturising unit located at Silvassa, computed the loss of such assets in accordance with the terms of the policy and submitted the claim together with the details to the surveyors of the insurer for an amount aggregating to Rs Crores including for loss of profit and accounted the same in the books of account. During the period the insurer released payment of Rs. Nil (Rs Crores as at ) as at (including loss of profit) pending finalisation of the claim which has been adjusted to the claim receivable to the extent and the balance claim receivable of Rs Crores (Rs Crores as at ) as at is carried forward under Loans and Advances which would be adjusted on receipt of the final claim amount. On November 25, 2008 the Company has received Rs.25 Crores against Insurance claim lodged. F-54

281 17. Subsequent to the date of this Balance sheet i.e. September 30, 2008, the company has proposed a Right issue of Equity shares aggregating up to Rs.450 Crores and the Promoter group has since brought in an amount of Rs Crores towards their part entitlement in the aforesaid issue. 18. Provision for Income Tax of Rs Crores (Rs Crores as at ) as at has been computed on the basis of Minimum Alternate Tax (MAT) in accordance with Section 115JB of the Income Tax Act,1961, in view of deductions available to the company. Considering the future profitability and taxable positions in the subsequent years, the company has recognized MAT credit entitlement amounting to Rs. Nil (Rs Crores as at ) as at , aggregating to Rs. Nil Crores (Rs Crores as at ) as at , as an asset by crediting the Profit and Loss Account for an equivalent amount and disclosed under Loans and Advances in accordance with the Guidance Note on Accounting for credit available in respect of Minimum Alternate Tax under the Income Tax Act, 1961 issued by The Institute of Chartered Accountants of India. 19. The amounts in balance Sheet, Profit and Loss account and cash flow statement are rounded off to the nearest lakh and denominated in Crores of rupees. 20. The figures of the previous years have been reclassified / regrouped wherever necessary to correspond with those of the current period. F-55

282 ANNEXURE V CONSOLIDATED SUMMURY OF RELATED PARTY TRANSACTIONS I 1. Related Parties Disclosure a. Names of related parties and nature of relationship As per Accounting Standard (AS 18) Related Party Disclosures, Company's related parties disclosed as below: 1. Names of related parties and description of relationship As at September 2008 As at March 2008 As at March 2007 Associates Alok Denims (India) Private Limited Alok Denims (India) Private Limited Alok Denims (India) Private Limited Alok Finance Private Limited Alok Finance Private Limited Alok Finance Private Limited Alok Knit Exports Limited Alok Knit Exports Limited Alok Knit Exports Limited Alok Textile Traders Alok Textile Traders Alok Textile Traders Ashok B. Jiwrajka (HUF) Ashok B. Jiwrajka (HUF) Ashok B. Jiwrajka (HUF) Ashok Realtors Private Limited Ashok Realtors Private Limited Ashok Realtors Private Limited Buds Clothing Co. Buds Clothing Co. Buds Clothing Co. D. Surendra & Co. D. Surendra & Co. D. Surendra & Co. Dilip B. Jiwrajka (HUF) Dilip B. Jiwrajka (HUF) Dilip B. Jiwrajka (HUF) Grabal Alok Impex Limited Grabal Alok Impex Limited Grabal Alok Impex Limited Grabal Alok International Limited Grabal Alok International Limited Grabal Alok International Limited Vaibhav Knit Fab Vaibhav Knit Fab Vaibhav Knit Fab Grabal Alok (UK) Limited (Formerly known as Hamsard 2353 Limited) Grabal Alok (UK) Limited (Formerly known as Hamsard 2353 Limited) Grabal Alok (UK) Limited (Formerly known as Hamsard 2353 Limited) Green Park Enterprises Green Park Enterprises Green Park Enterprises Honey Comb Knit Fabrics Honey Comb Knit Fabrics Honey Comb Knit Fabrics Jiwrajka Associates Private Limited Jiwrajka Associates Private Limited Jiwrajka Associates Private Limited Jiwrajka Investment Private Limited Jiwrajka Investment Private Limited Jiwrajka Investment Private Limited Niraj Realtors & Shares Private Limited Niraj Realtors & Shares Private Limited F-56 Niraj Realtors & Shares Private Limited Nirvan Exports Nirvan Exports Nirvan Exports Nirvan Holdings Private Limited Nirvan Holdings Private Limited Nirvan Holdings Private Limited Pramatex Enterprises Pramatex Enterprises Pramatex Enterprises Pramita Creation Private Limited Pramita Creation Private Limited Pramita Creation Private Limited Surendra B. Jiwrajka (HUF) Surendra B. Jiwrajka (HUF) Surendra B. Jiwrajka (HUF) Tulip Textiles Tulip Textiles Tulip Textiles Alspun Infrastructure Limited Alspun Infrastructure Limited Alspun Infrastructure Limited Ashford Infotech Private Limited Ashford Infotech Private Limited Gogri Properties Private Limited Gogri Properties Private Limited II Key Management Personnel Key Management Personnel Key Management Personnel Ashok B. Jiwrajka Ashok B. Jiwrajka Ashok B. Jiwrajka Chandra Kumar Bubna Di Dilip B. Jiwrajka Chandra Kumar Bubna Di Dilip B. Jiwrajka Chandra Kumar Bubna Di Dilip B. Jiwrajka Surendra B. Jiwrajka Surendra B. Jiwrajka Surendra B. Jiwrajka Alok A. Jiwrajka Alok A. Jiwrajka Alok A. Jiwrajka III Relatives of Key Management Relatives of Key Management Relatives of Key Management Prita D. Jiwrajka Prita D. Jiwrajka Prita D. Jiwrajka S. P. Bubna S. P. Bubna S. P. Bubna

283 2. Nature of transaction with Associates, Key Management Personnel & Relatives of Key Management Personnel (Rs. in Crores) Transaction Financial Year (April March) Associates Key Management Personnel Relatives of Key Management Personnel a) Unsecured Loans Balance as at 1 st April 30 th Sep Taken during the year (Net) 30 th Sep Repaid / Adjustment during the year 30 th Sep Balance as at March th Sep b) Loans and Advances Balance as at 1 st April 30 th Sep Granted during the year (Net) 30 th Sep Received / Adjustment during the year 30 th Sep Balance as at March th Sep F-57

284 Transaction Financial Year (April March) Associates Key Management Personnel Relatives of Key Management Personnel c) Investments Balance as at 1 st April 30 th Sep Invested during year 30 th Sep Balance as at March th Sep d) Share Application Money Balance as at 1 st April 30 th Sep Invested during year 30 th Sep Balance as at March th Sep e) Sundry Debtors Balance as at March th Sep f) Sundry Creditors Balance as at March th Sep g) Turnover Sales of Goods 30 th Sep Sale of Fixed Assets and Stores & spares 30 th Sep h) Expenditure Purchase of goods 30 th Sep Purchase of Fixed Assets 30 th Sep F-58

285 Transaction Financial Year (April March) Associates Key Management Personnel Relatives of Key Management Personnel Rent 30 th Sep Remuneration 30 th Sep Interest paid 30 th Sep i) Dividend Paid 30 th Sep j) Income Dividend 30 th Sep Rent 30 th Sep Note: Related party relationship is as identified by the company and relied upon by the Auditors. F-59

286 ANNEXURE - VI STATEMENT OF SEGMENT REPORTING - CONSOLIDATED (AS RESTATED) A) Primary Segment: Geographical Segment The company considering its higher level of international operations and present internal financial reporting based on geographical location of customer, has identified geographical segment as primary segment. The geographic segment consist of: a) Domestic (Sales to customers located in India) b) International (Sales to customers located outside India) Revenue directly attributable to segments is reported based on items that are individually identifiable to that segment. The company believes that it is not practical to allocate segment expenses, segment results, fixed assets used in the company's business or liabilities contracted since the resources/services/assets are used interchangeably within the segments. Accordingly, no disclosure relating to same is made. (Rs. in Crores) Particulars For 6 months for the year ended March 31, ended Sept. 30, A) Geographical Segment Operating Revenue* Domestic , , International , , , , Restated Profit Before Interest & Tax after Minority Interest (Segment Results Unallocable) Less : Interest & Finance Charges Less : Tax Restated Profit After Tax B) Secondary Segment : Business Segment The Group during the period was having single business segment as reportable segment as per AS 17 "Segment Reporting". Hence there is no secondary segment to be reported. * Operating revenue mainly comprises of sale of products manufactured and traded by the Company, job charges and export incentives F-60

287 ANNEXURE VII STATEMENT OF SECURED & UNSECURED LOANS (CONSOLIDATED), AS RESTATED (Rs. in Crores) Particulars As at As at March 31, Rate Of Interest September 30, A) SECURED LOANS a) Convertible/Non Convertible Debentures Varied b) Term Loans (1) From Financial Institutions - Rupee Loans Varied Foreign currency loans Varied (2) From banks - Rupee Loans Varied 3, , , Foreign currency loans Varied , , , (3) From Others (Rupee Loan ) c) From Banks on Cash Credit Accounts, Working Capital Demand Loans etc Varied d) Loans under Hire Purchase/Lease Arrangements Varied Total - Secured Loans (A) 5, , , B) UNSECURED LOANS (a) Fixed Deposits 9% (b) Term Loans and Advances From Banks and Financial Institutions -Rupee Loans 11% - 14% Foreign Currency Loans 10% - 13% (c) Other Loans and Advances From Banks -Foreign Currency Loans From Others (d) Foreign Currency Convertible Bonds (FCCBs) 1% Total Unsecured Loans (B) Total Loan Funds (A+B) 6, , , F-61

288 Note : No unsecured loan taken from Promoter/Group Company/Associates Notes for security : 4. The debentures are secured by pari passu charge on the immovable property situated at Mouje Irana, Taluka Kadi, District Mehsana in the state of Gujarat. 5. Term loans from financial institutions (Including foreign currency loans) to the extent of Rs Crores are secured by (i) a pari passu first charge created/to be created on all present and future movable and immovable assets of the company subject to exclusive charges created/to be created on specific fixed assets in favour of specified lenders. (ii) a charge created/ to be created on all current assets of the company subject to a prior charge on such current assets created/to be created in favour of the company's bankers towards working capital requirements and (iii) the personal guarantees of three promoter directors. 6. Term loans from Financial Institutions to the extent of Rs Crores are secured by (i) subservient charge on all movable assets of the Company present and future subject to prior charge on specific movable assets in favour of the company s term lenders and towards working capital requirements (ii) the personal guarantee of three Promoter Directors of the Company. 7. Term loan from Financial Institution of Rs Crores is secured by (i) subservient charge on all the present and future moveable fixed assets of the company except land and building. 8. Term loans from from banks (Including foreign currency loans) to the extent of Rs Crores are secured by (i) a pari passu first charge created/to be created on all present and future movable and immovable assets of the company subject to exclusive charges created/to be created on specific fixed assets in favour of specified lenders. (ii) a charge created/ to be created on all current assets of the company subject to a prior charge on such current assets created/to be created in favour of the company's bankers towards working capital requirements and (iii) the personal guarantees of three promoter directors. 9. Term loans from Financial Institutions to the extent of Rs Crores are secured by (i) subservient charge on all movable assets of the Company present and future subject to prior charge on specific movable assets in favour of the company s term lenders and towards working capital requirements (ii) the personal guarantee of three Promoter Directors of the Company. 10. Term loan from the bank to the extent of Rs Crores is secured by (i) a first charge created/ to be created on the entire present and future movable fixed assets of the company (ii) mortgage of immovable properties located at falandi-silvassa (iii) the personal guarantee of three Promoter Directors of the Company. 11. Term loan from banks to the extent of Rs Crores is secured by (i) an exclusive charge created on specific assets financed by them and (ii) the personal guarantees of three promoter directors. 12. Term loans from the Banks to the extent of Rs Crores are secured by (i) subservient charge on all assets of the Company excluding Land and Building (ii) Pledge of company's investment in a subsidiary viz. Alok Industries International Limited (ii) the personal guarantee of three Promoter Directors of the Company. 13. Term loan from the Bank to the extent of Rs Crores are secured by subservient charge on all present and future moveable fixed assets, stocks and receivables of the Company subject to prior charge in favour of the company s term lenders and working capital bankers. 14. Term Loan from others is secured by, a pari passu first charge on all present & future current assets, movable properties, right under project agreements, lease rental contracts at Mumbai & Silvassa. 15. Working Capital limits from banks are secured by (i) hypothecation of Company s inventories, book debts etc. (ii) second charge created / to be created on the fixed assets of the Company (iii) immovable properties belonging to the Company / Guarantors and (iv) the personal guarantees of three promoter directors of the Company. 16. Hire Purchase Loans are secured by the respective assets, mainly Plant and Machinery and Equipments, purchased under the said loans. 17. Unsecured Loan are repayable as under : Before March, 2009 Before March, 2010 Before March, 2011 Rs Crores Rs Crores Rs Crores F-62

289 ANNEXURE VIII STATEMENT OF INVESTMENTS (CONSOLIDATED) AS RESTATED (Rs. in Crores) Particulars Long Term Investments In Equity shares Unquoted (Trade) Associates As at As at March 31, September 30, Nos. Amt. Nos. Amt. Nos. Amt. Alspun Infrastructure Limited (FV Rs. 10/-) 25,000-25, Ashford Infotech Private Limited (FV Rs. 10/-) 50, , Grabal Alok (UK) Limited (FV GBP 0.001) 184,131, ,131, Others Shirt Company (India) Limited (FV Rs. 10/-) 1000, , , Dombivali Nagri Sahakari Bank Limited (FV Rs. 50/-) 10, , , Kalyan Janata Sahakari Bank Limited (FV Rs. 25/-) 10, , , In Equity shares - Quoted (Trade) Others Grabal Alok Impex Limited (FV Rs. 10/-) 1,900, ,900, ,900, In Preference Shares - Unquoted (Trade) In Associates Company Grabal Alok International Limited (FV USD 1/) 7,470, Current investments in Equity Shares Quoted In Bonds Unquoted in Debentures Unquoted In Mutual Funds Unquoted F Less: Provision for Diminution in carrying cost (0.34) (0.04) (0.48) Share Application Money Associate Company Grabal Alok (UK) Limited Mileta, a.s Alspun Infrastructure Limited Ashford infotech Private Limited Others Aurangabad Textiles & Apparel Parks Limited New City Of Bombay Mfg. Mills Limited Aggregate Book Value: Quoted Investments Unquoted Investments Aggregate Market Value: Quoted Investments

290 Annexure IX STATEMENT OF SUNDRY DEBTORS - CONSOLIDATED (AS RESTATED) Particulars As at September 30, 2008 (Rs. in Crores) As at March 31, Debts Outstanding for a period exceeding six months Other Debts Gross Less : Provision TOTAL Considered Good Considered Doubtful TOTAL Debtors Includes : Due from Associates Companies Grabal Alok UK Limited Buds Clothing Co F-64

291 ANNEXURE - X STATEMENT OF LOANS, ADVANCES AND CURRENT ASSETS - CONSOLIDATED (AS RESTATED) (Rs. in Crores) Particulars As at As at March 31, September 30, Advances recoverable in cash or in kind or for value to be received Loans - Inter Corporate Deposits Deposits Balances with Central Excise Collectorate Advance Tax (Net of provision for tax) MAT Credit Entitlement Less : Provision TOTAL Loans and Advances included : Considered Good Considered Doubtful TOTAL Loans and advances includes : a) Due from Officers of the Company Maximum during the year b) Due from Associate Companies Niraj Realators Private Limited Ashok.B.Jiwrajka (HUF) Dilip B Jiwrajka (HUF) Surendra B Jiwrajka (HUF) Grabal Alok Impex Limited Grabal Alok International Limited F-65

292 ANNEXURE - XI STATEMENT OF CURRENT LIABILITIES & PROVISIONS - CONSOLIDATED (AS RESTATED) (Rs. in Crores) Particulars As at As at March 31, September 30, CURRENT LIABILITIES : Sundry Creditors Total Outstanding dues to : - Micro Enterprises and Small Enterprises* Creditors other than Micro Enterprises and Small Enterprises * As per information available with the Company There are no dues outstanding for more than 30 days exceeding Rs Crores Unclaimed Dividend Interest accrued but not due on loans Advance from customers PROVISIONS TOTAL (A) Provision for Gratuity and Compensated Absences Proposed Dividend Provision for Tax on Dividend Provision for Taxation (Net of Advance Tax) Provision for FBT TOTAL (B) TOTAL (A+B) F-66

293 ANNEXURE XII STATEMENT OF OTHER INCOME - CONSOLIDATED (AS RESTATED) (Rs. in Crores) Particulars For six month for the year ended March 31, ended September 30, Directly business related Recurring Exchange Rate difference (Net) Provision for Doubtful Debts and Advances written back Sundry Credit Balances written back Non recurring Miscellaneous Income Profit on sale of Assets (Net) Insurance claim received Directly non- business related Recurring Dividend Income : Non recurring Profit on sale of Current Investments (Net) F-67

294 ANNEXURE XIII STATEMENT OF DIVIDEND Particulars (Rs. in Crores) For Six months ended For the year ended March 31, September 30, Rate of Dividend on Equity Shares - 12% 14% Dividend Proposed on Equity Shares Excess provision for Dividend of earlier year (including tax thereon) - (0.19) (0.39) Dividend proposed on Preference Shares at various percentages Corporate Dividend Tax On Equity Shares On preference Shares F-68

295 ANNEXURE XIV ACCOUNTING RATIOS (CONSOLIDATED) As at September (Rs. in Crores) As at march 31, Profit attributable to equity shareholders Restated net profit after tax Less: Dividend on Preference Shares including Dividend tax - - (0.84) Net Profit Available for Equity Shareholders (Basic) Add: Interest payable on FCCBs and exchange rate difference on FCCBs (Net of tax) Add: Preference Dividend payable (Net of tax) Add: Interest on convertible debenntures (Net of tax) Net profit available for Equity Shareholders (Dilutive) Net Worth (Restated) 1, , , Outstanding Shares at Year End (Nos) 196,974, ,174, ,371,974 Weighted average Number of equity shares outstanding Weighted average number of Equity Shares Basic (Nos.) 195,529, ,233, ,860,618 Add: Effect of potential equity shares on conversion of warrants (Nos.) 11,499,454 19,800,000 - Add: Effect of potential Equity Shares on conversion of FCCBs (Nos) 14,861,438 28,461,359 31,311,247 Add: Effect of potential Equity Shares on conversion of OFCD (Nos) - - Add: Effect of potential Equity Shares on conversion of OCPSs (Nos) - - 1,213,258 Weighted average number of Equity Shares Dilutive (Nos.) 221,889, ,494, ,385,123 Face Value of Equity Shares Earning per share (EPS) Basic EPS (in Rs.)* (Net Profit Available for Equity Shareholders (Basic) * /Weighted average number of Equity Shares Basic (Nos.)) Diluted EPS (in Rs.)* (Net profit available for Equity Shareholders (Dilutive)* /Weighted average number of Equity Shares Dilutive (Nos.)) Return on Net Worth (in %)* (Net profit available for Equity Shareholders * / Net Worth) Net Asset value per Share (in Rs.) (Net Worth (Restated)* /Outstanding Shares at Year End (Nos.)) * Not annualized in case of September 2008 F-69

296 ANNEXURE XV Capitalisation Statement (Consolidation) * Pre-Issue Borrowings Short 1, Long Term 4, (Rs. in Crores) Post issue# Shareholders' Funds Equity Share Capital Share Warrants Share Application Money Reserve and Surplus 1, Total Shareholders Fund 1, Long Term Debt / Equity 2.74 * Based on Statement of Assets & Liabilities, as restated as at # The corresponding post issue figures are not determinable at this stage pending finalization of size & price of Rights Borrowings which are repayable with in a year from the date of sanction is considered as short term loan. F-70

297 STOCK MARKET DATA FOR EQUITY SHARES OF OUR COMPANY Our Company s Equity Shares are listed on the BSE and NSE. As our Company s Equity Shares are actively traded on the BSE and NSE, stock market data has been given separately for each of these Stock Exchanges. The monthly high and low price and the volume of shares of our Company traded at the BSE and NSE during the past six months were recorded are stated below: BSE Month September, 2008 October, 2008 November, 2008 December, 2008 January, 2009 February, 2009 NSE High (Rs.) Date of High September 2,2008 Volume on date of high (No. of shares) Low (Rs.) Date of Low September 30, October 1, October 27, November 5, December 17, January 02, February 16, November 28, December 2, January 29, February 24, 2009 Volume on date of low (No. of shares) Average price for the month (Rs.) Month High (Rs.) Date of High September, 2008 October, 2008 November, 2008 December, 2008 January, 2009 February, September 1, October 1, November 5, December 17, January 05, February 16, 2009 Volume on date of high (No. of shares) Low (Rs.) Date of Low Volume on date of low (No. of shares) Average price for the month (Rs.) September 30, October 27, November 20, December 2, January 29, February 24, The high and low closing prices recorded on the BSE and NSE for the preceding three years and 195

298 the number of Equity Shares traded on the days the high and low prices were recorded are stated below. BSE Fiscal Year High (Rs.) Date of High January 1, December 31, May 11, 2006 Volume on date of high (No. of shares) Low (Rs.) Date of Low October 27,2008 Volume on date of low (No. of shares) Averag e price for the year (Rs.) March 5, July 24, NSE Fiscal Year High (Rs.) Date of High January 1,2008 December 31,2007 Volume on date of high (No. of shares) Low (Rs.) Date of Low October 27,2008 Volume on date of low (No. of shares) Averag e price for the year (Rs.) March 5, May 11, July 12, The market price of our Equity Shares as on October 28, 2008 (the trading day immediately following the day on which the first Board resolution was passed to approve the Rights Issue) was Rs on the BSE and Rs on the NSE. Further, as on January 5, 2009 (the trading day immediately following the day on which the second Board resolution was passed to approve the Rights Issue) the market price of our Equity Shares was Rs.19.25/- on both the BSE and the NSE. The market capitalization of our Equity Shares as on March 17, 2009 was Rs crores on the BSE based on a market price of Rs /- and the market capitalization of our Equity Shares on the NSE was Rs crores based on a market price of Rs /- 196

299 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion of our financial condition and results of operations together with our financial statements included in this Letter of Offer. You should also read the section entitled Risk Factors beginning on page xiii of this Letter of Offer, which discusses a number of factors and contingencies that could impact our financial condition and results of operations. The following discussion relates to our Company and unless otherwise stated, is based on our restated financial statements, which have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI DIP Guidelines. Our fiscal year ends on March 31 of each year, so all references to a particular Fiscal are to the twelve-month period ended March 31 of that year. OVERVIEW Our Company is one of the leading integrated textile manufacturers of India. With more than two decades of involvement in the textile industry, our products cover the entire textile value chain from spinning to garments and made-ups. Our Company operates in five major divisions, Spinning of Cotton Yarn, Apparel Fabrics (Woven & Knitted), Home Textiles, Garments and Polyester Yarn. Our Company s vertically integrated operations and flexibility to produce cotton, polyester, and viscose blends fabrics in various counts and constructions and in a variety of finishes, has enable our Company to meet demanding customer requirements. The company has developed its business model in such a way that it can produce wide range of products for variety of uses to cater to diverse market. This diversification ensures risk mitigation and stability of earnings and also places our Company at a distinct competitive advantage over other players in the industry. The overview of the financial performance of our Company based on the re-stated standalone audited financial information: (Rs. in crores) Particulars 6 Month Ended September year CAGR (%) Net sales 1, , , , % Exports , % EBITDA % PBT % PAT % Gross Fixed Assets including CWIP Tangible Net Worth Earnings per share Basic Book Value per share *not annualised 5, , , , % 1, , , % 3.38* % % Significant developments subsequent to September 30, 2008 The retail business of our company has been hived off to a wholly owned subsidiary Alok Retail (India) Ltd w.e.f December 1, Other than this, there have been no material developments since the last Balance Sheet date, i.e. September 30,

300 Factors Affecting Results of Our Operation Our financial condition and results of operations are affected by following factors General Economic Conditions We are likely to be affected by general economic conditions prevailing in the country where we operate and also the countries where we export. Growth rates of the economy and income levels of consumers are one of the determinants of demand in the textile industry. According to the November 2008 update of the World Economic Outlook issued by the International Monetary Fund (IMF), global real GDP growth on a purchasing power parity basis is projected to decelerate from 3.7% in 2008 to 2.2 percent in The US, UK, the Euro area and Japan which together accounted for nearly half of world GDP in 2007, are officially in recession. Moreover, the global crises are also affecting India s growth trajectory as reflected in the real GDP growth which has moderated to 7.8% in the first half of as against 9.3% in the first half of The third quarter of witnessed signs of further moderation in growth, especially in the industrial sector and some segments of the services sector. During April-November 2008, the index of industrial production ((IIP) growth decelerated to 3.9% from 9.2% a year ago. The US and European region continue to be a major export market for our Company. A slowdown in these economies translates to lower consumer spending and a consequent risk of lower textile exports to those markets. Our Company is looking to mitigate this risk by spreading the geographical reach for all the product offerings thereby broadening the export client base. Growth in the Indian textile industry The Indian textiles and apparel market has grown from US$ 46 billion in to about US$ 61 billion in as depicted in the diagram below: Year Year Source: Technopak Analysis dated February, 2009 Textile capacities in the developed economies have shrunk during the last few years, mainly due to high production and labour costs. On the other hand, Asian countries like India, China, Bangladesh, Vietnam and Cambodia have the advantages of relatively abundant raw material supplies and low wage costs. Asian textile manufacturers in general are likely to capture more of the global market share in the coming years, given their increasing technological capabilities, capacities to service large volume orders and competitive pricing. Further, the removal of textile quotas internationally has created potentially significant market opportunities for textile manufacturers from countries with relatively 198