Draft Letter of Offer September 18, 2013 For Eligible Equity Shareholders of our Company only MUKAND LIMITED Mukand Limited (the “Company” or the “Issuer”) was incorporated on November 29, 1937 as Mukand Iron & Steel Works Limited under the provisions of Indian Companies Act VII of 1913 in (erstwhile) Bombay. Our Company’s name was changed on March 23, 1989 to Mukand Limited. Our Company had also changed its registered office from Kurla, Mumbai to Bajaj Bhawan, Nariman Point, Mumbai with effect from September 1, 2001. The corporate identification number of our Company is L99999MH1937PLC002726. For further details in respect of our Company, please see the section titled “History and Corporate Structure” beginning on page 74. Registered Office: Bajaj Bhawan, Jamnalal Bajaj Marg, 226, Nariman Point, Mumbai - 400 021 Telephone: +91-22- 6121 6666 Fax: +91-22- 2202 1174 Contact Person: Mr. K J Mallya, Company Secretary and Compliance Officer E mail: [email protected], Website: www.mukand.com Promoters: Mr. Rahul Bajaj, Mr. Niraj Bajaj, Mr. Rajesh V Shah and Mr. Suketu V Shah FOR PRIVATE CIRCULATION TO THE ELIGIBLE EQUITY SHAREHOLDERS OF OUR COMPANY ONLY ISSUE OF [●] EQUITY SHARES WITH A FACE VALUE OF RS.10/- EACH OF OUR COMPANY (THE “EQUITY SHARES”) FOR CASH AT A PRICE OF RS. [•] PER EQUITY SHARE (INCLUDING A PREMIUM OF RS. [●] PER EQUITY SHARE FOR AN AMOUNT AGGREGATING UP TO RS. 160.00 CRORES ON A RIGHTS BASIS TO THE EXISTING EQUITY SHAREHOLDERS OF OUR COMPANY IN THE RATIO OF [●] EQUITY SHARES FOR EVERY [●] FULLY PAID-UP EQUITY SHARES HELD BY THE EXISTING EQUITY SHAREHOLDERS ON THE RECORD DATE, THAT IS ON [●] (THE “ISSUE”). THE ISSUE PRICE IS [•] TIMES THE FACE VALUE OF THE EQUITY SHARES FOR FURTHER DETAILS, SEE THE SECTION TITLED “TERMS OF THE ISSUE” BEGINNING ON PAGE 122 OF THIS DRAFT LETTER OF OFFER. GENERAL RISKS Investments in equity and equity related securities involve a degree of risk and Investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factors carefully before taking an investment decision in this Issue. For taking an investment decision, Investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this Draft Letter of Offer. Investors are advised to see the section titled “Risk Factors” beginning on page 11 before making an investment in this Issue. OUR COMPANY’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft 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 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 makes this Draft Letter of Offer as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The existing Equity Shares of our Company are listed on BSE Limited (BSE) and National Stock Exchange of India Limited (NSE). Our Company has received in-principle approvals from BSE and NSE vide their letters dated [●] and [●], respectively, for listing the Equity Shares arising from this Issue. BSE is the Designated Stock Exchange for the purposes of this Issue. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE ICICI Securities Limited Karvy Computershare Private Limited ICICI Centre Plot No. 17 – 24, Vittal Rao Nagar H.T. Parekh Marg, Churchgate Madhapur, Hyderabad 500 081 Mumbai 400 020, India Telephone: +91-40-4465 5000 Telephone: +91-22-2288 2460 Facsimile: +91-40-2343 1551 Facsimile: +91-22-2282 6580 Toll Free: 1-800-3454001 Email: [email protected] E-mail: [email protected] Investor Grievance Email: [email protected] Contact Person: Mr. M. Murali Krishna Website: www.icicisecurities.com Website: http://karisma.karvy.com Contact Person: Mr. Manvendra Tiwari / Mr. Ayush Jain SEBI Registration No: INR000000221 SEBI Registration No.: INM000011179 ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR RECEIVING REQUEST OF ISSUE CLOSES ON SPLIT APPLICATION FORMS [●] [●] [●] TABLE OF CONTENTS PARTICULARS PAGE NO. SECTION I – GENERAL 2 DEFINITIONS AND ABBREVIATIONS 2 NOTICE TO OVERSEAS SHAREHOLDERS 7 CERTAIN CONVENTIONS, USE OF FINANCIAL INFORMATION AND MARKET DATA 8 CURRENCY OF PRESENTATION 9 FORWARD LOOKING STATEMENTS 10 SECTION II – RISK FACTORS 11 INTERNAL RISK FACTORS 11 EXTERNAL RISK FACTORS 22 PROMINENT NOTES 25 SECTION III – INTRODUCTION 27 THE ISSUE 27 SUMMARY OF FINANCIAL INFORMATION 28 GENERAL INFORMATION 34 CAPITAL STRUCTURE 39 OBJECTS OF THE ISSUE 45 STATEMENT OF TAX BENEFITS 49 SECTION IV – ABOUT OUR COMPANY 56 INDUSTRY OVERVIEW 56 OUR BUSINESS 58 HISTORY AND CORPORATE STRUCTURE OF THE COMPANY 74 OUR MANAGEMENT 79 SECTION V – FINANCIAL STATEMENTS 84 FINANCIAL INDEBTEDNESS 84 AUDITORS REPORT 93 STOCK MARKET DATA FOR THE EQUITY SHARES OF OUR COMPANY 94 ACCOUNTING RATIO AND CAPITALISATION STATEMENT 96 CERTAIN OTHER FINANCIAL INFORMATION 98 SECTION VI – LEGAL AND OTHER INFORMATION 99 OUTSTANDING LITIGATIONS AND DEFAULTS 99 MATERIAL DEVELOPMENTS 106 GOVERNMENT AND OTHER STATUTORY APPROVALS 112 SECTION VII - OTHER REGULATORY AND STATUTORY INFORMATION 115 SECTION VIII – OFFERING INFORMATION 122 TERMS OF THE ISSUE 122 SECTION VIII – STATUTORY AND OTHER INFORMATION 144 MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION 144 DECLARATION 145 1 SECTION I - GENERAL DEFINITIONS AND ABBREVIATIONS Unless the context otherwise indicates or requires, the following terms shall have the meanings given below in this Draft Letter of Offer. References to statutes, enactments or regulations shall include any amendments and supplements thereto made from time to time. Issuer and Industry Related Terms Term Description Articles/Articles of Association/AoA The articles of association of our Company, as amended from time to time Auditors The statutory auditors of our Company, being Haribhakti & Co., Chartered Accountants Board/ Board of Directors/our Board Board of Directors of our Company or a duly constituted committee thereof, as the context may refer to Directors/our Directors The directors of our Company Equity Shares The equity shares of our Company of face value of Rs.10 each, which are listed on BSE and NSE Eligible Equity Shareholders The holders of fully paid-up Equity Shares, as on the Record Date i.e. [●] Group Companies Companies, firms, ventures etc. promoted by the Promoters of our Company, irrespective of whether such entities are covered under Section 370(1B) of the Companies Act or not Joint Venture/JV Mukand Vini Mineral Limited Kalwe Plant Plant of our Company located within the local limits of Dighe and Kalwe at Thane district “Mukand Limited” or “the Company” or “our Company” Mukand Ltd., a public limited company incorporated under the or “the issuer” or “we” or “us” or “our” provisions of the Indian Companies Act VII of 1913 and therefore, an existing company under the Companies Act Memorandum/Memorandum of Association The memorandum of association of our Company, as amended from time to time Promoter Any one of the Promoters referred to individually Promoters The promoters of our Company, being Mr. Rahul Bajaj, Mr. Niraj Bajaj, Mr. Rajesh V Shah and Mr. Suketu V Shah, referred to collectively Promoter Group Includes the Promoters and Mr. Sanjivnayan Bajaj, Mr. Shekar Bajaj, Mr. Madhur Bajaj, Mr. Anant Bajaj, Ms. Sunaina Kejriwal, Ms. Suman Jain, Mr. Narendra J Shah, Ms. Anjana Viren Shah (nee Anjana Munsif), Ms. Jyoti Shah, Ms. Bansri Rajesh Shah, Ms. Czaee Sukumar Shah, Ms. Priyaradhika Rajesh Shah, Mr. Kaustubh Rajesh Shah, Bajaj Auto Employees Welfare Fund, Mr. Surendra Bhaichand Jhaveri (Mukand EWF), Akhil Investments and Traders Private Limited, Bachhraj & Company Private Limited, Bachhraj Factories Private Limited, Bajaj Investments and Holdings Limited, Bajaj Sevashram Private Limited, Baroda Industries Private Limited, Jamnalal Sons Private Limited, Jeewan Limited, Mukand Engineers Limited, Niraj Holdings Private Limited, Sidya Investments Limited, Valiant Investments and Traders Private Limited and Bahar Mercantile Limited Registered Office The registered office of our Company situated at Bajaj Bhawan, Jamnalal Bajaj Marg, 226, Nariman Point, Mumbai 400 021, Maharashtra Subsidiaries Mukand Global Finance Limited, Vidyavihar Containers Limited, Mukand Vijayanagar Steel Limited, Mukand International Limited, Mukand International FZE and Mukand Sumi Metal Processing Limited Issue Related Terms and Abbreviations Term Description Abridged Letter of Offer The abridged letter of offer to be sent to the Eligible Equity Shareholders, in accordance with the SEBI Regulations Allotment The allotment of Equity Shares pursuant to the Issue Allotment Date The date on which Allotment is made Allottee(s) An Investor who is Allotted Equity Shares pursuant to Allotment 2 Application Application made between the Issue Opening Date and the Issue Closing Date, whether submitted by way of CAF or in the form of a plain-paper, in case of Investors to subscribe to the Equity Shares issued pursuant to the Issue at the Issue Price, including