Draft Letter of Offer May 17, 2011 For Equity Shareholders of our Company only BAJAJ HINDUSTHAN LIMITED Our Company was incorporated in India on November 24, 1931 as “The Hindusthan Sugar Mills Limited” under the Companies Act, 1913. The name of our Company was changed to “Bajaj Hindusthan Limited” on June 27, 1988. For further details of our corporate history and changes in structure, please see “History and Other Corporate Matters” on page 136 of this Draft Letter of Offer The corporate identification number of our Company is L15420MH1931PLC001797 Registered Office: Bajaj Bhavan, 2nd Floor, 226 Jamnalal Bajaj Marg, Nariman Point, Mumbai 400 021 Tel. : +91 22 2202 3626, 2284 2110 • Fax : +91 22 2202 2238 Corporate Office: Bajaj Bhawan, B-10, Sector 3, Jamnalal Bajaj Marg, Noida 201 301 Tel. : +91 120 2543 939 • Fax : +91 120 254 3949 Contact Person: Mr. Kausik Adhikari, Deputy Company Secretary and Compliance Officer Company Secretary: Mr.Pradeep Parakh, Group President (GRC) and Company Secretary E-mail: [email protected] Website: www.bajajhindusthan.com FOR PRIVATE CIRCULATION TO THE EQUITY SHAREHOLDERS OF OUR COMPANY ONLY ISSUE OF [•] EQUITY SHARES WITH A FACE VALUE OF `1 EACH AT A PREMIUM OF `[•] PER EQUITY SHARE (“RIGHTS ISSUE EQUITY SHARES”) FOR AN AMOUNT AGGREGATING `18,200 MILLION ON A RIGHTS BASIS TO THE EXISTING EQUITY SHAREHOLDERS OF BAJAJ HINDUSTHAN LIMITED (“COMPANY”) IN THE RATIO OF [•] EQUITY SHARE(S) FOR EVERY [•] FULLY PAID-UP EQUITY SHARE(S) HELD BY THE EXISTING EQUITY SHAREHOLDERS ON THE RECORD DATE, THAT IS ON [•], 2011 (THE “ISSUE”). THE ISSUE PRICE IS [•] TIMES THE FACE VALUE OF THE EQUITY SHARES. FOR FURTHER DETAILS, PLEASE SEE “TERMS OF THE ISSUE” ON PAGE 342 OF THIS DRAFT LETTER OF OFFER. GENERAL RISK Investment in equity and equity related securities involves 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 our Company and the Issue including the risks involved. The securities being offered in the Issue have not been recommended or approved by Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this Draft Letter of Offer. Investors are advised to refer to the “Risk Factors” on page 12 of this Draft Letter of Offer before making an investment in the Issue. OUR COMPANY’S ABSOLUTE RESPONSIBILITY Our Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Letter of Offer contains all information with regard to our Company and the Issue, which is material in the context of the Rights Issue, that the information contained in the Draft Letter of Offer is true and correct in all material aspects 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 make this Draft Letter of Offer as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING Our existing Equity Shares are listed on the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”) (the BSE and the NSE together, the “Stock Exchanges”). We have received “in-principle” approvals from BSE and the NSE for listing the Equity Shares arising from the Issue vide their letters dated [•] and [•], respectively. For the purposes of the Rights Issue, the Designated Stock Exchange is [•]. LEAD MANAGERS REGISTRAR TO THE ISSUE capital (A wholly owned subsidiary of Punjab National Bank) SBI CAPITAL MARKETS LIMITED IDBI CAPITAL MARKET PNB INVESTMENT SHAREPRO SERVICES (INDIA) SEBI Reg. No.: INM000003531 SERVICES LIMITED SERVICES LIMITED PRIVATE LIMITED 202, Maker Tower ‘E’ SEBI Reg. No.: INM000010866 SEBI Reg. No.: INM000011617 SEBI Reg. No.: INR000001476 Cuffe Parade 5th Floor, Mafatlal Centre 10, Rakesh Deep Building 13AB, Samita Warehousing Complex, Mumbai 400 005 Nariman Point, Mumbai 400 021 Yusuf Sarai Commercial Complex, 2nd Floor, Sakinaka Telephone Exchange Lane Tel: +91 22 2217 8300 Tel: +91 22 4322 1212 Gulmohar Enclave Andheri Kurla Road, Sakinaka, Andheri (East) Fax: +91 22 2218 8332 Fax: +91 22 2283 8782 New Delhi 110 049 Mumbai 400 072 Investor Grievance Email: Investor Grievance Email: Tel.: +91 11 4103 5051-55 Tel: +91 22 6191 5402 / 04 • Fax: +91 22 6191 5444 [email protected] [email protected] Fax: +91 11 4103 5057 Investor Grievance Email : Email: [email protected] Email: [email protected] Investor Grievance Email: [email protected] [email protected] Website: www.sbicaps.com Website: www.idbicapital.com Email: [email protected] Email: [email protected] Contact Person: Ms. Sylvia Mendonca Contact Person: Mr. Rishi Tiwari / Website: www.pnbisl.com Website: www.shareproservices.com / Mr. Anish Shrimankar Mr Subodh Mallya Contact Person: Mr. Narender Thakran Contact Person: Mr. Kumaresan V / Mr. Satheesh HK ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR RECEIVING REQUESTS ISSUE CLOSES ON FOR SPLIT FORMS [•] [•] [•] TABLE OF CONTENTS SECTION I – GENERAL ................................................................................................................................. 1 DEFINITIONS AND ABBREVIATIONS ........................................................................................................ 1 NOTICE TO OVERSEAS SHAREHOLDERS ................................................................................................ 6 PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA ............................. 10 FORWARD LOOKING STATEMENTS ....................................................................................................... 11 SECTION II - RISK FACTORS ..................................................................................................................... 12 SECTION III – INTRODUCTION ................................................................................................................. 37 THE ISSUE ..................................................................................................................................................... 37 SUMMARY FINANCIAL INFORMATION ................................................................................................. 39 GENERAL INFORMATION ......................................................................................................................... 49 CAPITAL STRUCTURE................................................................................................................................ 56 OBJECTS OF THE ISSUE ............................................................................................................................. 66 STATEMENT OF TAX BENEFITS ............................................................................................................... 84 SECTION IV – ABOUT US ............................................................................................................................ 92 INDUSTRY OVERVIEW ............................................................................................................................... 92 BUSINESS .................................................................................................................................................... 115 HISTORY AND OTHER CORPORATE MATTERS ................................................................................. 136 MANAGEMENT .......................................................................................................................................... 141 KEY INDUSTRY REGULATIONS ............................................................................................................. 148 SECTION V – FINANCIAL INFORMATION ............................................................................................ 149 MARKET PRICE INFORMATION ............................................................................................................ 245 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .............................................................................................................................................. 247 ACCOUNTING RATIOS AND CAPITALISATION STATEMENT .......................................................... 266 MATERIAL DEVELOPMENTS ................................................................................................................. 270 FINANCIAL INDEBTEDNESS ................................................................................................................... 276 SECTION VI – LEGAL AND OTHER INFORMATION ............................................................................ 305 OUTSTANDING LITIGATIONS AND DEFAULTS .................................................................................. 305 GOVERNMENT AND OTHER APPROVALS ........................................................................................... 326 OTHER REGULATORY AND STATUTORY DISCLOSURES ................................................................ 334 SECTION VII – OFFERING INFORMATION ........................................................................................... 342 TERMS OF THE ISSUE ..............................................................................................................................