Southern Iron and Steel Company Limited

DRAFT LETTER OF OFFER

(Private and Confidential) For Equity Shareholders of the Company only

SOUTHERN IRON AND STEEL COMPANY LIMITED (Incorporated on September 11, 1991 under the Companies Act, 1956) Registered Office: Pottaneri – M Kalipatti Village, Mecheri – 636 453, Mettur Taluk, Salem District, Tamil Nadu. Tel: (04298) 278400 ~ 403 Fax: (04298) 278618 E-mail: [email protected] DRAFT LETTER OF OFFER

Issue of 17,37,41,655 Equity Shares of Rs. 10 each for cash at par on rights basis to the existing Equity Shareholders of the Company in the ratio of 23 (Twenty Three) Equity Shares for every 10 (Ten) Equity Shares held on Record Date ______, 2005 aggregating Rs. 173,74,16,550. The face value of the Equity Shares is Rs. 10 per share and the Issue Price is 1 time the face value. GENERAL RISKS

Investment 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 Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this document. Attention of investors is drawn to the statement of Risk Factors appearing on Page iii of the Letter of Offer. 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 document as a whole or any of 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 Stock Exchange, Mumbai (BSE) (“Designated Stock Exchange”), Madras Stock Exchange (MSE) and Coimbatore Stock Exchange (CSE). The Company proposes to list the equity shares arising out of this issue on BSE, MSE and CSE. The Company has received in principle approvals from BSE, MSE and CSE vide letters dated ______, 2005, ______, 2005 and ______, 2005 respectively.

LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

Securities

ICICI Securities Limited Sharepro Services (India) Private Limited ICICI Centre, H.T. Parekh Marg Satam Estate, 3rd Floor, Cardinal Gracious Road Chakala Churchgate, Mumbai – 400 020 Andheri (East), Mumbai – 400 099 Tel: (022) 2288 2460, Fax: (022) 2282 6580 Tel: (022) 2821 5168, Fax: (022) 2837 5646 E-mail: [email protected] E-mail: [email protected]

ISSUE OPENS ON LAST DATE FOR RECEIVING ISSUE CLOSES ON REQUESTS FOR SPLIT APPLICATION FORMS

TABLE OF CONTENTS

RISK FACTORS ...... III I. GENERAL INFORMATION ...... 1 II. CAPITAL STRUCTURE...... 9 III. TERMS OF THE ISSUE...... 12 IV. TAX BENEFITS ...... 23 V. PARTICULARS OF THE ISSUE ...... 26 VI. THE COMPANY ...... 30 VII. MANAGEMENT OF THE COMPANY...... 31 VIII. IRON AND STEEL INDUSTRY...... 35 IX. BUSINESS OF THE COMPANY ...... 39 X. FINANCIAL PERFORMANCE OF THE COMPANY...... 52 XI. MANAGEMENT DISCUSSION AND ANALYSIS ...... 64 XII. PROMOTERS / PROMOTER GROUP COMPANIES AND ASSOCIATED COMPANIES 67 XIII. STOCK MARKET DATA ...... 88 XIV. BASIS FOR ISSUE PRICE...... 89 XV. UNAUDITED WORKING RESULTS FOR THE LATEST PERIOD...... 90 XVI. PROMISE VERSUS PERFORMANCE...... 91 XVII. OUTSTANDING LITIGATION, DEFAULTS AND MATERIAL DEVELOPMENTS ...... 95 XVIII. STATUTORY AND OTHER INFORMATION ...... 122 XIX. MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS...... 123 XX. DECLARATION...... 124

GLOSSARY OF TERMS/ ABBREVIATIONS

Act The Companies Act, 1956 and amendments thereto AGM Annual General Meeting Articles/ AOA Articles of Association of the Company AS Accounting Standards as issued by the Institute of Chartered Accountants of India BF Blast Furnace Board Board of Directors of Southern Iron and Steel Company Limited BRM Bar and Rod Mill BSE The Stock Exchange, Mumbai CAF Composite Application Form CAGR Compounded Annual Growth Rate CC Continuous Caster CDR Corporate Debt Restructuring CDSL Central Depository Services (India) Limited CEO Chief Executive Officer CESTAT Central Excise and Service Tax Appellate Tribunal CIT Commissioner of Income Tax Committee of Directors Committee of the Board of Directors of Southern Iron and Steel Company Limited authorised to take decisions on matters related to / incidental to the Issue Company / SISCOL / Issuer Southern Iron and Steel Company Limited CSE Coimbatore Stock Exchange CY Calendar Year ending on December 31 Depositories CDSL and NSDL Designated Stock Exchange The Stock Exchange, Mumbai Directors Directors on the Board of the Company DP Depository Participant EAF Electric Arc Furnace EGM Extraordinary General Meeting EOF Energy Optimizing Furnace EOT Electric Overhead Traction EPS Earnings per share Equity Shareholders Equity shareholders of the Company whose names appear as ! Beneficial owners as per the list to be furnished by the depositories in respect of the equity shares held in the electronic form and ! Members in the Register of Members of the Company in respect of the equity shares held in physical form FCNR Account Foreign Currency Non-Resident Account FEMA Foreign Exchange Management Act, 1999 read with rules and regulations thereunder and amendments thereto FIIs Foreign Institutional Investors registered with SEBI under applicable laws FIPB Foreign Investment Promotion Board, Department of Economic Affairs, Ministry of Finance, Government of India FITL Funded Interest Term Loan FRN Floating Rate Note FY Financial year ending March 31 GDP Gross Domestic Product GIR Number General Index Registry Number GM General Meeting GoI/Government Government of India Group Mr. Sajjan Jindal and Vrindavan Services Private Limited HUF Hindu Undivided Family Issue / Rights Issue Present issue of 17,37,41,655 equity shares of Rs. 10 each for cash at par on rights basis to the existing Equity Shareholders of the Company in the ratio of 23 (Twenty Three) equity shares for every 10 (Ten) equity shares held on Record Date ______2005 aggregating Rs. 173,74,16,550. Issue Price Rs. 10 per equity share I-Sec ICICI Securities Limited IT Act The Income Tax Act, 1961 and amendments thereto ITAT Income Tax Appellate Tribunal JISCO Jindal Iron and Steel Company Limited JSWHL Jindal South West Holdings Limited JTPCL Jindal Thermal Power Company Limited JVSL Jindal Vijayanagar Steel Limited

i KVA Kilo Volt Amperes kwh Kilo Watt Hour LC Letters of credit Lead Manager ICICI Securities Limited Letter of Offer/LoF/Offer This letter of offer circulated to the Equity Shareholders Document LMW Lakshmi Machine Works Ltd. ltr Litre Memorandum/MoA Memorandum of Association of the Company mgd Million gallons per day mtpa Million tonnes per annum Mumbai High Court High Court of Judicature at Mumbai MSE Madras Stock Exchange MW Mega Watt NA Not applicable NAV Net Asset Value NCD Non Convertible Debenture NR Non-Resident NRI (s) Non-Resident Indians NRE Account Non-Resident External Account NRO Account Non-Resident Ordinary Account NSDL National Securities Depository Limited NSE National Stock Exchange of India Limited OCD Optionally Convertible Debenture P/E Ratio Price/Earnings Ratio PAN Permanent Account Number PCI Pulverized Coal Injection Promoter(s) Promoters shall have the same meaning as ascribed to it under the SEBI Guidelines and which has been more particularly detailed in the disclosures in this Letter of Offer RBI Reserve Bank of India Record Date [to be fixed later] Registrar to the Sharepro Services (India) Private Limited Issue/Registrar/Sharepro Rights Entitlement The number of equity shares that an Equity Shareholder is entitled to under this Letter of Offer in proportion to his/her/its existing shareholding in the Company as on the Record Date RM Rolling Mill SEBI Securities and Exchange Board of India SEBI Guidelines SEBI (Disclosure & Investor Protection) Guidelines, 2000 read with amendments thereto Supreme Court Hon’ble Supreme Court of India TIDCO Tamilnadu Industrial Development Corporation Ltd. TL Term Loan TNEB Tamil Nadu Electricity Board VSPL Vrindavan Services Private Limited WCTL Working capital term loan w.e.f. With effect from WITECO Western India Trustee Company Ltd.

In this Letter of Offer, any discrepancies in any table between total and the sums of the amount listed are due to rounding off. All references to “Rs.” refer to Rupees, the lawful currency of India, “USD” refers to US dollar. References to the singular also refer to the plural and one gender also refers to any other gender wherever applicable.

ii RISK FACTORS Investors should consider the following Risk Factors together with all other information included in this Letter of Offer carefully, in evaluating the Company and its business before making any investment decision. Any projections, forecasts and estimates contained herein are forward-looking statements that involve risks and uncertainties. Such statements use forward looking terminology like “may”, “believes”, “will”, “expect”, “anticipate”, “estimate”, “plan” or other similar words. The Company’s actual results could differ from those mentioned in these forward-looking statements as a result of certain factors including those set forth in the Risk Factors below. Data appearing here has been obtained from industry publications, reports and other sources that the Company and the Lead Manager believe to be reliable. Neither the Company nor the Lead Manager has independently verified such data.

INTERNAL RISK FACTORS

1. Erosion of Net worth The Company continues to be a Sick Industrial Company under the Sick Industrial Companies (Special Provisions) Act, 1985 w.e.f. from June 30, 2004. It has been registered with the Board of Industrial and Financial Reconstruction. The Company had been making losses since inception. As on June 30, 2004, the accumulated loss was Rs. 355.82 crores, which has completely eroded the Net worth of the Company.

2. Operations below the rated capacity and proposed expansion The Company has been selling significant quantities of semi-finished steel as steel billets due to the delay in installation of Rolling Mill. However, with the increase in raw material prices (coke and iron ore), the realisations on sale of billets have not been able to absorb the overall cost of production. The Company has not been able to operate up to the rated capacity due to bottlenecks which can be removed only by incurring additional capital expenditure on another reheating furnace, one more crane in mill bay and finishing bay and commissioning of third finishing line equipment. Any delay or failure in making proposed investments to remove the bottlenecks in achieving the presently rated capacity of 0.3 mtpa (Phase I) and to double the capacity to 0.6 mtpa (Phase II), would seriously impact operations and financial performance of the Company.

3. Contingent liabilities of the Company As on September 30, 2004, the contingent liabilities of the Company not provided for aggregate Rs. 7,00,56,911 and comprise the following: i. A sum of Rs. 4,19,36,093 which the Customs Department has asked the Company to pay is payable contingent upon the bill of entry already filed by the Company being rejected. If the bill of entry is accepted, the duty amount of Rs. 3,07,65,944 which has already been paid will also be refundable to the Company. However, this amount, which may become due to the Company, has not been considered in the receivables of the Company. ii. The Customs Department issued a show cause notice on the Company for the following: a) Customs duty on excess quantity of coke received: Rs. 67,05,311 b) Differential duty: Rs. 1,82,68,557 c) Special Additional Duty: Rs. 31,46,950 The Company has subsequently received an adjudication order from the Commissioner of Customs demanding interest of Rs. 67,340 and penalty and fines of Rs. 35,00,000. The outstanding amounts have since been paid and with this the above show cause notice has been settled.

4. Outstanding litigation and disputes of the Company The Company is a defendant in a number of legal proceedings which, if determined against it, could have a material adverse effect on the business, financial condition and operations of the Company. A brief summary of major litigations and cases is given below. For details on these and other cases, refer to page 95 of the LoF. ! The Company had received a letter dated January 24, 2004 from the Superintendent Engineer, Mettur Electricity District Circle, Mettur Dam for payment of outstanding dues of Electricity Tax for the period February 2002 to December 2003. The Company has made provisions of Rs. 3.95 crores in its books of accounts till December 31, 2004 towards payment of these dues.

iii ! A demand has been made on the Company by the Public Works department, Government of Tamilnadu for Rs. 2,05,30,221 being arrears for the previous years. The Company is in negotiations with the Public Works department to reach a settlement and accordingly has made a provision of Rs. 2,05,30,221 in its books of accounts. ! Tamilnadu Electricity Board by a demand notice dated October 11, 2004 has demanded payment of Rs. 1,35,77,199 (inclusive of belated payment surcharge of Rs. 16,89,099) being arrears on account of peak hour charges for the period July 2003 to August 2004. The final hearing is awaited. ! The Company filed a writ petition challenging the provision of The Tamil Nadu Electricity (Taxation on Consumption) Act, 2003. As per the said act and the rules framed thereunder, the Company had to register its captive power plant with the Registering Authority (Electrical Inspectorate) and was also required to pay 10 paise tax per unit with effect from Jun 16, 2003 on power generated by generator or the captive power plant. Pending final hearing of the writ petition, the Company has obtained an interim injunction restraining the Tamilnadu Government from levying tax on sale of electricity for high tension service connection and consumption for own use. ! M/s Indo Fab Engineering ("Indo Fab") have obtained a decree of Rs. 31,90,734.92 plus interest against two companies viz. M/s Eastern Metallurgical Equipments Pvt. Ltd and M/s Simplex Engineering. As the Company owed Rs. 1,00,00,000 to M/s Simplex Engineering, Indo Fab has taken out garnishee order/attachment order in case no. OS700/96 to the tune of Rs. 54,57,844 in the execution application filed against M/s Simplex Engineering, i.e. the Judgment Debtors in the Trichirapalli District Court. Indo Fab, in another case (OS No. 697/1996) have obtained a decree and have applied to the court for garnishee order to the extent of Rs. 25,00,000. The Company is in the process of filing an affidavit. ! A winding up petition under Section 433 and 434 of the Companies Act, 1956 has been filed in the Madras High Court for default in payment of Rs. 76,30,054. The Company has filed an affidavit disputing the claim in the before the Court. ! The Company had received a notice under section 433 and 434 of the Companies Act in November 2004 for default in the payment of Rs. 81,65,356 plus interest thereon. The Company has replied to the notice disputing the above claim.

Civil cases ! One of the land dispersee has filed a case in the Court of the District Munsif of Mettur against the Company, demanding award of a labour contract to a particular group of land dispersed persons. ! Government of Tamilnadu acquired 154 acres of land and passed an award for 154 acres. However, symbolic possession has been given to the Company for 105 acres only. The handing over of balance portion of 49 acres has been stayed by the Court under the 3 petitions filed by the land owners against the Government of Tamilnadu and the Company.

Central Excise ! Two cases are pending before the Central Excise and Service Tax Appellate Tribunal (CESTAT) in respect of availment of MODVAT on Capital Goods for the fiscal years 1994-95 and 1999-2000 amounting to Rs. 23.56 lacs and Rs. 12.29 lacs respectively.

5. Rescheduling of redemption of debentures by the Company The Company has rescheduled the redemption of Partial Optional Convertible Debentures (POCDs) issued in March 1995. For details refer to page 96 of the LoF.

6. Defaults in Servicing by the Company Debenture interest aggregating Rs. 7,62,83,550 which was due on March 31, 2004 (Rs. 1,52,56,710), September 30, 2004 (Rs. 1,52,56,710) and December 31, 2004 (Rs. 4,57,70,130) has not been serviced by the Company. An amount of Rs. 83,31,300, being the first installment of redemption due on May 17, 2000 for debentures issued by the Company has not been paid for want of surrender of debenture certificates for endorsement by the debenture holders. For details refer to page 97 of the LoF.

iv 7. Any risk related to shortfall or non-availability of raw material supplies, power, fuel and water requirements The plant is located about 300 kms away from the ore pit heads and the supply of these raw materials depends on the mode of transportation. Any disturbance in transportation may cause delay in or suspension of production. The Company is highly dependent on suppliers in China for requirement of coke which is a major raw material for blast furnace, the price of which has fluctuated in the past: it went up from USD 144 per ton in April 2003 to USD 442 per ton in February 2004 and is currently around USD 300 per ton. The Company is mainly dependent on National Mineral Development Corporation Limited for its requirement of iron ore, which forms a major input for its steel products. Dependence on suppliers may also adversely affect the availability of supplies at reasonable prices thus affecting the margins and may have an adverse effect on the business, financial condition and operations of the Company.

8. Shortfall in performance of the Company with respect to projections made in the offer document for the public issue in 1995 The project by the Company for setting up its operations was scheduled for completion in March 1996. However, the Company could commission only the first phase of the project (iron making facilities) by July 1996. The project also suffered a cost overrun, from Rs. 450 crores at the time of original appraisal to Rs. 1035 crores till completion of the project in January 2003. For details, refer to page 91 of the LoF.

9. Economies of scale The capacity of 0.3 mtpa is not an optimum capacity and hence it is necessary to double the capacity to 0.6 mtpa so as to achieve economies of scale. An investment of Rs. 400 crores is envisaged under Phase I and Phase II to upgrade the capacity to 0.6 mtpa and to build a Coke Oven Plant. The benefits of economies of scale would accrue only when these investments are made and the project is implemented.

10. The key technical and managerial personnel The Company’s future success depends to a significant extent upon the continued contributions from its key technical and managerial personnel. The loss of one or more members of the senior management team could have an adverse effect on the business, financial condition and operations of the Company. For details of key managerial personnel, refer to 'Key Managerial Personnel' section on page 33 of the LoF.

11. Cordial relationships with employees The Company’s operations rely heavily on employees and on the employees’ ability to provide high-quality services. In the event of a shortage of skilled labour or a stoppage caused by disagreements with employees in future, it could affect its ability to meet the quality standards in manufacturing and timely completion of orders, which could lead to reduced business.

12. Restrictions on payment of dividends The Company cannot declare dividends without the permission of its lenders unless the Company has paid all the dues to the lenders up to the date on which the dividend is proposed to be declared or has made satisfactory provisions for the same. If there are unpaid dues or if the approval of financial institutions has not been obtained, dividend payout cannot be made to the Equity Shareholders of the Company.

13. Loss making companies/ventures of the Group Following companies belonging to the Group have made losses in one or more of the last three financial years ending March 31, 2004: Aras Overseas Private Limited, Argil Properties Private Limited, Baltimore Trading Private Limited, Gagan Trading Company Limited, Jindal Coated Steel Private Limited, Jindal Iron and Steel Company Limited, Jindal South West Holdings Limited, Jindal Stainless Limited, Jindal Strips Limited, Jindal Vijayanagar Steel Ltd, Kamshet Investments Private Limited, Kavita Securities Private Limited, Laptev Finance Private Limited, Meredith Traders Private Limited, Musuko Trading Private Limited, Nalwa Chrome Private Limited, Naman Enterprises Private Limited, Reynold Traders Private Limited, Rishikesh Finlease & Investments Private Limited, Sapphire Technologies Limited, Sun Investments Private Limited, Vijayanagar Minerals Private Limited, Vrindavan Services Private Limited and Wachovia Investments Private Limited.

v For details of these companies, refer to page 68 of the LoF.

14. Shortfall in performance of companies/ventures of the Group There were cost and time overruns in setting up of Cold Rolling Mill/Galvanising project by JISCO. Actual project cost was Rs. 513 crores as against the estimated cost of Rs. 454 crores. The project was completed in March 1998 as against the scheduled completion in September 1996. For details, refer to page 92 of the LoF. There was a cost overrun in setting up of integrated steel plant for manufacture of HR coils by JVSL. Actual project cost up to March 31, 2004 was Rs. 6226 crores as against the estimated cost of Rs. 3300 crores including margin money for working capital. For details, refer to page 92 of the LoF. There were cost and time overruns in the project by Jindal Strips Limited, to enhance capacity of Sponge Iron/Pig Iron and to put up a captive power generation unit. Actual project cost was Rs. 450 crores as against the estimated cost of Rs. 355 crores. The project was completed in Jan 1996 as against the scheduled completion in March 1994. For details, refer to page 93 of the LoF.

15. Litigation and contingent liabilities against the Directors, the Group and companies/ventures of the Group The details of litigation etc against the Directors, the Group and companies/ventures of the Group are given in the chapter titled “Outstanding Litigation, Defaults and Material Developments”. Kindly refer to page 95 of the LoF.

16. Action against companies/ventures of the Group by SEBI and Stock Exchanges There are certain penalties imposed against JVSL and JISCO by SEBI and stock exchanges. For details, refer to page 107 and 103 of the LoF.

17. Utilisation of Funds As per the lenders’ meeting held on June 16, 2004, ICICI Bank Ltd. had appointed MECON Ltd. to conduct a techno-economic feasibility study to make the project viable. Mecon Ltd. had assessed a capital expenditure of Rs. 400 crores for the expansion of capacity from 0.3 mtpa to 0.6 mtpa. There are some differences in the costs estimated by the Company with respect to those envisaged in the recommendations of Mecon Ltd. There could be deviations in actual utilisation of funds as compared to the costs estimated by the Company.

18. Conversion of debt into equity Rs. 395 crores of term loans, Rs. 74.95 crores of preference share capital and Rs. 35.10 crores of unsecured debt will get converted into equity at a premium of Rs. 52 per share in accordance with the CDR scheme. This will increase the equity base of the Company by Rs. 8.15 crores equity shares. Although this conversion will benefit the Company through reduction in interest on loans and dividend on preference shares, it will also result in a dilution of Earning per share and Book value per share of the Company, which may result in a fall in the market price of shares of the Company.

19. Pending approvals/consents An application for the renewal of the registration and license under Factories Act, 1948 for the factory premises has been filed by the Company in November 2004. The license has expired on December 31, 2004. The Company has entered into an agreement with the Public Works department, Government of Tamilnadu, for drawal of water for the plant. The agreement is yet to be renewed for the period June 1, 1999 onwards. For the new project/expansion, the Company is yet to obtain approvals, such as clearance from the Pollution Control Board for construction of the building from the local authority. For details, refer to ‘Government Approvals/Consents’ section on page 3 of the LoF.

EXTERNAL RISK FACTORS

1. Cyclicality in Prices The Company’s fortunes are linked to those of iron and steel industry which is cyclical in nature. The demand for iron and steel products has a significant impact on the prices of products manufactured by the Company. A fall in the prices would adversely impact the margins and hence the financial performance of the Company.

vi 2. Price volatility in Iron ore The price of iron ore (basic) which was at a level of Rs. 540 per ton in November 2003 is currently ruling around Rs. 900 per ton. Any further upward movement in the prices of the iron ore (basic) would adversely affect the business, financial condition and operations of the Company.

3. Regulation of exports and imports Any change in regulations, domestic or international, having an impact on the iron and steel market and its inputs will affect the industry as a whole. Such changes may be in the nature of introduction of quota, tariff barrier, subsidies etc. and could adversely affect the business, financial condition and the operations of the Company.

4. Political, economic and social developments in India and acts of violence or war Any change in the economic policies and laws affecting iron and steel companies, pace of deregulation, foreign investment, currency exchange rates and other matters could adversely affect the business, financial condition and the operations of the Company. Acts of violence, terrorist activity or war could affect the industrial and commercial operations in the country which could have an adverse effect on the demand and supply of iron and steel.

5. Natural disasters and technical failures The operations of the plant can be affected by natural disasters and technical failures which could adversely affect the business, financial condition and the operations of the Company.

6. Foreign exchange fluctuations The Company imports some of its raw materials which are subject to foreign exchange fluctuations. The import of raw materials has increased over the years. These fluctuations might put more pressure on the margins affecting the performance of the Company.

7. Change in technology Technology plays a vital role in iron and steel manufacturing plants. The Company’s failure or inability to adopt any change in technology might place its competitors at an advantage in terms of cost, efficiency and timely delivery of final products.

8. Pollution control measures and emission regulation Failure to comply with environmental laws, rules and regulations may adversely affect the Company’s business or operations. GoI has enforced specific pollution and emission requirements for iron and steel industry. Though the Company is compliant with the same, any further restrictions or amendments may have cost implications for the Company and may have an impact on the operations and profitability of the Company.

9. Competition The Company operates in a globally competitive business environment. Increasing competition may force the Company to reduce prices of its products, which may reduce the revenues and margins and/or also decrease its market share, either of which could have an adverse effect on the business, financial condition and operations of the Company.

NOTES TO RISK FACTORS

! Investors are advised to refer to "Basis for Issue Price" section on page 89 before investing in the Issue. ! Net worth (excluding revaluation reserves) of the Company as on September 30, 2004 was Rs. (-)1,492,435,549. ! The Issue size is Rs. 173,74,16,550. ! The Book Value per share as on June 30, 2004 was Rs. (-) 16.25 for face value of Rs. 10 per share. ! The Group has acquired the shares at a price of Re. 1 per share from the previous promoters.

vii ! Related Party Transactions: Transactions between the Issuer and the companies/ventures of the Group in the current financial year are as given below: Name of the Company Transactions Total Transaction Outstanding as till 25.01.05 (Rs.) on 25.01.05 (Rs.) Jindal Vijayanagar Steel Limited Sale of TMT bars to JVSL 15,27,30,849 38,59,920 Dr Purchase of Plates from JVSL 18,00,956 64,359 Cr Jindal Steel & Power Limited Sale of TMT bars to JS & PL 2,04,22,083 4,01,180 Dr JSW Power Ltd. Sale of TMT bars to JSW Power Ltd. 88,63,765 6,04,992 Dr South West Mining Ltd. Advance towards purchase of finished goods 7,00,00,000 7,00,00,000 Cr Purchase of iron ore 1,23,16,019 57,66,348 Cr

viii

Dear Shareholder(s), Pursuant to the resolutions passed by the Board of Directors of the Company at its meeting held on January 28, 2005, it has been decided to make the following offer to the Equity Shareholders of the Company:

I. GENERAL INFORMATION

REGISTERED OFFICE ADDRESS OF THE COMPANY Pottaneri – M Kalipatti Village Mecheri – 636 453, Mettur Taluk Salem District, Tamil Nadu. Tel: (04298) 278400 ~ 403, Fax: (04298) 278618 E-mail: [email protected]

IMPORTANT

1. The Issue is pursuant to the resolution passed by the Board of Directors at its meeting held on January 28, 2005. 2. This Issue is applicable to such Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the equity shares held in the electronic form and on the Register of Members of the Company at the close of business hours on the Record Date i.e. ____. 3. Your attention is drawn to the section on “Risk Factors” appearing on Page iii of the LoF. 4. Please ensure that you have received the CAF with the LoF. 5. Please read the Letter of Offer and the instructions contained herein and in the CAF carefully before filling in the CAF. The instructions contained in the CAF are an integral part of the LoF and must be carefully followed. An application is liable to be rejected if requirements of the Letter of Offer and the CAF are not complied with. 6. All enquiries in connection with the LoF or CAF should be addressed to the Registrar to the Issue, quoting the Registered Folio number/ DP and Client ID number and the CAF numbers as mentioned in the CAF. 7. The Lead Manager and the Company shall update the Letter of Offer and keep the public informed of any material changes till listing and commencement of trading. 8. All the legal requirements as applicable till the filing of the Letter of Offer with the Designated Stock Exchange have been complied with.

ISSUE SCHEDULE Issue Opening Date : Last date for receiving requests for split Application Forms : Issue Closing Date :

ISSUE MANAGEMENT TEAM

Lead Manager to the Issue Co-Manager to the Issue ICICI Securities Limited Fortune Financial Services (I) Ltd. ICICI Centre, H.T. Parekh Marg K. K. Chambers, 2nd Floor Churchgate, Mumbai – 400 020 Sir P. T. Marg, Fort, Mumbai - 400 001 Tel: (022) 2288 2460, Fax: (022) 2283 7045 Tel: (022) 2207 7931, Fax: (022) 22071776 E-mail: [email protected] Email: [email protected]

Registrar to the Issue Legal Advisor Sharepro Services (India) Private Limited M/s. Rajani Associates Satam Estate, 3rd Floor F-4, Panchsheel, 53,'C' Road Cardinal Gracious Road Chakala, Andheri (East) Churchgate Mumbai – 400 099 Mumbai – 400 020 Tel: (022) 2821 5168, Fax: (022) 2837 5646 Tel: (022) 2202 1010, Fax: (022) 2202 1011 E-mail: [email protected]

Bankers to the Issue ICICI Bank Limited Indian Bank Capital Markets Branch, Mumbai Samachar Marg 31 Variety Hall Road Mumbai – 400 021 Coimbatore 641 001 Tel: (022) 226 55285, Fax: (022) 226 11138 Tel: (0422) 239 9266, Fax: (0422) 238 0327

Company Secretary & Compliance Officer Auditors of the Company Mr. P. Boopalan N.R. Doraiswami & Co. M Kalipatti Village, Mecheri – 636 453 Chartered Accountants Mettur Taluk, Salem District, Tamil Nadu Taluk Office Road Tel: (04298) 278400 ~ 403 (Ext.518) Coimbatore – 641 018 Fax: (04298) 278618 Tel: (0422) 221 2772, Fax: (0422) 220 0511 Email: [email protected]

Bankers to the Company Indian Bank Punjab National Bank Main Branch, 31 Variety Hall Road Oppanakara Street Coimbatore 641 001 Coimbatore – 641 001 Tel: (0422) 239 9266, Fax: (0422) 238 0327 Tel: (0422) 239 6178, Fax: (0422) 239 0583

Bank of Baroda Indian Overseas Bank Corporate Financial Services Branch Park Square Branch 82, Bank Road Coimbatore – 641 018 Coimbatore – 641 018 Tel: (0422) 238 0876, Fax: (0422) 238 0033 Tel: (0422) 230 1201, Fax: (0422) 230 0069 Union Bank of India South Indian Bank Ltd. Gandhipuram Branch IF Branch, Trichy Road Coimbatore – 641 012 Coimbatore – 641 018 Fax: (0422) 249 5333 Tel: (0422) 230 2722, Fax: (0422) 230 2065

ICICI Bank Coimbatore Branch, Cheran Plaza Trichy Road, Coimbatore – 641 018 Tel: (0422) 230 3136, Fax: (0422) 539 2288 Note: Investors are advised to contact the Registrar to the Issue or the Company in case of any pre-issue/post-issue related problems such as non-receipt of LoF/Letter of Allotment/share certificates/refund orders/demat credit etc.

ELIGIBILITY FOR THE ISSUE The Company is an existing company under the Act, whose equity shares are listed on the BSE, MSE and CSE. The Company is eligible to come out with the Issue in terms of Clause 2.4.1 (iv) of the SEBI Guidelines. The Company, its Directors, the Group, companies/ventures of the Group, companies with which the Directors of the Company are associated as Directors or Promoters or the directors or promoters in control of the promoting Company are not prohibited from accessing the capital market under any order or direction passed by SEBI or any other regulatory authority. Further the Group, relatives of individual promoter (as per the Act), the Company and companies/ventures of the Group are not declared as willful defaulters by RBI / government authorities.

GOVERNMENT APPROVALS/CONSENTS The Company has obtained the following approvals:

Factory License The Company has obtained registration certificate and license under the Factories Act, 1948 and its rules. The said license is valid up to December 31, 2004 and is in respect of the factory premises of the Company situated at Pottaneri, Mecheri Via, Mettur Taluk, Salem District. The Company has applied for the renewal of the said license in November 2004 and the renewal is awaited.

Environmental Approvals The Company has received the approval from Tamil Nadu Pollution Control Board under Section 25 of the Water (Prevention and Control of Pollution) Act, 1974, as amended in 1978 and 1988, for discharge of sewage and/or trade affluent vide its consent order no. 15000 dated June 11, 2004 which is valid till the period ending March 31, 2005. The Company has also received the approval from Tamil Nadu Pollution Control Board under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981, as amended in 1987, for the existing operations of the plant vide its consent order no. 11000 dated June 11, 2004 which is valid till the period ending March 31, 2005. The Company has applied for renewal of the above approvals and Tamil Nadu Pollution Control Board has acknowledged the renewal application along with the fee on February 4, 2005.

Water Supply The Company has entered into an agreement with the Public Works department, Government of Tamilnadu, for drawal of water for the plant. The agreement is yet to be renewed for the period June 1, 1999 onwards. A demand has been made on the Company by the Public Works Department for Rs. 2,05,30,221 being arrears for the previous years during which time the Company had been making payments only towards utilisation up to 1 mgd water from the Cauvery river as against the allotted offtake of 5 mgd water. The Company is in negotiations with the Public Works department to reach a settlement. However, a provision of Rs. 2,05,30,221 has been made in its books of accounts.

Power The main source of power for the Company is being met from TNEB sub-station supplied at 110 KVA through a separate feeder. The power requirement is 30 MW at present and is expected to go up to 60 MW. The Company has set up captive power generation facilities of 7.7 MW utilizing the excess blast furnace gas available in the plant. The Captive Power Plant (CPP) is linked with the power grid of TNEB with facilities for wheeling power through the grid. The CPP comprises one turbo generator for power generation. The Company has entered into three agreements dated March 2, 1995, August 20, 1998 and February 8, 2002 with TNEB for 4230 KVA, 7770 KVA and 4000 KVA to meet its power requirements.

Excise Certificate of registration bearing No. 2/94 dated April 18, 1994 issued by the Superintendent of Central Excise, Mettur Range I, Division Salem, Collectorate, Coimbatore is applicable to the premises situated at Pottaneri Survey Nos. 89-90, 93-98, 303-321, Mettur Taluk, Salem District. The registration is non-transferable and is valid for the period the holder carries on the activity for which the certificate has been issued.

Central Sales Tax Certificate of registration bearing no. TNGST 325648 issued under the Tamil Nadu General Sales Tax Act, 1959 and another certificate of registration bearing no. CST 593396 issued under the Central Sales Tax Act, 1956 dated September 24, 1992 which have been issued by the Commercial Tax Officer, Coimbatore. The registration, which is non-transferable, is applicable to following premises:

(a) LMW Complex, LMW Road, SRKV Post, Coimbatore 641020 w.e.f. September 24, 1992; (b) Pottaneri Village, M Kalipatti, Mettur Taluk, Salem District w.e.f. October 28, 1993; (c) Factory situated at Mecheri, Mettur Taluk, Salem District w.e.f. September 24, 1992; (d) No. 45 T.S. 1 of Mettur Township, Coimbatore Area, Mettur Taluk (Pumping Station) (e) No. 7, Wallace Garden II Street, Nungambakkam High Road, Madras w.e.f. December 14, 1993; (f) No. f3, Park Road, Fairlands, Salem w.e.f. December 14, 1993; (g) 34-A, Kamraj Road, Coimbatore 641018 w.e.f. November 20, 1998; (h) No. E 101-102, Sunrise Chambers, No. 22, Ulsoor Road, Bangalore. The license has been renewed for a five year period from April 1, 2000.

General The Company has all the necessary approvals from the Government authorities as required to carry on the present business. It must be distinctly understood that, in granting these approvals, the Government does not take any responsibility for the financial soundness of this undertaking or for the correctness of any of the statements made or opinions expressed in regard to it. However, for the new project/expansion, the Company is yet to obtain approvals, such as clearance from the Pollution Control Board for construction of the building from the local authority. However, no approval for expansion is required since it pertains to a delicensed industry.

DISCLAIMER CLAUSE AS REQUIRED, A COPY OF THIS LETTER OF OFFER HAS BEEN SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF DRAFT LETTER OF OFFER TO SEBI SHOULD NOT, IN ANY WAY BE DEEMED/ CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPOSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE, OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE LETTER OF OFFER. THE LEAD MANAGER TO THE ISSUE, ICICI SECURITIES LIMITED HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURE AND INVESTOR PROTECTION IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE OFFER DOCUMENT, THE LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD MANAGERS ICICI SECURITIES LIMITED HAVE FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED FEBRUARY 11, 2005 IN ACCORDANCE WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992 WHICH READS AS FOLLOWS: “1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS ETC. AND OTHER MATERIALS MORE PARTICULARLY REFERRED TO IN THE ANNEXURE HERETO IN CONNECTION WITH THE FINALISATION OF THE DRAFT LETTER OF OFFER PERTAINING TO THE SAID ISSUE; 2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY; WE CONFIRM THAT:

a. THE DRAFT LETTER OF OFFER FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE; b. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONS ETC., ISSUED BY SEBI, GOVERNMENT OF INDIA AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; c. THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TO ENABLE INVESTORS TO MAKE A WELL-INFORMED DECISION AS TO INVESTMENT IN THE PROPOSED ISSUE; 4 WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE DRAFT LETTER OF OFFER ARE REGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID; AND 5. IF UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS THE FILING OF THE LETTER OF OFFER DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR SECTION 68 OF THE ACT OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCE AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MANAGER(S) (MERCHANT BANKERS) ANY IRREGULARITIES OR LAPSES IN THE LETTER OF OFFER.

CAUTION The Company accepts no responsibility for statements made otherwise than in the LoF or in any advertisement or other material issued by the Company or by any other persons at the instance of the Company and anyone placing reliance on any other source of information would be doing so at his own risk. The Lead Manager and the Company shall make all information available to the Equity Shareholders and no selective or additional information would be available for a section of the Equity Shareholders in any manner whatsoever including at presentations, in research or sales reports etc. after filing of the Draft Letter of Offer with SEBI. The Lead Manager and the Company shall update the Letter of Offer and keep the public informed of any material changes till the listing and commencement of trading.

DISCLAIMER WITH RESPECT TO JURISDICTION The LoF has been prepared under the provisions of Indian laws and the applicable rules and regulations hereunder. Any disputes arising out of the Issue will be subject to the jurisdiction of the appropriate court(s) in Tamil Nadu, India only. The distribution of the Letter of Offer and the offering of the securities on a rights basis to persons in certain jurisdictions outside India may be restricted by the legal requirements prevailing in those jurisdictions. Persons into whose possession the LoF may come are required to inform themselves about and observe such restrictions. Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Tamil Nadu, India only. The securities offered on a rights basis in terms of the LoF have not been, and will not be, registered under the US Securities Act of 1933 or under the securities laws prevailing in any state of the United States of America. No action has been, or will be taken to permit an offering of these securities in any jurisdiction where action would be required for that purpose, except that the LoF has been filed with SEBI and SEBI has given its observations and that the Letter of Offer would be filed with the relevant stock exchanges in India. Accordingly, the equity shares may not be offered or sold, directly or indirectly, and the LoF may not be distributed in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of the LoF, nor any sale hereunder, shall under any circumstances, create any implication that the affairs of the Company have remained unchanged since the date hereof or that the information contained herein is correct as of any time subsequent to this date.

DESIGNATED STOCK EXCHANGE The Designated Stock Exchange for the purpose of the Issue is BSE.

DISCLAIMER CLAUSE OF BSE BSE has given vide its letter dated ____ permission to the Company to use its name in this Draft Letter of Offer as one of the stock exchanges on which this Company’s equity shares are proposed to be listed. BSE has scrutinized this Draft Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. BSE does not in any manner: (i) warrant, certify or endorse the correctness or completeness of any of the contents of this Draft Letter of Offer; or (ii) warrant that the Company’s equity shares will be listed or will continue to be listed on BSE; or (iii) take any responsibility for the financial or other soundness of this Company, its promoters, its management or any scheme or project of this Company; and it should not for any reason be deemed or construed that this Draft Letter of Offer has been cleared or approved by BSE. “Every person who desires to apply for or otherwise acquires any equity shares of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against BSE by reason of any loss which may be suffered by such person consequent to or in connection with such subscription/acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever.”

IMPERSONATION As a matter of abundant caution, attention of the applicants is specifically drawn to the provisions of subsection (1) of Section 68A of the Companies Act, 1956 which is reproduced below: “Any person who- (a) makes in a fictitious name an application to a Company for acquiring, or subscribing for, any equity shares therein, or (b) otherwise induces a Company to allot, or register any transfer of equity 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 the Company does not receive the minimum subscription of 90% of the Issue, the entire subscription shall be refunded to the applicants within forty-two days from the date of closure of the Issue. If there is a delay in the refund of subscription by more than 8 days after the Company becomes liable to repay the subscription amount, (i.e. forty two days after closure of the Issue), the Company will pay interest for the delayed period, at prescribed rates in sub-section (2) and (2 A) of Section 73 of the Act. The Issue will become undersubscribed after considering the number of equity shares applied as per entitlement plus additional equity shares. The undersubscribed portion shall be applied for only after the close of the Issue. The Group shall subscribe to such undersubscribed portion as per the relevant provisions of the law. If any persons presently in control of the Company desire to subscribe to such undersubscribed portion and if disclosure is made pursuant to SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, such allotment of the undersubscribed portion will be governed by the provisions of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. Allotment to the Group of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement. The above is subject to the terms mentioned under the “Basis of Allotment”.

UTILISATION OF ISSUE PROCEEDS The Board of Directors declares that: 1. The funds received against the Issue will be transferred to a separate bank account other than the bank account referred to in sub-section (3) of Section 73 of the Act. 2. Details of all moneys utilised out of the Issue will be disclosed under an appropriate separate head in the balance sheet of the Company indicating the purpose for which such moneys have been utilised. 3. Details of all such unutilised moneys out of the Issue, if any, will be disclosed under an appropriate separate head in the balance sheet of the Company indicating the form in which such unutilised moneys have been invested. The funds received against the Issue will be kept in a separate bank account and the Company will not have any access to such funds unless it satisfies the Designated Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of the Issue has been received by the Company.

UNDERTAKING BY THE COMPANY The Company undertakes that: ! The complaints received in respect of the Issue shall be attended to by the Company expeditiously and satisfactorily. ! All steps for completion of the necessary formalities for listing and commencement of trading at all stock exchanges where the equity shares are to be listed will be taken within 7 working days of finalisation of basis of allotment. ! The funds required for dispatch of refund orders/allotment letters/certificates by Registered/Speed Post shall be made available to the Registrar to the Issue. ! The share certificates/refund orders to the Non-Resident Indians shall be dispatched within the specified time. ! No further issue of securities affecting equity capital of the Company shall be made till the shares issued/ offered through the Issue are listed or till the application moneys are refunded on account of non-listing, under- subscription etc.

CONSENTS CDR Empowered Group, constituted by RBI, has approved the Issue on February 3, 2005 and no further consent from any of the lenders is required for the Issue.

FILING The Draft Letter of Offer was filed with SEBI, Mittal Court 'A' Wing, Nariman Point, Mumbai 400 021 for its observations. The final Letter of Offer will be filed with the stock exchanges and SEBI. All the legal requirements applicable till the date of filing the Letter of Offer with the stock exchanges and SEBI will be complied with.

COMPULSORY/DEMATERIALISED DEALING The equity shares of the Company have been under compulsorily dematerialized trading for all investors with effect from October 31, 2000. The Company has an agreement with NSDL and CDSL and its equity shares bear the ISIN no. INE710 B01014.

ALLOTMENT LETTERS / REFUND ORDERS The Company will issue and dispatch letters of allotment/share certificates and/ or letters of regret along with refund order or credit the allotted shares to the respective beneficiary accounts, if any, within a period of six weeks from the date of closure of the Issue. If such money is not repaid within 8 days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73(2A) of the Act. Letters of allotment/share certificates/refund orders above the value of Rs. 1,500 will be dispatched by Registered Post/Speed Post to the sole/ first applicant’s registered address. However, refund orders for value not exceeding Rs. 1,500 shall be sent to the applicants under Postal Certificate. Such cheques or pay orders will be payable at par at all the centers where the applications were originally accepted and will be marked “A/c payee” and would be drawn in the name of the sole/first applicant. Adequate funds would be made available to the Registrar to the Issue for dispatch of the letters of allotment/share certificates/refund orders. In case the Company issues letters of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment or such extended time as may be approved by the Company Law Board under Section 113 of the Act or other applicable provisions, if any. Allottees are requested to preserve such letters of allotment, which would be exchanged later for the share certificates.

LISTING The existing equity shares are listed on BSE, MSE and CSE. The Company has made applications to BSE, MSE and CSE for permission to deal in and for an official quotation in respect of the shares being offered in terms of the LoF. The Company has received in principle approval from BSE, MSE and CSE vide letters dated ____, ____ and ___ respectively. If the permission to deal in and for an official quotation of the shares is not granted by BSE, MSE or CSE within six weeks from the closure of the Issue, the Company shall forthwith repay, without interest, all monies received from applicants in pursuance of the LoF. If such money is not paid within eight days after the Company becomes liable to repay it, then the Company and every Director of the Company who is an officer in default shall, on and from expiry of eight days, be jointly and severally liable to repay the money with interest as prescribed under Section 73 of the Act.

CREDIT RATING This being an issue of equity shares, no credit rating is required. No ratings have been received by the Company for other securities/instruments in the last three years.

II. CAPITAL STRUCTURE

(As on February 10, 2005)

Nominal

Amount (Rs.) Authorised share capital 30,00,00,000 Equity Shares of Rs. 10 each 3,00,00,00,000 10,00,00,000 Preference Shares of Rs. 10 each 1,00,00,00,000 Total 4,00,00,00,000

Issued, Subscribed and paid up share capital

7,55,39,850 Equity Shares of Rs. 10 each 75,53,98,500 5,48,52,600 15% Redeemable Cumulative Preference Shares of Rs. 10 each 54,85,26,000 3,00,00,000 16% Redeemable Cumulative Preference Shares of Rs. 10 each 30,00,00,000 Total 1,60,39,24,500

Present Issue being offered to the Equity Shareholders through the Nominal Amount Premium (Rs.) LoF (Rs.) 17,37,41,655 Equity Shares of Rs. 10 each at par 173,74,16,550 NIL

Paid up capital after the Issue Nominal (assuming Equity Shareholders subscribe to all the equity shares offered) Amount (Rs.) 24,92,81,505 Equity Shares of Rs. 10 each 2,49,28,15,050 5,48,52,600 15% Redeemable Cumulative Preference Shares of Rs. 10 each 54,85,26,000 3,00,00,000 16% Redeemable Cumulative Preference Shares of Rs. 10 each 30,00,00,000 Total 3,34,13,41,052

Nominal Share Premium Account Amount (Rs.) Share Premium Account before the Issue 76,07,96,300 Share Premium Account after the Issue 76,07,96,300

Notes to the Capital Structure a) The Equity Shareholders do not hold any warrant, option, convertible loan or debenture, which would entitle them to acquire further equity shares. b) Build up of share capital Details of capital structure of the Company since inception is as follows: % of Face Issue Date of No. of Pre- Considera Value Price Amount (Rs.) Remarks Allotment Shares issue tion (Rs) (Rs) Capital 20.09.1991 70 10 10 700 0.00% Cash Subscription by the Signatories to MoA/AoA 17.05.1995 7,49,99,930 10 20 1,49,99,98,600 99.29% Cash Public issue 22.06.1998 5,21,900 10 30 1,56,57,000 0.69% Cash Conversion of OCDs

16.09.1998 17,950 10 30 5,38,500 0.02% Cash Conversion of OCDs Total 7,55,39,850 100%

c) Equity shareholding pattern Pre-issue Shareholding Post-issue Shareholding Category No. of Shares % No. of Shares % Promoters and Promoter Group (a) The Group 3,00,00,000 39.71 9,90,00,000 39.71 (b) TIDCO 82,50,000 10.92 2,72,25,000 10.92 Sub Total (a)+(b) 3,82,50,000 50.64 12,62,25,000 50.64 Other Shareholders Mutual Funds and UTI 56,700 0.08 1,87,110 0.08 Banks, FIs and Insurance Companies 10,100 0.01 33,330 0.01 Private Corporate Bodies 29,71,974 3.93 98,07,514 3.93 Indian Public 3,42,21,976 45.30 11,29,32,521 45.30 NRIs/OCBs 29,100 0.04 96,030 0.04 Total 7,55,39,850 100% 24,92,81,505 100.00 Note: Post Issue shareholding is based on the assumption that all shareholders will subscribe to their entire rights entitlement. However, the Group, while ensuring that its rights entitlement is fully subscribed, may renounce a part of its entitlement to other persons like business associates and employees. The Group holds 3,00,00,000 shares aggregating 39.71% of the equity capital of the Company. The directors of the promoter company (VSPL) do not hold any shares in the Company. d) Top Ten Shareholders Top 10 Equity Shareholders as on January 10, 2005 (to be updated at the time of Stock Exchange filing) S. No. Name No. of Shares % of share capital 1. Mr. Sajjan Jindal 2,50,00,000 33.10 2. Tamilnadu Industrial Development 82,50,000 10.92 Corporation Ltd. (TIDCO) 3. Vrindavan Services Private Limited 50,00,000 6.62 4. Indus Portfolio Private Limited 5,38,440 0.71 5. Mr. Jagjit Singh Dhiman 3,44,190 0.46 6. Mr. Mohanlal Manshi Shah and Nirmala 2,61,000 0.35 Mohanlal Shah 7. Mr. Deepak P. Shah and Mrs. Bhavna 2,24,700 0.30 D. Shah 8. Mr. Hiren Mohanlal Shah 2,00,000 0.27 9. Mr. Pradeep Kumar Saraogi 1,75,000 0.23 10. Lily Enterprises Pvt. Ltd. 1,74,012 0.23

Top 10 Equity Shareholders as on December 31, 2004 (to be updated at the time of Stock Exchange filing) S Name No. of Shares % of share No capital 1. Mr. Sajjan Jindal 2,50,00,000 33.10 2. TIDCO 82,50,000 10.92 3. Vrindavan Services Private Limited 50,00,000 6.62 4. Indus Portfolio Private Limited 5,34,240 0.71 5. Mr. Jagjit Singh Dhiman 3,44,190 0.46 6. Mohanlal Manshi Shah 2,61,000 0.35 Nirmala Mohanlal Shah 7. Mr. Deepak P. Shah and Mrs. Bhavna 2,54,700 0.34 D. Shah 8. Pradeep Kumar Saraogi 2,07,500 0.28 9. Hiren Mohanlal Shah 2,00,000 0.27 10. Prem R. Mardia 1,74,012 0.23

Top 10 Equity Shareholders as on January 8, 2003 (to be updated at the time of Stock Exchange filing) S. No. Name No. of Shares % of share capital 1. Lakshmi Machine Works Limited 3,00,00,000 39.71 2. Tamilnadu Industrial Development 82,50,000 10.92 Corporation Ltd. 3. Annamallai Finance Limited 2,83,300 0.38 4. Mr. Ashok C. Samani 1,86,049 0.25 5. Jay and Jay Enterprises Limited 1,14,100 0.15 6. Ms. Indira Mehta and Ms. Bhavna Mehta 1,07,900 0.14 7. Mr. Muthiah M A M R 1,00,000 0.13 8. Mr. Pravin Haribhai Patel and Ms. 98,700 0.13 Vaishali Pravin Patel 9. Manaco Estates Pvt. Limited 93,000 0.12 10. Asman Investments Limited 83,300 0.11 e) The total number of Equity Shareholders as on December 31, 2004 is 76,214. f) There are no shares under lock-in. g) The present issue being a rights issue, the requirement of promoters’ contribution is not applicable as per clause 4.10.1(c) of SEBI Guidelines. h) The Company is planning to avail bridge loan of up to Rs. 50 crores to be repaid from the proceeds of the Issue, so that the capital investments towards Phase I and Phase II may commence [details of bridge loan, if any, to be incorporated at the time of Stock Exchange filing]. i) The Company, the Group, Directors and Lead Manager to the Issue have not entered into any buy-back, standby or similar arrangements for any of the shares being issued through the LoF. j) At any given time, there shall be only one denomination of the equity shares. The Company shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time. k) There has been no issue of shares for consideration other than cash. l) During the last six months, details of transactions in the shares of the Company by the Group are as follows: Purchases by the Group: Transaction No. of Shares Date of Name Price Amount (Rs.) purchased Purchase (Rs.) Vrindavan Services Pvt. Ltd. 50,00,000 18.12.04 Re. 1 per share 50,00,000 Mr. Sajjan Jindal 2,50,00,000 18.12.04 Re. 1 per share 2,50,00,000 The above purchases were made from Lakshmi Machine Works Ltd (LMW), the previous promoters of the Company. m) No further issue of capital by way of issue of bonus equity shares, preferential allotment, rights issue or public issue or in any other manner which will affect the capital of the Company, shall be made during the period commencing from the filing of the Letter of Offer with SEBI till the equity shares issued under the LoF have been listed or application moneys are refunded on account of the failure of the Issue. n) The Company presently does not have any proposal, intention, negotiation or consideration to alter the capital structure by way of split/consolidation of the denomination of the shares/issue of equity shares on a preferential basis or issue of bonus or rights or public issue of equity shares or any other securities within a period of six months from the date of opening of the present Issue other than the proposed conversion of loan/preference shares into equity shares as disclosed in this LoF. o) The Group has confirmed that the rights entitlement of the Promoters and Promoter Group will be fully subscribed. The Group also intends to subscribe to the full extent, directly or through its nominees, the shortfall in the Issue, if any. As a result of this subscription and consequent allotment, the Group may acquire equity shares over and above its entitlement in the Issue, which may result in their equity shareholding in the Company exceeding their current equity shareholding. This subscription and acquisition of additional equity shares by the Group, if any, will not result in change of control of the management of the Company and shall be exempt in terms of provision to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997.

III. TERMS OF THE ISSUE

The equity shares, now being issued, are subject to the terms and conditions of the LoF, the enclosed CAF, the Memorandum of Association and Articles of Association of the Company, the approvals from the GoI, FIPB and RBI, if applicable, the provisions of the Act, guidelines issued by SEBI, guidelines, notifications and regulations for issue of capital and listing of securities issued by GoI and/or other statutory authorities and bodies from time to time, terms and conditions as stipulated in the allotment advice or letter of allotment or share certificate and rules as may be applicable and introduced from time to time.

AUTHORITY TO THE ISSUE The Issue is being made pursuant to the resolution passed by the Board of Directors of the Company at its meeting held on January 28, 2005. . BASIS OF THE ISSUE The equity shares are being offered for subscription for cash to those existing Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the equity shares held in the electronic form and on the Register of Members of the Company in respect of equity shares held in the physical form at the close of business hours on the Record Date fixed in consultation with the Designated Stock Exchange. The equity shares are being offered for subscription in the ratio of 23 equity shares for every 10 equity shares held by the Equity Shareholders.

RIGHTS ENTITLEMENT Being an Equity Shareholder as on the Record Date, you are being offered equity shares in the Issue as shown in part A of the enclosed CAF.

FRACTIONAL ENTITLEMENT If the shareholding of any of the Equity Shareholders is not in multiple of 10, then the fractional entitlement of such holders arrived at after multiplying such number of shares by 2.3 shall be ignored. Shareholders holding less than 10 equity shares, whose fractional entitlement is being ignored as above, will be offered one new equity share out of those new equity shares not subscribed by the existing Equity Shareholders or available after consolidation of the fractional entitlements. Shareholders whose fractional entitlements are being ignored would be given preferential allotment of one additional share each if they apply for additional shares.

JOINT HOLDERS Where two or more persons are registered as the holders of any equity shares they shall be deemed to hold the same rights, as joint-tenants with benefits of survivorship subject to provisions contained in the Articles of Association of the Company.

NOMINATION FACILITY In terms of Section 109A of the Act, nomination facility is available in case of equity shares. The applicant can nominate any person by filling the relevant details in the CAF in the space provided for this purpose. Only one nomination would be applicable for one folio. Hence, in case the Equity Shareholder has already registered the nomination with the Company, no further nomination needs to be made for equity shares to be allotted in the Issue under the same folio. In case the allotment of equity shares is in dematerialised form, there is no need to make a separate nomination for the equity shares to be allotted in this Issue. Nominations registered with respective Depository Participant of the applicant would prevail. If the applicants wish to change the nomination, they are requested to inform their respective Depository Participants.

ISSUE OF DUPLICATE EQUITY SHARE CERTIFICATE If any equity share certificate is mutilated or defaced or the pages for recording transfers of equity share are fully utilized, the same may be replaced by the Company against the surrender of such certificate. Provided, where the equity share certificate are mutilated or defaced, the same will be replaced as aforesaid only if the certificate numbers and the distinctive numbers are legible. If any equity share certificate is destroyed, stolen or lost, then upon

production of proof thereof to the satisfaction of the Company and upon furnishing such indemnity/surety and/or documents as the Company may deem adequate, duplicate equity share certificate shall be issued.

PRINTING OF BANK PARTICULARS ON REFUND ORDERS As a matter of precaution against possible fraudulent encashment of refund orders due to loss or misplacement, the particulars of the applicant’s bank account are mandatorily required to be given for printing on refund orders. Bank account particulars will be printed on the refund orders/refund warrants which can then be deposited only in the account specified. The Company will in no way be responsible if any loss occurs through these instruments falling into improper hands either through forgery or fraud.

OFFER TO NON-RESIDENT EQUITY SHAREHOLDERS Applications received from Non-Resident Indians and other Non-Resident shareholders for allotment of equity shares shall be inter alia, subject to the conditions imposed from time to time by RBI under the Foreign Exchange Management Act, 1999 (FEMA) in the matter of refund of application moneys, allotment of equity shares, issue of letter of allotment/share certificates, payment of interest, dividends, etc. General permission has been granted to any person resident outside India to apply shares offered on rights basis by an Indian Company in terms of FEMA and the rules and regulations thereunder. The equity shares issued under the Issue and purchased by Non-Residents shall be subject to the same conditions including restrictions in regard to the repatriability as are applicable to the previously held equity shares against which equity shares under the Issue are issued. However, as per the provisions of AP DIR circular No. 14 dated September 16, 2003 (issued by RBI), such Equity Shareholders who have been allotted the equity shares as OCBs would not be permitted to participate in the Issue. Accordingly, shareholders/applicants who are OCBs and wishing to participate in the Issue would be required to submit approvals in relation thereto from FIPB and RBI. The Board of Directors may at its absolute discretion, agree to such terms and conditions as may be stipulated by RBI while approving the allotment of equity shares, payment of dividend etc. to the Equity Shareholders who are Non-Residents.

PRINCIPAL TERMS AND CONDITIONS OF THE ISSUE Equity Shares

Face value Each equity share shall have the face value of Rs. 10.

Issue Price Each equity share is being offered at par at an Issue price of Rs. 10.

Entitlement Ratio The equity shares are being offered on rights basis to the existing Equity Shareholders of the Company in the ratio of 23 equity shares for every 10 equity shares held as on the Record Date.

Market lot The market lot for the equity shares in dematerialised mode is one. In case of physical certificates, the Company would issue one certificate for the equity shares allotted to one folio (“Consolidated Certificate”). In respect of the Consolidated Certificate, the Company will be returning the share certificates issued for the entire holding, duly split as desired by the Equity Shareholders within a week’s time, as and when such requests are received from the Equity Shareholders without charging anything from the Equity Shareholder.

Terms of payment 100% of the issue price per equity share shall be payable on application.

Ranking of Equity Shares The equity shares shall be subject to the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects including dividends with the existing equity shares of the Company.

OPTION AVAILABLE TO THE EQUITY SHAREHOLDERS The CAF clearly indicates the number of equity shares that the Equity Shareholder is entitled to. If the Equity Shareholder applies for an investment in equity shares, then he can: ! Apply for his entitlement in part ! Apply for his entitlement in part and renounce the other part ! Apply for his entitlement in full ! Apply for his entitlement in full and also apply for additional equity shares Renouncees for equity shares can apply for equity shares renounced to them and also apply for additional equity shares.

HOW TO APPLY Resident Equity Shareholders Application should be made only on the enclosed CAF provided by the Company. The enclosed CAF should be completed in all respects, as explained in the instructions indicated in the CAF and submitted to the Bankers to the Issue. CAFs will not be accepted by the Lead Manager or by the Registrar to the Issue or by the Company at any office except in the case of postal applications as per instructions given in the LoF.

Non-Resident Equity Shareholders Applications received from the Non-Resident Equity Shareholders for the allotment of equity shares shall, inter-alia, be subject to the conditions as may be imposed from time to time by RBI, in the matter of refund of application moneys, allotment of equity shares, issue of letters of allotment/certificates/payment of dividends etc.

The CAF consists of four parts: Part A: Form for accepting the equity shares offered and for applying for additional equity shares Part B: Form for renunciation Part C: Form for application for renouncees Part D: Form for request for Split Application Forms

Acceptance of the Issue You may accept the offer and apply for equity shares offered, either in full or in part by filling Block III of Part A of the enclosed CAF and submit the same along with the application money payable to the Bankers to the Issue or any of the branches as mentioned on the reverse of the CAF before the close of the banking hours on or before the Issue closing date or such extended time as may be specified by the Board therefor in this regard. Applicants at centers not covered by the branches of collecting banks can send their CAF together with the cheque drawn on a local bank at Mumbai /demand draft payable at Mumbai (net of demand draft charges and postal charges) to the Registrar to the Issue by Registered Post.

RENUNCIATION The Issue includes a right exercisable by you to renounce the equity shares offered to you either in full or in part in favour of any other person or persons. Such renouncees can only be Indian nationals/limited companies incorporated under and governed by the Act, statutory corporations/institutions, trusts (unless registered under the Indian Trust Act), minors (through their legal guardians), societies (unless registered under the Societies Registration Act, 1860 or any other applicable laws) provided that such trust/society is authorised under its constitution/bye laws to hold equity shares in a company and cannot be a partnership firm, more than three persons including joint-holders, HUF, foreign nationals (unless approved by RBI or other relevant authorities) or to any person situated or having jurisdiction where the offering in terms of this LoF could be illegal or require compliance with securities laws of such jurisdiction or any other persons not approved by the Board. Any renunciation from Non-Resident Indian Shareholder(s) to Resident Indian(s) is subject to the renouncer(s)/ renouncee(s) obtaining the approval of the FIPB and/ or necessary permission of RBI under the Foreign Exchange Management Act, 1999 (FEMA) and other applicable laws and such permissions should be attached to the CAF. Applications not accompanied by the aforesaid approval are liable to be rejected. Any renunciation from Resident Indian Shareholder(s) to Non-Resident Indian(s) or from Non-Resident Indian Shareholder(s) to other Non-Resident Indian(s) is subject to the prevailing RBI guidelines.

By virtue of the Circular No. 14 dated September 16, 2003 issued by RBI, Overseas Corporate Bodies (“OCBs”) have been derecognized as an eligible class of investors and RBI has subsequently issued the Foreign Exchange Management [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, 2003. Accordingly, the existing Equity Shareholders of the Company who do not wish to subscribe to the equity shares being offered but wish to renounce the same in favour of renouncees shall not renounce the same (whether for consideration or otherwise) in favour of OCBs. The right of renunciation is subject to the express condition that the Board/Committee of Directors shall be entitled in its absolute discretion to reject the request for allotment to renouncee(s) without assigning any reason therefor.

PROCEDURE FOR RENUNCIATION To renounce the whole offer in favour of one renouncee If you wish to renounce the offer indicated in Part A, in whole, please complete Part B of the CAF. In case of joint holding, all joint holders must sign Part B of the CAF. The person in whose favour renunciation has been made should complete and sign Part C of the CAF. In case of joint renouncees, all joint renouncees must sign this part of the CAF.

To renounce in part/or renounce the whole to more than one person(s) If you wish to either accept this offer in part and renounce the balance or renounce the entire offer in favour of two or more renouncees, the CAF must be first split into requisite number of forms. Please indicate your requirement of split application forms in the space provided for this purpose in Part D of the CAF and return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the last date of receiving requests for split application forms. On receipt of the required number of split forms from the Registrar, the procedure as mentioned in paragraph above shall have to be followed. In case the signature of the Equity Shareholder(s), who has/have renounced the equity shares, does/do not match with the specimen registered with the Company, the application is liable to be rejected.

Renouncee(s) The person(s) in whose favour the equity shares are renounced should fill in and sign Part C of the CAF and submit the entire CAF to the Bankers to the Issue on or before the Issue closing date along with the application money.

Change and/or introduction of additional holders If you wish to apply for equity shares jointly with any other person or persons, not more than three, who is/are not already joint holder(s) with you, it shall amount to renunciation and the procedure as stated above for renunciation shall have to be followed. Even a change in the sequence of the name of joint holders shall amount to renunciation and the procedure, as stated above shall have to be followed. However, this right of renunciation is subject to the express condition that the Board of Directors of the Company shall be entitled in its absolute discretion to reject the request for allotment from the renouncee(s) without assigning any reason therefor.

Please note that: (a) Part A of the CAF must not be used by any person(s) other than those in whose favour this offer has been made. If used, this will render the application invalid. (b) Request for split form should be made for a minimum of 100 equity shares or in multiples thereof and one Split Application Form for the balance equity shares, if any. (c) Only the person to whom the LoF has been addressed to and not the renouncee(s) shall be entitled to renounce and to apply for Split Application Forms. Forms once split cannot be split again. (d) Split Application Form will be sent to the applicant by post at applicant’s risk.

ADDITIONAL EQUITY SHARES You are eligible to apply for additional equity shares over and above the number of equity shares you are entitled to, provided that you have applied for all the equity shares offered without renouncing them in whole or in part in favour of any other person(s). Applications for additional equity shares shall be considered and allotment shall be made in the manner prescribed elsewhere in the Letter of Offer under the section “Basis of Allotment”. The renouncees applying for all the equity shares renounced in their favour may also apply for additional equity shares.

In case of change of status of a holder, i.e., from a Resident Indian to Non-Resident Indian, a new Demat account shall be opened for the purpose. In case of application for additional equity shares by Non-Resident Equity Shareholders, the allotment of additional shares will be subject to the condition that the overall issue of shares to the Non-Resident Equity Shareholders in the total paid-up capital does not exceed the sectoral cap and will be subject to RBI guidelines in this regard. Where the number of additional equity shares applied for exceeds the number available for allotment, the allotment would be made on a fair and equitable basis in consultation with the Designated Stock Exchange. The summary of options available to the Equity Shareholder is presented below. You may exercise any of the following options with regard to the equity shares offered, using the enclosed CAF: Option Available Action Required 1. Accept whole or part of your entitlement without Fill in and sign Part A including Block III relating to the renouncing the balance. acceptance of entitlement. Block IV relating to additional equity shares to be left blank or Nil to be mentioned. (All joint holders must sign)

2. Accept your entitlement in full and apply for Fill in and sign Part A including Block III relating to the additional equity shares acceptance of entitlement and Block IV relating to additional equity shares. (All joint holders must sign)

3. Renounce your entitlement in full to one person Fill in and sign Part B (all joint holders must sign) indicating (Joint renouncees are considered as one). the number of equity shares renounced and hand it over to the renouncee. The renouncees must fill in and sign Part C (All joint renouncees must sign)

4. Accept a part of your entitlement and renounce the Fill in and sign Part D (all joint holders must sign) requesting balance to one or more renouncee(s) for Split Application Forms. Send the CAF to the Registrar to the Issue so as to reach them on or before the last date for OR receiving requests for Split Forms. Splitting will be permitted only once. Renounce your entitlement to all the equity shares offered to you to more than one renouncee On receipt of the Split Form take action as indicated below. • For the equity shares you wish to accept, if any, fill in and sign Part A. • For the equity shares you wish to renounce, fill in and sign Part B indicating the number of equity shares renounced and hand it over to the renouncees. Each of the renouncees should fill in and sign Part C for the equity shares accepted by them.

5. Introduce a joint holder or change the sequence of This will be treated as a renunciation. Fill in and sign Part B and joint holders the renouncees must fill in and sign Part C.

AVAILABILITY OF DUPLICATE CAF In case the original CAF is not received, or is misplaced by the applicant, the Registrar to the Issue will issue a duplicate CAF on the request of the applicant who should furnish the registered folio number/ DP and Client ID no. and his/her full name and address to the Registrar to the Issue. Please note that those who are making the application in the duplicate form should not utilise the original CAF for any purpose including renunciation, even if it is received/found subsequently. If the applicant violates this requirement, he/she shall face the risk of rejection of both the applications as well as forfeiture of amounts remitted along with the applications.

APPLICATION ON PLAIN PAPER An Equity Shareholder who has neither received the original CAF nor is in a position to obtain the duplicate CAF may make an application to subscribe to the Issue on plain paper, along with an Account Payee Cheque drawn on a local bank at Mumbai/ Demand Draft payable at Mumbai which should be drawn in favour of the Bankers to the Issue marked “A/c Payee” and marked “Name of the Bank - SISCOL - Rights Issue” and send the same by Registered Post directly to the Registrar to the Issue.

The application on plain paper, duly signed by the applicants including joint holders, in the same order as per the specimen recorded with the Company, must reach the office of the Registrar to the Issue before the date of closure of the Issue and should contain the following particulars: ! Name of the Issuer ! Name and address of the Equity Shareholder including joint holders ! Registered Folio Number/ DP and Client ID no. ! Number of equity shares held as on Record Date ! Number of Rights equity shares entitled to ! Number of Rights equity shares applied for ! Number of additional equity shares applied for, if any ! Total number of equity shares applied for ! Total amount paid @ Rs. 10/ - per equity share ! Particulars of Cheque/Draft ! Savings/Current Account Number and name and address of the bank where the Equity Shareholder will be depositing the refund order ! PAN/GIR number and Income Tax Circle/Ward/District where the application is for equity shares of a total value of Rs. 50,000 or more for the applicant and for each applicant in case of joint names, and ! Signature of Equity Shareholders, in the same sequence and order as they appear in the records of the Company Please note that those who are making the application otherwise than on original CAF shall not be entitled to renounce their rights and should not utilize the original CAF for any purpose including renunciation even if it is received subsequently. If the applicant violates any of these requirements, he/she shall face the risk of rejection of both the applications as well as forfeiture of amounts remitted along with the applications.

PAYMENT BY STOCKINVEST In terms of RBI Circular DBOD No. FSC BC 42/24.47.00/2003-04 dated November 5, 2003, the Stockinvest scheme has been withdrawn with immediate effect. Hence, payment through Stockinvest would not be accepted in the Issue.

LAST DATE OF APPLICATION The last date for submission of CAF is __. The Board/Committee of Directors will have the right to extend the said date for such period as it may determine from time to time but not exceeding sixty days from the date the Issue opens. If the CAF together with the amount payable is not received by the Bankers to the Issue/ Registrar on or before the close of banking hours on the aforesaid last date or such date as may be extended by the Board/ Committee of Directors, the offer contained in the LoF shall be deemed to have been declined and the Board/ Committee of Directors shall be at liberty to dispose off the equity shares hereby offered, as provided under the heading “Basis of Allotment”.

BASIS OF ALLOTMENT 1. Subject to provisions contained in the LoF, the Articles of Association and approval of the Designated Stock Exchange, the Board will proceed to allot the equity shares in the following order of priority: (a) Full allotment to those Equity Shareholders who have applied for their rights entitlement either in full or in part and also to the renouncee(s) who has/ have applied for equity shares renounced in their favour, in full or in part. (b) Allotment to the Equity Shareholders who having applied for all the equity shares offered to them as rights have also applied for additional equity shares. The allotment of such additional equity shares will be made as far as possible on an equitable basis having due regard to the number of equity shares held by them on the Record Date, provided there is an under-subscribed portion after making full allotment as per (a) above. The allotment of such equity shares will be at the sole discretion of the Board/Committee of Directors in consultation with the Designated Stock Exchange, as a part of the rights issue and not preferential allotment. (c) Allotment to the renouncees who, having applied for all the equity shares renounced in their favour, have also applied for additional equity shares, provided there is an under-subscribed portion after making full allotment as per (a) and (b) above. The allotment of such additional equity shares will be made on a proportionate basis at the sole discretion of the Board/Committee of Directors but in consultation with the Designated Stock Exchange, as a part of the rights issue and not preferential allotment.

2. The Company shall not retain over subscription. 3. The Issue will become undersubscribed after considering the number of equity shares applied as per entitlement plus additional equity shares. The undersubscribed portion shall be applied for only after the close of the issue. The promoters or any other person shall subscribe to such undersubscribed portion as per the relevant provisions of the law. If any person presently in control of the Company desires to subscribe to such undersubscribed portion and if disclosure is made pursuant to SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, such allotment of the undersubscribed portion will be governed by the provisions of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. Allotment to the promoters of any unsubscribed portion, over and above their entitlement shall be done in compliance with Clause 40A of the Listing Agreement. 4. After taking into account the allotments made under 1(a), 1(b) and 1(c) and 3 above, if there is still any under subscription, the unsubscribed portion shall be disposed off by the Board or Committee of Directors authorized in this behalf by the Board upon such terms and conditions, through such equity shares and to such person/persons and in such manner as the Board/Committee of Directors may in its absolute discretion deem fit, as part of the rights issue and not preferential allotment.

UNDERWRITING The Issue is not underwritten.

ALLOTMENT / REFUND The Company will issue and dispatch letters of allotment/ share certificates and/ or letters of regret along with refund order or credit the allotted shares to the respective beneficiary accounts, if any within a period of six weeks from the Date of Closure of the Issue. If such money is not repaid within 8 days from the day the Company becomes liable to pay it, the Company shall pay that money with interest as stipulated under Section 73 of the Act. Letters of allotment/ share certificates/ refund orders above the value of Rs. 1,500 will be dispatched by Registered Post/ Speed Post to the sole/ first applicant’s registered address. However, refund orders for value not exceeding Rs. 1,500 shall be sent to the applicants under Postal Certificate. Such cheques or pay orders will be payable at par at all the centers where the applications were originally accepted and will be marked “A/c payee” and would be drawn in the name of the sole/ first applicant. Adequate funds would be made available to the Registrar to the Issue for the dispatch of letters of allotment/share certificates and refund orders. In case the Company issues letters of allotment, the corresponding share certificates will be kept ready within three months from the date of allotment thereof or such extended time as may be approved by the Company Law Board under Section 113 of the Companies Act, 1956 or other applicable provisions, if any. Allottees are requested to preserve such Letters of Allotment, which would be exchanged later for the share certificates. As regards allotment/refund to Non-Residents, the following further conditions shall apply In case of Non-Residents, who remit their application monies from funds held in NRE/FCNR accounts, refunds and/ or payment of interest/dividend and other disbursement, if any, shall be credited to such accounts, details of which should be furnished in the CAF. Subject to the approval of RBI, in case of Non-Residents, who remit their application monies through Indian Rupee draft purchased from abroad, refund and/ or payment of dividend/ interest and any other disbursement, shall be credited to such accounts (details of which should be furnished in the CAF) and will be made net of bank charges/ commission in US Dollars, at the rate of exchange prevailing at such time. The Company will not be responsible for any loss on account of exchange fluctuations for converting the Indian Rupee amount into US Dollars. The equity share certificate(s) will be sent by registered post at the Indian address of the Non-Resident applicant.

LETTERS OF ALLOTMENT / EQUITY SHARE CERTIFICATES Letter(s) of Allotment/ equity share certificates or letters of regret will be dispatched to the registered address of the first named applicant or respective beneficiary accounts will be credited within six weeks, from the date of closure of the subscription list. In case the Company issues letters of allotment, the relative equity share certificates will be dispatched within three months from the date of allotment. Allottees are requested to preserve such letters of allotment (if any) to be exchanged later for equity share certificates. Export of letters of allotment (if any)/ equity share certificates to Non-Resident allottees will be subject to the approval of RBI.

ARRANGEMENT FOR ODD LOT EQUITY SHARES The Company has not made any arrangements for the disposal of odd lot equity shares arising out of this Issue. The Company will issue certificates of denomination equal to the number of equity shares being allotted to the Equity Shareholder.

EQUITY SHARES IN DEMATERIALISED FORM Applicants to the equity shares of the Company issued through the Issue shall be allotted the shares in dematerialised (electronic) form at the option of the applicant. The Company and the Registrars have signed a tripartite agreement with CDSL/NSDL on ___ and ____ (to be incorporated at the time of Stock Exchange filing) respectively which enables the investors to hold and trade in shares in a dematerialised form, instead of holding the shares in the form of physical certificates. In the Issue, the allottees who have opted for equity shares in dematerialised form will receive their equity shares in the form of an electronic credit to their beneficiary account with a depository participant. Investor will have to give the relevant particulars for this purpose in the appropriate place in the CAF. Applications, which do not accurately contain this information, will be given the shares in physical form. Separate applications for shares in physical and dematerialised form should not be made. If such applications are made, the application for physical shares will be treated as multiple applications and is liable to be rejected. In case of partial allotment, allotment will be done in demat option for the shares sought in demat and balance, if any, will be allotted in physical shares. Procedure for availing of this facility for allotment of equity shares in this Issue in the electronic form is as under: 1. Open a Beneficiary Account with any Depository Participant (care should be taken that the Beneficiary Account should carry the name of the holder in the same manner as is exhibited in the records of the Company. In case of joint holding, the Beneficiary Account should be opened carrying the names of the holders in the same order as with the Company). In case of Investors having various folios in the Company with different joint holders, the investors will have to open separate accounts for such holdings. Those Equity Shareholders who have already opened such Beneficiary Account (s) need not follow this step. 2. For Equity Shareholders already holding equity shares of the Company in dematerialized form as on Record Date, the beneficial account number shall be printed on the CAF. For those who open accounts later or those who change their accounts and wish to receive their rights equity shares by way of credit to such account, the necessary details of their beneficiary account should be filled in the space provided in the CAF. It may be noted that the allotment of shares arising out of the Issue may be made in dematerialized form even if the original equity shares of the Company are not dematerialized. Nonetheless, it should be ensured that the Depository Account is in the name(s) of the Equity Shareholders and the names are in the same order as in the records of the Company. 3. Responsibility for correctness of applicant’s age and other details given in the CAF vis-à-vis those with the applicant’s Depository Participant would rest with the applicant. Applicants should ensure that the names of the applicants and the order in which they appear in CAF should be same as registered with the applicant’s Depository Participant. 4. If incomplete / incorrect Beneficiary Account details are given in the CAF the applicant will get equity shares in physical form. 5. The rights equity shares allotted to investors opting for dematerialized form, would be directly credited to the Beneficiary Account as given in the CAF after verification. Allotment advice, Refund Order (if any) would be sent directly to the applicant by the Registrar to the Issue but the applicant’s Depository Participant will provide to him the confirmation of the credit of the Rights equity shares to the applicant’s Depository Account. 6. Renouncees will also have to provide the necessary details about their Beneficiary Account for allotment of shares in the Issue. In case these details are incomplete or incorrect, the application is liable to be rejected.

INVESTORS MAY PLEASE NOTE THAT THE EQUITY SHARES OF THE COMPANY CAN BE TRADED ON THE STOCK EXCHANGES ONLY IN DEMATERIALIZED FORM.

UTILISATION OF PROCEEDS Subscription received against the Issue will be kept in a separate bank account(s) and the Company would not have access to such funds unless it has received minimum subscription of 90% of the Issue and necessary approvals of the Designated Stock Exchange has been obtained to use the amount of subscription.

GENERAL INSTRUCTIONS FOR APPLICANTS (a) Please read the instructions printed on the enclosed CAF carefully. (b) Application should be made on the printed CAF provided by the Company and should be completed in all respects. The CAF found incomplete with regard to any of the particulars required to be given therein, and/ or which are not completed in conformity with the terms of the LoF are liable to be rejected and the money paid, if any, in respect thereof will be refunded without interest and after deduction of bank commission and other charges, if any. The CAF must be filled in English and the names of all the applicants, details of occupation, address, father’s / husband’s name must be filled in block letters. (c) The CAF together with cheque / demand draft should be sent to the Bankers to the Issue / Collecting Bank or to the Registrar and not to the Company or Lead Manager to the Issue. Applicants residing at places other than cities where the branches of the Bankers to the Issue have been authorised by the Company for collecting applications, will have to make payment by Demand Draft payable at Mumbai (net of demand draft charges and postal charges) and send their application forms to the Registrar to the Issue by Registered Post. If any portion of the CAF is / are detached or separated, such application is liable to be rejected. (d) Applications for a total value of Rs. 50,000 or more, i.e. where the total number of shares applied for multiplied by the Issue price, is Rs. 50,000 or more the applicant or in the case of application in joint names, each of the applicants, should mention his/ her permanent account number allotted under the Income-tax Act, 1961 or where the same has not been allotted, the GIR number and the Income-tax Circle/Ward/District. In case where neither the permanent account number nor the GIR number has been allotted, the fact of non-allotment should be mentioned in the CAF. Forms without this information will be considered incomplete and are liable to be rejected. (e) Applicants are advised to provide information as to their savings/current account number and the name of the Bank with whom such account is held in the CAF to enable the Registrar to print the said details in the Refund Orders, if any, after the names of the payees. Application not containing such details is liable to be rejected. (f) The payment against the application should not be effected in cash if the amount to be paid is Rs. 20,000 or more. In case payment is effected in contravention of this instruction, the application may be deemed invalid and the application money will be refunded and no interest will be paid thereon. Payment against the application if made in cash, subject to conditions as mentioned above, should be made only to the Bankers to the Issue. (g) Signatures should be either in English or Hindi or in any other language specified in the 8th Schedule of the Constitution of India. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a Special Executive Magistrate under his/ her official seal. The Equity Shareholders must sign the CAF as per the specimen signature recorded with the Company. (h) In case of an application under Power of Attorney or by a body corporate or by a society, a certified true copy of the relevant Power of Attorney or relevant resolution or authority to make investment and sign the application along with a copy of the Memorandum and Articles of Association and / or bye laws must be lodged with the Registrar to the Issue giving reference of the serial number of the CAF. In case these papers are sent to any other entity besides the Registrar to the Issue or are sent after the Issue closure date, then the application is liable to be rejected. (i) In case of joint holders, all joint holders must sign the relevant part of the CAF in the same order and as per the specimen signature(s) recorded with the Company. Further, in case of joint applicants who are renouncees, the number of applicants should not exceed three. In case of joint applicants, reference, if any, will be made in the first applicant’s name and all communication will be addressed to the first applicant. (j) Application(s) received from Non-Residents / NRIs, or persons of Indian origin residing abroad for allotment of equity shares shall, inter-alia, be subject to conditions, as may be imposed from time to time by RBI under FEMA in the matter of refund of application money, allotment of equity shares, subsequent issue and allotment of equity shares, interest, export of equity share certificates, etc. In case an Non-Resident or NRI Equity Shareholder has specific approval from RBI, in connection with his shareholding, he should enclose a copy of such approval with the CAF. (k) All communication in connection with application for the equity shares, including any change in address of the Equity Shareholders should be addressed to the Registrar to the Issue prior to the date of allotment in this Issue quoting the name of the first / sole applicant Equity Shareholder, folio numbers and CAF number. Please note that any intimation for change of address of Equity Shareholders, after the date of allotment, should be sent to the Registrar and Transfer Agents of the Company (i.e. Sharepro Services) in the case of equity shares held in physical form and to the respective DP, in case of equity shares held in dematerialised form.

(l) Split Application Forms cannot be re-split. (m) Only the person or persons to whom equity shares have been offered and not renouncee(s) shall be entitled to obtain Split Application Forms. (n) Applicants must write their CAF number at the back of the cheque / demand draft. (o) Only one mode of payment per application should be used. The payment must be either in cash or by cheque / demand draft drawn on any of the banks, including a co-operative bank, which is situated at and is a member or a sub member of the Bankers Clearing House located at the centre indicated on the reverse of the CAF where the application is to be submitted. (p) A separate cheque / draft must accompany each CAF. Outstation cheques / demand drafts or post-dated cheques and postal / money orders will not be accepted and applications accompanied by such cheques / demand drafts / money orders or postal orders will be rejected. The Registrar will not accept payment against application if made in cash. For payment against application in cash please refer point (f) above. (q) No receipt will be issued for application money received. The Bankers to the Issue / Collecting Bank/ Registrar will acknowledge receipt of the same by stamping and returning the acknowledgement slip at the bottom of the CAF. (r) An applicant which is a mutual fund can make a separate application in respect of each scheme of the fund and such applications shall not be treated as multiple applications. The application made by the asset management company or custodians of a mutual fund shall clearly indicate the name of the concerned scheme for which application is being made. (s) Mode of payment for Resident Equity Shareholders/ Applicants All cheques / drafts accompanying the CAF should be drawn in favour of the Collecting Bank (specified on the reverse of the CAF), crossed “A/c Payee only” and marked “Name of the Bank – SISCOL - Rights Issue”. Applicants residing at places other than places where the bank collection centers have been opened by the Company for collecting applications, are requested to send their applications together with Demand Draft for the full application amount favouring the Bankers to the Issue, crossed “A/c Payee only” and marked “Name of the Bank - SISCOL - Rights Issue” payable at Mumbai directly to the Registrar to the Issue by Registered Post so as to reach them on or before the Issue closing date. The Company or the Registrar will not be responsible for postal delays or loss of applications in transit, if any. (t) Mode of payment for Non-Resident Equity Shareholders/ Applicants As regards the application by Non-Resident Equity Shareholders, the following further conditions shall apply: Payment by Non-Residents must be made by demand draft / cheque payable at Mumbai (net of demand draft charges and postal charges) or funds remitted from abroad in any of the following ways: 1. Application with repatriation benefits (a) By Indian Rupee drafts purchased from abroad and payable at Mumbai or funds remitted from abroad (submitted along with Foreign Inward Remittance Certificate); or (b) By cheque / draft on a NRE or FCNR Account maintained in Mumbai; or (c) By Rupee draft purchased by debit to NRE/ FCNR Account maintained elsewhere in India and payable at Mumbai; or (d) FIIs registered with SEBI must remit funds from special Non-Resident rupee deposit account.

2. Application without repatriation benefits As far as Non-Residents holding shares on non-repatriation basis is concerned, in addition to the modes specified above, payment may also be made by way of cheque drawn on NRO Account maintained in Mumbai or Rupee Draft purchased out of NRO Account maintained elsewhere in India but payable at Mumbai. In such cases, the allotment of equity shares will be on non-repatriation basis.

All cheques/drafts submitted by Non-Residents should be drawn in favour of the Bankers to the Issue and marked “Name of the Bank - SISCOL - Rights Issue - NR” payable at Mumbai and must be crossed “A/c Payee only” for the amount payable. The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on the Issue Closing Date. A separate cheque or bank draft must accompany each CAF.

Applicants may note that where payment is made by drafts purchased from NRE/ FCNR/ NRO accounts as the case may be, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/ FCNR/ NRO account should be enclosed with the CAF. Otherwise the application shall be considered incomplete and is liable to be rejected. Notes: ! In case where repatriation benefit is available, interest, dividend and sales proceeds derived from the investment in equity shares can be remitted outside India, subject to tax, as applicable according to Income Tax Act, 1961. ! In case equity shares are allotted on non-repatriation basis, the dividend and sale proceeds of the equity shares cannot be remitted outside India. ! The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on the aforesaid Issue Closing Date. A separate cheque or bank draft must accompany each CAF. ! In case application received from Non-Residents, allotment, refunds and other distribution, if any, will be made in accordance with the guidelines/ rules prescribed by RBI as applicable at the time of making such allotment, remittance and subject to necessary approvals.

DISPOSAL OF APPLICATION AND APPLICATION MONEY No acknowledgment will be issued for the application moneys received by the Company. However, the Bankers to the Issue / Registrar to the Issue receiving the CAF will acknowledge its receipt by stamping and returning the acknowledgment slip at the bottom of each CAF. In case an application is rejected in full, the whole of the application money received will be refunded. Wherever an application is rejected in part, the balance of application money, if any, after adjusting any money due on equity shares allotted, will be refunded to the applicant within six weeks from the close of the Issue. For further instruction, please read the CAF carefully.

IMPORTANT 1. Please read the LoF carefully before taking any action. The instructions contained in the accompanying CAF are an integral part of the conditions of the LoF and must be carefully followed; otherwise the application is liable to be rejected. 2. All inquiries in connection with the LoF or accompanying CAF and requests for Split Application Forms must be addressed (quoting the Registered Folio Number/ DP and Client ID no., the CAF number and the name of the first Equity Shareholder as mentioned on the CAF and superscribed “SISCOL - Rights Issue” on the envelope) to the Registrar to the Issue at the following address: Sharepro Services (India) Private Limited Satam Estate, 3rd Floor Cardinal Gracious Road Chakala, Andheri (East) Mumbai – 400 099 Tel: 91-22-28215168, Fax: 91-22-28375646 E-mail: [email protected] 3. It is to be specifically noted that this Issue of equity shares is subject to Risk Factors appearing on Page iii of the LoF. 4. The Issue will not be kept open for more than 30 days unless extended, in which case it will be kept open for a maximum 60 days.

IV. TAX BENEFITS

The tax benefits listed below, based on the report dated December 27, 2004 from S. Krishnamoorthy & Co., Chartered Accountants, are the possible benefits available under the current tax laws 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 imperatives it faces in the future, it may not choose to fulfill.

BENEFITS AVAILABLE TO THE COMPANY The Company being a Sick Industrial Company, while computing the Book Profit tax at 7.5% payable under Section 115JB, the Book Profits shall be reduced by the amount of profits earned by the Company on and from the Assessment Year in which the said Company has become a Sick Industrial Company and ending with the Assessment Year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses.

BENEFITS AVAILABLE TO THE SHAREHOLDERS

The following tax benefits shall be available to prospective shareholders: Corporate Shareholders ! Under Section 10(38) introduced by the Finance (No.2) Act, 2004, Long term Capital gains arising out of sale of equity shares or a unit of equity oriented fund will be exempted from tax provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! Under Section 111A introduced by the Finance (No.2) Act, 2004, Short Term Capital Gains arising out of sale of equity shares or a unit of equity oriented fund will be taxed at a concessional rate of 10% as also education cess of 2% thereon provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! Under Section 48 of the Income-tax Act, 1961, the Long Term Capital Gains arising out of sale of Capital assets other than assets exempt under Section 10(38) will be computed after indexing the cost of acquisition/improvement under Section 112 of the Income-tax Act, 1961 and would be charged to tax at concessional rate of 20%. ! Under Section 10(34) of the Income-tax Act, 1961 any dividend income received by the Company from a domestic company will be exempted from Income tax.

Resident Shareholders ! Under Section 10(34) of the Income-tax Act, 1961 any dividend income received from a Indian Company is exempt from tax. ! Under Section 10(38) introduced by the Finance (No.2) Act, 2004, Long Term Capital Gains arising out of sale of equity shares or a unit of equity oriented fund will be exempted from tax provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! Under Section 111A introduced by the Finance (No.2) Act, 2004, Short Term Capital Gains, arising out of sale of equity shares or a unit of equity oriented fund will be taxed at a concessional rate of 10% provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! The Long Term Capital Gains accruing to the members of the Company from the transfer of the shares of the Company, otherwise than as mentioned in point 2 above, shall be charged to tax after deducting the indexed cost of acquisition at 20% (plus applicable surcharge and education cess) or without the benefits of indexation at @ 10% (plus applicable surcharge and education cess) as per the provisions of Section 112 of the Income-tax Act, 1961. ! Long Term Capital Gains on sale of shares of the Company by the members shall be exempt from Income tax if such gains are invested in bonds / equity shares specified in Section 54EC or Section 54ED respectively subject to the fulfillment of the conditions specified in those sections. In the case of individual or HUF members, Long Term Capital Gains on sale of shares of the Company shall be exempt from Income tax under Section 54F subject to the fulfillment of the conditions specified therein.

Non-Resident Shareholders ! Under Section 10(34) of the Income-tax Act, 1961 any dividend income received from an Indian company is exempt from tax. ! Under Section 10(38) introduced by the Finance (No.2) Act, 2004, Long Term Capital Gains arising out of sale of equity shares or a unit of equity oriented fund will be exempted from tax provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! Under Section 111A introduced by the Finance (No.2) Act, 2004, Short Term Capital Gains, arising out of sale of equity shares or a unit of equity oriented fund will be taxed at a concessional rate of 10% provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! As per the provisions of Section 115A of the Income-tax Act, 1961, the tax payable on the dividend (other than dividend referred to in Section 115 – O) income by a Non-Resident or a Foreign company shall be 20 per cent of such income. It shall not be necessary for them to furnish the Return of Income if their only source of income is investment income and tax has been deducted at source from such income under the provisions of Chapter XVIII B of the Income-tax Act, 1961.

Non-Resident Indian Shareholders ! Under Section 10(34) of the Income-tax Act, 1961 any dividend income received from an Indian company is exempt from tax. ! Under Section 10(38) introduced by the Finance (No.2) Act, 2004, Long Term Capital Gains arising out of sale of equity shares or a unit of equity oriented fund will be exempted from tax provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! Under Section 111A introduced by the Finance (No.2) Act, 2004, Short Term Capital Gains, arising out of sale of equity shares or a unit of equity oriented fund will be taxed at a concessional rate of 10% provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! Under Section 115E of the Income-tax Act, 1961, any Non-Resident Indian’s income from Long Term Capital Gains that are not exempt under Section 10(38) on transfer of shares be charged to Income tax at the rate 10% without aggregating any other income earned in India which is taxed separately. ! Under Section 115F of the Income-tax Act, 1961, the Long Term Capital Gains that are not exempt under Section 10(38) arising from transfer of a foreign exchange assets shall be exempted from Income tax entirely/proportionately, provided that net consideration is invested wholly or in part, in any specified asset or in any savings certificates referred to in Clause (4B) of Section 10 of the Income-tax Act, 1961, within six months of the date of transfer of asset. The amount so exempted shall be chargeable to tax if the new asset is transferred or converted into money within three years from the date of acquisition of the specified new asset. ! Under Section 115G of the Income-tax Act, 1961, a Non-Resident Indian is not obliged to file a Return of Income under Section 139(1), if his total income consists only of income from investments and/or Long Term Capital Gains earned on transfer of such investments and tax at source has been deducted from such income under the provisions of Chapter XVII B of the Income-tax Act, 1961. ! Under Section 115H of the Income-tax Act, 1961, where a Non-Resident Indian, in relation to any previous year, becomes assessable as Resident in India in respect of the total income of any subsequent year, he may furnish to the Assessing Officer a declaration in writing along with his Return of Income under Section 139 for the assessment year for which he is so assessable to the effect that the provisions of Chapter XII-A shall continue to apply to him in relation to investment income derived from any foreign exchange asset, being an asset of the nature referred to in sub clause (ii) to clause (v) of clause (f) of Section 115C, in which case, the provisions of Chapter XII-A shall continue to apply to him in relation to such income for that assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets. ! Under Section 115-I of the Income-tax Act, 1961 a Non-Resident Indian has the option of not to be governed by the provision of Chapter XII-A, for any assessment year, whereby his total income for that assessment year (including income arising from investment in the equity shares of the Company) will be computed according to the other provision of the Income-tax Act, 1961 and will therefore be eligible to get concessions applicable to a Resident Individual and will be liable to tax accordingly.

Foreign Institutional Investors ! Under Section 10(34) of the Income-tax Act, 1961 any dividend income received from an Indian company is exempt from tax. ! Under Section 10(38) introduced by the Finance (No.2) Act, 2004, Long Term Capital Gains arising out of sale of equity shares or a unit of equity oriented fund will be exempted from tax provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! Under Section 111A introduced by the Finance (No.2) Act, 2004, Short Term Capital Gains, arising out of sale of equity shares or a unit of equity oriented fund will be taxed at a concessional rate of 10 per cent provided the transaction of sale of such equity shares or unit is chargeable to securities transaction tax. ! Under Section 115AD of the Income-tax Act, 1961, Foreign Institutional Investors will be charged to tax at 20 per cent on income (other than income by way of dividends referred to in Section 115-O) from securities (other than units referred to in Section 115AB), at 10 per cent on long term capital gain (that are not exempt under section 10(38)) and Short Term Capital Gains arising from transfer of such securities, such income and capital gains to be computed in the manner set out in the said section.

Mutual Funds Under the provision of Section 10(23D) of the Income-tax Act, 1961 subject to the provision of Chapter XII-E any income inclusive of interest on debentures or dividends from shares, earned by mutual funds set up by a public sector bank or a public financial institution or authorized by SEBI or RBI will be exempt from Income-tax, subject to such conditions as the GoI may by notification in the Official Gazette specify in this behalf.

Wealth Tax and Gift Tax Shares are outside the scope of the word “Asset” defined under Section 2(ea) of the Wealth Tax Act, 1957 and are not liable to Wealth Tax. Gift tax is not leviable in respect of any gifts made on or after 1st October 1998. Therefore any gift of shares made will not attract gift tax.

Notes: i. All tax payable above is subject to surcharge and education cess is applicable. ii. In respect of Non-Residents, taxability of capital gains mentioned above shall be further subject to any benefits available under the Double Taxation Avoidance Agreement, if any, between India and the country in which the Non-Resident has fiscal domicile. In view of the individual nature of tax consequence, each investor is advised to consult his/her own tax adviser with respect to specific tax consequences of his/her participation in the scheme.

V. PARTICULARS OF THE ISSUE

OBJECTS OF THE ISSUE The Objects of the Issue are: 1. To part finance a) the proposed modifications / addition of the existing facilities to achieve the rated capacity of 0.3 mtpa (Phase I), b) the proposed enhancement of capacity from 0.3 mtpa to 0.6 mtpa (Phase II) and 2. To meet the Issue expenses.

COST OF THE PROJECT As per the lenders’ meeting held on June 16, 2004, ICICI Bank Ltd. had appointed Mecon Ltd. to conduct a techno- economic feasibility study to make the project viable. Mecon Ltd. had assessed a capital expenditure of Rs. 400 crores for the expansion from 0.3 mtpa to 0.6 mtpa. The costs estimated by the Company for Phase I and Phase II of the project, based on the recommendations of Mecon Ltd., are given below: (Rs. in lacs)

Civil & Estimated Particulars Plant & Other Structural Costs Machinery Facilities Buildings (Total) Phase I A. Iron Complex 2285 454 113 2852 B. Steel Melt Shop / ASP 1078 162 40 1280 C. Bar and Rod Mill 133 6 24 163 D. Others 74 9 2 85 E. Contingencies 96 19 5 120 Sub-Total 3666 650 184 4500

Phase II A. Iron Complex 17000 3400 850 21250 B. Steel Melt Shop / ASP 6196 1239.2 310 7745 C. Bar and Rod Mill 1704 340.8 85 2130 D. Utilities/Others 3016 603.2 151 3770 E. Contingencies 484 96.8 24 605 Sub-Total 28400 5680 1420 35500 Total for Phase I and Phase II 32066 6330 1604 40000

MEANS OF FINANCE The means of finance (Rs. in lacs) are as follows:

Particulars Amount (Rs. in lacs)

Present Rights Issue 17374 Term loan 23000 Total 40374 The above funds, after meeting issue expenses, would be used towards the projects as mentioned above. The amount in Means of Finance, which is in excess of the Cost of the Project after meeting the Issue expenses, would be added to Contingencies. The Company confirms that firm arrangements of finance through verifiable means towards 75% of the stated Means of Finance, excluding the amount to be raised through the Issue have been made.

DETAILS OF REQUIREMENTS OF FUNDS 1. The cost of the major plant facilities as estimated by the Company is as follows: Phase I: Augmentation of Existing Capacities (Rs. in lacs)

Estimated Particulars Costs

A. Iron Complex Capital repairs of Blast Furnace (402 cu. m.) 800 Tap hole drilling Machine 17 3rd Stove with incoming air preheating 500 Conversion at Sinter plant to utilise BF Gas for preheating 25 Truck tippler 10 PCI for Blast Furnaces (402 cu. m. + 550 cu. m) 1500 Sub-Total 2852 B. Steel Melt Shop / ASP 3rd Strand for Continuous Caster 300 85/25 m EOT Crane 270 Alloy feeding commissioning at existing Ladle Furnace 10 2nd Ladle Furnace 300 2nd Oxygen Compressor (4400 nm3/hr) 400 Sub-Total 1280 C. Bar and Rod Mill Charging Bay crane shifting to Mill Charging Bay 3 Scrap Bay crane shifting to Rolling Mill Bay 10 Descaler 10 Compactor 10 2nd Re-Heating Furnace 50 Automation 60 Capacitor banks at BRM 20 Sub-Total 163 D. Others QAD testing equipment 30 Colony Augmentation 25 Engineering Charges to Mecon Ltd. for BRM 30 Sub-Total 85 E. Contingencies 120 Total for Phase I 4500

Phase II: Expansion to 0.6 mtpa - Crude Steel (Rs. in lacs)

Estimated Particulars Costs

A. Iron Complex 0.4 mtpa - Coke Oven Plant 6000 90 sq. m. - Sintering Plant 5500 550 cu. m. - Blast Furnace 2 8500 Mud Gun & Drilling Machine 50 Spare Blower - 120000 nm3 capacity 1200 Sub-Total 21250 B. Steel Melt Shop / ASP 1 no. 45T - EOF / EAF 4000 1 No. Ladle Furnace 300 1 No. Vacuum Degassing Station with accessories 700 One 4 strand Continuous casting machine 2000 8 nos. Steel Teeming Ladles 120 Relocation of Pig Iron / Scrap feeding Yard 25 Bay Extensions 600 Sub-Total 7745 C. Bar and Rod Mill 1 No. 10T EOT Crane for Despatch Bay 30 10 strand wire rod block with stelmore cooling, compactor etc 1500 Transportation of wire rod block, refurbish, erection & commissioning 500 Cooling bed extension by 20 meters with civil work 100 Sub-Total 2130 D. Utilities/Others Water Reservoir 600 Utilities like cranes, pump houses etc. 1000 Main Power distribution system 1000 Civil work / Material Handling 1000 Engineering and Project Management charges 170 Sub-Total 3770 E. Contingencies 605 Total for Phase II 35500

2. Issue Expenses The expenses of the Issue to be borne by the Company are estimated to be around Rs. 103 lacs (0.6% of the issue size). These include issue management costs covering Lead Manager and Co-Manager fee: Rs. 40 lacs, Registrar fee and expenses: Rs. 15 lacs, SEBI and Stock Exchange fees: Rs. 3 lacs, Depository charges: Rs. 5 lacs, Printing costs: Rs. 15 lacs, Advertisement cost: Rs. 15 lacs and Other expenses and contingencies: Rs. 10 lacs. All the expenses for the Issue will be borne out of the Issue proceeds.

SCHEDULE OF IMPLEMENTATION The schedule of implementation is as follows: Existing Production Capacities Per Annum Phase 1 Phase II as on Dec 04 Target Dates for Completion Jul-05 Jun-06 Blast Furnace - Hot Metal (Tons) 324000 372000 1000000 Steel Melt Shop - Billets/ Blooms/Rounds (Tons) 300000 360000 1000000 Bar And Rod Mill - Rolled Products (Tons) 240000 312000 400000 Total Budgeted Costs (Rs. in crores) 45 355

COST INCURRED ON THE PROJECT As per the certificate dated January 8, 2005 from S. Krishnamoorthy & Co., Chartered Accountants, following capital expenses have been incurred by the Company as on December 30, 2004: I. Expenditure Rs. in lacs 1. Capital repair of existing Blast Furnace 614.01 2. Advance for the above 53.77 3. Advance for expansion in new project 41.64 Total 709.42

II. Source of Funds Rs. in lacs 1. Customer Advance from South West Mining Ltd. 584.42 2. Credit Balance of suppliers/creditors 125.00 Total 709.42

VI. THE COMPANY

HISTORY The Company was incorporated in September 1991 as a Public Limited Company promoted by M/s. Lakshmi Machine Works Ltd. (LMW) and Tamilnadu Industrial Development Corporation Ltd. (TIDCO). The Company is in the business of manufacturing Pig Iron, Billets, Bars and Rods at its integrated steel plant located at Pottaneri/M. Kalipatti villages. In terms of the CDR approval and as per approval of the shareholders of the Company, LMW has sold its entire shareholding in the Company to the Group.

MAIN OBJECTS OF THE COMPANY AS PER THE MEMORANDUM OF ASSOCIATION The object clause of the Memorandum of Association (MoA) of the Company enables it to undertake the activities for which the funds are being raised in the present Issue. Furthermore, the activities the Company has been carrying out until now is in accordance with the objects of the MoA. The main objects of the Company inter-alia are: 1. To carry on the business of smelting, manufacturing, prospecting, raising, operating, buying, selling, importing, exporting, purchasing or producing or otherwise dealing in pig iron of all grades/types/kinds, by products, grinding media balls, steel shots and grits, steel ingots, sectioning, rounds, and equipment and the articles of alloy and tool steel of every description of ferrous and non-ferrous metals. 2. To carry on the business of founders and manufacturers of ferrous and non-ferrous metals, sheet metal works, mechanical, electrical, railway, agricultural, domestic, mining, hydraulic, sanitation, civil, metallurgical, constructional engineers; to carry on the work for the manufacture of cast iron foundry, spun pipes, mild steel ingots, iron founders, iron and steel convertors, forges. 3. To carry on the business of manufacturers and fabricators of and merchants and dealers in iron and steel and non-ferrous bars, rounds, rods, angles, channels, sheets, wires, wire-nails; steel and non-ferrous ingots, castings in any other form and shape. 4. To search for, get, work, raise, make, merchandise, convert, sell and deal in coal, ferrous and non-ferrous limestone, manganese, magnesite, clay, fireclay, brick earth, bauxite, dolomite, quartzite and fuel, and generally to undertake and to carry on any business transaction or operation, commonly undertaken or carried on by explorers, prospectors or concessionaire, and to search, win, work, calcine, reduce, amalgamate, dress, refine and prepare for the market quarts, ore and mineral substances. The details of changes in the Memorandum and Articles of Association are given below:

Date of shareholders’ Particulars of change approval 23.08.1993 (2nd AGM) ! Increase in authorised share capital from Rs. 1 crore to Rs. 60 crores ! Share certificates to be issues in marketable lots ! Issue of debenture/debenture stock, bonds or other securities convertible into shares only with approval of shareholders 23.03.1994 (EGM) ! Increase in authorised share capital to Rs. 140 crores 28.11.1994 (EGM) ! Right to financial institutions for appointing nominee director(s) on the Board 11.09.1996 (5th AGM) ! Sub-division of certificates into two or more only in market lots 15.12.1997 (EGM) ! Increase in authorised share capital to Rs. 300 crores 16.09.1998 (7th AGM) ! Issue of shares without voting rights ! Register and Index of Members and Debenture holders to be kept in accordance with Sections 150 to 152 and 157 of the Act ! Issue of securities in Dematerialised form 22.09.2004 ! Change of registered office from Coimbatore to factory premises for administrative (Through ballot) convenience 09.02.2005 ! Increase in authorised share capital to Rs. 400 crores

VII. MANAGEMENT OF THE COMPANY

BOARD OF DIRECTORS The details of the Directors on board of the Company are given below: Name and Address Date of Birth Designation Qualification Experience Directorship in other Companies & Age Mr. N.K. Jain 01.09.1946 Chairman B.Com, 35 years Jindal Iron and Steel Co. Ltd. 302, Suman 58 years F.C.A., F.C.S. (Executive Vice Chairman) Playground Road JSW Power Ltd. (Chairman) Vile Parle (East) Jindal Thermal Power Co. Ltd. (Vice Mumbai - 400 057 Chairman) Jindal Praxair Oxygen Co. Ltd. (Chairman) Jindal Coated Steel Pvt. Ltd. JSW Holdings Ltd. Sapphire Technologies Ltd. Mr. Vijay Sharma 01.10.1954 Joint B.Tech. 28 years Nil MSP Akkammal Illam 50 years Managing (Metallurgical 3/47-7-9, KVS Nagar Director & Engineering), Narasothipatti CEO M.S. (Material Salem - 636 453 Science), PGDBA Mr. K.T. Krishna 21.10.1955 Director B.Com, LL.B, 26 years Jindal Thermal Power Co. Ltd. Deshika 49 years F.C.A, F.C.S. JSW Power Ltd. No.14, IInd Main AECS Layout III Stage, Sanjay Nagar Bangalore - 560 094 Mr. P. 03.05.1958 Director B.E. 22 years Indian Natural Medical Products Ltd. Shanmugasundaram 46 years (Mechanical), Saptarishi Agro Industries Ltd. 9, 5th Avenue MIE SKM Egg Products Export (India) Ltd. Auroshika Sree Maruthi Marine Industries Ltd. Besant Nagar Vishnu Fabrics Private Ltd. Chennai - 600 090 Mr. V. Prakash 18.06.1962 ICICI M.Sc., CAIIB 19 years Jamna Auto Industries 8th Floor, North 43 years Nominee Mascon Global Ltd. Tower Director Rain Industries Ltd. ICICI Bank Tower Bandra Kurla Complex Mumbai - 400 051 Mr. Kamal Kishore 12.12.1945 IFCI Nominee F.C.A. 35 years United Bank of India Gupta 59 years Director 4, Utkarsh Apartment 2, RN Marg, Civil Lines Delhi 110 054 Mr. S.V. Kshirsagar 22.07.1941 WITECO B.A. (Hons.) 40 years Nil Adwaitec 64 years (Debenture The United Western Trustee) Bank Colony Nominee Shahunagar, Godoli Director Satara - 415 001

Changes in the Directors in the last five years

Name of Director Appointed Resigned Reason Dr. D. Jayavarthanavelu 11.09.2001 25.11.2004 Resignation Mr. S. P. Nagarkatte * 11.09.1996 15.05.1999 Withdrawal of nomination Mr. P. R. Gopalakrishnan ** 28.01.1999 12.06.2002 Withdrawal of nomination Mr. S. Kishore * 16.05.1999 26.06.2000 Withdrawal of nomination Mr. P. Anandakrishnakumar * 26.06.2000 28.01.2002 Withdrawal of nomination Mr. Sharada N. Menon ** 12.06.2002 18.06.2003 Withdrawal of nomination Mr. P. R. Gopalakrishnan ** 18.06.2003 27.11.2003 Withdrawal of nomination Mr. S. Ramachandran *** 18.06.2003 19.11.2003 Withdrawal of nomination Mr. Arun Ramanathan 25.07.2002 24.10.2002 Resignation Mr. K. Skandan 24.10.2002 15.10.2003 Resignation Mr. Jacob Paulraj 12.05.1997 25.11.2004 Resignation Mr. Sanjay Jayavarthanavelu 21.06.1993 25.11.2004 Resignation Mr. M.S. Srinivasan 10.11.1997 28.06.2000 Resignation Mr. Shakthikantha Das 28.06.2000 30.06.2001 Resignation Mr. R. Sadagopan 23.01.2001 25.11.2004 Resignation Mr. M. A. Gowrishankar 30.06.2001 25.07.2002 Resignation Mr. R. Venkatrangappan 21.06.1993 25.11.2004 Resignation Mr. Kshirsagar *** 19.11.2003 Appointment Mr.V. Prakash * 23.09.2004 Appointment Mr. Kamal Kishore Gupta ** 27.09.2004 Appointment Mr. N. K. Jain 25/11/2004 Appointment Mr. Vijay Sharma 25/11/2004 Appointment Mr. K.T. Krishna Deshika 25/11/2004 Appointment Notes: * Nominee Director of ICICI/ICICI Bank ** Nominee Director of IFCI *** Nominee Director of WITECO (Debenture Trustee to the Company)

Shareholding of Directors The Directors of the Company do not hold any shares in Company.

Date of expiration of the current term of whole time Directors in the Company Name of Director Date of appointment / reappointment Date of expiration of current term Mr. Vijay Sharma 25.11.2004 24.11.2009

Qualification Shares required to be held by Directors As per the Articles of Association of the Company, no qualification share is prescribed for being a director.

Remuneration of the Directors No sitting fee was paid to the Directors till December 27, 2004. With effect from December 28, 2004, an amount of Rs. 10,000 is paid as sitting fee to the Directors for attending each meeting of the Board and Remuneration and Audit committees. No sitting fee is paid to the Joint Managing Director & CEO.

KEY MANAGERIAL PERSONNEL The day to day management of the Company is looked after by a group of senior executives who report to the Managing Director. Profile of the executives is given below: Name & Age Nature of Previous No of years Month of Last Qualification (years) duties/ Experience in the Commencem Employment Designation (years) Present ent of held / Employment Employment Organisation (years) Mr. Vijay 50 Joint Managing 28 NIL November Hospet Steel Sharma Director & CEO 2004 Ltd. B.Tech (Metallurgical Engineering), M.S. (Material Science), PGDBA Mr. B.A. 58 Executive Director 32 4 June 2000 Steel Kumar Authority of B.Sc. (Engg. India Ltd. Metallurgy) Mr. K. Kannan 44 General Manager 20 Nil December Hospet Steel B.E. (Electr. & (Engineering) 2004 Ltd. Comm.) Mr. 50 General Manager 22 2 January 2002 Tata Iron and Birendrajee (Maintenance) Steel B.Sc. (Engg. Company Ltd. Mech. PGDBM) Mr. Gautam 46 General Manager 17 Nil January 2005 Metropolitan Kumar Kundu (Bar and Rod Mill) Equipment & B.Tech. Consultant (Electrical) Pvt. Ltd. Mr. P. 46 Company 10 11 April 1993 Nizam Paper Boopalan Secretary & & Board Mill B. Com., ACA General Manager Ltd. & ACS (F&A) Mr. Vijay Sharma has been appointed as Joint Managing Director and Chief Executive Officer of the Company for a period of five years from November 25, 2004. Remuneration shall be paid to him subject to the approval of shareholders and GoI, and as per the remuneration committee it is Rs. 2,35,000 per month and a bonus for incentive of 20% of the earned basic. He would also be entitled to benefits and reimbursements as approved by the Committee and Board. The persons whose names appear as key management personnel are on the rolls of the Company as permanent employees and employees of group companies/subsidiaries/ holding companies are not included in key managerial personnel. The number of permanent employees currently on the payroll of the Company is 667.

Shareholding of Key Managerial Personnel As of December 28, 2004, none of the key managerial personnel held any shares in the Company.

Loans to Key Managerial Personnel There are no loans outstanding against key managerial personnel as on June 30, 2004.

Changes in the Key Managerial Personnel in the last three years

Name Date of Change Reason Mr. C.P. Baid, ED (P& O) 18.01.2001 Resignation Mr. R. M. Dubey, GM (Mech.) 30.04.2001 Resignation Mr. U.C. Prasad, GM (Elect.) 30.08.2001 Resignation Mr. H. Venkateswaran, SGM (M&F) 04.09.2001 Expiry of contract Mr. H.S.S. Rao, GM (Rolling mill) 15.10.2001 Resignation Mr. N.K. Seetharaman, GM (L&S) 31.12.2002 Superannuation Mr. Brindra Jee, GM (Maintenance) 24.01.2002 Appointment Mr. K. Kannan, GM (Engineering) 15.12.2004 Appointment Mr. Gautam Kumar Kundu, GM (Bar and 10.01.2005 Appointment Rod Mill) Mr. B.S. Prasad, GM (Iron) 20.01.2005 Resignation

EMPLOYEE SHARE REWARD PLAN / LONG TERM INCENTIVE PLAN The Company does not have any employees stock option scheme.

CHANGES IN THE AUDITORS IN THE LAST THREE YEARS There have been no changes in the statutory auditors in the last three years except as under: Pursuant to shifting of the registered office of the Company from Coimbatore to Mecheri, Salem, S. Krishnamoorthy & Co., Chartered Accountants, have informed the Company vide their letter dated February 8, 2005 of their inability to act as Auditors of the Company as they do not take up assignments outside Coimbatore. They have also informed the Registrar of Companies, Coimbatore accordingly.

INTEREST OF PROMOTERS / DIRECTORS The promoters and directors of the Company have no interest in the Company except to the extent of remuneration (received by them in their respective capacities) and reimbursement of expenses and to the extent of any equity shares of the Company held by them. There are no interests of promoters or payment or benefit to promoters/ Directors except as mentioned in the LoF.

CORPORATE GOVERNANCE The Company’s philosophy on corporate governance is to go beyond meeting the statutory requirements and to attain a high level of transparency and accountability in its functioning and the conduct of the business. This is done with the objective of increasing shareholders value.

Board Committees The details of board committees are as follows: ! Remuneration Committee This committee has been formed to determine the remuneration packages for Managing Director and other whole time Directors. It consists of Mr. P. Shanmugasundaram (Chairman), Mr. N.K. Jain and Mr. Kamal Kishore Gupta. ! Audit Committee Audit Committee monitors and supervises compliance of internal control systems and other financial disclosures in addition to the issues in respect of requirements specified by the Company law/stock exchanges etc. It consists of Mr. P. Shanmugasundaram (Chairman), Mr. V. Prakash, Mr. Kamal Kishore Gupta and Mr. Krishna Deshika. ! Shareholders/Investors Grievances Committee This committee has been formed to look into the shareholders/investors complaints, if any, on transfer of shares, non-receipt of Balance sheet, non receipt of interest and redemption of Debentures, etc. It consists of Mr. P. Shanmugasundaram (Chairman), Mr. K.T. Krishna Deshika and Mr. Vijay Sharma.

VIII. IRON AND STEEL INDUSTRY

The global economy has seen an upturn in 2004 with a strong recovery in some of the major economies of the world. Steel production is closely related to the growth in Gross Domestic Product (GDP). China remained the world’s largest crude steel producer in 2003 also (220.1 mtpa) followed by Japan (110.5 mtpa) and USA (91.3 mtpa). India occupied the 8th position (31.8 mtpa). The Indian steel industry is almost 100 years old now. Till 1990, the Indian steel industry operated under a regulated environment with insulated markets and large scale capacities reserved for the public sector. Production and prices were determined and regulated by GoI. In 1990, the Indian steel Industry had a production capacity of 23 mtpa. However, with the onset of liberalization, the Indian steel sector witnessed entry of several domestic private players and large private investments flowed into the sector to add fresh capacities. Today, India produces steel of international standards in almost all grades/varieties and has been a net exporter for the past few years which shows the growing acceptability of its products in the global market. The global outlook for steel industry has changed quite significantly, with increase in prices across key regions including Europe. In line with International trends, the domestic players have also increased steel prices. Steel is a highly capital intensive industry and cyclical in nature. Its growth is intertwined with the growth of the economy at large, and in particular, with steel consuming industries such as manufacturing, housing and infrastructure. Steel, given its backward and forward linkages, has a large multiplier effect. The steel industry is characterised by a spurt in domestic demand and firm trend in prices on the back of modest growth in steel production. Increase in exports had been the major source of demand for the steel sector during 2003-04. PRODUCTION / CONSUMPTION For the year 2003-04, the production of finished steel in the country was up 7.4% to 36.15 mtpa while the consumption was 30.4 mtpa. The production had grown 6.7% during 2002-03. • In 2003-04, production of finished carbon steel was 36.9 mtpa and pig iron production was 3.7 mtpa. Integrated steel plants main producers produce 43% of finished steel and 57% of production is by secondary producers. • Last 3 years production of pig iron and finished carbon steel is given below:

(in million tons) FY 02 FY 03 FY 04 FY 05 (Prov.) (April-Oct. 04)

Pig Iron 4.08 5.28 3.76 1.58

Finished Carbon Steel 30.63 33.67 36.95 21.68 • During the first half of 2004-05, domestic steel industry witnessed sedate growth in production against the background of surging global demand, rising inputs costs and accelerating price levels.

PRICES The last few years have witnessed growing acceptability of Indian steel in international markets and opening up of the economy has seen a progressive decrease in import tariffs on steel. On account of linkages with the global economy, domestic steel prices today are determined on the basis of two main factors: Input costs and International steel prices. The current trend in domestic prices of steel and inputs such as coke, iron ore and scrap, is a result of a worldwide increase in prices. This trend is being driven by the acceleration of economic growth in China and revival of key sectors across US, Europe and Asia. This has led to a sudden jump in demand for steel across the globe and consequently for raw material inputs as well. It has resulted in shortage of key inputs and consequent increase in prices. With most major producers in the country depending on import of inputs for production of steel, current prices are an end result of rising input costs.

MARKET SCENARIO After liberalization, there have been no shortages of iron and steel materials in the country. Apparent consumption of finished carbon steel increased from 14.8 mtpa in 1991-92 to 31.7 mtpa (Provisional) in 2003-04. China has been an important export destination for Indian steel. The steel industry in general is on the upswing due to strong growth in demand particularly by the demand for steel in china.

OUTLOOK The Indian steel industry expects to see some momentum in the domestic market in the near future, largely due to favorable global scenario. Also demand growth is set to improve, primarily due to growth in user industries like automobile, consumer durable, construction, infrastructure etc. The expected revival of US, European Union and Japan can further add to the prospects of the global steel industry. As a result, the domestic steel industry’s fundamentals indicate a reasonably favorable outlook, with cyclical fluctuations not being ruled out.

FINANCIAL POSITION AND OPPORTUNITIES IN THE INDIAN STEEL INDUSTRY The Indian steel industry's improved performance in 2002-03 has attracted attention. The lending and investment community is tracking the industry's progress with keen interest, from the point of view of recovering its past investments as well as for evaluating proposals for new investments. According to CRIS INFAC, the improved performance of the industry is likely to continue through 2003-04 to 2007-08 though the risk-return equation does not support new projects without a sound financial structure. The improvement in industry fundamentals will not correspondingly improve the credit profile of all the companies in the sector.

TYPES OF STEEL All steel products are made from semi-finished steel that comes in the form of slabs, billets and blooms. Though today there are over 3500 varieties of regular and special steel available, steel products can be broadly classified into two basic types according to their shape:

Flat Products Derived from slabs this category includes plates and Hot Rolled Steel such as Coils/Sheets. While plates are used for applications such as shipbuilding etc., HR Steel is the most widely used variety of steel and other downstream flat products such as Cold Rolled Steel and Galvanised steel are made from it. HR Steel has a variety of applications in the manufacturing sector. It is primarily used for making pipes and has many direct industrial and manufacturing applications, including the construction of tanks, railway cars, bicycle frames, ships, engineering and military equipment and automobile and truck wheels, frames and body parts. Cold Rolled Steel is used primarily for precision tubes, containers, bicycles, furniture and for use by the automobile industry to produce car body panels. Galvanised Steel is used for making roofs in the housing and construction sector.

Long Products These products derive their name from their shape. Made using billets and blooms they include rods, bars, pipes, ropes and wires, which are used largely by the housing/construction sector. There are also other products like rail tracks in the category. Bars and rods, including wire rods, constitute around 40 per cent of the long product segment. Bars and rods are available in various sizes ranging from 6 mm to 140 mm in diameter, the major segment being 6 mm to 25 mm. Rods of smaller diameters (5.5-14 mm) are generally produced in coil form. These are termed wire rods. The Company manufactures Long products.

Wire Rods Wire rod is a hot rolled steel product and is manufactured in a round section. The diameter of the wire rod ranges between 5.5 to 14 mm and is supplied in coil form. According to the Bureau of Indian Standards (BSI), a wire rod is generally square, round, half-round, rectangular or polygonal. It is generally converted into wire. Wire rods are rolled from billets. These are commonly known by names denoting the end-use.

Reinforcing Rods Reinforcing rods are steel bars/rods used to give adequate tensile strength and additional compressive strength to a concrete mass. These are also known as rebars and are mostly supplied in the form of ribbed bars. Ribbed bars are round shaped with protrusions on their surface to resist any relative movement between the bars and the surrounding concrete mass. Rebars are produced both in straight lengths and in coil form. In the US, these are also called deformed bars or debars.

High Strength Rebars These are produced either by cold twisting of standard rebars or through minor addition of alloys to steel, such as vanadium or niobium, which cause precipitation hardening in steel.

TMT Rebars TMT (thermo-mechanically treated) rebars are replacing cold twisted rebars, as they have better yield strength, which reduces their consumption in concrete structures and thus reduces weight. In thermo-mechanical treatment, finish rolling is done at a low temperature as compared with normal rebars and this is followed by controlled cooling treatment, which determines properties of the rebars.

Cold heading quality wire rods These are required for making products, such as nuts, bolts, rivets, studs and screws that are produced by cold forging/cold heading.

Tyre Cord Quality Wire Rods Tyre cord quality wire rods are high carbon wire rods used for making steel belted radial tyres.

REGULATORY ASPECTS AND RECENT CHANGES

The New Industrial Policy Regime The New Industrial policy has opened up the iron and steel sector for private investment by (a) Removing it from the list of industries reserved for public sector and (b) Exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are freely permitted up to certain limits under the automatic route. The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new/greenfield steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies.

Duties and Levies on Iron and Steel Customs Duty In the interim budget for 2004-05, announced in January 2004 the peak rate was reduced from 25% to 20%. In February 2004 the Customs Duty on carbon steel items and pig iron was further reduced to 15% and 10% respectively. In February end itself the customs duty on pig iron was further reduced from 10% to 5%. In the union budget 2004-05 the customs duty on non-alloy steel was reduced from 15% to 10% and on alloy steel from 20% to 15%. Excise Duty The Excise Duty on all the iron and steel items falling under Chapter 72 of the Central Excise Tariff Heading was reduced from 16% to 8% in February 2004. In the Union Budget 2004-05 it has been increased from 8% to 12%.

Pricing and Distribution Price regulation of iron & steel was abolished on January 16, 1992.

Export Licensing Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate exports. Under this scheme exporters on the basis of notified entitlement rates, are granted due credits which would entitle them to import goods without duty. The DEPB scheme was temporarily suspended from March 27, 2004 to July 12, 2004. The DEPB rates have recently been revised.

(Source:Websites of Indian Steel Alliance and Ministry of Steel, Government of India )

IX. BUSINESS OF THE COMPANY

The Company operates an integrated steel plant having facilities for production of Pig Iron, Steel Billet and Rolled Steel products in the long product category. The capacity of the plant is 0.3 mtpa. It has adopted the Sinter plant – Blast furnace – Energy Optimising Furnace – Continuous Casting Machine – Bar and Rod mill route with virgin iron ore as the basic input material. It also has plants for generation of power and production of oxygen. The Company started commissioning its units with iron making division and power plant in 1996, Sinter plant in August 1997, Steel Melting Shop in January 1999, Air Separation plant in June 1999 and Bar and Rod Mill in May 2002.

LOCATION AND RAW MATERIAL The Company's plant is located in Pottaneri/M. Kalipatti villages, in the district of Salem, Tamilnadu, which is at a distance of 35 kms from Salem and 20 kms from Mettur. The site is 2 kms from the Salem Mettur state highway. The power for the plant is available from the captive power plant and the TNEB sub-station at Nangavalli, which is about 7 to 8 kms from the plant. The source of water for this site is the Stanley Reservoir of Mettur dam from where it is drawn through a pipeline of 16 kms. The main source of iron ore for the Company is the Bellary-Hospet area in Karnataka, which is 614 kms by rail. Apart from iron ore, the other main raw material, coke is imported from China, Russia and Japan through Chennai port which is at a distance of 341 kms. The requirement of blast furnace grade limestone is being met from Bagalkot area of Karnataka and Cuddapah, Guntur and Krishna Districts of Andhra Pradesh. The requirement of manganese ore is being met from the Sandur Belt of Karnataka. The other raw materials such as Dolomite and Quartzite are being met from Bagalkot.

PLANT FACILITIES Iron Making Division This complex consists of Sinter Plant and a Mini Blast Furnace of 402 NM3 useful volume. Sinter Plant Sinter is an input material for Blast Furnace and is partial/full replacement of lump iron ore. This is produced by using coke fines, iron ore fines, limestone fines, dolomite, EOF slag and flew dust. Besides fulfilling the twin objectives of improving the productivity of Blast Furnace and reducing the coke rate, the usage of sinter at Blast Furnace addresses larger environmental aspects by waste utilization in the plant. The Sinter Plant is of 18 M2 grate area with a capacity of 580 tons per day.

Blast Furnace Iron is produced at Blast Furnace in the liquid state, which is called Hot Metal. This is either transferred to Steel Melting Shop (SMS) for converting it into liquid steel and thereafter to billets or Pig Casting Machine (PCM) to be cast into pigs. PCM is of 2 strand type capable of producing pigs with a weight of 22 Kg per piece with single notch. These pigs are either sold in the market for foundries or reused as solid cold charge at SMS. The Mini Blast Furnace is of 402 M3 useful volume. The technology was supplied by Central Establishment for Research in Iron and Steel Industry (CERIS), China.

Steel Making Division SISCOL has adopted Energy optimizing furnace route for manufacture of liquid steel. The secondary refining facilities consist of a 40 tons Ladle Furnace, which will facilitate making of various grades of alloy steel. Energy Optimising Furnace SISCOL has a 40 Ton capacity Energy Optimising Furnace (EOF), the technology of which was developed by Korf Technological Services (KTS) Brazil and supplied by M/s Tata Korf Engineering Services Limited. At the EOF, hot metal from Blast Furnace and solid metallic charges (generated as well as purchased) are charged and converted into liquid steel by using oxygen and fluxes. This solid charge percentage can be up to 30% maximum.

Ladle Furnace SISCOL has a Ladle Furnace (LF) of 40 Ton capacity. The LF facilitates further refining of steel by addition of Ferro alloys and purging with nitrogen / argon to achieve the chemical composition of the targeted grades of steel. It

also raises and maintains the liquid steel temperature to match the working regimes of EOF and Continuous Casting Machine.

Continuous Casting Machine SISCOL has a twin stand Continuous Casting Machine (CCM) with double radius of 9/16 meters and with a capability of casting billets / blooms in the sizes ranging from 100 mm x 100 mm – 220 mm x 205 mm. Presently, the billets in the sizes of 100 x 100, 130 x 130 and 160 x 160 mm are being produced.

Rolling Bar and Rod Mill (BRM) Bar and Rod Mill is a fully automated rolling mill having a capacity of 0.3 mtpa. It can produce a wide range of mild steel and alloy steel rolled products. The Bar and Rod Mill (BRM) is highly versatile and consists of 22 stand continuous mill preceded by a 3-high roughing stand, with a capacity of producing 0.3 mtpa of bars and rods in the sizes of 6 mm to 56 mm. The product profile includes: TMT - Bars (8-32mm) MS Rounds - wire rods in Coils/Straight Lengths (8-56 mm) Carbon steel wire rods/bars (8-56 mm) Spring steel flats Free cutting quality (8-56 mm) Low alloy steel rounds (8-56 mm) BRM has got the facility of the state of the art Rapid Water Quenching System, a unique technology provided by Mecon Ltd., Ranchi, India, for producing TMT Rebars and TMT Corrosion resistant rebars. BRM has adopted the latest innovation of Research and Development Centre for Iron and Steel (RDCIS), Steel Authority of India Limited (SAIL), Ranchi, Jharkhand, to produce the Corrosion Resistant TMT Rebars (TMT-CRS Rebars), the first of its kind in South India, in the range of 12mm to 32mm. Automation of the processes are done by Nelco Limited, Mumbai, India. Since the processes are fully automatic, the quality of the wire rods produced in the coil form comply with the standards and quality limits and are widely accepted in the market. Wire rods in the coil form are produced at the Edenborn coiler and Garret coiler.

Air Separation Plant Oxygen, Nitrogen and Argon are produced by cryogenic process based on the principles of different liquefying and boiling points of gases. The production can be in gaseous and liquid modes. Presently, oxygen and nitrogen with a purity of above 99.5% and 99.995% respectively are being generated. The plant has been provided with a most modern Distributed Control System (DCS) for operation of plant and online control of parameters including gas analysis. The gases are consumed in the plant and excess gas generated is marketed. The Air Separation Plant supplied by M/s Kaifeng Air Separation Factory Limited, China, is capable of generating 150 tons per day of oxygen.

UTILITIES

Power Plant The main source of power for the Company is being met from TNEB sub-station supplied at 110 KVA through a separate feeder. The estimated annual power requirement is 30 MW and will go up to 60 MW. The Company has set up captive power generation facilities of 7.7 MW utilising the excess blast furnace gas available in the plant. The Captive Power Plant (CPP) is linked with the power grid of TNEB with facilities for wheeling power through the grid. The CPP comprises one turbo generator for power generation and two turbo blowers for supply of cold blast to the blast furnace. The power plant also meets the low-pressure steam requirements for the plant auxiliaries. The Company has already a connected load of 16000 KVA.

Water Supply The water requirement is met by pumping water from intake location at the downstream of Stanley Reservoir at Mettur where it has constructed a pump house with adequate pumping systems for conveying the water to the plant. The water is treated and conditioned before being used in the plant. The Company’s water requirement will be 5 mgd after end of

Phase II.

Fuel Supply The requirement of fuel for blast furnace, sinter plant, EOF, ladle heaters and the reheating furnace of the rolling mill is met from the fuel oil storage systems. Presently SISCOL has two fuel oil storage systems set up by Bharat Petroleum and Indian Oil at the site aggregating a storage capacity of 296 kilo litres (kl). The existing storage facilities cater to about 7 days requirement of furnace oil and diesel for pig iron, power plant, sinter plant and mobile equipment.

TECHNICAL DATA (1) Age of the plant : 7 years. (2) Raw materials & finished products and capacity of the plant and processes Raw Materials : Iron Ore lumps / Iron Ore fines Coke / Coke fines Dolomite / Limestone Lime / Ferro Alloys Finished Products : Pig Iron, Billets and Rolled Products (Bars, rods, wire rods and flats) Capacity : Sinter Plant : 0.203 mtpa Blast Furnace : 0.310 mtpa Steel Melting Shop : 0.300 mtpa Billet Caster : 0.294 mtpa Bar and Rod Mill : 0.300 mtpa

Process Sinter Plant – Blast Furnace – Energy Optimizing Furnace – Continuous Casting Machine – Bar and Rod Mill route

(3) Fire protection details : Fire Tender 1 No. A fire hydrant system with 8 km. length of closed circuit pipeline with about 156 fire hydrants. Fire extinguishers 400 nos. (4) Details of furnaces, capacity: Details of Furnace Capacity (a) Mini blast furnace of 0.301 mtpa 402 cu. m. volume with Chinese technology (b) Energy optimizing furnace 40 tons capacity (c) Ladle Furnace 40 tons capacity (5) Details of Ladles: No. and capacity of largest ladles: Blast Furnace Capacity Steel Melting Shop Capacity Hot Metal ladle 40 T Steel ladles (8) 40 T (6 + 4) (6) Blast Furnace gas storage details (capacity of Holder and distance from production plant) Gas Holder capacity : 20,000 NM3 Distance from plant : 140 meters from BF (7) Details of Captive Power Plant: Turbo Generator 1 No. 7.7 MW Turbo Blowers 2 Nos. 54000 NM3/hr. Boilers 2 Nos. 25 T/hr. each DG Set 3 Nos. 625 KVA (8) Maintenance and Preventive maintenance details including maintenance frequency for furnaces is done once in a month matching with EOF re-lining.

Iron Zone 16 hrs. • Sinter Plant • Blast furnace • Power Plant Steel Making 24 hrs. • Energy Optimizing Furnace • Ladle Furnace • Continuous Casting Machine (9) Type of refractory for furnaces Blast Furnace : High Alumina Steel Making : Basic (Magnesia Carbon)

QUALITY CONTROL The Company has been awarded ISO 9001:2000 from BVQI for the quality management system for the manufacture and supply of Pig Iron, Billets/Blooms and Rolled products. SISCOL has an optical emission spectrometer as well as wet chemical lab facilities for analysis of various raw materials, iron, steel and all in process analysis for process control. The main facilities are: - 1. Optical emission spectrometer, make POLYVAC-2000, imported from U.K ensures high speed ON and OFF line chemical analysis. 2. A full-fledged wet chemical laboratory supplementing the instrument analysis. 3. Physical testing laboratory consisting of a 60 tons UTM, hardness testers, cold and hot upset testers. 4. Modern metallographic lab to ensure control of grain size, inclusion rating, microstructure, decarb level and surface defects. 5. An unique off line automatic shot blasting, Cisco graph, eddy current and ultrasonic testers to ensure dimensional accuracy and defect test for surface and internal soundness for special and forging quality steel.

PROCESS CONTROL Established, well-defined processes are laid down at various stages of iron making, steel making and rolling production stages.

CUSTOMER SERVICES A team of qualified and experienced technical staff is available to interact with the customers on a continuous basis for new product development, after sales service etc.

ENVIRONMENTAL ASPECTS Arrangements made for treatment of effluents and status of NOC/approval from the State Pollution Control Board 1. The wastewater generated from Gas Cleaning Plant connected with blast furnace and Energy optimization furnace is treated in the wastewater treatment plant comprising of flash mixer, thickener, sludge concentrator and filter press. The treated water is completely re-used / re-cycled. The sludge generated during the treatment is converted into filter cake, which is being sold to various cement plants. 2. The effluent generated from canteen is treated in the canteen effluent treatment plant of 15 M3/day capacity with activated sludge process system. The treated water is used for green belt development inside the plant. 3. A sewage treatment plant of 100 M2/day has been constructed with activated sludge process system in the SISCOL township to treat the sewage and sludge generated from SISCOL township quarters. The treated water is used for green belt development in the township. Effluent Water Treatment The plant uses large quantities of water in cooling circuits, various processes and utilities. Water for the integrated steel plant is sourced from Cauvery river with intake location at downstream of Stanley reservoir at Mettur. As the raw water cannot be used for the plant cooling system, a Raw Water Treatment Plant of 450 M3/hour capacity has been installed to produce clarified water of quality pH-7.5 to 8.5, total suspended solid < 20 parts per million (ppm) and total dissolved solid maximum 150 ppm.

Water used for indirect cooling get heated and has to be cooled and re-circulated. Water with high thermal load is cooled in cooling towers and re-circulated. Direct cooling water and process stream water are contaminated primarily by heat, low or high pH, suspended and dissolved solid, dissolved gases and metals. In order to minimise pollution and reduce makeup water consumption, water and waste water are treated and entire quantity of water re- cycled.

B.F. Gas cleaning plant A gas cleaning plant is installed to treat dust laden top gas from the blast furnace. The gas cleaning is carried out in two stages. In the first stage, dry mechanical separation of particulates using cyclones is carried out. In the second stage the gas is passed through an adjustable throat venturi scrubber with water spray. The cleaned gas is sent to a gas holder for use as a fuel. The wastewater from the venturi scrubber is treated in a wastewater treatment plant. The waste water treatment plant is designed for a capacity of 275 M3 per hour with inlet suspended solid level of 2500 ppm and outlet suspended solid level of 50 ppm. The Waste Water Treatment Plant consists of primary thickener, sludge concentrator and sludge storage tank, chemical preparation and dosing system etc.

Sewage Treatment Plant Canteen Waste A sewage treatment plant has been installed to treat the washings and waste water from industrial canteen. The sewage treatment plant is designed for a flow of 15 to 20 M3 per day of canteen wastewater based on the following: Before treatment Flow 15 - 20 M3/day pH 6.5 to 7.5 BOD 5 days 20 deg 400 to 500 mg/ltr Total suspended solid 400 to 500 mg/ltr COD 1000 - 1100 mg/ltr After treatment pH 7.0 - 9.0 M3/day BOD <30 mg/ltr Total suspended solid <100 mg/ltr COD <250 mg/ltr

Demineralization Plant For treating the acid and alkaline effluent from DM plant, treatment system has been installed. Hydrochloric acid and sodium hydroxide are used for regeneration of cation and anion resin beds. The acid and alkali collected from the regeneration is stored in a neutralization pit. The effluent is almost self-neutralizing. However, to correct the final pH, lime dozing facility is provided. Air agitation grid in the pit will agitate the effluent for proper mixing of lime and effluent. The neutralized effluent after proper pH correction is used for afforestation purpose inside the plant boundary.

Pig casting machine Pig casting unit have re-circulation facility consisting of settling tank to remove the solids, which is commercially saleable.

Slag Granulation Plant Slag granulation unit have separate re-circulation facility consisting of settling tank and filters to remove solids. The separated slags are being sold.

EOF Gas Cleaning Plant A Gas Cleaning Plant is installed to treat dust laden top gas from EOF. The gas is cooled down and cleaned before being released in the atmosphere through chimney. The wastewater from the Gas Cleaning Plant is treated in the wastewater treatment plant. The wastewater treatment plant is designed for a capacity of 250 M3 per hour with an inlet dust concentration in water 7.2 Kg/M3 and outlet suspended solid level of 100 mg/ltr.

Continuous casting machine The continuous casting machine has separate re-circulation facility for spray water consisting of settling tank to remove the suspended solids which are used back in the sinter plant partially and sold partially.

Bar and Rod Mill The Bar and Rod Mill has separate water circulation system consisting of settling tank and scale pit to remove the suspended items which are disposed off commercially.

MANPOWER DETAILS The Company has a total manpower of 667, comprising 7 senior executives, 30 middle level executives, 79 junior level executives, 31 administration staff, 94 supervisory staff and 426 workers. There are various committees constituted for recruitment of personnel at senior, middle and junior levels. Senior level recruitments are advised to the Board on a regular basis.

SWOT ANALYSIS The SWOT analysis of the Company is given in brief below: Strengths 1. The new promoter namely the Group has significant presence and experience in the steel industry, which would enable turnaround of the Company’s operations. 2. Proposed addition of the vacuum degassing unit would give the flexibility for producing special steels to the Company. 3. The CDR package approved by the lenders in November 2004, substantially reduced the interest burden. 4. Products of SISCOL have been well accepted in the southern steel market.

Weakness 1. High level of debt. 2. High Project cost mainly because of cost and time overruns in project implementation stage. 3. Rated capacity has not been achieved. 4. Some key personnel associated during the erection and commissioning of the plant have since left the Company.

Opportunities 1. Favourable demand for long products in the country due to increased investment in the infrastructure sectors. 2. Increasing steel demand and increasing trend in the steel prices. 3. Captive coke oven to be added in phase – II, thereby insulating the Company from the volatility of international coke prices.

Threats 1. Increased competition from new plants and capacity augmentation by major steel producers. 2. Competition from imported special steel grades.

DISTRIBUTION NETWORK AND SALES TEAM The Sales team is headed by a Chief General Manager stationed at Bangalore. The infrastructure as available within JVSL currently is being used in synergy for all Market development and product development for value addition. The Sales team currently at SISCOL is located at the two branches at Chennai / Bangalore. The distribution of products is done directly to end user segment of customers and also through agents and direct marketing executives.

PRODUCTION FIGURES OF THE COMPANY The production figures of the Company since inception are given below:

(in Tons)

Department Sinter Plant Blast Furnace SMS BRM (Product) (Sinter) (Hot Metal) (Billet) (Rolled Product) Month / Year of July ' 97 July ' 96 Jan ' 99 April ' 00 Commissioning

Production Period 1996-1997 0 48779 0 0 1997-1998 25652 88480 0 0 1998-1999 34238 59890 0 0 1999-2000 77630 100809 51781 0 2000-2001 64994 91625 67621 2180 2001-2002 42374 66765 46194 0 2002-2003 184252 232893 213885 29786 2003-2004 161894 185529 171073 110516 2004-2005 (Up to Dec 04) 100338 123142 97699 89910 Total Since Inception 691372 997912 648253 232392

PROJECT IMPLEMENTATION The steel making facilities were commissioned in November 2001 and the trial runs in the Rolling Mill commenced from March/April 2002. The project is not complete at present for producing 0.3 mtpa of the rolled products as envisaged in the original plan. The Rolling Mill has been partly installed with one Re-heating furnace and the balance facilities in the Rolling Mill sections are under commissioning. The Company needs to further commission the intermediate furnace (IF), which is vital for rolling special steel and stainless steel and in increasing the production volume to the rated capacity. The 2nd re-heating furnace is yet to be erected and commissioned and till such time it is put into operation, the optimum production levels of 0.3 mtpa cannot be achieved. MECON has estimated the balance expenditure for the above at Rs. 37.2 crores. The production level of the rolling mill during FY2004 was less than 40%. The Company has therefore been selling steel billets with lower realization. Also, the Company has been operating under tight cash flows due to a steep increase in coke prices. The existing working capital limits of the Company sanctioned originally by the working capital lenders are inadequate to meet the prevailing cost of raw material. The working capital lenders have reassessed the working capital requirements in November 2004 and sanctions for the enhanced limits are expected shortly.

PHYSICAL PERFORMANCE The Company has commissioned its iron making facilities and commenced production at its first phase from July 1996. The Company has also commenced production at its steel making facilities since November 2001 and the trial runs in the Rolling Mill commenced from March/April 2002. The table given below gives the installed capacity and production figures for various phases:

(Tons) FY 02 FY 03 FY 04 (Audited) (Audited) (Unaudited) Steel Billets & Blooms Installed Capacity 2,90,000 2,90,000 2,90,000 Production 47,034 2,20,977 1,74,574 Capacity Utilisation 16.2% 76.2% 60.2% Sales 40,315 1,82,30 56,929

Rolling Mill Installed Capacity 3,00,000 3,00,000 3,00,000 Production 0 29,766 1,15,040 Capacity Utilisation 0.0% 9.9% 38.3% Sales 248 28,600 1,09,149

CORPORATE DEBT RESTRUCTURING The Company has been making losses since inception. This is primarily due to the delay in the implementation of the project and non-stabilisation of the rolling mill. During FY 2004, even though the Company had higher sales realisations due to increase in steel prices, the Company’s profit did not increase proportionately due to significant increase in the prices of the basic raw materials, viz. coke, scrap, iron ore, etc. Further, delay in the stabilisation of the rolling mill, the mid-term repairs undertaken in the BF area and the strike by the transporters in the months of June - July 2003 also affected the operations and profitability. As on March 31, 2004, the accumulated losses were Rs. 310.30 crores and the net worth of the Company was completely eroded. The position of dues to lenders was as follows: Secured term loans (Institution/bank-wise) (Rs. in crores) Lender Interest bearing term debt FITL as on 31/3/2002 Interest on TL & Total outstanding as as on 31/3/2002 carrying 0% interest WCTL @ 12.50% on 31.03.04 for FY03 & FY04 TL WCTL A B C D A+B+C+D ICICI Bank 229.39 0.0 57.33 57.35 344.07 IFCI 75.75 0.0 19.39 18.94 114.08 Indian Bank 45.00 8.10 14.45 13.27 80.82 Indian Overseas Bank 32.16 4.40 10.16 9.14 55.86 Bank of Baroda 36.79 7.09 11.64 10.97 66.49 Union Bank of India 61.52 4.26 18.84 16.44 101.06 Punjab National Bank 24.34 1.31 7.48 6.41 39.54 South Indian Bank 17.71 4.75 5.46 5.62 33.54 Grand total 522.66 29.91 144.75 138.14 835.46

Working capital dues (Bank-wise) (Rs. in crores) Bank CC WCDL Total Fund Non Fund Based based Indian Bank 1.59 6.35 7.94 7.47 Indian Overseas Bank 0.68 2.72 3.40 3.20 Bank of Baroda 1.45 5.80 7.25 6.82 Union Bank of India 1.45 5.80 7.25 6.82 Punjab National Bank 1.15 4.60 5.75 5.41 South Indian Bank 0.59 2.35 2.94 2.77 Grand total 6.91 27.62 34.53 32.50

Financing agencies outside the purview of CDR system (Rs. in crores)

Details of Loans Amount Public NCDs (including interest accrued & due of Rs. 1.83 crores, interest accrued but not due of Rs. 6.83 crores and unclaimed & unpaid debenture interest of Rs. 1.83 crores) 31.67 Sales Tax Deferral Loan (interest free) 18.79 Capital creditors 14.27 Total 64.73

In view of the critical financial position of SISCOL, ICICI Bank (the lead lender) considered various alternatives for restructuring the Company. They engaged the services of MECON to make a techno economic study and suggest steps required for making the Company viable. ICICI Bank referred SISCOL to the Corporate Debt Restructuring (CDR) cell for change in management and debt restructuring. The Flash Report on Restructuring was discussed at the meeting of the CDR Empowered Group held on July 26, 2004 and the same was approved. A scheme of restructuring was accordingly drawn up to restructure the existing capital structure of the Company. The lenders came to the conclusion that the viability of the Company is dependent on further infusion of funds by way of equity and debt. As the then existing promoters namely LMW were not prepared to infuse further funds, the lenders started scouting for a new promoter. The Group agreed to step in subject to certain terms and conditions which were mutually discussed and agreed upon. And the CDR scheme was framed accordingly and the final scheme was approved in the meeting of the CDR Empowered Group held on September 28, 2004 and was communicated vide CDR letter dated October 14, 2004. In terms of CDR, the erstwhile promoters (LMW) have transferred their entire shareholding in the Company, to the Group, resulting in change in ownership and management control.

Terms of CDR The salient features of the Restructuring Scheme as approved by the CDR are as follows:

Cut-off date: March 31, 2004. “Completion Date” would be 18 months from the date of effective take-over by the Group. A. Calculation of outstanding debt as on March 31, 2004: Term Loans outstanding of Rs. 522.66 crores and Working Capital Term Loan (WCTL) outstanding of Rs. 29.91 crores, as on as on March 31, 2002, shall carry interest at the rate of 12.50% p.a. (payable annually). Interest for the period April 1, 2002 to March 31, 2004 to be funded and the funded interest term loan (FITL) to carry 0% interest. FITL of Rs. 144.75 crores as on March 31, 2002 to carry 0% interest. Any interest and other charges charged by banks and institutions over and above the interest as mentioned above shall be waived.

B. Priority Debt The incremental debt of Rs. 280 crores required for the proposed capacity expansion shall be treated as a priority debt with respect to the cash flows of the Company. The priority debt shall carry interest at the rate of 9.00% p.a. payable quarterly and shall be repaid in 32 equal quarterly installments commencing at the end of the first quarter after the Completion date, i.e. commencing from April 2006. The existing term lenders shall provide the priority debt of Rs. 230 crores to the Company by sanctioning additional loan assistance in proportion to their respective existing share in the secured term debt. The above amount of priority loan also includes funding of interest on such loan till the Completion Date. The lenders agree that they shall permit similar priority status in repayment (and pari passu in relation to security) to be granted to the new loans required to finance the untied portion.

C. Primary Term Debt From the Cut-off date, the principal outstanding on Secured Debt of Rs. 440 crores (after conversion into OCI) shall be restructured as follows: a) Interest: The principal shall carry interest rate of 9% p.a., payable quarterly plus applicable interest tax or other statutory levy, if any. Provided that the interest on this Primary Term Debt shall be waived (0%

interest) for the period commencing on the cut-off date up to March 31, 2006. At the option of the lender, the Company shall pay interest at monthly rests at an adjusted rate such that the annualized yield of proposed monthly rate is equal to the annualized yield of aforesaid quarterly rate. b) Term Loans will be repayable in 32 quarterly installments commencing at the end of first quarter after the Completion Date, i.e. commencing April 15, 2006.

D. Conversion of Residual Term debt into a Optionally Convertible Instrument (“OCI”) (such instrument shall be finalized to the mutual satisfaction of the Group and the lenders). As on the cut-off date, the lenders would convert Rs. 395 crores (in proportion to their term debt) into OCI, subject to the applicable laws for OCI. Terms of OCI The OCIs shall have the following features: a. Maturity: 12 years b. Repayment: 3 equal annual installments at the end of 10th, 11th and the 12th year i.e. beginning April 1, 2014 c. Yield: 10% p.a. d. Ballooning interest/dividend rate:

Year from the cut-off 1 2 3 4 5 6 7 8 9 10 11 12 date Rate (% p.a.) 1 1 1 5 5 15 15 15 24.3 24.3 24.3 24.3

e. Call option to the Company: The Company shall have the option to call the OCIs in the 4th, 5th and 6th year from the cut-off date and convert the same into equity at a premium of Rs. 52. f. The Company shall have an option to prepay the OCIs (without prepayment premium), in one or more tranches, anytime during the currency of the loan such that the yield of 10% p.a. is maintained.

E. Working Capital Assistance Working capital bankers will reduce the interest rates on fund-based limits to 9% p.a. payable quarterly. At the option of the lender, the Company shall pay interest at monthly rests at an adjusted rate such that the annualized yield of proposed monthly rate is equal to the annualized yield of aforesaid quarterly rate. The banks shall release the working capital limits (both fund based and non-fund based) in accordance with the assessment done by the lead bank.

F. Preference shares of ICICI bank and LMW Preference shares subscribed by LMW (Rs. 44.95 crores) and the preference shares subscribed by ICICI Bank (Rs. 30 crores) shall be converted to equity at premium of Rs. 52. All the accrued dividend as on the cut-off date and till the date of conversion shall be waived.

G. Unsecured loans from LMW Unsecured loans from LMW (Rs. 35.10 crores) shall be converted to equity at premium of Rs. 52. All the accrued interest as on the cut-off date and till the date of conversion shall be waived.

H. Security Term Debt: The Secured term debt (i.e. the priority debt, OCI and the Primary term debt) and all interest and other monies in respect of the same, shall be secured by: a) A first mortgage and charge on all the Company's immovable and moveable properties, both present and future, in such form and manner as may be required by lenders. b) The above mortgage and charge shall rank pari passu with the charges created and/or to be created in favour of all existing secured term lenders. The lenders shall provide No-objection certificates and cede pari passu charge as contemplated above along with the sanction of this scheme. c) A second pari-passu mortgage and charge on all the Company's current assets both present and future in such form and manner as may be required by such lenders.

Working Capital: The working capital assistance would continue to be secured by the existing securities.

ADDITIONAL CONDITIONS OF CDR PACKAGE The additional conditions of CDR Package are given below: 1. The Company shall ensure compliance of conditions stipulated by institutions and banks for grant of restructuring package. 2. The lenders have constituted a Monitoring Committee, comprising ICICI Bank, IFCI, Indian Bank, Union Bank of India, Punjab National Bank and CDR Cell, to monitor the restructuring scheme and the performance of the Company on a quarterly basis. The Company shall undertake to provide all information as and when required by the Monitoring Committee. All costs charges and expenses for convening the Monitoring Committee shall be incurred, met, paid by the Company. 3. The Company shall obtain necessary approval from the Monitoring Committee in respect of quarterly/annual budget. 4. The Company shall escrow all its receivables (including dividend income, non-operational income, extraordinary income etc.) into Trust and Retention accounts (TRA), which shall be opened and operated on terms and conditions to the satisfaction of the lenders. The Company shall also not escrow its future cash flow or create any charge or lien or interest of whatsoever nature without the prior approval of lenders. 5. The Company shall take prior written approval of lenders for incurring any capital expenditure in excess of Rs. 10 crores in any particular year, after completion of the proposed expansion to 0.6 mtpa. 6. The Company shall not undertake any new project or expansion or make any investments or take assets on lease or any divestments or sale without the prior approval of lenders. 7. The lenders shall have the right to appoint/retain a concurrent/special auditor to oversee and monitor this restructuring scheme and carry out an audit of the accounts of the Company. All costs, charges and expenses of the auditor shall be incurred, met, paid by the Company. The auditor would continue for duration as is satisfactory to the Monitoring Committee of lenders. 8. The lenders shall have the right to appoint/retain an Independent Engineer (IE) to assess the Company’s operation. All costs, charges and expenses of the IE shall be incurred, met, paid by the Company. The IE would continue for such duration as is satisfactory to the Monitoring Committee of lenders. 9. If required, the Company shall broad base its Board of Directors and audit sub-committee and strengthen its management set-up in consultation with and to the satisfaction of the Monitoring Committee of lenders. The Company shall not induct any person who is a director on the Board of a company, which has been identified as a willful defaulter, and in case such a person is found to be on the Board of the Company, it would take expeditious steps for removal of the person from its Board. 10. The lenders shall have a right to accelerate the repayment schedule if the Company’s cash flows so warrant. Under such circumstances, the Company shall clear dues as per the accelerated repayment schedule without demur. 11. The Company shall furnish a copy of the Fixed Assets Register to the lenders as at the end of every financial year, duly certified by the Statutory Auditor. 12. The lenders reserve the right to sell, assign, and securitise the loan assets or cash flows to any third party. 13. The lenders reserve the right to cancel, suspend, reduce or modify, including withdrawal with retrospective effect, all or any of the reliefs and concessions and/or amend or vary the terms and conditions thereof, in the event of default by the Company. 14. In the event of the Company committing default on the repayment of the loan or payment of interest on the due dates, the lenders shall have an unqualified right to disclose the name of the Company and its Directors as defaulters to the Reserve Bank of India (RBI)/Credit Information Bureau of India (CIBIL). The Company shall give its consent to the lenders/or RBI/CIBIL to publish its name and the names of its Directors as defaulters in such manner and through such medium as the lenders/RBI/CIBIL in their absolute discretion may deem fit. 15. All legal actions initiated by the lenders will be withdrawn (if any) on implementation of the restructuring package. 16. All securities, pledges, guarantees and legal documents shall continue to be valid till the entire loan outstanding is paid in full and all the conditions of sanction shall apply mutatis-mutandis to the restructuring package also. 17. The following individually and severally constitute special events of default which along with other defaults defined in Loan Agreement will be subject to any action as may be deemed fit by financial institutions/banks:

• Violation of any or all of the undertakings given by the Company. • Violation of any or all the undertakings given by the Promoters. • The company not renewing the Insurance Policies. • Withholding of important information or providing any misleading information by the Company/sponsors that is detrimental to the interests of the institutions. • Withdrawing unsecured loans or making payments of interest on such loans. • Diverting any amount from the operations of the Company for meeting any unrelated expenditures or payment to any other concern. • Any sale, transfer, mortgage, removal or disposal of the assets in any manner in any financial year of any division without the prior consent of the lenders. • The Company not adhering to the financial discipline envisaged in the restructuring package.

18. The Company shall not dispose off any of its fixed asset/non core assets, whether charged to the lenders or otherwise without prior approval of the lenders. 19. The restructuring package shall be subject to annual review, based on the findings of which, the package may be modified in consultation with the Company and the lenders. The Company agrees that if, as a result of annual review, the lenders determine that the operations of the Company continue to be unsatisfactory or the financial discipline as envisaged is not adhered to and/or commit any default as above or as per Loan Agreement, the lenders shall have the right to reverse the package and stipulate such additional conditions (including strengthening of management set up, appointment of independent finance director, raising of additional equity or interest free unsecured funds from the promoters) as institutions in their absolute discretion may deem fit. 20. The lenders shall have the absolute discretion of resetting the interest rate on their term loans/FITL after 3 years from the date of final approval of the restructuring package. 21. The lenders shall be entitled to retain or to appoint nominees on the Board of Directors of the Company during the currency of the financial assistance. 22. In the event of default, lenders shall have the right to convert the entire defaulted amount into equity at par. The Company shall undertake to increase its authorized share capital so as to ensure that lenders have the option to convert such defaulted amounts into equity. The conversion option can be exercised by lenders at anytime during the currency of the assistance. 23. No change in management without prior permission from all lenders. 24. The lenders shall reserve the right to convert 20% of the loan outstanding as on October 1, 2011, into equity at par. 25. In case of shortfall in cash flow of the Company, as projected in the scheme, the Company/promoters/ guarantors shall arrange additional funds from their own resources without any further resources from the lenders. The lenders shall have rights to have charge by way of mortgage/assignment on all of the Company’s existing and future brands/other rights.

DETAILS OF FRESH ASSISTANCE TO BE SANCTIONED (INSTITUTION/BANK-WISE) The project would require Rs. 230 crores of debt funding. It is proposed that the additional requirement of Rs. 230 crores be shared proportionally by the existing lenders as under: (Rs. in crores) Name of the Bank / FI CDR % Proposed share of share priority debt ICICI Bank 37.52 86.30 Union Bank of India 12.92 29.72 IFCI 12.45 28.63 Indian Bank 10.85 24.95 Bank of Baroda 9.10 20.93 Indian Overseas Bank 6.96 16.01 Punjab National Bank 5.80 13.34 South Indian Bank 4.40 10.12 Total 100.00 230.00 Except IFCI and South Indian Bank, all other lenders have agreed to provide the proportionate share of priority debt. The Company is in discussions with existing and new lenders for the amount of Rs.38.75 crores not being lent by IFCI and South Indian Bank.

Details of Reliefs and Concessions A. Waivers as on cut-off date: 1. For ICICI Bank – waiver of the accrued dividend on the preference shares (approx. Rs. 21.62 crores as on cut- off date) 2. No waivers proposed on the term loans as on the cut-off date. However, lenders who have been charging interest on FITL for period April 1, 2002 to March 31, 2004 to waive the same (approximately Rs. 8.27 crores as per Company)

B. Sacrifices for lenders: The sacrifices from the lenders would be on account of the following:

1. Waiver of interest on the Primary Term Debt of Rs. 440 crores from the cut-off date (April 1, 2004) till 18 months from the date of effective takeover (March 31, 2006) (Rs. 82 crores) (Rs. in crores) Bank / Institution Share in Primary Term Debt Interest waiver ICICI Bank 181.21 33.69 IFCI 60.08 11.17 Indian Bank 42.57 7.91 Indian Overseas Bank 29.42 5.47 Bank of Baroda 35.02 6.51 Union Bank of India 53.22 9.89 Punjab National Bank 20.82 3.87 South Indian Bank 17.66 3.28 Total 440.00 81.80 2. Reduction of interest on the Primary Term Debt of the debt from 12.50% p.a. to 9.00% p.a. post project completion 3. Reduction in interest on the working capital facilities to 9% p.a.

X. FINANCIAL PERFORMANCE OF THE COMPANY

AUDITORS’ REPORT

The Board of Directors Southern Iron and Steel Company Ltd. Pottaneri / M. Kalipatti Village Mettur Taluk, Salem Dist.

Dear Sirs, Re: Proposed Rights issue of 12,08,63,760 Equity Shares of Rs.10 each for cash at par in the ratio of 8 equity shares for every 5 equity shares held. We have examined the financial information of Southern Iron and Steel Company Ltd., (the “Company”/”SISCOL”), as attached to this report, i.e. Annexure 1 to 11 stamped and initialed by us for identification which are proposed to be included in the Letter of Offer of the Company and have been prepared in accordance with the provisions of paragraph 6.18.7 of Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 (the “Guidelines”) issued by the Securities and Exchange Board of India (“SEBI”) in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992 except as indicated otherwise in our report. A. Financial Information as per Audited Financial Statements. We have examined the accompanying Statement of Restated Profits and Losses of Southern Iron and Steel Company Limited for each of the financial years ended on 31st March 2000, 31st March 2001, 31st March 2002, 31st March 2003 and 30th June 2004 and quarter ended 30th September 2004 and the accompanying Statement of Restated Assets and Liabilities of the Company as at those dates together with the Significant Accounting Policies and Notes on Accounts enclosed as Annexure 1, Annexure 2 and Annexure 3 respectively to this report. B. Other Financial Information We have also examined the following information proposed to be included in the Letter of Offer, and annexed to this report: i) Capitalization Statement enclosed as Annexure 4 ii) Statement of Taxation enclosed as Annexure 5 iii) Accounting Ratios enclosed as Annexure 6 iv) Details of Secured Loans enclosed as Annexure 7 v) Details of Unsecured loans enclosed as Annexure 8 vi) Related party transaction enclosed as Annexure 9 vii) Cash Flow Statement enclosed as Annexure 10 viii) Ageing of Debtors and Details of Loans and Advances as Annexure 11 In our opinion, the financial information of the Company, as attached to this report as mentioned in A. and B. above after making groupings and adjustments, have been prepared in accordance with the provisions of paragraph 6.18.7 of the Guidelines issued by SEBI, as we considered appropriate, in pursuance of Section 11 of the Securities and Exchange Board of India Act, 1992. C. We further state that i) the Company has not declared any dividend since inception ii) the Company has no subsidiary; and iii) the Company has no investments since none has been made at any time in the past. iv) there has been no change in the Accounting policies during the period covered by this report. This report is intended solely for your information and for inclusion in the Letter of Offer in connection with the aforementioned proposed Rights Issue of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent. Yours faithfully,

N. R. Doraiswami K. N. Sreedharan Partner Partner

For and on behalf of For and on behalf of N. R. Doraiswami & Co. S. Krishnamoorthy & Co. Chartered Accountants Chartered Accountants Membership No. 2138 Membership No.12026

Coimbatore, December 24, 2004 Coimbatore, December 24, 2004

Note: Resignation of one of the Auditors of the Company Pursuant to shifting of the registered office of the Company from Coimbatore to Mecheri, Salem, S. Krishnamoorthy & Co., Chartered Accountants, have informed the Company vide their letter dated February 8, 2005 of their inability to act as Auditors of the Company as they do not take up assignments outside Coimbatore.

Annexure 1: Statement of Restated Profit and Loss Account

Financial Year 12 months 12 months 12 months 12 months 15 months 3 months ended ended ended ended ended ended 31.03.2000 31.03.2001 31.03.2002 31.03.2003 30.06.2004 30.09.2004 Income Sales : Pig Iron 232,722,133 148,731,337 109,976,720 171,669,375 319,746 80,847,953 Billets 387,829,757 838,089,744 11,143,435 Bar and Rods 215,649,855 2,536,627,820 521,051,546 Others sales 2,633,698 27,199,188 21,278,860 42,034,197 39,418,490 11,691,081 Trial production 589,224,147 704,928,414 361,782,498 1,867,260,307 Total 824,579,978 880,858,939 493,038,078 2,684,443,491 3,414,455,800 624,734,015 Other income 171,238,677 176,200,593 23,062,986 70,617,023 37,027,126 710,054 Increase (Decrease) in Inventories (23,595,901) (23,178,534) 137,283,373 (73,371,833) 60,581,266 255,254,396 972,222,754 1,033,880,998 653,384,437 2,681,688,681 3,512,064,192 880,698,465

Expenditure Raw Materials consumed 175,121,701 136,112,636 113,574,764 527,402,315 2,225,096,168 768,775,908 Staff Costs 35,803,713 42,810,027 40,697,762 67,807,875 134,877,792 23,257,015 Other manufacturing expenses 728,798,461 820,448,886 474,669,039 1,978,747,968 871,212,791 173,519,422 Administration Expenses 32,992,187 55,708,536 44,238,957 28,487,991 115,026,440 34,871,056 Selling and Distribution Expenses 3,333,080 3,035,807 1,406,040 11,330,680 50,086,129 4,777,653 Interest 177,441,426 177,870,912 171,176,455 341,475,149 1,067,662,023 22,893,827 Depreciation 86,578,204 86,128,220 84,764,236 183,484,034 582,152,282 117,431,919

Net Profit / (Loss) before tax and (267,846,018) (288,234,026) (277,142,816) (457,047,331) (1,534,049,433) (264,828,335) Extraordinary item Taxation Net Profit/(Loss) before Extraordinary (267,846,018) (288,234,026) (277,142,816) (457,047,331) (1,534,049,433) (264,828,335) Items Extra-ordinary items (net of tax) Net Profit/(Loss) after Extraordinary (267,846,018) (288,234,026) (277,142,816) (457,047,331) (1,534,049,433) (264,828,335) item

Annexure 2: Statement of Restated Assets and Liabilities

As at 31.03.2000 31.03.2001 31.03.2002 31.03.2003 30.06.2004 30.09.2004

A Fixed Assets : Gross Block 4,903,880,308 1,706,538,551 1,707,788,317 9,383,493,685 9,433,558,638 9,430,458,638 Less: Depreciation 304,032,464 389,079,419 473,828,417 656,464,767 1,237,917,656 1,354,197,312 Net Block 4,599,847,844 1,317,459,132 1,233,959,900 8,727,028,918 8,195,640,982 8,076,261,326 Less: Revaluation Reserve Add: Capital WIP 2,126,643,555 6,596,122,207 7,110,613,168 Net Block after adjustment 6,726,491,399 7,913,581,339 8,344,573,068 8,727,028,918 8,195,640,982 8,076,261,326 for Revaluation Reserve

B Current Assets and loans & advances Inventories 153,592,765 141,489,862 324,384,482 606,454,447 794,286,298 Sundry Debtors 50,389,479 9,583,656 110,986,542 100,018,767 66,929,427 89,272,579 Cash and Bank Balances 189,664,386 56,876,726 196,924,654 162,590,000 355,096,130 279,062,435 Loans and Advances 93,232,825 121,584,009 145,279,705 149,413,314 122,098,235 176,831,712 Other Current Assets 7,433,159 3,045,692 4,384,551 50,344,438 49,715,256 16,925,982 494,312,614 332,579,945 752,664,529 786,751,001 1,200,293,495 1,356,379,006

C Liabilities and Provisions: Secured Loans 5,073,659,118 6,333,216,806 7,437,761,487 8,207,881,449 9,212,948,705 9,224,295,469 Unsecured Loans 175,660,768 146,606,409 19,480,618 107,042,402 208,849,072 212,641,333 Current Liabilities and 642,617,736 725,705,704 876,505,943 892,413,849 1,201,743,914 1,488,139,079 Provisions 5,891,937,622 7,205,528,919 8,333,748,048 9,207,337,700 10,623,541,691 10,925,075,881

D Net worth 1,328,866,391 1,040,632,365 763,489,549 306,442,219 (1,227,607,214) (1,492,435,549)

E Represented by 1. Share Capital 1,603,924,500 1,603,924,500 1,603,924,500 1,603,924,500 1,603,924,500 1,603,924,500 2. Reserves 760,796,300 760,796,300 760,796,300 760,796,300 760,796,300 760,796,300 Less: Revaluation Reserve Reserves (Net of Revaluation Reserves) 760,796,300 760,796,300 760,796,300 760,796,300 760,796,300 760,796,300 Misc. Exp. and losses (1,035,854,409) (1,324,088,435) (1,601,231,251) (2,058,278,581) (3,592,328,014) (3,857,156,349) Net worth 1,328,866,391 1,040,632,365 763,489,549 306,442,219 (1,227,607,214) (1,492,435,549)

Annexure 3

I. ACCOUNTING POLICIES FOR THE YEARS/ PERIOD COVERED BY OUR REPORT: i) The financial statements are prepared on the basis of historical cost convention based on the accrual concept and in accordance with applicable Accounting Standards referred to in Sec 211(3 C) of the Companies Act. The Accounting is on the basis of a going concern concept. ii) Fixed assets are stated at original cost of acquisition including taxes, duties, freight and other incidental expenses related to acquisition and construction of the concerned assets less Cenvat Credit, if any, and depreciation. Technical know-how fee, pre-operative expenses and weighted average cost of funds during construction are also capitalised where appropriate. iii) Income and Expenditure are recognized and accounted on accrual basis. Revenue from sale transaction is recognized as and when the property in the goods sold is transferred to the buyer for a definite consideration.

iv) Depreciation on fixed assets in respect of vehicles, furniture and office equipment is being provided under written down value and in respect of plant & machinery, building and electrical equipment on straight line basis in the manner and at the rates specified in the Schedule XIV to the Companies Act, 1956. In respect of addition/deletion, depreciation is provided pro-rata to the period of use. v) Stock of raw materials and finished goods are valued at lower of cost or net realisable value. vi) The Gratuity liability is covered by a Master Policy issued by Life Insurance Corporation of India under Cash Accumulation Scheme. The Premium payable is determined and paid. vii) Foreign Currency transactions are recorded at the exchange rate prevailing on the date of transaction, exchange differences are charged/credited to revenue. Transactions in Foreign Currencies at the year-end, not covered by Foreign Exchange Contracts are translated at year-end rates. viii) Amortisation of Capital issue expenses and Preliminary expenses will be made in the years of profit. ix) Leave encashment benefit is provided on annual basis to eligible employees.

II NOTES FORMING PART OF ACCOUNTS FOR THE 3 MONTHS ENDED SEPTEMBER 30, 2004

1. Details of licensed and installed capacity, production, stocks and turnover

A. Licensed and installed capacity

The industry is de-centralised. The Company has filed memorandum for the manufacture of: 1. Foundry grade Pig Iron 2. Steel Billets and Bloom 3. Rolled Products

Installed capacity as certified by Management tons/ year

1. Foundry grade Pig Iron 180000 2. Steel Billets and Bloom 250000 3. Rolled Products 250000

B. Production and Captive consumption for the 3 months ended 30.09.2004

Product Production Captive Consumption in MT in MT Pig Iron 17,749.16 6,101.68 Steel Billets 47,960.30 20,224.13 Bars & Rods 25,108.23 0

C. Details of Stocks as on September 30, 2004

Product Opening Stock Closing Stock in MT in MT Pig Iron 1,845.00 7,639.76 Steel Billets 947.00 4,974.49 Bars & Rods 3,395.00 7,790.37

D. Turnover details for the quarter ending September 30, 2004

Products Quantity sold Turnover in MT in Rupees Pig Iron 5,852.72 80,847,953 Steel Billets 23,708.68 22,485,877 Bars & Rods 20,712.86 521,051,546

2. Raw Materials consumed for the quarter ending September 30, 2004

Product Qty. Value in MT in Rs. Iron ore lumps 76,283.33 89,558,051 Coke 37,433.58 613,308,478 Others 65,909,380

3. Expenditure in Foreign Currency for the quarter ending September 30, 2004 Rs. Consulting Fee 16,74,000 Traveling Expenses 2,51,326

4. Value of Imports for the quarter ending September 30, 2004 Rs. a) Import of Raw Material 57,77,44,480 b) Import of Capital Goods

5. Earnings in Foreign Currency – Export Sales for the quarter ending September 30, 2004 Nil

6. Estimated Amount of contracts remaining to be executed on capital account (less advance) be Rs. not provided for in the accounts 16,30,850

7. Managing Director’s Remuneration for the quarter ending September 30, 2004

Rs. Mr. Jacob Paulraj Salary 3,30,000 Other perks and allowance 69,036 ------3,99,036 ======

8. Interest and finance charges for the quarter ending September 30, 2004

Rs.

For Long Term Loans 0 For working capital 1,00,83,680.00 For debentures 93,44,734.88 For others 32,50,546.00 For bank charges 2,14,866.50 ------Total 2,28,93,827.38 ======9. 5% Redeemable Cumulative Preference shares are redeemable at a premium of 10% and redeemable at the end of 8th and 9th year respectively from the date of allotment viz. 15.12.1998: 28.01.1999: 10.03.1999 and there are arrears of dividend from the date of allotment – Rs. 47,17,43,087

10. 16% Redeemable Cumulative Preference shares are redeemable at par at the end of 7th, 8th & 9th year respectively from the date of allotment viz. 28.09.1999 and there are arrears of dividend from the date of allotment – Rs.24,04,27,397.

11. The amount shown under “OPTIONALLY CONVERTIBLE DEBENTURES” represents in its entirety debenture amount redeemable and interest accrued and due thereon.

The debentures are, in terms of the resolution passed by the members in the EGM held on 25th February 2002, due for redemption on 17th May 2005, 17th May 2006, 17th May 2007 and 17th May 2008.

The interest accrued and due included represents interest remaining unclaimed in respect of the period up to September 2001 is Rs. 2978770.13.

Interest for subsequent period is shown as “Interest accrued but not due” in accordance with the resolution passed by the members on 25.02.2002.

12. In the absence of profit, the Company has not created any Debenture Redemption Reserve.

13. Mortgage of Fixed Assets – Second charge has been created in favour of the Debenture Trustee – Western Indian Trustee and Executor Co. Ltd.

15. Terms Loans are secured by a first charge supported by an equitable Mortgage of Land, Building, Plant & Machinery and by the hypothecation of other movables (other than inventories) both existing and future.

16. Cash credit is secured by hypothecation of Raw Materials, Work-in-Progress, Finished Goods etc. and second charge on Plant & Machinery.

17. Provision for Excise Duty as on 30.09.2004 amounting to Rs. 30430300 (Previous year ended 30.06.2004 was Rs. 9149538) for the uncleared stock has been made in the accounts, and consequently such duty has been included for the purpose of valuation of stocks as per the requirements of AS 2.

18. The Company has imported coke under Advance License. However the Company could not export within the prescribed time. Customs Department issued show cause notice for the payment of interest, duty etc., which has been paid and the matter has been settled before Settlement Commission. However, the DGFT has demanded Rs. 11,73,928 towards penalty. The Company has requested for waiver of the same.

19. One of the creditors of Rs.76,30,054 on Capital account has filed a petition under section 434 of the Companies Act before the Hon’ble High Court of Madras. The Company is defending the same.

20. Deferred Sales Tax shown under the head “Unsecured Loans” represents Sales Tax collected and retained under the Tamil Nadu Sales Tax Deferral Scheme and the same is interest free. The same is payable after a period of 12 years and the first of the monthly installments will fall due for payment on 1st February 2013.

21. Contingent Liabilities not provided for: i. A sum of Rs. 4,19,36,093 which the Customs Department has asked the Company to pay is payable contingent upon the bill of entry which has been filed being rejected. If the bill of entry which has already been filed is accepted, the duty amount of Rs. 3,07,65,944.56 which has already been paid will also be refundable. However, no credit has been taken for this refund which may become due to the Company. ii. The Customs Department issued a show cause notice on the Company for the following: d) Customs duty on excess quantity of Coke received - Rs. 67,05,311 e) Differential duty - Rs. 1,82,68,557 f) Special Additional Duty – Rs. 31,46,950 No provision has been made for these amounts in this account. The Company has replied to the show cause notice and has also represented at the time of hearing. However, due to non receipt of official order, the same is reflected as a contingent liability.

22. The liability to Small Scale Industries for Supplies and Services as on 30.09.2004 is Nil on the basis of information available with the Company.

23. Deferred Tax Asset as on 30.09.2004 has not been recognised since there is no reasonable certainty of sufficient taxable Income being available against which such deferred tax assets can be realised.

24. Confirmation of balances from customers and creditors is in the process of being obtained.

25. Figures have been rounded off to the nearest rupee and the figures for the previous year have been regrouped wherever necessary.

26. Current period represents 3 months ended 30th September 2004.

27. RELATED PARTY DISCLOSURE FOR THE QUARTER ENDING SEPTEMBER 30, 2004 a) Related Party Relationships Associate Lakshmi Machine Works Limited Other Related Parties Nil

b) Related Party Transactions – 2004-05 (in Rs.) Associate Company Sale of Goods 27,31,916 Receiving of Services 1,96,200 Outstanding balance as on 30.09.2004. 35,11,81,685

c) Key Management Personnel Managerial Remuneration Rs. 3,99,036

27. The Company operates in only one segment. Hence AS-17 is not applicable.

Annexure 4: Capitalisation Statement

(Rs. in lacs) Pre-Issue as Adjusted for at 30.09.2004 Present Issue *

Borrowings: Short-term Debt 3466.44 3466.44 Long-term Debt 90902.92 90902.92 Total Debt 94369.36 94369.36

Shareholders’ Funds: Share Capital 16039.24 33413.40 Reserves 7607.96 7607.96 Total Shareholders’ Funds 23647.20 41021.36

Long term Debt/Equity Ratio 3.99 * 2.30 *

Rights Issue of Rs. 173.74 crores at par has been considered. * This debt equity ratio is worked without considering accumulated losses.

Note: The Capitalisation Statement given above is based on the letter February 8, 2005 from N R. Doraiswamy & Co., Chartered Accountants, which encloses the revised Capitalisation Statement.

Annexure 5: Statement of Taxation (Rs. in lacs)

1999-2000 2000-2001 2001-2002 2002-03 2003-04 (1) (2) (3) (4) (5)

A Profit/(Loss) after Contingencies (2678.46) (2882.34) (2771.43) (4570.47) (10788.09) Reserve Appropriation as per Audited Accounts

B Add back items

Appropriation to Contingencies Reserve - - - - - and other Special Appropriation

Foreign Exchange Loss for Repayment - - - - - of Foreign Currency Loans

Book Depreciation as per Accounts 865.78 861.28 847.64 1834.84 4659.98

Net Disallowable / (Allowable) sum under section 43B of the Income-tax Act (281.03) 1146.14 39.82 2672.84 7595.29

Others 1.56 0.14 - 23.42

C Deduction Items

Depreciation under the Income-tax Act (1731.84) (1451.24) (1109.89) (8644.61) (14488.65)

Interest and Finance Charges capitalised not debited to Profit and Loss Account - - - - -

Others (34.10) (34.10) (1181.80) (34.40) (34.42)

D Business Profit / (Loss) for the year under (3859.65) (2358.70) (4175.52) (8741.80) (13032.47) the Income-tax Act as per Return of Income

E Carry Forward Losses as at 31st March as 4462.13 18751.58 22927.10 31668.90 44701.37 per Return of Income to be adjusted against future taxable profit

1. Items 'A' to 'E' in Column (1) to (5) are as per Return of Income filed by the Company with the Income Tax Department, as revised.

Annexure 6: Key Accounting Ratios Year Year Year Year Qtr Ended Period ended ended ended ended ended Particulars 30.09.04 30.06.04 31.03.03 31.03.02 31.03.01 31.03.00 (15 months) Earning Per Share (EPS) (3.51) (20.31) (6.05) (3.67) (3.82) (3.55) Net Asset Value per Share (NAV) (19.76) (16.25) 4.06 10.11 13.78 17.59 Return on Net worth (RoNW) * * (1.49) (0.36) (0.28) (0.20)

Note: Period ended 30.06.04 represents the period from Apr 03 to June 04 (15 months) EPS - Net Profit/(Loss) /No. of Equity shares. NAV - (Shareholders funds - Misc. Exp. and Loss) / No. of Equity shares. RoNW - Net Profit/(Loss) / (Shareholders funds – Misc. Exp. and Loss) There is no change in the Equity Capital during the period from 01.04.99 to 30.09.04 * Since the Net worth has turned negative during these periods, the ratio has not been considered.

Annexure 7: Details of Secured loans as at 30.09.2004 (Rs. in lacs)

A. Optionally Convertible Debentures: Optionally Convertible Debentures 2117.80 Interest accrued and due 334.31 2452.11 B. Term loans: From Financial Institutions 30513.40 From Banks 21752.27 Interest accrued and due 13362.20 65627.87 C. Funded Interest Term Loan: From Financial Institutions 7672.11 From Banks 9308.59 16980.70 D. Working capital term loan: From Banks 2991.14 Interest due 724.58 3715.72 E. Working capital demand loan: From Banks 2785.66 F. Cash credit: From Banks 680.89 G. From Promoters/Directors/Promoter group/ Group companies 0.00

TOTAL 92242.95

Annexure 8: Details of Unsecured loans as at 30.09.2004

Unsecured loans from Promoters/Promoter group/ Group Companies Nil From others - Deferred sales tax 2126.41 lacs Note: Deferred Sales tax shown under the head "Unsecured loans" represents Sales tax collected and retained under the Tamilnadu Sales tax Deferral Scheme and the same is interest free. The same is payable after a period of 12 years and the first of the monthly installments will fall due for payment on 1st February 2013

Annexure 9: Related Party Transactions in accordance with AS-18

The Company has entered into certain related party transactions. The related party transactions covers the financial transactions carried out in the ordinary course of business. The details of the transactions as certified by the Auditors of the Company are as follows: a) Related party relationships:

Controlling companies : There is no controlling company

Subsidiary and Fellow Subsidiary : There is no subsidiary company

Associate Company : M/s. Lakshmi Machine Works Limited, Coimbatore. b) The following is a list of related party transactions for the financial year ended 30.06.2004 (15 months), 31.03.2003, 31.03.2002 and 3 months ended 30.09.2004. (in Rs.) Sale of Goods Qtr ended Period ended Year ended Year ended PARTICULARS 30-Sep-04 30-Jun-04 31-Mar-03 31-Mar-02 (15 months) Associates 2,731,916 763,286 15,555,967 4,914,935 Key Management Personnel Nil Nil Nil Nil

Receiving of Services Qtr ended Period ended Year ended Year ended PARTICULARS 30-Sep-04 30-Jun-04 31-Mar-03 31-Mar-02 (15 months) Associates 51,725 1,072,164 645,600 1,021,639 Key Management Personnel Nil Nil Nil Nil

Balance of payable Qtr ended Period ended Year ended Year ended PARTICULARS 30-Sep-04 30-Jun-04 31-Mar-03 31-Mar-02 (15 months) Associates 351,181,685 351,037,725 352,307,738 4,098,468 Key Management Personnel Nil Nil Nil Nil

Managerial Remuneration Qtr ended Period ended Year ended Year ended PARTICULARS 30-Sep-04 30-Jun-04 31-Mar-03 31-Mar-02 (15 months) Key Management Personnel Managing Director 370,476 2,222,124 1,857,363 1,823,465

Annexure 10: Cash flow statement

Year Year Year Year Qtr ended Period ended ended ended ended ended PARTICULARS 30.09.2004 30.06.2004 31.03.2003 31.03.2002 31.03.2001 31.03.2000 (15 months)

A. CASH FLOW FROM OPERATING ACTIVITIES

Net profit/(loss) before tax and extra-ordinary item (26.48) (149.78) (46.50) (30.00) (29.58) (27.23) Adjustments for Depreciation 11.74 58.22 18.35 8.48 8.61 8.66 Foreign Exchange Investments Interest/Dividend 2.29 106.77 34.15 17.12 17.79 17.74

Operating profit before working capital changes (12.45) 15.20 5.99 (4.40) (3.18) (0.83) Adjustments for Trade other receivables (2.23) 2.92 (3.87) (10.26) 4.87 1.38 Inventories (18.78) (28.21) (2.93) (15.36) 1.21 6.17 Trade payables 28.47 39.03 (1.67) 11.35 (12.03) 13.82 Cash generated from operations (4.99) 28.94 (2.47) (18.67) (9.13) 20.54 Direct taxes paid 0.00 0.00 Others-(loss on sale of fixed assets) 0.14 Cash flow before extra ordinary items (4.85) 28.94 (2.47) (18.67) (9.13) 20.54 Extra ordinary items 0.00 0.00 Net cash flow from operating activities (4.85) 28.94 (2.47) (18.67) (9.13) 20.54

B.CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed assets 0.05 (5.08) (56.45) (51.58) (127.22) (134.02) Change in loans and advances (2.19) 2.55 (0.19) (2.37) 3.09 3.69 Interest received 1.23 0.80 2.30 0.75 0.44 Miscellaneous Exp. not written off 0.00 0.00 Net cash used in investing activities (2.14) (1.30) (55.84) (51.65) (123.38) (129.89)

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from Working capital 0.38 8.06 8.42 39.31 4.23 1.12 Increase in share capital 0.00 0.00 30.00 Proceeds from secured loans 0.76 92.44 67.41 71.14 121.65 87.12 Proceeds from unsecured loans 0.38 10.18 8.76 (12.71) (2.91) 9.60 Interest paid (2.13) (108.44) (30.30) (13.89) (15.02) (17.74) Change in Capital liabilities (10.64) 0.59 0.48 11.28 8.57 Net cash used in financing activities (0.61) (8.39) 54.88 84.33 119.23 118.67 A + B + C (7.60) 19.25 (3.43) 14.01 (13.28) 9.32

Cash & Cash Equivalents (opening) 35.51 16.26 19.69 5.69 18.97 9.65 Cash & Cash Equivalents (closing) 27.91 35.51 16.26 19.70 5.69 18.97

Annexure 11: Statement of Ageing of Sundry Debtors as on 30.09.2004

Outstanding for above 6 months Rs. 75.31 lacs Others Rs. 817.42 lacs 892.73

Note: 1. No amounts are due from Promoters/Promoter group/Group companies. 2. No provision for doubtful debts was made for the quarter ended 30.09.04 and the figures given are therefore only on gross basis.

Details of Loans and Advances as on 30.09.2004 Rs. Advance towards Capital Expenditure 37,835,018 Deposits with Govt./ Statutory bodies 84,285,690 Tax deducted at source 692,738 Advance for purchases 54,018,266 176,831,712

Note: There are no loans or advances to Promoters/ Promoter group/Group companies or to companies in which Directors are interested.

XI. MANAGEMENT DISCUSSION AND ANALYSIS

The following discussion of our financial condition and results of operations should be read together with the audited financial statements for each of the periods ended March 31, 2002, March 31, 2003 and June 30, 2004 and three months ended September 30, 2004, including the notes thereto and the reports thereon, which appear elsewhere in the LoF. The audited financial statements are prepared in accordance with Indian Accounting Standards.

STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2002, MARCH 31, 2003, JUNE 30, 2004 AND THREE MONTHS ENDED SEPTEMBER 30, 2004 (Rs. in lacs)

Quarter ended Fiscal Year ended Particulars September 30, June 30, 2004 March 31, 2003 March 31, 2002 2004 (15 months) INCOME Sales 6247.34 34144.56 26844.43 4930.38 Profit on sale of Fixed assets 0.00 1.84 0.30 0.15 Other income & provision 7.10 368.43 705.88 230.48 Increase/ (decrease) in stock 2552.54 605.81 (733.72) 1372.83 TOTAL INCOME 8806.98 35120.64 26816.89 6533.84

EXPENDITURE Operating cost 9422.95 30963.09 25061.50 5882.44 Staff cost 232.57 1348.78 678.08 406.98 Administration cost 396.49 1651.13 398.19 456.45 Interest and Finance Cost 228.94 10676.62 3414.75 1711.76 Depreciation 1174.32 5821.52 1834.84 847.64 TOTAL EXPENDITURE 11455.27 50461.14 31387.36 9305.27

Profit/(loss) before taxation (2648.28) (15340.49) (4570.47) (2771.43) Less: Provision for Taxation 0.00 0.00 0.00 0.00 Less: Deferred Tax 0.00 0.00 0.00 0.00 Profit/(Loss) after Taxation (2648.28) (15340.49) (4570.47) (2771.43)

COMPARISON BETWEEN PERFORMANCE IN SUCCESSIVE PERIODS

FY 2003 and FY2002 The Company achieved turnover of Rs. 268.44 crores in FY 2003 as against 49.30 crores in FY 2002. The spurt is because the plant was operational only for 4 months in FY 2002 and there was additional production of value added products in FY 2003 for the first time. The Rolling Mill commenced its trial production in the month of May 2002. The Company was able to launch SISCOR, Corrosion Resistant TMT Bars with the help of Steel Authority of India Ltd., Ranchi. Electro Magnetic Stirrer (EMS) was imported from China for the production of alloy steels like spring steels flats. Sinter plant produced 0.184 million tons exceeding its capacity of 0.156 tons. Blast furnace produced 0.2329 million tons of hot metal at a productivity of 1.97 t/m3/day. 23 heats were achieved in Steel Melting Shop and the heat size was increased from 30 tons to 36 tons per heat. Rolled products were produced at 29,786 tons in this year. Commercial production of these products commenced from January 1, 2003. The operating profit was Rs. 93.69 lacs as against the operating loss at Rs. 442.66 lacs in the previous year. This increase in operating profit is primarily revenue driven. Increase in finance charges and depreciation is due to the accounting policy of charging Interest expenses and depreciation to the Capital account before commercial production begins and thereafter to the Revenue account.

FY 2004 and FY 2003 During the fifteen months ended June 30, 2004, the Company attained a turnover of Rs. 341.97 crores as against Rs. 268.44 crores in the previous year (12 months) and the Company made an operating profit of Rs. 697.38 lacs as against Rs. 93.69 lacs in the previous year (12 months). This was achieved in spite of the fact that the price of coke went up from USD 144 to USD 442 per ton in February 2004, constituting an increase of over 300%. The iron ore price has also increased from Rs. 298 per ton in October 2003 to Rs. 900 per ton in April 2004. The accumulated losses of the Company till June 30, 2004 amounted to Rs. 356.12 crores, which has totally eroded the net worth of the Company. It has already been registered with the Board of Industrial and Financial Reconstruction, Department of Economic affairs, Ministry of Finance, Government of India under case no. 361/2004 vide letter number F.No. 3(S-48)/BC/2004 dated December 12, 2004. In January 2004, Sinter Plant produced 17,829 tons which is the highest production achieved since beginning of production. In July 2003, production of billets and rolled products was 20,560 tons and 15,157 tons respectively, being the highest production since beginning of production. In FY 2004, various grades of steel products such as Carbon Steel, Spring Steel and free Cutting Grades were produced.

Period ended September 30, 2004 The Company made sales turnover of Rs. 62.47 crores for three months ended September 30, 2004 and the operating loss of Rs. 12.45 crores. There was a reduction in the selling price in this quarter and the plant was shut down for 26 days which resulted in a lower turnover and higher losses. Pig iron Billets and Long products production was 14,989 tons, 30,303 tons and 25,099 tons respectively during this period.

GENERAL Risk and concerns From September 2003 onwards, the price of metallurgical coke went on increasing. The price has nearly increased by 300% as compared to first quarter of 2002-03. Even though the Company has increased the selling prices of its end products, it has not been able to pass on the entire increase to the end users due to market resistance. The coke prices have already softened and currently quoting around USD 300 per ton as against USD 483 per ton in June 2004. The price of iron ore has increased from Rs. 298 per ton in October 2003 and is ruling around Rs. 900 per ton. Any further increase in prices may pressurize the margins significantly. Internal control systems and adequacy The Company has Annual production plan (APP) and the same is monitored regularly for any deviations and the reasons for the same are examined and corrective actions are initiated to achieve the APP. There is a team headed by the executive director which meets every week to monitor the performance and strategies to overcome any bottlenecks. Stock verification committee is formed to take physical stock of major raw materials and any deviations are analyzed and appropriate decisions are taken to rectify the same. Internal audit program covers all areas of activities and reports are submitted to the management along with responses from concerned department. Audit committee reviews all financial statements and ensures adequacy of internal control systems. Finance The Company has not serviced interest on long term debts, but has been servicing interest on working capital debts. The CDR has since approved a restructuring package for the Company.

Significant economic changes that materially affect or (are likely to) affect income from continuing operations The Company is highly dependent on imports especially from China for requirement of coke which is a major raw material. Any change in foreign exchange policy and foreign currency fluctuation could materially affect the income from continuing operations of Company.

Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations Price increase in iron ore, coke, power and fuel forming the major raw materials for the production are adversely affecting the income margins of the Company.

Future changes in relationship between costs and revenues, in case events such as future increases in labour or material costs or prices that will cause a material change are known

Increase in capacity to 0.6 mtpa as proposed will reduce cost per unit and financial performance will improve.

Status of any publicly announced new products or business segment There has been no announcement of any new products or business segment. The extent to which the business is seasonal Steel is generally considered to be a material with cyclic pattern of demand, which will peak out and again subsidise over a period of four to five years.

Any significant dependence on a single or a few suppliers or customers Company is mainly dependent on National Mineral Development Corporation Limited for its requirement of iron ore, which forms a major input for its steel products.

Competitive conditions Most of the other players in the industry have their own iron ore mines and coke oven plants which places them in an advantageous position as they do not have to depend on outside sources for the supply of these inputs. At the same time, the production capacity of the Company is low as compared to its peers, which increases the cost of production.

XII. PROMOTERS / PROMOTER GROUP COMPANIES AND ASSOCIATED COMPANIES

PROMOTERS The Company was promoted by Lakshmi Machine Works Limited (LMW) and co-promoted by Tamilnadu Industrial Development Corporation Limited (TIDCO). TIDCO has since its incorporation in 1965 been promoting industrialisation through public-private partnerships. Since emphasis of TIDCO had been on the formation of joint ventures in the state of Tamilnadu for manufacturing a wide range of products, TIDCO holds in excess of 10% of the capital of many such institutions/companies. However, these institutions/companies are not under the control of TIDCO and as a prudent policy, TIDCO does not interfere in the day-to-day affairs of these institutions/companies. These investments are held in the capacity of a development organisation. As such, details of these institutions/companies are not disclosed as forming part of group companies. The details relating to financials and litigation of TIDCO are also not furnished, as TIDCO is an enterprise of the Government of Tamilnadu. The lenders had approved a CDR package for the Company one of the conditions for which was change of promoters. VSPL, part of the Group, had applied to SEBI for necessary approvals for purchase of shares from LMW. SEBI vide its order CO/78/CRD/11/04 dated November 5, 2004 communicated vide letter. CFD/DCR/RC/TO /25439/04 dated November 8, 2004 has approved the acquisition of 3,00,00,000 equity shares of the Company and granted exemption from compliance of the provisions of regulation 10 and 12 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, subject to a special resolution being passed as per regulation 12 of these regulations. Accordingly, the said acquisition has been duly approved by the shareholders of the Company through a special resolution passed at the Extraordinary General meeting held on November 25, 2004 and also by postal ballot. The Group has acquired 3,00,00,000 equity shares of the Company on December 18, 2004 of which Mr. Sajjan Jindal has acquired 2,50,00,000 equity shares of the Company for an aggregate consideration of Rs. 2,50,00,000 as nominee of Vrindavan Services Private Limited (VSPL) and VSPL has acquired 50,00,000 equity shares of the Company for an aggregate consideration of Rs. 50,00,000. VSPL has, in compliance of Regulation 7 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, informed the Company as well as the stock exchanges on which the shares of the Company are listed.

Educational Qualification: B.E. Driving License No.: 44304/Hissar Passport No.: F 0256563

The Permanent Account number, Bank Account number and Passport number of Mr. Sajjan Jindal have been submitted to the stock exchanges on which the shares are proposed to be listed. Mr. Sajjan Jindal, aged 46 years, was instrumental in setting up JVSL. He has more than twenty years experience in the industry. He was the Chairman and Managing Director of JISCO and the Managing Director of JVSL. Consequent to the merger of the two companies, Mr. Jindal is the Vice Chairman and Managing Director of the merged entity. He is also the Chairman of Jindal Thermal Power Company Limited and Twenty-First Century Printers Limited. Mr. Jindal is the director in Jindal Aluminum Limited and Jindal South West Holdings Limited. He is also the director of Indian Institute of Management, Indore and a member of TTD Development Advisory council and Bombay chapter of the Young President organisation. He is the second among the four sons of Mr. O.P. Jindal, a leading industrialist in the country.

GROUP COMPANIES The group companies have been classified into the Promoter Company, the Promoter Group companies and Associate companies as given below.

(A) Promoter Company

Vrindavan Services Private Limited (VSPL) Vrindavan Services Private Limited was incorporated on April 8, 1982 as a Private Limited Company and converted into a public limited company “Vrindavan Services Ltd.” with effect from March 29, 1997. The company was reconverted into a private limited company on April 5, 2002. The company is carrying on the business of investments, trading in securities and providing management consultancy services. Board of directors of the company comprises Mr. R. Jayaraman, Mr. Bavneesh Gulati, Mr. P.R. Kole and Mr. K.S.N. Sriram. Shareholding Pattern The shareholding pattern is as follows: Name of the Shareholder No. of Shares % of shareholding

Sun Investments Pvt. Ltd. 7,880,000 21.71 Gagan Trading Co. Ltd. 5,000,000 13.77 Mendeza Holding Ltd. 3,877,450 10.68 Nacho Investments Ltd. 2,564,250 7.06 Sarmento Holdings Ltd. 2,564,100 7.06 Beaufield Holdings Ltd. 2,369,600 6.53 Heston Securities Ltd. 2,269,900 6.25 Templar Investments Ltd. 2,269,800 6.25 Pentel Holdings Ltd. 2,269,000 6.25 Estrela Investment Co. Ltd. 2,269,000 6.25 Jindal Holdings Ltd. 710,000 1.96 Jindal Coated Steel Pvt. Ltd. 625,000 1.72 Musuko Trading Pvt. Ltd. 340,000 0.94 Kamshet Investments Pvt. Ltd. 340,000 0.94 Wachovia Investments Pvt. Ltd. 340,000 0.94 Aras Overseas Pvt. Ltd. 340,000 0.94 Baltimore Trading Pvt. Ltd. 140,000 0.39 Jargo Investments Ltd. 65,500 0.18 Vavasa Investments Ltd. 64,400 0.18 Naman Enterprises Pvt. Ltd. 1,001 0.00 Mr. J. D. Jindal 401 0.00 36,299,402 100.00 Financial performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital 3629.94 3518.24 1644.13 Share Application Money - - 50.00 Reserve and surplus (excluding revaluation reserve) 2681.40 2061.32 219.01 Income 355.40 141.51 58.50 PAT 249.98 (31.80) (121.17) Dividend - - - EPS (Rs.) 0.69 (0.09) (0.74) BV (Rs.) 17.39 15.86 11.33

(B) Promoter Group Companies

1. Sun Investments Private Limited Sun Investments Private Limited was incorporated on June 2, 1981 as a private limited company and converted into a public limited company “Sun Investments Ltd.” with effect from October 15, 1990. The company was reconverted into a private limited company on February 18, 2003. The company is in the business of investing, trading in securities and providing management consultancy services. Its board of directors comprises Mrs. Sangita Jindal (Managing Director), Mr. V. P. Garg, Mr. Deepak Bhat and Mr. Ashok Goel. Shareholding Pattern The shareholding pattern is as follows:

Name of Shareholder No. of Shares % Jindal Iron and Steel Co. Ltd. 29,119,300 40.73 Jargo Investments Ltd. 11,119,300 5.55 Jindal Coated Steel Pvt. Ltd 5,513,700 7.71 Mendeza Holding Ltd. 4,760,100 6.66 Sarmento Holdings Ltd. 4,207,800 5.89 Nacho Investments Ltd. 3,711,900 5.19 Estrela Investment Co. Ltd. 3,052,300 4.27 Pentel Holdings Ltd. 2,989,400 4.18 Beaufield Holdings Ltd. 2,347,200 3.28 Heston Securities Ltd. 2,033,600 2.84 Templar Investments Ltd. 2,033,000 2.84 Vavasa Investments Ltd. 239,900 0.34 Mr. Naveen K. Jindal 60,000 0.08 Mr. Abhuday Jindal 51,000 0.07 Ms. Sminu Jindal 46,100 0.06 Vrindavan Services Pvt. Ltd. 39,300 0.05 Mr. P .R. Jindal 30,700 0.04 Ms. Tanvi Jindal 23,500 0.03 Jindal Strips Ltd. 17,000 0.02 Ms. Savitri Devi Jindal 14,500 0.02 Ms. Sangita Jindal 13,400 0.02 Mr. Ratan K .Jindal 13,300 0.02 O. P. Jindal (HUF) 10,500 0.01 Mr. Om Prakash Jindal 10,100 0.01 Ms. Urvi Jindal 10,000 0.01 Ms. Tripti Jindal 8,800 0.01 Ms. Tarini Jindal 6,000 0.01 Ms. Deepika Jindal 6,000 0.01 Colorado Trading Co. Ltd. 5,000 0.01 Mr. Puran Chand Sharma 100 0.00 Total 71,492,800 100.00 Financial performance The financial performance of the company (Rs. in lacs) is given below:

Particulars FY 04 FY 03 FY 02 Equity Share Capital 7149.28 7119.27 5827.30

Reserve and surplus 12649.76 11796.13 11381.94 (excluding revaluation reserve) Income 4051.89 1828.61 4394.33 PAT 733.59 (28.58) 1010.41 Dividend - - - EPS (Rs.) 1.03 (0.04) 1.73 BV (Rs.) 27.68 26.55 29.51

2. Gagan Trading Company Limited The company was incorporated on January 31, 1983 as a public limited company. It is into the business of investments, trading in securities and providing management consultancy services. Board of directors of the company comprises Mr. Rajeev Pai, Mr. P.R. Kole and Mr. Bavneesh Gulati.

Shareholders No. of shares % of shareholding Sun Investments Pvt. Ltd. 67,60,000 39.40 Pentel Holdings Ltd. 20,30,000 11.83 Beaufield Holdings Ltd. 20,30,000 11.83 Estrella Investments Ltd. 20,30,000 11.83 Templar Investments Ltd. 20,30,000 11.83 Heston Securities Ltd. 20,30,000 11.83 Others 2,49,000 1.45 Total 1,71,59,000 100.00 Financial performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital 1715.90 1715.90 1715.90 Reserve and Surplus (3241.90) (3344.65) (3150.68) (excluding revaluation reserve) Income 533.79 471.99 54.09 PAT 102.75 (193.97) (2168.42) Dividend - - - EPS (Rs.) *(0.65) *(2.38) (12.64) BV (Rs.) (8.91) (9.52) (8.40) * EPS has been arrived at after considering Dividend on Redeemable Cumulative Preference Shares.

3. Jindal South West Holdings Limited (JSWHL) Jindal South West Holdings Limited was incorporated on July 12, 2001 as a public limited company. It commenced its business on September 5, 2001. The company is in the business of investments, trading in securities and providing management consultancy services. Company’s Board of Directors comprises Mr. Sajjan Jindal, Mr. N. K. Jain and Dr. S. K. Gupta. Shareholding Pattern The shareholding of the company is given below:

Name of the Shareholder No. of Shares % of Shares held Sun Investments Pvt. Ltd. 50,000 50.00 Gagan Trading Co. Ltd. 20,000 20.00 Reynold Traders Pvt. Ltd. 15,000 15.00 Vrindavan Services Pvt. Ltd. 14,500 14.50 Mr. Nirmal Kumar Jain 100 0.10 Mr. Raman Madhok 100 0.10

Mr. Kantilal N. Patel 100 0.10 Mr. M. V. S Sheshagiri Rao 100 0.10 Mr. Vishnu Prakash Garg 100 0.10 100,000 100.00 Financial Performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital (Shares of Rs. 10 each) 10.00 10.00 5.00 Reserve & Surplus (excluding revaluation reserve) (4.87) 0.23 - Miscellaneous Expenditure not written off (8.23) (0.64) (0.71) Income 0.33 0.50 - PAT (5.09) 0.23 - Dividend - - - EPS (Rs.) (5.09) 0.23 - BV (Rs.) (3.09) 9.59 8.59 Through a scheme of Arrangement and Amalgamation amongst JISCO, JVSL and the Company (“scheme”), the investment business of JISCO has been demerged and transferred to the company from April 1, 2003, the Appointed Date under the scheme. The scheme has been sanctioned by the Hon’ble High Court of Mumbai and Karnataka and has since become effective from February 4, 2005. After sanction of the scheme, the Company has gained significant financial strength, facilitating growth in, business operation. The financials for FY 2004 excludes the finacials of the investment division of JISCO transferred to JSWHL pursuant to the scheme.

4. Meredith Traders Private Limited Incorporated on August 11, 1993 as a private limited company, it is in the business of Investments and trading in securities. Shareholding Pattern The shareholding pattern is as follows:

Shareholder No. of Shares % of shareholding Gagan Trading Co. Ltd. 1,201,001 50.04 Vrindavan Services Pvt. Ltd. 898,999 37.46 Everplus Securities Pvt. Ltd. 300,000 12.50 Gauri Investments Pvt. Ltd. 1 0.00 Silky Investments Pvt. Ltd. 1 0.00 2,400,002 100.00 Financial performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital (Shares of Rs. 2400.00 2400.00 2400.00 100 each) Reserve and surplus Excluding (1889.11) (4562.39) (4574.99) revaluation reserve Income 3030.82 14.01 8.12 PAT 1801.59 12.60 (76.62) Dividend - - - EPS Rs 75.07 0.52 (3.19) BV Rs 21.13 (90.31) (90.89)

5. Baltimore Trading Private Limited The company was incorporated on December 9, 1994 as a private limited company and converted into a public limited company “Baltimore Trading Ltd.” with effect from March 23, 1998. The company was reconverted into a

private limited company on July 26, 2002. It is mainly in the business of investments and trading in securities. The company’s board of directors comprises Mr. V. Surendranath and Mr. Deepak Bhat. Shareholding Pattern The shareholding pattern is as follows:

Name of the Shareholder No. of Shares % of shareholding Vrindavan Services Pvt. Ltd. 260,000 36.92 Gagan Trading Co. Ltd. 200,000 28.40 Jindal Holdings Ltd. 119,600 16.98 Jindal Equipment & Leasing Consultancy Services Ltd. 119,600 16.98 Wavelength Capital & Finance Pvt. Ltd. 1,100 0.16 Gati Securities Pvt. Ltd. 1,050 0.15 Starlight Equifin Pvt. Ltd. 1,000 0.14 Animation Finvest Pvt. Ltd. 950 0.13 Welworth Equifin Pvt. Ltd. 900 0.13 Naman Enterprises Pvt. Ltd. 2 0.00 TOTAL 704,202 100.00 Financial Information The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02

Equity Share Capital (shares of 704.20 704.20 704.20 Rs.100 each) Reserve and surplus Excluding (482.88) (482.58) (482.42) revaluation reserve Income - 0.005 20.00 PAT (0.30) (0.17) (0.25) Dividend - - - EPS (Rs.) (0.04) (0.02) (0.03) BV (Rs.) 31.43 31.47 31.49

6. Kamshet Investments Private Limited It was incorporated on November 16, 1994 as a private limited company and converted into a public limited company “Kamshet Investments Ltd.” with effect from March 23, 1998. The company was reconverted into a private limited company on August 9, 2002. This company is in the business of investing and trading in securities. The Board of directors comprises Mr. V.P. Garg, Mr. V. Surendranath and Mr. Apurva Jhalani. Shareholding Pattern The shareholding pattern is as follows:

Shareholder No. of shares % of shareholding Vrindavan Services Pvt. Ltd. 260,000 32.23 Gagan Trading Co. Ltd. 225,000 27.89 Jindal Holdings Ltd. 173,300 21.49 Jindal Equipment & Leasing Consultancy Services Ltd. 148,300 18.39 Mr. Atul Sud 2 0.00 Mr. Vijay Maniar 1 0.00 806,603 100 Financial Information The financial performance of the company (Rs. in lacs) is given below:

Particulars FY 04 FY 03 FY 02 Equity Share Capital 806.60 806.60 806.60 (Shares of Rs. 100 each) Reserve and surplus (934.60) (934.31) (933.99) (excluding revaluation reserve) Income - - - PAT (0.29) (0.33) (385.24) Dividend - - - EPS Rs (0.04) (0.04) (47.76) BV Rs (15.83) (15.87) (15.79)

7. MusukoTrading Private Limited (MTPL) MTPL was incorporated on November 14, 1994 as a private limited company and converted into a public limited company “Musuko Trading Ltd.” with effect from March 23, 1998. The company was reconverted into a private limited company on August 26, 2002. The company is mainly in the business of investments and trading in securities. Company’s board comprises Mr. P.R. Kole and Mr. Dileep Bhatt. Shareholding Pattern The shareholding pattern is as follows:

Name of the Shareholder No. of Shares % of shareholding Vrindavan Services Pvt. Ltd. 260,000 33.79 Gagan Trading Co. Ltd. 225,000 29.24 Jindal Holdings Ltd. 150,225 19.52 Jindal Equipment & Leasing Consultancy Services Ltd. 125,225 16.27 Wavelength Capital & Finance Pvt. Ltd. 2,160 0.28 Welworth Equifin Pvt. Ltd. 2,070 0.27 Animation Finvest Pvt. Ltd. 1,710 0.22 Starlight Equifin Pvt. Ltd. 1,620 0.21 Gati Securities Pvt. Ltd. 1,440 0.19 Naman Enterprises Pvt. Ltd. 2 0.00 Total 769,452 100.00 Financial Performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02

Equity Share Capital (Shares of 769.45 769.45 769.45 Rs.100 each) Reserve and surplus (excluding (505.16) (505.06) (513.00) revaluation reserve) Income 0.08 9.03 - PAT (0.11) 7.95 (0.39) Dividend - - - EPS (Rs.) (0.01) 1.03 (0.05) BV (Rs.) 34.35 34.36 33.33

8. Argil Properties Private Limited (APPL) APPL was incorporated on July 6, 1994 as a private limited company. This company is in the business of real estate development. The board of directors comprises Mr. P. Krishne Gowda, Mr. P. S. M. Chari and Mr. K.S.N.Sriram. Shareholding Pattern The shareholding pattern is as follows:

Shareholder No. of Shares % of shareholding Reynold Traders Pvt. Ltd. 5,000 18.50 Rishikesh Finlease & Investments Pvt. Ltd. 5,000 18.50 Vrindavan Services Pvt. Ltd. 5,000 18.50 Gagan Trading Co. Ltd. 5,000 18.50 Meredith Traders Pvt. Ltd. 5,000 18.50 Mr. Sandip Sharma 1,000 3.70 Mr. Devender Singhal 1,000 3.70 Mr. Rajiv Khaitan 10 0.04 Mrs. Rashmi Khaitan 10 0.04 27,020 100.00 Financial performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital 2.70 2.70 2.70 Reserve and surplus (2.63) (2.51) 0.01 (excluding revaluation reserve) Income - - - PAT (0.12) (2.52) (0.07) Dividend - - - EPS (Rs.) (0.46) (9.32) (0.26) BV (Rs.) 0.64 0.64 9.90

9. Wachovia Investments Private Limited This company was incorporated on November 16, 1994 as a private limited company and converted into a public limited company “Wachovia Investments Ltd.” with effect from March 23, 1998. The company was reconverted into a private limited company on August 9, 2002. It is mainly in the business of investments and trading in securities. Its board of directors comprises Mr. Rajeev Pai, Mr. P. R. Kole and Mr. Deepak Bhat. Shareholding Pattern The shareholding pattern is as follows:

Shareholder No. of shares % of shareholding Gagan Trading Co. Ltd. 175,000 28.18 Vrindavan Services Pvt. Ltd. 164,000 26.41 Jindal Equipment Leasing Consultancy Services Ltd. 102,505 16.51 Naman Enterprises Pvt. Ltd. 96,002 15.46 Jindal Holdings Ltd. 77,505 12.48 Starlight Equifin Pvt. Ltd. 1,380 0.22 Animation Finvest Pvt. Ltd. 1,320 0.21 Wavelength Capital & Finance Pvt. Ltd. 1,200 0.19 Welworth Equifin Pvt. Ltd. 1,080 0.17 Gati Securities Pvt. Ltd. 1,020 0.16 621,012 100.00 Financial Performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital (Shares of 621.01 621.01 621.01 Rs.100 each) Reserve and surplus (763.79) (759.02) (758.51) (excluding revaluation reserve) Income 26.84 - - PAT (4.77) (0.51) (126.71) Dividend - - - EPS (Rs.) (0.77) (0.08) (20.40)

BV (Rs.) (22.99) (22.22) (22.14)

10. Jindal Technologies & Management Services Private Limited (JTMSPL) JTMSPL was incorporated on December 3, 2003 to carry on the business of Management & Engineering Consultancy Services. Its shares are held by Vrindavan Services Private Limited and Sun Investment Private Limited equally, the number of shares being 5,000 each. Board of directors comprises Dr. V.K. Nowal, Mr. K.N. Patel, Mr. Rajeev Pai and Mr. Bavneesh Gulati. The company intends to prepare its first accounts for the period ending 31st March 2005 for period exceeding 15 months for which necessary permission has been obtained from Registrar of Companies.

11. Aras Overseas Private Limited The company was incorporated on September 7, 1994 as a private limited company and converted into a public limited company “Aras Overseas Ltd.” with effect from March 23, 1998. The company was reconverted into a private limited company on July 26, 2002. The company is in the business of investments and trading in securities. The Board of directors comprises Mr. Rajeev Pai, Mr. P. R. Kole and Mr. Dileep Bhatt. Shareholding Pattern The shareholding pattern is as follows:

Shareholder No. of shares % of shareholding Vrindavan Services Pvt. Ltd. 260,000 41.07 Gagan Trading Co. Ltd. 175,000 27.65 Jindal Equipment Leasing & Consultancy Services Ltd. 107,500 16.98 Jindal Holdings Ltd. 82,500 13.03 Starlight Equifin Pvt. Ltd. 1,840 0.29 Animation Finvest Pvt. Ltd. 1,760 0.28 Wavelength Capital & Finance Pvt. Ltd. 1,600 0.25 Welworth Equifin Pvt. Ltd. 1,440 0.23 Gati Securities Pvt. Ltd. 1,360 0.21 Naman Enterprises Pvt. Ltd. 2 0.00 633,002 100.00 Financial Performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital (Shares of Rs. 100 633.00 633.00 633.00 each) Reserve and surplus Excluding revaluation (351.68) (351.41) (350.79) reserve Income - 0.005 - PAT (0.27) (0.63) (0.45) Dividend - - - EPS (Rs.) (0.04) (0.10) (0.07) BV (Rs.) 44.44 44.48 44.58

12. Nalwa Chrome Private Limited This company was incorporated on September 2, 1985. It has made strategic investment in the shares of South West Port Limited. Its board of directors comprises Mr. I Qureshi, Mr. K.S.N. Sriram and Mr. Sanjay Agarwal. Financial Performance The financial performance of the company (Rs. in lacs) is given below:

Particulars FY 04 FY 03 FY 02 Equity Share Capital 1.00 1.00 0.003 Reserve and surplus (0.09) - - (excluding revaluation reserve) Miscellaneous Expenditure not (0.20) (0.24) (0.22) written off/Preoperative Expenses Income - - - PAT (0.09) - - Dividend - - - EPS (Rs.) (0.95) - - BV (Rs.) 7.10 7.60 (719.13) Shareholding Pattern The shareholding pattern is as follows:

Shareholder No. of shares % of shareholding Sun Investments Pvt. Ltd. 4,990 49.90 Vrindavan Services Pvt. Ltd. 4,990 49.90 Mr. Sushil Buwalka 10 0.10 Mr. Shyamlal Agarwal 10 0.10 Total 10,000 100.00

1. Jindal Iron and Steel Company Limited (JISCO) Jindal Iron and Steel Company Limited (JISCO) was originally incorporated as Piramal Steel Limited on June 2, 1972. Jindals, having wide experience in steel Industry, acquired controlling stake in the company in 1982 whereupon the name of the company was changed to its present name.

JISCO expanded rapidly and emerged as a major integrated steel producer in the private sector with in-house facility for the manufacture of Hot Rolled (HR) plates, Cold Rolled (CR) coils and sheets and Galvanised products with manufacturing facilities at Tarapur and Vasind in Maharashtra. HR Coils converted into CR Coils/Sheets are further converted into Galvanised Plain Sheets/Coils and Galvanised Corrugated Sheets. These are value added products in the steel industry and are mainly used in construction, white goods and auto sector. The company has capacities of 7,35,000 MT of Galvanising, 7,90,000 MT of Cold Rolling and 2,80,000 MT of HR Plates. JISCO is the largest exporter of Galvanised products from India, accounting for about 30% of the country’s total exports in FY 2004 and has market presence in 45 countries and 5 continents. The company has achieved gross sales of Rs. 1368.19 crores for the half year ended September 30, 2004. The company is listed on BSE, NSE and the Delhi Stock Exchange Association Limited.

Financial performance The financial performance of the company (Rs. in crores) is given below:

Particulars FY 04 FY 03 FY 02 Share capital 44.06 42.80 42.80 Reserves and surplus (excluding 618.30 363.78 257.50 revaluation reserves)

Sales(Gross) 2265.85 1607.25 1114.10 PAT 242.70 120.98 (68.54) Dividend (%) -- 30 -- EPS (Rs.) 55.77 28.19 (15.97) BV (Rs.) 145.16 86.50 58.75

Stock Market Data Highest and lowest market price and number of shares traded during the preceding 6 months along with respective dates, current market price and current market capitalisation: BSE NSE Month/2004 High (Rs.) Low (Rs.) High (Rs.) Low (Rs.) July 2004 233.00 168.00 232.65 168.35 August 2004 288.80 229.70 289.00 229.10 September 2004 290.50 257.65 290.00 256.65 October 2004 287.90 241.00 288.00 240.55 November 2004 303.00 260.10 301.00 260.00 December 2004 354.40 274.00 354.00 274.80 January 2005 361.90 305.40 361.40 305.00 The market price of shares of JISCO (as on February 8, 2005) on BSE was Rs.383.55 and the market capitalization was Rs.1687.40 crores. The company has its investor service center at Mumbai and has engaged the services of a Registrar & Transfer Agents to handle investor grievances. Out of 886 complaints received during the period April 2004 to November 2004, all complaints have been resolved. The average time taken by the company for redressal of complaints varies from 3 to 7 days, depending on the type of complaint. Through a scheme of Arrangement and Amalgamation amongst JISCO, JSWHL and JVSL, the investment business of JISCO has been demerged and transferred to JSWHL and the remaining steel business of JISCO has been amalgamated with JVSL from the Appointed Date April 1, 2003. The said scheme has been sanctioned by the Hon’ble High Court of Mumbai and Karnataka and has since become effective from February 4, 2005. Following which JISCO stands dissolved without being wound up. The Board of Directors of JISCO prior to dissolution comprised:

Mr. Sajjan Jindal Chairman & Managing Director Mr. N. K. Jain Executive Vice Chairman Mr. Raman Madhok Jt. MD & CEO Mr. Markand C. Gandhi Director Mr. Atul Desai Director Mr. D. J. Balaji Rao Director Dr. S R Chougule Nominee Director of ICICI Bank Ltd. Dr. L K Singhal Nominee Director of IFCI Ltd. Mr. S Jambunathan Nominee Director of UTI Asset Management Co. Pvt. Ltd. (Erstwhile Unit Trust of India)

2. Jindal Vijayanagar Steel Ltd.

Jindal Vijayanagar Steel Limited (JVSL) was incorporated on March 15, 1994. It has been promoted by JISCO and its associated companies and Karnataka State Industrial Investment Development Corporation Limited (KSIIDC). Spread over 3500 acres of land, JVSL's plant located at Toranagallu, Bellary District, has a production capacity of 2.5 mtpa of HR coils with an investment of around Rs. 6,500 Cr. The plant, which uses COREX technology from Voest – Alpine, Austria is the first plant to use oxygen-based Iron and Steel making in the country with continuous casting and hot strip mill. JVSL manufactures high quality Hot Rolled Coils, Plates and Sheets and is the only flat Steel Producer in South India. JVSL was set-up as a backward integration facility for production of hot rolled coils for JISCO. The complete steel making and hot rolling facilities have stabilised and the company has achieved a gross sales of Rs.2272.27 crores for the half year ended September 30, 2004. Financial Performance The financial performance of the company (Rs. in crores) is given below:

Particulars FY 04 FY 03 FY 02 Share capital 1631.07 1352.03 1351.99 Reserves and surplus (excluding Nil Nil Nil revaluation reserves) Sales (including Excise duty) 3596.31 2786.04 2000.34 PAT 528.68 (110.67) (351.07) Dividend (%) Nil Nil Nil EPS (Rs.) 3.92 (0.86) (2.73) BV (Rs.) 9.45 5.36 6.21 Stock Market Data Month/2004 BSE NSE High (Rs.) Low (Rs.) High Low (Rs.) (Rs.) July 2004 12.20 7.65 12.35 7.85 August 2004 12.60 9.72 12.65 10.40 September 2004 12.61 10.50 12.65 10.20 October 2004 12.99 11.10 13.00 11.55 November 2004 14.40 11.67 14.40 11.70 December 2004 18.75 12.90 19.00 12.90 January 2005 18.00 14.00 18.00 13.95 The market price of shares of JVSL (as on February 8, 2005) on BSE was Rs. 18.25 and the market capitalization was Rs. 2356.72 crores. The company has its investor service center at Mumbai and has engaged the services of a Registrar & Transfer Agents to handle investor grievances. Out of 4627 complaints received during the period April 2004 to November 2004, 4610 complaints have been resolved and 17 complaints are pending. The average time taken by the company for redressal of complaints varies from 7 to 15 days, depending on the type of complaint. Through a scheme of Arrangement and Amalgamation between JISCO, JSWHL and JVSL (“scheme”), the steel business of JISCO has been merged with that of JVSL from the Appointed Date 1st April, 2003. The said scheme has been sanctioned by the Hon’ble High Court of Mumbai and Karnataka and has since become effective from 4th February, 2005. After the merger, JVSL as a consolidated entity has acquired significant strength with strong financials, facilitating for organic and inorganic growth. The Board of Directors of the merged entity comprises:

Mr. P.R. Jindal Chairman Mr. Sajjan Jindal Vice Chairman & Managing Director Dr. B.N. Singh Jt. Managing Director & CEO Mr. Raman Madhok Jt. Managing Director & CEO Mr. Seshagiri Rao M.V.S Director (Finance) Dr. S.K. Gupta Director Mr.I.M. Vittala Murthy, IAS Nominee Director-KSIIDC Mr. N. Gokul Ram, IAS Nominee Director-KSIIDC Mr. R.N. Roy Nominee Director –IDBI Mr. Balaji Swaminathan Nominee Director-ICICI Bank Ltd Mr. David Chandrasekaran Nominee Director-LIC of India Mr. R.P. Singh Nominee Director-IFCI Ltd. Dr. Ramaswamy P. Aiyar Director The financials for FY 2004 excludes financials of steel business of JISCO merged with JVSL pursuant to the scheme.

Upon consolidation of results of JISCO and JVSL, the merged entity has reported a gross turnover of Rs. 5941.04 crores and net profit of 465.97 crores for the nine months ended December 31, 2004. the merged entity will be known by the name of Jindal Iron and Steel Company Limited.

3. Jindal Stainless Limited The company was promoted by Mr. Ratan Jindal. The company was originally incorporated on September 29, 1980 as Jindal Ceramics Limited. The name of the company was changed to Jindal Int.com Limited on January 25, 2001 and further to Jindal Stainless Limited on January 27, 2003. Under the scheme of Arrangement and Demerger

among Jindal Strips Limited and Jindal Stainless Limited, the stainless steel undertaking from Jindal Strips Ltd with all the property, asset, rights, powers and liabilities in respect to stainless steel undertaking stood transferred to and vested in Jindal Stainless Limited w.e.f. April 1, 2002 (the appointed date), vide Punjab & Haryana High Court order dated May 31, 2003. The company has integrated melting Hot Rolling and Cold Rolling facilities and manufactures and sells a broad range of stainless steel flat products including slabs, blooms, flat bars, hot rolled and cold rolled coils, plates and sheets. The board of directors of the company as on December 31, 2004 comprises Mr. O.P. Jindal, Mr. Ratan Jindal, Mr. Naveen Jindal, Mr. Rajinder Parkash, Mr. N. C. Mathur, Dr. L.K.. Singhal, Mr. R.G. Garg and Mr. Suman Jyoti Khaitan.

Financial performance The financial performance of the company (Rs. in crores) is given below: 2001-02 2002-03 2003-04 Equity Share capital 0.0007 13.83 19.98 Reserves and surplus - 391.80 530.24 (excluding revaluation reserves) Sales (including Excise duty) - 1989.93 2605.58 PAT (0.0001) 90.15 164.19 Dividend (%) - 60% 100% EPS (Rs.) - 9.30 17.08 BV (Rs.) - 58.13 55.57

Stock Market Data

NSE BSE Month High (Rs.) Low (Rs.) High (Rs.) Low (Rs.) July 04 71.95 49.00 71.95 49.00 August 04 80.00 65.50 76.50 65.50 September 04 89.40 67.35 89.35 67.10 October 04 94.50 76.00 93.30 77.20 November 04 89.40 78.10 88.40 78.05 December 04 96.75 81.00 96.70 80.70 January 05 91.95 80.00 89.80 82.40 The market price of shares of the company (as on February 8, 2005) on BSE was Rs. 96.30 and the market capitalization was Rs. 962.16 crores. The company has engaged the services of a Registrar & Transfer Agent to handle the grievances of the investors. The average time taken by the company for redressal of complaints varies from 7 to 25 days, depending on the type of complaint. Particulars of investor complaints during the period April to December 2004 are as follows: Complaints Received: 390, Resolved/Replied: 380 and Pending: 10.

4. Jindal Steel & Power Ltd The company was incorporated on September 28, 1979 as Orbit Strips Pvt. Ltd. which was converted into a public limited company ‘Orbit Strips Ltd.’ on May 27, 1998. Subsequently, the name of the company was changed to Jindal Steel & Power Ltd. on June 12, 1998. Pursuant to a Scheme of Arrangement between Jindal Strips Limited and the company as sanctioned by the Honorable High Court of Punjab & Haryana under Section 391 to 394 of the Act, Raigarh and Raipur divisions of Jindal Strips Ltd. were transferred to and vested in the company from April 2, 1998. The company has a unit in Raigarh which is engaged in production of Sponge Iron, Ferro Chrome and Steel Products like slabs, blooms, parallel flanges and billets. It is also engaged in generation of power. The company’s unit at Raipur is engaged in machining. The company has captive iron ore and coal mines at Tensa in Orissa and Mand area in Raigarh in Chattisgarh respectively.

The board of directors of the company as on December 31, 2004 comprises Mr. O. P. Jindal, Mr. Ratan Jindal, Mr. Naveen Jindal, Mr. Vikrant Gujral, Mr. Subir Bisht, Mr. Rajendra Singh, Mr. Amir Z. Singh Pasrich, Mr. Harsh Vardhan Lodha, Mr. Anand Goel, Mr. Shri Sushil K. Maroo and Mr. M. L. Gupta. Financial performance The financial performance of the company (Rs. in crores) is given below: 2001-02 2002-03 2003-04 Equity Share capital 12.90 14.63 15.40

Reserves and surplus (excluding revaluation 452.33 558.18 839.80 reserves) Sales (including Excise duty) 654.22 1,109.79 1561.49 PAT 107.55 145.08 305.46 Dividend (%) 70% 125% 200% EPS (Rs.) 38.00 52.00 100.22 BV (Rs.) 180.00 195.00 277 Stock Market Data

NSE BSE Month High (Rs.) Low (Rs.) High (Rs.) Low (Rs.) July 04 563.55 350.00 573.00 348.00 August 04 631.00 540.00 630.80 542.00 September 04 628.00 568.00 628.00 569.05 October 04 796.95 623.00 795.00 663.00 November 04 834.35 692.50 833.00 628.35 December 04 964.90 821.00 964.00 824.00 January 05 1030.00 851.00 1026.00 860.05 The market price of shares of the company (as on February 8, 2005) on BSE was Rs. 1004.45 and the market capitalization was Rs. 3092.93 crores. The investor grievances received by the company are handled through secretarial office of the company and through the Registrar & Transfer Agent engaged by the company. The average time taken by the company for redressal of complaints is up to 21 days, depending on the type of complaint. Particulars of investor complaints during the period April to December 2004 are as follows: Complaints Received: 107, Resolved/Replied: 105 and Pending: 2.

5. Jindal Saw Ltd. The company was incorporated on October 31, 1984 as Saw Pipes Ltd. The name of the company was changed to Jindal Saw Ltd. w.e.f. January 11, 2005. The company is an established player in the country for manufacturing and coating large diameter Submerged Arc Welded (SAW) line pipes. Swastik Foils was amalgamated into the company in 1988-89. As part of backward integration, Swastik Udyog, a subsidiary of Jindal Strips, which produces thicker gauge steel strips, was merged with the company in 1991-92. The company is a global player in the field of energy transportation with state-of-the-art facilities in four locations in India and is also involved in the manufacture of pipes including seamless pipes and coating thereof. The board of directors of the company as on December 31, 2004 comprises Mr. P. R. Jindal, Ms. Sminu Jindal, Mr. H. S. Chaudhary, Mr. Moosa Raza, Mr. Purshottam Lal, Mr. Devi Dayal, Mr. A.J.A. Tauro, Mr. M. V. Satya Prasad and Mr. Kuldip Bhargava.

Financial performance The financial performance of the company (Rs. in crores) is given below: 2001-02 2002-03 2003-04 Equity Share capital 46.48 38.98 38.98 Reserves and surplus (excluding revaluation 225.68 290.34 335.56 reserves) Sales (including Excise duty) 754.13 804.96 1123.30 PAT 42.34 76.08 56.24

Dividend (%) 15% 25% 25% EPS (Rs.) 10.32 19.41 14.43 BV (Rs.) 76.35 91.90 102.58

Stock Market Data

NSE BSE Month High (Rs.) Low (Rs.) High (Rs.) Low (Rs.) July 04 199.00 120.00 198.95 125.50 August 04 204.95 157.90 204.85 167.00 September 04 198.55 181.10 198.70 181.00 October 04 204.80 180.00 205.00 181.00 November 04 236.60 181.10 236.30 180.05 December 04 243.85 206.40 244.35 215.00 January 05 246.40 191.30 246.00 192.50 The market price of shares of the company (as on February 8, 2005) on BSE was Rs. 257.90 and the market capitalization was Rs. 1005.28 crores. The company has engaged the services of a Registrar & Transfer Agent to handle the grievances of the investors. The average time taken by the company for redressal of complaints is up to 15 days, depending on the type of complaint. Particulars of investor complaints during the period October to December 2004 are as follows: Complaints Received: 5, Resolved/Replied: 5 and Pending: Nil.

6. Jindal Strips Limited The company was promoted by Mr. O.P. Jindal and was incorporated on November 18, 1970 as Jindal Strips Private Limited. The name of the company was changed to Jindal Strips Limited on May 5, 1975. Subsequent to restructuring, the company is now a Non Banking Finance Company, mainly dealing and investing in securities. The board of directors of the company comprises Mr. O.P. Jindal, Mr. Ratan Jindal, Mr. Rajinder Parkash, Mr. H.V. Mishra, Mr. R.G. Garg and Mr. Rakesh Garg. Financial performance The financial performance of the company (Rs. in crores) is given below: 2001-02 2002-03 2003-04 Share capital 18.91 5.13 5.13 Reserves and surplus 446.41 293.46 249.26 (excluding revaluation reserves) Sales (including Excise duty) 1484.00 - - Interest and Dividend Income 1.07 11.56 12.44 Other Income 8.61 - - PAT 31.65 2.70 (44.19) Dividend (%) 40% 60% - EPS (Rs.) 15.99 5.26 (86.05) BV (Rs.) 253.66 81.24 495.22

Stock Market Data

NSE BSE Month High (Rs.) Low (Rs.) High (Rs.) Low (Rs.) July 04 145.50 113.00 147.80 114.00 August 04 240.00 137.00 240.00 137.00 September 04 208.90 197.10 210.00 197.00 October 04 242.90 197.10 239.00 196.00 November 04 243.30 216.05 245.00 218.25 December 04 284.00 222.50 282.00 230.00 January 05 294.00 251.00 285.60 261.10

The market price of shares of the company (as on February 8, 2005) on BSE was Rs. 304.85 and the market capitalization was Rs. 165.58 crores. The company has engaged the services of a Registrar & Transfer Agent to handle the grievances of the investors. The average time taken by the company for redressal of complaints varies from 7 to 20 days, depending on the type of complaint. Particulars of investor complaints during the period April to December 2004 are as follows: Complaints Received: 418, Resolved/Replied: 406 and Pending: 12.

7. Jindal Thermal Power Company Limited (JTPCL) JTPCL was incorporated on March 10, 1994. It is engaged in the business of power generation. JTPCL has set up a 2X130 MW thermal power plant, in Toranagallu village, District Bellary, Karnataka. The plant has been operating since January 2000 at PLF of over 95%. JTPCL consumes about 20 MW as auxiliary consumption and supplies about 140 MW of power to JVSL and about 100 MW to KPTCL. The Board of Directors comprises: Mr. Sajjan Jindal Chairman Mr. N.K. Jain Vice Chairman Mr. Raaj Kumar Joint Managing Director & CEO Mr. K.T. Krishna Deshika Director Finance Mr. Raman Madhok Director Mr. P. Abraham Director Mr. Balaji Swaminathan Nominee of ICICI Mr. R. Jayaraman Iyer Nominee of IDBI Mr. R.M. Malla Nominee of IFCI

Financial Performance The financial performance of the company (Rs. in crores) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital (Shares of Rs. 10 each) 289.00 289.00 289.00 Reserve & surplus Excluding revaluation 295.88 100.31 79.00 reserve Operating Income 278.43 234.55 231.20 PAT 195.56 21.46 56.56 Dividend - - - EPS (Rs.) 6.77 0.74 1.96 BV (Rs.) 20.24 13.47 12.73

8. JSW Power Limited (JPL) JPL was incorporated on January 3, 2003. JPL is promoted by Jindal Thermal Power Company Limited and other group companies. JPL is setting up two power plants with the capacity of 100 MW each, namely: Unit I and II, which will be captive to Jindal Vijayanagar Steel Limited (JVSL). The total project cost is Rs. 405 crores of which 30% will be equity and 70% debt. The scheduled time for commissioning of Unit I is March 2005 and for Unit II is October 2005. Company’s board of directors comprise of the following directors: Mr. N.K. Jain Chairman Mr. Raaj Kumar Vice Chairman Mr. K.T. Krishna Deshika Director Mr. Upinder Singh Whole time Director Mr. Sanjay Sagar Director Mr. K. J. Varkey Whole time Director Financial Performance The financial performance of the company for the first year is given below:

FY 04 Equity Share Capital Rs. 15 crores Reserves and Surplus NIL Sales Commercial Operation yet to begin PAT Commercial Operation yet to begin Dividend NIL EPS (Rs.) Commercial Operation yet to begin BV (Rs.) Rs. 9.17

9. Jindal Steel and Alloys Limited (JSAL) It is a wholly owned subsidiary of Jindal Strips Limited. The company was incorporated on June 10, 1993 in the name of Kay Kay Cold Storage Private Limited. Pursuant to scheme of arrangement sanctioned by High Court of Punjab & Haryana, Vasind division (consisting of cold rolling facility) of the Jindal Strips Limited has been transferred to a subsidiary company Kay Kay Cold Storage Limited with effect from January 1, 2000 (appointed date) on a going concern basis for a consideration of Rs. 35 crores. The name of the company was changed to Jindal Steel and Alloys Limited. The scheme has been made effective on October 3, 2000. Board of Directors of the company comprises Mr. Raman Madhok, Mr. K.N. Patel, Dr. V.K. Nowal, Mr. Rajeev Pai, Mr. R.C. Sharma, Mr. Shushil Bansal, Mr. Subhash Sharma and Mr. Om Prakash Agarwal. Financial Performance: The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital 702.00 702.00 702.00 Reserve and surplus 3,075.83 3005.34 2,951.06 (excluding revaluation reserve) Sales (incl. excise duty) 10,014.05 19,675.00 24,955.65 PAT 70.49 54.27 109.78 Dividend - - - EPS (Rs.) 1.00 0.77 1.56 BV (Rs.) 53.82 52.80 52.02

10. Jindal Coated Steel Private Limited The company was incorporated as a private limited company “JBS Steel Products Pvt. Ltd.” on December 12, 1996 and was converted into a public limited company “JBS Steel Products Ltd.” on August 6, 1998. The name of the company was changed to “Jindal Coated Steel Ltd.” with effect from February 23, 2001 and the company was reconverted into a private limited company with effect from July 26, 2002. The company had commenced a project for setting up an organic coated steel plant. However the project was shelved due to uncertain outlook in the steel market. Presently the company is in the process of diversifying into other business activities. The company’s Board of Directors comprises Mr. N. K. Jain, Mr. Raman Madhok and Dr. V. K. Nowal. Financial performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital (shares of Rs. 10 2200.00 2200.00 2200.00 each) Reserve & surplus (excluding revaluation (1053.92) (1051.83) (1039.99) reserve) Income 0.53 8.81 16.92 PAT (2.09) (11.85) (29.49) Dividend - - - EPS (Rs.) (0.009) (0.05) (0.13) BV (Rs.) 5.21 5.22 5.27

11. Jindal Praxair Oxygen Company Private Limited (JPOCL) JPOCL was incorporated on September 27, 1995 and manufactures liquid and gaseous Oxygen, Nitrogen and Liquid Argon. The Board of Directors of the company comprises Mr. N.K. Jain, Mr. I. Qureshi, Mr. Moosa Raza, Mr. Asit

Gangopadhyay, Mr. Indrajit Mookerjee, Mr. Sharad Madhok, Mr. K. Kalyana Sundaram, Mr. John Panikar, Mr. C. Muralidhara, Mr. Venkatesh Prabhu and Mr. Vikas Sharma. Financial performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 2003 FY 2002 FY 2001 Equity Share Capital (Shares of Rs. 10 each) 15,200.00 15,200.00 7,600.00 Reserves and surplus 4,752.42 3,551.17 1,248.89 (excluding revaluation reserves) Income (incl. other income) 27,571.47 25,877.37 16,718.79 PAT 2,910.10 2,604.01 845.03 Dividend (%) NIL NIL NIL EPS (Rs.) 1.91 2.01 1.11 BV per share (Rs.) 13.11 12.31 11.59 Note: Audit for FY 2004 has not been completed yet.

12. Maharashtra Sponge Iron Limited Maharashtra Sponge Iron Limited was incorporated on September 2, 1985 as a public limited company. The company has not yet commenced commercial activity. The company’s board of directors comprises Mr. P. R. Jindal, Mr. R. D. Bhalerao, Mr. R. Jayaraman, Mr. V. Surendranath and Mr. Anilkumar Agarwal. Financial Performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital (Shares of Rs. 10 each) 5.00 5.00 0.007 Reserve & surplus Excluding revaluation - - - reserve Miscellaneous expenditure not written off / (0.43) (0.40) (0.38) Pre operative expenses Income NA NA NA PAT NA NA NA Dividend NA NA NA EPS (Rs.) NA NA NA BV (Rs.) 9.13 9.19 (530.53)

13. Reynold Traders Private Limited The company was incorporated on 1st September, 1993. It carries activities of holding and letting out of property, investments in capital markets and providing consultancy services. The company’s board of directors comprises Mr. R. Jayaraman and Mr. P. R. Kole. Financial Performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital (Shares of 0.002 0.002 0.002 Rs.100 each) Reserve and surplus (excluding (670.40) (725.08) (715.45) revaluation reserve) Income 115.86 19.53 16.60 PAT 54.58 (9.62) (330.61) Dividend - - - EPS (Rs.) 2729130 (481073) (16530489) BV (Rs.) (33524543) (36253673) (35772825)

14. Kavita Securities Private Limited The company was incorporated on February 28, 1995. This company is mainly in the business of investments and trading in securities. The board of directors of the company comprises Mr. P.R. Kole and Mr. Dileep Bhatt.

Financial Performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital (Shares of 2.00 2.00 2.00 Rs. 100 each) Reserve and surplus Excluding (109.07) (108.93) (108.76) revaluation reserve Income - - - PAT (0.14) (0.16) (8.12) Dividend - - - EPS (Rs.) (7.01) (7.84) (405.64) BV (Rs.) (5348) (5342) (5335)

15. Laptev Finance Private Limited Laptev Finance Private Limited was incorporated on February 6, 1995. It is mainly in the business of Investments and Trading in securities. The board of directors comprises Mr. V. Surendranath, Mr. P.R. Kole and Mr. Apurva Jhalani. Financial Performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02

Equity Share Capital (Shares of Rs. 0.002 0.002 0.002 100 each) Reserve and surplus Excluding (109.36) (109.22) (109.03) revaluation reserve Income - - - PAT (0.14) (0.19) (8.12) Dividend - - - EPS (Rs.) (7157.50) (9770.00) (405937.50) BV (Rs.) (5468146) (5461814) (5452869)

16. Sapphire Technologies Limited This company was incorporated on October 5, 2000 as a public limited company to carry on the business of software development, to act as consultants and advisors on information sytem etc. The Company has developed a portal “Steelemart.com” through which it conducts auctions for facilitating sale of steel products. Its board of directors comprises Mr. N. K. Jain, Mr. Raman Madhok and Dr. V. K. Nowal. Financial Performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital 25.07 25.07 25.07 Reserve and surplus (12.60) (21.61) (8.70) (excluding revaluation reserve) Miscellaneous expenditure not (1.33) (4.22) (23.78) written off Income 121.29 14.81 20.31 PAT 4.83 (12.90) (8.70) Dividend - - - EPS (Rs.) 1.93 (5.15) (3.47) BV (Rs.) 4.44 (0.30) (2.95)

17. Rishikesh Finlease & Investments Private Limited Rishikesh Finlease & Investments Private Limited was incorporated on August 12, 1994. It is mainly in the business of investments and trading in securities. Its board of directors comprises Mr. P.R. Kole and Mr. Sriram K.S.N. Financial Performance The financial performance of the company (Rs. in lacs) is given below:

Particulars FY 04 FY 03 FY 02 Equity Share Capital (Shares of 5.00 5.00 5.00 Rs.100 each) Reserve and surplus (51.77) (51.74) (47.37) (excluding revaluation reserve) Income 0.18 1.50 - PAT (0.03) (4.37) (0.56) Dividend - - - EPS (Rs.) (0.57) (87.32) (11.22) BV (Rs.) (934.95) (934.45) (847.18)

18. Vijayanagar Minerals Private Limited The company was incorporated on June 17, 1997. It is in the business of mining and extraction of minerals, metals, ores etc. The board of directors comprises Dr. S. K. Gupta, Dr. B. N. Singh, Smt. Jija Madhavan Hari Singh, Dr. M. Basappa Reddy, Mr. Anil Sood, Mr. P. Krishne Gowda, Mr. M. A. Venkateshan and Mr. K. L. Negi. Financial performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital 1.00 1.00 0.00020 Reserve and surplus (463.16) (629.55) (568.10) (excluding revaluation reserve) Sales 2,289.88 1,664.74 1,051.90 PAT 166.39 (61.45) (568.10) Dividend - - - EPS (Rs.) - - - BV (Rs.) 10 10 10

19. Naman Enterprises Private Limited Incorporated on April 19, 1994 as a private limited company, the company is in the business of property development. The company’s board of directors comprises Mr. Deepak Bhat, Mr. V Surendranath and Mr. Apurva Jhalani. Financial performance The financial performance of the company (Rs. in lacs) is given below: Particulars FY 04 FY 03 FY 02 Equity Share Capital 5.00 5.00 5.00 Reserve and surplus (873.01) (873.96) (11.79) (excluding revaluation reserve) Income 1.27 2700.00 - PAT 0.95 (862.17) (0.19) Dividend - - - EPS (Rs.) 1.91 (1724.35) (0.38) BV (Rs.) (1736.02) (1737.95) (13.63)

20. South West Port Limited (SWPL) SWPL, incorporated on June 26, 1997 as a private limited company known as ABG Goa Port Private Limited and promoted by ABG Heavy Industries Limited (ABGHIL). The company’s name was subsequently changed to SWPL in September 2003. SWPL has entered into a license agreement with Mormugao Port Trust (MPT) on April 11, 1999 for the development, designing, engineering, financing, constructing, equipping, owning, operating and maintaining two dedicated bulk cargo berths at MPT on a build, own, operate and transfer (BOOT) basis. The board of directors of the company comprises Mr. Sajjan Jindal (Chairman), Captain B.V.J.K. Sharma (Joint MD and CEO), Mr. Raman Madhok, Dr. V.K. Nowal, Mr. Nasser Munjee and Mr. Saket Agarwal. Financial performance The financial performance of the company (Rs. in lacs) is given below:

Particulars FY 04 FY 03 FY 02 Equity Share Capital 3497.01 1150.00 550.00 Advance against Share Capital -- 450.00 -- Reserve & Surplus ------Miscellaneous Expenditure not 53.21 28.36 7.98 written off BV (Rs.) 9.85 9.82 9.85 Since the company had not started commercial operation till FY04, no profit and loss account has been prepared by the company.

XIII. STOCK MARKET DATA

The Company’s shares are listed on BSE, MSE and CSE. As the shares are actively traded on the Stock Exchange, Mumbai, the stock market data from BSE has been given. The high and low closing prices recorded on BSE for the preceding three years and the number of shares traded on the days the high and low prices were recorded are stated below:

BSE Year ending High Date of Vol. on date Low (Rs.) Date of low Vol. on date Average March 31 (Rs.) High of High of low price for the year (Rs.) 2004 13.83 19.08.03 8,61,034 3.25 01.04.03 3,200 6.76 2003 9.10 09.07.02 3,49,972 1.10 04.04.02 1,500 4.12 2002 2.85 20.04.01 1,099 1 Note (a) Note (a) 1.63 Note (a): Market price of Re. 1 on 12.09.01, 13.09.01, 14.09.01, 17.09.01, 18.09.01 and 21.09.01 with volumes of 300, 800, 1500, 2900, 100 and 400 respectively. Closing market price was Rs. 23.95 on 23.12.04, the trading day immediately following the day on which Board Meeting was held to finalise offer price for the Issue.

Monthly high and low prices for the preceding six months and volume of transactions on the respective dates of high and low: BSE Month High Date of High Volume on Low Date of Low Volume Total (Rs.) date of on date of Volume for High Low the month January 05 23.75 03.01.05 217078 18.00 20.01.05 64805 29,48,407

December 04 24.60 17.12.04 434716 20.10 06.12.04 135226 83,16,886 November 04 23.85 23.11.04 8,74,254 15.05 09.11.04 62,349 65,41,173 October 04 18.30 05.10.04 1,80,197 14.95 18.10.04 52,788 25,84,691 September 04 17.80 30.09.04 4,46,024 12.40 16.09.04 96,151 28,40,361 August 04 15.01 30.08.04 1,39,748 10.49 06.08.04 2,35,409 58,70,066 July 04 12.63 21.07.04 7,51,263 6.86 08.07.04 63,500 51,28,407

XIV. BASIS FOR ISSUE PRICE

1. Adjusted Earnings Per Share Not applicable as the Company has been making losses.

2. Price/Earnings Ratio (P/E) in relation to Issue price of Rs. 10 per share Particulars (a) Based on 2003-2004 EPS NA (b) Based on Weighted Average EPS NA (e) Industry P/E* 5.9 * Source: Capital Market Vol. XIX / 24, dated January 31-February 13, 2005 (Industry: Steel – Large)

Comparison of key ratios with the companies of comparable size in the same industry group Company Period ended Sales EPS P/E ratio RONW NAV Rs. crs. (Rs.) (%) (Rs.) SISCOL June 30, 2004 341.40 - - - (27.0) (15 months) Usha Martin Ltd. March 31, 2004 764.30 3.10 12.7 2.80 115.20 Sunflag Iron and Steel ltd. March 31, 2004 463.80 0.50 6.8 4.30 12.40 Mukand Ltd. March 31, 2004 1038.60 6.40 3.3 - 16.00 * Source: Capital Market Vol. XIX / 22, dated January 3-16, 2005 (Industry: Steel – Large) The P/E ratio is based on the price as on January 24, 2005 for comparable companies and the Issue price for the Company.

3. Return on Net Worth Not applicable as the Company has been making losses.

4. Minimum Return on Total Net Worth needed after the issue to maintain pre issue EPS: NA

5. Net Asset Value (NAV) (a) As at June 30, 2004 Not applicable (b) After Issue Not applicable (c) Issue Price Rs. 10

Note: Issue price is one time the face value of shares.

XV. UNAUDITED WORKING RESULTS FOR THE LATEST PERIOD

Information as required to be given vide Ministry of Finance Circular no. S2/SE/76 dated February 5, 1977 read with circular of even number dated March 8, 1977 is given below.

Interim results snapshot [to be inserted at the time of Stock Exchange filing]

Share prices of the Company

1. Weekend prices per share for the last four weeks:

Week ended on Closing Price (Rs.) February 4, 2005 23.55 January 28, 2005 20.10 January 21, 2005 18.00 January14, 2005 19.20

2. The Closing Price as on February 8, 2005 is Rs. 26.15 [to be updated at the time of Stock Exchange filing]

3. Highest and lowest prices of the equity shares in the period between January 1, 2004 and December 31, 2004 Price Date Highest price 24.60 17.12.04 Lowest price 4.49 22.03.04

XVI. PROMISE VERSUS PERFORMANCE

The details of shortfall in promise vs. performance for the Company and other listed group companies are given below:

PUBLIC ISSUE OF THE COMPANY The Company had come out with two simultaneous but unlinked issues of (a) 1,27,50,000 equity shares of Rs. 10 each for cash at a premium of Rs. 10 aggregating Rs. 25.50 crores and (b) 35,00,000 Partial Optional Convertible Debentures (POCDs) of Rs. 70 each for cash at par aggregating Rs. 24.50 crores. These issues opened for subscription on March 23, 1995. A comparison of promises versus performance is given below: (Rs. in crores unless mentioned otherwise)

FY 96 FY 97 FY 98 FY 99 Projection Actual Projection Actual Projection Actual Projection Actual Installed capacity (mtpa) 183,500 183,500 214,725 214,725 214,725 214,725 214,725 214,725 Capacity utilization 60.00% Trial prodn. 70.00% 22.72% 80.00% 41.21% 90.00% 27.89% Sales income 76.80 0.29 228.63 16.28 261.29 65.13 293.95 37.27 Other income - 4.31 1.50 0.80 4.50 0.35 7.50 1.99 Total income 76.80 4.60 230.13 17.08 265.79 65.49 301.45 39.27 PBIDT 14.44 (7.01) 84.81 (4.79) 101.00 (1.74) 116.98 (7.52) Interest 9.52 5.42 48.12 8.56 49.96 12.44 46.94 17.34 Depreciation 9.37 0.45 21.17 5.25 21.70 7.53 22.49 8.51 PBT (4.45) (12.88) 15.46 (18.61) 29.34 (21.71) 47.55 (33.37) Taxation ------PAT (4.45) (12.88) 15.46 (18.61) 29.34 (21.71) 47.55 (33.37) Gross cash accruals 5.66 (12.42) 37.37 (13.35) 51.78 (14.18) 70.78 (24.86) Dividends ------8.70 - Rate - % ------10.00% - Net cash accruals 5.66 (12.42) 37.37 (13.35) 51.78 (14.18) 62.08 (24.86) Equity capital 75.00 75.00 75.00 75.00 75.00 75.00 87.00 75.54 Reserves & surplus 70.55 75.00 86.01 75.00 113.91 75.00 161.87 76.08 EPS (Rs.) - (1.72) 2.06 (2.48) 3.91 (2.89) 5.47 (4.42) Book value (Rs) 19.41 19.58 21.47 17.14 25.19 19.00 28.61 17.16 Due to delay in disbursal of funds by the financial institutions for project completion, the cost of project went up substantially adding to the fixed cost component of its finished products. The lower capacity utilization was due to non-availability of input materials in time, which in turn was due to non-availability of working capital. The main reason for this was depressed steel market scenario with low demand and low selling prices, which was even below the cost of production. While the cost of input, mainly raw material, energy i.e. power and furnace oil increased, the selling prices showed a decreasing trend. In view of external factors such as adverse market conditions, competition, lower demand and lower sales realization, the Company took various steps to improve operational efficiency, decrease wastage, reduce cost of production and to improve quality. The plant, being an integrated steel plant, with pyro metallurgical equipment and machinery, blast furnace, Air Separation Plant (ASP) and boilers of power plant and Energy Optimization Furnace (EOF), requires uninterrupted operations. The shutdown of operations, especially at blast furnace, adversely affected the equipment and the life of refractory lining. Frequent shutdowns and start up at blast furnace has led to excessive consumption of costly input materials such as coke and furnace oil. Cryogenic equipment such as ASP is not designed for any stoppages and is expected to work with uninterrupted operations for years together. Frequent stoppages of ASP caused substantial increase in cost of up-keep for the equipment. Every start up required liquid oxygen to be purchased from external source, which added to the cost. Due to frequent stoppage and start-up, huge expenses at other areas of the plant also had to be incurred because of excessive refractory wear at EOF ladles and tundish and fuel cost for heating of refractory. Due to under-utilization of capacity at iron making and steel making stages and almost no capacity utilization in BRM, the fixed cost and

semi-fixed cost components such as manpower, electricity etc. also substantially contributed to a high cost of production. The unscheduled stoppages also resulted in huge inventory of high value items like ferro alloys which blocked working capital and increased interest cost. The Company’s project was originally scheduled for completion in March 1996, with commercial production in April 1996. However, the Company could commission only the first phase of the project (iron making facilities) by July 1996. The project has witnessed time and cost overrun since inception due to various reasons outlined above. The project had suffered a cost overrun from Rs. 450 crores at the time of original appraisal to Rs. 1035 crores till completion of project in January 2003.

RIGHTS ISSUE OF JINDAL IRON AND STEEL COMPANY LIMITED The company had come out with a rights issue of 98,70,000 10.5% secured redeemable Non-Convertible Debentures (NCDs) of Rs. 500 each with a detachable warrant for cash at par aggregating Rs. 493.50 crores. This issue opened for subscription on November 21, 1994. A comparison of promises versus performance is given below: (Rs. in crores unless mentioned otherwise) FY 95 FY 96 FY 97 FY 98 Particulars Projected Actual Projected Actual Projected Actual Projected Actual Total Income 505.00 565.82 763.00 754,58 1246.00 814.82 1929.00 1066.00 PBDIT 109.00 112.08 179.00 85.46 327.00 105.49 520.00 119.95 Net Interest Outflow 10.00 2.85 0.00 3.90 40.00 23.83 75.00 46.88 Depreciation 10.00 14.45 15.00 28.67 30.00 23.78 40.00 38.63 PBT 89.00 94.78 164.00 52.90 257.00 57.88 405.00 34.44 PAT 89.00 92.78 164.00 52.90 257.00 50.03 405.00 31.24 Equity Capital 42.91 41.70 52.91 42.73 62.78 42.77 62.78 42.78 Reserves ( Net of 371.94 367.01 807.42 41,80 1226.84 453.20 1606.73 476.56 Revaluation Reserve) EPS (in Rs.) 20.74 26.87 30.99 12.38 40.93 11.70 64.51 7.30 Book Value (Rs.) 96.68 94.85 162.60 104.96 205.42 114.61 265.93 120.07 Dividend (%) 30 35 35 35 40 35 40 20

Projected profitability was based on two projects, viz. Cold Rolling/Galvanizing project of Rs. 454.50 crores and Pelletization project of Rs. 339 crores. The same were proposed to be financed by the above rights issue of NCDs amounting to Rs. 493.50 crores and a proposed Euro issue of Rs. 300 crores. JISCO decided not to undertake Pelletization project which would have required Rs. 339 crores out of which a sum of Rs. 300 crores was proposed to be raised by Euro issue. Consequently the company did not come out with the proposed Euro issue. The Cold Rolling Mill/Galvanising project could be implemented only by March 98 as against the scheduled completion in September 96. The company had reviewed its decision on setting up Cold Rolling and Galvanising units at Tornagallu, and, based on detailed techno-economic feasibility study concluded that a growth strategy focussing on expanding and augmenting capacities at the existing manufacturing locations (i.e. Tarapur and Vasind) would be more beneficial to the company. The actual cost of project was Rs. 513.08 crores as against expected cost of Rs. 454.50 crores.

PUBLIC ISSUE OF JINDAL VIJAYANAGAR STEEL LIMITED The company had come out with two simultaneous but unlinked public issues of (a) 13,50,00,000 equity shares of Rs. 10 each for cash at par aggregating Rs. 135 crores and (b) 27,25,00,000 14% secured redeemable Partly Convertible Debentures (PCDs) of Rs. 40 each for cash at par aggregating Rs. 1090 crores. These issues opened for subscription on February 10, 1995. A comparison of promises versus performance is given below:

(Rs. in crores)

Six Months Year ending March 31 1997 1997 1998 1998 1999 1999 2000 2000 Particulars

Projections Actuals Projections Actuals Projections Actuals Projections Actuals Sales and other 621.00 0.08 1548.00 180.93 1740.00 537.92 1944.00 931.23 Income PBIDT 183.00 (0.30) 801.00 34.20 1093.00 78.87 1220.00 129.78 Interest 32.00 0.37 151.00 47.68 317.00 84.43 320.00 197.67 Depreciation 17.00 0.18 126.00 21.30 162.00 23.48 162.00 80.29 PBT 134.00 (0.84) 524.00 (34.77) 614.00 (29.04) 738.00 (148.18) PAT 134.00 (0.84) 530.00 (34.77) 623.00 (29.04) 725.00 (148.18)

The project cost to set up an integrated steel plant of capacity of 1.25 mtpa of HR coils in June 1994 was estimated to be Rs. 3300 crores including margin money for working capital. The actual project cost up to March 31, 2004 was Rs. 6226 crores. During the initial project implementation, modifications were effected to the basic design of the main plant and additional plant/facilities like pellet plant, converter caster, hot charging systems in Hot Strip Mill were added to enhance the overall capacity of the integrated steel plant to 1.57 mtpa. The commissioning of the plants was delayed due to technological issues. Corex 1 was recommissioned after a lapse of one year by carrying out rectifications/modifications. Delay in disbursal of loans and non-receipt of call money caused a further delay in project implementation. Capitalisation of pre-operative expenses incurred during prolonged trail run, increase in interest during construction and foreign exchange variation also resulted in a cost overrun of the project. When the company started operation of the integrated steel plant after recommissioning of Corex, the steel industry as a whole witnessed historically low level of selling prices on account of a global down turn.

PUBLIC ISSUE OF JINDAL STRIPS LIMITED In 1992, the company came out with the rights issue of 77,79,203 - 12.5% Partly Convertible Debentures (PCDs) of Rs. 360 each for cash at par aggregating Rs. 280.05 crores, to enhance capacity from 0.1 mtpa Sponge Iron/Pig Iron to 0.6 mtpa of Sponge Iron and 0.5 mtpa of Pig Iron and to put up a captive power generation unit of 45 MVA based on waste heat of the flue gases from Sponge Iron plant at Raigarh, Madhya Pradesh. This issue opened for subscription on March 9, 1992. A comparison of promises versus performance is given below: ! The cost of fixed assets in the project is as under (Rs. in crores): Planned Actual costs costs Land & site 1.99 2.41 development Building 19.68 28.34 Plant & Machinery 147.89 345.79 Misc. Fixed Assets 99.82 15.36 Others 85.62 57.62 Total 355.00 449.52 The actual project cost, cumulative till 1995-96, was Rs.449.52 crores. The cost overrun was due to the time taken for selection of appropriate equipment on the basis of technical and environment control aspects and price escalation.

! Installation of kilns of Sponge Iron and 45 MVA power generation facility was completed by the company as follows:

Actual Date of Particulars Completion Kilns 21-Mar-91 to 11-Jan-96 Turbine Generation # I 23-Mar-92 Turbine Generation # II 18-Mar-94 Turbine Generation # III 28-Mar-95 Electric Arc Furnace I 23-Feb-93 Electric Arc Furnace II 28-Feb-95 Submerged Arc Furnace 21-Mar-91 As per the plans disclosed in the letter of offer of the company, the kilns and submerged arc furnaces were expected to be installed by March 1994. As per the original plan, Sponge Iron was to be manufactured from the Rotary Kiln (6 kilns each of 0.1 mtpa) and the Sponge Iron in hot stage, without having the cooling cycle operation, was to be transferred to Submerged Arc Furnace for manufacturing Pig Iron. This technology was, however, not successful for the company, and problems were also faced by other steel manufacturers. The company, therefore, changed the plan for manufacture of Pig Iron and decided to install 2 Electric Arc Furnaces of 50 tons each for manufacturing Mild Steel. The Submerged Arc Furnace installed initially was utilized for manufacturing Ferro Chrome.

! The company expected to achieve a capacity utilization of 30% for 1992-93, 50% for 1993-94 and 70% for 1994-95 for its new project. The actual capacity utilization is as given under:

Year Product Unit Installed Capacity Production Utilisation 1990-91 Sponge Iron MT 100,000 97 4% Pig Iron MT 100,000 75 3% 1991-92 Sponge Iron MT 200,000 11,719 11% Pig Iron MT 100,000 490 0.5% 1992-93 Sponge Iron MT 200,000 46,734 23% Pig Iron MT 100,000 513 1% Mild Steel MT 200,000 5,566 26% 1993-94 Sponge Iron MT 300,000 97,175 43% Pig Iron MT 100,000 nil Mild Steel MT 200,000 20,916 10% Power - 30 MW 2,757,000 kwh 1994-95 Sponge Iron MT 400,000 204,850 66% Mild Steel MT 200,000 45,970 23% Power - 30 MW 35,073,667 kwh Ferro Chrome MT 30,000 1,771 6% 1995-96 Sponge Iron MT 500,000 300,380 71% Mild Steel MT 500,000 69,447 14% Power kwh 45 MW 78,613,745 Ferro Chrome MT 30,000 7,731 26% Note: Capacity utilisation % has been worked out after considering commissioning period. The actual capacity utilization is close to the projected figures except for some differences encountered during the process of stabilization of equipment.

PUBLIC ISSUE OF JINDAL SAW LIMITED In 1986, the company came out with the public issue of 19,92,000 equity shares of Rs. 10 each for cash at par aggregating Rs. 1.992 crores, to set up a project for the manufacture of high pressure, thick walled large diameter SAW Pipes. This issue opened for subscription on July 7, 1986. The project was completed on 13.3.1987 and commercial production was started.

XVII. OUTSTANDING LITIGATION, DEFAULTS AND MATERIAL DEVELOPMENTS

There are no outstanding litigations, disputes, non payment of statutory dues, overdues to banks/financial institutions, defaults against banks/financial institutions, proceedings initiated for economic/ civil/ any other offences (including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Companies Act, 1956) against the Company except as mentioned in the LoF.

CONTINGENT LIABILITIES NOT PROVIDED FOR As on December 31, 2004, the Company had the following contingent liabilities: i. A sum of Rs. 4,19,36,093 which the Customs Department has asked the Company to pay is payable contingent upon the bill of entry which has been filed being rejected. If the bill of entry which has already been filed is accepted, the duty amount of Rs. 3,07,65,945 which has already been paid will also be refundable. However, no credit has been taken for this refund which may become due to the Company. As against the demand for customs duty of Rs. 3,07,65,944 and interest of Rs. 4,19,36,093 from the Customs Department, the Company has paid the entire duty amount of Rs. 3,07,65,944 and has claimed refund of the amount on the ground that duty is not payable on the drawing portion of the goods kept under bonded warehouse and has accordingly not paid any interest. The matter is pending before the Divisional Office of Central Excise. ii. The Customs Department issued a show cause notice on the Company for the following: a. Customs duty on excess quantity of Coke received: Rs. 67,05,311 b. Differential duty: Rs. 1,82,68,557 c. Special Additional Duty: Rs. 31,46,950 No provision has been made for these amounts in this account. The Company has replied to the show cause notice and has also represented at the time of hearing. However, due to non receipt of official order, the same has been reflected as a contingent liability. The Company has subsequently received an adjudication order from the Commissioner of Customs demanding interest of Rs. 67,340 and penalty and fines of Rs. 35,00,000. The outstanding amounts have since been paid and with this the above show cause notice has been settled.

LITIGATION, DISPUTES, ETC. AGAINST THE COMPANY ! The Company had received a letter dated January 24, 2004 from the Superintendent Engineer, Mettur Electricity District Circle, Mettur Dam for payment of outstanding dues of Electricity Tax for the period February 2002 to December 2003. Writ petitions had been filed by the Company against the Tamilnadu Electricity Board in the Madras High Court contesting the levy of Electricity Tax. Madras High Court has dismissed the Writ Petitions. The Company as gone on appeal before the Division Bench of the Madras High Court. The Company has made provisions of Rs. 3.95 crores in its books of accounts till December 31, 2004 towards payment of these dues. ! A demand has been made on the Company by the Public Works department, Government of Tamilnadu for Rs. 2,05,30,221 being arrears for the previous years during which time the Company had been making payments only towards utilisation up to 1 mgd water from the Cauvery river against allotted quantity of 5 mgd water. The Company is in negotiations with the Public Works department to reach a settlement. However, the Company has made a provision of Rs. 2,05,30,221 in its books of accounts. ! The Company made an arrangement with the Tamilnadu Water and Drainage Board (TWADB) for using their bridge for the water pipeline owned by the Company by paying royalty charges of Rs. 3 lacs per annum. The Company received a letter dated October 15, 1998 from Executive Engineer, TWADB stating that the royalty charges have been revised to Rs. 11.549 lacs per annum effective from 1993. The Company is representing to TWADB for charging the originally agreed royalty of Rs. 3 lacs per annum and the matter is pending. However, a provision of Rs. 94,03,900 has been made in the accounts for the increase in the charges. ! Tamilnadu Electricity Board by a demand notice dated October 11, 2004 has demanded a payment of Rs1,35,77,199 (inclusive of belated payment surcharge of Rs. 16,89,099) being arrears of peak hour charges for the period July 2003 up to August 2004. The Company had filed Writs Petitions in the Madras High Court challenging the levy of belated payment surcharge of Rs. 16,89,099. Further, the Company also requested that it

be allowed to pay the peak hour charges of Rs. 1,35,77,199 (without the surcharge) in twenty (20) equal installments. By an order dated November 02, 2004, the Madras High Court permitted the Company to pay peak hour charges of Rs. 1,35,77,199 in ten (10) equal installments and granted an order of interim stay in respect of the demand of surcharge. The final hearing is awaited. ! The Company filed a writ petition challenging the provision of The Tamil Nadu Electricity (Taxation on Consumption) Act, 2003.As per the said Act and the rules framed thereunder, the Company had to register its captive power plant with the Registering Authority (Electrical Inspectorate) and was also required to pay 10 paise tax per unit with effect from June 16, 2003 on power generated by generator or the captive power plant. Pending final hearing of the writ petition, the Company has obtained an interim injunction restraining the Tamilnadu Government from the levy of tax on sale of electricity for High Tension service connection and consumption for own use out of generator. ! M/s Indo Fab Engineering ("Indo Fab") have obtained a decree of Rs. 31,90,734.92 plus interest against two companies viz. M/s Eastern Metallurgical Equipments Pvt. Ltd and M/s Simplex Engineering. As the Company owed Rs. 1,00,00,000 to M/s Simplex Engineering, Indo Fab has taken out garnishee order/attachment order in case no. OS700/96 to the tune of Rs. 54,57,844 in the execution application filed against M/s Simplex Engineering, i.e. the Judgment Debtors in the Trichirapalli District Court. Indo Fab, in another case (OS No. 697/1996) have obtained a decree and have applied to the court for garnishee order to the extent of Rs. 25,00,000. The Company is in the process of filing an affidavit. ! A winding up petition under Section 433 and 434 of the Companies Act, 1956 has been filed in the Madras High Court for default in payment of Rs. 76,30,054. The Company has filed an affidavit disputing the claim in the before the Court (case no. CP no. 204 of 2004). ! The Company had received a notice under section 433 and 434 of the Companies Act, in November 2004 for default in the payment of Rs. 81,65,356 plus interest thereon. The Company has replied to the notice disputing the above claim. Civil cases ! One of the land dispersee has filed a case in the Court of the District Munsif of Mettur (case OS no. 329 of 2004) against the Company, demanding award of a labour contract to a particular group of land dispersed persons. ! Government of Tamilnadu acquired 154 acres of land for the Company and passed an award for the 154 acres. However, symbolic possession has been given to the Company for 105 acres only. The handing over of balance portion of 49 acres has been stayed by the Court under the 3 Petitions filed by the land owners against the Government of Tamilnadu and the Company.

Labour related cases ! A driver in casual employment, engaged by an executive of the Company, has filed a case in the Labour Court, Salem (case no. ID 106/2002) against the Company, claiming employment in the Company. Employees of a labour contractor, claiming wage revision from the labour contractor, have included the Company as a party to the suit as the Company is principal employer. ! Employees of a labour contractor claiming wage revision from the labour contractor has included the Company as a party to the suit as a principal employer. The Deputy Commisioner of Labour has referred the dispute to the Government of Tamilnadu for settlement as an industrial dispute. The Company has filed a writ petition to quash the order of reference.

Rescheduling of redemption of debentures Partial Option Convertible Debentures (POCDs) of face value Rs. 70 were issued by the Company in March 1995 as per following terms mentioned in the prospectus: ! Face value of Rs. 70 with a compulsory conversion of Rs. 40 into 2 equity shares of Rs. 20 each at the time of allotment on May 17, 1995

! Balance amount of Rs. 30 to be treated as an Optionally Convertible Debenture (OCD) with an option of conversion into 1 equity share of face value of Rs. 10 each at a price of Rs. 30 each after 3 years from the date of allotment (i.e. on or after May 17, 1998). ! After May 17, 1998, debentures on which option to convert into equity is not exercised, to carry interest of 15% p.a. payable half-yearly in September and March. ! Debentures to be redeemed in 5 annual installments of Rs. 6 each, starting from May 17, 2000. The Company was regular in making the interest payment up to September 2000. Due to lack of liquidity, the Company was not in a position to pay interest due for the period October 1, 2000 onwards. The first redemption of Rs. 6 (due on May 17, 2000) was done by the Company except for the pending amount as stated below. The second installment for redemption of debenture due on May 17, 2001 could not be paid. A resolution was passed in a general meeting of debenture holders convened on February 25, 2002, to reschedule redemption of balance 4 installments, interest arrears and future interest as follows: Principal Original due Rescheduled Amount payable per Reduced date due date debenture for principal redemption May 17, 2001 May 17, 2005 Rs. 6 Rs. 18 May 17, 2002 May 17, 2006 Rs. 6 Rs. 12 May 17, 2003 May 17, 2007 Rs. 6 Rs. 6 May 17, 2004 May 17, 2008 Rs. 6 Nil Interest ! Interest for the period from 01.10.2000 to 30.09.2003 totaling Rs. 10.80 per debenture to be paid in two installments as under: Rs. 5.40 per debenture on 30.09.2003 and Rs. 5.40 per debenture on 31.12.2004 ! Interest for the delayed payment calculated at the same rate of 15% to be paid on 31.03.2005. ! For the period 01.10.2003 onwards, interest to be paid on March 31 and September 30 each year at 15% on the principal amount outstanding with reference to the period for which it has been outstanding.

The defaults in servicing in accordance with above terms are given below.

Defaults in Servicing Debenture interest aggregating Rs. 7,62,83,550 which was due on March 31, 2004 (Rs. 1,52,56,710), September 30, 2004 (Rs. 1,52,56,710) and December 31, 2004 (Rs. 4,57,70,130) has not been serviced by the Company. An amount of Rs. 83,31,300, being the first installment of redemption due on May 17, 2000 for debentures issued by the Company has not been paid for want of surrender of debenture certificates for endorsement by the debenture holders.

AGAINST THE DIRECTORS There is no outstanding litigation, criminal/ civil prosecution for any offences (irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the Act or not), disputes, defaults, non-payment of statutory dues, proceedings initiated for economic offences or securities related or other offences against the Directors of the Company except as under: Mr. P. Shanmugasundaram has received summon no. CC 802/02 Hg dated August 29, 2002 from IX Metropolitan Magistrate Court, Saidapet, Chennai and has appeared before the court as a nominee director of Indian Natural Medical Products Ltd. He is yet to be served with a copy of charge memo for the same.

AGAINST THE GROUP/COMPANIES AND VENTURES OF THE GROUP

(A) Promoter Company Vrindavan Services Private Limited 1. Contingent liability not provided for as on March 31, 2004 pertained to dividend on preference shares (pro-rata) amounting to Rs. 20.25 lacs. 2. As on March 31, 2004, there was a default relating to interest on OCDs amounting to Rs. 20 lacs.

(B) Promoter Group Companies

1. Sun Investments Private Limited Contingent liabilities not provided for as on March 31, 2004 related to disputed Income Tax demand of Rs. 111 lacs as given below.

S. No. Assessment Year Details & Current Status & Amount of Demand 1 1991-92 The demand had arisen due to disallowance of set off of brought forward loss of Rs. 54.29 lacs earlier year. On appeal, the CIT (Appeals) upheld the Assessing Officer’s contention. The company is in appeal to Income Tax Appellate Tribunal and the matter is yet to be decided. 2 1993-94 The demand had arisen due to disallowance of loss on renunciation of rights shares. Rs. 56.56 lacs The Company is in appeal to CIT(Appeals), which is yet to be decided.

Defaults in dues as on March 31, 2004 towards redemption of Non Convertible Debentures (Rs. 1029 lacs) and interest on Non Convertible Debentures (Rs. 1289 lacs)

2. Gagan Trading Company Limited

Contingent liabilities not provided for include: 1. Dividend on preference shares Rs. 2265.42 lacs. 2. Disputed tax demands Rs. 1502.84 lacs in respect of following:

Gagan Trading ITAT, Mumbai Assessment Year 592.08 lacs Addition of notional interest on security deposits Company Ltd. for Hearing 2000-01 received while computing income from house property Versus and disallowance of interest. Comm. of Income Tax Gagan Trading ITAT, Mumbai Assessment Year 567.40 lacs Addition of notional interest on security deposit Company Ltd. 1998-99 received while computing income from house property Versus and the disallowance of interest. On appeal, the CIT Comm. of Income (Appeals) has decided the matter relating to the Tax addition of notional interest in favour of the company. However, the company is in the process of filing appeal to ITAT on the other issue of interest disallowance. Gagan Trading ITAT, Mumbai Assessment Year Rs. 159.20 Chargeability to Wealth Tax u/s 4 (8)(b) of the Wealth Company Ltd. has heard the 1997-98 and 1998- lacs and Rs. Tax Act of the property of the company. On appeal, the Versus Appeal and the 1999 184.16 lacs, CWT (Appeals) upheld the Assessing Officer’s Comm. Of Wealth Order is awaited respectively contention. The company has filed an Appeal in the Tax ITAT against the order.

Outstanding Litigation

Case No. Parties Pending Before Subject of the Amount Facts Matter Involved (Rs.) Writ Gagan Trading Delhi High Customs duty on Nil The Comm. of Customs issued a notice Petition No. Company Ltd. Court and shall BMW Car under Central Motor Vehicles Rule 8090 of Versus come up for imported in the 126A for non-submission of 2003 Union of India, hearing in due year 2002 homologation certificate. Director General of course The petitioner filed this writ Foreign Trade contending that the same was not (DGFT) and required. Comm. Of Customs

3. Baltimore Trading Private Limited

Contingent liabilities not provided as on June 30, 2004 related to disputed Income Tax demand for Rs. 41.22 lacs. The demand has arisen on account of add back of interest payable amounting to Rs. 81.70 lacs, which the Assessing Officer had treated as no longer payable. On appeal, the CIT (Appeal) has deleted the addition and the matter stands decided in the Company’s favour.

Defaults in payments related to interest on OCDs amounting to Rs. 460.96 lacs.

4. Kamshet Investments Private Limited

Defaults in payment of interest on OCDs amounting to 521.91 lacs.

5. MusukoTrading Private Limited (MTPL)

Contingent liabilities not provided as on June 30, 2004 relate to Income tax demand disputed in appeal for Rs. 1.32 lacs. The demand has arisen on account of interest disallowance by the assessing officer. On appeal the CIT (Appeals) has upheld the disallowance. The company is in appeal to ITAT and the matter is pending.

Defaults in payment of interest on OCDs amounting to Rs. 561.62 lacs.

6. Wachovia Investments Private Limited

Defaults in dues related to interest on OCDs for Rs. 314.74 lacs and interest on Non Convertible Debentures for Rs. 318.05 lacs.

7. Aras Overseas Private Limited

Defaults in dues related to interest on OCDs for Rs. 288.87 lacs.

1. Jindal Iron and Steel Company Limited (JISCO)

Contingent liabilities not provided for:

(Rs. in lacs) S. Particulars As on March 31, No. 2004 1 Disputed Demand of Income Tax Company’s Appeal pending before ITAT / CIT(Appeals) 1305.29 Departments Appeal pending before ITAT 255.17 2 Disputed Demand of Excise and Custom Duty Company’s Appeal in Tribunal 30.30 Company’s Appeal with Commissioner of Central Excise 73.33 3 Disputed Demands of Sales Tax Company’s appeal with the Assistant Commissioner of Commercial Tax 1.23 4 Guarantees provided by Banks 174.53 5 Corporate Guarantee given to Banks/ Financial Institutions against credit facilities extended to a company under the same management 17109.20 6 Claims against the company not acknowledged as Debts 12394.05

Recovery Cases

Case(s) filed Against JISCO Sr. Case Parties Pending Before Subject of the Amount Facts No. No. Matter Involved (Rs.) 1. E.A Tiger Steels Ltd. & Bombay High Court Claim for supply Rs. 98.00 lacs The present execution application No. Ors. … Applicant (Chamber Judge for of damaged goods was filed in the Bombay High 149 of Versus Execution) Court by Tiger Steels Ltd. for 2004 JISCO … execution of decree passed by an Respondent Appellate Court in Dubai. Warrants of attachments were issued by an order passed by the Bombay High Court. JISCO appealed against the above order and the execution proceedings have been stayed on the deposit of Rs. 98.00 lacs by JISCO in the Court.

2. Balli Kloeckner Arbitration – The Claimant has USD 22.82 JISCO is disputing the claim on GmbH, Germany … International Court filed this claim for Million the ground that the monies have Claimant of Arbitration, USD 22.82 already been recovered by the Versus Stockholm, Sweden Million plus Claimant through liquidation of JISCO … interest at the rate inventories and receivables of Respondent of 3 % p.a. for related companies of JISCO in the non-payment of USA. steel slabs supplied in 2000.

Consumer Cases

There are two (2) Consumer Complaints filed against JISCO of which one has been filed by some shareholders for issue of certificates and dividend. The other case is regarding supply of certain material. The total claim of these matters is around Rs. 9.16 lacs.

Central Excise Matters

Cases filed Against JISCO Parties Pending Before Subject of the Amount Facts Matter Involved (Rs) Show Cause cum Demand Notice issued Deputy Disallowance of Rs. 64.33 lacs Deputy Commissioner, Kalyan by Deputy Commissioner, Kalyan on Commissioner, re-credit on receipt plus interest u/s has issued this show cause notice June 11,2002 Kalyan for of goods sent out 11AA of Central demanding duty of Rs. 64.33 lacs Adjudication for job work. Excise Act disallowing the re-credit on receipt of goods supplied for job work.

Apart from the above, there are certain additional show cause cum demand notices received by JISCO aggregating Rs. 92.00 lacs issued by the Excise Department in relation to interest on delayed payments recovered from customers, finished products drawn as samples, in-house testing and classification of certain materials used for the production of steel, etc.

Cases filed ByJISCO Parties Pending Before Subject of the Amount Facts Matter Involved (Rs) JISCO… Appellant CESTAT for Imposition of Rs. 50.00 lacs This appeal has been filed against Versus Hearing penalty. the order of Commissioner of Commissioner, Central Excise, Belgaum Central Excise imposing penalty … Respondent of Rs. 50.00 lacs for not including the additional consideration flowing from JISCO to JVSL in the form of advances amounting to Rs. 150.00 crores for supply of HR Coils.

Apart from the above matter there are three (3) Appeals filed by JISCO in the CESTAT against the Excise Department for penalty imposed due to the delay in payment of differential duty and the CENVAT credit availed on capital goods, involving an aggregate amount of Rs. 43.09 lacs.

Sales Tax Case

Case filed By JISCO Parties Pending Before Subject of the Amount Facts Matter Involved (Rs) JISCO (Howrah)… Appellant Assistant Inter-branch Rs. 1.23 lacs JISCO has filed this appeal Versus Commissioner of transfer included against the order passed by C.T.O Commercial Taxes Officer, Howrah Commercial Taxes, in sale. wherein certain inter-branch stock …Respondent Howrah for transfers in the F.Y 1999-2000 Arguments were assessed for tax liability for non-submission of FORM F.

JISCO is contending that production of Form F is not mandatory as other documents in support of stock transfer have already been produced

Customs Cases

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Cases filed Against JISCO Parties Pending Before Subject of the Amount Facts Matter Involved (Rs) Show Cause Notice was issued by Additional Withdrawal of Rs. 0.75 lacs plus Additional Commissioner of Additional Commissioner of Customs, Commissioner of DEPB benefit. interest u/s 11AA Customs, Mumbai has issued this Mumbai on March 03,2004. Customs, Mumbai of Central Excise show cause notice demanding for Arguments Act withdrawal of DEPB benefit as there was variation between declaration in shipping bill and physical examination of goods. JISCO has filed its reply to the show cause notice on March 12, 2004 contending that bill of lading was not issued for the container. Commissioner of Customs Commissioner of Withdrawal of Rs. 1.94 crores A show cause notice was served … Applicant Customs, Mumbai benefit under upon JISCO amounting to Rs. Versus for Arguments EPCG Scheme 1.94 crores in 1999 demanding JISCO … Respondent customs duty on the basis that certain goods which were imported were in fact components and not capital goods under EPCG Scheme and were as such liable to customs duty.

Income Tax Cases

Cases filed Against JISCO Parties Pending Before Subject of the Amount Facts Matter Involved (Rs) JCIT, Mumbai ITAT, Mumbai for Addition of Nil The issue is the about addition of … Appellant Arguments unutilised (net tax liability unutilised MODVAT credit to the Versus (Assessment Year MODVAT credit after adjusting value of closing stock amounting JISCO & Ors … Respondents 1996-97) to the value of refunds & to Rs. 4.17 crores and closing stock and payments) disallowance of start-up expenses other additions. amounting to 97.52 lacs etc. As per CIT (A) Order, no tax is payable and JISCO is in receipt of refund of Rs. 2.53 crores. The Dept. has appealed against the order of the CIT (A) before the ITAT. JCIT, Mumbai ITAT, Mumbai for Addition of Nil The issue is the about addition of … Appellant Arguments unutilised (net tax liability unutilised MODVAT credit to the Versus (Assessment Year MODVAT credit after adjusting value of closing stock amounting JISCO & Ors … Respondents 1995-96) to the value of refunds & to Rs. 8.95 crores. As per CIT (A) closing stock and payments) order no tax is payable and JISCO other additions. is in receipt of refund of Rs. 2.32 crores. The Dept. has appealed against the CIT(A) order.

Cases filed By JISCO Parties Pending Before Subject of the Amount Facts Matter Involved (Rs) JISCO & Ors. … Appellants CIT(A), Mumbai for Reduction of Nil JISCO has filed this Appeal as Versus Arguments Minimum (net tax liability Minimum Alternate Tax (MAT) DCIT, Mumbai (Assessment Year Alternate Tax after adjusting tax credit was not reduced while … Respondent 2003-04) (MAT) credit refunds & computing interest u/s 234B and payments) 234C of the Income Tax Act. As per AO's order, a demand of Rs. 29.29 lacs was computed and the same has been paid. JISCO & Ors. … Appellants CIT(A), Mumbai for Addition of Nil The issue is the about the addition Versus Arguments unutilised (net tax liability of unutilised MODVAT credit to Asst. Comm. of Income Tax, Mumbai (Assessment Year MODVAT credit after adjusting the value of closing stock … Respondent 2001-02) to the value of refunds & amounting to Rs. 9.49 crores and closing stock and payments) the disallowance of interest other amounting to Rs. 3.01 crores disallowances claimed u/s 36(1)(iii) of the Income Tax Act, front end fees and processing fees amounting to Rs. 1.07 crores paid to ICICI

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Limited. Interest amounting to Rs. 5.97 crores on borrowed funds u/s 14A of the Income Tax Act and addition on account of provision for doubtful debts/ advances while computing book profits amounting to Rs. 4.32 crores as the other issues of this appeal.. As per AO order, business loss of Rs. 47.85 crores was has been assessed, hence no tax liability. JISCO & Ors. … Appellants ITAT, Mumbai for Addition of Nil The issue is about the addition of Versus Arguments unutilised (net tax liability unutilised MODVAT credit to the Asst. Comm. of Income Tax, Mumbai (Assessment Year MODVAT credit after adjusting value of closing stock amounting … Respondent 2000-01) to the value of refunds & to Rs. 3.49 crores and the closing stock and payments) addition on account of provision other additions. for doubtful debts/advances while computing book profits amounting to Rs. 2.96 crores. Addition of amount transferred to lease equalisation account while computing book profits amounting to Rs. 66.24 lacs is also an issue in this ITAT Appeal. As per AO order tax demanded is Rs. 1.97 crores. The said demand has been adjusted against refunds and balance amount of Rs. 90.32 lacs has been paid by JISCO, hence no tax liability. JISCO has filed an Appeal with the ITAT. JISCO & Ors. … Appellants ITAT, Mumbai for Addition of Nil The issue is the about the addition Versus Arguments unutilised (net tax liability of unutilised MODVAT credit to Asst. Comm. of Income Tax, Mumbai (Assessment Year MODVAT credit after adjusting the value of closing stock … Respondent 1999-2000) to the value of refunds & amounting to Rs. 2.80 crores and closing stock and payments) the, provision for doubtful other additions. debts/advances while computing book profits amounting to Rs. 1.98 crores amount transferred to lease equalisation account while computing book profits amounting to Rs. 1.58 crores. Addition on account of surplus on forfeiture and re-purchase of own debentures amounting to Rs. 2.76 crores is also an issue in the Appeal. As per AO order tax demanded is Rs. 44.10 lacs. The said demand has been adjusted against refunds due, hence no tax liability. JISCO & Ors. … Appellants Appeal is being filed Disallowance of Nil Disallowance of deduction under Versus in the ITAT against deduction under (net tax liability section 80HHC amounting to Rs. Asst. Comm. of Income Tax, Mumbai the CIT (A) order. section 80HHC after adjusting 5.36 crores As per AO order tax … Respondent (Assessment Year refunds & demanded is Rs. 67.44 lacs and 1998-1999) payments) the same has been paid by JISCO, hence there is no tax liability. However, JISCO shall be filing an Appeal in the ITAT against the Order of the CIT(A) who has rejected JISCO's contentions. JISCO & Ors. … Appellants ITAT, Mumbai for Additions on Nil The issue is about the addition of Versus Arguments. account of (net tax liability provision for doubtful Asst. Comm. of Income Tax, Mumbai (Assessment Year provision for after adjusting debts/advances while computing … Respondent 19978-1998) doubtful refunds & book profits amounting to Rs. debts/advances payments) 0.58 crores and the additions of and amount amount transferred to lease transferred to lease equalisation account while equalisation computing book profits amounting to Rs. 1.58 crores. JISCO has filed this appeal in the ITAT against the Order of CIT(A).

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Penalty imposed by SEBI on JISCO

A penalty was levied on JISCO under section 15A of the SEBI Act aggregating Rs. 1.25 lacs for non-submission of periodical disclosures required to be made to the stock exchanges under regulations 6(2) and 6(4) of the SEBI SAT Regulations, 1997 and regulation 8(3) of the amended SEBI SAT Regulations, 1997 for the year 1998, 1999 and 2001. The company agreed for settlement by consent order with a request to reduce the penalty amount to Rs. 1 lac on the grounds that the company has complied with the regulations for the year 2001. The Order of the adjudicating officer appointed by SEBI is awaited.

2. Jindal Vijayanagar Steel Ltd.

Contingent liabilities not provided for as on March 31, 2004:

S. Particulars Rs. in crores No. 1. Claims against the Company not acknowledged as debts 6.82 2. Bills discounted 155.26 3. Disputed claims including those pending in Courts for excise & custom duties, sales 176.24 tax, income tax and other levies (excluding interest) 4. Other matters 13.04

Provident Fund Cases

There are ten (10) matters pending before various Provident Fund authorities regarding the payment of Provident Fund contributions by JVSL pertaining contract employees from the period April 1998 to April 2001 involving an amount of Rs. 26.00 lacs

Land Acquisition Cases

There are three (3) matters filed in the District Court at Bellary, Karnataka and one in the Karnataka High Court for enhancement of compensation and other claims for the land acquired by JVSL for its Steel Plant involving an amount of Rs. 7.00 lacs.

Labour Cases

There are six (6) labour related matters against JVSL for issues such as dismissal from employment, accident at the COREX-I site in July 2002 and compensation claims aggregating to Rs. 4.7 lacs.

Civil Cases

Sr. No. Case No. Parties Pending Before Subject of the Amount Facts Matter Involved (Rs.) 1. Civil Suit No. 538 of Mewar Growth Calcutta High Court Shares 5.90 crores The Plaintiff has filed 1999, G.A. No. 1880 Ltd. & Ors. for reinstat- (approx.) this suit for a of 2000 Vs. ement of the suit declaration by the JVSL earlier withdrawn court that they are the rightful owners of some shares of a banking company and that any transfers thereof were null and void. The Plaintiff thereafter withdrew the suit in 1999. The Plaintiff has in 2002 made an application for reinstatement of the suit. 2. - David James & London Court of Demurrage $ 57,311.45 The Claimant was Sons International Charges (for required to supply Vs. Arbitration for filing dispatch certain quantity of JVSL Pleadings earned & limestone to JVSL interest) under a contract. and $ On receipt of the

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118,450 consignments, the (for cost limestone was found and interest to be of a different for size than the one demurrage) desired by JVSL. Due to the variance in the size of the limestone, the calcinations process in the lime calcinations plant was not to expected level. The Claimant has filed this matter for the demurrage for the delivery of the limestone at the Goa Port. 3. Original Application SBI & others VS Debt Recovery Recovery of Loan 30.60 lacs This matter has been No. 190/03 Bellary Steels & Tribunal, Bangalore with interest with filed by Banks Alloys Ltd & interest seeking various sums others in which from Bellary Steel JVSL is one of the and others. JVSL is a Respondents. debtor of Bellary Steel and has been served with a garnishee notice for an amount of Rs. 30.60 lacs. 4. Writ Petition Bellary Steels & High Court of Reopening of 2.17 crores Bellary Steel has 10713/2004 Alloys Ltd Vs IT Karnataka for Assessment by the filed the Writ Petition Dept. JVSL is hearing Department to Stay Income Tax one of the Department Notice respondents reopening the assessment for the Assessment Year 1997-98 and claiming Rs. 2.17 crores The High Court has granted stay against the notice of the IT Dept. 5. Writ Petition JVSL Vs. BUDA High Court of Levy of 12.48 crores BUDA has levied Karnataka for Betterment betterment charges hearing Charges by BUDA on the Company in the year 1996-97 which claim has been challenged in the High Court by way of this Writ Petition. 6. Reference Income Tax High Court of Taxability of 10.99 crores A reference Application Officer Vs. Karnataka for Interest Income application has been JVSL hearing under the head filed in the High "Income From Court for challenging Other Sources" the taxability of interest income under the head "Income from Other Sources" after the commencement of business.

Custom Matters

Parties Pending Before Subject of the Amount Facts Matter Involved (Rs.) Commissioner of Customs Commissioner of Show Cause 8. 89 crores The Comm. of Vs. Customs Notice Customs, Chennai JVSL & Ors. has issued a show cause notice for the import of capital goods required for

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the Pellet Plant and Corex Module II under the EPCG Scheme.

Central Excise Matters

Parties Pending Before Subject of the Amount Facts Matter Involved (Rs.) JVSL CESTAT Excise Duty 50.00 lacs The penalty has been imposed by the Comm. Versus for Hearing for non inclusion of additional consideration Commissioner, flowing from JISCO to JVSL in the form of Central Excise, advances amounting to Rs. 150.00 crores for Belgaum supply of HR coils in the total valuation of the steel supplied. Commissioner of CESTAT, Excise Duty Rs. 9.08 JISCO had advanced an amount of Rs. 150.00 Central Excise Bangalore crores (as crores to JVSL during the year 1998-99, which Vs. for Hearing excise was meant to be adjusted against supply of HR JVSL & Ors. duty) and Coils made by JVSL to JISCO. Rs. 5.00 Department has issued a Show Cause Notice lacs (as that the interest accrued on the advance penalty) received from JISCO should not form part of the accessible value of the steel sold to JISCO and pay the differential Central Excise Duty amounting to Rs. 9.08 crores Comm. of Excise Commissioner of Sale of Corex Gas 4460.90 The Comm. has issued a Show Cause Notice Vs. JVSL Excise, CESTAT for various period lacs for the Sale of Corex gas to JTPCL & JPOCL. (October 1999 to The Excise Dept. contends that JVSL had to March 2004) discharge 8% of the sale price of corex gas since input credits were availed by JVSL for the exempted corex gas. Comm. of Excise CESTAT, Disallowance of 1094.00 The CESTAT has stayed the order passed by Vs. JVSL Bangalore cenvat credit on lacs the Comm. on structures and other items for Hearing steel structures Comm. of Excise CESTAT, Input credit on The quantum of pellets received at JVSL site 47.37 lacs Vs. JVSL Bangalore for high-grade pellets was higher than the quantity invoiced and duty Hearing discharged by the supplier. Hence the supplementary invoice for payment of differential duty was raised by the supplier and accordingly the cenvat credit was availed by JVSL. Comm. of Excise CESTAT, Input credit on The deptt. is of the view that the credit cannot 62.18 lacs Vs. JVSL Bangalore for Corex chilling be availed on the inputs when there was no Hearing production from Corex unit during the chilling period. Comm. of Excise CESTAT, Duty on Interest JVSL's Stay Application has been granted. A 908.00 lacs Vs. JVSL Bangalore for free advance of deposit of Rs. 50 lacs has been made by JVSL Hearing Rs. 150 crore as directed by the Tribunal received by JVSL from JISCO Comm. of Excise CESTAT, Demand of The CESTAT has ordered payment of customs 10.00 lacs Vs. JVSL Bangalore additional customs duty of Rs. 43,18,783/- and redemption fine of duty of Rs. 16.81 Rs. 10,00,000/-. JVSL may file a Writ lacs on Petition before the High Court of Karnataka warehoused goods Comm. of Excise Supreme Court of Import of Met A writ petition was filed before the High Court 4920.00 Vs. JVSL India for Hearing coke – Anti- of Karnataka challenging the validity of the lacs dumping Duty Govt. Notification as it was highly discriminatory and violative of fundamental rights. The dispute relates to antidumping duty payable by JVSL prior to 30.09.2002.

At that point of time a similar issue relating to antidumping duty on metcoke was filed by Tata Chemicals before the Supreme Court of India and the matter was pending for a decision before the Supreme Court. Therefore, during the preliminary hearing held before the High Court of Karnataka, it was decided by the Bench to transfer JVSL case to the Supreme Court for tagging on with other similar cases and disposal.

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Comm. of CESTAT, Import of The end use certificate could not be issued by the deptt 1103.00 Excise at Goa Bangalore for Goa Shredded scrap as the scrap was used by JVSL in the Basic Oxygen and Chennai Excise matter Furnace instead of the specified type of furnaces Vs. JVSL And mentioned above as per the notification no.20/99 Comm. Of Excise, dt.28.2.99. Chennai Comm. of CESTAT, Computation of 23.90 The goods were physically warehoused at Toranagallu. Excise Vs. Bangalore for Interest Charges The bill of entry for warehousing of the goods was filed JVSL Hearing at Chennai Customs for the movement of goods to Toranagallu. Therefore the interest charges were to be computed from the date of physical bonding at Toranagallu. This was not accepted by the Department.

Comm. of CESTAT, Customs duty on 104.40 Certain refractories and hoppers (chapter heading 68.15 Excise Vs. Bangalore for refractories & lock & 84.79) were cleared from the warehouse on payment JVSL Hearing hopper of Corex-1 of customs duty @ 40% & 35% respectively as per the assessment orders issued by DC, C.Ex., Bellary. Subsequently, a refund application was filed for refund of the excess customs duty paid by JVSL on account of classification issue as per the relevant chapter heading 69.02 and 84.19 for the respective goods. The Dept. filed an Appeal with Comm. (A) which was given in its favour. JVSL has filed this further Appeal to the CESTAT.

Note: An Appeal has been filed by the Customs Department against the Order of CESTAT given in favour of JVSL. The matter involves an amount of Rs. 59.46 crores plus Interest and Penalty of Rs. 52.31 lacs demanded by the Customs towards import of certain capital goods under EPCG Scheme.

Criminal Cases

Sr. No. Case No. Parties Pending Before Subject of the Amount Facts Matter Involved (Rs.) 1. W.P. NO. JVSL Vs Dy. S.P, High Court of Corex Accident Nil The Dy. S.P. Bellary 3352 / 2002 Bellary Karnataka, has initiated criminal Bangalore proceedings before the JMFC Court against JVSL officials in connection with the Corex Accident which had occurred at the factory site. Stay Order has been obtained by JVSL thereby prohibiting the Court from proceeding any further in the matter. 2. C.R.M.P.No. JVSL Vs The State by High Court of Discrimination Nil The Police have 700/03 Sub-Inspector of Karnataka for under SC-ST registered a case Police, Toranagallu Trial Atrocities Act against the Jt. MD & CEO and the GM (A&LA) of JVSL under SC-ST Atrocities Act, based on the Complaint filed by one employee Mr. V.K. Basappa who was an employee but was later dismissed by JVSL. 3. CRLP No. Mr. G.K. Saini, JVSL High Court of Lorry Accident Nil A Stay Order has been 38526/2003 Vs The Sub-Inspector Karnataka obtained by JVSL of Police, Toranagallu against the Sub- inspector of Police, Toranagallu thereby prohibiting the Police from further

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Sr. No. Case No. Parties Pending Before Subject of the Amount Facts Matter Involved (Rs.) investigating the matter in Lorry accident matter which happened near the RM gate wagon un- loading area in which 2 workers had lost their life.

Sales Tax Matters

Parties Pending Before Subject of the Matter Amount Facts Involved (Rs.) Comm. of CST Vs Commercial Tax Late submission of 1.78 lacs A demand was raised by the CST Dept. on account of JVSL Authority Form "C" and Form not furnishing Form C and Form F. The Forms have "F" with the now been submitted and a revised order is expected. Department

Stock Exchange Related Compliances

BSE suspended trading in the shares of the company for 19 days (from September 16, 1999 to October 4, 1999) and levied a penalty of Rs. 1,27,000/- for delay in intimation of book closure from August 17 to August 23, 1999.

3. Jindal Stainless Limited

Contingent liabilities not provided for as on 31.03.2004 are in respect of :

Sl. Particulars Rs. in No. Crores a) Counter guarantee given to the company’s bankers for the 34.93 guarantee given by them on behalf of the company b) Letter of Credit outstanding (net of liability provided for in the 254.21 books) c) Bill/cheques purchased / discounted by bank under BP/BD limit 127.06 d) Claims and other liabilities against the company not 5.26 acknowledged as debt e) Sales Tax against which company has preferred appeals 3.79 d) Disputed Excise Duty 5.31

Civil Matters: Litigation by Jindal Stainless Limited

Parties Pending Subject of the Amount Facts Before Matter Involved (Rs.) Jindal Stainless Ltd. High Court, Suit dismissed as Potential liability Upon instructions of Jindal Stainless Ltd, V/s. New Delhi infructuous. of USD ICICI Bank opened letter of Credit of ICICI Bank Jindal Stainless 4,48,500/- US$4,48,500/- in favour of Surya Impex. KBC KBC Bank N. V. New filed an Appeal alongwith Bank N. V. was the negotiating Bank. York Branch in the Delhi interest. KBC Bank N. V. negotiated the Letter of And Surya Impex. High Court Credit on the basis of forged and fabricated challenging the documents and inspite of requests from Jindal order of Stainless released payment to the holder in due dismissal of the course. suit. Jindal Stainless Ltd. filed the present suit for declaration that it is not liable to pay any amount under the L/C and also for a Permanent Injunction restraining ICICI Bank from making payment of the L/C amount to KBC Bank N.V. Haryana Vidyut Civil Court, Land 15,00,000/- Jindal Stainless Ltd. had acquired 2.5 Acres of Prasaran Nigam Limited Hisar land from HVPNL which is situated between (HVPNL) its two factories. However, subsequently, Vs HVPNL cancelled the allotment. Jindal

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Jindal Stainless Ltd. Stainless Ltd. filed a suit for specific performance and obtained a decree in its favour. HVPNL has filed this Appeal. Municipal Corporation Civil Court, Development The Municipal Corporation, Hisar had made a (Hisar) Hisar Charges demand for development charges in respect of Vs for Hearing a club constructed by Jindal Stainless Ltd. in Jindal Stainless Ltd. its factory premises @ Rs. 120/- per sq. yd. Jindal Stainless has disputed its liability and has filed this suit for declaration and an injunction restraining the Municipal Corporation from raising the demand for development. An Interim Order has been passed in favour of Jindal Stainless and the Municipal Corporation has filed an Appeal challenging the above interim order which is pending in the Court.

Excise and Service Tax Matters

1. Writ Petition Jindal Stainless Ltd. Supreme Court Service Tax - Rs. 49,71,163 The Excise Department has No.606 of 2002 Vs. of India For the period levied Service Tax @ 5% on Union of India & ors. 16.11.1997 to Rs. 9,44,23,259/- on account 1.6.1998 of the services provided by goods transport operators i.e. on account of the freight paid for the period from 16.11.1997 to 1.6.1998. The company has disputed its liability on the ground that the incidence and liability of such tax rests on the person providing taxable service and also that the demand was raised retrospectively by the Department. The company has paid the amount of Rs. 49,71,163/- under protest. 2. A/380-387/2001 Commissioner of Central Before Central For the period Rs. 57,14,188 The Department has levied – NB(D) Excise Excise, September, (in all Eight Modvat Credit on capital (Eight Appeals) Vs. Commissioner, November and Appeals) goods namely electrical (Northern Jindal Stainless Ltd. Rohtak for December, goods, electric items, Bench) Hearing 1994 Refractory items etc. January, 1995 CESTAT has by its order to May, 1995 remanded all the eight matters June, 1996 to back to the adjudicating March, 1996. authority for reconsideration of the entire matter in view of latest judgment of Supreme Court in Jawahar Mill’s case. 3. Appeal/Delhi – Central Excise Commissioner Modvat Credit Rs. 49,05,998 The Department has levied III/45/2001 Commissioner (Appeals), on capital Modvat Credit on capital Vs. Gurgaon goods goods namely Electrical and Jindal Stainless Ltd. For the period Machinery items and issued a April, 1996 to Show Cause dated October July, 1996 23, 1996. The company replied to the Show Cause Notice and Asst. Commissioner decided the case in favour of the Company. Being aggrieved, the Department filed Appeal before Commissioner (A) and the same is pending. 4. - Central Excise High Court, Modvat Credit Rs. The Department has levied Commissioner Delhi 21,69,000/- Modvat Credit on capital Vs. goods namely Wires and Jindal Stainless Ltd. Cables. The Company filed a Reference Application before the High Court against the order of CESTAT on Capital goods namely: Brass Casting

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Articles. High Court directed CESTAT to refer whether brass casting articles come within the ambit of definition of capital goods under Rule 57Q of the Central Excise Rules, 1944 for its opinion vide an Order dated November 9, 2000. 5. - Central Excise Commissioner Rs. The Department has levied Commissioner (Appeal), 19,33,000/- Modvat Credit on capital Vs. Gurgaon goods namely Refractories Jindal Stainless Ltd. and Refractory items. The case was held against the Department and subsequently the Dept. filed an Appeal before the Commissioner (A) and the same is pending. 6. - Show Cause Notice C. Commissioner Modvat/ Cenvat Rs. The company had entered No. IV of Central credit For the 78,06,003/- into agreement with State (HQ)361/Tech/Jindal/D- Excise, Rohtak period Electricity Board (SEB) for V/04/14357 dated January, 2004 supplying power generated by 28.12.2004 issued by to June, 2004 it to the SEB Grid and also Commissioner of Central for self consumption. Excise, Rohtak The Department has alleged that the company is supplying power only to SEB and therefore not entitled for Modvat/Cenvat credit of the duty paid on the fuel used for generation of power for self consumption. The company is contending that the agreement was entered into to ensure that the power generated was put to the optimum use and therefore allowed to claim modvat credit

4. Jindal Steel & Power Ltd

Contingent liabilities not provided for as on 31.03.2004 are in respect of :

Sl. No. Particulars Rs. crores a) Estimated amount of contracts remaining to be executed on capital account and not 459.38 provided for ( net of advances) b) Guarantee’s issued by the Company’s bankers on behalf of the Company 14.02 c) Letter of credit opened by banks 208.58 d) Disputed Excise duty and other demands 7.20 e) Future liability on account of lease rent for unexpired period 5.76 f) Bonds executed for machinery imports under EPCG Scheme. 36.28

Civil Matters

1. Babu Ram …Plaintiff Civil Court, Non-payment Rs. 5.53 lacs along The Plaintiff has filed two V/s. Jind, Haryana and for loss of with interest at 18% suits for declaration and Jindal Steels and Power expected profit. p.a. mandatory injunction Ltd. ... Defendants directing Jindal Steels and Power to pay a sum of Rs. 1,50,000/- along with interest and loss of profit. The Plaintiff was given a contract to carry out certain construction works by the Company at its factory at Raigarh, Chattisgarh. The Plaintiff is alleging non- payment for the work done. The company is disputing the

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same. Krishan Kumar Sharma… Civil Court, Non-payment Rs. 4,50,000/- The Plaintiff has filed two 2. Plaintiff Hisar, Haryana and for loss of suits for Rs. 4,50,000/- for V/s. expected profit. dues and loss of expected Jindal Steels and Power profit. The plaintiff was Ltd. ... Defendants allotted contract to carry out certain construction work by the company at its factory at Raigarh (Chhatisgarh).

Sales Tax Matters:

Sr. Parties Pending Subject of the Amount Involved Facts No. Before Matter (Rs.) 1. State Sales Tax Dept. Board of Denial of Rs. 4,58,340 for the The Company has been denied Vs. Revenue benefits for A.Y. 1997-98 benefits on its new/additional Jindal Steels and Power New/Addl. products manufactured by it. The Ltd. Products Company has already deposited a produced sum of Rs. 46,000/- against the amount demanded. By an Order dated April 29, 2000 the Dept. has passed an Order in the favour of the company. 2. State Sales Tax Dept. Board of Denial of Rs. 6,20,946 for the The company has been denied Vs. Revenue benefits for A.Y. 1998-99 benefits on its new/additional Jindal Steels and Power New/Addl. products manufactured by it. The Ltd. Products company has already deposited a produced sum of Rs. 1,75,000 against the amount demanded. 3. State Sales Tax Dept. Board of Surcharge Rs. 82,396/- for the The company has already deposited Vs. Revenue imposed and A.Y. 2000-2001 a sum of Rs. 42,000/- against the Jindal Steels and Power less set-off amount demanded. Ltd. allowed

Central Excise Matters

Sr. Case No. Parties Pending Subject of the Amount Involved Facts No. Before Matter (Rs.) 1. Writ Jindal Steels and Power High Court, Payment of 1.55 crores The Dept. has imposed a duty Petition Ltd. Chattisgarh Duty of on two (2) Induction Vs. Furnaces for the period April Comm. of Central Excise 1, 1998 to March 31, 2000. The matter had been appealed in the CESTAT by the company against the Order passed by the Comm. The company has paid an amount of Rs. 1.00 crores under protest. 2. V(CH- Comm. of Central Excise Jt. Comm., Classification 7.45 lacs The Department has imposed 86)15- Vs. Raipur for imposition duty on Ladle Transfer Car by 264/R/PR/ Jindal Steels and Power of duty treating it as an item falling JC/2004/ Ltd. under heading 86 instead of ADJ/5188 84. The company has already deposited the amount.

Notes: 1) There are some Entry Tax matters filed against the company which in aggregate amount to a demand of Rs. 10.60 lacs (approx.) against which the company has already deposited an amount of Rs. 1.75 lacs (approx.).

2) There are two (2) Central Sales Tax matters pertaining to A.Y. 1999-2000 and A.Y. 2000-2001 against the company for imposition of interest and penalty arising due to change of name of the company and non- submission of E-1 certificate respectively. The aggregate amount demanded is Rs. 2.06 lacs (approx.) against which the company has already deposited an amount of Rs. 0.21 lacs (approx.).

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3) The Gram Panchayat has served a Notice upon the company imposing Local Body Tax of Rs. 66,319. The company is disputing the levy.

4) The company has been served with two (2) Show Cause Notices from the Commissioner of Central Excise, Raipur for an amount of Rs. 7.50 lacs (approx.) pertaining to transfer of CENVAT credit for JSL to JSPL and classification of goods under an input chapter different from the one declared by the company.

5. Jindal Saw Limited

Contingent liabilities not provided for as on 30.09.2004 are in respect of:

Sl. Particulars Rs. in crores No. a) Counter Guarantee given to company’s bankers for Guarantee given by them on 229.35 behalf of the Company b) Letter of Credit Outstanding (net of liabilities provided in the books) 429.02 c) Claims against the company not acknowledged as debt (being under dispute) 0.02 d) Guarantees given to Bank for Credit facilities to Jindal Enterprises LLC (Wholly 58.16 Owned Subsidiary Abroad) e) Disputed Excise Duty - f) Liability in respect of Corporate Guarantee (for 100% EOU Unit at Mundra) 20.87 g) Bank Guarantee given to Custom Authority for export obligation for export under 4.00 EPCG Scheme

Civil Matters

Sr Case No. Parties Pending Subject of the Amount Facts . Before Matter Involved N (Rs.) o. 1. Case No.264 Jindal Saw Ltd. Delhi High Appeal against Rs. 48 crores This case relates to the of 2003 Vs. Court Arbitration (approx.) application of Price Gas Authority of India Award Reduction formula by Ltd. (GAIL) GAIL pursuant to the delay in supply of pipes by Jindal Saw Ltd. The reduction of price is being disputed by Jindal Saw Ltd. The Arbitrators have passed Award in favour of Jindal Saw Ltd. and the same has been challenged by GAIL. 2. - M/s. Jindal Saw Ltd. Arbitration Penalty for Rs. 1.83 This matter relates to the Vs. delay in crores application of price Bharat Petroleum supplying pipes reduction formula applied Corporation Ltd. by BPCL pursuant to the delay in supply of pipes by Jindal Saw Ltd. The reduction of price has been disputed by Jindal Saw Ltd. 3. Appeal M/s. Jindal Saw Ltd. Bombay High Appeal against 1.12 crores This case relates to the No.1002 of Vs. Court the Award of dispute relating to the 2002 Oil and Natural Gas the Arbitrator applicability of foreign Corporation Ltd. Exchange rates on (ONGC) payments made by ONGC to Jindal Saw Ltd. under a contract for supply of pipes. The Arbitrators have given the Award in favour of the Jindal Saw Ltd. ONGC has challenged the Award before the High Court. 4. Arbitration M/s. Jindal Saw Ltd. Bombay High - US$ This matter relates to the Petition Vs. Court 60224.58 application of price No.292 of Oil and Natural Gas reduction formula applied 2003 Corporation Ltd. by ONGC pursuant to the

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(ONGC) delay in supply of pipes. The reduction of price has been disputed by Jindal Saw Ltd. The Arbitrators have passed Award in favour of the Jindal Saw Ltd. ONGC has challenged the Award before the High Court. 5. Suit No.862 of M/s. Jindal Saw Ltd. Delhi High US$ 705698 SDJV, Bangladesh 2002 Vs. Court attempted to invoke the SDJV, Bangladesh performance Bank Guarantee for USD 705698 issued by Canara Bank through Bank of Nova Scotia, Dhaka on false and frivolous grounds. The High Court has granted permanent injunction against Canara Bank. The Bank of Asia Ltd. which alleges to be the successor of Bank of Nova Scotia, Dhaka has filed and application against the injunction. 6. Case No.178 United India Insurance 2nd Additional No relief has Jindal Saw Ltd. had of 1990 Company Ltd. District Judge been sough supplied pipes to HPCL Vs. at against the which were transported by CCI & Jindal Saw Ltd. Vishakapattam company CCI under separate agreement with HPCL. During the course of transportation some damage was done to pipes. HPCL filed its insurance claim and got the money. Thereafter, United India Insurance has filed the case at Visakhapatnam for recovery of claim amount from CCI alleging their negligence in transporting the pipes. It has made JSL as party proforma as supplier of these pipes. 7. Case No 209 Sidhanath Saxena District Forum, The Complainant has of 2004 and Vs. Lucknow and alleged deficiency of Appeal No A- Jindal Saw Ltd. State services in transferring the 415 of 2003 Commission, shares that were lodged by Govind Ram Agarwal respectively the Complainant for Vs. transfer. Jindal Saw Ltd. Jindal Saw Ltd. contends that all rules and regulations have been observed while transferring the shares and also that the Consumer Forum had no jurisdiction to try the matter.

Criminal Offences

Criminal Gujarat Pollution Control First Class Environmental The Pollution Board alleged that Jindal Saw 1. Case No Board Judicial Pollution Ltd. had undertaken substantial contraction 416 of 2004 Vs. Magistrate, of plant and blast furnace without obtaining Jindal Saw Ltd. & Ors Mundra prior environmental clearance. According to the Board this is in violation of the Environmental Impact Assessment Notification 1994. Jindal Saw Ltd. is disputing the above matter.

Other Indirect Taxes Matter

1. Assessing Authority Deputy A.Y. 1997-98 Rs. 1,83,694 The Add. Commissioner has reopened this

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Trade Tax Commissioner matter Under Section 21(2) of the U.P.T.T V/s (A) Kosi Kalan. Act 1948 for escapement of Tax. Under a Jindal Saw Ltd. Notification an amount equal to 20% of Basic Value of own material consumed in execution of Work Contract is stipulated to be taxed. 2. Assessing Authority High Court, A.Y. Rs. 1,42,940 This case is in relation to the import of Trade Tax Allahabad 1991-92 material from M/s P.J Pipes Mumbai Vs. without Form No.31 by Jindal Saw Ltd. for Jindal Saw Ltd. carrying out job work. The provisions of Section 15 A (1) (0) of the U.P.T.T Act 1948 are attracted which stipulates penalty up to 40% of value of material so imported. This Appeal has been filed by the Department against Jindal Saw Ltd. 3. Assessing Authority High Court A.Y. 1997-98 Rs. 5,66,906 The Assessing Authority imposed 10% tax Trade Tax Allahabad on value of Company's own raw material Vs. consumed in execution of Works Contracts Jindal Saw Ltd. under Section 3-F (2) (b) (1) of U.P.T.T Act 1948. 4. Assessing Authority High Court A.Y. Rs. 3,11,600 This matter relates to the imposition of Trade Tax Allahabad 1995-96 interest on tax deposited by Jindal Saw Ltd. Vs. on F.E. variation. Jindal Saw Ltd. 5. Assessing Authority Supreme Court This matter relates to the applicability of Trade Tax of India Form 3 B and C. Jindal Saw Ltd. had Vs. purchased HSD (High Speed Diesel from Jindal Saw Ltd. Indian Oil Corporation Ltd) and this case relates to purchase of HSD against Form 3 B and C

6. Jindal Strips Limited

Sr. Case No. Parties Pending Before Subject of the Amount Facts No. Matter Involved (Rs.) 1. O.A. No.213 of Benares State Bank DRT, New Delhi Recovery Suit for 86,40,291/- Jindal Strips had 2001 Ltd. for Hearing bills dishonoured by together accepted hundis worth The United Western Hindustan Foils. with Rs. 86,40,291/- drawn Bank Ltd. … A decree of Rs. interest by Hindustan Foils and Applicants 86,40,291/- along @22.15% discounted the same Vs. with interest is with the Applicant Hindustan Foils Ltd. & sought against Jindal Bank. Hindustan Foils Ors. Strips dishonoured the Jindal Strips Ltd. payment thereof and so (Resp. No.6) the Applicant Bank filed …Defendants the above recovery suit against both Jindal Strips and Hindustan Foils for payment of the hundi Amount. Hindustan Foil Ltd. has filed an application for registering itself as a Sick Industrial Unit with BIFR. The application is presently pending before A.I.F.R. Jindal Strips Ltd. has also filed seven suits against Hindustan Foil to recover an amount of Rs. 45 lacs (approx.)

- Sanjay Kumar Civil Court, Hisar Injunction Suit - The Plaintiff is a 2. …Plaintiff for Hearing shareholder of Jindal V/s. Strips and has filed this Jindal Strips Ltd. suit for restraining the …Defendants company from releasing any payment to other Defendants without adjusting the loss caused by the other Defendants to

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Defendant No.1. Special Leave Jindal Strips Ltd. Supreme Court of India Joint Venture - IDCOL had invited bids 3. Petition …Petitioner for Hearing Partnership for forming a JV with in No.27010 of V/s. between Industrial respect of Tangarpada 2004 State of Orissa & Ors. Development Mines and selected …Respondents Corporation of Jindal Strips as its JV Orissa Ltd. Partner. ("IDCOL") A Special Leave Petition has been filed pursuant to the Order passed by the Division Bench of Orissa High Court which directed IDCOL to issue fresh advertisement to select a new JV Partner. Jindal Strips has Appealed against the aforesaid order in the Apex Court. Other companies and organisations viz. TISCO and VISA had also filed Petitions challenging the selection of Jindal Strips as JV Partner of IDCOL. I.A. No.2 of Indian Charge Chrome Supreme Court of India - - Jindal Strips Ltd. has 4. 2004 Ltd. & Anr. for Hearing filed an Intervener In V/s. Application in a case Review Petition Union of India & Ors. filed by Indian Charge (Civil) No.469 And Chrome Ltd. on the of 2003 Jindal Strip Ltd. ground that interest of In the Petitioner and that of Transfer Case Jindal Strips Ltd. is No.9 of 2002. identical in nature. Indian Charge Chrome Ltd. had challenged the recommendation of the State Government on the ground that no special reasons were recorded for grant of preference to Nav Bharat Ferro Alloy Ltd. under Section 11(5) of the MMRD Act, 1957 in relation to Sukhinda Valley/Sukhinda Mines. The Petitioner has sought review of the said judgment from the Supreme Court. Intervention Application of JSL shall be considered only if review petition is allowed. 5. Supreme Court State of Orissa Supreme Court of India Lease of Mines Jindal Strips Ltd. has of India … Petitioner for Hearing filed an Intervention I.A. No.2 of V/s. Application as the 2004 GMR Technologies & issues under In Industries Ltd. & consideration of the SLP (Civil) Ors… Respondents Supreme Court in the No.17250 of And SLP were the same as 2003 Jindal Strip Ltd. … the issues involved In Applicant before the lower court in Civil Appeal a case filed by it. No.6788 of State Govt. decision to 2004 allocate the entire 436.295 hectares in Sukhinda Mines to Orissa Mining Corporation contrary to

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Chahar Committee Report which had in turn granted 39.742 hectares to Jindal Strips Ltd. amongst others was struck down by High Court of Orissa. State of Orissa has filed an SLP against the said judgment.

Jindal Strips Ltd. had also filed a Writ Petition against State of Orissa for quashing the decision of the State Government to allocate entire area of 436.295 hectors to Orissa Mining Corporation 6. Criminal Jindal Strips Ltd. MM Patiala House, Return of Inter- 50,00,000/- Jindal Strips made an Complaint No. Vs. New Delhi Corporate Deposit as principal Inter-Corporate Deposit 35 of 1996 M/s. Uniplas India For Evidence amount and (ICD) of Rs. 50,00,000/- under Section Ltd. & Ors. Rs. in Uniplas India Ltd. for 138 r/w Section 3,03,780/- a period of 90 days. 142 of the as interest Uniplas India Ltd. Negotiable issued cheques of Rs. Instruments Act. 50,00,000/- as principal amount and Rs. 3,03,780/- as interest by way of return of the ICD which were dishonoured by the Bankers of Uniplas India Ltd. This complaint was thereafter filed under section 138 r/w Section 142 of the Negotiable Instrument Act.

th 7. 45 of 1995 M.S.T.C. 4 Court pf Civil Judge Payment of Rs. 9.88 There was an suit filed Vs. (SK Division), Alipur Charges lacs in 1984 against the Jindal Strips Ltd. Court Company in which the Plaintiff was granted an Ex-parte Order for payment. The company filed another suit for setting aside the ex- parte order which is pending. nd 8. TS/141/1997 Sajjan Industrial 2 Sub-Judge Court(Sr. For Common No money Corporation Div.), Howrah Postage claim Vs. Jindal Strips Ltd. nd 9. TS/166/2004 Sajjan Industrial 2 Sub-Judge Court(Sr. Claim for Rent The Plaintiff has filed Corporation Div.), Howrah this suit claiming some Vs. rent to be payable by the Jindal Strips Ltd. company.

Note: Some Shareholders have filed 14 Cases in various Courts and Consumer Redressal Forums in India for grievances such as issue of duplicate share certificates, loss in transit and non-receipt of interest warrants.

Labour Disputes

1. Five (5) Cases State, through Asst. Chief Judicial Death and Injury Minimum fine Some workers of the Director, Magistrate, to some workers in of Rs. 1, company met with an Industrial Safety, Hisar for the Factory 20,000/- accident in the factory. A Health, Hisar… Hearing couple of them died and the Plaintiff others suffered grievous V/s. injuries. According to the R. P. Jindal (Occupier & department, there was a Manager of violation of Section 7A and

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M/s. Jindal Strips Ltd.) 21 of the Factories Act and ... Rule 66C of Punjab Defendants Factory Rules, 1952. The company is disputing the allegations.

Sales Tax Matters

1. Jindal Strips Ltd. … Joint Excise & A.Y. 1991-1992 Rs. 58,35,057 The Dy. Excise & Taxation Commissioner Appellant Taxation cum Assessing Authority, Hisar passed an V/s. Commissioner order levying total Purchase Tax of Rs. Assessing Authority, (Appeals) 58,35,057/- upon the Company in relation to Hisar Dist. store goods which were consumed in the …Defendants manufacture of goods which were sold either in Haryana or in consignment sales outside the State of Haryana. The company disputed the liability on the ground that no tax is to be levied as the percentage of goods purchased from Haryana was the same which were sold within the State of Haryana. The company has challenged the aforesaid order by filing this Appeal before the Jt. Commissioner (Appeal).

Income Tax Matters

1. I.T.A. No.276 Commissioner of Income High Court, A.Y. 1996-1997 Loss of Rs. The company has debited of 2003 Tax New Delhi This matter is in 6,47,95,725/ an amount of Rs. 6.47 V/s. respect of the Tax amount of crores to the profit and M/s. Jindal Strips Ltd. liability of Jindal Rs. 2.98 crores loss A/c. for the year Strips Ltd. ending 31.3.1996 on The first I.T. account of fluctuation in returns of Jindal foreign exchange rate. Stainless Ltd. have The Department has filed been filed in A.Y. the above Appeal in the 2003-04. Delhi High Court challenging the above order dated 17.10.2002 of ITAT, New Delhi.

7. Jindal Thermal Power Company Limited (JTPCL)

Contingent liabilities not provided for as on March 31, 2004:

1. Security provided to Banks/Financial Institutions by way of pledge of shares of (JVSL) against credit facilities extended to JVSL for Rs. 10,890.30 lacs. Similarly, JVSL has provided security in favour of the lenders of the company by way of pledge of their investments in the shares of the company for Rs. 14,449.95 lacs.

2. Claim by a Financial Institution against the company disputed by the Power Finance Corporation Limited on the ground that the same is not due in terms of the loan documents and not acknowledged as debt of Rs. 573.23 lacs, net of Rs. 24.72 lacs claimed by the company towards rebate for prompt payment on another loan from the same Financial Institution.

Outstanding Litigation

Sr. No. Case No. Parties Pending Before Subject of the Amount Facts Matter Involved (Rs.) 1. Supreme Court Modification of Nil The Govt. of Karnataka of India for Power Purchase Karnataka had Electricity Admission Agreement (PPA) granted permission to Regulatory JTPCL for selling Commission power directly to (KERC) industrial units and the balance to Versus KPTCL. Jindal Thermal JPTCL entered into a Power Company Power Purchase

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Sr. No. Case No. Parties Pending Before Subject of the Amount Facts Matter Involved (Rs.) Limited & Ors. Agreement with (JTPCL) KPTCL in November, 2000 for supply of power. Pursuant to Karnataka Electricity Reforms Act, 1999, Karnataka Electricity Regulatory Commission (KERC) came into existence KERC reduced the contractual rate for supply of electricity and also held that JTPCL was a Captive Power Plant and not an Independent Power Plant. JTPCL filed an appeal against this order before the Karnataka High Court which set aside the order passed by KERC. KPTCL has filed this appeal before the Supreme Court against the Order of the Karnataka High Court. " Labour Matters 2. KID Shaikh Shakeel Industrial Reinstatement of Nil This employee was No.123/ Ahmed Mohammad Tribunal, Hubli Employee terminated from the 2001 Yousuf – Award services of the Vs. Awaited Company. He had Jindal Thermal filed this complaint in Power Company the Labour Court Limited (JTPCL) under Section 10(4A) of the Industrial Disputes Act 1947 against the termination of services. The case has been subsequently transferred to the Industrial Tribunal, Hubli.

" Tax Matters 3. Karnataka High For the Assessment 0.71 crores The Tax Dept. levied Jindal Thermal Court, Bangalore Year i.e. the Net interest u/s 234B and Power Company for Arguments 2001-02 & 2002-03 Tax Liability 234C of the Income Limited (JTPCL) (after tax Act. adjusting JPTCL has filed this Versus refunds and writ petition against The Deputy Comm. payments) the levy of interest as of Income Tax & also the validity of Anr. the retrospective operation of the amendment carried out to section 115JB of the Income Tax Act. An interim stay has been granted in favour of JTPCL upon depositing Rs. 55 lacs with the Court.

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8. Jindal Steel and Alloys Limited (JSAL)

Contingent liabilities not provided for:

1. Disputed custom duty liability: Rs. 74.21 lacs as per details mentioned in the table below. 2. Bank guarantee of Rs. 2 lacs issued in favour of Commisioner of Trade Tax, Ghaziabad on account of non- production of F-31 byy the transporter of goods.

Outstanding Litigation

Sr. No. Case Parties Pending Before Subject of the Amount Facts No. Matter Involved (Rs.) 1. Jindal Steel & Alloys Appellate Imposition of 44.00 lacs JSAL imported mild Co. Ltd. (JSAL) & Ors. Tribunal, New Penalty HR Coils from Versus Delhi for Cluehart, UK in 1993. Enforcement Arguments The ship carrying the Directorate, FEMA consignment sunk along with its cargo near Spain. State Bank of Patiala (the L/ C opener) had already remitted the payment to the UK company towards the cost of the consignment. As the ship had sunk with the cargo, JSAL was unable to file the Bill of Entry with the Bank. The Special Director, Enforcement Directorate, Mumbai ignored JSAL's contention and passed an Order imposing an amount of Rs. 44.00 lacs as penalty. JSAL has appealed against the above Order in the Tribunal.

2. 94 of Sanjay Sharma Court of Senior Suit for declaration 60,000 JSAL had sacked the 1999 Versus Division, Sealdah, to reinstate as an employee, who was Jindal Steel & Alloys West Bengal, for employee of JSAL. marketing its products, Co. Ltd. (JSAL) Evidence for irregularities in his working. " Customs Matters 3. Comm. of Customs CESTAT for Payment of Customs 37.00 lacs JSAL supplied some Versus Hearing duty plus penalty steel strips to some Jindal Steel & Alloys of Rs. 37.00 companies for further Co. Ltd. (JSAL) lacs export. JSAL removed the goods under Form AR- 4A and declared that it had not avoided input stage credit. JSAL imported the consignment duty free under a Notification. The Customs Dept. issued a show cause notice upon JSAL stating that the benefit of the Notification was not available and demanded the payment of customs duty A stay application has

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Sr. No. Case Parties Pending Before Subject of the Amount Facts No. Matter Involved (Rs.) been filed by JSAL against the Show Cause Notice. " Tax Matters: Jindal Steel & Alloys CIT(A), Mumbai Assessment Year Disallowance of Co. Ltd. (JSAL) for Arguments 2001-02 interest amounting to Versus Rs. 2.24 crores on DCIT, Mumbai borrowed funds and the addition on account of provision for doubtful debts/ advances while computing book profits amounting to Rs. 1.59 crores. As per AO Order, JSAL has received a refund of Rs. 14.22 lacs.

9. Jindal Praxair Oxygen Company Private Limited (JPOCL)

Contingent Liabilities not provided as on March 31, 2003 were: Rs. in lacs S. No. Particulars Amount 1. Bank Guarantees 111.30 2. Excise Duty matters disputed by the company 6902.96 3. Claims against the company not acknowledged as debt 270.00

Outstanding Litigation

Cases filed by the Excise Department

Sr. No. Case No. Parties Pending Before Subject of the Matter Amount Facts Involved (Rs.) 1. 56 of 2000 Comm. Of Excise Order has been Pricing of Goods to 4.73 The dispute is (7 matters) Vs. passed by Comm. Related Party crores regarding the JPOCL Of Excise (A) in Department's favour of JPOCL.. consideration of PIL An Appeal may be as a related party of filed by the Dept. to JPCOL in the the CESTAT valuation of duty payable on goods. 2. 204 of Comm. Of Excise Order has been Pricing of Goods to 55.92 The dispute is 2001 Vs. passed by Comm. Related Party lacs regarding the JPOCL Of Excise (A) in Department's favour of JPOCL. - consideration of PIL An Appeal may be as a related party of filed by the Dept. to JPCOL in the the CESTAT valuation of duty payable on goods. 3. 220 of Comm. Of Excise Order has been Pricing of Goods to 5.39 The dispute is 2001 Vs. passed by Comm. Related Party crores regarding the JPOCL Of Excise (A) in Department's favour of JPOCL. - consideration of PIL An Appeal may be as a related party of filed by the Dept. to JPCOL in the the CESTAT valuation of duty payable on goods. 4. 152 of Comm. Of Excise Order has been Pricing of Goods to 3.58 The dispute is 2002 Vs. passed by Comm. Related Party crores regarding the JPOCL Of Excise (A) in Department's favour of JPOCL. - consideration of PIL An Appeal may be as a related party of filed by the Dept. to JPCOL in the the CESTAT valuation of duty

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Sr. No. Case No. Parties Pending Before Subject of the Matter Amount Facts Involved (Rs.) payable on goods. 5. 173 of Comm. Of Excise Order has been Pricing of Goods to 3.50 The dispute is 2002 Vs. passed by Comm. Related Party crores regarding the JPOCL Of Excise (A) in Department's favour of JPOCL. - consideration of PIL An Appeal may be as a related party of filed by the Dept. to JPCOL in the the CESTAT valuation of duty payable on goods. 6. 8 Appeals Comm. Of Excise CESTAT Claim of Duty 12.88 crores Venting of Gases has Vs. been treated by the JPOCL Dept. as despatch and levied duty upon the same. 7. 8 Appeals Comm. Of Excise CESTAT Claim of Duty 7.80 crores Venting of Liquid Vs. Products has been JPOCL treated by the Dept. as despatch and levied duty upon the same. 8. 2 Appeals Comm. Of Excise CESTAT Claim of Duty 1.84 crores Denial of MODVAT Vs. availed by JPOCL on JPOCL the Capital Goods. 9. 7 cases Comm. Of Excise CESTAT Claim of Duty 6.49 Denial of MODVAT Vs. crores availed by JPOCL on JPOCL the Capital Goods. 10. 4 cases Comm. Of Excise CESTAT Claim of Duty on 51.92 LOX Captive Vs. Captive Consumption lacs Consumption JPOCL 11. 2 cases Comm. Of Excise CESTAT Duty on Infrastructure 8.98 lacs Duty on Vs. Services reimbursement of JPOCL expenses 12. 1 case Comm. Of Excise Asst. Comm. Duty on MTOP 2.77 lacs Vs. JPOCL 13. 1 case Comm. Of Excise Asst. Comm. Duty on IT 11.16 lacs Vs. Reimbursement JPOCL

Cases filed by JPOCL against the Excise Department

Case No. Parties Pending Before Subject of the Matter Amount Facts Involved (Rs.) JPOCL Vs. Comm. Comm. Of Central Duty on Infrastructure 1.21 lacs Duty on reimbursement of Of Excise Excise (Appeals) Services expenses 4 cases JPOCL Vs. Comm. Comm. Of Excise Service Tax 55.73 lacs Service Tax payable on Of Excise (A) Engineering Services of Praxair Inc., Technical Services and Field Service Agreements. 2 cases JPOCL Vs. Comm. Comm. Of Excise Claim of Duty 60.48 lacs Denial of MODVAT availed Of Excise (A) and Asst. by JPOCL on the Capital Comm. Goods to the extent of 25% on project imports. 2 cases JPOCL Vs. Comm. Asst. Comm. Denial of MODVAT 2.06 crores Denial of MODVAT availed Of Excise credit by JPOCL on the Capital Goods (SS Plates and 25% on project imports. 10 Appeals JPOCL Vs. Comm. Comm. Of Excise Claim of Duty 92.52 crores Venting of Liquid Products Of Excise (A) has been treated by the Dept. as despatch and levied duty upon the same. 116 of JPOCL Vs. Comm. Asst. Comm. Claim of Duty 1.74 crores Venting of Liquid Products 2002 Of Excise has been treated by the (Provisional Dept. as despatch and levied Assessment) duty upon the same. 3 Appeals JPOCL Vs. Comm. Commissioner of Claim of Duty 5.20 crores Venting of Gases has been Of Excise Excise (A) treated by the Dept. as despatch and levied duty upon the same.

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10. Kavita Securities Private Limited

Defaults in dues related to Optionally Convertible Debentures for Rs. 50.00 lacs and interest on Optionally Convertible Debentures for Rs. 57.97 lacs.

11. Laptev Finance Private Limited

Defaults in dues related to Optionally Convertible Debentures for Rs. 50.00 lacs and interest on Optionally Convertible Debentures for Rs. 57.97 lacs.

12. Rishikesh Finlease & Investments Private Limited

Defaults in dues related to interest on Optionally Convertible Debentures for Rs. 290.51 lacs.

13. Naman Enterprises Private Limited Contingent liabilities not provided for comprised of dividend on Cumulative Preference Shares amounting to Rs. 197.92 lacs.

14. South West Port Limited (SWPL)

Contingent liabilities not provided for relates to claims made by a dredging contractor, currently pending before arbitration, to the extent the company does not expect any determination of liability in respect thereof amounting to Rs. 155.75 lacs.

Outstanding Litigation

Sr. No. Parties Pending Before Subject of the Amount Facts Matter Involved (Rs.) 1. Jaisu Shipping Arbitration at the Claims for the 3.47 crores SWPL is disputing the claim Company Pvt. Ltd. Evidence stage dredging work as the Claimant had not Versus carried out at the dredged the entire lagoon area South West Port Ltd. Marmagoa Port stipulated under the contract. Moreover, the work had also not been completed within time. SWPL has also filed a Counter Claim of Rs. 3.93 crores for delay and loss of profits due to a 45 days overrun along with interest @ 12.00 % p.a.

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XVIII. STATUTORY AND OTHER INFORMATION

INVESTOR GRIEVANCES AND REDRESSAL SYSTEM Redressal of investors’ grievance is given top priority by the Company. On 25.11.04, the Share Transfer Committee was reconstituted and the Investors’ Grievance Committee of the Board was formed with Mr.N.K.Jain, Mr.P.Shanmughasundaram (Chairman of committee) & Mr.Vijay Sharma. The Committee oversees redressal of complaints of shareholders/investors and other important investor related matters. In order to expedite the process of investor service, the Company Secretary, who is also the Compliance Officer, has been delegated by the Board the power to approve share transfers and deal with matters connected therewith. The Company has adequate arrangements for redressal of investor complaints as follows: a) Computerised record of correspondence b) Share transfer/dematerialisation/rematerialisation are handled by well equipped professionally managed Registrar and Transfer Agent, appointed by the Company in terms of SEBI’s direction for appointment of Common Agency for physical as well as demat shares. The Registrars are constantly monitored and supported by qualified and experienced personnel of the Company. Redressal norm for response time for all correspondence including shareholders complaints is two weeks. However, the Company endeavors to redress all the complaints within one week of the receipt of complaint.

Status of Complaints During the 15 month period ended June 30, 2004, 293 investor complaints were received, all of which have been resolved/redressed.

ISSUE EXPENSES For details of the expected Issue expenses which will be borne out of the Issue proceeds, refer to page 28 of the LoF.

EXPERT OPINION Save and otherwise stated in the Letter of Offer, the Company has not obtained any expert opinions.

OPTION TO SUBSCRIBE The Equity Shareholders are given the option to receive the share certificates or hold shares in dematerialised form with a depository. (Refer the “Terms of Issue” for details)

MATERIAL DEVELOPMENTS In the opinion of the Board of Directors of the Company, there have not arisen, since the date of the last financial statement disclosed in the Letter of Offer, any circumstances that materially and adversely affect or are likely to affect the trading or profitability of the Company or the value of its assets or its ability to pay its liabilities within the next twelve months (as per accounting standard 4 of the ICAI) except as mentioned in the LoF. In addition to the Lead Manager, the Issuer is also obliged to update the offer document and keep the public informed of any material changes till the listing and trading commencement.

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XIX. MATERIAL CONTRACTS AND INSPECTION OF DOCUMENTS

The following contracts (not being contracts entered into in the ordinary course of business carried on by the Company), which are or may be deemed material have been entered or are to be entered into by the Company. Copies of these contracts and also the documents for inspection referred to hereunder, will be delivered to the Designated Stock Exchange. These documents may be inspected at the Registered Office of the Company from 11:00 am to 2:00 pm on all working days, from the date of the LoF until the date of closure of the subscription list.

MATERIAL CONTRACTS 1. Memorandum of Understanding entered into between the Company and ICICI Securities Limited, Lead Manager to the Issue, dated February 10, 2005. 2. Memorandum of Understanding entered into between the Company and Registrar to the Issue, dated February 11, 2005. 3. Tripartite agreement entered between the Company, Central Depository Services (India) Limited and Registrar to the Issue dated ___. 4. Tripartite agreement entered between the Company, National Security Depository Limited and Registrar to the Issue dated ___.

DOCUMENTS 1. Memorandum and Articles of Association of the Company. 2. Certificate of Incorporation of the Company dated September 11, 1991. 3. Listing agreements or letters in lieu thereof with BSE dated ____, MSE dated January 28, 1999 and CSE dated ____. 4. Resolutions passed by the Board of Directors in the meetings held on December 22, 2004 and January 28, 2005 authorizing the Issue. 5. Resolution passed by the shareholders at the Extraordinary General Meeting held on November 25, 2004 approving the transfer of shares from the previous promoters to the Group. 6. Consents from Directors, Company Secretary, Auditors, Bankers to the Issue, Lead Manager to the Issue, Legal Advisor for the Issue and the Registrar to the Issue to include their names in the Letter of Offer and to act in their respective capacities. 7. Letter No. ___ and ___ issued by the Securities and Exchange Board of India 8. Annual reports of the Company for the last five years. 9. Auditors’ Report of the Company dated December 24, 2004 giving the financial information given in the Letter of Offer. 10. Report dated December 27, 2004 from S. Krishnamoorthy & Co., Chartered Accountants, on the tax benefits available to the Company and the shareholders. 11. Due Diligence Certificate dated February 10, 2005 from ICICI Securities Limited 12. Letters of intent for the subscription to rights entitlement and unsubscribed portion, received from the promoters. 13. Approvals/consents as mentioned on page 3 of the LoF 14. Application made to the stock exchanges at time of filing of the draft Letter of Offer. 15. In-principle approvals dated ___ from BSE, MSE and CSE for listing the shares offered in this issue. 16. Scheme of restructuring approved by the CDR Empowered Group vide letter no. CDR No. 1011/SISCOL dated October 14, 2004. 17. Deed of Agreement dated June 12, 2001 for deemed payment of deferred sales tax between Government of Tamilnadu and the Company. 18. Letter CFD/DCR/RC/TO/25439/04 dated November 8, 2004 from Division of Corporate Restructuring, SEBI, enclosing the SEBI order CO/78/CRD/11/04 dated November 5, 2004. 19. Sanctions from institutions/banks for financing the debt required for the project. 20. Letter number F.No. 3(S-48)/BC/2004 dated December 12, 2004 registering the Company with the Board of Industrial and Financial Reconstruction, Department of Economic affairs, Ministry of Finance, GoI.

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XX. DECLARATION

No statement made in the Letter of Offer contravenes the provisions of the Act and the rules made there under. All the legal requirements connected with the Issue as also the guidelines, instructions issued by Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992, Government and other competent authorities in this behalf have been complied with.

Yours faithfully

For Southern Iron and Steel Company Limited

Signed by All Directors

Mr. N.K. Jain

Mr. Vijay Sharma (Joint Managing Director & Chief Executive Officer)

Mr. K.T. Krishna Deshika

Mr. P. Shanmugasundaram *

Mr. V. Prakash

Mr. Kamal Kishore Gupta *

Mr. S.V. Kshirsagar *

* Through their constituted Attorney Mr. K.T. Krishna Deshika

Place: Date:

Encl: Composite Application Form

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