KANPUR PLASTIPACK LIMITED - Securities and … M Y K LETTER OF OFFER (Private and Confidential) (For Equity Shareholders-Beneficial Owners of the Company only) KANPUR PLASTIPACK LIMITED

C M Y K

LETTER OF OFFER (Private and Confidential)(For Equity Shareholders-Beneficial Owners of the Company only)

KANPUR PLASTIPACK LIMITED (Registration No. 20-3444)

(Originally Incorporated as Kanpur Plastipack Private Limited on 26th July, 1971 under the Companies Act, 1956 as Private LimitedCompany. Subsequently the Company was converted into Public Limited Company vide Special resolution passed on 9th September,1985 and received the Fresh Certificate of Incorporation on 9th December, 1985)

Registered Office: D-19-20, Panki Industrial Area, Kanpur - 208 022.(The Registered Office of the Company was shifted from 3/74, Vishnupuri, Kanpur - 208 002

to the above address with effect from 24th February, 1987)Tel No: (91) (0512) 2691113-6, Fax: (91) (0512) 2691117, Email: [email protected], website: www.kanplas.com

Contact Person: Mr. Jitendra Awasthi, Compliance Officer & Company SecretaryFor private circulation to the Equity Shareholders of the Company only

LETTER OF OFFER

Issue of 17,68,750 Equity Shares of Rs. 10 each for cash at a price of Rs. 20 per Equity Share (including premiumof Rs. 10 per Equity Share) aggregating to Rs 353.75 Lakhs (Rupees Three Crores Fifty Three Lakhs and SeventyFive Thousands) on Rights basis to the existing Equity Shareholders of the Company in the ratio of 1(One) EquityShare for every 2(Two) Equity Shares held on Record Date i.e. 23rd July 2007.

The face value of the Equity Share is Rs. 10 and Issue Price is 2 times the face value.

GENERAL RISKSInvestment in equity and equity related securities involve a degree of risk and investors should not invest any funds in thisoffer unless they can afford to take the risk of losing their investment. Investors are advised to read the Risk Factorscarefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely ontheir own examination of the Issuer and the Issue including the risks involved. The securities have not been recommendedor approved by Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy ofthis document. Investors are advised to refer to “Risk Factors” on page 5 of this Letter of Offer before making an investmentin this issue.

ISSUER’S ABSOLUTE RESPONSIBILITYThe Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Letter of Offer containsall information with regard to the Issuer and the Issue, which is material in the context of this Issue, that the informationcontained in this 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 ofwhich makes this document as a whole or any of such information or the expression of any such opinions or intentionsmisleading in any material respect.

LISTING ARRANGEMENTSThe existing Equity Shares of the Company are listed on the Bombay Stock Exchange Limited (“BSE”) (Designated StockExchange). Accordingly, the Company proposes to list the Equity Shares issued under this Letter of Offer on BSE. TheCompany has received in-principle approval from BSE vide letter dated 5th April 2007 for listing of the equity sharesbeing issued in terms of this Letter of Offer.

LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

VIVRO FINANCIAL SERVICES PRIVATELIMITEDSEBI Regn. No.: INM000010122Manu Mansion 16/18, Shahid Bhagatsingh Road,Opp. Old Custom House,Fort,Mumbai-400 023.Tel: 022-22657364, 22658397Fax: 022-22658406Email: [email protected]: www.vivro.netContact Person: Mr. Keval Gandhi

ISSUE OPENS ON LAST DATE FOR RECEIVING REQUESTSFOR SPLIT APPLICATION FORM

ISSUE CLOSES ON

13th August 2007 28th August 2007 12th September 2007

SKYLINE FINANCIAL SERVICESPVT. LTD.SEBI Regn. No.: INR 000003241123, Vinoba Puri, Lajpat Nagar IINew Delhi – 110 024Tel.:(91)(11) 29847136/29833777/30940462Fax: (91) (011) 29848352Email: [email protected]: www.skylinerta.comContact Person: Mr. Virender Kumar Rana

ISSUE SCHEDULE:

TABLE OF CONTENTS

Section TITLE Page No.

A Definition and Abbreviations

I Conventional/ General Terms/Definitions ................................................................................. 1

II Issue Related Terms ................................................................................................................. 1

III Company / Industry Related Terms .......................................................................................... 2

IV Abbreviations ............................................................................................................................. 3

B Risk Factors (including Forward Looking Statements) ............................................................... 5

C Introduction

I Summary ................................................................................................................................... 16

II Offering Details .......................................................................................................................... 17

III Summary of Financial, Operating and Other Data ................................................................... 18

IV General Information ................................................................................................................... 21

V Capital Structure ........................................................................................................................ 25

VI Objects of the Issue................................................................................................................... 33

VII Basic terms of Issue .................................................................................................................. 43

VIII Basis for Issue Price ................................................................................................................. 44

IX Tax Benefits ............................................................................................................................... 46

D About the Issuer Company

I Overview of Packaging Industry ............................................................................................... 50

II Business Overview .................................................................................................................... 56

III Key Industry Regulations .......................................................................................................... 68

IV History and Corporate Structure of the Company .................................................................... 69

V Management of the Company ................................................................................................... 74

VI Promoters & Promoter(s) Group ............................................................................................... 84

VII Currency of Presentation .......................................................................................................... 86

VIII Dividend Policy .......................................................................................................................... 87

E Financial Details

I Financial Information of the Issuer Company ........................................................................... 88

II Financial Information of the Group Companies ........................................................................ 109

III Management Discussion & Analysis of Financial Condition .................................................... 113

F Legal & Other Information

I Outstanding Litigation and Material Developments .................................................................. 117

II Government & Other Statutory Approval(s) .............................................................................. 125

G Other Regulatory and Statutory Disclosures ................................................................................ 127

H Offering Information ......................................................................................................................... 133

I Description of Equity Shares and Terms of Articles of Association of the Issuer Company . 148

J List of Material Contracts and Documents for Inspection ........................................................... 166

K Declaration ......................................................................................................................................... 167

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A. DEFINITIONS AND ABBREVIATIONS

I. CONVENTIONAL / GENERAL TERMS/ DEFINITIONS

AS Accounting Standards as issued by the Institute of Chartered Accountants of India

Act The Companies Act, 1956 as amended

Articles Articles of Association of Kanpur Plastipack Ltd. as amended

Board or Board of Directors Board of Directors of Kanpur Plastipack Ltd.

BSE Bombay Stock Exchange Limited

CDSL Central Depository Services (India) Limited

Depositories NSDL and CDSL

DP Depository Participant

FEMA Foreign Exchange Management Act, 1999 read with rules and regulations there underand amendments thereto

FIPB Foreign Investment Promotion Board, Department of Economic Affairs, Ministry ofFinance, Government of India

IT Act The Income-tax Act, 1961 and amendments thereto

ISIN International Securities Identification Number allotted to the depository

Memorandum (MOA) Memorandum of Association of Kanpur Plastipack Ltd.

NRI (s) Non Resident Indians

NSDL National Securities Depository Limited

RBI Reserve Bank of India

SEBI Securities and Exchange Board of India

SEBI Act Securities and Exchange Board of India Act, 1992

SEBI Guidelines SEBI (Disclosure & Investor Protection) Guidelines, 2000 read with amendments thereto

Security/ies Equity Shares of Kanpur Plastipack Ltd.

II. ISSUE RELATED TERMS

SEBI Securities and Exchange Board of India

CAF /CAFs Composite Application Form(s)

Designated Stock Exchange/BSE Bombay Stock Exchange Limited (BSE)

Draft Letter of Offer Draft Letter of Offer dated 16th March 2007 filed with SEBI for its comments

Equity Shareholders Equity Shareholders of the Company whose names appear as;

• Beneficial owner as per the list furnished by the Depositories in respect of the EquityShare held in electronic form as on the Record Date and

• Members on the Register of Members of the Company in respect of the Equity Shareheld in physical form as on record date 23rd July 2007.

Equity Share Equity shares of the Company of Rs. 10/- each

Rights Issue Issue of 17,68,750 Equity Shares of Rs. 10 each for cash at a price of Rs. 20 per EquityShare (including premium of Rs. 10 per Equity Share) aggregating to Rs. 353.75 lakhs onRights basis to the existing Equity Shareholders of the Company in the ratio of 1 (One)Equity Share for every 2(Two) Equity Shares held on Record Date i. e. 23rd July 2007.

KANPUR PLASTIPACK LIMITED

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Issue Opening Date The date on which the Issue opens for subscription, i.e., 13th August 2007.

Issue Closing Date The date on which the Issue closes for subscription, i.e., 12th September 2007.

Issue Period The period between the Issue Opening Date and Issue Closing Date and includes boththese dates.

Issue Price The price of Rs. 20 per equity share at which the Equity Shares will be issued by theCompany under this Letter of Offer

Issuer/Company/ KPL, Kanpur Plastipack Ltd.We, Us, Our Company

Lead Manager Vivro Financial Services Private Limited

Letter of Offer/ LOF/LOO/ Letter of Offer dated 31st July, 2007 as filed with the BSE after incorporating SEBIOffer Document observations thereon and circulated to the Equity Shareholders.

Record Date 23rd July 2007

Registrar to the Issue or Skyline Financial Services Pvt. Ltd., 123, Vinoba Puri, Lajpat Nagar- II,

Registrar New Delhi 110 024

Renouncee(s) Shall mean the person(s) who have acquired Rights Entitlements from EquityShareholder(s).

Rights Entitlement The number of Equity Shares that an Equity Shareholder is entitled to apply for under thisLetter of Offer in proportion to his/ her/ its existing shareholding in the Company as on theRecord Date

Stock Exchange Shall refer to the BSE where the shares of the company are presently listed.

Statutory Auditor M/s. Pandey & Co., Chartered Accountants, 24/24, Karachi Khana, 1st Floor, Kanpur –208 001

III. COMPANY/ INDUSTRY- RELATED TERMS

Board Board of Directors of Kanpur Plastipack Ltd.

Committee of Directors Committee of the Board of Directors of Kanpur Plastipack Ltd. who are authorized to takedecisions on matters related to/incidental to this Issue.

Directors Members of the Board of Directors of Kanpur Plastipack Ltd.

Equity Shareholders Equity shareholders of the Company whose names appear as beneficial owners as perthe list to be furnished by the Depositories in respect of the Equity Shares held in theelectronic form and on the Register of Members of the Company in respect of the EquityShares held in physical form.

Equity Share(s) or Shares The Issued, Subscribed and Paid Up Equity Share Capital of the Company and the additionalEquity Shares of the Company offered pursuant to this Rights Issue.

NRI Non Resident Indian

Promoter(s) Promoters shall have the same meaning as assigned to it under the SEBI Guidelines andwhich has been more particularly detailed in Section D VI - Promoters and Promoters’Group in this Letter of Offer.

Security Certificates Equity Share Certificates

PE Poly Ethylene

HDPE High Density Poly Ethylene

PP Poly Propylene

LDPE Low Density Poly Ethylene

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LLDPE Linear Low Density Poly Ethylene

MTPA Metric Tons Per Annum

FIBCs Flexible Intermediate Bulk Containers

SICA Sick Industrial Companies (Special Provisions) Act,

BIFR Board For Industrial And Financial Reconstruction constituted under Section 4 of SickIndustrial Companies (Special Provisions) Act, 1985

HBTI Harcourt Butler Technical Institute

UPFC Uttar Pradesh Finance Corporation

DMSRDE Directorate Of Materials Science Research Defense Establishment

UPSIC Uttar Pradesh Small Industries Corporation

IV. ABBREVIATIONS

AGM Annual General Meeting

AS Accounting Standards as issued by the Institute of Chartered Accountants of India

BIS Bureau of Indian Standards

BM Meeting of Board of Directors

BSE Bombay Stock Exchange Limited

Depositories Act The Depositories Act, 1996 as amended from time to time.DP Depository Participant

EGM Extra-ordinary General Meeting

EPS Earning Per Share

FCNR Account Foreign Currency Non Resident Account

FI Financial Institution

FY Financial Year

GDP Gross Domestic Product

GIR Number General Index Registry Number

GOI Government of India

GSM Grams Per Square Meter

HUF Hindu Undivided Family

IDRA Industries (Development & Regulation) Act, 1951

MOU Memorandum of Understanding

NA Not Applicable

NAV Net Asset Value

NR Non Resident

NRE Account Non Resident External Account

NRO Account Non Resident Ordinary Account

NWCG Net Working Capital Gap

OTS One Time Settlement

P/E Ratio Price/Earnings Ratio

P.A. Per Annum


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PAN Permanent Account Number allotted by the Income-tax Department.

PAT Profit After Tax

PBDT Profit before Depreciation and Tax

PBIDT Profit before Interest, Depreciation and Tax

PBT Profit before Tax

ROI Return on Investment

RONW Return on Net Worth

SCRR Securities Contracts (Regulations) Rules, 1957 as amended from time to time.

SEBI (SAST) Regulations/. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as amendedTakeover Regulations from time to time.

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B. RISK FACTORS

I. FORWARD LOOKING STATEMENTS

Certain Conventions, Use of Market Data

In this Letter of Offer, the terms “we”, “us”, “our Company”, “the Company”, “KPL” unless the context otherwiseimplies, refer to Kanpur Plastipack Ltd.

For additional definitions used in this Offer document, see the sections ‘Definitions and Abbreviations’ on pageno. 1 of this Offer document. In the section entitled “Description of Equity shares and Terms of Articles of Associationof Kanpur Plastipack Ltd.”, defined terms have the meaning given to such terms in the Articles of Association ofthe Company.

Market data used throughout this Offer document was obtained from internal Company reports, data and industrypublications. Industry publication data generally state that the information contained in those publications hasbeen obtained from sources believed to be reliable, but that their accuracy and completeness and underlyingassumptions are not guaranteed and their reliability cannot be assured. Although we believe that the market dataused in this Offer Document is reliable, it has not been independently verified. Similarly, internal Companyreports and data, while believed to be reliable, have not been verified by any independent source.

Throughout this document references to the singular also refer to the plural and one gender also refers to anyother gender wherever applicable.

Forward Looking Statements

This Offer Document contains certain forward-looking statements. These forward-looking statements generallycan be identified by words or phrases like “will”, “aim”, “likely result”, “believe”, “expect”, “will continue”, “anticipate”,estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “project”, “should”, “will pursue”and similar expressions or variations of such expressions, that are “forward looking statements”. Similarly, thestatements that describe our objectives, plans or goals are also forward-looking statements.

All forward looking statements are subject to risks, uncertainties and assumptions about us, that could causeactual results to differ materially from those contemplated by the relevant forward looking statements.

Important factors that could affect our results to differ materially from our expectations includes, inter-alia, ourability to successfully implement our strategy, [our growth and expansion], technological changes, our exposureto market risks, general economic and political conditions in India which have an impact on our business activitiesor investments, the monetary and interest policies of Government of India / Reserve Bank of India, inflation,deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices,the performance of the financial markets in India and globally, changes in domestic and foreign laws, regulationsand taxes, changes in laws and regulations in the Polymer industry, changes in competition in the said industryand force majeure conditions.

For further discussion of factors that could cause our actual results to differ, refer to the section entitled “Riskfactors” beginning on page 5 of this Offer Document. By their nature, certain market risk disclosures are onlyestimates and could be materially different from what actually occurs in the future. As a result, actual future gainsor losses could materially differ from those that have been estimated. Neither we, our Directors, the Lead Manager,nor any of their affiliates have any obligation to update or otherwise revise any statements reflecting circumstancesarising after the date thereof or to reflect the occurrence of underlying events, even if the underlying assumptionsdo not come to fruition. In accordance with SEBI requirements, the Company and the Lead Manager will ensurethat investors in India are informed of material developments until such time as the grant of listing and tradingpermission by the Stock Exchange.

Currency of Presentation

In this Offer Document, unless the context otherwise requires, all references to the word “Lakh” or “Lac”, means“One hundred thousand” and the word “Crore” means “ten million”. In this Offer document, any discrepancies inany table between total and the sum of the amounts listed are due to rounding off.


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All references to “Rupees” and “Rs.” in this Offer document are to the legal currency of India.

II. RISK FACTORS ENVISAGED BY MANAGEMENT AND MANAGEMENT’S PROPOSAL TO ADDRESS THERISKS:

A. SPECIFIC TO THE PROJECT AND INTERNAL TO THE COMPANY

1. Our Company, promoter(s) and one group company are involved in certain litigations, a summary ofwhich is given hereunder;

Sr. Particulars of litigations No. of Cases AmountNo. (Rs. in Lakhs)

A. Company

1 Litigations filed against Our Company 11 117.89

2 Litigations filed by Our Company 2 0.75

B. Group Company

KSM Exports Ltd.

(i) Litigation filed against KSM Exports Ltd. 1 1.00

(ii) Litigations filed by KSM Exports Ltd. 1 1.00

C. Promoter(s)

Mr. M. S. Agarwal

(i) Litigation filed against Mr. M S Agarwal 1 Nil

(ii) Litigation by Mr. M S Agarwal 2 Nil

For details on litigations, kindly refer to the Section “Outstanding Litigations” on page 117 of this Letter ofOffer.

2. Our Company was declared sick by BIFR on 11th March 1991.

Our Company incurred loss Rs. 172.45 lakhs for the financial year ended 1989-90 and the entire net worth ofthe Company was eroded on account of drastic reduction of company’s production followed by promulgationof statute for mandatory use of jute packaging material and increase in excise duty structure and higher statesales tax along with frequent power shortages. The Company was declared a sick unit by BIFR vide its orderdated 11th March 1991 under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

BIFR had sanctioned rehabilitation package in the year 1992 and subsequently approved the one timesettlement of dues to the financial institutions in the year 1997. The said packages had stipulated to bringadditional funds by way of equity by the promoters. With the company’s thrust on the exports of its products,the financial performance of the Company improved and with the result the company came out of the purviewof Sick Industrial Companies (Special Provisions) Act, 1985 vide its order dated 17th August 2000.

3. Our intended use of proceeds from the Issue has not been appraised by any bank or financialinstitution.

Our Company has proposed to implement modernisation and expansion plan aggregating to Rs. 2150 lakhs.Our modernisation and expansion project is not appraised by any Bank or Financial Institution. The issueproceeds will be deployed to meet the objects of the Issue as decided by the Board of Directors of ourCompany.

Our Company is planning to increase our existing fabric production facilities to 10,000 MTPA from 6,000MTPA so as to meet the increasing demand of our products. At present our Company is utilising approximately97% of the installed capacity. State Bank of India, Mid Corporate Group, Kanpur has appraised themodernization and expansion project for sanctioning the Foreign Currency Term Loan of Rs. 1250 lakhs and

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other working capital limits. However, no separate appraisal has been done for the purpose of this rightsissue. The cost of the project of Rs. 2150 lakhs has been arrived at by management estimates based on thequotations collected from reputed suppliers of plant & machineries and other fixed assets.

Moreover, the Promoter Directors of our Company are well-experienced technocrats who will be closelymonitoring the utilisation and end uses of the funds.

4. Delay in Project Implementation may lead to time and cost overrun.

Our Company has started civil construction work for the new factory shed for the expansion project after theacquisition of land. We are yet to place the orders for some of plant & machinery and other fixed assets. OurCompany proposes to complete modernization and expansion project by the end of December 2007. If thereis delay in the implementation of the proposed project, it may lead to time and cost overrun and may affectthe profitability of our Company.

Our Company has entered into a Memorandum of Understanding (MOU) on 5th January 2007 and additionalMOU on 26th February 2007 with M/s International Electron Devices Ltd. (IEDL) as an agreement to transferthe lease of Plot No. A-1 & A-2, Panki Industrial Area, Udyogkunj, Kanpur from IEDL to our Company fromUPSIDC admeasuring about 16357 square meters for a total consideration of Rs. 475 Lakhs which alsoinclude a built up factory shed of 20,000 square feet. Under the terms of MOU, Our Company has paid a totalconsideration of Rs. 475 Lakhs to IEDL on 3rd January 2007 and 26th February 2007 constituting paymentof Rs. 327.14 lakhs for factory land and Rs. 147.86 lakhs for cost of factory shed. In addition to existingfactory shed, we plan to construct approximately 92500 sq. feet in the form of new factory shed and first flooralso to be constructed thereon.

The civil construction envisaged in the project is to take care of installation of new plant & machineries forcutting and stitching purpose and increased storage requirement of despatch of finished goods. As far asexpansion and modernization of capacity is concerned, the new machineries for extrusions and circularlooms will be installed at existing unit whereas the new machineries for cutting & stitching will be installed atnew unit. Further, delivery of the machinery would take place immediately on payment, as the machinery iseasily available. Therefore, there would not be any production loss to our Company on account of delay inthe placement of orders. In case of delay in completion of construction work, our Company would make useof existing factory shed on temporary basis to overcome any storage problems. Therefore, the Company isconfident of avoiding any delay in the implementation of the proposed project as well as time and costoverrun in the project.

5. Our Company is yet to place the orders for certain Plant & Machineries costing Rs. 254.38 lakhs.

Out of the total cost of Rs. 1225 lakhs, our Company has placed an order for the plant & machineries worthRs. 970.61 lakhs being 79.23% of the total cost of plant & machinery. As on 30th June 2007, we are yet toplace the orders for the remaining plant & machineries and other fixed assets costing Rs. 254.38 lakhs being20.77% of the total cost of plant & machineries for which we have received the quotations and placement oforders are under process.

6. We are yet to enter into lease agreement with UPSIDC.

Our Company has entered into a Memorandum of Understanding (MOU) on 5th January 2007 and additionalMOU on 26th February 2007 with M/s International Electron Devices Ltd. (IEDL) as an agreement to transferthe lease of Plot No. A-1 & A-2, Panki Industrial Area, Udyogkunj, Kanpur from IEDL to our Company fromUPSIDC admeasuring about 16357 square meters for a total consideration of Rs. 475 Lakhs which alsoinclude a built up factory shed of 20,000 square feet. Under the terms of MOU, IEDL has undertaken to carryout all documentation and procedural formalities for transfer UPSIDC leased land in the name of Our Companyfor the residual period of lease.

Our Company has initiated the efforts for transfer UPSIDC land lease in the name of our Company, however,we are still to receive the final clearance from UPSIDC as to the transfer of lease in the name of our company.Our Company has got the sanction letter for transfer of Electricity Connection in our name vide letter no. C/419 dated 9th July 2007 from Kanpur Electricity Supply Co. Limited. In case our company fails to receive thetransfer of lease in our company’s name, it may have an adverse impact on our project and its implementation,


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on our business, financial condition and results of operations.

7. 40.38% of the amount collected through the Rights Issue would be adjusted against the allotment ofshares to promoters/ promoter group in the Rights Issue.

In order to avail the disbursement from State Bank of India out of the sanctioned loan of Rs. 1250 lakhs forimplementation of project and as a part of the condition towards disbursement of loan, our Company hasborrowed unsecured loans from its promoters/promoter group to the tune of Rs. 354 lakhs temporarily inplace of funds to be brought in by this rights issue.

As the unsecured loans taken from promoters are temporary and are required to be adjusted towards theshare application money under this rights issue, 40.38% of the amount collected through the Rights Issuewould be adjusted against the allotment of shares to promoters/promoter group in the Rights Issue.

8. All Products manufactured by the Company are tailor made and specifically manufactured againstPurchase Orders placed by the Customers.

All Products manufactured by the Company are tailor made and specifically manufactured against PurchaseOrders placed by the Customers. Each customer has his own unique set of specifications. Manufacturing isstarted only after receipt of Purchase Order from the Customers. The Company receives detailed specificationsi.e. size of fabric/bag and its weaving details from each customer and then manufacture and supply thefinished Bags to them. Such products are also printed as per customers' specifications.

9. We have reported negative cashflows from Operations and Investment activities for the year 2003-04, 2004-05, 2005-06 and 2006-07.

Our Company has reported negative cashflows from operations for the year 2003-04, 2004-05 and 2006-07.Further, our company has also reported negative cashflows from investments for the year 2003-04, 2004-05,2005-06 and 2006-07.

The Company has recorded negative cash flow from operations for the year 2004, 2005 & 2007 due toincrease in export sales. The Company has made exports sales of Rs. 1334.08, Rs. 2729.56 and Rs. 4742.77lakhs respectively for the year 2004, 2005 and 2007. The Company generally offers trade credit of 60-90days to its overseas customers. To meet such working capital gap, the promoters of the Company haveinfused unsecured loans from their own funds in the Company.

The Company has recorded cash outflows from investing activities for the year 2004, 2005, 2006 & 2007 dueto addition of fixed assets for ongoing modernization and expansion plan. The same outflows are being metthrough raising funds through secured loans from banks.

10. We sell significant quantity of our production to Chambal Fertilizers Limited

Our company sells approximately 15% of its total sales to M/s. Chambal Fertilizers Limited (CFL). Companyis supplying HDPE bags on regular basis to CFL for the last 20 years on yearly contract basis. Companyhas developed cordial relationship with CFL and expects to continue to maintain the same. On account ofgrowing export market, the Company is focusing on overseas market. The Company has increased itsexport sales from 62% in the year 2005-06 to 70% in the year 2006-07 of its total sales. In addition to it,during the year 2007-08, company has received an order worth Rs. 1250 lakhs from Indian Oil CorporationLimited for supply FIBC bags.

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11. We have contingent liabilities not provided for outstanding as on March 31, 2007.

The contingent liabilities not provided for by us as on March 31, 2007 and March 31, 2006 are as givenhereunder:

(Rs. In Lakhs)

Sr. Particulars As on As onNo. 31.03.2007 31.03.2006

1. Bank Guarantee 281.49 183.51

2. Foreign Bills Discounted andPurchased under Letter of Credit /LC opened. 82.30 276.90

3. Legal Undertakings submitted to customs and DGFT 927.10 2076.42under duty exemption scheme for import of rawmaterials against which all exports have beencompleted and advance licences are under redemption.

The contingent liabilities are in the normal course of business and the management does not foresee anymaterial adverse impact on the working results of the Company on account of the above. In case contingentliabilities materializes, the financial position of the Company is strong enough to absorb such liabilities.

12. There is a possibility of conflict of interest with one of the group companies, KSM Exports Ltd. inrespect of jobwork contract.

Our line of business involves manufacturing of HDPE/PP woven fabrics and sacks. We have number ofjobwork transactions with our group company KSM Exports Ltd. We give jobwork of stitching work of wovensack bags to KSM Exports Ltd. The value of stitching work outsourced to group company viz. KSM ExportsLimited for the last 3 financial years are as under:

(Rs. in Lakhs)

Year Value of Job Total Jobwork Total sales JobworkWork done from expenditure through KSM made during through KSM

KSM Exports Ltd. incurred as a % of the year as a % ofduring the Total by KPL Total Sales

year by KPL Expenditure of KPLof KPL

2004-05 33.00 4681 0.70% 5321 0.62%

2005-06 33.00 5005 0.66% 5503 0.60%

2006-07 38.00 6224 0.61% 6975 0.54%

M/s. Pandey & Co., Chartered Accountants, Kanpur, has certified by their certificate dated 10th July 2007that the prices at which job work transactions with M/s. KSM Exports Ltd. are made are reasonable, havingregard to prevailing market prices at the relevant time where such prices are available.

13. Additional subscription in the Rights Issue by the promoters of our Company may substantiallyincrease their shareholdings in the Company.

In view of the intention of promoters to apply for additional shares in order to ensure minimum 90%subscription, if the issue is under-subscribed, then there is a potential scope for increase in promoters'contribution and consequently promoters' shareholding may increase substantially in the company.

14. Substantial portion of our revenues come from limited number of customers.

Substantial portion of our revenues is derived from small number of customers. Our top ten customerscontributed 62.90% & 63.67% of our sales for financial year 2005-06 and 2006-07 respectively. Similarly,for financial years 2004-05 and 2003-04, the sales to the top ten customers were 62.86% and 70.30%


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respectively. We believe that we are dependent on a few customers for substantial part of our sales. In theevent, any of these top ten customers decide to procure their packing material requirements from othersuppliers, our revenues and profitability may get adversely affected.

Our management keeps on developing new clients for increasing our sales as well to reduce the dependenceon few customers. Our company has added the following new clients country wise during the last threefinancial years.

(Rs. in Lakhs)

2004-2005 2005-2006 2006-2007

Country Nos. of Amount Nos. of Amount Nos. of AmountCustomers of Sales Customers of Sales Customers of Sales

Spain 2 56.16 3 148.39 3 419.94

U.K. 3 265.02 5 252.38 4 514.79

USA 2 86.78 3 222.45 1 163.77

Germany 2 23.92 2 100.73 2 200.52

France 1 8.50 3 100.23 0 0.00

Australia 1 8.97 0 0.00 0 0.00

Italy 1 169.36 1 236.17 1 388.70

Netherland 1 16.07 1 35.86 1 329.69

Denmark 0 0.00 1 4.65 1 6.68

13 634.78 19 1100.86 13 2024.09

The details of number of customers dealt with by the company during the last three years are asunder:

Particulars 2004-05 2005-06 2006-07

Opening Customers 13 26 33

Add: Customers added during the year 13 19 13

Less: Customers lost during the year 0 12 22

Total 26 33 24

15. We are pre-dominantly dependent on export sales.

Our Company exports approximately 67% of its total production to U.K, Germany, Spain, USA, Netherlands,France, Italy, etc. As we are well placed in the International market with established dealers in terms ofquality and cost all over the globe, our Company does not foresee any difficulty in maintaining our exportsales at these levels, however, at the same time, we are also developing FIBC in domestic market inaddition to our other products to increase our exposure to Indian market as well.

16. We are subject to risks arising from exchange rate fluctuations.

Uncertainties in the global financial markets may have an adverse impact on the exchange rate betweenRupee vis-à-vis other currencies. The exchange rate between Rupee and other currencies is variable andmay continue to remain volatile in future depending upon the foreign exchange reserve position of India.Fluctuations in the exchange rates may have a serious impact on the revenues from our export business assignificant portion of our revenue come from Export Business. Any appreciation of Rupee against othercurrencies may have an adverse impact on our business revenues. Accordingly, any adverse fluctuation inthe exchange rate between Rupee and other currencies may adversely affect our financial position andresults of operation.

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The impact of exchange rate fluctuations on the profitability of the company during the last three financialyears are as under:

(Rs. In Lakhs)

Year Particulars Gain due to Loss fromForeign Exchange Foreign Exchange

Fluctuation Fluctuations

2004-05 Exchange Fluctuations – (5.78)

2005-06 Exchange Fluctuations – (13.10)

2006-07 Exchange Fluctuations 1.64 –

Our company has an established forex policy in place and actively hedges its forex exposure to offset thisrisk.

17. The uses of FIBC is mainly confined to Western European Countries like Germany, U.K. France,Spain, Italy, Switzerland, Netherlands, Belgium, Denmark’s, Sweden, Norway & USA.

The uses of FIBC is mainly confined to Western European Countries like Germany, U.K. France, Spain,Italy, Switzerland, Netherlands, Belgium, Denmark’s, Sweden, Norway & USA. Even in Europe the EasternEuropean Countries are not using FIBC’s to the extent their counterpart in Western Europe are using.Similarly, in Africa and Asia uses of FIBCs is almost negligible for the simple reason that the Industries arenot mechanized and labour is very cheap.

18. The Logo of our Company has not been registered with the Trademark Registrar.

The company has not registered its logo and it does not have registered trademark, nor has any applicationbeen made to Trademark Registry. Company operates in a competitive environment, where generatingbrand recognition will be a significant element of the business strategy of the company.

19. We depend on Key Managerial Personnel for smooth running of our business.

We depend upon the continued employment and performance of key employees of our Company. If any ofthese resign, or becomes unable to perform in his or her role and if they are not adequately replaced, ourbusiness operations and our ability to implement successfully our project and business plans could besubstantially affected. Our performance is also dependent on our ability to identify, hire and retain keypersonnel and if we are unable to do so, the results of operations and financial conditions could be materiallyand adversely affected.

Our Company has a comprehensive Human Resources Policy and has been able to retain its keymanagement team in the past. The management ensures that key personnel of the company remain intactwith the company so that it does not affect the operations of the Company.

20. We are subject to restrictive covenants of Loan agreement entered into with State Bank of India.

We have agreed to preliminary terms and conditions of State Bank of India, our Banker, which will providefor long term and short term borrowings (subject to certain conditions) to fund a portion of total project costunder proposed modernization and expansion plan

The material negative covenants in the sanction letter are stated below:

a. The company has to undertake that any new project, implement any scheme of expansion or acquire fixedassets except those indicated in the funds flow statement submitted to the Bank from time to time and approvedby the Bank.

b. The Bank will have the right to convert the debt into equity, at a time felt appropriate by the bank at a mutuallyacceptable formula.


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21. Our insurance cover may not be adequate to protect us against all potential losses to which we maybe subject.

We have taken adequate insurance cover against damages that may be caused by floods, fires andearthquakes etc. on our assets as well as third party liability insurance, which we believe is in accordancewith the relevant regulations and customary industry practices in India. However, the amount of our insurancecoverage may be less than the replacement cost of all the covered properties and may not be sufficient tocover all financial losses that we may suffer, should a risk materialise. Further, there are many events thatmay expose us to losses or third party liabilities, including war or natural calamities that could cause significantdamages to our operations for which we are not insured or fully insured. If significant liability arises forwhich we are not insured or not adequately insured, it could have a material adverse effect on our business,operations and financial condition.

22. Conditions of Indian Security Market may affect the price or liquidity of the equity shares.

In the past, Indian Stock Exchanges have experienced fluctuations in the prices and liquidity of listedsecurities. The reasons for such fluctuations include brokers’ default, settlement delays, government policies,inflations, natural calamities etc., which have a negative effect on market sentiments. This type of eventsmay occur in future also and if they do, they could adversely affect the market price and liquidity of thecompany’s equity shares.

23. We have not entered into any long-term supply contracts for raw materials.

Non-availability of required raw materials in desired quantity and quality at the required time may adverselyaffect our production process, ability to deliver orders in time and our business performance.

24. We are exposed to volatility in raw material prices.

A few raw materials such as HDPE/PP/LDPE granules constitute over 95% of the total raw materialrequirement. As the raw material prices are affected by the availability of crude oil and its global demand, itexposes us to price fluctuations resulting from shifts in supply and demand and other factors beyond ourcontrol.

25. All our current manufacturing facilities are geographically located at one place at Kanpur, UttarPradesh and the loss or shutdown of operations at the facility would have a material adverse effecton us.

All our existing manufacturing facilities are based in Kanpur, Uttar Pradesh. As a result, any local socialunrest, natural disaster or break down of services and utilities in that area could have material adverseeffect on the business, financial position and results of operation of our Company.

26. The unsecured loans taken by our Company can be recalled at any time.

Our Company has taken unsecured loans from the promoters of the Company to satisfy the covenants ofState Bank of India. These unsecured loans are repayable on demand and if recalled by the promoters atany time and in the event, may affect the financial operations of our company to that extent.

27. Our expansion and modernization project is subject to generate enough cash accruals in the year2007-08.

Our proposed means of finance include internal accruals of Rs. 393.25 lakhs being 18.29% of the cost ofthe project. Our Company has generated internal accruals to the tune of Rs. 176.49 lakhs for the yearended 31st March 2007 after payment of Dividend of Rs. 41.39 lakhs. In case, our company is not able togenerate enough cash accruals in the year 2007-08, it may adversely affect the viability of the expansionand modernization project.

28. Our Company has a geographical disadvantage due to its non-proximity to ports and thereby reducesour cost competitiveness.

We are operating our manufacturing operations from manufacturing facilities located at Kanpur, Uttar Pradesh.As Kanpur is located in the northern region of India, it does not have any proximity to ports. Therefore, our

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Company has to rely on Bombay Ports for export and imports of its finished goods and raw materials. Dueto this, our Company has higher lead-time of 8-10 weeks from India to Europe/USA, which makes ourCompany less competitive as compared to other competitors who are geographically well placed.

29. Failure to comply with export obligation may expose us to significant import duties and otherpenalties.

Our company has been allowed to import raw material viz. HDPE/PP granules Duty free under the AdvanceLicensing scheme of Government of India. The same raw material is used for manufacturing the finishedgoods, which are exported to different overseas customers. Under the customs law, we are obliged to makethe exports within a period of 24 months from the date of import of raw materials. If we fail to meet ourexports obligations within the aforesaid period then we may be required to pay import duty along withinterest for the delayed period. Further, we may also be subject to the penal provisions of Customs Act,1962. As on 31st March 2007, our Company has fulfilled all the export obligations. As on 31st March 2007,Legal undertakings that are due for redemption amount to Rs. 927.10 lakhs. With regular and sufficientexport orders in hand the company does not envisage any risk on this account since fulfillment of exportobligation is a continuous process.

30. The name of one of the Independent director, Shri B. L. Manchanda, in our Company appears inwillful Defaulters list of RBI.

Mr. B. L. Manchanda, one of the Independent Director on our Board appears in the Defaulters list of ReserveBank of India. Mr. B. L. Manchanda was employed with M/s. Uttar Pradesh Financial Corporation (UPFC)as General Manager. During his tenure with M/s. Uttar Pradesh Financial Corporation, he was appointed asa Director on the Board of M/s. Upar Chem Limited as a Nominee of UPFC. Subsequently he resigned fromthe Board of Directors of M/s. Upar Chem Limited and ceased to be a Director of M/s. Upar Chem Limitedsince last 15 years. At present, Mr. B L Manchanda is not in any way connected or related with M/s UparChem Limited in any manner. Further, he has never been involved in the promotion of M/s. Upar ChemLimited.

31. Acquisition of shares of our Company by our Promoter & Promoter Group during the period January2005 to October 2006 may involve the violation of the provisions of Takeover Regulations of SEBI.

The promoter and promoter group of our Company have acquired certain shares of our Company during theperiod January 2005 to October 2006 by way of purchases from the open market and transfers among thepromoter group. As the promoters and promoter group were, before the acquisition as above, holding 55%of the paid up equity share capital of the Company, they were required to comply with the open offerformalities under the Takeover Regulations. As a consequence of aforementioned violation of TakeoverCode, the promoters and promoter group may incur liability to an action in terms of Takeover Regulationsand the SEBI Act.

32. SEBI is investigating into the price movement in the share of our Company during the period fromDecember 2004 to January 2005.

“SEBI is investigating into the price movement in the scrip of the issuer company during the period fromDecember 2004 to January 2005. During the period substantial trading has been observed between thepromoter Shri M S Agarwal and the group company MSA Investment & Trading Co. Pvt. Ltd. Preliminaryinvestigations are also being carried out for apparent violation of disclosure norms under SEBI (Prohibitionof Insider Trading) Regulations, 1992, in respect of the change in holding of Shri M S Agarwal.”

33. Our Company has received a letter from BSE as to Non-Compliance with Disclosure under Clause40 of the Listing Agreement for the year 1998 and 1999.

Our Company had received a letter from BSE vide letter no. List/sg/ak/vm/2003 dated 21st November 2003for non-compliance of clause 40 of the Listing Agreement for filing takeover declarations. The said non-compliances were for the year 1998 and 1999. Our Company had clarified to BSE in its reply vide letter no.KPL/2003-04 dated 6th December 2003 about their compliance of clause 40 of the Listing agreement fromtime to time. Our Company had also resubmitted the Disclosure Statements for the year 1998 and 1999 interms of SEBI (Substantial Acquisition of Shares & Takeover Regulations) 1997.


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B. EXTERNAL AND BEYOND CONTROL OF THE COMPANY

1) Price volatility in Crude based raw materials

The main raw materials for the Company are HDPE/PP granules, which are crude based products andhence there is high volatility in price.

2) Political, economic and social developments in India and acts of violence or war

Any change in the economic policies and laws affecting companies in the plastic processing business, paceof deregulation, foreign investment, currency exchange rates and other matters could adversely affect thebusiness, financial position and the operations of the Company. Any acts of violence, terrorist activity orwar could affect the industrial and commercial operations in the country, which could have an adverseeffect on the demand and supply of plastic pipes & fittings.

3) Natural disasters and technical failures

The operations of the plant can be affected by natural disasters and technical failures including malfunctioningor breakdown of equipment, which could adversely affect the business, financial condition and the operationsof the Company.

4) Change in technology

Technology plays a vital role in manufacturing plants. The Company’s failure or inability to adopt anychange in technology might place its competitors at an advantage in terms of cost, efficiency and timelydelivery of final products.

5) Competition

The Company operates in a globally competitive business environment. Increase in competition may forcethe Company to reduce prices of its products, which may reduce the revenues and margins and/or alsodecrease its market share, either of which could have an adverse effect on the business, financial conditionand operations of the Company.

6) Any changes in taxation policies by the government may cause the business of the Company tosuffer.

Statutory taxes and other levies including tariffs may affect the margins in the event of company’s inabilityto pass on such expense to its customers. Any increase in any of these taxes or levies, or the imposition ofnew taxes and levies in the future, may have a material adverse impact on the Company’s business, resultsof operations and financial condition.

7) Any unfavorable policy of Government of India may adversely affect the business of the Company.

Introduction of any unfavorable policy or change in the existing statute by the Government of India affectingthe demand of plastic and packaging industry may have an adverse effect on the demand of our productsand resultantly affect our Company’s business, results of operations and financial condition.

NOTES TO RISK FACTORS

Size of the Issue:

Issue of 17,68,750 Equity Shares of Rs. 10 each for cash at a price of Rs. 20 per Equity Share (includingpremium of Rs. 10 per Equity Share) aggregating to Rs 353.75 Lakhs on Rights basis to the existing EquityShareholders of the Company in the ratio of 1(One) Equity Share for every 2(Two) Equity Shares held onRecord Date i. e. 23rd July 2007.

1. The average cost per Equity share for the Promoters of the Company is Rs. 7.35 per equity share.

2. The book value per share as on March 31, 2007 and March 31, 2006 is Rs. 27.37 and Rs. 24.45 for facevalue of Rs. 10 per share as per the Audited Restated Financial Statements respectively.

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3. Net worth (excluding revaluation reserves) of the Company as on March 31, 2007 and March 31, 2006 wasRs. 968.27 lakhs and Rs. 864.86 as per Audited Restated Financial Statements respectively.

4. Investors are advised to refer to “Basis for Issue Price” section on page 44 before investing in the Issue.

5. Our promoter/Promoter Group/Directors have not purchased or sold any shares during the last 6 months.

6. Related Party Transactions entered into by Kanpur Plastipack Ltd. during the preceding three financialyears are given at page no. 104 of the Letter of offer.

7. The Company and the Lead Manager are obliged to keep this Letter of Offer updated and inform theShareholders of any material change/developments till the listing and commencement of trading. Investorscan contact the Lead Manager or Compliance Officer of the Company for any clarifications/complaints. TheCompliance Officer will be available at the following address;

Mr. Jitendra Awasthi, Company Secretary & Compliance Officer, Kanpur Plastipack Ltd., D-19-20, PankiIndustrial Area P.O. Udhyog Nagar, Kanpur - 208 022, Tel. No. -(91) (0512) 2691 113-6, Fax No. (91)(0512) 2691 117, E-mail ID- [email protected]

8. In the event of the issue being oversubscribed, the allotment shall be on a basis described in section 'Basisof Allotment' on page 144 of the Letter of Offer.


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C. INTRODUCTION

I. SUMMARY

Industry

A Flexible Intermediate Bulk Container (FIBC) is defined as an intermediate bulk container, having a body made of flexiblefabric, which

Cannot be handled manually when filled

Is intended for shipment of solid material in powder, flake, or granular form.

Does not require further packaging

Is designed to be lifted from the top by means of integral, permanently attached devices (lift loops or straps)

Flexible intermediate bulk containers (FIBCs), also known as “big bags,” “bulk bags,” and “bulk sacks,” were firstmanufactured in the late 1950s or early 1960s. The first FIBCs were constructed with heavy-duty PVC-coated nylon orpolyester where the cut sheets are welded together to form the FIBC. These FIBCs were made with integrated lift slingsaround the container, or attached to a specially made pallet, or a metal lifting device that the container sat on. Thehandling devices allowed the container to be filled from the top and discharged from the bottom.

Flexible intermediate bulk containers manufactured with polyolefin fabrics were experimented with in England, Japan,Canada, and the United States all at about the same time in the late 1960s to the early 1970s. It was the development ofthese high-strength lightweight fabrics (i.e., polypropylene) that spurred the growth of the flexible intermediate bulk bagsthat are universally used today.

The rapid growth in Europe in the manufacturing of FIBCs occurred in the mid 1970s during the oil crisis. The oil-producingcountries building program required large quantities of cement. The demand for cement was shipped in FIBCs at the rateof 30,000-50,000 metric tons per week from Northern Europe, Spain and Italy to the Middle East.

The demand for bulk bags in the United States grew slower than in Europe until 1984, when the U.S. Department ofTransportation (DOT) agreed to grant exemptions for the shipment of hazardous products in FIBCs. Performance standardsfor FIBCs were established and issued by the Chemical Packaging Committee of the Packaging Institute, USA under T-4102-85. These standards were used to obtain exemptions until DOT included flexible containers with the other types ofFIBCs in the Title 49 CFR for hazardous products.

The flexible bulk container offers features that are unique to this package. It can be folded flat and bailed for shipment tothe user. The weight of a bulk bag used to ship one metric ton of product weighs 8-10 lb, offering a low package: productweight ratio. The cost of FIBCs is competitive with other forms of packaging as it is usually utilized without pallets. Theyare easy to store and handle in warehouses with standard equipment. When shipping by boat the FIBCs are gang-loadedwith up to 14 bulk bags on a spreader bar, and are shipped as break bulk. (Source: Official Website of Flexible IntermediateBulk Container Association i.e. www.fibca.com)

Business

Our Company was incorporated on 26th July 1971 as a private limited company with an object to manufacture HDPEWoven Fabric and Sacks of various sizes and other plastic packaging materials. The founder promoters of our Companyare Mr. Mahesh Swarup Agarwal and Mrs. Santosh Agarwal. The Company was converted into a Public Limited Companyw.e.f. 9th December 1985.

Our Company is engaged in the business of manufacturing of HDPE/PP woven fabric and bags and Flexible IntermediateBulk Containers of varied sizes used in various industries for transportation of Cement, Chemicals, Fertilisers, foodgrains,Sugar, Building materials, etc. These flexible and lesser weight plastic based packaging materials provide a cost-effectiveand a convenient tool for the packaging and transportation of bulky material across the sectors. In view of its flexibility andcheaper cost, it has been globally accepted as a convenient means of transportation for various bulky materials as well astransportation of small weight materials in bulk.

In the year 1972-73, our Company started its production with an installed capacity of 130 MTPA of unlaminated fabrics atD-19, Panki Industrial Area, Kanpur. Due to rapid expansion in the business of the Company, modernization of plant andmachineries and upgradation of production technology, our company achieved production of about 1890 MTPA ofunlaminated fabrics by the year 1985-86.

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Our Company was the first unit to start manufacturing various kinds of unlaminated fabric products like HDPE bags andPP woven bags, etc. in the entire North India and was first to introduce Circular Weaving Machinery in the country toupgrade its technology in the year 1983-84. Due to encouraging response from the customers and looking to the vastpotential of its products, our Company embarked upon an expansion programme to raise installed capacity to 3756 MTPAof unlaminated fabrics. Our Company purchased the adjoining plot at D-20 from UPSIDC in the year 1986 to achieveincreased production to cope up with the market demand. Our company in its continuous upgradation of Technology andthe resultant addition of machines and balancing equipment has led to a current manufacturing capacity of 6000 MTPA,which was largely funded from Internal accruals.

FIBC was added to our product range in the year 2000 and since then this segment of our activity has grown at a rapidpace. Exports took a quantum jump in 2004-05 when a 100% increase in Export turnover was recorded. Today FIBC’sconstitute nearly 65% of our total production. FIBC’s are not only value added items but also represent one of the fastestgrowing segments globally in the industrial packaging sector.

Recognizing the efforts made by our Company, ‘NIRYAT SHREE’ award was conferred by Federation of Indian ExportOrganizations (FIEO) for financial year 2004-05, presented by Shri Kamal Nath, Hon’ble Minister of Commerce, Governmentof India on 26th December 2006. Our Company has been awarded the “Amity Export Excellence award” at the 9th Internationalbusiness horizon INBUSH 2007, 23rd February 2007. Company has also been awarded the “highest rating” in India’s Top500 manufacturing SME companies at the 1st SMB TOP 500 Awards by Technology for Decision makers of Industry 2.0 inthe year 2006.

II. OFFERING DETAILS:

Equity Shares Offered to the Issue of 17,68,750 Equity Shares of Rs. 10 each for cash at a price of Rs. 20Existing Equity Shareholders per Equity Share (including premium of Rs. 10 per Equity Share) aggregating to

Rs 353.75 Lakhs on rights basis to the existing Equity Shareholders of theCompany in the ratio of 1(One) Equity Share for every 2 (Two) Equity Sharesheld on Record Date i. e. 23rd July 2007.

Equity shares outstanding 35,37,500 Equity shares of Rs. 10 eachprior to the issue

Equity shares outstanding 53,06,250 Equity shares of Rs. 10 each (Assuming Equity Shareholdersafter the issue Subscribe to all the Equity Shares Offered.)

Utilization of Proceeds The Company intends to deploy the proceeds from the issue of shares for thefollowing:1. To part finance-

a) Purchase of Factory Land at Plot No. A-1 and A-2, Panki IndustrialArea, Site – V, PO: Udyogkunj, Kanpur – 208 022

b) Construction of new factory building on the above mentioned plot.c) Purchase of Plant & Machineries and other Fixed Assets.d) Margin money for additional working capital.

2. To meet the expenses of the rights issue of equity shares.For Details see thesection entitled “Object of this Issue” on Page 33 of this Offer Document.


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III. SUMMARY OF FINANCIAL, OPERATING AND OTHER DATA

The following summary of the financial data has been prepared in accordance with the provisions of the SEBI Guidelinesissued by the SEBI in pursuance of Section 11 of the SEBI Act except as indicated otherwise described in Auditors Reportof M/s. Pandey & Co., Chartered Accountants in section entitled “Financial Information”.

STATEMENT OF RESTATED PROFIT AND LOSS ACCOUNTS: (Rs. In Lakhs)

For the year March 31 2007 2006 2005 2004 2003

Income

Gross Sales 6913.52 5436.63 5264.46 3939.74 3478.55

Less: Excise Duty 317.60 280.55 368.42 362.06 372.84

Net Sales 6595.92 5156.08 4896.04 3577.68 3105.71

Other income 61.29 66.75 56.43 89.34 67.34

Increase/(Decrease) in Stock 24.39 23.00 78.48 28.68 51.88

Total 6681.60 5245.83 5030.95 3695.70 3224.93

Expenditure

Raw material Consumption 4473.27 3424.69 3222.99 2277.87 2008.36

Manufacturing Expenses 836.02 716.26 680.33 574.86 528.90

Personnel Expenses 251.52 214.23 193.15 174.81 166.11

Administrative & Other Exp. 687.45 672.46 662.93 452.43 367.85

Total 6248.26 5027.64 4759.40 3479.97 3071.22

Op. Profit before Int. Dep & Prior Item 433.34 218.19 271.55 215.73 153.71

Interest and Finance Charges 137.19 79.21 70.73 64.72 47.10

Depreciation 73.08 75.09 70.72 60.35 57.06

Amortization 0.00 0.00 0.00 0.00 0.00

Operating Profit before Prior Period Expenses 223.07 63.89 130.10 90.66 49.55

Profit Before Tax & Extraordinary Items 223.07 63.89 130.10 90.66 49.55

Current Tax 74.48 29.09 30.80 11.80 1.00

Deferred Tax 3.23 -5.25 20.75 17.95 9.64

NP after Tax Before extraordinary items 145.36 40.05 78.55 60.91 38.91

Add: Tax provision for earlier years w/back 0.00 0.00 0.00 0.00 0.00

Add: Deferred Tax reversed 0.00 0.00 0.00 0.00 0.00

Less: Tax paid for earlier year 1.00 0.00 0.00 0.00 0.00

NP after Tax Before Extraordinary Item 144.36 40.05 78.55 60.91 38.91

Impact of material adjustment forestablishment in corresponding years

Add/ (Less): W/back of liability 0.00 0.00 0.00 0.00 0.00

Add/ (Less): Deferred Tax 0.00 0.00 0.00 -52.40 0.00

Add/ (Less): Deferred TaxProvided earliernow reversed 0.00 0.00 0.00 0.39 0.00

Add/ (Less): Tax adjustment 0.00 -1.26 0.00 0.00 0.00

Add/ (Less): Others 0.44 1.40 -0.67 -0.11 -5.59

Adjusted Profit (A+B) 144.80 40.19 77.88 8.79 33.32

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STATEMENT OF RESTATED ASSETS AND LIABILITIES: (Rs. In Lakhs)


Fixed Assets

Gross Block 1712.72 1503.83 1592.48 1396.53 1362.73

Less: Depreciation 819.18 804.32 891.72 822.35 776.72

893.54 699.51 700.76 574.18 586.01

Less: Revaluation Reserve 0.00 3.47 10.24 17.00 23.77

Add: Capital Work-in-Progress 686.08 0.00 0.00 0.00 0.00

A Net Block 1579.62 696.04 690.52 557.18 562.24

B Investments 1.18 1.18 1.18 1.18 0.75

C Current Assets

Inventories 866.22 767.04 638.27 539.89 419.77

Sundry Debtors 772.54 773.60 963.61 599.69 380.90

Cash & Bank Balance 65.09 84.75 43.03 55.01 22.87

Loans & Advances 444.79 290.53 204.76 157.11 146.68

Total Current Assets 2148.64 1915.92 1849.67 1351.70 970.22

D Total Assets (A+B+C) 3043.36 2613.14 2541.37 1910.06 1533.21

Less: Liabilities & Provisions

Secured Loans 1669.78 878.88 1044.25 571.38 399.12

Unsecured Loans 372.98 122.65 69.77 75.4 100.77

Deferred Tax Liabilities 98.72 95.49 100.74 80.00 62.04

Deferred Sales Tax Liabilities(U P Govt.) 0.00 0.00 0.00 0.00 0.00

Current Liabilities 347.83 586.62 427.37 368.52 225.53

Provision for Taxation 271.86 64.64 50.60 19.80 12.00

E Total Liabilities 2761.17 1748.28 1692.73 1115.10 799.46

Net Worth (D-E) 968.27 864.86 848.64 794.96 733.75

REPRESENTED BY

F Share Capital 353.75 353.75 353.75 353.75 353.75

Reserves & Surplus 614.52 514.58 505.13 458.21 403.77


Less: Misc. Expenditure 0.00 0 0 0 0

G Net Reserves & Surplus 614.52 511.11 494.89 441.21 380.00

H Net Worth (F+G) 968.27 864.86 848.64 794.96 733.75


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Working Results for the First Quarter ended on 30th June 2007 (Provisional)

(Rs. In Lakhs)

Particulars Amount

INCOME

Sales 1833

Other Income 10

Total Income 1843

Total Expenditure 1749

Profit before Tax & depreciation 94

Provision for Depreciation 22

Provision for Taxation 10

Net Profit 62

Stock Prices of the Company on Bombay Stock Exchange during the last 4 weeks are as under:

Date Open (Rs.) High (Rs.) Low (Rs.) Close (Rs.)

2 July 2007 20.50 21.40 20.50 21.05

3 July 2007 20.40 20.40 19.75 20.25

4 July 2007 20.00 22.10 20.00 21.85

5 July 2007 23.35 24.00 22.35 22.80

6 July 2007 23.50 23.50 21.15 21.20

9 July 2007 22.75 22.75 21.50 21.55

10 July 2007 20.00 21.90 20.00 21.35

11 July 2007 21.60 23.00 21.40 22.65

12 July 2007 21.15 23.50 21.15 22.50

13 July 2007 21.85 23.00 21.85 22.35

16 July 2007 21.30 23.60 21.30 22.90

17 July 2007 22.10 22.85 21.75 22.20

18 July 2007 20.80 21.00 20.00 20.90

19 July 2007 21.05 25.00 21.05 22.75

20 July 2007 21.60 22.25 21.00 21.55

23 July 2007 22.00 22.05 21.50 21.60

24 July 2007 21.00 21.20 21.00 21.20

25 July 2007 20.40 21.50 20.40 21.20

26 July 2007 20.90 22.05 20.90 21.35

27 July 2007 20.20 21.40 20.15 21.20

(Source: www.bseindia.com)

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KANPUR PLASTIPACK LIMITED(Originally Incorporated as Kanpur Plastipack Private Limited on 26th July, 1971 under the Companies Act, 1956 as

Private Limited Company. Subsequently the Company was converted into Public Limited Company vide Special resolutionpassed on 9th September, 1985 and received the Fresh Certificate of Incorporation on 9th December, 1985)

Registered Office: D-19-20, Panki Industrial Area, Kanpur - 208 022.(The Registered Office of the Company was shiftedfrom 3/74, Vishnupuri, Kanpur - 208 002 to the above address with effect from 24th February, 1987)Tel No: (91) (0512)

2691113-6, Fax: (91) (0512) 2691117, Email: [email protected], website: www.kanplas.comContact Person: Mr. Jitendra Awasthi, Compliance Officer & Company Secretary

The Company is registered with the Registrar of Companies, U.P., 37/17, Westcott Building, The Mall, Kanpur – 208 001.Company Registration No.: 20-3444

Issue to be Listed at: Bombay Stock Exchange Limited (BSE)Issue Opens On: 13th August 2007, Issue Closes on: 12th September 2007

IV. GENERAL INFORMATION

BOARD OF DIRECTORS:

Our Company is run and managed by our Board of Directors comprising of 9 (Nine) Directors. Mr. Mahesh SwarupAgarwal is the Executive Chairman. The day-to-day affairs of our Company are being managed by Mr. Manoj Agarwal,Managing Director of our Company. Our Board of Directors comprises of the following:

Name of the Director Designation Status

Mr. Mahesh Swarup Agarwal Executive Chairman Promoter Director

Mrs. Santosh Agarwal Director Promoter Director

Mr. Manoj Agarwal Managing Director Promoter Director

Mr. Ashok Kumar Bhatnagar Whole-Time Director Executive Director

Mr. Banarsi Lal Manchanda Director Independent Director

Mr. Sobhagya Mal Jain Director Independent Director

Mr. Pradeep Kumar Goenka Director Independent Director

Dr. Jagan Nath Gupta Director Independent Director

Dr. G.N. Mathur Director Independent Director

BRIEF DETAILS OF EXECUTIVE DIRECTORS:

Mr. Mahesh Swarup Agarwal

Mr. Mahesh Swarup Agarwal, aged 80 years, is a Bachelor of Arts from Allahabad University having experience of 60years in running business and industrial enterprises. He is involved in Industrial Packaging Industry since 1948. Heformed Kanpur Plastipack Limited in the year 1971. Since then he is successfully running and managing the Company.Presently he is Executive Chairman of our Company and looks after overall management and policy decisions of theCompany.

Mr. Manoj Agarwal

Mr. Manoj Agarwal aged 52 years, Master of Management Studies from Birla Institute of Technology and Science (BITS)Pilani. He is son of Mr. M. S. Agarwal, the founder promoter of Kanpur Plastipack Ltd. having experience of 30 years in theCompany and industry. He is Managing Director of our Company. After completing his studies, he joined our Company inJanuary 1977 and was initially looking after production of our company. He has been a key person behind the developmentand growth of the business of our Company. He looks after Export, Marketing, Administration & General Managementfunctions of our Company.


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Mr. Ashok Kumar Bhatnagar

Mr. Ashok Kumar Bhatnagar, aged 59 years, is a Bachelor in Textile Technology (B. Tech) from Indian Institute of Technology(IIT) Delhi. He is having over 30 years hands on experience in this industry in India and Overseas. He has been with ourCompany since 1983 and is contributing his valuable knowledge, skills and experience in development and growth of theCompany. Presently he is overall in charge of Operations, Production, Design & Development and Projects.

COMPLIANCE OFFICER & COMPANY SECRETARYMr. Jitendra AwasthiD-19-20, Panki Industrial Area,Udyog NagarKanpur – 208 022Tel: (91) (0512) 2691113 - 6Fax: (91) (0512) 2691117Email: [email protected]

Investors may contact the Compliance Officer for any pre-issue / post- issue related matter such as non- receiptof LOF/ Letter of Allotment/ Share Certificate/ Refund Orders / Demat Credit etc.

LEGAL ADVISOR TO THE ISSUEMr. Navin K. Pahwa71, New York Tower – AOpp: Muktidham DerasarThaltej Chowkdi, ThaltejAhmedabad – 380 059.Tel: (91) (79) 26855101- 4Fax: (91) (79) 26855105Email: [email protected]

AUDITORS OF THE COMPANYM/s Pandey & Co.,Chartered Accountants,24/24, Karachi Khana,1st Floor, Kanpur – 208 001Tel: (91) (512) 2312753 /2372914Fax: (91) (512)-2532162Email: [email protected]

BANKERS TO THE COMPANYState Bank of IndiaIndustrial Finance Branch,B-13, Sarvodaya Nagar,Kanpur – 208 005Tel: (91) (0512) 2217016 / 2215149Fax. No. 0512-2219890Email: [email protected]

LEAD MANAGER TO THE OFFER

Vivro Financial Services Private LimitedManu Mansion 16/18, Shahid Bhagatsingh Road,Opp. Old Custom House, Fort,Mumbai-400 023Tel: 022-22657364, 22658397Fax: 022-2265840Contact Person: Mr. Keval GandhiE-mail: [email protected]: www.vivro.net

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REGISTRAR TO THE ISSUESkyline Financial services Pvt. Ltd.123, Vinoba PuriLajpat Nagar IINew Delhi – 110 024Tel: (91) (011) 29847136 / 29833777/ 30940462Fax: (91) (011) 29848352Contact Person: Mr. Virender RanaE-mail: [email protected]: www.skylinerta.com

BANKER TO THE ISSUEHDFC Bank Ltd.Mithakhali BranchNavrangpura,Ahmedabad- 380 009.Tel: 91-79-65138811Fax: 91-79-26560503

ADVISOR TO THE COMPANYM/s. Adesh Tandon & AssociatesCompany Secretaries,“Godavari Dham”13/384, Civil Lines,Kanpur- 208 001Tel: (91) (0512) 2535135 / 2530407Fax: (91) (0512) 2530407E-mail: [email protected]

STATEMENT OF INTERSE ALLOCATION OF RESPONSIBILITIES AMONGST LEAD MANAGERS.

Since the issue is managed by one Lead Manager, the entire responsibilities shall vest with the Lead Manager.

CREDIT RATING

This being an issue of Equity Shares, no credit rating is required.

TRUSTEES

This being a Rights Issue of Equity Shares, appointment of Trustees is not required.

MONITORING AGENCY

In terms of clause 8.17.1 of the Guidelines, since the issue size will not be exceeding Rs. 500 Crores, no Monitoring Agencyhas been appointed.

APPRAISING ENTITY

The objects of the rights issue for which the funds are being raised have not been appraised by any bank or financialinstitutions. The same is based on the assessment of working capital and other financial requirements of the Companymade by State Bank of India, Mid-Corporate Group, Government Business Branch, Kanpur.

UNDERWRITING

The present Rights Issue is not underwritten. However, the Promoters have confirmed vide their Letter of Intent dated 12th

March 2007 that they intend to subscribe to the full extent of their entitlement in the Issue. Promoters intend to apply foradditional Equity Shares in the Issue such that at least 90% of the Issue size is subscribed. As a result of this subscriptionand consequent allotment, the Promoters may acquire Equity Shares over and above their entitlement in the Issue, whichmay result in their shareholding in the Company being above their current shareholding.

This subscription and acquisition of additional Equity Shares by the Promoters, if any, will not result in change of control ofthe management of the Company and shall be exempt in terms of provision to Regulation 3(1)(b)(ii) of the SEBI (SubstantialAcquisition of Shares and Takeover) Regulations, 1997. As such, other than meeting the requirements indicated in Objectsof the Issue (refer “Particulars of the Present Issue”), there is no other intention/purpose for this Issue, including any intentionto delist the Company, even if, as a result of allotments to the Promoters through this Issue, the Promoter shareholding inthe Company exceeds their current shareholding.


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However, the Promoters have confirmed vide the letter dated 12th March 2007 that in case the Rights Issue of the Companyis completed with their subscribing to Equity Shares over and above their entitlement and as a result, if the public shareholdingin the Company after the Rights Issue falls below the “permissible minimum level” on the basis of which the securities of theCompany continue to be listed, they will make an offer for sale of their holdings so that the public shareholding is raised tothe “permissible minimum level” within a period of 3 months from the date of allotment in the proposed Issue, as per therequirements of sub-clause 17.1 and 17.2 of SEBI (Delisting of Securities) Guidelines, 2003 or as per any amendmentthereto or any other period as may be directed by SEBI or any appropriate authority.

In this context, the Promoters of Kanpur Plastipack Limited have provided following undertaking:

“We hereby undertake that, in case the Rights Issue of Kanpur Plastipack Limited is completed with the Promoters subscribingto Equity Shares over and above their entitlement and as a result, if the public shareholding in the Company after the RightsIssue falls below the “permissible minimum level” as specified in the listing condition or listing agreement, we shall, individuallyor jointly with the Promoter Group make an offer for sale of our holdings so that the public shareholding is raised to the“permissible minimum level” within a period of 3 months from the date of allotment in the proposed Rights Issue, as per therequirements of sub-clause 17.1 and 17.2 of SEBI (Delisting of Securities) Guidelines, 2003 or as per any amendmentthereto or any other period as may be directed by SEBI or any appropriate authority.”

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V. CAPITAL STRUCTURE

CAPITAL STRUCTURE OF THE COMPANY AS ON 31st JULY 2007

Particulars Nominal Amount Aggregate Amount(Rs.) at Issue Price (Rs.)

A. Authorized share capital

100,00,000 Equity Shares of Rs. 10/- each 10,00,00,000 10,00,00,000

B. Issued, Subscribed and Paid up share capital

35,37,500 Equity shares of Rs. 10/- each 3,53,75,000 3,53,75,000

C. Present Rights Issue in terms of this Letter of Offer

17,68,750 Equity Shares of Rs. 10/- each for cash at an IssuePrice of Rs. 20 per Equity Share (including premium of Rs. 10 perEquity Share) on rights basis to the existing equity shareholdersof the company in the ratio of 1 (One) Equity Share for every 2(Two) Equity Shares held on the record date i.e. 23rd July 2007 1,76,87,500 3,53,75,000

D. Subscribed and Paid up capital after the Right Issue(Assuming full subscription)

53,06,250 Equity shares of Rs. 10/- each 5,30,62,500 5,30,62,500

E Share Premium Account

- Before the Right Issue - 30,00,000

- After the Right Issue - 2,06,87,500

Details of Changes in Authorised Capital:

Sr. No. Particulars of Increase Date of Meeting Nature of Meeting

1. As on Incorporation Rs. 3 Lakhs

2. Increase from Rs. 3 Lakhs to Rs. 5 Lakhs 29/05/1975 EGM

3. Increase from Rs. 5 Lakhs to Rs. 10 Lakhs 19/09/1978 AGM


5. Increase from Rs. 25 lakhs to Rs. 50 Lakhs 24/03/1984 EGM

6. Rs. 50 lakhs to Rs. 200 Lakhs (Sub division of equityshares from Rs. 100/- Per Share to Rs. 10/- Per share) 09/09/1985 AGM



9. Increase from Rs. 500 Lakhs to Rs. 1000 Lakhs 27/01/2007 EGM


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NOTES TO THE CAPITAL STRUCTURE

1) BUILD UP OF EQUITY SHARE CAPITAL AS ON 31ST JULY 2007

Details of Capital Structure of the Company since inception are as follows:

Date of No. of Cumulative Face Issue Cumulative Consi- Nature ofallotment Equity No. of Value Price Paid Up deration Allotment/Remarks

shares Shares (Rs.) (Rs.) CapitalAlloted (Rs.)

19/07/1971 2 2 100 100 200 Cash Subscription to theMemorandum

31/03/1975 2998 3000 100 100 3,00,000 Cash Allotment to promoters












24/07/1985 4000 42000 100 100* 42,00,000 Cash Allotment to promoters

20/03/1986 1,40,000 5,60,000 10 10 56,00,000 Cash Private placement

20/11/1986 5,60,000 11,20,000 10 10 1,12,00,000 Bonus Bonus Issue

04/12/1986 15,00,000 26,20,000 10 10 2,62,00,000 Cash Allotment under Public issue

03/12/1992 1,00,000 27,20,000 10 10 2,72,00,000 Allot. AllotmentTo Depositors asconversion per the order of BIFR dated

of Depo. 14/07/1992

03/12/1992 3,36,200 30,56,200 10 10 3,05,62,000 Cash AllotmentTo Promoters asper the order of BIFR dated14/07/1992



Total 35,37,500 3,53,75,000

*Our Company, vide resolution passed by the shareholders of our Company at AGM held on 9th September 1985, subdividedthe face value of Equity Shares from one equity share of the face value of Rs. 100/- per equity share to 10 equity sharesof the face value of Rs. 10/- per equity share.

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2) The Shareholding Pattern of the Promoters and Promoters Group as on 31st July 2007 is as under:

Sr. Particulars Nos. of Shares % of the Pre-Issue % of theNo. Paid Up Post-Issue

Share Capital Paid Up ShareCapital*

Promoters

1 M. S. Agarwal 3,67,299 10.38 10.38

2 Manoj Agarwal 1,47,300 4.16 4.16

3 Santosh Agarwal 1,68,773 4.77 4.77

Sub-total-(a) 6,83,372 19.31 19.31

Promoters Group

4 M. S. Agarwal HUF 2,14,570 6.07 6.07

5 Manoj Agarwal HUF 1,36,420 3.86 3.86

6 Usha Agarwal 3,10,917 8.79 8.79

7 Jayatika Goyal 37,900 1.07 1.07

8 Kanika Agarwal 44,000 1.24 1.24

9 Shashank Agarwal 46,400 1.31 1.31

10 Alka Jain 54,540 1.54 1.54

11 KSM Exports Ltd. 1,52,700 4.32 4.32

12 MSA Investment & Trading Co. Pvt. Ltd. 3,32,450 9.40 9.40

Sub-total-(b) 13,29,897 37.60 37.6

Total 20,13,269 56.91 56.91

* Assuming all the existing shareholders fully subscribe to the Rights Issue.

3) PROMOTERS’ CONTRIBUTION AND LOCK-IN

The present Issue being a Rights Issue, as per clause 4.10.1(c) of extant SEBI (Disclosure and Investor Protection)Guidelines, the requirement of Promoters’ contribution is not applicable. As a consequence none of the equity sharesare locked in.

4) The Company, Promoters, Directors and Lead Manager to the Issue have not entered into any buy-back, standby orsimilar arrangements for purchase of any of the securities being issued through this Letter of Offer.

5) The Equity shares offered through this Rights issue shall be made fully paid up within 12 months from the date ofallotment.

6) Top Ten shareholders as on the date of filing of Letter of Offer with the Stock Exchange i.e.31st July 2007

Sr. No Name of Shareholder No. of shares % of share capital

1. M.S.Agarwal 3,67,299 10.38

2. MSA Investment & Trading Company Pvt. Ltd. 3,32,450 9.40

3. Usha Agarwal 3,10,917 8.79

4. M.S.Agarwal HUF 2,14,570 6.07

5. Santosh Agarwal 1,68,773 4.77

6 KSM Exports Ltd. 1,52,700 4.32

7. Manoj Agarwal 1,47,300 4.16

8. Manoj Agarwal HUF 1,36,420 3.86

9. Alka Jain 54,540 1.54

10. Shashank Agarwal 46,400 1.31

Total 1931369 54.60


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7) Top Ten shareholders as on 10 days prior to the date of filing of Letter of Offer with the stock exchange i.e. 21st July 2007.

Sr. No Name No. of shares % of share capital

1. M.S.Agarwal 3,67,299 10.38


3. Usha Agarwal 3,10,917 8.79

4. M.S.Agarwal HUF 2,14,570 6.07


6 KSM Exports Ltd. 1,52,700 4.32



9. Alka Jain 54,540 1.54

10 Shashank Agarwal 46,400 1.31

Total 1931369 54.60

8) Top Ten shareholders as on two years prior to the date of filling of the Letter Of Offer with the Stock Exchange i.e. on31st July 2005

Sr. No. Name of Shareholder No. of shares % of share capital


2. Usha Agarwal 3,28,238 9.28

3. M.S. Agarwal 3,24,700 9.18

4. M.S.Agarwal HUF 2,14,570 6.07

5. KSM Exports Ltd. 1,52,700 4.32




9. Alka Jain 54,540 1.54

10. Shashank Agarwal 46,400 1.31

Total 1933338 54.65

9) The shareholding pattern of the Promoter Group as on 31st July 2007 is as detailed below:

Name of the Person No. of shares Percentageshareholding

A. Promoters

(1) Mr. Mahesh Swarup Agarwal 3,67,299 10.38

(2) Mr. Manoj Agarwal 1,47,300 4.16

(3) Mrs. Santosh Agarwal 1,68,773 4.77

Sub Total (A) 6,83,372 19.31

B. Others

(1) Relative of Promoters (both falling under Promoter Groupand Person Acting in Concert) 4,93,757 13.95

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Name of the Person No. of shares Percentageshareholding

(2) Company in which 10% or more of the share capital is held bythe promoter his immediate relative firm or HUF in which thepromoter or his immediate relative is a member 4,85,150 13.72

(3) Company in which the Company mentioned in (2) above holds10% or more of the share capital - -

(4) HUF in which aggregate share of the promoter and his immediaterelatives is equal or more than 10% of the total 3,50,990 9.93

Sub Total (B) 13,29,897 37.60

Total (A+B) 20,13,269 56.91

10) Our promoters/Promoter Group/Directors have not purchased or sold any shares during the last 6 months.

11) Till date, the Company has not introduced any Employees Stock Option Scheme / Employee Stock Purchase Scheme.

12) The Equity Shareholders do not hold any warrant, option or convertible loan or any debenture, which would entitle themto acquire further Equity Share.

13) The terms of Issue to Non-Resident Equity Shareholders/ Applicants have been presented under the “Terms of the Issue”Section of this Letter of Offer.

14) At any given time, there shall be only one denomination of the Equity Shares. The Company shall comply with suchdisclosure and accounting norms as may be specified by SEBI from time to time.

15) There have been no allotments in past which are for consideration other than cash except for 5,60,000 Equity Sharesissued as bonus shares by the Company on 20th November 1986 in the ratio of 1 (One) Equity Share for every 1 (one)Equity Share held.

16) No further issue of capital by way of issue of bonus Equity Shares, preferential allotment, rights issue or public issue or inany other manner which will affect the capital of the Company, shall be made during the period commencing from the filingof the Letter of Offer with the SEBI till the Equity Shares issued under this Letter of Offer have been listed or applicationmoneys are refunded on account of the failure of the Issue.

17) Further, presently the Company does not have any proposal, intention, negotiation or consideration to alter the capitalstructure by way of split/ consolidation of the denomination of the shares/ issue of shares on a preferential basis or issueof bonus or rights or public Issue of Equity Shares or any other securities within a period of six months from the date ofopening of the present Issue. However, if business needs of the Company so require, the Company may alter the capitalstructure by way of split/ consolidation of the denomination of the shares/ issue of shares on a preferential basis or issueof bonus or rights or public issue of shares or any other securities during the period of six months from the date of listingof the Equity Shares issued under this Letter of Offer or from the date the application moneys are refunded on account offailure of the Issue, after seeking and obtaining all the approvals which may be required for such alteration.

18) The Company does not have any partly paid-up Equity Shares and there are no calls in arrears.

19) The promoters, directors and Lead Manager to the Issue have not paid any amount, whether direct or indirect and in cashor kind, in the nature of discount, commission, allowance or otherwise to any person.

20) All information shall be made available by the Lead Manager and the Issuer to the public and investors at large and noselective or additional information would be available for a section of investors in any manner whatsoever including atroad shows, presentations, research or sales reports etc.

21) The Promoters have confirmed that along with relatives and the companies controlled by the promoters (together hereinafterreferred to as “Promoter” in this clause) vide their letter of intent dated 12th March 2007 that they intend to subscribe to thefull extent of their entitlement in the Issue. The promoter reserves the right to subscribe to their entitlement in the Issueeither by themselves, their relatives or a combination of entities controlled by them, including by subscribing for renunciationif any made within the promoter group to another person forming part of the promoter group.

Promoters intend to apply for additional Equity Shares in the Issue such that at least 90% of the Issue Size is subscribed.As a result of this subscription and consequent allotment, the Promoters may acquire Equity Shares over and above theirentitlement in the Issue, which may result in their shareholding in the Company being above their current shareholding.


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This subscription and acquisition of additional Equity Shares by the Promoters, if any, will not result in change of controlof the management of the Company and shall be exempt in terms of proviso to Regulation 3(1)(b)(ii) of the SEBI (SubstantialAcquisition of Shares and Takeover) Regulations, 1997. As such, other than meeting the requirements indicated in Objectsof the Issue (refer “Particulars of the Issue”), there is no other intention / purpose for this Issue, including any intention todelist the Company, even if, as a result of allotments to the Promoters through this Issue, the Promoter shareholding in theCompany exceeds their current shareholding.

The Promoters have given an undertaking that in case the Rights Issue of the Company is completed with their subscribingto Equity Shares over and above their entitlement and as a result, if the public shareholding in the Company after theRights Issue falls below the “permissible minimum level” on the basis of which the securities of the Company continue tobe listed, the promoters will make an offer for sale of their holdings so that the public shareholding is raised to the“permissible minimum level” within a period of 3 months from the date of allotment in the proposed Issue, as per therequirements of sub-clause 17.1 and 17.2 of SEBI (Delisting of Securities) Guidelines, 2003 or as per any amendmentthereto or any other period as may be directed by SEBI or any appropriate authority.

22) The Company has not availed of any Bridge Loan to be repaid from the proceeds of the issue. However, due to thedisbursement condition of State Bank of India, the promoters of the Company have brought in Rs. 354 lakhs as unsecuredloans in the company which will be adjustable against the rights issue subscription due from promoters of the Company.

23) The Company has 7602 members as on 31st July 2007.

24) Shareholding pattern before and after the offer

Category Category Pre-Issue Post IssueCode Shareholding Shareholding

(A) Shareholding of Promoter and Promoter No. of No. ofGroup Shares % Shares %

(1) Indian

(a) Individuals/HUFs & Relatives 1,528,119 43.20 2292178 43.20

(b) Central Government / State Government(s) Nil Nil Nil Nil

(c) Bodies Corporate 485150 13.71 727725 13.71

(d) Financial Institutions/ Banks Nil Nil Nil Nil

(e) Any Other (Specify) Nil Nil Nil Nil

Sub Total (A) (1) 2013269 56.91 3019903 56.91

2. Foreign

(a) Individuals (Non Resident Individuals/Foreign Individuals) Nil Nil Nil Nil

(b) Bodies Corporate Nil Nil Nil Nil

(c) Institutions Nil Nil Nil Nil

(d) Any Other (Specify) Nil Nil Nil Nil

Sub-Total (A) (2) Nil Nil Nil Nil

Total Shareholding of Promoter andPromoter Group (A)=(A) (1)+ (A)(2) 2013269 56.91 3019903 56.91

(B) Public Shareholding

(1) Institutions

(a) Mutual Funds/ UTI Nil Nil Nil Nil

(b) Financial Institutions/Banks Nil Nil Nil Nil

(c) Central Government /State Government (s) Nil Nil Nil Nil

(d) Venture Capital Funds Nil Nil Nil Nil

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Category Category Pre-Issue Post IssueCode Shareholding Shareholding

(e) Insurance Companies Nil Nil Nil Nil

(f) Foreign Institutional Investors Nil Nil Nil Nil

(g) Foreign Venture Capital Investors Nil Nil Nil Nil

(h) Any Other (Specify) Nil Nil Nil Nil

Sub- Total (B) (1) Nil Nil Nil Nil

(2) Non Institutions

(a) Bodies Corporate 60796 1.71 91194 1.71

(b) Individuals-Individual shareholders holding 1373176 38.82 2059764 38.82nominal share capital upto Rs. 1 Lakh

Individual shareholders holding nominalshare capital in excess of 1 Lakh 90259 2.56 135389 2.56

(c) Any Other (Specify) Nil Nil Nil Nil

Sub-Total (B)(2) 1524231 43.09 2286347 43.09

Total PublicShareholding (B) = (B) (1)+(B)(2) 1524231 43.09 2286347 43.09

TOTAL (A) +(B) 3537500 100 5306250 100

(C) Shares held by Custodians and againstwhich Depository Receipts have beenissued Nil Nil Nil Nil

Grand Total 3537500 100 5306250 100

(Note: Post issue shareholding is based on the assumption that all shareholders will subscribe to their entire rightsentitlement.)

(25) The promoters of our company have brought in funds by way of unsecured loans to the extent of Rs. 354.00 Lakhs. Themoney brought in by the Promoters will be adjusted against the share application money due from them towards theirsubscription in the Rights issue and also towards subscription to un-subscribed portion, if any, in the present Rights Issue.

Brief details of unsecured loans mentioned above are as follows:

Sr. No. Particulars Rs. In Lacs

From Promoters/Directors

1. M. S. Agarwal 115.00

2. Santosh Agarwal 14.00

3. Manoj Agarwal 63.00

Total (A) 192.00

From Other Individuals/Other Entities/Group Concerns

1. KSM Exports Ltd. 27.00

2. KPL Packaging Pvt. Ltd. 18.00

3. Manoj Agarwal HUF 12.00

4. Usha Agarwal 44.00

5. Kanika Agarwal 16.00

6. Shashank Agarwal 25.00


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Sr. No. Particulars Rs. In Lacs

7. M. S. Agarwal HUF 10.00

8. Alka Airen 7.00

9. Vaibhav Airen 3.00

Total (B) 162.00

TOTAL (A+B) 354.00

(26) Disclosure under SEBI (SAST) Regulations 1997

Our company had received a letter from SEBI vide letter no. CFD/DCR/RC/TO/30587/05 dated January 11, 2005 forViolation of Takeover Regulations- Settlement by Consent Order for violating the Regulation 6 and 8 of SEBI (SubstantialAcquisition of Shares and Takeovers) Regulations, 1997 for the years 1997, 1998, 1999, 2000, 2001 & 2002.

Our Company had also received a letter from BSE vide letter no. List/sg/ak/vm/2003 dated 21st November 2003 for non-compliance of clause 40 of the Listing Agreement for filing takeover declarations. The said non-compliances were for theyear 1998 and 1999.

Our Company had clarified to BSE in its reply vide letter no. KPL/2003-04 dated 6th December 2003 about their complianceof clause 40 of the Listing agreement from time to time. Our Company had also resubmitted the Disclosure Statements forthe year 1998 and 1999 in terms of SEBI (Substantial Acquisition of Shares & Takeover Regulations) 1997.

Our Company had also clarified to the SEBI vide letter No. KPL/2004-05 dated February 25, 2005 in respect of the saiddisclosures and its compliances.

(27) Promoters acquisition of Shares in Excess of 55% paid-up share capital of the Company

Two of the promoters of our Company have acquired 38,467 shares during the year 2006-07 by way of purchases fromthe open market, which constitutes 1.09% of the paid up share capital of the Company. As the promoters were, before theacquisition as above, holding 55.82% of the paid up equity share capital of the Company, they were required to make apublic announcement under the Takeover Regulations. As a consequence of the not making public announcement, thepromoters of the Company may incur liability to an action in terms of Takeover Regulations and the SEBI Act.

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VI. OBJECTS OF THE ISSUE

The objects of this Rights Issue are:

1. To part finance

a) Acquisition of additional Factory Land and Built up Shed at Plot No. A-1 & A-2, Panki Industrial Area, Udyogkunj,Kanpur

b) Construction of new factory Building

c) Expansion and Modernization of fabric manufacturing facilities to increase to 10,000 MTPA from 6000 MTPA atexisting and new premises

d) Margin for additional working capital

2. To meet the Rights Issue expenses.

The main objects clause and objects incidental or ancillary to the main objects clause of the Memorandum of Associationof the Company enable the Company to undertake its existing activities and the activities for which the funds are beingraised through this Issue.

COST OF THE PROJECT

Since its inception in 1971 our Company has been engaged in the manufacture of HDPE woven sacks and fabrics with aninitial installed capacity of about 130 MTPA. Subsequently it also started manufacturing PP woven sacks and FIBCs. Theinstalled capacity has been progressively increased from 130 MTPA to 1890 MTPA, 3756 MTPA, 4900 MTPA from timeto time and finally to a present installed capacity of 6000 MTPA. The present production capacity is almost fully utilizedand in order to meet the growing demand in the export and domestic market, our Company has set upon a modernizationand expansion plan to eventually increase the installed capacity from the present 6,000 MTPA to 10,000 MTPA.

Although the Company is performing well in terms of its production, it is facing bottlenecks in respect of certain plant &machineries, which have become very old and are of outdated technology ultimately resulting in lower output. Thus ourCompany is unable to optimize its production capacity and meet the rapidly growing demands from the customers.

Our Company has now planned to increase the installed capacity by purchasing the latest plant & machineries withmodern technology so as to increase the productivity of company, reduce the cost of production and increasing theproduction capacity of its plant. Our Company has also planned to modernize some of its existing machineries by way ofreplacing with new machineries, so as to increase the productivity, reduce the wastes and reduce the production costsresulting in improvement in overall profitability. Accordingly, expansion and modernization of our capacity would lead toincrease in the installed capacity from 6,000 MTPA to 10,000 MTPA.

On account of increase in the installed capacity through proposed expansion and modernization plan, there is a requirementfor additional space for installation of new plant & machineries, as well as storage of work-in-progress and finished goods.Accordingly, our Company has entered into Memorandum of Understanding to purchase additional land bearing Plot No.A-1 & A-2, Panki Industrial Area, Site – V, Udyog kunj, Kanpur – 208 022 on lease from UPSIDC measuring about 16,357Sq. Mtrs. A built up factory shed of about 20,000 sq. ft. along with Power connection is already available on this land whichis located less than 1 kilometer from our present premises thus reducing our gestation period and facilitating our operationswith minimum disturbance of production.

Accordingly, our Company has finalized the cost of project as under:(Rs. In Lakhs)

Sr. No. Particulars 2006-07 2007-08 Total Percentage (%)

(a) Acquisition of Land at Plot No. A-1 andA-2, Panki Industrial Area, Site – V,PO: Udyogkunj, Kanpur – 208 022 475.00 - 475.00 22.09

(b) Construction of new factory building onPlot as mentioned in point (a). 50.00 300.00 350.00 16.28

(c) Plant & Machinery and Other Fixed Assets 340.00 885.00 1225.000 56.98

(d) Margin for working capital - 80.00 80.00 3.72

(e) Issue Expenses 3.75 16.25 20.00 0.93

TOTAL 868.75 1281.25 2150.00 100.00


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I. Break up of the Cost of Project

a) Acquisition of Land

Our Company has entered into a Memorandum of Understanding (MOU) on 5th January 2007 and additional MOU on 26th

February 2007 with M/s International Electron Devices Ltd. (IEDL) as an agreement to transfer the lease of Plot No. A-1& A-2, Panki Industrial Area, Udyogkunj, Kanpur from IEDL to our Company from UPSIDC ad measuring about 16357square meters for a total consideration of Rs. 475 Lakhs which also include a built up factory shed on 20,000 square feet.Under the terms of MOU, Our Company has paid a total consideration of Rs. 475 Lakhs to IEDL on 3rd January 2007 and22nd January 2007 constituting payment of Rs. 327.14 lakhs for factory land andRs. 147.86 lakhs for factory shed.

As per the prevailing UPSIDC law, we are required to enter into a fresh lease agreement with UPSIDC for residual leaseperiod of 80 years. We have initiated the procedure for entering into a fresh lease agreement with UPSIDC, which will takeapproximately 2 to 3 months to have the fresh lease agreement in our name.

b) Construction of New Building

Our company has purchased new plot at A-1 & A-2, Panki Industrial Area, Udyogkunj, Kanpur measuring about 16,357Sq. Mtrs. and having about 20,000 Sq. Ft. first class constructed Factory shed. Our Company proposes to construct newbuilding on the above plot and measuring about 92,500 Sq. Ft. (including 20000 sq. ft. first floor construction over andabove the existing building) of covered area for our increased operations.

The total cost for the extension of the new building is estimated at Rs. 497.86 Lakhs, which is as under:

Particulars Cost (Rs. In lakhs)

Purchase of an already constructed factory shed at plot no. A-1 & A-2, Panki Industrial Area. 147.86

Construction of new building as estimated by M/s. Abhyuday Constructions 350.00

Total 497.86

The estimated cost for further extension of new building comes to Rs. 350 Lakhs as estimated by M/s. AbhyudayConstructions, Consulting Engineers, Kanpur, as per the details given below.

Particulars Cost (Rs. In lakhs)

First Floor Construction of 20000 sq. ft over the existing building 60.00

Construction of factory Shed of around 72500 sq. ft and first floor thereon with RCC framestructure with slab, outer brick walls with plasters, steel windows, shutters, CC flooring, insideand outside white cement painting and staircase. 290.00

Total 350.00

c) Plant & Machinery

At present, our Company has 3 tapelines of Lohia Starlinger Ltd. make. The installed capacity of existing extruders are6000 MTPA. Our Company has proposed modernization and expansion plans by installing new machineries to createadditional facility and upgrading technology, thereby increasing the production capacity which in turn will improve theoverall capacity utilization of its installed capacity (existing and proposed) of 10000 MTPA and reduce the overall cost ofproduction thereby making the product more competitive. Since the Company has already achieved capacity utilization ofapproximately 97.50% and keeping in view business prospects as mentioned above, company expects to achieve capacityutilization of 96% and 90% of the expanded capacity (existing + proposed) in the year 2007-08 and 2008-09 respectively.

Further, while estimating the cost of plant & machineries, our Company has also taken into account excise duty, sales tax,freight, packing charges, insurance, installation and erection, etc. Accordingly, the estimated cost of plant and machineriesincluding other fixed assets is worked out to be Rs. 1225 Lakhs.

Out of the total cost of Rs. 1225 lakhs, our Company has already placed an order for the plant & machineries worth Rs.970.61 lakhs being 79.23 of the total cost of plant & machinery. We are yet to place the orders for the remaining plant &machineries and other fixed assets costing Rs. 254.38 lakhs being 20.77% of the total cost of plant & machineries forwhich we have received the quotations and placement of orders are under process:

35

(Rs. in Lakhs)

Name of Plant & Machineries Qty. Name of Vendor Estimated DETAILS OF DETAILS OF Value (inCost ORDERS QUOTATION %) of P&M

for whichorder isyet to beplaced.

I Extrusion and Circular Looms

1 Tape Line with Melt Capacity 1 Lohia Starlinger Ltd 185 KP/CG/07/66/2006-07 LS/SLS/III/68D/2006 -600 Kgs. /Hour Model E 120B/ dtd.14.12.20061400 LOREX.

2 Gas heating system 1 Technology Corporation 6 - -of India

3 Circular weaving machines

a) LSL 6- 20 with Double deck 16 Lohia Starlinger Ltd 134 - LS/SLS/III/68D/2006winder

b) LSL 6 M 28 Lohia Starlinger Ltd 150 KP/CG/07/66/2006-07 LS/SLS/III/68D/2006 -dtd.14.12.2006

4 Needle Looms formanufacturing webbi7ng belts

a) Model 4 belts 8 Ravitex Machines Pvt Ltd 23 - MKT/SLS/E/EC/KPL/22/Q726

b) Model 8 belts 2 Ravitex Machines Pvt Ltd 5 - MKT/SLS/E/EC/KPL/22/Q725

5 Combi Double Head Machine 4 Susmatex Machinery 5 - SM/Q/BR/2006/045 0.38with Creel of 272 Ends

6 Extrusion Caoting Lamination 1 Sunderlam Industries 56 - - 4.54Plant For Wide widthfabric 2.2 Meters

7 LLDPE/ LDPE Liner Plant 1 JASCO 12 - - 0.99

II Fabric Cutting Machines

1 Ultrasonic Cutting Machine 1 Alfa technologies 12 - AT/JB-0517/06

2 Fabric Cutting Machine 1 Alfa technologies 8 - AT/JB-0517/06

3 Baffle Cutting Machine 2 GCL India Pvt Ltd 2 - 102/06-07 0.20

4 Webbing Cutting Machine 1 Alfa technologies 4 - AT/JB-0515/06

III Conversion Equipment

1 Sewing machines. Set of 7 13 Stitchman 57 KP/CG/07/84/2006-07 ST/QN/0250 -M/Cs - (No of sets required is 13) dated 03.02.2007

2 Sewing machine Juki style for 4 Stitchman 2 KP/CG/07/84/2006-07 ST/QN/0251 -Circular fabric dated 03.02.2007

3 Sewing machines for Baffles 2 Stitchman 3 KP/CG/07/84/2006-07 ST/QN/0252 -dated 03.02.2007

4 Printing Machine

a) 4 colour Rotary Flaxographic 1 Navjiwan Exporters 12 - NEX/260/2006Machine

b) 3 colour Rotary Flaxographic 1 Navjiwan Exporters 9 - NEX/260/2006Machine

5 Bale Press 2 Alfa Technologies 18 - AT/JB-0513/06

6 Bag Cleaning Machine 1 Alfa Technologies 8 - AT/JB-0512/06

7 Inspection Table 15 P.N.S Constructions 3 - 0.25

8 Heat Cutters 120 Hi Tech Engineers 2 - 0.15

9 Industrial Metal Detector 1 JASCO 12 - 0.99

10 Shrink Wrap System 1 JASCO 6 - 0.49


36

Name of Plant & Machineries Qty. Name of Vendor Estimated DETAILS OF DETAILS OF Value (inCost ORDERS QUOTATION %) of P&M

for whichorder isyet to beplaced.

IV Reprocessing Machine 1 DollPlast Machinery Inc 15 - 2199 1.21

V Accessories

1 Cheese Pipes for winding tapes 200000 Metelec Engineers 33 - 343/KPL/2006-07

2 Ultrasonic Cutters For foodgarde bags installed on 2looms only 2 RoopTelsonic Ultrasonix Ltd 6 - QR/01/02 0.53

3 Extra Surface Winders 2 Lohia Starlinger Ltd 2 - Proforma Invoice 0.14Double deck No.LS/SLS/III/68D/

2006 dtd. 11-12-06

4 Workshop Equipment Like Lot Mohan Machinery Stores 6 - N/4 0.49lathes, welding machines etc

5 Weighing Equipment Machines 8 Panchoo Gopal Karmokar 3 - PGKGS/KPL/ 0.24Grand Sons 0921206/151

Weighing Equipment Machines 1 Adkon Weighing Solution 1 - 326 0.08

6 Stainless Steel Tables and tops 20 P.N.S Constructions 6 - - 0.49

7 Laboratory Equipments Lot JASCO, Kamal Metal 7 - KMI/QUO/6520 0.59Universal breaking strength Industriestester and allied equipmentBreakdown Voltage tester

VI Materials Handlings

1 Electric Hoists 4 Shreeji Enterprises 4 - SE/KPL/PGM/ 0.32099-1689

2 Forklift 2 Godrej and Boyce Mfg Co Ltd 18 - AW/MHE/KPP/1108

3 Hopper loader and Dozing Unit 4 Prasad Koch Technik Pvt ltd 55 - PKTPL/NDO/ 4.51for tape lines For feeding and 2006-07/422proper mixing of material onplants

4 Plastic Crates - 5000 Neelkamal Crates and 10 - KNP/1360/NCB/06Bins Pvt ltd

5 Materials Handling, Trolleys, Lot Trel Co., Cease Fire 6 - TRE/SKG/Q-211/ 0.49Store Storage System, Industries Ltd., 2006-07Fire Fighting Equipment, under Aditya Engg. Worksground tank etc

6 Lift 4 KAGO Elevators 6 - NO/KEK/90 0.50

VII Utilities

1 Air Cooling and handling System Lot Advance Cooling corporation 23 - -

2 Air Compressor 250 cfm Dryer 1 Aircon Engineers 11 - AE/161975/HSK 0.94

3 Chilling Plant

a) Plant Package Unit 25 TR 1 Armac Cooling Systems Ltd 10 - ASO/OFFER/3164/06 0.84

b) Plant Package Unit 10 TR 3 Armac Cooling Systems Ltd 15 - ASO/OFFER/3164/06 1.20

4 Cooling Tower - 100 TR 3 Delta Cooling Towers Pvt ltd 4 - DCT/QTN/2006-07/1000

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5 Water Softening Plant 2 Bee Gee Associates 2 - BGA/RO/06-07

6 Distribution Transformer 1 Sai Electricals 19 - Se/nt/K&I/qtn/with AVR — 1 MVA K&l3/e1255

7 DG Set 500 KVA 1 Jaksons Ltd 29 - JL/QC03/SM/2K6-B1163

8 Water purification system 1 United Sales Corporation 2 - 2067/06for Drinking water

9 Air Curtains for Dust prevention 4 Envair Electrodyne Ltd 3 - CAS/QM-181/ DBSIn Food grade facilty

10 Arrangement for Clean room Lot Ajanta Steel Industry 3 - - 0.21facilty

VIII Others

1 Office Furniture and Lot Malhotra Air. Corp., 12 - 55789Equipment Like A/cs, Copiers, Shivangi Comp. P. Ltd.,computers Ajanta Steel Ind.

2 ERP package MATRIX INFOSYSTEMS 26 - Matrix/KPL EMS/LIMITED Proposal1

dtd. 0802-07

3 Erection and Commisioning Lot Elcon Switchgears 54 - EL/Q/19and Electricals India Pvt Ltd

IX Building Related

1 RCC - Over existing Building 20000 Abhyuday 60 - -at New premises in Sq ft. Constructions

2 False roofing New Unit in Sq ft 20000 Creative Concepts 8 - -

3 Flooring: Epoxy Coating 30000 Usha Enterprises 19 - -In bag making section in Sq. Ft.

4 Bore Well at D19/D20, 1 A V Corporation 1 - AVC 412 & 413/07Panki Ind. Area

5 Bore well at new unit 1 R R Traders 1 - RRT/210 & 211/07A-1 & A-2, Panki Ind. Area,Kanpur

6 Storage Systems, Panels, 1 Ajanta Steel Industry 1 - -Bolts & Nuts

7 Additions and Changes at 1 S.K. Enterprises 2 - -Existing premises

X Provision for Contingencies 8

TOTAL 1225 20.77

d) Margin Money for Working Capital requirement

(Rs. In Lakhs)

Particulars Actual Actual ProjectedMarch 31, 2006 March 31, 2007 March 31, 2008

Inventories 767 866 1256

Receivables 585 772 1049

Loans & Advances 54 445 55

Other Current Assets 266 65 283

Total Current Assets 1672 2148 2643

Less: Creditors 145 347 214


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Particulars Actual Actual ProjectedMarch 31, 2006 March 31, 2007 March 31, 2008

Other Current Liabilities 225 272 378

Total Current Liabilities excludingBank Borrowings 370 620 592

Working Capital Gap 1302 1528 2051

Less: Bank Borrowings 782 982 1425

Net Working Capital Gap (NWCG) 520 546 626

Margin for Additional working capital 80requirement

e) Issue Expenses

The expenses of the Issue to be borne by the Company are estimated to be around Rs. 20 lakhs (0.93% of the issue size)as under:

Sr. Particulars Rs. in Lakhs % of total % of totalNo. issue expenses issue size

1 Lead Manager Fees 9.00 45.00 2.54

2 Registrar Fees 1.00 5.00 0.28

3 Printing and Statutory Advertisement Cost 6.00 30.00 1.70

4 Bank and other charges 2.00 10.00 0.57

5 Other Expenses 2.00 10.00 0.57

Total 20.00 100.00 5.66

All the expenses for the Rights Issue will be borne out of its proceeds.

MEANS OF FINANCE (Rs. In Lakhs)

Sr. No. Particulars 2006-07 2007-08 Total Percentage(%)

(a) Proceeds of the Rights Issue Nil 353.75 353.75 16.45

(b) Foreign currency Term Loan from SBI 600.00 650.00 1250.00 58.14

(c) Unsecured Loans from the Promotersof the Company 153.00 - 153.00 7.12

(d) Internal Accruals 200.00 193.25 393.25 18.29

TOTAL 953.00 1197.00 2150.00 100.00

[Note: In order to start the implementation of modernization and expansion project, the promoters of our Company havealready brought in an amount of Rs. 354 Lakhs as unsecured loans in the company.]

The total project cost is proposed to be funded through (i) Proceeds of the present rights Issue; (ii) Foreign Currency TermLoan of State Bank of India; (iii) Unsecured Loans from the promoters of the Company; and (iv) the balance amountthrough internal accruals.

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In regard to the proceeds of the present rights issue, our promoters have already brought in their part of contribution in thepresent rights issue by way of unsecured loan to the extent of Rs.354 Lakhs. The break-up of unsecured loans given byour promoters/promoter group/friends are given below:

Sr. No. Particulars Relationship Rs. In Lacs

1. KSM EXPORTS LTD Group Company 27.00

2. M.S.AGARWAL Promoter Director 115.00

3. MANOJ AGARWAL HUF Promoter 12.00

4. SANTOSH AGARWAL Promoter Director 14.00

5. USHA AGARWAL Promoter Group 44.00

6. KANIKA AGARWAL Promoter Group 16.00

7 KPL PACKAGING PVT. LTD. Group Company 18.00

8. MANOJ AGARWAL Promoter Director 63.00

9. SHASHANK AGARWAL Promoter Group 25.00

10. M.S. AGARWAL HUF Promoter Group 10.00

11. ALKA AIREN Friends 7.00

12. VAIBHAV AIREN Friends 3.00

TOTAL 354.00

The adjustment towards share application money would be in respect of promoters and directors both.

Further, the adjustment towards rights issue entitlement would be on the pro rata basis of their contribution towards theloan.

The details of adjustment of unsecured loans against share application money are as follows: (Rs. in Lakhs)

Sr. Name of the Person Promoter/ Proposed Share Outstanding Adjustment ofNo. Director Application Unsecured Unsecured

Amt. Loans Loans

1. KSM EXPORTS LTD Group Company 15.27 27.00 15.27

2. M.S.AGARWAL Promoter Director 36.73 115.00 36.73

3. MANOJ AGARWAL HUF Promoter 13.64 12.00 12.00

4. SANTOSH AGARWAL Promoter Director 16.88 14.00 14.00

5. USHA AGARWAL Promoter Group 31.10 44.00 31.10

6. KANIKA AGARWAL Promoter Group 4.40 16.00 4.40

7. KPL PACKAGING PVT. LTD Group Company - 18.00 -

8. MANOJ AGARWAL Promoter Director 14.73 63.00 14.73

9. SHASHANK AGARWAL Promoter Group 4.64 25.00 4.64

10. M.S. AGARWAL HUF Promoter Group 21.46 10.00 10.00

Total 158.85 344.00 142.87


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M/s. Pandey & Co., Chartered Accountants, Kanpur has certified by their certificate dated 10th July 2007 the utilization ofunsecured loans of Rs. 354 lakhs taken as above from the promoters and friends of the Company as follows:

(Rs. In Lakhs)

Sr. No. Particulars Amount

1 Land 138.83

2 Building under construction 47.09

3 Plant & Machinery 168.08

Total 354.00

Our Company will comply and observe the applicable provisions of Companies Act, 1956 for conversion of loan intoequity at appropriate time.

The extent of the cashflow to the company from the present rights issue will be as under:

(Rs. In Lakhs)

Particulars Amount

Proceeds of the Rights Issue 353.75

Less: Adjustment towards the Share Application amount brought in by promoters and promotergroup of the Company by way of Unsecured Loans 142.87

Net Proceeds receivable by the company under the present Rights Issue 210.88

The unsecured loans as brought in above by the promoters of the Company shall be adjustable against the amount duefrom the promoters for their part of subscription in the present rights issue.

Any excess of unsecured loans over their required subscription in the present rights issue will be retained as unsecuredloans in the Company as a part of means of finance.

Pursuant to the application of the Company, State Bank of India, Mid Corporate Group, Kanpur Centre, Kanpur hassanctioned Foreign Currency Term Loan of Rs.1250 Lakhs in addition to other financial working capital assistance vide itsletter no. MCG/GBB-K/2006-07/411 dated February 10, 2007.

Terms of Secured Loan of SBI:

Name of the Borrower Kanpur Plastipack Limited

Name of Facility Foreign Currency Term Loan

Amount of Loan Rs. 1250 lakhs

Currency Indian Rupees

Purpose Purchase of Land, Plant & Machineries, Construction of new factory building and otherfixed assets

Primary Security 1st Charge on the entire Fixed Assets of the Company (both present and future) havingWDV of Rs. 6.97 crores as per the Balance Sheet as on 31st March 2006.

Collateral Security Extension of Charge on entire current assets of the Company

Period of Term Loan The period of term loan including moratorium is 8 years. The outstanding in FCNR (B)– Term Loan account will be converted in to rupee term loan after the end of the 5years.

Rate of Term Loan • At SBAR minimum 11.50% for the Rupee Term Loan• 250 bps over 6 months LIBOR for a tenor of 5 years

Repayment Schedule FCTL shall be repayable in 27 quarterly installments of as under with 1st Installmentfalling due on 30th June 2008.

41

Due Date of Principal Payment Rs.

30.06.2008 10,00,000/-

30.09.2008 10,00,000/-

31.12.2008 20,00,000/-

31.03.2009 20,00,000/-

30.06.2009 35,00,000/-

30.09.2009 35,00,000/

31.12.2009 35,00,000/

31.03.2010 35,00,000/

30.06.2010 35,00,000/

30.09.2010 35,00,000/

31.12.2010 35,00,000/

31.03.2011 35,00,000/

30.06.2011 55,00,000/

30.09.2011 55,00,000/

31.12.2011 55,00,000/-

31.03.2012 55,00,000/-

30.06.2012 60,00,000/-

30.09.2012 60,00,000/-

31.12.2012 60,00,000/-

31.03.2013 60,00,000/-

30.06.2013 60,00,000/-

30.09.2013 60,00,000/-

31.12.2013 60,00,000/-

31.03.2014 60,00,000/-

30.06.2014 70,00,000/-

30.09.2014 70,00,000/-

31.12.2014 70,00,000/-

Total Repayment 12,50,00,000/-

KPL has given an undertaking that firm arrangements for finance (to meet the cost of the project) through verifiable meanshave been made towards 75% of the above stated means of finance, excluding the amount to be raised through this RightsIssue.

APPRAISALThe objects of the rights issue for which the funds are being raised have not been appraised by any bank or financialinstitutions. The same is based on the assessment of working capital and other financial requirements of the Companymade by State Bank of India, Mid-Corporate Group, Government Business Branch, Kanpur.

SCHEDULED PLAN OF IMPLEMENTATION

Particulars Start Date Completion Date

Acquisition of Land (including some part of Building constructed thereon) February, 2007 February, 2007

Construction of new building on Plot No. A-1 and A-2, Panki IndustrialArea, Site – V, PO: Udyogkunj, Kanpur – 208 022 March, 2007 September, 2007

Placing of orders for machinery, electrical fittings, computers etc.(Including Payment of advances as per the terms of suppliers) January, 2007 August, 2007

Commencement of Production by replacement of existing plant &machineries at the existing factory building February 2007 August, 2007

Commencement of Production by installation of new plant &machineries at the new factory building located at A-1 & A-2,Panki Industrial Area, Udyogkunj, Kanpur August, 2007 December, 2007


42

Funds Deployed

Our Company has incurred an expenditure of Rs. 1101.91 Lakhs (Rupees Eleven Crores One Lakh and Ninety One Thousand)on the expansion and modernization project till 7th July 2007 as per the Certificate of M/s. Pandey & Co., Chartered Accountants,Kanpur dated 10th July 2007. The break up of the expenditure incurred till date are given as under:

Sr. Particulars Rs. in LakhsNo.

Cost Incurred till date

1 Purchase of Factory Land 327.14

2 Purchase of Factory Building, Roads, Boundry wall, etc. 147.86

3 Building Under Construction 172.66

4 Purchase of Plant & Machinery and Advances given 432.00

5 Rights Issue Expenses 10.06

6 Misc. Expenses 12.19

Total 1101.91

Means of Finance

1 Disbursement of SBI FITL Loan 583.01

2 Temporary Unsecured Loan from promoters of the Company 354.00

3 Internal Accruals 164.90

Total 1101.91

Interim use of Funds

Pending any use as described above, proceeds of the Issue shall be used by the Company for reduction of cash creditlimits and/or invest the funds in high quality, interest/dividend bearing short term/long term liquid instruments includingdeposits with banks for the necessary duration. The Company may also deploy the proceeds of this Issue in temporarilyreducing its exposure to working capital borrowings from bank. Such deposits/investments would be in accordance withthe directives of the Board of Directors.

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VII. BASIC TERMS OF THE ISSUE

Face Value Each Equity Share shall have the face value of Rs. 10/- each.

Issue Price Each Equity Share is being offered at a price of Rs. 20/- (Including a premium of Rs. 10)

Entitlement Ratio The Equity Shares are being offered on rights basis to the existing Equity Shareholdersof the company in the ratio of 1 (One) Equity Share for every 2 (Two) Equity Sharesheld as on the record date i.e. 23rd July 2007.

Market Lot The market lot for the Equity Share is 1. In case of physical certificates, the Companywould issue one share certificate to a single Shareholder.

Terms of Payment 100% of the issue price i.e. Rs. 20/- shall be payable on Application.

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


44

VIII. BASIS FOR ISSUE PRICE

Qualitative Factors

The Company is having established presence in the packaging industry for more than three decades.

The Promoter and Directors of our Company are qualified engineers and MBAs having wide experience in the Plasticwoven sacks and FIBC industry.

The Company has ability to offer Tailor made bulk-packaging solutions to the customers all over world by adoptingcustomized design to suit individual customer’s requirements.

Company’s products are well accepted in the industry and it enjoys goodwill from the customers.

The Company has been able to offer full range of FIBCs products which includes low end application Bags like BuildersBags, Medium End Application Bags i.e. Dust proof & Baffle Bags and High end application Bags like Foodgrade, conductive& UN Bags.

The Company has been able to keep low cost of production as compared to competitors making its products globallycompetitive owing to availability of cheap labor force and constant upgradation of production technologies.

The Company has come out of BIFR as a sick unit and now is a profit making entity growing rapidly both in terms ofbusiness and profitability.

Quantitative Factors

1. Adjusted Earning Per share

EPS (Rs.) Weight

(a) 2004-05 2.20 1

(b) 2005-06 1.14 2

(c) 2006-07 4.11 3

(d) Weighted Average EPS 2.80

2. Price/Earning Ratio (P/E) in relation to issue price of Rs. 20 per share

(a) Based on 2006-07 EPS 4.87

(b) Based on Weighted Average EPS 7.14

Industry P/E ratio:

i. Highest 39.83

ii. Lowest 5.41

(Source: Center for Monitoring of Indian Economy as on 11th July 2007)

Comparison of key ratios with the Company of comparable size in the same Industry Group

Sr. Company Name Turnover B.V. (Rs.) RONW EPS P/E MarketNo. (Rs. In Price as

Crores) on 11-7-07

1 Rishi Packers Ltd. 29.70 23.79 5.10% 1.22 11.55 14.10

2 Neo Sack Ltd. 62.00 27.49 4.77 1.18 39.83 47.00

3 Issuer CompanyKanpur Plastipack Ltd. 69.13 27.37 15.00% 4.11 5.41 22.25

[Source: CMIE (Center for Monitoring of Indian Economy as on 11th July 2007)]

45

3. Return on Net worth

Year RONW (%) Weight

(a) 2004-05 9.18 1

(b) 2005-06 4.65 2

(c) 2006-07 15.00 3

(d) Weighted Average RONW 10.58

4. Minimum Return on Increased Net Worth required to maintain pre-issue EPS of Rs. 4.11 is 22.52%.

5. Net Asset Value

Particulars Amt. In Rs.

(a) As on 31st March, 2005 23.99

(b) As on 31st March, 2006 24.45

(c) As on 31st March, 2007 27.37

(a) After issue 24.91

(b) Issue Price 20.00

The issue price of Rs. 20 per share is 2 times the face value of Rs. 10/- per share of the Equity Shares being issued. Theminimum return on net worth required to maintain pre-issue EPS of Rs. 4.11 is 22.52 % whereas the Company has earnedRONW of 15% for the twelve months period ended 31st March 2007 and 4.96% for the period ended 31st March 2006. Theoffer price of Rs. 20 is 4.87 times the pre-issue EPS, which is lower than the simple average P/E multiple 22.62 for thecomparable companies in the industry in which the Company operates. In view of the reasons mentioned above, ourCompany and the Lead Managers to the issue, in consultation with whom the Price has been decided, are of the opinionthat the Issue Price is reasonable and justified.

The face value of the Equity Share is Rs. 10/- per equity share and the Issue Price of Rs. 20 per Share is 2 (two) times ofthe face value.


46

IX. TAX BENEFITS

The Company is expected to get the following tax benefits according to the report dated 10th July 2007 submitted by itsstatutory auditor and reported hereunder.

Statutory Auditors' Letter

10th July 2007

The Board of Directors,Kanpur Plastipack LimitedD-19-20, Panki Industrial Area,Kanpur-208022

Dear Sirs,

Sub: Tax Benefits available under the Rights Issue of the Company

We have been asked by the Company vide their letter dated December 15, 2006 to advise the tax benefits which would beavailable to the Company and the shareholders of the Company under the current direct tax laws.

The tax benefits listed below are the possible benefits available under the current tax laws in India. Several of these benefitsare dependent on the Company or its Shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence theability of the Company or its Shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which basedon business imperatives they face in the future, they may not choose to fulfill.

The following tax benefits shall be available to the Company and the Shareholders under Direct Tax.

1. To the Company

There is no additional benefit arising to the Company under the Income-tax Act, 1961, by issue of Right Equity Shares tothe existing Shareholders.

2. To the Members of the Company

I. Under the Income-tax Act, 1961 (the “IT Act”)

A. Resident Members

1. Under Section 10 (34) of the IT Act income earned by way of dividend from domestic company referred to in Section 115Oof the Income Tax Act is exempt from income tax in the hands of the shareholders.

2. Under Section 10 (38) of the IT Act, long term capital gain arising to the shareholder from the transfer of a long term capitalasset, being an equity share in the company or unit of an equity oriented Mutual fund (i.e. capital asset held for the periodof twelve months or more) entered into in a recognized stock exchange in India after the notified date, is exempt.

3. In accordance with Section 10 (23D) of the IT Act, all mutual funds set up by Public sector banks or public financialinstitutions or mutual funds registered under the Securities and Exchange Board of India (SEBI) or authorized by theReserve Bank of India subject to the conditions specified therein are eligible for exemption from Income Tax on theirentire income, including income from investment in the shares of the company.

4. Under Section 54EC of the IT Act and subject to the conditions and to the extent specified therein, long term capital gains[not covered under the section 10 (38) of the Act] arising from the transfer of shares of the company will be exempt fromcapital gains tax if the capital gain is invested within a period of 6 months from the date of transfer in the bonds issued by-

- National Highway Authority of India

- Rural Electrification Corporation Ltd.

If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. The amount so exemptedshall be chargeable to tax subsequently, if the specified assets are transferred or converted within three years from thedate of their acquisition.

5. Under Section 54F of the IT Act and subject to the conditions and to the extent specified therein, long term capital gains[in cases not covered under Section 10 (38) of the Act] arising to an individual or Hindu Undivided Family (HUF), ontransfer of shares of the company, will be exempt from capital gains tax, subject to other conditions, if the net salesconsideration from such shares are used for purchase of residential house property within a period of one year before or

47

two years after the date on which the transfer took place or for construction of residential house property within a periodof three years after the date of transfer.

6. Under Section 111A of the IT Act, capital gains arising to a shareholder from transfer of short term capital assets, being anequity share in a company or unit of an equity oriented Mutual Fund, entered into in a recognized stock exchange in India[after the date of coming into force of Chapter VII of the Finance (No.2) Bill, 2004] will be subject to tax at the rate of 10%(plus applicable surcharge and educational cess on income tax).

7. Under Section 112 of the IT Act and other relevant provisions of the IT Act, long term capital gains [not covered undersection 10 (38) of the Act] arising on transfer of shares in the Company, if shares are held for a period of exceeding 12months, shall be taxed at a rate of 20% (plus applicable surcharge and educational cess on income tax) after indexationas provided in the second proviso to Section 48 or at 10% (plus applicable surcharge and educational cess on income tax)without indexation, at the option of the Shareholders.

B. Non-Resident Indians/ Members other than FIIs and Foreign Venture Capital Investors

1. By virtue of Section 10 (34) of the IT Act, income earned by way of dividend income from another domestic companyreferred to in section 115O of the Income Tax Act, is exempt from tax in the hands of the recipients.

Tax on income from investment and long Term Capital Gains:

- A Non Resident Indian (i.e. individual being a citizen of India or person of Indian Origin) has an option to be governedby the provisions of Chapter XIIA of the Act, viz., “Special Provisions Relating to certain income of Non-Residents”.

- Under section 115E of the IT Act, where shares in a company are subscribed for in convertible Foreign Exchange bya Non Resident Indian, capital gains arising to such Non Resident Indian on transfer of shares held for a period ofexceeding 12 months shall [in case not covered under Section 10 (38) of the I.T Act] be concessionally taxed at a flatrate of 10% (plus applicable surcharge and educational cess on income tax) without indexation benefit but withprotection against foreign exchange fluctuation under the first proviso to section 48 of the IT Act.

2. Capital gain on transfer of Foreign Exchange Assets, not to be charged in certain cases.

Under provisions of Section 115F of the IT Act, long term capital gains not covered under section 10 (38) of the Act arisingto a Non Resident Indian from the transfer of shares of the Company subscribed to in convertible Foreign Exchange shallbe exempt from income tax if the net consideration is reinvested in specified assets within six months of the date oftransfer. If only part of the net consideration is so reinvested, the exemption shall be proportionately reduced. The amountso exempted shall be chargeable to tax subsequently, if the specified assets are transferred or converted within threeyears from the date of their acquisition.

3. Return of Income not to be filed in certain cases

Under provisions of Section 115G of the IT Act, it shall not be necessary for a Non Resident Indian to furnish his return ofincome if his only source of income is investment or long term capital gains or both, arising out of assets acquired,purchased or subscribed in convertible foreign exchange and tax deductible at source has been deducted there from.

Other Provisions

• Under Section 115-I of the IT Act, a Non Resident Indian may elect not to be governed by the provisions of ChapterXII-A for any assessment year by furnishing his return of income under Section 139 of the IT Act declaring therein thatthe provision of the Chapter shall not apply to him for that assessment year and if he does so the provisions of thisChapter shall not apply to him, instead the other provisions of the IT Act shall apply.

4. Under the first proviso to Section 48 of the IT Act, in case of a Non Resident Indian, in computing the capital gains arisingfrom transfer of share of a company acquired in convertible foreign exchange (as per exchange control regulations),protection is provided from fluctuations in the value of rupee in terms of foreign currency, in which the original investmentwas made. Cost indexation benefits will not be available in such a case.

5. Under Section 54EC of the IT Act and subject to the extent specified therein, long term capital gains [not covered underSection 10 (38) of the Act], arising from the transfer of shares of the company, will be exempt from capital gains tax if thecapital gains are invested within a period of 6 months from the date of transfer, in the bonds issued by-


- Rural Electrification Corporation Ltd.


48

If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. The amount so exemptedshall be chargeable to tax subsequently, if the specified assets are transferred or converted within three years from thedate of their acquisition.

6. Under Section 54ED of the IT Act and subject to the conditions and to the extent specified therein, long term capital gains[not covered under Section 10 (38) of the Act] arising on the transfer of shares of the company, will be exempt from capitalgains tax if the capital gain is invested in equity shares of Indian public company, forming part of an eligible public issue,within a period of 6 months after the date of such transfer. If only part of the capital gain is so reinvested, the exemptionshall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the specifiedassets are transferred or converted within one year from the date of their acquisition.

7. Under Section 54F of the IT Act and subject to the conditions and to the extent specified therein, long term capital gains[in cases not covered under Section 10 (38) of the IT Act] arising to an individual or Hindu Undivided Family (HUF) ontransfer of shares of a company will be exempt from capital gains tax subject to other conditions, if the sale proceeds fromsuch shares are used for purchase of residential property within a period of one year before or two years after the date onwhich transfer took place or for construction of residential house property within a period of three years after the date oftransfer.

8. Under Section 112 of the IT Act and other relevant provisions of the IT Act, long term capital gains [not covered underSection 10 (38) of the IT Act] arising from the transfer of shares in a company, if shares are held for a period exceeding 12months shall be taxed at a rate of 20% (plus applicable surcharge) after indexation as provided in the second proviso tosection 48 of the IT Act. However, indexation will not be available if the investment is made in foreign currency as per thefirst proviso to section 48 stated above, or it can be taxed at 10% (plus applicable surcharge and the education cess onincome tax) without indexation at the option of assessee.

9. Under Section 111A of the IT Act, capital gains arising to a shareholder from the transfer of short terms capital assets,being an equity share in the company or unit of an equity oriented mutual fund, entered into in a recognized stockexchange in India [after the date of coming into force of Chapter VII of Finance (No.2) Bill, 2004] will be subject to tax atthe rate of 10% (plus applicable surcharge and the education cess on income tax).

C. Foreign Institutional Investors (FIIs)

1. By virtue of Section 10 (34) of the IT Act, income earned by way of dividend income from another domestic companyreferred to in section 115O of the IT Act, are exempt from tax in the hands of the institutional investor.

2. The income realized by FIIs on sale of shares in the company by way of short term capital gains referred to in Section111A of the Act would be taxed at the rate of 10% (plus applicable surcharge and educational cess on income tax) as perSection 115AD of the IT Act.

3. The income by way of short term capital gains (not referred to in section 111A of the IT Act) or long term capital gains [notcovered under Section 10 (38) of the IT Act] realized by the FIIs on sale of shares in the company would be taxed at thefollowing rates as per Section 115AD of the IT Act.

- Short term capital gains – 30% (plus applicable surcharge and educational cess on income tax).

- Long term capital gains – 10% (without cost indexation plus applicable surcharge and education cess on income tax)[shares held in a company would be considered as a long term capital asset provided they are held for aperiod exceeding 12 months].

4. Under Section 54EC of the IT Act and subject to the conditions and to the extent specified therein, long term capital gains[not covered under Section 10 (38) of the IT Act] arising from the transfer of shares of the company, will be exempt fromcapital gains tax, if the capital gains are invested within a period of 6 months after the date of such transfer for a period of3 years in the bonds issued by-


- Rural Electricity Board

5. Under Section 54ED of the IT Act and subject to the conditions and to the extent specified therein, long term capital gain[not covered under Section 10 (38) of the IT Act] on the transfer of shares of the company, will be exempt from capitalgains tax if the capital gains are invested in shares of an Indian company forming part of an eligible public issue, within aperiod of 6 months after the date of such transfer for one year.

49

II. Under the Wealth Tax Act, 1957

Shares of the company held by the shareholder will not be treated as an asset within the meaning of Section 2 (ea) ofWealth Tax Act hence the value thereof is not includible in the net wealth chargeable to Wealth Tax.

III. Under the Gift tax Act, 1957

Gift of shares of the company made on or after October 1, 1998, is not liable to tax.

Notes:

• All the above benefits are as per the current tax laws and will be available only to the sole/ first named holder in casethe shares are held by joint holders.

• In respect of Non-Residents, tax liability of capital gains mentioned above shall be further subject to any benefitsavailable 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 consequences, each investor is advised to consult his/ her own taxadviser with respect to the specific tax consequence of his/ her participation in the Rights Issue.

Thanking You,

Yours faithfully,

For, Pandey & Co.Chartered Accountants

Amit PandeyPartner

Membership Number 402377


50

D. ABOUT THE ISSUER COMPANY

The information presented in this section has been extracted from publicly available documents, which have not been preparedor independently verified by the Company, the Lead Manager or any of their respective affiliates or advisors or the sourcesreferred to herein. In this Section, we have relied on and referred to information regarding the industry and competitors frommarket research reports, other publicly available sources and information provided by the Company. Although we believe thatthis information is reliable, we have not independently verified the accuracy and completeness of the information.

I. OVERVIEW OF PACKAGING INDUSTRY

Introduction:

High-density polyethylene (HDPE) is a polyethylene thermoplastic made from petroleum. It takes 1.75 kilograms ofpetroleum (in terms of energy and raw materials) to make one kilogram of HDPE.

HDPE is resistant to many different solvents and has a wide variety of applications, including:

o Containers

o Tupperware

o Laundry detergent bottles

o Milk cartons

o Fuel tanks for vehicles

o Plastic bags

o Containment of certain chemicals

o Chemical-resistant piping systems

o Geothermal heat transfer piping systems

o Natural gas distribution pipe systems

o Water pipes, for domestic water supply.

o Coax cable inner insulators (dielectric insulating spacer)

o Root Barrier

o Corrosion Protection for Steel Pipelines.

(Source: www.wikipedia.org)

Plastic is the most important material in the U.S. Packaging industry, accounting for roughly 50 percent of the industry’srevenues. The total US packaging market is approximately $80 billion.

The plastic packaging industry consists of rigid and flexible plastics. Flexible packaging consists of bags, bubble wraps,tubes, stand-up pouches etc. Rigid plastic packaging comprises of blisters, bottles, cartridges, pallets, trays etc. Plasticshave increasingly replaced traditional materials in this sector due to their lightweight and superior functionality. The fivemajor polymers used in packaging are polyethylene (PE), polypropylene (PP), polystyrene (PS), polyvinyl chloride (PVC)and polyethylene terephthalate (PET).

Thermoplastics are the primary form of plastic used in packaging; the only thermoset resin in wide use for packaging isepoxy for adhesives. Typical packaging applications for LLDPE (linear low density polyethylene) include bag rollstock,container lids, food bags, pallet wrap and produce bags. Applications for PP (polypropylene) are caps and closures,bottles, dairy containers, microwavable containers, syringes and snack food packaging. HDPE (high density polyethylene)is typically used for detergent and personal care product bottles, gallon milk and water bottles. The use of PET (polyethyleneterephthalate) resins for bottles and jars is growing at an accelerating pace.

The trend in the packaging industry is to shift from rigid packaging to flexible packaging. There is also a trend of using ofstand-up pouches in place of bottles for packaging coffee beans. Cereals usually packaged in “bag in box” are now beingpackaged in stand-up pouches.

The growth in the flexible packaging market can be attributable to technological improvements like multi web films, andbags coupled with enhanced oxygen barriers, faster filling speeds and high resolution graphics. Multicolor, photo-quality

51

graphics, custom shapes and improved shelf life are features of flexible packaging that product marketers use to increasethe perceived quality of their products.

HDPE continues to be the most common container for fluid milk, particularly with larger volume packages such as gallonsand half-gallons.

Plastics can now also be used to play an active role in maintaining or even enhancing the quality of packaged foods.Antioxidant additives can be dispersed within a plastic packaging material or the plastic can be made inherently oxygenabsorbing by incorporating oxygen absorbing monomers into the polymer structure during polymerization. Other types ofsmart plastics can keep fruits, flowers and vegetables fresh by absorbing compounds such as ammonia, ethylene andhydrogen sulphide that form inside the package.

A flexible intermediate bulk container (FIBC) is defined as an intermediate bulk container, having a body made of flexiblefabric, which

Cannot be handled manually when filled

Is intended for shipment of solid material in powder, flake, or granular form.

Does not require further packaging

Is designed to be lifted from the top by means of integral, permanently attached devices (lift loops or straps)

Flexible intermediate bulk containers (FIBCs), also known as “big bags,” “bulk bags,” and “bulk sacks,” were firstmanufactured in the late 1950s or early 1960s. The first FIBCs were constructed with heavy-duty PVC-coated nylon orpolyester where the cut sheets are welded together to form the FIBC. These FIBCs were made with integrated lift slingsaround the container, or attached to a specially made pallet, or a metal lifting device that the container sat on. Thehandling devices allowed the container to be filled from the top and discharged from the bottom.

Flexible intermediate bulk containers manufactured with polyolefin fabrics were experimented with in England, Japan,Canada, and the United States all at about the same time in the late 1960s to the early 1970s. It was the development ofthese high-strength light-weight fabrics (i.e., polypropylene) that spurred the growth of the flexible intermediate bulk bagsthat are universally used today.

The rapid growth in Europe in the manufacturing of FIBCs occurred in the mid 1970s during the oil crisis. The oil-producingcountries building program required large quantities of cement. The demand for cement was shipped in FIBCs at the rateof 30,000-50,000 metric tons per week from Northern Europe, Spain and Italy to the Middle East.

The demand for bulk bags in the United States grew slower than in Europe until 1984, when the U.S. Department ofTransportation (DOT) agreed to grant exemptions for the shipment of hazardous products in FIBCs. Performance standardsfor FIBCs were established and issued by the Chemical Packaging Committee of the Packaging Institute, USA under T-4102-85. These standards were used to obtain exemptions until DOT included flexible containers with the other types ofIBCs in the Title 49 CFR for hazardous products.

The flexible bulk container offers features that are unique to this package. It can be folded flat and bailed for shipment tothe user. The weight of a bulk bag used to ship one metric ton of product weighs 8-10 lb, offering a low package: productweight ratio. The cost of FIBCs is competitive with other forms of packaging as it is usually utilized without pallets. Theyare easy to store and handle in warehouses with standard equipment. When shipping by boat the FIBCs are gang-loadedwith up to 14 bulk bags on a spreader bar, and are shipped as break bulk. (Source: Official Website of Flexible IntermediateBulk Container Association i.e. www.fibca.com)

Flexible Intermediate Bulk Containers (FIBC’s) started gaining acceptance in mid 1970s. FIBCs have played amajor role in transporting bulk materials safely in unit loads, ranging from comparatively low-value productssuch as Fertilizers, Cement and other building materials to high-grade chemicals and food products. FIBCs showedsignificant cost savings as well as logistical advantages over traditional methods as they offer a cost effectiveway for packaging, storing and handling a product.

The Flexible Intermediate Bulk Container Industry has seen tremendous growth in the last 10 years. In 1995 around 148million FIBCs were produced. By end of 2006, the annual production is approaching 320 million pieces at a CompoundedAnnual Growth Rate of 7.25% and expected to touch 460 million pieces by the end of the year 2010 translating theCompounded Annual Growth Rate of 10.75%. This development is mainly due to the concentration of population in cities,the growth of large-scale industry and agriculture and the expansion of international and intercontinental trade. Theeconomical and ecological situation of today’s world has made it necessary for industry to reduce costs, plan carefully,avoid waste and reuse or recycle the package. For users of large quantities of product and requiring bulk transportation ofsolids, FIBCs are the most cost saving materials of packaging, handling and transportation.


52

The growing use of FIBCs in different markets is partly caused by users changing their packaging solutions (e.g. Wovensacks, multi-wall papers Bags, kraft, octabins, metal bins and plastic RBCs) to FIBCs. In Europe, the demand for FIBCaugmented as a result of the EU Packaging Directives. Increased availability of specifically designed filling and dischargingmachines is also another reason for the shift from conventional packaging to FIBCs. The popularity and use of FIBCs willcontinue to grow as handling becomes increasingly mechanized. In our environmentally conscious world, FIBCs offer anexcellent alternative to the traditional packaging solutions as they can be reused as well as recycled and thereforeminimize disposal problems. (Source: PP/HDPE WOVEN SACKS NEWS, MAY 2006)

SIZE OF GLOBAL MARKET:

In 2005, the global consumer packaging market is estimated to be worth around US$370 billion with growth expected ataround 5% per annum in the near future.

Mature markets, for example North America and Western Europe, show moderate year-on-year increases, while developingmarkets feature above average growth trends. Food and beverage packaging are the two largest segments, accountingfor more than two-thirds of the total. Beauty and healthcare markets each account for around 5%.

Growth CAGR 05-09

Food 4.7%

Beverage 4.2%

Pharmaceutical 7.1%

Beauty 4.5%

Other 4.9%

Total 4.8%

Growth CAGR 05-09

Europe 3.6%

North America 2.4%

Latin America 8.1%

ROW 7.3%

Total 4.8%

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The Geographical distribution of packaging industry is as under: -

The size of Global Market is estimated to be approximately 320 Million pieces per annum in 2006. The segment wiseMarket will look like as under:

(Million Pieces Per Annum)

Particulars Market Size

Europe 150

USA 60

Rest of the World 105

India 5

Total 320

The FIBC’s Market is said to be growing at 10% Per Annum and its future growth is likely to be around 15% Per Annum.Additionally it is pertinent to note that World Trade is growing at 5% Per Annum.

FIBC’s industries are constantly capturing Market share of smaller Packages like 25 or 50 Kilo Bags and Bulk Carriage.We believe that pace of this substitution of other packaging materials by the FIBC is set to continue at about 7 to 10%growth Per Annum.

Thus, these two effects i.e. Normal growth of the Trade and substitution effect put together make the FIBC’s Industry oneof the fastest growing Industries.

(Source: PP/HDPE WOVEN SACKS NEWS, MAY 2006)


54

GLOBAL COMPETITION

Companies in the Western World are constantly looking for cheaper source of supplies. Since this product is a labourintensive product, cheaper source of labour makes it competitive. In Europe, many companies are either setting up shopor outsourcing from India and China. Since the labour cost is cheaper in India we are still competitive. Turkey has beenthe traditional source for FIBC’s to Europe, but with cost of Manpower going up in Turkey (due to their attempts to enterthe EEC) India is well placed to fill the gap. (Source: PP/HDPE WOVEN SACKS NEWS, MAY 2006)

The major producing Countries of FIBC’s in the world are estimated to have following production capacities.

(Million Pieces per Annum)

Sr. No. Name of the Country/Continent Production Capacities

A) Turkey 75

B) Eastern European Countries, which includes Poland, Checkoslavia, Hungry etc. 10

C) Western European Countries includes Belgium, France, U.K. Germany,and Greece & Portugal. 5

D) American Countries, which includes USA, Brazil, Argentina and Latin America. 40

E) India 40

F) China 100

G) Rest of the World, which includes Gulf Countries Australia, Russia, SouthAfrica, Egypt & Far East Asia. 40

Total 310

Thus, it is expected that Indian Market's share in the World is approximately 12.5% and there exists a supply demand gapfor reasons already explained above.

INDIAN MARKET:

The FIBC Market in India is estimated to be around 5 to 7 Millions Bags per Annum and is basically confined to Exportoriented units, which are packing their Products in FIBC and exporting the same to Overseas Market.

The following is the list of some of the industries, which typically use bulk bags:

Sr. No. Industry and Products

1 Chemicals- which obviously cover a multitude of industries

2 Ferro Alloys

3 Crushed Stone, Sand, Gravel, Cement

4 Food- Sugar, Salt, Dextrose, Starch, Food Additives

5 Pharmaceutical

6 Plastics- Resin, Pellets, etc.

7 Absorbent Polymers

8 Refractories – Abrasive Grit, Ceramics, Clays, Lime, Powdered Metals, Shot

9 Rubber

10 Carbon Black

11 Agriculture- Seed, Grain, Popcorn, Beans

12 Minerals and Speciality Minerals

(Source: www.fibca.com)

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Manufacturing of FIBC in India started somewhere between 1992 to 1995 but the manufacturing gained momentum onlyaround 1999 to 2000. There are approximately 15 manufacturing units in India, which are manufacturing the FIBC havinginstalled capacity of approximately 60,000 TPA. The total turnover of this Industry in India is around Rs. 1000 Crores andpresently all the manufacturers in India are exporting most of their production. Out of which 90% production is exported toEuropean Countries and balance 10% is being exported to American Countries. As per the Market sources approximately3,20,000 TPA of bulky material like cereal, rice, Soyabeen, construction materials, Chemicals, Cement, Fertilizers andPlastic material is required to be packed in the Indian Market. Assuming that Bulk Carriers & Tankers are used for Cement& Petro-chemical, and considering only 10% penetration by FIBC’s usages, there exists a potential of 32,000 TPA, whichis equivalent to 32 Million FIBC’s per annum. As against this, current FIBC’s sale in India is estimated to be in the rangeof 5 to 7 Million per annum, which in other word amounts to only 2% penetration in the domestic market. (Source: PP/HDPE WOVEN SACKS NEWS, MAY 2006)

As per the India’s Foreign Trade: 2006-07 (April-November), Primary products witnessed moderation in exports duringApril-September 2006. The moderation was mainly due to the substantial decline in the export of iron ore in the wake ofsharp decline in off-take by China. Within the primary products group, agriculture and allied products posted a growth of24 per cent during April-September 2006 on the back of sharp pick up in the exports of sugar and molasses. Traditionalexport items like tea, tobacco, spices and oil meal also recorded higher growth during April-September 2006. (Source:www.rbi.gov.in)

Manufactured goods exports, in general, showed a moderation in growth (19 per cent) during April-September 2006 (29per cent a year ago). Within manufactured goods, exports of engineering goods and chemicals and related products werethe main growth drivers, while leather and manufactures, textiles and related products, gems and jewellery and handicraftsposted low or negative growth. (Source: www.rbi.gov.in)

Exports of engineering products contributed to 64 per cent of the incremental manufactured products exports during April-September 2006 (37 per cent a year ago). Within this product group, machinery and instruments and electronic goods, inparticular, recorded strong growth, benefiting from the firm demand from the US, Singapore, the UAE, the Netherlandsand China. Exports of iron and steel also recorded marked growth in the wake of enhanced demand from the US, Germany,Belgium and UAE. (Source: www.rbi.gov.in)

Chemicals and related products exports recorded 21 per cent growth during April-September. Exports of Petroleumproducts doubled in US dollar terms from US $ 4.9 billion during April-September 2005 to US $ 9.8 billion during April-September 2006, while in volume terms it increased by 60 per cent. The major markets for petroleum products were theUAE, Singapore, Yemen, Iran and South Africa. (Source: www.rbi.gov.in)


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II. BUSINESS OVERVIEW

Introduction:

Our Company was incorporated on 26th July 1971 as a private limited company with an object to manufacture HDPE WovenFabric and Sacks of various sizes and other plastic packaging materials. The founder promoters of our Company are Mr.Mahesh Swarup Agarwal and Mrs. Santosh Agarwal. The Company was converted into a Public Limited Company w.e.f. 9th

December 1985.

Business:

Our Company is engaged in the business of manufacturing of HDPE/PP woven fabric and bags and Flexible Intermediate BulkContainers of varied sizes used in various industries for transportation of Cement, Chemicals, Fertilizers, foodgrains, Buildingmaterials, etc. These flexible and lesser weight plastic based packaging materials provide a cost-effective and a convenienttool for the packaging and transportation of bulky material across the sectors. In view of its flexibility and cheaper cost, it hasbeen globally accepted as a convenient means of transportation for various bulky materials as well as transportation of smallweight materials in bulk.

In the year 1972-73, our Company started its production with an installed capacity of 130 MTPA of unlaminated fabrics at D-19, Panki Industrial Area, Kanpur – 208 022 which was taken on lease from UPSIDC.

Due to rapid expansion in the business of the Company, modernization of plant and machineries and upgradation of productiontechnology, our company achieved production of about 1890 MTPA of unlaminated fabrics by the year 1985-86.

Our Company was the first unit to start manufacturing various kinds of unlaminated fabric products like HDPE bags and PPwoven bags, etc. in the entire North India and was first to introduce Circular Weaving Machinery in the country to upgrade itstechnology in the year 1983-84. Due to encouraging response from the customers and looking to the vast potential of itsproducts, our Company embarked upon an expansion programme to raise installed capacity to 3756 MTPA of unlaminatedfabrics. Our Company purchased the adjoining plot at D-20 from UPSIDC in the year 1986 to achieve increased production tocope up with the market demand.

Our Company is having major presence in the Industrial Packaging market in the country having excellent rapport with ourcustomers in fertilizers, cement, sugar and food grain industry, which are the major users of the products manufactured by ourcompany. However, our company has not entered into any long term supply contracts with any of its customers.

Due to promulgation of Jute Packaging Material Bill passed by the Government of India in the year 1987, our Company’s salesgot adversely affected. As a market diversification, our company was the first in the Country to explore the export market andstarted exporting its products through which the Company’s financial performance was strengthened gradually.

As an additional activity in the Financial Year 2002-03, our Company was appointed as a Consignment Stockiest by GasAuthority of India Ltd. for marketing polymers in Kanpur Region. This helped to improve the bottom line of our Company.

Recognizing the efforts made by our Company, ‘NIRYAT SHREE’ Award was conferred by Federation of Indian ExportOrganizations (FIEO) for financial year 2004-05, presented by Shri Kamal Nath, Hon’ble Minister of Commerce, Governmentof India on 26th December 2006. Our Company has also received “Top Customer Award “ from GAIL India Ltd. for the years2001-02 and 2003-04. Company has been awarded the “Amity Export Excellence award” at the 9th International businesshorizon INBUSH 2007, 23rd February 2007. Company has also been awarded the “highest rating” in India’s Top 500 manufacturingSME companies at the 1st SMB TOP 500 Awards by Technology for Decision makers of Industry 2.0 in the year 2006.

a. LOCATION OF THE PROJECT

(i) Our Company started its production of HDPE Woven Fabrics and Sacks of different sizes in the year 1971 with aninitial installed capacity of 130 MTPA at D-19, Panki Industrial Area, P.O. Udyog Nagar, Kanpur – 208 022.

(ii) On account of constant expansion plans coupled with modernization of plant and upgradation of productiontechnologies, our installed capacity was brought upto 3756 MTPA in the year 1985-86.

(iii) Due to rapid expansion programs and vast potential for market demand for our company’s products, our Companyacquired adjoining Plot No. D-20, Panki Industrial Area, P.O. – Udyog Nagar, Kanpur – 208 022 in the year 1985-86to meet the needs of increased production requirements and expansion plans.

(iv) Our Company has entered into MOU on 5th January 2007 and 26th February 2007 to transfer the lease of land bearingPlot No. A-1 & A-2, Panki Industrial Area, Site – V, Udyog kunj, Kanpur – 208 022 on lease from UPSIDC measuringabout 16,357 Sq. Mtrs.

57

b. PLANT, MACHINERY, TECHNOLOGY & PROCESS

Our Company has 3 existing extruder lines for manufacturing HDPE/PP/LDPE/LLDPE woven sacks & fabrics. The extruderlines are manufactured by M/s. Lohia Starlinger Ltd., a reputed suppliers of Tape Lines in India. Utilities like Air CoolingPlant, Air compressor, Chilling Plant, Water softening plant, Gas heating devices and Diesel Generator sets are requiredto provide least variation in standards of woven fabric. Apart from above, plant is equipped with various quality controldevices used at different stages of production.

The details of Plant & Machinery and other equipment proposed to be purchased for the modernization and expansionproject are given in the Section “Object of the Issue” on page 33 of the letter of offer.

The basic raw material used for manufacturing plastic woven fabrics, sacks and FIBC’s are HDPE and PP Granules.LDPE and LLDPE granules are used for the purpose of lamination and / or using them for Liners inside bags. Thesegranules are put into an extruder known as a tape Line where material is extruded in the form of a sheet and casted in awater quench tank slitted into strips, stretched and stabilized and the Flat Tape thus made is woven into Fabric on CircularLooms. This fabric is subsequently converted into bags after Cutting, sewing and Printing where required.

c. COLLABORATIONS, PERFORMANCE GUARANTEES OR ASSISTANCE IN MARKETING BY THE COLLABORATORS

The Company has not entered into any collaboration agreement such as performance guarantee or marketing assistancefor existing business or proposed project.

d. INFRASTRUCTURE FACILITIES

1. Raw Material

For manufacturing of HDPE/PP woven sacks, PP Box Bags and FIBCs, the major raw materials required are PP,HDPE, LDPE and LLDPE granules of different grades such PP- H030SG and R103, HDPE - E52009 and W50A009A,LDPE - 24FS040 and LLDPE - F20S009A granules. As these resins are domestically produced and easily availablefrom Reliance Industries Ltd., Haldia Petrochemicals Ltd. and Gail India Ltd. etc. our Company does not envisageany difficulty in meeting its raw material requirement. These raw materials can also be imported from overseasmarket under Open General Licence (OGL).

2. Utilities

Power

A) On existing premises at D-19-20, Panki Industrial Area, Kanpur, the total sanctioned power is 1350 KVA on 33KV Line from Kanpur Electricity Supply Company Ltd. The Company has full back-up power generation facilitieswith 3 x 380 & 1 x 500 KVA Diesel Generator Sets and thus has sufficient in house back up power generation,which enables the Company to operate its manufacturing facilities round the clock without any interruption.

The factory land purchased at A-1 & A-2, Panki Industrial Area, Kanpur has existing power connection of 500KVA on 11 KV Line from Kanpur Electricity Supply Company Ltd. This existing power connection will be helpfulin the earlier stages but we have planned to purchase another 600 KVA in addition to the existing connection byinstalling 1100 KVA Transformer and applying additional load from Kanpur Electricity Supply Company Ltd. Thecompany will realign existing diesel generator sets and purchase another new one of 500 KVA capacity so as tocarry out our manufacturing operations without any interruptions.

Water

A) At the existing premises at D-19-20 Panki Industrial Area, Kanpur, the production process requires water basicallyfor chilling process only. Hence there is very little consumption of water as most of the water is recycled forrepetitive use, which is sufficient for our requirement and will be installing one more Borewell.

B) At the new premises we already have one borewell. We plan to install one more borewell at the said premises.

3. Manpower

The existing manpower strength of our Company is of 337 permanent employees, which can be categorized as 3Executive Directors, 8 Managers & Departmental Heads, 38 supervisors, 16 commercial executives, 10 technicalexecutives, 24 clerks & assistants, 92 skilled workers, 117 semi-skilled workers & 29 unskilled workers. Besidesmanufacturing operation are also under taken on job work basis to enable management to meet its commitment ofsupplies to its customers.

For the proposed expansion project, we would require additional 262 employees to cater the needs of our variousmanufacturing and administrative operations to run the business smoothly. The breakup of the manpower requirementis given as under:


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Particulars Number of Employees

Manager/Departmental Head 2

Commercial Executives 4

Technical Executives 3

Supervisors 12

Clerks & Assistants 6

Skilled workers 138

Semi-skilled workers 27

Un-skilled workers 70

Total 262

As Kanpur is well known for its skilled manpower and presence of other industries in the Kanpur Industrial Area, ourCompany does not foresee any difficulty in recruiting the required manpower with requisite skill sets.

e. PRODUCTS

Our Company produces very wide range of products based on the customers’ specifications and requirement for Industrialand Agricultural Packaging use. The products can mainly be categorised as under:

HDPE LAMINATED

Bags for Fertilizers and Box Bags

PP LAMINATED

Open Mouth Gusseted Bags

PP Woven Sacks

Unlaminated Valve Type for Cement Packaging.

FIBCs

Normal U+2 Design FIBC, 4 Panel Bags, Baffle Bags, Bag For Food Grade Application, Bag with Liner, Bag with PortabulkLoops, Builders Bag, Circular Bag with Cross Corner Loops, Colored FIBC, Dust Proof FIBC, Tunnel Lift.

Bale wraps

External Cover for Textile products.

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f. LIST OF TOP TEN CUSTOMERS

The details showing Top customers of Our Company and percentage of sales contributed by them during last 5 years aregiven in the following table;

(Amt. in Lakhs)

YEAR Country 20002-2003 2003-2004 2004-2005 2005-2006 2006-2007

SL. NAME OF AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %NO. PARTY

1 CHAMBAL India 748.16 21.51 720.80 18.30 776.60 14.75 837.26 15.40 989.63 14.31FERTILIZERSLTD

2 CLIFFE UK 144.54 4.16 183.82 4.67 336.86 6.40 260.00 4.78 0.00 0.00INDUSTRIALPACKAGING

3 EMBAL SRL Italy 0.00 0.00 304.63 7.73 393.10 7.47 207.55 3.82 0.00 0.00

4 GAS India 0.00 0.00 234.66 5.96 0.00 0.00 199.08 3.66 0.00 0.00AUTHORITYOF INDIA LTD

5 INDIAN India 183.06 5.26 0.00 0.00 0.00 0.00 0.00FORMERSFERTILISERLTD

6 INDO GULF India 423.81 12.18 176.26 4.47 196.70 3.74 184.74 3.40 258.86 3.74CORPN. LTD

7 INDUSTRIAL UK 123.88 3.56 251.91 6.39 322.65 6.13 355.36 6.54 349.92 5.06BULKCONTAINERSLTD

8 LAXMI CEMENT India 320.24 9.21 354.53 9.00 261.43 4.97 294.94 5.43 335.41 4.85

9 PARADEEP India 119.58 3.44 0.00 0.00 307.28 5.84 0.00 0.00 0.00 0.00PHOSHPHATELTD

10 RELAINCE India 216.67 6.23 285.30 7.24 193.02 3.67 0.00 0.00 0.00 0.00INDUSTRIESLTD

11 TEXBERN LTD Italy 149.47 4.30 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

12 WEIR AND UK 154.70 4.45 149.05 3.78 0.00 0.00 0.00 0.00 0.00 0.00CARMICHALLTD

13 S.G. BAKER UK 0.00 0.00 108.87 2.76 304.15 5.78 609.82 11.22 586.85 8.49LTD

14 JUMBOTAINER Germany 0.00 0.00 0.00 0.00 217.61 4.13 234.81 4.32 586.81 8.49VERPACKUNGSGMBH

15 SACCHERIA Italy 0.00 0.00 0.00 0.00 0.00 0.00 236.17 4.34 388.70 5.62F. LLI FRANCESCHETTI SPA

16 TECNOPACKIN Spain 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 304.29 4.40G S.L.

17 PALETTESGENTION SERVICES France 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 271.47 3.93

18 EXIM HANDELSONDERNEMING B.V. Netharland 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 329.69 4.77

TOTAL 2584.11 74.29 2769.83 70.30 3309.4 62.86 3419.73 62.90 4401.63 63.67

The significant part of Company’s sales are dependent on some of its major and regular customers like Chambal Fertilizers, ,Cliffe Ind. Packaging, Embal SRL, Indo Gulf Corp., Laxmi Cement, S G Baker etc.


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MANUFACTURING PROCESS:

The basic raw material used for manufacturing plastic woven fabrics, sacks and FIBC’s are HDPE and PP Granules. LDPEand LLDPE granules are used for the purpose of lamination and / or using them for Liners inside bags. These granules are putinto an extruder known as a tape Line where material is extruded in the form of a sheet and casted in a water quench tankslitted into strips, stretched and stabilized and the Flat Tape thus made is woven into Fabric on Circular Looms. These WovenFabrics at this stage is called Unlaminated Fabrics.

These unlaminated fabrics are either used in its original form or are laminated as per the customers’ requirements. Thelamination process is done on an Extrusion coating plant and is used only when customers have a need for a moisture proofbag. In the lamination process PP granules are used for laminating PP woven Fabrics and a combination of LDPE/ LLDPEgranules is used for laminating on HDPE woven fabrics.

In either case the fabric is cut to required sizes depending upon the specifications of the customer. The next stage is printingwherever required, sewing and then baled into suitable packing lots for ultimate dispatch to customer. The printing, sewingand baling process is identical to small PP bags and FIBCs and is cumulatively referred to as “finishing” the bag. This sectionconsists of a variety of Industrial Sewing machines, Printing machines and Hydrualic Baling machines.

Some of the customers require liner bags for specific use such as packing sugar. Chemicals, Plastic Granules etc and hencethis facilty is also available. To produce liner bags, also an extruder is used where LDPE/LLDPE granules are extruded into asheet of plastic film. The Liners are inserted into the Outer Woven bag as a loose insertion and is done only on specific requestof customers. Company also produces a variety of components used for the manufacture of FIBC’s like webbing, sewingthread and tie tapes, which helps in vertical integration.

All Products manufactured by the Company are tailor made and specifically manufactured against Purchase Orders placed bythe Customers. Each customer has his own unique set of specifications. Manufacturing is started only after receipt of PurchaseOrder from the Customers. The Company receives detailed specifications i.e. size of fabric/bag and its weaving details fromeach customer and then manufacture and supply the finished Bags to them. Such products are also printed as per customers’specifications.

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QUALITY ASSURANCE, CONTROL AND TESTING

Our Company has in-house Testing Facilities to test parameters related to Woven Sacks manufacturing as per BIS and otherstandards to ensure quality performance of products manufactured by the company. Our Company has well-establishedQuality Testing Process supported by quality-testing laboratory which has all types of equipments required for checkingquality of HDPE/PP woven sacks and bags in line with Indian and International standards.

The equipments used in various quality tests include:

1. Reeling Machine & Weighing Scale

2. Measuring Tape

3. Template & Weighing Machine

4. Tensile Testing Machine

5. UV Weatherometer

6. Test Rig

Some of the major tests conducted by our Quality Control & Assurance Division are elaborated hereunder;

(1) Tape Testing:

Six number samples are drawn at random from each tape line and tested for tape denier, tape width, breaking load andelongation at break. This procedure is repeated three times each tape lines every shift. Results are immediately send tooperating staff. In the rare event of any deviations from set specifications, the operating staff is advised to keep the non-conforming material separately and take the necessary corrective actions. Fresh samples are drawn within 45 minutes toone hour for retesting. The operating staff checks denier at least twice in a shift. The non-conforming material is put toalternative usage only after due clearances from the chief of manufacturing department.

(2) Fabric Testing:

Whenever a loom is loaded the fabric is checked for correct type of tape, mesh and fabric width. The operating staffchecks, fabric width and other visual parameters from time to time and shift supervisor does it at least twice a shift. TheQuality Control staff does it once in a shift for all the looms. At the time of trolley changeover, a sample is drawn for testingof fabric GSM and tensile strength.

(3) Laminated Fabric Testing:

Operating staff is supposed to ensure proper coating quality and thickness. As soon as a laminated roll is made, a sample issent for testing tensile properties and GSM of the fabric to Quality Control laboratory. During consumption of such a fabrica sample is drawn after each 1000mtrs/1000 cut pieces and again tested for tensile properties. All non-conforming materialsare kept separately with proper identification for suitable disposal.

(4) Cutting Test: Cut pieces are checked for weaving defects, lamination defects (if any), straight cutting, fraying of cutedges, correct cut length, etc. by operating staff as well as Quality Control staff.

(5) Stitching and Printing Test: All machines are checked for number of stitches, correct fold and size of stitched bags.Samples are drawn in each shift from each machine for checking of seam strength. Printing quality is continuously monitoredto ensure defect free printing. Printing rejects are kept separately for suitable disposal. Samples from printing rejects arerandomly drawn for complete destructive testing of all bag parameters in each shift.

(6) Drop Test: Periodic drop tests, as per relevant standards are carried out using designated materials to ensure superiorbag performance.

(7) UV Testing: Whenever specified, samples are tested for UV stability using accelerated weather testing.

(8) Finished Goods, Pre Shipment Inspection: All finished goods are tested as per laid down procedures and standardsbefore being cleared for dispatch by Quality Control. Incoming materials like stitching threads, printing inks, kraft paper,etc. are tested for quality parameters to ensure use of only good quality inputs. The entire system operates in a closedloop, i.e., plan, set, manufacture, test, and plan.

Besides, our Company has been awarded ISO 9001:2000 Quality Certification by NQAQSR Certification Private Limited,New Delhi on February 05, 2000 for Quality Management System applicable to manufacture and supply HDPE/PP WovenFabrics, Sacks and allied products, papers, reinforced bags, bale wraps and jumbo bags and trading of plastic granules.The above certificate was renewed on November 25, 2005 and is valid upto November 24, 2008.

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TECHNOLOGY UPGRADATION/MODERNISATION

Company undertakes technological up gradation from time to time to meet the growing demands of quality products and needfor reduction in process cost. During the process of technology upgradation /modernization, our Company has made followingaddition in the Fixed Assets for the last 5 years.

(Rs. in Lakhs)

Particulars 2007 2006 2005 2004 2003

Addition to Fixed Assets 270.92 99.69 209.25 55.62 88.03

PROCESS CONTROL

Established, well-defined processes are laid down at various stages of manufacturing of HDPE / PP woven sacks, bags, FIBCsand other plastic products so as to optimize the yield percentage and reduce the wastage percentage.

CUSTOMER PROFILE

Our Company has got prestigious and renowned customers from various parts of the country and supplies various products tothem from time to time as per their need and specifications. Some of the major customers are using our products are detailedhereunder;

Sr. Name of Customer Sector CountryNo.

1 CHAMBAL FERTILIZER & CHEMICALS LTD. FERTILIZER INDIA

2 INDO GULF FERTILIZER LTD. FERTILIZER INDIA

3 J K CEMENTS LTD CEMENTS INDIA

4 J K LAXMI CEMENTS LTD. CEMENTS INDIA

5 RELIANCE INDUSTRIES LTD. (RIL) CHEMICALS INDIA

6 GAIL (INDIA) LTD. (GAIL) CHEMICALS INDIA

7 INDIAN OIL CORPORATION LTD. (IOC) CHEMICALS INDIA

8 BAJAJ HINDUSTAN LTD. SUGAR INDIA

9 BALRAMPUR CHINI MILLS LTD. SUGAR INDIA

10 DSCL LTD. SUGAR INDIA

11 BRITISH SUGAR CORPORATION SUGAR UK

Our Bags and mainly FIBCs are also sold to our Overseas Customers who in turn sell to the end users in overseas market.Some of Sector and Countrywise details are as under;

Sr. No. Sector Country

1 Manufacturer and Importer of FIBC. GERMANY

2 Manufacturer and Importer of FIBC GERMANY

3 Trader U.K.

4 Trader NETHERLANDS

5 Trader France

6 Trader Italy

7 Trader GERMANY

8 Trader U.K.

9 Trader GERMANY

10 Trader SPAIN


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MARKET AND COMPETITION:

The products being made by us are extensively used for industrial/agricultural packaging in the India and in overseas market.There are about 800 manufacturing units spread throughout the country at various destinations ranging from small scale tomedium scale having capacities from 1,000 to 30,000 MTPA. As at present the combined manufacturing capacity is estimatedto be about 7 Lakhs MTPA. (Source: Company data)

1. DOMESTIC MARKET:

The company’s product profile falls into two major categories. HDPE/ PP woven sacks for packing 50 KG material andFIBC’s. Market profile for 50 Kg PP / HDPE woven sacks is below:

Cement:

The entire production of cement about 150 Million Tones is being packed in plastic woven sacks. (Source: Company data)

Chemicals & Fertilizers:

The entire fertilizer manufactured and imported about 100 Million Tones is being packed in plastic woven sacks. Theentire production of Petrochemicals by Reliance Industries Ltd, Haldia Chemicals, GAIL (India) Ltd. and recently startedIndian Oil Corporation unit at Panipat apart from other chemical/resin manufacturing units based in the country use plasticwoven sacks. (Source: Company data)

Food grains:

The entire export of rice for the last few years is being packed in plastic woven bags and Govt. has allowed packing offood grains starting with procurement in Haryana and Punjab for domestic use also relaxing Jute Packaging Act. (Source:Company data)

Market scenario for FIBCs is given below:

The FIBC Market in India is estimated to be around 5 to 7 Millions Bags per Annum and is basically confined to Exportoriented units, which are packing their Products in FIBC and exporting the same to Overseas Market.

Manufacturing of FIBC in India started some where between 1992 and 1995 but the manufacturing gained momentumonly around 1999 and 2000. There are approximately 15 manufacturing Units in India, which are manufacturing the FIBChaving installed capacity of approximately 60,000 MTPA. The total turnover of the packaging Industry in India is aroundRs. 1000 Crores and presently all the manufacturers in India are exporting their 90% of their production out of India. Outof which 90% production is exported to European Countries and balance 10% is being exported to American Countries.Approximately 3,20,000 TPA of bulky material like cereal, rice Soyabeen, construction materials, Chemicals, Cement,Fertilizers and Plastic material is required to be packed in the Indian Market. Assuming that Bulkers & Tankers are usedfor Cement & Petro-chemical, and considering only 10% penetration by FIBC’s usages, there is a potential of 32,000 TPA,which is equivalent to 32 Million FIBC’s per annum. As against this, current FIBC’s sale in India is estimated to be in therange of 5 to 7 Million per annum, which in other word amounts to only 2% penetration in the domestic market.

2. SIZE OF GLOBAL MARKET:

The size of Global Market is estimated to be approximately 135 Million pieces per annum. The segment wise Market is asunder;

Sr. Region Pieces PercentageNo. (in Millions)

per annum)

1 Europe 90 66.67

2 USA 40 29.63

3 Rest of the World 05 3.70

TOTAL 135 100.00

It is interesting to note that the uses of FIBC is mainly confined to Western European Countries like Germany, U.K.France, Spain, Italy, Switzerland, Netherlands, Belgium, Denmark’s, Sweden, Norway & USA. Even in Europe the EasternEuropean Countries are not using FIBC’s to the extent their counterpart in Western Europe are using. Similarly, in Africaand Asia uses of FIBCs is almost negligible for the simple reason that the Industries are not mechanized and labour isvery cheap. Australia is the only other Country where we find use of FIBC.

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3. GLOBAL PRODUCTION CAPACITY: The major producing Countries of FIBC’s in the world are estimated to have followingproduction capacities.

A) Turkey 40 Millions pieces per Annum

B) Eastern European Countries, which includes Poland, Checkoslavia, Hungary etc. 05 Millions pieces per Annum

C) Western European Countries includes Belgium,France, U.K. Germany, and Greece & Portugal. 05 Millions pieces per Annum

D) American Countries which includesUSA, Brazil, Argentina etc. 20 Millions pieces Per Annum

E) India 25 Millions pieces Per Annum

F) China 30 Millions pieces Per Annum

G) Rest of the World, which includes Gulf CountriesAustralia, Russia, South Africa & Egypt. 10 Millions pieces Per Annum

Total 135 Millions Pieces Per Annum

Thus, we have observed that Indian Market’s share in the World is approximately 15%.

Exports Market:

The manufacture and export of FIBC’s in India is currently being done by about 15 units spread all over the country. Ourcompany has it’s own market ‘niche’ as most foreign buyers have identified their individual sources for supply of FIBC’s.(Source: Company data)

Our company has got good recognition in production of plastic woven bags & sacks and has it’s own brand image indomestic and export market.

Our Company is one of the medium sized company manufacturing HDPE/PP woven sacks and fabric with a fairly modernizedplant. Company faces competition from several other industrial players like Rishi Packers Ltd., Neo Sack Ltd., etc. However,our Company has some advantage over competitors in terms of established products, technical expertise and customertrust. Further, our trained technical staff and coupled with upgraded production technology makes our products costcompetitive, qualitative and user friendly.

MARKETING SET UP:

Our Company manufactures plastic woven sacks and fabrics. Due to our technical expertise and superior quality, theCompany over the years has earned reputation in the packaging industry. Our Company’s Executive Directors are qualifiedengineers and having management skills and are proven entrepreneurs having more than 25 years of experience in thepackaging industry. The overall marketing function is looked after by Mr. Nitin Ghodgaonkar, who is the General Managerand supported by Mr.A.K.Singh, who head our marketing division. Our Company sells its substantial production directly tothe Indian and Overseas customers.

MARKETING STRATEGY

With the proposed expansion and modernization of Company’s manufacturing facility, our Company proposes to utilizeinstalled capacity to the optimum level by adopting the following marketing strategy:

1. Emphasis on Export Market and thrust on production of FIBCs.

2. Direct marketing to large infrastructure, fertilizers & chemicals, Cements and agro-products sectors.

3. To increase the competitiveness in the market through reduction in the overall cost of production.

BUSINESS STRATEGY

Brief Statement about Business Strategy:

Our Company is in the manufacturing of plastic woven fabric and sacks for more than 30 years and has grown to thepresent level by developing quality of products, building trust in the customers. The Company wants to leverage thisstrength to its benefit in future so as to become an effective player in the plastic packaging industry with emphasis onexport market. To provide best quality products and services to the customers in the main business strategy of ourcompany.


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(i) Brief Statement about Future Prospects:

The FIBC’s Market is said to be growing at 10% Per Annum and its future growth is likely to be around 15% PerAnnum. The reason for such fast growth in the market is attributed to following two reasons:

A) World Trade is growing at 5% Per Annum.

B) FIBC’s industries are constantly capturing Market share of smaller Packages like 25 or 50 Kilo Bags and BulkCarriage. We believe that pace of this substitution of other packaging materials by the FIBC is set to continueabout 7 to 10% growth Per Annum.

Thus, these two effects i.e. Normal growth of the Trade and substitution effect combined together make the FIBC’sIndustry one of the fastest growing Industries. (Source: Company data)

(ii) Capacity & Capacity Utilisation

(a) Capacity:

The present installed capacity, past three years capacity utilization and proposed capacity utilization (includingexisting and proposed) is given as under:

(Capacity in MTPA)

Existing Installed Capacity Actual

2003-04 2004-05 2005-06 2006-07

Installed Capacity 4900 6000 6000 6000

Utilized Capacity 4680 5799 5830 5850

Utilization as % of installed capacity 95.51% 96.65% 97.17% 97.50%

(Capacity in MTPA)

Proposed Capacity (Existing + Proposed) Projected

2007-08 2008-09 2009- 10

Installed Capacity 8000 10000 10000

Utilized Capacity 7200 9000 9500

Utilization as % of installed capacity 90% 90% 95%

Note:

1. The installed capacity will remain at the same level of 6000 TPA for the financial year 2006-2007 as theproduction under modernization has commenced in part from April 2007.

2. The production under expansion plan will commence from January 2008.

(b) Capacity Utilization

The main assumptions for increase in capacity utilization over the next three years is mainly that the Companyhas proposed modernization and expansion plans to create additional facility and upgrading technology, therebyincreasing the production capacity which in turn will improve the overall capacity utilization of its installed capacity(existing and proposed) of 10000 MTPA and reduce the cost of production thereby making the product morecompetitive. Since the Company has already achieved a capacity utilization of around 97.50% and keeping inview business prospects as mentioned above, company is confident to achieve capacity utilization of 90% for theyear 2007-08 and 2008-09.

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Keeping in view the above, the business strategy of the Company is as under:

Business Strategy:

1. Improving the cost competitiveness

2. Widening the customer base

3. Optimum utilization of the production capacity

PROPERTIES

As per the audited balance sheet of the company as at 31st March 2007, the Company has the following immovableproperties:

Sr. Description Net BlockNo. (Rs. in Lakhs)

1 Land (Lease hold from UPSIDC) at Plot No. D-19 & 20,Panki Industrial Area, P.O. Udyognagar, Kanpur - Uttar Pradesh. 3.87

2 Factory Building at Plot No. 19 & 20, Panki Industrial Area,P.O. Udyognagar, Kanpur Uttar Pradesh. 113.73

3 Land (Lease hold from UPSIDC) at Plot No. A-1 & A-2,Panki Industrial Area, P.O. Udyog Nagar, Kanpur - Uttar Pradesh. 327.14*

4 Factory Building at Plot No. A-1 & A-2, Panki Industrial Area,P.O. Udyognagar, Kanpur Uttar Pradesh. 147.86*

All the above immovable properties (except land) and other movable properties of the Company are adequately insuredagainst all kinds of risks to which they are susceptible. Serial No.3 & 4 are properties acquired under the Currentmodernization and expansion project.

*The Company has obtained the Valuation Certificate dated 28th April 2007 from M/s. D.K. Architectural & EngineeringConsultants, Govt. Registered Valuers for the segregation of fair value of land & building purchased from IEDL as under:

(Rs. In Lakhs)

Sr. No. Particulars Amount Amount

1 Land 327.14

2 Building

- Building 123.94

- Other Items 23.92 147.86

Total 475.00

PURCHASE OF PROPERTY

There is no property, which the Company has purchased or acquired or proposes to purchase or acquire which is to bepaid for wholly or partly out of the proceeds of the present issue or the purchase or acquisition of which has beencontemplated in the present Rights Issue except as given below:

Sr. Description Date of Purchase Rs. in LakhsNo.

1 Land (Lease hold from UPSIDC) at Plot No. A-1 & A-2, 5th January 2007 327.14Panki Industrial Area, P.O. Udyog Nagar, Kanpur - Uttar Pradesh.

2 Factory Building at Plot No. A-1 & A-2, Panki Industrial Area, 5th January 2007 147.86P.O. Udyognagar, Kanpur Uttar Pradesh.

We have purchased the aforesaid properties from M/s International Electron Devices Ltd. (IEDL). M/s. International ElectronDevices Ltd. (IEDL) is not related to or connected with the Company, Promoters, Promoters’ Group or any Directors ofKanpur Plastipack Ltd.

Note: The details of agreements entered into to acquire the above properties are given under section – “Government andother Statutory Approvals” under the heading “Major Agreements entered into by the Company” at page no. 126.


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III. KEY INDUSTRY REGULATIONS

(i) Industries (Development and Regulation) Act, 1951, (IDRA)

Industries (Development and Regulation) Act, 1951, (IDRA) has been enacted to implement the industrial policy. It providesfor the development and regulation of major industries. IDRA envisages balanced industrial growth all over India andoptimum use of resources and infrastructure. The Act is applicable to the whole of India. IDRA is applicable to scheduledindustries as given in the First Schedule to the Act. Section 29B(1) of IDRA authorizes Central Government to exempt anyindustry or class of industries from any provision of the IDRA. Presently, Central Government has exempted most of theindustries from the provisions of licensing. There are only few industries, which require license. License is not required forany other industry. Those industries, which are not required to obtain license have to get themselves registered with SIAfor Industrial Entrepreneurial Memorandum. However, the Company has obtained Carry On Business (COB) License No.112/86 dated 31.12.1986 from Secretariate for Industrial Approvals (SIA), New Delhi to carry on manufacture of HDPE/PPwoven sacks on circular looms. The terms of the aforesaid license requires the following statement to be noted and readcarefully as our company is inviting public to subscribe its shares through Offer Document.

“A License has been obtained from the Central Government for carry-on-business for, the manufacture of circularlooms of HDPE/PP woven sacks of which a copy is open to public inspection at the head office of the company.It must be distinctly understood that in granting this license the Government of India do not take any responsibilityfor the financial soundness or for the correctness of any of the statements made or opinions expressed in regardto it.”

(ii) The Factories Act, 1948

The Factories Act, 1948 is the principal legislation for regulating various aspects relating to safety, health and welfare ofworkers employed in factories. This Act is enacted primarily with object to protect workers employed in factories againstindustrial and occupational hazards. This act requires that workers should work in healthy and sanitary conditions and forthat purpose it provides that precautions should be taken for safety of workers and prevention of accidents.

(iii) Environmental Legislations

a) Air Pollution (Control & Prevention) Act

b) Water Pollution (Control & Prevention) Act

Besides above, our Company is governed by various other statutes like Industrial Disputes Act, 1947, The Minimumwages Act, 1948, The Payment of Wages Act, 1936, The Contract Labour (Regulation and Abolition) Act, 1970,Workmen’s Compensation Act, 1923, The Payment of Gratuity Act, 1972, Employee’s States Insurance Act, 1948,Employee’s Provident Fund and Miscellaneous Provisions Act, 1952, Payment of Bonus Act, 1965, etc.

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IV. HISTORY AND CORPORATE STRUCTURE OF COMPANY

1 History & Background of The Company:

Kanpur Plastipack Limited was incorporated in the year 1971 as a private limited company under the Companies Act,1956 promoted by Mr. Mahesh Swarup Agarwal and Mrs. Santosh Swarup Agarwal for setting up a unit for manufacturingHDPE woven fabric and sacks of various sizes with an installed capacity of about 130 MT per annum at D-19, PankiIndustrial Area, Site - I, PO. Udyog Nagar, Kanpur.

With Constant expansions involving modernization of Plant and upgradation of production technology, our Companycould achieve a production capacity of about 1890 MTPA by the year 1985-86. Our Company was the first unit to startmanufacturing this kind product in the entire North India and was first to introduce Circular Weaving Machinery in theCountry to upgrade its technology in the year 1983-84. Encouraged by the expanded response from our customers andlooking to the vast potential for demand of our products, our Company embarked upon expansion programme and raisedinstalled capacity to 3756 MTPA and for the same we bought adjoining Plot No. D-20, Panki Industrial Area, PO: UdyogNagar, Kanpur – 208 022 from UPSIDC in the year 1986.

During the year 1985, our Company was converted to a Public Limited Company. During the period the Company increasedgradually its Share Capital from Rs. 2.65 Lakhs to Rs. 142 Lakhs. The Company went in for a Public issue of 12,00,000Equity Shares of Rs. 10/- each for cash at a premium of Rs. 2/- in the year 1986 and was over subscribed by 3.2 times.After this issue the paid up Share Capital enhanced to Rs. 262 Lakhs. Company’s Equity Shares were listed at BSE, DelhiStock Exchange, Kolkatta Stock Exchange and Uttar Pradesh Stock Exchange. On account of Online trading commencedby Bombay Stock Exchange and no trading of the Company’s Equity Shares at the Regional Stock Exchanges, ourCompany got the Equity Shares delisted from such regional stock exchanges as per the extant rules with effect from 31st

March 2005. Our Company’s Equity Shares are presently listed only at BSE.

The Company till then had all along been making profits and had major presence in the Industrial Packaging Market in thecountry having excellent rapport with its Customers in Fertilizers, Cement, Sugar and Foodgrain Industry. These were themain users of the products made by the Company.

Unfortunately, the Government of India to protect Jute Industry promulgated an act as Jute Packaging Material Bill,(Compulsory use in Packaging Commodities) 1987 which was passed by the Parliament on 6th May, 1987 and gazzettedon 11th May, 1987, which provided for compulsory use of Jute packaging products in various Industries and Graduallyrestrictions continued.

Thus, all of a sudden the demand of Company’s products was drastically curtailed whereby the Plastic Woven SackIndustry all over the Country faced bleak future and with competition amongst the various manufacturing units, the marginsstarted eroding adversely affecting the profitability of the entire Industry in the Country including us. For the first time in thehistory of our Company, cash loss of Rs. 47 Lakhs was incurred for the Financial Year 1987/88. Our Company continuedto suffer losses in subsequent years. As a Market diversification, our Company was the first in the country to explore theExport Market and started Exports of its Products, which at that time were not very remunerative. It was only to utilize themanufacturing facilities and contain losses.

Due to this Act of Parliament the entire project of paper-lined bag with installed imported machinery could not be utilizedand thus Capital cost incurred added to the burden of the Company. These unforeseen circumstances completely upsetthe projections made at the time of Public Issue & the Management was forced to take suitable steps to continue itsoperations.

Having eroded the entire net worth by the end of Financial year 1989-90 as per provision of the Central Government, theCompany applied to the Board for Industrial and Financial Reconstruction on 14th Aug. 1990 for registration as a sick unitunder the then provisions and was declared a Sick Unit vide Hon’ble Board Order dated 11/03/1991 under proviso toSection 15 (1) of the Sick Industrial Company (Special Provision), Act 1985. Thereafter, Rehabilitation package wassanctioned by the Hon’ble Board on 14/07/1992 providing for certain relief by the Financial Institutions and re-constructionof the Term liabilities. As per BIFR package, promoters, by way of sacrifice on their part, had been asked to convertexisting unsecured loan Rs. 10 Lakhs into the Equity and to further bring in Rs. 52 Lakhs by way of additional Equity atpar. As such the Share Capital of the Company increased from Rs. 262 Lakhs to Rs. 319.72 Lakhs by 1993/94.

The Company inspite of its best efforts could not meet the projections made in the BIFR package and as such reviewmeetings were held in May & July 1995 for further concessions and debt restructuring to settle dues of Financial Institutions.On July 31,1997 the Hon'ble bench of BIFR approved a One Time Settlement Scheme to the Financial Institutions wherebyan amount of Rs. 192 Lakhs out of total outstanding towards funded interest/compound/Penal and unpaid interest werewaived. As there were no overdues to State Bank of India, they did not participate in the OTS. The Company was required


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to bring additional funds and the promoters contributed additional Rs. 34.03 Lakhs towards the Equity Shares at par, thusmaking the total share Capital as on 31/03/1998 to Rs. 353 Lakhs.

With the Company’s thrust on Exports, the Company improved its financial performance during subsequent periods andmade timely settlement of OTS dues as provided in the Revised Rehabilitation package. Thereafter the Company submitteda Progress Report on the implementation of the scheme to the Hon’ble Board as on 31/03/2000 and the Hon’ble Boardwas pleased to discharge the Company over the purview of BIFR vide their Order dated 17th Aug. 2000. During the entireperiod between 1992-2000, the Company continued to upgrade its technology, installing additional and balancing Plantand Equipments, which resulted in continued increase in production and our company was granted ISO Certification –ISO 9002 by NQA Quality System Registrar Ltd in 1999 and now ISO 9001:2000 Certificate.

As an additional activity in the financial year 2002-03, the Company was appointed as a Consignment Stockiest by GasAuthority of India Ltd. for marketing polymers in Kanpur Region. During later periods Company’s progress continued andwith thrust on exports which doubled during Financial year 2004/05 resulted in Company availing export incentive under‘Target Plus Scheme’ from the Ministry of Commerce, which meant an Import License of about Rs. 2 Crores for duty freeimport of Raw material for domestic consumptions. The Company will thus take benefit of this during coming financialyears. Recognizing the efforts made by the Company, ‘NIRYAT SHREE’ Award was conferred by Federation of IndianExport Organizations (FIEO) for financial year 2004/05, presented by Shri Kamal Nath, Hon’ble Minister of Commerce,Government of India on 26/12/2006. During the year 2005/06, the Company was granted ‘One Star Export HouseStatus’ from the Ministry of Commerce and Industry, Government of India. It should be noted that after rehabilitation theCompany’s gross turnover which in financial year 2000/01 was Rs. 35 Crores reached to Rs. 55 Crores in 2005/06.

The Company continued making profits and with the cash so generated installed more balancing equipments with furtherthrust on exports for value added items- FIBC’s (Flexible Intermediate Bulk Containers) mainly for creations of additionalfinishing facilities necessary for Export Market. With the help of these efforts Company’s production gradually increasedand reached to the level of 6,000 MT per annum in the year 2005/06. After rehabilitation and having consolidated it’soperations, maiden Dividend @ 6% was declared for financial years 2004/05 & was repeated for 2005/06. During thefinancial year 2006-07 Company declared the dividend @ 10%.

2 Major Events in the History of the Company

YEAR MAJOR EVENTS

1971 Incorporated on 26th July 1971 as Private Limited Company in the name of Kanpur Plastipack Pvt. Ltd.·Set up a Unit for manufacturing HDPE Woven Fabric and Sacks with installed capacity of 130 M.T.P.A.at D-19, Panki Industrial Area, Kanpur.

1985 Converted into closely held Public Limited Company on 9th December 1985.

1985-86 Company’s Installed Capacity increased gradually from 130.00 M.T.P.A. to 1890.00 M.T.P.A.

1986-87 Issue of Bonus Shares in the ratio of 1:1

Maiden Public issue of 12 Lakhs Equity shares of Rs. 10/- each for cash at a premium of Rs. 2/- perequity share in October 1986. The issue was oversubscribed by 3.2 times

For manufacturing of paper Lined Bags, installed capacity was expanded from 1890.00 M.T. P.A. To3756.00 M.T. P.A.

The Registered Office of the Company was shifted from 3/74, Vishnupuri, Kanpur 208 002 TO D-19-20,Panki Industrial Area, Kanpur- 208 022 with effect from 24th February, 1987

1987 Jute Packaging Material Bill, 1987 passed by the Parliament on 6th May 1987 and gazzated on 11th May1987 provided compulsory use of Jute packaging in various industries. Notification issued by the Ministryof Textile dated 29th May 1987 in this regard.

1987-88 Due to Notification issued by Government on Jute Packaging Material, the entire project of paper linedbag with installation of Imported machinery could not be utilized, and company was prohibited in sellingits products to its traditional customers and for first time in it’s history company incurred cash loss ofRs. 47.00 Lakhs.As a market diversification, the Company started Exports of it’s products.

1989-90 Due to the erosion of entire net worth, application filled with BIFR on 14th August 1990 for registration asa sick company.

1991 Company was declared as Sick Unit by BIFR on 11th March, 1991 u/s 15(1)(Proviso) of the Sick IndustrialCompanies Act, 1985.

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YEAR MAJOR EVENTS

1992 Rehabilitation package was sanctioned by the BIFR on 14th July, 1992

1993-94 Due to the BIFR package, Paid-up share capital increased from Rs 262.00 Lakhs to Rs. 319.72 Lakhs.

1995 Company again approached to BIFR for further concessions and restructuring its dues with FI’s, ascompany could not meet the projections made in the BIFR package.

1997 Hon’ble bench of BIFR approved One Time Settlement with FI’s on 31st July 1997 with a waiver ofRs. 192.00 Lakhs towards funded interest/compound/Penal and unpaid interest with cut off date as31.03.97.

1998 Due to the BIFR order its Paid up capital further increased from Rs. 319.72 Lakhs to Rs. 353.75 Lakhs.

1999 Company got ISO Certification – ISO 9002 by NQA Quality System Registrar Limited.

2000 Due to partial relaxation of jute packaging act with continued progress and thrust on Exports its financialperformance has improved. Hon’ble Board of BIFR discharged the company over the purview of BIFRvide their letter dated 17th August 2000.

2002-03 Gas Authority of India Limited appointed company as a Consignment stockiest for marketing polymers inKanpur Region.

2005-06 Company was granted ‘One Star Export House Status’ from the Ministry of Commerce and Industry,Government of India on 19th October, 2005 on account of increase in it’s export sales.

Due to the efforts made by the company during these all years the production capacity of the companyhad reached to the level of 6000 M.T. P.A. with utilization of 97% of the installed capacity with Exportsales of around 70% of the Total sales.

Due to the increase in Exports in the year 2004-05, our Company received Export incentive under “TargetPlus Scheme” from the Ministry of Commerce on 30th May, 2006 by which an import License of aboutRs. 2.00 Crores for duty free import of Raw materials for domestic use.

Maiden Dividend @ 6% was declared to its shareholders for the Financial year 2004-05.

2006-07 Again Dividend @ 6% was declared to its shareholders for the Financial year 2005-06.

Conferred ‘NIRYAT SHREE’ award by Federation of Indian Export Organisations (FIEO), presented byShri Kamal Nath, Hon’ble Minister of Commerce, Government of India on 26th December 2006.

Acquisition of Plot No. A-1 & A-2, Panki Ind. Area, Kanpur by way of lease from UPSIDC to increase ourproduction capacity from present level of 6000 MTPA to 10,000 MTPA under our proposed modernizationand expansion project.

Awarded “Amity Export Excellence Award” from Amity International Business School for achievingsustainable and viable growth through excellence in Exports on February 2007.

2007-08 Awarded an Order worth Rs. 1250 lakhs from M/s. Indian Oil Corporation Limited for supply of FIBCbags.

Declared Dividend @ 10% to its shareholders for the Financial year 2006-07.

3 Main Objects of the Company:

The Object Clause of the Memorandum of Association (MOA) of the Company enables it to undertake the activities forwhich the funds are being raised in the present Rights Issue. Furthermore, the activities of the Company has beencarrying out until now are in accordance with the objects of the MOA. The main objects of the Company inter-alia are:

1. To manufacture, import, export, buy, sell, exchange, distribute, fabricate, mould, extrude, expand, compress, bond,laminate, reinforce, weld, shape, coat, print, treat, spin, weave, electroplate, vulcanse, melt, metallize, stretch, slit, toadopt any of processes for foaming, fibrillation, cocooning and to manipulate, prepare for market or otherwise deal inBakelite, Polythylene, Polyvinyl chloride, plastics and plastic products of any kind and nature whatsoever, wovenbags, sacks, tarpaulins, sheets, carpet backings, parachutes, fishing nets, mosquito nets, wall coverings, tents,wires, ropes, floor tiles, roofing sheets, containers, household & kitchen articles, furniture, writing and packing papers,art papers, strappings, foot wear and satchels.


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2. To manufacture, import, export, buy, sell, exchange, distribute, fabricate, process, print, weave or otherwise deal inand with synthetic rubber including silicon rubber, synthetic leather, synthetic fibres, all sorts of plastic raw materials,machinery & parts, plastic resins, pellets and powders in liquid form or any other form, reneverated cellulose includingartificial silk, bakelite, celluloid and other cellulose esters solutions, plastic extrusion and moulding substances,chemicals and cellulose bases of all kinds, synthetic fibres forming polymeric amides, acids, alkalis and adhesives.

3. To carry on the business of manufacturers of and dealers in products, articles and packagings made from paper,board pulp of all kinds, cellulose films, polyethylene, plastic films and metal foils and films of all kinds and otherflexible or treated or laminated materials, including card board, railway and other tickets, mill board, paper andcorrugated card board boxes, wall and ceiling papers, toilet rolls and tapes, containers; drinking straws, bags, pouches,envelops, sheets, rolls and all kinds of flexible packagings, and manufacturing, fabricating, printing, treating, waxingand laminating all kinds of packaging materials.

3A. To carry on the business of exporters, importers, distributors, traders, merchants, dealers, representatives, sellingagents, buying agents, buyers, repackers, sellers, wholesellers, retailers, suppliers and stockists of all kinds andvariation of polymers, chemicals and engineering items.

CHANGES IN THE MEMORANDUM OF ASSOCIATION:

Sr. Particulars Date of Meeting Nature of MeetingNo.

1. Change in Name Clause

Conversion of private limited company into public limited company. 9-September-1985 AGM

2. Change in Object Clause

Change in the object clause of the Company by way of insertionof new clause 3A in the main object of the Company. 21-September-2002 AGM

3. Change in Authorized Share Capital

(i) Increase in the authorized share capital of theCompany from Rs. 3 Lakhs to Rs. 5 Lakhs. 29-May-1975 EGM

(ii) Increase in the authorized share capital of 19-September-1978 AGMthe Company from Rs. 5 Lakhs to Rs. 10 Lakhs.

(iii) Increase in the authorized share capital of the 29-September-1980 AGMCompany from Rs. 10 Lakhs to Rs. 25 Lakhs.

(iv) Increase in the authorized share capital of theCompany from Rs. 25 Lakhs to Rs. 50 Lakhs. 24-March-1984 EGM

(v) Increase in the authorized share capital of 9-September-1985 AGMthe Company from Rs. 50 Lakhs to Rs. 200 Lakhs.

(vi) Increase in the authorized share capital of the 16-June-1986 AGMCompany from Rs. 200 Lakhs to Rs. 300 Lakhs.

(vii) Increase in the authorized share capital of the 28-September-1992 AGMCompany from Rs. 300 Lakhs to Rs. 500 Lakhs.

(viii) Increase in the authorized share capital of the Company 27-January-2007 EGMfrom Rs. 500 Lakhs to Rs. 1000 Lakhs.

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CHANGES IN THE REGISTERED OFFICE:

Sr. Details of change Date of Change MeetingNo.

1 Change in Registered Office of the Company from 23-February-1987 Board Meeting3/74, Vishnupuri, Kanpur 208 002 TO D-19-20,Panki Industrial Area, Kanpur- 208 022 witheffect from 24th February, 1987

4 Subsidiary of the Company, if any and their business

The Company does not have any subsidiary as on the date of the filing this Letter of Offer.

5 Shareholders Agreements:

The Company does not have any Shareholders Agreement as on the date of filing of this Letter of Offer.

6 Other Agreements:

The Company does not have any other Agreement as on the date of filing of this Letter of Offer.

7. Strategic Partner & Financial Partner:

The Company does not have any strategic or financial partners as on the date of filing of this Letter of Offer.


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V. MANAGEMENT OF THE COMPANY

1 Board of Directors

The details of the Directors of the Company are given below:

Name Address, Designation Date of Birth Experience DirectorshipOccupation & in other companiesQualification

Mr. Mahesh Swarup Agarwal” Executive 10.09.1927 60 a) KSM Exports LimitedRaghushree” Chairman b) KPL Packaging (Pvt.) Ltd.4/283/2, Vishnupuri c) MSA Investment & Trading Co.Kanpur – 208 002 (Pvt.) Ltd.BusinessBachelor of Arts (B.A.)

Mr. Manoj Agarwal Managing 24.09.1954 30 a) KSM Exports Limited“Raghushree”4/283/2, Director b) KPL Packaging (Pvt.) Ltd.VishnupuriKanpur – 208 002 c) MSA Investment & Trading Co.Business (Pvt.) Ltd.Master of ManagementStudies (BITS, Pilani)

Smt. Santosh Agarwal Director 03.03.1935 35 KSM Exports Limited“Raghushree”4/283/2,VishnupuriKanpur – 208 002BusinessHigher Secondary School

Mr. Ashok Kumar Executive 07.11.1947 37 KSM Exports LimitedBhatnagar Director602, Anand Vihar, 4/276,Parvati Bangla RoadKanpur – 208 001.BusinessBachelor of Technology(B.Tech), IIT, Delhi

Mr. Banarsi Lal Manchanda Independent 17.05.1925 56 M/s. Golden Proteins Ltd.C-41-43, Bima Vihar, DirectorLakhanpurKanpur – 208 024ServiceBechelor of Science (B.Sc.)

Mr. Sobhagya Mal Independent 01.07.1938 25 Surya Pharmaceuticals Ltd.Jain House No. 475, Sector Director– 14, Gurgaon – 122 001(Haryana)ServiceM.Com., ICWA(Cost Accountant)

Mr. Pradeep Kumar Goenka Independent 15.09.1954 25 a) Frontier Spring Limited805, Shantivan Appts. Director b) Abhyuday Infrastructure Ltd.2A/244, Azad Nagar c) Goenka Polypack Pvt. Ltd.Kanpur-208002 d) Abhyuday Industrial ConsultantsProfessional (P) Ltd.B.Com, FCA e) Hiltech Education (P) Ltd.(Chartered Accountant) f) Northern Sackplas (P) Ltd.

g) M.P Udhyog Ltd.h) Goenka & Agarwal, Chartered

Accountants (as Partner)i) M. P. Chini Industries Ltd.j) Ganesh Polytex Ltd.

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Name Address, Designation Date of Birth Experience DirectorshipOccupation & in other companiesQualification

Dr. Jagan Nath Gupta Independent 19.10.1942 45 J. K. Cotton Spinning & Weaving3/169, Vishnupuri Director Mills Co. Ltd.Kanpur – 208 002ProfessionalM.Com, Ph. D.

Dr. Gyanesh Narayan Mathur Independent 15.11.1944 30 a) Shri Lakshmi Cotsyn Ltd.117/H-11, KDA Colony, Director b) TPL Plastech Ltd.Block N, Kakadeo c) EMA India Ltd.Block-N, Kakadeo,Kanpur-208 005ServiceB.Sc. (BHU), M.Tech.,(IIT, Kanpur),Ph D. (Detroit USA).

Mr. Mahesh Swarup Agarwal

Mr. Mahesh Swarup Agarwal, aged 80 years, is a Bachelor of Arts from Allahabad University having overall experience of60 years including running business and industrial enterprises. He is involved in Industrial Packaging Industry since 1948.He had been Vice President of All India Tape Manufacturers Association during 1975 – 1985 and President of PankiIndustrial Association during 1976 - 1986. He was the founder president of Plastic Woven Sack (All India) ManufacturersAssociation during the year 1986 to 1988. He had also been President of Merchants Chamber of Uttar Pradesh during2004-2005.

In order to better utilize his industrial experience and talent, he formed Kanpur Plastipack Limited in the year 1971. Sincethen, he is successfully running and managing our Company. He is Executive Chairman of our Company. Presently helooks after overall management and policy decisions of our Company.

Mr. Manoj Agarwal

Mr. Manoj Agarwal, aged 52 years, has done Master in Management Studies from Birla Institute of Technology andScience (BITS) Pilani. He is the only son of Shri M. S. Agarwal, the founder of Kanpur Plastipack Ltd. having experienceof 30 years in the industry. He is Managing Director of our Company. After completing his education, he joined ourCompany in 1977 and was looking after production line of our company initially.

He has been a key person in rehabilitation of our company and bringing our company out of the purview of BIFR and hasbeen instrumental in the development and growth of the business of our Company with main thrust on Exports anddiversifying into value added products i.e. FIBC’s, which is now the main thrust of Company’s Export strategy. He hasbeen President of Plastic Woven Sacks Manufacturers Association during 1999 to 2001, member of the Governing bodyof AIFTMA since 2001 and Member, committee of Administration Plastic Export Promotion Council, Mumbai for nineyears. Presently he is Regional chairman, North Zone of the said council. He looks after Export, Marketing, Administration& General Management functions of our Company.

Mrs. Santosh Agarwal

Mrs. Santosh Agarwal, aged 72 years is having overall 35 years' administrative experience in our company. She ispromoter director of our company. She is also director in KSM Exports Limited, which is our Group Company . At presentshe provides valuable suggestions in administrative matters of our company.

Mr. Ashok Kumar Bhatnagar

Mr. Ashok Kumar Bhatnagar, aged 59 years, is a Bachelor in Textile Technology (B. Tech) from Indian Institute of Technology(IIT), Delhi. He is having over 30 years hands on experience in this industry in India and Overseas. He has also participatedvarious Management Development Programmes conducted by Indian Institutes of Management (IIMs) and other prestigiousinstitutions. He has been associated with our Company for more than 20 years and is contributing his valuable knowledge,skills and experience in development and growth of the Company. He is a key person of our manufacturing / productiondivision. Presently, he is overall in charge of Operations, Production, Design & Development projects. He is looking afterall the aspects of manufacturing operations, product development & planning and execution of technical upgradation andprojects, cost controls, improvement of work methods and techniques, Industrial relations, handle customers’ complaintsetc. and ensuring growth of our company in all spheres.


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Mr. Banarsi Lal Manchanda

Mr. Banarsi Lal Manchanda, aged 82 years, is a Bachelor of Science and is having vast and diversified experience ofabout 56 years. He contributed in the Industrial Growth of Uttar Pradesh by being part of State Government, PSUs likeUPFC, UPSIDC and their respective subsidiaries and Private Sector in various capacities. He has also worked in variouscapacities with Government of Uttar Pradesh in Food & Land Reforms Departments. He has also attended short- termmanagement programmes conducted by Indian Institutes of Management (IIMs), RBI, Institute of Public Enterprises etc.He had also acted as Managing Director of UPFC from July 4, 1967 to August 4, 1967 as a stop- gap arrangement. He hasgot niche in developing systems and procedures with his skills, knowledge and enthusiasm in any organisation whereverhe served. Presently he provides his valuable guidance and support in system designing and laying down procedures inorganizational growth.

Mr. Saubhagya Mal Jain

Mr. Saubhagya Mal Jain, aged 69 years, is Master of Commerce from university of Rajputana, Jaipur and member of TheInstitute of Cost and Works Accountants of India (ICWAI). He is having versatile experience of more than 25 years in thefield of Finance and Management in various organisations at top management level. During his tenure he has beeninstrumental in restructuring and revival of various financially sick organisations into profit making entities. He has workedwith various prestigious institutions like as a Finance Director and CMD of Fertilizers and Chemicals Travelcode Limited,as a Finance Director in Indian Farmers and Fertilizers Cooperative Limited and CMD in Paradeep Phospates Limited. Hejoined our company in 1999 as independent director. Presently he provides his valuable guidance and support in designingand laying down financial management policies and decisions in our company.

Mr. Pradeep Kumar Goenka

Mr. Pradeep Kumar Goenka, aged 52 years, is Bechelor of Commerce (B. Com) and a qualified Chartered Accountant(Fellow of The Institute of Chartered Accountants of India) having overall experience of 25 years in the field of Accounting,Finance and Issue Management. He is one of the leading practicing Chartered Accountants at Kanpur and has presentedvarious papers on Project Finance. He is occupying position of Director in various other companies and provides hisvaluable guidance, skills and knowledge contributing the growth of such companies. Presently he acts as independentdirector of our company and provides his guidance and support to the company as and when needed.

Dr. Jagannath Gupta

Dr. Jagannath Gupta, aged 64 years, is Master of Commerce (M.Com) from Agra University, Agra and Ph. D. from KanpurUniversity, Kanpur. He started his career in 1962 with Reserve Bank of India. He is having vast academic and managementexperience spanning over 44 years. He has been the Executive Director of U. P. Stock Exchange Association Ltd. He wasProfessor and Director of Dr. Gaur Hari Singhania Institute of Management & Research, Kanpur And Senior Reader,Dept. of Commerce, VSSD College, Kanpur University, Kanpur. He is also associated with Jagran Education Foundation,Kanpur as Chief Executive Officer. He was nominated by SEBI to represent India in the programme entitled “TheManagement of Securities Market in the emerging Countries”, held at Washington, USA in 1994. At present he occupiesmemberships, convenership of various Acedamic, Research and other comittees in various universities such as KanpurUniversity, Agra Unversity and Devi Ahilya University. Presently he acts as idependent director of our Company andprovides necessary guidance and support to our board of directors as and when needed.

Dr. Gyanesh Narayan Mathur

Dr. Gyanesh Narayan Mathur, aged 62 years, is Bechelor of Science (B.Sc.) in Chemical Engineering from BanarasHindu University, M.Tech. from IIT Kanpur, M.A.Sc (Chem Engg.), University of Windsor, Windsor, Canada and Ph. D. InEngineering from University of Detroit, Detroit, USA. He is having around 30 years’ diversified academic and industrialexperience in various prestigious organisations. He was consultant to Directorate of Industries UP and U.P.S.I.C., Kanpurfor establishment of plastic and rubber industries in the state of UP during 1978-1994.

He is having more than 30 years’ research experience in and has completed 14 sponsored research projects. He alsooccupies some prestigious positions in several organisations such as Director of DMSRDE, Kanpur, Dean, Planning &Developement at HBTI, Kanpur, Visiting professor at IIT, Kanpur. He is engaged in research work in a project titled “NanoTechnology and Polymers”. He is an independent director of our Company and provides technical support as and whenneeded.

Details of the Borrowing Powers:

The Board of Directors of the Company has power to borrow up to Rs. 60,00,00,000/-(Rupees Sixty Crores only) as perthe Resolution passed u/s 293(1)(d) in the EGM of the Company held on 27th January, 2007.

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2 Compensation To Managing Director & Other Executive Directors

Compensation and benefits in kind granted to the Directors:

The terms and conditions governing the appointment of Mr. Mahesh Swarup Agarwal, Mr. Manoj Agarwal and Mr. AshokKumar Bhatnagar are contained in a Special Resolutions passed at the AGM of the Company dated 16th September 2005.The principal terms and conditions set out in the aforesaid Resolutions are as follows:

1. Mr. M. S. Agarwal

Period of Appointment : 3 years from 01.09.2005

I. Salary : Rs.1,40,000 per month

II. Special Allowance : 25% of basic salary

III. Perquisites : Perquisites shall be allowed in addition to salary as under. However theseshall be restricted to an amount equal to the annual salary subject toan overall ceiling as mentioned hereinafter;

Category – ‘A’

i) Housing:

The expenditure incurred by the Company on hiring unfurnished accommodation shall be subject to a ceiling of thirtypercent of salary over and above twenty percent payable by Shri M.S. Agarwal. In case no accommodation is providedby the Company, the Company shall pay house rent allowance to the extent of thirty percent of salary of Shri M.S.Agarwal. The Company shall provide such furniture and furnishing as may be required by the Chairman. Further theexpenditure incurred by the Company on gas, electricity, water and furnishings shall be valued as per Income TaxRules, 1962.

ii) Medical Reimbursement /Medical Insurance:

Reimbursement of actual medical expenses incurred for self and family in India and / or abroad including hospitalisation,subject to a ceiling of one month’s salary in a year or three months’ salary over a period of 3 years.

iii) Leave Travel Concession:

For self and family, once in a year to any place in India or abroad subject to a ceiling of one month’s salary.

iv) Club Fees:

Fees of club subject to maximum of two clubs. No admission and life membership fee will be paid.

v) Personal Accident Insurance:

Personal Accident Insurance of an amount, the annual premium of which shall not exceed Rs. 12000/-

Category – ‘B’

i) Company’s contribution towards Provident Fund as per the Rules of the Company but not exceeding limits as prescribedunder the Government regulations from time to time.

ii) Company’s contribution towards Superannuation Fund as per the rules of the Company, but it shall not together withthe Company’s contribution to Provident Fund, exceed 25% of the salary. Contribution to Provident Fund andSuperannuation Fund will not be included in computation of the ceiling on perquisites to the extent these, either singlyor put together are not taxable under the Income Tax Act.

iii) Gratuity as per the rules of the Company but shall not exceed half month’s salary for each completed year of service.

iv) Encashment of leave at the end of tenure of service will not be included in the computation of the ceiling on perquisites.

v) He will not be entitled to any sitting fees for attending the meeting of the Board of Directors or Committees thereof.

Category – ‘C’

i) He will be entitled to free use of Company’s Car with driver for official as well as for personal purpose.

ii) The Company shall provide him mobile phone and telephone, and other communication facilities at residence andthese further will not be considered as perquisites.”


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Maximum Remuneration:

In the event of absence or inadequacy of profits in any financial year, the remuneration payable to Shri M.S. Agarwal byway of salary, allowances and perquisites, shall not exceed the maximum limit as prescribed under schedule XIII of theCompanies Act, 1956.”

2. Mr. Manoj Agarwal


I. Salary : Rs. 105000-15000-135000/- per month

II. Special Allowance : 25% of Basic Salary

III. Perquisites : Perquisites shall be allowed in addition to salary as under. However,these shall be restricted to an amount equal to the annual salary, subjectto an overall ceiling as mentioned herein under;

Category – ‘A’

i) Housing:

The expenditure incurred by the Company on hiring unfurnished accommodation shall be subject to a ceiling of thirtypercent of salary over and above twenty percent payable by Shri Manoj Agarwal. In case no accommodation isprovided by the Company, the Company shall pay house rent allowance to the extent of thirty percent of salary of ShriManoj Agarwal. The Company shall provide such furniture and furnishing as may be required by the ManagingDirector. Further the expenditure incurred by the Company on gas, electricity, water and furnishings shall be valuedas per Income Tax Rules, 1962

ii) Medical Reimbursement /Medical Insurance:

Reimbursement of actual medical expenses incurred for self and family in India and / or abroad including hospitalisation,subject to a ceiling of one month’s salary in a year or three months’ salary over a period of 3 years. In addition, theCompany will reimburse him towards Medical Insurance Premium, the amount of which shall not exceed Rs. 15000/-per annum.

iii) Leave Travel Concession:


iv) Club Fees:






ii) Company’s contribution towards Superannuation Fund as per the rules of the Company, but it shall not together withthe Company’s contribution to Provident Fund, exceed 25% of the salary. Contribution to Provident Fund andSuperannuation Fund not be included in computation of the ceiling on perquisites to the extent these, either singly orput together are not taxable under the Income Tax Act.







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Maximum Remuneration:

In the event of absence or inadequacy of profits in any financial year, the remuneration payable to Shri Manoj Agarwal byway of salary, allowances and perquisites, shall not exceed the maximum limit as prescribed under schedule XIII of theCompanies Act, 1956.”

3. Mr. Ashok Kumar Bhatnagar


I. Salary : Rs. 60000-10000-80000 per month

II Perquisites : Perquisites shall be allowed in addition to salary as under;

Category-‘A’

i) House Rent Allowance

House Rent Allowance shall be 30% of salary. The Company shall provide such furniture and furnishing as may berequired by the Executive Director. Further the expenditure incurred by the Company on gas, electricity, water andfurnishings shall be valued as per the Income Tax Rules, 1962.

ii) Medical Reimbursement

Reimbursement of actual medical expenses incurred for self and family in India and / or abroad including hospitalisation,subject to a ceiling of one month’s salary in a year or three months’ salary over a period of 3 years.

iii) Leave Travel Concession


iv) Club Fees:






ii) Company’s contribution towards Superannuation Fund as per the rules of the Company, but it shall not together withthe Company’s contribution to Provident Fund, exceed 25% of the salary. Contribution to Provident Fund andSuperannuation Fund not be included in computation of the ceiling on perquisites to the extent these, either singly orput together are not taxable under the Income Tax Act.







Maximum Remuneration

In the event of absence or inadequacy of profits in any financial year, the remuneration payable to Shri A. K. Bhatnagar byway of salary, allowances and perquisites, shall not exceed the maximum limit as prescribed under schedule XIII of theCompanies Act, 1956.”

3. Corporate Governance

The Company’s philosophy of Corporate Governance aims at assisting the management of the Company in the efficientconduct of its business and in meeting its responsibilities to all the stakeholders viz. Promoters, Shareholders, Customers,


80

Lenders, Government and employees. The Company stands committed to good corporate governance practices by wayof displaying highest standard of transparency, fairness, accountability and business ethics. The Company continues tolay great emphasis on the broad principles of Corporate Governance. Our pursuit towards achieving good corporategovernance is an on going process. Our Corporate Governance policies lay emphasis on communication, both internaland external and reporting.

The Company has complied with listing agreement requirements in respect of corporate governance specially with respectto broad basing of the board. The Board has Nine Directors of which, five are independent Directors as per the requirementsof Corporate Governance norms as enumerated in clause 49 of the listing agreement with the stock exchanges. TheBoard has constituted an Audit Committee, Shareholders Grievance Committee and Remuneration Committee.

Committees of the Board

Our Company has the following committees formed out of the members of the Board.

Audit Committee

The Audit Committee consists of four Directors. All of these Directors are Independent Directors. Mr. Jitendra Awasthi,Company Secretary acts as a Secretary to the Committee.

Name of the Members Designation Nature of Directorship

Mr. Saubhagya Mal Jain Chairman Independent Director

Mr. Jagan Nath Gupta Member Independent Director

Mr. Pradeep Kumar Goenka Member Independent Director

Mr. Banarsi Lal Manchanda Member Independent Director

Remuneration Committee

The Board has constituted a Remuneration Committee comprising of three Non-Executive Independent Directors consistingof the following members:


Mr. Banarsi Lal Manchanda Chairman Independent Director

Mr. Pradeep Kumar Goenka Member Independent Director

Mr. Saubhagya Mal Jain Member Independent Director

The remuneration committee mainly looks after fixation of salary, perquisites and commissions etc. to the directors of thecompany.

Shareholders/Investors’ Grievance Committee

As part of its Corporate Governance initiative, the Company has constituted the Shareholders/Investors grievance Committeeto specifically look into matters relating to shareholders grievance such as approval of transfer/transmission/demat/ rematof shares, issue of duplicate, split-up, consolidation, renewal of share certificate, non-receipt of Annual Report, non-receipt of declared dividends and such other issues.

Mr. Jitendra Awasthi, Company Secretary acts as Compliance Officer of the Committee. The Committee consists of thefollowing members:


Mr. Pradeep Kumar Goenka Chairman Independent Director

Mr. Mahesh Swarup Agarwal Member Non-Independent and Executive Director

Mr. Manoj Agarwal Member Non-Independent and Managing Director

81

4 Shareholding of Directors

The details of shareholding of Directors of the Company are as under:

Sr. No. Name of the Director No. of shares held % of total holding

1. Mr. Mahesh Swarup Agarwal 3,67,299 10.38

2. Mrs. Santosh Agarwal 1,68,773 4.77

3. Mr. Manoj Agarwal 1,47,300 4.16

4. Mr. Ashok Kumar Bhatnagar 100 0.00

5. Mr. Banarsi Lal Manchanda 100 0.00

6. Mr. Saubhagya Mal Jain Nil 0.00

7 Mr. Pradeep Kumar Goenka Nil 0.00

8 Dr. Jagan Nath Gupta Nil 0.00

9 Dr. G. N. Mathur Nil 0.00

Qualification shares required to be held by the Directors

As per the Clause 93 of the Articles of Association of the Company, no qualification share is required for being appointedas or holding the office as a Director of the Company.

5 Interest of Directors:

Except as stated in “Related Party Transactions” on page 104 of this Letter of Offer and to the extent of remuneration(received by them in their respective capacities) and reimbursement of expenses and to the extent any equity shares ofthe Company held by them, there are no interests of Promoters /Directors or payment or benefit to Promoters/ Directorsexcept as mentioned on page 77 under the heading “Compensation to Managing Director and other Whole Time Directors”in the Letter of Offer.

All Directors may be deemed to be interested in the contracts, agreements/arrangements entered into or to be enteredinto by the Company with any company in which they hold directorship as declared in their respective declarations.

6 Changes in the Directors during the last three years:

Name of Director Date of Appointment Date of ceasing Reason

Mr. G. N. Mathur 11.12.2006 – Appointment as Independent Director


82

7 MANAGEMENT ORGANISATION

83

8. Key Managerial Personnel:

The key managerial personnel of our company heading various functions are as under;

Name Age Date of Designation Qualification Last Employment Experience No. ofjoining (in years) shares

held

Sunil Mehta 45 02.09. 2002 Vice President B.Sc., B.Tech. N.P. Agro (I) Ind. Ltd. 22 Nil

J.P. Shukla 52 14.06. 1985 Manager, Diploma in J K Cotton Mills Ltd. 21 NilMaintenance Mech. Engg.

Alok Dhar 56 02.01. 1978 General Manager B.Sc., Dip. in Standard Casting & 28 100(Works) Heat Treatment Industries

R.K. Verma 58 01.10. 2001 Dy. General Dip. in Mech. Roto Pumps Ltd. 38 NilManager (P&A) Eng. & Bus.

Admn., Masterin (IR&PM)

Subodh Goel 51 18.09. 2002 Mgr. (Mkt.) M.Com. Reliance Ind. Ltd. 26 NilTrading Div.

Nitin Ghod-gaonkar 45 04.02. 2004 General Manager B.Sc., LLB, Pithampur Poly Products 24 Nil(Exports) MBA Ltd.

Shashi Kumar Garg 45 03.12. 2005 General Manager M.Com, CA Gajra Bevel Gears Ltd. 20 550(Finance &Commercial)

Jitendra Awasthi 30 05.06. 2006 Company B.Sc., LLB, CS SKS (Ship) Ltd. 5 NilSecretary

The Company has all its key managerial personnel as its permanent employees on the payroll of the Company.

Bonus Or Profit Sharing Plans For The Key Managerial Personnel

There are no bonus or profit sharing plans for the key managerial personnel of the Company.

Loans To Key Managerial Personnel

Name of KMP Details of Loans

Subodh Kumar Goel The company has grated a loan of Rs 40,000 on 8th May 2006 for purchase of vehicle withthe condition of repayment of Rs. 1000/- per month. The present outstanding balance isRs. 26,000/-.

Changes In The Key Managerial Personnel During Last 3 Financial Years

There have been no other changes in the Key Managerial Personnel during the last 3 financial years except the following;

Name Designation Date of Reasonappointment/Cessation

Mr. Jitendra Awasthi Company Secretary 05.06.2006 Appointed as Company Secretary

MR. Shivesh Shukla Sr. Manager Marketing 20.04.2007 Cessation as Sr. Manager Marketing

9 ESOS / ESPS Scheme to Employees of the Company

Our Company has not issued any equity shares under ESOS / ESPS to its employees since inception. Our Company doesnot intend to grant any shares to its employees under ESOS / ESPS scheme from the proposed Rights Issue.

10 Payment or Benefit to Officers of the Company

The officers of the Company do not have any interest in the Company other than to the extent of the remuneration orbenefit as per the terms of appointment and reimbursement of expenses incurred by them during the ordinary course ofbusiness. The Company does not intend to pay or give any consideration for payment of giving of the benefits.

None of the directors / key managerial personnel are inter related except three directors Mr. M S Agarwal, Mrs. SantoshAgarwal and Mr. Manoj Agarwal. Mr. Manoj Agarwal is the son of Mr. M S Agarwal and Mrs. Santosh Agarwal.


84

VI. PROMOTERS & PROMOTER(S) GROUP:

Mr. Mahesh Swarup Agarwal, aged 80 years, is a Bachelor of Arts from Allahabad Universityhaving overall experience of 60 years including running business and industrial enterprises.He is involved in Industrial Packaging Industry since 1948. He was the founder president ofPlastic Woven Sack (All India) Manufacturers Association during the year 1986 to 1988. Hehad been Vice President of All India Tape Manufacturers Association during 1975 – 1985 andPresident of Panki Industrial Association during 1976 - 1986. He had also been President ofMerchants Chamber of Uttar Pradesh during 2004-2005.

In order to better utilize his industrial experience and talent, he formed Kanpur PlastipackLimited in the year 1971. Since then, he is successfully running and managing our Company.He is Executive Chairman of our Company. Presently he looks after overall management andpolicy decisions of our Company.

Passport No.: E4294148

Driving License No.: 23631-90 D/C2,9,86

Voter ID No.: UP/64/292/0300648

PAN No.: AAMPA5834G

Mrs. Santosh Agarwal, aged 72 years is having overall 35 years’ administrative experiencein our company. She is promoter director of our company. She is also director in KSM ExportsLimited which is our Group Company. At present she provides valuable suggestions inadministrative matters of our company.

Passport No.: F2048111

Voter ID No.: UP/64/292/0300649

PAN No.: ACHPA3570E

Mr. Manoj Agarwal, aged 52 years, has done Master in Management Studies from BirlaInstitute of Technology and Science (BITS) Pilani. He is the only son of Shri M. S. Agarwal,the founder of Kanpur Plastipack Ltd. having experience of 30 years in the industry. He isManaging Director of our Company. After completing his education, he joined our Companyin 1977 and was looking after production line of our company initially. He has been a keyperson in rehabilitation of our company and bringing our company out of the purview of BIFRand has been instrumental in the development and growth of the business of our Companywith main thrust on Exports and diversifying into value added products i.e. FIBC’s, which isnow the main thrust of Company’s Export strategy. He looks after Export, Marketing,Administration & General Management functions of our Company.

Passport No.: E4465664

Driving License No.: 7247/88

Voter ID No.: UP/64/292/0300645

PAN No.: ACIPA2493H

Declaration:

The Permanent Account Number, Bank Account Number and Passport Number of the individual Promoters have been submittedto the stock exchange on which securities are proposed to be listed at the time of filing of the Letter of Offer with them. There areno litigations, disputes towards tax liabilities or criminal/civil prosecution/complaint against the above-mentioned Promotersother than as mentioned in the chapter "Outstanding Litigation, Defaults and Material Developments" of this Letter of Offer.

85

RELATIONSHIP BETWEEN THE PROMOTERS, DIRECTORS AND THE MANAGERIAL PERSONNEL

Mr. Mahesh Swarup Agarwal is the Promoter Director and Executive Chairman of our Company. Mrs. Santosh Agarwal ispromoter Director of our company and wife of Mr. Mahesh Swarup Agarwal. Mr. Manoj Agarwal is Managing Director of ourcompany and is son of Mr. Mahesh Swarup Agarwal and Mrs. Santosh Agarwal. Except this, there is no relationship among anyother directors or managerial personnel.

COMMON PURSUIT

There is no Common Pursuit in the business of the Company and other group companies other than those mentioned in theAnnexure X to the Auditor’s Report of this Letter of Offer. The group companies are either engaged in manufacturing of plasticsproducts, which are altogether of different range and applications, or are engaged in job work /compounding activities. Since noother entity is engaged in the line of activity in which Company is engaged, there is no conflict of interest that arises from thefinancial transactions dealt with among the group companies.

RELATED PARTY TRANSACTIONS:

The details of related party transactions are mentioned in Annexure X to the Auditor’s Report of this Letter of Offer.

Interest of Directors and Promoters:

Except as stated elsewhere in this Letter of Offer, all the Directors may be deemed to be interested to the extent of remunerationand/or sitting fees payable to them for attending the meeting of the Board or Committee thereof apart from reimbursement oftraveling/incidental expenses, if any, as per the Articles of Association of the Company.

The Managing Director/Directors/Promoters of the Company shall be deemed to be interested to the extent of shares held bythem and/or their friends and relatives and which may be allotted to them out of the present rights issue, and are also deemed tobe interested to the extent of remuneration and perquisites being drawn by them from the Company.

Except as stated otherwise in this Letter of Offer, the Company has not entered into any contract, agreements or arrangementduring the preceding two years from the date of this letter of offer in which the Directors are interested directly or indirectly andno payments have been made to them in respect of these contracts, agreements or arrangements which are proposed to bemade to them.


86

VII. CURRENCY OF PRESENTATION:

In this Letter of Offer, unless the context otherwise requires, all references to the word “Lakh” or “Lac”, means “One hundredthousand”. In this Letter of Offer, any discrepancies in any table between total and the sum of the amounts listed are due torounding off. All references to “Rupees” and “Rs.” in this Letter of Offer are to the legal currency of India.

87

VIII. DIVIDEND POLICY:

The declaration and payment of dividends on Equity Shares is recommended by the Board of Directors and approved by theshareholders of the Company based on the recommendation by the Board of Directors. The Board of Directors may recommenddividend, at its discretion, to be paid to our members after considering several factors, including but not limiting to, futureexpansion plans and capital requirement, profits earned during the financial year, cost of raising funds from alternate sources,liquidity, applicable taxes including tax on dividend, as well as exemption under tax laws available to various categories ofinvestors from time to time and money market conditions.

The summary of dividends declared by KPL for the last 5 financial years are as follows:

Particulars For the year ended on

31-03-07 31-03-06 31-03-05 31-03-04 31-03-03

Face Value of Equity Share (Rs. per share) 10.00 10 10 10 10

Dividend including Dividend Tax (in Rs. Lakhs) 41.39 23.97 24.20 0.00 0.00

Dividend per Equity Share (Rs.) 1.00 0.60 0.60 0.00 0.00

Dividend Rate (%) 10% 6% 6% 0.00 0.00

The amount paid as dividend in past is not indicative of the Company’s dividend policy in future.


88

E. FINANCIAL DETAILS

I. FINANCIAL INFORMATION OF THE ISSUER COMPANY

AUDITORS’ REPORT AS REQUIRED BY PART II OF SCHEDULE II OF THE COMPANIES ACT, 1956

To,

The Board of Directors,Kanpur Plastipack Limited,D-19, 20 Panki Industrial Area,KANPUR-208022.

Dear Sir,

We have examined the financial information annexed to this report, which has been prepared in accordance with the requirementsof:

a) Paragraph B (1) of Part II of Schedule II to the Companies Act, 1956 (‘the Act’);

b) The Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000 (‘the Guidelines’) andthe related clarifications issued by the Securities and Exchange Board of India (‘SEBI’) on January 19, 2000 as amendedby circular no SEBI/CFD/DIL/DIP/14/2005/25/1dated January 25, 2005, in pursuance of Section 11 of the Securitiesand Exchange Board of India Act, 1992.

c) The instructions dated 24th January 2007 received from Kanpur Plastipack Limited requesting us to issue a report asStatutory Auditor of the company relating to the Offer Document being issued by the Company in connection with theRights Issue of Equity shares of Kanpur Plastipack Ltd.

d) The Guidance Note on Audit Reports/ Certificate on Financial Information in Offer Documents issued by the Institute ofChartered Accountants of India (ICAI).

Financial information as per audited financial statements

1. We have examined the attached restated summary statement of assets and liabilities of the Company as at 31st March,2003, 2004, 2005, 2006 and 2007 and the attached restated summary statement of profits and losses for the years /Period ended on those dates (‘Summary Statements’) (See Annexure I and II) as prepared by the Company and approvedby the Board of Directors. Preparations of these Statements are the responsibility of Company’s Management. Theseprofits/ losses have been arrived at after making such adjustments and regroupings as in our opinion are appropriate andmore fully described in the notes on adjustments appearing in Annexure III to this report.

Based on our examination of these summary statements, we confirm that:

The impact arising on account of changes in accounting policies and estimates adopted by the Company as at yearended 2007 have been adjusted with retrospective effect in the attached summary statements:

The prior period items have been adjusted in the summary statements in the years to which they relate;

There are no extraordinary items which need to be disclosed separately in the summary statements; and

There are no qualifications in the auditors’ reports, which require any adjustments to the summary statements.

2. The summary of Significant Accounting Policies adopted by the Company pertaining to the audited financial statementsfor the Year ended March 31st 2007 along with Notes on Accounts thereon are enclosed as Annexure III to this report.

Other Financial Information

3. At your request, we have also examined the following other financial information of the Company proposed to be includedin the Offer Document as approved by you and annexed to this report:

Details of other financial information examined Annexure

Dividend Statement IV

Details of Other Income V

Capitalisation statement as at March 31st, 2007 VI

Statement of Tax Shelter (Last 5 years) VII

Statement of Accounting Ratios VIII

89

Details of Secured Loans IXA

Details of Unsecured Loans IXB

Details of Related Party Transactions X

Statement of Cash Flow (as Restated) XI

Details of Sundry Debtors XII

Statement of Contingent Liabilities XIII

Details Related to Consignment Stockist Division of the Company XIV

4. We have examined the “Dividend Statement” enclosed as Annexure IV to this report and report that correctly records thematter therein.

5. We have examined the “Statement of other income” enclosed in Annexure V to this report.

6. We have examined the “Capitalization Statement” enclosed as Annexure VI to this report and report that it correctlyrecords the matters stated therein.

7. We have examined the Statement of Tax Shelters for the years / Period ended 31st March 2003, 2004, 2005, 2006 & 2007enclosed as Annexure VII of this report, which in our opinion correctly reflects the “Tax Shelter” for each of those years.

8. We have examined the “Statement of Accounting Ratios” of the Company for the years ended 31st March, 2003, 2004,2005, 2006 and 2007 enclosed as Annexure VIII to this report and confirm that they have been correctly computed fromthe figures as stated in the “Statements of Restated Profits and Losses” and “Statement of Restated Assets and Liabilities”of the Company referred to in paragraph 1 above and read with the notes appended in Annexure III.

9. We have examined the “Statement of Secured Loan” enclosed vide Annexure IXA, Statement of “Unsecured Loan” videAnnexure IXB, Statement of “Sundry Debtors vide Annexure XII as on 31st March 2007.

10. We have examined the accompanying “Statement of Related Party Transactions” for the Year ended 31st March, 2007enclosed as Annexure X to this report and confirm that the relationships and transactions between the Company and itsrelated parties have been appropriately reported in accordance with Accounting Standard 18 (Related Party Disclosures)issued by The Institute of Chartered Accountants of India.

11. We have examined the “Cash Flow Statement” for the year ended 31st March 2003, 2004, 2005 , 2006 and 2007 of KanpurPlastipack Limited enclosed as Annexure XI to this report and confirm that, these statements have been prepared by theCompany in accordance with the requirement of Accounting Standard 3 (Cash Flow Statements) issued by the Institute ofChartered Accountants of India.

12. We have examined the “Statement of Contingent Liabilities” for the year ended 31st March 2003, 2004, 2005, 2006 and2007 of Kanpur Plastipack Limited enclosed in Annexure XIII to this report.

13. We have examined the “Details Related to Consignment Stockist Division of the Company” for the year ended 31st March2005, 2006 and 2007 of Kanpur Plastipack Limited enclosed in Annexure XIV to this report.

14. In our view, the financial information as per audited financial statements and other financial information mentioned abovehave been prepared in accordance with Part II of Schedule II of the Act and the Guidelines.

15. The sufficiency of the procedures performed, as set forth in the above paragraphs of this report, is the sole responsibilityof the Company. Consequently, we make no representation regarding the sufficiency of the procedures described aboveeither for the purposes for which this report has been requested or for any other purpose.

16. This report should not be in any way construed as a reissuance or redating of any of the previous audit reports issued byus or by other firm of Chartered Accountants nor should this report be construed as a new opinion on any of the financialstatements referred to herein.

17. This report may not be used or relied upon by or disclosed, referred to or communicated by you (in whole or in part) to anythird party for any purpose other than the stated use, except with our written consent in each instance and which consentmay be given only after full consideration of the circumstances at that time.

For Pandey & Co.,Chartered Accountants

Place: Kanpur Amit PandeyDate: 10-07-2007 Partner

Membership No. 402377


90

ANNEXURE - I

STATEMENT OF RESTATED PROFIT AND LOSS ACCOUNTS:(Rs. In Lakhs)


Income

Gross Sales 6913.52 5436.63 5264.46 3939.74 3478.55

Less: Excise Duty 317.60 280.55 368.42 362.06 372.84

Net Sales 6595.92 5156.08 4896.04 3577.68 3105.71

Other income 61.29 66.75 56.43 89.34 67.34


Total 6681.60 5245.83 5030.95 3695.70 3224.93

Expenditure





Total 6248.26 5027.64 4759.40 3479.97 3071.22

Operating Profit before Int,Dep & Prior Period Exps 433.34 218.19 271.55 215.73 153.71


Depreciation 73.08 75.09 70.72 60.35 57.06

Amortization 0.00 0.00 0.00 0.00 0.00

Operating Profit before Prior Period Expenses 223.07 63.89 130.10 90.66 49.55


Current Tax 74.48 29.09 30.80 11.80 1.00

Deferred Tax 3.23 -5.25 20.75 17.95 9.64






Impact of material adjustmentfor establishmentin corresponding years



Add/ (Less): Deferred TaxProvided earlier nowreversed 0.00 0.00 0.00 0.39 0.00


Add/ (Less): Others 0.44 1.40 -0.67 -0.11 -5.59


C/F Profit from previous year 368.35 352.12 298.44 289.65 256.33

Total 513.15 392.31 376.32 298.44 289.65

Appropriations

Dividend incl. Tax on dividend 41.39 23.96 24.20 0.00 0.00

General Reserve 0.00 0.00 0.00 0.00 0.00

Profit (Loss) C/F to Balance Sheet includingGeneral Reserves 471.76 368.35 352.12 298.44 289.65

91

ANNEXURE – II

STATEMENT OF RESTATED ASSETS AND LIABILITIES:(Rs. In Lakhs)


Fixed Assets

Gross Block 1712.72 1503.83 1592.48 1396.53 1362.73

Less: Depreciation 819.18 804.32 891.72 822.35 776.72

893.54 699.51 700.76 574.18 586.01


Add: Capital Work-in-Progress 686.08 0.00 0.00 0.00 0.00

A Net Block 1579.62 696.04 690.52 557.18 562.24

B Investments 1.18 1.18 1.18 1.18 0.75

C Current Assets

Inventories 866.22 767.04 638.27 539.89 419.77

Sundry Debtors 772.54 773.60 963.61 599.69 380.90

Cash & Bank Balance 65.09 84.75 43.03 55.01 22.87

Loans & Advances 444.79 290.53 204.76 157.11 146.68

Total Current Assets 2148.64 1915.92 1849.67 1351.70 970.22

D Total Assets (A+B+C) 3043.36 2613.14 2541.37 1910.06 1533.21

Less: Liabilities & Provisions

Secured Loans 1669.78 878.88 1044.25 571.38 399.12

Unsecured Loans 372.98 122.65 69.77 75.4 100.77

Deferred Tax Liabilities 98.72 95.49 100.74 80.00 62.04

Deferred Sales Tax Liabilities(U P Govt.) 0.00 0.00 0.00 0.00 0.00

Current Liabilities 347.83 586.62 427.37 368.52 225.53

Provision for Taxation 271.86 64.64 50.60 19.80 12.00

E Total Liabilities 2761.17 1748.28 1692.73 1115.10 799.46

Net Worth (D-E) 968.27 864.86 848.64 794.96 733.75

REPRESENTED BY

F Share Capital 353.75 353.75 353.75 353.75 353.75

Reserves & Surplus 614.52 514.58 505.13 458.21 403.77


Less: Misc. Expenditure 0.00 0 0 0 0

G Net Reserves & Surplus 614.52 511.11 494.89 441.21 380.00

H Net Worth (F+G) 968.27 864.86 848.64 794.96 733.75


92

ANNEXURE – III

Segment Reporting

The company is engaged in the manufacturing of Plastic Woven Sacks & Bags & in another segment of the company, it hasconsignment stockist Division, the details are as given below:

Segment Information For The Year- 2004

Information about Primary Segments(Rs. In Lakhs)

Particulars Manufacturing Consignment TotalOperations Stockist (Rs)

(Rs) Operations (Rs)

Segment Revenue 3981.75 47.33 4029.08

Less: Inter Segment Revenue - - -

Net Sales/Income from Operations 3981.75 47.334029.08

Segment Results (ProfitBefore Tax and Interest) 128.35 27.05 155.40

Less: Interest 64.72

Total Profit before Tax 90.67

Capital Employed

Segment Assets 1734.39 192.66 1927.05

Segment Liabilities 881.02 154.06 1035.09

Net Capital Employed 853.36 38.60 891.96

Capital Expenditure 33.76 0.04 33.80

Depreciation 60.29 0.06 60.35

Information about Secondary Segments

1. Revenue from Geographical Markets

India 2567.89

Overseas 1461.18

Total 4029.08

93

Segment Information For The Year-2005




Segment Revenue 5278.88 42.00 5320.88


Net Sales/Income from Operations 5278.88 42.00 5320.88

Segment Results (Profit Before Tax and Interest) 177.27 22.89 200.16

Less: Interest 70.73

Total Profit before Tax 129.43

Capital Employed

Segment Assets 2409.08 142.54 2551.62



Capital Expenditure 195.95 — 195.95




India 2343.77

Overseas 2977.11

Total 5320.88


94

Segment Information for the Year-2006.




Segment Revenue 5459.18 44.19 5503.38




Less: Interest 78.75 0.45 79.21

Total Profit before Tax 40.53 23.36 63.89

Capital Employed

Segment Assets 2261.56 355.06 2616.61



Capital Expenditure 80.61 — 80.61




India 2164.35

Overseas 3339.03

Total 5503.38

95

Segment Information For The Year-2007




Segment Revenue 6930.29 44.52 6974.80

Less: Inter Segment Revenue



Less: Interest 137.19 0.00 137.19

Total Profit before Tax 201.32 21.74 223.06

Capital Employed

Segment Assets 3643.71 85.75 3729.46



Capital Expenditure 207.02 0.00 207.02




India 2076.82

Overseas 4897.98

Total 6974.80

Payments in foreign exchange:(Rs. In Lakhs)

Particulars For the Year Ended 31st March

2007 2006 2005 2004 2003

Purchase of Raw Material 959.56 1568.64 1109.43 416.92 30.93

Capital Goods 0.00 0.00 0.00 0.82 0.53

Travels 3.05 8.91 5.94 6.44 2.77

Commission on Exports Sales 17.13 20.46 28.47 18.43 9.45

Subscription, Sample Testing Charges, Rejection ofSales of goods, etc. 17.22 3.40 18.48 2.76 1.22

Total 996.96 1601.41 1162.32 445.37 44.90


96

A. Notes on adjustments and significant accounting policies for restated financial statements.

The accounts are prepared to comply in all material aspects with the applicable accounting standards issued by The Instituteof Chartered Accountants of India and the relevant provisions of The Companies Act, 1956. The accounts are prepared underthe historical cost convention and in accordance with the generally accepted accounting principles in India. The significantaccounting policies are as under:

1. Use of Estimates:

The preparation of financial statements requires estimates and assumptions for the reported amount of assets and liabilitieson the date of the financial statements and the reported amount of revenues during the reporting period. Differencebetween the actual results and estimates are recognized in the period in which the results are known / materialized.

2. Fixed Assets:

Fixed Assets are valued at cost.

3. Revaluation of Assets:

Land, Building, Plant & Machineries have been revalued as on 31st March 1985 by the Company on the basis of the reportof professional valuer. Consequent to revaluation, Rs.1,47,40,547/- was credited to Revaluation Reserve representingthe net surplus over the written down value of the then existing assets. The depreciation on increase in assets due torevaluation was reduced from gross block of fixed assets and debited to Revaluation Reserve without affecting Profit &Loss Account.

4. Depreciation:

Depreciation has been provided on straight-line method on building, plant & machinery, electric installations and onwritten down value method on other assets, as per Schedule XIV of the Companies Act, 1956. Further, depreciation onassets, whose actual cost does not exceed Rs. 5000/- has been provided @ 100%.

5. Valuation of Inventory:

The raw materials, stores and spares and goods-in-process are valued at cost net of modvat credit, and finished goodsare valued at cost or net realizable value, whichever is lower. The cost is computed on FIFO basis and comprises all costof purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

6. Research & Development:

The Company does not have separate research & development department. The Company has not made any specificexpenditure on this head.

7. Foreign Currency Transactions:

Current assets and current liabilities relating to foreign currency transactions are converted in rupees at prevailing rate ofexchange. Profit or Loss on outstanding foreign currency contracts has been accounted for at the exchange rate prevailingat the close of the year.

8. Contingent Liabilities:

Contingent Liabilities as shown in the notes to the accounts, may affect the future profitability to the extent it materialisesfor payment.

9. Investments:

All investments are valued at cost price.

10. Recognition of Income / Expenditure:

All revenues / income are accounted for on accrual basis.

B. NOTES TO ACCOUNTS.

1. Previous year’s figures have been regrouped /recasted, wherever necessary to make them comparable with those of thecurrent year.

2. The company has provided for Income Tax according to the views of the Tax Auditors of the company, viz., M/s Pandey& Co, Chartered Accountants.

3. Figures in bracket indicate previous year’s figures.

97

4. Contingent Liabilities

Particulars 2007 2006 2005 2004 2003

Bank Guarantees 281.49 183.51 183.79 189.67 107.00

Foreign Bills Discounted and Purchased underLetter of credit 82.30 276.90 267.57 112.33 219.77

Legal Undertakings Submitted to customs andDGFT under duty exemption scheme for importof raw materials against which all exports havebeen completed and advance licences areunder redemption. 927.10 2076.42 1475.54 448.82 2.80

5. Remuneration to Whole-Time Directors:

Particulars For the Year Ended 31st March

2007 2006 2005 2004 2003

Salary 76.15 57.89 49.84 40.21 31.09

Contribution to PF 4.60 4.09 3.41 2.83 2.23

Total 80.75 61.98 53.25 43.04 33.32

6. Legal Cases:

In respect of the company’s claim with Central Excise authorities regarding wrong classification of product, which waspartially settled and the company was allowed consequential relief in November, 1998, the appeal of the Departmentagainst the same was rejected by the CEGAT and contention of the company was accepted. Now, the Department hasfiled reference, which is pending with Allahabad High Court.

The company has filed a criminal case in May 2003 u/s 138 of the Negotiable Instruments Act against M/s PriyadarshiniCements Ltd., Hyderabad regarding its cheque of Rs. 37,08,062/- received against payment of their outstanding bills,which was dishonoured.

7. Income Tax:

The Income Tax assessments for the A.Y.1995-96 to 2001-02 had been reopened and reassessment has been completed.For A.Y. 1995- 96, there is no demand as the same was setoff with brought forward losses, appeal has been decided incompany's favour by Income Tax Appellate Tribunal, Lucknow, department has filled an appeal before Hon'ble High CourtAllahabad. For Assessment Year 2001-02, Additional demand of Rs.46.97 Lacs was raised which has been paid andappeal is pending with Income Tax Appellate Tribunal, Lucknow. For assessment year 1996-97 and 1997-98 also, thereis no demand as the same was setoff with brought forward losses, appeals are pending with ITAT, Lucknow. Due toalleged additions in these assessment years additional demand of Rs. 154.28 lacs was raised for A.Y. 1998-99 to 2000-01 against which the company has paid Rs. 85.17 lacs till 31st March, 2007 and all the appeals are pending at Income TaxAppellate Tribunal, Lucknow. The management is hopeful of getting substantial relief in all the above cases.

8. Capital:

In the financial year 2003 – 04, the amount of share application money refundable, which was subject to reconciliation,was deposited in the financial year 2004 – 05 in full.

9. Central Excise:

In respect of the company’s claim with Central Excise authorities regarding wrong classification of product, which waspartially settled and the company was allowed consequential relief in November, 1998, the appeal of the Departmentagainst the same was rejected by the CEGAT and contention of the company was accepted. Now, the Department hasfiled reference, which is pending with Allahabad High Court.

Excise duty includes on export sales Rs. NIL (Previous Year Rs. 64.26 lacs) in the financial year 2004– 05.

The Excise Duty of Rs. 3,72,84,007/- includes an amount of Rs. 48,51,490/- paid during the year 2002-03 consequentupon orders of Settlement Commission passed under the relevant provisions of Central Excise Act, 1944.


98

10. Gratuity:

The provision for gratuity has been calculated in accordance with the provisions of the Payment of Gratuity Act, 1972. Theprovision has been made only for those employees, who have completed five years of service with the company.

During the financial year ending 31st march 2003 the provision for gratuity for the period upto 31st March 1997, are beingaccounted for as deferred revenue expenditure. Consequently, Rs 6,78,359.00 being 1/5th of the total liability had beenprovided during that year (it was last installment).

11. Sundry Creditors:

For financial year ending 2004:

Sundry Creditors includes Rs. 4.37 Lacs (previous year Rs. 3.57 lacs) due to Small Scale Industrial Undertakings and Rs.86.04 Lacs (previous year Rs. 42.98 lacs) due to other creditors. The disclosure is based on the information available withthe Company regarding the status of the suppliers. There are no sundry creditors, whose dues are outstanding for morethan 30 days and exceeding Rs. 1.00 lakhs.


Sundry Creditors includes Rs. 2.19 Lakhs (previous year Rs. 4.37 lacs) due to Small Scale Industrial Undertakings andRs. 235.99 Lacs (previous year Rs. 86.04 lacs) due to other creditors. The disclosure is based on the information availablewith the Company regarding the status of the suppliers. There are no sundry creditors, whose dues are outstanding formore than 30 days and exceeding Rs. 1.00 lac.


Sundry Creditors includes Rs.1.40 Lakhs (previous year Rs. 1.88 lacs) due to Small Scale Industrial Undertakings andRs.414.36 Lacs (previous year Rs. 249.37lacs) due to other creditors. The disclosure is based on the information availablewith the Company regarding the status of the suppliers. There are no sundry creditors, whose dues are outstanding formore than 30 days and exceeding Rs. 1.00 lac.


Sundry Creditors includes Rs 0.95 Lacs (previous year Rs. 1.40 lacs) due to Small Scale Industrial Undertakings andRs.271.04 Lacs (previous year Rs. 414.36 lacs) due to other creditors. The disclosure is based on the information availablewith the Company regarding the status of the suppliers. There are no sundry creditors, whose dues are outstanding formore than 30 days and exceeding Rs. 1.00 lac.

12. Leasehold land has been amortized as per requirement of AS-19.

13. Provision for leave encashment is yet to be made.

Deferred Tax:

In accordance with Accounting Standard 22, “Accounting for Taxes on Income” as issued by The Institute of CharteredAccountants of India, the Company has provided for deferred tax liability as per details given hereunder:

Nature of Timing Difference Deferred Tax Current year Deferred TaxAsset/Asset/(Liability) (Charges)/Credit (Liability) as on

As on 01.04.2007 31.03.2006

Depreciation (12956991) 712343 (12244648)

Sales Tax Deferment —- —- —-

Disallowances u/s 43B 3085199 389610 2695589

C/F Business Losses —- —- —-

Others —- —- —-

Total (9871792) 322733 (9549059)

99

Licensed & Installed Capacity, Production & Sales:

Unit Licensed Installed Production Sales(MT)

Fabric and Sacks Not 6000* 6327.5** 6318.00**Applicable (6000) (5829.50) (5793.00)

*The capacity is for producing unlaminated fabric.

(** Includes LDPE & others for finished goods. Also includes job work done for outside parties NIL (last year 26.3 MTs).

14 (a) Opening Stock of GIP & Finished Goods: As on 01.04.2006 As on 01.04.2005

i) Plastic products Qty. (MT) 398.85 362.40

Value (Rs. in lacs) 295.52 271.17

ii) Others (Rs. in Lacs) 3.22 4.57

(b) Closing Stock of GIP & Finished Goods: As on 31.03.2007 As on 31.03.2006

i) Plastic products Qty. (MT) 408.30 398.85

Value (Rs. in Lacs) 318.07 295.52

ii) Others (Rs. in Lacs) 5.06 3.22

15. Raw Material Consumed

2006-07 2005-06

Unit Qty. Rs in Lacs Qty. Rs. in Lacs

Plastic Granules (MT) 7123.10 4261.60 6495.5 3301.68

Others — 211.67 — 123.02

Total 7123.10 4473.27 6445.50 3424.70

*Plastic Granules includes cost of granules sold 5 MT (last year nil MT).

16. Value of Imported & Indigenous Raw Materials, Store & Spares consumed:

Particulars 2006-07 2005-06

Value % of Total Value % of TotalRs in Lacs Consumption Rs in Lacs Consumption

a) Stores & Spares

Imported 0.00 0.00 0.00 0.00

Indigenous 117.94 100.00 100.83 100.00

Total 117.94 100.00 100.83 100.00

b) Raw Materials

Imported 1008.09 22.54 1540.50 44.98

Indigenous 3465.18 77.46 1884.20 55.02

Total 4473.27 100.00 3424.70 100.00


100

17. Value of Imports on CIF Basis: 2006-07 2005-06

Rs. in Lacs Rs. in Lacs

a) Raw Material 959.56 1568.64

b) Stores & Spares 0.00 0.00

18. Expenditure in Foreign Currency on

a) Travel 3.05 8.91

b) Others 34.35 23.86

19. Earnings in Foreign Currency on FOB basis

Export of Goods 4742.77 3236.86

Others —- —-

ANNEXURE-IV

DIVIDEND STATEMENT

Particular 31/03/07 31/03/06 31/03/05 31/03/04 31/03/03

Face Value of Equity Share(Rs. per share) 10 10 10 10 10

Dividend including Dividend Tax (Rs. In Lakhs) 41.39 23.97 24.20 0.00 0.00

Dividend per Equity Share (Rs.) 1.00 0.60 0.60 0.00 0.00

Dividend Rate (%) 10 6 6 0 0

ANNEXURE-V

STATEMENT OF OTHER INCOME (Rs. in lakhs)

Particulars For the year ending on

31/03/07 31/03/06 31/03/05 31/03/04 31/03/03

Recurring-related to businessCommission onconsignment stock sale 40.74 41.88 40.96 46.03 16.17

Recurring related to businessIncome from Services - 0.38 3.99 13.60 37.54

Sale of scraps 10.71 6.72 7.17 7.06 6.84

Non-recurring-not related to business - Others 3.96 10.03 0.78 13.68 2.81

Foreign Exchange Difference on Sale of Products 1.64 - - 0.88 2.79

Interest Received on fixed deposit with bank forB/G & L/C 4.24 7.74 3.52 8.09 1.19

Total 61.29 66.75 56.42 89.34 67.34

Net profit before tax as restated 223.06 63.89 130.10 90.66 49.55

Other Income as a % of Net Profit Before Tax 27.48 104.48 43.36 98.54 135.90

101

ANNEXURE-VI

CAPITALIZATION STATEMENT

Table showing debt equity ratio: Pre Issue and Post Issue (Rs. in Lakhs)

Details Pre Issue Post Issue[As on 31.03.07] [Immediately after the issue]

Debt

Short Term Debt 1005.52 1005.52

Long Term Debt 1037.24 1037.24

Total Debt 2042.76 2042.76

Shareholders' Fund

Share Capital 353.75 530.62

Reserves 614.52 791.40

Less: Revaluation Reserve 0.00 0.00

Less: Profit and Loss Debit balance ------ ------

Total Shareholders' Fund 968.27 1322.02

Long Term Debt/Equity Ratio 1.07:1 0.78:1

Total Debt / Networth 2.10:1 1.55:1

ANNEXURE – VII

STATEMENT OF TAX SHELTER (Rs. in lakhs)

For the year March 31 2007 2006 2005 2004 2003Ordinary items as books (A) 223.06 63.89 130.10 90.67 49.55

Tax rate thereon 33.66% 33.66% 36.58% 35.88% 36.75%

Tax at the above rate 75.08 21.51 47.59 32.53 18.21

Adjustments:

Permanent difference

80 HHC 0.00 0.00 0.00 -1.71 0.00

80 G -2.50 -0.03 -1.20 0.00 0.00

Share of profit U/S 10(2A) 0.00 0.00 0.00 0.00 0.00

Total Permanent Differences (B) -2.50 -0.03 -1.20 -1.71 0.00

Timing Differences

Gratuity 11.57 5.23 4.41 3.33 3.63

Loss/Profit on sale of Investments 0.00 0.00 0.00 0.00 1.63

Loss/Profit on sale of Fixed Assets 0.00 2.01 0.96 -1.17 -0.03

Depreciation (diff. of IT & Book Values) -23.98 12.96 -43.44 4.46 4.50

Donations 5.00 0.37 2.38 0.21 0.63

Others (43 B items) 0.00 -0.71 -10.57 10.64 -131.17

Prior period income/expenses 0.00 1.19 -0.42 0.03 25.00

Brought forward Loss 0.00 0.00 0.00 -71.46 0.00

Tax on Perquisites of Directors 2.10 1.30 1.62 0.00 0.00

Dividend received on equity shares 0.00 -0.03 0.00 0.00 0.00

Total timing differences (C) -5.31 22.32 -45.06 -53.96 -95.81

Net Adjustments (B+C) -7.81 22.29 -46.26 -55.67 -95.81

Tax expenses (savings thereon) -2.63 7.50 -16.92 -19.97 -35.21

Profit/(Loss) as per IT return 215.25 86.18 83.81 35.00 -71.46

Taxable income as per MAT 25.32 5.08 9.71 7.06 0.92

Tax as per Income Tax as returned 72.45 29.01 30.67 12.56 0.92


102

ANNEXURE – VIII

KEY ACCOUNTING RATIOS

Sr. No. Particulars 2007 2006 2005 2004 2003

1 Net Profit (Restated) (Rs. in Lacs) 144.80 40.19 77.88 8.79 33.32

2 Equity Shares (Nos. of shares) 3537500 3537500 3537500 3537500 3537500

3 Equity Capital (Rs. in Lacs) 353.75 353.75 353.75 353.75 353.75

4 Net Worth- Restated (Rs. in Lacs) 968.27 864.86 848.64 794.96 733.75

5 Earning Per Share (in Rs.) 4.11 1.14 2.20 0.25 0.94

6 Net Asset Value Per Share (In Rs.) 27.37 24.45 23.99 22.47 20.74

7 Return on Net Worth (%) 15.00% 4.65% 9.18% 1.11% 4.54%

ANNEXURE – IXA

DETAILS OF SECURED LOANS (Rs. in Lakhs)


State Bank Of India(Secured by hypothecation ofraw material, finished goods, goods in process,spares, sale bills & mortgage of fixed assets)Rate of Interest

1. Cash-Credit: 0.75% above SBAR

2. EPC: 2.90% Below SBAR

3. FCNRDL: LIBOR + 2.75%

Working Capital loans repayable on demand. 602.34 479.89 448.45 423.29 398.70

Standard chartered grindlays bank(Secured by hypothecation of vehicle) — - 3.12 - 0.42

H.D.F.C. Bank(Secured by hypothecation of vehicle) — - 6.38 - -

State Bank Of India Export Bills purchase(export documents evidencing title of goods)Rate of Interest being @ 2.90% below SBAR andRepayable on demand. 379.18 302.33 473.83 148.09 -

State Bank Of India (Secured by mortgage of fixedAssets)Rate of Interest

1) TL-1: 0.75% below SBAR

2) TL-2: SBAR

3) TL-3(FCNRB): LIBOR + 2.50%

Repayable as per Repayment Schedule 688.26 96.66 112.48 - -

Total 1669.78 878.88 1044.26 571.38 399.12

Terms of Secured Loan of SBI:

Name of the Borrower Kanpur Plastipack Limited

Name of Facility Foreign Currency Term Loan

Amount of Loan Rs. 1250 lakhs

Currency Indian Rupees

Purpose Purchase of Land, Plant & Machineries, Construction of new factory building and other fixedassets

103

Primary Security 1st Charge on the entire Fixed Assets of the Company (both present and future) having WDV ofRs. 6.97 crores as per the Balance Sheet as on 31st March 2006.

Collateral Security Extension of Charge on entire current assets of the Company

Period of Term Loan The period of term loan including moratorium is 8 years. The outstanding in FCNR (B) – TermLoan account will be converted in to rupee term loan after the end of the 5 years.

Rate of Term Loan At SBAR minimum 11.50% for the Rupee Term Loan

250 bps over 6 months LIBOR for a tenor of 5 years

Repayment Schedule FCTL shall be repayable in 27 quarterly installments of as under with 1st Installment falling dueon 30th June 2008.

Due Date of Rs. Due Date of Rs.Principal Payment Principal Payment

30.06.2008 10,00,000/- 31.12.2011 55,00,000/-

30.09.2008 10,00,000/- 31.03.2012 55,00,000/-

31.12.2008 20,00,000/- 30.06.2012 60,00,000/-

31.03.2009 20,00,000/- 30.09.2012 60,00,000/-

30.06.2009 35,00,000/- 31.12.2012 60,00,000/

30.09.2009 35,00,000/ 31.03.2013 60,00,000/

31.12.2009 35,00,000/ 30.06.2013 60,00,000/

31.03.2010 35,00,000/ 30.09.2013 60,00,000/

30.06.2010 35,00,000/ 31.12.2013 60,00,000/

30.09.2010 35,00,000/ 31.03.2014 60,00,000/

31.12.2010 35,00,000/ 30.06.2014 70,00,000/-

31.03.2011 35,00,000/ 30.09.2014 70,00,000/-

30.06.2011 55,00,000/ 31.12.2014 70,00,000/-

30.09.2011 55,00,000/ — —

Sub-total 4,50,00,000/- Sub-total 8,00,00,000/-

Total Repayment 12,50,00,000/-

ANNEXURE – IXB

DETAILS OF UNSECURED LOANS (Rs. in lakhs)


From Shareholders falling within the promoter group 159.50 86.66 48.60 48.00 51.00

From Directors 192.00 3.00 0.00 0.00 9.00

From non- shareholders/ promoters 15.00 32.99 21.17 27.40 40.77

Deferred Sales Tax Liability - - - - -

Standard chartered grindlays bank(Secured by hypothecation of vehicle) 0.14 - - - -

H.D.F.C. Bank(Secured by hypothecation of vehicle) 0.27 - - - -

Kotak Mahindra Prime Ltd. 5.72 - - - -


104

Terms & Conditions:

The Company has taken unsecured loans from its promoters, promoter group & group companies at the rate of 11% p.a.simple interest and the loans are repayable on demand.

The adjustment towards share application money would be in respect of promoters and directors both.

Further, the adjustment towards rights issue entitlement would be on the pro rata basis of their contribution towards the loan.

The details of adjustment of unsecured loans against share application money are as follows:

(Rs. in Lakhs)

Sr. Name of the Person Promoter/Director Proposed Share Outstanding AdjustmentNo. Application Unsecured of

Amt. Loans UnsecuredLoans

1. KSM Exports Ltd. Group Company 15.27 27.00 15.27

2. M.S.Agarwal Promoter Director 36.73 115.00 36.73

3. Manoj Agarwal HUF Promoter 13.64 12.00 12.00

4. Santosh Agarwal Promoter Director 16.88 14.00 14.00

5. Usha Agarwal Promoter Group 31.10 44.00 31.10

6. Kanika Agarwal Promoter Group 4.40 16.00 4.40

7. KPL Packaging Pvt. Ltd. Group Company - 18.00 -

8. Manoj Agarwal Promoter Director 14.73 63.00 14.73

9. Shashank Agarwal Promoter Group 4.64 25.00 4.64

10. M.S.Agarwal HUF Promoter Group 21.46 10.00 10.00

11. Total 158.85 344.00 142.87

ANNEXURE – X

RELATED PARTIES TRANSACTION

Disclosures in respect of transaction with related parties, as defined in Accounting Standard 18 issued by the Institute ofChartered Accountants of India, which have taken place during the year under review are given below:

AS-18: RELATED PARTY DISCLOSURE (Rs. in lakhs)

Name of the Description of Nature Amount of Amount of Amount ofRelated party Relationship of transaction transaction transaction

Transaction (Rs.) 2005 (Rs.) 2006 (Rs.) 2007

Amount % of Amount % of Amount % ofSales Sales Sales

KSM Exports Ltd. Group Company Interest 0.39 0.007 0.34 0.006 1.01 0.014

KSM Exports Ltd. Group Company Job 32.87 0.624 32.85 0.604 37.57 0.543

KSM Exports Ltd. Group Company Rent 3.20 0.06 4.80 0.088 4.80 0.069

MSA Investment Group Company Interest - - - - - -& Trading Co.(P) Ltd.

MSA Investment Group Company Raw Material 5.70 0.11 - - - -& Trading Co.(P) Ltd.

105

Name of the Description of Nature Amount of Amount of Amount ofRelated party Relationship of transaction transaction transaction

Transaction (Rs.) 2005 (Rs.) 2006 (Rs.) 2007

Amount % of Amount % of Amount % ofSales Sales Sales

MSA Investment Group Company Rent 0.36 0.006 - - - -& Trading Co.(P) Ltd.

KPL Packaging Group Company Interest 1.10 0.02 1.58 0.29 1.97 0.028(P) Ltd.

Jayatika Goyal Relative Interest 0.66 0.012 0.66 0.012 0.66 0.009

Kanika Agarwal Relative Interest 2.81 0.053 2.77 0.05 1.89 0.027

Shashank Agarwal Relative Interest 0.38 0.007 1.19 0.02 2.74 0.039

M.S. Agarwal Relative Interest - - 0.03 0.00 0.33 0.004(HUF)

Manoj Agarwal Relative Interest - - 0.02 0.00 0.60 0.008(HUF)

Manoj Agarwal Relative Interest - - - - 2.53 0.036

Smt. Santosh Relative Interest - - - - 0.59 0.008Agarwal

Smt. Usha Relative Interest - - 0.30 0.005 2.30 0.033Agarwal

M. S. Agarwal Executive Interest - - - - 4.54 0.065Chairman

Alka Arren Relative - - - - - -

Sueera swarup Relative Interest - - 0.98 0.018 - -

Vedant Swarop Relative Interest 0.07 0.001 0.11 0.002 - -

Anubhuti Swaroop Relative 0.04 0.00 0.08 0.001 - -

M. S. Agarwal Executive Remuneration 26.74 0.507 31.60 0.581 39.03 0.564Chairman

Manoj Agarwal MD Remuneration 17.61 0.334 19.12 0.351 28.92 0.418

A. K. Bhatnagar ED Remuneration 8.90 0.169 11.26 0.207 12.80 0.185


106

ANNEXURE – XI

RESTATED CASH FLOW STATEMENTS:(Rs. in lakhs)


A Cash Flow fromOperating Activities

Profit Before Tax &Extraordinary Items 223.5 65.26 129.41 90.95 43.95

Adjustment for:

Depreciation 73.08 75.09 70.72 60.35 57.06

Profit/loss on sale of Fixed Assets 0.00 0.00 0.00 0.00 0.00

Excess Tax Provision/Def Tax Liability 0.00 0.00 0.00 0.00 0.00

Preliminary Expenses W/off 0.00 0.00 0.00 0.00 0.00

Interest 137.19 79.21 70.73 64.72 47.10

Operating Profit before Working Capital Changes 433.77 219.56 270.86 216.02 148.11

Adjustment for

Inventories -99.20 -128.75 -98.38 -120.12 29.19

Sundry Debtors -155.93 106.98 -411.58 -229.21 -101.39

Loans & Advances 0.00 0.00 0.00 0.00 0.00

Sundry Creditors & Other Liabilities -31.56 173.28 89.66 150.80 68.27

Provisions 0.00 0.00 0.00 0.00 0.00

Deferred Tax Liability

Less: Interest 137.19 79.21 70.73 64.72 47.10

Less: Direct Tax Paid 75.47 30.36 30.80 11.80 1.00

Net Cash From Operations -65.58 261.50 -250.97 -59.03 96.08

B Cash Flow from Investment Activities

Addition to Fixed Assets -270.92 -99.69 -209.25 -55.62 -88.03

Capital Work-in-progress -686.08 0.00 0.00 0.00 0.00

Deletion to Fixed Assets (net) 0.35 19.07 5.18 0.33 2.35

Redemption/(Purchase) of Investments 0.00 0.00 0.00 -0.43 0.00

Net Cash used in investing activities - 956.65 -80.59 -204.05 -55.72 -85.68

C Cash Flow from Financial Activities

Proceeds from Issue of Share Capital 0.00 0.00 0.00 0.00 0.00

Proceeds from Long Term Borrowings 1041.23 -112.20 467.24 146.89 117.31

Proceeds from Short Term Borrowings

Sales Tax Deferment (Interest Free) 0.00 0.00 0.00 0.00 -114.39

Dividends Paid -41.39 -23.96 -24.20 0.00 0.00

Finance Charges paid (Net)

Net Cash from Financing Activities 999.84 -136.46 443.04 146.89 2.92

D Net Increase in Cash & Cash Equivalents

(A+B+C) -22.39 44.45 -11.98 32.14 13.32

Opening Cash & Cash Equivalent 87.48 43.03 55.01 22.87 9.55

Closing Cash & Cash Equivalent 65.09 87.48 43.03 55.01 22.87

107

ANNEXURE – XII

AGE WISE ANALYSIS OF DEBTORS:(Rs. In lakhs)

Particulars 2007 2006 2005 2004 2003

Debts outstanding for a periodexceeding six months(considered good) 5.89 11.82 12.28 23.59 32.76

Related Parties Nil Nil Nil Nil Nil

In Percentage terms (A) 0.00% 0.00% 0.00% 0.00% 0.00%

Other Parties (not related to Promoters) 5.89 11.82 12.28 23.59 32.76

In Percentage terms (B) 0.76% 1.53% 1.27% 3.93% 8.60%

Debts outstanding for a periodnot exceeding sixmonths(considered good) 766.65 761.78 951.33 576.10 348.14

Related Parties Nil Nil Nil Nil Nil

In Percentage terms (C) 0.00% 0.00% 0.00% 0.00% 0.00%

Other Parties (not related to Promoters) 766.65 761.78 951.33 576.10 348.14

In Percentage terms (D) 99.24% 98.46% 98.73% 96.07% 91.40%

TOTAL SUNDRY DEBTORS 772.54 773.66 963.61 599.69 380.90

TOTAL PERCENTAGE (A+B+C+D) 100% 100% 100% 100% 100%

ANNEXURE – XIII

CONTINGENT LIABILITIES (Rs. in lakhs)

Particulars 2007 2006 2005 2004 2003

Bank Guarantee 281.49 183.51 183.79 189.67 107.00

Foreign Bills Discounted and Purchased underLetter of credit /LC opened 82.30 276.90 267.57 112.33 219.77

Legal Undertakings Submitted to customs andDGFT under duty exemption scheme for import ofraw materials against which all exports have beencompleted and advance licences are underredemption. 927.10 2076.42 1475.54 448.82 2.80


108

ANNEXURE –XIV

DETAILS RELATED TO CONSIGNMENT STOCKIST DIVISION OF THE COMPANY:(Rs. In Lakhs)

Particulars 2007 2006 2005 2004 2003

(1) Fixed Assets: 0.40 0.40 0.40 0.40 -

Less: Depreciation 0.20 0.17 0.13 0.07 -

Net Block 0.20 0.23 0.27 0.33 -

(2) Receivables 31.24 76.84 76.63 170.99 -

(3) Cash & Bank Balances 21.03 7.91 5.82 16.44 -

(4) Loans & Advances 10.63 6.23 8.31 4.92 -

(5) Reserves & Surplus(Profit & Loss A/c) 106.56 84.85 61.49 38.60 -

(6) Current Liabilities

(a) Sundry Creditors 20.55 269.66 78.56 153.38 -

(b) Outstanding Liabilities 0.61 - 2.49 0.69 -

109

II. FINANCIAL INFORMATION OF THE GROUP COMPANIES

A. DETAILS OF LISTED COMPANIES WITHIN THE PROMOTER GROUP COMPANIES.

There are no listed Companies within the Promoter Group Companies.

B. DETAILS OF UNLISTED COMPANIES WITHIN THE PROMOTER GROUP .

1. MSA Investment & Trading Company Private Limited:

MSA Investment & Trading Company Private Limited was incorporated on 22nd April, 1992 by Mr. Suraj PrakashRajvanshi and Mr. Swami Saran Dayal with the main object to carry on the business of (i) to lend and advance moneyor give credit to persons, companies, corporations, firms etc. (ii) to act as investor, guarantors, underwriters andfinanciers to provide finance to industrial enterprise, (iii) to carry on the investment business and to purchase, acquire,hold and dispose off investment in shares, debentures, bonds & other securities and (iv) to carry out business ofIssue house and related services. At present the company is carrying out main business of trading in Jute and thefinance & investments activities are its allied business activities.

The present Board of Directors of the company comprises of Mr. Mahesh Swarup Agarwal, Mr. Manoj Agarwal andMrs. Usha Agarwal.

The Authorized Share Capital of the Company is Rs. 1,00,00,000/- (Rs. One Crore only) divided into 10,00,000 (TenLakhs) Equity Shares of Rs.10/- (Rs. Ten only) each. The Issued, Subscribed and Paid-up Equity Share capital of theCompany is Rs. 77,37,000/- (Rs. Seventy Seven Lakhs Thirty Seven Thousands only) divided into 7,73,700 (SevenLakhs Seventy Three Thousands Seven Hundreds) Equity Shares of Rs.10/- (Rs. Ten only) each.

Shareholding Pattern as on 31st March 2006:

Name of the shareholder No. of shares % of holding

Mrs. Usha Agarwal 215000 27.79

Mr. Shashank Agarwal 166500 21.52

Mr. Manoj Agarwal 142000 18.35

Mr. M S Agarwal 115000 14.87

M/s M S Agarwal HUF 65000 8.40

Mrs. Santosh Agarwal 40000 5.17

M/s Manoj Agarwal HUF 30000 3.88

Mr. Swami Saran Dayal 100 0.01

Mr. Sanjeev Gupta 100 0.01

Total 773700 100.00

Financial Performance:

The brief financials of MSA Investment & Trading Company Pvt. Ltd. for the last three years based on auditedfinancial statements are as under:

(Rs. in lakhs)

Particulars For the financial year as at March 31

2006 2005 2004Audited Audited Audited

Sales 27.44 5.70 6.81

Total Income 44.05 20.74 15.25

Profit after Taxation 8.40 11.28 1.74

Share Capital 77.37 77.37 51.37

Reserves & Surplus 16.75 13.93 9.70


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Net Worth 94.12 91.30 61.07

Earning per share (EPS) (Rs.) 1.09 1.46 0.34

Net Asset Value per Share (Rs) 12.18 11.81 11.90

Dividend (%)(Including Interim Dividend) 6% 8% Nil

Note:

During the year 2005-06, the Sales of the Company increased by 381.40% from Rs.5.70 lakhs in the year 2004-05 toRs. 27.44 lakhs in the year 2005-06. The said increase was due to increase in trading of jute cloths. The total incomeof the Company increased by 112.39% in the year 2005-06 mainly due to increase in rent income of house properties.

2. KPL Packaging Private Limited:

KPL Packaging Private Limited was incorporated on 2nd February, 1989 by Mr. Ishwar Saran Garg and Mr. SuryaprakashRajvanshi. The Company is carrying on the business of manufacturing packaging products made from plastic, paper,board, pulp and all kinds of other fabrics, plastic films and metal foils And also manufacturing, fabricating, printing,treating, waxing and laminating all kinds of packaging materials.

The present Board of Directors of the company comprises of Mr. Mahesh Swarup Agarwal, Mr. Manoj Agarwal and Mrs.Usha Agarwal.

The Authorized Share Capital of the Company is Rs. 20,00,000/- (Rs. Twenty Lakhs only) divided into 2,00,000 (TwoLakhs) Equity Shares of Rs.10/- (Rs. Ten only) each. The Issued, Subscribed and Paid-up Equity Share capital of theCompany is Rs. 17,87,000/- (Rs. Seventy One Lakhs Eighty Seven Thousands only) divided into 1,78,700 (One LacSeventy Eight Thousands Seven Hundreds) Equity Shares of Rs.10/- (Rs. Ten only) each.

Shareholding Pattern as on 31st March, 2006:





Mr. M S Agarwal 17400 9.74




Total 178700 100.00


The brief financials of KPL Packaging Pvt. Ltd. for the last three years based on audited financial statements are asunder:

111

(Rs. in lakhs)



Sales Nil Nil Nil

Total Income 32.46 1.60 3.32


Share Capital 17.87 17.87 17.87


Net Worth 22.65 21.17 20.99



Dividend (%)(Including Interim Dividend) 6% 4% 5%

Note:

The total income of the Company increased by Rs. 30.86 lakhs in the year 2005-06 from Rs. 1.60 lakhs in the year2004-05 mainly due to sale of shares.

3. KSM Exports Limited:

KSM Exports Limited was originally a co-partnership firm under the name and style of Kanpur Shutter Company dulyconstituted under partnership deed with effect from 15th December 1983 comprising of seven partners. Thereafter,the said firm was converted into a joint stock company in the name of Kanpur Shutter Company Ltd. with effect from22.08.1984 with the objects of carrying out business of mechanically fabricated products such as shutters, grills,fences, rollers, machine parts etc. and to carry out process for foaming and fabrication cocooning. Thereafter, thename of the Company was changed from Kanpur Shutter Company Ltd. To KSM Exports Ltd. with effect from 9th

August 1995.

The present Board of Directors of the company comprises of Mr. Mahesh Swarup Agarwal, Mr. Manoj Agarwal, Mrs.Santosh Agarwal and Mr. Ashok Kumar Bhatnagar.

The Authorized Share Capital of the Company is Rs. 20,00,000/- (Rs. Twenty Lakhs only) divided into 2,00,000 (TwoLakhs) Equity Shares of Rs.10/- (Rs. Ten only) each. The Issued, Subscribed and Paid-up Equity Share capital of theCompany is Rs. 18,50,000/- (Rs. Eighteen Lakhs Fifty Thousands only) divided into 1,85,000 (One Lac Eighty FiveThousands) Equity Shares of Rs.10/- (Rs. Ten only) each.

Shareholding Pattern as on 31st March 2006:



Mr. M S Agarwal 49120 26.55






Total 185000 100.00


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The brief financials of KSM Exports Limited for the last three years based on audited financial statements are asunder:

(Rs. in lakhs)



Sales 32.92 32.88 29.57

Total Income 39.56 38.80 36.54


Share Capital 18.50 18.50 18.50


Net Worth 22.33 19.57 19.41



Dividend (%)(Including Interim Dividend) 10% 10% 8%

1. None of the above companies have made public or rights issue in the preceding three years.

2. None of the companies has become a sick company within the meaning of the Sick Industrial Companies (SpecialProvision) Act, 1995 or is under winding up.

C. DETAILS OF PARTNERSHIP FIRMS / PROPRIETORSHIP CONCERN WITHIN THE PROMOTER GROUP

There is no partnership firm or sole proprietorship concern formed or run by our promoters.

(a) The Promoters have not dissociated themselves from any of the above companies /firms during preceding threeyears.

(b) There is no Common Pursuit in the business of the Company and other group companies other than those mentionedin the Annexure- X “Related Party Transactions” to the Auditor’s Report of this Letter of Offer. The group companiesare either engaged in manufacturing of plastics products, which are altogether of different range and applications, orare engaged in job work /compounding activities. Since no other entity is engaged in the line of activity in which theCompany is engaged, there is no conflict of interest situation that arises from the financial transactions dealt withwithin the group companies.

(c) There are no transactions of sales or purchases among the companies in the promoter group that exceeds in valuein the aggregate 10% of the total sales or purchases of our Company.

CHANGES IN ACCOUNTING POLICIES IN THE LAST THREE YEARS

There has been no change in the Accounting Policies of the Company during the last three years, which would materiallyaffect the results of the Company.

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IV. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATION AS REFLECTED IN FINANCIAL STATEMENTS.

1. Overview of the business of the Company:

Our Company was incorporated on 26th July 1971 as a Private Limited Company with an object to manufacture HDPEWoven Fabric and Sacks of various sizes and other plastic packaging materials. The founder promoters of our Companyare Mr. Mahesh Swarup Agarwal and Mrs. Santosh Agarwal. The Company was converted into a Public Limited Companyw.e.f. 9th December 1985. Our Company started its production with an installed capacity of 130 M.T.P.A. at D-19, PankiIndustrial Area, Kanpur – 208 022 which was taken on lease from U.P.S.I.D.C.

Thereafter, due to rapid expansion in the business of the Company and modernization of plant and machineries andupgradation of production technology gradually, our company achieved production of about 1890 MTPA by the year1985-86.

Our Company was the first unit to start manufacturing of these kinds of products in the entire North India and was first tointroduce Circular Weaving Machinery in the country to upgrade its technology in the year 1983-84. Due to encouragingresponse from the customers and looking to the vast potential of its products, our Company embarked upon an expansionprogramme to raise installed capacity to 3756 MTPA.

Our Company came out with its maiden IPO in the year 1985-86, which was oversubscribed by 3.20 times.

Our Company is having major presence in the Industrial Packaging market in the country having excellent rapport with ourcustomers in fertilizers, cement, sugar and food grain industry, which are the main users of the products manufactured byour company.

Due to promulgation of Jute Packaging Material Bill passed by the Government of India in the year 1987, our Company’ssales got adversely affected. As a market diversification, our company was the first in the Country to explore the exportmarket and started exporting its products through which the Company’s financial performance was strengthened gradually.

As an additional activity in the Financial Year 2002-03, our Company was appointed as a Consignment Stockiest by GasAuthority of India Ltd. for marketing polymers in Kanpur Region. This helped to improve the bottom line of our Company.

2. Significant Developments subsequent to the last financial year

In the opinion of the Directors, there have not arisen, since the date of the last financial statements disclosed in the Letterof Offer, any circumstances that materially and adversely affect the business or profitability of the Company, or the valueof its assets, or its ability to pay liabilities within the next 12 months.

3. Comparison of significant items of income and expenditure of the company for the past five years:

(Rs. In lakhs)


Income

Gross Sales 6913.52 5436.63 5264.46 3939.74 3478.55

Less: Excise Duty 317.60 280.55 368.42 362.06 372.84

Net Sales 6595.92 5156.08 4896.04 3577.68 3105.71

Other income 61.29 66.75 56.43 89.34 67.34


Total 6681.60 5245.83 5030.95 3695.70 3224.93

Expenditure





Total 6248.26 5027.64 4759.40 3479.97 3071.22


114

(Rs. In lakhs)


Op. Profit before Int. Dep & Prior Item 433.34 218.19 271.55 215.73 153.71


Depreciation 73.08 75.09 70.72 60.35 57.06

Amortization 0.00 0.00 0.00 0.00 0.00

Operating Profit beforePrior Period Expenses 223.07 63.89 130.10 90.66 49.55


Current Tax 74.48 29.09 30.80 11.80 1.00

Deferred Tax 3.23 -5.25 20.75 17.95 9.64






Impact of material adjustmentforestablishment in corresponding years



Add/ (Less): Deferred TaxProvided earlier now reversed 0.00 0.00 0.00 0.39 0.00


Add/ (Less): Others 0.44 1.40 -0.67 -0.11 -5.59


FY 2004-05

During the year, the Net Sales of the Company was increased by 35.17% to Rs. 4836.04 lakhs from Rs. 3577.68 lakhs inthe corresponding previous year. The major factor in increase of net sales of the Company was due to satisfied overseascustomers and repeat orders for exporters. The Operating profit before prior period items and taxes increased by 43.5%to Rs. 130.10 lakhs as compared to previous year Rs. 90.66 lakhs. The said increase in operating profits was mainly dueto increase in export sales of FIBC with better realization. During the same period, the Profit after Tax of the Companygrew by 786% to Rs. 77.88 lakhs from Rs. 8.79 lakhs in the corresponding previous year. The increase was mainly due toprovision of Deferred Tax Liability during the year 2003-04.

FY 2005-06

During the FY 2005-06, the net sales of the Company increased by 5.31% to Rs. 5156.08 lakhs from Rs. 4896.04 lakhs inFY 2004-05. The Operating profit before prior period items and taxes decreased by 49.10% to Rs. 63.89 lakhs as comparedto previous year Rs. 130.10 lakhs. The said decrease in operating profits was mainly due to the following reasons:

1. The procurement of basic raw material i.e. PP/HDPE/LDPE was very unstable consequent to unstable political situationin the Middle East Countries as the prices are directly affected with increase of crude oil prices.

2. Due to the depreciation in foreign currencies i.e. EURO & GBP in comparison to INR the sales realization has beenbadly affected as our major exports were to European countries. Contracts made earlier took prevailing exchangerate of that period.

3. On the contrary the cost of Imported Raw Material for Export sales has gone up giving adverse effect due to theappreciation in US Dollar.

4. Margin in Domestic Sales further gone down due to increased domestic competition especially with Reliance IndustriesLimited, GAIL and Bajaj Hindustan resulting in heavy losses.

However, during the same period, the Profit after Tax of the Company declined by 48.39% to Rs. 40.19 lakhs from Rs.77.88 lakhs in the corresponding previous year. The decline in the profit after tax was mainly contributed to volatile exportmarket and increase in the Crude oil prices and consequently increased raw-material prices.

115

FY 2006-07

During the year, the Net Sales of the Company was increased by 27.93% to Rs. 6595.92 lakhs from Rs. 5156.08 lakhs inthe corresponding previous year. The major factor in increase of net sales of the Company was due to increase in exportsales by 46.69% from Rs. 3339.04 lakhs in the year 2005-06 to Rs. 4897.98 lakhs in the year 2006-07. The Operatingprofit before prior period items and taxes increased by 249.15% to Rs. 223.07 lakhs as compared to previous year Rs.63.89 lakhs. The said increase in operating profits was mainly due to increase in export sales of FIBC with better productmix, better realization and appreciation in Foreign Currency like GBP, EURO, Dollar.

The exports made by our company during the last three financial years are as under:(Rs. In Lakhs)

Particulars 2004-05 2005-06 2006-07

Export Sales 2729.56 3393.07 4897.98

Our company has added the following new clients during the last three financial years.(Rs. in Lakhs)

2004-2005 2005-2006 2006-2007

Country Nos. of Amount Nos. of Amount Nos. of AmountCustomers of Sales Customers of Sales Customers of Sales

Spain 2 56.16 3 148.39 3 419.94

U.K. 3 265.02 5 252.38 4 514.79

USA 2 86.78 3 222.45 1 163.77

Germany 2 23.92 2 100.73 2 200.52

France 1 8.50 3 100.23 0 0.00

Australia 1 8.97 0 0.00 0 0.00

Italy 1 169.36 1 236.17 1 388.70

Netherland 1 16.07 1 35.86 1 329.69

Denmark 0 0.00 1 4.65 1 6.68

13 634.78 19 1100.86 13 2024.09

The details of number of customers dealt with by the company during the last three years are as under:

Particulars 2004-05 2005-06 2006-07

Opening Customers 13 26 33

Add: Customers added during the year 13 19 13

Less: Customers lost during the year 0 12 22

Total 26 33 24

Reasons for Negative Cashflow from Operations & Investing Activities during the year 2005, 2006 & 2007

The Company has recorded negative cash flow from operations for the year 2004, 2005 & 2007 due to increase in exportsales. The Company has made exports sales of Rs. 1334.08, Rs. 2729.56 and Rs. 4742.77 lakhs respectively for the year2004, 2005 and 2007. The Company generally offers trade credit of 60-90 days to its overseas customers. To meet suchworking capital gap, the promoters of the Company have infused unsecured loans from their own funds in the Company.

The Company has recorded cash outflows from investing activities for the year 2004, 2005, 2006 & 2007 due to additionof fixed assets for ongoing modernization and expansion plan. The same outflows are being met through raising fundsthrough secured loans from bank.

Analysis of reasons for the changes in significant items of income and expenditure in respect of the following:

a) Unusual or infrequent events or transactions

There are no unusual or infrequent events or transactions.

b) Significant Economic changes that materially affected or are likely to affect income from continuing operations:

There are no significant economic changes that have effected or will affect the industry except the cost of the basicraw material and power, which are vital input in the manufacturing of HDPE/PP granular and tends to fluctuate as perthe market conditions and demand-supply of crude oil.


116

c) Known Trends or uncertainties:

The demand for the products of the company has shown the increasing trend in the past two years and likely toremain increasing in near future due to spurt in productive activities in the Indian Economy and development ofinfrastructure projects which would help the company in increasing its production, turnover and consequent profits.

d) Future changes in relationship between costs and revenues:

Due to increase in the demand for the Company’s product, there is scope for increase in the revenues of the company.The future increase in the revenue will offset any increase in cost price of the raw material and labor cost.

e) The extent to which material increase in net sales or revenue is due to increased sales volume, introduction ofnew products or services or increased sale prices.

The Company’s present installed capacity is utilized to the level of approximately 90%. The Company proposes tomodernize and expand its capacity with the latest technology, which would not only reduce the cost of production butalso increase the production substantially on account of higher speed of machinery. Therefore, with higher production,the Company would increase its sales volume with competitive prices.

f) Seasonality of business:

The Company’s business is not seasonal.

g) Dependence on single or few suppliers/customers

The Company is dependent on few suppliers like Reliance Industries, Haldia Petrochemicals for their raw materials likeHDPE/PP granules. The Company exports more than 67% of its total sales to customers in the overseas market likeUnited Kingdom, United States of America, Spain, Germany, etc.

As far as supply of raw material is concerned, the Company can also import the raw material from various internationalsuppliers by working out the trade-of the domestic and overseas cost. In regard to customers, the Company is planningto increase its presence in the domestic market to substantially reduce its dependence on the overseas market.

h) Competitive Conditions:

The Company operates in competitive conditions. However, the Company has accreditation from ISO: 9001-2000 forits all products and above all its quality of products enjoys good reputation amongst customers.

i) Material developments after the date of the last Balance sheet:

There are no material developments after the date of last audited Balance sheet, which will have any adverse impact onthe Company.

j) Adverse events:

There are no adverse events affecting the operations of the Company occurring within one year prior to the date of filingof the Letter of Offer with the BSE.

k) Exchange Fluctuations:

The impact of exchange rate fluctuations on the profitability of the company during the last three financial years areas under:

(Rs. In Lakhs)

Year Particulars Gain due to Foreign Loss from ForeignExchange Fluctuation Exchange Fluctuations

2004-05 Exchange Fluctuations - (5.78)

2005-06 Exchange Fluctuations - (13.10)

2006-07 Exchange Fluctuations 1.64 -

4. Director’s Statement:

In the opinion of the Directors, there have not arisen, since the date of the last financial statements disclosed in the Letterof Offer, any circumstances that materially and adversely affect the business or profitability of the Company, or the valueof its assets, or its ability to pay liabilities within the next 12 months.

5. Statement of Assets and Liabilities after deducting Revaluation Reserve and Net Worth arrived at after suchdeduction as per clarification XIII:

Land, Building, Plant & Machineries had been revalued as on 31st March 1985 by the Company on the basis of the reportof professional valuer. Consequent to revaluation, Rs.1,47,40,547/- was credited to Revaluation Reserve representingthe net surplus over the written down value of the then existing assets. The depreciation on increase in assets due torevaluation was reduced from gross block of fixed assets and debited to Revaluation Reserve without affecting Profit &Loss Account. The amount standing to the credit of the Revaluation Reserve as on 31st March 2006 is Rs. 3.47 Lakhs andas on 31st March 2007 is Nil.

117

F. LEGAL AND OTHER INFORMATION

I. OUTSTANDING LITIGATIONS AND MATERIAL DEVELOPMENTS

Save as stated herein under, the Company have not defaulted in meeting any of its statutory or institutional dues and havemade all payments/refunds on fixed deposits and no proceedings have been initiated against the Company, for any of theoffences specified in paragraph 1 of Part I of Schedule XIII of the Companies Act, 1956. Further, there are no disputes/litigations towards tax liabilities or criminal prosecutions against the Company and its Directors for any offence, economicor otherwise civil litigations against the Company and its Directors, there are no material disputes/legal actions other thanthose disclosed below.

There are no pending proceedings initiated for economic offences against the Company. No disciplinary action/ investigationhas been taken by the SEBI against the Company, its subsidiaries and sponsored institutions and its respective directors.

Promoters, their relatives (as per Companies Act, 1956) and the Company, Group Companies, Associate Companies arenot detained as willful defaulters by RBI/ Government authorities and there are no violations of securities laws committedby them in the past and are pending against them.

There are no past cases in which penalties were imposed by the regulatory authorities on the Company or its directors.

There are no cases of pending litigations/defaults in respect of firms/Companies with which the Promoters are associatedin the past but are no longer associated.

Disclosure under SEBI (SAST) Regulations 1997

Our company had received a letter from SEBI vide letter no. CFD/DCR/RC/TO/30587/05 dated January 11, 2005 forViolation of Takeover Regulations- Settlement by Consent Order for violating the Regulation 6 and 8 of SEBI (SubstantialAcquisition of Shares and Takeovers) Regulations, 1997 for the years 1997, 1998, 1999, 2000, 2001 & 2002.

Our Company had also received a letter from BSE vide letter no. List/sg/ak/vm/2003 dated 21st November 2003 for non-compliance of clause 40 of the Listing Agreement for filing takeover declarations. The said non-compliances were for theyear 1998 and 1999.

Our Company had clarified to BSE in its reply vide letter no. KPL/2003-04 dated 6th December 2003 about their complianceof clause 40 of the Listing agreement from time to time. Our Company had also resubmitted the Disclosure Statements forthe year 1998 and 1999 in terms of SEBI (Substantial Acquisition of Shares & Takeover Regulations) 1997.

Our Company had also clarified to the SEBI vide letter No. KPL/2004-05 dated February 25, 2005 in respect of the saiddisclosures and its compliances.

Acquisition of shares of our Company by our Promoter & Promoter Group during the period January 2005 toOctober 2006 may involve the violation of the provisions of Takeover Regulations of SEBI.

The promoter and promoter group of our Company have acquired certain shares of our Company during the periodJanuary 2005 to October 2006 by way of purchases from the open market and transfers among the promoter group. Asthe promoters and promoter group were, before the acquisition as above, holding 55% of the paid up equity share capitalof the Company, they were required to comply with the open offer formalities under the Takeover Regulations. As aconsequence of aforementioned violation of Takeover Code, the promoters and promoter group may incur liability to anaction in terms of Takeover Regulations and the SEBI Act.

SEBI is investigating into the price movement in the share of our Company during the period from December 2004to January 2005.

"SEBI is investigating into the price movement in the scrip of the issuer company during the period from December 2004to January 2005. During the period substantial trading has been observed between the promoter Shri M S Agarwal andthe group company M.S. A Investment & Trading Co. Pvt. Ltd. Preliminary investigations are also being carried out forapparent violation of disclosure norms under SEBI (Prohibition of Insider Trading) Regulations, 1992, in respect of thechange in holding of Shri M S Agarwal."


118

OUTSTANDING LITIGATIONS AGAINST THE COMPANY:

[A] OUTSTANDING LITIGATIONS INVOLVING ISSUER COMPANY

[1] Outstanding Litigations against the Company

Sr. No. 1

Case No./date ITA No.493/Luc/2004 (A.Y.1995-96).

In the Court of High Court, Allahabad

Applicant Commissioner of Income Tax –II, Kanpur.

Particulars The date for admission of Appeal has not been fixed.

Status The appeal is pending in the High Court.

Background A.O. withdrawn deduction u/s 80HHC vide order u/s 143 Dt. 28.03.2003 amounting to Rs.10.50Lakhs (Earlier allowed vide order u/s 154 dt. 24/03/2000) and income assessed amounting toRs.79.80 and the said amount was adjusted towards earlier years unabsorbed brought forwardlosses. C.I.T. (A)-2, Kanpur confirmed A.O. order. Further, we preferred an appeal before ITATLucknow and the said amount has already been allowed in our favour and cancelled assessmentorder u/s148/143(3) dt.28/03/2003 passed by Add. C.I.T. Range-6, Kanpur on the ground thatthe case reopens on the basis of audit objection and assessment order passed by Ld. Add. C.I.T.Range-6, Kanpur without jurisdiction.

Risk assessment No financial risk involved in view of carry forward losses.

Sr. No. 2

Case No./date ITAT No.870/ Luc/06. (A.Y.1996-97)

In the Court of Income Tax Appellate Tribunal, Lucknow.

Respondent Income Tax Officer –6(2), Range-6, Kanpur.

Particulars The hearing of Appeal has been adjourned to 5th September, 2007.

Status The appeal is pending in the Income Tax Appellate Tribunal, Lucknow.

Background A.O. has made assessment on income amounting to Rs.256.82 Lakhs vide order Dt.29/03/2004 u/s147/143(3) after making addition amounting to Rs.153.33 (Lakhs) on account un accounted salesand also withdrawn deduction U/s 80HHC Rs.19.33 Lakhs (earlier allowed vide orderdt.24/03/2000 u/s 154) and the said amount was adjusted against earlier year brought forward losses.

Risk assessment No financial risk involved in view of carry forward losses

Sr. No. 3

Case No./date ITAT No.1002 / Luc/06. (A.Y.1997-98).



Particulars The hearing of Appeal has been adjourned to 5th September, 2007

Status The appeal is pending in the Income Tax Appellate Tribunal, Lucknow.

Background A.O. has made assessment on income amounting to Rs. 209.00 Lakhs vide order Dt.29/03/2004u/s 147/143(3) after making addition amounting to Rs. 72.52 (Lakhs) on account of un accountedsales and also withdrew deduction U/s 80HHC of Rs.19.62 Lakhs (earlier allowed vide orderdt.24/03/2000 u/s 154) and the said amount came to be adjusted against earlier year broughtforward losses.

Risk assessment No financial risk involved in view of carry forward losses

119

Sr. No. 4

Case No./date ITAT No.113 / Luc/06. (Department Appeal) (A.Y.1998-99).



Particulars Hon’ble ITAT Vide its order dated 28-2-2007, has set aside the appeal and given direction toCommissioner of Income tax Appeals having appropriate jurisdiction to dispose off the matter inlight of Direction given by ITAT.In response to order of ITAT, the Company has filed an appealbefore the Hon’ble High Court of Allahabad -Lucknow bench. The Hon’ble High Court allowed theextant appeal and set aside the impugned judgement and order dated 28th February 2007 passedby ITAT Lucknow. The High Court in its order dated 30th March 2007 directed that the Tribunalshall restore the appeal preferred by appellant to its original number and decide the same afreshon merit in accordance with law expeditiously preferably within 6 months.

Status The appeal is pending in the Income Tax Appellate Tribunal, Lucknow and the hearing of Appealhas been adjourned to 30th July 2007.

Background A.O. has made assessment u/s 147/143(3) vide order dated 18.02.2005 on income amounting toRs. 124.55 lakhs after making addition amounting to Rs.28.17 lakhs withdrawing set off ofunabsorbed losses (in earlier assessment year's fully adjusted) and raised demand amounting toRs.72.15 Lakhs including interest u/s 234B. C.I.T.(A)-2, appeal allowed partly. Against the aboveorder both parties preferred an appeal before ITAT Lucknow and appeal is fixed for hearing on30th July 2007.

Risk assessment Hon ITAT has given finding and matter is expected to be resolved in favour of company in duecourse of time. Company has paid taxes against the same hence no additional liability will arise.

Sr. No. 5

Case No./date ITAT No.927 / Luc/05. (Assessee Appeal)(A.Y.1999-2000).



Particulars Hon ITAT Vide its order dated 28-2-2007, has set aside the appeal and given direction toCommissioner of Income tax Appeals having appropriate jurisdiction to dispose off the matter inlight of Direction given by ITAT. In response to order of ITAT, the Company has filed an appealbefore the Hon’ble High Court of Allahabad -Lucknow bench. The Hon’ble High Court allowed theextent appeal and set aside the impugned judgement and order dated 28th February 2007 passedby ITAT Lucknow. The High Court in its order dated 30th March 2007 directed that the Tribunalshall restore the appeal preferred by appellant to its original number and decide the same afreshon merit in accordance with law expeditiously preferably within 6 months.

Status The appeal is pending in the Income Tax Appellate Tribunal, Lucknow and the hearing of Appealhas been adjourned to 30th July 2007. The appeal is time barred and liable to be quashed.

Background A.O. has made assessment u/s 147/143(3) vide order dated 18.02.2005 on income amounting toRs. 100.83 Lakhs and withdrew setoff of unabsorbed losses (in earlier assessment year’s fullyadjusted) and raised demand amounting to Rs.62.23 Lakhs including interest u/s 234B. C.I.T.(A)–2 confirmed A.O. order. Against the above order we preferred an appeal before ITAT Lucknowand same appeal finally heard on dt. 23/01/2007.

Risk assessment Hon ITAT has given finding and matter is expected to be resolved in favour of company in duecourse of time. Company has paid taxes against the same hence no additional liability will arise.


120

Sr. No. 6

Case No./date ITAT No.928 / Luc/06.(Assessee Appeal)(A.Y.2000-01).

Case No./date ITAT No.969 / Luc/06.(Department Appeal).



Particulars Hon ITAT Vide its order dated 28-2-2007, has set aside the appeal and given direction toCommissioner of Income tax Appeals having appropriate jurisdiction to dispose off the matter inlight of Direction given by ITAT.In response to order of ITAT, the Company has filed an appealbefore the Hon’ble High Court of Allahabad -Lucknow bench. The Hon’ble High Court allowed theextent appeal and set aside the impugned judgement and order dated 28th February 2007 passedby ITAT Lucknow. The High Court in its order dated 30th March 2007 directed that the Tribunalshall restore the appeal preferred by appellant to its original number and decide the same afreshon merit in accordance with law expeditiously preferably within 6 months.

Status The appeal is pending in the Income Tax Appellate Tribunal, Lucknow and the hearing of Appealhas been adjourned to 30th July 2007. The appeal is time barred and liable to be quashed.

Risk assessment Hon ITAT has given finding and matter is expected to be resolved in favour of company is duecourse of time. Company has paid taxes against the same hence no additional liability will arise.

Sr. No. 7

Case No./date ITAT No.281 / Luc/05. (Assessee Appeal)(A.Y.2001-02).

Case No./date ITAT No.362 / Luc/05. (Department Appeal)(A.Y.2001-02).


Respondent Additional Commissioner of Income Tax, Range-6, Kanpur.

Particulars The hearing of Appeal has been adjourned to 5th September, 2007.

Status Both Appeals are pending for disposal before ITAT, Lucknow.

Background A.O. has made assessment income on Rs.118.00 Lakhs and disallowed set-off of unabsorbedlosses amounting to Rs. 64.90 (Lakhs) and also reduced deduction claimed u/s 80HHC to theextent of Rs. 35.13 (claimed Rs. 53.71 Lakhs and allowed Rs. 16.90 Lakhs).

Risk assessment In case the matter is decided against us, there shall not be any demand as the company hasalready paid the same.

Central Excise

Sr. No 8

Case No./Date 23 of 2001

In the Court of High Court Allahabad

Against Refund of Modvat amount Rs. 1,16,28,268.60

Particulars Classification Matter

Status The case is pending in High Court Allahabad

Background The reference application filed by the Central Excise

Risk Assessment This being only a “reference” on law point there is no likelihood of this liability accruing on thecompany since all law points were already settled by the Hon’ble Supreme Court in our favour.However, in case the matter is decided against us, the Company has to repay the refund amountof Rs. 116 Lacs claimed subject to the decision of the Hon’ble High Court.

121

Labour Law Cases:

Sr. No. 9

Case No. Writ Petition.37942/2005

In the court of High Court of Allahabad

Petitioner Teekam Singh and Others

Respondent Kanpur Plastipack Limited

Particulars Petition filed by the Petitioner to implement the order of Labour Court.

Status The Petition is pending before the High Court, Allahabad

Background This Petition is filed by the Petitioner to implement the order passed by the Labour Court pursuantto stay order granted to the company.

Risk Assessment Maximum Rs. 75,000/- approx. subject to the final outcome of the Writ Petition as pending withthe Hon’ble High Court.

Sr. No. 10


In the court of High Court, Allahabad

Petitioner Babooram and Others

Respondent State of U.P. and others.

Particulars This case is once decided ex-parte in favour of the Company but later the petitioner filed recallapplication which is pending before the Court.


Risk Assessment Amount involved is Rs. 14451.45 subject to the final outcome of writ petition.

Sr. No. 11



Petitioner Brijesh Kumar Pandey

Respondent Kanpur Plastipack Limited

Particulars The petitioner was dismissed on the grounds of serious misconduct. The petitioner filed a case,which he lost and Consequent to which writ petition was filed by the petitioner, which is pending.


Risk Assessment Maximum Rs. 1,00,000/- subject to final outcome of the petition pending in the High Court.


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[2] Pending Litigations Filed by the company

Labour Law Cases:

Sr. No. 1

Case No. / Date Writ petition No. 20823/2005

In the Court of High court, Allahabad

Petitioner Kanpur Plastipack Limited

Respondent Teekam Singh and Other

Particulars Termination of Employment on the grounds of serious mistakes done resulting into Industrialdispute. The case is decided by the Labour Court Kanpur passed an in favour of Mr. TeekamSingh. Consequent to which company filed a petition for setting aside the said award.

Status The case is pending before the High Court of Allahabad.

Risk Assessment Maximum Rs. 75,000/- approx. subject to final outcome of the petition pending in the Hon’bleHigh Court.

Sr. No. 2



Petitioner Kanpur Plastipack Limited

Respondent Babooram and Others

Particulars This petition is connected with the above mentioned writ petition as both are relating to sameworkman.


Risk Assessment The claim of the petitioner is subject to final outcome of the petition pending in the High Court

[3] Amounts Owed to Small Scale Undertakings

There are no dues to small- scale industrial undertakings exceeding Rs. 1,00,000/-which is outstanding for more than 30days as on 31-03-2007.

[B] OUTSTANDING LITIGATION INVOLVING SUBSIDIARY COMPANIES

Not applicable as the Company has no Subsidiary

[C] OUTSTANDING LITIGATIONS INVOLVING GROUP COMPANIES

1. Cases filed against K.S.M. Exports Limited.

Sr. No. 1



Petitioner Shri Ram Chakrawarti

Respondent K.S.M. Exports Limited

Particulars The petitioner was dismissed on the grounds of gross misconduct. Petitioner then filed a case,which was adjudicated and order was passed against which the petitioner filed a writ petition.


Risk Assessment Rs. 1,00,000/-

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2. Cases filed by K.S.M. Exports Limited.

Sr. No. 1



Petitioner Kanpur Shutter Co. Ltd. (K.S.M. Exports Limited)

Respondent Arvind Tiwari.

Particulars The petitioner was dismissed on the grounds of gross misconduct. Petitioner then filed a case,which was adjudicated and order was passed against which the Company filed a writ petition.


Risk Assessment Rs. 1,00,000/-

[D] OUTSTANDING LITIGATIONS AGAINST DIRECTORS/ PROMOTERS

Litigations against the Promoter / Director

There are no outstanding litigations, disputes, non-payment of statutory dues, overdues to banks / financial institutions,defaults against banks / financial institutions, defaults in dues towards instrument holders like debenture holders, fixeddeposits, and arrears on cumulative preference shares issued, defaults in creation of full security as per terms of issue,other liabilities, proceedings initiated for economic / civil / any other offences (including past cases where penalties mayor may not have been awarded and irrespective of whether they are specified under paragraph (i) of Part I of Schedule XIIIof the Companies Act, 1956) against the promoters and director of the Company, except the followings:

Litigations Against Promoter - Mr. M.S. Agarwal

Sr. No. 1

Case No./Date PP Appeal No.10 2001

In The Court Of Ld Court of District Judge, Alipore

Against North Bihar Saw Mills (Inoperative entity)

Particulars The Board of Trustees for the Port of Calcutta made an application for condonation of delayunder section 5 of the Limitation Act read with section 151 of CPC being aggrieved by the orderdated 26-12-2000 of the Estate officer.

Status The appeal is pending at Ld Court of District Judge, Alipore

Background The plaintiff had been lessee in respect of land in the industrial area of Calcutta Port Trust. Thelease was for 30 years. The lease was granted for the purpose of running a sawmill. The leasecontained restrictive covenants as to construction, subletting of land etc. With the development ofCalcutta Metropolis the locality became a densely populated area and running of sawmill graduallybecame hazardous. The plaintiff had substantial investment on the sawmill. In anticipation ofgetting permission from Calcutta Port Trust a Memorandum of Understanding setting forth theterms of sub-tenancy was settled vide memo dated 24-11-1975.The Land Manager CPT did notallow sub letting initiated ejection proceedings against North Bihar Saw Mills through Estateofficer who passed an order in favour of the North Bihar Saw Mills Accepting the arrears in rentand damages, advising the CPT to renew the lease in their favour.

Risk Assessment North Bihar Saw Mills has deposited around Rs. 6.5 Lakhs in various drafts.

Even if the case is decided against the promoter, there shall be no liability on the promoter since he would receive therefund of the amount.


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Litigations filed by Mr. M.S. Agarwal

Sr. No. 2

Case No./Date Money suit No. 2 of 2002

In The Court Of 1st Court of Civil Judge, Sr. Div. Alipore

Against M/s. Ferini Eleven Up

Particulars For Recovery of money valued at Rs. 3,35,677.72 and Interest thereon tentatively fixed at Rs.5,000/-

Status The suit is pending in the 1st Court of Civil Judge, Sr. Div. Alipore

Background That permission of subletting a portion of land rejected by Calcutta Port Trust Authorities.Subsequently petitioner received notice under section 4 of Public Premises (E.U.O) Act 1971from the Estate officer, Calcutta Port Trust being proceeding No. 358 of 1999. The defendant wasadded a party on its own Prayer.The defendants indulged in fraudulent and illegal activities withthe sole intention to penalize the plaintiff. The plaintiff is therefore entitled to recover the loss.

Sr. No. 3

Case No./Date Title Suit No. 30 of 2001 filed on 22-06-01Now 78-04

In The Court Of 1st Court of Civil Judge, Sr. Div. Alipore

Against M/s. Ferini Eleven up and Others

Particulars Mr. M.S. Agarwal proprietor of North Bihar Saw Mills filed a suit for recovery of Khas possessionand mesne profit valued at Rs. 51,000/- and Rs. 5,000/- for eviction and mesne profits.

Risk Assessment North Bihar Saw Mills has deposited around Rs. 6.5 Lakhs in various drafts to CPT.

Even if the case is decided against the promoter, there shall be no liability on the promoter since he would receive therefund of the amount.

[E] Litigations Post Filing of the Offer Document

The Company undertakes to incorporate the factual position in respect of any litigation against the Company or by theCompany, its Group Companies and Promoters that may take place after filing the Letter of Offer with SEBI.

STATUTORY DUES

The Company has been regular in depositing with appropriate authorities undisputed statutory dues including ProvidentFund, Income Tax, Sales Tax, Excise Duty, wealth Tax, Custom Duty, Service Tax, Cess, Investor Education and Protectionfund, Employees’ State Insurance and other Statutory dues applicable to it.

CONTINGENT LIABILITY NOT PROVIVED FOR:

The Contingent Liabilities not provided for as on 31st March 2007 are as follows:

Sr. Particulars Amount in LakhsNo.

1. Bank Guarantees 281.49

2. Foreign Bills Discounted and Purchased under Letter of credit /LC opened 82.30

3. Legal Undertakings Submitted to customs and DGFT under dutyexemption scheme for import of raw materials against which all exportshave been completed and advance licences are under redemption. 927.10

MATERIAL DEVELOPMET SINCE THE LAST BALANCE SHEET DATE

In the opinion of the Company there is no material development after the date of latest Balance Sheet that are likely tomaterially affect the performance and prospects of the company.

ADVERSE EVENTS

There are no adverse events affecting the operations of the company occurring within one year prior to the date of filing ofthe offer document with the Stock Exchange

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II. GOVERNMENT AND OTHER STATUTORY APPROVALS

GOVERNMENT APPROVALS/LICENSING ARRANGEMENTS

The Company has obtained following licenses, permissions and approvals from the Central and State Government and OtherAgencies required for carrying out the business:

1. Certificate of Incorporation issued by Registrar of Companies, U.P. Kanpur, and No. 20-3444 dated 26th July 1971.

2. Certificate of Change of Name issued by Registrar of Companies, U.P. Kanpur dated 9th December 1985.

3. Factory License No. KPR-821 vide letter dated 26-11-1997

4. Sales Tax Registration No.KR-0041886 vide their certificate dated 20/07/1972 under Uttar Pradesh Sales Tax Act 1948

5. Central Sales Tax Registration Certificate No. KR-5031676 dated 9/8/1972 under the Central Sales Tax Act, 1956.

6. Letter issuing Permanent Account No. AAACK5541K by Income Tax Authority under the Income Tax Act, 1961.

7. Service tax Registration No. AAACK5541KST001 issued by Ministry of Finance Customs and Central Excise Division -1Kanpur

8. Tax Deduction Account No. KNPK00306F allotted by Income Tax Authority under the Income Tax Act, 1961.

9. The Importer-Exporter Code (IEC) from Government of India, Ministry of Commerce issued from the fileno: 06/04/130/00168/AM89 dated 15.01.2003 and Number of the Company is "0688001688"

10. Central Excise Registration Certificate No. AAACK5541KXM001 issued under the Central Excise Rule 2001

11. Consent Order No. 555/K22/07/07 dated 19/01/07 for operation of plant under Section 25/26 of the Water (Preventionand Control of Pollution) Act, 1974 from Uttar Pradesh Pollution Control Board.

12. Consent Order No. 674/K-22/07/07 dated 19/01/2007 for operation of plant under Section 21/22 of the Air (Prevention andControl of Pollution) Act, 1974 from Uttar Pradesh Pollution Control Board.

13. SIA Acknowledgement No. IL No.112/86 dated 31/12/1986 COB Licence issued for manufacturing of HDPE/PP WovenSacks on circular looms falling under Scheduled Industry No.12 (1).

14. ISIN No. INE694E01014 for Equity Shares issued by NSDL and CDSL.

15. Certificate of Recognition according the status of One Star Export House in accordance with the provisions of the ForeignTrade Policy, 2004-09. The Certificate is valid for a period of Five years effective from 1st April 2004 to 31st March 2009

16. Certificate from Directorate of Industries for Registration as a Small Scale Industrial Unit No. 21/32/02362/TMT/FSI/02dated 26/06/1971.

17. Certificate No. 21-0846-90 dated 7th July, 1973 issued by Regional Director, Employee State Insurance Corporation(ESIC), ESIC Bhawan, Sarvodayanagar, Kanpur.

18. Certificate No. Gr. IV / CL/ UP/5067 dated 26th November, 1976 issued by the Office of the Regional Provident FundCommissioner, U.P., Nidhi Bhawan, Sarvodaya Nagar, Kanpur.

Certification of Quality Management

Certificate No. 05/165/R from NQAQSR Certification Private Limited for Quality Management Systems as per ISO 9001:2000 forManufacture and Supply of HDPE/PP Woven Fabrics, Sacks and Allied products, paper Reinforced Bags, Bale Wraps andJumbo Bags and Trading of Plastic Granules.

The Company can undertake all the present and proposed activities in view of the present approvals. No further approvals fromany Government Authorities or any other statutory authorities are required by the Company to undertake the present andproposed activities except those that may be required to be taken in the normal course of business from time to time.

It must be understood that in giving the above approvals, the concerned authority does not take any responsibility for thefinancial soundness or correctness of the statements made by the Company.


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MAJOR AGREEMENTS ENTERED IN TO BY THE COMPANY:

1. MEMORANDUM OF UNDERSTANDING FOR THE PURCHASE OF PROPOSED LAND

Our Company has entered into Memorandum of Understanding on 5th January 2007 with M/s. International ElectronDevices Ltd. (IEDL), having its Registered office at A-208, Okhla Industrial Area, Phase No.1, New Delhi through itsManaging Director Shri Sudhir Kaura. As per the said MOU, M/s. International Electron Devices Ltd. is the leaseholder ofPlots No. A-1 and A-2 situated at Industrial Area, Panki-5, (Udyog Kunj) Kanpur- Nagar, cumulatively measuring 16357square meters acquired by them by virtue of lease hold deed dated 28th March 2003 duly registered in Book No.1, volume52 at office of District Registrar Kanpur. M/s. International Electron Devices Ltd. has constructed building over the aforesaidplots and established manufacturing unit consisting of building, sheds, office, boundary wall and installed bus bar,transformer, distribution boxes and other equipments relating to the said manufacturing unit and business as per plansanctioned by UPSIDC on the terms enumerated in the aforesaid lease hold deed.

IEDL through its legal representative negotiated to sell and transfer the aforesaid Unit with plots of land totaling 16357square meters on the conditions as ‘it is where it is’ basis for total lumpsum consideration of Rs. 475 lakhs (Rupees FourCrores & Seventy Five Lakhs only), thereby fixing the value of land, building, built up sheds, office, boundary wall, and allelectrical including transformers, control panels, bus bars and distributions boxes and cable etc. as installed in the premises.

The terms of the transfer have been orally settled between the parties and this MOU has been entered to avoid futurecomplications:

1. The lease granted on 24/04/1997 was for a period of 90 years. IEDL shall surrender its lease for the residual periodto the lessor as per terms of Lease Hold Deed and shall also pay lease rent and other dues and taxes in full and finalsettlement upto the date of transfer to the Second Party.

2. IEDL shall sign and submit all documents, which may be required for granting fresh renewed lease for the residualperiod in favour of our Company according to the rules and bylaws of U.P.S.I.D.C.

3. That IEDL shall be responsible to get all clearances for the renewal of the lease in favour of our Company and shallbe responsible to get the name of our Company as lessee of U.P.S.I.D.C.

4. IEDL shall be responsible to clear all liabilities of the Bank and other Financial Institutions including Statutory Duesand shall get clearance certificates from its banker and or Financial Institutions to satisfy our Company that thepremises is free from all types of encumbrances, Mortgage, lien, any defects whether latent and patent.

5. That IEDL shall permit access in to the demised property to our Company and his representatives as and whenrequired and IEDL shall have right to continue to use its premises. Our Company undertakes that we shall notinterfere in the use and enjoyment of the premises by IEDL.

6. The possession of the property shall be given only after full payment to IEDL. IEDL shall not damage or remove theexisting construction and installed equipments.

2. Additional MOU entered into with M/s. International Electron Devices Ltd.

Our Company entered into an additional MOU with M/s. International Electron Devices Ltd. on 26th February 2007 andagreed upon the following points:

1. That the our Company have paid a sum of Rs.4.54 Crores (Rupees Four Crores Fifty Four Lacs Only) in favour ofState Bank of India, A/c International Electron Devices Ltd. by DD No. 161111 dated 22/02/2007 payable at NewDelhi to the IEDL as per terms duly agreed and in conformity to the MOU dated 5th January 2007. Payment of Rs. 454lakhs along with Rs. 21 Lacs i.e. sum paid in advance satisfies full consideration payable to the IEDL in relation to theaforesaid transactions.

2. That IEDL shall sign all documents necessary for surrender and transfer of the said leased Plots Nos. A-1 and A-2required to be filed before the U.P. State Industrial Development Corporation Limited including all or any otherdocuments required for a peaceful and proper transfer of the said Plots in favour of our Company.

3. That since State Bank of India has valued the property aforementioned at Rs. 5.00 Crores (Rupees Five Crores only)therefore, it shall be the liability and the responsibility of IEDL to deposit the balance amount of Rs. 25 Lacs as valuedby the Bank, to the Bank and obtain the original documents of the property from the Bank and hand over the same toour Company.

Further, IEDL agrees to make this aforesaid balance payment to the Bank within a period of 15 days from the date ofthis Additional Memorandum and get the original Deed released from State Bank of India, New Delhi (Bankers of ourCompany) within the next 15 days thereafter.

4. Our Company shall be entitled to damages and Costs that may arise and that may be determined by us on accountof the failure of IEDL to fulfill the aforementioned condition. IEDL shall be liable for any consequences thereof.

Except as stated above, there is no other major agreement entered in to by the Company.

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G. OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Present Issue:

The Issue is being made pursuant to the provisions of Section of 81(1) of Companies Act, 1956 and resolution passed by themembers of the Company at its meeting held on 27th January 2007.

Prohibition by SEBI

The Company, its Directors, its Promoters, any of the Company Associates or Group Companies with which the Directors ofthe Company are associated, as Directors or Promoters have not been prohibited from accessing the capital market under anyorder passed by SEBI.

Eligibility of the Issue:

The Company is an existing listed Company and it is eligible to offer this Rights Issue in terms of Clause 2.4.1 (iv) of the SEBIGuidelines.

DISCLAIMER CLAUSE

AS REQUIRED, A COPY OF THIS LETTER OF OFFER HAS BEEN SUBMITTED TO THE SECURITIES AND EXCHANGEBOARD OF INDIA (SEBI).

“IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THE LETTER OF OFFER TO SEBI SHOULD NOT,IN ANY WAY BE DEEMED/ CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOESNOT TAKE ANY RESPOSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FORWHICH THE ISSUE IS PROPOSED TO BE MADE, OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONSEXPRESSED IN THE LETTER OF OFFER. THE LEAD MANAGER VIVRO FINANCIAL SERVICES PRIVATE LIMITED HASCERTIFIED THAT THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE GENERALLY ADEQUATE AND ARE INCONFORMITY WITH SEBI GUIDELINES FOR DISCLOSURE AND INVESTOR PROTECTION IN FORCE FOR THE TIMEBEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKINGINVESTMENT IN THE PROPOSED ISSUE.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLEFOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE LETTER OF OFFER,THE LEAD MANAGER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGESITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE THE LEAD MANAGER VIVROFINANCIAL SERVICES PRIVATE LIMITED HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED 14TH

MARCH, 2007 IN ACCORDANCE WITH THE SEBI (MERCHANT BANKERS) REGULATIONS, 1992 WHICH READS ASFOLLOWS:

1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIALDISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS ETC. AND OTHER MATERIALS MOREPARTICULARLY REFERRED TO IN THE ANNEXURE THERETO IN CONNECTION WITH THE FINALISATION OF THELETTER OF OFFER PERTAINING TO THE SAID ISSUE;

2. ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORS ANDOTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THEOBJECTS OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THEANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY;

WE CONFIRM THAT:

a. THE LETTER OF OFFER FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS ANDPAPERS RELEVANT TO THE ISSUE;

b. ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE AS ALSO THE GUIDELINES, INSTRUCTIONSETC., ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVEBEEN DULY COMPLIED WITH;

c. THE DISCLOSURES MADE IN THE LETTER OF OFFER ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORSTO MAKE A WELL INFORMED DECISION AS TO INVESTMENT IN THE PROPOSED ISSUE; AND

d. WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE LETTER OF OFFER AREREGISTERED WITH SEBI AND TILL DATE SUCH REGISTRATION IS VALID


128

THE FILING OF THE LETTER OF OFFER DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANY LIABILITIESUNDER SECTION 63 OR SECTION 68 OF THE COMPANIES ACT, 1956 OR FROM THE REQUIREMENT OF OBTAININGSUCH STATUTORY OR OTHER CLEARANCE AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSEDISSUE. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MANAGER,VIVRO FINANCIAL SERVICES PRIVATE LIMITED ANY IRREGULARITIES OR LAPSES IN THE LETTER OF OFFER.”

DISCLAIMER

The Company and the Lead Manager to the issue accepts no responsibility for statements made otherwise than in this Letter ofOffer or in any advertisement or other material issued by the Company or by any other persons at the instance of the Companyand anyone placing reliance on any other source of information would be doing so at his own risk.

CAUTION

The Lead Manager and the Company shall make all information available to the Equity Shareholders and no selective oradditional information would be available for a section of the Equity Shareholders in any manner whatsoever including atpresentations, in research or sales reports etc. after filing of the Letter of Offer with SEBI. The Lead Manager and the Companyshall update the Letter of Offer and keep the public informed of any material changes till the listing and trading commences.

Disclaimer with respect to Jurisdiction

This Letter of offer has been prepared under the provisions of Indian Laws and the applicable rules and regulations hereunder.Any disputes arising out of this Issue will be subject to the jurisdiction of the appropriate court(s) in Kanpur, India only.

The distribution of the Letter of offer and the offering of securities on a rights basis to persons in certain jurisdictions outside Indiamay be restricted by the legal requirements prevailing in those jurisdictions. Persons into whose possession the LOF may comeare required to inform themselves about and observe such restrictions. Any disputes arising out of such issue will be subject tothe jurisdiction of appropriate courts in Kanpur, India only.

No action, has been, or will be taken, to permit offering of these securities in any jurisdiction where action would be required forthat purpose, except that the LOF has been filed with SEBI and SEBI has given its observations and that the Letter of offer wouldbe filed with the relevant Stock Exchanges in India. Accordingly, the Equity Shares may not be offered or sold directly orindirectly, and the LOF may not be distributed in any jurisdiction, except in accordance with the legal requirements applicable insuch jurisdiction. Neither the delivery of the LOF, nor any sale hereunder, shall under any circumstances create any implicationthat the affairs of the Company have remained unchanged since the date hereof or that the information herein is correct as of anytime subsequent to this date.

Disclaimer Clause of the BSE (the Designated Stock Exchange)

BSE (“the Exchange”) has given vide its letter dated 5th April 2007 permission to the Company to use the Exchange’s name inthis Letter of offer on which this Company’s Securities are proposed to be listed. The Exchange has scrutinized this Letter of offerfor its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company.

The Exchange does not in any manner:

(i) warrant, certify or endorse the correctness or completeness of any of the contents of this Letter of Offer; or

(ii) warrant that this Company’s securities will be listed or will continue to be listed on the Exchange; or

(iii) take any responsibility for the financial or other soundness of the Company, its Promoters, its management or any schemeor project of this Company;

And it should not for any reason be deemed or construed that this Letter of offer has been cleared or approved by theExchange. Every person who desires to apply for or otherwise acquires any securities of this Company may do sopursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoeverby 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.

FILING

This Letter of Offer was filed with SEBI, at The Regional Manager, 5th Floor, Bank of Baroda Building, 16, Sansad Marg, NewDelhi - 110 001. The Letter of Offer has been filed with the Designated Stock Exchange as per the requirements of the law. Allthe legal requirements applicable till the date of filing the Letter of Offer with the Stock Exchanges have been complied with.

DESIGNATED STOCK EXCHANGE

The designated stock exchange for the purpose of the issue is BSE.

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LISTING

The existing Equity Shares are listed on BSE (Designated Stock Exchange). The Company has made application to BSE forpermission to deal in and for an official quotation in respect of the securities being offered in terms of this Letter of offer videletter dated 14th March 2007. The Company has received in-principle approval from BSE vide letter dated 5th April 2007.

If the permission to deal in and for an official quotation of the securities is not granted by the Designated Stock Exchangementioned above, within six weeks from the Issue Closing Date, the Company shall forthwith repay, without interest, allmonies received from applicants in pursuance of this Letter of Offer. If such money is not paid within eight days after theCompany 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 theSection 73 of the Act.

Consents

The written consents of Promoters, Directors, Auditors, Lead Managers to the Issue, Registrars to the Issue, Legal Advisor,Bankers to the Company and Bankers to the Issue to act in their respective capacities, have been obtained and such consentshave not been withdrawn up to the time of delivery of the Letter of offer with the Stock Exchanges.

The Auditors of the Company have given their written consent for inclusion of their report in the form and content appearing inthis Letter of offer and such consent and report have not been withdrawn up to the time of delivery of the Letter of offer to theStock Exchange.

The Auditors of the Company have given their written consent for inclusion of income tax benefits in the form and contentappearing in this Letter of Offer, accruing to the Company and its members.

To the best of our knowledge, there are no other consents required for making this Rights Issue. However, should the needarise, necessary consents shall be obtained by us.

Expert Opinion

The Company has not obtained any expert opinion apart from whatever is already mentioned in this Letter of Offer.

Expenses of the Issue

The expenses of the Rights Issue payable by the Company inclusive of brokerage, fees payable to the Lead Manager to theIssue, Registrar to the Issue, Stamp duty, printing, publication, advertising and distribution expenses, bank charges, listingfees and other miscellaneous expenses will not exceed Rs. 20 Lakhs and will be met out of the proceeds of the Rights Issue.

Details of Fees payable

The expenses for the issue include among others, lead management fees, advertising costs, printing and distribution expenses,fees payable to the Stock Exchange, Registrar and depository fees and other miscellaneous expenses. The estimate of theissue expenses of Rs. 20 Lakhs is as follows which is 0.93 % of the total issue size.

(Rs. in Lakhs)

Sr. Particulars Amount % of Total % of TotalNo. Issue Exp. Issue Size

1 Lead Manager Fees 9.00 45.00 2.54

2 Registrar Fees 1.00 5.00 0.28

3 Printing and Statutory Advertisement Cost 6.00 30.00 1.70

4 Bank and other charges 2.00 10.00 0.57

5 Other Expenses 2.00 10.00 0.57

Total 20.00 100.00 5.66


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Underwriting Commission, Brokerage and Selling Commission

The Rights Issue has not been underwritten. No fee under this head is payable.

Previous Public or Rights Issues

There was no public/rights issue done by the Company in the last 5 years.

Previous issues of shares otherwise than for cash.

The Company had issued 5,60,000 Equity Shares as bonus shares vide Resolution passed by the members of the companyat Annual General Meeting held on 16th June 1986, to the existing members of the Company in the ratio of one Equity share forevery One Equity Share held by the members as on the record date.

There is no issue of shares in past for consideration otherwise than cash other than issue of bonus shares as stated above.

Commission or Brokerage on previous Issues

The Company has not made any public issue in last five years. Hence no commission or brokerage has been paid on any publicissue in the last five years.

Particulars in regard to the Company and other listed companies under the same management within the meaning ofSection 370(1)(B) of the Companies Act, 1956, which made any public issue during the last three years.

The Company as well as the other Companies under the same management have not done any Public Issue / Rights Issue inlast three years. The Company has paid dividend to its equity shareholders for the last two years as under:

Sr. Financial Year Rate of Dividend Final or InterimNo. (%)

1 2006-07 10% Final

2 2005-06 6% Final

PROMISES VS. PERFORMANCE

Kanpur Plastipack Limited:

Initial Public Offer

Kanpur Plastipack Limited came out with its Maiden Public Issue of 12,00,000 equity shares of Rs. 10/- each for cash at apremium of Rs. 2/- per share in the year 1986. The issue opened on 14th October 1986 and closed on 23rd October 1986. Thisoffer was made to the public at large and the consideration was received by the Company in cash. The Company had confirmedthat the proceeds of the issue were utilised as stated in the offer document. However, due to Government policies, theCompany could not commence the operations of the expansion and diversification project immediately. The prospectus didnot contain the promised future performance of the project.

Listed Venture of Promoters

There is no other listed venture promoted by the Promoters.

Outstanding Bonds/Debentures

There are no outstanding debentures or bonds or redeemable preference shares or any other instruments issued by the issuercompany outstanding as on the date of Letter of Offer.

STOCK MARKET DATA

The Company’s shares are listed on BSE. The shares are actively traded on BSE. The high and low closing prices recordedon BSE for the preceding three years and the number of shares traded on the days the high and low prices were recorded arestated below:

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BSE

Year High Date Volume Low Date of Vol. on Avg.ending (Face Value of on Date (Face Low date of price for

of Rs. 10) High of High value of Low the year(No. of Rs. 10) (No. of (Face value

Shares) Shares) of Rs. 10)

2006 17.90 6.11.2006 5569 8.00 29.03.2006 13800 12.95

2005 31.90 08.09.2005 30450 13.40 30.03.2005 1200 22.65

2004 16.11 31.12.2004 11200 2.40 22.07.2004 200 9.25

(Source: www.bseindia.com, Official Website of Bombay Stock Exchange Limited, Mumbai)

Monthly high & low prices for the preceding six months and volume of transactions on the respective dates of High & Low.

Month High(Face Date Volume Low Date of Vol. on Total volumeValue of of High of Date (Face Low date of for theRs. 10/-) High Value Low month

(No. of of (No. of (No. ofShares) Rs. 10/-) Shares) Shares)

Jan, 2007 24.70 02.01.2007 15524 19.65 18.01.2007 3750 117489

Feb, 2007 23.80 01.02.2007 4525 16.55 28.02.2007 350 45,445

March, 2007 17.80 01.03.2007 450 13.70 28.03.2007 326 44,566

April, 2007 19.85 24.04.2007 4560 14.00 02.04.2007 2800 38,106

May, 2007 21.10 31.05.2007 2486 16.50 23.05.2007 4851 49,603

June, 2007 25.95 05.06.2007 13700 18.90 28.06.2007 2922 1,19,799

(Source: www.bseindia.com, Official Website of Bombay Stock Exchange Limited, Mumbai)

Market Price as on 12th July 2007, immediately after the date of passing the Board Resolution for approving the Issue:

Rs. 22.55 Per Share

Disclosure on Investor Grievances and Redressal System

The Company has set up Shareholders / Investors Grievance Committee. The committee is headed by Shri P.K. Goenka aNon Executive and Independent director. Other two members are Shri M.S. Agarwal and Shri Manoj Agarwal. Shri JitendraAwasthi, the company secretary acts as the Compliance Officer. During the year 2006-07, twenty-seven Committee Meetingswere held.

The Committee looks into the matter relating to transfer of shares, demat of shares, issue of duplicate share certificates,redressal of investor complaints regarding non- receipt of dividends, Annual Reports, dividend warrants etc. The Companyhas developed well-arranged correspondence system for letters of routine nature. The company has appointed Skyline FinancialServices Pvt. Ltd. as its Share Transfer Agents both for the physical as well as for demat shares. Letters are filed categorywise after having attended to Redressal norm for response time for all correspondence including shareholders complaints isten days. However, the Company ensures to redress all the investor grievances well within the said ten days from the date ofreceipt of the complaint.

The Compliance Officer Mr. Jitendra Awasthi takes care for redressal of complaints on a regular basis.

Status of Complaints

No. of shareholders complaints as of 31st March, 2007 Nil

Total number of complaints received during last financial year (2006-07) 14 (All complaints were resolved)

Total number of complaints received during 1st April 2007 to 30th June 2007 1

Status of Complaints Complaint is resolved.

Time normally taken by it for disposal of various types of investor grievances 10 days


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Investor Grievances arising out of this Issue

The Company’s investor grievances arising out of this issue will be handled by Skyline Financial Services Pvt. Ltd., Registrars tothe Issue. The Registrars will have a separate team of personnel handling only our post issue correspondence. Investor grievanceswill be settled expeditiously and satisfactorily by us. The agreement between Registrar and the Company will provide for retentionof records with the Registrars for a period of at least one year from the last date of dispatch of Letter of Allotment/ShareCertificate/Warrant/refund order to enable the Registrars to redress grievances of Investors.

All grievances related to the issue may be addressed to the Registrars to the issue giving full details such as folio no., nameand address of the first applicant, number and type of shares applied for, Application Form Serial number, amount paid onapplication and the name of the bank and the branch where the application was deposited, along with a photocopy of theacknowledgement slip. In case of renunciation, the same details of the renouncee should be furnished.

Investor may contact the Compliance Officer in case of any pre-issue/post-issue related problems such as non-receipt of letterof allotment/share certificates/demat credit/refund orders etc.

Changes in the Auditors in the last three years

There has been no change in Auditors in the last three years.

Capitalization of Reserves or profits (during last Five Years)

There is no capitalization of reserves/profits during the last five years.

Revaluation of Assets, if any (during last five years)

There is no revaluation of assets carried out during the last five years.

However, the Land, Building, Plant & Machineries have been revalued as on 31st March 1985 by our Company on the basisof the report of professional valuer. Consequent to revaluation, Rs.1,47,40,547/- was credited to Revaluation Reserverepresenting the net surplus over the written down value of the then existing assets. The depreciation on increase in assetsdue to revaluation was reduced from gross block of fixed assets and debited to Revaluation Reserve without affecting Profit &Loss Account.

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H. OFFERING INFORMATION

TERMS OF THE PRESENT ISSUE

The Equity Shares, now being offered are subject to the provisions of the Act and terms and conditions of this Letter of Offer,CAF, the Memorandum & Articles of Association of the Company, approvals under the Foreign Direct Investment Scheme ofGovernment of India, FEMA, if applicable, provisions of the Act, guidelines issued by SEBI, guidelines, notifications andregulations for the issue of capital and for listing of securities issued by Government of India and/ or other statutory authoritiesand bodies from time to time, Listing Agreement entered into by the Company with the Stock Exchange, such terms andconditions as may be incorporated in the Letter of Allotment /Share Certificate or any deed or document executed by theCompany regarding the Rights Issue.

Authority for the Issue

The Issue is being made pursuant to the provisions of Section of 81(1) of the Act and resolution passed by the members of theCompany at its Extra Ordinary General Meeting held on 27th January 2007.

Basis of the Issue

The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose names appear asbeneficial owners as per the list to be furnished by the Depositories in respect of the Equity Shares held in the electronic formand on the Register of Members of the Company in respect of Equity Shares held in the physical form at the close of businesshours on the Record Date 23rd July 2007 fixed in consultation with the Designated Stock Exchange.

The Equity shares are being offered for subscription in the ratio of One [1] Equity Share for every Two [2] Equity Share held bythe Equity Shareholders.

Ranking of Equity Shares.

The Equity shares being offered shall be subject to the Provisions of the Act, the Memorandum and Articles of Association andshall rank pari-passu in all respect with the other existing equity shares of the Company including rights in respect of dividend.The allottees will be entitled to dividend or any other corporate benefits (including dividend), if any, declared by the Companyafter the date of allotment.

Mode of payment of Dividend

The dividend will be paid to all the eligible shareholders in terms of the provisions of the Act and Articles of Association withregard to payment of dividend. The unclaimed dividend will be transferred to Investor Protection Fund as prescribed under theAct.

Face Value

The face value of the Equity Shares of the Company is Rs.10.

Issue Price

The equity shares of Rs.10 each are being issued at a price of Rs. 20 per share including premium of Rs. 10 per equity sharein the present rights issue.

Premium

The Equity Shares of Rs.10/- each are being issued at a premium of Rs. 10 per share.

Rights of the Equity Shareholders

Subject to applicable laws, the Equity Shareholders shall have the following rights:

Right to receive dividend, if declared.

Right to attend general meetings and exercise voting powers, unless prohibited by law

Right to vote on a poll either in person or by proxy

Right to receive offers for rights shares and be allotted bonus shares, if announced

Right to receive surplus on liquidation

Right of free transferability and


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Such other rights, as may be available to a shareholder of a listed public company under the Act or any other applicablelaw from time to time and Memorandum and Articles of Association of the Company.

For a detailed description of the main provisions of the Company’s Articles of Association relating to voting rights, dividend,forfeiture and lien, transfer and transmission and/or consolidation/splitting, see “Description of Equity Shares and Terms ofArticles of Association” on page 148 in this Letter of Offer.

Market Lot

The market lot for the Equity shares in dematerialized mode is one. In case of physical certificates, the Company would issueone certificate for the Equity Shares allotted to one folio (“Consolidated Certificate”)

Nomination facility to the Investors

Nomination facility

In terms of Section 109A of the Act, nomination facility is available in case of Equity Shares. The applicant can nominate anyperson by filling the relevant details in the CAF in the space provided for this purpose.

The sole Equity Shareholder or first Equity Shareholder, along with other joint Equity Shareholders (being individual(s) maynominate any person(s) who, in the event of the death of the sole holder or all the joint-holders, as the case may be, shallbecome entitled to the Equity Shares. Person(s), being a nominee, becoming entitled to the Equity Shares by reason of thedeath of the original Equity Shareholder(s), shall be entitled to the same rights to which he would be entitled if he/she were theregistered holder of the Equity Shares. Where the nominee is a minor, the Equity Shareholder(s) may also make a nominationto appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the event of death of the saidholder, during the minority of the nominee. A nomination shall stand rescinded upon the sale/disposal of the Equity Share bythe person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. When two or morepersons hold the Equity Share(s), the nominee shall become entitled to receive the shares only on the demise of all theholders. Fresh nominations can be made only in the prescribed form available on request at the Registered Office of theCompany located at “D- 19-20 Panki Industrial Area, Kanpur –208 022, Uttar Pradesh, India or such other place at suchaddresses as may be notified by the Company. The applicant can make the nomination by filling in the relevant portion in theCAF.

Only one nomination would be applicable for one folio. Hence, in case the Equity Shareholder has already registered thenomination with the Company, no further information needs to be made for the Equity Shares to be allotted in the issue underthe same folio.

In case the allotment of equity shares is in dematerialized form, there is no need to make a separate nomination for the EquityShares to be allotted in the Rights Issue. Nominations registered with respective Depository Participant of the applicant wouldprevail. If the applicants wish to change the nomination, they are requested to inform their respective Depository Participants.

Minimum Subscription

If the Company does not receive the minimum subscription of 90% of the Rights Issue, the entire subscription shall be refundedto the applicants within forty-two days from the date of closure of the Issue. If there is a delay in the refund of subscription bymore than 8 days after the Company becomes liable to repay the subscription amount, (i.e. forty two days after closure of theIssue), the Company will pay interest for the delayed period, at prescribed rates in sub-section (2) and (2A) of Section 73 of theAct.

This Rights Issue will become under subscribed after considering the number of Equity Shares applied as per entitlement plusadditional Equity Shares.

The above is subject to the terms mentioned under the “Basis of Allotment”.

The Issue will become under subscribed after considering the number of Equity Shares applied as per entitlement plus additionalEquity Shares. The Promoters shall subscribe to such under subscribed portion as per the relevant provisions of the law. If anyperson presently in control of the Company desires to subscribe to such under subscribed portion and if disclosure is madepursuant to SEBI (SAST) Regulations, such allotment of the under subscribed portion will be governed by the provisions of theSEBI (SAST) Regulations. Allotment to the Promoters of any unsubscribed portion, over and above their entitlement shall bedone in compliance with Clause 40A of the Listing Agreement.

If the Company does not receive the minimum subscription of 90% of the Rights Issue (excluding the amounts on the rightsentitlement on the Equity Shares held in abeyance as explained in the notes to the “Capital Structure”), the entire subscriptionshall be refunded to the applicants within forty-two days from the date of closure of the Issue.

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If there is a delay in the refund of subscription by more than 8 days after the Company becomes liable to repay the subscriptionamount, (i.e. forty two days after closure of the Issue), the Company will pay interest for the delayed period, at prescribed ratesin sub-section (2) and (2A) of Section 73 of the Act.

The above is subject to the terms mentioned under the “Basis of Allotment”.

Arrangements for disposal of Odd Lots

The Company has not made any arrangements for the disposal of odd lot Equity Shares arising out of this issue. The Companywill issue certificates of denomination equal to the number of Equity Shares being allotted to the Equity Shareholder. TheEquity Shares are being issued in the ratio of one Equity Share for every two Equity Shares held as on record date. The marketlot is one share. Therefore there is no possibility of odd lot.

Restriction on Transfer and Transmission of Shares

Nothing contained in the Articles of Association of the Company shall prejudice any power of the Company to refuse to registerthe transfer of share.

No fee shall be charged for sub-division and consolidation of share certificates (physical form), debenture certificates anddetachable warrants and for sub-division of letters of allotment and split, consideration, renewal and pucca transfer receiptsinto denomination corresponding to the market units of trading.

Rights Entitlement

As your name appears in the Register of Members as an Equity Shareholder/Beneficial Owner (as per the list provided by theDepositories) of the Company on the Record Date 23rd July 2007 you are entitled to the number of Equity Shares by way ofRights as shown in Part A of the enclosed CAF on the basis mentioned above.

Fractional Entitlement

“For Equity Shares being offered on rights basis under this issue, if the shareholding of any of the Equity Shareholders is lessthan one or is not in the multiples of 2, then the fractional entitlement of such holders for Equity Shares shall be rounded up tothe next higher integer subject to minimum entitlement of ONE Equity Share. The Equity Shares needed for such shares willbe adjusted from the Promoters’ entitlement. “

ISSUE PROCEDURE

Principal Terms and Conditions of the Issue

The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose names appear asbeneficial owners as per the list to be furnished by the Depositories in respect of the Equity Shares held in the electronic formand on the Register of Members of the Company in respect of Equity Shares held in the physical form at the close of businesshours on the Record Date 23rd July 2007 fixed in consultation with the Designated Stock Exchange.

The Equity Shares are being offered for subscription in the ratio of 1 (One) Equity Share for every 2 (Two) Equity Shares heldby the Equity Shareholders.

Entitlement Ratio

The Equity Shares are being offered on rights basis to the existing Equity Shareholders of the Company in the ratio of 1 (One)Equity Share for every 2 (Two) Equity Share held as on the Record Date.

Terms of payment

The entire amount of Rs. 20 per share is payable on application by all shareholders.

Ranking of the Equity Shares

The Equity Shares shall be subject to the Memorandum and Articles of Association of the Company and shall rank pari-passuin all respects including dividends with the existing Equity Shares of the Company.

Option available to the Equity Shareholders

The Composite Application Form (CAF) clearly indicates the number of Equity Shares that the Equity Shareholder is entitled to.

The Equity Shareholders will be having the following options:

Apply for his entitlement in part

Apply for his entitlement in part and renounce the other part


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Apply for his entitlement in full

Apply for his entitlement in full and also apply for additional Equity Shares

Renounce his entitlement in full.

Renouncees for Equity Shares can apply for the Equity Shares renounced to them and also apply for additional Equity Shares.

Applicants to the Equity Shares of the Company issued through the Rights Issue shall have an option either to receive securitycertificates or to hold the securities in dematerialized form with a Depository.

Offer to Non-Resident Equity Shareholders / Applicants

Applications received from NRIs and other NRI shareholders for allotment of Equity Shares shall be, inter alia, subject to theconditions imposed from time to time by RBI under the FEMA in the matter of refund of application moneys, allotment of EquityShares, issue of Letter of Allotment / share certificates, payment of interest, dividends, etc. General permission has beengranted to any person resident outside India to apply shares offered on rights basis by an Indian Company in terms of FEMAand the rules and regulations there under.

The Equity Shares issued under the Rights Issue and purchased by NRI shall be subject to the same conditions includingrestrictions in regard to the repatriability as are applicable to the previously held Equity Shares against which Equity Sharesunder the Rights Issue are issued.

As per the Provisions of AP DIR Circular No. 14 dated September 16, 2003 (Issued by RBI), such Equity Shareholders whohave been allotted equity shares as OCBs, would not be permitted to participate in the issue. Accordingly the Shareholders/applicants who are OCBs and wishing to participate in the issue would be required to submit the approval in relation theretofrom FIPB and RBI.

The Board of Directors may at its absolute discretion, agree to such terms and conditions as may be stipulated by RBI whileapproving the allotment of Equity Shares, payment of dividend etc. to the Equity Shareholders who are NRI.

How to Apply

Option Available Action Required

1. Accept whole or part of your Fill in and sign Part A including Block III relating to the acceptance of entitlemententitlement without renouncing and Block IV relating to additional Equity Shares to be left blank or Nil to bethe balance. mentioned (All joint holders must sign)

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

3 Renounce your entitlement in full Fill in and sign Part B (All joint holders must sign) indicating the number of sharesto one person (joint renouncees renounced and hand it over to the renouncee. The Renouncee must fill in andare considered as one) sign Part C (All joint holders [Renouncees] must sign)

4 Accept a part of your entitlement Fill in and sign Part D (all joint holders must sign) requesting for splitand renounce the balance to one Application Form. Send the CAF to the Registrar to the Issue so as to reachor more renouncees OrRenounce them on or before the last date for receiving requests for Split Forms. Splittingyour entitlement in full offered to will be permitted only once.On receipt of the Split Form take action as indicatedyou to more than one renouncee 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 numberof Equity Shares renounced and hand it over to the authorized person. Each of therenouncees should fill in and sign Part C for the Equity Shares accepted by them.

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

Availability of Application Forms

Resident Equity Shareholders

Application should be made only on the enclosed CAF provided by the Company. The enclosed CAF should be completed inall respects, as explained in the instructions indicated in the CAF. Applications will not be accepted by the Lead Manager or bythe Registrar to the Issue or by the Company at any offices except in the case of postal applications as per instructions givenin the Letter of Offer.

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Non-Resident Equity Shareholders

Applications received from the Non-Resident Equity Shareholders for the allotment of Equity Shares shall, interalia, be subjectto the conditions as may be imposed from time to time by the Reserve Bank of India, in the matter of Refund of applicationmoneys, 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 Renouncee.

Part D: Form for request for Split Application Forms

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 CAFon the request of the applicant who should furnish the Registered Folio Number/ DP and Client ID No. and his / her full nameand address to the Registrar to the Issue. Please note that those who are making the application in the duplicate form shouldnot use the original CAF for any purpose including renunciation, even if it is received/ found subsequently. If the applicantviolates any of these requirements, he/ she shall face the risk of rejection of both the applications as well as forfeiture ofamounts 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 anapplication to subscribe to the Rights Issue on plain paper, along with an Account Payee Cheque drawn on a local bank atDelhi/ Demand Draft payable at Delhi (net of demand draft charges and postal charges) which should be drawn in favour of theCompany 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 specimenrecorded with the Company, must reach the office of the Registrar to the Issue before the Date of Closure of the Issue andshould contain the following particulars:

Name of 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

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 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 therefund order PAN/GIR number and Income Tax Circle/Ward/District where the application is for Equity Shares and foreach applicant in case of joint names, and

Signature of Equity Shareholders to appear 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 theirRights and should not utilize the original CAF for any purpose including renunciation even if it is received subsequently. If theapplicant violates any of these requirements, he/she shall face the risk of rejection of both the applications.

Mode of Payment

Payments in such cases, should be through a cheque/ demand draft payable at Delhi to be drawn in favour of the Bankers tothe Issue marked “A/c Payee” and marked “Kanpur Plastipack Limited - Rights Issue “


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Acceptance of the Rights 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 theenclosed CAF and submit the same along with the application money payable to the “Bankers to the Issue” or any of thebranches as mentioned on the reverse of the CAF before the close of the banking hours on or before the Issue Closing Dateor such extended time as may be specified by the Board thereof in this regard. Applicants at centers not covered by thebranches of collecting banks can send their CAF together with the cheque drawn on a local bank at Delhi /demand draftpayable at Delhi (net of demand draft charges and postal charges) to the Registrar to the Issue at Skyline Financial ServicesPvt. Ltd., 123,Vinoba Puri, Lajpat Nagar-II, New Delhi- 110 024, by registered post.

Renunciation

As an Equity Shareholder, you have the right to renounce your entitlement for the Equity Shares in full or in part in favour ofone or more person(s). Your attention is drawn to the fact that the Company shall not allot and/or register any Equity Sharesin favour of:

More than three persons including joint holders

Partnership firm(s) or their nominee(s)

Minors

Hindu Undivided Family

Any Trust or Society (unless the same is registered under the Societies Registration Act, 1860 or any other applicableTrust laws and is authorized under its Constitutions to hold Equity Shares of a Company)

The right of renunciation is subject to the express condition that the Board/ Committee of Directors shall be entitled in itsabsolute discretion to reject the request for allotment to renouncee(s) without assigning any reason thereof.

Any renunciation from Resident Indian Shareholder(s) to Non–Resident Indian or from Non-Resident IndianShareholder(s) to other Non-Resident Indians(s) is subject to Prevailing RBI Guidelines.

By virtue of circular No 14 dated September 16,2003 issued by RBI, Overseas Corporate Bodies (‘OCBs”) have beenderecognized as an eligible class of investors and RBI has subsequently issued the Foreign Exchange Management(withdrawal of General Permission to Overseas Corporate Bodies (OCB) Regulation, 2003. Accordingly the existingShareholders of the company who do not wish to subscribe to the equity shares being offered but wish to renouncethe same in favour of renouncees shall not renounce the same (whether for consideration or otherwise) in favour ofOCBs.

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, alljoint holders must sign Part B of the CAF. The person in whose favour renunciation has been made should complete and signPart 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 morerenouncees, the CAF must be first split into requisite number of forms.

Please indicate your requirement of split forms in the space provided for this purpose in Part D of the CAF and return the entireCAF to the Registrar to the Issue so as to reach them latest by the close of business hours on the last date of receivingrequests for split forms. On receipt of the required number of split forms from the Registrar, the procedure as mentioned inparagraph above shall have to be followed.

In case the signature of the Equity Shareholder(s), who has renounced the Equity Shares, does not agree with the specimenregistered 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 Application Form andsubmit the entire Application Form to the Bankers to the Issue on or before the Issue Closing Date along with the applicationmoney.

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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 jointholder 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 aboveshall have to be followed.

However, this right of renunciation is subject to the express condition that the Board of Directors of the Company shall beentitled in its absolute discretion to reject the request for allotment from the renouncee(s) without assigning any reasonthereof.

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) Only the person to whom this Letter of offer has been addressed to and not the renouncee(s) shall be entitled to renounceand to apply for Split Application Forms. Forms once split cannot be split again.

c) Split form(s) will be sent to the applicant(s) by post at the 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, providedthat you have applied for all the Equity Shares offered without renouncing them in whole or in part in favour of any otherperson(s). Applications for additional Equity Shares shall be considered and allotment shall be made in the manner prescribedin the Letter of Offer under the section “Basis of Allotment”. The authorized person applying for all the Equity Shares renouncedin their favour may also apply for additional Equity Shares.

In case of application for additional Equity Shares by non-resident Equity Shareholders, the allotment of additional securitieswill be subject to the permission of the Reserve Bank of India.

Where the number of additional Equity Shares applied for exceeds the number available for allotment, the allotment would bemade 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 optionswith regard to the Equity Shares offered, using the enclosed CAF:

Option Available Action Required

1 Accept whole or part of your Fill in and sign Part A including Block III relating to the acceptance of entitlemententitlement without renouncing and Block IV relating to additional Equity Shares to be left blank or Nil to bethe balance. mentioned (All joint holders must sign)

2 Accept your entitlement in full and ? Fill in and sign Part A including Block III relating to the acceptance of entitlementapply for additional Equity Shares and Block IV relating to additional Equity Shares (All joint holders must sign)

3 Renounce your entitlement in Fill in and sign Part B (All joint holders must sign) indicating the number of sharesfull to one person (joint renouncees renounced and hand it over to the renouncee. The renouncees must fill in andare considered as one) sign Part C (All joint holders [renounces] must sign)

4 Accept a part of your entitlement Fill in and sign Part D (all joint holders must sign) requesting for split Applicationand renounce the balance to one Form. . Send the CAF to the Registrar to the Issue so as to reach them on oror more renouncees Or Renounce before the last date for receiving requests for Split Forms.Splitting will beyour entitlement of all the equity permitted only once.On receipt of the Split Form take action as indicated below.shares offered to you to more than For the Equity Shares you wish to accept, if any, fill in and sign Part A.For theone renouncee 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 renouncee. Each of therenouncees should fill in and sign Part C for the Equity Shares accepted by them.

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

Last date of Application

The last date for submission of CAF is 12th September 2007. The Board/Committee of Directors will have the right to extendthe said date for such period as it may determine from time to time but not exceeding sixty days from the date the Issue opens.


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If the CAF together with the amount payable is not received by the Bankers to the Issue/ Registrar on or before the close ofbanking hours on the aforesaid last date or such date as may be extended by the Board/ Committee of Directors, the offercontained in this Letter of offer shall be deemed to have been declined and the Board/ Committee of Directors shall be atliberty to dispose off the Equity Shares hereby offered, as provided under the heading “Basis of Allotment”.

Equity Shares in Dematerialised Form

Applicants to the Equity Shares of the Company issued through this Rights Issue shall be allotted the securities in authorized(electronic) form at the option of the applicant. The Company and Skyline Financial Services Pvt. Limited, the Registrar to theCompany, have signed a tripartite agreement with CDSL on 30th November 2001 and with NSDL on 30th November 2001,which enables the investors to hold and trade in securities in dematerialized form, instead of holding the securities in the formof physical certificates.

In this Rights Issue, the allottees who have opted for Equity Shares in Dematerialized form will receive their Equity Shares inthe 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 donot accurately contain this information, will be given the securities in physical form. No separate applications for securities inphysical and dematerialized form should be made. If such applications are made, the application for physical securities will betreated as multiple applications and is liable to be rejected. In case of partial allotment, allotment will be done in demat optionfor the shares sought in demat and balance, if any, will be allotted in physical shares.

Procedure for availing 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 shouldcarry the name of the holder in the same manner as is exhibited in the records of the Company. In case of joint holding, theBeneficiary Account should be opened carrying the names of the holders in the same order as with the Company). In caseof Investors having various folios in the Company with different joint holders, the investors will have to open separateaccounts for such holdings. Those Equity Shareholders who have already opened such Beneficiary Account (s) need notadhere to this step.

2. For Equity Shareholders already holding Equity Shares of the Company in Dematerialized form as on Record Date, thebeneficial account number shall be printed on the CAF. For those who open accounts later or those who change theiraccounts and wish to receive their Rights Equity Shares by way of credit to such account, the necessary details of theirbeneficiary account should be filled in the space provided in the CAF. It may be noted that the allotment of securitiesarising out of this Issue may be made in dematerialized form even if the original equity shares of the Company are notdematerialized. Nonetheless, it should be ensured that the Depository Account is in the name(s) of the Equity Shareholdersand 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 a vis those with the applicant’sDepository Participant would rest with the applicant. Applicants should ensure that the names of the applicants and theorder 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 physicalform.

5. The Rights Equity Shares allotted to investors opting for Dematerialized form, would be credited to the Beneficiary Accountas given in the CAF after verification. Allotment advice, Refund Order (if any) would be sent directly to the applicant by theRegistrar to the Issue but the applicant’s Depository Participant will provide to him the confirmation of the credit of theRights 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 securities inthis Issue. In case these details are incomplete or incorrect, the allotment of shares will be made in physical form.

Utilisation of Proceeds

Subscription received against this Issue will be kept in a separate bank account(s) and the Company would not have accessto such funds unless it has received minimum subscription of 90%, of the Issue and the necessary approvals of the DesignatedStock Exchange, to use the amount of subscription.

General instructions for applicants

Do’s & Don’t’s

(a) Please read the instructions printed on the enclosed CAF carefully.

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(b) Application should be made on the printed CAF, provided by the Company and should be completed in all respects. TheCAF found incomplete with regard to any of the particulars required to be given therein, and/ or which are not completedin conformity with the terms of this Letter of offer are liable to be rejected and the money paid, if any, in respect thereof willbe refunded without interest within stipulated time period and after deduction of bank commission and other charges, ifany. The CAF must be filled in English and the names of all the applicants, details of occupation, address, contact no.,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 theRegistrar and not to the Company or Lead Managers to the Issue. Applicants residing at places other than cities where thebranches of the Bankers to the Issue have been authorized by the Company for collecting applications, will have to makepayment by Demand Draft payable at Delhi (net of demand draft charges and postal charges) and send their applicationforms to the Registrar to the Issue by REGISTERED POST. If any portion of the CAF is / are detached or separated, suchapplication is liable to be rejected.

(d) All applications or in the case of application in joint names, each of the applicants, should mention his/ her permanentaccount number allotted under the Income-Tax Act, 1961 or where the same has not been allotted, the GIR number andthe Income-Tax Circle / Ward / District. In case where neither the permanent account number nor the GIR number hasbeen allotted, the fact of non-allotment should be mentioned in the CAFs. Forms without this information will be consideredincomplete 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 withwhom such account is held in the CAF to enable the Registrar to print the said details in the Refund Orders, if any, afterthe 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. Incase payment is effected in contravention of this, the application may be deemed invalid and the application money will berefunded within the stipulated time period and no interest will be paid thereon. Payment against the application if made incash, 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 ofIndia. Signatures other than in English or Hindi and thumb impression must be attested by a Notary Public or a SpecialExecutive Magistrate under his/ her official seal. The Equity Shareholders must sign the CAF as per the specimen signaturerecorded 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 therelevant Power of Attorney or relevant resolution or authority to make investment and sign the application along with acopy of the Memorandum & Articles of Association and / or bye laws must be lodged with the Registrar to the Issue givingreference of the serial number of the CAF. In case these papers are sent to any other entity besides the Registrar to theIssue 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 specimensignature(s) recorded with the Company. Further, in case of joint applicants who are renouncees, the number of applicantsshould not exceed three. In case of joint applicants, reference, if any, will be made in the first applicant’s name and allcommunication 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 EquityShares shall, interalia, be subject to conditions, as may be imposed from time to time by the RBI under FEMA in the matterof refund of application money, allotment of Equity Shares, subsequent issue and allotment of Equity Shares, interest,export of Equity Share certificates, et c. In case a Non-Resident or NRI Equity Shareholder has specific approval from theRBI, 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 EquityShareholders should be addressed to the Registrar to the Issue prior to the date of allotment in this Issue quoting thename of the first / sole applicant Equity Shareholder, folio numbers and CAF number. Please note that any intimation forchange of address of Equity Shareholders, after the date of allotment, should be sent to the Registrar and Transfer Agentsof the Company (i.e. Skyline Financial Services Pvt. Ltd.) in the case of equity shares held in physical form and to therespective DP, in case of equity shares held in Dematerialized form.

(l) Split 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 obtainsplit forms.


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(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 / demanddraft drawn on any of the banks, including a co-operative bank, which is situated at and is a member or a sub member ofthe Bankers Clearing House located at the Centre indicated on the reverse of the CAF where the application is to besubmitted.

(p) A separate cheque / draft must accompany each CAF. Outstation cheques / demand drafts or post-dated cheques andpostal / money orders will not be accepted and applications accompanied by such cheques / demand drafts / moneyorders or postal orders will be rejected. The Registrar will not accept payment against application if made in cash. (Forpayment 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 willacknowledge 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 suchapplications shall not be treated as multiple applications. The application made by the asset management company orcustodians of a mutual fund shall clearly indicate the name of the concerned scheme for which application is being made.

Grounds for Technical Rejection

Applicants are advised to note that applications are liable to be rejected on technical grounds, including the following:

(i) Amount paid does not tally with the amount payable for;

(ii) Bank account details (for refund) are not given;

(iii) Age of first applicant not given;

(iv) PAN photocopy/ PAN Communication/ Form 60/ Form 61 declaration not given;

(v) UIN number not given as applicable;

(vi) In case of Application under power of attorney or by limited companies, corporate, trust, etc., relevant documents are notsubmitted;

(vii) If the signature of the existing shareholder does not match with the one given on the application form and for Renouncees,if the signature does not match with the records available with their Depositories;

(viii) If the Applicant desires to have shares in electronic form, but the application form does not have the applicant’s Depositoryaccount details;

(ix) Application forms are not submitted by the applicants within the time prescribed as per the application form and the Letterof Offer;

(x) Applications not duly signed by the sole/joint Applicants;

(xi) Applications by OCBs unless accompanied by specific approval from the RBI permitting the OCBs to invest in the issue;

(xii) Applications accompanied by Stock invest;

(xiii) In case no corresponding record is available with the Depositories that matches three parameters, namely, names of theapplicants (including the order of names of joint holders), the Depositary Participant’s identity (DP ID) and the beneficiary’sidentity;

(xiv)FIIS applying on forms used for accepting shares renounced in their favour or applications for additional shares, withoutthe copy of RBI permission / approval enclosed will be rejected;

(xv) Applications by ineligible Non-residents (including on account of restriction or prohibition under applicable local laws) andwhere last available address in India has not been provided.

Payment Instructions

Resident Shareholders

All cheques / drafts accompanying the CAF should be drawn in favour of the Collecting Bank (specified on the reverse of theCAF), crossed “A/c Payee only” and marked “Kanpur Plastipack Limited - Rights Issue”. Applicants residing at placesother than places where the bank collection centers have been opened by the Company for collecting applications, arerequested to send their applications together with Demand Draft for the full application amount (Net of demand draft and postal

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charges) favouring the Bankers to the Issue, crossed “A/c Payee only” and marked “Kanpur Plastipack Limited - RightsIssue” payable at Delhi directly to the Registrar to the Issue by registered post so as to reach them on or before the IssueClosing Date. The Company or the Registrar will not be responsible for postal delays or loss of applications in transit, if any.

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 drawn in favour of the Banker to the Issue and marked“Kanpur Plastipack Limited - Rights Issue – NR” payable at Delhi or Mumbai (net of demand draft charges and postalcharges) 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 Delhi or Mumbai or funds remitted from abroad(submitted along with Foreign Inward Remittance Certificate); or

b) By cheque / draft on a Non-Resident External Account (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 Delhi orMumbai; 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 Non-Resident (Ordinary) Account maintained in Mumbai orRupee Draft purchased out of NRO Account maintained elsewhere in India but payable at Delhi or 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 “KanpurPlastipack Limited - Rights Issue – NR” payable at Delhi or Mumbai and must be crossed “A/c Payee only” for theamount payable. The CAF duly completed together with the amount payable on application must be deposited with theCollecting Bank indicated on the reverse of the CAF before the close of banking hours on the Issue Closing Date. Aseparate 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 maybe, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting theNRE/ FCNR/ NRO account should be enclosed with the CAF. Otherwise the application shall be considered incompleteand is liable to be rejected.

Note:

In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the investment in EquityShares can be remitted outside India, subject to tax, as applicable according to IT Act.

In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity Shares cannotbe remitted outside India.

The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bankindicated on the reverse of the CAF before the close of banking hours on the aforesaid Issue Closing Date. A separatecheque 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 accordancewith the guidelines/ rules prescribed by RBI as applicable at the time of making such allotment, remittance and subject tonecessary 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 thebottom of each CAF.

In case an application is rejected in full, the whole of the application money received will be refunded within six weeks from theclose of the Issue. Wherever an application is rejected in part, the balance of application money, if any, after adjusting anymoney due on Equity Shares allotted, will be refunded to the applicant within six weeks from the close of the Issue.


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Fictitious Applications

Attention of the applicants is specifically drawn to the provisions of sub-section (1) of Section 68A of the Companies Act, 1956which is reproduced below:

“Any person who:

(a) makes in a fictitious name, an application to a company for acquiring or subscribing for, any shares therein, or

(b) otherwise induces a company to allot, or register any transfer of shares, therein to him, or any other person in a fictitiousname, shall be punishable with imprisonment for a term which may extend to five years.”

Basis of Allotment

i. Subject to provisions contained in this Letter of Offer, the Articles of Association and approval of the Designated StockExchange, 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 andalso 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 and havealso applied for additional Equity Shares. The allotment of such additional Equity Shares will be made as far aspossible 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 in (a) above. The allotment of such EquityShares will be at the sole discretion of the Board/Committee of Directors in consultation with the Designated StockExchange, as a part of the Rights Issue and not preferential allotment.

c) Allotment to the renouncee who having applied for the Equity Shares renounced in their favour has also applied foradditional Equity Shares provided there is an under-subscribed portion after making full allotment in (a) and (b)above. The allotment of such additional Equity Shares will be made on a proportionate basis at the sole discretion ofthe Board/ Committee of Directors but in consultation with the Designated Stock Exchange, as a part of the RightsIssue and not as a preferential allotment.

d) The Issue will become under-subscribed after considering the number of Equity Shares applied as per entitlementplus additional Equity Shares. The Promoters and the Promoter group shall subscribe to such under-subscribedportion as per the relevant provisions of the law to ensure that the Issue is successful. If any person presently incontrol of the Company desires to subscribe to such under subscribed portion and if disclosure is made pursuant toSEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, such allotment of the under subscribedportion will be governed by the provisions of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations,1997.

e) After taking into account the allotments made under 1(a), 1(b) and 1(c) 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 theBoard upon such terms and conditions and to such person/persons and in such manner as the Board / Committee ofDirectors may in its absolute discretion deem fit, as part of the Rights Issue and not as a preferential allotment.

The decision of the Board or committee of Directors of the Company in this regard shall be final and binding. In theevent of over subscription, allotment will be made within the overall size of the issue.

Allotment to the Promoters of any unsubscribed portion, over and above their entitlement shall be done in compliancewith Clause 40A of the Listing Agreement and other applicable laws prevailing at that time.

Allotment / Refund

The Company shall give credit to the beneficiary account with Depository Participants within two working days from the dateof the allotment of Equity Shares. Applicants having bank accounts at any of the 15 centres where clearing houses aremanaged by the Reserve Bank of India (RBI) will get refunds through Electronic Credit Service (ECS) only, except whereapplicant is otherwise disclosed as eligible to get refunds through direct credit or Real Time Gross Settlement (RTGS). In caseof other applicants, the Company shall ensure despatch of refund orders, if any, of value up to Rs. 1,500 “Under Certificate ofPosting”, and shall dispatch refund orders of Rs. 1,500 and above, if any, by registered post or speed post. Applicants to whomrefunds are made through Electronic transfer of funds will be sent a letter (refund advice) “Under Certificate of Posting”intimating them about the mode of credit of refund within Six weeks from the date of closure of Issue.

The Company shall ensure dispatch of refund orders/refund advice, if any, “Under Certificate of Posting” or registered post orspeed post or Electronic Clearing Service or Direct Credit or RTGS, as applicable, only at the sole or First shareholder’s nameand all communication will be addressed to the person whose name appears on CAF within 42 days of the Issue Closing Date,

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and adequate funds for making refunds to unsuccessful applicants as per the mode(s) disclosed shall be made available tothe Registrar by the Issuer.

Shareholders should note that on the basis of name of the shareholders, Depository Participant’s name, Depository Participant-Identification (DP ID) number and Beneficiary Account Number provided by them in the Composite Application form, theRegistrar to the Issue will obtain from the Depository, the Bidders bank account details including the nine digit Magnetic InkCharacter Recognition (MICR) code as appearing on a cheque leaf. Hence, Shareholders are advised to immediately updatetheir bank account details as appearing on the records of the depository participant. Please note that failure to do so couldresult in delays in credit of refunds to shareholders at the shareholders sole risk and neither the Lead Manager nor theCompany nor the Refund Banker nor the Registrar shall have any responsibility and undertake any liability for the same.

In accordance with the requirements of the Stock Exchanges and SEBI Guidelines, the Company undertakes that:

Dispatch of refund orders/ refund advice shall be done within 42 days from the Issue Closing Date; and the Company shall payinterest at the rate of 15% per annum (for any delay beyond the 42-days time period as mentioned above), if allotment is notmade, refund orders/credit intimation are not dispatched and in case where a refund is made through electronic mode, therefund instructions have not been given to the clearing system, and demat credit within the 42-days time prescribed above,provided that the beneficiary particulars relating to such shareholder as given by the shareholder is valid at the time of theupload of the electronic transfer. The Company will provide adequate funds required for the cost of dispatch of refund orders/refund advice/ allotment advice to the Registrar to the Issue. Save and except refunds effected through the electronic modei.e. ECS, direct credit or RTGS, refunds will be made by cheques, pay orders or demand drafts drawn on the Refund Bank andpayable at par at places where applications are received. The bank charges, if any, for encashing such cheques, pay ordersor demand drafts at other centres will be payable by the shareholders.

Payment of Refund

In case of shareholder applying for physical shares, refunds will be made on the basis of the bank account details provided bythem in the Composite Application Form.

Mode of Making Refunds

The payment of refund, if any, would be done through various modes in the following order of preference

I. ECS - Payment of refund would be done through ECS for applicants having an account at any of the 15 centers whereclearing houses for ECS are managed by Reserve Bank of India, namely Ahmedabad, Bangalore, Bhubneshwar,Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Patna andThiruvananthapuram. This mode of payment of refunds would be subject to availability of complete bank acccount detailsincluding the nine digits Magnetic Ink Character Recognition (MICR) code as appearing on a cheque leaf, from thedepository. The payment of refund through ECS is mandatory for applicants having a bank account at any of the 15centers named hereinabove, except where applicant is otherwise disclosed as eligible to get refunds through direct creditor RTGS.

II. Direct Credit – Applicants having their bank account with the Refund Banker, i.e. HDFC Bank shall be eligible to receiverefunds, if any, through direct credit. The refund amount, if any, would be credited directly to the eligible applicant’s bankaccount with the Refund Banker.

III. RTGS – Applicants having a bank account at any of the 15 centers detailed above, and whose application amountexceeds Rs, 1 million, shall be eligible to exercise the option to receive refunds, if any, through RTGS. All applicantseligible to exercise this option shall mandatorily provide the IFSC code in the Composite Application Form. In the event offailure to provide the IFSC code in the Composite Application Form, the refund shall be made through the ECS or directcredit, if eligibility disclosed.

Please note that only applicants having a bank account at any of the 15 centres where clearing houses for ECS are managedby the RBI are eligible to receive refunds through the modes detailed in I, II and III hereinabove. For all the other applicants,including applicants who have not updated their bank particulars alongwith the nine digit MICR Code, the refund orders wouldbe dispatched “Under Certificate of Posting” for refund orders of value up to Rs. 1,500 and through Speed Post/RegisteredPost for refund orders of Rs. 1,500 and above.

LETTERS OF ALLOTMENT / SHARE CERTIFICATES

In case the Company issues Letters of Allotment, the corresponding Security Certificates will be kept ready within threemonths from the date of allotment thereof or such extended time as may be approved by the Company Law Board underSection 113 of the Companies Act, 1956 or other applicable provisions, if any. Allottees are requested to preserve suchLetters of Allotment, which would be exchanged later for the Security Certificates.


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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/ orpayment of interest/ dividend and other disbursement, if any, shall be credited to such accounts, details of which should befurnished in the CAF. Subject to the approval of the RBI, in case of nonresidents, who remit their application monies throughIndian Rupee draft purchased from abroad, refund and/ or payment of dividend/ interest and any other disbursement, shall becredited to such accounts (details of which should be furnished in the CAF) and will be made net of bank charges/ commissionin US Dollars, at the rate of exchange prevailing at such time. The Company will not be responsible for any loss on account ofexchange fluctuations for converting the Indian Rupee amount into US Dollars. The Equity Share certificate(s) will be sent byregistered 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 along with refund order will be dispatched to the registeredaddress of the first named applicant or respective beneficiary accounts will be credited within six weeks, from the date ofclosure of the subscription list. In case the Company issues Letters of Allotment, the relative Equity Share certificates will bedispatched within three months from the date of allotment. Allottees are requested to preserve such Letters of allotment (ifany) 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.

Undertakings by the Company

The Company undertakes as follows:

a. That the complaints received in respect of this issue shall be attended to expeditiously and satisfactorily;

b. That all steps will be taken for the completion of the necessary formalities for listing and commencement of trading at allthe stock exchanges where the Equity Shares are proposed to be listed within seven working days of finalisation of thebasis of allotment;

c. That the funds required for dispatch of refund orders or allotment advice or Share certificates by registered post or speedpost shall be made available to the Registrar to the issue;

d. Where refunds are made through electronic transfer of funds, suitable communication shall be sent to the applicant within42 days of closure of the issue giving details of the bank where refunds shall be credited along with the amount andexpected date of electronic credit of refund;

e. That the refund orders or allotment advice to the NRIs or FIIs shall be dispatched within the specified time; and

f. That no further issue of Equity Shares shall be made till the Equity shares issued through this Letter of offer are listed oruntil the application monies are refunded on account of non-listing, under-subscription etc.

Utilisation of Issue Proceeds

The Board of Directors of the Company certify that:

i. All monies received out of the fresh issue shall be transferred to a separate bank account other than the bank accountreferred to in sub-section (3) of Section 73 of the Act.

ii. Details of all monies utilised out of fresh issue referred to above shall be disclosed under an appropriate separate head inthe balance sheet of the Company indicating the purpose for which such monies have been utilised; and

iii. Details of all unutilised monies out of the fresh issue, if any, shall be disclosed under the appropriate separate head in thebalance sheet of the Company indicating the form in which such unutilised monies have been invested.

The Company shall not have recourse to the Rights Issue proceeds until approval for trading of Equity Shares from the stockexchange where listing is sought is received and the Company satisfies the Designated Stock Exchange with suitabledocumentary evidence that the minimum subscription of 90% has been received by the Company.

Pending utilisation of net proceeds of the fresh issue as specified under the section “Objects of the Issue”, the net proceedswill be invested by the Company in high quality interest bearing liquid instruments including but not limited to deposits withbanks for the necessary duration.

Restrictions on Foreign Ownership of Indian Securities

Foreign investment in Indian securities is regulated through the industrial policy of Govt. of India or the IndustrialPolicy and FEMA. While the Industrial Policy prescribes the limits and the conditions subject to which foreign investment

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can be made in different sectors of the Indian economy, FEMA regulates the precise manner in which such investmentmay be made. Under the Industrial Policy, unless specifically restricted, foreign investment is freely permitted in allsectors of Indian economy to any extent and without any prior approvals, but the foreign investor is required to followcertain prescribed procedures for making such investment. The government bodies responsible for granting foreigninvestment approvals are the Foreign Investment Promotion Board of the Govt. of India (FIPB) and the RBI.

The existing non-resident shareholders may apply for issue of additional shares and the company may allot the samesubject to the condition that the overall issue of shares to non-residents in the total paid up capital does not exceedthe sectoral cap. In other words, non-residents may subscribe for additional shares over and above shares offered onrights basis by the company and renounce the shares offered in full or part thereof in favour of a person named bythem.

By way of Circular No. 53 dated December 17, 2003, the RBI has permitted FIIs to subscribe to shares of an Indiancompany in a public issue without prior RBI approval, so long as the price of Equity shares to be issued is not lessthan the price at which Equity shares are issued to residents.

The transfer of Equity shares of NRIs, FIIs, Foreign Venture Capital Investors registered with SEBI and Multilateral andBilateral Development Financial institutions shall be subject to the conditions as may be prescribed by the Governmentof India or RBI while granting such approvals.


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I. DESCRIPTION OF EQUITY SHARES AND TERMS OF ARTICLESOF ASSOCIATION OF THE ISSUER COMPANY

3. Company not to purchase its own shares—Save as permitted by Section 77 of the Act, the fund of the Company shallnot be employed in the purchase of, or lent on the security of shares of the Company and the Company shall not give,directly or indirectly, any financial assistance whether by way of loan, guarantee, the provision of security or otherwise, forthe purpose of or in connection with any purchase of or subscription for shares in the Company or any Company of whichit may, for the time being , be a subsidiary.

3A. Notwithstanding anything contained in the preceding Article 3, but subject to provisions of the Companies Act, 1956 andall other applicable provisions of the Law, as may be in force from time to time Company may acquire, purchase, hold, re-sell, re-allot any of its own fully/partly paid-up shares and may make payment out of funds its disposal for and respect ofsuch acquisitions/purchase on such terms and conditions and at such time as the Board may at its discretion decide anddeem fit.

4. The business of the Company shall include within the scope of these presents or as may be permitted or authorised by theobjects clause of the Memorandum of Association.

5. The Authorised Share Capital of the Company shall be of. such sums and comprising of such number of shares asspecified in Clause V of Memorandum of Association of the Company.

6. Allotment of shares Subject to the provision of these Articles the shares shall be under the control of the Board who allotor otherwise dispose of the same to such persons on such terms and condition and at such times as the Board thinks fiteither at par or at premium and for such consideration as Board thinks fit. Provided that where at any time (Subsequent tothe first allotment of shares) it proposed to increase the subscribed capital of the Company by the issue of new shares,then, subject to an directions to the contrary which may be given by the Company in general meeting, the Board shallissue such shares in the manner set out in Section 81(1) of the Act, Option or right to call of shares shall not given to anyperson or persons except with the sanction of the Company in General Meeting.

7. Return of allotment—As regards all allotments made from time to time the Company s duly comply with Section 75 of theAct.

8. Restriction on allotment—If the Company shall offer any of its shares to the public for sub-scription—

(a) No allotment thereof shall be made unless the amount stated in the prospectus as the minimum subscription hasbeen subscribed and the sum payable on application thereof has been paid to and received by the Company but thisprovision shall no longer apply after the first allotment of shares offered to the public for subscription.

(b) The Company shall comply with the provision of sub-section (4) of Section 69 of the Act.

And if the Company shall propose to commence business on the footing of a statement in lieu of pros-pectus, theBoard shall not make any allotment of shares payable in cash less seven at least of the shares proposed to be issuedshall have been subscribed for on cash footing by seven members and Section 70 of the Act, shall have beencompiled with.

9. Commission and brokerage—The Company may exercise the powers of paying commissions conferred by Section 76of the Act, provided that the rate per cent or the amount of the commission paid or agreed to be paid shall be disclosed inthe manner required by the said Section and the commission shall not exceed 5 per cent of the price at which any shares,in respect where of the same is paid, are issued or 2.5 per cent of the price at which any debentures are issued (as thecase may be). Such commission may be satisfied by the payment of cash or the allotment of fully or partly paid shares orpartly in one way and partly in the other. The Company may also on any issue of shares or debentures pay such brokerageas may be lawful.

10. Redeemable Preference shares.—Subject to the provisions of these Articles, the Company shall have power to issuePreference shares carrying a right to redeem out of profits which otherwise be available for dividend or out of the proceedsof a fresh issue of shares made for the purpose of such redemp-tion or liable to be redeemed at the option of the Companyand the Board may, subject to the provisions of Section 80 of the Act, exercise such power in such manner as may beprovided in these Articles.

11. Shares at a discount.—With the previous authority of the Company in General Meeting and the sanction of the Court andupon otherwise complying with Section 79 of the Act, the Board may issue at dis-count shares of a class already issued.

12. Installments on share to be duly paid.—If, by the conditions of allotment of any share, the whole or part of the amountor issue price thereof shall be payable by installments, every such installments shall, when due, be paid to the Company

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by the person who for the time being shall be the member registered in respect of the share or by his executor oradministrator.

13. Liability of members registered Jointly in respect of shares. —Members who are registered jointly in respect of ashare shall be severally as well as jointly liable for the payment of all installments and calls due in respect of such shares.

14. Trusts not recognized—Save as herein otherwise provided, the Company shall be entitled to treat the member registeredin respect of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competentjurisdiction or as by statute required, he bound to recognise any equitable or other claim to or interest in such share on thepart of any other person.

15. Who may be registered.—Shares may be registered in the name of any person, Company or other body corporate, notmore than three persons shall be registered jointly as members in respect of any share.

CERTIFICATE

16. Subject to the provisions of the Companies (Issue of Shares Certificates) Rules, 1960, or any statutory modification or re-enactment thereof, share scripts shall be issued as follows:

(a) Certificates—The certificates of all shares and duplicate thereof, when necessary, shall be issued under the Seal ofthe Company which shall be affixed in the presence of (1) Two Directors or a Director and a person acting on behalfof another Director under a duly registered power of attorney or two persons acting as attorneys for two Directors asaforesaid, and (ii) the Secretary or some other person appointed by the Board for the purpose, all of whom shall signsuch share certificate, provided that, if the composition of the Board permits of it, at least one of the aforesaid twodirectors shall be person other than a Managing or whole time Director.

(b) Members right to certificate. Every member shall be entitled free of charge to one certificate for all the shares of eachclass registered in his name or, if the Board so approves to several certificates each for one or more of such sharesbut, in respect of each additional certificate, the Company shall be entitled to charge a fee of Rs. 2/- or such less sumas the Board may determine. Unless the conditions of issue of any shares otherwise provide, the Company shallwithin three months after the date of either allotment and on surrender to the Company of its letter making theallotment or of its fractional coupons of requi-site value (save in the case of issue against letters of acceptance or ofrenunciation or in case of issue of bonus shares) as the case may be complete and have ready for delivery thecertificate of such shares. In the case of transfer of shares the Company shall within two months of receipt of theapplication for registration of transfer of any of its shares issue the certificate of such shares or shall issue, withinfifteen days of such receipt, pucca transfer receipts autographically signed by a responsible official of the Com-panyand bearing an endorsement that the transfer, has been duly approved by the Board or that no such approval isnecessary. Every certificate of shares shall specify the name of the person in whose favour the certificate is issued,the shares to which it relates and the amount paid by thereon. Particulars of every certificate issued shall be enteredin the Register of members maintained in the form set out in the Act, or in a form as near thereto as circumstancesadmit, against the name of the person to whom it has been issued, indicating the date of issue. In respect of anyshare registered in the joint names of several members the Company shall not be bound to issue more than onecertificate and delivery of a certificate to one of several members registered jointly in respect thereof shall be sufficientdelivery to all such members.

(c ) As to issue of new certificate.—If any certificate of any share or shares be surrendered to the Com-pany for sub-division or consolidation or if any certificate be defaced, torn or old, decrepit, worn-out or where the cages in thereverse for recording transfers have been duly utilised, then upon surrender thereof to the Company the Board mayorder the same to be cancelled and may issue a new certificate in lieu thereof, and if any certificate be lost ordestroyed, then, upon proof thereof to the satisfaction of Board, and on such indemnity as the Board thinks fit beinggiven a new certificate in lieu thereof shall be given to the party entitled to the shares to which such lost or destroyedcertificate shall relate. In the case of loss the new certificate shall be given within six weeks from the receipt ofnotification of the loss, where a certificate has been issued, in place of a certificate which has been defaced, torn orold decrepit, worn-out, lost or destroyed, or where the cages in the reverse for recording transfers have been dulyutilised, it shall state on the face of it and against the stub or counterfoil that it is issued in lieu of share certificate oris a duplicate issued for the one so defaced, torn or old, decrepit, worn-out, loss or destroyed, or where the cages inthe reverse for recording transfers have been duly utilised, as the case may be, and in the case of a certificate issuedin the place of one which has been lost or destroyed the word “duplicate” shall be stamped or punched in bold lettersacross the face thereof. For every certificate issued under this Article except for a certificate issued in place of an old,decrepit, or worn-out certificate or in place of a certifi-cate the cages in the reverse whereof for recording transfershave been duly utilised there shall be paid to the Company the sum of Rs. 2/- or such smaller sum together with suchout of pocket expenses incurred by the Company in investigation evidence as the Board may determine provided that


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no fee shall be charged for issued new certificates when sub-division or consolidation of share certificate is made intolots of market unit.

(d) Particulars of new certificate to be entered in the Register.—Where a new share certificate has been issued inpursuance of the last preceding Article, particulars of every such certificate shall also be entered in Register ofRenewed and duplicate certificates indicating against the name of the person to whom the certificate in lieu of whichthe new certificate is issued and necessary changes indicated in the Register of Members by suitable cross-referencesin the “Remarks” column. All entries made in Register of mem-bers or in the Register or Renewed and duplicateCertificate, shall be authenticated by the Secretary or such other person as may be appointed by the Board purposesof sealing and signing the share certificate under paragraph (a) hereon.

CALLS

17. Calls. —The Board may, after obtaining the sanction in the general meeting, time to time, subject to the terms on whichany shares may have been issued, and subject to the provisions of Section 91 of the Act, make such calls from themembers in respect of all moneys unpaid on the shares held by them respectively, and not by the conditions of allotmentthereof made payable at fixed times, and each member shall pay the amount of every call so made on him to the personsand at the times and places appointed by the Meeting. A call may be made payable by installments and shall be deemedto have been made when the resolution of the Company in Genera] Meeting authorizing such call was passed.

18. When interest Call or installments payable—If the sum payable in respect of any call or installments be not paid on orbefore the day appointed for payment thereof, the member for the time being in respect of the share for which the call shallhave been made or the installment shall be due shall pay interest for the same at the rate of 12 per cent per annum fromthe day appointed for the payment thereof to the time of the actual payment or at such lower rate (if any) as the Board maydetermine.

19. Restriction on power to make call and notice.—No call shall exceed one-half of the nominal amount of a share, or bemade payable within one month after the last proceeding call was payable. Not less than fourteen day’s notice of any callgiven specifying the time and place of payment and to whom such call shall be paid.

20. Amount payable at fixed times or payable by installments as calls -If by the terms of issue of any share or otherwiseany amount is made payable at any fixed time or by installment at fixed times, whether on account of the amount of shareor by way of premium every such amount or installment shall be Payable as if it were a call duly made by the Board andof which due notice had been given, and all the provisions herein contained in respect of calls shall relate to such amountor installment accordingly.

21. Evidence in actions by company against members—On the trial or hearing of any action or suit brought by the companyagainst any member or his representative to recover any debt or money claimed to be due to the company in respect of hisshares, it shall be sufficient to prove that the name of the defendant is, or was, when the claims arose on the Register asa holder, or one of the members in respect of the share for which such claim is made, and that the amount claimed is notentered as paid in the books of the company and it shall not be necessary to prove the appointment of the Board whomade any call, nor that a quorum was present at the Board meeting at which any call was made nor that the meeting atwhich any call was made was duly convened, or constituted nor any other matter whatsoever, but the proof of the mattersaforesaid shall be conclusive evidence of the debt.

22. Payment of calls in advance—The Board may, if think fit, receive from any member willing to advance the same, all orany part of the money due upon the share held by him beyond the sums actually called for, and upon the money so paidor satisfied in advance, or so much thereof as from time to time exceeds the amount of the calls then made upon the sharein respect of which such advance has been made, the Company may pay interest at such rate not exceeding 6 percent perannum as the members paying such sum in advance and the Board agrees upon. Money so paid in excess of the amountof calls shall not rank for dividends or confer to a right to participate in profit. The Board may at any time repay the amountso advanced upon giving to such member not less than three month’s notice in writing.

23. Revocation of call.—A call may be revoked or postponed at the discretion of the Board subject to sanction in GeneralMeeting.

FORFEITURE AND LIEN

24. If call or installment not paid notice may be given—If any member fails to pay any call or installment on or before theday appointed for the payment of the same the Board may at any time thereafter during such time as the call for installmentremains unpaid, serve a notice on such member requiring him to pay the same, together with any interest that may haveaccrued and all expenses that may have been incurred by the company by reason of such non-payment.

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25. Form of Notice.—The notice shall name a day (not being less than fourteen days from the date of the notice) and a placeon and at which such call or installment and such interest and expenses as aforesaid are to be paid. The notice shall alsostate that in the event of non payment at or before the time and at the place appointed, the shares in respect of which suchcall was made or installment is payable will be liable to be forfeited.

26. If notice not complied with shares may be forfeited. —If the requisitions of any such notice as aforesaid be notcomplied with any shares in respect of which such notice has been given may, at any time thereafter, before payment ofsaid calls or installments, interest and expenses, due in respect thereof, be forfeited by a resolution of the Board to thateffect. Such forfeiture shall include all dividend declared in respect of the forfeited shares and not actually paid before theforfeiture.

27. Notice after forfeiture—When any share shall have been forfeited, notice of the resolution shall be given to the memberin whose name it stood immediately prior to the forfeiture and an entry of the forfeiture, with the date thereof, shallforthwith be made in the Register, but no forfeiture shall he in any manner invalidated by any omission or neglect to givesuch notice or to make such entry as aforesaid.

28. Forfeited share to become property of the company.—Any share so forfeited shall be deemed to be the property, andthe Board may sell, re-allot or otherwise dispose of the same in such manner as it think fit.

29. Power of annual forfeiture.—The Board may, at any time before any share so forfeited shall have been sold, re-allottedor otherwise disposed, of annual the forfeiture thereof upon such conditions, as it thinks fit.

30. Liability on forfeiture—A person whose share has been forfeited shall cease to be a member in respect of the forfeitedshares, but shall, notwithstanding, remain liable to pay, and shall forthwith pay to the company, all calls or installments,interest and expenses, owing upon or in respect of such shares at the time of forfeiture together with interest thereon, fromtime of forfeiture until payment at 12 per cent per annum and the Board may enforce the payment thereof or any partthereof without any deduction or allowance for the value of the shares at the time of forfeiture, but shall not be under anyobligation to do so.

31. Evidence of forfeiture—A duly verified declaration in writing that the declarant is a Director of the Company, and thatcertain shares in the Company have been duly forfeited on a date stated in the declaration shall be conclusive evidenceof the facts therein stand as against all persons claiming to be entitled to the shares and such declaration and the receiptof the company for the consideration, if any, given for the shares on the sale or disposition thereof shall constitute a goodtitle to such shares; and the person to whom any such shares is sold shall be registered as the member in respect of suchshares and shall not be bound to see to the application of the purchase money nor shall his title to such share be affectedby any irregularity or invalidity in the proceedings in reference to such forfeiture, sale or disposition.

32. Company’s lien on shares—The Company shall have a first and paramount lien upon every share not being fully paid upregistered in the name of each member (whether solely or jointly with others) and upon the proceeds of sale thereof formoneys called or payable at a fixed time in respect of such share whether the time for the payment thereof shall haveactually arrived or not and no equitable interest in and share shall be created except upon the footing and condition thatArticle 14 hereof is to have full effect. Such lien shall extend to all dividends from time to time declared in respect of suchshare. Unless otherwise agreed, the registration of a transfer of share shall operate as waiver of the company’s lien, ifany, on such shares, the Directors may at any time declare any shares wholly or in part to be exempt from the provisionsof this clause.

33. As to enforcing lien by sale.—For the purpose of enforcing such lien the Board may sell the share subject thereto insuch manner as it thinks fit, but no sale he made until such time for payment as. aforesaid shall have arrived and untilnotice in writing of the intention to sell shall have arrived and until notice in writing of the intention to sell shall have beenserved no such member, his executor or administrator or his committee, curator bonus or other legal representative as thecase may be and default shall have been. made by him or them in the payment of the moneys called or payable at a fixedtime in respect of such share for seven days after the date of such notice.

34. Application or proceeds of sale—The net proceeds of the sale shall be received by the company and applied in ortowards payment of such part of the amount in respect of which the lien exists as is presently payable, and the residue, ifany, shall (subject to a like lien for sums not presently payable as-existed upon the share before the sale) be paid toperson entitled to the share at the date of the sale.

35. Validity of sales in exercise of lien and other forfeiture.—Upon any sale after forfeiture or for enforcing a lien inpurported exercise of the powers therein before given the Board may appoint some person to execute an instrument oftransfer of the share sold and cause the purchaser’s name to be entered in the Register in respect of the share sold, andthe purchaser shall not be bound to see to the regularity of the proceedings nor to the application of the purchase money,and after his name has been entered in the Register in respect of such share and validity of the sale shall not be impeached


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by any person, and the remedy of any person aggrieved by the sale shall be damages only and against the Companyexclusively.

36. Board may issue new certificates.—Where any share under the powers in that behalf herein contained is sold by Boardand the certificate in respect thereof has not been delivered to the company by the former holder of such share, the Boardmay issue a new certificate for such share distinguishing it in such manner as it may think fit from the certificate not sodelivered up.

TRANSFER AND TRANSMISSION

37. Extension of, transfer etc.—Save as provided in Section 108 of the Act, no transfer of a share-shall be registered unlessa proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of thetransferee has been delivered to the Company together with the certificate or, if no such certificate is in existence, theletter of Allotment of the share. The instrument of transfer of any share specify the name, address and occupation (if any)of the transferee, and the transferor shall be deemed to remain the member in respect of such share until the name of thetransferee is entered in the Register in respect thereof. Each signature to such transfer shall be duly attested by thesignature of one credible witness who shall write his name and address.

38.—Applications for the registration of the transfer of share may be made ~either by the transferor or the transferee, providedthat, where such application is made by the transferor no registration shall in the case of party paid share be effectedunless the company gives notice of the application to the transferee in the manner prescribed by Section 110 of the Act,and subject to the provisions of these Articles the Company shall, unless objection is made by the transferee within twoweeks from the date of receipt of the notice, enter in the Register the name of the transferee in the same manner andsubject to the same conditions as if the application for registration of the transfer was made by the transferee.

39. Form of Transfer - The instrument of transfer shall be in the form prescribed by the Act or rules made there under andshall be in writing and all the provisions of Section 108 of the Act, and of any statutory modifications thereof for the timebeing shall by duly complied with in respect of all transfers of shares and registration thereof.

40. In what cases the Board may refuse to register transfer —Subject to the provisions of Section 111 of the Act, theBoard without assigning any reason for such refusal, may, within two months from the date on which the instrument of thetransfer was delivered to the company refuse to register the transfer of a share. Provided that registration of a transfershall not be refused on the ground of the transferor being, either alone or jointly with any other person or persons,indebted to the Company or on any account whatsoever except a lien.

41. No Transfer to minor etc.—No transfer shall be made to a minor or person of unsound mind.

42. Transfer to be left at office when to be retained __Every instrument of transfer shall be left at the office for registration,accompanied by the certificate of the share to be transferred or, if no such certificate is in existence, by the letter ofallotment, of the share and such other evidence as Board may require to prove the title the transferor or his right totransfer share. Every instrument of transfer, which shall be registered shall be retained by the company, but any instrumentof transfer which the Board may refuse to register shall be returned to the person depositing the same.

43. Notice of refusal to register transfer —If the Board refuses to register the transfer of any share the company shall,within two months from the date on which the instrument of transfer was lodged with the company, send to the transfereeand the transferor notice of the refusal.

44. Fee on registration of transfer —The Company shall not charge any fee for the registration of share in case of transfer.

45. As to survivorship—The executor or administrator of a deceased member (not being one of several members registeredjointly in respect of a share) shall be the only person recognised by the company as having any title to the share registeredin the name of such member, and, in case of the death of any one or more of the members registered jointly in respect ofany share. The survivor shall be the only person recognised by the Company as having any title to or interest in suchshare, but nothing herein contained shall be taken to release the estate of a deceased member from any liability on theshare held by him Jointly with any other person. Before recognising any executor or administrator the Board may requirehim to obtain a Grant of Probate or letters of administration or other legal representation, as the case may be, from acompetent court in India and having effect in Kanpur, provided nevertheless that in any case where the Board in itsabsolute discretion thinks fit it shall be lawful for the Board to dispense with the production of probate or letters ofadministration or such other legal representation upon such terms as to indemnity or otherwise as the Board; in itsabsolute discretion, may consider adequate.

46. As to transfer of shares of insane minor, deceased or bankrupt members —Any committee or guardian of a lunaticor minor member or any person becoming entitled to or to transfer a share in consequence of the death or bankruptcy orinsolvency of any member upon producing such evidence that sustained the character in respect of which proposes to act

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under this Article or his title as the Board thinks sufficient, may with, the consent of the Board (which the Board, shall notbe bound to give) be registered as a member, in respect of such share, or, any, subject to the regulations as to transferherein-before contained, transfer such share. This Article is here in after referred to as “The Transmission Article”.

47. Election under the Transmission Article______

(1) If the person so becoming entitled under the Transmission Article shall elect to be registered as member in respect ofthe share himself, he shall deliver or send to the company a notice in writing signed by him stating that he so elects.

(2) If the person aforesaid shall elect to transfer the share, he shall testify his election by executing an instrument oftransfer of the share.

(3) All the limitations, restrictions and provisions of these Articles relating to the right to transfer and 4 the registration ofinstruments of transfer of a share shall be applicable to any such notice or transfer as aforesaid as if the death,lunacy, bankruptcy or insolvency of the member had not occurred and the notice for transfer were a transfer signedby that member.

48. Right of persons entitled to shares under the Transmission Article—A person so becoming entitled under theTransmission Article to a share by reason of the death, lunacy, bankruptcy or insolvency of the member shall, subject tothe provisions of Article 80 and of Section 206 of the Act, be entitled to the same dividends and other advantages to whichhe would be entitled if he were the registered member in respect of the share.

Provided that the Board may at any time give notice requiring any such person to elect either to be registered himself orto transfer the share, and if the notice is not complied with within ninety days, the Board may thereafter withhold paymentof all dividends, bonuses or other moneys payable in respect of the share, until the requirements of the notice beencomplied with.

48-A Dematerialisation of Securities

1. Definitions

For the purpose of this Article

Beneficia1 Owner’ means a person or persons whose name is recorded in the Register maintained by a Depositoryunder he Depositories Act, 1996;

‘Bye-laws’ means bye-laws made by a Depository under Section 26 of the Depositories Act, 1996;

‘Depositories Act’ means the Depositories Act, 1996 and any statutory modification or re-enactment thereof for thetime being in force.

‘Depository’ means a company formed and registered under the Companies Act, 1956 (‘the Act’) and which hasbeen granted a certificate of registration to act as Depository under sub-section (IA) of Section 12 of the Securities &Exchange Board of India Act, 1992;

‘Record’ includes the records maintained in the form of books or stored in a computer or in such other form as maybe determined under the regulations made by SEBL;

‘Regulations’ means the regulations made by SEBI;

‘SEBI’ means the Securities & Exchange Board of India;

‘Security’ means such security as may be specified by SEBI from time to time.

2. Dematerialisation of Securities

Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialise its Securitiesand to offer securities in a dematerialised form pursuant to the provisions of the Depositories Act, 1996 or otherwise.

3. Option for Investors:

Every person subscribing to securities offered by the Company shall have the option to. receive the security certificatesor to hold the securities with a Depository. Such a person who is the beneficial owner of the securities can at any timeopt out of a Depository, if permitted by law, in respect of any security in the manner provided by the Depositories Actand the Company shall, in the manner and within the time prescribed, issue to the beneficial owner the requiredcertificates of securities.’

If a person opts to hold his security with a Depository, the Company shall intimate such depository the details ofallotment of security, and on receipt of such information, the Depository shall enter in its record the name of theallottee as the beneficial owner of the securities.


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4. Securities in depository mode to be in fungible form:

All securities held in the depository mode with a depository shall be dematerialised and be in, a fungible form. Tosuch securities held by a depository on behalf of a beneficial owner nothing contained in Sections 153, 153A, andl53B. l87A, 187B. 187C and 372A of the Act shall apply.

5. Right of Depositories and Beneficial Owners :

(a) Notwithstanding anything to the contrary contained in the Act or these Articles, a Depository shall be deemed tobe the registered owners for the purposes of effecting transfer of ownership of security on behalf of the beneficialowner.

(b) Save as otherwise provided in (a) above, the depository as the registered owner of the securities shall not haveother membership rights in respect of the securities held by it.

(c) Every person holding securities of the Company and whose name is entered as the beneficial owner in theregister maintained by a depository shall be deemed to be a member of the Company. The beneficial owner ofsecurities shall alone be entitled to all the rights and benefits and be~ subject to all the liabilities in respect of theSecurities held in the depository mode of which he is the beneficial owner.

6. Service of documents:

Notwithstanding anything in the Act or these Articles to the contrary, where securities are held in a depository mode, therecords of the beneficial owner may be, served by a depository on the Company by means of electronic mode or bydelivery of floppies or disks.

7. Transfer of Securities:

Nothing contained in Section 108 of the Act or these Articles shall apply to a transfer of securities effected by a transferorand transferee, both of whom are entered in the Register maintained under the Depositories Act, 1996 by a depository asbeneficial owners.

8. Distinctive numbers of securities held in the depository mode:

Nothing contained in the Actor these Articles regarding the necessity of having distinctive numbers for Securities issuedby the Company shall apply to securities held in the depository mode.

9. Register and index of beneficial owners:

The register and index of beneficial owners maintained by a depository under the Depositories Act, 1996 shall be deemedto be register and index of members and holders of securities for the purpose of these Articles and the Act.

10. Option to opt out in respect of any security: -

If a beneficial owner seeks to opt out for a Depository in respect of any security, the beneficial owner shall inform theDepository accordingly. The Depository shall, on receipt of the intimation as above, make appropriate entries in its recordand shall inform the Company accordingly.

The Company shall within thirty (30) days of the intimation from the Depository and on fulfillment of such conditions andon payment of such fees as may be specified by the regulations, issue the certificate of securities to the beneficial owneror the transferee as the case may be.

11. Intimation to Depository:

Notwithstanding anything contained in the Act or these Articles, where securities are dealt with in a Depository, theCompany shall intimate the details of allotment of securities thereof to the Depository1 immediately on allotment of suchsecurities.

12. Stamp duty on securities held in dematerialised form:

No stamp duty would be payable on shares held in deinaterialised form in any medium as may be permitted by lawincluding any form of electronic medium.

13. Applicability of the Depositories Act:

In case of transfer of shares, where the Company has not issued any certificate and where such share are being held inan electronic and fungible form in a Depository, the provisions of the Depositories act 1996 shall apply.

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INCREASE & REDUCTION OF CAPITAL

49. Power to increase capital – The Company in general meeting may from time to time increase the capital by the creationof new shares of such amount as may be deemed expedient.

50. On what conditions new shares may be issued – Subject to any special rights or privileges for the time being attachedto any shares in the capital of the Company then issued, the new shares may be issued upon such terms and conditions,and with such rights and privileges attached thereto as the general meeting resolving upon the creation thereof, shalldirect, and if no direction be given as the Board shall determine, and in particular such shares may be issued with apreferential or qualified right to dividends and in the distribution of assets of the Company.

51. Provision relating to the issue – Before the issue of any new shares, the Company in general meeting may makeprovisions as to the allotment and issue of the new shares, and in particular may determine to whom the same shall beoffered in the first instance and whether at par or at a premium, or subject, to the provisions of section 79 of the Act, at adiscount in default of any such provision, or so far as the same shall not extend, the new share may be issued in conformitywith the provision of Article 6.

52. How far new shares to rank with existing shares – Except so far as otherwise provided by the conditions of issue or bythese presents, any capital raised by the creation of new shares shall be considered part of then existing Capital of theCompany, and shall be subject to the provisions herein contained with reference to the payment of calls and instalments,transfer and transmission, forfeiture lien and otherwise

53. Inequality in number of new shares – If, owing to any inequality in the number of new shares to be issued, and thenumber of shares held by members entitled to have the offer of such new shares or any difficulty shall arise in theapportionment of such new shares or any of them amongst the member such difficulty shall, in the resolution creating theshares or by the Company in general meeting be determined by the Board.

54. Reduction of Capital etc: The Company may from time to time by Specialo Resolution , reduce its capital and anyCapital Redemption Reserve Fund or Share premium Account in any manner and with and subject to any incident authorisedand consent required by law.

ALTERATION OF CAPITAL

55. Power to sub-divided and consolidate shares: The Company in General Meeting may-

(a) Consolidate and divide all or any of its share capital into shares of large amount than its existing shares.

(b) Sub-divide its existing shares or any of them into shares of smaller amount then is fixed by the memorandum sohowever, that in the sub-division the proportion between the amount paid and amount, if any, unpaid on each reducedshare shall be the same as it was in the case of the share from which the reduced share is derived.

(c) Cancel any shares which at the date of the passing of the resolution, have not been taken or agreed to be taken byany person and amount diminish the amount of its share capital by the amount of the share so cancelled.

(d) Convert all or any of the fully paid shares into stock and reconvert that stock into fully paid shares of amountdenomination.

56. Sub-division into Preference and Equity. —The resolution where by any share is sub-divided may determine that asbetween the holders of the shares resulting from such sub-division, one or more of such shares shall have some preferenceor special advantage as regards dividend, capital, voting, or otherwise over or as compared with the others or other,subject, nevertheless, to the provisions of Sections 85, 87, 88 and 106 of the Act.

57. Surrender of shares. —Subject to the provisions of Sections 102 to 105 insive of the Act, the Board may accept from anymember the surrender on such terms and conditions as shall be agreed of all or any of his shares.

MODIFICATION OF RIGHTS

58. Power to modify Rights. —Whenever the capital (by reason of the issue of Preference Shares or otherwise) is dividedinto different classes of shares, all or any of the rights and privileges attached to each class may, subject to the provisionsof Sections 106 and 107 of the Act, the modified, commuted, effected, abrogated, varied or dealt with by agreementbetween the Company and any person purporting to contract on behalf of that class, provided, such agreement is (A)consented to in writing by the holders or at least three-fourth of the issued shares of that class or (B) sanctioned by aresolution passed at a separate general meeting of the holders of shares of that class in accordance with Section 106(1)(b)of the Act and all the provisions hereinafter contained as to general meetings shall, mutatis mutandis, apply to every suchmeeting except that the quorum thereof shall be not less than two persons holding or representing to proxy one-fifth of thenominal amount of the issued shares of the class. This Article is not by implication to curtail the power of modification


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which the Company would have in this Article were committed. The Company shall comply with the provisions of Section192 of the Act, as to forwarding a copy of any such agreement or resolution to the Registrar.

BORROWING POWERS

59. Power to borrow.—The Board may from time to time at its discretion, subject to the provisions of Sections 292, 293 and370 of the Act, raise or borrow from the Directors or from elsewhere and secure the payment of any sum or sums ofmoneys for the purposes of the Company, provided that the Board shall not without the sanction of the Company ingeneral meeting, borrow any sum which (apart from temporary loans obtained from the Company’s bankers in the ordinarycourse of business) will exceed the aggregate for the time being of the paid-up capital of the Company and the freereserves, that is to say, reserve not set aside for any specific purpose.

“In the event of any agreement between the members of the Company and any other body corpo-rate entered for thepurpose of securing finance, technical know-how or collaboration of any other benefit or compensation for the Companyentrusting control or composition of the Board of Directors of the Company with the other body corporate so that theCompany become subsidiary of the body corporate within the meaning of Section 4(1)(a) of the Companies Act, 1956, theBoard and Company shall during the course of continuance of such agreement abide by the terms of such agreement andgive due affect to the rights of a holding Company arising on account of subsidiary holding relationship between theCompany and such body corporate”.

60. Conditions on which money may be borrowed.—The Board may raise or secure the payment of such sum or sums insuch manner and upon such terms and conditions in all respect as it thinks fit and in particular, by the issue of bonds,perpetual or redeemable, debentures or debenture stock, or any mortgage, or other security on the undertaking of thewhole or any part of the property of the Company (both present and future) including its uncalled capital for time being.

61. Issue with discount etc. with special privileges.—Any debentures, debenture stock bonds or other securities may beissued at a discount, premium or otherwise and with any special privilege as t& redemption, surrender, drawings, allotmentsof shares, appointment of Directors and otherwise, Debentures, debenture-stock, bonds and other securities may bemade assignable free from any equities between the Com-pany and the person to whom the same may be issued.Provided that debentures with the right to the allotment of or conversion into shares shall not be issued except inconformitywith the provisions of Sec-tion 81(3) of the Act.

62. Instrument of transfer.—Save as provided in Section 108 of the Act, no transfer of debentures shall be registered unlessthe proper instrument of transfer duly stamped and executed by the transferor and transferee has been delivered to theCompany together with the certificates of the debentures.

63. Notice of refusal to register transfer.—The Board shall intimate the refusal of the transfer of Debentures to the transferorand the transferee within one month.

65. When annual general meeting to be held. —In addition to any other meetings, annual general meeting of the Companyshall be held within such intervals as specified in Section 166(1) of the Act, and subject to the provisions of Section 166(2)of the Act, at such times and places as may be determined by the Board. Each general meeting shall be called an “annualgeneral meeting” and shall be specified as such in the notice convening the meeting. Any other meeting of the Companyshall except in the case where an Extraordinary General Meeting is convened under the provisions of the next followingArticles, be called a “General Meeting”.

66. When other general meeting to be called.—The Board may, whenever it thinks fit, call a general meeting, and it shall,on the requisition of such number of members as hold, at the date of the deposit of the requisition not less than one-tenthof such of the paid up capital of the Company as at the date carried the right of voting in regard to the manner to beconsidered at the meeting, forthwith proceed to call an Extra-ordinary general Meeting, and in the case of such requisitionthe following provisions shall apply

(1) The requisition shall state the matters for the consideration of which the meeting is to be called, shall be signed by therequisitionists and shall be deposited at the office. The requisition may consist of several documents in like form eachsigned by the one or more requisitionists.

(2) Where one or more distinct matters are specified in the requisition, the requisition shall be valid oniy in respect ofthose matters in regard to which the requisition has been signed by the member or members hereinbefore specified.

(3) If the Board does not, within twenty-one days from the date of deposit of a valid requisition in regard~ to any matters,proceed duly to call a meeting for the consideration of these matters on a day not later than forty five days from thedate of deposit, the requisitionists or such of them as are enabled so to do by virtue of Section 169(6) (b) of the Actmay them selves call the meeting so called shall not be commenced after three months from the date of deposit.

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(4) Any meeting called under this Article by the requisitionists shall be called in the same manner as nearly as possibleas that in which meetings are to be called by the Board shall be held at the office.

(5) Where two or more persons hold any shares jointly a requisition or notice calling a meeting signed by one or some ofthem shall, for the purposes of this Article have to same force and effect as if it had been signed by all of them.

(6) Any reasonable expenses incurred by the requisitionists reason of the failure of the Board duly to call a meeting shallbe repaid to the requisitionists by the Company and any sum so repaid shall be retained by the Company out of anysums due or to be come due from the Company by way of fees or other remuneration for their services to such of theDirectors as are in default.

67. Circulation of member resolution—The Company shall comply with provisions of Section 188 .of the Act, as to givingnotice of resolutions and circulating statements on the requisition of members.

68. Notice of Meeting—Save as provided in sub-Section (2) of Section 171 of the Act, not less than twenty-one days’ noticeshall be given of every general meeting of the Company. Every notice of a meeting specify the place and the day and hourof the meeting and shall contain a statement of the business to be transacted thereat. Where any such business consistsof ‘special business’ as hereinafter defined there shall be annexed to the notice a statement complying with Section173(2) and (3) of the Act.

Notice of every meeting of the Company shall be given to every member of the Company, to Auditors of the Company andto any persons entitled to a share in consequence of the death or insolvency of a member in any manner hereinafterauthorised for giving of notices to such persons.

The accidental omission to give any such notice to or the non-receipt by any member or other person to whom it should begiven shall not invalidate proceedings of the meeting.

PROCEEDINGS AT GENERAL MEETINGS

69. Business meetings.—The ordinary business of an Annual General Meeting shall he to receive and consider the profitand Loss Account, the Balance Sheet and the Reports of the Directors and of the Auditors, appointment of Directors andAuditors and fix their remuneration and to declare dividends. All other business transacted at an Annual General Meetingand all business transacted at any other general meeting shall be deemed special business.

70. Quorum to be present when business commenced—No business shall be transacted at any general meeting unless aquorum of members is present at the time when the meeting proceeds to business save as here in otherwise provided fivemembers present in person shall be quorum.

71. Resolution to be passed by Company in general meeting. —Any act or resolution which, under the provisions of theseArticles or of the Act, is permitted or required be done or passed by the Company in general meeting shall be sufficientlyso done or passed if elected by an Ordinary Resolution as defined in Section 189(1) of the Act unless either the Act orthese Articles specify require such act to be done or resolution passed by a special Resolution as defined in Section189(2) of the Act.

72. Chairman of general meeting.—The Chairman of the Board shall be entitled to take the chair at every general meetingif there be no such Chairman, or if at any meeting he shall not be present within fifteen minutes after the time appointedfor holding such meeting, or is unwilling to act, the members present shall choose another Director as Chairman, and if noDirector be Present, or it all the Directors present decline to take the chair then the members present shall, on a show ofhands or on the poll if properly demanded elect one of their members being a member entitled to vote, to be Chairman.

73. Where if quorum not present meeting to be dissolved and when to be adjourned—If within half-an4iour from the timeappointed for the meeting a quorum be not present, the meeting, if convened upon such requisition as aforesaid, shall bedissolved but in any other case it shall stand adjourned to the same day in the next week, at the same time and place orto such other day and at such time and place as the Board may by notice appoint and if at such adjourned meeting aquorum be not present, those members who are present and not being less than two shall be quorum and may transactthe business for which the meeting was called.

74. How questions to be decided at meetings, Casting vote. —Every question submitted to a meeting shall be decided inthe first instance by a show of hands, and in the case of an equality of votes, both on a show of hands and on a poll, theChairman of the meeting shall have a casting vote in addition to the vote to which he may be entitled as a member.

75. What is to be evidence of the passing of a resolution where poll not demanded.—At any General Meeting, before oron the declaration of the result of the show of hands a p011 may be taken by the Chairman of meeting on his own motionand shall be ordered to be taken by him on demand made in that behalf by any member or members present in person orby proxy and holding shares in the Company, which confer the power to vote on the resolution, not being less than one-


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tenth of the total voting power, or on which an aggregate sum of not less than Rs. 50,000/- has been paid. A declarationby the Chairman that the resolution has not been carried, either unanimously, or by a particular majority and an entry tothat effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact,without proof of the number or proportion of the votes cast in favour or against the resolution.”

76. Poll

(1) If a poll be demanded as aforesaid it shall be taken forthwith on a question on adjourn-ment of election of a Chairman andin any other case in such a member and at such time, not being later than forty-eight hours from the time when thedemand was made, and at such place as the Chairman of meeting directors and subject as aforesaid, either at once orafter an interval of adjournment or otherwise, and the result of the poll shall be deemed to be the decision of the meetingon the resolution on which the poll was demanded.

(2) The demand of a poll may be withdrawn at any time.

(3) Where a poll is to be taken the Chairman of the meeting shall appoint two scrutineers, one at least of whom shall be amember (not being an officer or employee of the company) present at the meeting provided such a member is availableand willing to be appointed to scrutinize the votes given on the poll and to report to him thereon.

(4) On a poll a member entitled to more than one vote, or his proxy or other person entitled to vote for him, as the case maybe, need not if he votes, use all his votes or cast in the same way all the Votes he, uses.

(5) The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than thequestion on which a poll has been demanded.

77. Power to adjourn general meeting.—

(1) The Chairman of a general meeting may adjourn the same from time to time and from place to place, but no business shallbe transacted at any adjourned meeting other than the business left unfinished at the meeting from which adjournmenttook place.

(2) When a meeting is adjourned it shall not be necessary to give any notice of adjournment or of the business to he transactedat an adjourned meeting.

VOTES OF MEMBERS

78. (a) Save as hereinafter provided, on a show of hand every member present in person and being a member registered inrespect of ordinary Shares shall have one vote and every person present either as a General proxy (as defined inArticle 83) on behalf of a member registered in respect of Equity Shares, if he is not entitled to vote in his own right,or as a duly authorised representative of a body corporate, being a member registered in respect of Equity Shares,shall have one vote.

(b) Save as hereinafter provided, on a poll the voting rights of a member as registered in respect of Equity Shares, shallbe as specified in Section 87 of the Act.

(c) The Members registered in respect of the preference Shares shall not be entitled to vote at general meetings of thecompany except

(i) On any resolution placed before the company at a general meeting at the date of which dividend due or any partthereof remains unpaid in respect of an aggregate period of not less than two years preceding to date of commencementof such meeting and for this purpose the dividend shall be deemed to be due yearly on the 30th day of September ineach year in respect of the yearly period ending on the Preceding 31St day of March whether or not such dividendhas been declared by the Company, or,

(ii) On any resolution placed before the Company, which directly affects the rights attached to the preference Shares andfor the purpose any resolution for the winding up the Company or for the repayment or reduction of its share capitalshall be deemed to affect the right attached to such schemes.

Where the member registered in respect of any preference Shares has a right to vote on any resolution in accordance withthe provisions of this Article, his voting rights on a poll as such member shall, subject to any statutory provision for the timebeing, applicable, be in the same proportion as the capital Paid up on the preference shares bears to the total paid upEquity Share Capital of the Company for the time being as defined in Section 87(2) of the Act.

Provided that no company or body corporate shall vote by proxy so long as resolution of its Board of directors under theprovision of Section 187 of the Act, is in force and the representative named in such, resolution is present at the generalmeeting at which the vote by proxy is tendered.

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79. Where a Company or a body corporate (hereinafter called member Company) is a member of the Company a personduly appointed by resolution in accordance with the provisions of Section 187 of the Act, to represent such memberCompany at a meeting of the Company, shall not, by reason of such appointment, be deemed to be a proxy, and theproduction at the meeting of a copy of such resolution duly signed by one Director of such member Company andcertified by him as being a true copy of the resolution shall, on production at the meeting, he accepted by the Companyas sufficient evidence of the validity of his appointment. Such person shall be entitled to exercise the same rights andpowers, including the rights to vote by proxy on behalf of the member Company which he represents, as that MemberCompany could exercise.

80. Votes in respect of deceased, insane and insolvent members.—Any person entitled under the TransmissionArticle to transfer any shares may vote at any general meeting in respect thereof in the same manner as if he were themember registered in respect of such shares, provided that forty-eight hours at least before the time of holding themeeting, or adjourned meeting, as the case may be, at which he process to vote he shall satisfy, the Board his rightto transfer such shares, unless the Board shall have previously admitted his right to vote at such meeting in respectthereof. If any member be a lunatic, idiot of non compos mentis he may vote whether on a show of hands or at a pollby his Committee mentioned persons may give their votes by proxy.

81. Members registered jointly.—Where there are members registered jointly in respect of any share any one of suchperson may vote at any meeting either personally or by proxy in respect of such shares as if he were solely entitledthereto and if more than one such members be present at any meeting either personally or by proxy, that one of thesaid members present whose name stands first on the Register in respect of such share alone shall be entitled to votein respect thereof. Several executors or administrators of a deceased member in whose name any share is registeredshall for the purpose of this Article be deemed to be members registered jointly in respect thereof.

82. Proxines permitted - On a poll votes may be given either personally or by proxy, or, in the case of a body corporate,by a representative duly authorised as aforesaid.

83. The instrument appointing a proxy shall be in writing under the hand of the appointing of his attorney duly authorisedin writing or if such appointer is a body corporate be under its Common seal or the hand of its officer or attorneyauthorised. A proxy who is appointed for a specified meeting only shall be called a special proxy, any other proxyshall be called a General proxy.

A person may be appointed a proxy though he is not a member of the Company and every notice convening a meeting of theCompany shall state this and that a member entitled to attend and vote at the meeting is entitled to appoint a proxy toattend and vote instead of him.

84. Instrument appointing a proxy to be in writing—The instrument appointing a proxy and the power of Attorney or otherauthority (if any) under which it is signed, or a notarially certified copy of that power of authority, shall be deposited at theoffice not less than forty eight hours before the time for holding the meeting at which the person named in the instrumentpurports to vote in respect thereof and in default the instrument of proxy shall not be treated as valid.

85. When vote by proxy valid through authority revoked—A vote given in accordance with the terms of an instrumentappointing a proxy shall be valid notwithstanding the previous death or insanity of the principal, or revocation of theinstrument, or transfer of the share in respect of which the vote is given pro-vided no intimation in writing of the death,insanity, revocation or transfer of the share shall have been received by the Company at the office before the vote isgiven. Provided nevertheless that the Chairman of any meeting shall be entitled to require such evidence as he may in hisdiscretion think fit of the due execu-tion of an instrument of proxy and that the same has not been revoked.

86. Form of instrument appointing a special proxy.—Every instrument appointing a special proxy shall be retained by theCompany and shall, as nearly as circumstances will admit, be in any of the forms set out in Schedule IX of the Act.

87. Restrictions on voting—No members shall be entitled to exercise any voting either personally or by proxy at any meetingof the Company in respect of any shares registered in his name on which any calls or other sums presently payable by himhave not been paid or in regard to which the Company has, and has exercised right of lien.

88. (a) Objection, as to the admission or rejection of a vote, either on a show of hands, or poll made in due time, shall bereferred to the Chairman and determination made in good faith shall be final and conclusive.

(b) No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which thevote objected to is given or tendered and every vote not disallowed at such meeting, shall be valid for allpurpose.


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89. Number of Directors: —

(i) Subject to the provisions of Section 252 of the Companies Act, 1956 and until otherwise determined by specialresolution the number of the Directors of the company shall not be less than three nor more than twelve excludingnominee Directors.

(ii) If at any time the Company obtains any loans from any financial institution and/or any Central or State Governmentreferred to in this Articles as “The Corporation~~ or enters into underwriting arrangements with the Corporation andit is a term of such loan or of the underwriting arrangement that the Corporation shall have the right to appoint one ormore Director as nominee Director then subject to the terms & condi-tions of such loans, or underwriting arrangementsthe Corporation shall be entitled to appoint one or more Directors, as the case may be, to the Board of Directors of theCompany and to remove from office any Director, so appointed and to appoint another in his place if he resigns orotherwise vacates his office. Such Director or Directors shall not be liable to retire by rotation. Any such appointmentor removal shall be made in writing and shall be signed by the Corporation or by any person duly authorised by it andshall be served at the office of the Company, the Director or Directors in accordance with the provisions of thesearticles.

90. Proportion to retire by rotation. —Not less than two thirds of the total number of Directors shall be persons whoseperiod of office is liable for determination by retirement of Directors by rotation. Board of Directors of the Company shallbe entitled to appoint Director or Directors not liable to retire subject to limit prescribed under the Act.

91. First Directors: —The persons hereinafter named shall be the First Directors of the Company: —

1. Mahesh Swaroop Agarwal

2. Santosh Swaroop Agarwal

Company may appoint from time to time Managing Director or Manager subject to provisions of Sec-tion 197-A of the Act.

92. Power of Board to add to its number—The Board shall have power at time and from time to time appoint any person asa Director as an addition to the Board but so that the total number of Directors shall not at any time exceed the maximumnumber fixed by these Articles. Any Director so appointed shall hold office only until the next Annual General Meeting ofthe Company and shall then be eligible for r-e-election.

93. Share qualification of Directors.—The Director shall not be required to hold any qualification shares.

94. Director’s fees, remuneration & expenses — Each Director shall be entitled to receive out of the funds of the companyfor attending meeting of the Board or any of those adjourned, sitting fees for each meeting of the Board or Committeerespectively attended by him, a sum not exceeding such amount as prescribed under the Companies Act, 1956 from timeto time in addition to traveling expenses actually incurred or such smaller sum as may be decided by the Board.

95. Directors’ remuneration— The Directors shall be entitled to receive a commission (to be divided between them in suchmanner as they shall from time to time determine and in default of determination equally) of one per cent of the net profitsof the Company (computed in the manner referred to in sub-sec-tion (1) of Section 198 of the Act) in any financial year. Allother remuneration, if any, payable by the Company to each Director, whether, in respect of his services as a ManagingDirector or a Director in the ‘whole or part time employment of the Company shall be determined in accordance with andsubject to the provisions of these Articles and of the Act. The Directors shall be entitled to be paid their reasonable travel-ling and hotel and other expenses incurred in-consequence of their attending Board and Committee meetings, and otherwiseincurred in the execution of their duties as Directors.

96. Remuneration for extra service.—If any Director, being willing, shall be called upon to perform extra service or to makeany special exertions in going or residing away from Kanpur for any of the purposes of Company or in giving specialattention to the business of the Company or as a member of a Committee or the Board then, subject to Section 198, 309and 310 of the Act, the Board may remunerate the director so doing either by a fixed sum or by percentages of profits orotherwise and such remuneration to which he may be entitled.

97. Board may act not withstanding vacancy; —The continuing Directors may act notwithstanding any vacancy in theirbody but so that if the number falls below the minimum above fixed the Board shall not, except for the purpose of fillingvacancies, act so long as the number is below the minimum.

98. Directors not to hold office of profit under the Company or its subsidiary—No Director, no partner or relative of aDirector, no firm in which a Director or his relative is a partner no private com-pany of which a Director is a Director ormember and no Director or Manager of such a private company shall, without the previous consent of the companyaccorded by special resolution, hold any office or place of profit under the company or under any subsidiary of theCompany (unless the remuneration received from such subsidiary in respect of such office or place is paid over to the

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company or its holding company in so far as such remuneration is over and above the remuneration to which he is entitledas a Director, of such subsidiary) except that of a Managing Director, Secretaries and Treasurers, Manager, legal ortechnical adviser, banker or trustee for the holders of debentures.

99. When Director of the Company appointed Director of a Company in which the Company is interested either as amember or otherwise—A Director of the Company may be or become a Director of any other Company promoted bythis Company or in which it may be interested as a vendor, shareholder or otherwise, and no such Director shall beaccountable for any benefits received as a Director or member of such Company.

100. Conditions under which Directors may contract with the Company—Subject to the pro-visions of Section 297 of theAct, a Director neither shall be disqualified from contracting with the Company either as vendor, purchaser or otherwisefor goods, materials or service or for under-writing the subscription of any shares in or debentures of the Company norshall any such contract or arrangement entered into by or on behalf of the Company with a relative of such Director or afirm in which such Director or relative is a partner or with any other partner in such firm or with a private company ofwhich such Director is a member or Director be avoided nor shall any Director so contracting or being such member orso interested be liable to account to the Company for any profit realised by any such contract or arrangement by reasonof such Director holding office or of fiduciary relation there-by established.

101. Vacation of office of Director.—The office of a Director, shall ipso facto be vacated if at any time he commits any of theacts as set out in Section 283 of the Act.

102. Disclosure of a Director’s interest—Every Director who is in any way, whether directly or indirectly concerned orinterested in a contract or arrangement entered into or to be entered into by or on behalf of the Company shall disclosedthe nature of his concern or interest at a meeting of the Board as required by Section 299 of the Act. A general notice,renewable in the last month of each financial year of the company, that a Director or a member of any specified bodycorporate or is a member of any specified firm and is to be regarded as concerned or interested in any subsequentcontract or arrangement with that body corporate or firm shall be sufficient disclosure of concern or interest in relation toany contract or arrangement so made and after such general notice, it shall not be necessary to give special noticerelating to any particular contract or arrangement with such body corporate or firm provided such general notice is givenat a meeting of the Board or a Director concerned takes reasonable steps to secure that it is brought up and read at thefirst meeting of the Board after it is given.

103. Discussion and Voting by Director interested.—No Director shall, as a Director, take any part in the discussion of, orvote on any contract or arrangement in which he is in any way, whether directly or indirectly concerned or interested, norshall his presence count for the purpose of forming a quorum at the time of such discussion or vote. This prohibition shallnot apply to (a) any contract to indemnity against any loss which the Directors or any of them may suffer by reason ofbecoming or being sureties or a surety for the Company or (b) any contract or arrangement entered into or to be enteredinto by the Company with a public company or with private company which is a subsidiary of a public company, in whichthe interest of the Director consists solely in his being a director of such company and the holder of not more than theshares of such number of value therein as requested to qualify him for appointment as a Director thereof, he havingbeen nominated as such director by the Company.

104. Relation and retirement of Directors—At each Annual General Meeting of the Company one-third of such of theDirectors for the time being as are liable to retire by rotation, or if their number is not three or a multiple of three, then thenumber nearest to one third shall retire from office. An additional Director appointed by the Board under Article 92 hereofshall not be liable to retire by rotation with in the meaning of this Article.

105. Which Directors to retire.—The Directors to retire by rotation at every Annual General Meeting shall be those whohave been longest in office since their last appointment, but as between persons who became Directors on the sameday those to retire shall in default of or subject to any agreement among themselves, be determined by lot.

106. Appointment of Directors to be voted on individually—Save as permitted by Section 263 of the Act, every resolutionof a General meeting for the appointment of a Director shall relate to one named individual only.

107. Meeting to fill up vacancies.—The Company at the Annual General Meeting at which a Director retires by rotation inmanner aforesaid may fill up vacated office by appointing the retiring Director or other person thereto.

If the place of the retiring Director is not so filled up and the meeting has not expressly resolved not to fill the vacancy,the meeting shall stand adjourned till the same day in the next week at the same time and place or if that day is a publicholiday, till the next succeeding day which is not a public holiday, at the same time and place. If at the adjourned meetingalso, the place of the retiring Director is not filled up and that meeting also has not expressly resolved not to fill thevacancy, the retiring Director shall be deemed to have ~been re-appointed at the adjourned meeting unless


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a. at the meeting or at the previous meeting a resolution for re-appointment of such Director has been put to the voteand lost, or

b. the retiring Director has by notice in writing addressed to the Company or the Board expressed his unwillingnessto be re-appointed, or

c. he is not qualified for appointment, or

d. a resolution, whether special or ordinary is required for his appointment or re-appointment by virtue of any provisionsof the Act, or

e. the proviso of sub-section (2) of Section 263 of the Act is applicable to the case.

108. Power to remove Director by ordinary Resolution on Special notice.—The Company may, subject to the provisionsof’ Section 284 of the Act, by ordinary resolution of which special notice has been given, remove any Director before theexpiration of his period of office and may by ordinary resolution of which special notice has, been given appoint anotherperson in his stead, if the Director so removed was appointed by the Company in general meeting or by the Board underArticle 109. The person so appointed shall hold office until the date upto, which his predecessor would have held officeif he had not been so removed. If the vacancy created by the removal of a Director under the provisions of this Article isnot so filled by the meeting at which he is removed the Board may at any time thereafter fill such vacancy under theprovisions of Article 109.

109. Board may fill up casual vacancies—If any Director appointed by the Company in general meeting vacates office as aDirector before his term of office will expire in the normal course the resulting casual vacancy may be filled up by the Boardat a meeting of the Board but any person so appointed retain his office so long only as the vacating Director would haveretained the same if no vacancy had occurred, provided that the Board may not fill such a vacancy by appointing theretoany person who has been removed from his office of Director under Article 108.

110. When candidate for offices of Director must be given notice.—No person not being a retiring Director shall be eligiblefor appointment to the office of Director at any general meeting unless he or some member intending to propose him has,not less than fourteen days before the meeting, left at the office of the Company a notice in writing under his handsignifying his candidature for that office as the case may be along with a deposit of five hundred rupees which shall berefunded to such person or, as the case may be, to such member, if the person succeeds in getting elected as director.

ALTERNATE DIRECTORS

111. Power to appoint Alternate Director.—The Board may appoint any person to act, as alternate Director for a Directorduring the later’s absence for a period not less than three months from the state in which meetings of the Board areordinarily held and such appointment shall have effect and .such appointee, whilst he holds office as an alternate Director,shall be entitled to notice of meeting of the Board and to attend and vote there at accordingly, but he shall not require anyqualification and shall ipso facto vacate office if so and when the absent Director returns to the State in which meetings ofthe Board .are ordinarily held or the absent Director vacates office as a Director.

PROCEEDINGS OF DIRECTORS

112. Meetings of Directors—The Board shall meet together at least once in every three months for the conduct of businessand may adjourn and otherwise regulate its meetings. Notice in writing of every meeting of Board shall be given to everyDirector for the time being in India, and at his usual address in India to every other Director. Unless otherwise determinedfrom time to time at any time by the consent of all Directors for the time being in India, meetings of the Board shall takeplace at the office.

113. Director may summon meeting———A Director may, at any time, convene a meeting of the Board.

114. Chairman—-If at any meeting of the Board, the Chairman be not present within five minutes after the time appointed ofholding the same, the Directors shall choose some one of their members to be Chairman of such meeting.

115. Quorum—The quorum for a meeting of the Board shall be determined from time to time in. accordance with the provisionsof Section 287 of the Act. If quorum shall not be present within fifteen minutes from the time appointed for holding ameeting of the Board, it shall be adjourned until such date and time as the Chairman of the Board shall appoint whatevernumber of Director or Directors shall present in the adjourned Board Meeting that will form quorum.

116. Power of quorum—A Meeting of the Board of which a quorum be present shall be competent to exercise all or any of theauthorities, power and discretion by or under these Articles for the time being vested in or exercisable by the Board.

117. How questions to be decided. —Subject to the provisions of Sections 315, 3 72(4) and 386 of the Act, questions arisingat any meeting shall be decided by a majority of votes, and in case of an equality of votes, the Chairman shall have asecond or casting vote.

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118. Power to appoint Committees and to delegate.—The Board may, subject to the provision of the Act, from time to timeand at any time delegate any of its powers to a Committee consisting of such Directors as it thinks fit, and may from timeto time revoke such delegation. Any Committee so formed shall, in the exercise of the powers delegated, conform to anyregulations that may from time to time be imposed upon it by the Board

119. Proceedings of Committee.—The meetings and proceedings of any Committee consisting of two or more members shallbe governed by the provisions herein contained for regulating the meetings and proceedings of the Board so far as thesame are applicable thereto, and are not superseded by and regulations, made by the Board under the last precedingArticle.

120. When acts of a Director valid defective appointment, etc. - Acts done by a person as a Director shall be validnotwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect ordisqualification or had terminated by virtue of any provisions contained in the Act, or in these Articles. Provided thatnothing in this Article shall be deemed to give validity to acts done by a Director after his appointment has been shown tothe Company to be invalid or to have terminated.

121. Resolution without Board meeting - Save in those cases where a resolution is required by Section 262, 292, 297, 316,372(4) and 386 of the Act, to be passed at a meeting of the Board, a resolution shall be as valid and effectual if it had beenpassed at a meeting of the Board Committee of the Board, as the case may be, duly called and constituted, if a draftthereof in writing is circulated, together with the necessary papers, if any, to all the Directors, or to all the members of theCommittee of the Board, as the case may be, then in India (not being less in number than the quorum fixed for a meetingof the Board or Committee, as the case may be) and to all other Directors or members of the Committee at their usualaddress in India, and has been approved by such of them as are then in India or by a majority of such of them, as areentitled to vote on the resolution.

122. Minutes to be made.—(l) The Board shall cause Minutes to be duly entered in books provided for the purpose

(a) of the names of the Director present at each meeting of the Board and of any Committee of the Board and in thecase of each resolution passed at the meeting, the names of directors, if any, dissenting from or not concurring inthe resolution;

(b) of all orders made by the Board and Committee of the Board;

(c) of all appointments of Directors and other officers of the Company; and

(d) of all proceedings of general meetings of the Company and of meeting of the Board and Committees of the Board.

The Minutes of each meeting shall contain a fair and correct summary of the proceeding thereat Provided that nomatter need be included in any such Minutes, which the Chairman of the meeting, in his absolute discretion, is ofopinion;

(a) is or could reasonably be regarded as defamatory of any person;

(b) is irrelevant or immaterial to the proceedings; or

(c) is detrimental to the interest of the Company;

(2) Any such Minutes of any meeting of the Board of any Committee of the Board or of the Company is general meetingif purporting to be signed by the Chairman of such meeting or by the Chairman of the next succeeding meeting, shallbe evidence of the matters stated in such Minutes. The Minute Books of general meeting of the Company shall bekept at the office and shall be open to inspection by members on business days between the hours of 10.30 a.m. to12.30 p.m.

123. In the event Company acquires substantial shares in Company or advance money to a Company, Board may nominateany director of the Company on the Board of the investee or loanee Company.

124. The Company shall have power to enter into partnership with any individual, firm, body corporate or other association orpersons engaged in any business, which Company is authorised to do. In such event, any director may be authorised toact, as representative of the company.

POWER OF THE BOARD

125. General power of Company vested in the Board. —Subject to the provisions of the Act, the Board of Directors of theCompany shall be entitled to exercise all such powers, and to do all acts and things as the company is authorised toexercise and do; provided that the Board shall not exercise any power or do any act, or thing which is directed or required,whether by the Act, or any other Statute or by the Memorandum of the Company in general meeting. Provided further that


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in exercising any such power or doing any such thing, the Board shall be subject to the provisions in that behalf containedin the Act, or any other statute or in the Memorandum of the Company or in these Articles, or in any regulation notinconsistent therewith and duly made there under, including regulations made by the Company in general meeting, but noregulation made by the Company in general meetings shall invalidate any prior act of the Board which would have beenvalid if that regulation had not been made.

THE SEAL

131. Custody of seal.—The Board shall provide for the safe custody of Seal and the shall never be used except with theauthority given by the Board or a Committee of the Board authorised by the Board in that behalf and subject to theprovisions in Articles 16(a) hereof relating to issue of Share Certificates, every deed or other instruments to which the Sealof the Company is required to be affixed, shall be signed by any one of the Directors.

133. Reserves.—The Board may from time to time before recommending any dividend set apart any such portion of the profitsof the Company as it thinks fit as Reserves to meet contingencies or for the liquidation of any debentures, debts or otherliabilities of the Company for equalisation of dividends , for repairing, improving or maintaining any of the property of theCompany and for such other purposes of the Company as the Board in its absolute discretion thinks conducive to theinterests of the Company, and may, subject to the provisions of Section 372 of the Act, invest the several sums so setaside upon such investment (other than shares of the company ) as it may think fit, and from time to time deal with and varysuch investments and dispose of all or any part thereof for the benefit of the Company and may divide the Reserves intosuch special funds as it think fit, with full power to employ the Reserves or any part thereof in the Business of Company,and that without being found to keep separate from the other assets

134. Investment of money.—All moneys carried to the Reserves shall nevertheless remain and be profits of the Companyapplicable, subject to due provisions being made for actual loss or depreciation, for the payment of dividends and suchmoneys and all the other moneys of the Company not immediately required for the purposes of the Company, may subjectto the provisions of Sections 370 and 372 of the Act, be invested by the Board in or upon such investments or securities asit may select or may be used as working capital or may be kept at any Bank on deposit or otherwise as the Board may fromtime to time think proper.

CAPITALISATION OF RESERVES

135. Capitalization of reserves.—Any general meeting may resolve that any moneys investments or other assets forming partof the Company standing to the credit of the Reserves or any Capital Redemption Reserve Fund, or in the hands of theCompany and available for dividend or representing premiums received on the issue of shares and standing to the creditof the shares premium Account be capitalised and distributed amongst such of the members as would be entitled toreceive the same if distributed by way of dividend and in the same proportions on the footing that they become entitledthereto as capital and that all or any part of such capitalized fund be applied on behalf of such members in paying up in fullany unissued shares, debentures or debenture – stock of the Company which shall be distributed accordingly or in atowards payment of the uncalled liability on any issued shares, and that such distribution or payment shall be accepted bysuch members in full satisfaction of their interest standing to the credit of a share premium Account or a Capital RedemptionReserve fund may, for the purpose of this Article, only be applied in the paying up of unissued shares to be issued tomembers of the Company as fully paid bonus shares.

136. A general meeting may resolve that any surplus money arising from the realisation of any invest-ments representing thesame, or any other undistributed profits of the Company not subject to charge for income-tax, be distributed among themembers on the footing that they receive the same as dividend.

137. Fractional Certificate.—For the purpose of giving effect to any resolution under he two last preceding Articles and Article146 hereof the Board may settle any difficulty which may arise in regard to the distribution as it thinks expedient and inparticular may issue fractional certificates and may fix the value for distribution of any specific assets, and may determinethat cash payments shall be made to any members upon the footing of the value so fixed in order to adjust the rights of allparties and may vest such cash or specific assets in trustees upon such trusts for the persons entitled to the dividend orcapitalised fund as may seem expedient to the Board. Where requisite a proper contract shall be filed in accordance withSection 75 of the Act, and the Board may appoint any persons to sign such a contract on behalf of the persons entitled tothe dividend or capitalised fund, any such appointment shall be effective.

DIVIDENDS

138. How profits shall be divisible—Subject to the rights of members entitled to shares if any with preferential or Specialrights attached thereto, the profits of the company which it shall from time to time be determined to divide in respect of anyyear or other period shall be applied in the payment of a dividend on the ordinary shares of the Company but so that apartly paid up share shall only entitle the members in res-pect thereof such a proportion of the distribution upon a fully paid

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up share as the amount paid thereon bears to the nominal amount of such share and so that where capital is paid up inadvance of calls upon footing that the same shall carry interest, such capital shall not, whilst carrying interest, rank fordividend or confer a right to participate in profits.

139. Declaration of dividends.—The Company in general meeting may declare a dividend to be paid to the members accordingto their rights and interest in the profits and may, subject to the provisions of Sec-tion 207 of the Act, fix the time ofpayment.

140. Restrictions on amounts of dividends.—No large dividend shall be declared than is recom-mended by the Board, butthe Company in general meeting may declare a smaller dividend.

141. Dividend out of profits only.—No dividend shall be payable except out of the of the company or out of moneys providedby the Central or State Government for the payment of the dividend in pursuance of any guarantee given by such government.

142. What to be deemed net profit—The recommendation of the Board as to the rate of Dividend shall be conclusive.

143. Interim Dividends—The Board may, from time to time pay to the member such interim dividends as appear to the Boardto be justified by the profits of the Company.

144. Debts may be deducted—The Board may deduct from the dividend payable to any member all sums of money, if any,presently payable by him to the Company on account of calls or otherwise in relation to the shares of the Company.

145. Dividend and call together.—Any general meeting declaring a dividend may make a call on the members of such amountas the meeting fixed out so that the call on each member shall not exceed the dividend payable to him, and so that the callbe made payable at the same time as the dividend may, if so arranged between the company and the member, be set offagainst the call.

146. Dividend in specie. —Any general meeting declaring a dividend may resolve that be paid wholly or in part by the distributionof specific assets, and in particular of paid up share or debenture-stock of the company or paid up shares, debentures ordebenture-stock of any other company, or in any one or more of such ways.

147. Effect of transfer. —A transfer of shares shall not pass the rights to any dividend declared there on before the registrationof the transfer by the company.

148. To whom dividends payable. —No dividend shall be paid in respect of any shares except to the member registered inrespect of such shares or to his orders or to his Bankers but nothing contained in this Article shall be deemed to require theBankers of a member to make a separate application to the Company for the payment of the dividend.

149. Members registered jointly. —Any one of several persons who are members registered jointly in respect of any sharemay give effectual receipts for all dividends, bonuses and other payment in respect of such shares.

150. Notice of dividends.—Notice of any dividend whether interim or otherwise, shall be given to the persons entitled to sharetherein in the manner hereinafter provided.

151. Payment by post—Unless otherwise directed in accordance with Section 206 of the dividend, interest or other moneyspayable in cash in respect of a share may be paid by cheque or warrant sent through the post to the registered address ofthe member or in the case of members registered jointly to the registered address of the first named in the register or tosuch person such address as the member or members, as the case may be, may direct, and every cheque or warrant sosent shall be made payable to the order of the person to whom it is sent.

152. Unclaimed dividends. —No unclaimed or unpaid dividend shall be forfeited by the Board and Company shall comply withall the provisions of Section 205-A of the Act in respect of unclaimed dividend.


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J LIST OF MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

The following contracts (not being contracts entered into in the ordinary course of business carried on by the Company), whichare or may be deemed material have been entered or are to be entered into by the Company. Copies of these contracts andalso the documents referred to hereunder will be delivered to BSE (Designated Stock Exchange). These documents may beinspected at the Registered Office of the Company at “D-19-20, Panki Industrial Area, Kanpur - 208 022 from 11:00 am to 2:00pm on all working days, from the date of this Letter of offer until the date of closure of the Subscription List.

Material Contracts

1. Memorandum of Understanding entered into between the Company and Vivro Financial Services Private Limited, LeadManager to the Issue dated 28th February 2007.

2. Tripartite agreement entered between the Company, Central Depository Services (India) Limited and Skyline FinancialServices Pvt. Ltd. dated 30th November 2001

3. Tripartite agreement entered between the Company, National Security Depository Limited and Skyline Financial ServicesPvt. Ltd. dated 30th November 2001.

4. Copy of Memorandum of Understanding dated 26th December, 2005 between the Company and Share Transfer Agent i.e.Skyline Financial Services Private Limited.

5. Copy of Memorandum of Understanding dated 1st March, 2007 between the Company and Skyline Financial ServicesPrivate Limited, Registrar to the Rights Issue for the proposed rights issue.

6. Special Resolutions containing the terms and conditions for appointment of Mr. M.S. Agarwal as Executive Chairman onfresh terms and conditions with effect from 1st day of September, 2005 and appointment of Mr. Manoj Agarwal as ManagingDirector on fresh terms and conditions with effect from 1st day of September 2005 passed by the members at the AnnualGeneral Meeting held on 16th September 2005.

7. Special Resolutions containing the terms and conditions for appointment of Mr. A.K. Bhatnagar as Director (Operations)with effect from 01/01/2005 on terms and conditions as set out in the Special Resolution passed by the members at theAnnual General Meeting held on 16th September 2005

8. Memorandum of Understandings with M/s. International Electron Devices Ltd., for the purchase of plot no. A-1 & A-2,Panki Industrial Area, Udyognagar, Kanpur dated 5th January 2007 and 26th February 2007.

Material Documents for Inspection

1. Memorandum and Articles of Association of the Company.

2. SIA Acknowledgement No. IL No.112/86 dated 31/12/1986 for COB License issued for manufacturing of HDPE/PP WovenSacks on circular looms falling under Scheduled Industry No.12 (1).

3. Resolution passed by the Members at the Extra Ordinary General Meeting held on 27th January 2007 authorizing theproposed rights Issue.

4. Consents from Directors, Auditors, Bankers to the Company, Banker to the Issue, Lead Manager to the Issue, Registrarto the Issue and Legal Advisor to the Issue and Company Secretary.

5. Annul reports of the Company for the last five years.

6. Auditors’ Report of the Company dated 10th July 2007 giving the financial information given in the Letter of Offer.

7. Tax Consultant’s Certificate dated 10th July 2007 regarding tax benefits.

8. Letter of intent for the subscription to rights entitlement and unsubscribed portion, received from the Promoters.

9. In-principle approvals dated 5th April 2007 from BSE for listing of the securities offered in this issue.

10. Insurance Certificate from National Insurance Company Limited with respect to the insured assets of the company.

11. SBI Sanction Letter No. MCG/GBB-K/2006-07/411 dated 10th February, 2007 and agreement entered on 1st March, 2007.

12. Copy of SEBI Observation Letter No. 5/1424/07-NRO/2007/2761 dated 27th June 2007.

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K. DECLARATION

This is to confirm that all the relevant provisions of the Act, and the guidelines issued by the Government have been compliedwith and no statement made in this Letter of Offer is contrary to the provisions of the Act, and rules made there under. All thelegal requirements connected with this said offer as also the guidelines, instructions etc., issued by SEBI, the Government andany other Competent Authority in this behalf have been duly complied with.

Undertaking

We, the Directors of Kanpur Plastipack Limited, declare and confirm that no information/material likely to have a bearing on thedecision of the investor in respect of the equity shares offered in terms of this Letter of offer have been suppressed/ withheldand/or incorporated in a manner that would amount to misstatement /misrepresentation and in the event of it transpiring at anypoint of time till allotment/refund, as the case may be, that any information / material has been suppressed/ withheld and /oramounts to misstatement/ misrepresentation, we undertake to refund the entire application moneys to all the subscriberswithin seven days thereafter, without prejudice to the provisions of section 63 of the Act.

Since the date of last financial statement disclosed in this Letter of Offer, there have been no circumstances that materiallyand adversely affect or are likely to affect the profitability of the company or the value of its assets or its ability to pay off itsliabilities within a period of next twelve months.

All the Directors of the Company including Mr. Jitendra Awasthi in his capacity as Company Secretary & Compliance Officer ofthe Company certify that all disclosures made in the Letter of Offer are true and correct.

SIGNED BY ALL THE DIRECTORS OF KANPUR PLASTIPACK LIMITED

Mr. M S Agarwal Mrs. Santosh Agarwal

Mr. Manoj Agarwal Mr. A. K. Bhatnagar*

Mr. P. K. Goenka* Mr. S.M. Jain*

Mr. B. L. Manchanda* Mr. J. N. Gupta*

Mr. G. N. Mathur*

* Through their Constituted Attorney Mr. Shashi Garg

Signed by Mr. Jitendra AwasthiCompany Secretary & Compliance Officer

Place: KanpurDate: July 31, 2007


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