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LETTER OF OFFER (Private & Confidential) For Equity Shareholders of the Company Only

DIGJAM
BIRLA

BIRLA VXL LIMITED

Originally incorporated as Shree Digvijaya Woollen Mills Limited on 15/03/1948 with Registrar of Companies, Nawanagar State. Thereafter the name of the company was changed to VXL India Limited on 13/06/1986 and subsequently to Birla VXL Limited on 05/04/1995 and fresh certificate of incorporation consequent to change of name was obtained from the Registrar of Companies, Gujarat, Dadra & Nagar Haveli. Registered Office Contact person : : Aerodrome Road, Jamnagar 361 006, Gujarat, Tel: (0288) 2712972 Fax: (0288) 2712991 Mr. Girish Bhatia Company Secretary, Birla Building, 9/1, R.N. Mukherjee Road, Kolkata 700001. Tel: (033) 2213168/22489105 (Extn: 1262), E-mail: birlavxl@birlas.com; Website: www.birla-vxl.com

OFFER FOR 2,49,96,964 EQUITY SHARES OF RS.10/- EACH FOR CASH AT PAR (i.e. AT A PRICE OF RS. 10/- PER SHARE) AGGREGATING TO RS. 2499.70 LACS ON A RIGHTS BASIS TO THE EXISTING EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF FOUR (4) EQUITY SHARES FOR EVERY SEVEN (7) EQUITY SHARES (i.e. 4:7) OF RS. 10/- EACH HELD ON ( ) (THE RECORD DATE).THE ISSUE PRICE IS SAME AS THE FACE VALUE OF RS.10/-. GENERAL RISKS Investment in Equity and Equity related securities involve a degree of risk and investors should not invest any funds in this issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue including the risks involved. The securities have not been recommended or approved by the Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or the adequacy of this document.The attention of investors is drawn to the statement of Risk Factors appearing on page nos. (iv) to (ix) of this Letter of Offer. ISSUERS ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Letter of Offer contains all information with regard to the Issuer and the Issue, which is material in context of the Issue, that the information contained in this Letter of Offer is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions, expressed herein are honestly held and that there are no other facts, the omission of which makes this document as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Equity Shares of the company are listed on Bombay Stock Exchange Ltd. (BSE), (the Designated Stock Exchange) and The National Stock Exchange of India Ltd.(NSE). The Company has received in-principle approval from BSE & NSE vide their letter no. ( ) dated ( ) and letter no. ( ) dated ( ) respectively for listing of the equity shares being issued in terms of this Letter of Offer. LEAD MANAGER TO THE ISSUE REGISTRAR TO THE ISSUE

KEYNOTE CORPORATE SERVICES LIMITED 307, Regent Chambers, Nariman Point, Mumbai - 400 021. Tel. : (022) 2202 5230 Fax : (022) 2283 5467 E-mail: mbd@keynoteindia.net Website: www.keynoteindia.net SEBI Regn. No.: INM 000003606 ISSUE OPENS ON

INTIME SPECTRUM REGISTRY LIMITED C-13, Pannalal Silk Mills Compound, LBS Road, Bhandup West, Mumbai 400 078 Tel.: (91)(22) 25960320; Fax: (91)(22) 25960329 E-mail: birlavxlrights@intimespectrum.com Website:http://www.intimespectrum.com SEBI Regn. No.: INR 000003761 ISSUE CLOSES ON

LAST DATE FOR RECEIVING REQUESTS FOR SPLIT FORMS

( )

( )

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I. TABLE OF CONTENTS SECTION II III IV CONTENTS PAGE NOS. ii iv

DEFINITIONS AND ABBREVIATIONS .................................................................................................................. RISK FACTORS .......................................................................................................................................................... INTRODUCTION A B C D Summary ......................................................................................................................................................... General Information ....................................................................................................................................... Capital structure of the Company ................................................................................................................ Objects of the offering ...................................................................................................................................

1 4 9 15

ABOUT THE ISSUER COMPANY A B C D E F G Industry Overview ......................................................................................................................................... Business Overview ........................................................................................................................................ Key Industry Regulation and Policies .......................................................................................................... History and Corporate Structure of the Company ..................................................................................... Management ................................................................................................................................................... Promoters ....................................................................................................................................................... Dividend Policy .............................................................................................................................................. 25 29 34 36 47 56 57

VI

FINANCIAL INFORMATION A B C D Auditors Report ............................................................................................................................................. Financial details of group companies ............................................................................................................ Changes in Accounting Policies ..................................................................................................................... Managements Discussion and Analysis of Financial Condition and Result of Operations ..................... 58 89 95 95

VII

LEGAL AND OTHER INFORMATION A B Outstanding Litigations and Defaults ........................................................................................................... Government Approvals ................................................................................................................................. 99 118 119

VIII IX

OTHER REGULATORY AND STATUTORY DISCLOSURES ............................................................................ OFFERING INFORMATION A B Terms of the issue ......................................................................................................................................... Issue Procedure ..............................................................................................................................................

127 129 142

X XI

TERMS OF ARTICLES OF ASSOCIATION ......................................................................................................... OTHER INFORMATION A B List of Material Contracts and Documents for Inspections ....................................................................... Declaration ......................................................................................................................................................

147 148

II. DEFINITIONS AND ABBREVIATIONS In this Letter of Offer, the terms the Company or Birla VXL or BVXL, unless the context otherwise implies, refer to Birla VXL Limited. All references to Rs.or INR refer to Rupees, the lawful currency of India. References to the singular also refers to the plural and one gender also refers to any other gender, wherever applicable, and the words lakh or lac mean 100 thousand and the word million means 10 lakh and the word crore means 10 million or 100 lakhand the word billion means 1,000 million or 100 crores. Any discrepancy in any table between the total and the sums of the amounts listed are due to rounding off. CONVENTIONAL / GENERAL TERMS Act AGM AS EGM EPS MOU NAV P/E Ratio PAN PAT PBDT PBIDT PBT PAT RONW Security Certificate Security(ies) OFFER RELATED TERMS Articles Board BSE/Designated Stock Exchange CAF Issuer/Company/BVXL Directors Equity Shareholders : : : : : : : Articles of Association of Birla VXL Limited Board of Directors, of Birla VXL Limited Bombay Stock Exchange Limited Composite Application Form Birla VXL Limited Directors on the Board of Birla VXL Limited Equity Shareholders of the Company whose name appear as: Beneficial Owners as per the list furnished by the depositories in respect of Equity Shares held in electronic form and Member on the Register of Members of the Company in respect of the Equity Shares held in Physical form Equity Shares of the Company of Rs.10/- each Lead Manager to the Issue i.e. Keynote Corporate Services Ltd. Offer for 2,49,96,964 Equity Shares of Rs. 10/- each for cash at par (i.e. at a price of Rs.10/- per share) aggregating to Rs.2499.70 Lacs on a rights basis to the existing equity shareholders of the Company in the ratio of Four Equity Shares for every Seven Equity Shares held (i.e. 4:7) as on []. The date on which the issue closes for subscription. The date on which the issue opens for subscription. The period between the Issue Opening Date and Issue Closing Date and includes both these dates. The price at which the equity shares are issued by the Company under this Letter of Offer. ii : : : : : : : : : : : : : : : : : The Companies Act, 1956 and subsequent amendments thereto Annual General Meeting Indian Accounting Standard Extra Ordinary General Meeting Earnings Per Share Memorandum of Understanding Net Assets Value Price/Earnings Ratio Permanent Account Number Profit After Tax Profit Before Depreciation and Tax Profit Before Interest, Depreciation and Tax Profit Before Tax Profit After Tax Return on Networth Equity Share Certificate Equity Share(s)

Equity Shares Lead Manager/ LM Issue/ Rights Issue

: : :

Issue Closing Date Issue Opening Date Issue Period Issue Price

: : : :

Letter of Offer/ Offer Document Record Date Renouncee Rights Entitlement Registrar to the Issue Underwriter ABBREVIATIONS BIFR CDSL DCA Depositories Act Depository DP FCNR Account FEMA FI FII (s) NA NR NRE Account NRI(s) NRO Account NSDL OIL RBI SEBI SEBI (SAST) Regulations SEBI Guidelines

: : : : :

This Letter of Offer dated [] circulated to the Equity Shareholders and filed with the Stock Exchanges where equity shares of Birla VXL Ltd. are listed, containing inter alia the Issue price and the number of equity shares to be issued and other incidental information. [] A person who has acquired rights entitlement from equity shareholders. The no. of equity shareholders that a shareholder is entitled to in proportion to his/her shareholding in the Company as on the record date. Intime Spectrum Registry Limited Underwriter to the issue i.e. SMIFS Capital Markets Limited

: : : : : : : : : : : : : : : : : : : :

Board for Industrial & Financial Reconstruction Central Depository Services (India) Limited Department of Company Affairs The Depositories Act, 1996 as amended from time to time A Depository registered with SEBI under the SEBI (Depositories & Participant) Regulations, 1996 as amended from time to time Depository Participant Foreign Currency Non Resident Account Foreign Exchange Management Act, 1999 read with rules and regulations there under and amendments thereto Financial Institution Foreign Institutional Investors registered with SEBI under applicable laws. Not Applicable Non Resident Non Resident External Account Non Resident Indians Non Resident Ordinary Account National Securities Depository Limited OCM India Limited The Reserve Bank of India Securities and Exchange Board of India Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Means the extant Guidelines for Disclosure and Investor Protection issued by Securities and Exchange Board of India, constituted under the Securities and Exchange Board of India Act, 1992 (as amended), called Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000.

COMPANY/INDUSTRY RELATED TERMS FCDs PCDs Scheme of Arrangement/ Scheme : : : Fully Convertible Debentures Partly Convertible Debentures The Scheme of Arrangement, under Sections 391 to 394 of the Companies Act, 1956, between the Company and its Existing lenders, Creditors and Shareholders and OCM India Ltd and its Shareholders, as approved by the Honble High Courts of Gujarat and Punjab & Haryana vide their orders dated 20/02/2006 and 23/02/2006 respectively. Asset Reconstruction Company (India) Ltd., a Securitization & Reconstruction company registered with RBI pursuant to Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 Sick Industrial Companies (Special Provisions) Act, 1985 iii

ARCIL

SARFAESI SICA

: :

III. RISK FACTORS The investors should consider the following risk factors together with all other information included in this Letter of Offer carefully, in evaluating the Company and its business before making any investment decision. Any projections, forecasts and estimates contained herein are forward looking statements that involve risks and uncertainties. Such statements use forward looking terminology like may, believes, will, expect, anticipate, estimate, plan or other similar words. The Companys actual results could differ from those anticipated in these forward looking statements as a result of certain factors including those, which are set forth in the Risk Factors below. The Letter of Offer also includes statistical data regarding the textile industry. This data has been obtained from industry publications, reports and other sources that the Company and the Lead Manager believes to be reliable. Neither the Company nor the Lead Manager has independently verified such data. The Managements proposal to address the risks has been enumerated wherever applicable. INTERNAL RISK FACTORS 1. Litigations There are litigations / disputes/ cases pending against the Company / its Subsidiaries / Promoter / Directors and Group companies : I. Criminal Cases against the Company There are 9 criminal matters filed by the workers of the Company pending with Chief Judicial Magistrate, Jamnagar. Besides this there are 6 criminal applications in relation to labour matters pending in the Honble Court at Ahmedabad, 4 seeking to quash criminal cases filed against the Company before the Chief Judicial Magistrate, Jamnagar and one by a workman for setting aside the judgment of Sessions Court, Jamnagar. The amount involved is not quantifiable. For more information please refer to Chapter VII Legal and other Information commencing on page no. (99) of this Letter of Offer. II. Other Litigations against the Company The Company is involved in certain legal proceedings, incidental to its business and operations, which if determined against the Company, could have an adverse impact on the results of its operations and financial condition. The Summary of these litigations is as follows: Approx.amount involved where quantifiable (Rs. In lacs) 1 Civil Proceedings 7 Not quantifiable 2 Labour related 60 Not quantifiable 3 Income Tax related matters 10 180.50 4 Arbitration matters 2 2273.64 5 Excise duty related Company appeals 1 3.55 6 Wealth tax related matters 1 28.89 7 Miscellaneous 5 112.20 For more information please refer to Chapter VII Legal and other Information commencing on page no. (99) of this Letter of Offer. III. Litigation pending against Promoters/Directors of the Company There is one civil application pending against Mr. Arvind N. Lalbhai, Director in High Court of Bombay and one private complaint pending against Mr. N.L. Hamirwasia, Director in the Special Court for Economic Offences in Bangalore. For more information please refer to Chapter VII Legal and other Information commencing on page no. (99) of this Letter of Offer. Sr. No Particulars No. of cases/disputes

iv

IV. Litigations pending against Subsidiaries/Group Companies There are some litigations pending against Subsidiaries, listed companies and top five unlisted companies within the Group. For more information please refer to Chapter VII Legal and other Information commencing on page no. (99) of this Letter of Offer. 2. Defaults / Overdues I. Of the Company As per the audited accounts for the period ended 31/03/2006 the Company has overdue amounts aggregating Rs.1,183.99 lacs in repayment to Financial Institutions/Banks. For more information please refer to page no. (102) of this Letter of Offer. Managements Proposal The Company has undergone, inter alia, the restructuring of its debts under the Scheme of Arrangement, which has become effective on 30/03/2006. As per the Auditors Report on the accounts for the period ended 31/03/2006, the Company has not defaulted, having regard to the implementation of the scheme of arrangement, in repayment of dues to Financial Institutions and Banks except the dues mentioned. These overdues were not part of the loans covered under restructuring in the Scheme. II. Of the Group Companies There are certain overdues as on 31/03/2006 in payments to a financial institution, and a bank in Mysore Cements Ltd., one of the Group Companies. Cimmco Birla Ltd., one of the Group Company has defaulted in repayment of dues to Financial Institutions, Banks and Debenture holders as on 30/06/2005 and it has not been regular in depositing certain statutory dues due to financial constraints.

For more information please refer page no. (112) &(116) of this Letter of Offer respectively. Managements Proposal In the view of the management the said overdues of the Group companies are unlikely to affect the interests of the Company. 3. Contingent Liabilities As per consolidated audited accounts as of 31/03/2006, the Company and its subsidiaries has some contingent liabilities as detailed below, determination of which may accordingly affect the financial position of the Company and its subsidiaries.
Sr.No. i. ii. iii. iv. v. vi. vii. viii. ix. Particulars Bills discounted with the Companies Bankers Surety given to Government authorities Claims against the Companies not acknowledged as debts Income Tax/ Wealth Tax/Sales Tax matters pending in appeals Excise matters in appeals (Deposit made Rs. 15.50 lacs) (Previous period : Rs. 15.50 lacs) Customs duty on import of raw materials/machinery under export obligation Effect of reduction in liability of interest Arrears of Cumulative Preference dividend [including Corporate Dividend Tax Rs. 186.66 lacs (Previous period: Rs. 535.34 lacs)] Estimated amount of contracts remaining to be executed on capital account (net of advances) (Rs. in Lacs) March 31, 2006 6.11 1,006.00 568.65 111.71 134.08 269.82 * 193.41 21.74

*In terms of the Scheme, on occurrence of event of default, as specified therein, the remedies of the Existing Lenders would include, inter alia, revocation of reliefs and concessions granted to the Company under the present scheme, which will be dealt with in the accounts if and when determined.

4.

Adverse financial condition of the Company The Company has incurred losses since year ended 30/06/1999. During the period ended 31/12/2000 the losses of the Company resulted into erosion of networth of the Company by more than 50% of the peak networth during the immediately preceding four financial years. The same was reported to the BIFR under section 23(1)(a)(ii) of SICA. During the period ended 30/06/2004, the networth of the Company was fully eroded. However, during that period, certain banks and financial institutions assigned their financial assistance, to the Company, to Asset Reconstruction Company (India) Ltd. (ARCIL), which is a securitisation and reconstruction company registered with RBI. As the acquisition of financial assistance by ARCIL was under relevant provisions of legislation, no reference was made to BIFR in accordance with the provisions of SICA. As per audited accounts of the Company and Consolidated accounts, the Company reported a net loss of Rs.4250.68 Lacs (after considering exceptional items Rs.1704.72 Lacs) and Consolidated net loss of Rs.3631.39 Lacs (after considering exceptional items Rs.1210.88 Lacs) respectively for the 18 months period ended 31/12/2005; and net profit of Rs.17.62 Lacs and Consolidated net loss of Rs.606.55 Lacs respectively for three months period ended 31/03/2006. The losses during past years were mainly on account of high burden of interest and depreciation, low production due to working capital constraints and strategy to restrict the production of low-margin varieties, etc. The Company has negative networth of Rs.5140.80 Lacs as on 31/03/2006.

5.

Reduction in paid up value of equity shares of the Company Pursuant to the Scheme of Arrangement, approved by the Honble High Courts of Gujarat and Punjab & Haryana vide their orders dated 20/02/2006 and 23/02/2006 respectively the Share Capital of the Company has been reorganised and the paid up value of Rs. 8/- per equity share out of Rs. 10/- each stands cancelled and the balance paid up value of Rs. 2/- per equity share stands consolidated by consolidating 5 such fully paid up equity shares of Rs 2/- each into 1 fully paid up equity share of Rs 10/- each. This led to the reduction in the paid up value of equity shares of the shareholders..

6.

Listing Status The equity shares of the Company are listed on BSE and NSE. Presently BSE and NSE has requested their members not to deal in the equity shares of the Company from 27/04/2006 upon the Scheme of Arrangement becoming effective. Managements Proposal Pursuant to the Scheme of Arrangement the share capital and loans have been reorganized/restructured and number of equity shares have been reduced and fresh shares were allotted to the existing shareholders and further, equity shares were allotted to the lenders and preference shareholders by way of conversion of their restructured loans and preference shares. Accordingly, upon Scheme becoming effective on 30/3/2006 the Company has allotted 1,30,14,293 equity shares to the existing shareholders. The Company also allotted 3,07,30,394 equity shares on 12/04/2006 to existing lenders and preference shareholders. . As advised by the depositories, the Company has obtained a fresh ISIN number for the shares and has accordingly completed all the relevant formalities of BSE, NSE and depositories to give effect to the Scheme. The Company has received in-principle approval from BSE for listing 1,30,14,293 equity shares of Rs.10/- each and trading permission is awaited. The listing and trading approval from NSE is also awaited. The Company has submitted the application to BSE and NSE for listing of balance 3,07,30,394 equity shares allotted on 12/04/2006. As such, in terms of the Scheme of Arrangement, these shares are under lock in period of one/three years from the date of allotment. The Company is confident that, after complying with the relevant formalities in this regard, these shares will also be listed on BSE and NSE soon.

7.

Audit Qualification The Auditors of the Company, in absence of substantial evidence, are unable to express an opinion regarding recoverability of advances made by the Company towards building aggregating to Rs.880.63 Lacs. The profit for the period, balance in profit and loss account, assets and liabilities are without considering the said amount. Managements Proposal Management is of the opinion that these advances are good and recoverable hence no provision is considered necessary. vi

8.

Expiry of certain Licenses & Consents The following Licenses/approvals have expired during the ordinary course of business, any delay in renewal of the same will affect the operations of the Company. Factory Licence for the Jamnagar plant expired on 31/12/2005. Certificate of Registration of Trade Mark No.437547 and 270518, valid upto 10/05/2006 and 27/03/2006 respectively. Consent from Haryana State Pollution Control Board for Faridabad Plant expired on 31/03/2006. Managements Proposal The Company has applied for renewal of factory license for Jamnagar plant vide letter dated 14/09/2005, and of registration of Trade Mark vide letters dated 27/3/2006 and 1/3/2006 respectively. All the above renewals are awaited. The Faridabad unit has applied for renewal of said consent for 2006-07 vide letter dated 06/06/2006. Renewal is awaited

9.

Losses made by Subsidiary Companies The following subsidiary companies of BVXL reported losses during one or more of the last three financial years (as per their audited accounts ). (Rs.in Lacs) Particulars Year/period ended 31/3/2006 30/9/2005 31/3/2004 (6 months) (18 months) OCM India Limited (OIL) (896.18)# (4.69) (15.54) Year ended 31/3/2006 31/3/2005 31/3/2004 Masuzawa Punjab Silk Limited (MPSL) (342.34) (112.86) (109.79) # including net loss of Rs 785.52 lacs pertaining to OCM Division for the period from 01/07/2004 till 31/12/2005 In terms of the Scheme, the restructured loans transferred to OIL as part of the OCM Division are to be settled in full out of the net proceeds from the disposal of the OCM Division/shares held by the Company in OIL, the process for which has been initiated. Besides this MPSL is a sick industrial company in terms of Section 3(1)(o) of SICA on account of full erosion of its networth, mainly caused by continued default by the collaborator, to whom notice has been served for due performance. The liabilities towards Export Import Bank of India (Exim Bank), for which the Company had furnished corporate guarantee, were resolved through one-time settlement. In terms of the settlement, Exim Bank took possession of movable and immovable assets of MPSL and is in the process of disposal of the same.

10. Losses Made by Group Companies The Company is part of S.K. Birla Group of companies. Out of the three listed and top five unlisted companies, the following companies made losses during one or more of the last three financial years (as per their latest available audited results) Listed Companies Particulars Cimmco Birla Limited (as at 30th June) Mysore Cements Limited (as at 31st March) 2005-06 -(8990.85) 2004-05 (6315.23) (2478.68) (Rs in Lacs) 2003-04 (4835.77) (3609.60)

The operations of Cimmco Birla Limited (CBL) were stalled consequent to lockout at the plant of CBL since 13/11/2000 and suspension of operations at other locations including at project sites because of freezing of banking operations by the consortium of banks. Thereafter, Cimmco Birla Limited was declared as a sick vii

industrial company within the meaning of section 3(1)(o) of the SICA. The networth of Mysore Cements Limited (MCL) was fully eroded during the year 2003-04. Subsequently MCL has been registered with BIFR under the provisions of the SICA. Unlisted Companies Particulars (as at 31st March) Mineral Oriental Limited 2004-05 (0.25) 2003-04 3.68 (Rs in Lacs) 2002-03 3.12

11. Shortfall in the Promises vis--vis performances during the previous issues made by the Group Companies. Some of the group companies made certain projections in their previous issues. However, due to various reasons, the projections could not be achieved. For further details, please refer to page (124) of this Letter of Offer. 12. Import Risk The Companys products could be out-priced by cheaper imports. Managements Proposal The Company markets its products under the brand name DIGJAM and has created its own niche in the domestic market segment. Besides exports constitute about 40% of total sales. The management is confident of mitigating the import risk. 13. Foreign currency exchange rate fluctuation Major raw material for fabric production by the Company is raw wool which it mostly imported from Australia and New Zealand, while a relatively small quantity is procured locally. The wool accounts for more than half of the raw material cost of the fabric. The Company exports 35-40 % of its worsted fabric production and major part of its garments production to various countries across the world. Hence, the Company is exposed to risks from fluctuations in rates of various foreign currencies. Managements Proposal The foreign exchange risk is largely mitigated to the extent of exports equaling imports. Currently the exports of the Company are more than its imports, hence, foreign currencies rate fluctuation risk pertains to the net foreign exchange receipts only in the case of the Company. 14. Restrictive covenants There are various restrictive covenants under special terms and conditions as set out in the Scheme of Arrangement. The said terms require, in many case, prior permission of the Monitoring Committee of the lenders for various activities, including amongst others, creating or assuming further indebtness, undertaking of new projects/expansion or making any investments, entering into any merger/amalgamation, payment of dividends etc. Under the Scheme, in the events of default by the Company as specified thereunder, the remedies to lenders would include revocation of reliefs granted under the Scheme, conversion of defaulted amounts in equity shares etc. For further details please refer to page no.(38). EXTERNAL RISK FACTORS 1. Change in Technology Technology plays a vital role in manufacturing plants. The Companys failure or inability to adopt any change in technology might place its competitors at an advantage in terms of cost, efficiency and timely delivery of final products.

viii

2.

Competition The Company operates in a globally competitive business environment. Increasing competition may force the Company to reduce prices of its products, which may reduce the revenues and margins and/or also decrease its market share, either of which could have an adverse effect on the business, financial condition and operations of the Company.

3.

Change in Import & Export Regulations Any change in regulations, domestic or international, having an impact on the textile market and its inputs will affect the industry as a whole. Such changes may be in the nature of introduction of quota, tariff barrier, subsidies etc. and could adversely affect the business, financial condition and the operations of the Company.

4.

Slowdown in economic growth in India could cause the business to suffer Any slowdown in the growth of Indian economy, could adversely affect the business of the Company, including the future financial performance, shareholders funds and ability to implement strategy and the price of the Equity Shares.

5.

Significant change in the Governments economic liberalization and deregulation policies The Government of India has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy. Its economic policies have had and could continue to have a significant effect on public and private sector entities, including the Company, and on market conditions and prices of Indian securities, including in the future on Companys Equity Shares. The present Government, which was formed after the Indian parliamentary elections in April-May 2004, is headed by a coalition of several political parties. Any significant change in the Governments policies or any political instability in India could adversely affect the business and economic conditions in India and could also adversely affect the business, future financial performance and the price of Companys Equity Shares.

6.

Decline in Indias foreign exchange reserves. At present, Indias foreign exchange reserves are the sixth largest in the world. A decline in such reserves could result in reduced liquidity and higher interest rates in the Indian economy. Reduced liquidity or an increase in interest rates in the economy following a decline in foreign exchange reserves could adversely affect business and financial performance of the Company and the price of Equity Shares.

7.

Downgrading of Indias debt rating. Any adverse revisions to Indias credit ratings for domestic and international debt by international rating agencies may adversely impact the ability to raise additional financing from domestic & overseas markets, and the interest rates and other commercial terms at which such additional financing is available. This could have a material adverse effect on the business and financial performance and adversely affect the ability to raise resources at competitive rates.

8.

Sensitivity to the economy and extraneous factors The Companys performance is highly correlated to the performance of the economy and the financial markets. The health of the economy and the financial markets in turn depends on the domestic economic growth, state of the global economy and business and consumer confidence, among other factors. Any event disturbing the dynamic balance of these diverse factors would directly or indirectly affect the performance of the Company.

ix

NOTES TO THE RISK FACTORS: 1. Preissue Networth As on 31/03/2006 (three months period) As on 31/12/2005 (eighteen months period) Preissue Net Asset Value As on 31/03/2006 (three months period) As on 31/12/2005 (eighteen months period) Issue Size Rs.(5140.80) Lacs Rs.(14468.33) Lacs Rs.(39.50) per share* Rs.(22.23) per share Offer for 2,49,96,964 Equity Shares of Rs. 10/- each for cash at par (i.e. at a price of Rs.10/- per share) aggregating to Rs. 2499.70 Lacs on a rights basis.

Cost per share to the promoter Rs.82.34 * based on 1,30,14,293 equity shares as at 31/03/2006; and without considering 3,07,30,394 equity shares allotted on 12/04/2006 pursuant to Scheme of Arrangement. The bracket indicates negative figures. 2. 3. 4. 5. There is no interest of Promoters/Directors/key management personnel other than reimbursement of expenses incurred or normal remuneration/sitting fees or benefits. There were no transactions since past 6 months on the stock exchange in the shares of the Company by the Promoters/Directors of the Company. Related party disclosures: For details please refer to page nos.(69) of this Letter of Offer. The Lead Manager and the Company shall update this Letter of Offer and keep the shareholders/public informed of any material changes till the listing and trading commencement.

IV. INTRODUCTION A. SUMMARY Summary of Indian Textile Industry Textile Sector is the largest employer after agriculture and its importance in Indias economy is recognized for its contribution to industrial production and export earnings. With the phasing out of the Multi Fiber Arrangement (MFA) from 2005 and the removal of Quantitative Restrictions (QR) and dismantling of tariff barriers, the industry is required to achieve a competitive strength for its survival in the global environment. India accounts for 3.30% of the world trade in Textiles and phasing of MFA and QRs has resulted in new opportunities emerging for the Indian textile industry. (Source WTO International Trade Statistics) Currently, Indian Textile Industry adds about 14% to the industrial production and about 4% to the GDP. It has immense potential for employment generation, particularly in the rural and remote areas of the country on account of its close linkage with agriculture. It provides direct employment to about 35 million people including substantial segments of Scheduled Class /Scheduled Tribes and women. The contribution of this industry to the gross export earnings of the country is about 21 per cent. Therefore the growth and development of this industry has a significant bearing on the overall development of the Indian economy. The Indian textile industry is extremely complex and varied with hand-spun and hand-woven sector at one end of the spectrum and the capitalintensive sophisticated mill sector at the other, with the decentralized power loom and knitting sectors coming in between. This industry uses natural fibers cotton, jute, silk and wool, as well as synthetic/ manmade fibers polyester, viscose nylon, acrylic and their multiple blends. The complex and varied structure of the industry coupled with its close linkage with our ancient culture and tradition provides it with the unique capacity to produce, with the help of latest technological inputs and design capability, a wide variety of products suitable to the varying consumer tastes and preferences, both within the country and overseas. The textile industry has shown remarkable resilience and has grown considerably in terms of installed spindleage, yarn production and output of fabrics and garments. The production of cloth by all sectors mill, power loom, handloom and khadi, wool and silk has shown an upward trend in recent years. Textile industry in India had historically been fragmented. Although the development of textile sector was earlier taking place in terms of general policies, in recognition of the importance of this sector, for the first time a separate policy statement was made in 1985 for development of Indian textile industry. Further, in 2000 a comprehensive textile policy was formulated for developing a globally competitive textile industry in India through modernization and consolidation for taking up the challenges arising of end of quota regime in the industry. Vision 2010 for textiles formulated by GoI aims to increase Indias share in worlds textile trade from around 3.30% (around USD13 billion) in 2003 to 8% by achieving export turnover of USD 50 billion by 2010. It also envisages growth in domestic textile trade from the current USD 25 billion to USD 55 billion by that period. (Source: Textile Policy, 2000 of Ministry of Textiles, GoI). Business Summary Birla VXL Limited operates in the worsted textile segment and has a modern composite mill (ISO 9002 certified) for manufacturing high quality suiting fabrics at Jamnagar, and Universal Clothing (UC), the garment manufacturing unit at Faridabad. The Company has been a significant player in this industry in India and has been in this business for more than 50 years. A brief on the respective business units and brands is as under: DIGJAM Jamnagar unit DIGJAM facility started operations in 1948 and was taken over by the Birla group in 1952. Since then the Company continuously upgraded and modernized its facility. As on date, the unit has 14800 worsted spindles and 98 operating looms to support a production capacity of about 6 million meters. The unit has ISO 9002 certification. The brand has been listed among the trusted apparel brands in the country in a Brand Equity article in 2001. The fabrics manufactured by the unit are well accepted in the world markets, specifically in US and Europe, including Italy. The fabric under the brand name DIGJAM also gets exported to Middle East.

Universal Clothing Faridabad unit The unit was set up, as a forward integration move, with US technology and design. The unit converts fabric manufactured in the DIGJAM unit into garment to cater reputed brands, and retail stores overseas. The unit has a capacity to manufacture about 5 lac pieces per annum of garments. It has provided BVXL the base needed to target the export market, in particular leading international brands. In addition BVXL has two operating subsidiaries, namely, OCM India Ltd (OIL) which manufactures worsted fabrics and VXL Technologies Ltd (VTL), which manufactures defence stores and communication equipments. Issue Details Offer for 2,49,96,964 Equity Shares of Rs. 10/- each for cash at par (i.e. at a price of Rs.10/- per share) aggregating to Rs. 2499.70 Lacs on a rights basis to the existing equity shareholders of the Company in the ratio of Four equity shares for every Seven equity shares held on [] (Record date). The face value of the Equity Shares is Rs. 10/- per share and the Issue Price Rs.10/- is equal to the face value. Summary of Financial Data Please read the following data in conjunction with the detailed Auditors report commencing on page no. (58) under the heading FINANCIAL INFORMATION Summary statement of Assets and Liabilities - as restated as at 31.3.2006* A Fixed Assets Gross Block Less : Depreciation Net Block Less : Revaluation Reserve Net Block (after adjustment of Revaluation Reserve) Capital Work-in-progress Total Fixed Assets Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Total Current Assets Total Assets Liabilities and Provisions Secured Loans Unsecured Loans Current Liabilities and Provisions Total Liabilities and Provisions Net Worth (D-E) Represented by Shareholders Funds Share Capital Equity Capital Suspense Reserves Less : Revaluation Reserve Reserves (Net of Revaluation Reserve) Profit and Loss Account - Cr/(Dr) Less : Misc. Expenses (not written off) Net Worth (F+G+H+I-J) 25,763.53 17,309.23 8,454.30 8,454.30 7.77 8,462.07 7,089.78 4,074.98 2,460.00 2,930.34 2,123.76 11,589.08 27,140.93 21,192.52 3,059.39 8,029.82 32,281.73 (5,140.80) 1,303.06 3,073.04 (9,516.90) (5,140.80) 31.12.2005 57,617.68 36,138.77 21,478.91 3,690.85 17,788.06 5.03 17,793.09 5,780.64 6,378.59 4,280.70 3,269.21 2,536.12 16,464.62 40,038.35 42,495.03 3,183.61 8,828.04 54,506.68 (14,468.33) 10,633.78 15,916.14 3,690.85 12,225.29 (36,610.25) 717.15 (14,468.33) 30.6.2004 57,722.01 32,343.13 25,378.88 4,263.01 21,115.87 64.46 21,180.33 11,875.54 6,761.36 3,591.14 94.47 2,609.98 13,056.95 46,112.82 44,588.06 3,199.65 9,056.40 56,844.11 (10,731.29) 10,633.78 16,534.97 4,263.01 12,271.96 (32,430.31) 1,206.72 (10,731.29) (Lac Rs.) 31.12.2002 31.12.2001 59,434.85 28,423.08 31,011.77 4,882.57 26,129.20 227.80 26,357.00 12,429.28 8,370.28 6,222.72 135.17 3,185.61 17,913.78 56,700.06 43,778.20 2,494.62 11,350.04 57,622.86 (922.80) 10,633.78 17,334.70 4,882.57 12,452.13 (22,322.22) 1,686.49 (922.80) 59,368.81 25,249.33 34,119.48 5,291.31 28,828.17 213.97 29,042.14 12,429.28 11,573.78 5,964.61 173.86 3,720.45 21,432.70 62,904.12 43,431.53 2,644.61 10,767.55 56,843.69 6,060.43 10,633.78 17,781.85 5,291.31 12,490.54 (15,451.38) 1,612.51 6,060.43

B C

D E

F G H I J

*Excludes figures of OCM Division transferred to OCM India Ltd pursuant to Scheme of Arrangement.

Summary statement of Profit and Loss - as restated 1.1.2006 to 31.3.2006 * Income Sales Gross Sales Less : Excise Duty on Sales Net Sales Other Income Increase/(Decrease) in Inventories Expenditure Materials Cost Manufacturing Expenses Personnel Expenses Administrative Expenses Selling and Distribution Expenses Interest and Finance Charges (Net) Impact of Foreign Exchange Fluctuation on loans Provision for Premium on redemption of loans Provision for Diminution in value of assets Profit/(Loss) before Depreciation and Tax Depreciation and Amortisation Less : Transferred from Revaluation Reserve Net Profit/(Loss) before tax and Exceptional items Exceptional Items (Net) Taxation (including Fringe Benefit Tax) Net Profit/(Loss) for the period Impact of Adjustments Adjusted Net Profit for the period Add : Transfers from Debenture Redemption Reserve Investment Allowance Reserve Balance brought forward Balance carried to Balance Sheet 985.29 751.94 448.77 130.62 438.73 184.46 2,939.81 276.62 191.37 191.37 85.25 (61.56) (6.07) 17.62 17.62 (9,534.52) (9,516.90) 10,729.08 6,032.91 4,731.35 1,658.40 3,185.04 1,834.08 28,170.86 1,156.44 4,278.44 560.18 3,718.26 (2,561.82) (1,704.72) 15.86 (4,250.68) 70.74 (4,179.94) (32,430.31) (36,610.25) 11,172.66 5,001.98 4,451.63 1,530.08 2,099.15 5,906.69 30,162.19 418.44 (145.71) (4,943.03) 5,188.79 583.98 4,604.81 (9,547.84) (666.37) (2,143.09) (12,357.30) 2,115.71 (10,241.59) 133.50 (22,322.22) (32,430.31) 7,459.76 3,647.34 3,626.04 1,183.96 1,620.86 4,482.52 22,020.48 33.93 (217.84) (4,048.31) 3,601.19 407.74 3,193.45 (7,241.76) 567.27 1,927.14 (4,747.35) (2,130.79) (6,878.14) 7.30 (15,451.38) (22,322.22) 7,415.00 4,256.03 3,549.61 1,238.75 1,826.11 2,481.98 20,767.48 (306.73) (381.38) (805.48) (1,881.77) 3,773.23 531.10 3,242.13 (5,123.90) (5,123.90) (15.65) (5,139.55) 344.43 264.00 (10,920.26) (15,451.38) 2,993.56 2,993.56 81.02 141.85 3,216.43 29,258.14 24.25 29,233.89 562.78 (469.37) 29,327.30 26,940.33 1,667.11 25,273.22 493.85 (820.64) 24,946.43 21,953.16 1,455.16 20,498.00 511.71 (2,853.63) 18,156.08 22,881.88 1,854.78 21,027.10 650.64 (1,298.44) 20,379.30 1.7.2004 to 31.12.2005 1.1.2003 to 30.6.2004 (Lac Rs.) 1.1.2002 to 1.1.2001 to 31.12.2002 31.12.2001

* Excludes figures of OCM Division transferred to OCM India Ltd pursuant to Scheme of Arrangement.

B. GENERAL INFORMATION Dear shareholder(s), The Board of Directors in their meeting held on 03/06/2006 has decided to make the offer to the equity shareholders of the Company on rights basis. The resolution in respect of this has been approved by the shareholders of the Company in the Annual General Meeting of the Company held on 10/07/2006 and authorized the Board of Directors to decide on terms of the issue and also to take steps to give effect to the said resolution. Accordingly the Board of Directors in their meeting held on 14/07/2006 have decided to make following offer to the existing shareholders of the Company: Issue of 2,49,96,964 Equity Shares of Rs. 10/- each for cash at par (i.e. at a price of Rs.10/- per share) aggregating to Rs. 2499.70 Lacs on a rights basis to the existing equity shareholders of the Company in the ratio of Four equity shares for every Seven equity shares held on record Date []. The face value of the Equity Shares is Rs. 10/- per share and the Issue Price is equal to the face value. Name of the Company Registered Office : : BIRLA VXL LIMITED Aerodrome Road, Jamnagar 361 006, Gujarat. Tel: (0288) 2712972 Fax: (0288) 2712991. E-mail: birlavxl@birlas.com, Website: www.birla-vxl.com Digjam Division Aerodrome Road, Jamnagar- 361 006 Gujarat, India Tel : (0288) 271 2972 Fax : (0288) 271 2991 E-mail : vxldigjam@sify.com Universal Clothing Division 14/5, Mathura Road, Faridabad 121003 Haryana, India Tel: (0129) 227 6401, Fax: (0129) 227 6236 E-mail: ucvxl@uc-birlavxl.com Contact person: : Mr. Girish Bhatia Company Secretary Birla VXL Ltd. Birla Building, 9/1, R.N. Mukherjee Road, Kolkata 700001. Tel: (033) 2213168/22489105 (Extn: 1262) E-mail: birlavxl@birlas.com; Website: www.birla-vxl.com 04-753 Registrar of Companies, Gujarat, Dadra & Nagar Haveli.

Plants

Registration No. Registrar of Companies IMPORTANT 1.

: :

This Issue is pursuant to the resolution approved by shareholders under sections 81, 81(A) of the Companies Act. 1956 at the Annual General Meeting held on 10/07/2006 & subsequent resolution passed by the Board of Directors of the Company in their meeting held on 14/07/2006. This Issue is applicable to such Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the Equity Shares held in the electronic form and on the Register of Members of the Company at the close of business hours on the [] (Record Date). Your attention is drawn to the section on risk factors starting from page no. (iv) of this Letter of Offer. Please ensure that you have received the CAF with this Letter of Offer. Please read the Letter of Offer and the instructions contained herein and in the CAF carefully before filling in the CAFs. The instructions contained in the CAF are an integral part of this Letter of Offer and must be carefully followed. An application is liable to be rejected for any non compliance of the Letter of Offer or the CAF.

2.

3. 4. 5.

6.

All enquiries in connection with this Letter of Offer or CAFs should be addressed to the Registrar to the Issue, quoting the Registered Folio number/ DP and Client ID number and the CAF numbers as mentioned in the CAFs. The Lead Manager and the Company shall make all information available to the Equity Shareholders and no selective or additional information would be available for a section of the Equity Shareholders in any manner whatsoever including at presentations, in research or sales reports etc. after filing of the Letter of Offer with SEBI. All the legal requirements as applicable till the filing of the Letter of Offer with the Designated Stock Exchange have been complied with.

7.

8.

BOARD OF DIRECTORS The Board of Directors of the Company comprises of: S.K.Birla - Chairman Sidharth Birla Vice Chairman A.N.Lalbhai Arvind Agarwal R.K.Choudhury Dr.G.Goswami N.L.Hamirwasia G.Momen A.C.Mukherji P.K.Pujari C.L.Rathi Managing Director Rajeev Surana Executive Director & Chief Operating Officer

BRIEF BIOGRAPHY OF THE DIRECTORS S.K. Birla - Chairman Shri S. K. Birla, the Chairman of the Board of Directors, aged 72 years, is an entrepreneur and Director of various companies. He has wide experience of over 53 years in the fields of Finance, Marketing, General Management, Board level Corporate Governance, Strategic Issues, Corporate and Finance Structuring, Resource Mobilization, Planning and Budgeting. He was President of various leading Chambers of Commerce like The Federation of Indian Chambers of Commerce, New Delhi, Indian National Committee of International Chamber of Commerce, New Delhi and Indian Chamber of Commerce, Kolkata, Chamber of Commerce of G-77 countries of United Nations, New York. He was previously a member of various Government of India bodies including Prime Ministers National Integration Council, Delhi and official delegation to UNCTAD72 and CAFEA66. He is also associated with several education and philanthropic institutions. Sidharth Birla Vice Chairman Shri Sidharth Birla, aged about 49 years, is a MBA from Lausanne and has completed OPM (Owner-President Management) programme at Harvard Business School. He has extensive experience of over 27 years in the fields of Finance, Marketing, General Management, Board level Corporate Governance, Company Law, Strategic Issues, Corporate and financial structuring, resource mobilisation. A.N.Lalbhai Shri A.N. Lalbhai, aged 89 years, is a Science Graduate. He has been associated with business and industry for the last 63 years and is the Chairman of reputed Lalbhai group well known in textile industry. He is former President of the Federation of Indian Chamber of Commerce and Industry. Arvind Agarwal Shri Arvind Agarwal, aged 46 years is a senior IAS Officer. He has vast experience in the fields of Management and Administration. He has held distinguished position in the Govt. of Gujarat.

R.K.Choudhury Shri R.K. Choudhury, aged 70 years is a leading Advocate practicing mainly in Kolkata. He has wide experience in the matter of taxation, corporate planning and International Arbitration. He is a member of International Bar Association, Supreme Court Bar Association, Bar Council of India and Indian Council of Arbitration. Shri R.K. Choudhury is connected with several social and philanthropic organisations. Dr. G. Goswami Dr. G. Goswami, aged 66 years, is an ex Banker, having wide knowledge and experience, especially in the area of Finance and Banking and past Chairman of Industrial Investment Bank of India. N.L.Hamirwasia Shri N.L. Hamirwasia, aged 71 years, is a professional manager and is presently Managing Director of Mysore Cements Ltd. He has held senior position in management of various companies and has over 50 years of experience in the industry. G.Momen Shri G. Momen, aged 73 years is a businessman of repute and is well known in Tea Trade Industry. He holds expertise in marketing of Teas for over two decades and holds general expertise in marketing of products, besides expertise in packaging of teas for purposes of marketing. Shri A.C. Mukherji Shri A.C. Mukherji, aged 81 years, is the past Chairman of New India Assurance Co.Ltd. having vast knowledge and experience. P.K.Pujari Shri P.K. Pujari, aged 49 years, is a Senior IAS Officer. He has vast experience in the fields of Finance, Management and Administration. He has held distinguished positions in the Govt. of Gujarat. C.L.Rathi Managing Director Shri C.L. Rathi aged 60 years, is a Fellow Member of The Institute of Chartered Accountants of India and The Institute of Company Secretaries of India. He is having expertise in managing the affairs of large industrial undertakings and has experience of more than 37 years in manufacturing industries at top management levels in India and abroad. Rajeev Surana Executive Director & Chief Operating Officer Shri Rajeev Surana, aged about 43 years, is a fellow member of the Institute of Chartered Accountants of India. He is having expertise in managing affairs of the Company and has experience of more than 20 years in manufacturing industries at middle and top level. Compliance Officer & Company Secretary Shri. Girish Bhatia Company Secretary Birla VXL Limited Birla Building, 9/1, R.N. Mukherjee Road, Kolkata - 700001 Tel: (033) 2213 1680 Fax: (033) 2213 1144. E-mail: birlavxl@birlas.com Investors can contact the Compliance Officer in case of any pre-issue or post-issue related problems such as non-receipt of letters of allotment, credit of allotted shares in the respective beneficiary account or refund orders etc. 6

Legal Advisor to the issue Khaitan & Co. Emerald House, 1B Old Post Office Street, Kolkata 700001 Tel: (033) 2248 7000; Fax: (033) 2248 7656 E-mail: cal@khaitanco.com Bankers to the Company UCO Bank Digjam branch Aerodrome Road, Jamnagar 361006 Tel: (0288) 2711050 Email: ucojamnagar@sancharnet.in ISSUE MANAGEMENT TEAM Lead Manager to the issue KEYNOTE CORPORATE SERVICES LIMITED 307. Regent Chambers Nariman Point, Mumbai 400 021 Tel: (022) 22025230, Fax: (022) 22835467 Website: www.keynoteindia.net E-mail: mbd@keynoteindia.net SEBI Regn No: INM 000003606 Contact Person: Mr. Satish Mangutkar Registrar to the issue INTIME SPECTRUM REGISTRY LIMITED C-13, Pannalal Silk Mills Compound, LBS Road, Bhandup West, Mumbai 400 078 Tel.: (91)(22) 25960320; Fax: (91)(22) 25960329 E-mail: birlavxlrights@intimespectrum.com Website:http://www.intimespectrum.com/ SEBI Regn. No.: INR 000003761 Contact Person: Ms. Awani Punjani Bankers to the Issue To be appointed Auditors of the Company Khimji Kunverji & Co. Chartered Accountants Suite 52, Bombay Mutual Building, Sir P.M.Road, Fort, Mumbai 400 001. Tel: (022) 2266 2550 Fax: (022) 2266 4045 Email: info@khimjikunverji.com INTERSE ALLOCATION OF RESPONSIBILITIES Not Applicable CREDIT RATING/DEBENTURE TRUSTEE This being an issue of Rights Equity Shares, no Credit Rating or appointment of Debenture Trustee is required. State Bank of Saurashtra Ranjit Road, Jamnagar 361006 Tel: (0288) 2675101; Fax: (0288) 2553503 Email: jamrnjtbrne@sbs.co.in

MONITORING AGENCY Presently the Company is in the process of implementing the Scheme of Arrangement. ARCIL, a Securitization & Reconstruction company registered with RBI pursuant to Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 is acting in its capacity as trustee of trust(s), wherein financial assets pertaining to BVXL have been acquired from certain financial institutions/banks. ARCIL is one of the lenders of BVXL. The purpose of the issue is to raise funds for general business requirements, including Rs 2,000 lacs as envisaged under the Scheme of Arrangement and for meeting Rights Issue expenses. The funds flows of the Company, including those pertaining to the present issue, shall be within the purview of the supervisory framework of the Monitoring Committee, constituted by the lenders comprising ARCIL and Banks, in accordance with the Scheme of Arrangement. APPRAISING ENTITY Not Applicable MINIMUM SUBSCRIPTION If the Company does not receive minimum subscription of 90% of the issue including devolvement of underwriters, the entire subscription shall be refunded to the applicants within forty two days from the date of closure of the issue. ii) If there is delay in the refund of subscription by more than 8 days after the company becomes liable to pay the subscription amount (i.e., forty two days after closure of the issue), the company will pay interest for the delayed period, at prescribed rates in sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956. STANDBY UNDERWRITING The Company has made arrangement of standby underwriting of the rights issue vide agreement dated 31/03/2005 and Deed of Variance dated 13/07/2006 to the extent of an amount of Rs. 765.00 Lacs and has also received full advance there against. The advance, after adjusting the amount of devolvement, if any, upon the standby underwriter, would be refunded out of the proceeds of the aforesaid issue. Name and Address of the Underwriter SMIFS Capital Markets Limited Vaibhav (4F), 4, Lee Road, Kolkata 700 020. Tel: (033) 22470362 Fax: (033) 22874042 Email: smifscap@vsnl.com Indicative Number of Equity Shares Underwritten 76,50,000 Amount Underwritten (Rs. lacs) 765.00 i)

In the opinion of the Board of Directors, the resources of the Underwriter are sufficient to enable it to discharge its underwriting obligations in full. An advance of Rs. 765.00 Lacs equivalent to the underwriting obligation has already been received by the Company from the said Underwriter. The above-mentioned Underwriter is registered with SEBI under Section 12(1) of the SEBI Act. Out of the total size of this rights issue of Rs. 2499.70 Lacs the Promoters have committed funds to the extent of Rs.1485.00 Lacs (for details refer notes to the capital structure on page no.(11). The Company has arranged standby underwriting for the part of the present issue i.e. to the extent of Rs.765.00 Lacs which ensures the minimum subscription. ISSUE SCHEDULE ISSUE OPENS ON LAST DATE FOR RECEIVING REQUESTS FOR SPLIT ISSUE CLOSES ON FORMS [] [] []

C. Capital structure of the Company Details as on date of Letter of Offer A. Authorized Capital 8,00,00,000 Equity Shares of Rs. 10/- each 25,00,000 Preference shares of Rs. 100/- each 2,00,00,000 Cumulative Redeemable Preference shares of Rs.10/- each B. Issued Capital 4,37,54,436 Equity Shares of Rs.10/- each* C. Subscribed & Paid-up Capital 4,37,44,687 Equity Shares of Rs.10/- each D. Present Rights Issue 2,49,96,964 Equity Shares of Rs. 10/- each E. Post Issue Capital 6,87,41,651 Equity Shares of Rs.10/- each F. Share Premium Account Before the Offer After the Offer Nil Nil Aggregate Nominal Value (Rs. In Lacs) 8000.00 2500.00 2000.00 4375.44 4,374.47 2499.70 6875.80

*The Scheme of Arrangement (Scheme), under Sections 391 to 394 of the Companies Act, 1956, between the Company and its Existing Lenders, Creditors and Shareholders and OCM India Ltd (OIL) and its Shareholders, has been approved by the Honble High Courts of Gujarat and Punjab & Haryana vide their orders dated 20/02/2006 and 23/02/2006 respectively. Pursuant to vesting of OCM Division in OIL and as a part of the revised debt and capital structure, the Share Capital of the Company has been reorganised as under, in accordance with the terms of the Scheme: a) The existing paid up Equity Share Capital of the Company comprising of 6,50,71,465 equity shares of Rs.10/each aggregating to Rs. 6,507 lacs stands reorganised. The paid up value of Rs. 8/- per equity share of Rs.10/each stands cancelled and the balance paid up value of Rs. 2/- per equity share stands consolidated by consolidating 5 such fully paid up equity shares of Rs 2/- each into 1 fully paid up equity share of Rs.10/each. The Company fixed May 5,2006 as Record Date for this purpose. With this, the existing 6,50,71,465 equity shares of Rs.10/- each stand reorganised to 1,30,14,293 equity shares of Rs. 10/- each.

b) The Preference Share Capital of Rs. 4,125 lacs stood reduced and consolidated to an amount of Rs. 1,031.25 lacs and has since been converted into 61,60,394 equity shares of Rs. 10/- each as fully paid at a price of Rs.16.74 per share (including premium of Rs. 6.74 per equity share) determined in accordance with SEBI Guidelines for Preferential Issue. The equity shares have been allotted on 12/04/2006. c) The lenders have been allotted, on 12/04/2006, 2,45,70,000 equity shares of Rs. 10/- each fully paid up at a price of Rs. 16.74 per share (including premium of Rs. 6.74 per equity share) determined in accordance with SEBI Guidelines for Preferential Issue by conversion of their loan amounts.

Notes to Capital Structure: 1. Details of present Equity Share Capital are as follows: Pre-Restructuring
Year/Date of Allotment As on 31/3/1981 16/6/1981 1/7/1983 No. of Shares 8,38,796 8,38,796 4,79,925 Face Value (Rs.) 10 10 10 Issue Price (Rs.) 15 Consideration Bonus Cash Bonus Shares (1:1) Conversion of Rs.45/- out of Rs.125/13.5%, 1,59,975 Convertible Secured Debentures into 3 Equity Shares of Rs.10/each at a total price of Rs.15/- per share (including premium of Rs.5/- per share) Equity Shares allotted to the Shareholders of Universal Electrics Ltd. and The Oriental Carpet Manufacturers (India) Ltd. pursuant to the Scheme of Amalgamation Bonus Shares (1:1) Equity Shares allotted on part conversion (Rs.50/- out of Rs.100/-) 12.5%, 34,50,000 partly convertible secured Debentures Allotted on conversion of 12.5% 41,64,537 fully convertible secured Debentures of Rs.50/- each

27/3/1986

16,24,246

10

10

Other than cash

7/3/1988 13/10/1989 1/6/1992 & 1/12/1992

37,81,763 69,00,000 *83,29,074 reduced to 83,18,648 after forfeiture

10 10 10

25 25

Bonus Cash Cash

1/2/1994

18/5/1994 6/1/1996 Total 30/3/2006

**3,59,08,038 reduced to 3,58,59,291 shares after forfeiture 29,30,000 35,00,000 6,50,71,465

10

30

Cash

Allotted on conversion of Zero Coupon Fully Convertible Debentures of Rs.90/each Issued to Prime Securities Ltd. on private placement basis Allotted to Birla Resource Leasing Ltd. against exercise of option given against 35,00,000 Warrants allotted to them

10 10

55 57

Cash Cash

Post Restructuring
1,30,14,293 10 10 Cash 6,50,71,465 existing Equity Shares of Rs.10/- each reorganized pursuant to the Scheme of Arrangement which has become effective from 30.3.2006. The paid-up value of Rs.8/- per Equity Share of Rs.10/- each cancelled and balance paid-up value of Rs.2/- per Equity Share consolidated by consolidating 5 such fully paid-up Equity Shares of Rs.10/- each into 1 fully paid-up Equity Share of Rs.10/- each Allotted to Existing Lenders pursuant to the Scheme of Arrangement on conversion of existing loan amount (refer note 2) Allotted to the Preference Shareholders pursuant to the Scheme of Arrangement on conversion of Pref. Shares as per Scheme (refer note 2)

12/4/2006 12/4/2006

2,45,70,000 61,60,394

10 10

16.74 16.74

Cash Cash

Total

4,37,44,687

Notes relating to capital pre-restructuring * 10,426 Equity Shares forfeited on 1.12.1992 for non-payment of allotment /call money ** 48,747 Equity Shares forfeited on 28.3.1995 for non-payment of allotment / call money a. 16,24,246 Equity Shares of Rs.10/- each were allotted pursuant to Scheme of Amalgamation without payment being received in cash. b. 47,20,420 Equity Shares were allotted as fully paid-up Bonus Shares by way of capitalization of Reserves.

10

2.

The present issue being a rights issue, provisions of promoters contribution and lock-in are not applicable. However presently the equity shares aggregating to 70.25% of the present paid up equity share capital issued pursuant to Scheme of Arrangement are under lock-in period. The details are as follows:
Name of Shareholder Allotment to Existing lenders ARCIL (Arcil-Birla VXL Ltd.Trust and Arcil-BVXL II Trust) Punjab & Sind Bank Union Bank of India Allotment to the Preference Shareholders Central India General Agents Ltd. Pilani Investment and Industries Corpn. Ltd. Birla Eastern Ltd, ICICI Bank Ltd. Goldstar Estates Pvt. Ltd. M.P.Estates Pvt. Ltd. B. M. Properties Pvt. Ltd. P.B. Estates Pvt. Ltd. A. C. Mukherji Total No. of Shares 24040000 430000 100000 3621565 448028 298685 1493428 156810 74671 37335 29868 4 30730394 Lock-in period (from the date allotment i.e 12/04/2006) 1 year 1 year 1 year 3 years 3 years 3 years 1 year 1 year 1 year 1 year 1 year 1 year

3.

Pre & Post issue shareholding pattern of the Company is given below:Category of shareholder Pre-issue No. of Shares Post-issue No. of Shares

(A) (1) (a) (b) (c) (d) (e) (2) (a) (b) (c) (d)

(B) (1) (a) (b) (c) (d) (e) (f) (g) (h) (2) (a) (b)

(c)

(C)

Shareholding of Promoter and Promoter Group Indian Individuals/ Hindu Undivided Family Central Government/ State Government(s)/Government company Bodies Corporate Financial Institutions/ banks Any Other (specify) Sub- Total (A)(1) Foreign Individuals (Non-Resident Individuals/ Foreign non Individuals) Bodies Corporate Institutions Any other (specify) Sub-Total (A)(2) Total Shareholding of Promoter and Promoter Group (A)= (A)(1)+(A)(2) Public shareholding Institutions Mutual Funds/ UTI Financial Institutions/ Banks Central Government/ State Government(s) Venture Capital Funds Insurance Companies Foreign Institution Investors Foreign Venture Capital Investors Any Other (specify)( Foreign National) Sub-Total (B)(1) Non-institutions Bodies Corporate individualsi. Individual shareholders holding nominal share capital up to Rs. 1 lakh. ii. Individual shareholders holding nominal share capital in excess in excess of Rs. 1 lakh. Individuals (Non-Resident Individuals/ Foreign non Individuals) Sub-Total (B)(2) Total public shareholding (B)= (B)(1)+(B)(2) TOTAL (A)+(B) Shares held by Custodians and against which Depository Receipts have been issued GRAND TOTAL (A)+(B)+(C)

25120 7495335 477782 7998237 7998237

0.06 17.13 1.09 18.28 18.28

39474 11778384 750800 12568658 12568658

0.06 17.13 1.09 18.28 18.28

3491 2063334 1234744 1256646 189 263 4558667 25575913 5233925 203064 174881 31187783 35746450 43744687 43744687

0.00 4.7 2.82 2.88 0.00 0.00 10.40 58.46 12.00 0.46 0.40 71.32 81.72 100.00 100

5486 3242382 1940312 1974729 297 413 7163620 0 40190720 8224739 319101 274813 49009373 56172993 68741651 68741651

0.00 4.7 2.82 2.88 0.00 0.00 10.40 58.46 12.00 0.46 0.40 71.32 81.72 100.00 100

*Investor are requested to refer para on Fractional entitlement on page no. (129). 11

4.

Present Rights Issue :

Type of Instrument Equity Shares Ratio 4:7 (Four equity shares for every seven shares held) Face Value (Rs.) 10/No. of shares 2,49,96,964 Issue Price (Rs.) 10/Consideration Cash

5.

The shareholding pattern of the promoter group is as detailed below:

Particulars Present No. of Equity Shares of Rs.10/each 23920 1200 Nil % of Present Capital 0.05 Negligible Nil Post Rights No. of Equity % of Shares of Rs.10/post issue each capital 37589 1886 Nil 0.05 Negligible Nil

a)

b) c)

Promoters/Directors Shri S. K. Birla Shri Sidharth Birla Immediate relatives of promoters (Spouse, parent, child, brother, sister) Company in which 10% or more of the share capital is held by the promoter his immediate relative firm or HUF in which the promoter or his immediate relative is a member. Central India General Agents Ltd. Mysore Cements Ltd. Janardhan Trading Co. Ltd. Birla Eastern Ltd. Sutlej Cotton Mills Supply Agency Ltd. Company in which the Company mentioned in (c) above holds 10% or more of the share capital. HUF/Trust/Societies in which aggregate share of the promoter and his immediate relatives is equal or more than 10% of the total. Sushila Birla Memorial Institute Sukriti Education Society Total

d)

3621565 2109351 1175362 589057 Nil Nil

8.28 4.82 2.69 1.35 Nil Nil

5691031 3314694 1846997 925661 Nil Nil

8.28 4.82 2.69 1.35 Nil Nil

e)

49460 428322 7998237

0.11 0.98 18.28

77723 673077 12568658

0.11 0.98 18.28

The Promoters/Promoter group has confirmed that they intend to subscribe to the full extent of their entitlement in the Issue collectively. The entitlement of the promoters in the said Rights Issue would be Rs.457.04 Lacs. In addition the Promoters/Promoter group intend to subscribe in this Issue to the extent of an amount upto Rs.1027.96 Lacs. As a result of this subscription and consequent allotment, the Promoters may acquire Equity Shares over and above their entitlement in the Issue, which may result in their shareholding in the Company being above their current shareholding. Assuming undersubscription and promoters subscribing to such an extent, the holding of promoters post Rights Issue would be 33.24%. This subscription and acquisition of additional equity shares by the Promoter/directors/associates, if any, will not result in change of control of the management of the Company and shall be exempt in terms of provision to Regulation 3(1)(b)(ii) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. The Promoters/Promoter group of BVXL has brought in funds by way of advance application money to the extent of Rs. 1235 lacs. The money brought in by the Promoters/Promoter group will be adjusted against the share application money due from them towards their subscription in the rights issue component and also towards subscription to un-subscribed portion, if any, in the present rights issue. The details of advance application money brought in by the promoters & promoter group entities as certified by Khimji Kunverji & Co., statutory auditors of the Company vide their certificate dated 10/07/2006 are as follows: Name of the Promoter/Promoter group Central India General Agents Ltd Sutlej Cotton Mills Supply Agency Ltd. Amount (Rs.in Lacs) 635 600

ARCIL vide their letter no. ARG I/SK/FY07/01593 dt. 10/07/2006 has confirmed that they are agreeable to renounce their rights entitlement of the Rights Issue in favour of the Promoters and or their nominees subject 12

to the condition that the Promoter shareholding with the said Rights Issue would not exceed 51% of the total post issue paid up share capital of the Company. 6. The Company has made standby underwriting arrangement to the extent of an amount of Rs. 765 lacs and has received full advance thereagainst from the Underwriter. The advance, after adjusting the amount of devolvement, if any, upon the standby Underwriter, will be refunded out of the proceeds of the present issue. The details of the underwriting please refer page no. (8). The Company has not issued any warrant, option, convertible loan, debenture or any other securities convertible at a later date into equity, which would entitle the holders to acquire further Equity Shares of the Company. Equity Shares of the Company are being traded in compulsory dematerialized mode. The market lot of the Equity Shares is 1 (one). There are no transactions in the securities of the Company during preceding 6 months which were financed/undertaken directly or indirectly by the promoters, their relatives, their group companies or associates or by the above entities directly or indirectly through other persons.

7.

8. 9.

10. The ten largest shareholders two years prior to the date of filing of this Letter of Offer with Stock Exchange sare as follows :
Sl.No 1 2 3 4 5 6 7 8 9 10 Name of Shareholder Mysore Cements Limited Gujarat State Investments Ltd Janardhan Trading Co Ltd Life Insurance Corporation of India Sukriti Education Society The Indiman Fund ( Mauritius ) Ltd Birla Eastern Ltd Magnum Capital Corporation Ltd National Insurance Co Ltd General Insurance Corporation of India No. of Shares 10,546,758 6,173,720 6,119,479 5,660,371 2,141,612 2,000,000 1,451,861 1,150,000 743,960 713,383 % age 16.21 9.49 9.41 8.70 3.29 3.07 2.23 1.77 1.14 1.10

11. The ten largest shareholders as on 10 days prior to the date of filing of the Letter of Offer with Stock Exchanges are as follows :
Sl.No 1 2 3 4 5 6 7 8 9 10 Name of Shareholder Asset Reconstruction Company (India) Ltd (Arcil - Birla VXL Limited Trust and Arcil BVXL II Trust) Central India General Agents Ltd Mysore Cements Ltd ICICI Bank Ltd Gujarat State Investments Ltd Janardhan Trading Company Ltd Life Insurance Corporation of India Birla Eastern Ltd Pilani Investment & Industries Corporation Ltd Punjab & Sind Bank No.of Shares 24,040,000 3,621,565 2,109,351 1,493,428 1,234,744 1,175,362 1,127,333 589,057 514,378 430,000 % age 54.96 8.28 4.82 3.41 2.82 2.69 2.58 1.35 1.18 0.98

12. The ten largest shareholders as on the date of filing of the Letter of Offer with Stock Exchanges are as follows :
Sl.No 1 2 3 4 5 6 7 8 9 10 Name of Shareholder Asset Reconstruction Company (India) Ltd (Arcil - Birla VXL Limited Trust and Arcil BVXL II Trust) Central India General Agents Ltd Mysore Cements Ltd ICICI Bank Ltd Gujarat State Investments Ltd Janardhan Trading Company Ltd Life Insurance Corporation of India Birla Eastern Ltd Pilani Investment & Industries Corporation Ltd Punjab & Sind Bank No.of Shares 24,040,000 3,621,565 2,109,351 1,493,428 1,234,744 1,175,362 1,127,333 589,057 514,378 430,000 % age 54.96 8.28 4.82 3.41 2.82 2.69 2.58 1.35 1.18 0.98

13

13. The Equity Shares of the company are of face value of Rs.10/- and marketable lot is 1 (one). At any given time there shall be only one denomination for the shares of the Company and the disclosures and accounting norms specified by SEBI from time to time will be complied with. 14. The Company, presently does not have any Employee Stock Option Scheme or Employee Stock Purchase Scheme in place, and thus no options have been granted or shares issued pursuant to the above schemes. 15. The Company shall not make any further issue of capital whether by way of issue of bonus shares, preferential allotment, rights issue or public issue or in any other manner during the period commencing from the submission of the Letter of Offer to SEBI for the Rights Issue till the securities referred in the Letter of Offer have been listed or application money refunded on account of failure of the issue. 16. Further, presently the Company does not have any proposal, intention, negotiation or consideration to alter the capital structure by way of split/ consolidation of the denomination of the shares/ issue of shares on a preferential basis or issue of bonus or rights or public issue of Equity Shares or any other securities within a period of six months from the date of opening of the present Issue. However, if business needs of the Company so require, the Company may alter the capital structure by way of split/ consolidation of the denomination of the shares/ issue of shares on a preferential basis or issue of bonus or rights or public issue of shares or any other securities whether in India or abroad during the period of six months from the date of listing of the Equity Shares issued under this Letter of Offer or from the date the application moneys are refunded on account of failure of the Issue, after seeking and obtaining all the approvals which may be required for such alteration. 17. The entire issue price is to be paid on application hence there will be no partly paid up shares arising out of this issue. 18. The total numbers of shareholders in the company are 83,111.

14

D. OBJECT OF THE ISSUE The Company proposes to issue equity shares by way of Rights to raise funds for: a) General business requirements (including Rs 2,000 lacs as per Scheme of Arrangement) b) Meeting Rights issue expenses. The main object clause of the Memorandum & Articles of Association of the Company enables the Company to undertake the existing activities and the activities for which the funds are being raised through the present issue. Funds Requirement General Business requirements (including Rs 2,000 lacs as per the Scheme of Arrangement) Rights Issue expenses Total Means of Finance Rights Issue Total Rationale BVXL had made substantial investments in mid-1990s in capacity expansion and modernization which could not yield commensurate returns due to underutilization of expanded capacity mainly on account of slow pace of growth and over supply position in the worsted textiles industry, resulting in high capacity costs i.e. interest and depreciation, and higher debt burden for the company. The profitability of the Company, over past few years, also suffered on account of depressed market conditions, lower sales realization and margins, high input cost, etc. The efforts of the Company towards cost reduction and improvement in operational efficiency yielded some positive results. The secured lenders of the company comprising of Financial Institutions and Banks formulated, in 2001, a scheme of restructuring of liabilities, which was to be effective from 01/04/2000. However the said scheme could not be implemented completely for various reasons. The financial position of the Company has deteriorated over the time and ARCIL acquired debts from certain Financial Institutions and Banks who had given loans and financial assistance to the Company. Accordingly the Company proposed Scheme of Arrangement (Scheme) between the Company and its existing lenders, creditors and shareholders and OCM India Ltd. and its shareholders. The Scheme sought to evolve a customized and contemporary business model, and a revised capital and debt structure (including through write downs, conversions, etc) so that these are resized in line with the business viability and cash flows. The Scheme contained provisions for restructuring of debts and capital of the Company (including through write downs etc.), transfer of OCM Division to OCM India Limited (OIL), a wholly owned subsidiary of the Company unlocking value in its specified investments and non-core assets under the scheme, through carving out a separate and distinct division as Investment Division in BVXL to which specified investments and non-core assets, liabilities along with Loans (ICo Loans) in terms of this Scheme have been allocated. The proposals also include steps to raise capital resources for, iter alia, supplementing working capital resources for operations and to invest in brand promotion. Company expects to preserve and enhance business value thereby creating value for stakeholders and it will enable the Company to recast its weakened net worth towards positive levels through the restructuring process. The Scheme was approved by the Honble High Courts of Gujarat and Punjab & Haryana vide their orders dated 20/02/2006 and 23/02/2006 respectively, and has become effective upon filing of the orders of the Honble courts with the respective Registrars of Companies on 30/03/2006. The Scheme has stipulated that the promoters of the Company shall arrange for the infusion of funds of Rs 2,000 lacs. Accordingly the Company made a standby underwriting arrangement with SMIFS Capital Markets Ltd. to the extent of Rs.2000 lacs. and received advance of Rs 2000 lacs thereagainst from the Underwriter. The underwriting, and accordingly advance, has since been reduced to and now stands at Rs 765 lacs. Accordingly, the Board proposed a rights issue to raise required funds, including Rs 2000 lacs required as per the scheme. Accordingly the special resolution under section 81, 81(A) of Companies Act was passed at the AGM of the Company held on 10/07/2006. The members of the Company authorized the Board of Directors to decide on terms & conditions & implement the said resolution. Thus the present rights issue of equity shares is offered. (Rs. In Lacs) 2,499.70 2,499.70 (Rs. In Lacs) 2,365.00 134.70 2,499.70

15

The total size of the rights issue is Rs.2499.70 Lacs. The promoters/Promoter group of BVXL have undertaken to subscribe to their entitlement in full and have also undertaken to subscribe to the unsubscribed portion, if any in the rights issue at least to the extent of Rs. 1485 lacs. The Promoters/Promoter group of BVXL have brought in funds by way of share application money to the extent of Rs.1235.00 lacs. The money brought in by the Promoters/Promoter group will be adjusted against the share application money due from them towards their subscription in the rights issue component and also towards subscription to un-subscribed portion if any in the present rights issue. Name of the Promoter/Promoter group Central India General Agents Ltd Sutlej Cotton Mills Supply Agency Ltd. Amount (Rs.in Lacs) 635 600

Accordingly the standby underwriting has been reduced to Rs. 765 Lacs in terms of Deed of variance dated 13/07/2006 between Underwriter & BVXL. DEPLOYMENT OF PROCEEDS OF RIGHTS ISSUE The cashflows of the Company, including the proceeds of this Rights Issue, would be within the purview of waterfall mechanism as per Scheme of Arrangement, which would be broadly operational on the following lines: Budgeted Operating Expenses including taxes, if any, as per the business plan, statutory payments, VRS payments Court settlement, etc.; Approved increase in the working capital requirements net of sanctioned additional working capital borrowings; Payment of pressing liabilities as per the approved business plan subject to a maximum principal value of Rs.9.70 crores plus interest thereon towards short term debt availed for working capital to be paid during the currency of restructuring; Interest and charges on normal working capital finance/credit; Lease/Hire charges and interest on Principle Rupee Debt, Funded Interest, Funded Interest Term Loan and Working Capital Term Loan, if any; Budgeted capital expenditure; Repayment of restructured loan amount as per Scheme; Accelerated repayment of the said restructured loan amount; and Balance is available to the Company.

Changes, if any, from time to time will be applicable as specified by the Monitoring Committee. Rights Issue Expenses The Rights Issue expenses are estimated to be Rs.135 Lacs. Breakup of the expenses is given below: Sr. No. 1 2 3 4 5 Particulars Fees to the intermediaries Printing & Stationery and Postage expenses Advertisement Legal and other certification charges Miscellaneous Expenses Total Amount (Rs. in Lacs) 31.00 87.00 10.00 5.00 1.70 134.70

SOURCES & DEPLOYMENT OF FUNDS The total issue expenses for the issue will be borne out of the issue proceeds. The Company has spent an amount of about Rs.6 Lacs till date towards Issue Expenses which was funded through internal accruals for the time being. INTERIM USE OF FUNDS The proceeds of this Rights Issue would be utilized under the observation of Monitoring Committee.

16

Basis for issue price Qualitative Factors One of the largest manufacturers of woollen / worsted fabrics in India Significant player in the Indian worsted fabric industry for more than 50 years Strong brand, DIGJAM with high recall and excellent quality perception Vertical supplier ability to meet outsourcing needs of international players Fundamental operational strengths of plant and management team Strong marketing and distribution network Experience in Ready Made garments manufacturing and supply to reputed international brands

Quantitative Factors (based upon adjusted Profit and Loss Account) 1. Earnings Per Share (EPS) Period ended As on 30/06/2004 (eighteen months period) As on 31/12/2005 (eighteen months period) As on 31/03/2006 (three months period) Weighted Average EPS *Basic annualized EPS 2. Price Earning Ratio (PE) The PE ratio based on audited figures as on 31/03/2006 is 4.11. 3. Return on Networth (RONW) The networth of the Company was negative since year 2002 hence Return on Networth has not been computed. 4. Minimum RONW required to maintain pre-issue EPS The pre-issue Networth was negative hence minimum Return on Networth required to maintain pre-issue EPS has not been computed. 5. Net Asset Value (NAV) NAV (Rs.) (pre issue)* NAV (Rs.) (post issue) (39.50) (3.84) EPS(Rs)* (10.57) (3.31) 2.43 (1.65) Wts 1 2 3

* based on audited figures as on 31/03/2006, without considering the equity shares allotted on 12/04/2006 under Scheme of Arrangement 6. Industry P/E Ratio (companies manufacturing woollen/worsted fabrics) Highest (Raymond) Lowest (Shri Dinesh Mills) Average
(Source:Capital Market and www.bseindia.com)

18.86 5.18 13.00

17

7.

Comparison of key ratios with the companies manufacturing woolen/worsted fabrics The Company is in the business of manufacturing woolen/worsted fabrics & garments. There are no listed companies, whose business model is same as that of the Company. Although not comparable, the key ratios of the companies who are also manufacturing woollen/worsted fabrics amongst textile/other business activities are as follows: EPS (Rs.) BVXL Industry S Kumars Raymond Shri Dinesh Mills 2.43 3.1 20.9 164.4 PE (based on price as on 10/07/2006 N.A. 14.95 18.86 5.18 Return on Networth (%) N.A. 7.1 15.9 Net Asset Value (Rs.) (39.50) 2.3 193.9 1023

(Source:Capital market and www.bseindia.com)

The Issue Price of Rs. 10/- per share is 1 times the Face Value of Rs.10/- per share of the Equity Shares being issued. Since the issue is made at par, the issue price of Rs.10/- per equity share is justified.

18

Tax benefits to the Company and its members The Company has been advised by Khimji Kunverji & Co., the auditors of the Company, about the possible tax benefits that may be available to the Company and its Shareholders under the Income Tax Act, 1961 and other Direct Tax laws of India vide their report dated July 07, 2006, appended hereunder. The Board of Directors Birla VXL Limited Aerodrome Road Jamnagar 361 006 Gujarat Dear Sirs: We hereby report that the enclosed statement states the possible tax benefits available to Birla VXL Limited (the Company) under the IncomeTax Act, 1961 presently in force in India and to the shareholders of the Company under the Income Tax Act, 1961, Wealth Tax Act, 1957 and the Gift Tax Act, 1958, presently in force in India. Several of these benefits are dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant provisions of the statute. Hence, the ability of the Company or its shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which based on business imperatives the Company faces in future, the Company may or may not choose to fulfill. The benefits discussed in the enclosed statement are not exhaustive. This statement is only intended to provide general information to the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising out of their participation in the issue We do not express any opinion or provide any assurance as to whether: i. ii. the Company or its shareholders will continue to obtain these benefits in future; or the conditions prescribed for availing the benefits have been/ would be met with

The contents of the enclosed statement are based on information, explanations and representations obtained from the Company and on the basis of our understanding of the business activities and operations of the Company. For KHIMJI KUNVERJI & CO. Chartered Accountants Sd/SHIVJI K VIKAMSEY Partner Membership No. 2242 Mumbai, Dated: July 07, 2006

19

STATEMENT OF DIRECT TAX BENEFITS AVAILABLE TO BIRLA VXL LIMITED (THE COMPANY) AND ITS SHAREHOLDERS The following key tax benefits shall be available to the Company and the prospective shareholders under the current direct tax laws in India (I) Key benefits available under the IncomeTax Act, 1961 (the Act) (A) to the Company 1. 2. 3. 4. The Company is entitled to claim depreciation allowance at the prescribed rates on specified assets under section 32 of the Act. The Company will be entitled to claim expenditure incurred in respect of voluntary retirement scheme under section 35DDA of the Act in five equal annual installments. Under section 10(34) of the Act, any income by way of dividends, referred to in section 115O of the Act, received from any domestic company is exempt from tax in the hands of the Company. Under section 10(35) of the Act, income in respect of units of a mutual fund specified under section 10(23D) of the Act, or units from Administrator of other specified undertaking, or units from specified company is exempt from tax in the hands of the Company. This exemption shall not apply to the income from transfer of such units. Under section 10(38) of the Act, longterm capital gains arising to the Company from transfer of equity share in a company or a unit of an equity oriented fund, if transacted through a recognised stock exchange in India and the transaction is chargeable to Securities Transaction Tax, will be exempt from tax in the hands of the Company. However, income by way of long term capital gain shall be taken into account in computing the book profit and income tax payable under section 115 JB of the Act. Under section 112 of the Act, the longterm capital gains arising to the Company otherwise than as stated in 5 above, will be chargeable to tax @ 20% (plus applicable surcharge and education cess) after considering indexation benefit under section 48 of the act. However, if such tax payable on transfer of listed securities/ units/ Zero coupon bonds exceeds 10% of the LTCG, without availing benefit of indexation, the excess tax is ignored. The Company will be eligible to claim exemption in respect of tax on long term capital gains under sections 54EC of the Act, if the amount of capital gains is invested in long term specified assets within six months from the date of such transfer, to the extent and subject to the fulfillment of the conditions specified in those sections. Under section 111A of the Act, short term capital gains arising to the Company from transfer of equity share in a company or unit of an equity oriented fund, transacted through a recognised stock exchange in India and where the transaction is subject to Securities Transaction Tax, will be taxable at the rate of 10% (plus applicable surcharge and education cess). The Company has brought forward unabsorbed depreciation, business losses and long term capital losses which will be available for setoff against taxable income in the future years in accordance with the provisions of sections 32(2), 72 and 74 of the Act. Under section 115JAA of the Act, credit for tax paid under section 115JB (MAT), to the extent of difference between MAT paid and the tax payable in accordance with the other provisions of the Act, will be allowed for any assessment year commencing on or from April 1,2006. Such MAT credit can be carried forward upto the fifth assessment year immediately succeeding the assessment year in which the MAT credit becomes allowable.

5.

6.

6.

7.

8.

9.

20

(B) Benefits available to the Shareholders of the Company (B.1) Resident Shareholders 1. 2. Under section 10(34) of the Act, any income by way of dividends, referred to in section 115O, of the Act received by a shareholder on the shares of the Company will be exempt from tax. Under section 10(38) of the Act, longterm capital gains arising to a shareholder from transfer of equity share held in the Company, if transacted through a recognised stock exchange in India and the transaction is chargeable to Securities Transaction Tax, will be exempt from tax. Under section 112 of the Act, the longterm capital gains arising to a shareholder on sale of shares of the Company, otherwise than as stated in 2 above, will be chargeable to tax @ 20% (plus applicable surcharge and education cess) after considering indexation benefit under section 48 of the act. However, if such tax payable on transfer of the shares of the company exceeds 10% of the LTCG, without availing benefit of indexation, the excess tax is ignored. A shareholder will be eligible to claim exemption in respect of tax on long term capital gains on transfer of share of the Company, under sections 54EC of the Act and subject to the extent and conditions provided thereunder, if the amount of capital gains from the transfer is invested in long term specified assets within six months from the date of such transfer. Long term capital gain on sale of share of the Company arising to Individuals or HUF shareholders will be exempt from tax, under section 54F of the Act, to the extent and subject the conditions provided thereunder, if the net consideration from sale of shares is used for purchase or construction of a residential house property within the specified time period under that section. Under section 111A of the Act, short term capital gains arising to a shareholder from transfer of equity share of the Company, transacted through a recognised stock exchange in India and where the transaction is subject to Securities Transaction Tax, will be taxable at the rate of 10% (plus applicable surcharge and education cess). As per Section 88E of the Act, the Securities Transaction Tax (STT) paid in respect of the taxable securities transactions entered into in the course of business would be eligible for rebate from the amount of income tax on the income chargeable under the head Profits and Gains of Business or Profession arising from taxable securities transactions. As such, no deduction in respect of amount paid on account of securities transaction tax will be allowed in computing the income chargeable to tax as capital gains

3.

4.

5.

6.

7.

(B.2) Nonresident Indian/ Nonresident Shareholders [other than Foreign Institutional Investors (FIIs) and Foreign Venture Capital Companies/ Funds] 1. 2. Under section 10(34) of the Act, any income by way of dividends, referred to in section 115O of the Act, received by a shareholder on the shares of the Company will be exempt from tax. Under section 10(38) of the Act, longterm capital gains arising to a shareholder from transfer of equity share held in the Company, if transacted through a recognised stock exchange in India and the transaction is chargeable to Securities Transaction Tax, will be exempt from tax. As per Section 88E of the Act, the Securities Transaction Tax (STT) paid in respect of the taxable securities transactions entered into in the course of business would be eligible for rebate from the amount of income tax on the income chargeable under the head Profits and Gains of Business or Profession arising from taxable securities transactions. As such, no deduction in respect of amount paid on account of securities transaction tax will be allowed in computing the income chargeable to tax as capital gains A shareholder will be eligible to claim exemption in respect of tax on long term capital gains on transfer of share of the Company, under sections 54EC of the Act and subject to the extent and conditions provided thereunder, if the amount of capital gains from the transfer is invested in long term specified assets within six months from the date of such transfer.

3.

4.

21

5.

Long term capital gain on sale of share of the Company arising to Individuals or HUF shareholders will be exempt from tax, under section 54F of the Act, to the extent and subject the conditions provided thereunder, if the net consideration from sale of shares is used for purchase or construction of a residential house property within the specified time period under that section Under the first proviso to section 48 of the Act, in the case of a nonresident shareholders, in computing the capital gains arising from transfer of shares of the Company acquired in convertible foreign exchange (as per exchange control regulations) protection is provided from fluctuation in the value of rupee in terms of foreign currency which was utilized for purchase of the shares initially. The capital gain/loss in such a case is computed by converting the cost of acquisition, full value of consideration and expenditure incurred wholly and exclusively in connection with such transfer into same foreign currency which was initially utilized for purchase of the shares. The resultant gains thereafter need to be reconverted into Indian currency. The conversion needs to be at the prescribed rates prevailing on dates stipulated. Cost indexation benefits will not be available in such a case. Under section 111A of the Act, short term capital gains arising to a shareholder from transfer of equity share of the Company, transacted through a recognised stock exchange in India and where the transaction is subject to Securities Transaction Tax, will be taxable at the rate of 10% (plus applicable surcharge and education cess). Under section 90(2) of the Act, if the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the country of residence of the nonresident are more beneficial than the provisions of the Act, then the provisions of the DTAA shall be applicable. Nonresident Indians, as defined in section 115C(e) of the Act, being shareholders of the Company have the option of being governed by the provisions of Chapter XIIA of the Act, which, inter alia, entitles them to the following benefits in respect of income from shares of the Company, acquired, purchased or subscribed to in convertible foreign exchange: Under section 115E of the Act and subject to the conditions specified therein, longterm capital gains arising on the transfer of Companys shares will be charged to Income Tax @ 10% (plus applicable surcharge and education cess), without indexation benefit. Under section 115F of the Act and subject to the conditions specified therein, the long term capital gains arising on transfer of the shares of the Company will be exempt from tax entirely/proportionately if entire or a portion of the net consideration is invested within 6 months of the date of transfer in specified assets as defined in section 115C(f) or any savings certificates referred to in section 10(4B) of the Act. The amount so exempted shall, however, be chargeable to tax as long term capital gains under the provisions of section 115F(2) if the specified assets are transferred or converted into money within three years from the date of acquisition thereof as specified in the said section. Under section 115G of the Act, Nonresident Indians are not obliged to file a return of income under section 139(1) of the Act, if their only source of income is income from specified investments or long term capital gains earned on transfer of such investments or both, provided tax has been deducted at source from such income as per the provisions of Chapter XVIIB of the Act. Under section 115H of the Act, where a Nonresident Indian becomes assessable as a resident in India, he may furnish a declaration in writing to the Assessing Officer, alongwith his return of income for that year under section 139 of the Act to the effect that the provisions of the Chapter XII A shall continue to apply to him in relation to investment income derived from the specified assets for that year and subsequent assessment years until such assets are converted into money. Under section 115I of the Act, when a Nonresident Indian, may elect not to be governed by the provision of Chapter XIIA of the Act for any assessment year by furnishing his return of income for that assessment year under section 139 of the Act, declaring therein that the provisions of Chapter XIIA shall not apply to him for that assessment year and his total income for that year shall be computed in accordance with the other provisions of the Act.

6.

7.

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(B.3) Foreign Institutional Investors (FIIs) 1. Under section 10(34) of the Act, any income by way of dividends, referred to in section 115O of the Act, received by a shareholder on the shares of the Company will be exempt from tax. Under Section 115AD, income (other than income by way of dividends referred in Section 115O) received in respect of securities (other than units referred to in Section 115AB) shall be taxable at the rate of 20% (plus applicable SC & EC). No deduction in respect of any expenditure/ allowance shall be allowed from such income Under section 10(38) of the Act, longterm capital gains arising to a shareholder from transfer of equity share held in the Company, where the transaction is chargeable to Securities Transaction Tax, will be exempt from tax in the hands of FIIs. Under section 54EC of the Act, long term capital gains on sale of shares of the Company will not be taxable, if the amount of capital gains is invested in long term specified assets within six months from the date of such transfer, to the extent and subject to the fulfillment of the conditions specified in those sections Under section 111A of the Act, short term capital gains arising to a shareholder from transfer of equity share of the Company, transacted through a recognised stock exchange in India and where the transaction is subject to Securities Transaction Tax, will be taxable at the rate of 10% (plus applicable surcharge and education cess). Under section 115AD(1)(b)(ii) of the Act, short term capital gain arising from the transfer of shares (otherwise than as mentioned in 4 above) held in the Company will be taxable @ 30% (plus applicable surcharge and education cess). Under section 115AD(1)(b)(iii) of the Act, long term capital gain arising from the transfer of shares (otherwise than as mentioned in 2 above) held in the Company will be taxable @ 10% (plus applicable surcharge and education cess). Benefit of indexation is not available to FIIs. As per Section 88E of the Act, the Securities Transaction Tax (STT) paid in respect of the taxable securities transactions entered into in the course of business would be eligible for rebate from the amount of income tax on the income chargeable under the head Profits and Gains of Business or Profession arising from taxable securities transactions. As such, no deduction in respect of amount paid on account of securities transaction tax will be allowed in computing the income chargeable to tax as capital gains Under Section 90(2) of the Act, if the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the country of residence of the nonresident are more beneficial than the provision of Income Tax Act, 1961, then the provisions of the DTAA shall be applicable.

2.

3.

4.

5.

6.

7.

8.

(B.4) Mutual Funds As per section 10(23D) of the Act, any income of Mutual Funds registered with the Securities and Exchange Board of India Act, 1992 or Regulations made thereunder, Mutual Funds set up by public sector banks or public sector financial institutions and Mutual Funds set up authorized by Reserve Bank of India would be exempt from income tax, subject to such conditions as the Central Government by notification in the Official Gazette specify in this behalf. (B.5) Venture Capital Companies/ Funds Under section 10 (23FB) of the Act, all venture capital companies/funds, registered with the Securities and Exchange Board of India, subject to the conditions specified, are eligible for exemption from income tax on all their income, including income from sale of shares of the Company.

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(II) KEY BENEFITS UNDER THE WEALTH TAX ACT, 1957 Asset as defined under section 2(ea) of the Wealth Tax Act, 1957, does not include shares in Companies and hence, shares are not liable to wealth tax. (III) KEY BENEFITS UNDER THE GIFTTAX ACT, 1958 Gift tax is not leviable in respect of any gifts made on or after October 1, 1998.

Notes 1. All the above possible benefits are as per the current direct tax law as amended by the provisions of Finance Act, 2006 and will be available only to the first holder in case the shares are jointly held. 2. In the case of nonresident, the tax rate and the consequent taxation mentioned above shall be further subject to any benefits available under the Double Taxation Avoidance Agreement (DTAA) and amendments thereon, if any. The above statement sets out possible direct tax benefits in a general and summary manner and does not purport to be a complete analysis or listing of all the provisions or possible tax consequences of the subscription, purchase, ownership or disposal etc. of shares. In view of the individual nature of tax consequences, each investor is advised to consult his/ her own tax advisor with respect to specific tax consequences of investing in the shares of the company.

3.

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V. ABOUT THE ISSUER COMPANY A. INDUSTRY OVERVIEW The information presented in this section has been obtained from publicly available documents from various sources, including officially prepared materials from the Government of India and its various ministries, industry websites/publications and company estimates. Industry websites/publications generally state that the information contained in therein has been obtained from sources believed to be reliable but their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although the Company believes industry, market and government data used in this Letter of Offer is reliable, it has not been independently verified. Similarly, internal Company estimates, while believed to be reliable, have not been verified by any independent agencies. Overview of the Indian Textile Industry Textile Sector is the largest employer after agriculture and its importance in Indias economy is recognized for its contribution to industrial production and export earnings. With the phasing out of the Multi Fiber Arrangement (MFA) from 2005 and the removal of Quantitative Restrictions (QR) and dismantling of tariff barriers, the industry is required to achieve a competitive strength for its survival in the global environment. India accounts for 3.30% of the world trade in Textiles and phasing of MFA and QRs has resulted in new opportunities emerging for the Indian textile industry. (Source WTO International Trade Statistics) Currently, Indian Textile Industry adds about 14% to the industrial production and about 4% to the GDP. It has immense potential for employment generation, particularly in the rural and remote areas of the country on account of its close linkage with agriculture. It provides direct employment to about 35 million people including substantial segments of Scheduled Class /Scheduled Tribes and women. The contribution of this industry to the gross export earnings of the country is about 21 per cent. Therefore the growth and development of this industry has a significant bearing on the overall development of the Indian economy. The Indian textile industry is extremely complex and varied with hand-spun and hand-woven sector at one end of the spectrum and the capitalintensive sophisticated mill sector at the other, with the decentralized power loom and knitting sectors coming in between. This industry uses natural fibers cotton, jute, silk and wool, as well as synthetic/ manmade fibers polyester, viscose nylon, acrylic and their multiple blends. The complex and varied structure of the industry coupled with its close linkage with our ancient culture and tradition provides it with the unique capacity to produce, with the help of latest technological inputs and design capability, a wide variety of products suitable to the varying consumer tastes and preferences, both within the country and overseas. The textile industry has shown remarkable resilience and has grown considerably in terms of installed spindleage, yarn production and output of fabrics and garments. The production of cloth by all sectors mill, power loom, handloom and khadi, wool and silk has shown an upward trend in recent years. Textile industry in India had historically been fragmented. Although the development of textile sector was earlier taking place in terms of general policies, in recognition of the importance of this sector, for the first time a separate policy statement was made in 1985 for development of Indian textile industry. Further, in 2000 a comprehensive textile policy was formulated for developing a globally competitive textile industry in India through modernization and consolidation for taking up the challenges arising of end of quota regime in the industry. Vision 2010 for textiles formulated by GoI aims to increase Indias share in worlds textile trade from around 3.30% (around USD13 billion) in 2003 to 8% by achieving export turnover of USD 50 billion by 2010. It also envisages growth in domestic textile trade from the current USD 25 billion to USD 55 billion by that period. (Source: Textile Policy, 2000 of Ministry of Textiles, GoI) Table on segment-wise Fabric Production in the country
Cotton Fabric Quantity Growth (Million Rate sq. Mtr.) 19627 3% 19769 1% 19296 (2%) 18062 (6%) 20578 14% Blended Fabric Quantity Growth (Million Rate sq. Mtr.) 6348 7% 6288 (1%) 5877 (7%) 6078 3% 6025 (1%) 100% Non Cotton Fabric Quantity Growth % (Million Rate share sq. Mtr.) 14358 5% 36% 15334 7% 37% 16289 6% 39% 17970 10% 43% 18388 2% 41% Total Quantity (Million sq. Mtr.) 40333 41390 41462 42109 44991 Growth rate 4% 3% 0% 2% 7%

FY 2001 2002 2003 2004 2005

% share 49% 48% 47% 43% 46%

% share 16% 15% 14% 14% 13%

(Source: Ministry of Textiles, Government of India) 25

The worsted industry, like other textile segments is spread over organised and un-organised sectors. While official data is not available for either of these sectors, atleast for the organised sector reasonably reliable estimates are available. Based on such market intelligence data, the current size of Indian worsted market is estimated to be about 30 35 million meters with Raymond, DIGJAM, OCM, Reid & Taylor as major players and Dinesh, Grasim, Siyaram (J. Hampstead) BSL (Geoffrey Hammond), Mayur, Donear (Ferrino Mizzoni) as the other players. The Industry, after having seen downward trend from 2000 to 2004 is witnessing impressive growth since 2005 and is likely to maintain this trend. Strong growth in the economy, burgeoning middle class with rising disposable income, change in fashion trends in favour of formals, high exposure to international business, better levels of air conditioning in offices cars - homes are some of the triggers for this growth. Exponential growth in organised apparel retailing is also acting as a catalyst for the worsted industry. It is expected that the organised retail in India will grow at over 25% CAGR over the next 5 years. Textile and clothing, the largest segment, accounts for more than 40% of such organised retail sales and is expected to greatly benefit from such boom. Emergence of mall culture, which estimates the mall space to rise from 40 million sq. ft in 2006 to close to 100 million sq. ft by 2010 augurs well for high growth in textile and apparel market. The Indian garment industry is also witnessing a significant amount of global relocation of production and outsourcing from India. Removal of quotas and its impact on Indian textile and clothing exports For 40 years, the international trade in textiles and clothing was regulated by special arrangements outside the rules of General Agreement on Tariff and Trade (GATT). The framework of Multi-Fibre Arrangement (MFA) applied to international trade in textiles and clothing for the period 1974 to 1994. This MFA imposed restrictions on exports from low-cost Asian textile/garment producers. Consequent upon the establishment of the World Trade Organisation (WTO) with effect from January 01, 1995, the quantitative restrictions in the bilateral agreements under the MFA were being governed by the Agreement on Textiles and Clothing (ATC) contained in the final Act of the Uruguay Round negotiations. The ATC was a transitory regime between the MFA and the full integration of textiles and clothing into the multilateral trading system. Four countries carried the MFA restrictions into the ATC (Canada, the EU, Norway and the United States). As per the ATC agreement, the signatory members were to remove all the quantitative restrictions in four phases over a 10-year period. The quota regime in the textile sector as a result now stands completely phased out by the end of 2004. World trade in textiles and clothing amounted to US $385 billion in 2003, of which textiles accounted for 43 percent (US $169bn) and the remaining 57 percent (US $226bn) for clothing. Developed countries accounted for little over one-third of the world export in textiles and clothing. The expiry of ATC has increased the size of the accessible global market for Indian exporters of garments and that of made-ups to developed markets of U.S, Canada and European Union. Especially in made-ups (or home furnishings / textiles), the overall shrinkage in the supply base in developed markets due to adverse cost structures has thrown up a unique opportunity of Indian exports. Further, as global retailers and merchandisers are looking to outsource a greater share of their need from low-cost manufacturing bases, India is slowly emerging as a major outsourcing destination, next to China. As a fallout to the quota regime, there would be consolidation of production and distribution in supplying countries, which would necessarily mean improved scale of operations. Indian players should also integrate to achieve operating leverage and demonstrate high bargaining power. It is reported that Chinese textile firms have already invested heavily to expand and grab huge market share in the quota free world. In India, organised players in this sector would require huge investments to remain competitive in the quota-free world. According to a research report by Exim Bank, Textiles Exports: Post MFA Scenario, it is estimated that the industry would require Rs1.5trillion (US$35bn) new capital investment in the next ten years (by 2014) to tap the potential export opportunities of US$70bn. It is estimated that USA and European Union (EU) together would offer a market of US$42bn for Indian textiles and garments in 2014. Government initiatives: The Government has recognised the urgency to revive and modernise the industry and hence the Ministry has set the following targets to be achieved in a 5-year period: 1. Upgradation of the technology of the industry for achieving a growth of the textile economy from the current level to $ 105 billion by 2010; 26

2. 3. 4. 5. 6.

Creation of supportive environment for facilitating massive investment in the sector and thereby creating additional 12 million jobs in Textile Sector; Increasing Indias share in world textile trade from the current 4% to 8% by 2010 and achieving export value of $ 50 billion by 2010; Expediting the process of modernisation and consolidation for creating a globally competitive industry; Undertaking effective schemes for ensuring handsome growth in handlooms, power looms and handicrafts, thereby substantially enhancing the incomes of the weavers and artisans; and Turning the Public Sector Undertakings from chronic loss making units into self-reliant entities.

Initiative for Organised Mill Sector Efforts will be made to restore the organised mill industry to its position of pre-eminence to meet international demand for high value, large volume products. For this purpose, the following measures will be initiated: Integration of production efforts on technology driven lines; Encouragement to setting up of large integrated textile complexes; Strategic alliances with international textile majors, with focus on new products and retailing strategies; Creation of awareness and supportive measures for application of IT for upgradation of technology, enhancement of efficiency, productivity and quality, better working environment and HRD.

Strategy A multi-disciplinary strategy has been formulated to: 1. 2. 3. 4. 5. 6. 7. Continue and give stability to the fiscal duty reform process and thereby encouraging fresh investment into the Sector; Make the Banks to proactively invest in Textile Sector; Provide an additional allocation of Rs. 1000 crore in the balance Xth Plan period for Technology Upgradation Fund Scheme (TUFS), Technology Mission on Cotton (TMC), Textile Infrastructure Development Scheme and Apparel Parks for Export Scheme (APE); Provide 10% Capital subsidy for processing under TUFS; De-reserve knitting sector from the ambit of Small Scale Industries (SSI); Accelerate Labour & Power reforms to enhance the competitiveness of the Indian textiles and Accelerate the process of leveraging assets of PSEs for funding already approved rehabilitation schemes.

Fiscal Duty Reforms Far-reaching decisions have been taken to remove the discriminatory excise duty structure, which placed the organized industry at a disadvantaged position and throttled investment in the modern mills. In the Budget 2003-04 custom duty on raw wool was reduced from 15% to 5%. In the budget 2004- 05 4% special additional custom duty was also removed. In the Budget 2004-05, the duty structure of textiles was completely revised. The excise duty for textiles was made optional with mandatory duty only on man-made fibres / yarns; Except for mandatory duty on man-made fibres / yarns, all other textile goods were fully exempt from excise duty; For those opting to pay the duty and thereby avail of duty credit, the duty was reduced to a nominal rate of 4% for cotton textile items (i.e., yarns, fabrics, garments and made-ups) and 8% for other textile items including yarn, fabrics, garments, and made-ups; Additional Excise Duty was abolished; Customs duty on a number of textile items was also reduced; and The process of fiscal duty reforms continued in the Budget 2005-06 Excise duty on Man made fibre, Polyester Filament Yarn and customs duty on a number of textile machinery items reduced. Texturising of Polyester Filament Yarn exempted from excise duty. Opportunities and Threats The opening of the international markets has thrown a host of opportunities with unique set of challenges. The margins, though, are under pressure due to severe competition from other countries. The competition will not only intensify in the international markets but also in the domestic markets. Various countries, especially the developed nations may, however, increasingly resort to protectionist measures or regional trade agreements to protect their 27

domestic textile & clothing industry, which has been severely impacted by the imports of low cost products from China. Despite all round positive developments, the Indian textile sector faces a number of challenges, foremost being infrastructure and inflexible labour laws. Inflow into India of spurious fabric material, counterfeit, fake and misleading selvedge descriptions continues. However, recognizing the threat these spurious imports poses, if continued unchecked, the government has taken a number of steps to check the inflow of such products. Rising oil prices could result in higher input prices, especially polyester and fuel, and higher inflation which will push up the cost structure.

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B. BUSINESS OVERVIEW Overview The Company operates in the worsted textile segment and has a modern composite mill (ISO 9002 certified) for manufacturing high quality fabrics at Jamnagar, and Universal Clothing, the garment manufacturing unit at Faridabad. The Company has been a significant player in this industry in India for more than 50 years. The fabric produced by the Company is marketed in India under the brand name of DIGJAM. The brand has been listed among the trusted apparel brands in the country in a Brand Equity article in 2001. The fabric manufactured by the unit is well accepted in the world markets, specifically in US and Europe, including Italy and is also exported to Middle East under DIGJAM brand name.. The Company also produces ready made garments including for some of the top international brands. At present the company has not been selling readymade garments under its own brand name due to lack of necessary marketing infrastructure. In addition BVXL has two operating subsidiaries, namely, OCM India Ltd., to which OCM division of BVXL has been transferred pursuant to Scheme of Arrangement and VXL Technologies Ltd (VTL), which manufactures defence stores and communication equipments. Details of the business of the Company Location of the Plants Birla VXL Limited has a composite textile mills for the manufacture of woollen/ worsted fabrics at Jamnagar, Gujarat (DIGJAM unit). The Company also has a ready-to-wear garment manufacturing unit at Faridabad, Haryana (Universal Clothing unit). Plant & Machinery The Company has following plants in operations: DIGJAM Jamnagar unit: As on date, the unit has 14800 worsted spindles and 98 operating looms to support a production capacity of about 6 million meters. The unit has ISO 9002 certification. Present Capacities at Jamnagar unit Installed Capacity Worsted Spindles Looms Wool Combing (per annum) Units Nos. Nos. Kg. 2005-06 14,800 98 13,05,000 2004-05 14,800 98 13,05,000

Universal Clothing Faridabad unit: The unit was set up, as a forward integration move, with US technology and design. The unit converts fabric manufactured in the Jamnagar unit into Readymade garments to cater to apparel brands, and retail stores overseas. The unit has a capacity to manufacture about 5 lac pieces per annum. Manufacturing Process The process of manufacturing woolen/worsted fabrics involves following steps: 1. Grey Combing: The wool received as per specifications in different microns is opened, scoured, dried, carded and combed. Scouring: Removes dirt, sweat, natural grease etc. Carding: Individualisation of fibres is achieved and it also separates vegetable matter. It converts loose fibres into a continuous sliver for subsequent process. Gilling & Combing: Parallelisation of fibres. Removal of vegetable matters and short fibres is achieved. 2. Tow to top converter: Polyester is received in a tow form and is cut in the required length to match with wool fibre for homogeneous blending. 29

3. 4.

Dyeing: Wool tops and polyester tops are dyed separately in required colours. There is a separate section for fabric dyeing for qualities that are dyed after weaving. Recombing & Spinning: During dyeing process, certain degree of disturbances take place in the fibre. Hence parallelisation is required. In recombing we achieve this as well as remove short fibres to achieve better quality of yarn and improve spinning performance. Gradual reduction in weight from top to required yarn count is achieved through the processes of gilling, rowing and ring frame jointly described as spinning. Depending on the count and blend, the twist is also imparted to give adequate strength to the yarn. This is followed by autoconing to remove spinning faults, if any, and the final yarn is assembled and twisted to make it suitable for weaving. Warp preparation: We use sectional warpers and depending on the pattern required in the fabric, the creel is arranged. The warp beams are produced followed by drawing, reaching and denting to prepare the beam for weaving. Weaving: The weaving takes place on the loom with interlacement of warp and weft. Number of ends and picks are dependent on the count and weave required. Mending: It is the manual operation carried out by trained workmen to rectify spinning and weaving faults that may be present in the fabric. Finishing: It is divided into two areas, viz., wet processing and dry processing. In wet processing, the fabric is washed with detergent to remove stains or chemicals that are applied during earlier operations. It also eliminates stresses on the yarn during spinning and weaving. In dry processing, the fabric is set for dimensional stability, sheared to give clear fabric which is then pressed and becomes ready for tailoring. Inspection & folding: 100% of the fabric is inspected and graded (fresh/defective). The inspected fabric is cut into lengths as per market requirements and delivered to Warehouse.

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10. Quality control: At each stage of production, control checks are incorporated to ensure the required quality. This is an online process. Certain tests like shrinkages, pilling, washing fastnesses, etc., are carried out in the Central Lab. 11. Designing: A team of qualified and experienced designers on a continuous basis, develop fabric in required texture, weave, colours and designs to cater to both domestic and export requirements. 12. Production planning: It is the nerve centre, coordinating activities from the time of procurement of orders to delivery upto Warehouse. It also ensures timely delivery of all fabrics in the stipulated time frame and in assortments. Infrastructure Facilities 1. Raw materials The major raw materials manufacture of fabric at DIGJAM unit at Jamnagar are as follows: a. Greasy Wool: The major suppliers of Greasy Wool are in Australia and New Zealand. Greasy Wool can be easily imported under Open General License (OGL) and there are no restrictions on its imports. The desired micron and quality are easily available as per specified parameters. Polyester: Polyester fibre is easily available in India and is being purchased locally. Sometimes small quantities are imported from Germany. P/V Yarn: Polyester/Viscose yarn is also easily available in India and there are many suppliers for the same.

b. c.

The major raw material required for making readymade garments at Universal clothing unit at Faridabad is fabric, which is sourced from the Digjam unit. Accessories and Trims at Faridabad unit are procured domestically or from overseas market as per the buyers specifications. 30

2.

Utilities Water: The average monthly consumption of water at Jamnagar unit is approx. 47,000 Kilo Ltr. and approx.1200 Kilo Ltr. at Faridabad unit. The Company has adequate water supply for both the plants from respective Municipal Corporations and from own and outside boring wells. Power: The Jamnagar unit of the Company has connected load of 3,500 KA from Gujarat Electricity Board as against its existing peak requirement of 3,300 KVA. The unit also has standby Generator Sets of 4500 KVA. The Faridabad unit of the Company has connected load of 500 KVA from Dakshin Haryana Vidyut Vitran Nigam Board as against its existing peak requirement of 500 KVA. During the three months period ended on 31/03/2006 the Company purchased 4,396 thousand units and generated 132 thousand units through diesel generators for its operations. Consumption of power for production of fabrics and blankets etc. was 3.57 KWH per unit (per mtr.). Environmetal: Company is conscious of the need for environmentally clean and safe operations. Both the existing plants of the Company have obtained No Objection certificates from concerned Pollution Control Authorities. However consent for pollution control in Faridabad unit has expired on 31/03/2006. The Company had applied for renewal of the consent and same is awaited. Manpower The present manpower strength of the Company is as follows: Sr.No. 1 2 3 4 5 Category Management personnel (a) Senior Managers (b) Managers Covered Staff/Workmen Badli worker Contractual workers Total No.of employees/staff/workers 6 15 51 1119 269 129 1589

Products, Marketing & Selling arrangements BVXL manufactures and markets its suitings fabrics under its well established and famous brand - DIGJAM. The Companys DIGJAM unit at Jamnagar is one of the major producers of quality worsted woollen fabrics in the country and its products carry the ISO 9002 and the Woolmark certifications. The Company is backed by strong designing cell and is supported by regional sales representatives spread throughout the country. The DIGJAM unit has a network comprising of about 1500 direct dealers in domestic market. Apart from this, there are about 4000 tag dealers who are serviced by the wholesale channel. For export marketing, the Company has an office in New York, USA and has appointed Export agents in various parts of the world. The Company is one of the largest Indian exporter of worsted woollen fabrics. DIGJAM has been awarded the status of "ACCREDITED MILL" by the internationally renowned DuPont and is now a part of the elite LYCRA ASSURED Network, which is the world's leading supply chain for innovative, quality stretch fabrics. The Company has not entered into any collaboration agreement. Business Strategy Established strong presence in the fast growing Ready Made Garment segment Traditionally, the worsted fabric industry focused on providing fabric, which were customized into garments by tailors. This business model is slowly giving way to Readymade Garments (RMG) under brand names. Some of the other trends include: Preference of casual wear to formal wear (woollen / worsted fabrics considered to be suitable only for suits and other formal wear); Lightweight fabrics and fabrics that require less care like wrinkle free fabrics, etc. are preferred; In view of these developments, the new proposals (in addition to traditional business line) are as follows: 31

Prioritise and expand Company exclusive show rooms to sell fabric as well as branded RMG (under DIGJAM) as this will boost the overall plans of the Company in providing one stop shopping experience to customers; Sell fabric and branded RMG direct to department chains and malls; Sell fabric directly to RMG brands Domestic as well as exports; Sell garment packages to RMG brands / department chains, malls in Buyers brands (Private Label) domestic as well as export market; In short to medium term focus on fabric selling and in medium to long term focus on garment selling both branded as well as non-branded; Build a portfolio of non-worsted outsourced fabrics to offer a wide range to the consumers; Building better sales infrastructure The key steps in this regard include: Strengthening the sales and marketing channels. Expanding geographical reach through increasing dealerships, opening exclusive showrooms; besides redesigning the sales terms to ensure greater through put By aggressive & intelligent use of both electronic & print media to increase the visibility of the DIGJAM brand; Improving product mix: In past few years, the Companys product mix was skewed towards Economy segment, which impacted the margins significantly. As part of its strategy, the Company proposed to reorient its product mix to cater more to Standard and Premium segments thereby increasing the overall margins. Future Outlook In Post Quota era, there are huge opportunities for those who will innovate, offer product-plus, cost-efficiency and customer service. Suitings market in India is growing and formals are in vogue. High exposure to international business, invasion of TV-Mobile-Internet, high infusion of FDI, better levels of air-conditioning in offices cars - homes are some triggers to it's growth. The Company believes that the market will grow much faster in coming years. The Company has a distinct image in the market and will endeavor to strengthen it further. The Company is well placed amongst the peer set competitors. Competitive Strengths Presence - DIGJAM is an old and established brand in the market and its long lasting presence provides it with a good positioning in the market. Exports Consistent growth in exports over the years - almost all major countries. Flexibility - Has been flexible to adjust to change in market conditions in serving the dealers. Well defined and market friendly sales policies. Quality Product The finish imparted to its fabric is comparable to the best available in market. Product Range It is big and diverse enough to have a fair representation for all segments. Strong in Economy and Standard range Distribution Network A strong distribution network comprising of Retail Showrooms, General Retailers and Wholesalers. An all-India presence. Quality Management System - DIGJAM unit has been accredited with ISO 9002 : 2000 Quality Management System Certification. Principal Competitors The woollen/worsted fabric industry in India is dominated by a few major players viz. Raymond Ltd (Raymond), Birla VXL Limited ( DIGJAM), OCM India Ltd. (OCM), a subsidiary of Birla VXL, Shri Dinesh Mills Ltd (Dinesh) and S Kumars (Reid & Taylor) accounting for 88% of the total domestic market share. Apart from this, Grasim Industries Limited, Bhilwara Suitings Limited and Reliance (Vimal) are also present in this segment. 32

Insurance Adequate Insurance Cover has been taken for all the properties viz. Building, Plant & Machinery, Furniture & Fixtures, Vehicles, and all stocks, etc of the Company on reinstatement value basis. The risks covered are fire & shock, earthquake, lightening, explosion and implosion, aircraft damage, storm, cyclone, typhoon tempest, hurricane, tornado, flood and inundation, subsidence and landslide including rock slide, bursting and/or overflowing of water tanks, apparatus and pipes, missile testing operations, bush fire, etc. Property The registered office, DIGJAM division at Jamnagar and Universal Clothing division at Faridabad are situated on the land owned by the Company. Purchase of Property The Company does not propose to purchase any property in the form of land, building or other structures out of the proceeds of the present rights issue.

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C. KEY INDUSTRY REGULATIONS & POLICIES Over the past five years, the Indian government has removed many of the barriers hindering growth of various sectors. But to fulfill the potential of the countrys textile industry, the government needs to eliminate the remaining restrictions that perpetuate the lack of scale and poor operational and organisational performance of local manufacturers which discourage investment, particularly foreign direct investment. Regulations still protect small-scale garment industry in a number of ways. While the production of ready-made garments is no longer reserved for small-scale manufacturers, a few products, such as hosiery, still are. In addition, Indian manufacturers often choose to set up several small plants, instead of a single big one, to take advantage of labour laws. As a result, Indian apparel/garment making units typically have less number of machines than its counterparts in other countries. In order to encourage upgradation of textile sector and to give a fillip to exports of textile products, some of the important initiatives taken by the Government of India are as follows: Announcement of New Textile Policy: One of the main objectives of the New Textile Policy announced in November 2000 (National Textile Policy, 2000) is to facilitate the textile industry to attain and sustain a pre-eminent global standing in the manufacture and export of clothing. The policy endeavors to achieve the target of textile and apparel exports from the present level to US$ 50 billion by 2010, of which the share of garments will be US$ 25 billion. Subsequent to the announcement of NTxP 2000, woven segment of readymade garment sector has been de-reserved from SSI. Technology Up-gradation Fund Scheme: In view of the urgent need for stepping up the process of modernisation and technology upgradation of the textile industry in India, Ministry of Textiles launched a Technology Upgradation Fund Scheme (TUFS) for the textile and jute industry for a five years time frame providing for 5% interest reimbursement in respect of loans availed under the Scheme from the concerned financial institutions for investment-benchmarked technology for the sectors of the Indian textile industries specified thereunder. Liberalization of FDI Policy: Government has allowed foreign equity participation upto 100%, through automatic route, in the textile sector with the only exception in knitwear/knitting sector, which is still reserved for SSI. SSI investment limit for the knitwear/knitting sector has been increased from Rs.1 crore to Rs. 5 crore. Export Promotion Capital Goods (EPCG) Scheme: The scheme facilitates import of capital goods at 5% concessional rate of duty with appropriate export obligation. Import of second hand capital goods is allowed under the EXIM Policy as announced on March 31, 2003. Advance Licensing Scheme: With a view to facilitating exports and to access duty-free inputs under the scheme, standard input-output norms for about 300 textiles and clothing export products have been prescribed and this scheme remained under operation. Duty Drawback & Duty Exemption Pass Book (DEPB) Scheme: The exporters are allowed refund of the excise and import duty suffered on raw materials under the scheme so as to make the products more competitive in the international market. DEPB credit rates have been prescribed for textiles and clothing products. Human Resource Development: Attention has also been paid to Human Resource Development in the textile sector. National Institute of Fashion Technology (NIFT) which is imparting training to Fashion Designers and Fashion Technologists to cater to the human resource requirements of garment industry has 7 branches at Delhi, Mumbai, Calcutta, Hyderabad, 34

Bangalore, Chennai and Gandhinagar. Ministry of Textiles has established a Nodal Centre for Upgradation of Textile Education at the Indian Institute of Technology, Delhi with funding from the Ministry of Textiles. Construction of Apparel International Mart: Apparel Export Promotion Council is constructing an Apparel International Mart at Gurgaon with assistance from Government. Apparel Park for Exports Scheme: A centrally sponsored scheme titled "Apparel Parks for Exports Scheme" has been launched. The scheme is intended to impart focussed thrust to setting up of apparel manufacturing units of international standards at potential growth centres and to give fillip to exports. Since the inception of scheme in March 2002, eleven project proposals have been sanctioned for setting up Apparel Parks at Tronica City & Kanpur (U.P.), Surat (Gujarat), Thiruvananthapuram (Kerala), Visakhapatnam (Andhra Pradesh), Ludhiana (Punjab), Bangalore (Karnataka), Tirupur & Kanchipuram (Tamil Nadu), SEZ, Indore (Madhya Pradesh) and Mahal (Jaipur, Rajasthan). Textile Centres Infrastructure Development Scheme (TCIDS): Development of infrastructure facilities at pre-dominantly textile/apparel sector areas is one of the thrust areas of National Textile Policy, 2000. For attaining this objective, a new scheme (TCIDS) has been launched for upgrading infrastructure facilities at important textile centers. The WTO 2005 Initiative Protection of the textile and clothing sector has a long history in United States and Europe. In the 1950s, Japan; Hong Kong, China; India and Pakistan agreed to voluntary restrain export for cotton textile products to the United States. In 1962 a Long Term Agreement regarding International Trade in Cotton Textiles (LTA) was signed under the auspices of the GATT (replacing a 1-year short-term agreement). The LTA was renegotiated several times until it was replaced by the MFA, which extended restrictions on trade to wool and man-made fibers in addition to cotton. Since 1947, when the General Agreements on Tariff and Trade (GATT) was first signed, an increasing proportion of international trade was regulated by the international agreements, designed to ensure countries could erect or maintain barriers to international trade only under mutually agreed terms. Apparel / readymade garments were not included in GATT provisions. In 1947, the Multi-Fibre Agreement (MFA) was signed, without reference to GATT, essentially ratifying countries right to impose quotas on textiles and apparel/readymade garment imports from each other. This was intended to be a temporary measure allowing developed countries time to restructure their apparel / ready-made garments and textile industries before opening them up to competition from developed countries. In practice the MFA was frequently renewed. In 1994, GATT signatories signed the Agreement on Textiles and Clothing (ATC), committing to phasing out MFA and replacing it by the general systems for agreeing trade barriers and disputes that the GATT has laid down. Almost simultaneously, the GATT was replaced by the World Trade Organisation (WTO). The most important underlying principles of the ATC are: The quotas would be phased out to an agreed timetable (16% of imports quota-free by January 1, 1995, a further 17% by January 1, 1998, a further 18% by January 1, 2002 and the remaining 49% by January 1, 2005); There would be no extension date; The ATC would be binding only on trade between WTO member states; There would be no temporary provisions while the ATC was in force for monitoring progress and managing duties. Accordingly, quota restrictions have been removed with effect from January 1, 2005. This removal of world trade quota restrictions is expected to bring a change in the global apparel trade. Productivity, labour costs, quality and creativity will determine which countries will eventually emerge as winners.

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D. HISTORY AND CORPORATE STRUCTURE OF THE COMPANY BRIEF HISTORY The Company, a part of SK Birla Group, is engaged in the manufacturing of woollen / worsted fabrics in India. It has a textile mill for the manufacture of woollen/ worsted fabrics at Jamnagar, Gujarat (DIGJAM unit). Besides the Company has a ready-to-wear garment-manufacturing unit with installed capacity of about 5 lac pieces per annum at Faridabad, Haryana. The Company was originally incorporated as Shree Digvijaya Woollen Mills Limited on 15/03/1948 with Registrar of Companies, Nawanagar State. Thereafter the name of the company was changed to VXL India Limited on 13/06/1986 and subsequently to Birla VXL Limited on 05/04/1995 and fresh certificate of incorporation consequent to change of name was obtained from the Registrar of Companies, Gujarat, Dadra & Nagar Haveli. Effective July 1983, the Oriental Carpet Manufacturers (India) Limited (established in 1924) and Universal Electric Co. Ltd (established in 1961) merged with the Company. Prior to this merger, these businesses were run by the SK Birla group as independent companies. A brief historical perspective of the BVXL business operations over the last two decades is presented below: Pre 1992 Pre-liberalization period During this period, most large businesses were run as diversified conglomerates. As of 1986, BVXL had diversified business interests in textile businesses through OCM and DIGJAM, carpet business, energy meters and defence stores and communication equipments business. The group also moved up in the textile value chain by putting up Ready-to-wear (RTW) facility. The business of the company grew well and the Company enjoyed steady and growing profits during this period. The total capacity in the textile business (worsted fabric) was 10 million meters, second largest in the country and its brands had a strong image in the market. In 1985, The Company set up Sidharth Soya products unit to manufacture soya products at Harda, Madhya Pradesh. During 1990, the Company acquired Saurashtra Chemicals (Sauchem), from one of the Birla group companies and thereby ventured into chemical business. It undertook significant initiatives to strengthen the chemicals business and invested substantially in modernisation and capacity up-gradation. However, around the same time the soda ash industry went into severe downturn because of surplus capacity and the Companys chemical business became unprofitable. Post liberalization The post liberalization period saw a period of increased competition, sharp reduction in duty barriers and as such BVXL was required to change its diversified business mode and impart higher levels of focus and strategy to each of its business segments. With this overall strategy, BVXL demerged many of its businesses to separate companies in 1992: Soya products business: - The Company demerged its soya products business to Sidharth Soya Products Ltd (SSPL). BVXL held 75% share of the equity capital of the Company. The investment in SSPL was divested in 2004. Defence stores and communication equipments: - This business was demerged to VXL Technologies Ltd (VTL), 100% subsidiary of the Company. Energy meter business: This business was demerged to VXL Landis & Gyr Ltd (VLG). The Company held 60% of the equity capital of VLG which was later divested in two trenches. With the entry of various small and unorganized players in the carpet business because of favorable government policies, the Company discontinued the carpet manufacturing business.

During this period the textile business grew and the brands DIGJAM & OCM got further strengthened. Riding on the textile market buoyancy the Company expanded its capacity to 15 million meters during 1994-96.

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While the chemical business continued to be part of the Company, BVXL completed a major expansion project for this business. However, because of the excess capacities in the market, the chemical business continued to bleed, its losses being funded mainly by the textile business. Following the period of growth in the textile business (1992- 95), the textile industry witnessed substantial capacity addition. The liaberalisation paved the way for freer import of cheaper goods into the market, posing a severe threat to the domestic products. On the other hand, due to the economic slowdown, the demand for the product did not keep pace. Hence, there grew a severe demand-supply mismatch in the domestic textile market. The above factors contributed to slowdown in the Companys textile business, while the chemical division continued to be a drain on its resources. Weighing the market conditions, BVXL cut back on proposed expansion cum modernization plan for its Jamnagar unit, and, of its own accord, surrendered sanctioned loan of Rs.46 crores to the financial institutions. With the slowdown in the textile industry, and draining of resources the profitability of the Company continued to suffer. Some of the notable events during this period include: During 1995 a subsidiary company, now known as Masuzawa Punjab Silk Ltd. was set up to manufacture spun silk yarn in technical & financial collaboration with Masuzawa Company Ltd., Japan. Effective July 1998, the Company demerged its loss-making chemical business to Saurashtra Chemicals Limited (SCL). However, the Company had to support the financial requirements (including losses) of this business for more than one year after the demerger i.e. till the date of approval by the court. The outstanding amount of such financial support was converted into preference shares in SCL. These preference shares were disposed of pursuant to the process of settlement of dues of secured lenders and preference shareholders of SCL undertaken by ARCIL, against upfront buy out consideration settled by them in the year 2005. During this period of difficulty, the debt burden of the Company grew substantially and reached an unsustainable level without a corresponding growth in the profitability. Economic slowdown, particularly in the worsted textiles industry, led to blocking of inventories, which got built up with higher productions levels subsequent to capital investments, without corresponding growth in demand. The accumulated inventories were gradually cleared at substantially discounted prices, which affected the Companys profitability as well as its brand image.

The Company has been incurring losses since year ended 30/06/1999. During the period ended 31/12/2000 the losses of the Company have resulted into erosion of networth of the Company by more than 50% of the peak networth during the immediately preceding four financial years. The same was reported to the Board of Industrial and Financial Reconstruction (BIFR) under section 23(1)(a)(ii) of the Sick Industrial Companies (Special provisions) Act, 1985 (SICA). During the period ended 30/06/2004, the networth of the Company was fully eroded. However, during that period, certain banks and financial institutions assigned their financial assistance, to the Company, to Asset Reconstruction Company (India) Ltd. (ARCIL), which is a securitisation and reconstruction company registered with RBI. As the acquisition of financial assistance by ARCIL was under relevant provisions of legislation, no reference was made to BIFR in accordance with the provisions of SICA. Despite these strong adversities in the last few years, BVXL remains a good operating company with high-class manufacturing and brand assets. To overcome its problems, the Company undertook various initiatives for rationalisation of operations including voluntary retirement plan which led to broad-based savings in manpower cost, utilities, spare parts and consumables, development costs, overheads as well as reduction in waste and defectives. The management believes that the business can be profitable if it can endure the present and reorient its business model to the future opportunities. Restructuring Initiative Asset Reconstruction Company (India) Ltd. (ARCIL), the countrys premier asset resolution and revival agency considered a comprehensive restructuring plan for the Company. This plan was worked out jointly by the Company and ARCIL,keeping in view the following key considerations: Enable ARCIL and other lenders to realize (through disposal of some of the assets) a substantial debt repayment along with evolution of a sustainable business model (there by enabling reduction in exposure levels). Enable ARCIL to become a strategic partner to BVXL in effecting a sharp turnaround towards realizing value for the shareholders through increasing in share valuation over the next 3-5 years 37

Enable capital restructuring to ensure that debt and equity levels are resized in line with assessed business viability. Enable BVXL to recast its current negative net worth position to positive levels through the restructuring process. The above key considerations were designed to ensure that: BVXL is able to unlock and better utilise its productive assets; BVXL can effectively leverage its premium brand to formulate a business model with further value addition beyond the fabric stage, which can be reasonably expected to generate significantly enhanced value for its stakeholders; Focus is given to preserve and enhance value of business/ collateral with focus on management and resolution; Fair treatment is given to all stakeholders of BVXL;

In line with the restructuring plan worked out with ARCIL, and the discussions with lenders, Company proposed the Scheme of Arrangement. Gist of Scheme of Arrangement The Scheme of Arrangement (Scheme) under Sections 391 to 394 of the Companies Act, 1956, between the Company and its Existing lenders, Creditors and Shareholders and OCM India Limited (OIL) and its Shareholders, was approved by the Honble High Courts of Gujarat and Punjab & Haryana vide their orders dated February 20, 2006 and February 23, 2006 respectively. Upon filing of the orders of the Honble Courts with the respective Registrar of Companies, the Scheme has become effective on March 30,2006. The salient elements of the Scheme, as provided therein, are summarized hereunder. The provisions of the Scheme have been/are being implemented, after the Scheme has become effective. 1. Appointed Date of the Scheme: July 1,2004 2. Realignment, Transfer, Allocation and Restructuring of Existing Loans A. Realignment of Existing Loans The Existing Loans of Birla VXL Ltd (the Company), as on the Cut-off Date i.e. June 30,2004, shall be realigned to an aggregate amount of Rs. 38,556 Lacs (Restructured Loan Amount) and would include such part of balance Existing Loans which would be adjusted against the Share Premium, on issue of shares to the Existing Lenders. The remainder Existing Loans and all other loans and/or liabilities including any interest, premium on redemption of loans and other charges with respect to the Existing Loans shall stand waived or shall abate. B. Settlement of Restructured Loan Amount of Rs. 16,000 lacs transferred to OIL The Restructured Loan Amount to the extent of Rs. 16,000 Lacs (OIL Loans) as on Cut-off Date, being transferred to OIL, as a part of OCM Division shall be settled by the net proceeds from the disposal of OCM Division/shares held by the Company in OIL as may be decided by the Monitoring Committee of the lenders, on such terms and conditions as the Monitoring Committee may deem fit. OIL Loans shall not carry interest provided that, surplus of net consideration from the said disposal after payment of the OIL Loans shall be utilized for payment of interest to the respective Existing Lenders at the rate of 9% per annum on the said OIL Loans on pro-rata basis from the Appointed Date till the date of realization of proceeds from such disposal. The residual surplus of net consideration on disposal shall be distributed by OIL to the Company, which the Company will utilize in repayment of BLS- I, BLS- II and ICo Loans. Any part of OIL Loans remaining unpaid on account of shortfall on disposal shall abate and stand waived. There shall be no liability whatsoever of the Company in respect of OIL Loans thereafter. C. Settlement of balance Restructured Loan Amount of Rs. 22,555 lacs by the Company The balance Restructured Loan Amount to the extent of Rs. 22,555 Lacs shall be dealt with by the Company as under.

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C.i.

Allocation of Restructured Loan Amount of Rs.5,000 lacs to Investment Division The Company shall carve out a separate division, namely Investment Division (ICo) wherein the Investments / Non-core assets and liabilities as on Cut-off Date as set out in the Scheme shall stand allocated together with the Restructured Loan Amount to the extent of Rs. 5,000 Lacs (ICo Loans). No interest shall be payable on the ICo Loans. The Company shall, subject to the approval of the Monitoring Committee, dispose of the Investments/Non-core assets allocated to ICo within a time frame of three years from the Appointed Date or within such extended time frame as may be decided by the Monitoring Committee. If the net consideration realized on sale of Investment Division is more than the ICo Loans, then the Existing Lenders shall be entitled to share the said surplus on pro-rata basis among themselves. However, if the net consideration realized on the sale of Investment Division is less than the ICo Loans, the unpaid portion of ICo Loans shall stand discharged and there would be no liability on the part of Birla VXL to discharge the said unpaid ICo Loans.

C.ii. Settlement of Restructured Loan Amount of Rs 15,071 lacs The Restructured Loan Amount to the extent of Rs.11,983 Lacs (BVXL Loans) shall be divided into two parts namely Birla VXL Loan Series I (the BLS-I) aggregating to Rs 6,664 Lacs and Birla VXL Loan Series II (BLS- II) aggregating to Rs.5,319 Lacs. The lenders shall have right to choose any of the two options for repayment of each of the aforesaid series of the BVXL Loans, as set out in the Scheme. The Restructured Loan Amount to the extent of Rs 3,088 Lacs shall be the Working Capital (Fund Based) Limits for the Company. C.iii. Conversion of Restructured Loan Amount of Rs 2,484 lacs into Equity Shares The Restructured Loan Amount to the extent of Rs. 2,484 lacs shall be, at the option of the Existing Lenders, treated as an interest free advance to be adjusted against amount payable, to the extent of face value of shares, on allotment of shares to them. Upon the scheme being effective, the Company shall allot Equity Shares of Rs.10 each, to those Existing Lenders who have already exercised their option, in writing, of treating the Converted Loan amount as the said advance, by adjusting the said interest free advance against the price payable for the Equity Shares. The Equity Shares of the face value of Rs. 2,484 lacs, shall be allotted to Existing Lenders, as aforesaid, at par or at such price as may be determined in accordance with the guidelines issued by Securities and Exchange Board of India (SEBI), if applicable. 2. Reorganisation of Share Capital of the Company A. Equity Share Capital Pursuant to the vesting of OCM Division under the Scheme, and as a part of revised capital and debt structure, the paid up Equity Share Capital of the Company shall be written down. The par value (Rs.10) of the paid up Equity Shares of the Company, on the Record Date shall be reorganized. The paid up value of Rs.8 per Equity Share of Rs.10 each shall be treated as cancelled and the balance paid up value of Rs. 2 per Equity Share shall be consolidated by consolidating 5 (Five) such fully paid up Equity Shares of Rs. 2 each into 1 (One) fully paid up Equity Share of Rs.10 each. B. Preference Share Capital. Pursuant to the vesting of OCM Division and as a part of revised capital and debt structure, the Paid up Preference Share Capital of Birla VXL shall be reorganized in the following manner: The paid up value of Rs.7.50 per Preference Share of Rs.10 each shall be treated as cancelled. The balance paid up value of Rs. 2.50 per Preference Share shall be consolidated into fully paid up Preference Shares of Rs.10 each. On consolidation, the Preference Shares shall be converted into Equity Shares of Rs.10 each which shall be allotted either at par or at such price as may be determined in accordance with the guidelines issued by SEBI, if applicable. The paid up value of Rs.75 per Preference Share of Rs.100 each shall be treated as cancelled. The balance paid up value of Rs. 25 per Preference Share shall be consolidated into fully paid up Preference Share of Rs.100 each. On consolidation, the Preference Shares shall stand converted into Equity Shares of Rs.10 each which shall be allotted either at par or at such price as may be determined in accordance with the guidelines issued by SEBI, if applicable. 39

Pursuant to the cancellation and conversion of the preference shares as stated above, any arrears of dividend on preference shares or any liability attached to the preference shares shall abate. 3. Extract of special terms and conditions to restructuring The Promoters of the Company shall within a period of 9 months from Cut-off Date or within such extended period as may be decided by the Monitoring Committee arrange for infusion of fresh funds of Rs.2,000 lacs, in a manner satisfactory to the Monitoring Committee. The Board of Directors of the Company shall issue Equity Shares upto 10% of equity stake to the key employees of the Company on such terms, conditions and as per modalities as may be deemed fit and approved by the Monitoring Committee. The Promoters of the Company shall pledge their present and future shareholding in the Company, with voting rights to secure the repayment of BVXL Loans. The pledge of shares, as aforesaid, would be in a form and manner to the satisfaction of the Monitoring Committee and the Promoters shall ensure that the Existing Lenders are able to transfer the same in their name in the event of default by the Company. The Promoters of the Company shall ensure that their aggregate shareholdings the Company shall not exceed 51% of the paid up equity share capital of the Company, at any point of time for a period of 5 years from the Cut-off Date without the prior approval of the Monitoring Committee. The Company shall open a Trust and Retention Account (TRA-2) with a Bank acceptable to the Monitoring Committee. All receipts and payments of the Company shall be routed through this account only. TRA-2 shall have waterfall mechanism for utilization of funds. The Company shall not operate any other account with any Bank without the prior approval of the Monitoring Committee in writing. The capital and revenue budget of the Company shall be subject to prior approval of the Monitoring Committee. No expenses would be incurred except in accordance with the said budget without prior approval of the Monitoring Committee. The Existing Lenders shall have the right to appoint / retain consultants / concurrent auditors to oversee and monitor the restructuring including the TRAs and carry out concurrent audit of the accounts of the Company and OIL. All costs, charges and expenses of the consultants / concurrent auditor would be incurred, met, paid by the Company or OIL as the case may be. The following events would constitute an event of default: o o o Default in any debt servicing obligation by the Company as per the Scheme to an Existing Lender beyond 90 days from the due date. Inability of the Company to allot equity shares to the lenders on conversion of loans within 90 days from the Effective Date. Inability of the Promoters to arrange for infusion of fresh funds as stated in the Scheme

On occurrence of event of default (2 consecutive defaults or 180 days which ever is later, of payment obligations in the Company) remaining uncorrected, the Existing Lenders remedies would include, but not be restricted to: o o o o Revoke the reliefs and concessions granted under the present Scheme; Change or take over of management/sale or lease of business of the Company; Enforcement of security interest in accordance with the provisions of the SARFAESI Act; and Conversion of all defaulted amounts into Equity Shares at par subject to the guidelines issued or at such price as may be determined in accordance with the guidelines issued by Securities and Exchange Board of India (SEBI), if applicable.

In case the cash flows of the Company so warrant, the Existing Lenders at their discretion will have the right to accelerate the payments of their loans as mentioned in para 2 C.(ii) above. In addition, the Existing Lenders will have right to recompense sacrifices made under this Scheme from 70% (the balance shall be available to the Company for its reinvestment in the business) of surplus operational cash flows, arising during the currency of the assistance of the Company. 40

The Company shall always ensure that more than half of its Board of Directors shall always be comprised of non-promoter and professional directors. The promoter directors shall not be more than 50%. The Company shall constitute Committees of its Directors in compliance with the provisions of law and the Listing Agreement, if applicable. The Existing Lenders shall be entitled to appoint from time to time, one or more person(s), whether the Existing Lenders employee(s) or not, as director(s) (the Nominee Director) on the Board of Directors of the Company for which purpose, the Company shall promptly take necessary corporate and regulatory actions and authorizations to implement such appointment by the Existing Lenders. The Nominee Director shall not be required to hold any qualification shares and, subject to provisions of Articles of Association of the Company and the Act, shall not be liable to retire by rotation. If required by the Existing Lenders, the Nominee Director shall be also included as a member of any Management Committee or other Committee(s) that may be constituted by the Board of Directors of the Company. The Nominee Director shall be entitled to all the rights and privileges of other directors of the Company and shall also have the right to receive notices of and attend all general meetings and Board meetings of the Company and meetings of any Committee of the Company of which the Nominee Director may be a member. The Nominee Director shall be paid the same sitting fees, commission, remuneration and expenses as shall be payable to other non-wholetime directors. The Company shall pay the sitting fees, in case such Nominee Director is not an employee of the Existing Lenders to the Nominee Director directly, and in other cases to the Existing Lenders. All other expenses incurred / to be incurred by Nominee Directors shall be paid to them directly. However, the commission, if any payable to Nominee Director, shall accrue to the Existing Lenders and accordingly be paid by the Company directly to the Existing Lenders. In addition, any expenses that may be incurred by the Existing Lenders on such Nominee Director during the currency of directorship shall also be paid or reimbursed by the Company to the Existing Lenders. No Nominee Director appointed as aforesaid shall incur any obligation or liability by reason only of his being a director or for anything done or omitted to be done in good faith in the discharge of his duties as a director or anything in relation thereto. The Company shall indemnify every Nominee Director and the Existing Lenders against all actions and proceedings, and losses and expenses suffered or incurred by the Nominee Director or the Existing Lenders in, or in relation to, the discharge of his duties as such director. The Company shall furnish agenda notes of the meetings of its Board of Directors to the Existing Lenders whenever required by it provided that agenda notes of Board Meetings at which Companys annual accounts shall be taken up for consideration shall be forwarded by the Company well in advance even if not specifically called for by the Existing Lenders. The Company further covenants and agrees that until full and final payment by the Company of all its indebtedness to the Existing Lenders, as stipulated under the Scheme, it shall not, without the prior written consent of Monitoring Committee: o o o o create any mortgage, charge, lien or other encumbrance in any form whatsoever over any of its properties and assets; enter into any merger / amalgamation or consolidation or any scheme of arrangement or compromise for the benefit of its creditors, or sell, lease or transfer all or any part / portion of its undertaking or division (s) and/or fixed assets other than in ordinary course of business; create, incur or assume any further indebtedness of any nature whether for borrowed money or otherwise except in normal course of business; and assume, guarantee, endorse or in any manner become directly or contingently liable for or in connection with the obligation of any person, firm, company or corporation except for transactions in the ordinary course of business: amend its Memorandum and Articles of Association; allow transfer or disposal of shareholding of any promoters in its equity or quasi equity capital or permit withdrawal of any subordinated loans or deposits obtained at any time by Birla VXL from its Promoter, directors and their friends and associates or the Working Capital requirements of Birla VXL, or make prepayment of any long term debt; declare or pay any dividend or make any distribution to any of the shareholders; and 41

extend any loan or advance or place deposit in the nature of loan with any company.

Existing Lenders shall have the right to convert from time to time during the currency of the assistance, either in whole or part of the defaulted amount payable by the Company, into fully paid-up equity shares of the Company, at par, subject to the guidelines issued by Securities and Exchange Board of India (SEBI), if applicable, from such date (date of conversion) and in such manner as may be specified in a notice in writing to be given by the Existing Lenders to the Company (conversion notice). The Company shall not undertake any new project or expansion or make any investments without the prior approval of the Monitoring Committee. The Company shall not pay any dividend on equity shares without the prior written approval of the Monitoring Committee. The Existing Lenders shall individually and/or jointly, subject to lenders representing a minimum of 26% of the outstanding amount, shall reserve the right in their absolute discretion to cancel, suspend, reduce or modify, including withdrawal with retrospective effect, of all or any of the reliefs / concessions and/or amend or vary the terms and conditions thereof, including restoration of dues of the Company, in the event the Company/OIL (till such time OIL is subsidiary of the Company) /Promoters fails to comply with any of the terms and conditions contained herein. It is clarified for removal of doubts that no consent or agreement of the Company/OIL/Promoters is/will be required for any such action of Existing Lenders. Pursuant to the allotment of Shares by OIL to the Company as per the Scheme, the Company shall pledge the shares so allotted and the shares already held by it in OIL alongwith voting rights to secure the repayment of OIL Loans as stipulated in the Scheme. Notwithstanding anything contained in Clause 3B of Part III of the Scheme, the Monitoring Committee shall be entitled to determine the servicing, repayment and the period thereof of OIL Loans on review of profitability of OIL on a periodic basis. 4. Transfer of OCM Division to OIL With effect from the Appointed Date, subject to the provisions of the Scheme, all the estates, assets, properties, liabilities (subject to the Existing Loans being restructured in terms of the Scheme), obligations, rights, title and interest of OCM Division shall, pursuant to Section 394 of the Act and without any further act or deed, be transferred to and vested in or be deemed to have been transferred to and vested in OIL so as to become as and from the Appointed Date, the estates, assets, properties, liabilities, obligations, rights, title and interest of OIL. With effect from the Appointed Date and up to and including the Effective Date, (a) The Company shall be deemed to have been carrying on and to be carrying on all business and activities relating to OCM Division and stand possessed of all the assets, properties, liabilities, obligations, rights, title and interest of OCM Division for and on account of, and in trust for, OIL ; and (b) all profits accruing to the Company, or losses arising or incurred by it (including the effect of taxes if any thereon) or all expenses, relating to OCM Division including common allocated expenses, shall for all purposes, be treated as the profits, taxes, expenditures or losses, as the case may be, of OIL .

Upon the Scheme being effective and on transfer and vesting of OCM Division to OIL, OIL shall, without any further application, act or deed shall issue and allot to the Company 1,30,91,363 Equity Shares of the face value of Rs.10 each at par credited as fully paid up.

42

MAIN OBJECTS OF THE COMPANY The main objects of the Company are as follows: (As set out in the Memorandum and Articles of Association of the Company) 1. To carry on the business of spinning, weaving, manufacturing and dealing in wools, jute, flax and hemp, cotton, silk and other fibrous substances, and the preparation, bleaching, dyeing, printing or colouring of any of the said substances, and for that purpose manufacture bleaching, dyeing and other materials and generally to act as merchants for the purchase and sale of yarn, linen cloth, woolen and other worsted stuff, and other fibrous products and goods, whether textile, felted, netted or looped, and to do all other things and processes which are incidental or connected with all or any of the foregoing trades, businesses or industries. To carry on all or any of the business of silk mercers, silk weavers, cloth manufacturers, hosiers, carpet makers, makers and suppliers of clothing lingerie, and trimmings of every kind, furriers, milliners, glovers, lace makers and dealers, feather dressers and merchants, hatters, importers and wholesale and retail dealers in any of the foregoing and in textile fabrics of all kinds. To wash, clean, purify, scour, bleach, wring, dry iron, colour, dye, disinfect, renovate and prepare for use all articles of wearing apparel, household, domestic and other linen, cotton and woolen goods and clothing and fabrics of all kinds.

2.

3.

The object clause of the Company enables the Company to undertake the activities for which funds are being raised in the present issue. Changes in the Memorandum of Association Change of Name The Company was incorporated as Shree Digvijaya Woollen Mills Limited on 15/03/1948 with Registrar of Companies, Nawanagar State. Thereafter the name of the Company was changed to VXL India Limited on 13/06/1986 and subsequently to Birla VXL Limited on 05/04/1995 and fresh certificate of incorporation consequent to change of name was obtained from the Registrar of Companies, Gujarat, Dadra & Nagar Haveli. Change in Authorised Share Capital The Company was incorporated with authorized share capital of Rs.100 Lacs divided into 35000 8.57% Cumulative Preference Shares of Rs.100/- each and 6,50,000 Ordinary Shares of Rs.10/- each. The authorized share capital of the Company was changed from time to time. The present authorized share capital of the Company is Rs.12500 Lacs divided into 8,00,00,000 equity shares of Rs.10/- each, 25,00,000 preference shares of Rs.100/- each and 2,00,00,000 Cumulative Redeemable Preference Shares of Rs.10/- each.

43

SUBSIDIARIES OF THE COMPANY: The Company at present has three subsidiaries namely; VXL Technologies Limited, OCM India Limited., and Masuzawa Punjab Silk Limited. The details of these subsidiaries are as follows: 1. VXL Technologies Limited (VTL) VTL was originally incorporated on December 28, 1966 under the name of Eastern Electronics (Delhi) Pvt. Ltd. Later on its name was changed to Unitron Ltd. with effect from July 5,1979 and then to VXL Engineers Ltd. with effect from December 7,1993, and thereafter to VXL Technologies Ltd. with effect from July 16,2001. The Registration No. of VTL is 05-35163. VTL is a wholly owned subsidiary of the Company and is engaged in the business of manufacturing of ammunition parts and accessories, two way radio communication equipment and microwave components and connectors. The Board of Directors of VTL consists of the following persons: Shri B D Bose Shri M P Sarda Shri R B Putatunda Shri A C Mukherji Dr. D K Ghosh

The financial performance of VTL based on its audited accounts is given below: (Rs in Lacs) Particulars For the year ended/as at 31.3.2006 Sales and Other Income Profit after Tax Equity Share Capital Preference Share Capital Net Reserves Book Value (Rs) EPS (Rs) 2860.38 64.95 2000.00 1000.00 (25.34) 9.87 (0.44) 31.3.2005 2627.17 132.04 2000.00 1000.00 (90.28) 9.55 (0.11) 31.3.2004 2779.28 132.93 2000.00 1000.00 (221.83) 8.88 (0.10)

For details of outstanding litigations against VTL please refer to section Outstanding Litigations and Defaults beginning on page (99). 2. OCM India Limited (OIL) OIL was originally incorporated on August 28, 1922 under the name of The East India Carpet Co. Ltd. as a Private Company, limited by shares. Later on, its name was changed to OCM India Ltd. with effect from January 11, 1989. The Registration No. of the OIL is 38 of 1922-23. OIL is a wholly owned subsidiary of the Company and is engaged in the business of manufacture of woolen worsted fabrics at its mills at Amritsar, and sells its product under OCM brand. The Scheme of Arrangement (Scheme), under Sections 391 to 394 of the Companies Act, 1956, between Birla VXL Ltd. and its Existing lenders, Creditors and Shareholders and OIL and its Shareholders, has been approved by the Honble High Courts of Gujarat and Punjab & Haryana vide their orders dated February 20, 2006 and February 23, 2006 respectively, and has become effective upon filing of the orders of the Honble courts with the respective Registrars of Companies on March 30, 2006. Pursuant to the said scheme the OCM Division of the Company has been transferred to OIL with effect from July 1, 2004, the Appointed Date under the Scheme. The Board of Directors of OIL consists of the following persons: Shri N L Hamirwasia Shri Rajendra Singhvi Shri Rajeev Surana Shri Golam Momen

The financial performance of OIL based on its audited accounts is given below: (Rs in Lacs) 44

Particulars

For the year ended/as at 31.3.2006# (6 months) 4476.58 (896.18)* 22.50 1309.14 30.9.2005 (18 months) 58.11 (4.69) 22.50 31.3.2004

Sales and Other Income 49.42 Profit/(Loss) after Tax (15.54) Equity Share Capital 22.50 Equity Share Suspense (shares since allotted to the Company) Net Reserves (986.67) (90.49) (85.80) Book Value (Rs) (438.52) (30.22) (28.13) EPS (Rs) (Basic & Unannualised) (398.30) (2.08) (6.91) # including figures of OCM Division transferred from Birla VXL Limited pursuant to the Scheme * including net loss of Rs 785.52 lacs pertaining to OCM Division for the period from the Appointed Date till 31.12.2005 In terms of the Scheme, the restructured loans transferred to OIL as part of the OCM Division are to be settled in full out of the net proceeds from the disposal of the said division/shares held by the Company in OIL, the process for which has been initiated. For details of outstanding litigations against OIL please refer to section Outstanding Litigations and Defaults beginning on page (99). 3. Masuzawa Punjab Silk Limited (MPSL) MPSL was originally incorporated on October 16, 1995 under the name of Birla Masuzawa Silk Ltd. Later on its name was changed to Masuzawa Punjab Silk Ltd. with effect from September 1, 2000. The Registration No. of the company is 16-17164. MPSL is engaged in the business of manufacturing spun silk yarn. BVXL is holding 60% of the paid up capital of MPSL. In terms of agreement with Punjab State Industrial Development Corporation Ltd. (PSIDC), BVXL was to buy back, from PSIDC, 7,50,000 equity shares subscribed by them in MPSL. The price for the shares has since been paid to PSIDC; and the shares are in the process of transfer. Board of Directors of MPSL consists of the following persons: Shri D.P. Goenka Shri Hideaki Masuzawa Shri Rajeev Surana Shri Rajan Kapur

The financial performance of MPSL based on its audited accounts is given below: Particulars Sales and Other Income Profit/(Loss) after Tax Equity Share Capital Preference Share Capital Net Reserves Book Value (Rs) EPS (Rs) (Rs in Lacs) For the year ended/as at 31.3.2006 31.3.2005 31.3.2004 41.92 (342.34) 500.00 15.00 (1652.17) (23.30) (6.85) 44.87 (112.86) 500.00 15.00 (1309.83) (16.20) (2.26) 95.58 (109.79) 500.00 15.00 (1196.97) (13.94) (2.20)

MPSL is a sick industrial company within the meaning of Section 3(1)(o) of SICA on account of erosion of its net worth, due mainly to continued default by the collaborator, to whom notice has been served for due performance. Necessary reference was made to Board for Industrial and Financial Reconstruction as per the provisions of SICA. The liabilities of MPSL towards Export Import Bank of India (Exim Bank), for which the Company had furnished corporate guarantee, was resolved through one-time settlement. In terms of the said settlement, Exim Bank took possession of movable and immovable assets of MPSL under SARFAESI, and is in the process of disposal of the same. For details of outstanding litigations against MPSL please refer to section Outstanding Litigations and Defaults beginning on page (99). 45

SHAREHOLDERS AGREEMENT Pursuant to the Scheme of Arrangement The Promoters of Birla VXL shall enter into a buyback agreement related to the Equity Shares issued and allotted by Birla VXL to the existing lenders. Under the said agreement, the Promoters shall have a first right of refusal to buy back the Equity Shares at any time when the said Equity Shares are to be offered for sale by the Existing Lenders. Provided that the Existing Lenders shall not create any third party rights on the said Equity Shares which may result in change in management control of BVXL till such time there is no event of default. Till date such agreement has not been entered into by the Promoters of BVXL. OTHER AGREEMENTS Besides the joint venture agreement entered with Dormeuil Freres, SA and agreements entered into normal course of business, the Company has not entered into any other agreement. JOINT VENTURE Dormeuil Birla VXL Limited (DBVL) DBVL is joint venture between the Company and Dormeuil Freres SA (Dormeuil), a company incorporated in France and having its registered office at 14, avenue du 1 er MAI 91120, Palaiseau, France. DBVL was incorporated on January 13, 1997 and its Registration No. is 21-82750. Dormeuil holds 51% of the share capital of DBVL, and the balance 49% is held by BVXL. Dormeuil has entered into agreement with DBVL for providing Technical Know-how and assistance, to use Trade Mark, to supply products and contract manufacturing. DBVL presently imports Dormeuil brand suiting fabrics and accessories for marketing in India. The Board of Directors of DBVL comprises Shri S.K. Birla, Shri C.L. Goswami, Shri B.D. Bose, Shri C.S. Robinson and Shri J. Campbell. The financial performance of DBVL based on its audited accounts is given below: Particulars Sales and Other Income Profit/(Loss) after Tax Equity Share Capital Net Reserves Book Value (Rs.) EPS (Rs.) 31.12.2005 127.43 1.19 140.00 6.50 10.46 0.09 (Rs. in lacs) For the year ended/as at 31.12.2004 31.12.2003 127.76 87.21 18.70 5.49 140.00 140.00 5.30 (13.40) 10.38 9.04 1.34 0.39

46

E.

MANAGEMENT

Board of Directors
Name, Age, Designation, Qualification, Address, Experience, Nationality S. K. Birla (72) Chairman (Promoter and Non-Independent) Science Graduate 3/1, Raja Santosh Road, Kolkata 700 027 Industrialist Indian Sidharth Birla (49) Vice-Chairman (Promoter & NonIndependent) B.Sc (Hons), MBA from IMD, Lausanne, 29, Prithviraj Road, New Delhi 110011 Entrepreneur & Company Director Indian A. N. Lalbhai (89) Director -Independent B.Sc. Shalimar, Shahibag, Ahmedabad 380 004 Industrialist Indian Arvind Agarwal (46) Nominee Director of Govt. of Gujarat Non-Independent M.Com, ACA, IAS 16/302, Satyagrah, Chhavni, Near Bhavnirzar, Satellite Road, Ahmedabad 380 015 Govt. Service (Industries Commissioner Govt. of Gujarat) Indian R. K. Choudhury (70) Director -Non-Independent B.Com, LLB Suryakiran, Flat No. 403 4A, Ashoka Road Kolkata 700 027 Advocate Indian Other Directorship Birla Bros. Pvt. Ltd. Birla Eastern Ltd. Dormeuil Birla VXL Ltd. Mysore Cements Ltd. Navin Investments Ltd. Pilani Investment and Industries Corpn. Ltd. Mysore Cements Ltd. Xpro India Ltd. Sutlej Cotton Mills Supply Agency Ltd. Xpro Global Ltd. Terxpro Films Pvt. Ltd. Date of Appointment 23/04/1981 Date of expiration of current term Rotational

02/07/1984

Rotational

Atul Ltd. Arvind Products Ltd. J.K. Industries Ltd. Lok Prakashan Ltd. The Arvind Mills Ltd. Arvind Overseas (M) Ltd. Gujarat Agro Industries Corpn. Ltd. Alcock Ashdown (Gujarat) Ltd. Gujarat Port Infrastructure Development Co. Ltd. Gujarat Adani Port Ltd. Gujarat Small Industries Corpn. Ltd. Gujarat Industrial Investment Corpn. Ltd. Gujarat Chemical Port Terminal Co. Ltd.

23/10/1953

Rotational

24/04/2004

NonRotational

Dr. G. Goswami (66) Director -Independent M.Tech, Ph.D 3B, Vatika 43D, Biren Roy Road (East) Kolkata 700 008 Retired Company Executive Indian

Balrampur Chini Mills Ltd. Khaitan Consultants Ltd. Lynx Machinery & Commercials Ltd. Puja Corpn. Ltd. Reliance Bengal Industries Ltd. RKDK International Ltd. Suryakiran Apartment Services Pvt. Ltd. Upper Ganges Sugar & Industries Ltd. Elpro International Ltd. Travel Hub Pvt. Ltd. EITA India Ltd. Essar Steel Ltd. Naffar Chandra Jute Mills Ltd. FCL Technologies & Products Ltd. Rishra Investment Ltd. Amar Investments Ltd. Ganpati Sugar Industries Ltd. Essar Oil Ltd. AI Champdany Industries Ltd. Shibir India Ltd. Mysore Cements Ltd. OCM India Ltd.

22/06/1992

Rotational

31/07/2002

Rotational

N. L. Hamirwasia (71) Director, Promoter and Non-Independent B.Sc. MBIM (Lon) 44/1, Fairfield Layout, Bangalore 560 001 Company Executive Indian

30/03/1993

Rotational

47

Name, Age, Designation, Qualification, Address, Experience, Nationality G. Momen (73) Director - Independent Bachelor of Arts 5, Dover Park, Kolkata - 700019 Businessman Indian

Other Directorship Appejay Tea Ltd. Baghmari Tea Co. Ltd. Bengal Tea & Fabrics Ltd. White Cliff Properties Pvt.Ltd. Empire & Singlo Tea Co.Ltd. Jutlibari Tea Co. Ltd. Kanco Enterprises Ltd. OCM India Ltd. Scottish Assam (India) Ltd. White Cliff Tea Pvt. Ltd. White Cliff Holdings Pvt. Ltd. Dover Tea Pvt. Ltd. Harrisons Malayalam Ltd. Williamson Magor & Co.Ltd. Aekta Ltd. Asiatic Oxygen Ltd. Kirloskar Pneumatic Co.Ltd. NPR Finance Ltd. Sahara India Life Insurance Co. Ltd. Titan Industries Ltd. U.T. Ltd. VXL Technologies Ltd. Gujarat State Petroleum Corpn. Ltd. Gujarat State Energy Generation Ltd. Gujarat State Petronet Ltd. Gujarat Narmada Valley Fertilisers Co. Ltd. GSPC Gas Co. Ltd. Bharuch Eco Aqua Infrastructure Ltd. Effluent Channel Project Ltd. Gujarat Chemical Port Terminal Corp. Ltd. SAR Infracon Pvt. Ltd. Dahej SEZ Ltd. GSPC Pipavav Power Co.Ltd. Gujarat Urja Vikas Nigam Ltd. Drap Leasing & Finance (Pvt.) Ltd. Drap Plastics Pvt. Ltd.

Date of Appointment 31/01/2000

Date of expiration of current term Rotational

A. C. Mukherji (81) Director - Independent M.A., Fellow of Insurance Institute of India (FII) CD-254, Sector - 1 Salt Lake City Kolkata 700 064 Retired Company Executive Indian P. K. Pujari (49) Nominee Director of Govt. of Gujarat - Non-Independent B.A. (Eco), M.A. (Eco), M.Sc in Macro Eco. & Policy & Planning A/304, Bagheshree Apartment, Satellite Road, Iskon Mandir, Ahmedabad Govt. Service (Vice-Chairman & Managing Director, GIDC, Govt. of Gujarat) Indian C. L. Rathi (60) Managing Director B.Com (Hons), LLB, FCS, FCA 12, Gouri Apartment, 3-4, South End Lane, New Delhi 110 011 Company Executive Indian Rajeev Surana (43) Whole-time Director designated as Executive Director & Chief Operating Officer B.Com (Hons), FCA G-1, Saket, 3rd Floor, New Delhi 110 017 Company Executive Indian

22/06/1992

Rotational

24/04/2004

NonRotational

01/06/1998

31/05/2009

OCM India Ltd. Oriental Vinyls Ltd. Digjam Apparel Ltd. Masuzawa Punjab Silk Ltd.

01/11/2005

31/10/2010

48

Compensation of Directors Compensation to Managing Director Shri C.L. Rathi was appointed as Managing Director of the Company, for a period of three years with effect from June 1, 2006, subject to such approvals including of the Central Government as may be necessary, with liberty to either party to terminate the appointment on three months notice in writing to the other at a remuneration and on the terms set out below : Salary : Rs.1,75,000/- per month, subject to such periodic increments upto a total of Rs.1,85,000/- per month, as may be recommended by the Remuneration Committee and approved by the Board, provided that all emoluments paid shall in any case be within the overall limits laid down by Schedule XIII to the Companies Act, 1956 and any amendments/re-enactment thereof. Not exceeding 2% of the net profits of the Company computed in the manner laid down under Section 309(5) read with Section 198(1) and Sections 349 and 350 of the Companies Act, 1956; however, the actual amount of commission to be paid will be determined at the absolute discretion of the Remuneration Committee and the Board/Committee of the Board in respect of each year or part thereof. Category : A i) Housing : The expenditure by the Company on hiring furnished accommodation will be subject to a ceiling of 60% of the salary, over and above 10% payable by him as may be determined by the Board or Remuneration Committee from time to time. No expenditure shall be incurred by the Company on gas, electricity and water charges which will be borne/recompensed by Shri C.L. Rathi. Medical Reimbursement : Reimbursement of actual medical expenses incurred in India or abroad and including hospitalization, nursing home and surgical charges for Shri C.L. Rathi and family. Leave and Leave Travel Concession : As per Rules of the Company. Club Fees : Subject to a maximum of two Clubs. This will not include Admission and Life Membership Fee. Personal Accident Insurance :Premium not to exceed Rs.4,000/- per annum.

Commission

Perquisites

ii) iii) iv) v) :

Category : B In the computation of the ceiling on remuneration specified in Para I, II and III above, the following perquisites shall not be included : contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Incometax Act, 1961; ii) gratuity payable at a rate not exceeding half a months salary for each completed year of service ; and iii) leave with full pay or encashment thereof as per rules of the Company. i)

Category : C Provision of one car with driver for use on Companys business and telephone at residence not to be considered as perquisites. Personal long distance telephone calls and use of car for private purpose shall be billed by the Company as far as practicable on actual basis, failing which on an estimated basis. For the purpose of calculating the above ceiling, perquisites shall be evaluated as per Income-tax Rules, 1962 wherever applicable and in the absence of any such rules, perquisites shall be evaluated at actual cost. 49

Overall Remuneration

Provided that all emoluments paid and value of perquisites granted shall in any case be within the overall limits laid down by Schedule XIII to the Companies Act, 1956 and any amendment/re-enactment thereof. Notwithstanding, where in any corporate financial year, during the currency of tenure of service of the Managing Director, the Company has no profits or its profits are inadequate, it may pay him remuneration by way of salary and perquisites not exceeding the limits specified above as minimum remuneration but within the limits specified in Para 1(A) of Section II of Part II of Schedule XIII to the Companies Act, 1956.

Minimum Remuneration

Compensation to Wholetime Directors Shri Rajeev Surana was appointed as a Wholetime Director designated as Executive Director & Chief Operating Officer (ED and COO) for a period of five years w.e.f. November 1, 2005, with liberty to either party to terminate the appointment on three months notice in writing to the other, at a remuneration by way of salary, perquisites and other allowances as detailed below : Salary : Rs. 1,00,000/- per month (with annual increments w.e.f. 1.4.07 as may be recommended by the Remuneration Committee and approved by the Board/ Committee of Board, upto a maximum salary of Rs. 1,35,000/- per month). Not exceeding 2% of the net profits of the Company, computed in the manner laid down under Section 309(5) read with Section 198(1) and Sections 349 and 350 of the Companies Act, 1956 ; however, the actual amount of commission to be paid will be determined at the absolute discretion of the Remuneration Committee and the Board/Committee of the Board in respect of each year or part thereof. Upto Rs. 35,000/- per month. No expenditure shall be Rent Allowance incurred by the Company on gas, electricity and water charges which will be borne/recompensed by Shri Rajeev Surana. Rs. 25,000/- per month (no retirement or terminal benefits are payable on special allowance). a) Reimbursement of medical/hospitalization the expenses for self and family; b) Personal Accident Insurance; c) Use of Car(s) and Telephone(s) at Residence; d) Leave & Leave Travel concession. Perquisites/Benefits shall be valued as per IncomeTax Rules, 1962 wherever applicable, and in absence of any such Rules perquisites shall be valued at actual cost. Contribution to Provident, Superannuation or Annuity Fund to the extent these either singly or put together are not taxable under the Income Tax Act, 1961; b) Gratuity at the rate of 15 days salary for each completed year of service, at the end of the tenure; and c) Encashment of un-availed leave at the end of the tenure. Notwithstanding anything contained herein, in the event of inadequacy or absence of profits in any year as computed under Sections 349 and 350 of the Companies Act, 1956 as amended, it is proposed to pay the above remuneration, by way of minimum remuneration, wherever necessary with the approval of the Central Government. a)

Commission

Housing/House

Special Allowance Perquisites/Benefits (In each case subject to Rules of the Company)

: :

Other Perquisites (not to be included in the computation of the ceiling on remuneration specified above in paragraphs i, ii, iii, iv and v.) Minimum Remuneration

50

Compensation to non executive Directors The Directors other than executive directors are presently being paid sitting fees of Rs. 4,000/- for each meeting of the Board or its committees attended by them. No commission is paid to any Director. Borrowing powers of Directors As per the Articles of Association of the Company (Article 73) the Board of Directors of the Company may, from time to time at its discretion, subject to the provisions of Sections 292 and 293 of the Companies Act, raise or borrow, either from the Directors or from banks and financial institutions and secure the payment of any sum of money for the purposes of the Company. Vide resolution dated 25th April, 1994 approved by the members at the General Meeting, the Board of Directors is empowered to borrow up to Rs.750 crores exclusive of interest and other monies due thereon. Compliance with Corporate Governance requirements The Company has complied with SEBI guidelines in respect of Corporate Governance specially with respect to broad basing of Board, Constituting the committees. The extract of report on Corporate Governance as required under Clause 49 of the Listing Agreement with the Stock Exchange is set out below: A. Board of Directors The Board presently consists of 12 Directors, of which 10 are non-Executive. The Chairmans position is basically non-Executive and non-managerial in character and the Vice-Chairman officiates in his absence. Shri C.L. Rathi is the Managing Director of the Company and as Corporate Head contributes to the Companys overall management, particularly in the policy sphere and in addressing correlated priority issues, including mobilisation of resources & resolution of debts and is responsible for corporate level activities including Board and Committee Meetings, corporate accounts, statutory audit, corporate governance and related compliances, subject to the overall general supervision, control and direction of the Board. Shri Rajeev Surana is the Executive Director and Chief Operating Officer (ED & COO), for the core (textile) business and as Business Head is accountable to the Board through the Managing Director for profitable, dayto-day and overall operations of the textile business, holding prime responsibility to achieve strategic, financial and operational goals and objectives of the textile business. He is also responsible for ensuring timely compliance with all relevant rules, laws and regulations including inter alia various Industrial and Labour Laws, as may be applicable, industrial relations, appropriate liaison with local administration(s), utilities, State and Central Governments pertaining to the textile business and its divisions. The ED and COO reports to the Board through the Managing Director and discharges his functions subject to the overall superintendence, control and direction of the Board. Each unit of the Company is headed by senior and experienced officers, who report to the ED and COO and attend to the day-to-day working of the units. The SEBI Code requires that in the case of a non-executive chairman, at least one-third of the Board should comprise of independent directors. Out of 12, Board of Directors has 4 Independent Directors, viz. Shri Arvind N. Lalbhai, Shri G. Momen, Shri A.C. Mukherji and Dr. G. Goswami. None of the Directors (except Shri S.K. Birla and Shri Sidharth Birla) are related to each other or to promoters. The Independent Directors play an important role in deliberations at the Board level and bring to the Company their wide experience in fields of industry, banking and finance, law and administration and contribute significantly to Board Committees. Their independent role vis--vis the Company means that they add a broader perspective, help ensure that interests of all shareholders are kept in acceptable balance and can also provide an objective view in a potential conflict of interest between stakeholders. As required by law, the appointment(s) and remuneration(s) of any Executive Director(s) require the approval of the shareholders, the period of such appointments are not more than five years and, when eligible, they qualify for re-appointment at the end of their term. One third of the rotational Directors retire every year and, when eligible, qualify for re-appointment. Nominees of the Govt. of Gujarat do not usually retire by rotation. Specified details are provided in the notice for appointment or re-appointment of a Director.

51

B. Composition & category of Directors:The Board of BVXL consists of 12 Directors. The composition and category of Directors is as follows: Name of Directors S.K.Birla Sidharth Birla A.N.Lalbhai Arvind Agarwal R.K.Choudhury Dr.G.Goswami N.L.Hamirwasia G.Momen A.C.Mukherji P.K.Pujari C.L.Rathi Rajeev Surana Designation Chairman Vice Chairman Director Director Director Director Director Director Director Director Managing Director Executive Director & Chief Operating Officer Category Promoter Promoter Independent Nominee Non Independent Independent Promoter Independent Independent Nominee Executive Executive

C. Constitution and composition of Committees formed :1. Audit Committee The terms of reference of the Audit Committee, as specified by the Board in writing, include the role specified in the SEBI Code and the Companies (Amendment) Act, 2000, including a review of audit procedures and techniques, financial reporting systems, internal control systems and procedures besides ensuring compliance with regulatory guidelines. The committee members are all Independent Directors collectively having requisite knowledge of finance, accounts and company law. The committee recommends the appointment of external Auditors and their fees/payments and also takes an overview of the financial reporting process to ensure that financial statements are correct, sufficient and credible. The reports of the statutory and internal auditors are reviewed along with managements comments and action-taken reports. The committee has explicit authority to investigate any matter within its terms of reference and has full access to the information, resources and external professional advise which it needs to do so. The committee comprises Shri A.C. Mukherji (as its Chairman), Shri G. Momen and Dr. G. Goswami and is mandated to meet at least four times in a year; to assess the final audited accounts and to review each quarter, the limited review report before they are put up to the Board. The Secretary of the Company acts as the Secretary to the Audit Committee. 2. Remuneration Committee The Remuneration Committee comprises of non-executive Directors, majority of whom are independent. Presently the committee comprises of Shri A.C. Mukherji- Chairman, Shri G. Momen, Dr. G. Goswami and Shri R.K. Choudhury. The committee would make recommendation to the Board for induction of any new Director in the Board and also helps ensure that non-executive Directors make decisions on appointment, remuneration, assessment and progression of Executive Directors; any compensation of non-executive directors is a subject only for the whole Board. The Directors other than executive directors are paid sitting fees of Rs. 4,000/- for each meeting of the Board or its committees attended by them. No commission is paid to any Director. 3. Shareholders / Investors grievance Committee The committee reviews, records and helps expedite transfer of shares. The committee meets quite frequently throughout the year to minimise any delays in the transfer process. Any shareholders grievance is referred to this committee in the first instance, for earliest resolution of any problem. The Secretary, Shri Girish Bhatia is appointed as Compliance Officer under relevant regulations. This committee comprises of Shri A.C. Mukherji (Chairman), Shri R.K. Choudhury and Shri C.L. Rathi. 4. Committee of Directors In addition to the above, a Committee of Directors comprising of Shri S.K. Birla, Chairman, Shri Sidharth Birla, Vice-Chairman, Shri R.K. Choudhury, Shri A.C. Mukherji and Shri C.L. Rathi attends to matters specified and/or delegated appropriately by the Board from time to time. 52

Shareholding of Directors Name S.K.Birla A.N. Lalbhai Sidharth Birla Arvind Agarwal R.K. Choudhury Dr. G. Goswami N.L. Hamirwasia G. Momen A.C. Mukherji P.K. Pujari C.L. Rathi Rajeev Surana Interest of Directors All the Directors may be deemed to be interested to the extent of reimbursement of expenses, if any, or normal remuneration/sitting fees or benefits payable to them under the articles. The Directors may also be deemed to be interested to the extent of the shares, if any, held by them or by the relatives or by firms or companies of which any of them is a partner and a Director/ Member respectively and the shares if any, out of the present Offer that may be subscribed for and allotted to them or their relatives or any Company in which they are Directors / members of firms in which they are partners. Changes in Board of Directors The changes in the Board of Directors since past three years are as follows: Name of Director Shri Sanjoy Gupta Shri Satish Gupta Shri Satish Gupta Shri V.R. Mehta Shri Arvind Agarwal Shri P.K. Pujari Dr. G. Goswami Dr. G. Goswami Dr. S. Ganguly Shri Rajeev Surana Date of Appointment/ Resignation 29/08/2003 29/08/2003 23/01/2004 28/01/2004 24/04/2004 24/04/2004 31/01/2005 01/02/2005 30/07/2005 01/11/2005 Reason for Appointment/Resignation Nomination withdrawn by ICICI Bank Ltd. Nominated by ICICI Bank Ltd. in place of Shri Sanjoy Gupta Nomination withdrawn by ICICI Bank Ltd. Resigned due to personal reasons Nominated by Govt. of Gujarat Nominated by Govt. of Gujarat Nomination withdrawn by Industrial Development Bank of India Appointed as Independent Director Resigned due to personal reasons Appointed as Additional Director and Wholetime Director designated as Executive Director and Chief Operating Officer Number of Shares held 23920 4117 1200 Nil Nil Nil 200 Nil 112 Nil Nil Nil

53

Management Organization Structure

BOARD OF DIRECTORS

MANAGING DIRECTOR

EXECUTIVE DIRECTOR & CHIEF OPERATING OFFICER

PRESIDENT (DIGJAM) VICE PRESIDENT EXPORTS & HEAD UNIVERSAL CLOTHING VICE PRESIDENT (TECHNICAL) VICE PRESIDENT (SALES & MKTG) VICE PRESIDENT (LEGAL)

GENERAL MANAGER (PERSONNEL)

GENERAL MANAGER (FINANCE)

GENERAL MANAGER (CORP. FINANCE)

COMPANY SECRETARY

Details of key managerial personnel The details of the key managerial personnel are as follows: Sr. No 1 2 Name, Age and Designation of the Person Shri C.L. Rathi (60) Managing Director Shri Rajeev Surana (43) Executive Director & Chief Operating Officer Date of appointment 01.06.1998 01.11.1996 Whole-time Director designated as ED & COO wef 01.11.2005 01.05.2006 14.05.1973 01.08.1978 01.11.2003 01.09.1993 Qualifications B.Com (Hons) LLB, FCS, FCA B.Com (Hons) FCA Previous Company Experience (yrs.) Sidharth Soya Products Ltd. (6) Birla Eastern Ltd. (4) Shares held in the Company NIL NIL

3 4 5 6 7

Shri R.K. Kedia (56) President Jamnagar Unit Shri Sarvjit Maheshwari (55) VP (Sales & Marketing Shri Sukhwinder Singh (47) VP (Technical) Shri P.K. Das (49 VP Exports & Head Universal Clothing Shri Bhimji Vora (53) VP & Chief Resident Executive (UK)

B. Text B.Sc. Dip. in Textiles B.Com B.A.

Reliance Ltd. (2) None None

Industries

NIL 60 NIL NIL NIL

Cimmco Birla Ltd. (5) Tech Trade (Singapore) Pte Ltd.

All the abovementioned key managerial personnel are permanent employees of the company. The remuneration of each of the key managerial personnel is as per the provisions of Section 217(2A) of the Companies Act, 1956. The Company has policy to declare bonus to its Key Managerial Personnel on year to year basis at the sole 54

discretion of the Board of Directors. The Company has not offered any profit sharing plan to its Key managerial Personnel. Changes in Key Managerial Personnel during last three years Name Shri P.K. Das Shri G.P. Rao Shri P.L. Suresh Shri A.M. Parekh Shri S.B. Gaekwad Shri M.K. Goenka Shri Sandip Mukim Shri S.K. Agarwal Shri D.P. Goenka Shri Sandip Mukim Shri S.B. Gaekwad Shri A.M. Parekh Shri R.K. Kedia Employees Presently the Company has strength of 1589 personnel. There has been no Employee Stock Option Scheme/ Employee Stock Purchase Scheme in existence as on date. Payments or benefits to the officers of the Company The officers of the Company are provided benefits such as Provident Fund, Housing Rent Allowance, Superannuation and other benefits as per the rules of the Company/in terms of appointment letter(s) other than the salary. Designation & Functional Area VP Exports & Head Universal Clothing VP - HRD VP Universal Clothing Unit Senior President & Chief Executive Officer Joint President - HR President Jamnagar Unit Head Apparel Business & GM Universal Clothing Joint President (Technical), Amritsar Unit President, Amritsar Unit Head Apparel Business & GM Universal Clothing Joint President HR Senior President & Chief Executive Officer President, Jamnagar Unit Date of Change 01/11/2003 23/08/2003 13/09/2003 02/02/2004 03/11/2004 30/06/2004 19/11/2004 30/04/2005 30/06/2005 10/07/2005 10/09/2005 31/01/2006 01/05/2006 Nature Appointed Resigned Resigned Appointed Appointed Resigned Appointed Resigned Resigned Resigned Resigned Resigned Appointed

55

F. PROMOTERS The Company was originally promoted in 1948 by Wattal Family in collaboration with the then Navanagar State. Subsequently, the holding of Wattal family was bought over by the Birla Group in 1950. The Gujarat Government continues to hold the shares originally held by the erstwhile Navanagar State and are entitled to nominate two members on the Board of directors of the Company. The Company is presently a part of the S.K. Birla Group. The details of Promoters are as follows: 1 Shri S. K. Birla, the Chairman of the Board of Directors, aged 72 years, is an entrepreneur and Director of various companies. He has wide experience of over 53 years in the fields of Finance, Marketing, General Management, Board level Corporate Governance, Strategic Issues, Corporate and Finance Structuring, Resource Mobilization, Planning and Budgeting. He was President of various leading Chambers of Commerce like The Federation of Indian Chambers of Commerce, New Delhi, Indian National Committee of International Chamber of Commerce, New Delhi and Indian Chamber of Commerce, Kolkata, Chamber of Commerce of G-77 countries of United Nations, New York. He was previously a member of various Government of India bodies including Prime Ministers National Integration Council, Delhi and official delegation to UNCTAD72 and CAFEA66. He is also associated with several education and philanthropic institutions. Educational Qualification: Science Graduate Driving Licence No.: WB-011952236849 Voter ID No.: N.A. Passport No.: E2834417 PAN AEKPB3108 Shri Sidharth Birla, aged about 49 years, is a MBA from Lausanne and has completed OPM (Owner-President Management) programme at Harvard Business School. He has extensive experience of over 27 years in the fields of Finance, Marketing, General Management, Board level Corporate Governance, Company Law, Strategic Issues, Corporate and financial structuring, resource mobilization.

Educational Qualification: Voter ID No.: Passport No.: PAN

B.Sc (Hons), MBA from IMD, Lausanne CKB1003086 Z1174641 AEKPB3109B

The above details have been submitted to BSE & NSE where the shares of the Company are listed. Common pursuits None of the other S. K. Birla group companies except OCM India Ltd., a subsidiary of BVXL, is engaged in the business of manufacturing woollen/worsted fabric. Except above there are no common pursuits between the Company and its Promoters and group companies. Interest of Promoters The Promoters do not have any interest in the Companys business except to the extent of their shareholding in the Company and returns earned thereon. Related Party Transactions For details please refer page no. (69).

56

G. DIVIDEND POLICY The Company has a policy of rewarding its shareholders by way of payment of dividend out of distributable profit of the Company. The Company had paid uninterrupted dividend for 36 years till the year 1998. However due to adverse market condition and lack of profitability, the Company has not paid any dividend since year 1999.

57

VI. FINANCIAL INFORMATION A. AUDITORS REPORT

AUDITORS REPORT AS REQUIRED BY PART II OF SCHEDULE II TO THE COMPANIES ACT, 1956

The Board of Directors Birla VXL Limited Aerodrome Road Jamnagar 361 006 Gujarat Dear Sirs, 1. We have examined the following financial information of Birla VXL Limited (the Company) prepared in accordance with the requirements of paragraph B(1) of Part II of Schedule II of the Companies Act, 1956 (the Act); the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 as amended from time to time (the SEBI Guidelines) issued by the Securities and Exchange Board of India (SEBI) on January 19, 2000, as amended, in pursuance to Section 11 of SEBI Act, 1992 and related clarifications; and in accordance with the terms of reference received from the company, requesting us to carry out engagement to include the same in the letter of offer of the company in connection with its proposed right issue of equity shares in the Company: A) Summary Statement of Assets and Liabilities, As Restated of the Company as at March 31, 2006 (being the last date to which the accounts of the Company have been made up and audited for presentation to the members of the Company), December 31, 2005, June 30, 2004 and Years Ended December 31, 2002 and December 31, 2001 (Annexure 1) B) Summary Statement of Profit and Loss, As Restated for the periods/ years ended March 31, 2006, December 31, 2005, June 30, 2004 and Years Ended December 31, 2002 and December 31, 2001 (Annexure 2) C) Summary Cash Flows Statement, As Restated for the periods/ years ended March 31, 2006, December 31, 2005, June 30, 2004 and Years Ended December 31, 2002 and December 31, 2001 (Annexure 3) D) Significant Accounting policies and Notes to accounts (Annexure 4) E) Statement of secured Loans and assets charged as security as on March 31, 2006 (Annexure 5) F) Statement of unsecured Loans as on March 31, 2006 (Annexure 6) G) Statement of Investments (Annexure 7) H) Statement of Sundry Debtors (Annexure 8) I) J) Statement of Loans & Advances (Annexure 9) Details of other income (Annexure 10)

K) Statement giving Accounting ratios (Annexure 11) L) Capitalisation Statement (Annexure 12) M) Statement of Tax Shelter (Annexure 13) N) Summary Statement of Consolidated Assets and Liabilities, As Restated (Annexure 14) of the Company and its Subsidiaries as at March 31, 2006; December 31, 2005; June 30, 2004; December 31, 2002 and December 31, 2001 (Annexure 14) O) Summary Statement of consolidated Profits & Losses, As Restated of the Company and its Subsidiaries for the years/ periods ended on March 31, 2006; December 31, 2005; June 30, 2004; December 31, 2002 and December 31, 2001 (Annexure 15) P) Summary Statement of consolidated Cash Flow Statement, As Restated of the Company and its Subsidiaries for the years/ periods ended on March 31, 2006; December 31, 2005; June 30, 2004; December 31, 2002 and December 31, 2001 (Annexure 16) 58

Q) Notes to Consolidated Financial Accounts (Annexure 17) R) As Accounting Standard (AS) 21 issued by the Institute of Chartered Accountants of India (ICAI) became mandatory in respect of Accounting periods commencing on or after April 1, 2001, Consolidated Financial Statements/ Information for the year ended December 31, 2001 have not been prepared Statements mentioned in (A) to (M) above are jointly referred to as Summary Statements; and Statements mentioned in (N) to (Q) above are jointly referred to as Consolidated Summary Statements; in this report 2. We have audited the accounts of the company for the periods ended March 31, 2006 and December 31, 2005. We have relied on relevant financial statements of the Company for the years/ periods ended June 30, 2004, December 31, 2002 and December 31, 2001, which were audited by other firm of Chartered Accountants We have audited the consolidated accounts of the Company for the periods ended March 31, 2006 and December 31, 2005. We have relied on relevant consolidated financial statements of the Company for the years/ periods ended June 30, 2004 and December 31, 2002, which were audited by other firm of Chartered Accountants. Further, the Consolidated Summary Statements, As Restated have been examined by us, is based on the audit of the respective subsidiary companies being conducted by their respective auditors. We have not audited any financial statements of the subsidiary companies/ Joint Venture i.e. VXL Technologies Limited (VTL); OCM India Limited (OIL); Masuzawa Punjab Silk Limited (MPSL); Dormeuil Birla VXL Limited (DBVXL); and Sidharth Soya Products Limited (SSPL) The Company has not declared or distributed any dividend during years/ periods ended March 31, 2006; December 31, 2005; June 30, 2004; December 31, 2002 and December 31, 2001 Attention is invited to: 5.1 We are unable to express our opinion on the extent of reliability of Loans and Advances amounting to Rs.880.63 lacs as referred to in Note No. 9b of Annexure 4, adjustment whereof has not been made in the Summary Statements Note No. 9c of Annexure 4 for retrospective adjustments not being made in the Summary Statements for the period ended December 31, 2005 in respect of provisions of Scheme of Arrangement, the appointed date of which is July 1, 2004, which became effective on March 30, 2006; and for earlier periods/ years in respect of Effect of Financial Restructurings/ Settlements/ Assignment with Financial Institutions/ Banks/ Asset Reconstruction Company effective from the respective dates of such Sanctions, etc. Note No. 12a of Annexure 4 relating to Nonavailability of balance confirmation from certain lenders, debtors, creditors etc. Note No. 12b of Annexure 4 regarding going concern assumption.

3.

4. 5.

5.2

5.3 5.4 6.

We report that the Summary Statements and Consolidated Summary Statements referred to in Para 1 above, subject to our comments in Para 5 above, have been prepared in accordance with the provisions of Part II of Schedule II of the Act and SEBI Guidelines. This report is intended solely for your information and for inclusion in the Letter of Offer in connection with the Proposed Right Issue of the Company and is not to be used, referred to or distributed for any other purpose without our prior written consent

7.

For and on behalf of KHIMJI KUNVERJI & CO. Chartered Accountants Sd/Shivji K Vikamsey Partner Membership No. 2242 Mumbai, Dated: July 10, 2006 59

Annexure- 1 SUMMARY STATEMENT OF ASSETS AND LIABILITIES - AS RESTATED AS AT 31.3.2006* A Fixed Assets Gross Block Less : Depreciation Net Block Less : Revaluation Reserve Net Block (after adjustment of Revaluation Reserve) Capital Work-in-progress Total Fixed Assets Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Total Current Assets Total Assets Liabilities and Provisions Secured Loans Unsecured Loans Current Liabilities and Provisions Total Liabilities and Provisions Net Worth (D-E) Represented by Shareholders Funds F G H Share Capital Equity Capital Suspense Reserves Less : Revaluation Reserve Reserves (Net of Revaluation Reserve) Profit and Loss Account Cr/(Dr) Less : Misc. Expenses (not written off) Net Worth (F+G+H+I-J) 1,303.06 3,073.04 (9,516.90) (5,140.80) 10,633.78 15,916.14 3,690.85 12,225.29 (36,610.25) 717.15 (14,468.33) 10,633.78 16,534.97 4,263.01 12,271.96 (32,430.31) 1,206.72 (10,731.29) 10,633.78 17,334.70 4,882.57 12,452.13 (22,322.22) 1,686.49 (922.80) 10,633.78 17,781.85 5,291.31 12,490.54 (15,451.38) 1,612.51 6,060.43 25,763.53 17,309.23 8,454.30 8,454.30 7.77 8,462.07 7,089.78 31.12.2005 57,617.68 36,138.77 21,478.91 3,690.85 17,788.06 5.03 17,793.09 5,780.64 30.6.2004 57,722.01 32,343.13 25,378.88 4,263.01 21,115.87 64.46 21,180.33 11,875.54 31.12.2002 59,434.85 28,423.08 31,011.77 4,882.57 26,129.20 227.80 26,357.00 12,429.28 (Lac Rs.) 31.12.2001 59,368.81 25,249.33 34,119.48 5,291.31 28,828.17 213.97 29,042.14 12,429.28

B C

4,074.98 2,460.00 2,930.34 2,123.76 11,589.08 27,140.93 21,192.52 3,059.39 8,029.82 32,281.73 (5,140.80)

6,378.59 4,280.70 3,269.21 2,536.12 16,464.62 40,038.35 42,495.03 3,183.61 8,828.04 54,506.68 (14,468.33)

6,761.36 3,591.14 94.47 2,609.98 13,056.95 46,112.82 44,588.06 3,199.65 9,056.40 56,844.11 (10,731.29)

8,370.28 6,222.72 135.17 3,185.61 17,913.78 56,700.06 43,778.20 2,494.62 11,350.04 57,622.86 (922.80)

11,573.78 5,964.61 173.86 3,720.45 21,432.70 62,904.12 43,431.53 2,644.61 10,767.55 56,843.69 6,060.43

D E

I J

*Excludes figures of OCM Division transferred to OCM India Ltd pursuant to Scheme of Arrangement, as referred in Note B.1 in Annexure 4. 60

Annexure- 2 SUMMARY STATEMENT OF PROFIT AND LOSS - AS RESTATED 1.1.2006 to 31.3.2006 * Income Sales Gross Sales Less : Excise Duty on Sales Net Sales Other Income Increase/(Decrease) in Inventories Expenditure Materials Cost Manufacturing Expenses Personnel Expenses Administrative Expenses Selling and Distribution Expenses Interest and Finance Charges (Net) Impact of Foreign Exchange Fluctuation on loans Provision for Premium on redemption of loans Provision for Diminution in value of assets Profit/(Loss) before Depreciation and Tax Depreciation and Amortisation Less : Transferred from Revaluation Reserve Net Profit/(Loss) before tax and Exceptional items Exceptional Items (Net) Taxation (including Fringe Benefit Tax) Net Profit/(Loss) for the period Impact of Adjustments Adjusted Net Profit for the period Add : Transfers from Debenture Redemption Reserve Investment Allowance Reserve Balance brought forward Balance carried to Balance Sheet 2,993.56 2,993.56 81.02 141.85 3,216.43 985.29 751.94 448.77 130.62 438.73 184.46 2,939.81 276.62 191.37 191.37 85.25 (61.56) (6.07) 17.62 17.62 (9,534.52) (9,516.90) 1.7.2004 to 31.12.2005 29,258.14 24.25 29,233.89 562.78 (469.37) 29,327.30 10,729.08 6,032.91 4,731.35 1,658.40 3,185.04 1,834.08 28,170.86 1,156.44 4,278.44 560.18 3,718.26 (2,561.82) (1,704.72) 15.86 (4,250.68) 70.74 (4,179.94) (32,430.31) (36,610.25) 1.1.2003 to 30.6.2004 26,940.33 1,667.11 25,273.22 493.85 (820.64) 24,946.43 11,172.66 5,001.98 4,451.63 1,530.08 2,099.15 5,906.69 30,162.19 418.44 (145.71) (4,943.03) 5,188.79 583.98 4,604.81 (9,547.84) (666.37) (2,143.09) (12,357.30) 2,115.71 (10,241.59) 133.50 (22,322.22) (32,430.31) 1.1.2002 to 31.12.2002 21,953.16 1,455.16 20,498.00 511.71 (2,853.63) 18,156.08 7,459.76 3,647.34 3,626.04 1,183.96 1,620.86 4,482.52 22,020.48 33.93 (217.84) (4,048.31) 3,601.19 407.74 3,193.45 (7,241.76) 567.27 1,927.14 (4,747.35) (2,130.79) (6,878.14) 7.30 (15,451.38) (22,322.22) (Lac Rs.) 1.1.2001 to 31.12.2001 22,881.88 1,854.78 21,027.10 650.64 (1,298.44) 20,379.30 7,415.00 4,256.03 3,549.61 1,238.75 1,826.11 2,481.98 20,767.48 (306.73) (381.38) (805.48) (1,881.77) 3,773.23 531.10 3,242.13 (5,123.90) (5,123.90) (15.65) (5,139.55) 344.43 264.00 (10,920.26) (15,451.38)

* Excludes figures of OCM Division transferred to OCM India Ltd pursuant to Scheme of Arrangement, as referred in Note B.1 in Annexure 4. 61

Annexure- 3 SUMMARY CASHFLOW STATEMENT - AS RESTATED 1.1.2006 to 31.3.2006 A Cash Flow from Operating Activities Net Profit/(Loss) before tax and Exceptional Items Adjusted for : Depreciation and Amortisation Interest and Financial Charges Interest and Dividend Income (Profit)/Loss on Sale/Discard of Assets/Investments etc Gain due to Foreign Exchange Fluctuation Premium on redemption of loans Operating Profit before working capital changes Adjusted for : Trade and other Receivables Inventories Trade Payables and other liabilities Cash generated from operations Direct Taxes Payment for voluntary retirements Net Cash from/(used) in Operating Activities.(A) Cash Flow from Investing Activities Purchase of Fixed Assets Proceeds from sale of Fixed assets Sale/reduction of Investments Non-compete fee Interest received Dividend received Net Cash from/(used) in Investing Activities.(B) C Cash Flow from Financing Activities Proceeds from Issue of Preference Shares Advance against infusion of funds Proceeds from/(Repayment of) borrowings (Net) Interest and Financial Charges Deferred Revenue Expenditure Dividend Payment Premium relating to redemption of debentures Net Cash from/(used) in Investing Activities.(C) (28.25) 4.98 87.79 64.52 (34.51) 283.42 2,038.78 250.00 290.07 45.27 2,873.03 (99.08) 1,408.06 393.14 187.96 22.81 1,912.89 (236.40) 267.31 110.08 69.13 210.12 (1,114.49) 1,682.44 22.10 362.78 69.17 1,022.00 1.7.2004 to 31.12.2005 1.1.2003 to 30.6.2004 1.1.2002 to 31.12.2002 (Lac Rs.) 1.1.2001 to 31.12.2001

85.25 191.37 272.25 (87.79) (1.85) 459.23 (454.07) (205.07) 419.84 219.93 (20.33) 199.60

(2,491.08) 3,718.26 2,049.54 (331.47) (120.25) 2,825.00 (412.22) 382.77 (1,850.82) 944.73 165.67 1,110.40

(9,584.26) 4,604.81 6,132.08 (211.78) (196.21) (418.44) 145.71 471.91 2,275.86 1,608.92 (1,256.31) 3,100.38 (14.76) (167.58) 2,918.04

(7,445.41) 3,193.45 4,613.74 (181.68) 8.02 (33.93) 217.84 372.03 (414.95) 3,203.50 302.18 3,462.76 53.52 (452.21) 3,064.07

(5,139.55) 3,242.13 2,859.81 (431.35) (2.48) 381.38 909.94 2,762.93 1,930.15 (513.52) 5,089.50 16.57 5,106.07

(358.09) (225.21) (8.16) (591.46) 62

2,000.00 (1,290.15) (1,510.22) (8.32) (808.69)

332.31 (5,170.34) (8.60) (25.00) (4,871.63)

(335.42) (2,977.21) (0.25) (3,312.88)

2,425.00 (2,434.91) (5,007.26) (1,132.11) (0.53) (6,149.81)

1.1.2006 to 31.3.2006 Net Increase/(Decrease) in Cash or Cash Equivalents (A+B+C) Cash and Cash Equivalent (Opening Balance) Less : Cash and Cash Equivalents transferred to OIL as at 31.12.2005 Cash and Cash Equivalent (Closing Balance)

1.7.2004 to 31.12.2005

1.1.2003 to 30.6.2004

1.1.2002 to 31.12.2002

(Lac Rs.) 1.1.2001 to 31.12.2001

(327.34) 3,269.21 (11.53) 2,930.34

3,174.74 94.47 3,269.21

(40.70) 135.17 94.47

(38.69) 173.86 135.17

(21.74) 195.60 173.86

Notes 1. Figures in brackets represent outflow. 2. Cash and Cash Equivalents include Cash, Cheques, Balance with Schedule Banks

63

Annexure 4 SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS A. Significant Accounting Policies a. Basis of Preparation of Financial Statement The financial statements have been prepared on a going concern basis under the historical cost convention, except in case of certain fixed assets which are revalued, in accordance with the generally accepted accounting principles and provisions of the Companies Act, 1956 as adopted consistently by the Company. The Company follows mercantile system of accounting and recognises significant items of income and expenditure on accrual basis. Whenever it is not possible to determine the quantum of accrual with reasonable certainty e.g. insurance and other claims, refund of custom/excise duty etc., these continue to be accounted for on settlement basis. b. Sales Sales include Excise duty charged to Customers and reported net of turnover/trade discounts, returns and claims. Rebate/discount other than usual allowances accounted for as and when incurred. c. Fixed Assets Stated at cost of acquisition inclusive of freight, duties, taxes, roll over charges of forward contracts on foreign currency loans & incidental expenses related to acquisition/installation, adjusted by revaluation of certain fixed assets. d. Impairment of Assets An asset is treated as impaired when the carrying cost of the same exceeds its recoverable amount. An impairment is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of the recoverable amount. e. Depreciation Depreciation, including on assets acquired under finance lease after January 1, 2002, charged under Straight Line Method in accordance with the rates, on pro rata basis, specified in Schedule XIV of the Companies Act, 1956. Depreciation in respect of increase in value of assets due to revaluation provided on the basis of remaining life of assets as estimated by the valuers. Depreciation on additions due to exchange rate fluctuations provided prospectively over the residual life of the assets. f. Foreign Currency Translation Transactions denominated in foreign currencies normally recorded at exchange rate prevailing at time of transaction. Monetary items denominated in foreign currencies at the year end and not covered by forward exchange contracts translated at year end rates and those covered by forward exchange contracts translated at rate at the date of transaction as increased or decreased by the proportionate difference between the forward rate and exchange rate on the date of transaction, such difference having been recognised over the life of the contract. Any income or expenses on account of exchange difference either on settlement or on translation recognised in the Profit and Loss Account except in cases where they relate to the loans and liabilities incurred for acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets. Fixed assets of foreign offices translated at the original rates consistent with the historical cost concept. Revenue items of foreign offices translated at the average rate of exchange prevailing during the year and resultant net effect considered in the Profit and Loss account. 64

g.

Treatment of Expenditure during construction period Expenditure during construction/erection period allocated to the respective assets on completion of such construction or erection. Interest on borrowings as allocated by management for new/expansion projects calculated in proportion to the purpose for which such funds are allocated and capitalised accordingly.

h.

Investments Long Term investments are stated at cost less provision for diminution in value other than temporary, if any. Current Investments are valued on category basis, at cost or below cost, as the case may be.

i.

Valuation of Inventories Inventories valued at lower of cost and net realisable value, except waste, scrap & byproducts valued at net realisable value. Cost computed on weighted average basis. Finished goods & Process stock include cost of conversion and other costs incurred in bringing the inventories to the present location and condition.

j.

Borrowing cost Interest cost relating to (i) funds borrowed for acquisition of fixed assets capitalised upto the date asset put to use, and (ii) funds borrowed for other purposes charged to Profit & Loss Account.

k.

Taxation Tax liability estimated considering the provisions of the Income Tax Act, 1961. Deferred Tax recognised on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. On prudent basis, Deferred Tax asset recognised and carried forward to the extent that there is reasonable certainty that the assets will be adjusted in future.

l.

Deferred Revenue Expenditure Payment made under voluntary retirement scheme written off over a period of five years. Certain expenditure identified against which benefit is expected to flow into future periods is treated as Deferred Revenue Expenditure and charged to Profit & Loss Account over the expected duration of benefit.

m. Inter Divisional Transfers Transfer of Fixed Assets made at cost and others at realisable value. n. Retirement Benefits Contribution to Provident Fund and Family Pension Fund as incurred charged to Profit & Loss Account, contribution for Gratuity and Superannuation funded either with Life Insurance Corporation of India or otherwise depending upon the respective scheme and liability for encashment of leave as per Actuarial Valuation charged to the Profit & Loss Account. o. Research & Development Expenditure Revenue expenditure charged to Profit & Loss Account under respective heads of account and Capital expenditure added to the cost of Fixed Assets in the year in which it is incurred. p. Government grants Project capital subsidy credited to capital reserve & other government grants including export incentives credited to Profit and Loss account or deducted from related expenses. q. Contingent Liabilities Contingent Liabilities are not provided and are disclosed by way of notes. 65

B. Notes on Accounts 1. Scheme of Arrangement The Scheme of Arrangement (Scheme) under Sections 391 to 394 of the Companies Act, 1956 (the Appointed Date of which is July 1, 2004) has been sanctioned by the Honble High Courts of Gujarat and Punjab & Haryana and became effective upon filing of certified copy of the order of the Honble High Courts with the respective Registrar of Companies at Ahmedabad and Jalandhar on March 30, 2006. Accordingly, the effects of the Scheme, salient ones set out hereunder, have been given in the accounts for the period ended March 31, 2006. a. the Existing Loans and liabilities etc have been restructured, allocated and transferred. b. the effect of reduction of 6,50,71,465 equity shares Rs. 10 each aggregating to Rs. 6,507.15 lacs (on May 5,2006, i.e. the Record Date) into equity shares of Rs. 2 each and consolidation thereof into 1,30,14,293 equity shares of Rs. 10 each fully paid up aggregating to Rs. 1,301.43 lacs considered c. The Preference Share capital of Rs. 4,125.00 lacs reduced to an amount of Rs. 1,031.25 lacs and consolidated into their respective original face value, which has since been converted on April 12,2006, into 61,60,394 Equity Shares of Rs. 10 each fully paid, allotted at a price of Rs. 16.74 (including a premium of Rs. 6.74) per equity share, pursuant to the SEBI Guidelines for Preferential Issues. Pending allotment as on 31.3.2006, the face value of these Rs. 616.04 lacs presented under Equity Capital Suspense. d. Loan Amount of Rs. 2,457 lacs has since been converted on April 12,2006, into 2,45,70,000 Equity Shares of Rs. 10 each fully paid up, allotted at a price of Rs. 16.74 per equity share (including premium of Rs. 6.74), pursuant to the SEBI Guidelines for Preferential Issues. Pending allotment as on 31.3.2006, the face value of these Rs. 2,457 lacs presented under Equity Capital Suspense. e. The Investments/Noncore assets and liabilities, specified in the Scheme, have been allocated to Investment Division (ICo) of the Company. Net proceeds from sale of these assets, net of liabilities etc, shall be utilised for full and final settlement of restructured loans of Rs. 5,000 lacs allocated to ICo (ICo loans). Any shortfall or surplus in the said net proceeds shall be to the account of lenders. f. Assets, liabilities and restructured loans of OCM Division have been transferred to OCM India Limited (OIL) effective July 1,2004 and , as net consideration, OIL has since allotted 1,30,91,363 Equity Shares of Rs. 10 each at par as fully paid up. The Company carried on the business of OCM Division, from the Appointed Date upto the Effective Date, in trust for and on account of OIL and profit/loss, income, expenses including common allocated expenses, etc pertaining to OCM Division for this period has been transferred to OIL. The audited net profit of the said Division Rs. 938.43 lacs and effect on account of depreciation on revaluation amount and deferred revenue expenditure etc. pursuant to the Scheme, pertaining to the period ended December 31,2005 have been transferred from/to the brought forward balance of Profit & Loss Account and other respective accounts. g. The waivers, writedowns, debits/credits pursuant to the Scheme were recorded in Reconstruction Reserve Account and balance of all reserves including premium referred in Notes 1(c) and 1(d) above adjusted against Deferred Revenue Expenditure and debit balance of Profit and Loss Account. The net impact of such adjustments alongwith transfers stated under Note 1(f) above amounting to Rs. 27,075.73 lacs has been adjusted against the debit balance of Profit & Loss Account brought forward. 2. 3. Net Block of Fixed Assets as at March 31,2006 includes Rs. 412.10 lacs pertaining to ICo division of the Company. Investments in shares of some companies, valued herein as at March 31,2006 at Rs. 5,764.80 lacs stand allocated to ICo division and are pledged as security for the ICo Loans. The investments in shares of OIL amounting to Rs. 1,324.14 lacs have since been pledged with lenders to secure the OIL Loans transferred to OIL as part of the OCM Division. Cash and Bank Balances, as at March 31,2006 include net proceeds from investments allocated to ICo and placed in fixed deposits, since utilised towards repayment of ICo Loans (inclusive of Noncompete fee and interest) Rs. 1,112.47 lacs.

4.

66

5.

a. Loans and Advances as at March 31,2006 include amount due from Masuzawa Punjab Silk Limited, a subsidiary company, Rs. 429.00 lacs (net of provisions Rs.750.26 lacs). b. Advances, as at March 31,2006, include those in the nature of interestfree loans to employees Rs. 9.47 lacs, maximum amount due during the period Rs. 14.29 lacs. This includes due from Executive Director Rs. 1.36 lacs, being balance of advance made prior to his appointment as Director, (maximum balance due Rs. 1.66 lacs). Advances, as at March 31,2006, (net of provisions Rs. 963.40 lacs), include Rs. 333.34 lacs against land; Rs. Nil (net of provision Rs. 111.90 lacs) against investments. Further it includes Rs. 880.63 lacs towards building, the physical possession of which has been arbitrarily withheld by the developer. The Company has taken necessary steps to get the possession of the said building/recovery of amounts paid alongwith interest. Necessary adjustments, including interest, will be made on settlement of the ongoing legal/arbitration proceedings. Unsecured Loans as at March 31, 2006, include loan from subsidiary company Rs.964.44 lacs stands allocated to ICo division. Current Liabilities and Provisions, as at March 31, 2006, include (i) Acceptances Rs. 1,224.73 lacs (ii) Advance received against standby underwriting Rs. 2,000 lacs (iii) due to OCM India Ltd., subsidiary company Rs. 16.01 lacs and (iv) Advances from customers Rs. 63.56 lacs. Exceptional items include: 1. for the period ended March 31, 2006, comprise (a) debits for (i) Provision for diminution in value of investments/assets, on realignment of the net value of assets with outstanding loans allocated to ICo as at March 31, 2006 Rs. 262.56 lacs (ii) Provision against advances Rs. 9.00 lacs; and (b) credit for writeback of provision for loan no longer required Rs. 210.00 lacs, for the period ended December 31,2005, comprise (a) debits for (i) Loss on sale of long term investments Rs. 4,056.12 lacs (ii) Provision/writeoff of Loans and Advances Rs. 834.06 lacs (including provision made against advance arising on onetime settlement of dues of MPSL to EXIM Bank, for which the Company was guarantor Rs. 750 lacs) (iii) Loss on Impairment of Fixed Assets Rs. 32.32 lacs and (b) credits for (i) Noncompete fee received related to divestment of certain long term investments Rs. 250.00 lacs (ii) Reduction in Interest and Premium liabilities, pursuant to the approval of proposal by Arcil for restructuring of financial assistance assigned by certain financial institutions/banks to them Rs. 2,967.78 lacs, for the period ended June 30,2004 comprise (a) debits for (i) Loss on sale/adjustment of long term investments (Net) Rs. 160.60 lacs (ii) Provision for doubtful debts Rs. 404.33 lacs (ii) Provision/writeoff of Loans and Advances Rs. 539.42 lacs [including writeoff of balance in Cenvat account under Additional Duties of Excise (Textiles and Textiles Articles Act 1978) Rs. 445.40 lacs] (iii) Capital Workinprogress written off Rs. 100.10 lacs (iv) Reversal of interest credit for nonimplementation of restructuring scheme by bank Rs. 1,075.21 lacs; (v) Default interest on ECB Rs. 327.76 lacs, and (b) credits for (i) Reduction in interest/premium liabilities, pursuant to the approval of proposal by Arcil for restructuring of financial assistance assigned by certain financial institutions/banks to them Rs. 676.83 lacs and (ii) Reduction in interest and principal loan liability on onetime settlement with banks etc. Rs. 1,264.22 lacs. for the period ended December 31,2002 comprise (a) debits for (i) Provision for doubtful debts Rs. 352.79 lacs (ii) Provision/writeoff of Loans and Advances Rs. 118.83 lacs, and (b) credit for (i) and (ii) Reduction in interest and principal loan liability pursuant to restructuring of liabilities Rs. 1,038.89 lacs

c.

6. 7.

8.

2.

3.

4.

67

9.

a. Impact on account of adjustments as required under SEBI DIP Guidelines (Rs. In lacs) Particulars Net Profit/(Loss) as per audited accounts Adjustments made : Material Prior Period Adjustments Excess Interest Provision written back Interest Provision Deferred Tax Credit Adjusted Net Profit/ (Loss) for the period Add : Transfer from Reserves Deferred Tax Credit on Initial Adoption Adjustment on restatement Balance Brought Forward Balance Carried to Balance Sheet as restated (9,534.52) (9,516.90) (32,430.31) (36,610.25) 133.50 (22,322.22) (32,430.31) 7.30 224.99 (224.99) (15,451.38) (22,322.22) 608.43 (10,920.26) * (15,451.38) 17.62 70.74 (4,179.94) (36.42) 2,152.13 (10,241.59) (184.98)* (18.67) (1,927.14) (6,878.14) (15.65) (5,139.55) 1.1.2006 to 31.3.2006 17.62 1.7.2004 to 31.12.2005 (4,250.68) 1.1.2003 to 30.6.2004 (12,357.30) 1.1.2002 to 31.12.2002 (4,747.35) 1.1.2001 to 31.12.2001 (5,123.90)

(Figures in bracket represent decrease in income or increase in expenditure and vice versa) * Corresponding adjustment made in opening balance of Profit & Loss Account as at 1.1.2001 b. c. The adjustment in respect of advance of Rs. 880.63 lacs, as stated in Note No. 5(c) above has not been made as the same is considered good by the management. As stated under Note No.1 above, the effect of the Scheme of Arrangement, the Appointed Date of which was 1.7.2004, has been given in the accounts for the three months period ended 31.3.2006 as the Scheme became effective on 30.3.2006 after the sanction of the Honble High Court of Gujarat and Punjab & Haryana and upon filing of the order with the respective Registrar of Companies on 30.3.2006. Effect of financial restructurings/settlements with Arcil, financial institutions and banks have been considered in the years of sanctions/settlement thereof, since the same took effect from those respective dates. Remuneration of Managing Director consist of Salaries Rs. 5.25 lacs, approximate value of perquisites Rs. 0.15 lacs, contribution to PF & other funds Rs. 1.47 lacs [Previous period : Rs. 28.00 lacs, Rs. 1.13 lacs, and Rs. 7.82 lacs) and that of Executive Director, subject to approval of the Central Government, consist of Salaries Rs. 4.80 lacs, contribution to PF & other funds Rs. 0.84 lacs [Previous period : Rs. 3.20 lacs, and Rs. 0.56 lacs) for the period ended March 31,2006 this exclude accumulated amount of gratuity (funded through LIC fund, contributions not separately identified).

10.

68

11.

In terms of the Scheme of Arrangement, on occurrence of event of default, as specified therein, the remedies of the Existing Lenders would include, inter alia, revocation of reliefs and concessions granted under the present scheme, which will be dealt with in the accounts if and when determined. Notes in respect of matters referred in certain audit qualifications on accounts for the period ended March 31, 2006: a. b. Balance of some debtors, creditors, loans and advances, secured loans and unsecured loans are subject to confirmation and/or reconciliation. The Board expects that under improved market conditions and post implementation of various provisions of the Scheme, adequate net worth and working capital will be available for continued and sustained operations. Therefore, despite negative net worth, the accounts of the Company have been drawn on going concern basis.

12.

13.

Various financial institutions and banks have assigned their financial assistance to Arcil from time to time. In view of assignment of financial assistance to Arcil, no reference was required to be made by the Company to the Board for Industrial and Financial Reconstruction (BIFR) as provided under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. CONTINGENT LIABILITIES 31.3.2006 Bills discounted with the Companys Bankers Outstanding Guarantees to Banks for subsidiary companies Claims against the Company not acknowledged as debts Income Tax / Wealth Tax/ Sales Tax etc. matters pending in appeals v Customs duty on import of raw materials/machinery under export obligation vi Effect of reduction in liability of interest/ principal etc. vii Arrears of Cumulative Preference dividend (including Corporate Dividend Tax Nil (Previous period: Rs. 353.54 lacs) viii Estimated amount of contracts remaining to be executed on capital account (net of advances) * Refer Note 11 above i. ii. iii iv 6.11 1,262.00 1.13 79.95 * 10.71 (Lac Rs.) 31.12.2005 4.94 1,262.00 236.63 79.95 266.17 4,824.02 2,874.30 2.56

14.

15. Related Parties Disclosures (I) Relationship (a) Subsidiary Companies VXL Technologies Limited OCM India Limited Masuzawa Punjab Silk Limited (b) Joint Venture DormeuilBirla VXL Limited Joint Venture (c) Key management personnel Shri C L Rathi Managing Director Shri R Surana Executive Director and COO

69

(II) Transactions with related parties, referred to in (I) above. Particulars of Transactions Interest expense Remuneration Sales Service Charges income Selling Commission expense Advance given As at Balances Debit (Net) Credit (Net) Guarantees /Collateral given Cosurety for Company (Lac Rs.) With related parties referred to in (I) (a) above 2006 200405 13.63 81.74 0.53 31.3.2006 429.00 980.45 1,262.00 104.00 46.92 3.15 31.12.2005 471.51 953.86 1,262.00 104.00 (I) (b) above 2006 200405 1.38 8.42 4.13 33.71 31.3.2006 70.00 31.12.2005 65.01 (I) (c) above 2006 200405 Refer Note 9. above 31.3.2006 1.36 30.12.2005 1.66

Note: Transactions with OCM Division, transferred to OIL, considered as related party transactions since March 31, 2006, i.e. after Effective Date of the Scheme 16. Segment information The Company operates in a single business segment as Primary Segment i.e. Textiles in terms of Accounting Standard 17 (AS 17) issued by the Institute of Chartered Accountants of India. The information on Secondary segments based on location of customers is as under: 2006 Segment Revenue Within India Outside India Total Carrying amount of Segment Assets Within India Outside India Total Addition to Fixed Assets Within India Outside India Total 17. 1,444.69 1,628.04 3,072.73 16,001.54 740.98 16,742.52 28.22 2.46 30.68 (Lac Rs.) 200405 18,653.50 10,939.67 29,593.17 33,767.98 843.46 34,611.44 36.62 0.32 36.94

The figures for the period ended March 31,2006 are not comparable with those of the immediately preceding period as these exclude figures of OCM Division, transferred to OIL, and include the effect of debt and capital restructuring pursuant to the Scheme of Arrangement ,and also due to varying spans of the accounting periods. The figures of the periods are not comparable with those of their respective previous periods, where their spans differ pursuant to change in accounting year(s). The previous periods /years figures have been regrouped/rearranged wherever considered necessary and material.

18.

70

Annexure 5 STATEMENT OF SECURED LOANS AND ASSETS CHARGED AS SECURITY AS AT MARCH 31,2006 Particulars (i) Term Loans Birla VXL Term Loans Series I (BLS-I) from Arcil and Banks 5,901.31* Nil Loan, originally restructured at Rs 6,664 lacs, repayable in quarterly instalments as under: (i) First pari passu charge on the Fixed Assets of Jamnagar division and Universal Clothing division at Faridabad (ii) First pari passu charge on "Digjam Brand", and (iii) Pledge on promoters' shareholding in the Company As on 31.3.2006 (Lac Rs.) Rate of Interest (%) p.a. Repayment Schedule Assets charged

Birla VXL Term Loans Series II (BLS-II) from Arcil and Banks

5,319.00*

Nil upto 30.6.2009, thereafter 9% p.a. depending upon the option of the lender(s)

15.26% of the loan repayable during July 1,2005 to June 30,2006 in 4 equal quarterly instalments commencing from September 30,2005 (3 quarterly instalments repaid till 31.3.2006) 28.35% of the loan repayable during July 1,2006 to June 30,2007 in 4 equal quarterly instalments commencing from September 30,2006 28.30% of the loan repayable during July 1,2007 to June 30,2008 in 4 equal quarterly instalments commencing from September 30,2007 28.09% of the loan repayable during July 1,2008 to June 30,2009 in 4 equal quarterly instalments commencing from September 30,2008 Bullet payment at the end of on or before 30.6.2009, either by raising a fresh loan from banking sources or by arranging for the sale of the outstanding loan amount to another lender/investor; or at the option of the lender(s), in 20 equal quarterly instalments alongwith interest @9% p.a. with effect from 1st July, 2009 on the outstanding balance of the loan with first installment falling due on 30th September 2009.

(i) First pari passu charge on the Fixed Assets of Jamnagar division and Universal Clothing division at Faridabad (ii) First pari passu charge on "Digjam Brand", and (iii) Pledge on promoters' shareholding in the Company

71

Particulars ICO Loans from Arcil and Banks (allocated to Investment Division of the Company)

As on 31.3.2006 (Lac Rs.) 5,000.00

Rate of Interest (%) p.a. Nil

Repayment Schedule To be settled, in full and final, by net sale proceeds (net of expenses and liabilities) of investments and non-core assets allocated to the Investment Division of the Company. Any excess or shortfall in the said net proceeds shall be to the account of the lenders. Principal repayable in monthly instalment of Rs. 8.69 lacs. Accrued interest shall be payable after principal amount is repaid in full. Repayable in 20 equal quarterly instalments commencing from January 1,2010

Assets charged (i) Pledge on investments allocated to Investment Division, on pari passu basis (ii) First pari passu charge on the non-core assets allocated to the Investment Division

Housing Loan from HDFC

408.46

12% p.a.

Secured/to be secured by mortgage of specified immovable properties

Liability to Exim Bank

1,179.00

Rate of Interest of Gsec (1 Year)+1% from 1.1.2010

This liability of RS 1,179 lacs, pursuant to one-time settlement of dues of Masuzawa Punjab Silk Ltd (MPSL), subsidiary of the Company for which the Company had furnished corporate guarantee, to be reduced by the net sales proceeds of the assets of MPSL, after deducting therefrom expenses/costs/outgoings etc. as per settlement, is secured by a mortgage and hypothecation subservient to the charges for BLSI and BLS-II and working capital over its moveable and immoveable fixed assets situated at Jamnagar, both present and future. (i) Hypothecation of all the movable stocks relating to Jamnagar Division, at Jamnagarand (ii) Second charge on fixed assets of Jamnagar Division and Universal Clothing Division at Faridabad Secured by assets purchased out of these borrowings

(ii) Working Capital borrowings (Fundbased - from various Banks)

3,362.81

9% p.a.

No repayment schedule

(iii) Deferred Liabilities (Car finance from various Banks) Total Non-fund based facilities From various banks

21.94

Part of EMI

Repayment in monthly equated instalments

21,192.52

1,415.66

(i) Hypothecation of all the movable stocks relating to Jamnagar Division, at Jamnagarand (ii) Second charge on fixed assets of Jamnagar Division and Universal Clothing Division at Faridabad 72

* Loan amounts and interest terms based on option I of the Scheme of Arrangement

Annexure 6 STATEMENT OF UNSEURED LOANS AS AT MARCH 31,2006 Particulars As on 31.3.2006 (Lac Rs.) 1080.74 234.21 Rate of Interest (%) p.a. 19-20% 12% Repayment schedule

From Financial Institutions Trade Deposits

Overdue for payment Dependant upon continuance of business relationship with the concerned dealer/ sales representative Within one year Allocated to ICo Division - to be settled by the proceeds of Investments/Non-core assets allocated to that division. Within one year Annexure-7

Inter-corporate Deposits From VXL Technologies Ltd. (subsidiary company)

710.00 964.44

12% 6%

From Dormeuil-Birla VXL Ltd (JV) Total STATEMENT OF INVESTMENTS Long Term Investments A. Book Value of Investments in Quoted Equity Shares Subsidiary Companies Others Total (A) Market Value of Investment in Quoted Equity Shares B. Book Value of Investments in Unquoted Equity Shares Subsidiary Companies Subsidiary Companies (Pending Allotment) Others Others (Listed but not Quoted) Total (B) C. Book Value of Investments in Unquoted Preference Shares Subsidiary Companies Others Total (C)

70.00 3059.39

8%

31.3.2006

31.12.2005

30.6.2004

31.12.2002

(Lac Rs.) 31.12.2001

643.52 643.52 2,068.80

643.52 643.52 1,147.50

643.52 643.52 372.34

1,191.02 1,191.02 592.66

1,191.02 1,191.02 838.21

2,015.47 1,309.14 1,809.34 11.75 5,145.70

2,015.47 1,809.34 11.75 3,836.56

3,183.17 1,810.54 11.75 5,005.46

3,183.17 1,814.22 11.75 5,009.14

3,183.17 1,814.22 11.75 5,009.14

1,000.00 299.98 1,299.98 73

1,000.00 299.98 1,299.98

1,000.00 5,221.98 6,221.98

1,000.00 5,221.98 6,221.98

1,000.00 5,221.98 6,221.98

D.

Book Value of Bonds and other Securities Shares Subsidiary Companies Others Total (D) Grand Total (A+B+C+D) Includes :

0.58 0.58 7,089.78 #

0.58 0.58 5,780.64

4.58 4.58 11,875.54

7.14 7.14 12,429.28

7.14 7.14 12,429.28

# i)

specified investments valued herein at Rs 5,764.80 lacs as at 31.3.2006 which, alongwith certain other assets, stand allocated to the Investment Division ( ICo) of the Company and are pledged to secure the restructured loan of Rs 5,000 lacs (ICo Loans) allocated to ICo, in terms of the Scheme. The net proceeds from their disposal, net of liabilities etc. of ICO shall be utilised for full and final settlement of the ICo Loans Any shortfall or surplus in said net proceeds shall be to the account of the lenders. These include investment of Rs 616.88 lacs in Mysore Cements Ltd. which are under pledge also for the loans, aggregating to the extent of Rs 33,670 lacs, availed by them from institutions and banks. the investments in shares of OIL valued herein at Rs 1,324.14 lacs as at 31.3.2006 have since been pledged to secure the OIL Loans transferred to OIL as part of the OCM Division pursuant to the Scheme. The net proceeds from disposal of OCM Division/Shares in OIL shall be used in full and final settlement of the OIL Loans. The process of disposal of the said division/shares has been initiated.

ii)

Annexure-8 STATEMENT OF SUNDRY DEBTORS Particulars 31.3.2006 31.12.2005 30.6.2004 31.12.2002 (Lac Rs.) 31.12.2001

(i) Debts outstanding for a period more than six months - Considered Good - Considered Doubtful Less : Provided for Sub-Total (ii) Other Debtors - Considered Good Total 159.57 543.82 543.82 159.57 2,300.43 2,460.00 578.40 1,328.59 1,328.59 578.40 3,702.30 4,280.70 722.54 1,395.34 1,395.34 722.54 2,868.60 3,591.14 1,553.42 980.23 980.23 1,553.42 4,669.30 6,222.72 1,672.94 749.98 749.98 1,672.94 4,291.67 5,964.61

74

Annexure-9 STATEMENT OF LOANS AND ADVANCES Particulars* Loan/Advances to Subsidiaries - OCM India Limited - Masuzawa Punjab Silk Ltd Advances Recoverable in cash or in kind or for value to be received Tax deducted at source (Net of Provisions) Deposits with Government & Others Total 31.3.2006 429.00 1,485.58 31.12.2005 170.37 429.00 1,590.16 30.6.2004 170.37 1,745.88 31.12.2002 170.37 1,935.42 (Lac Rs.) 31.12.2001 170.37 2,479.55

84.06 125.12 2,123.76

78.51 268.08 2,536.12

213.67 480.06 2,609.98

189.87 889.95 3,185.61

243.39 827.14 3,720.45

* Unsecured, considered good and net of provisions Annexure 10 DETAILS OF OTHER INCOME - AS RESTATED (Lac Rs.) Particulars Operating Miscellaneous Receipts Excess Liabilities/Provision etc written back Others Rent Received Dividend on Long Term Investments Profit on sale/discard of Assets (Net) 10.27 1.85 81.02 62.23 45.27 120.25 562.78 59.85 22.81 196.21 493.85 41.95 69.13 326.73 18.80 69.17 23.95 650.64 Recurring Recurring Non-recurring 16.44 121.26 127.16 103.16 193.19 Recurring 1.1.2006 to 31.3.2006 1.7.2004 to 31.12.2005 1.1.2003 to 30.6.2004 1.1.2002 to 31.12.2002 1.1.2001 to 31.12.2001 Nature

52.46

213.77

87.82

112.49

345.53

Non-recurring

Note The above are other than those considered under Exceptional Items in the financial statements

75

Annexure 11 STATEMENT OF ACCOUNTING RATIOS Year/Period ended I. Net Profit after Tax as restated Exceptional Items Net Profit after Tax but before Exceptional Items Preference Dividend for the period Adjusted Net Profit available to Equity Shareholders (1) Number of Outstanding Equity Shares (2) Number of Dilutive Equity Shares Total Number of Equity Shares (3) Net Worth (4) Earning per Share (EPS) Basic EPS - (1/2) / Annualised Diluted EPS - (1/3) / Annualised Net Asset Value per Share (NAV) (4/2) Return on Net Worth (RONW) (1/4) Lac Rs Lac Rs Lac Rs Lac Rs Lac Rs 31.3.2006 17.62 (61.56) 79.18 79.18 31.12.2005 (4,179.94) (1,704.72) (2,475.22) (753.34) (3,228.56) 30.6.2004 (10,241.59) (666.37) (9,575.22) (741.30) (10,316.52) 31.12.2002 (6,878.14) 567.27 (7,445.41) (439.24) (7,884.65) 31.12.2001 (5,139.55) (5,139.55) (380.49) (5,520.04)

II.

Nos. Nos. Nos. Lac Rs

13,014,293 30,730,394 43,744,687 (5,140.80)

65,071,465 65,071,465 (14,468.33)

65,071,465 65,071,465 (10,731.29)

65,071,465 65,071,465 (922.80)

65,071,465 65,071,465 6,060.43

III. IV.

Rs. Rs.

0.61/2.43 0.18/0.72

(4.96)/(3.31) (4.96)/(3.31)

(15.86)/(10.57) (15.86)/(10.57)

(12.12)/(12.12) (12.12)/(12.12)

(8.48)/(8.48) (8.48)/(8.48)

V.

Rs.

(39.50)

(22.23)

(16.49)

(1.42)

9.31

VI.

(91.08)

The Networth being negative, Return of the Net Worth has not been computed.

76

Annexure 12 CAPITALISATION STATEMENT Pre-issue as at 31.3.2006 Borrowings Long Term Short Term Total Debts 21,192.52 3,059.39 24,251.91 21,192.52 3,059.39 24,251.91 (Lac Rs.) Adjusted for Proposed Rights Issue

Shareholders Funds Equity Share Capital Equity Suspense Account (shares since allotted) Less : Profit & Loss Account (Dr Balance) Total Shareholders Funds 1,303.06 3,073.04 (9,516.90) (5,140.80) 6,876.10* (9,516.90) (2,640.80)

Long Term Debts/ Equity

**

**

* Including Equity Share capital allotted on 12.04.2006 pursuant to Scheme of Arrangement Rs. 3073.04 lacs, and maximum amount of proposed Rights Issue- Rs.2500 lacs ** The Total Shareholders' Funds being negative, this ratio has not been computed.

77

Annexure -13 STATEMENT OF TAX SHELTER (Lac Rs.) Particulars Income Tax rates applicable (%) A. Business Loss Net Profit/ (Loss) before current and deferred taxes, as per audited accounts Adjustments: Permanent Differences Dividend from Shares Long term capital (gains)/loss on investment Others adjustments Sub-Total Timing Differences Difference between Tax Depreciation and Book Depreciation (including Amortisation) Amount Disallowed/(written back)(net) u/s 43B Others Sub-Total Business Loss ( including Unabsorbed Depreciation).. (A) B. Capital Gains and Other Income Capital Gains Dividend Total Capital Gains and Other Income. (B) Total ( A + B) Total Taxation Nil Nil Nil Nil (1,073.03) (1,073.03) (1,903.22) (2,749.31) (2,749.31) (5,670.44) (1.29) 69.09 67.80 (3,264.70) (52.69) (52.69) (5,930.69) 747.48 747.48 (10,983.74 ) Nil (175.52) (6,468.79) (6,369.53) (4,963.23) (12,584.73 ) 2004-05 36.59 2003-04 35.88 Previous Year 2002-03 36.75 2001-02 35.70 2000-01 39.55

(22.76) (68.56) (38.12) (129.44) 1,652.73

(22.81) 158.93 (74.47) 61.65 1,810.43

(69.09) 19.63 (49.46) 1,473.37

(69.22) 7.72 82.01 20.51 282.54

(54.01) (1,372.72) 968.12 (458.61) (1,219.26)

(2,233.58) 55.62 (525.23) (830.19)

1,189.56 486.02 3,486.01 (2,921.13)

1,136.66 476.46 3,086.49 (3,332.50)

(1,977.99) 760.17 (935.28) (5,878.00)

2,292.54 238.84 1,312.12 (11,731.22 )

Notes 1. The above computations are as per Income Tax Returns for the respective previous years. 2. The Income Tax Return for previous year 2004-05 is under revision to incorporate the effect of the Scheme of Arrangement, and, hence the above computations for that year will undergo changes based on the revised Income Tax Return for that year. 3. As the periods of above previous years are different from the financial years/periods for which accounts have been made by the Company under the Companies Act, 1956; the figures for the said previous years have not been restated. 78

Annexure- 14
CONSOLIDATED SUMMARY STATEMENT OF ASSETS AND LIABILITIES - AS RESTATED- AS AT

31.3.2006 A Fixed Assets Gross Block Less : Depreciation Net Block Less : Revaluation Reserve Net Block (after adjustment of Revaluation Reserve) Capital Work-in-progress Total Fixed Assets Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Total Current Assets Total Assets Liabilities and Provisions Secured Loans Unsecured Loans Deferred Tax Liability (Net) Current Liabilities and Provisions Minority Interest Total Liabilities and Provisions Net Worth (D-E) Represented by Shareholders Funds F G H Share Capital Equity Capital Suspense Reserves Less : Revaluation Reserve Reserves (Net of Revaluation Reserve) Profit and Loss Account - Cr/(Dr) Less : Misc. Expenses (not written off) Net Worth (F+G+H+I-J) 1,303.06 3,073.04 330.21 330.21 (11,302.01) 0.53 (6,596.23) 62,348.63 39,017.52 23,331.11 23,331.11 7.77 23,338.88 2,696.67 7,389.41 4,698.38 3,616.23 2,333.18 18,037.20 44,072.75 37,267.08 2,842.41 152.66 10,391.83 15.00 50,668.98 (6,596.23)

31.12.2005 62,292.60 39,022.15 23,270.45 3,690.85 19,579.60 46.01 19,625.61 2,697.11 7,008.60 4,997.03 3,687.55 2,153.49 17,846.67 40,169.39 42,725.25 2,785.21 148.26 9,354.32 15.00 55,028.04 (14,858.65)

30.6.2004 64,341.55 34,849.81 29,491.74 4,299.52 25,192.22 87.61 25,279.83 7,624.31 7,693.11 4,065.36 568.22 2,773.72 15,100.41 48,004.55 47,184.63 2,959.67 272.46 8,516.66 442.55 59,375.97 (11,371.42)

(Lac Rs.) 31.12.2002 65,899.81 30,489.05 35,410.76 4,934.25 30,476.51 241.00 30,717.51 8,264.20 11,578.40 7,463.11 615.58 3,357.16 23,014.25 61,995.96 48,598.96 3,032.36 205.13 11,166.86 442.20 63,445.51 (1,449.55)

B C

D E

10,633.78 16,246.35 3,690.85 12,555.50 (37,330.18) 717.75 (14,858.65)

10,633.78 16,929.57 4,299.52 12,630.05 (33,427.55) 1,207.70 (11,371.42)

10,633.78 17,759.55 4,934.25 12,825.30 (23,221.09) 1,687.54 (1,449.55)

I J

79

Annexure- 15 CONSOLIDATED SUMMARY STATEMENT OF PROFIT AND LOSS - AS RESTATED 1.1.2006 to 31.3.2006 Income Sales Gross Sales Less : Excise Duty on Sales Net Sales Other Income Increase/(Decrease) in Inventories Expenditure Materials Cost Manufacturing Expenses Personnel Expenses Administrative Expenses Selling and Distribution Expenses Interest and Finance Charges Impact of Foreign Exchange Fluctuation on loans Provision for Premium on redemption of loans Profit/(Loss) before Depreciation and Tax Depreciation and Amortisation Less : Transferred from Revaluation Reserve Net Profit/(Loss) before tax and Exceptional items Exceptional Items (Net) Taxation (including Deferred and Fringe Benefit Tax) Net Profit/(Loss) for the period Impact of Adjustments (Refer Note 10 in Annexure 17) Adjusted Net Profit for the period of which : Minority Share Group Share Add : Transfers from General Reserve Debenture Redemption Reserve Deferred Tax Credit/(Charge) on initial adoption Share in brought forward balance in JV Balance brought forward (Refer Note 2 and 10 in Annexure 17) Appropriations Dividend on Equity Shares (Minority) Transferred to Minority Interest Balance carried to Balance Sheet 5,141.24 44.99 5,096.25 149.33 415.85 5,661.43 1,873.09 1,215.59 945.81 399.91 625.27 185.75 5,245.42 416.01 562.93 562.93 (146.92) (487.76) 28.13 (606.55) 201.83 (404.72) (404.72) (10,897.29) (11,302.01) (11,302.01) 34,173.55 572.62 33,600.93 627.64 (617.70) 33,610.87 12,208.39 6,447.85 5,924.50 2,279.25 3,204.56 1,812.50 31,877.05 1,733.82 4,623.34 560.18 4,063.16 (2,329.34) (1,210.88) (91.17) (3,631.39) 44.52 (3,586.87) (3,586.87) (33,743.31) (37,330.18) (37,330.18) 37,219.02 2,167.90 35,051.12 612.42 (1,562.10) 34,101.44 16,753.08 5,817.40 5,835.85 2,154.66 2,347.51 5,792.87 38,701.37 418.44 (145.71) (4,327.20) 5,657.70 599.15 5,058.55 (9,385.75) (829.65) (2,219.57) (12,434.97) 2,089.49 (10,345.48) 4.10 (10,349.58) 25.00 133.50 (9.21) (23,221.09) (33,417.28) 10.27 (33,427.55) 36,528.24 1,809.28 34,718.96 511.66 (3,356.71) 31,873.91 17,953.89 4,519.97 4,459.59 1,583.38 2,296.64 4,783.82 35,597.29 33.93 (217.84) (3,907.29) 3,884.88 417.85 3,467.03 (7,374.32) 596.32 1,794.25 (4,983.75) (2,130.79) (7,114.54) (12.23) (7,102.31) 7.30 (100.52) (16,204.58) (23,412.34) 15.26 (206.51) (23,221.09) 1.7.2004 to 31.12.2005 * 1.1.2003 to 30.6.2004 (Lac Rs.) 1.1.2002 to 31.12.2002

* Figures for 2004-05 exclude those of SSPL, desubsidiarised during the period 80

Annexure- 16 CONSOLIDATED SUMMARY CASHFLOW STATEMENT - AS RESTATED 1.1.2006 to 31.3.2006 A Cash Flow from Operating Activities Net Profit/(Loss) before tax and Exceptional Items Adjusted for : Depreciation and Amortisation Interest and Financial Charges Interest and Dividend Income (Profit)/Loss on Sale/Discard of Assets/Investments etc Gain due to Foreign Exchange Fluctuation Premium on redemption of loans Operating Profit before working capital changes Adjusted for : Trade and other Receivables Inventories Trade Payables and other liabilities Cash generated from operations Direct Taxes Payment for voluntary retirements Net Cash from/(used) in Operating Activities.(A) Cash Flow from Investing Activities Purchase of Fixed Assets Proceeds from sale of Fixed assets Sale/reduction of Investments Non-compete fee Movement of Loans Interest received Dividend received Net Cash from/(used) in Investing Activities.(B) Cash Flow from Financing Activities Advance against infusion of funds Proceeds from/(Repayment of) borrowings (Net) Interest and Financial Charges Dividend Payment Premium relating to redemption of debentures Net Cash from/(used) in Investing Activities.(C) Net Increase/(Decrease) in Cash or Cash Equivalents (A+B+C) Cash and Cash Equivalent (Opening Balance) Less : Cash and Cash Equivalents of SSPL Add : Cash and Cash Equivalent on initial adoption of JV Cash and Cash Equivalent (Closing Balance) 54.91 562.93 287.41 (97.29) 2.50 810.46 (12.06) (380.81) (175.04) 242.55 (81.71) 160.84 (65.33) 12.52 97.29 44.48 25.90 (294.38) (8.16) (276.64) (71.32) 3,687.55 3,616.23 1.7.2004 to 31.12.2005 (2,284.82) 4,063.16 2,098.85 (376.14) (120.91) 3,380.14 (687.27) 600.01 (1,832.35) 1,460.53 127.36 1,587.89 (267.44) 359.68 2,038.78 250.00 (40.00) 334.74 45.27 2,721.03 2,000.00 (970.35) (2,192.62) (8.32) (1,171.29) 3,137.63 568.22 (18.30) 3,687.55 1.1.2003 to 30.6.2004 (9,448.39) 5,058.55 6,097.34 (264.81) (169.53) (418.44) 145.71 1,000.43 2,923.18 3,887.79 (2,249.45) 5,561.95 (26.18) (167.58) 5,368.19 (275.66) 1,422.99 393.74 240.82 22.98 1,804.87 (2,166.49) (5,033.00) (8.60) (25.00) (7,233.09) (60.03) 615.58 12.67 568.22 (Lac Rs.) 1.1.2002 to 31.12.2002 (7,577.97) 3,467.03 4,006.32 (173.76) 10.66 (33.93) 217.84 (83.81) (215.01) 3,868.05 (102.41) 3,466.82 (7.89) (452.21) 3,006.72 (346.19) 271.90 202.76 22.67 151.14 (1,024.08) (2,300.59) (15.51) (3,340.18) (182.32) 797.90 615.58

Notes : 1. Figures in brackets represent outflow. 2. Cash and Cash Equivalents include Cash, Cheques, Balance with Schedule Banks 81

Annexure 17 Notes to Consolidated Financial Information 1. Principles of Consolidation of financial statements a. The consolidated financial statement relate to the Birla VXL Limited (Company) and its subsidiary companies (subsidiaries) and its interest in Joint Venture (JV). These have been prepared in accordance with Accounting Standard 21 (AS 21) Consolidated Financial Statements and Accounting Standard 27 (AS 27) Financial Reporting of Interests in Joint Ventures issued by the Institute of Chartered Accountants of India (ICAI). The Consolidated Financial Statements were not prepared for the year ended December 31,2001, as AS21 became mandatory in respect of accounting periods commencing on or after April 1,2001. For the purpose of consolidation, the financial statements of the subsidiaries and Joint Venture Company have been drawn upto the same reporting date as that of the Company, using uniform accounting policies except the method of valuation of inventories in Joint Venture is different from that of the Company; however the impact of the same is not material. The financial statements of the Company, its subsidiaries and its interests in Joint Venture have been combined on a linebyline basis by adding together the book values of like items of assets, liabilities, income and expenditure, after eliminating intercompany transactions and balances to the extent consolidated. The excess of the cost/carrying value to the Company of its investment in subsidiaries and Joint Venture over Companys portion of equity of the subsidiaries and its interest in Joint Venture or vice versa has been recognised as Goodwill or Capital Reserve as the case may be. The Consolidated Financial Statements comprise the financial statements of Birla VXL Limited and its subsidiaries and interest in JV as under: Name of company* Subsidiaries OCM India Ltd. (OIL) VXL Technologies Ltd. (VTL) Masuzawa Punjab Silk Ltd. (MPSL) Sidharth Soya Products Ltd. (SSPL) ** Joint Venture Entity DormeuilBirla VXL Ltd. (DBVXL)*** * ** *** All incorporated in India Ceased to be subsidiary since October 14, 2004 and, hence, its accounts consolidated till the period ended June 30, 2004. Interest in JV consolidated from the Accounting period ended June 30, 2004, as AS27 became mandatory in respect accounting periods commencing on or after April 1, 2002. Percentage of shareholding as at (%) 31.3.2006 31.12.2005 30.6.2004 31.12.2002 100.00 100.00 60.00 49.00 100.00 100.00 60.00 49.00 100.00 100.00 60.00 75.32 49.00 100.00 100.00 60.00 75.32 49.00

b.

c.

d. e.

The financial year of all the subsidiary companies ends on 31st March and that of JV on 31st December. 2. Scheme of Arrangement The Scheme of Arrangement (Scheme) proposed by the Company under Sections 391 to 394 of the Companies Act, 1956 (the Appointed Date of which is July 1, 2004) has been sanctioned by the Honble High Courts of Gujarat and Punjab & Haryana and became effective upon filing of certified copy of the order of the Honble High Courts with the office of the respective Registrar of Companies at Ahmedabad and Jalandhar on March 30, 2006. Accordingly, the effects of the Scheme, salient ones set out hereunder, have been given in the accounts for the period ended March 31, 2006. a. b. the Existing Loans and liabilities etc of the Company have been restructured, allocated and transferred. the effect of reduction of 6,50,71,465 equity shares Rs.10 each aggregating to Rs.6,507.15 lacs (on May 5,2006, i.e. the Record Date) of the Company into equity shares of Rs.2 each and consolidation 82

thereof into 1,30,14,293 equity shares of Rs.10 each fully paid up aggregating to Rs.1,301.43 lacs considered c. The Preference Share capital, of the Company, of Rs.4,125.00 lacs reduced to an amount of Rs.1,031.25 lacs and consolidated into their respective original face value, which has since been converted on April 12, 2006, into 61,60,394 Equity Shares of Rs.10 each fully paid, allotted at a price of Rs.16.74 (including a premium of Rs.6.74) per equity share, pursuant to the SEBI Guidelines for Preferential Issues. Pending allotment as on 31.3.2006, the face value of these Rs.616.04 lacs presented under Equity Capital Suspense. Loan Amount of Rs.2,457 lacs, of the Company, has since been converted on April 12,2006, into 2,45,70,000 Equity Shares of Rs.10 each fully paid up, allotted at a price of Rs.16.74 per equity share (including premium of Rs.6.74), pursuant to the SEBI Guidelines for Preferential Issues. Pending allotment as on 31.3.2006, the face value of these Rs 2,457 lacs presented under Equity Capital Suspense. The Investments/Noncore assets and liabilities, specified in the Scheme, have been allocated to Investment Division (ICo) of the Company. Net proceeds from sale of these assets, net of liabilities etc, shall be utilised for full and final settlement of restructured loans of Rs.5,000 lacs allocated to ICo (ICo loans). Any shortfall or surplus in the said net proceeds shall be to the account of lenders. Assets, liabilities and restructured loans of OCM Division have been transferred to OCM India Limited (OIL) effective July 1,2004 and , as net consideration, OIL has since allotted 1,30,91,363 Equity Shares of Rs. 10 each at par as fully paid up, which were eliminated in consolidation. The Company carried on the business of OCM Division, from the Appointed Date upto the Effective Date, in trust for and on account of OIL and profit/loss, income, expenses including common allocated expenses, etc pertaining to OCM Division for this period has been transferred to OIL. The figures of OCM Division have been consolidated in the accounts for the period ended March 31, 2006 as part of OIL. The waivers, writedowns, debits/credits pursuant to the Scheme were recorded in Reconstruction Reserve Account and balance of all reserves including premium referred in Notes 1(c) and 1(d) above adjusted against Deferred Revenue Expenditure and debit balance of Profit and Loss Account of the Company. The net impact of such adjustments alongwith transfers stated under Note 1(f) above amounting to Rs. 26,432.89 lacs has been adjusted against the debit balance of Profit & Loss Account brought forward.

d.

e.

f.

g.

3. 4.

Net Block of Fixed Assets as at March 31, 2006 includes Rs. 412.10 lacs pertaining to ICo division of the Company. Investments in shares of some companies, valued herein at Rs. 2,695.73 lacs as at March 31,2006 alongwith, inter alia, investments in subsidiaries (except that in OIL) and JV, eliminated in consolidation stand allocated to ICo division and are pledged as security for the ICo Loans. The investments in shares of OIL amounting to Rs. 1,324.14 lacs, eliminated in consolidation, have since been pledged with lenders to secure the OIL Loans transferred to OIL as part of the OCM Division. Cash and Bank Balances, as at March 31,2006 include net proceeds from investments allocated to ICo and placed in fixed deposits, since utilised towards repayment of ICo Loans (inclusive of Noncompete fee and interest) Rs. 1,112.47 lacs. a. Advances, as at March 31, 2006, include those in the nature of interestfree loans to employees Rs. 9.47 lacs, maximum amount due during the period Rs. 14.29 lacs. This includes due from Executive Director Rs. 1.36 lacs, being balance of advance made prior to his appointment as Director, (maximum balance due Rs. 1.66 lacs). Advances, as at March 31,2006, (net of provisions Rs. 218.84 lacs), include Rs. 333.34 lacs against land; Rs. Nil (net of provision Rs. 111.90 lacs) against investments and Rs. 11.38 lacs against fixed assets. Further it includes Rs. 880.63 lacs towards building, the physical possession of which has been arbitrarily withheld by the developer. The Company has taken necessary steps to get the possession of the said building/recovery of amounts paid alongwith interest. Necessary adjustments, including interest, will be made on settlement of the ongoing legal/arbitration proceedings. 83

5.

6.

b.

7. 8.

Minority Interest, as at March 31, 2006, includes minoritys share in: Equity Capital Rs. 200 lacs, Preference Capital Rs. 15.00 lacs and Reserves and Surplus Rs. (200) lacs. Current Liabilities and Provisions, as at March 31,2006, include (i) Acceptances Rs. 1,425.85 lacs (ii) Advance received against standby underwriting Rs. 2,000 lacs and (iii) Advance from customers Rs. 110.96 lacs. In terms of the Scheme, on occurrence of event of default, as specified therein, the remedies of the Existing Lenders would include, inter alia, revocation of reliefs and concessions granted to the Company under the present scheme, which will be dealt with in the accounts if and when determined. a. Impact on account of adjustments as required under SEBI DIP Guidelines Particulars 1.1.2006 to 31.3.2006 (606.55) 1.7.2004 to 31.12.2005 (3,631.39) (Rs. In lacs) 1.1.2003 1.1.2002 to to 30.6.2004 31.12.2002 (12,434.97) (4,983.75) (184.98)* (18.67) (1,927.14) (7,114.54) 7.30 124.47 (224.99) (16,204.58) 15.26 (206.51) (23,221.09)

9.

10.

Net Profit/(Loss) as per audited accounts Adjustments made : Material Prior Period Adjustments : Excess Interest Provision written back Interest Provision 70.74 (36.42) Provision for Doubtful Advances 206.20* Deferred Tax Credit 2,152.13 Interest Provision arsing out of audit (4.37) (26.22) (26.22) qualification Adjusted Net Profit/ (Loss) for the period (404.72) (3,586.87) (10,345.48) Add : Transfer from Reserves 158.50 Deferred Tax Credit on Initial Adoption Adjustment on restatement Share in brought forward balance of Profit & (9.21) Loss Account in JV Balance Brought Forward (10,897.29) (33,743.31) (23,221.09) Less : Dividend on Equity Shares (Minority) Transferred to Minority Interest 10.27 Balance Carried to Balance Sheet as (11,302.01) (37,330.18) (33,427.55) restated (Figures in bracket represent decrease in income or increase in expenditure and vice versa) * Corresponding adjustment made in opening balance of Profit & Loss Account as at 1.1.2002 b. c.

The adjustment in respect of advance of Rs. 880.63 lacs, as stated in Note No. 6(b) above has not been made as the same is considered good by the management. As stated under Note No.2 above, the effect of the Scheme of Arrangement of the Company, the Appointed Date of which was 1.7.2004, has been given in the accounts for the three months period ended 31.3.2006 as the Scheme became effective on 30.3.2006 after the sanction of the Honble High Court of Gujarat and Punjab & Haryana and upon filing of the order with the respective Registrar of Companies on 30.3.2006. Effect of financial restructurings/settlements with Arcil, financial institutions and banks have been considered in the years of sanctions/settlement thereof, since the same took effect from those respective dates. a. VTL had been accounting for the liquidated damages as and when same are deducted from the payments received against the invoices for the supplies made. However, it has, in the period ended December 31, 2005, and decided to accrue the liquidated damages liability, wherever the delivery is delayed or anticipated to be delayed. Due to above change, profit before tax for the period on account of liquidated damages is lower by Rs. 17.52 lacs. 84

11.

b.

VTL had hitherto been accounting for the long service award cost on actual payment basis. However, in accordance with the provisions of the Accounting Standard 15 issued by ICAI, it has, from the period ended December 31,2005, provided for long service award liability on the basis of actuarial valuation, resulting in profit before tax for the period ended December 31,2005, being lower by Rs. 6.85 lacs. VTL decided to provide depreciation @ 100% on all fixed assets individually costing upto Rs. 5,000 during the period of acquisition as against the hitherto followed practice of providing depreciation on these assets at the normal rate prescribed in Schedule XIV to the Companies Act, 1956. As a result of above change, during the period ended December 31, 2005, the profit before tax for the period is lower by Rs. 11.99 lacs. VTL, conformity with the Accounting Standard2 issued by ICAI, changed the basis of absorption of overheads in respect of stocks of workinprocess and finished goods, during the period ended December 31, 2005. As a result of above change, the profit before tax for that period is lower by Rs. 54.53 lacs.

c.

d.

12. Exceptional items include a. for the period ended March 31,2006, comprise (a) debits for (i) Provision for diminution in value of investments/assets, on realignment of the net value of assets with outstanding loans allocated to ICo as at March 31,2006 Rs. 262.56 lacs (ii) Provision for doubtful debts, loans and advances Rs. 225.20 lacs. for the period ended December 31,2005, comprise (a) debits for (i) Loss on sale of long term investments Rs. 4,056.12 lacs (ii) Provision/writeoff of Loans and Advances Rs. 84.49 lacs , (iii) Loss on Impairment of Fixed Assets Rs. 922.35 lacs) and (b) credits for (i) Noncompete fee received related to divestment of certain long term investments Rs. 250.00 lacs(ii) Reduction in liabilities, to the extent of interest and premium on redemption of loans, pursuant to the approval of proposal by Arcil for restructuring of financial assistance assigned by certain financial institutions/banks to them Rs. 2,967.78 lacs, (iii) Reduction in loan/interest liabilities of certain financial institution/banks including on one time settlement Rs. 634.30 lacs. for the period ended June 30,2004 comprise (a) debits for (i) Loss on sale/adjustment of long term investments (Net) Rs. 177.55 lacs (ii) Provision for doubtful debts Rs. 550.06 lacs (ii) Provision/writeoff of Loans and Advances Rs. 540.02 lacs [including writeoff of balance in Cenvat account under Additional Duties of Excise (Textiles and Textiles Articles Act 1978) Rs. 445.40 lacs] (iii) Capital Workinprogress written off Rs. 100.10 lacs (iv) Reversal of interest credit for nonimplementation of restructuring scheme by bank Rs. 1,075.21 lacs; (v) Default interest on ECB Rs. 327.76 lacs, and (b) credits for (i) Reduction in interest and premium liabilities pursuant to the approval of proposal by Arcil for restructuring of financial assistance assigned by certain financial institutions/banks to them Rs. 676.83 lacs and (ii) Reduction in interest and principal loan liability on onetime settlement with banks etc. Rs. 1,264.22 lacs for the period ended December 31,2002 comprise (a) debits for (i) Provision for doubtful debts Rs. 353.15 lacs (ii) Provision/writeoff of Loans and Advances Rs. 118.83 lacs, and (b) credit for (i) and (ii) Reduction in interest and principal loan liability pursuant to restructuring of liabilities Rs. 1,068.30 lacs

b.

c.

d.

13. Remuneration, for the period ended March 31,2006, of Managing Director of the Company consist of Salaries Rs. 5.25 lacs, approximate value of perquisites Rs. 0.15 lacs, contribution to PF & other funds Rs. 1.47 lacs (Previous period : Rs. 28.00 lacs, Rs. 1.13 lacs, and Rs. 7.82 lacs) ; of Executive Director of the Company, subject to approval of the Central Government, consist of Salaries Rs. 4.80 lacs, contribution to PF & other funds Rs. 0.84 lacs (Previous period : Rs. 3.20 lacs, and Rs. 0.56 lacs); and of Executive Director of VTL consists of Salaries Rs. 4.35 lacs, approximate value of perquisites Rs. 0.21 lacs, contribution to PF & other funds Rs. 1.21 lacs (Previous period : Rs. 23.60 lacs, Rs. 0.14 lacs and Rs.6.59 lacs).

85

14. In view of the uncertainties about realisability Deferred Tax Asset for the period has not been created in the Company, OIL, and MPSL. Deferred tax liability (net) has been provided in VTL Rs.4.40 lacs as under: March 31, 2006 (i) Deferred Tax liabilities Depreciation (ii) Deferred Tax assets Unabsorbed depreciation and business losses Provision for doubtful debts/advances Accrued expenses deductible under income tax in later years Others Subtotal Deferred Tax liability (Net) (iii) 230.83 3.41 54.90 19.86 78.17 152.66 (Lac Rs.) December 31, 2005 234.99 15.82 56.38 14.53 86.73 148.26

15. Notes in respect of matters referred in certain audit qualifications on the accounts of the Company for the period ended March 31,2006: a. b. Balance of some debtors, creditors, loans and advances, secured loans and unsecured loans are subject to confirmation and/or reconciliation. The Board of the Company expects that under improved market conditions and post implementation of various provisions of the Scheme, adequate net worth and working capital will be available for continued and sustained operations. Therefore, despite negative net worth, the accounts of the Company have been drawn on going concern basis. (Lac Rs) 31.12.2005 4.94 1,006.00 591.85 102.73 56.98 266.17 4,824.02 3,062.51 15.19

16. CONTINGENT LIABILITIES 31.3.2006 Bills discounted with the companies Bankers Surety given to government authorities Claims against the companies not acknowledged as debts Income Tax / Wealth Tax/ Sales Tax matters pending in appeals v. Excise matters in appeals Deposit madeRs. 15.50 lacs (Previous period : Rs. 15.50 lacs) vi. Customs duty on import of raw materials/ machinery under export obligation vii. Effect of reduction in liability of interest viii Arrears of Cumulative Preference dividend [including Corporate Dividend Tax Rs. 186.66 lacs (Previous period: Rs. 535.34 lacs)] ix. Estimated amount of contracts remaining to be executed on capital account (net of advances) * Refer Note 9 17. Related Parties Disclosures (I) Relationship* (a) Joint Venture DormeuilBirla VXL Limited Joint Venture (b) Key management personnel Shri C L Rathi Managing Director, Company Shri R Surana Executive Director and COO, Company Shri B D Bose Executive Director, VTL * as identified by the respective companies 86 i. ii. iii. iv. 6.11 1,006.00 568.65 111.71 134.08 269.82 * 193.41 21.74

(II) Transactions with related parties, referred to in (I) above. Particulars of Transactions Interest expense Remuneration Service Charges income As at Balances Debit (Net) Credit (Net) 18. Segment information (I) Primary Segment 2006 Segment Revenue Textiles Engineering Others Elimination Total Segment Revenue Unallocated Revenue Total Revenue Segment Results Textiles Engineering Others Total Segment Results Interest & Financial Charges Dividend Income Nonoperational items (Net) Amortisation of DRE Exceptional items Profit/(Loss) before Tax Provision for Tax Current Fringe Benefit Tax Income Tax of earlier years (refund) Deferred Tax Credit/(charge) Profit /(Loss)after Tax Other Information Segment Textiles Engineering Others Elimination Total Segment Unallocated Total Assets 31.3.2006 34,691.23 4,017.64 604.38 (1,393.44) 37,919.81 6,153.47 44,073.28 31.12.2005 34,908.65 3,984.14 638.55 (1,386.01) 38,145.33 6,638.86 44,784.19 Liabilities 31.3.2006 31.12.2005 6,632.95 6,654.19 485.37 575.40 1,211.10 1,234.55 (1,179.26) (1,208.82) 7,150.16 7,255.32 43,447.01 47,705.28 50,597.17 54,960.60 4,707.31 558.99 26.33 5,292.63 (2.06) 5,290.57 193.96 (148.80) ( 4.27) 40.89 (185.75) (2.06) (487.76) ( 634.68) 9.10 (12.94 ) 36.37 (4.40) ( 606.55) (Lac Rs.) 200405 29,710.83 4,804.25 52.63 34,567.71 166.18 34,733.89 (390.46) 362.15 (164.76) (193.07) (1812.50) 45.27 120.91 (489.95) (1,210.88) (3,540.22) (58.15) (43.99) 49.59 (38.62) (3,631.39) (Lac Rs.) With related parties referred to in (I) (a) above (I) (b) above 2006 200405 2006 200405 1.38 8.42 Refer Note 13 4.13 33.71 31.3.2006 31.12.2005 31.3.2006 31.12.2005 1.36 1.66 70.00 65.01 0.20

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Textiles Engineering Others Total (II) Secondary Segment

Capital Expenditure 2006 200405 15.90 36.94 51.19 222.94 67.09 259.88

(Lac Rs.) Depreciation and Amortisation 2006 200405 503.11 3,229.06 35.28 203.33 24.54 140.82 562.93 3,573.21

2006 Segment Revenue Within India Outside India Total Carrying amount of Segment Assets Within India Outside India Total Capital Expenditure Within India Outside India Total 3,489.90 1,802.73 5,292.63 37,056.34 863.47 37,919.81 64.62 2.47 67.09

200405 23,022.45 11,545.26 34,567.71 37,301.87 843.46 38,145.33 259.56 0.32 259.88

The business segments have been considered as the primary segment for disclosure. The products included in each of the business segment are as under : Textiles includes Woollen/Worsted fabrics, Yarn, Garments Engineering includes Ammunition parts & accessories, Communication equipments, Others includes Spun Silk yarn

Segment assets include operating assets and segment liabilities include operating liabilities. Depreciation for the previous period is after netting off amount withdrawn from revaluation reserve. In respect of secondary segment, segment revenue has been presented based on location of customers and segment assets based on location of assets. 19. The figures of the periods are not comparable with those of their respective immediately preceding period, where their spans vary pursuant to change in accounting year(s). Further, the figures for period ended June 30,2004 are not comparable with its previous period also due to consolidation of interest in JV from that period, and the figures for the period ended December 31,2005 are not comparable with those of its previous period, as the latter included the figures of SSPL, desubsidiarised during 200405, and hence not consolidated. The figures for period ended March 31, 2006 is also not comparable with those of the preceding period as the latter are after considering the effect of Scheme of Arrangement. 20. The previous periods/years figures have been regrouped/rearranged wherever considered necessary and material.

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B. FINANCIAL & OTHER DETAILS OF GROUP COMPANIES GROUP COMPANIES Details of Listed Companies within the promoter group companies. 1. Mysore Cements Limited (MCL) Mysore Cements Limited was incorporated on 13/05/1958 with the then Registrar of Companies, Mysore, Bangalore. The Registration No. of the company is (08)1318. The company is engaged in the business of manufacturing and sale of Portland Cement, Sponge Iron and M.S. Ingots besides dealing in Real Estate. MCL has three manufacturing plants located in the States of Karnataka, Madhya Pradesh and Uttar Pradesh. MCLs registered office is situated at 1st Floor, Industry House, 45, Race Course Road, Bangalore - 560001. The Board of Directors of MCL consists of: Shri S. K. Birla, Chairman Shri A. Ghosh Shri Padam Kumar Khaitan Shri N. L. Hamirwasia Managing Director Shri Sidharth Birla, Vice-Chairman Shri H. K. Kejriwal Shri N. K. Balaram Shri N. Lodha, Executive Director Dr. V. K. Gangwal Shri A. S. Shankare Gowda Shri N. U. Nampoothiri

The Shareholding pattern of MCL (as on 31/03/2006) is as follows: Sr. No 1 2 3 4 5 6 7 8 Category Promoters holding Mutual Funds and UTI Banks, Financial Institutions, Insurance Companies Foreign Institutional Investors (FIIs) Private Corporate Bodies Indian Public Non Resident Indians (NRIs) and OCBs Others Grand Total No. of shares held of Rs10/- each 21809959 3040667 12913192 5212709 17937246 27607239 1611723 102086 90234821 % of voting strength 24.17 3.37 14.31 5.78 19.88 30.59 1.79 0.11 100.00 (Rs. in Lacs) 2003-04 34642.17 (3609.60) 6870.12 (11219.39) (6.33) (5.84)

Financials Particulars (As at 31st March) Sales & Other Income PAT /(Loss) Equity Share Capital Net Reserves Book Value per share (Rs) EPS (Rs) 2005-06 43419.53 (8990.85) 9023.48 (20224.44) (12.41) (10.56) 2004-05 40318.26 (2478.68) 8423.48 (12274.59) (4.57) (3.36)

MCL is listed on BSE, NSE and Bangalore Stock Exchange Ltd. The shares of MCL were not traded on Bangalore Stock Exchange Ltd. during last 6 months. Quotes for last six months at BSE and NSE are as follows: Month January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 Stock Market Data High/ Low price in the last 6 months (Rs) Market price on date of filing of letter of offer with Stock Exchange (Rs) 89 BSE: Rs.56.90/24.50 NSE: Rs.57.00/24.50 [] BSE High (Rs) Low (Rs) 32.30 25.30 31.90 25.65 50.70 29.20 54.20 46.50 56.90 37.80 45.50 30.45 NSE High (Rs) Low (Rs) 31.45 24.50 31.85 25.65 50.30 29.20 54.25 46.40 57.00 37.75 45.60 30.15

MCL has not made any public/right issues during last three years. The networth of the MCL was totally eroded during the year 2003-04, subsequently MCL has been registered with BIFR under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1995. 2. Xpro India Limited (XIL) Xpro India Limited was originally incorporated as Biax Films Limited on 26/11/1997 with Registrar of Companies, West Bengal. The name of XIL was changed to Xpro India Limited w.e.f. 05/10/1998 and consequently fresh certificate of incorporation was obtained. Registration No. of the company is (21) 85972. XIL is engaged in the business of manufacturing Thermoplastic Films/Sheets/Liners and Thermosetting Powders and Resins. XILs registered office is situated at Barjora-Mejia Road, P O Ghutgoria, Tehsil Barjora Bankura District - 722202 West Bengal. The Board of Directors of XIL consists of : Shri Sidharth Birla, Chairman Mrs. Madhushree Birla Mr. Utsav Parekh Shri. C. Bhaskar, MD and CEO Shri P. Murari Shri Haigreve Khaitan Shri Amitabha Ghosh Shri S. Ragothaman

The Shareholding pattern of XIL (as on 31/03/2006) is as follows: Sr. No 1 2 3 4 5 6 7 8 Category Promoters holding Mutual Funds and UTI Banks, Financial Institutions, Insurance Companies Foreign Institutional Investors (FIIs) Private Corporate Bodies Indian Public Non Resident Indians (NRIs) and OCBs Others Grand Total No. of shares held of Rs10/- each 3732040 9469 792868 425000 690893 4289468 80680 54582 10075000 % of voting strength 37.04 0.09 7.87 4.22 6.86 42.58 0.80 0.54 100.00 (Rs. in Lacs) 2003-04 16236.72 1371.63 1007.50 8197.71 91.37 13.61

Financials Particulars (As at 31st March) Sales & Other Income PAT /(Loss) Equity Share Capital Reserves Book Value per share (Rs) EPS (Rs) 2005-06 10968.54 239.52 1007.50 8938.30 98.72 2.38 2004-05 15037.82 960.59 1007.50 8928.54 98.62 9.53

XIL is listed on CSE & NSE and permitted to trade on BSE. The shares of the company were not traded on CSE during last 6 months. Quotes for last six months at BSE and NSE are as follows: Month January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 Stock Market Data *Traded under Permitted Securities High/ Low price in the last 6 months (Rs) Market price on date of filing of letter of offer with Stock Exchange (Rs) BSE: Rs.50.70/26.65 NSE: Rs.51.00/23.30 [] *BSE High (Rs) Low (Rs) 50.70 41.75 42.50 35.60 37.75 31.35 48.20 36.10 47.45 30.00 36.40 26.65 NSE High (Rs) Low (Rs) 51.00 40.30 42.40 36.35 44.00 31.50 48.30 36.60 46.95 29.75 36.90 23.30

XIL has not made any capital issue during last three years. XIL is not a sick company within the meaning of the SICA. 90

3.

Cimmco Birla Limited (CBL) Cimmco Birla Limited was originally incorporated in the name of Texmaco (Gwalior) Limited on 08/09/1943 with Registrar of Companies, Madhya Pradesh, Gwalior. The name of the company was changed to Central India Machinery Manufacturing Company Limited and then to Cimmco Limited and then to Cimmco Birla Limited and consequently fresh certificate of incorporation was obtained. The Registration No. of the company is (10) 222. CBLs registered office is situated at Birlanagar, Gwalior 474 004. The company is engaged in the business of manufacturing textile machineries & accessories, railway wagons, steel castings and cement plant machineries etc. However the operations of the CBL were stalled consequent to lockout at the plant of CBL since 13/11/2000 and suspension of operations at other locations including at project sites because of freezing of banking operations by the consortium of banks. The Board of Directors of CBL consists of : Shri Y. N. Bhargava Shri J. P. Gupta- Director (works) Shri J. K. Shukla Shri B. M. Vijay

The Shareholding pattern of CBL (as on 31/03/2006) is as follows: Sr. No 1 2 3 4 5 6 7 8 Category Promoters holding Mutual Funds and UTI Banks, Financial Institutions, Insurance Companies Foreign Institutional Investors (FIIs) Private Corporate Bodies Indian Public Non Resident Indians (NRIs) and OCBs Others Grand Total No. of shares held of Rs10/- each 5246880 15369 2091757 680429 6144634 81818 14260887 % of voting strength 36.79 0.11 14.67 4.77 43.09 0.57 100.00 (Rs. in Lacs) 2002-03 4702.60 (369.25) 1430.43 222.69 Negative Negative

Financials Particulars (As at 30th June) Sales & Other Income PAT /(Loss) Equity Share Capital Net Reserves Book Value (Rs) EPS (Rs) 2004-05 4792.16 (6315.23) 1430.43 222.69 Negative Negative 2003-04 4520.79 (4835.77) 1430.43 222.69 Negative Negative

CBL is listed on NSE and Madhya Pradesh Stock Exchange Ltd., Indore (MPSE). The company has applied to stock exchanges at Mumbai (BSE), Delhi and Kolkata Stock Exchange for delisting of equity shares from these stock exchanges. However CBL has not received any confirmation from these stock exchanges. The shares of the company were not traded on MPSE during past 6 months. Quotes for last six months at NSE Month January 2006 February 2006 March 2006 April 2006 May 2006 June 2006 Stock Market Data High/ Low price in the last 6 months (Rs) Market price on date of filing of letter of offer with Stock Exchange (Rs) NSE: Rs.10.90/4.50 [] NSE High (Rs) Low (Rs) 10.35 8.35 8.75 6.64 7.30 6.25 8.95 6.95 10.90 6.95 6.10 4.50

The net worth of the company was fully eroded as per the Accounts for the period 1999-2000, whereby it became a sick industrial company as per the provisions of SICA. The company has accordingly made a 91

reference to BIFR and has been declared a sick industrial company at hearing on 21/08/2002. IDBI has been appointed as Operating Agency (OA) under section 17(3) of SICA. CBL has not made any capital issues during last three years. Details of the five largest unlisted companies within the promoter group companies (chosen on the basis of income from operations as on 31/03/2005). 1. Mineral Oriental Limited Mineral Oriental Limited was incorporated on 07/03/1972 with Registrar of Companies, West Bengal. The Registration No. of the company is (21) 28268. The Registered Office of the Company was shifted from the State of West Bengal to the State of Rajasthan, as confirmed by an Order of Company Law Board, Eastern Region Bench, Kolkata, wef 16.11.1990. The Registration Number of the Company is now 17-05681. The Registered Office is situated at Village Morchana, Post Pasoond, NH-8, District Rajsamand 313324 (Rajasthan) The company is engaged in the business of mining of Marbles and Granites. Its Board of Directors consists of the following persons: Shri R.R.Bhansali Shri N.K.Agarwalla Shri J.P.Agarwal Shri N.K.Poddar

The Shareholding pattern of the company as on 31/03/2006 is as given below: Name of the Shareholder Promoter group companies Individual Promoters & their relatives Societies Others Total No. of Shares 758400 70425 127400 7025 963250 Percentage of holding 78.73 7.31 13.23 0.73 100.00

The financial performance of Mineral Oriental Limited based on latest available audited accounts is given below: (Rs in Lacs) Particulars 2004-05 2003-04 2002-03 (As at March 31st) 437.86 407.84 Income from operations 476.66 PAT /(Loss) (0.25) 3.68 3.12 Equity Share Capital 97.02 97.02 47.02 Reserves 80.50 156.52 150.78 Book Value per share (Rs) 18.30 26.13 42.07 EPS (Rs) Negative 0.38 0.66 Mineral Oriental Limited is neither a sick company within the meaning of SICA nor is under winding up . 2. Birla Eastern Limited Birla Eastern Limited was incorporated on 19/09/1979 with Registrar of Companies, West Bengal. The Registration No. of the company is (21) 32247. The company is engaged in the business of management consultancy. Its Board of Directors consists of the following persons: Shri. S. K. Birla-Chairman Shri R. P. Singh Shri B. K. Dalmia Shri N. K. Poddar- Managing Director Shri B. D. Bose Smt. Vasusri Jhaver

The Shareholding pattern of the company as on 31/03/2006 is as given below: Name of the Shareholder Promoter group companies Individual Promoters & their relatives Societies Total No. of Shares 5222687 1173500 1407375 7803562 92 Percentage of holding 66.92 15.04 18.04 100.00

The financial performance of Birla Eastern Limited based on latest available audited accounts is given below: (Rs in Lacs) Particulars 2004-05 2003-04 2002-03 (As at March 31st) 320.38 316.07 Income from operations 283.08 PAT /(Loss) 26.74 52.23 25.17 Equity Share Capital 780.36 780.36 780.36 Preference Share Capital 19.00 19.00 19.00 Reserves 852.23 825.49 768.59 Book Value per share (Rs) 20.92 20.58 19.85 EPS (Rs) 0.34 0.67 0.33 Birla Eastern Limited is neither a sick company within the meaning of SICA nor is under winding up. For details of outstanding litigations against the company please refer to page no. (117). 3. Janardhan Trading Co. Limited Janardhan Trading Co. Limited was incorporated on 30/03/ 1970 with Registrar of Companies, West Bengal. The Registration No. of the company is (21) 27687. The company is an investment company registered as Non Banking Financial Company (NBFC) with RBI. Its Board of Directors consists of the following persons: Shri B. D. Bose Shri U. C. Jain Shri J. P. Agarwal Shri N. K. Poddar

The Shareholding pattern of the company as on 31/03/2006 is as given below: Name of the Shareholder Promoter group companies Societies Total No. of Shares 2306409 630493 2936902 Percentage of holding 78.53 21.47 100.00

The financial performance of Janardhan Trading Co. Limited based on latest available audited accounts is given below: (Rs in Lacs) Particulars 2004-05 2003-04 2002-03 (As at March 31st) 261.55 345.41 Income from operations 192.38 PAT /(Loss) 63.03 27.09 5.42 Equity Share Capital 293.69 293.69 293.69 Preference Share Capital 600.00 600.00 600.00 Reserves 707.54 695.79 719.57 Book Value per share (Rs) 34.09 33.69 34.50 EPS (Rs) 2.15 3.02 0.18 Janardhan Trading Co. Limited is neither a sick company within the meaning of SICA nor is under winding up. 4. Central India General Agents Limited Central India General Agents Limited was incorporated on 27/02/1942 with Registrar of Companies, Madhya Pradesh. The registered office of the company was shifted to the state of West Bengal in the year 1987. The Registration No. of the company is (21) 42140. The company is an investment company registered as Non Banking Financial Company (NBFC) with RBI. Its Board of Directors consists of the following persons: Shri J. P. Agarwal Smt. Sumangala Birla Shri R. R. Bhansali Smt. Anusri Pramanik Shri U. C. Jain

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The Shareholding pattern of the company as on 31/03/2006 is as given below: Name of the Shareholder Promoter group companies Individual Promoters & their relatives Total No. of Shares 39727 14704 54431 Percentage of holding 72.99 27.01 100.00

The financial performance of Central India General Agents Limited based on latest available audited accounts is given below: (Rs in Lacs) Particulars 2004-05 2003-04 2002-03 (As at March 31st) 235.70 91.96 91.31 Income from operations PAT /(Loss) 144.70 53.25 70.09 Equity Share Capital 5.14 5.14 5.14 Reserves 301.15 185.75 225.00 Book Value per share (Rs) 596.16 371.56 385.00 EPS (Rs) 281.63 105.54 108.17 Central India General Agents Limited is neither a sick company within the meaning of SICA nor is under winding up. 5. GCC Investment Trading Company Limited GCC Investment Trading Company Limited was incorporated on 20/04/1982 with Registrar of Companies, West Bengal. The Registration No. of the company is (21) 34802. The company is an investment company registered as Non Banking Financial Company (NBFC) with RBI. Its Board of Directors consists of the following persons: Shri J. P. Agarwal Shri U. C. Jain Shri P. K. Chhawchharia

GCC Investment Trading Company Limited is a wholly owned subsidiary of Birla Eastern Ltd. The financial performance of GCC Investment Trading Company Limited based on latest available audited accounts is given below: (Rs in Lacs) Particulars 2004-05 2003-04 2002-03 (As at March 31st) 150.97 43.32 16.65 Income from operations PAT /(Loss) 145.06 22.09 10.39 Equity Share Capital 325.00 325.00 325.00 Preference Share Capital 80.00 80.00 Net Reserves 89.43 (55.63) (77.72) Book Value per share (Rs) 12.75 8.28 7.61 EPS (Rs) 4.46 0.68 0.32 GCC Investment Trading Company Limited is neither a sick company within the meaning of SICA nor is under winding up.

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C. CHANGES IN ACCOUNTING POLICIES There has been no change in accounting policies since past three years. D. MANAGEMENT DISCUSSION AND ANALYSIS Overview of the business of the Company The Company operates in the worsted textile segment and has a modern composite mill (ISO 9002 certified) for manufacturing high quality fabrics at Jamnagar, and Universal Clothing, the garment manufacturing unit at Faridabad. The Company has been a significant player in this industry in India for more than 50 years. The fabric produced by the company is marketed in India under the brand name of DIGJAM. The brand has been listed among the trusted apparel brands in the country in a Brand Equity article in 2001. The fabric manufactured by the unit is well accepted in the world markets, specifically in US and Europe, including Italy and is also exported to Middle East under DIGJAM brand name.. The Company also produces ready made garments including for some of the top international brands. Although at present the company has not been selling readymade garments under its own brand name it has plans in this regard. In addition BVXL has two operating subsidiaries, namely, OCM India Ltd., to which OCM division of BVXL has been transferred pursuant to Scheme of Arrangement and VXL Technologies Ltd (VTL), which manufactures defence stores and communication equipments. Significant development after the date of last Balance Sheet i.e.31/03/2006 In the opinion of the Directors, there has not arisen, since the date of the last financial statements disclosed in the Letter of Offer, any circumstances that materially and adversely affect or is likely to affect the trading or profitability of the Company, or the value of its assets, or its ability to pay liabilities within the next 12 months. Factors that may affect results of Operations Unusual or infrequent events or transactions The Company has recently undergone restructuring under the Scheme of Arrangement, which was approved by the Honble High Courts and became effective on 30/03/2006. Besides this, there are no material infrequent transactions which may affect results of operations of the Company. Significant economic changes Governments focus on exports will have major bearing on the companies involved in export. Any major changes in the policies of the government would have significant impact on the profitability of the company. Known trends or uncertainties RMG/RTW is growing at faster phase which may impact a fabric off take pattern. Rise in the cheap imports of fabric can put margin pressure on the sales of Companys products. Besides this there are no known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

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Future changes in relationship between costs and revenues The revenues would be dependent on the ability to compete in the post quota regime, which the Company has successfully weathered over the last one year. With improvement in sales volume, the margins improve resulting from economies of scale.

Extent of impact on Sales volume Increases in revenues are by and large linked to increases in volume of business activity carried out by the Company.

New Products New technology driven products and innovations like wrinkle free, hydro-phyllic, stain repellant, fragrant etc., are being introduced.

Seasonality of business The business of the Company is not seasonal however there is a distinct increase in sales volume during marriage, festival and winter seasons.

Dependence on single or few suppliers/customers The major raw material required by the Company is greasy wool, polyester fibre and polyester/viscose yarn. There is no dependence on single supplier in case of greasy wool as there are number of suppliers in Australian/New Zealand markets. For polyester, there are limited suppliers, major player being Reliance Industries Ltd. However, the Company is not facing any difficulties in procurement. For polyester/viscose yarn, there are several indigenous suppliers and hence there is no difficulty in procurement. The Company has wide customer base spread all over India and hence there is no over dependence.

Competitive Conditions There are 3/4 major players in the worsted industry with Raymond having nearly 60% market share. Imports also pose some competition.

Results of Operations Results of operations for the last three years/periods are as follows: PARTICULARS For 3 Months period ended 31/03/2006* 3074.58 2613.50 461.08 For 18 Months period ended 31/12/2005 29796.67 26806.15 2990.52 (Rs.in Lacs) For 18 Months period ended 30/06/2004 25767.07 25076.14 690.93 (9547.84) (12357.30)

Total Income Total Expenditure (excl Interest) Profit Before Interest, Depreciation and Tax (PBIDT) Profit/(Loss) Before Exceptional Item and 85.25 (2561.82) Tax Net Profit/ (Loss) After Tax (as reported) 17.62 (4250.68) * after considering the Scheme of Arrangement, exclude the figures of OCM Division Comparison of Results of Operation 3 months period ended March 31,2006.

The figures for 3 months ended 31/03/2006 are not comparable with those of preceding period of 18 months ended 31/12/2005 as the former are after incorporating the effects of Scheme of Arrangement, and therefore, inter alia, exclude the figures of OCM Division, and also due to the varying span of the accounting periods.. 96

The Management discussion on the operations for three months period ended on 31/03/2006 is as follows: Production of fabric as well as garments have shown considerable improvement during this period as compared to previous period. Similarly, per unit realisation has also shown remarkable improvement. Consistent efforts to improve product mix and thereby improve realisations as well as profitability margins have started bearing results. Whereas exports during the current period have shown improvement, domestic sales quantity showed a marginal decline mainly because of greater focus on higher value added products. The domestic markets, during later half of January, February & March were unprecedentedly slack particularly due to early onset of summer. Many competitors resorted to either preponing despatches scheduled for April/May or offering heavy discounts in order to effect sales. The Companys garment division has shown improvement in production as well as sales. Overall sales of the Company have shown improvement over previous period. During this period, the Company reported PBIDT of Rs 461.08 Lacs and Profit before Exceptional Items and Tax of Rs. 85.25 Lacs and net profit for the period of Rs. 17.72 Lacs. The PBIDT for the period was 15.00 % of Total Income as against 10.04 % during previous 18 months period ended 31/12/2005. 18 months period ended December 31,2005. The figures for period ended 31/12/2005 and 30/06/2004, both for 18 months, includes figures of OCM division which stands transferred pursuant to the Scheme of Arrangement. Net Sales The Company reported net sales of Rs 29233.89 Lacs during period ended 31/12/2005, as against net sales of Rs. 25273.22 Lacs during period ended 30/06/2004. The sales during these 18 months registered a growth of 15.67 % on a corresponding period basis. Other Income During period ended 31/12/2005, other income stood at Rs. 562.78 Lacs as compared to Rs.493.85 Lacs during period ended 30/06/2004. Total Expenditure Total expenditure (excluding Interest) were at Rs 26806.15 Lacs (91.70% of the net sales) for the period ended 31/12/2005 as against Rs.25076.14 Lacs (99.22% of net sales) for the period ended 30/06/2004. The was achieved by consistent efforts towards cost reduction, helping in improving the operating margins. Profit before Interest etc (PBIDT) The Company reported PBIDT of Rs 2990.52 Lacs (10.04% of Total Income) as against Rs 690.93 Lacs (2.68% of Total Income) during 18 months period ended 31/12/2005 and 30/6/2004 respectively. This improvement was mainly on account of better average net sales realizations, aided by reduction in duties, and cost control measures pursued by the Company. Interest Interest cost (including Financial Charges) accounted for Rs. 1834.08 Lacs for 18 months period ended 31/12/2005 as against Rs. 5906.69 Lacs for 18 months period ended 30/06/2004. The reduction in interest cost was mainly on account of effect of sanction of restructuring of loans liabilities by ARCIL. Profit after tax The Company reported loss before Exceptional Items and Tax of Rs. 2561.82 Lacs and net loss of Rs 4250.68 Lacs for 18 months period ended 31/12/2005; as compared to corresponding loss of Rs. 9547.84 Lacs and Rs 12357.30 Lacs respectively for preceding 18 months period ended 30/06/2004. During 18 months period ended June 30, 2004. Net Sales The Company reported net sales of Rs. 25273.22 Lacs during 18 months period ended 30/06/2004, as against net sales of Rs. 20498.00 Lacs for 12 months year ended 31/12/2002. The sales for 2003-04 were subdued on account of slowdown in the economy and difficult market conditions. Other Income Other Income for the period ended 31/12/2004 were at Rs 493.85 Lacs against Rs 511.71 Lacs for the previous year ended 31/12/2002. 97

Total Expenditure Total expenditure (excluding interest) were Rs 25076.14 lacs (99.22% of net sales) during the period ended 30/06/2004, as against Rs 20391.59 Lacs (99.48% of net sales) during year ended 31/12/2002. Profit before Interest etc (PBIDT) The Company reported PBIDT of Rs 690.93 Lacs (2.68% of Total Income) during 18 months period ended 30/6/2004 as against Rs 618.12 Lacs (2.94% of Total Incme) year ended 31/12/2002. The operating profits for the periods remained subdued on account of poor market conditions and low sales realizations, restriction on output due to liquidity crunch etc. Interest Interest and Financial Charges were Rs. 5906.69 Lacs (Annualised Rs 3937.79 Lacs) during the period ended 30/06/2004 as against Rs. 4482.52 Lacs for 12 months period ended 31/12/2002. The interest burden during the period was eased by restructuring of loan liabilities by ARCIL. Profit after tax The Company reported loss before Exceptional Items and Tax of Rs. 9547.84 Lacs and net loss of Rs 12357.30 Lacs for 18 months period ended 30/06/2004; as compared to corresponding loss of Rs. 7241.76 Lacs and Rs 4747.35 Lacs respectively for preceding 12 months period ended 31/12/2002. Risk relating to Foreign Exchange The Company imports raw material used for production which subjects it to foreign exchange exposure. The fluctuations in foreign exchange rates might have an impact on the financial performance of the Company. WORKING RESULTS Information relating to the Company sales, gross profit etc., as required by the Ministry of Finance vide circular No.F2/5/SE/76 dated February 5, 1977 read with the amendments of even No. dated March 8, 1977 as under: The unaudited working results of the Company for the period from 01/04/2006 to 30/06/2006 are given hereunder: Particulars (Rs. in Lacs) For the period ended on 30/06/2006 2648 45 2693 2619 160 181 21 (246) 3 (249) 4376 (0.57)

Net Sales Other Income Total Income Total Expenditure Interest & Financial Charges Depreciation & Amortisation Exceptional item Profit/(Loss) Before Tax Provision for taxation - Fringe Benefit tax Net Profit/(Loss) after Tax Paid-up Equity Share Capital EPS

98

VII. LEGAL AND OTHER INFORMATION A. OUTSTANDING LITIGATIONS AND DEFAULTS Save as stated herein under, the Company, have not defaulted in meeting any of its statutory or institutional dues and have made all payments/refunds on fixed deposits or no proceedings have been initiated against the Company, for any of the offences 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, economic or otherwise civil litigations against the Company and its Directors, there are no material disputes/legal actions other than those disclosed below. There are no pending proceedings initiated for economic offences against the Company. No disciplinary action/ investigation have been taken by the SEBI against the Company, its subsidiaries and sponsored institutions and its respective Directors, other than those disclosed below. OUTSTANDING LITIGATIONS AGAINST THE COMPANY Criminal cases There are 9 criminal matters filed by the workers of the Company as per details given herein below :Sr No 1 Case No Cr.Case No.-953/87 In the court of Chief Judicial Magistrate, Jamnagar Parties Babu Jiwa Meghvar Vs. Somani Cont. & B. C. Jain Basawanrai Vs. Babulal Himatsinh Jalamsinh & Others Vs. Shri S.C. Agarwal, Shri N. C. Trivedi & Shri M. R. Bhandari Particulars Death of Contract Labour due to collapse of Sulzer Dept. roof

Cr.Case No.-672/92

Chief Judicial Magistrate, Jamnagar Chief Judicial Magistrate, Jamnagar

Criminal complaint against H.O.D. of Finishing Dept. Shri Babulal under Sec.504, 506 (2) of IPC Bonus was not received intentionally by three workers and criminal complaint was lodged under Sec.403, 406,408,418,34,114 of IPC

Cr. Case No.5796/93

Cr. Case No.5797/93

Chief Judicial Magistrate, Jamnagar

Himatsinh Jalamsinh & Others Vs. Shri S.C. Agarwal, Shri N. C. Trivedi & Shri M. R. Bhandari

As above

Cr. Case No.5798/93

Chief Judicial Magistrate, Jamnagar

Himatsinh Jalamsinh & Others Vs. Shri S.C. Agarwal, Shri N. C. Trivedi & Shri M. R. Bhandari

As above

Cr.Case No-1968/96

Chief Judicial Magistrate, Jamnagar

C.B.Modhvadia Vs. Shri C. L. Goswami

Criminal complaint for defamation was lodged against Company's President Shri C. L. Goswami by Chhaganbhai Modhvadia - Union leader of Gujarat Rajya Kamdar Sabha(R. J. Mehta Union) Watchman Raghuvirsingh was assaulted by workman Gopalsingh

Cr. Case No.5063/98

Chief Judicial Magistrate, Jamnagar

Raghuvirsingh Vs. Gopalsingh Jodhsingh

99

Sr No 8

Case No Cr.Case No.1731/99

In the court of Chief Judicial Magistrate, Jamnagar

Parties Apprentice Advisor Vs. Birla VXL Ltd & Shri ML Verma

Particulars Criminal complaint lodged against Company's Manager by Apprenticeship Advisor under Apprentices Act 1961 for recruitment of less Apprentices against allotment of quota. Watchman Raghunathsinh lodged a criminal complaint against Security Officer and Jamadar Sec. 504 & 506 (1) of IPC

Cr.Case No.6124/2000

Chief Judicial Magistrate, Jamnagar

Raghunathsingh Sujansingh Sekhawat Vs. Shri M. C. Meena & Shri Motisingh

There are 6 other criminal applications in relation to labour matters pending in the Honble Court at Ahmedabad, 4 seeking to quash criminal cases filed against the Company before the Chief Judicial Magistrate, Jamnagar and one by a workman for setting aside the judgment of Sessions Court, Jamnagar. Labour matters There are 26 labour cases pending against the Company in Labour Court, Jamnagar for reinstatement by 26 separate employees. Besides, there are 3 more matters, one being an application for calculation of ex-gratia amount of bonus, one for recovery of 20 days wages by an employee and one for the interpretation of the Standing Order Nos.22, 23 and 24 by the Workers Union. There are further 29 matters pending before the Industrial Tribunal, Rajkot, 15 of which are in relation to the dismissal of employees, 5 in relation to suspension of workers, one in relation to interpretation of bonus amount, one in relation to modification in the Standing Orders, one being complaint u/s 33A of Industrial Disputes Act, one being workmens stay against superannuation, one for interim injunction against disciplinary action taken by the company, one for ESI recovery, one seeking declaration that persons who had worked 240 days and more should be considered as permanent workers, one by workers not covered by ESI seeking sick leave and medical allowance and, one seeking stay against dismissal from services of the company. There are 2 labour related matters in relation to Companys unit at Faridabad, Haryana being Universal Clothing, details whereof are as under :Sr. 1 Parties Shakila Hussain Vs. Universal Clothing Birla VXL Ltd & ors. Workers Union Vs. Universal Clothing Birla VXL Ltd & ors Court Presiding Officer, Labour Court Faridabad Subject Shakila Hussain, a female employee filed a case for reinstatement in the Labour Court at Faridabad Amount involved -

Before the Conciliation Officer, Faridabad

Permanent workers raised a demand note in the month of April 2006 and referred the matter for conciliation to the Conciliation Officer, Faridabad

Amount cannot be ascertained at this stage

Arbitration matters

There are two arbitrations pending as against DLF Real Estate Developers Ltd. (previously known as DLF Universal Ltd.). One arises out of an agreement dated April 15, 1995 for purchase of an office block admeasuring 24,210 sq. ft. at DLF Corporate Park, DLF City, Phase II, Gurgaon where despite payment of full agreed consideration of Rs.573.64 lakhs DLF has defaulted in handing over possession of the office block. The other arises out of three purchase orders placed in 1994 upon DLF Industries Ltd., predecessor in interest of DLF Universal Ltd. by one Saurashtra Chemicals Ltd., the erstwhile Chemical Division of the Company for supply of turbine generators. An amount of approx. Rs.17 crores is claimed by DLF in the said arbitration proceeding as against Saurashtra Chemicals Ltd. and the Company under various heads. Application of the Company for deletion of its name on the ground that there is no privity of contract has been rejected by the Ld. Arbitrator and an appeal there from is pending in the Honble High Court of Gujarat at Ahmedabad. 100

Central Excise, wealth & income tax matters Assistant Excise & Taxation Commissioner (Mobile Wing), Jalandhar imposed penalty of Rs.355,000/- under Section 14B(7) of the Punjab General Sales Tax Act, 1948 for the period 1999-2000 in relation to Companys unit at Faridabad, Universal Clothing, against which Company has filed an appeal with Deputy Excise & Taxation Commissioner, Joint Director (Mobile Wing), (Appellate Authority), Jalandhar Division. Wealth tax matters are pending for assessment years 1993-94 to 1998-99 in relation to the valuation of land at Joka and Amritsar, and the total outstanding wealth tax amount involved is Rs.28.89 lakhs plus interest and penalty. Income tax matters are pending for various assessment years as per following particulars :Pending before Gujarat HC - do ITAT ITAT ITAT ITAT ITAT ITAT ITAT CIT (Appeals) Particulars Companys appeal against re-opening proceedings enhancing book profits. Departments appeal on repairs of guest house and expenses for issue of convertible debentures. Appeals both by Company and Department on allowance and disallowance of expenditures. - do - do - do - do - do - do - and amount withdrawn from revaluation reserve not included in book profit. Companys appeal from non allowing deduction of extraordinary items and depreciation on revalued assets from book profits. Total tax involved Amount of income in dispute 23.52 53.43 355.55 520.62 106.53 1207.68 2080.16 1190.13 1138.37 277.80 Amount of Tax Involved 12.35 23.85 82.10 62.20 180.50

Miscellaneous matters a) There are about four matters, three in the Honble Delhi High Court and one before the Addl. Rent Controller, Delhi in relation to Companys occupation of Flat No.12, 3-4 South End Lane, New Delhi. Company is presently occupying the said flat in terms of the orders passed in Companys favour by the Honble Supreme Court of India, and the Company has also made an application before the Addl. Rent Controller, Delhi for fixation of standard rent. Two suits, one by O.P. Khaitan (HUF), and the other by one Kanti Arora have been filed for recovery of the said flat and for mesne profits of Rs.85,000/- per month. Suit filed by O.P. Khaitan (HUF) has been dismissed against which Regular First Appeal is now pending in the Honble High Court of Delhi at New Delhi. O.P. Khaitan (HUF) had made an application before the Addl. Rent Controller for impleadment which was dismissed, and against the same a revisional application under Article 227 of the Constitution of India is pending in the Honble High Court of Delhi at New Delhi. Total amount involved is about Rs.85,000/- per month mesne profits from May 1995 Suit filed by one Media Trans Asia against the Company for recovery of advertisement and publicity expenses incurred is pending in the Honble High Court of Delhi at New Delhi. On the Company showing to the plaintiff that all payments have been made and nothing remains to be paid, the plaintiff has made a statement before the Court to delete the name of the Company and has filed an application to this effect. The matter is since pending. Amount involved Nil. Besides the above, other outstanding matters are as follows :Case No. RCSA No.587/89 Sp.C.S. No.57/96 In the Court of Civil Judge, (S.D.) Jamngar Civil Judge, Jamngar (S.D.) Filed by/Against Hriday Narayansingh (GRKS) Vs Birla VXL Ltd. Chhagan Bimabhai Modhwadia Vs. Shri. C.L. Goswami Particulars Relief asked for recovery against amount of bonus paid as an advance for the accounting year 1987-88 A civil suit filed by Chhaganbhai Modhvadia union leader of Gujarat Rajay Kamdar Sabha (R.J. Mehta UnionBombay) Against Shri C.L. Goswami & Birla VXL Ltd, An amount of Rs.11 Lacs was claimed as Compensation for defamation. Declaration and permanent injunction was asked for by the workman against the disciplinary action.

b)

c)
Sr. 1. 2.

3.

Civil Regular Appeal No. 52/98

District Judge Jamnagar

Mukesh Narain Vs. Birla VXL Ltd. Jamnagar

101

4.

RCS No. 401/98

Civil Judge, Jamnagar

(S.D.),

Jentilal Valji Vs. Birla VXL Ltd., Jamngar Sashirekha Vs 18 Defendants including Birla VXL Ltd. Priyanka & Ors. Insulation Materials Mfg. Co. Pvt. Ltd. Vs. Birla VXL Ltd.

5.

OS/1699/05

City Civil Court Bangalore & Karnataka HC City Civil Court Bangalore Neela & Ors Presidency Small Causes Court Calcutta

6. 7.

OS/119/06 CS/7/2004

Workman after about seven months from submitting resignation, approached the Civil Court, Jamnagar for Declaration and permanent Injunction for considering him. Partition suit filed by daughter of the original owner of Ejipura land claiming she was not party to the compromise between her family Members and Shri Pai. Suit claiming partition of Ejipura land claimed as joint family property. Eviction Suit in respect of tenancy of Room No. 5 at 1/1A, Vansittart Row, Kolkata.

Defaults/Overdues by the Company The Company has undergone, inter alia, the restructuring of its debts under the Scheme of Arrangement, which has become effective on 30/03/2006. It has not defaulted, having regard to the implementation of the Scheme of Arrangement, in repayment of dues to financial institutions and banks except the overdue amounts of Rs 1183.99 Lacs (including carryover of Rs 1018.09 Lacs from the previous period) the as at 31/03/2006. These overdues were not part of the debts covered under restructuring in the Scheme. OUTSTANDING LITIGATIONS AGAINST PROMOTERS / DIRECTORS 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, fixed deposits, 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 may or may not have been awarded and irrespective of whether they are specified under paragraph (i) of Part I of Schedule XIII of the Companies Act, 1956) against the promoters and director of the Company, except the following:
S. No. 1 Particulars Civil Application No. 3032 of 2005 in First Appeal No.39029 of 2003 Union of India through Asst. Director of Enforcement vs. Mr. Arvind N. Lalbhai Court Arvind Narottam Lalbhai High court of Mumbai Status The present first appeal is filed by Union of India through Asst. Director of Enforcement FERA against the Order dated 12th May 2003 passed by the Appellate Tribunal for Foreign Exchange New Delhi which had set aside the impugned order of adjudicating authority dated 23rd December 1987 By the said order of FERA Board the impugned order holding the Appellants guilty of contravention and penalties on companies and its directors were liable to be quashed and the payments made pursuant to interim orders were directed to be refunded the said present first appeal is pending for hearing before the High Court Mumbai Private complaint for alleged delay in furnishing documents under the Companies Act. Next date is 7.9.06. In the meanwhile, application u/s 482 of Cr. P. C. moved before Karnataka High Court and matter has been stayed until further orders.

H. V. Jayaram Vs Mysore Cements, N. L. Hamirwasia, Managing Director, Nirbhay Lodha, Executive Director & G. K. surekha, Company Secretary

Special Court for Economic Offences, Bangalore

OUTSTANDING LITIGATIONS AGAINST SUBSIDIARY COMPANIES

A. OCM INDIA LIMITED

Labour Matters There are 12 outstanding litigation in relation to labour related matters, one pending in the Honble Chandigarh High Court, one before the Ld Industrial Tribunal, Chandigarh and ten before the Labour Court, Amritsar. The labour matters mostly relate to claims for reinstatements by dismissed workers. There is no monetary amount involved in any of the labour cases except two matters before the Labour Court, Amritsar where two workers have raised demand for ex gratia bonus, which amount is insignificant. 102

Central Excise matters There are nine outstanding Central Excise matters, two filed by the Company and pending before the CESTAT, Delhi. One is for abetment availed in respect of post removal expenses , on which Excise demand for Rs.6.02 lakhs and penalty of Rs.15 lakhs is outstanding. The other is for proforma credit taken under Rule 56A but denied to be transferred to Modvat Credit Account since proforma credit has been discontinued. Amount involved is Rs.4.06 lakhs. Of the other seven matters, two are pending in the Chandigarh High Court for which amount involved is Rs.6.14 lakhs; three before CESTAT, Delhi on which Excise demand for Rs.73,595/- and penalty of Rs.50 lakhs is outstanding on abatement availed in respect of post removal expenses, one is pending before the Commissioner (Appeals), Jalandhar on which amount involved is Rs.6.07 lakhs and one matter is in relation to modvat credit availed under Rule 57H on the input lying in the stock without permission of the Department. Commissioner (Appeals) set aside the order passed by the Asst. Commissioner and has remanded the case back to him for readjudication. Amount involved is Rs.210.82 lakhs. Income tax matters There are no outstanding litigation except in relation to income tax matters relating to assessment years 1992-93, 1977-78 to 1981-82 and 1983-84. Though the amount in dispute for all these assessment years is total Rs.62.64 lakhs, no tax is involved in relation thereto as the additions stands adjusted against carried forward losses. All the matters are pending before the Honble High Court at Chandigarh as per details given hereinbelow :Assessment Year 1992-93 1977-78 to 1981-82 1983-84 Particulars Departments appeal regarding actual quantum of commission received and amount credited to Profit & Loss Account. Departments appeal against mistake stated to have occurred not covered by Section 292B. Companys reference against Order of the ITAT, Amritsar Bench, challenging additions on account of wastage, sale of copper wire from discarded cable. Amount in dispute (Rs.lakhs) 10.46 15.74 36.44

Miscellaneous matters
Sr. No. 1 2 3 Parties Cethar Vessels Ltd Tiruchinapalli Veer Mercantile Pvt. Ltd., Raipur. U.P. Small Industries Corpn., Kanpur. Court Amritsar Raipur Kanpur Amount (Rs. in Lakhs) 56.50 0.91 4.41 Subject Civil suit for non payment against boiler supplied filed in Amritsar Court. Civil Suit for recovery filed at Raipur. Fixed for appearance of defendants (Agent) Suit filed in 1982 at Kanpur Court and decreed against the company with future interest. Against the order of the lower court a revision application filed and the same was also rejected by the Court. Now, review application has been filed in Kanpur Court which is pending for hearing. Civil Suit for recovery filed by the party in Satna Court. Fixed for service of the defendants. Civil Suit for recovery transferred to Allahabad High Court by the Honble Supreme Court of India, and the matter is now pending adjudication in the Allahabad High Court.

4 5

M/s.Mandhan Synthetics, Satna M/s. Oil & Natural Gas Commission, Dehradun.

Satna Allahabad High Court

2.61 5.14

B. MASUZAWA PUNJAB SILK LTD. 1. 2. Winding up petition in Chandigarh High Court has been filed against the Company by one of the creditors for a disputed amount of Rs.14.94 lakhs, which is pending. Income tax appeal for assessment year 2000-01 is pending before the Income Tax Appellate Tribunal against the order of CIT (Appeals) holding the Company as NRI under Section 163 of Income Tax Act, 1961. Amount involved is Rs.0.35 lakhs. There are two Central Excise matters pending before the CESTAT, Delhi for sale of silk yarn on which the Company has claimed exemption under Notification no.13/98 but disallowed by the Department on the plea that the conditions of the Notification has not been complied with by the Company. Total amount involved is Rs.46.98 lakhs and penalty amount of Rs.13.86 lakhs.

3.

103

C. VXL TECHNOLOGIES LTD. 1. Income-tax appeals are pending for the assessment years 1996-97 and 1998-99 before the Income Tax Appellate Tribunal, New Delhi. Total demand outstanding is Rs.8.58 lakhs for the assessment year 1998-99. Demand of Rs.24.40 lakhs for the assessment year 1996-97 has been paid under protest. Central Excise matter for the period December 1993 to March 1994 in relation to classification decided by CESTAT is pending for order of original authorities, i.e. Assistant Commissioner of Excise. Amount involved is Rs.8.27 lakhs. Sales Tax claim of Rs.1.97 lakh for the period 1963-64 to 1965-66 for sales tax imposed on stock transfer and paid in full under protest is pending before Honble Chandigarh High Court. An appeal is pending before the Additional District Judge, Faridabad in relation to a demand for external development charges raised by HUDA and Municipal Corporation of Faridabad for Rs.311.24 lakhs

2.

3. 4.

Details of claims outstanding : 1. Claim on account of service tax for the year 2004-05 for Rs.52,000/- has been made against the Company vide show cause notice dated December 31, 2004. Company has filed its reply to the same, and the matter is since pending.

OUTSTANDING LITIGATIONS AGAINST GROUP COMPANIES There are no outstanding litigation, 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, fixed deposits, 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 may or may not have been awarded and irrespective of whether they are specified under paragraph (i) of Part I of Schedule XIII of the Companies Act, 1956) against the listed and top five (based on total income) unlisted promoter group companies, except the following: Listed Companies I. MYSORE CEMENTS LTD

A. Ammasandra Unit: Criminal matters There are two criminal matters pending against the Company as per details given below :Sl. No 1. Parties Asst. Director of Factories, Tumkur. Vs Occupier & Factory Manager, Mysore Cements Ltd. H.V. Jayaram Vs Mysore Cements Ltd. Mysore Cements Ltd. Vs H.V. Jayaram Case No. 292 2005 of Court JMFC, Turuvekere. Subject Criminal case before JMFC, Turuvekere under Section 92 of the Factories Act, 1947 against Occupier and Factory Manager for having contravened Section 7A(1) and 7A (2) (c) and Rule 84 of the Karntaka Factories Rules, 1969 read with Section 41 of the Factories Act for death of one Guddaiah who was working in the night shift on 22.6.05 and sustained injuries while on duty and died on 27.6.2005. Alleged delay in furnishing documents under the Companies Act, 1956

2.

833 of 2003 3002 of 2004

2A.

Special Court for Economic offences, Bangalore Karnataka High Court, Bangalore

Companys application u/s 482 of CrPC against above complaint alleging delay in furnishing documents under the Companies Act, 1956 filed in the High Court on the grounds of limitation. Matter stayed until further orders of the High Court.

There is no monetary claim in respect of the above criminal matters.

104

Labour matters : There are total 19 outstanding labour related matters, 4 by the Company and 15 against the Company in relation to its Cement Unit at Ammasandra, Bangalore. The details of these labour related matters are given hereinbelow:Sl. No 1. Parties Case No. Court Subject Total Amount Involved (Rs. Lakhs) 4.19 (less paid 2.10)

6 of 2002 Mysore Cements Ltd Vs ESI Corporation, Bangalore Mysore Cements Ltd. Vs Vasappa 1211 of 2005

Industrial Tribunal (ESI Court) Bangalore. Karnataka State Consumer Disputes Redressal Commission, Bangalore. - do -

Proceeding initiated by the Company challenging order made by The Reg. Director, ESIC, Bangalore under Sec. 85B of ESI Act purporting to levy damage of Rs.4,19,361/-. Matter pending adjudication. Appeal preferred by the Company against common judgment dated made by the District Consumer Forum, Tumkur in relation to claims made by Mr.Vasappa for non payment of salary for August, September and October 2003, paid leave salary, medical reimbursement, gratuity, super annuation and delay in PF settlement on account of his misconduct while functioning as Dy.ManagerPersonnel. Proceedings initiated by the Company against levy of ESI contribution on the civil modification work at Bangalore office premises at Golden Enclave & Industry House. All India Trade Union Congress, Bangalore had raised dispute before the Dy. Labour Commr., Bangalore regarding the transfer Mr. MG. Renukaiah and Mr. HC Siddaramaiah to Damoh unit requesting transfer them back to Amsa. Since the Conciliation ended in failure, the State Govt. has referred the case for adjudication. The Govt.of Karnataka has referred the dispute over the charter of demands of MCEA for adjudication. Claim for interest at 12% for the period from 9.7.2002 to 23.9.2002 and 24% thereafter on delayed gratuity payment till the interest amount is ultimately paid to him.

2.

0.52

3.

Mysore Cements Ltd. Vs DK Siddaiah Gowda Mysore Cements Ltd Vs ESIC Corporation AITUC, Bangalore Vs Mysore Cements Ltd

1212 of 2005

2.11

4.

26 of 2005

ESI Court Bangalore Industrial Tribunal Bangalore.

1.31 less paid 1.31 9.92

5.

25 of 2001

6.

MCEA, Ammasandra Vs Mysore Cements Ltd Mr.AV.Sunder Raj, Ex-Dy.Manager Sales, Ayarahalli, Kuppalu Post Vs Mysore Cements Ltd Secretary, Mysore Cements Employees Assn., Ammasandra Vs Mysore Cements Ltd. Mr.DT Jayaram, S/o. Thimmaiah Vs Mysore Cements Ltd Mr.Sidde Gowda, S/o.Lingappa alias Budde Gowda Vs Mysore Cements Ltd Mr.HT Venkatappa S/o.Thimmappa Vs Mysore Cements Ltd.

26 of 2001

Labour Court Bangalore

9 7.

98 of 200203

8.

3 of 2003

Asst.Labour Commisioner, Bangalore Division & Controlling Authority Payment of Gratuity Act. National Industrial Tribunal, Mumbai

0.23

Application by MCEA for implementation of new wage settlement signed between Cement Manufacturers Association and Cement Federation of Trade Unions on August 14, 2000. Application by Mr.DT Jayaram, employee of a Contractor, for compensation under Workmen Compensation Act. Application by employee of Contractor for reninstatement, payment of dues and other benefits, etc. - do

530.79

1104 of 2004

10

48 of 2005

Commissioner for Workmens Compensation, Tumkur District, Tumkur Labour Court, Bangalore

20.00

11

49 of 2005

Labour Court, Bangalore

105

Sl. No 12

Parties Mr.Nanjundaiah Shivananje Gowda Vs Mysore Cements Ltd Mr.Rangaswamy, S/o.Kenchappa Vs Mysore Cements Ltd Mr.AN Siddaiah S/o.Nanjappa Vs Mysore Cements Ltd Mr. Rangaswamy, S/o.Allaiah Vs Mysore Cements Ltd Mr.DBDhananjaya, S/o Byatappa, Dandinashivara Vs Mysore Cements Ltd Mr.Arun Kumar Vs Mysore Cements Ltd Mr. Vasappa Vs Mysore Cements Ltd Mr. D.K.Siddaiah Gowda Vs Mysore Cements Ltd

Case No. 50 of 2005

Court Labour Court, Bangalore

Subject - do -

Total Amount Involved (Rs. Lakhs) -

13

51 of 2005

Labour Court, Bangalore Labour Court, Bangalore

- do -

14

52 of 2005

- do -

15

53 of 2005

Labour Court, Bangalore

- do -

16

41 of 2005 -06

Labour Officer & Authority under the Minimum Wages Act Prl. Civil Judge (Sr.Divn), & CJM, Tumkur Regional Labour Commissioner Bangalore Regional Labour Commissioner Bangalore

Petition under the Minimum Wages Act for the period 1986 to 2001for compensation.

3.63

17

3 of 2006

Application for 50% gratuity amount by deceased workers brother. Gratuity claim settled by the Company in favour of deceased employees widow and nominee. Gratuity claim by an employee whose services had been terminated for defalcation. - do -

0.51

18 19

36(02) of 2006 36(03) of 2006

1.94 4.97

Claims outstanding as against the Company

576.71

Matters relating to Composite Pre-University College There are three outstanding litigations as against the Composite Pre-University College run by the Company at Tumkur, Bangalore details whereof are as follows :Sr. 1. 2. Parties MK Mustafa Khan Vs Management of MJC Amsa TV Venkatachaliah Vs. Principal, MJC, Amsa & Others Elasamma George, Vs. Management of MJC Amsa & Others Case No. 2/91 7/94 Court Additional Dist Sessions Judge Tumkur EAT, Tumkur Subject Application by Mustafa Khan, Clerk MJC who had been dismissed from service for reinstatement Application for setting aside the dismissal order of the management dated 18.5.94. Matter presently with Karnataka High Court Decree made by the District Judge in favour of applicant, Elasamma George for payment back wages without deduction. Matter pending in Karnataka High Court. Stay of decree granted upon deposit of Rs.1.98 lacs with District Court, Tumkur, Appeal Pending Total amount involved Total amount involved (Rs. Lakhs) ---

3.

142/97 Dist. Judge & EAT, Tumkur

Principal & Tumkur

2.01

2.01

106

Motor Vehicle matters There are two motor accident claims pending against the Company, details whereof are as follows :Sl. No 1 Parties Narasamma & Ors. Vs Mysore Cements Ltd & Ors. Honnamma & Ors. Vs Mysore Cements Ltd & Ors. Case No. MPC/1172-050 Court Prl. Civil Judge & MACT, Tumkur Subject On 30.9.2005, when Companys truck was bringing red soil from quarry to factory, it ran over one Yellappa, husband of the claimant. As a result, Yellappa died on the spot. On 8.11.1999, the driver lost control of the truck which fell into a ditch and two persons died on the spot. One of the deceaseds wife, Honnamma who was paid compensation for loss of life and also appointed on compassionate grounds, resigned from her job on 27.10.2002 and filed the case. Total Amount Involved Rs. Lakhs 18.00

MUC/1143-02

Civil Judge (Sr.Dn) & MACT, Tiptur

10.00

Total claim outstanding

28.00

Miscellaneous matters Details of other outstanding matters relating to the Cement Unit of the Company at Ammasandra is as under :Sl. No 1. Parties Case No. Court Subject Total Amount Involved Rs. Lakh -

Mysore Cements Ltd Vs Jute Commissioner Kolkata

261-291/2004

High Court of Kolkata

2.

Mysore Cements Ltd. Vs Revenue Authority, Gujarat

66 of 1993

Chief Revenue Controlling Authority, Ahmedabad

3.

Mysore Cements Ltd Vs Government of Karnataka

53107 of 2003

KHC Bangalore

Notice received from Jute Commissioner as to why penal action should not be taken against Company for violation of order issued by Govt. of India u/s. 3(1) of the Jute Packaging Materials (Compulsory use in Packing Commodities) Act, 1987. Notice stayed by High Court. Transfer petition filed by Jute Commission in Supreme Court is pending. Claim of concessional stamp duty objected to by audit and reviewed by the authorities in respect of the second charge created on assets of the Company at Gujarat for securing Debentures. Matter was earlier challenged by the Company before the Gujarat High Court and withdrawn with liberty to approach again and avail legal redressal before the Revenue Authority. Challenging the validity of levy of Electricity Tax at Re.0.25 paise per unit for energy generated and consumed during 16.10.03 to 30.6.04. Karnataka High Court on 24.8.04 ordered stay subject to payment of 50% of demand within four weeks. However, since Company was registered under SICA, a letter drawing attention to Section 22 of SICA addressed by the Company to the Chief Electrical Inspector on 13.9.04 requesting him to desist from recovering the dues. An Act to levy Special Entry tax on the purchases from outside the State at rates of the local sales tax notified w.e.f. 1.10.04 to levy and tax on petroleum products and 22 items. The same has been challenged on the grounds of constitutional validity. Banks suit in DRT against the Lessor for default in repayment. Company impleaded as a codefendant being Lessee of Slip Power Recovery System for Damoh plant. Plaintiffs suit for permanent injunction against Mining operation at Vajra Mines within radius of 2 Kms from the temple.

78.01

83.75 (Less paid 7.50)

4.

Mysore Cements Ltd. Vs State of Karnataka

8224 of 2005

KHC, Bangalore

60.59

5.

6.

The Federal Bank Ltd, Ernakulam Vs Concert Capital Ltd & Ors. T.C.Renukaradya & Anr. Vs Mysore Cements Ltd

168-2003 208-2000 64-1999 9 of 2000

Debts Recovery Tribunal, Chennai at Cochin Civil Judge Tiptur

25.20

107

Sl. No 7.

Parties

Case No.

Court

Subject

8.

9.

M/s Sri Lakshmi & Company Vs Mysore Cements Ltd & Anr. Andhra Bank, Hyderabad Vs Amulaya Packaging Systems (P) Ltd, & Ors. Indian Oil Company Ltd. Vs Mysore Cements Ltd Johnson Petrochem & Another Vs Mysore Cements Ltd Sashirekha Vs 18 Defendants including Mysore Cements Ltd

692 of 2000

Munsif Court, Coimbatore Debt Recovery Tribunal, Hyderabad City Civil Court, Bangalore

Application for stay of invocation of bank Guarantee.

Total Amount Involved Rs. Lakh 4.73

113 of 2002

Notice received from Debt Recovery Tribunal, Hyderbad on behalf of Andhra Bank for payment of outstandings for supply of bags by Amulaya Packaging (P) Ltd. Andhra Bank has in the meantime assigned its loan to ARCIL. Claim alleged illegal recovery of entry tax on petroleum products for the period from 27.2.86 till 30.4.92 and thereafter entry tax on petroleum products used as inputs for generation of electricity was held to be not liable to tax. Claim for alleged outstanding payment for supply of bags. Suit stayed u/s 22 of SICA.

10.37

6150 of 2003

51.27 less paid Rs.51.27

10.

71 of 2004

Dist. Judge, NTR Nagar.

53.26

11.

1699 of 2005

City Civil Court, Bangalore & K.H.C, Bangalore

Partition Suit filed by the daughter of the original owner of land claiming that she was not a party to the compromise entered into between her family members and Shri Pai in respect of Ejipura land. The Court had granted interim injunction against Defendant No.18 (Salarpurias) against which appeal had been preferred to the High Court. The High Court has set aside the interim injunction. Two ESPs for Kiln and coal mill were sold and taken back on lease from Tata Finance Limited (TFL) for a period of 60 months from March 1996 though the equipments was entitled for 100% depreciation, the same was disallowed by I.T. authorities. Hence, TFL has claimed the differential rent and interest @ 30% thereon.

12

Tata Finance Limited Vs Mysore Cements Ltd

2.2.05

Arbitral Tribunal, Mumbai

515.34

Amount involved which is total outstanding

823.75

B. Diamond Cements Unit - Damoh 1. Supply and C&F Agent related cases There are eight cases outstanding as against the Company for supply related claims pending in various Courts, including quality claims and claims for damages for alleged non-supply. Total amount involved is Rs.9.37 lakhs. The Company made application in two cases, one against U.P. Awas Evem Vikash Parishad for setting aside exparte order dated March 20, 2002 for attachment for Rs.1.26 lakhs passed by VCJI, Mathura and another against Indocon Polymech for setting aside ex-parte decree for Rs.10,51,000/- passed by ADJ, Delhi. There are three cases filed by C&F Agents as against the Company seeking monetary claim for interest on deposits and advance payments. Total money claim on this amount is Rs.6.07 lakhs. 2. Electricity matters : There are eleven maters outstanding in relation to electricity, details whereof are as follows :Sr. No. 1. 2. Parties MPEB Sagar Vs. Diamond Cements MPSEB Vs. Diamond Cements Court High Court, Jabalpur ____do____ Case details MPEBs claim for payment of FCA for the year 1995-96. MPSEBs appeal against the order of MP Electricity Regulatory Commission (MPERC) dated January 19, 2004 removing condition for minimum 50% offtake from MPSEB. Amount involved (Rs. Lakhs) 108.51 ---

108

Sr. No. 3. 4.

Parties MPEB Vs. Cements Diamond

Court _____do_____ _____do_____

Case details MPEBs appeal alongwith stay petition and application for condonation of delay against order dated April 5, 2004 of MPERC, Bhopal Companys writ petition challenging rejection by Energy Department, State Government Companys Entitlement to exemption from payment of electricity dues vide notification dated November 11, 1992. Companys writ petition challenging MPSEBs notice dated July 24, 1998 corresponding to Bill for July, 1996 on 55% load factor whereas the Agreement provided for minimum monthly consumption on the basis of 40% load factor. Companys writ petition challenging MPEBs claim that 30% Demand Cut for EOUs availed in 1992-93 is not available to the company as the company did not export 75% of its products. Companys application for fresh stay against arbitrary action on the part of MPSEB officials on October 15, 2003 sanctioning of T.G. and D.G. Sets of Narsingarh Plant Companys writ petition challenging notice dated December 7, 2004 from Addl. Supdt. Engineer, MSPEB, Damoh (North) Demanding Rs.359,110/- on the basis of inspection by MPSEB on August 9, 1993. Companys writ petition against non-payment of interest on security in view of High Courts Order dated October 14, 2003 setting aside injunction dated January 24, 1996. Companys appeal against order of MPERC dated July 1, 2002 granting permission to use 2x3.2 MW DG sets subject to certain conditions. Companys application for refund of Energy Development Cess on electrical energy produced from 1.3.2000 to 8.12.2003 in terms of order of the Honble Supreme Court of India dated 9.12.2003 in respect of CMA together with interest @ 9% p.a. Total outstanding claim amount -

Amount involved (Rs. Lakhs) --146

Diamond Cements Vs MPSEB

5.

Diamond Cements Vs.

_____do_____

35.83 (19.71 paid) MPEB

6.

Diamond Cements Vs.

_____do_____

105.99 (100.0 paid) MPEB

7.

Diamond Cements Vs. MPSEB Diamond Cements Vs. MPSEB & Ors.

_____do_____

8.

_____do_____

3.59

9.

Diamond Cements Vs MPSEB & Ors. Diamond Cements Vs MPERC & Ors. Diamond Cements

_____do_____

10.

_____do_____

--

11.

_____do_____

280.21

3. Central Excise maters : There are 60 outstanding cases in relation to Central Excise matters, 57 by the Company and 3 against the Company. The matters filed by the Company against the Excise Department relate to the years 11998 to 2006 and are pending with the Central Excise authorities at various centers. Total amount involved which is outstanding in relation to the said 57 outstanding cases of Rs.320.05 lakhs. The cases initiated by the Central Excise Department relate to the year 2005 and 2006 and the total amount involved which is outstanding is Rs.226.42 lakhs. 4. Sales Tax matters : There are 14 outstanding sales tax related cases. 9 instituted by the Company and 5 by the Commercial Tax Dept. against the Company. Of the 9 cases instituted by the Company, one is pending in the Honble Supreme Court of India, one in the Honble High Court at Bilaspur and rest 7 are pending in the Honble High Court at Jabalpur. The matters relate to the years 1992-93 to 2004-05, and the total amount involved which is outstanding is Rs.202.02 lakhs. Of the 5 cases instituted against the Company, which relate to the years 198788 onwards till 2002-03, and the total amount involved which is outstanding is Rs.340.53 lakhs. 5. Land Acquisition Matters Two matters, both for contempt of Court has been filed in the High Court at Jabalpur by one Kanchhedi in connection with land acquired for ropeway. Amount involved is Rs.NIL.

109

Another land matter by the Company against Ghanshyam Prasad and others is pending in the Honble High Court at Jabalpur. The concerned land at Imlai has been allotted by the State Government to the Company. Amount involved is Rs.Nil. 6. Gram Panchayat matter : There are two pending litigations against two notices issued by the Gram Panchayat at Imlai and Narsingarh demanding tax on the colony quarters. The said two notices have been challenged by the Company in the Honble High Court at Bhopal. Total amount involved is Rs.1.09 lakhs. 7. Bank Gurantee matter : There is one outstanding litigation by one H.B. Crane Manufacturing Co. Pvt. Ltd., Ludhiana who has filed a civil suit in Ludhiana and has obtained an order of injunction against the Company for encashing bank guarantee for Rs.115,700/-. 8. Labour Cases : There are 20 labour related cases against the Company, one under the Factories Act for alleged violation of the Safety Rules under the M.P. Factory Rules, 1962 on the death of Mr. Vijayan Pillai who was working as a fitter with one of the Contractors. There are 18 cases relating to reinstatement and/or transfer of employees and 1 matter relating to extension of Wage Board facilities to labourers engaged by the Contractors. 9. Criminal matters : There are three criminal matters pending against the Company and its officers. in relation to its cements plant at Damoh One matter being Case No.1015/95 pending in the Court of CJM, Damoh is a prosecution launched by the State against Diamond Cements Unit of the Company and two of its officers u/s 285, 286 and 287 of IPC in a factory accident case. Another is a motor accident claim filed before the Motor Accident Claims Tribunal, Shahdol claiming compensation to the tune of Rs.6,06,000/- involving a truck carrying fly ash to the Company's Damoh Cement Unit from Chachai on April 27, 2000. The third matter is a criminal complaint filed before CJM, Sonebhadra u/s 120B, 418, 421, 423, 465-469, 471, 477A and 406 of IPC alleging unilateral change in the rate of transportation by the accused persons. Company has filed a criminal miscellaneous appeal being CMA No.9842 of 2002 pending in the Hon'ble High Court at Allahabad against the third criminal proceeding. Each of the above matters is pending. Total monetary claim which is outstanding in relation to the above criminal proceedings is Rs.6,06,000/- for the motor accident claim. 10. Miscellaneous matters One matter relating to payment of coal premium for the period May 16, 1992 to July 31, 1999 is pending in the Honble Supreme Court of India. As against total monetary involvement of Rs.485.85 lakhs, Company has already paid Rs.481.03 lakhs. Two matters relating to stamp duty are pending in the Honble High Court at Jabalpur. Amount involved is Rs.25.05 lakhs. One matter is pending in the Honble High Court at Jabalpur challenging a demand notice dated December 31, 1999 issued by the SDO, Damoh for purported recovery of water charges. Amount involved is Rs.Nil. Four Mining matters are pending, of which one is in the Honble Supreme Court of India. This application is in relation to surrender of 705.74 hectares of land in Village Narsingarh and Bijori. Inadvertently, Company had surrendered entire land including area on which the plant of the Company and other permanent structures are standing. Company has also challenged arbitrary increase of royalty for Rs.4.50 MT to Rs.10/- per MT in September 1997 made by the Collector, vide his order dated January 14, 1992. There are two petitions by the Company challenging the demand notices dated February 13, 2004 and January 28, 2005 issued by the Mining Officer, Damoh. There is also an appeal against the order dated November 19, 2004 passed by ADJ, Damoh against the order of CJI, Damoh wherein suit filed by the Company seeking orders against Lakhan Lal & Ors in relation to ropeway line at Hinani was decided against the Company. 110

Besides there are certain other outstanding matters, the details whereof are as follows :Sr. No. i. ii. Parties Central Railway vs. Diamond Cements State of UP vs. Diamond Cements Court High Court Jabalpur Supreme Court Subject Appeal against refund of excess freight charged on clinker, decided in Companys favour by RCT, Bhopal Vide notification dated 27.2.98, the Govt. of U.P. had granted rebate on trade tax on goods having fly ash content but was not applicable to cement Cos. outside U.P. Company had challenged the said notification before Allahabad High Court. States appeal pending in S.C. The petitioners have challenged the the notification dated 18.1.02 of the Tahsildar, Patharia, wherein M/s. Diamond Cements was granted permission for entry in the leased land for mining at villages Satpara & Jagthar. State of U.P., Commissioner of Trade Tax, U.P. & another vide SLP (Civil) No.8589/2004 has challenged the final judgment and order dated 27.1.2004 of the High Court of Allahabad passed in W.P. No.1453/03 vide which the High Court struck down the U.P. Tax on Entry of Goods Act. The complainants have alleged that the CMA and Cement Manufacturers are indulging in Restrictive Trade Practice, Cartelisation etc. for unjustly increasing the price of cement and wanted MRTP to issue a direction to roll back the price to that of November, 2000. A writ petition has been filed by the villagers amount of Motha village alleging that the flood in river not Sonar during monsoon of 2005 was caused quantified to their village due to stock piles created by Diamond Cements Factory in the shape of heaps of rejected materials of Mines (Dumper head) and they suffered heavy losses on account of the flood. Companys suit against defendants seeking declaration in respect of amounts due from the defendants and other reliefs. Claim made by the defendants against the Company is Rs.13.58 lakhs but no proceeding initiated. Total Amount involved (Rs. In Lakhs) 196.98 -

iii.

Ram Ratan & Ors vs. State of M.P. & Ors.

High Court, Jabalpur

iv.

State of UP & Ors vs. Diamond Cements

Supreme Court

v.

Mr. S.S. Mokha & Ors. vs. Diamond Cements & Ors.

M.R.T.P. Commission

vi.

Samast Gramvasigan, Gram : Motha, Dist. Damoh vs. Gen. Manager Diamond Cements

High Court Jabalpur

vii.

Mysore Cements Ltd vs, P K Engineering & Anr

District Court Damoh

13.58

Total amount outstanding

210.56

C. Jhansi Unit: 1. Supply & C&F related cases There are 16 cases outstanding as against the Company for supply related claims pending in various Courts, including quality claims and claims for damages. Total amount involved is Rs.29.38 lakhs. The Company has filed an appeal in the State Commission against an award of Rs.80,000/- made by the District Consumer Forum in the case of one Mr. J.P. Chouhan. Mr J.P. Chouhan has also filed an appeal from the said order. Both the appeals are pending. There are 12 cases filed by C&F Agents as against the Company seeking monetary claim for interest on deposits and advance payments. Total money claim on this account is Rs.9.35 lakhs. 2. Labour matters : There are two labour matters outstanding as against the Company alleging unlawful termination of services, details whereof are as follows :Sr.No. 1 Sr. Parties Lala Ram vs. Diamond Cements Court Labour Court Kanpur Subject Complaint filed under Industrial Disputes Act against termination of services Amount Involved Nil

111

Sr.No. 2

Sr. Parties Naresh Kr. Pacheriya vs. Presiding Officer, Labour Court, Kanpur

Court High Court Allahabad

Subject Writ petition filed against the Award dated August 12, 2005 of the Presiding Officer, Labour Court, Kanpur, dismissing the claim of Mr. Pacheriya. An appeal is also pending before the District Judge, Jhansi against an order of the Assistant Labour Commissioner, Jhansi holding Mr. Pacheriya as an employee of the Company.

Amount Involved Nil

3.

Excise matters : There are two outstanding Central Excise matters including one by the Company before the Assistant Commissioner, Central Excise, Jhansi for refund of service tax on freight charges. Amount involved is Rs.15,98,312/- which has been paid by the Company under protest. The other matter is by the Commissioner, Central Excise, Kanpur outstanding before CEGAT, New Delhi against the order dated December 17, 1993 passed by the Commissioner (Appeals), Central Excise, Allahabad. Amount involved is Rs.5,000/- only.

4.

Sales Tax matters: There are total 18 sales tax matters outstanding, of which 12 have been initiated by the Company and 6 by the Department against the Company. Total amount involved in the 12 cases initiated by the Company is Rs.784.38 lakhs and for the six cases initiated by the Department is Rs.1087.18 lakhs. The issue in all the six cases initiated by the Department pertains to the issue whether freight is a part of taxable turnover. In a writ petition filed by the Company before the Honble High Court at Allahabad, the Honble High Court has passed an interim order to the effect that assessment proceedings for the year 1998-99 may go on but no final orders shall be passed. Companys petition is pending before the tax authorities in relation to purchase of high speed diesel (HSD) on concessional rate. DC (Appeals), Trade Tax, Jhansi has allowed purchase of HSD on concessional rates of tax for consumption in pay loaders, excavators and loco engines. A writ petition is also pending in the Honble High Court at Allahabad contending that in view of Section 22 of SICA no proceeding for execution or realization of tax can be made without the leave of BIFR. Recovery of tax for the assessment year 2002-2003 has been stayed until further orders by the Honble High Court.

4.

Miscellaneous matters : There is one writ petition pending in the Honble High Court at Allahabad in relation to claim for Octroi at Agra, one for capital subsidy involving an amount of Rs.15 lakhs. Five civil suits are also pending against the Indian Railways for undercharges on clinker involving total amount of Rs.30.39 lakhs. Against an order passed by the Jhansi Court in one of the matters, Railways has filed an appeal in the Honble High Court at Allahabad. There is a matter against U.P. Power Corporation Ltd. challenging the Circular dated August 31, 2001 levying 15% Additional Surcharge and the order dated September 13, 2003 passed by the U.P. Electricity Regulatory Commission, Lucknow. As against demand of Rs.132 lakhs, Rs.39.58 has been paid by the Company. There is one land matter pending before the Civil Judge, Jhansi against State Administration from causing disturbance on various land in possession of the Company.

Defaults/Overdues There were no overdues as on 31/03/2006 in payments to financial institutions and banks as well as debentureholders excepting a maximum amount of Rs 304.78 Lacs for a period upto 71 days to a bank and a maximum amount of Rs 1718.26 Lacs for a period upto 168 days to a financial institution.

112

II. XPRO INDIA LIMITED

1. Labour Matters : There are four labour matters pending against the Company as per details given hereinbelow :Case No. 1 2 3 4 R/748/02 R/67/04 R/321/04 25/WCNF/ 04 Parties Jyoti Dhar vs XPRO India Ltd. Jai Prakash vs XPRO India Ltd -doShiv Kr. Singh -vsXPRO India Ltd Case Details/ Status Application made u/s 2A of IDA claiming reinstatement with back wages. Application made for reinstatement with back wages. Application mae u/s 33C(2) of IDA claiming dues of Rs.6,576/-. Application made for compensation of Rs.2 lakhs for face injury suffered during plant operation. In the Court of Labour Court, Faridabad Labour Court, Faridabad Labour Court, Faridabad Honourable Labour Court, Dist. Dhar (M.P.) Total Amount involved (Rs. In Lakhs) Nil Nil 0.07 2.00

2.07

2.

Income Tax matters : There are two income tax matters for assessment years 2001-02 and 2002-03 which are pending with CIT (Appeals) Kolkata. Amount of demand of Rs.4.17 lakhs and Rs.107.67 lakhs respectively have been paid under protest.

3.

Sales Tax matters : Sales Tax matters are pending for assessment years 1996-97 onwards before the Deputy Commission (Appeals,) Durgapur and total amount outstanding for WBST is Rs.25 lakhs and for CST is Rs.43.87 lakhs. An appeal also pending before the Appellate & Revisional Board, Kolkata for he assessment year 1997-98 for WBST of Rs.2.75 lakhs. For assessment year 2004-05 appeal is pending before the Joint Commissioner (Appeals), Trade Tax, Noida for a demand for UPST of Rs.4.26 lakhs Sales tax demand for WBST of 17,000/- is also pending for assessment years 1999-2000. 2000-01 and 2001-02 in respect of Thermoset Division at Kolkata, which is pending before Assistant Commissioner of Commercial Tax, Kolkata, and for the assessment year 2003-04 for UPST of Rs.1.48 lakhs, which is pending before the Joint Commissioner (Appeals), Trade Tax, Noida.

4.

Excise and Customs matters : Central Excise demand for Rs.89,48,306/- for the period April 1994 to July 1996 is pending adjudication before CEGAT. Demand for Rs.368.61 lakhs by the Customs authorities for the period January 1993 to July, 1996 on account of differential customs duty on High Impact Polystyrene on account of classification is pending adjudication before the customs authorities.

4.

Entry Tax demand for the year 2002-03 is pending for Rs.11,34,138/- in the Honble Supreme Court of India.

6. Miscellaneous matters :Besides, there are six other matters outstanding as against the Company as per details hereinbelow :Sr 1 2 Case No. 103 of 1998 1998-99 In the Court of City Civil Court, Calcutta High Court of Delhi, New Delhi District Court, Faridabad District Court, Faridabad Case filed By Corrugated Containers Aerotechnica Services Pvt. Ltd. M. L. Mongia M. L. Mongia Particulars Suit for alleged non payment of outstanding bills for Rs.59,433.88 & Interest thereon Rs.9,05,418. Suit for alleged non payment of balance amount for supply, errection & commissioning of HVAC System for Rs.4,76,826/-. Acknowledged liability Rs.2,26,618/- against which Rs.2,00,000/- deposited in Court. Suit for recovery of alleged Rent from 1/93 to 2/94 for Rs.108,391/- with interest @ 12% p.a.. Ex-parte decree passed against XIL on 11-5-99. Suit for recovery of alleged Rent/ Electricity/ Water charges from 7/96 to 4/99 filed Civil Suit for Rs.197575/-

3 4

339 of 1994 1332 of 1993

113

Sr 5 6

Case No. 568 of 2000 3656 of 2004

In the Court of District Court, Faridabad Punjab and Haryana High Court, Chandigarh

Case filed By Municipal Corporation of Faridabad (MCF) Municipal Corporation of Faridabad (MCF)

Particulars Suit by MCF claiming Rs. 320000/- for tube well charges from 4/99 to 10/2000 for 4 inch dia (2 tube wells) @ Rs.10000/- p.m. per tubewell. MCF's appeal in the High Court against vacation of stay granted by Dist. Court, Faridabad, claiming Rs.320000/- for the period from April, 1999 to October, 2000.

III. Cimmco Birla Limited A. Unit Bharatpur Labour matters There are 62 labour related matters pending in various Courts including Labour Court, Bharatpur. Of the above, 35 matters relate to reinstatement by casual workers, contractors employees and/or apprentices and probationary cases. 5 matters pertain to dismissal of regular employees of the Company, and 1 matter relates to reinstatement application by a domestic servant employed by Auditors and Engineers. 6 maters relate to retirement benefits and/or concerning voluntary retirement scheme. One matter relates to overtime payment for work on Sundays and one matter against the union from holding meetings, dharnas etc. at Companys main gate. Balance 14 matters relate to computation of back wages. One of the workers, Mathura Prasad has filed a complaint before the Additional Metropolitan Judicial Magistrate against the Factory Manager of the Company for non-compliance of the award of the Labour Court, Bharatpur. A revisional application filed against this complaint has been dismissed by the Special Judge, Bharatpur. The Company is now in the process of moving the High Court of Rajasthan at Jaipur by way of writ petition. Total amount involved in relation to the above matters is Rs.289.79 lakhs. Besides, there are about 13 labour related matters outstanding in the High Court in relation to reinstatement and/or back wages on which amount involved is Rs.92.49 lakhs. There are also 90 gratuity related labour claims before the Controlling Authority under the Payment of Gratuity Act, Bharatpur and the total amount involved in relation thereto is Rs.99.16 lakhs plus interest thereon. Industrial matters A show cause notice issued by Senior Inspector (F&B) regarding violation of Factories Act and pay scales to Welfare Officers in 1993 has been challenged by the Company in the Honble High Court of Rajasthan at Jaipur, which is pending. Total amount involved is Rs.5.50 lakhs. Miscellaneous matters Besides the above, following is the details of other pending matters :Sr. no. 1 2 3 4 5 6 7 8 Parties Ambeylon Synthetics Vs. Cimmco Birla Ltd. Pramod Ice Factor Vs. Cimmco Birla Ltd. Bharatpur Zila Khadi Gramodyog Samittee Vs. Cimmco Birla Ltd. VSNL Vs. Cimmco Birla Ltd. District Collector, Erode Vs. Cimmco Birla Ltd. District Collector, Lalitpur Vs. Cimmco Birla Ltd. District Collector, Tanakpur Vs. Cimmco Birla Ltd. Cimmco Shramik Sangh (Intuc) -vsCimmco Birla Ltd. Court Civil Judge Bayana Addl. District Judge, Bharatpur Civil Judge, Bharatpur Addl. Division Judge, Bharatpur SDO Bharatpur SDO Bharatpur SDO Bharatpur Labour Court & Industrial Tribunal, Bharatpur Particulars Plaintiffs claim for goods supplied and not paid Proceedings stayed u/s 22 of SICA Proceedings stayed u/s 22 of SICA Proceedings stayed u/s 22 of SICA Application by the Sales Tax Authority, Erode, Tamil Nadu Claims pending till Company comes out of BIFR Claims pending till Company comes out of BIFR. Complainants demand for bonus and other benefits Amount involved Amount (Rs. in lakhs) 0.21 0.71 0.19 1.31 13.24 8.18 345.89 369.73

114

B. Textile Machinery Division, Gwalior Labour matters : There are 72 labour related matters outstanding, of which 60 matters are pending before the Industrial Court, Gwalior, seven matters are pending before the Labour Court, Gwalior, four matters before the Asst. Lahour Commission, Gwalior and one is before Shri Girish Patwardhan, Indore. Total amount involved is Rs.57.46 lakhs. Other matters : There are four civil suits pending against the Company for supplies effected and payment outstanding and two suits for recovery of loans given to the employees of the Company. Total amount involved is Rs.13,38,920/- inclusive of interest claim thereon. C. Steel Foundry Division, Gwalior Labour matters : There are 11 labour related matters, of which ten are pending before the Industrial Court, Gwalior and one before the Labour Court, Gwalior. Total amount involved is Rs.8,11,970/-. Other matters : There are about nine matters for supplies effected and payment outstanding as against the Company. Total amount involved is Rs.50,90,013/- inclusive of interest on claim amount. D. Delhi Office Labour matters There are three labour related matters pending. Two for reinstatement in service pending before the Labour Court, Tis Hazari, Delhi. One matter relating to gratuity claim is pending in civil writ petition in the Delhi High Court. Amount involved in all three cases Rs. 20,12,608/-. Central Excise matters There are 8 matters pending before the Customs & Excise authorities on account of differential excise duty on which total amount of claim outstanding is Rs.287.33 lakhs. Central Excise matters are also pending on account of (i) free supply of material on which outstanding claim amount is Rs.209.84 lakhs; (ii) parts on which outstanding claim amount is Rs.224.15 lakhs; (iii) national interest gain on advances from customers on which outstanding claim amount is Rs.64.20 lakhs; (iv) clearance of spare parts on which outstanding claim is Rs.9.71 lakhs; (v) modvat credit on capital goods on which outstanding claim is Rs.3.68 lakhs; (vi) duty free inputs for Talcher Wagons on which outstanding claim is Rs.15.70 lakhs; (vii) erection and commissioning charges on which outstanding claim is Rs.1.15 lakhs. Besides, cental excise claims are also outstanding in relation to nonsubmission of proof of exports, amount involved Rs.15.69 lakhs; demand relating to Steel Foundry Division for Rs.126.28 lakhs; demand in relation to Gwalior unit Rs.26.27 lakhs and in relation to Calcutta is Rs.22.21 lakhs. Income tax and Sales Tax matters Income tax matters are pending in relation to various assessment years as per details given hereinbelow :Assessment Year 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1999-2000 2001-02 Pending before ITAT (Delhi) - do - do - do - do Matter remanded to Assessing officer CIT (Appeals) ITAT (Delhi) CIT (Appeals) Asst. CIT CIT (Appeals) Total Claim outstanding Amount disputed in assessment 89.86 32.76 184.62 131.36 463.00 nil 49.81 82.57 25.03 28.84 Reopening of assessment order 4044.29 5132.14

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There are about 39 sales tax matters pending against the company, the total outstanding claim in respect of which is about Rs.4150.47 lakhs. Other matters Details of other matters pending are as follows :S. No. Title of Case Party & Subject (PARTICULARS) Claim amount (Rs. in lacs) Name of the Authority/Court/ Arbitrator Status as on date

A. MATTERS IN ARBITRATION 1. Uppal Engineering Company Private Ltd., Delhi.

3794.63

Mr. B.S.Mathur Mr. R.N. Pandit Mr. R.G. Gaggar (Arbitration Tribunal) Sole Arbitrator Shri S.N. Johari Sole Arbitrator Shri S.N. Johari Mr. Anil Deo Singh, Retd. High Court Judge. Mr. Jaspal Singh, Retd. High Court Judge

2.

NALCO Bhubneswar a)against NALCOs order dated 7.12.99. b)against NALCOs order dated 9.6.00. M/s. J.P. Agrawal (a) Against agreement dated 24.8.93

31.37

56.95

One of the member of the Tribunal, Mr. R.G. Gaggar resigned. Since the appointment of third arbitrator in place of Mr. Gaggar is pending the proceedings are held up. An application in the High Court of Delhi for appointment of 3rd Arbitrator in placer of Mr. R.G. Gaggar has been filed by the claimant. Since Cimmco could not execute both the orders due to labour trouble and lock out, M/s. NALCO decided to purchase these items at the risk and cost of M/s. Cimmco and submitted their claims before the arbitrator. Cimmco has refuted the liability In both the arbitration parties decided to settle the cases and accordingly a Memorandum of Understanding has been made. Arbitrator has given an Award dated 16.3.2006 for Rs. 55 lacs payable to M/s. J.P. Agrawal in accordance with MOU. There is no clause for interest. There is no need for further provision in the books because more than Rs.73 lacs is lying credit there.

(b) Against
dated 21.7.92.

agreement

512.32

B. MATTERS IN THE COURT 4. Shri Bansi Lal Contractor

40.93

Honble High Court Delhi HIGH COURT CHANDIGARH Sasaram Court High Court, Delhi

5.

6. 7.

Engineer in Chief (Employer) Haryana PWD B&R Branch, Chandigarh Kalyanpur Cements Ltd. Roko Construction Uganda

340.15

750,65 135,42

8.

Sulzer Flowell

74.00

High Court, Delhi

9.

M/s. Baijnath Prasad Gulab Singh, BTP

299.27

HIGH COURT DELHI

Companys application for setting aside the award of the Sole Arbitrator dated 17.11.2003 for Rs.17,45,190/- in favour of Mr. Bansi Lal alongwith interest @ 8% w.e.f. 13.11.2000. Award dated 28.4.2006, wherein Tribunal awarded Rs. 149.82 lacs plus interest thereon @ 12% w.e.f. 28.4.2006 in favour of PWD, Haryana to be challenged in the High Court. The matter is at Sasaram Court for a claim by the petitioner against supplies effected. Decree obtained by M/s. Roko Construction from Uganda Court. They have filed at Delhi High Court for getting the decree executed. Cimmco has challenged the decree. The Honble High Court vide its order dated 23.11.2005 held that this petition filed by M/s. Roko Construction for execution of decree cannot be proceeded in view of provision of Section 22 of the SICA and accordingly disposed off. The Award made in favour of M/s. Sulzer flowell has been disputed. Company has also taken a plea of sick industry and the matter is under BIFR. The matter is before Delhi High Court for final arguments. The Arbitrator has given his award on 2nd January, 2006. The arbitrator in his award allowed claims of Rs. 59,37,126/- against the total claim of Rs. 3 crores. The Arbitrator has also awarded intrest @ 10% w.e.f. 18.6.97. Cimmco has filed lthe objections in the Honble High Court at Delhi on 28th March, 2006 against the award made by the Arbitrator.

Total amount involved

6035.69

Besides, there are few other miscellaneous cases, where there have been no movements. Total outstanding claim on account of such miscellaneous cases is Rs.1021.76 lakhs.. Defaults/ overdues The company has defaulted in repayment of dues to financial institutions, banks and debentureholders as on 30/06/2005 (including carried over from previous year) amounting to Rs 6403.81 Lacs, Rs 25444.63 Lacs and Rs 1557.99 Lacs respectively. 116

The company was not strictly regular in depositing its statutory dues due to financial constraints. The overdues outstanding as on 30/06/2005 were in respect of Service Tax Rs 0.66 Lacs, Excise Duty- Rs. 0.11 Lacs, Property Tax- Rs 5.37 Lacs, Professional tax Rs 0.32 Lacs, Turnover Tax Rs 0.17 Lacs, Central Sales Tax Rs 117.53 Lacs, States Sales Tax Rs 12.47 Lacs, Custom Duty Rs 1271.20 Lacs, Interest on Custom Duty Rs 840.69 Lacs, Works Contract Tax Rs 3.48 Lacs, ESI Rs 9.78 Lacs, Interest on delayed period of Sales tax Rs 4.89 Lacs and Interest against late deposit of ESI Rs 1.09 Lacs. Unlisted Companies (top five companies based on income from operations) A) MINERAL ORIENTAL LIMITED There are no pending litigations against the company. B) BIRLA EASTERN LIMITED Income tax matters are pending for assessment years 1995-96 and 1996-97 for which appeals have been preferred by the Income Tax Department before the Honble High Court at Calcutta. No demand is presently outstanding, but liability of Rs.328 lakhs will arise if the appeals are decided against the Company. C) JANARDAN TRADING COMPANY LIMITED There are no pending litigations against the company. D) CENTRAL INDIA GENERAL AGENTS LIMITED There are no pending litigations against the company. E) GCC INVESTMENT & TRADING COMPANY LIMITED There are no pending litigations against the company. Other Companies SUTLEJ COTTON MILLS SUPPLY AGENCY LIMITED There are no pending litigations against the company. MATERIAL DEVELOPMENTS AFTER THE DATE OF THE LAST BALANCE SHEET There are no material developments after the date of the last Balance Sheet.

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B. GOVERNMENT APPROVALS On the basis of the indicative list of approvals below, the Company is permitted to carry on business activities and no further approvals from any Government authorities/RBI are required by the Company to undertake the business of the Company. It must be distinctly understood that, in granting these licenses, the Government of India and/or RBI does not take any responsibility for Companys financial soundness or for the correctness of any of the statements made or opinions expressed in this behalf. The approvals obtained and/or required to be obtained relate to the Company and also particularly to each of its manufacturing units in Jamnagar and Faridabad. The Company has obtained necessary approvals and registrations from various authorities in relation to its business activities; which include: i) ii) iii) iv) v) vi) Permanent Account Number and Tax Deduction Account Number under the Income Tax Act, 1961; Service Tax Registration; Registration under the Central Sales Tax Act, 1956, and various state sales tax legislations; Central Excise Act, 1944; Importer-Exporter Code Number under the Foreign Trade Development and Regulation Act, 1992; Registration with the Employees State Insurance Corporation under Employees State Insurance Act., 1948; and vii) Registration under Employees Provident Fund & Miscellaneous Provisions Act, 1952. viii) Export house recognition. ix) Registration of Trade Mark of DIGJAM. The Company has also obtained necessary approvals from various authorities for conduct of business at the manufacturing units located at Jamnagar and Faridabad. These approvals include: i) ii) Factory License under the Factories Act, 1948 for manufacturing units located at Jamnagar and Faridabad; Contract Labour Registration under the Contract Labour (Regulation and Abolition) Act 1970 for manufacturing units located at Jamnagar & Faridabad; iii) Authorisation under Rule 3(c) and Rule 5(5) of Hazardous Wastes (Management and Handling) Rules, 1989 for manufacturing units located at Jamnagar & Faridabad; iv) Consent Order under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981 for manufacturing units located at Jamnagar & Faridabad; v) Consent Order under Section 25 of the Water (Prevention and Control of Pollution) Act, 1974 for manufacturing units located at Jamnagar & Faridabad; and vi) Licence for Quality Management Systems Certification ISO 9002:2000 awarded by Bureau of Indian Standards, Mumbai for Jamnagar plant.

Some of the registrations/licenses/approvals obtained by the Company have expired in the ordinary course of business and are in the process of being renewed. The Company undertakes to obtain all approvals, licenses, registrations and permissions required to continue to operate its business. Registrations/licenses/approvals pending renewal/approval include: i) Factory License under the Factories Act, 1948 for manufacturing unit located at Jamnagar. The Company has applied for renewal of the said license vide its letter dt.14/09/2005 and renewal is awaited; ii) Authorisation under Rule 3(c) and Rule 5(5) of Hazardous Wastes (Management and Handling) Rules, 1989 for manufacturing unit located at Faridabad; iii) Consent Order under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981 for manufacturing unit located at Faridabad and iv) Consent Order under Section 25 of the Water (Prevention and Control of Pollution) Act, 1974 for manufacturing unit located at Faridabad. Please also refer to the risk factor titled Expiry of certain Licenses & Approvals. in the section titled Risk Factors on page (vii) of this Letter of Offer.

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VII. OTHER REGULATORY AND STATUTORY DISCLOSURES Authority for the present issue The Board of Directors of the Company in their meeting held on 14/07/2006 pursuant to a special resolution passed at the Annual General Meeting held on 10/07/2006 have decided to offer 2,49,96,964 equity shares of Rs. 10/- each for cash at par aggregating to Rs.2499.70 Lacs to the existing equity shareholders of the Company on rights basis in the ratio of 4 (Four) equity shares for every 7 (Seven) equity shares (i.e.4:7) held as on [] (Record Date). Prohibition by SEBI The Company, its Promoters, Directors or any of the Companys associates or group companies with which the Directors of the Company are associated as Directors or Promoters have not been prohibited from accessing the capital market under any order or direction passed by SEBI. Eligibility BVXL is an existing listed Company. It is eligible to offer this Rights Issue in terms of Clause 2.4(iv) of the SEBI (DIP) Guidelines, 2000. The promoters, their relatives, BVXL, group companies are not detained as willful defaulters by RBI/ Government authorities and there are no violations of securities laws committed by them in the past or pending against them. Disclaimer Clause IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF OFFER DOCUMENT TO SEBI SHOULD NOT IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE ISSUE IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE OFFER DOCUMENT. LEAD MERCHANT BANKER, KEYNOTE CORPORATE SERVICES LTD. HAS CERTIFIED THAT THE DISCLOSURES MADE IN THE OFFER DOCUMENT ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (DISCLOSURES AND INVESTOR PROTECTION) GUIDELINES IN FORCE FOR THE TIME BEING. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING INVESTMENT IN THE PROPOSED ISSUE. IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER COMPANY IS PRIMARILY RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE OFFER DOCUMENT, THE LEAD MERCHANT BANKER IS EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE LEAD MERCHANT BANKER KEYNOTE CORPORATE SERVICES LTD. HAS FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED 03/08/2006 IN ACCORDANCE WITH SEBI (MERCHANT BANKERS) REGULATIONS 1992 WHICH READS AS FOLLOWS: (I) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS ETC. AND OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE OFFER DOCUMENT PERTAINING TO THE SAID ISSUE; ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE ISSUE, PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE COMPANY.

(II)

119

WE CONFIRM THAT: A) THE OFFER DOCUMENT FORWARDED TO SEBI IS IN CONFORMITY WITH THE DOCUMENTS, MATERIALS AND PAPER RELEVANT TO THE ISSUE; B) ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID ISSUE, AS ALSO THE GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND C) THE DISCLOSURES MADE IN THE OFFER DOCUMENT ARE TRUE, FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE. D) BESIDE OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE LETTER OF OFFER ARE REGISTERED WITH THE BOARD AND THAT TILL DATE SUCH REGISTRATION IS VALID. E) WE HAVE SATISFIED OURSELVES ABOUT THE WORTH OF THE UNDERWRITERS TO FULFILL THEIR UNDERWRITING COMMITMENTS. THE FILING OF OFFER DOCUMENT DOES NOT, HOWEVER, ABSOLVE THE COMPANY FROM ANY LIABILITIES UNDER SECTION 63 OR 68 OF THE COMPANIES ACT, 1956 OR FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI, FURTHER RESERVES THE RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MERCHANT BANKER(S) ANY IRREGULARITIES OR LAPSES IN OFFER DOCUMENT. THE PROMOTERS / DIRECTORS OF BVXL VIZ. SHRI S.K.BIRLA, SHRI SIDHARTH BIRLA, SHRI C.L.RATHI, SHRI RAJEEV SURANA, SHRI A.N.LALBHAI, SHRI ARVIND AGARWAL, SHRI R.K.CHOUDHURY, DR.G.GOSWAMI, SHRI N.L.HAMIRWASIA, SHRI G.MOMEN, SHRI A.C.MUKHERJI, SHRI P.K.PUJARI DECLARE AND CONFIRM THAT NO INFORMATION/MATERIAL LIKELY TO HAVE A BEARING ON THE DECISION OF INVESTORS IN RESPECT OF THE SHARES OFFERED IN TERMS OF THIS LETTER OF OFFER HAS BEEN SUPPRESSED WITHHELD AND / OR INCORPORATED IN THE MANNER THAT WOULD AMOUNT TO MIS-STATEMENT/MISREPRESENTATION AND IN THE EVENT OF ITS TRANSPIRING AT ANY POINT IN TIME TILL ALLOTMENT/REFUND, AS THE CASE MAY BE, THAT ANY INFORMATION/MATERIAL HAS BEEN SUPPRESSED/WITHHELD AND/ OR AMOUNTS TO A MIS-STATEMENT/MIS-REPRESENTATION, THE PROMOTERS/DIRECTORS UNDERTAKE TO REFUND THE ENTIRE APPLICATION MONIES TO ALL SUBSCRIBERS WITHIN 7 DAYS THEREAFTER WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 63 OF THE COMPANIES ACT. Caution statement / Company disclaimer The Issuer Company accepts no responsibility for statements made otherwise than in this Letter of Offer or in the advertisement or in any other material issued by or at the instance of the Company and the Lead Manager and any one placing reliance on any other source of information would be doing so at his/her/their own risks. Disclaimer in respect of Jurisdiction This offer is being made in India to persons resident in India (including Indian nationals resident in India who are majors, Hindu Undivided Families, companies, corporate bodies and societies registered under the applicable laws in India and authorised to invest in shares, Indian mutual funds registered with SEBI, Indian financial institutions, commercial banks, regional rural banks, co-operative banks (subject to RBI permission), Societies registered under the Societies Registration Act, 1860, or any other Trust law and who are authorised under their constitution to hold and invest in shares) and to NRIs, OCBs and FIIs as defined under the Indian laws. This Offer Document does not, however, constitute an offer to sell or an invitation to subscribe to securities issued hereby in any other jurisdiction. Any person into whose possession this Offer Document comes is required to inform himself about and to observe any such restrictions. Any dispute arising out of this Offer will be subject to the jurisdiction of appropriate court(s) in India only. No action has been or will be taken to permit a public offering in any jurisdiction where action would be required for that purpose, except that this Offer Document has been submitted to the SEBI. Accordingly, the Equity Shares represented thereby may not be offered or sold, directly or indirectly, and this Offer Document may not be distributed, in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of Offer Document nor any sale hereunder shall, under any circumstances, create any 120

implication that there has been no change in the affairs of BVXL since the date hereof or that the information contained herein is correct as of any time subsequent to this date. Disclaimer clause of BSE Bombay Stock Exchange Ltd. (the Exchange) has given vide its letter dated [] permission to the Company to use the Exchanges name in this draft Letter of Offer as one of the stock exchanges on which this Companys securities are proposed to be listed. The Exchange has scrutinized this draft Letter of Offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Company. The Exchange does not in any manner: Warrant, certify or endorse the correctness or completeness of any of the contents of this draft Letter of Offer; or (ii) Warrant that this Companys 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 this Company, its promoters, its management or any scheme or project of this Company; and its should not for any reason be deemed or construed that this draft Letter of Offer has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by 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. Disclaimer clause of NSE As required, a copy of this letter of offer has been submitted to National Stock Exchange of India Limited (hereinafter refereed to as NSE). NSE has given vide its letter no. [] dated [] permission to the Issuer to use the Exchanges name in this Letter of Offer as one of the stock exchanges on which this Issuers securities are proposed to be listed. The Exchange has scrutinized this letter of offer for its limited internal purpose of deciding on the matter of granting the aforesaid permission to this Issuer. It is to be distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed that the letter of offer has been cleared or approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this letter of offer; nor does it warrant that the Issuers securities will be listed or will continue to be listed on the Exchange; nor does it take any responsibility for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of this Issuer. Every person who desires to apply for or otherwise acquire any securities of this Issuer may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by 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 any other reason whatsoever. Filing A copy of this Letter of Offer has been filed with SEBI (Mittal Court, B Wing, Nariman Point, Mumbai 400021), BSE (Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai 400 001), Designated Stock Exchange and NSE (Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051). Listing The equity shares of the Company are listed on BSE and NSE. Presently BSE and NSE has requested their members not to deal in the equity shares of the Company from 27/04/2006 upon the Scheme of Arrangement becoming effective. Pursuant to the Scheme of Arrangement the share capital and loans have been reorganized/restructured and number of equity shares have been reduced and fresh shares were allotted to the existing shareholders and further, equity shares were allotted to the lenders and preference shareholders by way of conversion of their restructured loans and preference shares. Accordingly, upon Scheme becoming effective on 30/3/2006, the Company has allotted 1,30,14,293 equity shares to the existing shareholders. The Company also allotted 3,07,30,394 equity shares on 12/04/2006 to existing lenders and preference shareholders. The Company has received in-principle approval from BSE for listing 1,30,14,293 equity shares of Rs.10/- each and trading permission is awaited. The listing and trading approval from NSE is also awaited. 121 (i)

The Company has submitted the application to BSE and NSE for listing of balance 3,07,30,394 equity shares allotted on 12/04/2006. The Company has received in-principle approval from BSE & NSE vide their letter no. [] dated [] and letter no. [] dated [] respectively for listing of the equity shares being issued in terms of this Letter of Offer. The Application will be made to BSE & NSE, for listing and trading permission for the Equity Shares being issued pursuant to this Letter of Offer. If the permissions to deal in and for an official quotation of the Equity Shares are not granted by BSE/NSE, the Company shall forthwith repay, without interest, all monies received from the applicants. In case of delay interest shall be paid in accordance with the provisions of Section 73 of the Act. Impersonation Attention of the applicants is specifically drawn to the provisions of Sub-Section (1) of Section 68A of the Companies Act, 1956 which 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 fictitious name, shall be punishable with imprisonment for a term which may extend to five years." Consents Consents in writing of the Directors, Auditors, Lead Manager, Registrar to the Issue, Legal Advisors to the Issue and standby Underwriter to act in their respective capacities have been obtained and filed with Stock Exchanges at the time of filing this Letter of Offer and such consents have not been withdrawn up to the time of delivery of the Letter of Offer for registration with the stock exchanges. The Auditors of the Company have given their written consent for the inclusion of their Report in the form and content as appearing in the Letter of Offer and also the tax benefits accruing to the Company and its members and such consents and reports have not been withdrawn up to the time of delivery of the Letter of Offer for registration with the Stock Exchanges. Expert Opinion The Company has not obtained any expert opinion for this issue. Expenses of the Issue Sr. No. 1 2 3 4 5 Particulars Fees to the intermediaries Printing & Stationery and Postage expenses Advertisement Legal and other certification charges Miscellaneous Expenses Total Amount (Rs. in Lacs) 31.00 87.00 10.00 5.00 1.70 134.70 % of total issue expenses 23.01 64.59 7.42 3.71 1.26 100.00 % of total issue size 1.24 3.48 0.40 0.20 0.07 5.39

Underwriting Commission, Brokerage and Selling Commission No Brokerage and selling Commission will be payable for this issue. An underwriting commission @1.5% on Issue Price of the amount of equity shares for which Underwriter have provided the standby underwriting support will be payable.

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Previous Public/Rights Issue The Company has not made any public/rights issue during last 5 years. Previous issues of shares otherwise than for cash The Company has issued following shares for consideration otherwise than in cash:
Year 1986 No. of Shares 16,24,246 (preRestructuring) Face Value (Rs.) 10 Consideration Other than cash Equity Shares allotted to the Shareholders of Universal Electrics Ltd. and The Oriental Carpet Manufacturers (India) Ltd. pursuant to the Scheme of Amalgamation.

Commission and Brokerage on previous issue The Company has not made any Public/Rights Issue during last five years, hence no commission or brokerage has been paid. Particulars regarding capital issues Besides shares issued pursuant to Scheme of Arrangement by BVXL there has been no capital issue made by BVXL or any of its group company during last three years. Promise vis--vis Performance a) Issues by the Company Rights Issue 1989 BVXL issued 15,50,000 12.5% Secured Redeemable Partly Convertible Debentures of Rs. 100/- each for cash at par. Rs. 50/- aggregating to Rs.1550 Lacs, converted on the expiry of six months from the date of allotment in two Equity Shares of Rs. 10/- each at a premium of Rs. 15/- per share vide letter of offer dated 10/02/1989. Issue opened on 16/02/1989 and closed on 15/03/1989. The object of the issue was to augment long term working capital requirement and to strengthen the capital base of the Company. The offering Letter of Offer did not contain the promised future performance of the Company. Rights Issue 1991 BVXL issued 37,96,674 12.5% Secured Fully Convertible Debentures of Rs. 50/- each for cash at par to the Equity Shareholders and Employees of the Company vide letter of offer dated 25/02/1991. Rs. 25/- converted into one Equity Share of Rs. 10/- at a premium of Rs. 15/-on the expiry of 12 months from the date of allotment and Rs. 25/- converted into one Equity Share of Rs. 10/- at a premium of Rs. 15/- on the expiry of 18 months from the date of allotment. Issue opened on 05/03/1991 and closed on 20/04/1991.The object of the issue was modernization of plant Saurashtra Chemicals, Porbandar unit. There is no schedule of implementation is proposed. The offering Letter of Offer did not contain the promised future performance of the Company. Rights Issue 1993 BVXL issued 1,25,35,930 Zero Coupon Secured FCDs of Rs. 90/- each for cash at par. One Debenture converted into three Equity Shares of Rs. 10/- each at a premium of Rs. 20/- per share vide letter of offer dated 30/07/1993. Issue opened on 23/08/1993 and closed on 25/09/1993. The object of the issue was to finance a part of the cost of modernization schemes of companys textile divisions, to finance diversification scheme of Universal Engineering unit, to finance a part of the diversification scheme at Saurashtra Chemicals Ltd., to make investment in Mysore Cements Ltd., repayment of long term liabilities and augment of long term working capital. The project was completed within the time schedule and funds were deployed for the purposes for which it has been raised.

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The promise-v/s-performance in respect of the rights issue was as under: (Rs Lacs) 1994 Total Income PBT PAT Proj 39715 2714 2516 Actual 40091 4170 2837 1995 Proj 41525 3015 2042 Actual 46893 5030 3439 1996 Proj 42501 3620 1871 Actual 53563 4617 2572

b) Issues by Listed Group Companies Mysore Cements Limited (MCL) MCL issued 2,64,35,034 Zero Interest Secured FCDs of Rs. 45/- each for cash at par aggregating to Rs.11895.76 Lacs. Issue was opened on 01/09/1993 and closed on 29/09/1993. The object of the issue was to set up a new cement plant at Damoh, to finance for purchasing balancing & material handling equipments at existing plant and working capital requirement etc. The project was expected to be completed on 31/03/2004 as per appraisal report. The project was completed within the time schedule and funds were deployed for the purposes for which it has been raised. The promise-v/s-performance in respect of the rights issue was as under: (Rs Lacs) 1994 Total Income PBT PAT Xpro India Limited The Company has not made any public or rights issue since inception. Cimmco Birla Limited (CBL) Cimmco Birla Limited has made a rights issue of 40,40,062 equity shares of Rs. 10/- each for cash at a premium of Rs.50/- per share aggregating to Rs.2424.03 Lacs to the shareholders of CBL vide letter of offer dated 14/12/1994. Issue opened on 29/12/1994 and closed on 28/01/1995.The object of the issue was to augment long term working capital requirements, normal capital expenditure, standardization & rationalization of man-power level & work methods and discharge of high cost liabilities. There is no schedule of implementation is proposed. The promise-v/s-performance in respect of the rights issue was as under: (Rs Lacs) 94/95 Turnover PBT PAT Outstanding Instruments in BVXL There are no outstanding debentures or bonds and redeemable preference shares and other instruments issued by the Company as on date of this Letter of Offer. Proj 42500 706 646 Actual 38906 516 441 95/96 Proj 46750 949 879 Actual 45155 708 681 96/97 Proj 51700 1000 920 Actual 42497 119 118 Proj 23815 42 42 Actual 30753 927 927 1995 Proj 29535 2592 2592 Actual 35604 1968 1968 1996 Proj 29535 2813 2813 Actual 38614 3181 3181

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Stock market data for shares of the Company The following is the movement of the existing equity share of the Company listed and traded on BSE and NSE. Information regarding the Company's share prices at BSE and NSE are as given below: BSE High (Rs) High Date Volume on date of high (no of shares) 176198 1382930 393389 90237 29793 51824 287728 Low (Rs) Low Date Volume on date of Low (no of shares) 5777 1750 38792 44160 47386 47257 15768 Average Price (Rs.) Total Volume

Particulars

2003 2004 2005 Jan.06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 * Not traded Arrangement. NSE

2.40 24/03/03 4.88 5143383 4.10 24/06/04 8.49 24560730 13.20 27/12/05 18.21 34268556 13.30 31/01/06 14.65 895637 11.40 24/02/06 12.74 860205 9.45 21/03/06 11.07 1553242 11.83 03/04/06 12.92 1040271 Not traded* Not traded* on account of temporary suspension of trading w.e.f. 27/04/2006 pursuant to Scheme of

13.00 23.20 27.30 16.54 14.00 13.10 15.08

29/12/03 28/12/04 30/08/05 04/01/06 16/02/06 01/03/06 12/04/06

Particulars

High (Rs)

High Date

2003 2004 2005 Jan.06 Feb 06 Mar 06 Apr 06 May 06 June 06 * Not traded Arrangement.

2.65 27/03/03 4.79 8856548 4.10 24/06/04 7.87 39458657 13.05 27/12/05 18.78 41753062 13.40 31/01/06 14.72 744816 11.35 24/02/06 12.76 652781 9.35 21/03/06 11.08 992603 11.95 03/04/06 12.99 708191 Not traded* Not traded* on account of temporary suspension of trading w.e.f. 27/04/2006 pursuant to Scheme of

13.50 23.30 28.00 16.65 14.00 13.15 15.35

29/12/03 28/12/04 31/07/05 04/01/06 16/02/06 01/03/06 12/04/06

Volume on date of high (no of shares) 203665 2418117 180810 64727 33613 43314 148645

Low (Rs)

Low Date

Volume on date of Low (no of shares) 822 2830 42011 49636 69347 40968 14820

Average Price (Rs.)

Total Volume

Week end price of Equity Shares of BVXL on BSE & NSE is as follows: Week ended 14/07/2006 07/07/2006 30/06/2006 23/06/2006 BSE (Rs.) Not traded Not traded Not traded Not traded NSE (Rs.) Not Traded Not Traded Not Traded Not Traded

The shares of BVXL are not traded on account of suspension of trading, immediately after the date on which the resolution of the shareholders passed in the AGM i.e. 10/07/2006. The equity shares of the company were in no delivery period from [] to []. The cum-rights closing price of the shares of the company as on [] was Rs. []. The ex-rights closing price of the shares of the company as on [] was Rs. []. 125

Redressal of investor grievances The investor grievances against the Company will be handled by the Registrars and Transfer Agents in consultation with the secretarial department of the Company. To handle the grievances received, the Company has appointed Mr. Girish Bhatia, Company Secretary as a Compliance Officer. He will supervise redressal of complaints received from the investors at the office of the Company as well as the Registrars to the Issue and ensure timely settlement. The company normally resolves various kinds of investor grievances within a period of 15 days. During the 18 months period ended on 31/12/2005 the Company has received 89 complaints and during 3 months ended on 31/03/2006 the Company has received 16 complaints. All the complaints have been resolved and there are no complaints pending as on 31/03/2006. All grievances related to the issue may be addressed to the Registrar to the issue quoting the application No. (including prefix), Number of equity shares applied for, amount paid on application, date, Bank and branch/ Collection centre where application was submitted . Change in Auditors The changes in Auditors of the Company during last three years is as follows. Name M/s Lodha & Co. Date 16/12/2004 Nature of change Expiry of term. Not re-appointed pursuant to Special Notice within the meaning of Section 190 and under Section 225(1) of the Companies Act, 1956 from some members of the Company. Appointment

M/s. Khimji Kunverji & Co. Capitalisation of reserves or profits

16/12/2004

Till date the Company has issued 9,44,084 (47,20,420 equity shares- pre restructuring) Equity Shares as fully paid up Bonus Shares by way of capitalisation of reserves. Revaluation of Assets During the year 1998-99 certain fixed assets of the Company were revalued by approved valuers on current replacement cost as on 01/01/1989, 31/03/1992 & 30/06/1998. Pursuant to the Scheme of Arrangement the balance of revaluation reserve i.e Rs.4263.01 Lacs as at 30/06/2004 alongwith other reserves has been fully utilized.

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IX. OFFERING INFORMATION A. TERMS OF THE ISSUE The Equity Shares now being offered are subject to the provisions of the Act and the terms and conditions of this Letter of Offer, the CAF, the Memorandum and Articles of Association of the Company, the approvals from the Government of India, FIPB and RBI, if applicable, the provisions of the Act, guidelines issued by SEBI, guidelines, notifications and regulations for issue of capital and for listing of securities issued by Government of India and/or other statutory authorities and bodies from time to time, Listing Agreements entered into by the Company with Stock Exchanges, terms and conditions as stipulated in the allotment advise or letter of allotment or Security Certificate and rules as may be applicable and introduced from time to time, the FEMA and the Letters of Allotment/Equity Shares to be issued. Over and above such terms and conditions, the Equity Shares shall also be subject to applicable laws, guidelines, notifications and regulations relating to issue of capital and listing of securities issued from time to time by SEBI, the Government of India, RBI and or other authorities. Ranking of equity shares The new Equity Shares proposed to be issued shall rank in all respects pari-passu with existing fully paid up Equity Shares. Mode of payment of dividend The dividend is paid to all the eligible shareholders as per the provisions of Companies Act. Face value & issue price The Face Value of Equity Shares of the company is Rs.10/-. The Equity Shares of Rs. 10/- each are being issued at par i.e. at a price of Rs. 10/- per share in the present rights issue. Rights of equity shareholders The Shareholders are entitled to receive dividend, as and when declared and bonus and rights shares, as and when issued. Further, the rights of the above and other holders of shares are subject to the provisions of the Companies Act, 1956, the Memorandum and the Articles of Association of the Company, the terms of this Letter of Offer and other laws as applicable from time to time. Market lot The market lot for the Equity Shares held in the demat mode is one share. In case of physical certificate, the Company would issue one certificate for the Equity Shares allotted to one person (Consolidated Certificate). In respect of consolidated certificate, the Company will, only upon request from the equity shareholder, split & return such consolidated certificate into smaller denomination within 7 days time in conformity with the clause 3 of the Listing Agreement. No fee would be charged by the Company for splitting the consolidated certificate. Nomination In terms of Section 109A of the Act, nomination facility is available in case of Equity Shares. The applicant can nominate any person 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) may nominate any person(s) who, in the event of the death of the sole holder or all the joint-holders, as the case may be, shall become entitled to the Equity Shares. Person(s), being a nominee, becoming entitled to the Equity Shares by reason of the death of the original Equity Shareholder(s), shall be entitled to the same rights to which he would be entitled if he/she were the registered holder of the Equity Shares. Where the nominee is a minor, the Equity Shareholder(s) may also make a nomination to appoint, in the prescribed manner, any person to become entitled to the Equity Share(s), in the event of death of the said holder, during the minority of the nominee. A nomination shall stand rescinded upon the sale/disposal of the Equity Share by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed. When two or more persons hold the Equity Share(s), the nominee shall become entitled to receive the shares only on the demise of all the holders. 127

Fresh nominations can be made only in the prescribed form available on request at the office of the Company located at Birla Building, 9/1, R.N. Mukherjee Road, Kolkata-700001 or such other place at such addresses as may be notified by the Company. The applicant can make the nomination by filling in the relevant portion in the CAF. Only one nomination would be applicable for one folio. Hence, in case the shareholder(s) has (have) already registered the nomination with the Company, no further nomination need to be made for Equity Shares to be allotted in this Issue under the same folio. In case the allotment of Equity Shares is in dematerialised form, there is no need to make a separate nomination for the Equity Shares to be allotted in this Issue. Nominations registered with respective Depository Participant of the applicant would prevail. If the applicant requires to change the nomination, they are requested to inform their respective Depository Participant. Minimum subscription If the Company does not receive minimum subscription of 90% of the issue including devolvement of underwriters, the entire subscription shall be refunded to the applicants within forty two days from the date of closure of the issue. ii) If there is delay in the refund of subscription by more than 8 days after the company becomes liable to pay the subscription amount (i.e., forty two days after closure of the issue), the company will pay interest for the delayed period, at prescribed rates in sub-sections (2) and (2A) of Section 73 of the Companies Act, 1956. 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 Company will issue certificates of denomination equal to the number of Equity Shares being allotted to the Equity Shareholder. Restrictions on transfer and transmission of shares and on their consolidation/ splitting There are no restrictions on transfer and transmission and on their consolidation/splitting of shares issued pursuant to this issue. i)

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B. BASIS OF THE OFFER

ISSUE PROCEDURE

The Equity Shares are being offered for subscription for cash to those existing Equity Shareholders whose names appear as beneficial owners as per the list to be furnished by the depositories in respect of the Equity Shares held in the electronic form and on the Register of Members of the Company in respect of Equity Shares held in the physical form at the close of business hours on the Record Date. The Company has in consultation with the Designated Stock Exchange fixed the Record Date for determining the shareholders who are entitled to receive this offer for Equity Shares on a rights basis. The Equity Shares are being offered for subscription in the ratio of Four Equity Shares for every Seven Equity Shares held by the Equity Shareholders. The shareholders whose names appear as beneficial owners as per the list furnished by the depositories in respect of the Equity Shares held in electronic form and on the register of members of the Company in respect of the shares held in physical form on [] at the close of business hours shall be entitled to the Equity Shares on the Rights basis in the ratio of Four equity shares for every Seven Equity Shares held by them. OPTION TO SUBSCRIBE Applicants to the Equity Shares of the Company issued through this Rights Issue shall be allotted the securities in dematerialized (electronic) form at the option of the applicant. The Company has signed a tripartite agreement with National Securities Depository Limited (NSDL) and MCS Ltd. on 24/10/2003 and with Central Depository Services (India) Limited (CDSL) and MCS Ltd. on 03/09/2003, which enables the Investors to hold and trade in securities in a dematerialised form, instead of holding the securities in the form of physical certificates. RIGHTS ENTITLEMENT As your name appears as beneficial owner in respect of the shares held in the electronic form or appears in the register of members as an equity shareholder of the Company on the Record Date, you are entitled to this Rights Offer. The number of Equity Shares to which you are entitled is shown in Block I of Part A of the enclosed CAF and as shown in part A of the enclosed CAF. FRACTIONAL ENTITLEMENT On applying the rights ratio the rights entitlement may lead to fractional entitlement to some of the shareholders. In such an event the fractional entitlement will be rounded off to the next higher integer. The additional entitlement shall be made available out of the entitlement of one of the promoters. The adjustment will be made in the composite application form so as to ensure the allocation is made within the issue size. JOINT-HOLDERS Where two or more persons are registered as the holders of any Equity Shares, they shall be deemed (so far as the company is concerned) to hold the same as joint-tenants with benefits of survivorship subject to provisions contained in the Articles. OFFER TO NON-RESIDENT EQUITY SHAREHOLDERS/ APPLICANTS Presently 1,75,333 Equity Shares aggregating to 0.40% of the present issued capital are held by NRIs/FIIs on repatriation basis. Applications received from NRIs and other NR shareholders for allotment of Equity Shares shall be, inter alia, subject to the conditions imposed from time to time by the RBI under the FEMA in the matter of refund of application moneys, allotment of Equity Shares, issue of Letter of Allotment / share certificates, payment of interest, dividends, etc. General permission has been granted to any person resident outside India to apply shares offered on rights basis by an Indian Company in terms of FEMA and the rules and regulations thereunder. Vide notification dated June 18, 2003, bearing number FEMA 94/2003, RBI has granted general permission to Indian companies to issue rights/bonus shares to existing non-resident shareholders. The existing non-resident shareholders may apply for issue of additional shares and the Company may allot the same subject to the condition that the overall issue of shares to non-residents in the total paid up capital does not exceed the sectoral cap. In other words, non-residents may subscribe for additional shares over and above shares offered on rights basis by the company and renounce the shares offered in full or part thereof in favour of a person named by them. Residents may subscribe for additional shares over and above the shares offered on rights basis by the Company and also renounce the shares offered either in full or part thereof in favour of a person named by them. The Equity Shares issued under the Rights Issue and purchased by NR shall be subject to the same conditions 129

including restrictions in regard to the repatriability as are applicable to the previously held Equity Shares against which Equity Shares under the Rights Issue are issued. However, as per the provisions of AP DIR circular No. 14 dated September 16, 2003 (issued by the RBI), such shareholders who have been allotted the Equity Shares as OCBs would not be permitted to participate in the Rights Issue. Accordingly, shareholders/ applicants who are OCBs and wishing to participate in the Rights Issue would be required to submit approvals in relation thereto from the FIPB and the RBI. The Board of Directors may at its absolute discretion, agree to such terms and conditions as may be stipulated by RBI while approving the allotment of Equity Shares, payment of dividend etc. to the Equity Shareholders who are NR. NOTICES All notices to the Equity Shareholder(s) required to be given by the Company shall be published in one English national daily with wide circulation, one Hindi national daily with wide circulation and/or, will be sent by ordinary post to the registered holders of the Equity Share(s) from time to time. ISSUE OF DUPLICATE EQUITY SHARE CERTIFICATE If any Equity Share Certificate(s) is/are mutilated or defaced or the pages for recording transfers of Equity Shares are fully utilized, the Company against the surrender of such Certificate(s) may replace the same, provided that the same will be replaced as aforesaid only if the Certificate numbers and the Distinctive numbers are legible. If any Equity Share Certificate(s) is/are destroyed, stolen, lost or misplaced, then upon production of proof thereof to the satisfaction of the Company and upon furnishing such indemnity/ surety and/or such other documents as the Company may deem adequate, duplicate Equity Share Certificate(s) shall be issued. OPTIONS AVAILABLE TO THE EQUITY SHAREHOLDERS The Equity Shareholders will be having the following five options: Apply for his entitlement in part Apply for his entitlement in part and renounce the other part Renounce his entire entitlement Apply for his entitlement in full Apply for his entitlement in full and apply for additional Equity Shares

HOW TO APPLY For Resident Indian Shareholders Application should be made only on the enclosed CAF provided by the Company. The enclosed CAF should be completed in all respects, as explained in the instructions indicated in the CAF. Applications will not be accepted by the Lead Managers or by the Registrar to the Issue or by the Company at any offices except in the case of postal applications as per instructions given in the draft Letter of Offer. Payment should be made in cash (not more than Rs.20,000/- or by cheque/bank draft/ drawn on any bank (including a co-operative bank) which is situated at and is a member or a sub-member of the bankers clearing house located at the centre where the CAF is submitted and which is participating in the clearing at the time of submission of the application. Outstation cheques/money orders/postal orders will not be accepted and CAFs accompanied by such cheques/money orders/postal orders are liable to be rejected. For Non-Resident Shareholders Applications received from the Non-Resident Equity Shareholders for the allotment of Equity Shares shall, inter alia, be subject to the conditions as may be imposed from time to time by the RBI, in the matter of refund of application moneys, allotment of Equity Shares, issue of letters of allotment/certificates/ payment of dividends etc. Letter of Offer and CAF shall be dispatched to non-resident Equity Shareholders in India only. For applicants residing at places other than designated Bank Collecting branches. Applicants residing at places other than the cities where the Bank collection centres have been opened should send their completed CAF by registered post/speed post to the Registrars to the Issue, Intime Spectrum Registry Pvt. 130

Ltd. alongwith demand drafts, net of demand draft and postal charges, payable at Mumbai in favour of BVXL Rights Issue crossed A/c Payee only so that the same are received on or before closure of the Issue i.e []. The Company will not be liable for any postal delays and applications received through mail after the closure of the Issue are liable to be rejected and returned to the applicants. Applications by mail should not be sent in any other manner except as mentioned below. All application forms duly completed together with cash/cheque/demand draft for the application money must be submitted before the close of the subscription list to the Bankers to the Issue named herein or to any of its branches mentioned on the reverse of the CAF. The CAF alongwith application money must not be sent to the Company or the Lead Manager to the Issue or the Registrar to the Issue except as mentioned above. The applications are required to strictly adhere to these instructions. Failure to do so could result in the application being liable to be rejected by the Company, the Lead Manager and the Registrar not having any liabilities to such applicants. 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 renouncees Part D : Form for request for split application forms You may exercise any one of the following options with regard to the Equity Shares offered to you, using the enclosed CAF : Sr. No 1. Options available Accept whole or part of the Equity Shares offered to you without renouncing the balance Renounce all the Equity Shares offered to you to one person (joint renouncees are deemed as one person) without your applying for any of the Equity Shares offered to you. Accept a part of your entitlement and renounce the balance or part of it to one or more Renouncee(s). OR Renounce your entitlement or part of it to one or more persons (joint renouncees are deemed as one person). Action Required Fill in and sign Part A indicating in Block III of Part A the number of Equity Shares accepted. If you accept all the equity share offered in Block II of Part A you may apply for additional Equity Shares. Indicate in Block IV the additional Equity Shares applied for. Fill in and sign Part B indicating the number of Equity Shares renounced in Block VII and handover the ENTIRE FORM to the renouncee. The renouncee/ joint renouncee(s) must fill in and sign Part C of CAF. Fill in and sign Part D for the Split Form and send the ENTIRE CAF to the Registrar to the Issue. On receipt of Split Forms : a For the Equity Shares you are accepting, fill in and sign Part A. For the Equity Shares you are renouncing fill in and b sign Part B indicating the number of Equity Shares renounced in Block VII. Each of the renouncees should fill in and sign Part C.

2.

3.

4.

Note: If application is made jointly with any other person(s) who is/are not already joint holders or change in the sequence of names of joint holders, it will amount to renunciation and the procedure mentioned in (2) above will have to be followed. Acceptance of Offer You may accept the Offer and apply for the Equity Shares offered, either in full or in part by filling Block III of Part A of the enclosed CAF and submit the same along with the application money payable to the bankers to the Issue or any of the branches as mentioned on the reverse of the CAF before the close of the banking hours on or before the Issue Closing Date or such extended time as may be specified by the Board thereof in this regard. Applicants at centers not covered by the branches of collecting banks can send their CAF together with the demand draft, net of demand draft and postal charges, payable at Mumbai to the Registrar to the Issue by registered post. Such applications sent to anyone other than the Registrar to the Issue are liable to be rejected. 131

You may apply for the Equity Shares offered wholly or in part by filling in the enclosed CAF and submitting the same along with the application money to the Bankers to the Issue or its designated branches on or before the closure of the subscription list. The CAF should be complete in all respects, as explained in the INSTRUCTIONS indicated in the CAF. The CAF should not be detached under any circumstances, otherwise the application(s) will be rejected forthwith. Application for additional Equity Shares You are also eligible to apply for additional Equity Shares over and above the number of Equity Shares offered to you provided you have applied for all the shares offered to you without renouncing them in full or in part. However, the additional Equity Shares cannot be renounced in full or in part, in favour of any other person(s). If you desire to apply for additional Equity Shares, you may fill in the number of additional Equity Shares in Part A of the CAF. The allotment of additional Equity Shares will be at the sole discretion of the Board on an equitable basis with reference to the number of Equity Shares held by you on the Record Date in consultation with The Designated Stock Exchange. In the case of requests for additional Equity Shares by Non Residents, the allotment will be subject to the approval of Reserve Bank of India. The Board may reject any application for additional Equity Shares without assigning any reasons thereof. The renounces can also make an application for additional shares. Renunciation You may renounce all or any of the Equity Shares, you are entitled to in favour of any individual, limited companies, or statutory corporations / institutions. However renunciation in favour of more than three persons as joint holders, trust or society (unless the same is registered under the Societies Registration Act, 1860 or any other applicable trust laws and is authorised under its constitution to hold shares in a company), OCBs, minors (unless acting through natural or legal guardians), Partnership Firms, or their nominees, or any of them will not be accepted. Any renunciation from Resident(s) to Non- Resident(s) is subject to the renouncer(s)/ renouncee(s) obtaining requisite approval(s) of the Reserve Bank of India (RBI) and the said permission must be attached to the CAF. Procedure for renunciation (i) To Renounce in WHOLE If you wish to renounce this offer in whole, please complete PART 'B' of the CAF enclosed with the Letter of Offer for the number of Equity Shares renounced and deliver the CAF duly signed to the person(s) in whose favour the Equity Shares are so renounced. All joint holders must sign as per specimen signatures recorded with the Company at the place provided for the purpose and in the same order. The person(s), in whose favour the offer has been renounced (renouncees) should complete and sign PART C of the CAF. In case of joint renouncees, all joint renouncees must sign. (ii) To Renounce in PART If you wish to either accept this offer in part and renounce the balance of this offer the CAF must first be split into the requisite number of forms, by applying to the Registrar to the Issue. Please indicate your requirement of split forms in the space provided for this purpose in PART D of the CAF and return the entire CAF to the Registrar to the Issue so as to reach them latest by the close of business hours on or before the last date for receiving requests for split forms i.e. []. If you wish to apply for Equity Shares jointly with any person(s) who is/are not already joint holder(s) with you, then it would amount to renunciation and the procedure of renunciation as mentioned above 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 above shall have to be followed. Further, this right of renunciation is subject to the express condition that the Board shall be entitled in its absolute and unqualified discretion to reject any such request for allotment of Equity Shares from renouncee(s) without 132

assigning any reason thereof save where the Equity Shares have been renounced in favour of a person who is already a member of the Company. 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 and NOT the renouncees shall be entitled to split forms. Forms once split cannot be resplit. Request for spilt forms: Request for Split Forms should be addressed to the Registrar to the Issue so as to reach them on or before the last date for receiving of request for split forms by filling in PART D of the CAF. Requests for Split Forms will be entertained only once.

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 CAF on the request of the applicant who should furnish the registered folio number/ DP and Client ID number and his/ her full name and address to the Registrar to the Issue. Please note that the request for duplicate CAF should reach the Registrar to the Issue within 15 days from the Issue Opening Date. Please note that those who are making the application in the duplicate form should not utilize the original CAF for any purpose including renunciation, even if it is received/ found subsequently. If the applicant violates any of these requirements, he / she shall face the risk of rejection of both the applications as well as forfeiture of amounts 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 an application to subscribe to the Rights Issue on plain paper, along with a Demand Draft payable at Mumbai which should be drawn in favour of the Company 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 specimen recorded with the Company, must reach the office of the Registrar to the Issue before the Issue Closing Date (i.e []) and should contain the following particulars: Name of Issuer, being BVXL . Name and address of the Equity Shareholder including joint holders Registered Folio Number/ DP and Client ID no. Number of shares held as on [] (Record Date). Certificate numbers and distinctive numbers, if held in physical form Number of Rights Equity Shares entitled Number of Rights Equity Shares applied for out of entitlement Number of additional Equity Shares applied for, if any Total number of Equity Shares applied for Total amount paid at the rate of Rs. 10/-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 the refund order Applications for a total value of Rs, 50,000 or more, i.e. where the total number of securities applied for multiplied by the Issue price, is Rs. 50,000 or more the applicant or in the case of application in joint names, each of the applicants, should mention his/her PAN number allotted under the Income-Tax Act, 1961 and also submit a photocopy of the PAN card(s) or a communication from the Income Tax authority indicating allotment of PAN (PAN Communication) along with the application for the purpose of verification of the number. Applicants who do not have PAN are required to provide a declaration in Form 60/ Form 61 prescribed under the I.T.Act along with the application. Applications without this photocopy/ PAN Communication/declaration will be considered incomplete and are liable to be rejected. In case of Non-Resident shareholders, NRE/FCNR/NRO Account No., name and address of the bank and branch. 133

Signature of Equity Shareholders to appear in the same sequence and order as they appear in the records of the Company Payment in such cases, should be through a demand draft, net of demand draft and postal charges, payable at Mumbai be drawn in favour of BVXL - Rights Issue crossed A/c Payee only. Please note that those who are making the application on plain paper shall not be entitled to renounce their rights and should not utilize the original CAF for any purpose including renunciation even if it is received subsequently. If the applicant violates any of these requirements, he/she shall face the risk of rejection of both the applications as well as forfeiture of amounts remitted along with the applications. The Company shall refund such application amount to the applicant without any interest thereon. Quoting of PAN/GIR no. in the application forms Where an application is for allotment of securities in response to a rights issue, for a total value of Rs. 50,000/- or more i.e. the total number of securities applied for multiplied by the issue price, is Rs. 50,000/- or more the applicant or in the case of applications in joint names, each of the applicants, should mention his/her permanent account number (PAN) allotted under the Income-Tax Act, 1961 or where the same has not been allotted, the GIR number and the Income-Tax Circle/Ward/District. In case neither the permanent account number nor the GIR number has been allotted, the fact of non-allotment should be mentioned in the application forms. Application forms without this information will be considered incomplete and are liable to be rejected. Last date for submission of CAF The last date for receipt of CAF by the Bankers to the Issue together with the amount payable on application is []. If the relevant CAF together with amount payable thereunder is not received by the Bankers/Registrar to the Issue on or before the close of banking hours on the aforesaid last date the offer contained in this Letter of Offer shall be deemed to have been declined and the Board shall be at liberty to dispose of the Equity Shares hereby offered as provided under "Basis of Allotment". Incomplete application CAFs which are not complete or are not accompanied with the application money amount payable are liable to be rejected. TERMS OF PAYMENT The entire amount of Rs. 10/- per share is payable on application by all shareholders/applicants. MODE OF PAYMENT For Resident Shareholders/Applicants Payment(s) must be made by cheque/demand draft and drawn on any bank (including a co-operative bank) which is situated at and is a member or a sub-member of the Bankers' Clearing House located at the centre where the CAF is submitted. A separate cheque/draft must accompany each CAF. Only one mode of payment should be used. Money orders, postal orders and outstation cheques will not be accepted and applications accompanied by any such instruments will be rejected. Shareholders/Applicants residing at places other than those mentioned in the CAF and applicants who wish to send their applications but not having collection centres should send their application by Registered Post, ONLY to the Registrar to the Issue enclosing a demand draft drawn on a clearing Bank and payable at Mumbai ONLY net of bank charges and postal charges, before the closure of the issue. Such cheque/drafts should be payable to "BVXL - RIGHTS ISSUE". All cheques/ drafts must be crossed 'A/c Payee only. No receipt will be issued for the application money received. However, the Collection Centre receiving the application will acknowledge receipt of the application by stamping and returning the acknowledgement slip at the bottom of each CAF. The Company is not responsible for any postal delay/ loss in transit on this account.

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For Non-Resident Shareholders/Applicants As regards the application by non-resident equity shareholders, the following further conditions shall apply: Application with repatriation benefits Payment by NRIs/ FIIs/ foreign investors must be made by demand draft/cheque payable at Mumbai or funds remitted from abroad in any of the following ways:

By Indian Rupee drafts purchased from abroad and payable at Mumbai or funds remitted from abroad (submitted along with Foreign Inward Remittance Certificate); or By cheque / draft on a Non-Resident External Account (NRE) or FCNR Account maintained in Mumbai; or By Rupee draft purchased by debit to NRE/ FCNR Account maintained elsewhere in India and payable in Mumbai; or FIIs registered with SEBI must remit funds from special non-resident rupee deposit account.

All cheques/drafts submitted by non-residents applying on repatriable basis should be drawn in favour of "BVXL - RIGHTS ISSUE - NR" payable at Mumbai and crossed A/c Payee only for the amount payable. A separate cheque or bank draft must accompany each application form. Applicants may note that where payment is made by drafts purchased from NRE/FCNR accounts as the case may be, an Account Debit Certificate from the bank issuing the draft confirming that the draft has been issued by debiting the NRE/FCNR account should be enclosed with the CAF. In the absence of the above the application shall be considered incomplete and is liable to be rejected. In the case of NRIs who remit their application money from funds held in FCNR/NRE Accounts, refunds and other disbursements, if any shall be credited to such account details of which should be furnished in the appropriate columns in the CAF. In the case of NRIs who remit their application money through Indian Rupee Drafts from abroad, refunds and other disbursements, if any will be made in US Dollars at the rate of exchange prevailing at such time subject to the permission of RBI. The Company will not be liable for any loss on account of exchange rate fluctuation for converting the Rupee amount into US Dollars or for collection charges charged by the applicants Bankers. 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 or Rupee Draft purchased out of NRO Account maintained elsewhere in India but payable at Mumbai. In such cases, the allotment of Equity Shares will be on non-repatriation basis. All cheques/drafts submitted by non-residents applying on non-repatriation basis should be drawn in favour of "BVXL - RIGHTS ISSUE payable at Mumbai and must be crossed A/c Payee only for the amount payable. The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF. If the payment is made by a draft purchased from an NRO account, an Account Debit Certificate from the bank issuing the draft, confirming that the draft has been issued by debiting the NRO account, should be enclosed with the CAF. In the absence of the above, the application shall be considered incomplete and is liable to be rejected. New demat account shall be opened for holders who have had a change in status from resident Indian to NRI. Note:

In case where repatriation benefit is available, interest, dividend, sales proceeds derived from the investment in Equity Shares can be remitted outside India, subject to tax, as applicable according to Income Tax Act, 1961. In case Equity Shares are allotted on non-repatriation basis, the dividend and sale proceeds of the Equity Shares cannot be remitted outside India.

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The CAF duly completed together with the amount payable on application must be deposited with the Collecting Bank indicated on the reverse of the CAF before the close of banking hours on or before the Issue Closing Date. A separate cheque or bank draft must accompany each CAF. In case of an application received from non-residents, allotment, refunds and other distribution, if any, will be made in accordance with the guidelines/ rules prescribed by RBI as applicable at the time of making such allotment, remittance and subject to necessary approvals.

Payment by Stockinvest In terms of RBI Circular DBOD No. FSC BC 42/24.47.00/2003- 04 dated November 5, 2003, the Stockinvest Scheme has been withdrawn with immediate effect. Hence, payment through Stockinvest would not be accepted in this Issue. Application will not be accepted by the Lead Manager or by the Company. Note on cash payment (section 269 ss) Having regard to the provisions of Section 269 SS of the Income Tax Act, 1961, subscriptions against applications for securities should not be effected in cash and must be effected only by Account Payee cheques or Account Payee bank drafts, if the amount payable is Rs. 20,000/- or more. In case payment is effected in contravention of this provision, the application is liable to be rejected. FORFEITURE The allotment shall be made only on receipt of full application money as mentioned in Terms of Payment. As such there will be no partly paid-up shares emerging from this issue & hence no requirement of any forfeiture. APPLICATION UNDER POWER OF ATTORNEY In case of applications under Power of Attorney or by Limited Companies or Bodies Corporate or Societies registered under the applicable laws, a certified copy of the Power of Attorney or the relevant authority, as the case may be, along with the certified copy of the Memorandum and Articles of Association or Bye-laws, as the case may be, must be lodged separately by registered post at the office of the Registrar to the Issue simultaneously with the submission of the CAF, indicating the serial number of the CAF and the name of the bank and the branch office where the application is submitted within 10 days of closure of the offer, failing which the application is liable to be rejected. In case the Power of Attorney is already registered with the Company, then the same need not be furnished again. However, the serial number of the Registration under which the Power of Attorney has been registered with the Company must be mentioned below the signature of the Applicant. BANK DETAILS OF THE APPLICANT The applicant must fill in the relevant column in the CAF giving particulars of Savings Bank/Current Account Number and the name of the Bank with whom such accounts is held, to enable the Registrar to the Issue to print the said details in the Refund Orders, if any, after the name of the payees. Please note that provision of Bank Account details has now been made mandatory and applications not containing such details are liable to be rejected. APPLICATION NUMBER ON THE CHEQUE/DEMAND DRAFT To avoid any misuse of instruments, the applicants are advised to write the application number and name of the first applicant on the reverse of the cheque / demand draft. GROUNDS FOR TECHNICAL REJECTIONS Applicants are advised to note that applications are liable to be rejected on technical grounds, including the following: Amount paid does not tally with the amount payable for; In case of physical shareholders, bank account details (for refund) are not given; Age of first applicant not given in case of renouncee(s); 136

PAN photocopy/ PAN Communication/ Form 60 / Form 61 declaration not given if Application is for Rs. 50,000 or more; Cash applications for an amount exceeding Rs.20,000/-; In case of Application under power of attorney or by limited companies, corporate, trust, etc., relevant documents are not submitted; 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; If the Applicant desires to have shares in electronic form, but the CAF does not have the Applicants depository account details; CAFs are not submitted by the Applicants within the time prescribed as per the CAF and the Draft Letter of Offer; Applications not duly signed by the sole/joint Applicants; Applications by OCBs unless accompanied by specific approval from the RBI permitting the OCBs to invest in the Issue; In case no corresponding record is available with the Depositories that matches three parameters, namely, names of the Applicants (including the order of names of joint holders), the Depositary Participants identity (DP ID) and the beneficiarys identity; Applications by ineligible Non-residents (including on account of restriction or prohibition under applicable local laws) and where last available address in India has not been provided; Multiple applications. GENERAL (a) All applications should be made on the printed CAF provided by the Company and should be complete in all respects. Applications which are not complete in all respects or are made otherwise than as herein provided or not accompanied by proper application money in respect thereof will be refunded without interest. (b) Please read the instructions in the enclosed CAF carefully. (c) ALL COMMUNICATIONS IN CONNECTION WITH YOUR APPLICATION FOR THE EQUITY SHARES INCLUDING ANY CHANGE IN YOUR REGISTERED ADDRESS SHOULD BE ADDRESSED TO THE REGISTRAR TO THE ISSUE. (d) Application Forms must be filled in ENGLISH in BLOCK LETTERS. (e) Signatures should be either in English or Hindi or the languages specified in the Eighth Schedule to the constitution of India. Signatures other than in the aforementioned languages or thumb impressions must be attested by a Notary Public or a Special Executive Magistrate under his/her official seal. (f) In case of Joint Holders, all joint holders must sign the relevant parts of the Application Form in the same order and as per the specimen signatures recorded with the Company. (g) In case of joint applicants, refunds and all payments will be made to the person whose name appears first on the application form and all communications will be addressed to him/her. To prevent any fraudulent encashment of refund orders by third parties, the Sole/First Applicant must indicate Saving / Current Account number and the name of the bank and its branch with whom such account is held in the space provided in the CAF for the purpose so that Refund Orders are printed with these details after the name. Applications without this information are liable to be rejected. (h) The Application Form should be presented to the Bank in its entirety. If any of the Part(s) A,B,C and D of the Application Form(s) is /are detached or separated, such application will forthwith be rejected. (i) All shareholders must submit the CAF along with remittance only to the Bankers to the Issue mentioned elsewhere in this Letter of Offer and not to the Company, the Registrar or the Lead Manager. (j) Any dispute or suit action or proceedings arising out of or in relation to this Letter of Offer or in respect of any matter or thing herein contained and claimed by either party against the other shall be instituted or adjudicated upon or decided solely by the appropriate Court where Registered Office of the Company is situated. (k) The last date for receipt of CAF alongwith the amount payable is []. However, the Board will have the right to extend the same for such period as it may determine from time to time, but not exceeding 60 days from the date of opening of the subscription list. If the CAF together with the amount payable thereunder is not received by the bankers to the issue on or before the closure of the banking hours on the aforesaid date, or such date as may be extended by the Board, the offer contained in this Letter of Offer shall be deemed to have been declined and the Board shall be at liberty to dispose the Rights hereby offered. For further instructions please read CAF carefully.

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DEMATERIALISATION As per the provisions of the Depositories Act, 1996, the shares of a body corporate may be held in dematerialized form i.e. not in the form of physical certificates but be fungible and be represented by the statement issued through electronic mode. The Equity Shares of BVXL are traded in the demat segment. The Company has entered into a tripartite agreement dated 24/10/2003 with the National Securities Depository Ltd. (NSDL) and MCS Ltd. for dematerialisation of the Equity Shares of the Company. The Company has also entered into a tripartite agreement dated 03/09/2003 with the Central Depository Services Limited (CDSL) and MCS Ltd. for dematerialisation of the Equity Shares of the Company. The present ISIN No. of the Company is INE 471A01023. An applicant has the option to seek allotment in physical or demat mode. An applicant who seeks allotment in demat mode must have at least one Beneficiary Account with any of the Depository Participants (DP) of NSDL or CDSL registered with SEBI, prior to the application. Such applicants must necessarily fill in the details (including the Beneficiary Account Number and Depository Participants ID Number) appearing under the head Request for shares in electronic form in the CAF. Applicant must indicate in the CAF, the number of shares they wish to receive in electronic form out of the total number of Equity Shares applied for. In case of partial allotment, shares will first be allotted in electronic form and the balance, if any, will be allotted in physical form. Names in the CAF should be identical to those appearing in the account details in the Depository. In case of joint holders, the name should necessarily be in the same sequence as they appear in the account details in the Depository. No separate application for demat and physical shares is to be made. If such applications are made the application for physical shares will be treated as multiple applications and rejected accordingly. It may be noted that electronic shares can be traded only on the stock exchanges having electronic connectivity with NSDL and CDSL. Non-transferable allotment letters/ refund orders will be directly sent to the applicant by the Registrar to the Issue. The applicant is responsible for the correctness of the applicants demographic details given in the share application form vis--vis those with his/her DP. Equity Shares allotted in demat mode will be credited directly to the respective Beneficiary Account. DISPOSAL OF APPLICATION AND APPLICATION MONEY The Board reserves the right to reject applications in case the application concerned is not made in terms of this Letter of Offer. In case an application is rejected in full the whole of the application money received will be refunded to the first named applicant and where an application is rejected in part, the excess application money will be refunded to the first named applicant within 6 weeks from the date of closure of the subscription list in accordance with Section 73 of the Act. If there is delay of refund of application money by more than 8 days after the Company becomes liable to pay (i.e. forty-two days after the closure of Issue), the Company will pay interest for the delayed period at the rate prescribed under sub-Section (2) and (2A) of Section 73 of the Act. The subscription monies received in respect of this Issue will be kept in a separate bank account and the Company will not have access to nor appropriate the funds until it has satisfied the Stock Exchange with suitable documentary evidence that minimum subscription of 90% of the application money for the Issue has been received. No acknowledgment will be issued for the application monies received by the Company. However, the Bankers to the Issue at its collection branches to the Issue receiving the CAF as applicable as per the terms of this Letter of Offer, will acknowledge its receipt by stamping and returning the acknowledgment slip at the bottom of each CAF. Except for the reasons stated under Grounds for Technical Rejections on page (136) of this Letter of Offer and subject to valid application, acknowledgement of receipt of application money given by the collection agent shall be valid and binding on issuer and other persons connected with the Issue. BASIS OF ALLOTMENT In the event of the issue being oversubscribed, the basis of allotment will be made only within the overall size of the Rights Issue, as stated in the Letter of Offer and the Board will proceed to allot the Equity Shares in consultation with the designated stock exchange in the following order of priority: 138

1.

Full allotment to the Shareholders who have applied for their Rights entitlement, either in full or in part and also the renouncee(s) who have applied for Equity Shares renounced in their favour either in full or in part (subject to the other provisions contained under the paragraph titled Renunciation). Allotment to the shareholders who have applied for additional Equity Shares provided that they have applied for all the Equity Shares offered to them, provided there is a surplus after making full allotment under (1) above. The allotment of such additional Equity Shares will be made as far as possible on the basis of the Equity Shares held as on the Record Date. Allotment to the renouncees who have applied for all the Equity Shares renounced in their favour and have applied for additional Equity Shares, as the Board may in its absolute discretion deem fit, provided there is a surplus after making full allotment (1) and (2) above. Allotment to any other person as the Board may in their absolute discretion deem fit, provided there is a surplus after making full allotment under (1), (2), (3) above.

2.

3.

4.

The issue will become undersubscribed after considering the number of shares applied as per the entitlement plus additional shares. The undersubscribed portion can be applied for only after the close of the Issue. The Company has made arrangement of standby underwriting to the extent of an amount of Rs. 765 lacs and has also received full advance there against by the underwriter. The advance, after adjusting the amount of devolvement, if any, upon the standby underwriter, would be refunded out of the proceeds of the aforesaid issue. The details of the underwriting please refer page no. (8). The promoters of BVXL have undertaken to subscribe to their entitlement in full & have also undertaken to subscribe to the unsubscribed portion, if any in the rights issue at least to the extent of Rs. 1485 lacs. This acquisition of additional Equity Shares due to undersubscription, if allotted to the Promoter shall be in terms of proviso to regulation 3(1)(b)(ii) of the Takeover Code and will be exempt from the applicability of regulation 11 and 12 of Takeover Code. This disclosure is made in terms of the requirement of Regulation 3(1)(b)(ii) of the Takeover Code. Further this acquisition of additional Equity Shares will not result in change of control of management of the Company. In case of oversubscription the allotment would be done in a proportionate manner in consultation with the designated Stock Exchange. The Company shall retain no oversubscription. LETTERS OF ALLOTMENT OR REFUND ORDERS Company shall ensure despatch of refund orders, if any, by under the Certificate of Posting or registered post or speed post or through modes as mentioned in section, Terms of the Issue clause Mode of Payment on page (134) of this Letter of Offer, as applicable, only at the sole or First Applicants sole risk within 42 days of closure of the Rights Issue, and adequate funds for making refunds to unsuccessful applicants as per the mode(s) disclosed shall be made available to the Registrar to the Issue by the issuer. In case of those shareholders who have opted to receive their Right Entitlement Shares in dematerialized form by electronic credit under the depository system, an advice regarding the credit of the Equity Shares shall be given separately. Allotment of Equity Shares to non-residents and the issue of letters of allotment/share certificates to nonresidents shall be subject to the approval received from RBI. For Non-Resident Applicants, refunds, if any, will be made as under: Where applications are accompanied by Indian Rupee Drafts purchased abroad and payable at Mumbai, India, refunds will be made in convertible foreign exchange equivalent to Indian Rupees to be refunded. Indian Rupees will be converted into foreign exchange at the rate of exchange, which is prevailing on the date of refund. The exchange rate risk on such refunds shall be borne by the concerned applicant and the Company shall not bear any part of the risk. Where the applications made are accompanied by NRE/FCNR/NRO cheques, refunds will be credited to NRE/FCNR/NRO accounts respectively, on which such cheques are drawn and details of which are provided in the CAF. 139

MODE OF PAYMENT OF REFUND Applicants should note that on the basis of name of the applicants, Depository Participants name, Depository Participant-Identification number and Beneficiary Account Number provided by them in the Composite Application Form, the Registrar to the Issue will obtain from the Depositories, the applicants bank account details including nine digit MICR code. Hence, applicants are advised to immediately update their bank account details as appearing on the records of the depository participant. Please note that failure to do so could result in delays in credit of refunds to applicants at the applicants sole risk and neither the Lead Manager nor the Company shall have any responsibility and undertake any liability for the same. The payment of refund, if any, would be done through various modes in the following order of preference: I. Direct Credit For investors having their Bank Account with the Collecting Bankers, the refund amount would be credited directly to their Bank Account with the Collecting Bankers. II. RTGS Investors desirous of taking direct credit of refund through RTGS, will have to provide the IFSC code in the Composite Application Form III. ECS - Payment of refund would be done through ECS for applicants residing at one the 15 centres, namely Ahmedabad, Bangalore, Bhuvaneshwar, Kolkata, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram, where clearing houses for ECS are managed by Reserve Bank of India. This would be subject to availability of complete Bank Account details including MICR code from the depositories. For all the other applicants except for whom payment of refund is possible through I, II and III, the refund orders would be despatched under the Certificate of Posting for refund orders less than Rs. 1,500/- and through Registered Post or Speed Post for refund orders exceeding Rs. 1,500/-. These refund orders will be drawn on the Collection Bank(s) and payable at par at the places where applications are accepted. Bank charges, if any, for encashing such cheques or pay orders will be borne by the Applicants. INTEREST IN CASE OF DELAY IN ALLOTMENT / DESPATCH The Company will issue and dispatch letters of allotment/ share certificates and/ or letters of regret along with refund order or credit the allotted securities to the respective beneficiary accounts, if any within a period of six weeks from the date of closure of the Issue. If such money is not repaid within 8 days from the day the Company becomes liable to pay it, the Company shall pay that money with interest at the rate of 15% per annum as stipulated under Section 73 of the Act. UNDERTAKING The Company undertakes that: i) ii) iii) iv) v) The complaints received in respect of the Issue shall be attended to by the Company expeditiously and satisfactorily. All steps for completion of the necessary formalities for listing and commencement of trading at all Stock Exchanges where the securities are to be listed will be taken within seven working days of finalization of basis of allotment. The funds required for dispatch of refund orders/ refund instructions/ allotment letters/ certificates by registered post shall be made available to the Registrar to the Issue. No further issue of securities affecting equity capital of the Company shall be made till the securities issued/offered through the Issue are listed or till the application moneys are refunded on account of nonlisting, under-subscription etc. The Company accepts full responsibility for the accuracy of information given in this Letter of Offer and confirms that to best of its knowledge and belief, there are no other facts the omission of which makes any statement made in this Letter of Offer misleading and further confirms that it has made all reasonable enquiries to ascertain such facts. All information shall be made available by the Lead Managers and the Issuer to the investors at large and no selective or additional information would be available for a section of the investors in any manner whatsoever including at road shows, presentations, in research or sales reports etc.

vi)

The Issuer and Lead Manager shall update the Letter of Offer and keep the investors informed of any material changes till the listing and trading commences. 140

UTILISATION OF ISSUE PROCEEDS The Board of Directors declares that: i. The funds received against this Issue will be transferred to a separate Bank Account other than the Bank Account referred to sub-section (3) of Section 73 of the Act. ii. Details of all moneys utilised out of the Issue shall be disclosed under an appropriate separate head in the Balance Sheet of the Company indicating the purpose for which such moneys has been utilised. iii. Details of all such unutilised moneys out of the Issue, if any, shall be disclosed under an appropriate separate head in the Balance Sheet of the Company indicating the form in which such unutilised moneys have been invested. The funds received against this Issue will be kept in a separate Bank Account and the Company will not have any access to such funds unless it satisfies the Designated Stock Exchange with suitable documentary evidence that the minimum subscription of 90% of the Issue has been received by the Company.

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X. TERMS OF ARTICLES OF ASSOCIATION Main provisions of the Articles of Association

CERTIFICATES Article 23 Members right to certificate Every member shall be entitled free of charge to one certificate for all the shares of each class registered in his name or to several certificates for the shares held by him by paying for each additional certificate a fee of Rs.2/- or such smaller sum as the Directors may determine. The Board may, however, at its discretion, issue more than one certificate for any number of shares allotted to or held by a member with or without any charge. Article 23a Notwithstanding anything contained in Article 23 hereof, the Board may refuse applications for sub-division or consolidation of share certificates into denominations of less than 50 equity shares except when such sub-division or consolidation is required to be made to comply with any law or statutory regulation or order or an order or a decree of a competent court. Issue of share certificates When the company issues any capital, no certificate of any share or shares in the company shall be issued except : i. in pursuance of a resolution passed by the Board; and ii. on surrender to the company of its letter of allotment or of its fractional coupons of requisite value, save in cases of issues against letters of acceptance or of renunciation, or in cases of issue of bonus shares; provided that if the letter of allotment is lost or destroyed, the Board may impose such reasonable terms, if any, as to evidence and indemnity and the payment of out of pocket expenses incurred by the company in investing evidence, as the Board thinks fit. Article 24b No certificate of any share or shares shall be issued either in exchange for those which are sub-divided or consolidated or in replacement of those which are defaced, tom or old, decrepit, worn out or where the cages on the reverse for recording transfers have been duly utilized , unless the certificate in lieu of which it is issued is surrendered to the company; Provided that the company may charge such fee, if any, not exceeding Rs.2/- for every new share certificate as the Board may think fit, but no fee shall be charged for issue of new certificate in replacement of those which are old, decrepit or worn out or where the cages on the reverse for recording transfers have been fully utilized. Article 24c No duplicate share certificate shall be issued in lieu of those that are lost or destroyed, without the prior consent of the Board or without payment of such fees, if any, not exceeding Re.1/- and on such reasonable terms if any, as to evidence and indemnity and the payment of out of pocket expenses incurred by the company in investigating evidence, as the Board may think fit. New certificate in place of one not surrendered When any shares under the power in that behalf in these articles herein contained are sold by the Directors and the certificate thereof has not been surrendered to the company by the former holder of the said shares, the Directors may issue a new certificate for such shares distinguishing it in such manner as they may think fit from the certificate not so delivered up. JOINT HOLDERS OF SHARES Article 26 Joint-holders Where two or more persons are registered as the holders of any share, they shall be deemed to hold the same as joint-tenants with benefit of survivorship subject to the provisions following and to the other provisions of these Articles relating to jointholders : a. The company shall not be bound to register more than four persons as the joint-holders of any share. b. The joint holder of a share shall be liable severally as well as jointly in respect of all payments which ought to be made in respect of such share. c. On the death of any one of such joint-holders, the survivor or survivors shall be the only person or persons recognized by the company as having any title to or interest in such share but the Directors may require such evidence of death as they may deem fit. d. Only the person whose name stands first in the register as one of the joint-holders of any share shall be entitled to delivery of the certificate relating to such share. Article 34 FOREFEITURE If any member fails to pay any call or instalment of a call on or before the day appointed for the payment of the same, the Director may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve a notice on such member requiring him to pay the same, together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non- payment. Any share so forfeited shall be deemed to be the property of the Company, and the Directors may sell, or otherwise dispose of the same in such manner as they think fit.

Article 24a

Article 25

Article 38

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Article 40

1)

2) 3) 4) 5) 6)

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall notwithstanding forfeiture remain liable to pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the date of forfeiture with interest thereon from the date of forfeiture until payment at such rate not exceeding nine percent per annum as the Directors may determine. The liability of such person shall cease if and when the Company shall have received payment in full of all such moneys in respect of the shares. The Company may receive the consideration, if any, given for the share on any sale or disposal thereof and execute a transfer of the share in favour of the persons to whom the share is sold or disposed of. The transferee shall thereupon be registered as the holder of the share. The transferee shall not be bound to see to application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. The provisions of these regulations as to forfeiture, shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way or premium, as if the same had been payable by virtue of a call duly made and notified.

Article 43

Companys lien on shares The company shall have a first and paramount lien upon all the shares (other than fully paid up shares) registered in the name of each member (whether solely or jointly with others) and upon the proceeds of sale thereof for all moneys (whether presently payable or not) called or payable at a fixed time in respect of such shares and no equitable interest in any share shall be created except upon the footing and condition that Article 14 hereof is to have full effect and such lien shall extend to all dividends and bonuses from time to time declared in respect of such share. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of the companys lien, if any, on such shares. The Directors may at any time declare any shares to be wholly or in part to be exempt from the provision of this clause. TRANSFER AND TRANSMISSION OF SHARES

Article 46

Execution of transfer etc. Subject to the provision of the Foreign Exchange Regulations Act, 1947 as in force, the company shall not register a transfer of shares in, or debentures of the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address, description by way of fathers or husbands name and occupation, if any, of the transferee, has been delivered to the company alongwith the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or debentures. Provided that where, on an application in writing made to the company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of Directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit. The transferor shall be deemed to remain holder of such share until the name of the transferee is entered in the Register in respect thereof.

Article 47

Application for transfer An application for the registration of the transfer of a share may be made either by the transferor on the transferee provided that, where such application is made by the transferor, no registration shall in the case of partly paid shares be effected unless the company gives notice of the application to the transferee in the manner prescribed by the Act, and subject to the provisions of Articles 14, 51, 52 and 56 hereof, the company shall unless objection is made by the transferee within two weeks from the date of receipt of the notice, enter in the Register the name of the transferee in the same manner and subject to the same conditions as if the application, for registration was made by the transferee.

Article 48

Notice of transfer to Registered holder Before registering any transfer tendered for registration, the Directors may, if they so think fit, give notice by letter posted in the ordinary course to the registered holder that such transfer deed has been lodged and that, unless objection is taken, the transfer will be registered and if such registered holder fails to lodge an objection in writing at the office of the company within seven days from the posting of such notice to him, he shall be deemed to have admitted the validity of the said transfer. Where no notice is received by the registered holder, the Directors shall be deemed to have decided not to give notice and in any event the non-receipt by the registered holder of any notice shall not entitle him to make any claim of any kind against the company in respect of such non-receipt.

Article 52 Article 53

No transfer shall be made to a minor or person of unsound mind or to a firm except with the consent of the Board. Every instrument of transfer shall be left at the office for registration, accompanied by the certificate of the shares to be transferred, and such other evidence as the Directors may require to prove the title of the transferor or his right to transfer the shares or the right of the transferee to have the shares transferred. All instruments of transfer which shall be registered shall be retained by the company, but any instrument of transfer which the Directors may decline to register shall be returned to the person depositing the same. If the Directors refuse to register the transfer of any shares, they shall, within two months from the date on which the instrument of transfer was lodged with the company, send to the transferee and the transferor notice of the refusal. The transferee shall pay to the company in respect of the transfer or transmission of any number of shares to the same party a transfer fee or Rupees two for each transfer or such smaller fee as the Directors from time to time may determine. The Directors may decline to register the transfer until transfer fee has been paid. On given seven days notice by advertisement in a newspaper circulating in the neighbourhood of the office of the company, the transfer books and register of members may be closed during such time as the Directors think fit not exceeding in the whole forty five days in each year but not exceeding thirty days at a time.

Article 54 Article 55 Article 56

Article 57

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Article 58

The executors or administrators or the holder of a succession certificate in respect of shares of a deceased member (not being one of several joint-holders) shall be the only person whom the company shall recognize as having any title to the shares registered in the name of such member and in case of the death of any one or more of the joint-holders of any registered shares, the survivors shall be the only persons recognized by the company as having any title to or interest in such shares, but nothing herein contained shall be taken to release the estate of a deceased joint-holder from any liability on shares held by him jointly with any other person. Before recognizing any executors or administrator or legal heir, the Directors may require him to obtain a grant of probate or letters of administration or succession certificate or other legal representation as the case may be, from some competent court provided nevertheless and subject to Section 84 of the Estate Duty Act that in any case where the Directors in their absolute discretion think fit, it shall be lawful for the Directors to dispense with the production of probate or letters of administration or succession certificate or such other legal representation upon such terms as to indemnity or otherwise as the Directors may consider desirable, provided also that the holder of a succession certificate shall not be entitled to receive any dividends already declared but not paid to the deceased member unless the succession certificate declares that the holder thereof is entitled to receive such dividends; provided also that if the member was a member of a Joint Hindu family, the Directors on being satisfied to that effect and on being, satisfied that the shares standing in his name in fact belonged to the joint family, may recognize survivors thereof as having title to the shares registered in the name of such member but this proviso shall in no way be deemed to modify or nullify the provisions contained in Article 14 hereof. MODIFICATION OF RIGHTS Power to modify rights Whenever the share capital is divided into different classes of shares, all or any of the rights attached to any class may be modified, commuted, affected, abrogated, varied according to the procedure and with sanctions prescribed in section 106 of the Act or any statutory modification or re-enactment thereof from time to time and for the time being in force; and in respect of any general meeting of members holding shares of that class to be held for the purpose all the provisions hereinafter contained as to General Meetings shall, Mutatis Mutandis apply but so that the quorum thereof shall be two persons, at least holding or representing by proxy one tenth of issued shares of that class. This Article is not to derogate from any power the company would have had if this article were omitted. Provided that the rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied under these Articles by the creation or issue of further shares under Article No.67 and such new shares may be issued with such preferential rights as may be decided at the time of issue thereof.

Article 72

Article 72A

Dematerialization of securities Notwithstanding anything contained in these Articles, the company shall be entitled to dematerialize its securities and to offer securities in a dematerialized form pursuant to the Depositories Act, 1996. Options for Investors Every person subscribing to securities offered by the company shall have the option to receive security certificates or to hold the securities with a depository. Such person who is the beneficial owner of the securities can at any time opt out of a depository, if permitted by the law, in respect of any security in the manner provided by the Depositories Act, 1996 and the company shall in the manner and within the time prescribed, issue to the beneficial owner the required certificate of securities. If a person opts to hold his security with a depository, the company shall intimate such depository the details of allotment of the security and on receipt of the information, the depository shall enter in its record the name of the allottee as the beneficial owner of the security Rights of depositories and beneficial owners a. Notwithstanding anything to the contrary contained in the Act or these Articles, a depository shall be deemed to be registered owner for the purposes of effecting transfer of ownership of security on behalf of the beneficial owner. b. Save as otherwise provided in (a) above, the depository as the registered owner of the securities shall not have any voting rights or any other 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 the records of the depository shall be deemed to be a member of the company. The beneficial owner of securities shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of his securities which are held by a depository. GENERAL MEETINGS

Article 88

Notice of meeting A meeting of the company may be called by not less than twenty one days notice in writing but a General Meeting may be called after giving shorter notice than that specified above if consent is accorded thereto in the case of an Annual General Meeting by all the members entitled to vote thereat an din case of any other meeting, by members of the company holding not less than 95 percent of such part of the paid up share capital of the company as gives a right to vote at the meeting, provided that where any members of the company are entitled to vote only on some resolution or resolutions to be moved at a meeting and not on the others, those members shall be taken into account for the purpose of this Article in respect of the former resolution or resolutions and not in respect of the latter.

Article 111

Inspection of Minutes Books of General Meetings The book containing the aforesaid minutes shall be kept and be open to the inspection of any member without charge as provided in section 196 of the Act and he shall be furnished with a copy of any minutes in accordance with the terms of that

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Section. VOTE OF MEMBERS Article 112 a) Subject to any rights or restrictions for the time being attached to any classes of shares on a show of hands, every member present in person or if a body corporate through a representative appointed under the provisions of Section 187 of the Act and Article 113 hereof or by proxy shall have one vote and on a poll the voting right of such member whether present in person or by representative or by proxy shall be in proportion to his share of the paid up equity share capital of the company. In the case the company may accept from any member the whole or a part of the amount remaining unpaid on any shares (whether equity or preference shares) held by him, although no part of the amount has been called up the member shall not be entitled to any voting rights in respect of the moneys so paid by him until the same would , but for such payment, become presently payable. A body corporate (whether a company within the meaning of the Act or not) may, if it is a member of the company by resolution of its Board of Directors or other Governing Body, authorize such person as it thinks fit, to act as its representative at any meeting of the company or at any meeting of any class of members of the company. If such body corporate be a creditor (including a holder of debentures) of the company, it may by resolution of the Board of Directors or other Governing Body, authorize such person as it thinks fit, to act as its representative at any meeting of any creditor of the company held in pursuance of the Act or of any rules made thereunder, or in pursuance of the provisions contained in any Debenture or Trust Deed, as the case may be. A person authorized by a resolution as aforesaid, shall be entitled to exercise the same rights and powers (including the right to vote by proxy) on behalf of the body corporate which he represents as that body could exercise if it were a member, creditor or holder of debentures of the company. He shall be counted for the purpose of ascertaining whether a quorum of member is present. The production at the meeting of a copy of such resolution duly signed by one Director of such body corporate or by the Managing Agents or other duly authorized officer thereof and certified by him or them as being a true copy of the resolution may on production at the meeting be accepted by the company as sufficient evidence of the validity of the appointment.

b)

Article 113

a)

b)

c)

Article 114

Subject to provisions of the Articles, any person entitled under the transaction article to transfer any shares may vote at any General Meeting in respect thereof in the same manner as if he were the registered holder of such shares, provided that 48 hours at least before the time of holding the meeting or adjourned meeting as the case may be at which he proposes to vote he shall satisfy the Directors of his right to transfer such shares, or the Directors shall have previously admitted his right to vote at such meeting in respect thereof. If any member be a lunatic, idiot or a persona non compos mentis, he may vote whether on a show of hand or at a poll by his committee, curator bonis or other person recognized by the company as entitled to represent such member and such last mentioned person may give his vote by proxy. Where there are joint registered holders of any share any one of such persons may vote subject to provisions of Article 112 at any meeting either personally or by proxy in respect of such share as he were solely entitled thereto and if more than one of such joint holders be present at any meeting either personally or by proxy then that one of the said persons so represent whose name stands, prior in order on the Register in respect of such share shall alone be entitled to vote in respect thereof. Several executors or administrators of a deceased member in whose name nay share stands shall for the purpose of this Article be deemed joint-holders thereof. Votes may be given either personally or by proxy or in case of a company or other body corporate by a representative duly authorized as aforesaid. A proxy or representative shall be entitled to vote on a show of hands as well as on a poll. No member shall be entitled to be present or to vote on any question either personally or by proxy at any General Meeting or upon a poll or be reckoned in a quorum whilst any call or other sum shall be due and payable to the company in respect of any of the shares of such member or in regard to any shares of such member or in regard to any shares on which the company has and has exercised any right of lien. No objection shall be taken to the validity of any vote except at the meeting or poll at which such vote shall be tendered and every vote not disallowed at such meeting or poll and whether given personally or by proxy or otherwise shall be deemed valid for all purposes. Any such objection made in due time shall be referred to the Chairman of the meeting whose decision shall be final and conclusive. Subject to the provisions of these Articles and Section 205 of the Act, the net profits of the company (after making provision, if any, for sinking fund, depreciation and reserve funds and carrying forward balances) which shall from time to time be determined to be divided in respect of any year or other period shall be applied first in paying the preferential dividend on the capital paid up on the preference shares, if any, to the close of such year or other period and the surplus shall be divisible amongst the holders of equity shares in proportion to the amounts paid up on the equity shares held by them respectively. WINDING UP Upon the winding-up of the company, the holders of preference shares if any shall be entitled to be paid all arrears of preferential dividend to the commencement of winding up and also to be repaid the amount of capital paid up or credited as paid up on such preference shares held by them respectively, in priority to the equity shares, but shall not be entitled to any other further rights to participate in profits or assets; subject as aforesaid and to the rights of any other holders of shares entitled to receive preferential payment over the equity shares, in the event of the winding-up of the company, the holders of the equity shares shall be entitled to be repaid the amount of capital paid up or credited as paid up on such shares and all surplus assets thereafter shall belong to the holders of the equity shares in proportion to the amount paid up or credited as

Article 115

Article 116 Article 123

Article 124

Article 179

Article 208

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paid up on such equity shares respectively, at the commencement of the winding up. If the assets shall be insufficient to repay the whole of the paid up equity capital, such assets shall be distributed so that as nearly as may be the losses shall be borne by the members holding equity shares in proportion to the capital paid up or which ought to have been paid up on the equity shares held by them respectively at the commencement of the winding up, other than the amounts paid by them in advance of calls. Article 209 If the company shall be wound up whether voluntarily or otherwise the liquidators may with the sanction of a special resolution of the company and any other sanction required by the Act divide among the contributories in specie or kind any part of the assets of the company and may, with the like sanction, vest any part of the assets of the company in trustees upon such trusts for the benefit of the contributories or any of them as the liquidators with the like sanction shall think fit. INDEMNITY Article 210 Subject to the provisions of Section 201 of the Act, every Director, Manager and other Officer or servant or Managing Agents of the company shall be indemnified against, and it shall be the duty of the Directors to pay out of the funds of the company all costs, losses and expenses which any such Directors, Manager or other officer or servant or Managing Agents may incur or become liable to by reason of any contract entered into or in any way in the discharge of his duties including expenses and in particular, and so as not to limit the generality of the foregoing provisions, against all liabilities incurred by him as such Director, manager, Officer or servant or Managing Agents in defending any proceedings whether civil or criminal, in which judgement is given in his or their favour or he or they is or are acquitted, or in connection with any application under section 633 of the Act in which relief is granted by the court and the amount for which such indemnity is provided shall immediately attach as a lien on the property of the company and have priority as between the member over all other claims. Subject to the provisions of the Act and so far as such provisions permit, no Director, Auditor or other Officer of the company shall be liable for acts, receipts, neglects or defaults of any other Director or officer or for joining in any receipt or other act for conformity, or for any loss or expense happening to the company through the insufficiency or deficiency of any security in or upon which any of the moneys of the company shall be invested, or for any loss occasioned by any error of judgement, omission, default or oversight on his part, or for any loss, damage or misfortune whatever shall happen in the execution of the duties of his office or in relation thereto unless the same happens through his own dishonesty. SECRECY Article 212 Subject to the provisions of these Articles and the Act no member or other person (not being a Director) shall be entitled to enter the property of the company or to inspect or examine the companys premises or properties of the company without the permission of the Directors or to require discovery of or any information respecting any detail of the companys trading or any matter which is or may be in the nature of a trade secret, mystery of trade, or secret process or of any matter whatsoever which may relate to the conduct of the business of the company and which in the opinion of the Directors it will be inexpedient in the interest of the company to communicate.

Article 211

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XI. OTHER INFORMATION MATERIAL CONTRACTS AND DOCUMENTS The Contracts referred to in para (A) below (not being contracts entered into in the ordinary course of the business carried on by the Company or entered into more than two years before the date of this Letter of Offer) which are or may be deemed material, have been entered into by the Company. The contracts together with the documents referred to in paragraph (B) below, copies of all of which have been attached to the copy of this Letter of Offer which has been delivered to BSE & NSE may be inspected at the Registered Office of the Company between 11.00 a.m. and 1.00 p.m. on any working day from the date of this Letter of Offer until the closing of the subscription list. A. MATERIAL DOCUMENTS 1. 2. 3. 4. 5. Copy of Memorandum of Understanding dated 22/06/2006 between the Company and Keynote Corporate Services Limited, Lead Manager to the Issue. Copy of Memorandum of Understanding dated 08/07/2006 between the Company and Intime Spectrum Registry Pvt. Ltd, Registrar to the Issue. Copy of Tri- Partite Agreement dated 24/10/2003 between the Company, MCS Ltd. and National Securities Depository Limited. Copy of Tri-Partite Agreement dated 03/09/2003 between the Company, MCS Ltd. and Central Depository Services (India) Limited. Copy of standby underwriting agreement dated 31/03/2005 and deed of variance dated 13/07/2006 between the Company and SMIFS Capital Markets Ltd.

B. DOCUMENTS FOR INSPECTION 1. 2. 3. 4. 5. Copy of Memorandum and Articles of Association of the Company. Copies of Annual report for years ended 31/12/2001, 31/12/2002, for the 18 months period ended on 30/06/2004, for the 18 months period ended on 31/12/2005 and 3 months period ended on 31/03/2006. Copy of resolution passed u/s 81, 81(1A) by the shareholders of the Company at the Annual general meeting held on 10/07/2006 authorizing the proposed rights issue. Copy of resolution passed at the Board meeting held on 14/07/2006 approving the terms of the issue. Copy of the Scheme of Arrangement, under Sections 391 to 394 of the Companies Act, 1956, between the Company and its Existing lenders, Creditors and Shareholders and OCM India Ltd and its Shareholders, as approved by the Honble High Courts of Gujarat and Punjab & Haryana vide their orders dated 20/02/2006 and 23/02/2006 respectively. Copy of certificate dated 10/07/2006 issued by Khimji Kunverji & Co., Chartered Accountants and Statutory Auditors of the Company in terms of Part II Schedule II of the Companies Act 1956 including capitalisation statement, taxation statement and accounting ratios. Copy of letter dated 07/07/2006 received from Khimji Kunverji & Co., Chartered Accountants and Statutory Auditors of the Company advising the company on the tax benefits available to the company and its shareholders. Copy of report on outstanding litigations against Company Subsidiaries of the Company Promoter/Directors of the Company and promoter group companies by the legal advisor to the issue M/s Khaitan & Co. Copy of various undertakings from the Company.

6.

7.

8. 9.

10. Copy of in-principle approval received from BSE vide their letter no. [] dated []. 11. Copy of in-principle approval received from NSE vide their letter no. [] dated []. 12. Copy of SEBI observation letter No. [] dated []. 147

DECLARATION No statement made in this Letter of Offer shall contravene any of the provisions of the Companies Act, 1956 and the rules made there under. All the legal requirements connected with the said issue as also the guidelines, instructions etc. issued by SEBI, Government and any other competent authority in this behalf have been duly complied with. We further certify that all the disclosures made in the Letter of Offer are true and correct. Yours Faithfully For Birla VXL Limited Signed by all the Directors

Sd/S.K.Birla Chairman Sd/A.N.Lalbhai * Director Sd/R.K.Choudhury Director Sd/N.L.Hamirwasia Director Sd/A.C.Mukherji * Director Sd/C.L.Rathi Managing Director * By their constituted Attorney Place: Kolkata Date: 14/07/2006

Sd/Sidharth Birla * Vice Chairman Sd/Arvind Agarwal * Nominee Director of Govt. of Gujarat Sd/Dr.G.Goswami Director Sd/G.Momen Director Sd/P.K.Pujari Nominee Director of Govt. of Gujarat Sd/Rajeev Surana Executive Director & Chief Operating Officer

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