PRESS RELEASE

July 21, 2002 Mumbai, India

LANDMARK CORPORATE RESTRUCTURING OF HINDALCO AND INDO GULF TO CREATE NON FERROUS METAL POWERHOUSE AND AN INDIAN CORPORATE GIANT
Indo Gulf to merge copper business with Hindalco Fertiliser business of Indo Gulf to be demerged into a separate company to be named Indo Gulf Fertilisers 1 equity share of Hindalco for 12 equity shares of Indo Gulf and 1 equity shares of the fertiliser company for 5 equity shares of Indo Gulf to be issued to Indo Gulf shareholders Attractively priced open offer for Indal shares at Rs. 120 by Hindalco at premium of 36% to 26 Week Average (SEBI Statutory Price) with aim to attain 100% shareholding in INDAL EPS accretion of approximately 7-10% in the short term and 15-20% in the medium term for Hindalco shareholders Premium over market price for Indo Gulf shareholders Transaction expected to be value enhancing for shareholders of all three companies
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The Boards of Directors of Hindalco Industries Limited (Hindalco) and Indo Gulf Corporation Limited (IGCL), in their respective meetings today have approved the restructuring proposal on the consolidation of the copper business of IGCL with Hindalco and the demerger of its urea fertiliser business as an independent entity. The scheme of arrangement, valuation report and share entitlement ratio has also met with Boards approval. This landmark restructuring, valued at around Rs. 7,000 crores (US$ 1.4 billion), is one of the largest of its kind in India. Mr. Kumar Mangalam Birla, Aditya Birla Group Chairman, said This restructuring exercise is an important step in our ongoing endeavours to create a business that is both focussed and has the financial capability to become a global player. The non-ferrous metal sector is integral to our future growth plans. We would like to bring in maximum focus and harness all possible synergies to make it truly world class. Putting this in context of a similar exercise by the group for its cement businesses four years ago in Grasim and Indian Rayon, Mr. Birla said, we created significant value for shareholders together with market out-performance for both those group companies in a similar restructuring exercise and expect to do the same through this transaction. The Restructuring Scheme Under the scheme, Hindalco will issue to IGCL shareholders 1 equity share of Hindalco for every 12 equity shares of IGCL held. IGCL shareholders will also receive 1 equity share of a new company to be named as Indo Gulf Fertilisers Limited (Indo Gulf Fertilisers) for every 5 equity shares of IGCL. Similarly, the GDR holders of IGCL will receive 1 GDR of Hindalco for every 12 GDRs held by them in IGCL, and receive 1 GDR of Indo Gulf Fertilisers for every 5 GDRs held by them in IGCL. The recommended swap ratio is expected to translate into a reasonable premium to IGCL shareholders based on current Hindalco share price and estimated price for Indo Gulf Fertilisers based on fertiliser industry multiples and the companys financial performance and balance sheet strength. The share exchange ratio approved by the Board of the two companies was based on a joint valuation report, of CC Chokshi & Co., a member firm of Deloitte Touche Tohmatsu and Ernst & Young. The share exchange ratio has been determined in accordance with the best practices

in valuation using well-established techniques such as discounted cash flow, book value and relative market prices.

As per the approval of the Board, Hindalco is also simultaneously making a voluntary open offer for the balance shareholding in INDAL at Rs. 120 per equity share, thereby providing an opportunity to INDAL shareholders to exit their holding in the company at an attractive premium to the market price. Consequent to successful completion of the offer, Hindalco proposes to de-list INDAL from all the Stock Exchanges. The open offer price is at 24 % premium to last 1 month average price and 36 % premium to the 26 week average (SEBI statutory price). To facilitate this plan, on July 21, 2002, the Board of Directors of Hindalco also took note of the stoppage of the Buyback programme and approved closure of the scheme. The Restructuring Plan Mr. Birla stated that the global consolidation trend has accelerated the growth of the bigger players at the expense of smaller players. In his view, Even though Hindalco and IGCLs copper business have performed excellently relative to their global peers and are expected to continue to do so, given the current global environment, the coming together of these businesses will propel their future growth at a faster pace. He explained that this transaction will enhance our financing capability, access to global opportunities as well as investor interest, as capital markets increasingly reward larger players with better valuations. A stronger balance sheet created by such a merger undoubtedly opens a window to a variety of value enhancing opportunities. Capital markets have rewarded multi-resource companies, for instance BHP Billiton and Rio Tinto, which are key examples of multi-resource companies with global leadership positions in metals. These companies have significant exposure to both aluminium and copper and have demonstrated superior capital market performance in recent times as compared to perceived metal pure-plays. The market has rewarded these players for taking proactive steps in a consolidating industry, having balanced exposure to commodities without exposure to commensurate risks, financial strength and strong cash flow generation and high resilience to risk.

Mr A.K. Agarwala, Director (Whole-time), Hindalco Industries stated Our intent is to transform Hindalco into a globally competitive non-ferrous metals powerhouse and create enhanced value for all stakeholders.

Mr. D. Bhattacharya, Managing Director, Indo Gulf Corporation said, Even though Hindalco and IGCL have demonstrated strong performance continuously, we believe that the stock of both these companies is undervalued. We believe that over the medium term this restructuring should help correct this anomaly and should result in a positive re-rating of the combined entity. Building a Platform for Value Enhancing Growth Post Restructuring Post restructuring, Hindalco will emerge as one of the largest private sector companies in India (proforma at March 31, 2002 and including full financial consolidation of INDAL and Dahej Harbour & Infrastructure Ltd.): Net sales in excess of Rs. 6,000 crores (US$ 1.2 billion), an increase of around 60% Net profit in excess of Rs.1,000 crores (US$ 200 million), an increase of around 36% Net worth in excess of Rs.6,000 crores (US$ 1.2 billion), an increase of around 25% Balance sheet size in excess of Rs.10,000 crores (US$ 2.0 billion), an increase of around 30% Over the medium term, the transaction is expected to create a company with a very strong operating/ financial growth story: Aim to triple the revenues within next 5 years . . . . . .resulting in EBITDA growth of around 250%. . . . . .resulting in substantial increase in financing capability in the medium term The transaction is expected to be beneficial to shareholders of both Hindalco and IGCL. The merger would enhance value for shareholders of Hindalco, which will include all shareholders of Indo-Gulf, through the creation of a larger non-ferrous metal company with the strong profitability of the copper business and full consolidation benefits of INDALs earnings. Importantly, the transaction is expected to provide attractive EPS accretion for Hindalco shareholders of approximately 7-10% in the short term and 15-20% in the medium term.

For shareholders of IGCL, benefits accrue from the opportunity to participate in the future growth of Hindalco as they would become its shareholders as well as continue as shareholders of a robust and focussed fertiliser entity Indo Gulf Fertilisers that is expected to: have a strong debt free balance sheet with significant leverage capability for future initiatives in the sector continue to enjoy a leadership position in profitability in the industry as one the most cost efficient Urea producers be well positioned to benefit from a market re-rating, attractive demand growth, likely industry policy changes, as also from disinvestment opportunities in the sector Advisors to the Restructuring DSP Merrill Lynch Limited (DSPML) acted as Transaction Advisors; DSP ML, one of India's leading investment bank and securities firm is an affiliate of Merrill Lynch & Co. (ML), one of the world's leading capital raising, financial management and advisory companies. Amarchand & Mangaldas and Suresh A. Shroff & Company, one of Indias leading law firms acted as Legal Advisors. The valuers to the transaction were CC Chokshi & Co. (a member firm of Deloitte Touche Tohmatsu) and Ernst & Young. The proposed restructuring will be filed in the High Court of Judicature at Mumbai and the High Court in Uttar Pradesh. The restructuring will further be subject to various approvals, including those from shareholders, regulatory authorities and lenders / creditors.