CMYK LETTER OF OFFER (Private and Confidential) For Equity Shareholders of the Company only Dated : June 8, 2007 PM ORIENT PAPER & INDUSTRIES LIMITED (Originally incorporated under the Indian Companies Act, 1913, as “Orient Paper Mills Limited” vide certificate of registration dated July 25, 1936 issued by Registrar of Joint Stock Companies, Bengal and received its certificate of commencement of business on July 30, 1936. The name of our Company was changed to “Orient Paper & Industries Limited” on September 13, 1978. The registered office of our Company was shifted from 8, Royal Exchange Place, Calcutta-700001, West Bengal to Brajrajnagar, District – Jharsuguda - 768216, Orissa, in the year 1947 and further shifted to its current address, Unit-VIII, Plot No.7, Bhoinagar, Bhubaneswar-751012, Orissa in the year 2000. Registered Office: Unit-VIII, Plot No. 7, Bhoinagar, Bhubaneswar-751 012, Orissa Tel: +91 674 2396930/2392947; Fax: +91 674 2396364 Head office: 9/1, R. N. Mukherjee Road, Kolkata - 700 001 Company Secretary & Compliance Officer: Mr. S.L. Saraf Tel: +91 33 2248 3406; Fax: +9133 2243 0490; E-mail: [email protected] Website: www.orientpaperindia.com LETTER OF OFFER Issue of 44,51,187 Equity Shares of Rs. 10/- each for cash at a price of Rs. 360/-(including a premium of Rs. 350/-) per Equity Share aggregating to Rs. 16024.27 lacs on rights basis to the existing Equity Shareholders of our Company in the ratio of 3 Equity Shares for every 10 Equity Shares held on Record Date i.e. on June 15, 2007. The issue price for the equity shares will be payable in two installments: 50% of the issue price will be payable on application; 50% of the issue price will become payable at the option of our Company, between 3 and 12 months after the allotment date. The face value of the Equity Shares is Rs. 10/- per share and the Issue Price is 36 times the face value. For more details, see “Issue Information” on page 308 of this Letter of Offer. 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 section titled “Risk Factors” beginning on page ‘v’ of this Letter of Offer 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 Securi- ties and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this document. 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 our Company are listed on Bombay Stock Exchange Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”). Accordingly, our Company proposes to list the Equity Shares arising out of this issue on BSE and NSE, for which in- principle approvals have been received from BSE and NSE vide letters dated January 29, 2007 and February 1, 2007 respectively. Bombay Stock Exchange Limited shall be the Designated Stock Exchange. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE ICICI Securities Primary Dealership Limited ICICI Securities Primary Dealership Limited Sharepro Services (India) Pvt. Ltd. ICICI Centre Satam Estate, 3rd Floor, H.T. Parekh Marg, Churchgate Above Bank of Baroda, Mumbai 400 020 Cardinal Gracious Road, Chakala, Tel: +91 22 2288 2460 Andheri (E), Mumbai - 400 099 Fax: +91 22 2282 6580 Tel: 91-22-2821 5168, 2821 5169 Website: www.icicisecurities.com Fax: 91-22-2837 5646 E-mail: [email protected] Website : www.shareproservices.com E mail: [email protected] Contact Person: Tathagat Mukhopadhyay Contact Person : V. Kumaresan ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR RECEIVING REQUESTS ISSUE CLOSES ON FOR SPLIT FORMS JUNE 29, 2007 JULY 16, 2007 JULY 31, 2007 FRIDAY MONDAY TUESDAY CMYK TABLE OF CONTENTS Contents Page No. Section I – General Definitions ,Abbreviations and Technical terms i Section II – Risk Factors v Section III – Introduction 1 The Issue 4 Summary Financial Information 5 General Information 10 Capital Structure 15 Objects of The Issue 23 Basis of Issue Price 33 Statement of Possible Tax Benefits 35 Section IV – About the Issuer Company Industry Overview 42 Our Business 53 Regulations and Policies 63 History and Other Corporate Matters 67 Our Management 74 Our Promoters 85 Related Party Transactions 101 Section V – Financial Information Auditor’s Report 102 Management’s Discussion and Analysis of Financial Conditions and Results of 209 Operations Financial Indebtedness 219 Section VI – Legal and Regulatory Information Outstanding Litigations 224 Government / Statutory and Business Approvals 275 Material Developments 297 Other Regulatory and Statutory Disclosures 298 Stock Market Data for the Equity Shares of Our Company 306 Section VII – Issue Information 308 Section VIII – Main Provisions of Memorandum and Articles of Association 330 Section IX – Other Information Material Contracts and Documents for Inspection 345 Declaration 347 DEFINITIONS, ABBREVIATIONS AND TECHNICAL TERMS In this Letter of Offer, the terms “we”, “us”, “our”, “Our Company” or “OPIL”, unless the context otherwise implies, refer to Orient Paper & Industries Limited. All references to “Rs.”or “INR” refer to Rupees, the lawful currency of India, “USD” or “US$” refer to the United States Dollar, the lawful currency of the United States of America. References to the singular also refers to the plural and one gender also refers to any other gender, wherever applicable, and the words “Lakh” or “Lacs” mean “100 thousand” and the word “million” means “10 lakh” and the word “crore” means “10 million” or “100 lacs” and the word “billion” means “1,000 million” or “100 crores”. Any discrepancies in any table between the total and the sums of the amounts listed are due to rounding off. Conventional/ General Terms and Abbreviations Act The Companies Act, 1956 AGM Annual General Meeting APHA American Public Health Association APMDC Andhra Pradesh Mineral Development Corporation Limited Articles/ Articles of Articles of Association of Our Company as originally framed or as altered Association/ AOA from time to time in pursuance of any previous companies law or of this Act AS Accounting Standards as issued by the Institute of Chartered Accountants of India Board/Board of Board of Directors of Orient Paper & Industries Limited or Committee of the Directors/ Directors Board of Directors of Orient Paper & Industries Limited authorized to take /Committee of Directors decisions on matters related to / incidental to this Issue for Rights Issue BIS Bureau of Indian Standards BSE Bombay Stock Exchange Limited BTPS Bhusawal Thermal Power Station CAGR Compounded Annual Growth Rate CDSL Central Depository Services (India) Limited CENVAT Central Value Added Tax CESTAT Central Excise and Sales Tax Appellate Tribunal CIT (A) Commissioner of Income Tax (Appeals) CMA Cement Manufacturers’ Association Company/ OPIL/ Orient Paper & Industries Limited Issuer/We/us CSE The Calcutta Stock Exchange Association Limited Depositories NSDL and CDSL Depository Participant A depository participant as defined under the Depositories Act, 1996 as amended from time to time DGS&D Directorate General of Supplies & Disposals Directors Directors on the Board of Our Company ECS Electronic Credit System EGM Extraordinary General Meeting EPS Earnings per share FCNR Account Foreign Currency Non Resident Account FEMA Foreign Exchange Management Act, 1999, read with rules and regulations there under and amendments thereto FERA Foreign Exchange Regulation Act, 1973 FII(s) Foreign Institutional Investors registered with SEBI under applicable laws FIPB Foreign Investment Promotion Board, Ministry of Finance, Government of India i Conventional/ General Terms and Abbreviations FY Financial Year of Our Company being the period of 12 months ending on March 31 of every year GAAP Generally Accepted Accounting Principles GBP British Pound GDP Gross Domestic Product GIR Number General Index Registry Number GoI Government of India HUF Hindu Undivided Family IPMA Indian Paper Manufacturers’ Association I-Sec/ Lead Manager ICICI Securities Primary Dealership Limited ISO International Standards Organization IT Act Income Tax Act, 1961 and amendments thereto ITAT Income Tax Appellate Tribunal KES Kenyan Shilling Kolkata High Court High Court of Judicature at Calcutta Memorandum/ Memorandum of Association of our Company as originally framed or as Memorandum of altered from time to time in pursuance of any previous companies law or of Association/ MOA this Act MOEF Ministry of Environment and Forest NA Not Applicable NAV Net Asset Value NBFC Non-Banking Financial Company NGN Nigerian Naira NRE Account Non Resident External Account NRO Account Non Resident Ordinary