Private & Confidential Whitefield Paper Mills Limited SEZ-based Paper Mill Project July 2010

Private & Confidential

Whitefield Paper Mills Limited SEZ-based Paper Mill Project

July 2010


The Project Concept

• A Greenfield venture to set-up a manufacturing facility with new imported machinery to produce 210,000 TPA of Writing and Printing Paper from a mix of eco-labeled virgin pulp and recycled waste paper through eco-friendly processes. Support facilities include a De-inking Plant, a 80-MW captive thermal power generating station and a zero-discharge Effluent Treatment Plant.

• The facility will be installed in coastal Andhra Pradesh, India, in a government approved sector-specific Special Economic Zone (SEZ), specially built by the Company for the purpose, which entitles the Project to a host of tax, infrastructural and other benefits from the governments.

• The Project is a bold but humble attempt by a first-generation entrepreneur to globally integrate the Indian paper industry, which is recognized as a need of the hour by the India Paper Manufacturers Association (IPMA). When on stream this will be the single largest Paper machine in any paper Mill in India, producing consistent quality of paper meeting international standards. Products will be exported to South Asean, ASEAN, Middle East and African countries.


Promoters

• Mr T Srinivasa Rao – He has worked with a prominent South Indian industrial business group, as

Director- Business Development– He has a more than a decade of experience in Infrastructure and Power

sector projects.

• Mr P Ramesh Babu– He is the Chairman and MD of SMS Pharmaceuticals Ltd. situated at

Hyderabad, Andhra Pradesh (A.P). – He is a Technocrat having started his career in 1984. – Till date he has turned around 5 sick units through his technical and business

skills. – He is a dynamic leader and played a pivotal role in the development of

Andhra Pradesh Pharma Industry.

• Mr Surendra Babu– He is in the business of civil engineering, having successfully executed

government-sponsored Infrastructure and Hydro Power Projects.– He has done his graduation in engineering and management and has a vast

experience as a Chartered Engineer.


Board of Directors

• Mr. T. Srinivasa Rao, Promoter Chairman

• Mrs. T.L.S. Geetha Kameswari, Executive Director, is a dynamic entrepreneur having a decade of experience in Business Management, Public Relations and Co-ordination. She has widely traveled across the globe and has developed good overseas contacts.

• Mr. Saleem Ahmed, Independent Director, is a Post-Graduate in Economics from Bangalore University. He is active in business as Director of KK Group of Companies, one of the leading manufacturers of Polymers & Plastics. He is also involved in Solid Waste management and Real Estate businesses in Bangalore. Mr. Ahmed is also actively involved in social and environmental issues such as use of waste plastics in laying roads, a concept patented by their group and appreciated by the United Nations.

• Mr. Surendra A. Dave, Independent Director, was the Chairman of Unit Trust of India, at the time, the largest Mutual Fund in India. He is the founder chairman of Securities and Exchange Board of India, the Indian counter-part of Securities and Exchange Commission in the US. Presently, he is part of various committees formed to advise the government on economic and financial issues in India. He will be advising the Company on corporate governance aspects.


Management

• The Company is backed by a strong professional team of senior personnel with cumulative experience of more than 200 man-years of experience in key-management positions with large paper companies in India and abroad:

• Mr. V. Chakrapani - Director is a Chemical Engineer and has got over 40 years of experience in India & abroad in the paper industry. In the paper industry he logged experience at various levels right from the shopfloor and has thorough understanding of the working of paper mills. He is a veteran of installation, maintenance and modernization of paper mills of all makes.

• Mr. P. Narayana Rao (VP - Finance and Company Secretary) is an experienced finance professional in the Paper Industry and has gained a considerable insights into the commercial aspects industry in the last 40 years of his association with the Indian paper industry. He is also a legal professional by qualification and officiates as the Company Secretary.


Management (contd…)

• Dr. R. Sambasiva Rao - Director, a Ph D, has more than 30 years of managerial experience in establishing and developing major industries. His Responsibilities include liaison and co-ordination with Government Bodies. Dr. Rao has been instrumental in the process of acquiring the land and also coordinating with all the government agencies in obtaining the necessary approvals.

• Mr. K.S.P. Rao - Director, an M Sc (Chemistry) and MBA (International Trade), has over two decades of experience in Forestry, Pulp & Paper Industry. His main stay has been in the areas of Quality Management and marketing. Mr. Rao has deep understanding of global market dynamics of the industry. In his last assignment as the Head of Export Marketing & Sales of a major paper house in India, he has been instrumental in developing export markets in regions, including Middle East, SAARC Region, South East Asia, Africa, Australia & New Zealand and UK.

• Mr. B. Subramanian (VP – Engineering), is a qualified Mechanical Engineer and Pulp & Paper Technologist having more then 32 years of experience in the engineering & planning areas including automation. He is an ISO Auditor from DCS International, London.


Strategic Advisors

• So as to continually get updated and advised on the industry trends, the Company has retained outside consultants.

• Mr VGK Murthy, Advisor (Paper), a chemical engineer and graduate of

Institute of Paper Technology, has 37 years of experience in the paper Industry, more than half of which is logged, at a senior level, at one of the largest plants in Indonesia, the industry leader in Asia. He is presently running a consultancy firm specially for Paper Industry and is rendering a wide range of services to large players in the market. His services have also been retained to optimise the costs-benefits during the Project implementation stages as well.

• Mr Kamala Kumar, Advisor (Power), is a retired Chief Engineer, Generation, APSEB. He has wide exposure in coal based stations in operation, maintenance and erection. He was also associated with TATA Consulting Engineers and EPDC (Owners Engineers) for Techno-Commercial aspects of a 2X260MW Coal-fired Thermal Power Station in Andhra Pradesh.


Industry Overview

• Over the centuries, paper has been one of the "unsung" drivers of world development.

• Paper remains an essential ingredient of homes, factories, offices and schools even with the advent of the modern world of electronic communication and paperless offices. In fact, far from ushering in the paperless office, the advent of computers and other equipment has fueled paper demand. By one estimate, personal computers alone account for 115 billion sheets of paper per year worldwide.

• Although the paper industry is cyclical, the long term trend is ever upwards as the demand continues to grow. Unlike consumption trends in other mature commodity sectors, paper consumption shows little sign of decoupling from economic growth.

• In the developing world, paper consumption is growing quite rapidly - by more than 7% annually between 1980 and 1994 - but average per capita consumption remains low, at about 15 kilograms per year, well below the 30 to 40 kilograms of paper per capita per year considered the minimum level to meet basic needs for communication and literacy.

• Paper consumption is projected to grow by about 50% by 2010 from its level in 2000. The biggest increase - over 80% - is expected to occur in developing countries in Asia, where demand is being driven by rapid growth of both incomes and population.


SEZ Advantages

• Treated as foreign territory for trade operations involving substantial duty and tariff benefits

• No license required to import goods• Exemption from customs duty on import of capital goods, raw

materials, consumables, spares, etc.• Exemption from Central Excise duty on procurement of capital

goods, raw materials, consumables spares etc. from domestic market

• Reimbursement of Central Sales Tax if paid on domestic purchases

• Income-tax exemption for 15 years.• No service-tax on services rendered and received• No dividend payment tax• Supplies from Domestic Tariff Area (DTA) to SEZ treated as

exports


Location Advantages

• Project is situated in Bayyavarm in WG Dist of AP.

• Proximity to State & National Highways, Railway Station, Port and Airport

– Major Town & Railway Station: Kovvur 25 Km

– Ports: Kakinada 110 Kms and Vizag 250 Km

– Airport: Rajahmundry 40 Km, Vizag 250 Km and Vijayawada 150 Km.

• 132 KV power available within 5 Km to the site to facilitate construction and plant start-up

• Availability of water from River Godavari within 5 Km

• Located near Coal Mines

• Proximity to natural gas pipeline – 8 Km away for future link

• Availability of trained manpower


Project Cost

Particulars Amount

Land & Site Development 44.25

Building & Civil Works 154.28

Plant & Machinery 1094.87

Engineering Services 29.60

Miscellaneous Fixed Assets 55.12

Preliminary & Preoperative Exp. 38.36

Interest During Construction 77.78

Working Capital Margin 36.99

Contingency 68.91

TOTAL 1600.16

INR in Crores


Financing Options

• The project cost is proposed to be met through Equity of about the INR 160.16 Crores and FC Debt of about INR 1440 Crores.

• Equity:Promoters would be contributing about INR 160.16 Crores by way of Equity..

• Debt:External Commercial Borrowings (ECB)/ FC Loan of USD 300 million is being tied up for the entire amount of Debt..


Project Support

• Poyry Consulting Group, SingaporeCarried out the project techno-economic feasibilty study and submitted viability report

• SPB-PCAssist Poyry with focus on domestic expertise on mill site, cost levels, etc.

• SBI Capital Market Pvt. Ltd., India Appraised the project as

financially viable

• Tata Consulting EngineersProject Consultancy including 'Detailed Engineering & Project Management‘

• Ramky Environmental ConsultantsEnvironmental Consultancy

• Quest Profin Advisor Pvt Ltd, Mumbai, IndiaOverall co-ordination of financial, legal and commercial matters

The Company has appointed the consultants as noted below for implementing the project:


Raw Materials

• The key Raw Materials for Paper Plant are Wood Pulp and Waste Paper. Coal is used in the process of generating steam in the Power Plant.

• Virgin Wood Pulp and Recycled Waste Paper– The Company has signed agreement with Elof Hansson AB, Sweden

for supply of pulp and waste papers. – The Company is planning to procure waste paper from USA and

Europe. Domestic waste paper recovery will also be developed to supplement imports.

• Coal– The Company has applied to Ministry of Coal, GoI for coal allocation.

The Company has tied-up with an international trading company for sourcing coal from Indonesia.


Marketing & Selling Arrangement

PAPER

• Export Market– The Company has entered into an Agreement with Elof-Hansson AB, Sweden for

selling 60% of the finished production through the latter’s international network.

• Deemed Exports– The Company plans to sell 20% of its finished products as deemed exports, which will

comprise of:• Users consuming paper located in notified SEZ,• 100% Export Oriented Units, and• Buyers paying in foreign currency.

– The Company will directly sell to publishing houses, stationary product units in SEZs etc in India through in-house expertise and contracts.

• Domestic Market– The Company plans to sell 20% of its finished products in domestic market through 5-

10 dealers in selected centers.

SURPLUS POWER

• The Company has entered into a Power Purchase Agreement with Power Trading Corporation for sale of upto 40 MW for 25 years.


Current Status

• Of the total 500 acres of land, 271.35 acres land is paid for and possession obtained

• Site leveling and filling work on 203.35 acres completed. Site office, Workmen Mess/Hostels built; additional facilities under construction.

• 12 acres land acquired for constructing Approach Road for heavy vehicular movement, temporary road constructed and is in use.

• Two full fledged offices in Kovvur established and 70 people already employed.

• Temporary power connection taken from nearby APTRANSCO sub-station for construction work.

• Permission received for drawing 26 MGD of water from Godavari River and laying of the pipeline for pumping of the water from Godavari River is completed.

• Natural Water Reservoir built for facilitating construction.


Financial Projections

2012 2013 2014 2015 2016

Income

Sales – Paper 791.59 924.95 1008.41 1011.85 10011.85

Sales – Power 109.18 117.29 119.83 119.83 119.83

Total (A) 900.76 1042.24 1128.25 1131.69 1131.69

Expenditure

Cost of Goods Sold 496.15 567.53 608.67 611.48 612.58

Selling, Adm & Other Exp

31.56 36.48 39.49 39.61 39.61

Total (B) 527.68 604.00 648.16 651.09 652.18

PBDIT (A-B) 373.08 438.28 480.08 480.60 479.50

PBDIT Margin 41.42% 42.05% 42.55% 42.47% 42.37%

PBT 225.22 295.76 346.72 357.37 366.43

Deferred Tax 46.71 36.28 27.29 19.67 13.16

PAT 178.51 259.53 319.43 337.71 353.27

PAT Margin 19.82% 24.90% 28.31% 29.84% 31.22%

Amount in Crores, Financial Year ending March 31


Liaison Office: Registered office :230, Bhavya’s Varun Villa’s Apartments, 15-1-23,Bapuji Nagar,Plot No. 6-3-1099 / 1,2,3 Kovvur – 534350,Rajbhavan Road, Somajiguda, West Godavri DistrictHYDERABAD 500 082. India Phone : (08813) 233085Phone:(040) 6552 9800, Fax : (08813) 233080Fax: (040) 2332 2665

Documents

Private & Confidential Whitefield Paper Mills Limited SEZ-based Paper Mill Project July 2010